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Wyoming State Revenue Picture Good, But Future Is Uncertain

in News/wyoming economy

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By Jim Angell, Cowboy State Daily

Recent gains in revenue for the state’s main bank account are good news for the state, but the trends that led to the increase are not guaranteed to continue, a state budget official said Tuesday.

“There’s no guarantee we’re out of the woods yet,” Kevin Hibbard, director of the state’s Budget Department, told Cowboy State Daily. “But we are happy we have a little bit of a revenue bump.”

The latest update on the state’s revenues prepared by members of the Consensus Revenue Estimating Group — a group of financial experts who predict what the state can expect to receive in the future — showed that as of the end of June, income for the state’s “General Fund” exceeded predictions made in January.

The report showed that thanks largely to higher sales tax and mineral tax income, the general fund, which finances most state operations, received $168 million more than predicted. The number grows to more than $200 million once capital gains from investments are counted.

The extra money is particularly good news given the fact the Legislature, in an effort to reduce state spending in the face of more dire revenue predictions made in January, used a one-time source of funding to pay for major maintenance of state property, Hibbard said.

“We have to remember we have to recover from that,” he said. “I think there’s an expectation that we will have to put the major maintenance (costs) back into a (regularly occurring budget) line item rather than pay for it with a one-time source of funds.”

Much of the increase in income was attributed to unexpected gains in sales taxes which resulted from increased retail sales generated by COVID stimulus payments and Hibbard said the state cannot anticipate such increases again.

“We attribute that (increase) to the stimulus payments, which is not going to be around forever,” he said.

The gain in oil and gas tax income, meanwhile, was was due largely to oil and gas prices that were higher than what had been expected in January, he said.

“We do like the fact the price of oil and gas is better than we estimated,” he said. “We like the fact that we have a modestly higher than anticipated price for oil and gas and we hope that continues.”

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Wyoming Tax Revenues Up $73 Million From Projections

in News/Legislature

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By Jim Angell, Cowboy State Daily

The tax revenues that pay for Wyoming’s government programs are coming in a bit higher than predicted earlier this year, according to a state report.

An update on the state’s revenues prepared by the Consensus Revenue Estimating Group showed that as of the end of March, income for the state’s “general fund,” the main bank account used to pay for state operations, was $45.5 million above what had been predicted in January.

In addition, revenues for the state’s “Budget Reserve Account,” an account used to provide funds for government agencies if money from the general fund runs short, has increased by $25.7 million over projections, the report said.

“Combined, revenue collections are $71.3 million ahead of pace or 6.2% higher than projected at this point in the fiscal year,” the report said.

The CREG is a group of fiscal analysts from various state agencies who track and predict state income. The group’s projections form the basis for the governor’s office and the Legislature as they prepare the state’s two-year budget.

After the Legislature approved a budget for the 2021-22 cycle in 2020, CREG predicted the state would run short of funds by up to $1.5 billion because of slumps in the state’s energy industry and business closures caused by the coronavirus that would reduce tax income.

Gov. Mark Gordon and the Legislature cut the state’s budget by more than $500 million to address the shortfall.

CREG updated its projections in January and predicted growth in some of the state’s tax revenue.

The report released Friday said revenues had grown even more than predicted in January, with sales and use tax collections for the state’s general fund exceeding projections by $18 million through the end of March to total $322.4 million, a 4% increase.

Those numbers could run even higher, the report said, thanks to federal coronavirus relief programs.

“Recent collections do not yet account for potentially increased consumer spending, stimulated by the most recent round of direct individual payments from the American Rescue Plan,” it said.

The biggest gain in sales taxes was from the retail sector, where collections actually exceeded collections by the same point last year by 1.8%.

However, sales taxes paid by the mining sector dropped by 61.4% from last year, the report said.

Despite the slump in the state’s energy industry, severance taxes paid to the state also exceeded projections by $13.6 million, about 10.8%, the report said. Revenues generated by oil production, natural gas production and trona production were all above earlier estimates.

Also topping projections were revenues for the state’s schools, which totaled $264.8 million through the end of March, $11.4 million over earlier estimates.

The report should only be seen as an update to revenue projections and will not be used to make any adjustments in the CREG’s earlier report, said Michael Swank, a senior fiscal analyst with the Legislative Service Office.

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CREG Report Released: Wyoming Still Looking At Deficit, But Lower By Almost Half Than Earlier Projections

in News/budget

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By Jim Angell, Cowboy State Daily

While the Wyoming’s main bank account is still expected to fall short of what is needed to pay for state operations for the next two years, the level of that deficit has been cut almost in half, according to a state report.

A group of state fiscal experts, in a report issued Monday, said the state’s General Fund, the fund used to pay for most government operations, will fall about $451.1 million short of estimates used to prepare the state government budget for the current biennium.

However, that is an overall improvement of almost $426 million from estimates released in May, the report from the Consensus Revenue Estimating Group said.

