February 17, 2014
BY
Senator Eli Bebout
Representative Steve Harshman
Co-Chairs of the Joint
Appropriations Committee
President Dwight D. Eisenhower once said, “Plans are nothing; planning is everything.” It’s one thing to talk about making plans for the future, it’s another to take the necessary actions to plan ahead for the things you can predict and, more importantly, the things you cannot.
Fortunately, Wyoming has done just that and, as a result, we have come through rocky fiscal times ahead of the curve.
And it is no accident.
The Wyoming State Legislature worked hard to control the growth of government over the last four years while developing reserves required to maintain services. Their sound judgment has allowed us to stave off severe budget cuts and laid the foundation for smart budgeting that strikes a balance between saving, investing and spending.
It’s through this lens we developed the Fiscal Year 2015/2016 biennial budget that prioritizes Wyoming needs and invests in Wyoming’s people, jobs, communities, responsible mineral development and education. The bill appropriates $3.32 billion of general funds, approximately the same as the previous biennium. The budget does more with less, decreasing the size of government while making focused investments in Wyoming’s infrastructure that create jobs and maintain a high quality of life throughout our communities.
Most importantly, this budget plans for the future. In Wyoming, approximately 75 percent of our budget is derived from mineral production which is subject to world markets, weather and the regulatory whims of Washington D.C. Future dips in revenue are not a possibility, they’re a given. The war on coal is being waged right here in Wyoming’s backyard. The overreach of the Environmental Protection Agency (EPA) has already had detrimental impacts on energy production in Wyoming, and things only stand to get worse.
Wyoming’s private sector bears the brunt of these changing dynamics. Energy producers must frequently acclimate to regulatory and market variations that alter their business models and plans for the future. It is because of their innovation and adaptability that Wyoming has the revenues to fund this budget cycle. The challenge we face is planning today for the next decade. What should we spend and what should we save? Responsible saving has served us well and we need to continue this practice going forward.
To protect against anticipated revenue fluctuations, Wyoming established the Legislative Stabilization Reserve Account (LSRA), commonly referred to as the “rainy day fund,” and the people of Wyoming voted to create the Permanent Wyoming Mineral Trust Fund (PWMTF) as part of the Wyoming Constitution in 1974. The PWMTF was established with the goal of setting aside a portion from the extraction of minerals (severance tax) so we could sustain our way of life and keep taxes low when the minerals are gone. Further amendments to our Constitution and statutes have allowed up to 55 percent of the fund to be invested in equities. An additional 1 percent of the severance tax was designated to the fund in 2005. Currently we save just over one-third of the severance tax in the PWMTF. We spend the other two-thirds every year to provide services.
In Fiscal Year 2003, the PWMTF produced $59 million in investment income for the state. Last year, it produced more than $366 million. It is through careful planning and discipline that we were able to double the size of the fund between 2002 and 2010. By continuing to save just one-third of the severance tax we can double it again to $8 billion by 2018. Additionally, the budget directs $33 million to the LSRA at the end of the 2013/2014 budget cycle.
Wyoming currently has $17 billion managed by the State Treasurer’s Office, including these constitutionally protected funds (of which we can only spend the interest):
$6.5 billion in the PWMTF
$3 billion in the Permanent Land Fund (created when Wyoming became a State)
$1.6 billion in the Workers Compensation Fund
$557 million in the Hathaway Scholarship Fund
$119 million in the Excellence in Higher Education Fund
Combined, these funds are on pace to generate nearly $1 billion in returns in this biennium to help fund the government. This is a tremendous hedge against an income tax or increased property taxes like most other states have. These investment returns are literally saving our budget.
The Wyoming Legislature has worked hard and made tough budget decisions to protect future generations. We must continue to set good fiscal policy for future leaders and not saddle our children with a legacy of debt and overspending. Through prudent budgeting and disciplined planning Wyoming can make significant investments in our people, our infrastructure, our children and our future.
