Wyoming budget keeps cuts, boosts salaries and local government

Gov. Mead greets members of the House at the opening of the 2013 General Session. The 2014 Wyoming budget session began on February 10, 2014, starting 20 days of debate on a flat budget that redirects funds from last year's cuts to people, infrastructure, and local governments. (Gregory Nickerson/WyoFile — click to view)

Gov. Matt Mead greets members of the House at the opening of the 2013 General Session. The 2014 Wyoming budget session began on February 10, 2014, starting 20 days of debate on a flat budget that redirects funds from last year’s cuts. (Gregory Nickerson/WyoFile — click to view)

By Gregory Nickerson
— February 11, 2014

The opening gavel of the Wyoming Legislature this week kicks off 20 days of debate on the budget that will fund the next two years of state government. The $3.34 billion General Fund spending proposal keeps executive branch spending essentially flat. It does so by maintaining cuts from the 2013 session, then adding new spending on people, local government and infrastructure.

The draft budget offers $80.9 million in salary raises for state employees and educators — the first major salary adjustment since 2009. It would also provide $10.1 million to address a backlog of individuals awaiting care related to disabilities and brain injuries.

Further, the budget would provide $150 million in aid to local governments, and spend more than $632 million in construction for K-12 schools, community colleges, the University of Wyoming, and a unified technology network. (See this WyoFile legislative feature for more on capital construction funding.)

A high-level view of Wyoming's proposed budget and savings. (WyoFile — click to enlarge)

A high-level view of Wyoming’s proposed budget and savings. (WyoFile — click to enlarge)

“We will not change our ways —  we will keep our fiscally disciplined approach — but we will exhibit the wisdom, born from experience, to ‘pay it forward’ at a time when we can responsibly do so,” wrote Gov. Mead in his budget message.

In the 2013 session, lawmakers cut ongoing spending in select agencies by 6.5 percent. Most of those cuts will carry forward at the same level into 2015-2016, to the tune of $124 million.

The continuing cuts will have the biggest effect on agencies that spend the lion’s share of General Fund money. For example, Mead’s current spending proposal for the Department of Health started out $38 million below the 2013-2014 budget. The subsequent addition of $30 million in federally mandated Medicaid expansion and other exception requests then erased the cuts.

The University of Wyoming block grant will start out $20 million below 2013-2014 levels. The Community College Commission budget proposal is down $34 million below the last funding cycle, and the Department of Corrections is down $7 million. Those cuts will continue in 2015-2016, freeing up money for uses that Gov. Mead and the Joint Appropriations Committee (JAC) considered high priorities.

Though a tiny dollar amount compared to the total budget, the JAC’s proposal to cover about $2 million in non-game species funding to the Game & Fish Department could help that agency remain solvent. Separate legislation to generate more revenue for the Game & Fish Department by increasing license fees by 10 percent died on the first day of the session when it failed a vote of introduction.

A separate measure, Senate File 45, would transfer some of the $4.7 million in Game and Fish employee insurance costs, plus grizzly management costs, out of the agency budget into the General Fund. The senate approved introduction of this bill.

Additionally, lawmakers will consider two bills for the optional expansion of Medicaid. The “Medicaid Fit” bill would spend $156 million in Federal Funds to expand Medicaid to 17,600 individuals, while reducing Wyoming’s General Fund expenditures by $34.68 million.

The Big Picture

The grand total for Gov. Mead’s 2015-2016 draft budget is roughly $8.389 billion. Most of the attention in this session will focus on the $3.34 billion General Fund proposal, which pays for the majority of state programs. That’s because lawmakers have the most control over General Fund spending. Other major portions of the budget — like $2.072 billion in spending for the state’s K-12 schools — come in the form of block grants, meaning lawmakers don’t debate the particulars.

The proposed $2.0782 billion in school spending for 2015-2016 comes in two parts. The School Foundation Program budget proposes $1.66 billion for operating K-12 schools, while the School Capital Construction Account is budgeted at $412 million for school construction and major maintenance.

Together, the General Fund proposal and the K-12 school funding add up to $5.4 billion. The state will then spend another $3.4 billion, with almost half of that coming from federal funds. The remainder comes mostly from internal funds, enterprise funds, special revenue, highway funds, agency funds, and tobacco funds.

Projected Revenue

If all of the $8.389 billion in Wyoming’s draft budget came from taxes paid by individuals, every man woman and child in Wyoming would pay $14,399 to fund state government. That tax burden is greatly reduced by the presence of Wyoming’s mineral industries.

