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Legislators on dwindling state revenues: ‘It’s real, it’s bad’

Published on in Energy/News/Taxes
Silhouette of a Pump Jack
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By Ike Fredregill, Cowboy State Daily

As coal, oil and natural gas revenues decline, state legislators could have some hard decisions ahead, according to information generated by a strategic planning effort created by Gov. Mark Gordon. 

Dubbed “Power Wyoming,” the planning effort forecasts several scenarios for mineral-based state revenue streams during the next five years, all of which predict a deficit in coming years. 

The information compiled by Power Wyoming was presented to the Wyoming Legislature’s Joint Revenue Committee on Nov. 11. 

“The best projections in this model are very unlikely, and the worst are the most likely,” said Sen. Cale Case, R-Lander, the Senate committee’s chair. “That’s very scary.”

Case worked on Power Wyoming with Rep. Dan Zwonitzer, R-Cheyenne, chairman of the House Revenue Committee. Also on the team were members of the executive branch and economists familiar with the state’s energy sector such as Rob Godby, the University of Wyoming director for Energy Economics and Public Policies Center and a College of Business associate professor. 

Zwonitzer said the planning effort is the starting point to prepare for diminishing mineral revenues. 

“Power Wyoming is just the first step of saying, ‘Here’s what’s going to happen to Wyoming,’” he said. “The group was formed to get the message out there: ’It’s real, and it’s bad.’”

Renny MacKay, Gordon’s policy adviser, said Power Wyoming was not established to be a group of individuals working on potential solutions to the state’s revenue problems, but rather a group of experts working to gather to analyze data.

“This is a cone of different scenarios for both revenue and energy production,” MacKay said.

In its current iteration, Power Wyoming provides insight by compiling information from the state’s Consensus Revenue Estimating Group and the U.S. Energy Information Administration, among others.   

“Energy production is declining … and if there is production decline, the traditional jobs we have in Wyoming would be impacted,” MacKay said. “Information gives us power. The more we look at it, the more we talk about it, we can figure out what our opportunities are as a state.”

Worst case scenarios

While the coal industry’s struggles are being felt across the state, Case said Power Wyoming illuminated potential problems with the natural gas sector as well.

“I did not realize the issues with natural gas were as serious as they are,” he said. “Everybody else is thinking natural gas is doing great, and it’s not.”

The planning effort’s initial simulation results highlight some scenarios where the state’s total mineral revenue drops by 10 percent as early as 2020-2022 before a potential partial recovery by 2024. Some scenarios show a full recovery to expansion in revenues, but Power Wyoming reports they are the least likely cases within the current market conditions and expectations.

Most scenarios predicted a decrease in both Wyoming’s total employment and population, but in the worst case scenarios, the state’s total employment could decrease by about 20,000 jobs by 2024, followed by a similar decrease in population.

“In the next five years, there’s no way to absorb those (lost) jobs,” Zwonitzer said. “That means we’ll either have to have an increase in taxes, or a decrease in government services.”

In the worst case scenarios, he said the state would most likely need to pursue both. 

“We’ve lived a certain way in this state for 100 years with minerals paying the taxes,” Zwonitzer said. “That major revenue source is going away. So what does that look like for our future, and what do we want to do about it?”

Unreliable oil

Some of the scenarios, including those in the best case category, relied heavily on increased oil production balancing decreased coal and natural gas production. But Case warned against putting faith in the oil market.

“I think oil is very susceptible to environmental and carbon risk,” he said. “Changes in policy from Washington, D.C., and from other states could make it impossible to grow petroleum.”

A low-carbon policy consideration was also provided for the Revenue Committee as part of the Power Wyoming data package. Case said the presentation offered a more realistic outlook of oil than the initial simulation results put together by Godby.

In the policy consideration, Shell Global estimates a high usage of liquid hydrocarbon fuels, such as gasoline, in 2020 by about 25 million barrels a day. After the peak, however, the oil company predicts a gradual decrease down to 10 million barrels a day in 2060 and about 2 million barrels in 2100 as part of its strategy to comply with the Paris Climate Accord.

Most scenarios presented by Power Wyoming indicate the mineral sector is going to take a significant hit in the next five years, but even if the best case scenarios come true, Case said the future of energy is moving away from Wyoming’s traditional mineral offerings.

