When two trains are barreling down the tracks headed straight for each other, no one in that moment worries that an even bigger train wreck is coming in the future. 

Yet as Wyoming lawmakers try to mitigate the economic damage in the next two years from the one-two punch of lost mineral tax revenues and the impact of the coronavirus pandemic, they can’t afford to only focus on the current emergency. For the state’s fiscal survival, it’s the long game that will matter.

And that long game will have to entail raising taxes to put Wyoming on more stable footing.

If the Legislature doesn’t take far-sighted action when it convenes in January, what Gov. Mark Gordon now calls “the biggest fiscal crisis in our history” will result in absolute budget devastation in years to come.

Lawmakers must find revenues beyond what the state receives from taxing a dying fossil fuels industry that now provides about two-thirds of state government funding. Much of that money is gone, folks, and it’s not coming back in a world that must try to avert the looming environmental and economic disasters from climate change.

Last week, Gordon tried to brace Wyoming for what’s coming when he announced $250 million in budget cuts for the 2021-22 biennium. His recommendation includes 10% reductions to most state agencies. The toll on employees and services — plus the ripple effect it will have on communities, counties and the entire state’s economy — will be enormous.

But those deep cuts will only make up a quarter of the estimated $1 billion general fund deficit, and the state can’t keep turning to its “rainy day fund” to fill budget holes. The fund has a $1.6 billion balance, a healthy sum, but it’s not bottomless. In recent years it has been used to shore up education funding, which has a $500 million deficit headed into the next biennium.

The governor has already asked agencies to prepare for a total 20% cut, which would be devastating if it’s implemented across-the-board to all departments. The 9% cut Gordon has recommended for the Department of Health already amounts to $90 million.

The governor warns that his cuts will include severe reductions to social services and public health programs that now help seniors, the poor, the mentally ill and people with substance abuse problems. 

“We must all understand what is lost and what we further stand to lose with all these cuts,” Gordon told the Joint Appropriations Committee. “They will have real impacts on people’s lives.” 

It’s difficult to assess Gordon’s motive in making such noble pronouncements. By highlighting the harsh impact that cuts will have on residents, he may be hoping to spark a tax reform discussion.

But surely the governor knows the state’s most vulnerable citizens are in the crosshairs of legislators every time a budget crisis arises, and most lawmakers have no problem pulling the trigger if they think it will save the state money. Merely calling attention to the impact from cuts Gordon has already advanced isn’t going to change legislators’ behaviors.

To be sure, lawmakers should take a scalpel instead of an axe to the biennial budget and make judicious decisions to keep essential public health and social services intact. But unless they are willing to raise revenues by increasing taxes, even vital programs are destined to soon disappear. 

Ignoring the train wreck that became inevitable when coal began to spiral downward, the Legislature hasn’t even tried to look for a plan B to save the state’s economy. It has rejected Medicaid expansion since 2013, killed attempts to establish a corporate income tax, refused to even debate  a personal income tax and opted against holding a public hearing on ending sales tax exemptions for many businesses.

The only revenue-generating move I’ve heard many legislators endorse is removing the sales tax exemption on groceries, which would disproportionately hurt the poor. It would be extremely callous, but it’s the one bill most likely to be approved. That’s shameful.

Gordon may call for a revision of Wyoming’s tax structure, but he’s hardly been a proponent of change during his first two years in office. He supported a statewide lodging tax that passed this year, but that’s it. He’s still on the fence about Medicaid expansion, despite its enormous benefits. It would initially add about $120 million in federal funds to the economy, create health sector jobs, provide insurance to at least 19,000 low-income residents and shore up the bottom line of the state’s struggling rural hospitals. 

The governor points out it’s up to the Legislature to pass any tax increases, and he can only give his opinion about such proposals. But as the state’s chief executive, he can do a lot more.

House Minority Leader Cathy Connolly (D-Laramie) was spot-on after Gordon’s JAC appearance when she told WyoFile, “When the governor has leadership the Legislature listens, and the governor right now is refusing to take that leadership.”

State Budget Director Kevin Hibbard told the JAC if a second round of cuts becomes necessary if COVID-19 worsens, the results would be “more catastrophic, more significant.”

The fallout of drastic budget reductions would be felt for years, wiping out a multitude of jobs in the public and private sectors. Wyoming may have been spared the brunt of the pandemic’s force both health-wise and economically so far, but who knows if that will last?

Don Richards, state budget administrator, told the committee “the problem is really in the next [2023-24] biennium.”

“It gets worse if we don’t get a sizeable recovery, where we still are left with an $800 million to $1 billion shortfall on the General Fund,” Richards said. “We’re left with double the size of that shortfall on [the K-12 education account].”

Doubling the current public schools funding deficit would bring the shortfall to $1 billion. And that astounding figure may be even higher.

