Imagine a fictional Wyoming legislator who fell asleep Rip-Van-Winkle-style after the 2010 legislative budget session only to wake up today. What are some of the most significant changes she would notice as she wandered into the third week of the 2020 budget session?
Not only would she find an entirely new fiscal landscape, but she’d be gazing at it from a perspective she rarely, if ever, held while in office.
But short-run analyses make it difficult to visualize the long-term trends that, after all, are most important in planning for the future. In the short run, last year’s dip in one revenue source is often offset by a rise in another, making trends difficult to detect. Likewise, one-time investment expenses can foreshadow what is really happening to the cost of government services.
Our imaginary sleepy lawmaker gives us a lens through which to take a longer-term view of change — a chance to examine budgetary trends over the the last decade without being distracted by all of the incremental developments that happened in between.
A number of parameters or benchmarks are useful in setting the stage. From 2010 to 2020, the cost of living as measured by the consumer price index climbed 18.3%. That’s how much purchasing power each budgeted dollar lost over the decade. In approximate terms, each dollar spent on state services in 2010 would require $1.18 to provide the same services in 2020. Alternatively, the purchasing power of $1 in 2010 is equal to about 83 cents in 2020.
Our public schools educated 89,476 students in 2010. In 2019 enrollment was 93,832, an increase of 4.8%. The number of authorized state employees in 2020 is 7,314, which is 383 fewer than the 7,697 authorized in 2010. Wyoming was home to 563,226 residents in 2010. The estimated population in 2020 is 579,280, an increase of 2.8%. The percentage of the population aged 65 and over rose from 12.4% to 16.5% over the decade.
The changes in each of these figures have real impact on demand for government services. How will our newly awakened legislator see that demand reflected in the budget?
General fund spending is a key top-line measure of financing state services. In 2010 the legislature appropriated $2.863 billion for the 2011-12 fiscal biennium. General fund spending will be about $2.972 billion for the 2021-22 biennium, according to the latest 2020 fiscal profile. That roughly $109 million increase comes to a 3.8% spending growth over 10 years. Let’s recall that the population grew 2.8% during that period and inflation made everything 18.3% more expensive. In other words prices and population grew 5.5 times more than the growth of general fund spending.
The legislature appropriated $1.6 billion for the school foundation program for the 2011-12 biennium. It appears that the school foundation program appropriation will be approximately $1.9 billion for 2021-22. This translates to an increase of 17.5% for the decade. By means of comparison, enrollment growth plus the inflation rate over the decade was 23.1% or about 1.3 times the change in the public education budget.
So our astute, if narcoleptic, fictional lawmaker will be stunned to see that the expense of maintaining state government services far outpaced the state’s budgeting during her nap. She’s probably approaching her revenues briefing with a sinking sense of pessimism. Her suspicions will be quickly confirmed.
A decade ago, the general fund and its close ally the budget reserve account together enjoyed $875 million in severance taxes, $754 million in mineral royalties and $877 million in sales and use taxes. By contrast it is expected that for the 2021-22 biennium, state severance taxes will amount to $607 million, the allotment of mineral royalties will be $382 million and sales and use taxes will total $1.1 billion. A little arithmetic tells her the state’s main sources of income are today bringing in $403 million less than they did a decade ago.
A comparison of investment income, largely due to the Permanent Wyoming Mineral Trust Fund, is nearly as grim. This revenue source generated $654.7 million in the 2011-2012 biennium. This income is projected to equal about $513.6 million for the upcoming biennium, a reduction of $141.1 million. It needs to be understood, however, that realized capital gains during the biennium could offset some or all of this decrease.
Probably the biggest contrast in the fiscal environment is that surpluses were so abundant during the 2010 budget session that $575 million could be socked away into the state’s rainy day fund. That’s a stark difference from the $300 million to $400 million that budgetters may need to withdraw this cycle from that very same account.
The changes in general government revenue have, by this time, left our imaginary legislator reeling. But then, to add insult to injury, she learns that the 10-year change in revenue flows to the school foundation program is even more pronounced.
Federal mineral royalties, a major source of funding for schools, accounted for more than $612 million when she was writing the budget. These royalties are projected to contribute only $373 in the upcoming biennium. Property tax, the other main source of funding schools in Wyoming, is projected to be 12% lower than the $575 million received in the FY 2011-12 biennium.
Perhaps the most surprising observation someone would experience after a 10-year absence is the change in the revenue mix from individual minerals. Subject to global commodity markets, mineral revenues are extremely volatile by nature. As a state that relies so heavily on such revenues, those unavoidable ups and downs hit government budgeting hard. In fact, a recent study by the PEW Charitable Trust found that Wyoming experiences the third most volatile revenue stream among all 50 states. Recent estimates indicate that revenue volatility in Wyoming through time is two to four times that of a typical state.
Beyond that predictably unpredictable volatility through time, we can see an unmistakable 10-year trend for selected revenue streams. First and foremost, mineral royalties and severance tax statistics demonstrate that the revenue flowing to the state from minerals has dropped by one-third.
This trend has been established during a time when the mix of the individual components comprising the mineral sector has also changed dramatically. In 2011, crude oil accounted for 24% of mineral-related revenue here in Wyoming. By 2021 the percentage of mineral revenue traced to crude oil will be 47%. The percentages for 2011 and 2021 pertaining to natural gas will fall from 41% down to 22% in 2021, reflecting a 30% drop in natural gas prices as well as a significant drop in production. Coal’s share will also drop from 32% to 26% over this same 10-year span. That natural gas has experienced the most dramatic drop among all three of these major minerals in the last decade has received little attention in the state.
Finally, an examination of the percentage of assessed valuation from all minerals relative to total assessed valuation of all classes of property has slipped from 64% in 2010 to 45% in 2021. This reduction dwarfs any other 10-year period in recent Wyoming history.
For our our newly reanimated representative, an examination of these dramatic shifts has revealed a “brave new world.”
For today’s actual lawmakers, taking a look back to a decade ago can provide valuable perspective and insight on the ongoing metamorphosis of the state’s fiscal infrastructure.