Wyoming PBS

Capitol Outlook - Week 3 (2016)

Feb. 26, 2016 - CHEYENNE, WY

Joint Revenue Committee co-chairman Rep. Mike Madden

Join Revenue Committee co-chairman Sen. Ray Peterson

Joint Revenue Committee members Sen. Cale Case, Sen. Dave Kinskey and Rep. JoAnn Dayton

Senate Minority Leader Chris Rothfuss

House Minority Leader Mary Throne

Craig Blumenshine, Wyoming PBS: This week, Capitol Outlook dives into the tall task ahead for the Joint Revenue Committee of the Wyoming Legislature as we visit with its co-chairmen, Representative Mike Madden and Senator Ray Peterson. And we'll visit with Joint Revenue Committee members Senator Cale Case, Senator Dave Kinskey and Representative JoAnn Dayton. The Joint Revenue Committee will be asked to look at a changing Wyoming tax base in the interim, and they'll be asked to complete their work sooner rather than later. Then, we'll visit with the Minority Leaders of the Wyoming Legislature: Representative Mary Throne and Senator Chris Rothfuss. Revenues and the Minority, next on Capitol Outlook. It's our pleasure to be joined on the Capitol Outlook set by the two Chairmen of the Joint Revenue Committee. Senator Ray Peterson, welcome to Capitol Outlook

- Thank you.

- And Representative Mike Madden, welcome.

- Thank you.

- I want to begin our discussion on maybe some work that lies in front of you. We have a clip that we took with the Senate President in our first week, and he talks about some work that might be coming your way, and we'd like to show our viewers that, that clip, right now.

- We are going to belooking at the tax base. We will assign it to the Revenue Committee to look at that and be sure that they're attending the notion that the principal, large, energy firms are going to be paying the tax, and the longer you wait, the more tax that you're going to have to throw on 'em; the more quickly you respond, the more modest the increase.

- And that's where I want to begin our discussion. There's a lot to changing the tax base in Wyoming. It has been looked at before; the most serious study is almost now, what, almost 18 years ago. So, Representative Madden, let me begin with you, if I could. The issues on how we might, or how your thinking is, on bringing that discussion to the citizens of the state of Wyoming.

- Well, I think the first thing we're going to have to do is look at the loss in tax base that we've experienced, particularly, for example, with building schools. We used to be able to finance all of our, all of our school construction out of Coal Lease Bonus money, and if you want to look at that as part of a tax base, that tax base is no longer really viable unless things change politically in Washington. So, obviously, we need to look for another source of revenue to replace that, and that's going to be our top priority in the Revenue Committee during this coming interim.

- How do you include the State of Wyoming, the people of Wyoming in those discussions? Senator?

- Well, obviously, through our Committee meetings; that's the normal way to involve the public. I think the public knows what's going on; we have less revenues that we're working with. The challenge is, as I see it, is that we've had a pretty good run for the last 10, 12 years, and with Wyoming so dependent on our resources for revenue, when one of my constituents comes to me and says, you know, we're somewhat over-taxed in Wyoming, I have to disagree with that. You know, resources take up a lot of the slack, carry a lot of the lifting in our tax revenue base, and everything that I've read, nationally, about our state is that when compared to other states, is we're too dependent on our resources. So that's why the Tax 2000 study was done, and it was probably during a time when we had the same fiscal challenges that we're having now, and we'll pick up that study again and we'll look at some other sources and some other revenue options that we have. But first, before we do that, and I think Chairman Madden probably agrees that this whole budget session has been directed towards cutting costs and expenses, or expenditures, and I'd like to continue that route before we go to raise taxes or look at other options. I think our Revenue Committee, as President Nicholas suggested, will be charged with taking that Tax 2000 off the shelf, looking at all options, being prepared, but I find it would be very hard to go back to the citizens of Wyoming and say, we're going to increase taxes here or there, and without going through the healthy exercise of trying to reduce expenditures.

- Certainly, with the reserves, also.

- Sure.

- Representative Madden, that Tax 2000 study talked about things like exemption and a state income tax.

- Mm-hmm.

- A lot of serious thought and discussion went into that report, and then Wyoming's revenue outlook changed, and really, it has been on the shelf. Are there exemptions, in your mind, that you're thinking about, both of you, Senator Peterson as well, that we really need to take a look at? And there's been an idea floated that a CREG-like, a consensus-like group to look at exemptions might be a good idea and a good way to go. What are your thoughts on looking at exemptions that might need to be looked at?

