A Tale of Two States

Two states, rural, rich in natural resources and - by their own fault - with governments dependent on taxes on extraction of those resources. 

Two ideas on how to handle the downturn in tax revenue. First, a story from the Casper Star Tribune (CST):
Lawmakers will consider a bill that would increase taxes for all property in Wyoming and send tens of millions of dollars to public schools here over the coming years. The education-funding deficit has been a dominant topic for Wyoming lawmakers for years, as the recent bust created a deficit that was projected to top $1.8 billion by the beginning of the next decade. Two years later, the situation has stabilized somewhat, but the core problem remains unsolved, officials said. This measure, which would add three mill levies to all property in Wyoming in each of the next three years, would attempt to address that. “We still have a structural deficit,” said Sen. Cale Case, a Lander Republican and the co-chairman of the Joint Revenue Committee, which is sponsoring the bill. “We still have to fix the education-funding issue. We’re still funded largely by minerals.”
In other words, Senator Case wants to raise taxes to fix the over-spending problem. 

We might also want to note how the CST starts off by making school funding the problem - not the extra burden that HR68 is going to impose on taxpayers. 

It is no small tax hike we are talking about. The CST reports that HB68 would roll out its tax hike gradually, with three new mills per year over three years:
In each of those years, the three added mills would bring roughly $33 million more for public schools. Kathy Vetter, the president of the Wyoming Education Association, said the mills had previously been in place for some districts, before lawsuits fundamentally reshaped how Wyoming funded its schools. Currently, Wyoming schools are funded by 43 total mills. As it stands, minerals carry much of the education funding load, as they’re assessed at 100 percent of property value. But that leaves the state’s schools vulnerable to drastic downturns when the bottom falls out on the economy, as it did a few years ago.
Nine mills is 0.9 percent of the assessed value of your property. This may not sound like much, and so long as there is no increase in the share of the value of your property that counts toward the tax, then yes - it is going to be a small increase. However, keep in mind that this is just one of five bills that will raise taxes across the state. Also, the property-tax hike will not be limited to private property - many businesses will find it hard to pony up the extra cash. 

Furthermore, there is nothing to say there won't be an increase in the taxable share of your property value. While no such proposal is on the books yet this year, it was only last year that the Revenue Committee pushed for an increase in the taxable share of the property value. It would have increased property taxes:

a) on industrial property from 11.5 cents per dollar of property value to 13.5 cents per dollar, and
b) on private property from 9.5 cents per dollar to 11.5 cents per dollar.

This would have represented a 17-percent increase in your property-tax bill if you owned industrial (commercial) property, and 21 percent if you owned private property.

The current property-tax bill, HB68, does not propose an increase in taxable value, but there is nothing to say we won't see a bill proposing that, in this session or the next. Why? Because there is a widespread attitude among our legislators to try to solve the state budget problem by means of higher taxes. Keep in mind that HB68 is only one of a total of five bills that will raise your taxes: in addition to HB68, we have HB64, HB66 and HB67, as well as SF16 which will make it easier for local governments to create new "community development districts" with taxation powers.*

So what does Chairman Case have to say about HB68? According to the CST,
Case said this particular bill would likely be more palatable to other lawmakers if there was a companion bill that cut spending. Vetter said those bills have already been considered over the past three years. Wyoming schools have been slashed by as much as $100 million over that time.
Really? Listen to this:
“They’ve frozen funding for transportation and special education. They’ve already made a number of those cuts without addressing the funding issue,” she said. “They did the cuts first. Now it’s time to address the funding.”
Did you hear what Karen Vetter from the Wyoming Education Association actually said? "They've frozen funding".

Clearly, the Wyoming Education Association needs to teach its officials some basic arithmetic:

100 - 0 = 100. This is what we call "unchanged", or - to use Vetter's terminology - "frozen".

100 - 1 = 99. This is what we call "reduction", or a cut. 

Karen Vetter is using fiscal politology, where an increase in funding is unchanged funding, unchanged funding is a cut in funding, and a cut in funding is akin to a nuclear war. 

So there you have the story in Wyoming. Now, how do they discuss the state budget problems in Alaska? Well, let's take a listen. The Alaska Journal has the story:
Alaskans should expect a balanced state budget next year, at least as long as Donna Arduin has a say in it. The new [state] Office of Management and Budget director said she wouldn’t be doing her job if she didn’t draft a budget to present to the Legislature that matched revenue expectations. 
Did you hear that? She wants to present "a budget to present to the Legislature that matched revenue expectations".

I guess the nuclear holocaust is going to engulf Alaska any day now.

The Alaska Journal again:
The alternative would mean relying on speculative income growth or require future government cuts; that’s work she doesn’t plan to leave on the table. “I don’t believe in budgeting towards hoping revenues go up,” Arduin said in a Dec. 28 interview. “The budget should be steady and predictable, so we shouldn’t budget hoping that we’re going to get more revenues next year.” 
But... but why don't you just raise taxes...? I mean - taxpayers won't mind, will they?
The $5.7 billion fiscal year 2020 general fund budget proposal Gov. Michael J. Dunleavy’s administration released Dec. 14 — mostly crafted by former Gov. Bill Walker’s team as often happens when state leadership changes hands — is projected to result in a deficit of more than $1.6 billion after a roughly $300 million deficit this year.
Hello - Wyoming here. We have a solution! Just raise taxes, guys. Hello...?
Shortly before leaving office Walker released his budget as balanced, but that was based on a $75 per barrel average oil price forecast; a number derived in October when Alaska North Slope crude prices averaged $80.02 per barrel, according to the state Tax Division. New Revenue Commissioner Bruce Tangeman curbed the $75 per barrel projection to a $64 per barrel average for 2020 as prices for Alaska crude, which is priced to the international Brent benchmark, have retreated to the mid-$50s.
Juneau, this is Cheyenne calling. Tax hikes. Over.
[Governor] Dunleavy is ardently averse to new or higher taxes and dedicated to paying statutory formula-based Permanent Fund dividend that would collectively be about $920 million more than the latest PFD payout of $1.02 billion, according to OMB documents. That means reducing government spending by $1.6 billion — or 28 percent of a $5.7 billion budget — in other areas is pretty much the only remaining option. On the prospect of making those spending cuts, Arduin said, “If you don’t do them this year you’re going to have to do them next year. It doesn’t get any easier.”
Spe... Spending... Spending what? Cuts...? 


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*) Technically, the taxes that fund the development districts are often referred to as "fees", but since the districts have the same status as any other government entity, they can use the same powers against those who do no pay the "fees", including eminent domain. Therefore, any means of funding a development district is a tax. End of story.

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