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Wyoming’s budget calamity comes at a time when legislators are examining how they will meet the state’s constitutional mandate to provide a quality education to all students. 

In 2017, Senate budget hawks trying to justify cutting school funding appeared shell-shocked when a consultant said they actually needed to spend $70 million more. Confronted with that reality, as usual, they did nothing.

So, Wyoming could cut state budgets past the bone in the next two years, causing tremendous damage to vulnerable citizens, state agencies and institutions, and still be staring at billion-dollar deficits in both the general fund and education funding in 2023.

Looking at the big picture and taking unpopular actions may seem as dangerous to politicians as staring directly at the sun, but it’s unavoidable. The state’s first line of defense will be voters in November, who must elect a new crop of legislators who are up to the task.

But many who fill House and Senate seats will be the incumbents who have refused to diversify Wyoming’s economy. They used much of their power futilely instead, by attempting to keep the minerals industry in the role of the state’s sugar daddy. 

These public servants chose to run for re-election, so I hope they are up for the challenge that awaits. It won’t be easy, but it will be necessary.

Veteran Wyoming journalist Kerry Drake has covered Wyoming for more than four decades, previously as a reporter and editor for the Wyoming Tribune-Eagle and Casper Star-Tribune. He lives in Cheyenne and...

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  1. “The only revenue-generating move I’ve heard many legislators endorse is removing the sales tax exemption on groceries, which would disproportionately hurt the poor. It would be extremely callous, but it’s the one bill most likely to be approved. That’s shameful.”.
    Why would the tax hurt the poor ” disproportionately? ”

    A Wyoming native asking for a friend.

    1. Sales taxes are fundamentally ‘regressive’ meaning that they generally take a larger percentage of income away from lower-income individuals than they take from people with higher incomes. Instituting a sales tax has more significant negative impact to people with lower incomes than it has on people with higher incomes.

      Take someone who makes $10,000 a year versus someone who makes $100,000 a year. (not quite “wealthy,” but certainly not poor either)
      Lets assume they are both adult males (but not elderly) , single, no kids.

      Person A makes $10,000 a year:
      Say their spending on groceries is in line with the USDA’s ‘thrifty’ plan at $190.40 per month. (they are poor, so they make thrifty choices on food, opting for cheaper and lower quality items and generally purchase less groceries overall, with little wasted food)
      That amounts to $2,280.80 per year on groceries.
      2,290.8 / 10,000 = 22.91% of their income spent on groceries.

      Person B makes $100,000 a year:
      Say their spending on groceries is in line with the USDA’s “Liberal” plan at $388.70 per month. (they are fairly well off, so they have no problem with spending more money on more expensive, higher quality grocery items, and/or purchasing more items overall even if some food goes to waste)
      That amounts to $4,664.40 per year on groceries.
      4,664.40/ 100,000 = 4.66% of their income spent on groceries.

      Let’s assume that these costs reflect an EXEMPTION to sales tax on groceries.

      Now, let’s remove the exemption.
      Removing the sales tax exemption will immediately increase the cost of groceries of each person by 5%. (the state sales tax rate, plus 1% county-level general purpose tax rate. I am excluding optional county-level special purpose 6th penny tax, since it isn’t consistently in-place around the state, nor is it in place at all times)

      Person A’s annual grocery spending is now $2,394.84 or 23.95% of their annual income.
      Person B’s annual grocery spending is now $4,897.62 or 4.9% of their annual income.

      Repealing the grocery exemption will have the direct effect of taking away about 1.04% of Person A’s annual income compared to leaving the exemption in place (23.95-22.91=1.04).

      Repealing the grocery exemption will have the direct effect of taking away 0.23% of Person B’s annual income compared to leaving the exemption in place (4.9-4.66=0.24).

      If exemption is removed, then Person A is losing more than 4 times the percentage of their annual income compared to Person B, even though Person B spends just over twice as much money on groceries as Person A.
      This is a greater burden to person A than it is for Person B.

      Additionally, Person B, if they even notice or care about this impact to their budget, still has the ability to scale back their grocery spending or other discretionary spending, whereas person A is already subsisting on the bare minimum, and has very little room to scale back their grocery spending to account for the cost increase to necessary spending on groceries.

      In this way, repealing the grocery exemption hurts poor people disproportionately, because a poor person can’t just stop buying the bare minimum of groceries in order to make ends meet in response to a sudden and significant increase to their grocery budget, whereas a wealthier person often does actually have the ability to curtail grocery spending, assuming they would even need to do this at all in order to continue to get by.

  2. Kerry,
    I am curious as to why you do not address the Liz Cheney-Trump rift. My take is that liz will do anything to protect her father’s policies in the Middle East, including keeping boots on the ground. Are you a supporter of her position or do you stand with the President in bringing our troops home?

