The Powell Economic Partnership and Wyoming Business Alliance brought together a panel of experts and legislators at Northwest College for a Tuesday discussion on how state and local governments will respond to challenges facing Wyoming’s economy.

Officials from the city of Powell, Cody, Park County, and the state came to hear the discussion, which was also streamed live online.

“There is optimism here, and you can really see it when you come to a community like Powell,” said Renny MacKay, policy director for the governor’s office, adding, “That said, there are some really big challenges.”

The decline in state revenues resulting from changes in extraction industries, which is straining budgets at all levels of government, was presented as a challenge to be overcome, and the presenters said they wanted to avoid a pessimistic outlook on the situation.

While much of the discussion was a presentation of facts with the goal of creating an informed understanding of the problem, talk of solutions brought out the debate over taxes and spending.

MacKay pointed out a number of economic positives, including low unemployment and a population increase in 2019, which reversed a previous decline. He also presented factual realities in the coal industry, which is down 35%, and an equally troubling decline in the natural gas industry, both of which are primary sources of state revenues.

The state is facing a structural deficit of $400 million over the next biennium and a $77 million shortfall in revenues over that time. Part of the deficit comes from a $200 million deficit in education.

MacKay also discussed the impact of closing budgetary gaps by tapping into the state’s savings accounts. Currently, Wyoming’s “rainy day” fund is at $1.5 billion, but that will drop to $1.3 billion in the coming biennium in order to close the budget shortfall for education.

The state has drawn $600 million from savings funds in the past five years, most of it to cover education, and most of it came from a now-depleted account set aside specifically for education.

“The governor’s analogy has been that we have a fiscal storm ahead of us,” MacKay said.

Sen. Hank Coe, R-Cody, called education spending “the 800-pound gorilla in the room.”

Laying out the history of the issue in the state, Coe said Wyoming spent $644 million on education in the 2001-2002 biennium, which came to $7,203 per student in the state. By the 2011-2012 biennium, which followed the state’s restructuring of education spending, the education budget had ballooned to $1.34 billion — $14,557 per student.

In the 2019-2020 biennium, the state was spending $16,043 per student.

Maintaining services

Cindy Delancey, president of the Wyoming Business Alliance, moderated the forum. She urged the state and local leaders in the audience to participate in the coming legislative session to be sure their needs were communicated to lawmakers.

“If you’re not at the table, you’re on the menu,” Delancey warned.

Ashley Harpstreith, executive director of the Wyoming Taxpayers Association, provided some facts on Wyoming’s tax structure, which is highly dependent on taxes on coal, natural gas, and oil.

Harpstreith stressed she wasn’t advocating one way or another as far as any changes in the state’s tax policy. However, she pointed out that, with no personal or corporate income tax, Wyoming’s revenues outside of the mineral industry taxes rely entirely on sales and property taxes.

To illustrate the relationship between the cost of government services taxpayers use and the amount of taxes they pay, she used an example of a family of three with an annual income of $60,000 per year and home valued at $200,000. This family would pay about $3,180 a year for public services — which would cost the state $27,050 to provide.

Speaking after the meeting, Harpstreith said there are a number of variables involved in calculating this snapshot, so it’s only illustrative of the challenge with regard to the level of services and the revenues to support it.

Robert Godby, deputy director of the University of Wyoming’s Center of Energy Regulation and Policy, elaborated on the state’s revenue situation, especially with regard to mineral taxes.

The state collects severance taxes on all coal, natural gas, and oil produced in the state. Well known is coal’s decline, but Godby said natural gas is also suffering the same trend.

“Natural gas declines are equally disturbing, and it’s going on silently,” he said.

Oil, however, is “really booming,” Godby said, and projections for future production are high. He cautioned that the commodity market for oil is volatile, so it’s not reliable enough to bet on as a future revenue source.

Since these industries export much of the energy they produce, it’s allowed Wyoming to “tax other people for our services,” he explained.

Looking at various scenarios, Godby said, we could be looking at a total deficit of close to $1 billion in the 2022 to 2024 biennium.

“When we say we have a structural deficit ... we mean our current taxation and revenue system will not be able to support our current level of public services. So we have tough choices,” he said.

Taxes

As for plans to diversify the state’s economy and alleviate its reliance on extraction industries, Godby pointed to a problem. He proposed a hypothetical scenario in which the tech industries that operate in Silicone Valley of California were somehow transplanted to central Wyoming. Rather than providing Wyoming with a richly diverse economy, it would bankrupt the state, since those sectors are not taxed. Such a scenario would only generate a higher demand for public services.

“Success is not dependent on having low taxes. But of course, we all prefer that to more taxes,” Godby said. “So we have to think about, what is it that we really cherish? What are those things that are most important? How much do they cost? And then what are we willing to do to pay for them?”

Dan Laursen, R-Powell, reiterated his unmitigated opposition to taxes.

“Taxes keep businesses away,” he said.

Laursen proposed further cuts to government spending and greater efficiencies within departments. He also wants to see ports open to coal exports in order to improve coal production.

Carolyn Danko, who serves on the NWC Board of Trustees, spoke during a question period following the panel presentations. She said education spending increases are necessary to prepare students for the demands of the modern workforce.

“Someone has to pay for this,” Danko said. “We have always asked our sugar daddy to pay for all we have. Well, our sugar daddy has gotten pretty small lately. It’s time maybe we start calling our taxes user fees ... because every one of us uses what our tax money provides.”

Park County Commissioner Joe Tilden said the county is going through the same challenges as the state, having transferred $1.2 million out of reserves to balance its budget and maintain current services. Despite extensive budgetary analysis, Tilden said they still struggle to pay for services. He thinks too many cuts will become harmful.

“I’ve never been an advocate of taxes,” Tilden said, but the commission will likely pursue a 1-cent general purpose tax, which he said he hopes voters will approve.

“At some point in time, the people of Wyoming are going to need to pay the bills,” he said.

Laursen discussed a bill that will allow voters to make the general purpose tax permanent, eliminating the need to vote on it every few years. He said he wants to maintain that requirement and thinks specific purpose taxes, which are enacted to cover one-time projects, are a much better way to go.