- Well, if you're talking about prospective exemptions, I think that the CREG-like group that you allude to will work. Our problem is that we have probably granted too many exemptions and it seems like the sun never sets in Wyoming when we talk about exemptions. And I joke with a lot of my fellow House members about every time the Management Council puts exemptions on our docket for the interim, we end up adding another one. And it's really difficult to get the group inspired, I should say our Joint Committee inspired to get rid of an exemption because they start liking them, too. One thing about any time you talk about an exemption or getting rid of an exemption, that's one way we can fill up a room in the interim with people protesting it.

- One of the conclusions of that study is that Wyoming's tax base was not equitable. It certainly did implement some recommendations, like not taxing groceries. But today, do you believe that Wyoming's tax base is equitable?

- Well, to the extent that, Senator Peterson mentioned that we depend too much on minerals, I think we could argue that, that it's not equitable. We have some industries that are favored industries. We have agriculture, for example, they have little or no property tax; they have little or no sales tax on equipment that they buy. There's certain repairs that they do pay taxes on, but by and large, your fuel tax is exempted, and, you know, for too long, we've had a attitude in the state that, you know, let energy pay for it, you know? And that, I remember two years ago, when I worked day and night getting the fuel tax passed, you know, I'd have to face these people every day in the House that says, well, let energy pay for it, you know, and that's the kind of mentality a lot of the people have here.

- Services also might be an issue that will come up. that is whether services in Wyoming should be taxed. You've both probably thought about that. Senator?

- Well, my thoughts on that is our sales tax has always been so important in Wyoming, one of the three legs of our revenue stool, but it's broke in the fact that, as we were talking before, the services, the products that we buy, with our changing world and the internet, we have, in Wyoming especially, a disadvantage of trying to collect a sales tax off of an internet purchase. And we've looked at sales tax and it's been continually declining since, well, the food, you know, exemption. But I think a large portion of that is because of the internet sales, that we cannot collect on. It's a national project that Wyoming's been involved with since the days of Johnnie Burton, and because we co-chair Revenue, Representative Madden and myself participate in this national effort, and Wyoming has been one of, I believe it's about 28 states, that are trying with this project to put together a program that would basically charge some type of a national tax on these internet sales. And I think that would be the best thing that would happen to Wyoming to help us diversify our revenue base away from the minerals. The sales tax is already in place, we just need to do a better job of collecting it by implementing some type of a sales tax on these internet sales and being able to collect it from those manufacturers or those industries or retailers that are doing business over the internet.

- Representative Madden, if I buy my baseball glove from Amazon, should I pay a tax on that glove, just like I would if I bought it from my local sporting goods store?

- Oh, if you're obeying the law, you would be paying tax on it. The problem is, it's not a easy thing to audit, an easy thing to monitor. You know, it's one thing to be able to monitor a semi-load of furniture coming to your house from Montana or something like that, but it's quite another thing to, you know, go through people's items that they buy somewhere else and they don't pay a use tax on it here.

- I want to talk about Senate file 68, which, on the face of it, is really the contingency plan on what powers the Governor may have should revenues fall much more than anticipated. But also that bill talks about codifying the Consensus Revenue Estimating Group, which produces the report that is probably the most looked-at report this body gets. It also exempts it from the requirements of open meetings and public records law. Why is that a good idea? Why shouldn't their meetings be perhaps more transparent and open?

- Well, I, maybe the Senator's got his idea on that, but I would, of all the meetings we have, that would be one that I don't think should be open to the public, and the reason why is that these people that are on the CREG Committee will bring in industry experts to talk frankly about what the future holds in whatever industry they're talking about, whether it be coal or gas or crude oil or whatever the case is. And the whole thing that makes the CREG Committee work well is that it's done in an objective fashion, to not be politicized or to be, let's say, glossed over a little bit because it's going to be in the newspaper tomorrow.

- So you're fearful honesty would be compromised if these entities needed to testify in an open forum.

- Yeah, I think the damage would be done to the end product, the results of the study; it would definitely be influenced and probably for the worse, and I think the closed meetings on the CREG is critical, that we get the best product and best estimates from that group, and to do that, some of these companies that they involve in getting these figures and facts, that would be compromised and then the product wouldn't be as good as quality.

