Two legislators take on taxes with restrictive spending law

Two conservative lawmakers introduced a measure this week to cap growth in state budgets in anticipation of the next boom — during which they say Wyoming could save enough money to avoid any future tax increases.

The proposal is being carried in mirror House and Senate bills by Sen. Bo Biteman (R-Ranchester) and Rep. Chuck Gray (R-Casper). House Bill 172 and Senate File 98 are both called Wyoming Budget Stabilization Act. The bills would prevent both the governor and the Legislature from increasing annual spending more than an amount calculated through a combination of inflation and population growth rates.

The bill is a countermeasure to lawmakers interested in raising revenue through tax proposals they say will modernize the state’s tax system, the sponsors say.  

“We are going to work hard to stop these harmful tax increase proposals,” Gray wrote in an email to WyoFile. “Our state government needs to manage spending during boom years to save more for bust periods.” 

With 16 lawmakers cosponsoring it — five senators and 11 representatives — the bill shows some lawmakers think spending is still high even after years of reducing budgets in most areas of state government.

Skeptics of the measure worry it could tie the hands of future legislators and governors and lead to cuts to government services. In the past, policymakers have taken advantage of booms and the corresponding spikes in state revenues to invest in Wyoming’s public institutions, from infrastructure to building projects, including schools and government buildings, particularly the Capitol. Despite increased spending during boom times, the state has built up impressive savings, accumulating one of the largest sovereign wealth funds in the world.

But Gray and Biteman suggest the state can save more in the next boom and avoid having to raise taxes on residents, who currently enjoy having their government services largely paid for by taxes on mineral extraction. Larger savings could also save the state from service cuts during downturns in that industry. Indeed, in recent years the Legislature’s chief saving account — commonly called the “rainy day fund” — staved off even deeper cuts to public education than Wyoming saw in 2018.

“The idea of the bill is that state government has enough revenue to fund government across a boom-bust economic cycle,” Gray wrote. “If the state saves more during good years to grow its savings, we will be able to manage years where there is not as much revenue.”

Gray did not respond to a question asking whether the bill counts on a future boom when energy markets — particularly the coal and oil markets — look increasingly uncertain. Increased oil prices and robust stock market earnings appeared to have pulled Wyoming out of tough fiscal in an October revenue report. But those gains have taken a hit since and it’s unclear where oil prices go from here, according to Wyoming’s January economic forecast.

The Gray-sponsored bill has been assigned to the House Revenue Committee.

The measure will seem too restrictive to many lawmakers and faces an uphill battle, predicted Marguerite Herman, a longtime legislative observer and director of the Wyoming League of Women’s Voters.

“It looks suspiciously like a soapbox,” Herman said.

Speaker argues lawmakers already save

The “instability” of the state’s reserve funds makes public education funding a challenge during busts, Gray and Biteman said in a press release when the legislation was first made public on the LSO website.

“During bust periods, when there are large deficits, harmful, dangerous and unnecessary tax increases are proposed,” the sponsors wrote.

The Wyoming Budget Stabilization Act would cap budget growth at a number tied to inflation rates and population growth but the cap does not apply to education funding or Medicaid spending. Many policymakers say health care costs are set to skyrocket because of Wyoming’s aging population.

The act requires a “cash budget” once the state has stashed away enough money to fund a year of expenses, according to the two lawmakers. Cash budgeting would move the state away from its current use of revenue projections in budgeting which has led to volatility in the past, they said.

Every five years, the bill requires agencies to rebuild their budgets from scratch. Proponents of such budgeting say it leads to cost savings by forcing agencies to budget more thoroughly. “It is another control on our spending levels,” Gray wrote in response to questions from WyoFile.

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Speaker of the House Steve Harshman, who has been immersed in Wyoming’s budget process for 12 years both as a member and chairman of the House Appropriations Committee, said Gray’s bill seeks to put in policy something the Legislature does naturally.

“What we did in the past boom for saving was incredible,” Harshman said. “It [HB172] sets out a guideline to do exactly what we did.”

During past booms, lawmakers have spent surplus revenue on infrastructure, an investment similar to savings, Harshman said.  

“You really can’t bind future legislatures,” Harshman said.

Taxpayer bill of rights?

Some worry the formula of inflation rates and population growth leads to cuts, not stabilization.

The Wyoming Budget Stabilization Act is similar in some respects to a taxpayer’s bill of rights. Gray filed a similar measure last year. In that case, Gray brought the bill as a constitutional amendment, which would have required the approval of Wyoming’s voters. But that measure included a provision requiring voters to approve any tax increases, which is not included in this year’s bill. This year, Gray chose to bring a statutory spending cap, not a constitutional one.

As statute, not a constitutional change, Marguerite Herman said future lawmakers could simply repeal the Wyoming Budget Stabilization Act.

Colorado voters passed a Taxpayer Bill of Rights in 1992, commonly referred to as TABOR. Under that act, state spending is capped and any revenue that comes in over the state’s needs is returned to voters through tax refunds. Colorado’s TABOR caps spending using a formula combining inflation rates and population growth.

The formula falls behind “normal growth” in the cost of keeping up government services, according to the Center on Budget and Policy Priorities, a think tank that studies how budget choices impact low-income people. “Inevitably, TABOR forces large, annual cuts to services that families and businesses rely on and that support state economic prosperity,” an analysis on the think tank’s website said.

The bill could block Wyoming’s decision makers from adapting to changing circumstance, Herman said. It would also cut against the grain of lawmakers’ desires for control over Wyoming’s budgetary affairs by binding their hands, she said, and that might turn many of Gray’s and Biteman’s colleagues against the bill.

“It presumes that any need that might arise, the Legislature will not be able to consider and evaluate and fund,” she said. “Really they embrace that task right now. They desire for everything to come through the legislative process so they can look at it.”

This story was emended to correct a fault in grammar. — Ed.