Cutting Waste from the Wyoming Budget

As the minerals boom turned to bust, so did the revenue supporting big government in Wyoming. Now our politicians have a choice. Should they:

• cut spending back to a level Wyoming taxpayers can afford;
• use revenues hoarded in savings accounts to continue spending at ever higher levels until savings run out, or;
• give money to private companies to magically increase state revenue?

The politically expedient choice at the moment appears to be: try to increase state revenues with a scheme known as corporate welfare.

But who is fooled by this choice? According to a recent survey, the majority of the people of Wyoming know that they will gain little if any benefit when government hands out tax dollars to private companies. Instead of ramping up what politicians call economic development but what are really taxpayer-funded giveaways, government should eliminate corporate welfare completely and start right-sizing government to a level taxpayers are willing and able to fund.

In the 1980's, when the bottom last fell out of the minerals industry, the Wyoming government managed to amend Article 3, Section 36 of the Wyoming Constitution, a clause that prohibits appropriations to "any person, corporation or community not under the absolute control of the state." Still today known as the Amendment 4 program (because of its position on the ballot), the amendment created an exception to Article 3, Section 36 to allow mineral funds to be loaned to fund economic development. This program came to an ignoble end after losing more than 40 percent of the $18 million in handouts. However, the amendment is still part of the constitution and is used today to rationalize handouts to private companies for nebulous benefits such as job creation and economic diversification.

What do the people of Wyoming think about handing out tax dollars to private companies? Do they think their families and communities will benefit when government gives their money away to companies feeding at the taxpayer trough?

In a survey by the Wyoming Liberty Group in June 2015, potential voters in Wyoming were asked: Suppose a private company cannot get enough funding on its own for a project. If that company goes to the government for funding, how likely is it that your family will benefit from this spending of tax dollars?

Fifty-eight percent of respondents said it was unlikely their families will benefit when government funds companies that cannot get funding in financial markets. Thirty-five percent thought it likely and eight percent were unsure.

The survey also showed that 73 percent of respondents agreed that Wyoming would be more prosperous if individuals had more of their own money to spend in their own community rather than government spending it on their behalf for the benefit of their community. In terms of ideology, 84 percent of conservatives and 73 percent of moderates agreed, while only 38 percent of liberals thought communities would be more prosperous if people had more of their own money to spend.

Most people appear to understand they are very unlikely to benefit from corporate welfare schemes, schemes that instead benefit the politically connected.

For example, one corporate welfare program in Wyoming called the Minerals to Value Added Program would force Wyoming taxpayers to provide a supply guarantee to a company such as DKRW. Who is involved with DKRW? Arch Coal was a primary investor in DKRW (it sold off its investment in DKRW at a loss). Tom Lockhart, chairman of the House Minerals, Business and Economic Development Committee sat on Arch Coal's board, and Dave Freudenthal, a former governor of Wyoming, currently sits on the Arch Coal board. If you've ever wondered why the Democrats don't complain about corporate welfare, you might be surprised to learn that Mary Throne (D-Laramie) is the lawyer for DKRW.

When entrepreneurs make investment decisions with their own money, they base these decisions on risks and rewards. When government spends other people's money to benefit private companies, political considerations become paramount. This classic case of misallocation wastes resources by placing dollars in the wrong places, encourages companies to serve government instead of customers, and leads to corrupt back room cronyism.

And the people of Wyoming know this.

When asked: "Who is better at determining the long term benefits and potential of new technologies, private sector companies and investors who use their own money or government officials who use other people's money?" 73 percent said private sector companies and investors and only 10 percent said government officials. In fact, more people were unsure about who made the best decisions, at 17 percent, than thought government officials were best.

Corporate welfare sends the signal that political connections help the bottom line better than staying competitive in the marketplace and creating value for customers. It distorts incentives and directs businesses into nonproductive activates and away from value-creating activities. Instead of putting a new spin on a bad program and hurting communities and families along the way, legislators must get out of the way by reducing regulation and lowering taxes so people are freed to make their own wealth creating investment decisions.