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deficit spending

State long-term debt is real issue of concern, legislators say

in Government spending/News
2319

By Cowboy State Daily

Wyoming’s short-term revenue and budget problems are not as concerning as the state’s long-term deficit, according to two members of the Legislature’s Joint Appropriations Committee.

Sen. Eli Bebout, R-Riverton, the committee’s chairman, and Sen. Mike Gierau, D-Jackson, said the Legislature needs to address the fact that for several years, state spending has exceeded income, with the difference being made up through a combination of spending cuts and the use of money from various savings accounts.

Gierau said the state has already made significant reductions in spending to address what is called the “structural deficits.”

“A lot of folks need to realize that … we have less employees in state government than we had eight years ago,” he said. “Government is smaller. Programs are smaller.”

While the state could use about $1.6 billion from its reserve accounts to resolve the issue on a short-term basis, the action would deplete those accounts and the outlook to replace that money is not good.

“Over the next five years, with declining revenues, those ‘rainy day’ funds are anticipated to start to shrink if we keep spending at the same levels,” Gierau said. “And we won’t have money, given our current revenue picture … to replace them.”

The decline in mineral revenue has had a significant impact on the state’s revenues and the Legislature will have to look seriously at some action to deal with issue on a long-term basis, Bebout said.

“The challenge is to not just kick the can down the road,” he said. “I think we need to start making progress on our future to deal with our structural deficit.”

Specifically, the state needs to make plans for the day when mineral revenues no longer contribute a large amount to the state’s income, Bebout said.

“The revenue stream and the way we generate revenue is changing,” he said. “Minerals will not be able to carry the load like they have in the past. We need to be prepared for that and start moving in that direction.”

Several legislative committees are looking at ways to boost the state’s income, including the creation of a statewide lodging tax, an increase in gas taxes, a possible increase in property taxes and a corporate income tax.

Over half of the anticipated deficit spending — $250 million — can be traced to education funding and a legislative committee recently approved a $19 million increase in education spending to account for inflation. Legislators argued the increase must be approved to comply with Wyoming Supreme Court orders regarding school financing.

Bebout said he disagreed with such mandates being handed down by the court and said education spending should be determined by elected officials.

“Quite frankly, I’m tired of the courts dictating how we spend money on education,” he said. “I think it should be up to elected officials, i.e., the Legislature to make those decisions. If you don’t like what we do, you vote us out, rather than have the court tell us what to do.”

Peterson: How to fix Wyoming’s revenue struggles

in Government spending/Column/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.

Appropriations members say budget difference just part of the process

in News
884

By Cowboy State Daily

Differences between the House and Senate over the proposed supplemental budget are just part of the legislative process and center largely on what constitutes necessary spending, two members of the Joint Appropriations Committee said Thursday.

Sen. Eli Bebout, R-Riverton, chairman of the Senate Appropriations Committee, and Rep. Tom Walters, R-Casper, agreed that the two bodies will bridge the $70 million gap between the House and Senate versions of the budget.

“Being the wonderful process that it is, we’ll get together and figure out our differences and in the next couple of weeks we’ll have a good supplemental budget that Wyoming can be proud of,” Walters said.

The Legislature approves a two-year budget during even-numbered years. The supplemental budget is a mechanism to provide funding for needs that may arise between the Legislature’s budget session. The supplemental budget submitted this year to the Legislature by the Joint Appropriations Committee outlines spending from the state’s main bank account or “General Fund” of $119 million.

The House and Senate finished their independent reviews of the budget this week. The House added $51 million in spending, while the Senate cut $19 million. The Senate is now reviewing the House changes to the budget while the House is reviewing the Senate version. A “conference committee” will later be appointed to reach a compromise between the two versions.

Bebout said many in the Senate consider the supplemental budget a way to pay for emergencies.

“So I felt we ought to deal with emergencies and as we worked through the budget, that’s where the House had differences from the Senate,” he said. “That’s the process. We talk about it, we debate, you take the vote…”

Part of the difference between the two bodies stems from education funding. The House increased the “external cost adjustment” for schools — an amount designed to help ease the impact of inflation on schools — by $21 million. The Senate cut the amount by $9 million.

Another difference is a software upgrade proposed for in Department of Revenue. The House added $15 million to JAC’s recommendation, while the Senate cut it by $5 million.

“Quite frankly, I didn’t think a lot of the things we brought up as we worked through the process … in the House vs. the Senate, that we had $52 million in additional spending that we needed,” Bebout said. “I’m not saying that we shouldn’t have some, but I felt that was more than I was willing to accept.”

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