Just as we reach the end of winter, a fiscal chill is taking our state in a firm grip. The Casper Star Tribune reports:
Gov. Matt Mead says he will resist a federal government move to withhold more than $53 million, or 5 percent, of the state’s share of federal mineral royalties because of automatic federal budget cuts that started this month. Mead asked Wyoming Attorney General Greg Phillips for advice on what he can do to block the Interior Department’s action. He also contacted Wyoming’s congressional delegation and neighboring states affected by the cut. Wyoming, the nation’s leading coal-producing state, had been scheduled to receive $995 million in federal mineral royalties during the 2013 federal fiscal year that ends Sept. 30.
In total, according to U.S. Census Federal Aid to States reports, 26 states collect approximately $2 billion annually in federally collected severance taxes. This means that the Department of the Interior is withholding a total of more than $100 million, half of which it owes Wyoming.
The motive, again, is the implementation of the sequestration budget cuts, which raises two red flags for Wyoming.
The first has to do with the severance tax itself and its role in the state budget. If the federal government can suddenly, and unilaterally, decide to take five percent, then who is to say they are not going to take ten, fifteen or fifty percent next time?
Such large withholdings would have very serious consequences for the Wyoming state budget. We all remember the big fight that took place over a few tens of millions of dollars in budget “cuts” this past legislative session. If our lawmakers and governor had to fight so hard among each other over those cuts, then what would happen if more of the Obama administration decided to hold back more of the severance tax revenues?
Casper Star Tribune gives us a hint:
The money goes mainly to K-12 schools, the Budget Reserve Account and school capital construction. Lesser amounts are distributed to the University of Wyoming, the highway fund, county roads, cities and towns and community colleges.
In other words, because we have made our education system dependent on money that is routed through the federal government, the education of our children is now at the mercy of the Obama administration and its whimsical approach to budgeting.
This brings us to the other big red flag sent up by this severance-tax withholding. The severance taxes represent, roughly speaking, half of all the money that Wyoming gets from the federal government each year. Technically, the severance tax revenue falls under the Minerals Leasing Act which in turn dispenses money under the Federal Aid to States umbrella.
If the federal government can unilaterally, and without warning, reduce our share of the severance taxes, then what is to stop them from cutting other Federal Aid to States programs with a similar bureaucratic dictate? If they can make a temporary cut like this, what is to stop them from making those cuts permanent?
This is an excellent learning moment for our lawmakers and our governor: the longer we remain dependent on Uncle Sam, the more unpleasant surprises Uncle Sam will have for us.
But don’t despair: help is on the way. Wyoming Liberty Group has a project going for structurally reforming away our dependency on federal funds. You can learn a lot more about it if you join us for our Liberty Forum, Tuesday April 2 at 6PM, 1902 Thomes Avenue in Cheyenne. If you can’t come in person, watch our webcast here at wyliberty.org.