Following weeks of budget negotiations in January, Legislative Service Office fiscal staff stacked two boxes of agency budget binders and a pair of laptop bags on a cart and left the Joint Appropriations Committee’s meeting room. The budget crafted then has now been amended separately on the House and Senate side. This week, the two chambers will begin reconciling their differences. (Andrew Graham/WyoFile)

The two chambers of the Wyoming Legislature concluded their budget writing Friday, setting up negotiations over visions that largely agree on spending but diverge sharply on the sources of funding.

Expenditures on general government in the two budget bills are within $1 million of each other, Speaker of the House Steve Harshman (R-Casper) told WyoFile Monday. The difference is how they’re paid. The House wants to use investment income and savings to meet the budget deficit. The Senate opposes the use of investment earnings and instead wants the money to come strictly from savings.

There is “significant divergence” in the two budget bills, said House Appropriations Committee Chairman Bob Nicholas (R-Cheyenne) on Monday. He is still studying the Senate’s work, he said, and declined to speculate on where negotiations between the chambers will focus. Senate Appropriations Chairman Bruce Burns (R-Sheridan) did not return a request for comment Monday.

Beyond general government spending, the Senate budget bill advances cuts to public school spending.

Last week, the Senate heavily amended its budget bill to strip out much of the work the Joint Appropriations Committee did to balance the budget before the session began. The Senate removed a variety of proposals to move money and change statutory spending policies. While not seen as a long term solution, Nicholas told WyoFile in January, some of those efforts had saved the state from drawing too heavily on its savings.

This box holds the state’s two-year budget, when printed out into spiral notebooks divided by agencies. (Andrew Graham/WyoFile)

But senators prefer to spend money out of the Legislature’s savings account — commonly known as the “rainy day fund” — in order to keep the state’s structural deficit on lawmaker’s minds, Senate President Eli Bebout (R-Riverton) told reporters Friday morning. The deficit is estimated at around $856 million after a January revenue report. The majority of that comes from education funding, where the Legislative Service Office has estimated a $661 million gap between projected revenues and spending.

“If you’re going to vote for this project or that project,” Bebout said, “I want you to know it’s coming out of savings right now because that’s all we have.”

Harshman supported the JAC’s budget balancing, he told reporters Friday. “It’s a good plan,” he said. “I think they’ve done a nice job and in a real balanced and thoughtful and frankly smart way.”

In the next few days, Nicholas said, Bebout and Harshman will assign five members from each chamber to a conference committee. The two committees will then meet and begin negotiating for a middle path between each side’s approach. Whatever agreements they come up with will then have to be presented to each chamber.

During budget negotiations last year, the conference committee was made up of JAC lawmakers from each chamber. Those lawmakers are considered to be the budget experts, who spent weeks before the session taking detailed testimony from agency heads about their proposed spending.

Budget balancers

The most significant differences between the chambers comes towards the end of the budget bill, where savings accounts were used and statutes were changed to help plug the deficit.

“The House is rerouting some of those revenue sources and the Senate didn’t do that,” said Sen. Bill Landen (R-Casper) a Senate Appropriations Committee member.  

“Any flow of money that was interrupted [by the budget bill] the Senate undid that,” Landen said. The money will still be accessible to lawmakers under the Senate budget, he said, but they’ll have to make the decision to use it, as opposed to having it automatically directed towards spending on education or general government.

Over the last two weeks of legislative deliberations, Harshman has repeatedly talked about “modernizing” how the state’s revenue streams are allocated. 

Sen. Bill Landen (R-Casper)

Bebout, on the other hand, prefers for lawmakers to spend money out of one place and avoid allocating revenue streams. “Everything starts with the state’s general fund,” he said. “It’s so important that you don’t earmark everything for education and you don’t earmark it for this [or that].”

To help pay for education, the JAC had diverted some mineral severance tax money from the general fund to school funding. The Senate erased that diversion in its budget bill, sending all the money to the general fund.

The Senate also deleted a section of the budget bill that would have sent more federal mineral royalties to schools rather than to a reserve account.

Both chambers, however, retained a clause in the budget that keeps an estimated $89 million in annual severance tax money flowing to the general fund and not the state’s constitutionally established trust fund — the Wyoming Permanent Mineral Trust Fund. In the past, the Legislature had been putting more money into the trust than constitutionally required. Under the current budget, lawmakers will keep as much of the severance taxes on hand for spending as they legally can.