  3. Thanks Kerry for another useful article on a subject that obviously the Governor and the legislature don’t want to hear more about. The Legislature continues to do counter productive things, witness the Minerals Committee next week, July 28, considering capping severance taxes at 3% instead of the current 6% for all crude oil production for a year, if the price rises about $45 (it is almost there). That will have the effect of depriving the State of the benefit of rising oil prices at the same time that we need the revenue the most.
    As you know but some of your readers forget, diversifying the economy is a net loss of revenue to the State and Local governments if the jobs are not in the mineral extraction business. That is why initiatives like Blockchain are net losers for the State, they don’t pay their way, they can’t even pay for all the Legislative time they have consumed.
    Tax modernization is essential, or the State and the education system as we know it is doomed.

  4. Mr. Drake, I was with you right up to the point you mention voting in November – I disagree. It is the election in August that matters most. If we want a path out of this mess, we have to get it right at the primary August 18th. We must elect progressive thinkers. Many running for office spout “no new taxes” and “slashing gov’t”. These folks will take Wyoming back to the dark ages if elected/re-elected. Don’t make the mistake of thinking the election in November as most critical. Yes it is important but we have to get it right in August or we will pay the price for decades. We have to put forward our best and brightest thinkers. Please take the time to educate yourself on candidates’ voting records and experience….social media is filled with garbage that will take you off the path of electing the best candidates. Do your research and go to the polls informed on August 18th. Vote for the candidates with an actual plan and ability to navigate through this mess. Tired backwards rhetoric sounds good to some during a campaign but wont get the job done. Go to a debate, research voting records and don’t believe every tweet or facebook post you read. You have the power to fix this problem — it is the power of your vote — use it wisely!

  5. When faced with a budget shortfall, there are two strategies a person can employ: increase revenue, and cut expenses. It sounds very simple, but in reality it is not.

    Increasing revenue means one of two things: raise taxes or expanding the economy. Let’s look at raising taxes first. Most Wyoming income is from production of commodities. The prices for these commodities are set in global markets which means any chance to pay for something like an income tax by raising the value of Wyoming produced goods, that is by passing the taxes on to someone else, is very limited. A brand new income tax will largely come from current income, and will be, effectively, like taking money from the wallet and stuffing it in the pants pocket. Income taxes also rarely play out as well as their proponents claim. Look at the last two U.S. states to enact income taxes; New Jersey and Connecticut. Both enacted taxes claiming that the funds would “fix the potholes” and put each state on a better fiscal footing. Yet, each state is now in worse fiscal shape than before the income tax. They have poorer rankings as a state in which to do business, and the “potholes” remain.

    With regard to expanding or diversifying the economy I fail to see why that is the business of the legislature, or what they can effectively do about it. Economies are built on private enterprise providing services and products people are willing to buy. Government has a very poor track record putting public money into profitable projects. Can anyone point to even one success? It may come as a surprise to readers here, but Wyoming has something like 2800 manufacturing enterprises — most are small and service niche markets. How would one go about expanding such a collection using “government”? Wyoming has been trying to diversify its economy for at least 45 years, I recall. What do we see as the result of these efforts? Expanding or diversifying the economy is a collective operation — smart government regulation and taxation combined with innovative private citizens. Right now we only seem to see ways to raise taxes and transfer income from one group to another.

    Finally, while Mr. Drake decries budget cuts, there may be quite a bit one can do with some political courage. I know that education is a sort of sacred cow, and that the local K-12 schools are the economic backbone of many small communities, but I also know most of my property tax money goes to support schools. When one must cut expenses, look at the biggest expenditures first.

    Recently I had a look at the employee photo board of a local school and I counted one para-education specialist for every three staff. I suspect that as enrollment has actually declined administrative and services staff have increased. Do we need so many personnel? The university is another example. Over the years there have been many attempts to decrease the size of the “back office”, that is to trim back overhead. Each time what seems to have happened is that administrators hire more administrators and staff to help manage the trimming of administration — it is a sort of perpetual growth machine. President Nichols provided incentives to get rid of the more highly paid staff, and also encouraged a lot of younger faculty to leave; but then produced new offices, new vice presidents, associate vice presidents and associated staff. Government, in fact all bureaucracy, expands by nature. There is even a law, Parkinson’s Law, which explains this. Look at state retirement. It should have become a defined contributions plan long ago; and most of the retirees consume these retirements in other states which does not contribute toward expanding the state economy at all.

    Getting the state budget into some sort of balance with the state economy is not exclusively the responsibility of the Governor, or the legislature, though they’ll take the brunt of criticism for lack of “leadership”. I don’t envy them for what will be a thankless task. I do know that government can react to crises in a way that makes everyone worse off.

  6. —-helping “the” mentally ill?

    Curious is it not how quickly that “the” crept into our vernacular? That generic?