The House and Senate gather in a joint session to hear Gov. Mark Gordon’s state-of-the-state speech on Monday, the first day of the 2020 Legislative session. (Mike Vanata/WyoFile)

CHEYENNE— The 65th Wyoming Legislature convened yesterday with much talk about a coming fiscal “storm” but little anticipation that lawmakers will batten down the hatches in the next month. 

Lawmakers are painfully aware of the structural budgetary problems for a state facing a decline in its mainstay revenue generator, the energy industry. Signs of more trouble are on the horizon, but few observers expect lawmakers to shore up the state’s budget in any meaningful way this year.

Republican Gov. Mark Gordon first used the “coming storm” image in a November letter introducing his budget to the Joint Appropriations Committee. 

He did not describe a storm in his state-of-the-state speech to lawmakers Monday, however. Instead, he said “Wyoming’s economy and the state is strong.” The wisdom of past state leaders to create savings accounts will buy the state time, he said. 

“We have time, not a lot of time, but time to make thoughtful decisions,” he said.

Gov. Mark Gordan gives his state-of-the-state speech in the newly remodeled Capitol Monday. Behind him are Senate President Drew Perkins and Speaker of the House Steve Harshman. (Mike Vanata/WyoFile)

Wyoming Supreme Court Chief Justice Michael K. Davis followed Gordon. Reflecting on cuts to the judicial system, the judge gave a starker assessment of the economy.

An already overworked judicial system’s load “may increase as families are under stress, unemployment and poverty increase and businesses fail,” Davis said.

For the first time in four years, the Legislature gathered in its traditional home Monday. A $300 million restoration of the Capitol was so recently completed that an internal letter warned lawmakers of expected technical glitches during the session. 

“Things that work right now might stop working during the session,” the letter from the Speaker of the House and Senate President read. “Things will fail and warranty claims will need to be made.”

But a new building’s quirks rank low on the list of challenges facing the 90-member Legislature.

This year’s budget session is four days longer than previous ones due to a change legislative leadership made last year.

The Wyoming Constitution requires lawmakers to leave at the session’s end with a balanced budget. It’s likely lawmakers will tap into a large savings account to cover the deficit, continuing a pattern started following a revenue plunge in 2016, lawmakers interviewed by WyoFile said. 

Meanwhile, the two chambers will debate internally and with each other over hundreds of bills as well as the state’s two-year budget. The Joint Appropriations Committee voted to approve the budget bill Friday.

Budgeters shaved off around more than $100 million in expenditures in their first draft. The bulk of those cuts came from information-technology programs. State budgets have been pared down for four consecutive years, beginning with a $250 million cut by Gov. Matt Mead in 2016.

Sen. Ogden Driskill (R, SD-1, Devils Tower)

There are indications the House and Senate will scrap over a number of high-dollar building projects, particularly asks from the University of Wyoming. Over the last few years such fights have led to dramatic late-night showdowns between the two chambers.

Every five years, the Legislature convenes a committee to examine what the state’s schools provide students, and determine what it costs. The Legislature will set the terms for the 2020 committee and lawmakers in the Senate see a new battleground for a years-long argument over whether to significantly curtail public education spending. 

“It’ll be heavily debated,” Senate Vice President Ogden Driskill (R-Devils Tower) said. 

Dwindling savings

Two lawmakers said they expected the Legislature in 2020 to “kick the can down the road” without conclusive action on an education funding deficit revenue estimators say could grow to between $150-200 million a year by 2022.

The savings account, called the Legislative Reserve Account and nicknamed the “rainy day fund,” has saved the state a lot of angst in a time of declining mineral revenues, Driskill said. “It’s been absolutely wonderful that we’ve been able to stabilize using these really big funds,” he said. Two concurrent factors are growing Wyoming’s budget deficit. First, public education in the state is expensive, and courts have limited lawmakers control over those expenses. Second, lawmakers have declined to rewrite the state’s tax codes to raise revenue from sectors other than the ailing energy industry.

