The legislative budget season is just around the corner. By virtue of property tax cuts last session, local governments have borne the brunt of much of the property tax relief.
Government entities are starting to feel the pain of the tax cuts. Some politicians, anxious to get reelected, are turning a deaf ear to the pain of local governments.
Budget session bills aimed at bolstering the campaigns in an election year will be filed to curry favor with the voters. Understanding local government finance will help us all understand the consequences of these politically motivated bills.
Cities and counties receive funding from many sources. They are funded by sales and use taxes, mineral royalties, severance taxes, property taxes and fuel taxes.
In addition, the local governments may impose a lodging tax as well.
Article 15 of the Wyoming Constitution gives counties the ability to levy 12 mills of property tax. (21 of the 23 counties levy the maximum. Campbell and Teton do not.)
The constitution also gives cities the ability to levy 8 mills of property tax. (79 of the 99 counties impose the maximum levy.)
Other districts, like hospital districts, rural health care districts and community college districts also have the statutory ability to levy mills for their operations.
In addition to local governments imposing taxes, the state of Wyoming directly distributes funds to local governments according to a formula calculated to benefit certain communities, to the expense of other communities.
The formula changes from time to time, depending on who is in power.
The current formula distributes more money to “hardship” communities – those with the lowest valuation and sales tax collections, and less money to the richer counties. In other words, a complicated formula is created to benefit certain communities more than other communities.
Direct distributions from the state coffers to local governments and grant and loan programs appropriated was $146.25 million dollars in fiscal 2023 through fiscal 2026, up from $105 million in 2021-22.
Each year of the biennium, $73.125 million dollars is distributed to local governments. Essentially counties divide 35.17% of the direct distribution from state coffers and municipalities receive 63.83%.
Then, the distribution taking into account the hardship calculation is made. It gets really complicated from here. Each town receives a flat distribution. $15,000 if the population of the town is less than 35, and $35,000 is the population is greater than 35.
Then, the hardship calculation is made. Per capita sales and use tax distributions are added to the direct distributions for each municipality. Theyn the lowest quartile of this amount is identified.
For the municipalities below the lowest quartile, hardship money is distributed to each community to bring the hardship community to the quartile amount.
The rest of the money is distributed by a formula. Sales tax per capita is inverted, normalized and weighted by 75%. Assessed valuation is inverted, normalized and weighted by 25%.
Then, the weighted share sale tax is added to the assessed value and distributed as each municipality’s proportional distribution.
The county formula is not much easier. For the small assessed valuation counties, if one mill of each county’s value is less than $300,000, a subsidy is calculated to make up the difference. Then, each low-value county received three times the hardship subsidy.
The rest of the money is distributed on another formula. Sales taxes per capita are inverted, normalized and weighted by 24%. Assessed value is inverted, normalized and weighted by 76%.
The cost of government index is calculated by multiplying the population of the county times 628 and adding 9,900,000 and then normalized.
Each county is compensated by adding the sale tax calculation plus the assessed value calculation times the cost of government index to determine the final distribution to counties.
These direct distributions are in addition to other collections made by cities and counties, including enterprise funds, which are the fees charged by each community for services they provide, including franchise fees, waste collection, water and electricity.
Funding of local governments purposely is complex. Each formula or calculation allows for political mischief. Changing one fractional calculation can mean millions of dollars shifted from one community to another.
As complicated as it may seem, we all need to try and understand these formulae so we can know how our local governments are funded.
Otherwise, when folks want to game the system, they will get away with skullduggery.
Tom Lubnau served in the Wyoming Legislature from 2004 - 2015 and is a former Speaker of the House. He can be reached at: YourInputAppreciated@gmail.com