“This will tell you that the bad times are here,” Case said. “This is not just a tool for the Revenue Committee, but it’s also a tool for us. If you’re an employee in the coal industry, it’s probably time for you to get your own house in order.”

MacKay said Gordon is already working on the next steps of the planning effort. 

“We are bringing folks from the private industry now,” he explained. “Power Wyoming will definitely stick around for the foreseeable future.”

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Legislative committee approves Medicaid expansion plan

Published on in Health care/News/Taxes
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CHEYENNE — A plan to expand Medicaid coverage to about 19,000 Wyoming residents won approval from a legislative committee on Tuesday.

The Legislature’s Revenue Committee voted 8-5 to send to the full Legislature a bill that would expand Medicaid coverage at a cost of about $154 million for two years. Federal funds would cover about $136 million of the cost, with the state picking up the remaining $18 million.

Supporters argued that given declines in the state’s mineral industry, residents will need the extra assistance provided by expanded Medicaid coverage.

“I think the coal bankruptcies up in the northeast have made people sit back and think a little bit differently about our economy,” said committee member Rep. Cathy Connolly, D-Laramie. “We know that people are going to lose their jobs. We know it. Every bit of information points to it.”

Marcie Kindred, a Cheyenne Democrat who plans to run for the state House of Representatives, said the state owes it to its residents to provide assistance.

“I’m really lucky that I have a network of support of people to help me get out of that cycle of poverty,” said Kincaid, a mother of four who has relied on Medicaid coverage. “But what about the people that don’t have that network of support, that don’t have that health (coverage)? We, as citizens of Wyoming, have to care for our own. We have to be that support and turn back and pull them out.”

Opponents of the measure argued that the state will have to pick up a larger share of the expense should the federal government reduce its level of support.

“The federal government does not have the money for this,” said Karl Allred, a former state representative from Evanston. “Eventually, that’s going to go away. And once you’re into it, you can’t get out really effectively. Are you going to tell people all of a sudden now that you’ve been giving them health care and now you’re going to take it away?”

Bob Wharff, a lobbyist from Evanston, agreed.

“If we become dependent and reliant upon the government to fulfill that and it falls apart, there’s no other safety net there,” he said.

The measure will be forwarded to the full Legislature for its consideration during its upcoming budget session in 2020.

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Proposed increase in alcohol tax rejected by committee

Published on in Food and Beverage/News/Taxes
alcohol tax
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By Ellen Fike, Cowboy State Daily

A bill that would have doubled the alcohol taxes in Wyoming was rejected on Wednesday by a legislative committee.

The bill lost by one vote, with seven members of the Joint Labor, Health and Social Services Committee voting against it and six members voting to move it forward to the full Legislature.

The bill considered by the committee during its meeting in Cheyenne would have doubled the excise tax on alcohol — from three quarters of one cent to 1.5 cents per 100 milliliters of wine, from 2.5 cents to five cents per 100 milliliters of spirits and from one-half cent to one cent per liter of beer — for three years. 

The money raised from the increase, estimated at $1.9 million a year would have been split, with half going to the Department of Health to fund behavioral programs that provide mental health and substance use treatment. The other half would have been used by the Department of Corrections for the purpose of providing mental health and substance use treatment for parolees and people who have been released from an institution. 

It would have been the first increase in alcohol taxes since the end of Prohibition in 1933.

Even with the increase, Wyoming’s alcohol taxes still would have been the lowest in the nation, Rep. Mike Yin,  D-Jackson, pointed out during the meeting. 

The discussion drew passionate pleas from both elected officials and members of the public, with Sen. Charles Scott, R-Casper, being one of the major proponents of moving the bill forward. 

“We’ve identified a real need for substance abuse treatment for the public and our inmates,” he said. “By identifying that need, we should fund it.”

According to a University of Wyoming study, alcohol abuse cost the state more than $840 million in 2010 due to lost productivity, health care costs and criminal activity.

However, some legislators simply did not support any tax increase.

Rep. Clarence Styvar, R-Cheyenne, admitted before the vote even took place that he would say “nay” to the proposed bill. 

