The Wyoming House of Representative failed to advance any new revenue measures in its first week of action, effectively killing any chance of raising new funds to meet the state’s budget shortfalls.
Funding education, overcoming the budget deficit and diversifying the state’s economy remain the pressing issues on the minds of legislative leaders. But a clear path forward for education funding has yet to emerge.
Economic diversification has widespread support, but efforts to diversify the state’s tax system to capture revenues from a less-mineral dependent economy are dead in the water.
House leadership let 37 bills expire without an introduction vote Friday. The list included a lodging tax pushed by Senate President Eli Bebout, a tobacco tax increase, a wind energy tax, real estate transfer tax and a personal income tax. Avoiding votes on tax bills follows committee inaction last month when a months-long revenue discussion lost steam as the legislative session approached.
“It’s not even 3:30,” House Minority Floor Leader Cathy Connolly said as the House floor cleared out Friday afternoon. Though the prevailing sentiment was clearly against tax increases, the House leadership had wiped away an opportunity to debate what the state’s revenue picture should look like in a post-mineral dependence future.
Last year, the Legislature cut spending and used savings to reduce the state’s “structural deficit” from $1.2 billion to $900 million, according to the Legislative Service Office. The deficit projection doesn’t take into account potential diversions of revenues or use of the state’s substantial savings in new ways, as some bills propose.
The budget bill will be debated next week, and the deficits ensure there will be a number of attempts to amend the work conducted by the Joint Appropriations Committee. A review of the education, economic diversification and changes to state’s savings bills successfully introduced this week offers a picture of the options still open to lawmakers.
Education
Speaking separately with reporters Friday morning, Speaker of the House Steve Harshman and Senate President Eli Bebout showed they continue to envision different solutions for education funding. Bills introduced in each chamber reflected those split views.
The Senate voted to introduce two proposed constitutional amendments with large margins. Senate Joint Resolution 3 changes the Wyoming Constitution to make local school districts responsible for constructing and maintaining schools. School boards would have to acquire bonds through local elections, though the state could provide funding in certain situations. Sen. Charles Scott (R-Casper) and Senate Education Committee Chairman Hank Coe (R-Cody) proposed the amendment, which passed the Senate’s introductory vote 30-0.
Senate Joint Resolution 4 changes the Constitution to make the Legislature responsible for setting education funding levels and enabling lawmakers to take revenue levels into account when it does so. It would prevent the judicial system from ordering the Legislature to raise revenue to pay for education. The amendment would enable the Legislature to sidestep state supreme court rulings that say the Constitution guarantees every Wyoming child a high quality education and demands the Legislature find a way to fund it, said Senate Minority Floor Leader Chris Rothfuss (D-Laramie), who voted against the measure.
Sen. Affie Ellis (R-Cheyenne) sponsored the amendment, which passed its introductory vote 25-4. Coe, Bebout and Senate Majority Floor Leader Drew Perkins (R-Casper) all co-sponsored the bill, giving it a hefty endorsement.
Elected officials should determine how much money is spent on education without the courts handicapping them, Bebout said.
“What’s wrong with the voters having an opportunity to elect people like me to decide how much money we spend,” he said. “I like the Legislature more involved than the courts.”
On the House side, Harshman wasn’t concerned. “I’m not afraid of that,” he said.
“I think the people in Wyoming aren’t interested in scrapping the Constitution,” Harshman said. Lawmakers and Wyoming residents prefer separate branches of government acting as checks to each other, he said.
“We don’t want all the power in the executive branch, nor do we want it all in the legislative branch,” he said.
The House also passed a bill that cuts $17 million through various changes to the school funding model. Bills that originated from the Select Committee on School Finance Recalibration also advanced. A bill to review compensation for special education teachers passed an introductory vote on the House 58-2.
In the Senate, a bill to review school transportation funding passed an introductory vote with 29 aye votes and one excused.
It was too early to tell what effect 2017’s recalibration effort will have on debate, Rothfuss said. Consultants spent months, and $480,000, coming up with a new funding model. Their work was discarded because it concluded the state should spend about $70 million more on schools.
“It’s too early honestly,” to see the impact of recalibration, Rothfuss said. But he expects the consultants’ discarded report to carry weight in education debates over the weeks to come.
