The Wyoming State Budget: Part 2

This is the second installment in a series of articles on the Wyoming state budget. You can find the first part here.
Contrary to conventional wisdom, the gateway to knowing what our state government actually spends does not run through the state budget itself. Due to lack of transparency, it is difficult to get a good grip on state spending by examining the budget. It is possible, of course, as we will see in a later installment, but if we go into the budget without any reference knowledge, it will make our experience more confusing than it needs to be. 

There are a few other sources we can use in order to get a grip on our state's spending. The preferred ones are:

Some people ask if these are reliable data sources. Keep in mind that the Census Bureau is a federal agency; a state that inaccurately reports its spending data is lying to the federal government, which has its consequences. As for NASBO, they are an independent organization, owned by the states, which removes any reasonable incentives toward inaccurate reporting. There have been problems with Wyoming numbers in their spending reports, but those problems go back to the early 2000s and seem to have been at least partially corrected over the years. 

There are advantages with both the Census and the NASBO data. The Census Bureau offers more detailed and better organized data, better suited for strict quantitative analysis, while the NASBO data is better for those who want a more policy-oriented understanding of spending. NASBO also offers a better idea of the presence of federal funds in state budgets: they break down federal money by spending program, something the Census Bureau no longer does. 

Which brings us to an important detail. According to the Census Bureau and all other federal databases, the revenue from severance taxes that Wyoming receives from the federal government are counted as federal aid to our state. This is correct from a narrow, legal viewpoint, but not from an economic viewpoint. Those taxes are collected from minerals activity here in Wyoming and are designated Wyoming state revenue, and should therefore be counted as in-state revenue.

That is, in fact, precisely how NASBO accounts for it. This results in a notable difference in how much federal money the Census Bureau and NASBO report as going into our state's coffers. Once we adjust for that difference, though, the two sources are comparable and provide a good platform for an analysis of state spending.

Today, we are going to review the Census data; next time, we take an in-depth look at NASBO's state expenditure reports, and after that we will be ready to dig into our state's own budget documents. 

Because of the volume of state budget data that the Census Bureau processes (all 50 states plus the District of Columbia) they lag behind two years in their reporting. Therefore, the numbers we will review here are from 2016. They are still useful because they give us a structured overview of what our state's spending actually goes toward - and, not to forget, where the revenue comes from. 

Let us start with the spending side. First, and overview by character, as it is called: 

Table 1

Wyoming state spending 2016, $millions
Total expenditure 6,454
By character and object:
State funds to local governments 1,868
Direct expenditure 4,587
Current operations 3,196
Capital outlays 454
Construction 430
Other capital outlays 24
Other direct expenditure 937

Direct expenditure is, simply, what we normally refer to as "spending". The only indirect form of expenditure is the money that the state sends to local governments. That amount, by the way, happens to be fairly substantial. In 2016, state funds accounted for 36 percent of all local-government revenue here in Wyoming. 

It is worth noting that capital outlays, in 2016, were fairly moderate. The amount varies noticeably over time, and seems to correlate with the legislature's perception of how the minerals industry is doing.

A breakdown of direct expenditure by function looks as follows: 

Direct expenditure, non-capital, 2016, $millions
Education          1,578.4
Social services, income maintenance          1,101.2
Transportation             533.7
Public safety             219.8
Environment and housing             332.5
Government administration             357.6
Utility, liquor store, other             423.0

The Census Data breaks down these expenditures one more layer; to not make this too tedious, let us limit that review to the two biggest items. First, education (again excluding capital outlays):

     Education services:          1,578.4
               Education             786.8
                 Higher education             580.6
                 Elementary & secondary                 0.0
                 Other education             206.2
               Libraries                 4.8

The astute reader notes that there is zero dollars allocated to K-12 education. Technically, this is not true, but that money is included in the funds that the state sends to local governments. Whatever money shows up in the table above is what the state would spend directly, independently of the school districts.