The improved picture for the fiscal 2021-22 biennium were caused by tax collections in fiscal 2020 — which ended in June — that were higher than expected, an improved revenue outlook for the current biennium and improved revenue estimates for the state’s Budget Reserve Account, which is used to supplement the General Fund when the state needs additional money.

The report said all three upturns were due in part to the federal government’s CARES program and other steps taken during the pandemic to ease the economic impact caused when businesses were closed and activities were restricted to slow the spread of coronavirus.

“The downturn in Wyoming’s economy and associated revenue collections are historic, especially for Wyoming’s top two industries — mining and tourism,” the report said. “However, the depths of the downturn, to date, have not been as severe as contemplated in the May 2020 projection in part due to actions of the federal government.”

In addition, the May report was issued at a time when national and state parks were forced to close by the pandemic, the report said.

“This October … report also recognizes the rebound in tourism experienced over the summer, crowning with record visitation in the moth of September at both Grand Teton and Yellowstone National Parks,” the report said.

The improvement in tourism contributed to the state collecting $81.3 million more in sales and use tax revenue than had previously been forecast, it said.

The report also noted that when the earlier estimates were issued in May, the state’s energy industry was feeling the impact of a global oil price war which has since ended. 

The end result was that while production and tax income fell from 2019 figures, they did not fall as far as forecast in May, it said.

Moving forward, the state will see continued economic recovery, but it will be slow, the report said.

“Looking forward to the remainder of this calendar year and (fiscal) 2021, the themes found within this forecast include a relatively muted, extended recovery in the extractive industries with more overall optimism in total sales and use tax collections,” it said.

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CREG: Latest Wyoming Revenue Estimate Shows $48 Million Drop

in Government spending/News/politics

By Bob Geha

Wyoming legislators will have $48 million less to spend over the next two years than originally believed, according to a report issued Friday.

The state’s Consensus Revenue Estimating Group (CREG) submitted a report to the Legislature’s Joint Appropriations Committee that showed revenues for the state over the next biennium, running from July of 2020 through June of 2022, will drop below levels predicted in October.

The CREG told JAC members the decline was largely due to drops in natural gas prices.

The JAC is meeting to prepare its budget for the biennium for presentation to the Legislature, which opens its budget session on Feb. 10. After all of the state’s agencies are funded, officials believe lawmakers will only have about $20 million to $25 million to finance other projects.

Although the state has reserve funds it can use to pay some operations, those reserves will not last forever and lawmakers will have to take that into account, said JAC member Rep. Tom Walters, R-Casper.

“There’s going to be multiple legislators that have great ideas coming from their neck of the woods and we’ll just have to see how those work out,” he said. “Wyoming is in a good position as we do have some reserves that can be used, but those reserves won’t last forever, so we have to make some hard choices for certain.”

Rep. Albert Sommers, R-Pinedale, another JAC member, said he believes the Legislature will have to be careful with programs that put an ongoing drain on state coffers.

“Those ongoing expenses of government that we have, we need to be careful where we inflate those and where the needs are, because I really do worry about revenues going into the future,” he said.

As the state adjusts to lower revenues from its energy industry, it might turn more to the tourism and outdoor recreation sectors to make up for declining income, said committee member Sen. Mike Gierau, D-Jackson.

“It really puts the attributes that this state loves and the things that we love about living here and puts it right out front,” he said. “We want to display that to the world. That’s the way we can get people to come, to visit, to spend money, which creates money for the state. It’s a good bet for the state.”

Revenues ahead of estimates, though structural problems remain

in Government spending/News/Taxes
Wyoming taxes

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. 

Companies look for alternative uses for coal

in Energy/Economic development/News/Business
Companies look for alternative uses for coal

By James Chilton, Cowboy State Daily

CHEYENNE — Once upon a time, coal helped to usher in a new technological age. So much concentrated energy in such a convenient package helped power the steam engines that drove the Industrial Revolution, transforming the way we live and work. Now, with coal’s future anything but certain, innovators are looking for new uses for the mineral that could fuel a new carbon-based high-tech manufacturing industry.

Coal’s fortunes have fallen in recent years – once the preferred fuel source for power plants, the mineral has been supplanted by cheaper, cleaner-burning natural gas in many places, while renewable energy sources like wind and solar have also been ramping up. And while coal is far from dead as a fuel source – China and India alone consumed about 4.56 billion tons of it in just 2017 – international pressure to ultimately phase out coal as an energy source remains strong, with at least 10 European Union nations now vowing to eliminate coal power by 2030 and similar draw downs and moratoria on new coal plants announced even in large coal-consuming nations including China and India.

Wyoming produces more coal than any other state in the U.S., and the mineral severance taxes paid to Wyoming for its coal comprise a large portion of the state’s annual revenues. But where once that amount rose steadily, from $85.3 million in Fiscal Year 1999 to $294.3 million in FY 2011, it has since been in decline, with the state’s Consensus Revenue Estimating Group (CREG) projecting coal severance taxes of $192.3 million for FY 2019, and continuing to drop through 2024. 

