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Right sizing a supersized government

As Winston Churchill said, we should never let a good crisis go to waste. Why? Because it creates an opportunity for fundamental change. The fiscal crisis in Wyoming is a good example.

 

As minerals tax revenue in Wyoming skyrocketed, government spending supersized. Now, with minerals tax revenue imploding, the gap between spending and revenue has caused a crisis. In this crisis we find the opportunity to right size government to a spending level remaining Wyoming taxpayers are willing and able to fund.

According to the American Legislative Exchange Council, Wyoming has 873 government workers per 10,000 of population. That is more than twice as many than the best two scoring states, Nevada at 387 and Arizona at 427.  This is a good example of just how supersized our government has become.

But right sizing government will cost money. Extracting cash from the pockets of the people of Wyoming would further reduce economic activity so one place to find the money for right sizing is the rainy day fund.

When the governor and legislators talk about the rainy day fund they mean the Legislative Stabilization Reserve Account, or LSRA. That account was set up in 2005 as a way to funnel some of the minerals tax bonanza out of the hands of spendthrift politicians. The LSRA doesn’t have an official source of funds like the general fund for example, but received appropriations every year until 2014. In 2015, the legislature diverted funds destined for the LSRA to cover off the state’s revenue shortfall. The LSRA currently holds about $1.5 billion.

During a Wyoming Revenue Committee meeting in 2015, the Pew Foundation presented its study of the state’s rainy day fund.

According to a Pew Foundation, the rainy day fund is too small to maintain spending at current levels, so cannot be used to bail out past bad spending decisions. According to its analysis, the state would need a rainy day fund holding $3.3 billion if officials wanted to cover off nine out of ten possible downturns, and the cumulative effect, for 10 years. Wyoming’s rainy day fund, at $1.5 billion, just isn’t big enough to maintain a supersized government.

The Pew Foundation also found Wyoming legislators never answered the question, what is the rainy day fund for?

We now have an answerstreamlining government.

Why is streamlining a good idea?

Imagine a family situation in which one spouse has lost his or her job. With the loss in income, the family must sit down and decide what it should and shouldn’t be doing. In the same way, the fiscal crisis has opened the door to a fundamental rethink about what government should be doing. For example, government could extract itself from areas better served by the private or charitable sectors. If it did, taxpayers would face one-time costs such as closing facilities and paying severance. Over time we would have more personalized and cost-effective services provided by the very groups crowded out by government, and government could focus on activities it should be doing, such as the court system and protective services. 

So far we have yet to see much in the way of streamlining.

Although Governor Mead recently reduced government spending with across the board budget cuts, these can punish efficient departments and create incentives for budget padding to maintain wasteful program spending—the very opposite of streamlining. For example, the Game and Fish Department kept its wolf management budget at $1.46 million for the 2017-18 biennium even though wolves are back on the endangered species list and all monitoring activity ceased. Where did the Game and Fish across-the-board cut come from? You guessed itthe wolf budget. According to the department’s budget reduction proposal, the cut came from money it wasn’t going to spend. 

Governor Mead must implement a state-wide audit to weed out this type of budget fiddling. But we have an even bigger opportunity. An audit would also allow us to look at all government programs and determine where government could streamline.

Government in Wyoming grew to fit the level of revenue it extracted from the minerals industry but now remaining taxpayers must extract themselves from government. The rainy day fund is too small to maintain a supersized government but using it to right size government is one way we can ensure a better future in Wyoming. 

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Thursday, 30 March 2017
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