Economic Diversification (and revenue)
Gov. Matt Mead’s economic diversification effort, ENDOW, appears to be steaming forward with momentum from lawmakers across the political spectrum. ENDOW-originated bills to expand Wyoming’s broadband, expand agricultural marketing and develop new markets abroad, develop a fund for business startups and fund new workforce training programs all soared through introductory votes in the Senate. They are now before the Senate Minerals Committee, chaired by Senate Vice-President Michael Von Flatern, an ENDOW proponent.
Despite his support, Von Flatern said he agrees with leaders in the minority party, who say successful economic diversification effort must be paired with changes to Wyoming’s tax code to benefit the state in the long run.
“Let’s say ENDOW was wildly successful and somehow created 50,000 manufacturing jobs,” said Rothfuss. “It would probably bankrupt the state. We don’t make any money off manufacturing jobs.” He touted statistics often cited by House Revenue Committee Chairman Mike Madden that show the gap between the cost of services Wyoming residents receive from the state, particularly education, and the amount of money they pay in taxes.
Read more reporting on economic diversification without tax reform
The House narrowly killed an ENDOW-related bill. House Bill 154, sponsored by the Management Council, which would have taken $500 million from the state’s massive trust fund to create a loan program for towns and counties to pursue infrastructure projects. Today, the $8 billion Permanent Mineral Trust Fund is invested in stocks and bond markets around the world.
Supporters of HB-154 pitched it as a way to invest in Main Street over Wall Street. Opponents said it would damage the PMTF’s ability to provide for future generations.
Twenty representatives voted against the bill — many of them from the House’s most fiercely conservative faction. A majority of the House will need to vote in favor of the other ENDOW bills as well, if they pass through the Senate.
Finding revenue without taxes
Taxes aren’t the only way for the Legislature to provide more money for the budget. Harshman wants lawmakers to change spending and savings policies in order to free up more money. The House voted unanimously, with one member excused, to introduce a bill Harshman brought forward to that effect. House Bill 186 uses a complicated formula to divert some investment income out of the Permanent Mineral Trust Fund and make it spendable. It would raise $70 million a year, Harshman said, which the bill largely directs towards school maintenance and construction. The PMTF would have to make a 4 percent return on its investments most years to cover the expenditures, he said.
“It’s a little more predictable than the price of oil,” Harshman said. Citing a poll conducted by the Wyoming Business Alliance, he said the legislation aligns with voters’ desires to see the state maximize the use of its investments before it raises taxes.
“It’s our hedge against a personal income tax,” he said.
Despite its popularity in the House, Harshman’s bill may still see opposition. Some lawmakers worry about relying on investment earnings, even with complicated systems of reserve accounts to back them up.
“We’ve got to be very careful that we don’t dig ourselves a hole thinking the money and the revenues are there when they really aren’t,” Bebout said. “It’s kind of smoke and mirrors when you start transferring money around.”
The Senate narrowly killed a bill to permanently direct a portion of severance tax money away from the PMTF, where it can’t be spent under the Wyoming Constitution, and spend that money on general government operations, instead. A similar change is in the budget bill, but it would only last for two years. Senate Revenue Committee Chairman Ray Peterson said he thought senators preferred to make the change temporary.
The week started with Bebout and Harshman saying they expect to have their differences on funding education.
“There’s nothing wrong about having a good discussion between the House and Senate about the amount of money we spend and how we spend it,” Bebout told reporters Monday. With the bills that remain, there is little indication of where they would align. Bebout made clear that observers shouldn’t expect a single solution, and no legislation emerged that mirrored last year’s comprehensive omnibus education bill.
“What the speaker and I both agree on is to try and solve the problem step by step over a period of time,” Bebout said Friday. “Hopefully a short period of time.”
Budget work begins Monday
The Legislature will reconvene Monday. Bills that survived introductory votes now head into committees, or if already advanced by committee, will go back to the chamber they began in for amendments and three more votes.
Each chamber works on an identical version of the budget bill. Once the budget passes the House and Senate, differences in each chamber’s version are hashed out by a conference committee. Both chambers will begin debate on the budget bill sometime Monday.
For a complete look at what bills lived and which died in week one, consult the LSO’s bill tracking page here.