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Peterson: How to fix Wyoming’s revenue struggles

in Government spending/Column/Taxes
Wyoming Government spending
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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.

Gordon says true biennium budget will lead to better planning

in Government spending/News
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Gov. Mark Gordon’s efforts to create a true two-year budget for state government should encourage state agencies to plan better for the future, he said Thursday.

Gordon, speaking during a news conference, said his plan to limit supplemental budget requests to true emergencies will lead agencies to plan better for the state’s biennium budget cycle rather than depend on supplemental budgets, such as the one passed recently by the Legislature.

“We’re working very hard to make sure that what is conveyed in (the two-year budget to be reviewed in 2020) is truly a biennium budget,” he said. “Hopefully, by looking at a two-year cycle, you start to look at what you really need. I’m working with the Legislature to see if there are ways we can incentivize better savings and build a cost-conscious culture throughout our agencies.”

State agencies submit two-year budgets for approval by the Legislature during even-numbered years. Supplemental budgets are submitted during odd-numbered years and were originally seen as a way to provide funding for urgent needs until a new two-year budget could be approved the following year.

In recent years, the supplemental requests have become more substantial.

Gordon admitted he is not the first Wyoming governor to try to limit the use of supplemental budgets.

“I’m certainly one of a number of governors that have tried this, but I’m really going to try to stick to this,” he said.

Gordon said he has already advised state agencies to budget with declining revenues in mind.

“The budget instructions I sent to agencies reminded them that revenue streams will be tight,” he said. “My goal, and I’ve been pretty consistent, has been to avoid across-the-board cuts.”

The governor also said he wants to study the number of uninsured children in the state, which a recent study said was nearly double the national average.

“I’ll bring together a task force with our insurance agencies to see what tools and what efforts we can apply to really address that issue,” he said.

On other issues, Gordon announced he has named policy director Buck McVeigh to serve as his acting chief of staff, filling the vacancy created with the retirement of Pat Arp.

Wyoming’s jets cost state $1 million in 2018

in Government spending/News/Transportation
Wyoming’s jets cost state $1 million in 2018
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By Ike Fredregill, Cowboy State Daily

With 99 municipalities spread far and wide across Wyoming’s approximately 98,000 square miles, transportation can be time consuming for state employees and elected officials.

However, some disagree on whether the best way to meet those travel needs is to keep the two state jets sometimes jokingly referred to as the “Wyoming Air Force.”

In 2002, the state purchased two Cessna Citation Encores, twin-engine transport jets, to reduce the time its employees and officials spent on the road, said Brian Olsen, administrator of the Wyoming Department of Transportation Aeronautics Division.

Not everyone, however, agrees the jets are the most efficient form of transportation.

Rep. Chuck Gray, R-Casper, said he has added an amendment to the state’s budget bill to sell one of the jets every year since he was elected in 2017. But, so far, the amendment has failed.

“I think they’re an example of government extravagance,” Gray said. “There’s no reason we should have this many jets.”

Olsen disagreed. By owning two jets, he said the state could ensure one plane is available whenever needed.

“When it comes to maintenance, one plane is no plane,” Olsen explained.

According to Wyoming’s checkbook, WYDOT spent about $494,700 on aircraft maintenance with Cessna Aircraft Company in 2018. Olsen said $464,000 of that total was spent on maintaining the jets. The state also owns a Cessna 208, a single-engine turbo prop used to photographically survey road conditions, he said.

WYDOT Director and retired U.S. Army Maj. Gen. K. Luke Reiner said two jets is optimal.

“We have one jet going into maintenance in June,” Reiner said. “Having two planes does provide a certain sense of redundancy. Also, there’s use for two aircraft … in terms of the ability for elected leaders and agencies to fulfill their responsibilities to the state and the residents.”

Regardless of whether flying is more efficient, government air service stymies private enterprise, said Kevin Lewis, a researcher for Equality State Taxpayers Association.

“People who fly in Wyoming make up a market for air travel,” Lewis said. “Right now, the government sector is removed from that market. We’re talking about a business that lives and dies on slim margins.”

By selling the jets, he suggested the state could create an environment for private intra-state air travel to expand.

“Wyoming is never going to grow itself if your main competitor is the government,” Lewis added.

Cost efficiency

Olsen said WYDOT researched the possibility of booking flights with private charters, but determined owning and maintaining its own fleet was about 44 percent more cost effective.

WYDOT also looked into fractional aircraft, the practice of sharing aircraft ownership, maintenance and operation costs with multiple owners, and determined fractional ownership would be 32 percent more expensive than owning the jets solely.

In regards to employee travel, Olsen said WYDOT studies reported flying employees across the state was 14 percent more cost efficient than paying them to drive.

“We looked at a couple salary levels, but mostly around the $100,000-a-year mark,” he explained. “But those studies don’t take into consideration the cost of motels or opportunity costs.”

Employees are rendered somewhat ineffective while driving, because the time they spend on the road — even when carpooling — is not conducive to a productive work environment, he added.

As stewards of taxpayers’ dollars, Reiner said he believed the jets were the most fiscally responsible travel option for state employees and elected officials.