“We don’t need to be taxing one group of people,” he said. “I said it last year when they tried to raise the tobacco prices. I’ve said it before and I’ll say it again: ‘No new taxes.’”

Others expressed concern that the tax income, once raised, might be used for purposes other than what were intended.

Mike Moser, executive director for the Wyoming State Liquor Association, argued other resources are available for those suffering from substance abuse and mental health problems.

“We’re asking responsible consumers of alcohol, the vast majority, to be forced to pay for substance abuse when so many of these cases don’t have anything to do with alcohol and mental health programs,” he said. “This isn’t apples and oranges. I believe we’re targeting a select, responsible few to cover the entire gamut.”

Moser also argued that the tax increase could hurt alcohol sales to “price-sensitive” Wyoming consumers and said those along Wyoming’s southern border might drive to Colorado to purchase their alcohol.

Wyoming is one of 17 “control states,” meaning that the state has a monopoly over the wholesaling or retailing of some or all alcoholic beverages.

Sen. Anthony Bouchard, R-Cheyenne, said the bill’s supporters seemed to imply that alcohol was bad, yet the state has a monopoly on selling it.

“We’re not saying alcohol is inherently bad,” Scott replied. “We’re saying that it has a risk and somebody has to pay the price of it. That risk should be taxed.” 

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What if coal production drops to zero? Legislature looking for new revenues

Published on in Energy/Government spending/News/Taxes
Electricity
2270

By Laura Hancock, Cowboy State Daily

Coal production in Wyoming has dropped by over 100 million tons in the past decade, and state Sen. Cale Case doesn’t think the downward slide is close to finished.

“There isn’t a scenario where it turns around, where the decline stops,” said Case, R-Lander, a co-chair of the Wyoming Legislature’s Joint Revenue Committee. “No one can articulate that.”

That will likely spell trouble for state coffers, which are dependent on coal revenue to pay the bills.

What if coal production trickled down to zero? It’s not entirely a hypothetical question these days, considering PacifiCorp’s recently announced draft plan to retire coal plants early.

Fueling state accounts

Wyoming coal producers pay severance taxes, federal mineral royalties, coal lease bonus revenues and ad valorem taxes at various points of the mining process, which flow to different state, education and local government funds. But each revenue source has decreased in the past 10 years:·      

  • Severance taxes: In 2009, mining companies paid the state $273.3 million. In 2018, they paid $198.8 million. In 2024, state projections show they could pay $185.9 million.·      
  • Federal mineral royalties, which are divided between the federal and state governments by 51% and 49% respectively: Wyoming received $262.5 million in 2009 and $198.1 million in 2018. Federal data didn’t contain royalty projections for the future.·      
  • Coal lease bonuses, which have funded Wyoming’s ambitious school construction program, were $213.6 million in 2009 and $5.3 million in 2018. From 2019 to 2024, the state estimates $0 from the bonuses, collected when mining companies pay for expanding operations on federal land. There are no expectations that mines will expand operations in the near future. ·      
  • Ad valorem taxes, assessed on the value of coal and paid a year after the assessment: Coal companies paid taxes on $3.8 billion in 2009 assessed valuations. They are expected to pay taxes on $2.8 billion in 2018 assessed valuations. By 2024, state projections show valuations falling by another $100 million to $2.7 billion.

The total income from severance taxes, federal mineral royalties and coal lease bonuses dropped from $749.4 million in 2009 to $402.2 million in 2018.

Case notes these figures don’t include sales and use taxes companies pay for items small and large — ranging from paper for copiers to tires for haul trucks.

“We don’t get the sales tax on stuff they buy,” he said. “Because they’re not buying much anymore.”

Replacement revenues

As Revenue Committee co-chair, it’s Case’s job to consider ways to make up for lost coal revenue.

“That’s a big lift,” he said. “It’s a lot of money.”

True, oil and gas continue to bring Wyoming revenue – but not enough to replace coal. And it’s entirely possible, with market concerns about global climate change, that new restrictions could kill demand for those fossil fuels.

