CHEYENNE — As the 66th Wyoming Legislature’s budget session convened Monday, it was no secret the state’s finances are on the up. The budget outlook, buoyed by fossil fuel markets, rebounded nearly $850 million from its pandemic-driven depths, and those gains do not include a $1 billion American Rescue Plan Act windfall that also must be allocated. On top of that, the state’s Consensus Revenue Estimating Group in January added $38.5 million more to the pot legislators can distribute.
Although Wyoming’s on much sounder financial footing than a year ago, Gov. Mark Gordon encouraged the Legislature to hold on to what it can.
“We haven’t seen the end to the assault on our state’s core industries perpetrated by this administration,” Gordon said Monday during his State of the State address in Cheyenne. “Therefore, my focus must remain on the long-term fiscal viability of Wyoming and our ability to fight back. That’s why I’ve proposed placing an additional $400 million in savings.”
Debate over savings versus spending will emerge as Wyoming’s 90 representatives and senators hash out how to appropriate the federal stimulus, some $502 million of which qualifies as revenue replacement and can be spent flexibly or socked away. Gordon and the Legislature have so far not been inclined to use the funds to restore the size of the government agencies, which saw budgets slashed following a COVID-19-induced plunge in revenues.
The latest revenue dynamics lead Senate Revenue Committee Chairman Cale Case (R-Lander) to believe his colleagues tasked with appropriating the budget will have smooth sailing in the four weeks ahead. “They didn’t have to make tough cuts,” Case said of the decisions that led to this point, “and they were able to roll things over when they thought it was going to be a terrible year.”
The budget fights that the Lander businessman foresees in the coming session will be more over “pet projects,” like new hospitals, he says.
And the rosier outlook will likely forestall the more consequential conversations Case says the Legislature needs to have over financing Wyoming in the long term.
“In a way, I have mixed feelings about the ARPA funding,” Case said. “Certainly I hope it does some good, but we’re failing to realize that the billion-plus dollars in ARPA funding, believe it or not, doesn’t even cover the amount of mineral revenues we’ve lost since 2014. That’s a gigantic thing to think about and we’re not doing anything in our tax structure, or the way we assess taxes or what we tax to think about that.
“I find that just stunning,” he said.
Savings and spending
Factoring all sources of funds at projected levels, Wyoming will run its government with approximately $8.9 billion in the 2023-2024 fiscal biennium. That makes the state a nearly $4.5 billion annual operation, according to Gov. Mark Gordon’s recommended budget. But only a fraction of those funds are fluid and able to be moved around freely. Federal funding earmarked for specific state programs constitutes nearly a quarter of what the state takes in, while other revenue streams are auto-siphoned into permanent trusts and reserve accounts. Altogether it constitutes a complex system of financial plumbing that sometimes can even throw legislators for a loop.
“I don’t know exactly what the genesis of that complexity was,” said Mike Madden, a former longtime Wyoming House representative from Buffalo. “But sometimes it looks like it was made to confuse all but the most discerning people so that they wouldn’t know if they had any money, or if they were out of money.”
It’s clear, however, that Wyoming has managed to squirrel away quite a bit of money. Investment income from one savings account alone — the mineral severance-tax funded Permanent Wyoming Mineral Trust Fund — is now paying for hundreds of millions of dollars worth of general government operations.
“When I came into the Legislature [in 2003] the Permanent Trust Fund was $2 billion,” Rep. Steve Harshman (R-Casper) said. “Now that thing’s over $9 billion, and it’s really starting to be substantial. It was under 10% of our revenues and now it’s over 25%.”
One idea that will be introduced this session seeks to make those funds more accessible. The joint resolution, which requires an amendment to the Wyoming Constitution, would transfer investment earnings from the Permanent Wyoming Mineral Trust Fund to a separate fund. That pot would then be freely available to the Legislature to allocate, of an amount up to 8% of the PMTF’s market value.
Eventually, Rep. Bob Nicholas (R-Cheyenne) told members of the Select Committee on Capital Financing and Investments last week, the state could build up that earnings fund enough to cover losses and fund the government during down years, blunting the effects of energy market crashes.
Regardless of how the Permanent Mineral Trust Fund is accessed, it’s become a significant moneymaker for Wyoming: potentially the second-largest source of revenue going forward, Case said. It’s also an important funding source, he said, because it’s not as cyclical and prone to crashing as mineral revenue.
“We’ll be trust fund babies,” Case said, “only because we put some money away.”
Sustainable into the future
With the industries that built the permanent funds withering, Case also argued that investment income shouldn’t be thought of as the state’s financial salvation.
“I can suspect there’s going to be a very long-term structural situation where carbon minerals are going to be off the table. Increasingly less, less, less,” Case said. “What are we doing to make Wyoming more of a sustainable economy in the sense that we can pay for things on an ongoing basis?”
Overall, Wyoming’s revenues are still on a long-term downswing. The state government’s had it “pretty tough” since 2016, Harshman said, and is still operating with less than it did 10 years ago. That’s true in real dollars, without even factoring in inflation, he said.
“But I’m really optimistic,” Harshman said. “I think we’re going to build up, and do some good with this federal windfall plus this current spike in energy prices.”
For Case, considering those same circumstances provokes worry.
“If it wouldn’t have been for the COVID-related funding and now the ARPA funding, we would be down a billion dollars,” he said. “We would be down that right now.”