Lawmakers and dignitaries greet each other at the start of the 2020 Legislative session. In the center, State Treasurer Curt Meier shakes hands with Rep. Scott Clem as Meier enters the newly restored House chamber on the first day of the session. (Mike Vanata/WyoFile)

There is little appetite for tax reform, and the debate over whether to cut education has pitted the House against the Senate in the last three sessions. Driskill anticipated much of the same this go-round.

“It’s gonna be another year of kick the can down the road,” he said. “I’m not going to look much at taxes in general until education comes to the table.”

But the rainy day fund’s longevity is threatened by continued depletion and slow replacement. Some worry that within five years, lawmakers will draw it down to a point where it’s no longer useful or sustainable.

House Revenue Committee Chairman Dan Zwonitzer (R-Cheyenne)

“The road that we’ve been kicking the can down ends,” said Rep. Dan Zwonitzer (R-Cheyenne).

This will be Speaker of the House Steve Harshman’s fourth year rallying the politically more diverse House against a united Senate. He broke a state tradition by not stepping down from the speaker’s chair after one term.

Harshman (R-Casper) has blunted the impact of revenue decline by shifting revenue streams and drawing on investment earnings and savings accounts. He sees opportunities to continue that work this session, he said. But opposition to those moves, which critics say rob the state of future savings to cover current problems, is growing.

“I’m just trying to give ourselves a little time,” Harshman said in an interview Friday. “I know people are getting tired of it.”

Education’s next fight: Recalibration

The process to reset education costs is the legacy of a series of Wyoming Supreme Court cases in the 1990s that mandated the Legislature to provide an equal and high-quality education to school children around the state. 

Every five years the Legislature hires outside consultants to review the cost of education in a process called recalibration. Consultants study what’s being offered to students, and how much it should cost. The Legislature is supposed to fund education to the amount determined in that study.

The Legislature last undertook its regularly scheduled recalibration in 2015. Then, as a debate over education funding began, lawmakers conducted an early recalibration in 2017. Lawmakers seeking cuts hoped the study would find cost savings. Instead, consultants found the Legislature was underfunding education by around $70 million a year, given what it was asking the school system to do. Lawmakers rejected the study.

Gov. Mark Gordon hands Senate President Drew Perkins and Speaker of the House Steve Harshman the original flags that flew over House and Senate chambers before the Capitol’s renovation. (Mike Vanata/WyoFile)

The consultants have taken cost inflations into account and additions to what schools are providing, without looking at the foundations of what drives school funding costs, Driskill said. This year, he is hopeful the committee will embark on a deeper dive that might find savings, he said.

“We really need that ability for whoever does recalibration to look at the basket of goods [being offered],” he said, “not just do an inflation increase.” He predicts the House will resist that idea.

Comments by Harshman suggest that’s right. Recalibration is required by law, he said, and is already a comprehensive look at education. “I think those people who say [it’s not] have never been involved in it,” he said.

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In his speech to lawmakers Monday, Gordon endorsed such an examination into the “basket of goods.” However, he couched it as needed modernization. The state’s education system “was crafted before Wyoming schools had access to the internet,” he said.

Another sentence in his speech, however, could be read as a nod towards cuts. “The valve on education funding is stuck open,” Gordon said, “and will require further consideration by this body as to whether that plumbing will hold up over time.”

Limited revenue options

The other side of the structural deficit — incoming revenues — may receive less debate depending on what bills get introduced.

House Minority Floor Leader Rep. Cathy Connolly (D-Laramie)

The Legislature convenes with a limited number of bills to raise new revenue for the state. House Minority Floor Leader Cathy Connolly (D-Laramie) has a bill to impose a 4% personal and corporate income tax that would raise $115 million a year. 

“It makes no sense to continue the way that we’re going now, so we have to talk about taxation,” Connolly said in a press conference Monday. “We prided ourselves on being low taxation but honestly we’ve just had a sector of the economy carry our needs.” 

Given the anti-tax attitude of many in the House, Connolly’s bill is unlikely to gather anywhere near the two-thirds majority required for introduction during the budget session. House leadership has held back tax bills from introduction and debate in past sessions.