“I think these aircraft are a really good use of resources for our state,” he said.

Between bulk jet fuel purchases of about $185,000, $464,000 in maintenance costs and approximately $327,000 in pilot’s salaries, Wyoming spent about $1 million on traveling via the two jets in 2018.

Despite WYDOT’s efficiency report, Gray said he would still like Legislature to review the possibility of reducing the state’s air fleet by one jet.

“When I’ve done town halls, I’ve consistently heard the jets are a problem,” he said. “We’re going to continue trying the amendment.”

Reiner said he doesn’t believe the state needs more than two jets, but the state should maintain its current fleet.

“The planes are a tremendous asset for our government,” he said. “The bottom line is they help us accomplish our mission.”

Wyoming’s Air Fleet By the Numbers

  • Aircraft: 2-Cessna twin-engine passenger jets, 1-Cessna single-engine turbo prop survey plane
  • Viable landing strips across Wyoming: 34
  • Maintenance cost for 2018: About $464,000
  • Fuel cost for 2018: About $185,000
  • Annual pilot salaries combined: About $327,000
  • Transport jet flights in 2018: 663, carrying a total 2,213 passengers

Spending data provides window into state expenses, but lacks big picture

in Government spending/News
Wyoming’s checkbook contains a mountain of information about state agency spending, but it’s far from a full accounting of Wyoming’s budget
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By Ike Fredregill, Cowboy State Daily

Wyoming’s checkbook contains a mountain of information about state agency spending, but it’s far from a full accounting of Wyoming’s budget.

“There’s a lot in the checkbook, but there’s also a lot missing,” said Kevin Lewis, an Equality State Taxpayers Association (ESTA) researcher. “The auditor’s office only tracks the checks they write, and some agencies use their own internal accounting system.”

After a years-long legal battle between ESTA, American Transparency and the state, newly elected Wyoming State Auditor, Kristi Racines, released the checkbook shortly after taking office in January. The checkbook contains approximately 4.9 million line items of expenditures made by state agencies during the last six years, but it does not include several spending categories such as state employee salaries or victims’ benefit payments.

Additionally, Lewis said portions of the released information are missing identifying codes.

The coding system is used so the data can be broken down by agency and spending category, but some codes fall short of identifying anything more than the department that ordered the expenditure.

“You’ll frequently see (in the checkbook) Wyoming Department of Transportation only, or Attorney General only,” Lewis said. “In general, you’d like to not have that, because it makes it difficult to figure out where the money is being spent.”

Confidential payments

Releasing information to the public is a complex process, but it boils down to fulfilling information requests, Racines said.

“Payroll is different than writing a check to someone,” she said. “The auditor’s office doesn’t deal with salaries, it deals with paychecks.”

Paychecks can include confidential information about employees, so Racines said her office has to approach releasing paycheck data carefully as some of it might be covered under various confidentiality laws, both state and federal.

Regardless of the hurdles, she said the answer to why payroll information wasn’t in the checkbook is simple.

“It wasn’t in the request,” Racines explained.

If the information were to be requested, she said the office would release the information, but only after they reviewed state and federal statutes and consulted with the Wyoming Attorney General’s office about what portions of the paycheck could be released.

Other confidential categories include victim benefit payments, some law enforcement activities, subsidized adoption payments and benefit payment assistance.

“There’s a lot of categories that might seem obvious,” Racines said. “And some of the categories are not as black and white as they may seem. An expert witness payment may be confidential while a case is ongoing, but not later.”

Because the checkbook is a line-by-line expense report, the auditor said it did not include many payments protected by confidentiality laws. While the payments themselves are confidential, the amount an agency spends on a confidential category is not. 

“The public can request to see how much an agency spent on something like victim’s benefit payments,” Racines explained. “But because that wasn’t in the (checkbook) request, we didn’t include it.”

The auditor’s office handles most of the state’s accounting, but some agencies use their own accounting system.

“We use Wyoming Online Financial System, which is like a gigantic version of QuickBooks,” Racines said. “Some agencies, like the University of Wyoming, have an internal system, though.”

When an agency uses a different system, Racines said she can’t access its records, and therefore, her office couldn’t include its expenditures in the checkbook. In addition to the university, Wyoming Game and Fish and WYDOT expenses were largely absent from the released data as well as Wyoming Pipeline Authority and Wyoming Infrastructure Authority line items.

“The infrastructure authority and the pipeline authority are a little different,” Racines explained. “They’re authorities, not agencies, so my understanding is the state cuts them a check for their budget, because it is appropriated by legislature. Then (the authorities) cut out individual checks.”

Coding system

Wyoming’s agencies use about 6,000 codes to categorize how state money is spent, but the system is old and has not been regularly updated, Racines said.

“Our data is only as good as our codes are,” she explained. “We have a lot of codes that are unused, and some that could maybe be better described.”

Lewis said without better code descriptions, the data reviewers are left to guess at what the state spends money on.

“On one line item, maintenance might be spelled out, but on another it could be just MT, then in another it’s ‘Op & Maint,’” Lewis said. “Spelling and consistency problems aside, the chart of accounts often doesn’t include enough information about the item. We can see the governor’s office spent ‘X’ amount on farm equipment in 2017, but we don’t know why.”

