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The 2015 Supplemental Budget – A Wrap Up

Bills to hate and bills to love—this session had it all. With a large and growing budget deficit, the supplemental budget bill turned out better than expected. After the legislature bailed out Governor Mead’s deficit budget, it left a small budget surplus. However a large part of cash used to bail out the state’s deficit came from one-time funds. With dark clouds on the horizon for 2017-18, what might we expect for the next budget session? 

The outlook is not rosy. If Governor Mead continues pushing for a rainy day fund raid instead of bringing the size of government down to a level citizens can afford to fund, he will leave our children and grandchildren with a legacy of debt and higher taxes.

The unexpected speed of declining oil prices meant Wyoming’s Consensus Revenue Estimating Group (CREG) overestimated state revenues last year, so general fund spending based on these expectations left the state with a $222 million deficit in the 2015-16 biennial budget. That meant the first job facing the Joint Appropriation Committee (JAC) was to somehow cover the $222 million deficit. It did this by diverting $44 million in extra natural gas revenue and $140 million in pre 2013-14 reversions (money appropriated by agencies but not spent) from the Legislative Stabilization Reserve Account, commonly known as the rainy day fund. These were one-time bonanzas unlikely to happen again next year. 

The JAC also took $34 million in 2013-14 reversions and $21 million from the Strategic Investments and Projects Account (SIPA), for a total of $239 million in extra cash. This patched over the deficit and left just under $18 million for the governor’s supplemental budget request and any bills coming out of the session requiring funds.

Governor Mead’s request for $167 million more in spending this year indicates a disconnect with fiscal reality. As a result, the JAC had to not only cover the $222 million deficit, it had to reduce the governor’s request to something below $18 million. The JAC managed to reduce the governor’s request to $8.7 million, the smallest supplemental budget request in decades – kudos to the JAC.

After the budget went through the house and senate, the legislature upped the governor’s request to $9.3 million, leaving about $8 million to cover bills with appropriations. These bills totaled $3.5 million. After all the revenue re-routing, cuts to spending requests and rejected demands to raid the rainy day fund, the state was left with a slight budget surplus of about $4.3 million. 

The CREG forecasts a $338 million deficit for the 2017-18 budget. How will government handle the shortfall this time? It could trim agency budgets like it did in 2012, only to increase them again the next year, or divert unspent funds from savings accounts, as it did this year.

But a surprise windfall next year is unlikely so will the governor call for another short-term budget snipping exercise or will he once again call for a rainy day fund raid? Or worse, will he call for a tax hikes? Or could we hope he would take a leadership role and call for real and permanent cuts to programs that fall outside the fundamental role of government?

What might past experience foretell?

After cutting agency budgets and diverting funds, the legislature has raided the savings accounts. For example, in 2011, $20 million was appropriated from the Permanent Wyoming Mineral Trust Fund Spending Policy Reserve Account for spending. Any funds in reserve accounts, such as the $1.8 billion Legislative Stabilization Reserve Account (the rainy day fund) and the $100 million in the School Foundation Program Reserve Account can be appropriated and spent. But could a rainy day fund raid be justified this time around. 

Maybe not.

During Gov. Mead’s 2015-16 budget speech given on November 29, 2013 he said, “Some of these savings are permanent in nature–providing long-term stability for Wyoming’s financial future. Others are intended to backstop the budget providing protection in the event of unforeseen economic downturns.”

The CREG has already forecast a deficit for 2017-18, so it is hardly unforeseen.

The ups and downs in mineral revenues are not exactly news. Obviously, the rainy day fund has more than enough to cover the forecasted deficit but instead of riding the wave in the up times and smashing into the rocks in the down times, the legislature should reduce the size of government to stay on a steady course no matter the tide. Unless citizens demand that government bring the size of government down to a level we can afford to fund, expect a rainy day fund raid next year.

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Sunday, 22 October 2017
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