Among proposals before the Joint Revenue Committee:      

  • The committee advanced a proposal in September that would create a corporate income tax of 7 percent on companies with at least 100 shareholders – in other words, businesses not generally headquartered in the state. The revenue created would be around $20 million to $25 million a year, Case said. It’s not a replacement for coal, but a start. A similar measure failed earlier this year in the Legislature.
  • Changes to property taxes, including: An increase in the statewide mill levy for schools, increases in some property taxes, and creating a new property tax class for multi-million dollar homes.
  • Wyoming taxes wind $1 per megawatt hour. Case would like to see it increased. Case would, in general, like to impose an electricity export tax. “Wyoming’s biggest export is electricity,” he said. At this point, there is no bill draft before lawmakers.

Many conservatives have said they want to see cuts to state government before looking to raise taxes.

“Here’s what I tell people: you’ll get your cuts,” Case said. “We’re going to have to cut like crazy. And we’re still going to need revenues. This is very serious. We’ve never faced anything like this.”

Ongoing discussions

The Wyoming Taxpayers Association, which represents many of the companies that would be affected by a corporate income tax, didn’t support the idea in the Legislature earlier this year. Its leadership hasn’t yet decided on its position on the bill currently under consideration, said Ashley Harpstreith, the organization’s executive director.

The Wyoming Taxpayers Association will be discussing the state’s revenue picture at its annual meeting next month. 

“The point is we’re going to have to have those hard conversations,” Harpstreith said. “It’s coming to a head. Industry has been paying the bills for a long time.”

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Governor Gordon talks taxes

Published on in News/Taxes
Gov Gordon Taxes
2218

By Cowboy State Daily

Wyoming must prioritize the work that needs to be done on its roads before it considers raising gasoline taxes, according to Gov. Mark Gordon.

Gordon, speaking during a news conference Tuesday, said he is taking a “wait and see” approach to the 3-cent per gallon fuel tax increase recommended by the Legislature’s Joint Revenue Committee for consideration during the Legislature’s 2020 budget session.

Gordon said the state has a $165 million gap between income for road maintenance and repairs and the estimated cost to keep the state’s roads up.

“We’re not going to go crazy on trying to figure out revenue to fix all that,” he said. “I think part of the conversation has to be how do we prioritize the roads and how do we make sure people in Wyoming understand what we won’t be able to do before we start saying how we’re going to raise taxes.”

While Gordon said he is not a fan of a proposed corporate income tax the Joint Revenue Committee will submit to the Legislature, he might be able to support a statewide lodging tax, a proposal that died in the 2019 legislative session.

“If it seems to be well targeted and not generally affecting Wyoming’s population, I think I would be generally supportive of that,” he said.

On other issues, Gordon said he is concerned with the growing use of “vape” products by Wyoming’s teens and is working with the state Health Department to study options to deal with the issue.

“It does seem to me it doesn’t make sense for us to sell vaping products to anyone under 21 years of age,” he said. “This is an area the Legislature should look into. But from my standpoint and whether I would issue an executive order, I’m looking at those policies, too.”

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Zwonitzer: Time for Legislature to study gas tax increase

Published on in News/Taxes/Transportation
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It is time for the state to study a possible increase in gasoline taxes, according to the co-chairman of the Legislature’s Revenue Committee.

Rep. Dan Zwonitzer, R-Cheyenne, said the proposed 3-cent per gallon tax increase approved by the Revenue Committee in July should definitely be reviewed by the Legislature when it meets in 2020.

“The last actual tax that the Legislature has increased, the only tax in my 15 years, has been the gas tax,” he said. “And it’s probably time again.”

The 3-cent increase would boost Wyoming’s total tax on gasoline to 27 cents per gallon and raise an additional $20 million per year. Under the proposal forwarded to the Legislature by the Revenue Committee, $13.5 million of that would go to the state Department of Transportation to build and maintain roads, while $6.5 million would be split between city and county governments.

Zwonitzer said the increase, which would leave Wyoming’s total gas taxes among the lowest in the region, would help offset some of the Department of Transportation’s deferred maintenance costs.

“But with hundreds of millions of dollars in deferred maintenance needed, the 3 cents is really just kind of a chip in the bucket,” he said.

The state last increased gasoline taxes in 2014, adding 10 cents to the price of a gallon of gasoline.

Cassie Craven, of the Wyoming Liberty Group, said she wondered what the money raised by the last increase had been used for.

