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Tuesday, February 25, 2020

Should Taxpayers Have A Say on Taxes?

It sounds good that taxpayers should have a say on whether or not taxes should go up, right? Well, not every proposal for a taxpayer voice is what it looks like.

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Representative Hallinan has an interesting idea:
A joint resolution proposing to amend the Wyoming Constitution to provide that for six years two-thirds (2/3) of state mineral royalties earned from the lease of state school lands may be appropriated by the legislature for the support of the public schools and providing a ballot statement.
Here is what Hallinan wants to see added to Article 7, Section 2 in our state constitution (amended text in italic):
Provided, that the rents for the ordinary use of said lands shall be applied to the support of public schools and, when authorized by general law, not to exceed thirty-three and one third (33 1/3) per centum of oil, gas, goal, or other mineral royalties arising from the lease of any said school lands may be so applied, except for the period from July 1, 2021 through June 30, 2027, during which time up to sixty-six and two-thirds (66 2/3) per centum of mineral royalties may be so applied.
This is a good idea, and a bad idea baked into one. The good idea is to put tax measures before voters; the bad idea is to keep spending money on school construction in a state where two out of three counties have lost population in the past five years. 

The focus on school construction funding is understandable. It is the official narrative that our state's budget deficit is exclusively tied to school funding. If that were the case, there would be no need for either a corporate income tax or any other tax bills brought before the legislature this session.

House District 32 Representative Tim Hallinan said that there is a roughly $396.7 million deficit in school foundation and school capital construction spending in the state. He said that the legislature has been unwilling to raise taxes and have likewise failed to find ways to cut spending.
I appreciate Representative Hallinan's precise language on this official deficit story. We sometimes hear that the deficit is about "school funding" in general, something that obviously is not the case. School operations funding is separate from the funding of school construction - just as it should be - and more than adequate. As per 2017, the latest year for which the Census Bureau publishes school funding data, Wyoming had the 7th highest per-student funding in the country:

Table 1
Source: Census Bureau

Per student
NY 23,091
D.C. 21,974
CT 19,322
NJ 18,920
VT 18,290
AK 17,838
WY 16,537
MA 16,197
RI 15,943
PA 15,798
NH 15,683
IL 15,337
DE 15,302
MD 14,848
HI 14,322
ND 13,760
ME 13,690
MN 12,647
OH 12,645
NE 12,579
CA 12,143
WA 11,989
WI 11,968
MI 11,907
VA 11,886
WV 11,554
IA 11,461
MT 11,443
OR 11,264
LA 11,199
KS 10,961
SC 10,590
MO 10,589
GA 10,205
KY 10,121
IN 10,045
AR 9,967
SD 9,939
NM 9,881
CO 9,809
AL 9,511
TX 9,375
NV 9,320
TN 9,184
FL 9,075
NC 9,072
MS 8,771
AZ 8,003
OK 7,940
ID 7,486
UT 7,179



How does a rural state like South Dakota or New Mexico get away with spending about 60 cents to the dollar of what we spend? Well, that's a question for another day... For now, let us note, again, that Representative Hallinan's HJ1 is not about the funding of school operations, but rather school construction. That is a good focus, but as mentioned the bill has two parts that we should separate in order to truly accomplish what the good legislator is aiming for. 

The first part has to do with the idea of putting government funding before the voters. Hallinan's intention, as he explains it to Cap City News, is good and foresightly:
"Nothing else has worked," Hallinan said in explaining why he was proposing asking voters to decide. "The people will decide. If they don't want this, then that is a license to raise taxes, in my opinion."
It is not correct to say that the failure of this resolution in a general election constitutes a blank check to raise taxes. For that purpose, this ballot measure would be far too narrow and technical in nature. However, he is correct in that voters and taxpayers should have the final say in how their money is being spent. If this is something that our legislators are interested in from a broader perspective, I would recommend that they get behind Representative Gray's HJ2, the WyoTABOR bill that would split the jurisdiction over taxes and spending between elected officials and we the voters. 

A clear-cut ballot measure giving voters a straightforward chance to say no to higher taxes, would do what Representative Hallinan is alluding to, namely solve the current impasse in the legislature between tax hikers and fiscal conservatives. It would be surprising if the tax-hungry members of our legislature would dare face the voters in this unmasked fashion, but the initiative would certainly be welcome.

The second part of Hallinan's HJ1 is more problematic. The funding he wants to get voter approval for would go straight into the school construction fund. I do not have immediately available data over how many schools we have built in the past five years around the state, but given that the state has depleted the fund for such projects, one has to wonder just how prolific this construction activity happens to be. 

This question is central not just because construction funding is being portrayed as the deficit culprit, but also because we are a state with a declining population. In the past five years, two out of three counties in Wyoming have lost population:

Table 2: Population change, 2013 to 2018
Source: Bureau of Economic Analysis

5yr
Statewide -0.8%
Albany 2.8%
Big Horn -0.5%
Campbell -4.0%
Carbon -5.5%
Converse -5.1%
Crook 4.2%
Fremont -3.4%
Goshen -1.3%
Hot Springs -5.7%
Johnson -2.1%
Laramie 3.4%
Lincoln 6.1%
Natrona -2.4%
Niobrara -6.2%
Park 1.0%
Platte -1.6%
Sheridan 1.7%
Sublette -3.6%
Sweetwater -4.7%
Teton 3.4%
Uinta -3.1%
Washakie -6.3%
Weston -2.4%

Instead of diverting even more money into building schools around the state, the legislature should put a one-year moratorium on those projects and give itself some time to reconsider the very funding model itself. Obviously, we need to replace old, worn-down school buildings, and there is always a need for ongoing renovation and general upkeep. However, a look at the population trend around the state suggests that this might be a good time to take a more comprehensive look, not just at school construction funding but at our K-12 system as a whole.

Again, I applaud Representative Hallinan's idea to ask voters for a decision on taxes. This particular initiative, his bill HJ1, is not the right one for that purpose, but it points in the right direction. Once we open for voters to have a direct say in how they are being taxed, we have taken one step closer to a Taxpayer's Bill of Rights here in Wyoming. That, in turn, is a step closer to real, structural and long-term fiscally sustainable reforms to government spending. 

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