SHERIDAN — Wyoming officials have accepted that their state is going to have to adapt to the dramatic economic changes it’s seen over the last decade which, by all accounts, are expected to continue.
The Wyoming Legislature’s Joint Revenue Committee has been one of the central forums for discussions and debates about how Wyoming can “diversify it’s economy.” It’s a massive undertaking that’s required input from every level of the state. The process has at times moved slow, and in some cases seemed endless, but recent events highlight why the topic has been such a focus for Wyoming’s lawmakers.
Last week, one of the country’s largest coal mining companies, Blackjewel, LLC, abruptly declared bankruptcy and closed two of its mines in the Powder River Basin, leaving nearly 600 Wyoming residents unemployed.
While dozens of officials in the state have predicted Wyoming’s future economy unable to rely on the energy industry, those predictions seem to be coming through faster and more unexpectedly than anyone would have guessed.
Taxes on extractive industries, particularly on companies in the energy sector, have historically been the backbone of Wyoming’s economy. Those companies have seen their business decline steadily in recent years as global demand for energy has shifted away from the sources that have traditionally provided it, like coal.
The easiest way for the state to make up at least some of those disappearing revenues would be to create new revenue streams — most likely by establishing new taxes in the state.
Both Wyoming citizens and lawmakers have been wary, if not outright hostile, to new tax proposals, however.
Bodies like the Legislature’s Revenue Committee have examined the challenges to a diverse economy in Wyoming exhaustively, and in many cases have discovered fundamental barriers to economic diversification that have to be addressed before the state can begin cultivating new industries.
During the committee’s interim session last summer, Peter Evangelakis, a senior economist with the economic forecasting firm REMI, presented the Revenue Committee with an analysis that suggested new industries could drag down, rather than rescue, Wyoming’s economy unless the state changes its tax structure.
Because Wyoming earned the bulk of its revenue from taxes on energy extraction, the state did not assess taxes on other business sectors in the state.
Because of that Evangelakis argued last year, in short, that recruiting new industries to the state without finding a way to earn revenue from them would do more harm than good. New businesses would mean new people moving to Wyoming, who would increase the strain on public services and infrastructure.
The state would be paying to make sure its services and infrastructure can handle that increased demand, then. The new residents responsible for the state’s increased funding burden would not contribute to offsetting it, though, as Wyoming’s tax collections still focus on energy extraction.
Over a long enough period of time, that trend could amount to a net loss for the state, Evangelakis warned the committee.
Evangelakis reiterated that to the committee when he spoke to it in Cheyenne earlier this week.
He conceded, though, that revamping the state’s tax structure effectively would be difficult from both an accounting standpoint and a political standpoint.
Some state officials suggested helping Wyoming residents understand the challenges facing the state economy could drum up more support for the state’s attempts to address those challenges.
Buck McVeigh, who is Gov. Mark Gordon’s acting chief of staff, described the efforts of a team of experts the governor’s office convened to study and discuss how changes in the energy market are impacting Wyoming.
McVeigh said the group plans to track those impacts on local, regional and national levels. But more than documenting the problem for government officials, he said he hoped the report could help them educate their constituents on the challenges the state is facing.
He noted that even if lawmakers did find a solution that would update the state’s tax and revenue systems, implementing it would be nearly impossible without public support.
Both Wyoming voters and some of their representatives have been extremely wary of new or increased taxes, as evidenced in the Legislature’s most recent session where all of the proposed tax bills were defeated.
“We all know the resistance that we face in this state to finding any additional revenue sources,” McVeigh said.
At some point though, McVeigh said, Wyoming’s citizens and politicians are going to have to decide whether they want to try and replace the revenue the state is losing with the decline of coal or adapt to living with significantly less public money.
Whichever direction the state decides to go, that conversation will have to take place, and McVeigh said he hopes the group’s efforts will provide a detailed and accessible look at the current state of Wyoming’s economy.