(Opinion) — Everyone knows the adage about how the same glass can be seen as half-full by an optimist and half-empty by a pessimist.
Imagine that the glass represents the potential of the state of Wyoming to deal successfully with its three-year, $1.3 billion shortfall. Based on the recommendations submitted last week by Gov. Matt Mead, I’d say it’s about three-quarters full.
Depending on what the Legislature does during its upcoming budget session, the state might have a decent shot at keeping Wyoming’s glass at the governor’s promising level. But if a majority of state lawmakers take the same distorted view of the budget as they have in recent years, they could nearly drain that sucker flat.
Call me a pessimist — many people do — but I admit I was surprised that Mead’s budget strategy was generally creative and sensible. I feared Wyoming might be falling back to its recent past, when both the governor and legislators were in favor of drastic across-the-board cuts to all agencies and programs.
I don’t agree with all of Mead’s budget proposals, and there are a few I think are way off the mark. But the most important elements of his plan would fix much of the state’s projected revenue losses through 2018: A $618 million shortfall that rises to $1.3 billion when education expenses are added.
Mead has suggested doing something novel — actually using the state’s $1.8 billion “rainy day fund” as it was intended, to keep us from being drenched in a shortfall storm. While the Republican leadership has insisted on remaining saving zealots who are horrified at the thought of spending even a dime from the reserve account until the balance at least doubles, the governor makes a strong case for temporarily dipping into this account.
One of Wyoming’s primary budget problems is that state law prevents it from counting as revenue the income Wyoming has earned from investing its $6.8 billion Permanent Mineral Trust Fund in stocks and bonds. The state can’t use such income until it becomes realized capital gains at the end of the year, long after the budget has been approved by the Legislature and signed by the governor.
This situation can create an artificial shortfall. If investment income was available to use earlier, Wyoming wouldn’t be looking at such a large estimated lack of funds to operate state government. Last year the state earned a record $395.3 million from its investments, which would have wiped out its $159 million shortfall for fiscal year 2016.
How can Wyoming fix this cash flow problem in a minerals-based economy that has been hit like a sledgehammer by steadily falling prices and production for coal, oil and natural gas?
Mead says he wants to borrow $448 million from the rainy day fund (officially called the Legislative Stabilization Reserve Account) and use it to pay for the state’s operating needs. State government would “borrow” the money now and put it all back into the LSRA by 2018 as tax revenue and investment income comes into the state’s coffers.
The governor would balance the $3.5 billion fiscal year 2016 budget the Legislature has already approved by making $159 million in cuts to state agencies, programs, the University of Wyoming, community colleges, K-12 education and other spending. These are cuts no one one wants to make, especially those lawmakers who recognize the negative impact they will have on the lower-and-middle class residents of Wyoming.
Mead estimates the state could generate an additional $97 million from tax revenue and investments during the three-year span, above the amount borrowed from the LSRA. The Legislature could decide to save that money and at least grow the rainy day fund a relatively small amount compared to the hundreds of millions it has socked away in the past three years.
The governor, though, suggests the surplus funds should be used to make up for cuts that were necessary to balance the budget in 2016. That would be a better use of the money.
Mead’s concept should work and significantly improve the budget process, but only if conservative legislators are willing to dump their save-at-all-costs mentality that has prevailed. While the initial reaction to the plan has been positive, it’s hardly a sure bet it will be embraced by the GOP. If the governor can’t close the deal with members of his own party, it could lead to a legislative train wreck next year with severe budget cuts and likely an increasingly bigger shortfall.
Why would Republicans do that? Because many think this is the perfect time to whack the hell out of the budget, cutting what they view as wasteful spending and too much government control. “Tapping into the rainy day fund, all that does is kick the can down the road,” Rep. Kendell Kroeker (R-Evansville) told the Casper Star-Tribune last week. “It doesn’t address the issue of bloated government and too much spending.”
Need another reason? Many Republican legislators are more stubborn than the average mule. They proved that when they overwhelmingly refused to back Medicaid expansion for the past three years — even when Mead begged them and it was indisputably proven by the state’s health experts the move would provide health insurance to more than 17,000 low-income residents and save millions of dollars.
Mead correctly says that if Wyoming turns down the federal government’s offer to pay 95 percent of the costs for Medicaid expansion next year, we’ll just be giving our tax money to other states at a time when we need every dollar we can get. More than $100 million a year in federal dollars will flow into the state’s economy from Medicaid expansion as hospitals and health care providers finally get paid for providing medical services to a low-income population that can’t afford to pay them but still need care, primarily going to emergency rooms. The facilities now must write off the money they lose in uncompensated care, which has forced at least a half-dozen small community hospitals to operate in the red and struggle to keep their doors open.
In an absurd final twist, it will actually cost the state $35 million more per year if legislators don’t expand Medicaid.
I hope Mead prevails this time, because it would be a positive health and economic move for the entire state. But with an election next year and many lawmakers scared they could lose their seats if they do anything to help President Barack Obama or the feds, the fear factor could decide the issue.
Now that I’ve spent so much time and space commending Mead for showing leadership on two vitally important issues, let’s address some personal grievances about the negatives in his budget. My main complaint is the greatly reduced lack of funding for cities, towns and counties.
Mead is well-known as a supporter of state funding for local governments. For 2015-16 he recommended giving $175 million to cities, towns and counties, and he convinced the Legislature to approve that amount, plus an additional $8 million in supplemental budget requests.
But for the 2017-18 biennium the governor has dropped requested state aid for local governments to $90 million. That’s a huge decrease, especially for a sector of Wyoming that has been fiscally hurting for a number of years.
In addition to several municipalities and counties bringing in less sales tax and property tax revenue, many have never recovered from the Legislature’s removal of the sales tax on food. It was the right action to take to assist the working poor, but lawmakers promised to make these local governments whole by making up for their losses. It didn’t happen.
Perhaps Mead is looking at political reality because he knows many legislators don’t want any state money at all to be spent on local governments. But if he was looking to compromise, the governor shouldn’t have started by nearly halving the figure from the last biennium. Just getting up to $90 million will probably be a fight.
Finally, there’s an issue I’ve heard more complaints about from voters than any of Mead’s far more costly budget decisions. He stepped into the middle of a controversy he will likely regret when he recommended a $5 million match from the General Fund to double contributions to the University of Wyoming’s athletic department.
The Cowboy Joe Club has cited myriad reasons for state funds to be given to UW sports, and none of them mean anything to the growing number of people who believe legislators should approve money for academics, not athletics. Especially in a year when the football team managed to win only two games.
There has always been a portion of UW’s fanbase that argues the football and basketball teams would be better off competing in a much smaller regional league and actually recruit players from Wyoming. A $5 million state match for what is seen by many as an already bloated sports department could be the final straw, even for fans who have backed the Cowboys for years. In fact, it’s the self-described loyal fans I’ve talked to who seem the most upset.
If UW needs more money, it should spend what it gets on recruiting better professors, not bigger linebackers.
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