The most recent revenue projections from Wyoming’s Consensus Revenue Estimating Group (CREG) came out in January. In that report, CREG estimated that extraction of publicly-owned minerals will contribute $1.87 billion in severance taxes, and $2.019 billion in Federal Mineral Royalties and Coal Lease Bonuses in the 2015-2016 biennium. Together, those revenue streams could add up to roughly 46 percent of the projected funds available to Wyoming government and K-12 schools. For the General Fund/Budget Reserve Account only, the mineral revenue could contribute 50 percent of funds in the next budget cycle.

The other major revenue streams for Wyoming’s General Fund include Sales and Use Taxes. That category is projected to contribute $1.055 billion (29.7 percent) of General Fund revenue for 2015-2016. Income from the Permanent Mineral Trust Fund and investments will contribute about 12.9 percent of General Fund revenue, according to projections. Money from other sources could contribute about 7.2 percent of General Fund dollars.

the newly constructed Big Horn Middle School/High School, which opened in Autumn 2011.

The newly constructed Big Horn Middle School/High School, which opened in Autumn 2011. (Gregory Nickerson/WyoFile — click to enlarge)

Saving for Schools

Much of Wyoming’s construction money for K-12 schools comes from Coal Lease Bonuses. Some lawmakers are worried that the historically strong revenue stream may weaken, given two failed federal coal lease auctions in 2013 spurred by market and national policy realities. Lawmakers responded by creating a new School Foundation Reserve Account, which would provide for liquid savings that could be used to cover shortfalls in school funding. The JAC has proposed putting $100 million in the fund this year.

“In two years the school fund is going to be under water,” said Rep. Steve Harshman (R-Casper), who co-chairs the Joint Appropriations Committee. “With school funds and capcon, we have to find a solution to it. Part of it is to save a little bit for the downfall and hopefully we get a change in Washington and we can export coal to Asia.”

Money for Raises

Gov. Mead proposed $88 million in raises for state employees and educators. The Joint Appropriations Committee reduced that proposal to $80 million during its January meetings.

The current JAC proposal includes $39 million in raises for executive branch and judicial employees. That includes 2 percent raises in both 2015 and 2016 for state workers and University of Wyoming employees. That group would also have recent retirement cost increases covered by the state. Community college employees would receive a single 2 percent raise estimated to cost $3.65 million.

The JAC also approved $41.3 million in increased compensation for the K-12 system. About $29 million of that would go toward an external cost adjustment to pay for supplies, utilities, and salary increases. Another $12.3 million would cover recent increases in retirement costs for the state’s roughly 10,000 K-12 employees.  For more on the state employee raises, read this WyoFile feature.

Local Government

Driver David Bussard is one of 10 employees in the Platte County Road and Bridge Department. During a blizzard, he may spend up to 16 hours per day plowing roads. (Gregory Nickerson/WyoFile — click to enlarge)

County governments use state money to provide important services like road maintenance. (Gregory Nickerson/WyoFile — click to enlarge)

One of Gov. Mead’s top priorities for the 2014 session is his proposal to provide $175 million in funding to local governments, with 40 percent of that for infrastructure and 60 percent for operations.

“Infrastructure is another form of savings and it does not fluctuate with the market,” Mead wrote in his budget message. “It supports local communities, commerce, industry, education and citizens. Infrastructure projects … are long-term investments that return dividends to the State in real and diverse ways.”

The Joint Appropriations Committee approved $150 million in aid to city and county governments, plus $25 million in additional funds should the federal government eliminate Payment in Lieu of Taxes (PILT) money in its Farm Bill. In its present form, the federal Farm Bill includes the PILT money, so the JAC proposal for local aid stands at $150 million for 2015, and another $25 million more for 2016 not contingent on the PILT funds.

“I am really worried about not providing the resources to our counties and cities to enable them to take care of the infrastructure,” said Senate Minority leader John Hastert (D-Green River), who is a member of the JAC. Many of us have said that the government closest to the people should be the one that governs and certainly the city councils and commissioners are right there on the front lines.”

Wyomings Five Biggest General Fund Agencies

2013-2014 ongoing General Fund Appropriations

The state’s five largest agencies with General Fund appropriations for the 2013-2014 biennium. The Wyoming Department of Health (WDH) uses about a third of the state General Fund appropriations, while the Department of Family Services (DFS), Community Colleges (CC), the University of Wyoming (UW) and Corrections also take large amounts. (WyoFile — Click to enlarge)

More than $2 billion of the proposed spending for 2015-2016 would go to five agencies that form the majority of Wyoming’s General Fund budget. These agencies took the largest cuts in the 2013 session, but they also provide bulk of government services to Wyoming’s people.

Health

The Wyoming Department of Health receives more General Fund money than any other agency. The proposed General Fund appropriation for the agency is $953 million. A large portion of that, $597 million, is the state’s share of the Medicaid program.

