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Six Years of Spending Cuts - in Wyoming??

Last week I explained that the pending revenue dry-up is putting the Wyoming state government in a problematic situation. If General Fund spending grows by as little as two percent per year, the General Fund will $312 million short by the time we get to the 2019-20 biennium.

With a three-percent annual spending growth, the deficit will exceed half a billion dollars.

  This is a serious outlook that should be at the top of the budgetary priority list of every state legislator – and the governor. Yet it does not attract any attention in the budget that the state’s chief executive has presented to the Appropriations Committee for the 2015 legislative session.

Does the governor have another document in his back pocket where he addresses the looming structural deficit?

In fairness, Governor Mead deserves kudos for having slowed down growth in state spending. Compared to his predecessor who signed budgets growing spending by as much as seven percent per year, Mead is a fiscal conservative:

  • General Fund appropriations in the governor’s budget for the 2015/16 biennium grew by 4.8 percent over the 2013/14 biennium budget;
  • Comparing second-year, supplementary budgets, General Fund spending increased 6.1 percent;
  • The General Fund increase from original budget to supplementary budget within the 2013/14 biennium was only 1.8 percent and three percent for the current biennium.

Broken down by year, these spending increases never come close to the fiscal excesses of the Freudenthal administration.

That said, General Fund spending is still increasing. I cannot stress this enough: the only way that the state government of Wyoming can avoid a deficit just two biennia down the road is to freeze General Fund spending, to freeze it now and to keep it frozen through 2020.

And this scenario relies on four important assumptions:

  1. There are no new spending commitments added to the General Fund;
  2. Other tax revenues come ticking in as predicted;
  3. There is no decline in federal funds that would force the state to replace Uncle Sam’s dollars with in-state sourced money;
  4. Other Funds spending does not suffer revenue stagnation of the kind that is predicted for the General Fund.

If just one of these assumptions turns out to be wrong, it will throw the state budget deeper into its looming deficit hole.

Where is the debate over this not-so-distant future? Does Governor Mead plan to kick the deficit can down the road, for his successor to take it on? Where is the long-term outlook among our elected lawmakers?

In January the Consensus Revenue Estimating Group will publish an updated forecast. It is unlikely to be any better than their October report, especially since oil prices have plummeted below $60 and could fall even further. With oil production being responsible for roughly one quarter of all the state’s severance taxes, this has a dramatic effect on the revenue outlook.

It is possible that just freezing general spending will no longer be enough. We cannot rule out a scenario where our state legislature, in order to avoid chronic deficits, will have to start making annual spending cuts.

For four, five, even six years in a row.

Who is up to the challenge?

The Governor's Budget: A Reality Check
Facts Discouraged

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Sunday, 22 October 2017
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