- If we had a CREG-like group to talk about exemptions, would you think that would be more transparent and open?

- Oh, yes, it would.

- I think so.

- Yes, OK. Our thanks to the co-chairmen of the Joint Revenue Committee, Senator Ray Peterson and Representative Mike Madden. We had an extended conversation with the co-chairmen, and we asked them their thoughts on the Madden Amendment, which may change the way cities, towns and counties receive monies from the state, and we talked about their thoughts on diverting money away from the Permanent Mineral Trust Fund as a mechanism to fund this year's budget. Both say more cuts are likely in the coming biennium and the rest of our interview is available online for our viewers to see right now at wyomingpbs.org. When the Wyoming legislature winds its work down in the spring, there's always one sure sign, and that's Cale Case's baseball glove that appears on his desk when spring training starts each and every year, and that's when we know that the legislature's work is winding down. With a week left, we're pleased to continue our discussion with members of the Joint Revenue Committee, and joining us is Senator Case, welcome.

-  Thank you, Craig

- Welcome to Capitol Outlook. Representative Dayton, welcome to Capitol Outlook--

- Thank you.

- and Senator Kinskey.

- Thank you.

- Thank you for joining us on Capitol Outlook. We were joking that we should have a "V" next to your name, for "veteran", and an "R" next to your name, for "rookies", on this committee at least, and you have a lot of work to do, so forgive us, Representative Dayton, for making that "D" an "R", at least today. But I want to start our discussion with the budget. In this room, the budget fails by a one to two vote, so Senator Kinskey, you voted for the budget a week ago. Tell us about your vote and why you think it's a good budget at this time for the state of Wyoming.

- Well, voting for is different than saying it's good, right? There's much not to like in the budget, and there's much to like, but in the end, you gotta have a budget. And so that's the nature of the legislative process, there's some give and take, some compromise, and sometimes you vote for a budget overall and not necessarily totally pleased with it, but you gotta have a budget.

- [Craig] What part of the budget concerned you the most, then?

- Well, I'm concerned about the cut to the cost of living adjustment for the schools; I'm concerned with $700,000 being cut from the weed and pest control on state lands; I'm concerned with $200,000 being cut for livestock losses due to wolf predation, those are three that come to mind very readily, and then I'm very concerned about the funding for the smaller, poorer communities, the local government funding.

- We'll talk about that in just a little bit--

- OK.

- with the redistribution, perhaps, of how money is given to cities, towns and counties, but Representative Dayton, you also, you were a nay vote on the budget, and tell us why, what concerns you the most about the budget that you voted on last week.

- My thoughts on the budget were very, very much like the Senator's here, and also, in addition to that, our senior citizen centers, our literacy programs, which cuts 38 jobs, some of them are not full-time, but it still cuts 38 jobs. Those are just a couple, in addition to some of the others that have already been spoken about, that concern me. I don't feel that the people of Wyoming were equally represented in the budget.

- OK, Senator Case: you were one of two "no" Republican votes in the Senate of the Wyoming legislature. Why did you vote no?

- Well, I guess I feel that the budget is really not sustainable in the long run, and that it hasn't done enough, really, to address the serious revenue deficiencies that we have coming forward. It's funny; I stopped at a McDonald's, and I saw a former member of the Senate, and he tore into me about the fact that the budget has 8 million dollars for athletics at UW and didn't do much for people. I had a hard time arguing with him because, you know, I did not vote for the budget and I do think that priorities are a little bit mixed up. But the basic point is it's not sustainable over the long term.

- Do we all agree that this budget will be cut even more in the next biennium, more likely than not? And are you concerned about that? With the cuts you still have to make? Senator Kinskey?

- Unless there's a dramatic turnaround in mineral prices, we're just gettin' started. And when you can take, for instance, the CREG report, which is the forecast of state revenues, they stated, as bleak as it is, they state at the beginning, we're actually more pessimistic than this says, because as they were writing it, prices kept going down and down and down, and if you go through the report, that even the bleak forecast assumes that natural gas is going to go to 2.75 this year, and to 3.40 by 2020; might be realistic. It assumes that oil's going to go to $40 and to $55 by 2020; could happen. But, then again, so far, all the evidence is it's goin' the wrong way, and may stay there for a while.

- Representative Dayton?

- It's not a bright picture for Wyoming in revenue. You know, our focus really needs to be on our state agencies, and programs and grants that are going to help our small businesses, because I really feel our small businesses are going to play an even bigger part in the future.

