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Monday, November 18, 2019

Governor Gordon Caves on Spending Cuts

Governor Mark Gordon has presented his first budget. Since his election a year ago he has been building himself up as a fiscal conservative. Now, when it is time to deliver...

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A lot of people have told me that Mark Gordon is a fiscal conservative to be reckoned with. I have told them that actions speak louder than words, and that the governor's actions will be revealed in the budget. I have been told that I am too pessimistic and should place trust in our new governor. I have said that I like the guy - Mark Gordon is one of the most likable politicians I have ever met - but that likability and fiscal conservatism do not necessarily go hand in hand.

Well... Never bark at the Big Dog. The Big Dog is always right.

For sure, since Gordon was elected governor he has dropped more than a few hints that he wants to see some belt-tightening in state government. Recently the Casper Star Tribune reported:
Entering Monday’s news conference outlining Gordon’s [budget] recommendations, only one thing is already certain: The operating budget for the next biennium will be significantly smaller than in recent years. Gordon has already made it clear that he expects an internal downsizing of government agencies. Following the release of the Consensus Revenue Estimating Group’s latest income projections last month, he released a statement anticipating even more belt-tightening when state lawmakers return to Cheyenne for work this February.
Spending cuts were yesterday. Today Governor Gordon released his first budget. Nick Reynolds reports over at the Tribune:
Most expected Gov. Mark Gordon’s first budget of his administration to be defined by significant spending cuts and reduced services across the board. Instead, citizens of Wyoming were greeted Monday morning with a budget containing an increase to education funding, few programmatic cuts and a warning: Though Wyoming has enough money to pay its bills today, its traditional revenue sources are changing – meaning the state must focus on finding new revenue or expect cuts later.
So much for all the fiscal posturing we have seen from the Governor's office. We the taxpayers now have to fight even harder to protect ourselves from the prying hand of government. Not only do we have to fight the slew of smaller tax increases that the Revenue Committee has been, and will be, considering for 2020; not only do we have to double our efforts to shut the door on an income tax here in Wyoming; but we also have to count the governor out in helping us get the work done.

Why? A governor who talks a lot about spending restraint but does not deliver the first chance he gets, is not a pillar to build a house on.

But wait. There is more. The governor actually just sent a signal to the legislative leadership that he is willing to accept higher taxes.

More on that in a moment. First, let us listen a bit more to Nick Reynolds:
Gordon’s budget increases the state’s education funding where it was expected to be cut, and proposes little reduction in ongoing spending. Noting the state’s changing future, however, Gordon draws the line at working with the money Wyoming does have, declining to fund 127 positions that were requested across state government while slashing the state’s capital construction funding by roughly one-third – a reduction of $55.3 million.
The state's budget deficit could soon be $1 billion, and Governor Gordon takes $55 million away from capital construction. Other than that he apparently allows government spending to continue as-is. 

That is not "working with the money Wyoming does have". That is working with the deficit Wyoming does have. But more importantly, it is setting us up for tax hikes. After all, if the governor is not going to do anything to reduce spending, what is Gordon's strategy when it comes to closing the budget gap?

Reynolds again:
Though Wyoming has found relative stability for now, one thing is clear: “Additional spending cuts are on the horizon and appear imperative to keep Wyoming moving forward,” Gordon wrote in his budget message. While state agencies remain largely unscathed, an October report by the Consensus Revenue Estimating Group showed that state revenues are expected to fall by more than $185 million over the next three years ... “I have spoken about the changes that have taken place in the energy industry, changes including declining coal production and low natural gas prices,” Gordon said in a Monday morning press conference. “Those changes will impact how we fund government services over the next year and into the future.”
Spending cuts additional to what spending cuts? There are no spending cuts in Gordon's first budget. If he refers to the restraint that we saw under Mead's gubernatorial tenure, it was certainly not a matter of spending cuts. 

Perhaps this should have been obvious but... a failure to increase spending according to a random budget baseline is not the same as cutting spending. 

The governor then resorts to an old appropriations conjuring trick. On the one hand, the Tribune explains, the governor's budget
employs a new approach to one-time spending and, moving forward, will continue to incorporate his newly-imposed mandate of reducing agency budgets internally; a nod to the paltry $23.5 million in ongoing funding available this biennium to any entity in state government.
On the other hand, the budget includes
roughly $70 million in “buffer” funding to allow the state to absorb small cuts to offset future declines and an estimated $200 million available for the Legislature to deploy from the state’s severance tax revenues.
And then we get to the real juice in all this: the signal flashing "tax hikes coming". 

Governor Gordon knows how strongly Wyoming taxpayers oppose tax hikes, so he does not want to hold that hot potato in his hand. Instead, he passes it on to the legislature. The vehicle is mental health care. Listen to this, again from the Tribune report:
However, some of his budget denials – like a nearly $25 million appropriation for long-term mental health care – come with caveats: finding the money for projects like that fall on the Legislature, not the governor’s office. “To fund projects like this,” Gordon wrote, “new revenue must be found or cuts identified.” “I have said consistently that we need to address these long-term care needs for psychiatric health; we were just unable to find the funding at this point,” he said in his press conference. “So I think the Legislature will look at ways they can make adjustments. Looking forward, we will continue to work on this, but the challenge for us has been how to set this budget up to prepare for potential cuts in the future and better aligned to meet the challenges.”
Did you follow that? Governor Mark Gordon agrees with the legislature that the state should spend more on mental health care. He does not want to be seen as the one initiating tax hikes, so he tells them to find new revenue - in short, raise taxes. He even tells them how to get it done: tie your tax hikes to more mental-health spending, and I will play ball.

Note that the amount floated here, "nearly" $25 million, is very close to the projected revenue from the corporate income tax that the Revenue Committee already has passed. 

Clearly, the fight to protect Wyoming taxpayers from the clawing fingers of government has only just begun. We need to do more, work harder and be more firm in our message:

Wyoming cannot afford higher taxes. Period.

There are plenty of spending reforms that Governor Gordon and the legislature could be working on. Some suggestions:
  • School choice with firm homeschool protection, following the Arizona ESA architecture or the Wisconsin voucher model; this would generate savings for taxpayers in the hundreds of millions;
  • Vouchers in Medicaid and charity compacts in long-term care; savings well north of $100 million; return us to a private-only hospital system and we will see more than that;
  • Toll the I-80 to get it self-funded and out of the state budget; focus transportation funding on the rest of WYDOT's jurisdiction and thereby secure better funding for our highways;
  • Zero-based government budgeting coupled with transparency and efficiency reforms to secure a government as slim as operationally cost-conscious as the private sector; 
  • and
  • Merge the Appropriations and Revenue committees into a Budget Committee where every dime spent must be directly tied to a specific tax, fee or charge; strict prioritization where core government functions - law enforcement and transportation - must be fully funded before any other functions are considered.

Tough issues to talk about, no doubt. But consider the alternative, with a seven-percent corporate income tax and a door opening up for an individual income tax; even higher gasoline taxes; higher property taxes (yes, they will come back, trust me) and possibly even a sales tax on services and food.

Taxmageddon is back. 

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