The shift in coal’s economics have led innovators to look for new uses for the mineral, and Randy Atkins, CEO of Ramaco Carbon in Sheridan, is among those leading the push locally. Atkins said that while coal is best known today as fuel for power plants and as a reducing agent in the steelmaking process, it was once believed to have potential far beyond just those uses.

“There used to be a thing called the ‘coal tree’ in the early part of the 20th century. In Germany and even the U.S. they had these tree drawings, it was all the various things you could make from coal,” Atkins said. “We were making all sorts of chemical products, drugs, cosmetics, you name it; all from coal.”

That changed following the invention of catalytic cracking, the process by which crude oil is broken up into smaller molecules that are then made into refined products like gasoline, plastics, and a myriad of other uses. From then on, Atkins said, exploration of coal’s alternative uses effectively evaporated.

“I wouldn’t even say it was left by the wayside, it’s just all the technology advanced through the use of petroleum,” he said. “If you go back to the ’80s there were a couple attempts to make coal to fuels, and that involved making what looked like a refinery for processing coal. … But it’s really been the last three years that some of this stuff has started to come together in ways that began to make the argument that coal needs to be given a second look for uses beyond combustion.”

Since coal is primarily composed of carbon, Atkins and like-minded researchers have been looking at coal’s potential as a source for carbon fiber, a high-strength, low-weight material used primarily in aircraft and the aerospace field, but with the potential for many other uses.

“What we’re trying to do with carbon fiber is to make it dramatically less expensive than today’s use of carbon fiber from petroleum,” Atkins said. “Right now prices are $25 to $45 a pound for (carbon fiber) precursor made from petroleum. We think we can get that down to five bucks.”

In fact, Atkins, along with other members of the National Coal Council, contributed to a report published earlier this spring at the behest of the Department of Energy, “Coal in a New Carbon Age: Powering a Wave of Innovation in Advanced Products and Manufacturing.”

The report lists carbon fiber as just one of many potential coal products likely to see increasing demand in the 21st century. Other uses include advanced prosthetics, biosensors, electrodes, fertilizers and as a medium for 3D printers. And at a cost of $12 to $50 a ton versus nearly $500 a ton for petroleum, Atkins believe coal could find mass appeal again as further uses and innovations are discovered.

“As this becomes more widely known, I think we’ll see some fascinating breakthroughs in materials science,” he said. “Twenty or 30 years from now we may look back and say ‘My gosh, the 2020s were when we switched from widespread use of steel and aluminum to widespread use of carbon fiber from coal,’ that’d be huge.”

If and when those breakthroughs occur, Atkins hopes they’ll be under the roof of iCAM, or the Carbon Advanced Materials research park currently under construction in Sheridan. There, Ramaco Carbon plans to host researchers “from national laboratories, universities, private research groups and manufacturing organizations” in a collaborative effort to unlock the potential of coal’s carbon content. 

Ultimately, Atkins’ plan is to develop an entire “Carbon Valley” akin to northern California’s Silicon Valley, with both research and manufacturing facilities fed by an adjacent coal mine.

That proposed coal mine, the Brook Mine, would be the first new coal mine in Wyoming in half a century, and one Atkins said would be relatively tiny compared to some of the extant mines in the state. But it has yet to materialize after Wyoming’s Environmental Quality Council rejected the mine’s permit application in September 2017 amid concerns over the potential environmental impacts. Ramaco’s appeal of that decision was heard in state district court in Cheyenne earlier this month, even as the company has submitted a revised permit application to the Department of Environmental Quality.

Even if the mine is ultimately approved, and in spite of his optimism about coal’s potential, Atkins says he doesn’t expect carbon fiber production will be what reverses the drop in severance taxes – at least not in the short-term. But in time, he believes coal’s high-tech uses could be what keeps mining a viable industry in the worst-hit parts of the state.

“As products develop over time … mines that can’t make it selling their coal at $12 to $15 a ton may be able to make it if they can sell at $25 to $40,” Atkins said. “I’m hopeful over a medium-term period this will provide an alternative demand for coal beyond its use as thermal coal.”

Travis Deti, executive director of the Wyoming Mining Association, believes Atkins’ proposals have promise, even if they don’t immediately offset the recent declines in production.

“What Ramaco’s doing with carbon fiber, graphene, graphite, 3D printing, that’s a great way to use our resource and make it viable in the future,” Deti said. “Is it going to replace the 300 million tons we’re mining right now? Probably not. But it’s an innovative use of the resource and it’s a great project.”

Deti said that while coal is still widely used internationally, especially in the Asia-Pacific region, it remains a hard sell domestically. While techniques for capturing and sequestering carbon dioxide from coal-fired power plants are still developing, he said, it’s important for stakeholders in the coal economy to find alternative uses of the mineral.

“We want to continue to use our coal for electricity generation, but it’s really a remarkable resource,” Deti said. “And looking at the direction of where we’re going right now in terms of electricity generation … we need to start looking at other avenues and ways of using the resource.”

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