How Other Spending Obscures Wyoming’s Fiscal Cliff

Imagine you have ten accounts you allocate your paycheck to every month. At bill time, you take money from two of these accounts, call them your traditional accounts, to pay your bills. One day, your paycheck suddenly plunges and you don't have enough flowing into these traditional accounts. No problem, you can just divert the flow from some other account into your traditional accounts and pay your bills that way. All appears good—but is it?

Say your spouse handles a third account, one that pays for your children's schooling. Suddenly, school fees go up. You still have enough money in the school account to pay for the higher fees this year, but what will happen next year if your paycheck doesn't recover? You should probably start rethinking how you define deficit because after all, you only have one paycheck.

Perhaps it is time for government to do the same.

The Wyoming government has billions of dollars squirreled away in hundreds of accounts. It divides up some of the same flows of tax dollars into some of these accounts and at budgeting time, spends the money in ways that can sometimes obscure the seriousness of declining revenues. This could create future fiscal peril for Wyoming families.

Why?

Although the legislature eliminated Governor Mead's 2015 supplemental budget deficit and ended up with a small budget surplus, one of the biggest spending hikes didn't even show up in this calculation because it came not from the governor's traditional spending accounts but from other funds.

Wyoming school districts are funded not from traditional accounts, but from the School Finance Block Grant Funding model. About half of the funding for the block grant comes from the state's School Foundation Program Account (SFPA), and the other half from local revenue sources.

The problem is that some of the money flowing into the SFPA comes from Federal Mineral Royalties (FMRs), which also flow into the governor's traditional spending accounts. Falling oil prices that caused Wyoming's deficit also hit the SFPA, which lost $49.2 million in FMRs in fiscal year 2015-16.

This will be a big problem in the future because the School Finance Block Grant Funding model will be recalibrated (read-inflated) this year. Making matters worse, school districts received an additional $52.7 million in the 2013-14 biennium budget, which means the school district's block grant will inflate from a bigger base. But that's not all. School district representatives lobbied the government for even more money. As a result, the legislature approved yet another inflationary increase for school districts this session, at $10.6 million.

The increase was more than the governor's entire 2015 supplemental budget appropriation of $9.3 million! But the $10.6 million didn't show up as an addition to the deficit because in Wyoming, when we talk about the deficit, we are talking about a lack of money in the state's traditional accounts.

But funds in other accounts filled from the same tax sources are also in decline.

So the question is—if oil prices stay low, where will the money come from to pay for these and other escalating costs? School district inflationary increases will undoubtedly feed into the model recalibration, boding poorly for Wyoming's future fiscal health because at the end of the day, there is only one taxpayer.

Wyoming's budgeting process is extremely complicated and these complications could lead us blindly off the fiscal cliff. With a budget deficit in traditional accounts forecasted for the 2017-18 biennium and escalating costs funded from other accounts with similar revenue sources, Governor Mead and legislators must moderate their apparent expectation that Wyoming families and the minerals industry are in a position to bail out past bad spending decisions. It is time for Wyoming to bring its spending in line with taxpayer's ability to pay.