Education funding is so critical to the future of Wyoming that we can’t, and shouldn’t, stop discussing it until we solve it. So here come two more people with ideas for the legislators who are toiling away on this issue.
Both are close observers of the debate with much to offer from experience in finance and in Wyoming’s tax system: Gail Symons and Larry Wolfe.
Gail is a ranch owner from Sheridan and retired U.S. Naval Officer specializing in logistics and finance, now retired from General Electric with experience in supply chain and marketing process improvement. She is a member of Wyoming’s Commission on Efficiencies in State Government.
Larry is a lawyer in Cheyenne, who has been deeply involved in Wyoming’s tax system since the late 1980s as a minerals industry lawyer. He was appointed by Governor Mead as a representative of the public on the Mineral Tax Task Force that submitted its report in 2016. Larry’s essay was originally his comment on the education “white paper” released in January that explored options before the 2017 session; he kindly permitted us to publish an updated version.
As Larry says at the end of his piece, legislators need courage, wisdom and concern for the future of the state to solve this problem. We all need to help with positive suggestions. The old question was why more money didn’t necessarily mean better outcomes. Now, the question is how less money can lead to better outcomes.
Take a look at these essays and see what you think. Post a comment in response. Maybe even offer to write a column for us on this topic yourself to move the conversation further.
By Larry Wolfe
This is an open letter to Wyoming legislators, particularly those serving on committees dealing with revenue and with education needs and finances:
I appreciate that you are focusing on these critical issues. As you recognize, education operational funding is only one part of the challenge, the other financial issues facing the state are equally formidable, including school capital construction and major maintenance, State of Wyoming capital construction and investment (prison, state facilities, roads, technology upgrades etc.), local government and of course State general operational funding. Any one of these issues would be a sufficient challenge for the Legislature, you and your colleagues have to deal with all of them at the same time.
I would encourage you to approach the task of fixing these funding problems as a multi-year undertaking. Each future legislative session will need to take up the issue to find solutions to the many funding problems that face the state.
Please do not be persuaded that improvements in energy markets will save the State’s finances. It is not likely to happen, but if it does, it will just help diminish the pain and will not relieve your responsibilities to put Wyoming on a stronger and more sustainable financial footing.
To get into the details:
Regarding consolidation of school districts: it is probably not worth the effort, the politics (and the Fremont County legislators) will be against it and the savings are not large.
Regarding existing funding streams: you should look at redirecting the diversions now going to the Water Development Accounts and also consider taking some of the amounts in Water Development Account 3. It has over $46.7 million left according to the latest Fiscal Profile by the Legislative Service Office. While everyone wants to believe that the State will build dams and conveyance systems, the reality is that these projects are of marginal benefit to the State as a whole, they benefit only a small handful of citizens and the large ones are not likely to be built in the near future, if at all.
You should encourage the Legislature to adopt bonding schemes for major State capital construction projects. It was disappointing to see that approach turned down for the prison during the recent session. These projects build long term assets and it is only fair that the projects be paid for over time, rather than burdening solely the state’s current inhabitants. Bonding for these projects will free up cash to be used to pay for other things, such as education funding.
We all recognize that Wyoming is highly dependent on mineral revenues (both taxes and royalties). Since that is the case the Legislature should be wary about imposing further tax costs on the mineral industry, because it exacerbates the State’s dependence and it will bring strong opposition from energy and mineral producers. It is important to remember that additional mills and raising the statewide sales tax both impose most of their additional costs on the minerals industry.
We all know what the real issues are in Wyoming’s tax system: Individuals, you and me, do not pay anything close to the cost of the services that the State provides. You should analyze and include in your list of potential revenue enhancements:
- Raise the assessment ratio for residential and commercial properties. It is currently 9.5% and it could be raised to 11.5% to match the industrial ratio, or at least set somewhere higher than the current ratio. This will provide funding directly to schools and also to local governments (counties, cities and towns) and special districts but it will not be borne primarily by the minerals industry. At a June 12 meeting of the Revenue Committee and Select Committee on School Finance Recalibration, the Legislative Service Office estimated additional revenue of $72.7 million per year from raising the residential and commercial assessment ratio to 10.5 percent and raising the industrial from 11.5 percent to 12.5 percent.
- Reimpose the grocery tax. This won’t be popular but it raises significant revenue ($28.8 million annually was the LSO’s estimate) and it does not burden the minerals industry.
- As recommended years ago in Tax Reform 2000 (a study available on the Department of Revenue’s website) — the Department of Revenue should study how Wyoming might impose a corporate income tax, including the mechanics and how much it would raise (given the Constitutional and statutory limitations). Ideally, legislators would have this information for the 2018 session. The problem with all the arguments about diversifying our economy is that we do not have a tax system that captures the benefits of a more diverse economy. We need to figure out a tax system that works fairly and efficiently to tax companies that do not extract minerals.
- Allow counties to enact an optional real estate transfer tax that could be set at a certain level that it would only apply to high value properties. This was also a Tax Reform 2000 recommendation.
- A sales tax on services will be controversial and there will be substantial opposition (including from lawyers) but if you are serious, that too should be the subject of a study you direct the direct the Department of Revenue to conduct soon.
- Repeal or aggressively sunset (and stick to sunsets) sales tax exemptions.
One final note. All the legislators serving in 2017 – 2018 are going to have to act as if it is the last term you will serve. It will take that kind of courage, wisdom and concern for the future of the State to withstand the pressures from the voters and interest groups.