Spending Cuts: In Response to the Revenue Committee

by Wyoming Liberty Group Staff

Some citizens who have corresponded the Revenue Committee in opposition to tax hikes have been asked for input on where the state can make budget cuts. This is a welcome question, one that legislators have asked before.

Before I respond to this request, I would like to point out that there is not exactly a vacuum where proposals for spending cuts should be. In fact, Wyoming Liberty Group has published numerous articles on government reforms that also explain how those reforms will reduce the cost of government. I invite the Committee members to sign up for updates here at our website.

To further advance the conversation, here is a summary of reforms we have proposed; the methodology behind the numbers can be provided upon request.

Efficiency and Transparency

Giving government a leaner organization is a great way to start spending reforms. Relying on the Alvarez and Marsal report, this reform carries a fiscal value of approximately $200 million. However, that is only for part of the state government – and does not even touch local governments. Assuming similar savings are available there as well, we are looking at a potential fiscal value – reduced spending – of $300-$350 million.

Efficiency and transparency reform is not the end-all, be-all of making government fiscally sustainable, but it is a great start. It buys us the time we need to start structural spending reforms. It also opens a conversation about zero-based budgeting, both at the state level and locally.

Medicaid reform

There are two parts to a reform of this massive program. The first consists of bringing insurance choice – vouchers – to enrollees who are not in long-term care. Together with a reform that opens up for interstate purchases of health insurance plans, this carries a potential for substantial cost reductions.

The second part has to do with long-term care, where a model called the Charity Compact can revolutionize funding, increase quality and reduce cost in one reform. 

The scope for cost savings in Medicaid is considerable; a prudent fiscal-value estimate suggests $150 million, but the potential for cost savings is as high as $300 million. It all depends on how far the legislature is willing to go.

Education choice

There are many ways to bring educational freedom to our K-12 system. A reform that protects homeschoolers while bringing the Wisconsin model to Wyoming, has a fiscal-value potential of $300 million. This number is attainable if some 25 percent of all K-12 students in Wyoming attend private schools.

This reform could move swiftly if the legislature decided to get behind it. There is strong interest in education choice among parents across Wyoming, and the reform is well in tune with conservative moral values.

Highway funding

Here, we can replace the current, inefficient and inadequate funding model with a model based on fixed-vehicle contributions. In plain English, a vehicle registration tax. This model, explained in more detail in a previous article, allows for the removal of highway funding from the state budget. It would be handled through an entirely separate entity, where revenue is 100 percent dedicated to highway maintenance and construction. Or, as I explain it in the separate article, a vehicle registration tax for the purposes of highway funding would

• Dedicate funds to highways,
• Replace the gasoline tax,
• Separate highways from the rest of the state budget,
• Protect our privacy,
• Provide sustainable funding, and
• Be transparent enough to keep government accountable and efficient.

Cut economic development

This is a potentially huge savings opportunity. There is no credible research that shows how economic development actually generates more tax revenue than it costs. This item is not so much about reducing regular expenses – although that comes in the bargain – as it is a matter of preventing future cost increases.

Without taking into account the positive effects of separate highway funding and the macroeconomic benefits from an expanding private sector, it is reasonable to expect that these reforms could reduce the combined size of state and local governments in Wyoming by $800-$900 million. These would be permanent reductions, the effects of which are likely under-estimated; the economic growth benefits from privatization (Medicaid, education choice) are significant.

As we all know, stronger economic growth means higher incomes, more jobs – and a larger, more solid tax base. Government would get more revenue without having to raise taxes.

Now: with this summary of ideas for spending reforms, I would like to put the ball in the Revenue Committee's court. Please explain to us taxpayers:

1. Will, or will not, your proposed tax increases harm economic growth in our state?
2. What value is added to the economy if government gets to spend that money instead of leaving it in the private sector?