Next, let us look at the details under social services and income maintenance:

Social services and income maintenance:          1,101.2
Public welfare             824.8
                    Cash assistance payments               21.5
                    Vendor payments             644.8
                    Other public welfare             158.6
Hospitals                 4.6
Health             256.3
Employment security administration               15.5
Veterans' affairs                 0.0

Medicaid shows up under "health". Approximately half of our state's Medicaid program is paid for with federal funds; the money we see here is the other half. 

As for the other items, it is worth noting that financial administration - filed under "government administration" - cost the state $154.6 million in 2016. This is what we spend in order to have experts invest our state's sizable savings. 

The Census data offers a similar breakdown of spending at the local level. It is quite revealing to examine the state and local figures side by side. We will get there later in this budget tutorial. For now, let us stay at the state level and take a look at where the revenue is coming from. 

Wyoming state revenue, 2016, $m
Total revenue 5,914
General revenue 5,090
Intergovernmental funds 2,143
Federal funds 1,938
Local government funds 205

Here, again, let me caution that the $1.9 billion in federal funds includes severance taxes that belong to Wyoming but are collected by the federal government on our behalf. 

Next, let us look at revenue from "own sources", in other words revenue that our state collects from us directly (again in millions of dollars):

General revenue from own sources        2,947.2
    Taxes        1,913.6
     Charges and miscellaneous general revenue        1,033.6

As we can see, taxes are only a minor part of all revenue. They account for:

  • 64.9 percent of general in-state revenue,
  • 37.6 percent of total general revenue (including federal funds), and
  • 32.4 percent of total state revenue.

So what taxes deliver what revenue? Let's take a look:

          Property           338.8
          Sales and gross receipts           820.1
               General sales           641.5
               Selective sales           178.7
                    Motor fuel           115.2
                    Alcoholic beverage               1.9
                    Tobacco products             24.1
                    Public utilities               4.8
                    Other selective sales             32.7
          Individual income                -  
          Corporate income                -  
          Motor vehicle license             76.4
          Other taxes           678.2

We hear a lot about how heavily we depend on severance taxes, and that we therefore need a tax reform to diversify our base. In theory, this is a valid point; in practice, though, it amounts to a moot point. First, other states are as dependent on one type of tax as we are, if not more. California, for example, depends more on its personal income tax than we do on our severance tax. Given how slanted that income tax is in its reliance on high-earning households, a breakdown of the dependency per "taxpayer unit" almost makes California more vulnerable to the swings in earnings of individual taxpayers than we are.

Furthermore, Florida depends on its sales taxes more than we depend on severance taxes. Again, we have a state where one tax is slanted in its dependency on one segment of the economy, in this case tourism. A drop in tourism can have much the same effect on tax revenue to them as swings in severance-tax revenue have on our state's budget. 

Secondly, it might be worth to take a look at the spending side of our state budget. To this point, without reference to Wyoming: state spending in Florida is approximately half of what it is in New York, and the two states have almost the same population. 

Now for the other big in-state revenue source: charges and miscellaneous revenue. Here is how they break down:

     Charges and miscellaneous general revenue 1,033.6
          Current charges 201.6
               Education 117.5
               Hospitals 1.1
               Highways 9.2
               Air transportation (airports) 0.8
               Natural resources 5.6
               Parks and recreation 0.9
               Housing and community development 3.5
               Other charges 63.2
          Miscellaneous general revenue 831.9
               Interest earnings 497.6
               Special assessments 0.0
               Sale of property 7.2
               Other general revenue 327.1

We will get back to these revenue sources and examine them in more detail later. For now, let us wrap up with a comparison of revenue and spending:

2016, $m
Total revenue     5,914.0
Total spending     6,454.1

In other words, already in 2016 our state was running a $540-million deficit. This figure is often blurred in the debate, because state legislators - especially those in the leadership - have a tendency to want to break it down by accounts. In theory, that is a good idea, but it really does not change the bottom line. It's all green at the end of the day. 

That is all for now. The third installment, examining NASBO state spending data, will be published Wednesday next week. 

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