SUNDANCE — The age of mineral wealth may be at an end for the State of Wyoming. The latest CREG report shows a severe drop in revenue over the next couple of years thanks to a huge decline in income from coal, oil and natural gas, and Senator Ogden Driskill warns that it may not be temporary.
“It’s going to be a very difficult two years – and it could be permanent. COVID-19 accelerated it and made it worse, but the real truth is that we were in a structural decline before it hit,” the senator says.
“Coal was already declining, oil and gas were doing alright but they weren’t wild, we had big problems with our power plants. A lot of these issues are over-time structural issues that have been there and it’s just that the chicken has come to roost.”
This sentiment was echoed by Governor Mark Gordon last week during a press conference.
“It is true that these [problems] existed before COVID-19, but COVID-19 has exacerbated these problems and brought them into sharp focus,” he said. “It is also clear that we cannot cut our way completely to solving this problem.”
State leadership no longer has a choice, Driskill says: the time has come to act. The latest projections show that revenue has lagged behind the state’s biennial budget by between $1.4 and $1.7 billion.
To put that figure in perspective, the senator points out that it represents around half the general fund budget, or the equivalent of eliminating the salary and benefits of every state employee outside of education, or of completely eliminating the Department of Health.
“We’re already rebounding a little so probably, as things often are, it’s not quite as bleak as it looks on the surface,” he says. However, if nothing is done to correct the current course, he continues, the state will have zero dollars left in savings at the end of this biennium.
As is always the case, Wyoming will have two options to solve its financial woes: to cut the amount being spent, or to generate more revenue to replace what has been lost. Driskill believes the time has come to call for the Department of Education to play its part.
“The real question is going to be, do we do something with education at this point? Education has taken to this point virtually no cuts in the last ten years,” he says.
“They’ve taken some cuts to their [salary] increase, but they’ve taken no actual cuts. Their employment has gone up by massive amounts and, in the timeframe they’ve gone up, general government has taken 10 to 12% cuts across every agency other than education.”
The drop in revenue is so severe, Driskill says, that “you just literally cannot cut your way out of it.” He says he will not be considering revenue options until the Department of Education has played its part.
“Until education comes to the table in an honest way, I’m not going to vote for any tax increases in Wyoming. The record has been to this point that any time we create new revenue, the school just absorbs it and asks for more,” he says. “This year, a very large part of the districts in the State of Wyoming have given raises this year to their teachers and their staff. This is a time when we’ve got double-digit unemployment, I don’t think it sits well.”
Educators do a fine job in Wyoming and take great care of our kids, Driskill says, but we are now at the point where everyone needs to live within their means, education included.
“We’re in a box now where we probably only have two ways out, and that’s either to cut education funding somewhat, or go to massive tax hikes. A and B, that’s all we have, there’s just not going to be revenue to support government as we know it,” he says.
The education budget is $1.7 billion, which is similar to the amount the state is in deficit. If education cut 20%, the senator feels it would go a long way to soften the blow.
While nobody wants to make those kinds of hard choices, Driskill says we are at the point it’s inevitable.
“The longer we wait to deal with this, the more difficult it’s going to be,” he says.
Meanwhile, revenue options have already been put forth, such as a bill that was floated this week to increase property taxes by 2%.
“I killed the property tax bill – I’ll take credit for that,” Driskill says. “It’s one tax that I’ll fight to the bitter end because it goes directly to the pockets of the people who hire the people that created our wealth and they’re in a time that they really can’t afford increases right now. Property tax, as far as I’m concerned, is absolutely a non-starter.”
The state will also need to be careful to protect its investment portfolio, says the senator, from which around 30% of income is generated.
“If you spend that money, it’s only a one-time spend and then you lose that investment income,” he says. “That’s going to look more attractive than ever because we’re not going to have good returns now, so people are going to say, well, it’s only making us a few percent, so why shouldn’t we spend it to save our problems.”
Another option that has been touted is for the state to borrow money to cover the deficit through bonding. “I’m vehemently opposed to borrowing to dig our way out of this,” Driskill says.
He does, however, suspect there may be assistance coming from the federal level.
“As bad as it is for us, it’s just as bad for a lot of other states. There’s probably going to be some national solutions that come as well,” he says. “I would not bank on them, but I would guess there’s some coming.”
For cities and counties, the need for a steady income is particularly great. Driskill compares them to aged people on a fixed income, who do not have the means to raise revenue on their own.
For them, the options will include drastic – perhaps draconic – spending cuts; the state finding a way to raise revenue to then pass down; and giving these entities the ability to raise revenue themselves.
“Those are the only three options available to us and they’re going to have to have something. They are the base level of our government, they provide the tax revenue and are the tax collectors,” Driskill says.
“Cities and towns have got to go on and they’ve got to be made whole in some fashion. Some of the decisions they’ll have to make will be just as tough because what the legislature is likely to do is pass on to them the ability to raise taxes.”
The process of finding a way to shore up the budget has just begun. Answers have yet to be found.
“Everybody is looking at it, but we just don’t know yet,” Driskill says. “The bottom line is that it’s just unbelievably hard to replace mineral revenues because the dollar figures are so high. We’ve lived very well off minerals and fortunately we’ve saved a lot of money.”