The Department of Health also receives a large amount of federal funding. Gov. Mead recommended $794 million in federal money for the agency in 2015-2016. The total budget for the agency, including General Fund, Federal Funds, and other funds is $1.949 billion.

The major changes to the Department of Health budget this year include roughly $30 million in costs associated with mandatory expansion of Medicaid under the Affordable Care Act. That money will be matched by $34 million in additional federal funds.

Additionally, the department budget includes $10.1 million to reduce the number of individuals on the waiting list for disability and Acquired Brain Injury waivers. That money would provide services to 172 of 234 adults, and 115 of 298 children on the disability waiver waiting list. It would also offer care for 51 of 74 individuals waiting for the Acquired Brain Injury waiver.

The JAC approved mandatory Medicaid expansion and waiver proposals, along with $2.7 million in funding for immunizations. “Most of what we asked for was approved,” said Department of Health spokesperson Kim Deti. She acknowledged there will be significant discussion during the session about Medicaid expansion and the waiver programs. The legislature will also consider funding a study of capital construction projects at the Wyoming State Hospital in Evanston, the Wyoming Veterans Home in Buffalo, and the Wyoming Life Resource Center in Lander.

University of Wyoming

A conceptual drawing of the high bay engineering research facility. This drawing is a rendering for fundraising purposes, not an actual design. (Molone/Belton/Abel — click to enlarge)

A conceptual drawing of the high bay engineering research facility at the University of Wyoming. This drawing is a rendering for fundraising purposes, not an actual design. (Molone/Belton/Abel — click to enlarge)

The budget proposal for the state’s flagship university for 2015-2016 is $409 million in General Fund money. That starting point is $20 million below the 2013-2014 biennium level of $429 million. Appropriations that come with legislative instructions on how the money should be spent reduce the university’s amount of flexible block grant money to $359 million for the upcoming budget cycle.

The Joint Appropriations Committee proposal for the university includes more than $10 million in salary raises. The raises come on the heels of four years without raises — a period when the university lost 90 faculty members, many of them to peer institutions offering higher pay. The JAC also approved $20 million for changes at the College of Engineering and Applied Sciences, which includes money for the High-Bay research facility, and programmatic changes in the engineering school.

In addition, the JAC approved $5 million to complete the renovation of the Arena Auditorium, and $1 million for Wyoming Public Media, which operates the state’s National Public Radio affiliate stations. The committee also approved funds for classroom renovations, a wireless backbone for the campus.

Corrections

Wyoming’s Department of Corrections system has the capacity to house 2,433 inmates. The Department employs some 1,286 people at its major prisons in Rawlins, Torrington, Lusk, and its Honor Farms in Riverton and Newcastle. The proposed department budget for 2015-2016 is $301.5 million, with $288 million coming from the General Fund.

The JAC denied Gov. Mead’s recommendation for $11.5 to expand the Wyoming Medium Correctional Institution in Torrington by 144 beds, citing a need for further study. For more, read this piece by Joan Barron of the Casper Star-Tribune.

Community Colleges

Wyoming operates seven community college districts that serve more than 18,000 full-time students, nearly twice as many students as the University of Wyoming. The Wyoming Community College Commission oversees the budget for the colleges, though each college operates under its own block grant. Gov. Mead proposed $242 million for the Community College Commission in 2015-2016, some $34 million less than the previous funding cycle. The JAC recommended $9 million in funding for enrollment growth, an exception request that Gov. Mead denied.

The JAC’s other major changes to the funding for community colleges came in the realm of capital construction. The Commission submitted a list of 12 prioritized projects at 10 locations to the Department of Administration (A&I), which manages funding of construction at the colleges. A&I subsequently forwarded the list of projects to the State Building Commission, which voted to forward all the projects during a meeting that Gov. Mead did not attend.

When the proposal arrived on Gov. Mead’s desk, he recommended state funding for just two projects. He recommended $22.9 million for a tech center at Eastern Wyoming College in Torrington, and $3.8 million for the Lancer Hall dormitory expansion. He also proposed $7 million in state funds for a technical education center at Laramie County Community College (LCCC) in Cheyenne.

“Community colleges continue to be a significant part of Wyoming’s higher education system,” Gov. Mead wrote in his budget message. “I want to continue to support capital construction projects at our community colleges. They are difficult to prioritize and the Legislature and others might have different ideas.”

In meetings last month, the JAC added $11 million for a joint UW/LCCC building in Cheyenne. The committee also approved state funds equal to 21 percent of the total cost of the following projects:

  • Sheridan College Science/Ag/Culinary Center, $13 million total cost (JAC approved $2.7 million in General Fund dollars and $10.3 million in local revenue)
  • Riverton Student Success Center, Central Wyoming College, $4.9 million total cost (JAC approved $1 million from General Fund and $4 million in local revenue)
  • Gillette Activity Center, $18.9 million total cost (JAC approved $4.2 from the General Fund and $14.7 million from local sources.)

