CHEYENNE — As Wyoming begins dipping into its savings to cover the cost of its K-12 education system, state lawmakers have begun to reckon with the question of what happens when the state’s “rainy day fund” — the Legislative Stabilization Reserve Account, referred to as the LSRA — runs out.
A Sublette County lawmaker believes he has the answer, however, pushing a bill through committee that could help stabilize the state’s reserve accounts.
Carried in the House Appropriations Committee by Sen. Albert Sommers, R-Pinedale, House Bill 186 proposes a number of provisions intended to guarantee continued funding of the LSRA by shifting dividends earned from the state’s permanent mineral trust fund — which compounds interest used to fund a number of programs — into accounts like the school foundation account, the strategic investments and project account, and the LSRA itself.
The legislation also proposes a “tip-out” from the LSRA back into the permanent mineral trust fund whenever the fund exceeds $1.6 billion, an effort to replace some of the funds taken away during tough times for the state.
Most important of all would be a base-level increase to the state’s sales tax from its current 4 percent to 5 percent, a change that could potentially generate $200 million in new state revenues in its first year, according to a fiscal note for a similar bill introduced this year. None of these provisions would take effect unless the balance of the LSRA falls below $500 million — which would present an inherent issue to the state’s cash flow.
The LSRA currently funds everything from local governments to funding gaps in a plethora of agencies, making the account one of the most critical pieces of balancing the state’s budget.
It will be needed even more, particularly as significant sources of revenue beyond coal, oil and gas remain elusive and those traditional sources decline and are expected to fall even further, according to January projections released by the Consensus Revenue Estimating Group.
But those various savings accounts will likely need saving too.
Estimates released by Gov. Mark Gordon’s office this fall anticipate this year’s budget will bring the balance of LSRA down to $1.3 billion this coming biennium.
By the end of 2024, Sommers said the balance of LSRA is expected to fall somewhere around $632 million.
“We’re in a definite decline,” he said Monday night. “So do you wanna wait? Or do you wanna do nothing?”
While critics argued that the legislation could tie the hands of future legislatures, Sommers argued his legislation would not be needed forever, highlighting a number of sunsets in place on other fiscal bills passed over the years.
“I just don’t see this being that,” Sommers said.
House Speaker Steve Harshman, R-Casper — who was in attendance for a hearing of the bill Monday night — endorsed the concept, saying it continued a trend begun with amendments to the state’s mineral royalty revenues and a tip-out to the state’s Strategic Investment Planning Account.
“I think we’ve got to keep bringing solutions and plans forward for the citizens of this state,” Harshman said.
The bill passed committee unanimously.
Another bill, proposed by Rep. Tim Hallinan, R-Gillette, would have allowed the state’s voters to enact a constitutional amendment to tip two-thirds of the state’s mineral royalties to schools for up to six years.
The impetus for the bill, Hallinan said, comes from what he called a lack of desire from lawmakers to cut budgets further, leaving the Legislature just three options: increase taxes, raid savings or eliminate funds being added to savings accounts.
“We can kick the can down the road or do something dramatic,” he told members of the House Appropriations Committee on Monday.
That dramatic action? Put the question to the voters.
“There’s a $396 million deficit in the school foundation budget for the 2021-22 biennium,” Hallinan said. “We need to begin to address this issue.”
Hallinan estimated that the new revenues to some of these accounts could eliminate approximately 64% of the deficit facing the schools at no cost to the taxpayers, albeit imposing a significant hit to the state’s investment earning potential.
This elicited protests from some like longtime lobbyist Marguerite Herman, who argued this shift could potentially rob future generations of greater returns from the state’s permanent mineral trust fund in support of short-term interests.
Ultimately, the House Appropriations Committee — five of whom voted against Hallinan’s bill on an introductory vote last week — chose to go a different direction, killing the bill on a 5-2 vote.
Chairman Bob Nicholas, R-Cheyenne, who voted “aye” in committee after voting against it on introduction, said the committee was likely wary of the prospect of putting the question to the voters via constitutional amendment — what he called a “high-minded task, though a wonderful idea.”
He added that the idea might gain movement with future legislatures, however, adding that the closer Wyoming gets to an anticipated fiscal cliff in the state’s future, the more likely the bill’s passage becomes.