Spending cuts could cost state more in future

CASPER — Even before COVID-19, most state leaders already understood that Wyoming would be unable to cut itself out of its current budget crisis. 

But a review of the state’s first round of proposed budget cuts shows that the state could actually be cutting itself into a worse crisis in the coming months, with even greater reductions in government spending still on the horizon. 

Short-term solutions to reducing state spending, including cuts to preventative care and tourism, could actually cost Wyoming more money in the long run, either by exacerbating already existing gaps in public service or by doing away with services intended to generate money for the state. 

Cutting the Wyoming Department of Tourism’s $2 million advertising budget, for example, could cost the state an estimated $15 million in tax revenue from reduced public awareness, according to agency estimates. Eliminating a $1 million program within the Wyoming Department of Health – its Health Innovation Fund – could prevent innovations in preventative care that could have saved the state money long-term. 

“I always thought of them as like the FRAM oil filter expenditures that if you paid for them now, it saves you some money later on,” Rep. Dan Kirkbride, R-Chugwater, said in an interview. “I thought anything you would do to keep senior citizens in their homes instead of sending them to a nursing home or an assisted living facility would save a lot of money, and early childhood development saves us money in the education system.” 

With few concrete numbers and an uncertain economic future amid a declining mineral sector and an increasingly polarized Legislature, most can only speculate how dramatic the long-term economic and social impacts of the cuts will be. 

For example, a $2.75 million cut from the Wyoming Home Services program – which helps keep the state’s senior population out of expensive nursing homes by meeting them where they live – could potentially cost government thousands of dollars more per patient if that reduction continues long-term.

Cutting those funds from the state budget, AARP Wyoming’s Tom Lacock warned, could make things worse down the road, either by forcing seniors to use more expensive nursing home facilities or deferring preventative care measures, leading to more serious health concerns later on. 

“The great news for policy makers is that, in this case, the least-expensive choice is the choice the public wants,” Lacock said. “You’ve already got the hearts and minds.” 

The problem is that the state – now faced with cutting government to the bare necessities – can no longer afford even that. 

Though Gov. Mark Gordon’s office, which approved the cuts, made them with an emphasis on trying to reduce the impact on public health, safety and law enforcement, initial efforts to transition the state’s balance sheets from red to black will come with ample collateral damage that could extend well beyond the Wyoming Capitol. 

“These budget cuts are going to have way more impacts outside of Cheyenne when you talk about reductions in payments or services the Department of Health runs or for what tourism is able to do,” Gordon’s policy adviser, Renny MacKay, said in an interview with the Star-Tribune.

For the Department of Health, 87% of its annual operating budget is channeled not to the bureaucracy of Cheyenne, but to health care providers and hundreds of state employees in communities around the state. 

“When we give those dollars out to providers, local organizations, local businesses, there’s obviously a multiplier effect of those funds, because they have staff, those staffs receive salaries and those salaries go back into the community,” Wyoming Department of Health Deputy Director Stefan Johannson said in an interview. “When we cut programs, when we cut contracts, when we cut reimbursement rates, there will be a negative multiplier effect on our economic impact.” 

It’s not clear when those effects will be felt, or whether the communities and organizations who rely on those funds will be able to weather them. Ahead of the multi-million dollar cuts seen toward the end of Gov. Matt Mead’s administration, there was an open question among the health care community of whether reductions to Medicaid reimbursement rates could drive some providers out of business or lead them to stop serving Medicaid patients at all. 

While that never came to fruition, Johannson said a similar question is lingering ahead of this year’s round of cuts, particularly given a revenue picture even bleaker than the one lawmakers faced in 2017 and 2018.

“It’s really hard to say what the tipping point is where we would start to lose providers – whether they go out of business or whether they stop serving the department’s clientele – but we know that every reduction that we make, whether to a contract, a reimbursement rate or a program, we sort of move that risk along,” he said. 

Revenue is a big part of that conversation. Even before the impacts of COVID-19, Johannson said his division was already preparing for reductions prompted by the structural revenue declines in the state’s fossil fuel industry, while agencies like the Department of Transportation – which already faced funding shortfalls in excess of more than $100 million – tried in vain to lobby lawmakers for a means to avert maintenance concerns that would cost the agency even greater sums in the long term. 

While MacKay said that the executive branch is cognizant of the ancillary effects many of the state’s budget reductions could have, history shows that the impacts could be long-lasting and likely more expensive than the cost of the programs meant to prevent them. In the wake of cuts to substance abuse programs in Wyoming’s prisons in early 2017, recidivism rates in Wyoming’s corrections system spiked upward. With this year’s budget cuts leaving the state a choice between a fully staffed prison or drug treatment programs, the state might be facing a similar scenario. 

Especially with an additional 20% of the budget left to cut by this spring.

“Mental health and substance abuse programs did not take a very large cut in the first round,” said Andi Summerville, the former mayor of Laramie and executive director of the Wyoming Association of Mental Health and Substance Abuse Centers. “You would see that both in the line item for the Department of Health as well as in the budget for the Department of Corrections. What we are concerned about is the longer-term ramifications of even more budget cuts and what that will look like.” 

Though Gordon’s office has set the tone for this year’s budget cuts, it will ultimately be up to state lawmakers to carry the ball over the goal line. History shows that the Wyoming Legislature’s position closely tracks the governor’s position and sometimes even exceeds it. Joint Appropriations Committee member Tom Walters, R-Casper, said that is likely to happen this round as well. 

“It’s somewhat counterproductive for the Legislature to reverse the reductions he put in place,” Walters said. “So unless we really have a reason to be adamantly opposed with him, it just makes logical sense to agree with him and move on and see what we can do to make Wyoming better the next day.” 

With the largest deficit the state has faced and government as small as ever, the space to avert the worst impacts is likely gone. Wyoming’s mineral revenues have all but dissipated, with oil and coal markets facing bleak futures into 2021. Meanwhile, the state’s revenues from investments have slowed significantly and, without substantial changes to its revenue streams, fiscal analysts have warned the state’s savings are set to disappear before the next twoyear budget cycle. Those problems cannot be solved around the margins, MacKay said. 

“You can have a lot of ideas around efficiencies,” MacKay said. “And they do create savings. But five agencies make up two-thirds of our general fund budget. When you cut those agencies by 10%, the impact is going to be very significant. There just aren’t margins there.” 

With revenue generation already expected to be an uphill battle this session as the Wyoming Senate turns even farther to the right, additional budget cuts will likely be unavoidable. However, public sentiment toward those reductions has already soured, with some around the state speculating that Gordon’s budget cuts to date were intended to hurt taxpayers in an effort to sell them on tax increases.

MacKay soundly rejected that claim.

“I’ve heard that criticism, and that is absolutely not accurate,” he said. “The decisions we made were all hard, and there aren’t easier ones. This is a challenge in front of everyone who cares about Wyoming from legislators to county electeds to others to make sure that people do understand how we got here, that we had to do these cuts and that the governor is constitutionally mandated to present a balanced budget. And the way he can get there is through cuts.”