Lawmakers respond to governor's call for fiscal conservatism

Oct. 29—CHEYENNE — Lawmakers are taking heed of Gov. Mark Gordon's call for fiscal conservatism in the upcoming general session, despite reports that state revenue estimates have exceeded previous forecasts.

"I really applaud the governor, and I strongly agree with his approach," said Rep. Cyrus Western, R-Sheridan, a member of the Joint Minerals, Business and Economic Development Committee. "The reality is, it's hard to say for sure how sustainable we'll be. If we knew this is what our budget was going to be, or our revenue streams were going to be for the next 10 years, we might be able to have a different conversation."

Consensus Revenue Estimating Group officials presented the October report Wednesday to the Wyoming Legislature's Joint Appropriations Committee, and cited estimates of $2.2 billion worth of combined increases in the general fund and budget reserve accounts, as well as the School Foundation Program Account. The forecast included other revenue streams that are expected to increase in the current 2023-24 biennium, but placed an emphasis on the $738 million jump since January.

Gordon will have $912 million available under statute for his supplemental budget recommendation, which will be released Nov. 18.

Although the governor said he welcomed the news of a higher-than-expected forecast, he warned that it should be considered one-time funds. He said he hopes to make investments for the future, due to the volatility of mineral revenues, and "a federal energy policy and misguided investment mandates that are hostile to our state's primary industries."

Legislators across the state told the Wyoming Tribune Eagle they believed a fiscally responsible approach was important, but their plans for approaching the budget varied. Some also argued now was the time to reevaluate revenue streams and tax systems in the wake of an economic boom.

Conservative approach

"The Legislature will be really fiscally prudent," said Joint Revenue Committee co-Chairman Rep. Steve Harshman, R-Casper. "We have become experts in Wyoming over the last couple of decades, of really taking windfalls like this and investing them for long-term benefits. I think you'll see we've done it with the Permanent Mineral Trust Fund and the Hathaway Scholarship."

Harshman provided an example, such as by saving $700 million in surplus, the state could generate nearly an extra $100 million in revenue. He said that is a tremendous rate of return, and he hopes to see appropriations for trust funds for the suicide prevention hotline or Wyoming's Tomorrow Scholarship in order to take care of residents.

He said he believes a very large portion of the excess revenue will go toward savings and investments in other respects. Harshman said state employees should receive pay raises, and funding should go toward infrastructure. He said buildings are one way to invest in your state and local communities, because the cost will not get any cheaper, especially for educational facilities.

"Laramie County is continuing to grow, Teton, as well, and I just think that's part of that deal," he said. "That's part of that whole savings and investment piece. You're basically spending one-time dollars on a one-time facility that will benefit many generations of kids, students and families."

Western agreed that funding should go into investment accounts, "because the best money is the money that makes money for you." He said he would also consider one-time appropriations, but was wary of recurring expenditures, such as employee raises or K-12 education external cost adjustments. He said he has voted on raising state employee wages in the past, but more funding should be put into savings.

Sen. Cale Case, R-Lander, serves as co-chairman of the Revenue Committee with Harshman, and he is advocating for a conservative budget, but not a "spartan budget." He wants to save as much as possible moving forward, in hopes that they can prepare for the harsher economic times he expects.

However, he said the state should make appropriations for education and state employees.

Case said they've lost ground in funding education, and it is proven in terms of teacher salaries and the ability to recruit staff. While he said the political environment and socially motivated criticism are also impacting educators' desire to stay in the profession, the state must maintain competitive wages.

He said he still doubts there will be significant increases in the wake of the Wyoming Education Association lawsuit over K-12 education, because legislators will want to wait and see where the court stands.

Budget compromises

Members of the Joint Appropriations and Revenue Committees on the other side of the aisle voiced a similar perspective, saying they agreed with Gov. Gordon — to a point.

Sen. Mike Gierau, D-Jackson, said there was enough funding to wipe out the structural deficit in K-12 education, and put money into the school capital construction account to invest and provide a stable revenue stream. He said the difficulty in making that decision isn't if there is enough money, but whether fellow legislators "have the political will to do it."

He said he was a conservative Democrat when it came to spending, but there were other areas where he hoped funding would go, such as state employees, because there aren't enough to develop the programs being asked for by the public. He said employees are underpaid and overworked, and the state continues to ask more of them without compensating them properly.

"Are we going to take care of our employees, and get new employees, so we can get these programs funded and out the door?" he said. "Or are we just going to continue to have our employees run out the door and quit and go to the private sector, because they see no end in sight of this."

Rep. Mike Yin, D-Jackson, said the state has the breathing room to help state employees, and he doesn't want hundreds of millions of dollars going into savings at their expense. He said he also hopes that the supplemental budget discussions will include solutions for housing problems across the state, because there is an affordable housing crisis.

Yin said the state still needs to prepare for the downturn in the boom-and-bust cycle, otherwise budget cuts will go too deeply again in the future. He sees this happening in a re-evaluation of the tax system in Wyoming.

Revenue streams

Yin said the diversification of the economy and encouraging business growth is important, but he doesn't believe it will benefit the state in the current tax structure. He said the best time to make those changes is not when state pocketbooks are hurting, but in a time when there is an excess of funds.

"This money right now gives us an opportunity to have a discussion without having a gun to our head when we do it," Gierau concurred. "And that's the time to have it, is when you can have a full rational discussion about what would be the best way for us to go, given our circumstances. But will we? I'm doubtful."

He said Republicans are reluctant to revise the tax structure, because they are "in fear of losing their jobs for their own political hierarchy."

Case said he has tried his best in recent years to focus on the future for Wyoming, when the ability to depend on the mineral industries runs out. He said he's looked at a more balanced tax structure, similar to the majority of states across the nation, but people "don't have the appetite for anything that has the T-word."

He doesn't believe that low taxes create a thriving economy, even after the state was rated the best business climate in the country. He said it is difficult to attract businesses when there aren't amenities, and what the government provides in terms of education or roads.

"The truth is, Wyoming's economy grew slower than any of our neighboring states over the past decade. It actually contracted; it got smaller. And the population in Wyoming grew less than any one of our neighboring states, than any other state in the West," Case said. "What does that tell you? If low taxes were such a great thing, we would be swimming with people."

Other Republicans were not as welcome to re-evaluating the tax structure. Western said that consistency and reliability is not the hallmark of the revenue streams that the state has relied on, but he wouldn't entertain a tax increase before "meaningfully reforming our spending, specifically in K-12."

Harshman said he still believes that minerals are going to play a huge part in revenue streams for the state into the future, and possibly nuclear energy. He said the difficulty with diversification is having enough workforce, and the state doesn't have enough with its current population.

"Wyoming's future is very bright. I think these ups and downs are tough," he said. "But I think we're getting really good at saving during these times, and making this investment in the permanent mineral trust fund, all these common school accounts, all these things that will provide revenue investment income forever."

Jasmine Hall is the Wyoming Tribune Eagle's state government reporter. She can be reached by email at jhall@wyomingnews.com or by phone at 307-633-3167. Follow her on Twitter @jasminerhphotos and on Instagram @jhrose25.