A Note From Pete:

It’s a new year and a new subject for the Pete Simpson Forum. However, last year’s theme, Wyoming’s political identity, will form our backdrop for this year’s discussions.

 So, this month it’s the economy — Wyoming’s economy specifically – and note I’m avoiding the old James Carville 1992 campaign tag on, because forum readers aren’t stupid. Far from it! We rely on your contributions and we encourage you always to join the discussion. That’s what makes the forum! And, it’s a good place to make your points and your ideas known and heard.

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Right now, Wyoming’s economy looks pretty robust, particularly compared with other states. I’m no economist; but, from a historical perspective that’s typical for us. When gas prices go up in Chicago, there are new jobs for Wyoming’s oil field workers in Midwest. Which is to say, we are an economy based on natural resources and when prices on the world market rise our economic outlook gets rosier. Of course, we have no control over world prices. So, the Wyoming economy has a cyclical, or, better yet, a countercyclical character – better when the resource is in demand and worse when it’s not. Like it or not, ours is a “boom and bust” economy and, like the old well driller says, we’ve had to get used to “chicken one day and feathers the next.”

 Right now, it’s chicken. Unemployment is almost half the national average. Per-capita income is 6th highest in the U.S. and the number of bankruptcy filings is nearly the lowest. Our home ownership rate is 73 percent, the ninth highest in America. But, we all know things can change – and they do. That’s probably why our political leaders are cautious about expenditures and insist on balanced budgets and reserve accounts at the state level.

 One of my professor friends from UW, former political science department head, Jim King, put together what I think is a pretty good summary of Wyoming’s political culture – cautiously conservative with a libertarian streak. But, when it comes to forging 21st century economic policies, David Wendt, president of the Jackson Hole Center for Global Affairs, suggests strategies that might run counter to our long held attitudes – about the role of government particularly. Put in a larger context, will our political attitudes promote or hinder economic growth and stability in a 21st century global economy? What do you think?

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— Peter K. Simpson

Public-private partnerships spur infrastructure and enterprise growth in Wyoming

There is a widely-held belief in Wyoming that if the private sector can’t do it, it probably shouldn’t be done. As a state legislative representative said recently, commenting on a decision of the Wyoming Business Council, “We ought to have free enterprise doing these things instead of government involvement.”

This belief reflects some of our most treasured values: our self-reliance, our resourcefulness, our individualism. Even our most dedicated government officials share this belief. A former president of the Wyoming State Senate and senior State Department official, who should know, once in conversation contrasted the lethargy of the process by which governments “exchange talking points” with the “resourcefulness, ingenuity, and creativity” of the private sector.

All this is true, but it is only part of the story. This country was not built by the private sector alone. The transcontinental railroad and the agricultural extension service, to take two examples, showed how public-private partnerships could jump-start the free enterprise system.

Today, the information technology revolution presents new challenges to channel our increased productivity to meet public needs. We will stifle those sources of productivity through overtaxation, fiscal insolvency, or both, if we place too heavy a burden on the public sector to meet those needs. Public-private sector partnerships can play a critical role in mobilizing private resources to help fill these public needs, while enhancing the productivity of the private sector itself.

Businesses seeking to enter the market in today’s competitive environment need access to communications and transportation capabilities that may exceed their resources. That is the value of concentrating these resources within a centralized infrastructure that provides these facilities. The Wyoming State Loan and Investment Board (SLIB) has recently recognized this value by approving the recommendation of the Wyoming Business Council for $15 million in total grants for business and industrial parks in Laramie County and Cheyenne and a $2 million loan for the conversion of a former Amoco facility into the industrial park in Casper. These are the kinds of public sector investments that enhance the overall productivity and job-creating potential of the private sector.

A clean energy infrastructure is also important to our state’s economy. An immediate opportunity for productivity growth and energy savings is presented by the use of natural gas as a transportation fuel. Natural gas vehicles, however, are an “infant industry,” in the sense that both vehicles and a fueling infrastructure are comparatively few in numbers. Moreover, the one depends upon the other. Without vehicles, the fueling stations will not be built; but without fueling stations, people will not buy the vehicles.

