Wyoming Revenues: A Lesson in Transparency
In 1974 the Wyoming Legislature created the Permanent Wyoming Mineral Trust Fund (PWMTF) by passing a constitutional amendment that was ratified by the people of Wyoming on November 5, 1974. This amendment made the PWMTF a constitutionally protected, inviolable fund fueled by a one-and-a-half percent severance tax on the gross value of coal, petroleum, natural gas, oil shale, and any other minerals designated by the legislature and extracted from Wyoming’s terra firma. The constitution also specifies that the income earned from the fund will be deposited into the general fund account on an annual basis to be used by the legislature for the purpose of subsidizing government expenses.
Over the past 39 years, the PWMTF has grown to well over $5 billion, with average income earnings of over $90- 100 million a year. From 1974 to 2009, earnings off the PWMTF and deposited into the general fund account were $2.73 billion.
Since the PWMTF was created and investment income earnings were slated for deposit into the general fund, deb ate about how to profile these funds has been ongoing. Currently the Treasurer’s office has broad latitude to determine income projections. With that latitude, the Treasurer’s office takes a conservative approach and only projects the possible fixed income within the fund. This approach, which does not allow for the calculation of any potential capital gains, has led to an under-estimating of the revenues that are deposited into the general fund.
To add to that debate, every so often an “irregular” event has taken place within the fund. Once around every 5 years the PWMTF portfolio is rebalanced, and in executing this rebalancing, shares are often sold. This results in additional income above and beyond the regular yearly investment earnings. While other revenue sources have been clearly projected, profiled and assigned to their appropriate spending account, these irregular earnings and capital gains have become an outlier and have resulted in a less- than-transparent process of acknowledging their existence and their availability for expenditure.
This past December, Governor Mead made note of these earnings in his testimony before the Joint Appropriations Committee and said he believed they should be projected, profiled and made available to him when he is developing his annual budget. The governor believes that both branches of government need to have a shared starting point with the budget.
As a result of the debate, the 2013 supplemental budget creates a new spending account – entitled the Strategic Investments and Projects Account (SIPA). This account will receive any earnings off the PWMTF in excess of the amounts projected by the January 14, 2013 Consensus revenue estimating group (CREG) report. In other words, all irregular earnings not profiled – estimated to be around $80M this year– and all others, including capital gains earnings not profiled by the treasurer’s office -will be deposited into this new account and may be used by the Governor for “one-time expenditures as he deems necessary” in his 2015-2016 budget requests to the Legislature.
The past 39 years of PWMTF dollars illustrate Wyoming’s considerable dependence on energy production to fuel the wheels of government. So, how these dollars are projected and profiled for expenditure matters a great deal in the larger discussion of fiscal responsibility and transparency. At the very least, the people of Wyoming deserve to know where every state dollar comes from and where it is to be spent or saved.
There are also more focused discussions to be had about the ultimate purpose of the PWMTF and how the state is going to realize that purpose, the savings philosophy of our state leaders, and the mechanics needed to steer the state towards permanent long-term spending reductions. These discussions can only be fruitful if, as the Governor discussed, we are all starting at the same place in the budget. Without such transparency, these discussions are flawed before they even begin.