Even with missing codes and jumbled descriptions, Lewis said releasing the checkbook was strong step toward increasing transparency in Wyoming government, but it’s just the start.

“Even though we finally got the checkbook, we only have a little bit of the picture,” Lewis said. “We have a long way to go before we figure out the rest of it.”

Auditor encourages transparency, says it is not as simple as some believe

in Government spending/News/Transparency
Wyoming State Auditor Kristi Racines
1061

By Cowboy State Daily

Transparency in state government is very important, but achieving it can sometimes be difficult, according to state Auditor Kristi Racines.

Racines, in an interview with Cowboy State Daily, said she strongly believes that information on state government spending must be available to the state’s taxpayers.

“We want to know, as taxpayers, where our dollars are going,” she said. “What is our government doing, do we agree with it, do we not. We can’t divine if we agree or not if we don’t have the information.”

However, it can sometimes take a great deal of work to determine whether information held by the state should be public or private, she said.

“It’s never quite as simple as some folks make it,” she said. “The auditor’s office, we put out checks and there’s well over 1 million a year … A lot of those are confidential. The overwhelming majority isn’t. But sorting out everything that’s confidential and isn’t, it’s not clear. Not everything is black and white.”

For instance, while the auditor’s office pays the state’s bills using public money, some expenses are confidential, such as Medicaid payments or Victims’ Assistance payments, she said.

Racines was elected last year to succeed Cynthia Cloud, who did not seek re-election. Cloud’s final months in office were marked by ongoing litigation with a government transparency advocacy group that worked for several years to gain access to the state’s “checkbook,” the list of payments made by the auditor’s office.

Racines released the information about one month after taking office.

“I can’t really speak to what was done before,” she said. “I know a lot of times, public records requests can be intimidating to public employees. There’s often times fear … and sometimes there’s just some misunderstanding there.”

Senate prepares for worst-case budget scenario that leaders doubt will occur

in News
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By Jim Angell, Cowboy State Daily

Although Wyoming’s Senate is preparing for a worst-case scenario with the state’s supplemental budget, the leaders of both of the Legislature’s chambers are predicting their members will reach a compromise on the spending bill.

The Senate on Wednesday changed its rules to allow the late introduction of three bills proposing spending of about $45 million to support air transportation, education and the departments of Health and Family Services.

The appropriations are already contained in the supplemental budget bill making its way through both chambers, but Senate President Drew Perkins, R-Casper, said the Senate wanted to address the issues in separate bills should the supplemental budget die.

“If we can’t come to an agreement on the supplemental budget, we’ve got a backup,” he said. “There’s about four things that absolutely have to happen this session because they were uncompleted issues from the biennium budget last year.”

But House Speaker Rep. Steve Harshman, R-Casper, said he believes that a deal on the budget will be worked out and that the Senate’s backup plan is unnecessary.

“I told my secretary ‘Please don’t bring (the bills) into my office even if they do make it over because I’m not going to walk away from the process,’” he said. “It’s been here long before I was even born, it will be here a long time after I’m dead and gone and I’m not going to be part of trying to muck things up.”

The issue arose as the House and Senate looked at each other’s versions of the supplemental budget, which proposes spending needed between the even-numbered years when the Legislature sets a two-year budget.

As sent to both chambers by the Joint Appropriations Committee, the bill proposes spending of about $206 million, including $119 million from the state’s main bank account, called the “General Fund.”

By some counts, the House and Senate are $70 million apart in their versions, although both Perkins and Harshman set the difference at closer to $40 million.

The main differences between the House and Senate versions of the bill stem from beliefs in the Senate that the state should save its money, given uncertainties in the future of oil and gas prices, Perkins said, along with the idea the supplemental budget should only be used for emergency needs.

“The Senate views the supplemental budget as a supplemental budget, which by definition should be unanticipated needs or emergency needs,” he said. “A lot of those issues, we don’t believe, fall into those categories. The other side, too, is as we look at what we’re going to need next year, the Senate feels pretty strongly we ought to be saving money to cover what we’re going to see as a deficit in the school foundation program next year.”

That uncertainty prompted the Senate to kill a bill providing more than $50 million for various construction programs around the state, including repairs and upgrades at several community colleges and roof repairs for the State Penitentiary, Perkins said.

“We’re just trying to know where we can fill the gaps next year,” he said. “If I knew I was going to be short on my household income next year and I had some extra money this year, I’d set it aside because I’m thinking I’m going to need it next year — and that’s kind of where the Senate is.”

Harshman said many of the remaining disputes over the budget center on when spending might be necessary. He pointed as an example a proposed upgrade of the state Revenue Department’s excise tax computer system, which is based on an old computer language.

“It needs to be upgraded,” he said. “This was really a question of when. I think some senators thought maybe they don’t need this money for another 12 months and we can do it (in the biennium budget) net year. If that’s the case, fine.”

Both men said differences between the House and Senate on the budget are common and both predicted the supplemental budget bill would survive the session.

“We’ve still got plenty of time to resolve these things and get them moved forward and bring this in for a landing before the session’s over,” Perkins said.

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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