The House and Senate gather in a joint session to hear Gov. Mark Gordon’s state-of-the-state speech on Monday, the first day of the 2020 Legislative session. (Mike Vanata/WyoFile)

Advocates for tax reform and its fierce opponents will both watch one bill closely in the coming days. The Joint Revenue Committee voted this year to advance an income tax aimed at out-of-state large corporations like Walmart or franchise restaurant chains. 

The bill would raise around $23 million a year, according to a fiscal estimate by the Legislative Service Office. 

House Bill 64 – The National corporate tax recapture is an evolution of a bill that leaders of both chambers backed last session. The bill passed the House with 44 votes. It died when support in the Senate suddenly crumbled in the face of opposition from corporate lobbyists and conservative activists rallied by the Wyoming Republican Party. 

Lawmakers gave mixed reviews about whether they think the new version can survive the two-thirds vote. If supporters lose five votes from last year, it will die.

Rep. Cyrus Western chats with a colleague on the first day of the 2020 Legislative session. (Mike Vanata/WyoFile)

Voters haven’t given a clear message to lawmakers on taxes, one House Revenue Committee member argued.

“There has not been a massive ground-swelling from the public sector that would indicate people have an appetite for this type of Legislation,” second-year lawmaker Rep. Cyrus Western (R-Sheridan) said. By the public sector, he said, he means people who collect a government paycheck. Lawmakers aren’t hearing from the “third grade teacher who takes the time to call their representative and says we need to talk about this,” Western said.

He doesn’t expect the corporate income tax bill to get the 40 votes it needs, he said.

Connolly is also bringing a bill to raise sales tax by one percent, to 5%. The bill would bring in $200 million a year and is cosponsored by both House and Senate Revenue Committee chairman, Connolly told reporters Monday. The bill is not yet available to the public. 

‘It is a tortuous process’ 

Harshman welcomed disagreement with the Senate across the spectrum of issues. Friction was built into the system, he said. 

“We shouldn’t agree, we should argue and fight,” Harshman said. “It is a tortuous process.”

All the sound and fury isn’t leading to progress on the state’s biggest issue, however, one legislative observer and former lobbyist said. 

“It’s pretty amazing, and that’s being kind, that Gordon can write, ‘we’ve got a fiscal storm here already,’ but we’re not going to do anything about it,” said Larry Wolfe, a longtime lobbyist with Cheyenne law firm Holland & Hart who is now retired.

Wyoming Supreme Court Chief Justice Michael K. Davis speaks to lawmakers on the first day of the 2020 Legislative session. (Mike Vanata/WyoFile)

Like Zwonitzer, Wolfe said the state’s leaders are running out of time to head off a catastrophe. Oil and gas prices are always volatile and look poised to stay low, he said. Coal markets are in sustained decline.

“There’s this prayer that Wyoming has always had which is some force way beyond our control is going to come bail us out,” Wolfe said. “Nobody has any idea what that force is anymore.”

Legislative leaders acknowledge the challenge. Citing low natural gas prices, Harshman said the pending problem could be “worse than coal.”

Future lawmakers will be left holding the bag, Wolfe said. “When this really comes home it’s going to be a bloodbath,” he said. “When whoever is standing around in the Legislature and having to deal with hundreds of millions of dollars per year of deficits and no savings.”

Zwonitzer agreed. A true accounting for energy’s decline, when it comes, will be harsh, he said. “Every economic indicator for Wyoming is saying it’s going to get worse,” he said, “at the same time all the legislators I talk to don’t see a path forward this session.”

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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  1. Obviously, this state must control spending but also raise some revenues. From what I read in the article above, “Legislature Convenes under a New Roof and a Gathering ‘Storm'”, a proposed 1% increase in sales tax will raise a projected $200M per year, while the proposed income tax only $115M per year, Implementing an income tax program in the state will be expensive, as we currently do not have the program to collect and manage it. A sales tax increase comes with absolutely no increase in infrastructure, as the program is already in place. And the Department of Revenue is already well-situated to respond to changes in sales tax revenues, which they do constantly for changing county sales taxes. Seems to me sales tax should win hands down over income tax here – double the income with no additional expense. Question is: how do we structure this so that the legislators don’t just spend more because they are collecting more?