“I’m wondering where that money went,” he said. “We heard back then we wouldn’t feel it at the pumps and gas prices don’t seem to indicate that. So where did the money go?”

The Wyoming Taxpayers Association, Wyoming Truckers Association and Petroleum Marketers Association have all said their members would support the increase as long as the extra tax is not tied to inflation.

The Wyoming Farm Bureau is on record as opposing the tax because of the expenses it would add to farming operations.

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Revenue Committee looks again at corporate income tax

Published on in News/Taxes
2062

A legislative committee is once again studying a proposal to impose an income tax on so-called “big block” stores.

The Legislature’s Joint Revenue Committee will take testimony on the proposal during its meeting in Pinedale this week. Members will decide whether to forward the bill to the Legislature during their meeting in November.

Under consideration is a measure similar to one killed in the Legislature this year. It would impose a 7 percent corporate income tax on companies with more than 100 shareholders.

In debates on the bill during the Legislature’s general session earlier this year, backers said national companies that do business in Wyoming have already built the cost of corporate income taxes assessed in other states into the price of goods sold in Wyoming. Supporters said the new tax would simply amount to Wyoming collecting its share of those taxes on purchases made in the state.

The measure is expected to bring another $45 million into the state and Tammy Johnson of the Wyoming Education Association said the money would go a long way toward funding education.

“(It is) the equivalent of funding 600 teaching positions for one year,” she said. “It’s the equivalent of funding a (Class) 3A school district for one year. It’s a lot of money. And it’s needed by the people of Wyoming to fund education, which is a fundamental right in Wyoming.”

Chris Brown of the Wyoming Retailers Association said his group just wants the Legislature to make sure any tax measure adopted is fair to all.

“Not one that picks winners and losers and treats businesses competing for the same customers different on a tax basis,” he said.

Johnson said since the companies that would be affected by the tax are already building the cost of taxes into their products, it just makes sense for Wyoming to collect its share of the revenue.

But Brown disagreed.

“To suggest that this is a tax that’s already being paid and Wyoming is just going to get its share back is incorrect,” he said. “Make no mistake, this is a brand new tax that, if this bill is passed, will be applied to some businesses in Wyoming and very well could translate down to the consumer.”

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Peterson: How to fix Wyoming’s revenue struggles

Published on in Column/Government spending/Taxes
Wyoming Government spending
1902

By R. Ray Peterson, guest column for Cowboy State Daily

While serving in the Wyoming Senate, I had the privilege of serving on both the Appropriations Committee for six years and as chairman of the Senate Revenue Committee for six years.  These two committees deal with the state budget through expenditures and revenues.

As I served, I was able to attend many state and regional meetings as well as review reports, and studies, all while having direct involvement in directing expenditures and revenue streams of our state.  These experiences allowed me insights and knowledge concerning our states budget along with growing concerns of revenue streams and how we will meet the expectations of funding state and local governments into the future.

The most recent developments of our coal industry in Wyoming should be setting off alarms with every elected official and citizen in our state.  Over the years, our state’s natural resources have subsidized a major portion of our taxes or revenue streams that we use to fund our schools and governments.  Over half of all revenues used to meet these expenses come from our mineral extraction industry. 

Learning from our history of our boom and bust cycles, our legislature has wisely put aside additional revenues from the high years to assist us during the low years.  This philosophy has served us well for the past 50 years in providing a more consistent budget, but the times, “they are a changing.”  The question now is, how long before our reserves are depleted?  Will our natural resources come back as they have in the past to save us yet another time? 

Wyoming, by our state’s constitution, must have a balanced budget.  Some would argue that we do not deficit spend in Wyoming while others would argue that we use the reserves to balance the budget which is, in a sense, deficit spending.  From my own simple understanding, when we spend more in a period than we take in, it is deficit spending. 

Although our budget is balanced in the end, we are still spending more than we take in during our low years.  Thanks to our cash reserves or “rainy day” funds and our investments, we seem to be holding our own while hoping that the revenue streams will return to higher levels. 