- I want to continue this discussion, and we have a lot to talk about in terms of revenue, and the work that you have in front of you, what it means to have an equitable tax structure in the state of Wyoming, and we're going to continue that discussion with the three members of the Joint Revenue Committee on the web. But for now, for this segment, gentlemen and lady, thank you so much for joining us on Capitol Outlook.

- Thanks for havin' us.

- Thank you. It's our pleasure to be joined now by the minority leadership of the Wyoming legislature. The Senate's Minority Floor Leader, Senator Chris Rothfuss, thank you for joining us today.

- Good morning.

- And the House's Minority Floor Leader, Representative Mary Throne. Thank you so much for joining us.

- Good morning.

- Representative Throne, I'd like to start with you. There's a lot of discussions about the budget, both of you were "no" votes to the budget in your respective bodies. You said in the media, you were quoted, Representative Throne, as saying, "The Joint Appropriations Committee just went through "and basically went on a cutting spree without "any stakeholder or public comments, or even "much deliberations." The response to that would be, their meetings are open, when they got the budget in December, they went through the budget nearly line-by-line, and the public could listen to, and also participate in those meetings. What should be done differently as a Joint Appropriations Committee gets that budget from the Governor?

- Well, there are a lot of layers to that question, Craig, but first of all, their meetings are open to the public, but they don't take public comment. They only take comment from the agencies. So they only had comment, I believe, on one day, and then you're also under the illusion that they actually make their decisions in that open meeting; that's not really how it works, quite frankly. But my real frustration is, you know, the J.C., they're the money people, but the rest of the standing committees have the substantive knowledge of all these programs, and if we were going to have these kinds of cuts, I think we should have started in the summer and had all of the interim committees look at the programs of the agencies they oversee. That's what we did as a result of the recession in 2009, 2010, and it was a much better process. I felt like they cut some programs that they didn't really even know who they served or what they did, which became apparent when we discussed it on the floor, because they didn't even know what they had done, completely.

- [Craig] Senator Rothfuss, do you agree with that? That this process isn't as, maybe, vibrant and efficient and open as it could be?

- It's not; it's really a challenge to come up with a proper prioritization, to weigh what the real impact of programs are, and compare those to one another when you're making cuts, and when you have to scale back your expenditures. And what we saw here was very much, as Representative Throne pointed out, a slash approach, where whole programs were cut without a full understanding of the impact of those cuts. Positions were actually cut and had to be restored, because there were mistakes made. There was a cut of the literacy program that involved 38 positions while there was the impression given that no positions were being lost. So there was a lot of misunderstanding throughout that process, and it's very difficult to go through that thoughtful approach, to involve the standing committees, and that step was skipped.

- I want to turn to Medicaid, both of you. You had an opportunity to vote on Medicaid this session, Medicaid expansion, you did not, Representative Throne, yet you've been very vocal in your support of its importance. Senator Rothfuss, you called it "one of the most fiscally irresponsible decisions "that the body has made." Two questions: number one, in your view, does the people of the state of Wyoming, if we were to survey today, do they believe that Medicaid expansion is a good idea? And if so, what part of the message isn't getting through to the people that make these decisions?

- The people of Wyoming really have come out strongly in support of Medicaid expansion over this last year in particular. When you look at all of the interest groups representing various communities and constituencies, they've all, with very few exceptions, come out in favor of expansion, recognizing the impact it would have on economic development in this state, on health care and coverage, and providing access to affordable health care for our most vulnerable populations. And really, the fact that a lot of groups have recognized that there's no alternative available, the only option we have on the table is Medicaid expansion, because the costs are substantial otherwise. And then there's a new constituency that's come along this last year that's realizing that the way the ACA was structured, we've paid for the Medicaid expansion with our tax dollars, but we're refusing to accept those tax dollars coming back to us on the order of over 260 million dollars in the biennium. So, really, there's been a significant increase in support over this last year, but that has not led to a significant change in the legislature and the Representatives and Senators. A lot of that, I think, has to do with campaign promises, assurances that were given in the past, and an unwillingness to change minds for political purposes.

- Are we’re finished discussing Medicaid expansion in the Wyoming legislature?

