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Joint Revenue Committee

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

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.”

Legislative committee approves Medicaid expansion plan

in News/Health care/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.

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

in Government spending/Energy/News/Taxes
Electricity
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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.”

Zwonitzer: Time for Legislature to study gas tax increase

in News/Transportation/Taxes
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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.

Revenue Committee looks again at corporate income tax

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.”

Wyoming Legislature’s tax panel draws a crowd

in News/Taxes
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Wyoming’s legislators are examining several proposed new taxes and changes to existing taxes as the state’s coal industry continues its decline.

Members of the Revenue Committee, meeting in Cheyenne on Monday, reviewed several proposals that have been rejected by the Legislature in the past, including changes to the state’s wind energy tax, an increase in fuel taxes and a tax on large national retail stores.

Dan Zwonitzer, R-Cheyenne, the committee’s co-chair, said it is important that the committee study all options available to it to keep the state’s revenue stream stable, even if those options are unpopular.

“We’re going to be bringing something (to the Legislature’s 2020 session) and people probably won’t like it,” he said. “People don’t like taxes.”

The recent closure of two major Wyoming coal mines owned by Blackjewel indicates that it is time for the state to plan for different levels of coal production and how that will affect the state’s revenues in the future, said Buck McVeigh, acting chief of staff for Gov. Mark Gordon.

“The strife that’s facing our coal industry and that steady revenue player that we always counted on during the tough times with oil and gas, we’re losing that,” he said.

One proposal being considered is a corporate income tax that would be assessed against large retail stores with headquarters outside the state. Dubbed the National Retail Fairness Act, the tax is designed to account for the fact that the cost of goods sold by such retailers often includes an element for corporate income taxes assessed in other states. Backers maintain the measure would let Wyoming collect its fair share of the taxes paid by its residents.

The proposal was rejected by Wyoming’s Legislature during its recent general session and Senate Vice President Ogden Driskill, R-Devils Tower, said he is not sure any more support exists for the measure going forward.

“Some things just don’t know when to die and they get revisited and revisited,” he said. “That came out of left field pretty fast last year. I don’t think there was good understanding on either side of it.”

The measure has the support of the Wyoming Education Association because of the $40 million to $45 million it could raise annually.

“The National Retail Fairness Act is one step in the right direction to increase funding for schools,” said Tammy Johnson, the WEA’s government relations director.

The Revenue Committee continued its meeting Tuesday.

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