They’ll have to revisit the issue in 2020 because the Senate voted not to consider legislation to make the change more permanent.

One of the most significant differences comes in the form of investment income. The JAC’s budget bill had loosened spending policies on the Permanent Mineral Trust Fund’s investment income, which can be significant in some years. This year, for example, the state made nearly $1 billion in capital gains. However, the Legislature does not include that money in its budgeting projections.

The House is attempting to loosen restrictions to allow for the use of more of that investment income. It adds up to around $90 million a year, according to Harshman. The change is sustainable, he said, as long as the state can earn a 4.5 percent return on its investments most years. More than half of that would come just through standard interest earning on bank accounts, Harshman said.

But with strict adherence to its ideas of fiscal conservatism, the Senate removed that change to avoid relying on investment earnings. “Those are revenues that we don’t have yet,” Landen said.

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Wyoming’s budgeting process is complicated. The state’s balance sheet is built on projected revenues and more than a hundred different savings, spending and trust accounts. Both chamber leaders say their vision of the budget will bring more transparency.

The JAC’s budget bill would have made things more complicated in order to solve a budget deficit, Bebout said.

“What they’re going to do is they’re going to make further tips, further buckets,” Bebout said. “It’s more complicated and we lose transparency. A lot of people in the Legislature can’t follow all those tips and buckets and we want to make it more transparent.”

Bebout is considering pushing an interim topic dedicated to bringing more transparency and simplicity to the state’s budget process, he said.

Harshman, however, said it is not that complicated, because energy-dependent Wyoming has few revenue sources.

“We’re talking about revenue off investments, our trust funds,” he said. “We’re talking about modernizing our revenue streams, which are basically federal mineral royalties, [state] severance tax and sales tax. I mean that’s our choices.”

Voters are asking why the state is eyeing more cuts, he said. “You got billions in the bank. Why aren’t you using it?” Harshman said is the question. “And I agree.”

Using more investment income brings the state closer to an “honest to goodness bottom line balance sheet with people,” he said.

Mead and next governor still must cut 50 state jobs

Neither chamber touched a directive to Gov. Matt Mead to cut 50 state positions over the next two and a half years.

The governor would have to start finding those positions, or their equivalent in funding, on July 1, Nicholas told WyoFile. During committee hearings, those 50 positions were estimated to equal nearly $7.5 million in savings. 

House Appropriations Committee Chairman Bob Nicholas (R-Cheyenne)

The cuts are divided into six-month periods. In the first six months, Mead must find 12 positions or their funding equivalent to cut. He must find 13 positions or their equivalent to cut in the following six months. At the end of each period, the executive branch will have to report to the JAC on the cuts it identified.  

“The reason [for the six-month structure] is to make sure it gets implemented,” Nicholas said. Last session, the Legislature had called on the governor to cut 90 positions, or an equivalent of $13.5 million. In the end, Nicholas said, the governor didn’t comply with that order, recommending only around $8.5 million from across his various agencies.

“We didn’t know that they didn’t implement [the full cut] until we had JAC committee meetings,” Nicholas said. 

The JAC didn’t accept all Mead’s recommended cuts, and chose to put money back into the Department of Health, the Department of Family Services and the Department of Corrections in order to avoid detrimental consequences.

Throughout the budgeting process, a majority of lawmakers have resisted calls from some members to implement broad, across-the-board cuts — 2 percent off the top of each agency’s budget, for example. The JAC prefers to let the executive branch find precision cuts, Nicholas said, because lawmakers who only meet for a few months each year aren’t able to make sure cuts don’t carry undue harm to government function.

This story was edited Feb. 27 to note the Senate’s version of the 2019-20 budget bill includes proposals for significant reductions in spending on Wyoming’s public schools. The House budget bill also cuts education spending, but its proposed reductions are much lower. Readers can see details in a previous WyoFile story — Ed.

Andrew Graham

Andrew Graham is reporting for WyoFile from Laramie. He covers state government, energy and the economy. Reach him at 443-848-8756 or at andrew@wyofile.com, follow him @AndrewGraham88

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