The JAC’s recommendation for partial state match of these projects means that each college will have to find its own local funding to complete the project, most likely through fundraising or a bond issue. “We don’t know what logic was followed in terms about determining the state versus local match,” said Community College Commission Director Jim Rose. “Its one of those difficult problems because on the one hand you’ve been granted state funds. At the same time it’s not the amount that you thought you needed.”

Department of Family Services

Wyoming’s Department of Family Services employs 695 people, and has a proposed budget of $295 million ($170 million General Fund, $114 million federal funds, $10 million other funds).

This year, the agency’s largest request was $13 million for construction of a new classroom building at the Wyoming Boys School. Some classes are held in a former dormitory built in 1965. The JAC approved the request, along with $6.9 million for the Wyoming Eligibility System, which would enable prospective clients to sign up for services online.

Department of Family Services spokesperson Tony Lewis says the Wyoming Eligibility System represents a major improvement over former system, which was designed decades ago. “There will still be some interviewing and communications, but it makes it so much more accessible,” Lewis said.

Department of Transportation

Wyoming Department of Transportation revenue in 2014. Only a small portion comes form the General Fund. (WyDot — click enlarge)

Wyoming Department of Transportation revenue in 2014. Only a small portion comes form the General Fund. (WyDOT — click enlarge)

After the state Department of Health, the Wyoming Department of Transportation (WyDOT) spends more money than any other agency, approximately $1.2 billion per biennium. In terms of employee count, the 2,000 workers who maintain and patrol Wyoming’s roads significantly outnumber the Department of Health’s 1,460 employees. However, only a small portion of WyDOT’s $627 million budget for 2014 is under legislative control. That’s because the department directly receives federal funds and other user fees to maintain U.S. highways in Wyoming, bypassing Wyoming’s General Fund.

In the 2013-2014 biennium, the legislature approved $85 million in General Fund money for WyDOT. This year, the department requested $117 million dollars from the General Fund. Gov. Mead subsequently denied $52 million of that amount on grounds that the gas tax passed last year would provide enough funds for maintenance. That leaves the department with $65 million in proposed General Fund spending going into the session.

While legislative appropriations to WyDOT may be minimal in the context of the overall agency budget, they can help when the other revenue sources fall short. WyDOT’s long-term plan indicates that it needs an additional $269 million in funds each biennium to maintain Wyoming’s roads in their current condition. Even with the $95 million in revenue from the gas tax, WyDOT projects a $128 million shortfall in the coming biennium.

“The legislature and the governor are real hesitant about putting general fund money into highways,” said Rep. Steve Harshman (R-Casper). Though lawmakers put General Fund money toward roads during the recent boom, he doesn’t think that policy is sustainable. “It’s a deal where you can’t continue that. It will eat you alive.”

An Enviable Position

Natural gas prices (red lines) make the difference between Wyoming's revenues (black line) being high enough to cover the state's appropriations.

Wyoming’s budget doubled between 2003 and 2008. Natural gas prices (red lines) make the difference between Wyoming’s revenues (black line) being high enough to cover the state’s appropriations. (Courtesy of Legislative Service Office, Budget/Fiscal Division — click to enlarge)

While Wyoming may experience decreased revenue from coal production and an uncertain natural gas market in coming years, the state remains in good fiscal shape. With $17 billion in investments, the state has the potential to receive major investment windfalls. Last summer, the state received $346 million in capital gains from investments, putting $132 million of that into savings. Even with other deposits, the state had more than $150 million in un-budgeted money for the General Fund and the Strategic Projects and Investments Account.

For now, the budget for 2015-2016 comes in below projected revenues, leaving legislators to debate over how much to put into permanent savings versus infrastructure or other projects. One of the key debates of the past few sessions has shifted to how much money to put in permanent savings in comparison to savings that can be spent, like the rainy day account.

In this session, the state is poised to increase spending on people, while contributing significant amounts to local governments and capital construction projects. Still, the Permanent Wyoming Mineral Trust Fund is set to grow by almost $700 million dollars, getting the fund closer to some lawmakers’ goal of an $8 billion balance by 2018.

“Wyoming is in the enviable position of being able to ask how much we should save (in dollars and infrastructure investment) and how much we should spend,” wrote Gov. Mead in his budget message. “It is a budget that continues to guard against the explosive growth of the last decade … ”

Companion features:
— Gregory Nickerson is the government and policy reporter for WyoFile. He writes the Capitol Beat blog. Contact him at greg@wyofile.com. Follow him on twitter @GregNickersonWY.
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Published on February 11, 2014

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