Today’s challenges are different

But today’s challenges to the budget are different than our past experiences of our boom and bust cycles.  Today, we face the strong possibility that coal will never come back to contribute to our revenues as it once did for our state.  The market has changed.  The demand has changed.  Unlike natural gas and oil, coal was a more consistent contributor to our states revenues with even slight increases from year to year, as amounts extracted increased with what the market demanded. 

But the demand for coal is decreasing for different reasons.  Although Wyoming has stepped up to produce cleaner burning coal technology to protect our coal’s value, other factors have weighed in that have had a dramatic effect on the value of coal. 

The war on coal was real and certainly had its effect.  More power plants have converted from coal fired to natural gas fired power generation.  But more importantly, consumer states of energy, such as California and others, have required energy supply companies to provide evidence that a majority of their power generation portfolio is derived from renewable sources such as hydro, wind and solar, or they will go elsewhere for their energy purchases.  The market is changing and because of this, Wyoming should be prepared and adapt with those changes.

Action is required

There are two principles used when budgeting in a shortfall.  Increase revenues or reduce expenditures.  Wyoming has done both without raising taxes. And there are other good things the state has done and continues to do.  As I mentioned, it participates with private energy corporations in developing clean coal technology as well as other cleaner burning fossil fuel efforts.  It also participates in the effort to develop new markets for our coal.  It has worked to create more transmission lines to deliver our natural gas and oil to market areas. 

These are things our state has done to try and increase or stabilize our revenues by strengthening the current resources we have.  The state has also used excess revenue of the good years to save and invest.  These investments, at times, provide additional revenues that are used to fill the budget holes left from the decreasing value of our market driven resources.  This effort combined with savings, have provided a long-needed stabilizing influence on our past boom and bust budget cycles.

Our challenge today

Our subsidy by mineral taxation has lightened the tax burden on Wyoming citizens over the years, but it has taken a hit, creating a shortfall.  The savings and investment of those savings are currently filling the shortages, allowing our state and local leaders time to make adjustments to their budgets. 

But reserves shrink and investments don’t always perform consistently.  The investment portfolio that perhaps saved our budget the year before could generate nothing the following year.  Trusting our trust funds is not the long-term solution to our shortfall problems. 

Most will argue that we need to reduce our expenditures.  I certainly agree with this position.  As with our own home budgets, we make less, we should spend less.  It should be no different with our state budget and over the last few years the state budget has been reduced in most areas.  But these are all short-term solutions to our current situation. 

What needs to be brought to the table are long-term solutions.  The solutions need to address the real problem of an inconsistent revenue stream, where nearly 60 percent of current revenues collected are market driven or out of our own control.  Wyoming needs to meet the challenge of reducing that market driven 60 percent, to 50 percent or even 40 percent of total revenue collected by the state. 

Now the question should be; How do we do this?

It’s time

By applying the two principles of budgeting in a shortfall of raising revenue and reducing expenses, I’ll offer one revenue increasing idea and two reducing expenditures ideas. 

A good start to the effort of stabilizing our revenue stream would be to pass a bill increasing the statewide lodging tax.   This increase would have the lowest effect on our tax payers and would be consistent to what surrounding states charge.   

For my ideas of reducing expenditures, I would suggest eliminating the $15 million annual automatic escalator for funding K-12 education.  I would also zero base the Department of Education budget and the Department of Health budget every ten years in the appropriations committee.  Stagger them to spread out the work load, but the two largest budgets in our state need more legislative scrutiny. 

These actions would be a good start in stabilizing our budget in Wyoming.

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Tax numbers cast doubt on assumption of tough times

Published on in News/Taxes
Wyoming economy
1820

By Bill Sniffin, Cowboy State Daily

Poor Gillette obviously is in the doldrums from mines closing. Poor Casper with all the downturns in the energy industry, is certainly lagging, right?

Not necessarily.

If you go by taxable retail sales, the conventional wisdom that Wyoming, as an entire state, is hurting just is not true.

The map showing the ups and downs of taxable sales for the first three months of 2019, compared to 2018, shows a far different story than what folks around Wyoming seem to believe.

Douglas and Converse County sales tax collections have increased by 64 percent, year-over-year.

Rawlins and Carbon County collections are up 31.7 percent, followed by Buffalo and Johnson County with gains of 31.1 percent and Rock Springs and Sweetwater County with an increase of 30.8 percent.

