If you’ve been wondering why there’s been so much talk of budget negotiations in the Legislature this year — a supposedly non-budget year — you’re not alone.
During my 12 years of service in the House, I sensed that the most difficult aspect of state government for the general public to get a good grasp on was the state budget. The same was true for many legislators.
Or at least that’s the idea. In practice legislators also spend considerable time debating and arguing budgetary matters during general sessions. The final product of that general session legislating is a supplementary budget — not to be confused with the biennial budget produced in even-numbered year budget sessions.
The biennial budget appropriates funds for two consecutive years of state government based on expectations of agency needs. But precise planning for such an extended window of time is extremely unlikely. A lot can and does change in two years, giving rise to the need for tweaks, changes and updates — thus the supplemental budget.
Early residents of Wyoming had it much simpler. For the first 81 years of statehood, a legislative session was called only once every two years to complete all legislative duties including general bills and the biennial budget. Except for a few special sessions, only two instances over these 81 years did the Legislature schedule a second session.
In 1971, a joint resolution calling for a legislative session every year was enacted. A vote of the citizens ratified this resolution as an amendment to the Wyoming Constitution in 1972. Further language made it specific that the new second session of the two-year cycle be devoted to the biennial budget.
The idea at that time was even-number year sessions prioritize budgeting nearly to the exclusion of all other matters. Specifically, Article 3 of the Constitution requires any non-budget bills receive a two-thirds majority introductory vote just to be considered in a budget session. Time, however, has proven this screening measure isn’t very effective in preventing an excessive number of general bills from creeping into budget sessions. The result is often a lack of adequate time to prepare the budget.
During the first two or three decades, the supplementary budget mirrored the intent of the 1972 constitutional change. Long-time retired legislators have shared their recollections that some supplementary budgets were often no more than $100,000 in those years. Compared to a biennium budget well over one $1 billion, typical supplementary budgets used to be very minimal.
That’s no longer the case thanks to a number of structural changes in the Wyoming fiscal system. Revenues have become more volatile. Expenditures have evolved somewhat beyond the control of the Legislature. For example, court decisions concerning equity between school districts require uniform funding over the years. Similar factors have occurred with regard to health services and incarceration standards and in other areas.
A review of the supplementary budgets since 2003 confirms lawmakers are now necessarily reacting to a more complex fiscal arena. Over these years the combined General Fund and school biennial budgets have ranged between approximately $3.7 billion to $4.9 billion.
The relative scale of supplementary budgets have grown in that same time span, ranging all the way from $805 million in 2005 down to negative $206 million in 2017. The negative appropriation in 2017 reflects the very substantial reductions in mineral-related income witnessed in late 2015 and 2016. Because anticipated revenue fell so far from projections, the Legislature was forced to actually de-appropriate funding that was granted the previous year during the 2016 budget session. This de-appropriation would have even been $105 million higher if money from the rainy day account had not been used.
The largest supplementary budget reflected in 2005 included about $150 million of appropriations into savings as well as appropriations for improved school salaries and a large increase in school construction allocations.
Other supplementary budgets since 2003 were also quite large, but a significant amount of those appropriations merely directed excess funds to saving accounts.
It is important to recognize the growing reliance on such off-year budget adjustments are driven largely by the increasing instability of revenue flows through time. For some years, high supplementary budgets can be traced to realized capital gains in various accounts. These gains show up in supplementary budgets as either appropriations to savings or to spending. They can be substantial some years. For example, in the case of the nearly $8 billion permanent Wyoming Mineral Trust fund, a capital gain of only three percentage points amounts to nearly $250 million.
So how does this year’s impending supplementary budget compare? If the status of appropriation bills remain as they were at the end of last week, the supplementary budget will be approximately $160 million. However, this amount is subject to change depending on the final disposition of other bills that contain appropriations and on the separate capital construction appropriation that is sure to require conference committee negotiations.
All things considered, that’s pretty unremarkable compared to the extremes we’ve seen in the last two decades.
It’s important to consider Wyoming has seen several budgetary phases since statehood. In the first 80 years, there were no supplementary budgets because they only met once every two years. Agency budgets were administered under the assumption the appropriation needed to last two years.
Next, for the two or three decades extending from 1972 when the Wyoming Legislature began meeting yearly, the opportunity for supplementary budgets became reality. However the dominant purpose of this exercise in these early years was to rectify the relatively minor unexpected budgetary needs that cropped up between budget sessions. In a few instances, limited funds were reallocated from agency to agency. This was the purpose envisioned by those who initiated the constitutional change.
Now, it is apparent that over the last 20 years, we’re increasingly dependent upon supplementary budgets to keep state government operating smoothly — primarily because of enormous revenue fluctuations. When revenue falls short of earlier forecasts, any available reserve funds need to be appropriated. In more extreme cases, supplementary budgets are needed to cut appropriated funds from the biennial budgets as we saw in 2017.
In contrast, when revenues are higher than expected, supplementary budgets move the “found money” into savings accounts or appropriate them for other unmet state needs. Quite simply, the volatility of revenue coupled with the need for uniformity in delivering government services produces the need for supplementary budgets during general sessions in today’s environment.
Which begs the question: Is the biennial budgeting process still the best approach for Wyoming or is it an outdated relic of the pioneer days?
It is hard to predict when, or even if, a new phase in budgeting will happen in Wyoming. It is apparent to some that perhaps the convenience of a biennial process has worn out its usefulness in Wyoming. During the first several years of statehood, a biennial budget made practical sense. Transportation was difficult. The ability for legislators to take time from their personal lives was also more challenging than now. These constraints have been eased over time.
One potential solution is to phase out the biennial budgeting process. Interestingly, Speaker Steve Harshman (R-Casper) drafted a resolution this year, HJ6-Legislative sessions, that would have removed the distinction between general and budget sessions. The resolution also provided for the possibility of enacting a state budget annually as is practiced in the vast majority of the states.
The resolution necessarily called for a citizen vote for amending language in the Constitution. The resolution passed handily in the House, but failed in the Senate. It is a new idea and will take some time for some to accept. But it is one that can be expected to arise in the future as long as Wyoming revenue streams remain volatile and undiversified.