Healthy Rainy-Day Fund Keeps Fiscal Storms at Bay
Under Gov. Matt Mead, Wyoming has maintained one of the largest rainy day funds in the nation despite financial volatility in the energy-producing state caused by fluctuating gas prices. He has also focused on diversifying Wyoming’s economy through innovation and technology and by expanding business opportunities in the technology, renewable energy and manufacturing sectors. Mead said opening up the state to new industries combined with disciplined budgeting have kept Wyoming stable through the economy’s ups and downs.
1. Wyoming is consistently ranked among the top states for its rainy day fund, which currently has about $1.6 billion. How has planning ahead helped prepare the state for more challenging fiscal times?
“The rainy day fund was established in 2005 to help the state manage the volatility in our economy caused by fluctuations in energy prices. The rainy day fund provides stability and helps smooth out some of the dips in our budget, allowing us to maintain needed public services during a time of diminished revenue growth, and prudent use of the fund has allowed Wyoming to stay strong with balanced budgets, important projects moving ahead and savings in reserve for the future.”
2. With the low prices of natural gas and other fossil fuels, what is Wyoming doing to reduce tax revenue volatility?
“We have been working to diversify the economy with projects like the Integrated Test Center, or ITC. The ITC is a state-private partnership that will help lay the groundwork for a carbon-asset industry. Teams from around the world are participating in the XPRIZE Foundation’s carbon competition at the ITC, seeking solutions for emissions from coal power plants. During my time in office, Wyoming has also aggressively recruited technology businesses and firearms companies and promoted manufacturing. Looking back many years, it is clear that diversification of the state’s economy requires more than one governor’s time in office. Mindful of that, I recently announced the Economically Needed Diversity Options for Wyoming, or ENDOW Initiative. This initiative will develop a 20-year diversification plan for the state, building on our successes and looking long-term into the future.”
3. What do you hope the short- and long-term impacts of the ENDOW Initiative will be on the state’s economy?
“Wyoming is a welcoming, business-oriented state. Year after year we are recognized as number one among states for our business-friendly tax climate and as one of the best states to start a business. Wyoming has no state income or corporate tax, and our internet connectivity is second to none. Several years ago, I asked agencies to reduce regulations by a third, and this has been a successful effort—some agencies reduced rules by more. The ENDOW Initiative will produce a 20-year comprehensive economic diversification strategy and include four-year action plans. Our community colleges and the University of Wyoming will be involved to ensure we have the job training employers are looking for. We are not trying to displace energy, tourism and agriculture, our top three industries. We hope to increase economic opportunities in those areas and expand our economic base overall.”
4. You have been recognized by EducationSuperHighway for your leadership on increasing internet connectivity in public schools. In a rural state like Wyoming, why is this important?
“Wyoming places a high value on education. As a rural, geographically large state, we understand the value of internet connectivity to student learning. Our investment in the statewide Unified Network gives our students the opportunity to compete on a national and global scale and at every level. We have successfully upgraded all schools to a minimum of 200 Kbps per student. We continue to work with schools to assure that students and teachers in Wyoming classrooms have access to high-quality connectivity. In the world of technology, the challenge is to keep pace with rapid changes. Wyoming is well equipped to continue leading the nation in connectivity for schools.”
5. During budgetary downturns, addressing revenue shortfalls represents only half the challenge. How do you balance cuts to state programs and services?
“In 2016, the combined cuts to the 2017–18 budget by the Legislature and my office totaled $317 million—about 11 percent of the executive branch budget. These cuts were difficult but necessary due to falling revenues. It is never easy to decide where cuts come from because each will have an effect. I asked agency heads to try to limit cuts to programs that would have a compounding effect—for example, a $1 cut becomes $2 because of lost matching funds. A hiring freeze left some vacancies that saved dollars. Rather than across-the-board cuts that weaken everything, I favored strategic reductions that maintain essential services.”
6. You recently closed a deal with Amazon to begin collecting taxes on their online sales. What impact can internet sales taxes have on state revenues?
“Collection of taxes on internet or ‘remote’ sales will solve two longstanding problems. First, it will place remote sellers and Wyoming brick-and-mortar retailers on equal footing. Second, it will help to ensure that taxes legally due in Wyoming are paid. A 2009 study claimed that Wyoming had potential unpaid taxes from remote sales between $23 million and $46 million. While not a major portion of state revenue, these taxes will obviously help maintain a balanced budget and provide needed services to our citizens. Electronic commerce is growing and our tax systems need to address the changing economy.”
7. Wyoming has been a leader in the country’s move toward energy independence. What do you see as the future of energy development in the state and across the country?
“Energy is Wyoming’s number one industry and provides more than 70 percent of state revenue. We are the number one exporter of energy to other states. We are number one in coal and uranium production and in the top 10 for oil and gas production. We have world-class wind energy resources and lots of sunshine. In 2013, at my direction, Wyoming was the first state to develop and release a comprehensive energy strategy. In 2016, we updated the strategy. Wyoming’s energy strategy supports an all-inclusive energy mix and can be a model for others, including the federal government. With fewer federal regulations and pro-growth policies, including support for energy development, the national economy will grow. One way to spur the economy is to get America’s energy sector working again
—bringing back those jobs. A growing economy needs more, not less, energy and a secure, abundant supply.”
8. Some lawmakers have proposed fining utilities for wind or solar power production. Why is renewable energy production important to Wyoming’s energy portfolio?
“Wyoming is blessed with plenty of sunshine and wind, providing great opportunities for renewable energy development. As a state, we look to embrace every opportunity to grow and diversify our economy. We will soon be home to the largest wind farm in the country, the Chokecherry project in southern Wyoming, with up to 3,000 megawatts of energy and hundreds of new jobs. Our community colleges have developed training courses to meet the demand of this growing sector. We also hope to attract companies involved in manufacturing, research and technology development.”
9. You’ve been a leader in efforts in Wyoming and among Western governors to protect threatened animals and to prevent their listing under the Endangered Species Act. Why is this a priority for you?
“Wildlife and open spaces are a vital part of Wyoming’s heritage and economy. We love the outdoors. As stewards of the resources, we have a responsibility to manage them well. Our proactive management of species, like sage-grouse, successfully balances the needs of wildlife with the needs of our people. This promotes healthy wildlife populations and a strong economy and ensures that the sometimes crippling restrictions of the Endangered Species Act need not apply.”
10. What changes have been made in fiscal policy in recent decades that have provided elected officials more flexibility in addressing revenue shortfalls today?
“Conservative, disciplined budgeting has kept Wyoming strong through good and not-so-good economic times. We are required by law to balance our budgets, and we do that. Since taking office in 2011, I reduced the executive branch operating budget from $2.9 billion to roughly $2.6 billion. Our Permanent Mineral Trust Fund was started in 1974 and now stands at approximately $7.4 billion, and our rainy day fund was established in 2005 and now has about $1.6 billion. Both funds have grown substantially during my time in office—a result of saving when possible and being fiscally conservative. Savings and frugality help us weather revenue shortfalls.”