- Uh, no, I mean, we can't be. You know, the numbers don't lie, Craig, and on the floor, the Speaker Pro Tem, Representative Stubson, who made the motion to remove Medicaid expansion in the JAC, he had to admit at the mike that the Governor's budget for the Department of Health, with Medicaid expansion, spent less general fund dollars than the JAC budget. So, again, the numbers don't lie.

- The irony of that, also, was the fact that that motion was made based on a justification that it was in defense of insurance providers in the state of Wyoming, and their potential vulnerability. However, if you go to the largest insurance provider in the state of Wyoming and ask them, do you support Medicaid expansion, the answer is a resounding yes. They've come out in firm favor of it, so I have no idea where that analysis came from.

- No, they just seized on, they just didn't want to do it, and so, if they saw one tidbit of information, even if it wasn't really supported by any evidence, they latched onto it and used that to justify their decision.

- It'd be interesting to see how and whether this resurfaces. I want to turn our thoughts now to a point that co-chairman Madden, of the Joint Revenue Committee, made, and then talk about philosophical spending out of reserve accounts. He thought, in a web-extra that we shot this week, that it's a bad idea that we're not diverting as much money to the Permanent Mineral Trust Funds as he thinks that we should, and taking some of that money now to use for other purposes in state government. Couple that thought with the spending now that is occurring out of the LeSR account, 1.8 billion dollar rainy day fund. Have we set an adequate policy to spend out of that account? Are we spending too much out of that account? Not enough? Are we spending our reserves at a good rate, not enough to fund some of the ideas that you both have? I'll start with you, Representative Throne, go ahead.

- Well, I don't know how you got Chairman Madden to answer that question-- in your short timeframe. 'Cause it is a very complicated question, but, essentially, what the budget structure is doing with these three budget bills we have, or four budget bills, they're taking the statutory diversion and they're putting it in a holding account to back up the construction projects that they want to build. We don't need that money yet, and when you put a 100 million dollars into the Permanent Mineral Trust Fund, you know, he's being a little simplistic, it's going to make 5 million dollars. And so, if we don't need that money for cash-flow purposes, for two, three, four years, you know, Chairman Madden's exactly right. You know, we have to be careful, because we could run into a cash crunch, but it's bad money management. You know, the old dollar cost averaging that all our 401k advisors tell us? You know, you need to keep the flow in. I think there could be a time when we do need to take that money, but what they're using it for is just ludicrous, 'cause it's going to sit in account where, and we don't even need it for two years, at least. And it's not going to make money.

- How 'bout spending from the 1.8 billion dollar account? Have we set good policy in the way we've now been willing to spend a little bit of that money?

- Well, I wouldn't say we've set good policy, that there are any clear guidelines; there's some legislation--

- [Craig] Is that part of the problem?

- running through that may or may not. Honestly, it's difficult to set clear guidelines, because one legislature can't bind a future legislature. And that's a key concept. So, we can set some policies, we can seet some guidelines, and then those can be overrun in a future legislature. So the key is to be thoughtful about prioritization this time, recognize the need for investment in the state, recognize that the money, as Representative Throne is talking about, that is sitting in the Legislative Stabilization Reserve Account is not earning significant interest, so we have 1.8 billion dollars effectively in a checking account. That's a tremendous amount of potential resources that would be available to us if they were invested in equities and in permanent funds, so that alone is an opportunity cost loss. If we are going to keep those funds and invest them, that's a reasonable approach in terms of investment in the state of Wyoming, so infrastructure and other things that would offset future costs. So there's a lot of different possible ways you can look at it. I don't think the way that we have right now, the approach that we're using, is a particularly effective approach. As far as how much we're spending, I don't think we're necessarily spending an unreasonable amount out of the Legislative Stabilization Reserve Account. We're taking some, we need some. I disagree with the prioritization, this idea that we're doing buildings before we're doing people.

- And we're going to talk more about exactly that as we take this conversation to the web. I want to thank you in this segment, Senator Rothfuss and Representative Throne, for visiting with us. Next week on Capitol Outlook, we'll tie it all up, we'll visit with the Governor. Governor Matt Mead will be on the Capitol Outlook's set and he'll reflect on the work of the 63rd legislature, and we'll also visit with the Majority Leadership, Senator Eli Bebout and Representative Rosie Berger. Until then, thank you for joining us. Remember, we have a lot more content available at wyomingpbs.org, a lot more web conversations and we'd like you to take a look at those, too. From all of us at WyomingPBS, thanks for joining us.