Cheyenne and Laramie County collections were up by 16.4 percent.

Gillette, with all its woes, saw collections increase by 12.7 percent in 2019 over 2018. And if those two mines are bought and the workers go back to work, things are going to be just fine in Campbell County.

Casper and Natrona County tax collections increased by 14.2 percent in 2019 over 2018.

So if all these places are doing so well, who is not showing an increase?

Pinedale and Sublette County have seen the steepest decline in tax collections, down 25.5 percent, which echoes the current slide in the natural gas production.

Lander and Riverton in Fremont County saw a collections decline of 7 percent.

Big Horn County (Greybull, Basin, Lovell) saw tax income drop by 6.4 percent and Thermopolis and Hot Springs County declined by 3.5 percent.

Laramie and Albany County are holding their own, down just 0.3 percent from 2018 and Lusk and Niobrara County are down by 1.5 percent.

Note: Please check out our additional story in the Cowboy State Daily featuring comments from folks living in these cities and towns.

Revenues ahead of estimates, though structural problems remain

Published on in Government spending/News/Taxes
Wyoming taxes
1811

By Laura Hancock, Cowboy State Daily

Sales taxes, investment income, oil severance taxes and federal mineral royalties are proving to be the saving grace for state coffers, according to a recent report, but the overall revenue picture for Wyoming remains bleak.

In the first six months of the year, production of natural gas and coal – as well as prices for coal – came in below the state’s official forecast, according to the Census Revenue Estimating Group, made up of revenue experts from the legislative and executive branches of Wyoming government. 

CREG recently released a six-month revenue update for Wyoming, and compared those revenues against its previous official state forecast, released in January. 

At one time, coal and natural gas were counter-cyclical – when one was down, the other was up – which helped Wyoming absorb the booms and busts of a natural resource economy, and money continued to flow to keep state government running. 

But the July 31 CREG update underscored a new reality: Production of both commodities was down, and the income for two accounts that fund most day-to-day operations in state government would have also missed estimates had it not been for other forms of revenue. 

Revenue receipts to the General Fund, which is something of a state checking account, were $201 million or 16.9 percent ahead of earlier forecasts for the year due to higher-than-anticipated sales tax, investment and oil severance tax income.  

Receipts to the Budget Reserve Fund, which is akin to a state overdraft account, were 6.7 percent ahead of projections, thanks to severance taxes and federal mineral royalties. State Rep. Dan Zwonitzer, R-Cheyenne, said that Wyoming can’t always count on high returns on investments. 

“Future projections for investment returns are nowhere near where they’ve been the last four years,” he said. “They’re looking at 5.5 percent, 5.25 percent (rate of return) for the retirement system. We have some serious problems ahead of us.”

Zwonitzer is a co-chair of the Legislature’s Joint Revenue Committee, which is studying whether to implement new taxes, such as a corporate income tax or a gross receipts tax. 

The difference between the two? A corporate income tax is assessed on business profits, or income. Gross receipts taxes are levied on sales. 

Companies don’t pay corporate income taxes if their profits are zero or negative. But that’s not true with gross receipts taxes, according to the conservative Tax Foundation.

Forty-four states have a corporate income tax and four have a gross receipts tax, Zwonitzer said. 

Other taxes under consideration: 

  • A higher assessment against wind power generation
  • An increase of the statewide mill levy for schools
  • Increases for some property taxes
  • Adding a fourth category of property taxes – currently there are residential, commercial and industrial – which would consider multi-million dollar residential homes. “That would require a constitutional amendment,” Zwonitzer said. 

However, tax talk is tough in the Cowboy State, where people are conservative and used to one of the nation’s lowest tax rates. Previous tax proposals – such as requiring taxes be assessed on services including haircuts, real estate transactions and legal services – went nowhere. 

“Some in the Republican caucus say we need to be cutting services more before raising taxes,” Zwonitzer said. “They can’t identify where those cuts are” outside of education. 

Revenue bills must first be introduced in the House, where Zwonitzer said many proposals will likely gain the two-thirds vote necessary to clear introduction and be referred to a committee on budget years, such as the 2020 session. 

“I think we’re going to have some good discussions,” he said. 

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