    And, it is time to take a hard look at primary and secondary education. Yes, we want to educate our children – that is paramount. First, we must eliminate some of the spending associated with sporting events. Bussing our youth all the way or half way across the state every week (without seatbelts and often on week-days) for regular-season games is absurd and takes our children out of school far too often. Also, the expenditures for sporting facilities is through the roof in some districts. Our youth can have fun, exercise and learn sportsmanship skills on limited budgets and it is way past time for to re-vamp the State’s athletic departments. We simply can not afford some of this. Second, let’s better utilize some of the technology that is in place in the schools. A few specialized teachers can provide many electives to students across the state via the internet. This will provide more choice for less. Third, let’s look at the ratio of administrators to teachers. It just keeps increasing. Fourth, put teachers back in the classrooms during the school year and stop filling the classrooms with subs. Let teachers teach again! Teachers can use time during the summer when they are not in the classroom or before/after school for professional development and committee meetings (via internet to eliminate travel time), and stay in the classroom. We pay them well, and we have good teachers. Let’s utilize them better, let them manage their classrooms, and let’s eliminate the small amount of chaff that we have, regardless of the outdated concept of tenure. Finally, get rid of those *$#/ consultants hailing from states with inferior systems of education! Listen to your award-winning teachers here. They know what they need to do their job.

  2. Taxes. In and of itself that word doesn’t look any dirtier than any other word but just mention it to some people in Wyoming and you might just as well have accosted their Grandma.
    Yet every one of those who take umbrage with the concept want law and order. Sheriffs and deputies (lots and lots of deputies). Courts and justices. Clean air. Clean and pure water. Sewer waste that gets treated. Rivers to fish in. Paved highways. Rest areas. Graded roads. Culverts. Fences. Snow removal. Millions of acres of public lands with few people. Reasonable cost of living. Local government. Building and zoning ordinances. Public swimming pools. Public parks. Low real estate taxes. Low gas prices. Airports. A good education for our children. .The list of wants is enormous and yet no one wants to pony up for ANY of it. We have been spoiled for so long in Wyoming that we have forgotten what it costs to provide everything that we all love about Wyoming.
    Now with the arrival of cell phones and the world wide interweb we have been inundated by people from other parts that believe we have some kind of magic formula for easy, cheap living. We have all done what needs to be done on a shoestring for so long that it goes unnoticed until we find ourselves having to explain to the newcomers why they can’t have the same services they had back “there”..and that is because it is too expensive.
    Taxes will always be a dirty word. I don’t want to pay any more than I have to yet I love Wyoming so much that I would be willing to contribute more to live here. I don’t ever want the legislature to quit being fiscally responsible but I also would like for them to get to the point where every session is not a contest to see who can pare the most meat from the bone.
    Oh… and, Herman, where is Cape Town, Wyoming?

  3. Coal Mining has been the mainstay of state tax revenues for Wyoming ,and it is here ,due to the size and expansion potential of the industry that I believe the state should focus its attention and efforts on.
    Coal and gas can be converted to high value polymers and gasoline that could earn the state billions of tax dollars annually.
    The state could consider talking with mining companies to establish what their optimum capacity is and collectively drive for the imlimentation of a CTL and or GTL facility which could change the fortunes of WYO for ever.

  4. This line really sums up the cowardice of the dominant Republican Party and illustrates the lie they tell us about fiscal responsibility: “It (corporate tax bill) died when support in the Senate suddenly crumbled in the face of opposition from corporate lobbyists and conservative activists rallied by the Wyoming Republican Party.” Just like you can’t tax your way out of a deficit, you can’t just cut your way out of one either; revenue has to increase and energy taxation ain’t gonna do it any more.