Gordon: Half of Wyo’s revenue windfall should go to savings

Thanks to a better-than-expected state revenue picture — especially for coal, oil and natural gas — Wyoming will see an extra $329 million for the current fiscal year and an extra $739 million for the 2023-24 biennium budget period, according to revised estimates in the Consensus Revenue Estimating Group’s October report.

The 2023-24 biennium budget of $2.8 billion — approved in March — was based on the January 2022 CREG forecast, but with an improved outlook Wyoming could spend one-third more. But the unexpected windfall is merely a “fortuitous” blip for an extraction-dependent state economy facing intensifying fiscal challenges — especially inflation and mounting implications of the climate crisis, according to Gov. Mark Gordon. 

Rather than add the entirety of the revenue windfall to the state’s spending plans, the Legislature should set aside “almost half” for savings and investments, he said. The remainder could be added to several “urgent areas” of the state’s budget, such as health and mental health services, state employee compensation and water infrastructure, he said.

“It’s our responsibility not to squander this fortuitous opportunity and to make sure that we invest in our future in a way that will pay off for years to come,” Gordon said at a press conference Friday highlighting details of his proposed supplemental budget plan. “We have benefited from high energy prices, but at the same time inflation has created significant increases for the cost of [paying for] government [services].

The circumstances of Wyoming’s volatile fossil fuel-economy — temporarily fetching more state revenue while still on a long-term declining trajectory — demands a steady, conservative approach, he said. Meantime, inflation has sapped household finances and increased the cost of state services and major construction projects.

“I want to make sure that people understand I am acutely aware of how [inflation] has affected households and businesses and especially those living on fixed income,” Gordon told reporters.

Among Gordon’s supplemental budget recommendations: 

• Setting aside $412 million in the state’s Permanent Mineral Trust Fund 
• Adding $70 million to state education
• $50 million to cover inflation costs of state construction projects
• $50 million to match federal dollars for carbon capture, utilization and sequestration projects
• $18.7 million to the Department of Health
• $10 million to the state’s mineral royalty grant program, which helps with local infrastructure and ran out of money this year
• $1 million to the property tax refund program

(Click here for a complete breakdown of the supplemental budget proposal.)

Gordon will present his supplemental budget proposal to the Joint Appropriations Committee in December. 

Savings and investment

Earlier this year, the Legislature trimmed the state’s spending plan by about 14% when it approved a 2023-24 biennium budget of $2.8 billion. 

Wyoming, with a population of about 579,000, has a sovereign wealth fund valued at more than $23 billion — mostly built on decades of saving and investing state earnings from coal, oil and natural gas. The state’s budgetary “rainy day fund” — which the Legislature can access at will — swelled beyond $2 billion this year — “a level never before seen in our history,” Gordon wrote in his 2023-24 supplemental budget proposal, adding that his proposal would keep the fund intact.

Due to deep budget cuts in recent years in response to declining revenue from coal and other fossil fuels, however, “government in Wyoming is leaner than it has been for a generation,” Gordon said. It should remain lean to help it weather a declining fossil fuel market, he said. “We have been meticulous in streamlining and bringing more efficiencies to [state] government. We’re not done yet.”

Setting aside about half the state’s current revenue windfall in savings and investments “is important because it will generate ongoing revenues that will benefit us for years to come,” Gordon told reporters, adding that budgetary revenue from investments saves the average Wyoming taxpayer about $3,500 annually in foregone tax increases.

The $412 million Gordon recommends adding to the Permanent Mineral Trust Fund equals the amount of federal dollars that have supplemented the state’s current budget, he said. “Our ability to do that in future years will dry up,” he wrote in his budget message to lawmakers.

The state still has about $120.5 million in federal American Rescue Plan Act dollars, which must be fully appropriated by December 2024 and spent by December 2026. Those one-time federal dollars, along with potentially millions more from the Infrastructure Investment and Jobs Act and Inflation Reduction Act, Gordon said, provide an opportunity for strategic investments without committing too much state revenue to ongoing state services that could permanently inflate the state’s budget.

