The root of Wyo’s budget crisis and how to pull it

Gov. Mark Gordon announced $250 million in budget cuts in late August, while also warning Wyomingites they were just the beginning. Despite his narrative, however, the cuts are only a little about COVID-19 or last month’s rig count.

What really created the situation is a dysfunctional state political system that allowed us to squander what should have been a 25-year head start in the race to diversify our economic strategy beyond cashing coal royalty checks. Understanding this — and saying it out loud — is critical. What is happening in Wyoming is not temporary and will not reverse itself with a vaccination or another four years of Donald Trump.

We’ve known this was coming for a very long time. When I worked for the parent company of ARCO-Coal, we bought Arch Coal with excitement, and took over the operations of the Black Thunder Coal Mine. Revisions to the Clean Air Act had fueled a shift from Appalachian coal (which my family mined for two generations) to the low-sulfur Powder River Basin coal.

But all of that was short-lived. Obama-era environmental regulations helped accelerate coal’s decline, but the primary driver has been the de-regulation of the electrical grid.

The move from rigidly structured utility monopolies to a marketplace of electricity suppliers and distributors was tailor-made for gas-fired power plants. Gas plants are nimble and can be turned on and off with a switch – critical to balancing loads in a deregulated environment and buying and selling capacity. The thermodynamics of coal plants, by contrast, mean that they take days to safely heat up or cool down.

Electric utilities made no secret about the shift. Every year they announced plans to decommission old coal plants, and were forthright in saying they had no intention of building more coal-fired plants. I saw this transition firsthand when I worked on a natural gas pipeline for a major utility. Not only was the utility transitioning away from coal, it was laying expensive and permanent infrastructure for natural gas — and was open about its intentions.

This is why, under the Trump administration, instead of bringing back King Coal in Wyoming, there has been a rash of coal producer bankruptcies. The Trump administration may have been successful at rolling back some environmental rules, but it could not change the laws of thermodynamics.

And instead of taking advantage of a 25-year advanced warning to create an economic model that acknowledges a predictable and continued decline in coal royalties, Wyoming has been mired in a political environment where political candidates tell voters whatever they think we want to hear.

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Keeping their jobs is more important to politicians than being straight with Wyoming voters. As a result, we are left with underfunded schools, crumbling infrastructure, vulnerable coal communities and persistent brain drain as our kids leave the state for good jobs. 

Recognizing this deeply embedded root cause of our current quandary is critical, because in the long run, we cannot cut our way to fiscal stability. Wyoming’s state pension plan entered the year underfunded by $2 billion, a deficit likely to expand to $3 billion by year end. We have 99 dams that are rated “high hazard,” a $149 million gap in school capital expenditures and roughly 10% of our bridges that are structurally deficient and will need repair or rebuilding. 

And unless we want to be the next Flint, Michigan, we’ll need an estimated $500 million in infrastructure work over the next 10 years to maintain a safe drinking water supply.

The time for more reports and PowerPoint presentations on diversification is over. Wyoming leaders need to take immediate action to invest in creating the foundations for a post-coal economy, and at the voting booth we voters must reward those who are willing to tell us the difficult truth, and punish those who wasted these past 25 years. 

The encouraging news is that as long as we let go of our past and concentrate our efforts on the future, Wyoming has everything we need to expand our tax base and economy. In subsequent columns, I will outline what such a future might look like.