Legislators seek possible alternative sources of revenue

In order to break the boom and bust cycle for Wyoming’s economy, the state might need to break the tradition of relying on extraction minerals as its primary economic contributor.

Wyoming is set to lose billions of dollars in coming years due to decreased values of extraction minerals. According to the latest report from the Consensus Revenue Estimating Group (CREG), state revenue is projected to decrease by about 23 percent.

The general fund and budget reserve account are projected to drop from $4.01 billion in 2013-14 to $2.94 billion in 2017-18. The School Foundation Program Account and the School Capital Construction Account are also projected to decrease from $2.73 billion in 2015-16 to $1.508 bilion in 2017-18.

A longterm and sustainable solution needs to be found, because some of the CREG report’s predictions for decreased revenue for the state could last far longer than just until 2020. It could be another 10-15 years before things return to the booming end of the cycle, said Sen. Ray Peterson, R-Cowley.

With less revenue, the state could have to cut funding to programs or eliminate some entirely. But extraction minerals aren’t the only possible ways for generating state revenue.

A different approach to revenue

For the first time in Wyoming’s history, the 2015-16 fiscal year’s investment income from the Permanent Wyoming Mineral Trust Fund and state agency pool made up the largest revenue stream for the general fund at $608.5 million, or 40.3 percent. Sales and use taxes were close behind at 36.1 percent, or $544 million, for fiscal year 2015.

The state’s Capital Investments Committee met recently, and this fact caught Peterson’s eye, he said.

“Past legislators before my time were wise enough to make that investment,” Peterson said.

The strange thing about Wyoming’s economy is, it is opposite of the national trends — when one does well, the other struggles, Peterson said.

“I kept thinking, ‘Why are we investing outside of Wyoming? Why not invest it in our state?’ The argument against it is, when the country does well, we don’t do well here — we play that to our advantage,” Peterson said.

For now, the hope is for a very cold winter to hit the country this year to bring back demand for natural gas, Peterson said. Natural gas prices are currently half of where they were two years ago, at about $2.33 compared to about $4.50.

As for coal, increased regulations have made the outlook for demand unlikely to increase.

“I read about other states and everyone says Wyoming has to do something about its dependency on minerals and get more balanced, and I agree with that. But with those revenues coming in from oil, gas, trona, coal ... I am conservative when I say, ‘Why tax when you don’t need it?’” Peterson said. “If this continues 10-15 years, we will need to tax to maintain services. There are some essential programs out there we have no choice but to fund.”

The Legislature had to make cuts last time oil and gas slumped around 1999 and 2000.

“But you can only cut so far,” Peterson said. “There are services you have to maintain, so sales tax might need increased and at that time, personal income tax was considered for the first time.”

Online sales tax

Sales tax revenue in Wyoming is decreasing, according to the CREG report, and while a lot of sales tax is generated through industrial activity, it is not the only contributor to sales tax revenues. Depending on the vendor, an online purchase often doesn’t generate sales tax.

“Rather than raising or creating an income tax, we need to make efforts where we have a sales tax; it just needs to be fair and equitable,” Peterson said, estimating the revenue generated would be hundreds of millions of dollars. “It would make the cushion even softer for us if we got the sales tax we should be collecting.”

Wyoming joined a coalition of several states 20 years ago to streamline sales taxes nationwide for purchases made outside of the state such as through catalogues or online.

“If you are in a large state, you have a fat hog — and in outlying rural states, it is not fair when shops on Bent Street get taxed, but the Internet is not taxed and it is not a fair playing field,” Peterson said. “It is not a new tax, it is just that we can’t collect the tax.”

By law, there is a form that should be filled out to pay sales taxes on all purchases, “but nobody does it,” Peterson said.

With a new speaker of the house now in place in Congress, Peterson said he hopes to see something come up for a vote.

Has coal’s window of opportunity been shut?

The CREG report did not include the possibility for expanding Wyoming’s coal market into Asia, since that deal was still on the table as the report was drafted. Then, right after the October CREG report was released, Cloud Peak Energy announced a cutback in Montana’s coal shipments to Asia in 2016 — cutting an estimated $15 million in tax revenue for Montana.

While Wyoming was not participating in the same deal as its neighbor to the north, it did have its foot in the door, and efforts were underway to get in the game along with Montana.

“It is kind of like you are looking at an opportunity and the door is slammed,” Peterson said. “It is just one more nail on the coffin.”

In order for Wyoming to sell to Asia, coal has to be shipped through other states to reach the ports in the Pacific Ocean, and those agreements were not yet in place.

This doesn’t mean Wyoming needs to stop its efforts toward international export of coal, said Rep. Tim Stubson, R-Casper, a member of the Appropriations Committee. He said he recently met with representatives from India, who were interested in buying coal from Wyoming.

“There is huge demand for our coal there, if we can get it to the ports” Stubson said. “We need to continue to work on that.”

Pressure at the federal level and from special interest groups is putting a squeeze on coal use in America, but Peterson said he thinks it will remain a key player since so many power plants rely on it.

“My thinking is the coal-fire generation plants aren’t set up to do anything but burn that coal, so what will happen when brownouts start to happen because plants have demand they can’t meet?” Peterson said. “We are seeing plants shut down and make changes that are expensive ... it could change in a heartbeat nationally or internationally, and we would be back in the saddle again.”

Governor Mead’s budget priorities

Just in time for the Christmas season, Wyoming Gov. Matt Mead is due to release his budgetary priority list — basically a wish list for the Legislature to consider as the next biennium’s budget is formed in early 2016.

Mead’s list isn’t due for release until Dec. 1, but like any Christmas wish list; legislators are already aware of what’s in store.

Stubson anticipates Mead will want to dip into the rainy day fund, but by how much remains unknown.

“We have concerns about spending a bunch out of the LSRA (rainy day fund),” Stubson said.

Expanding Medicaid is among the likely budgetary priorities, since it would get a boost from federal dollars.

“But, federal money is my money as well, and expanding a social program through there might be a need, (but) I am not convinced the need is that drastic, so I voted against it the last two years,” Peterson said.

The University of Wyoming requested $80 million in construction projects, Stubson said.

“There are huge demands on the governor’s desk, but we’ll have to wait until December (to see what the top priorities will be),” Stubson said.

Read the previous CREG report story here.