This is the kind of stalemate that a public-private partnership can resolve. The Wyoming Business Council has responded to this challenge by allocating a total of $1 million towards the private sector development of fueling stations in Jackson and Afton. The Sublette County School District has taken an additional step by funding a natural gas fueling facility for school buses that is also accessible by the public.

In addition, infrastructure improvements are important in sustaining the state’s second largest sector, tourism. In Jackson Hole, a new Travel and Tourism Board (TTB), funded by a 2 percent lodging tax on visitors, allocates $2.6 million/year to strengthen the local tourism and recreational infrastructure through expanded visitor services (e.g., bicycle and pedestrian pathways, public transportation) and promotional activities. These investments have had a multiplier effect within the local tourism and hospitality industry, where they have brought enterprises together to share information and coordinate activities to produce revenue gains and cost savings. As TTB Marketing and Administrative Director Kate Sollitt commented, “When everyone’s moving in the same direction, it’s much more efficient to get there.”

Another way in which the public and private sector can be mutually supportive is through policy frameworks which encourage the private sector to come forward to help meet public sector needs. A good example of how this works is California’s adoption of a 33 percent standard for renewable energy by the year 2020. This requirement creates a significant opportunity for private sector investors like Anschutz and Duke American Transmission Company to develop and transmit sources of wind power in Wyoming to help meet California’s renewable energy needs.

That potential market for Wyoming’s wind power would not exist without California’s 33 percent renewable energy standard. But utilities and other suppliers of electricity in California first have to be convinced of the benefits of wind power transmitted from Wyoming in supplementing in-state sources of renewable energy to meet that demand. In a further demonstration of public sector support for free enterprise opportunities, the Wyoming Infrastructure Authority has commissioned numerous studies which help to make this case. WIA is now vigorously shopping these studies with relevant authorities in California.

The health care exchanges established through the Affordable Care Act (ACA) are another example of a policy framework which helps to elicit a private sector response to a public sector need. Wyoming had an opportunity under ACA to set up a statewide exchange designed to meet its own specific needs, but declined to do so. As provided by law, the federal government then countered with its own alternative. Over 3,500 residents of Wyoming who would not otherwise have access to group health insurance plans have now enrolled in plans offered by the two private sector carriers who are part of this exchange, Blue Cross Blue Shield of Wyoming and WINhealth Partners.

Wyoming owes the success of its coal industry to another policy framework. In 1991, Congress reauthorized the Clean Air Act to include a market-based approach to the regulation of sulfur dioxide emissions from coal-fired power plants, called “cap-and-trade.” By putting an industry-wide “cap” on sulfur dioxide emissions and then letting the electric utility industry figure out the most efficient means of meeting these targets on a plant-by-plant basis, the law achieved a four-fold reduction in these acid-rain-causing emissions at a fraction of the estimated cost. Wyoming’s coal became instantly more attractive to East Coast and Midwest coal-fired power plants as a result of its lower sulfur content.

In 2009, Congress tried to extend this market-based approach to the regulation of carbon dioxide emissions from coal-fired power plants. Here was another opportunity for the coal and electric utility industries to buy in to a policy framework that was in their own long-term interest. But this time these industries balked. As a result, the legislation failed, and the U.S. was left with no climate or energy policy.

This egregious failure to forge a larger national public-private partnership to reduce carbon-dioxide emissions from coal-fired power plants then ricocheted down to the failure of numerous individual partnerships, including that between GE and the State of Wyoming to build a coal-gasification test facility for Powder River Basin coals. Unfortunately, the policy framework now belatedly imposed by EPA to control these emissions in the absence of the market-based approach envisioned by Congress in 2009 has been one of the factors that have brought the construction of new coal-fired power plants to a standstill, to Wyoming’s detriment.

The productivity gains of the information technology revolution are now starting to come at the expense of job creation and economic growth. To sustain job growth into the future, we must find new ways to harness this revolution to meet public sector needs. Public-private sector partnerships provide an important source of institutional innovation to respond to this opportunity. If we take the time to learn from our successes and failures, Wyoming may be able to take the lead in showing how to seize this opportunity.

— David Wendt is president of the Jackson Hole Center for Global Affairs. In 2010, he ran unsuccessfully on the Democratic ticket for Wyoming’s U.S. House of Representatives seat against U.S. House Rep. Cynthia Lummis.

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