“Increasing our savings now will help pay for the services we have all agreed are essential, and will hold down the need to consider additional taxes in the future,” Gordon said.

Mental health services

After years of budget cuts combined with growing needs, Wyoming ranks last in the nation for overall mental health and services, according to a 2022 report by Mental Health America. Lawmakers restored some cuts to the Department of Health, including money for behavioral health services, in 2021 using one-time ARPA funds.

“In terms of mental health and substance abuse [funding], everything is pretty static,” Wyoming Association of Mental Health and Substance Abuse Centers Executive Director Andi Summerville said.

Gordon recommends adding $18.7 million to the department’s 2023-24 budget and adding a full-time position to help coordinate crisis care. The bulk of the $18.7 million is to meet increasing Medicaid and Medicare reimbursement rates. 

About $5 million of the $18.7 million is to help implement a multiyear effort to redesign community mental health and substance abuse. “This one-time funding would pay for required changes to Wyoming Medicaid eligibility and claims processing systems,” WDH spokesperson Kim Deti said. 

“That money is a placeholder to help with the system-software logistics that need to be done ahead of the implementation date of July 1, 2024,” Summerville said. “So it’s not going to provide any additional services.”

Another budget adjustment includes additional funding for the Mental Health Board “to effectively manage the increased number of applications and process the new requirements set forth by the Legislature,” Gordon said.

“There’s zero money [in Gordon’s supplemental budget proposal] for additional behavioral health services that go directly out to residents,” Summerville said.

Inflation

Gordon’s supplemental budget request includes an additional $1 million to the Property Tax Refund Program. “The first [year of the program] brought relief to more than 3,000 Wyoming households,” Gordon wrote in his supplemental budget proposal document.

The program aims to ease rising homeownership costs that threaten low-income and elderly households. The problem is especially acute in Teton County where property taxes increased 36% in 2021, according to Department of Revenue data. Wyoming’s 22 other counties also experienced increases at an average of 16.17%.

Though not directly addressed in his supplemental budget proposal, the Legislature should consider an adjustable sales tax as a way to help residents cope with inflation, Gordon said responding to a reporter’s question. The recommendation comes from the Gas and Diesel Price Working Group formed by Gordon in June. 

Though a state fuel tax holiday would not effectively help Wyoming consumers with high prices at the pump, according to the group’s October report, the state could help ease the pain of high petrol prices by adjusting taxes on other items, it said. The state receives an extra $100 million in severance tax and ad valorem tax revenue annually for every $10 increase in the price of oil, according to the report. Some type of adjustable sales tax relief on non-fuel products like food, based on the average annual price per barrel of oil, “would be a relatively efficient way to help Wyoming residents,” the group reported.

 “I think that’s a good effort, and we’ll continue to look at that,” Gordon told reporters.

Gordon also recommended adding $26 million in direct payments to local governments to help with inflationary costs, and $10 million to the mineral royalty grant program to help local governments meet infrastructure challenges — particularly municipal water systems. The program ran out of funds this year. 

The State Lands and Investments Board, for example, recently declined the city of Rawlins’ $7 million grant request for ARPA dollars to help with a municipal water crisis. When aging water infrastructure failed in March, much of the city was under a boil advisory for several days. The city estimates it needs about $21 million for water system upgrades.

Employee retention

Gordon proposes adding $61 million for state employee compensation, hoping to help address high turnover rates.

There are currently about 140 vacant correctional officer positions, 44 vacant highway patrol positions and abnormally large vacancies at the Department of Transportation, according to Gordon. The vacancy rate among state healthcare and social workers is approaching 50%. On average, state workers were paid 19.4% below market value before lawmakers implemented a two-phase plan earlier this year to bring wages up.

“All of these are positions that need to be compensated at a better rate,” he said.

Lawmakers approved a two-step pay increase during the 2022 budget session. The first half of pay increases went into effect in July for an average boost of 8%. 

Of 2,933 state employees (representing 36% of the state workforce) surveyed this year, 1,077 said their current wages are not sufficient and that they have to work a second job, according to the Wyoming Department of Administration and Information.