Wyoming sings the budget blues

While many states figure how to refund tax surpluses to their citizens, Wyoming officials are singing the budget-time blues and scrambling to cover a looming $183 million biennial budget shortfall without making their citizens too unhappy.

It’s not an easy choice, because after years of magically pulling budget-balancing solutions out of hats, it appears the only realistic options out there are either raising taxes or cutting services.

The final decisions won’t be made until the Legislature convenes on Valentine’s Day, 2000 for a 20-day budget session to appropriate money for the state’s 2001-2002 biennium budget. But the agonizing already has started, as lawmakers spent the summer scrutinizing agency budgets, looking for fat to trim or looking for potential new revenue.

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So far, judging from several packed public hearings, legislators may find it more palatable to raise taxes in an election year than incur the wrath of the citizenry for even considering cuts to programs for the developmentally disabled or other less fortunate Wyomingites.

Wyoming’s budget blues have been building since the mid-1980s Energy Bust plucked the feathers of a golden goose that during the Energy Boom had given lawmakers more golden eggs than they could spend and allowed them to keep taxes on individuals and families the second-lowest in the nation (after Alaska).

During the late 1990s especially, Wyoming’s energy industry has been beset by chronic low prices, and the oil industry has seen reduced production as well as low prices. The rebound in oil prices this summer may ease the pressure somewhat, but not enough, according to legislative staff.

Wyoming’s tax base declined by 5.5 percent this year, due mainly to depressed oil prices, according to the state Department of Revenue. The state’s total assessed valuation this year is $7.02 billion, compared with $7.44 billion in 1998.

The drop of $416 million was blamed on declining mineral prices in general and especially the precipitous drop in oil prices and production. Total mineral values dropped in 1999 by $581 million — from about $4 billion to $3.4 billion. The total assessed valuation is the lowest since 1995, when it was $6.4 billion.

Wyoming’s budget blues were further exacerbated by a Wyoming Supreme Court decision in 1995 declaring the state’s method of school financing unconstitutional, setting off a legislative rush to fix inequities among students by revising the funding formula and pumping more money into the process.

As a result, if Wyoming merely maintains its spending levels in the coming biennium, it will need upwards of $183 million to pay for it. (The projected budget shortfall is $183 million, though legislators could reduce it to $127 million by spending all available reserves).

To confront the problem, a joint executive/legislative effort was launched earlier this year to deal with the projected deficit as well as to look beyond for long-term solutions to the chronic imbalance between revenues and expenditures.

Finding places to cut was not easy, because as Sen. Grant Larson, co-chair of the Legislature’s Joint Appropriations Committee noted, legislators and executives alike have closely scrutinized the agency budget for more than a decade.

“Almost without exception, the agency budgets have been essentially flat,” Larson said, adding that when adjusted for inflation, many agencies are spending less than they were in 1986.

But to get the discussion going, the Joint Legislative/Executive Committee on State Government Expenditures and Revenues and its Oversight Committee in late August recommended sharp budget cuts of $120 million for the biennium, including $100 million from the state’s all-purpose General Fund, which funds most programs, and $20 million from the Highway Fund.

Specific General Fund cuts included $44 million in education, including the University of Wyoming, $25 million in state Health Department spending, and $11 million in public safety and justice. Other cuts targeted the State Fair, Wyoming Public Television and the Wyoming Water Development Commission.

Reaction was swift and negative. Swarms of people attended a public hearing in Casper Sept.14 and swamped the state’s video-teleconferencing network the following day to protest the proposed cuts.

Especially vocal were supporters and beneficiaries of existing programs for the developmentally disabled, but health and education supporters were literally waiting in the wings, ready to give their piece. Many were unable to testify directly, so they submitted written testimony.

Others, including University of Wyoming president Philip Dubois, went public with their suggestions. In guest columns, speeches and his own statewide news conference, Dubois warned that state economic-development efforts will be doomed if the state allows mediocrity in education.

“Once Wyoming was a state of ‘firsts’& Today, we are a state of too many ‘lasts,'” Dubois said. “It is time for our leaders and citizens to recognize that now is the time for investment in the state’s future.”

Meanwhile, a separate statewide forum on state revenues and expenditures produced a similarly strong message for legislators — stay away from broad spending cuts and instead broaden the state’s tax base to increase revenue.

Those recommendations emerged from a two-day forum sponsored by the Wyoming Heritage Foundation and the Wyoming Business Alliance, the state’s leading business and industry organization.

Participants overwhelmingly recommended increasing revenue by eliminating sales-tax exemptions, enacting a real estate transfer tax, increasing alcohol and tobacco taxes and de-earmarking revenues. They were less prone to cut spending, though a slim majority said the state could spend less on K-12 education.

As a result, the legislative committees have backed off their earlier recommendation of slashing $120 million from the biennial budget, but they went ahead recommending a variety of tax increases, including alcohol and tobacco and elimination of sales-tax exemptions but no income tax.

The ball now goes to Gov. Jim Geringer’s court, and his choices aren’t easy. By law, he must recommend a budget that is balanced under currently available revenues, and with the revenue shortfall looming, that will mean recommending severe cuts.

When Gov. Mike Sullivan faced a similar budget dilemma in 1994, he submitted two budgets — one with draconian cuts totaling nearly $50 million that was quickly dubbed the “doomsday budget” and a more realistic budget that recommended continued diversion of mineral revenues from savings to balance the budget.

Geringer says he will take the same approach this year. Only he is calling his version of the doomsday budget a “reality check” budget, while his alternative will be a “long-term solution” budget that will recommend a combination of tax increases, revenue “de-earmarking” and spending cuts. The governor is scheduled to present his recommendations Dec. 1, and the Legislature will take it from there. Chances are the budget blues will continue into the new century.