primer: strategic revenue declines€¦ · i. major sources of wy revenue & trends (p. 3) ii....
TRANSCRIPT
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Primer: Strategic Revenue Declines
2020 Interim Topic Priority #3
WYOMING LEGISLATIVE SERVICE OFFICE July 13-14, 2020 – Joint Appropriations Committee (updated July 13, 2020)
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Presentation OutlineI. Major Sources of WY Revenue & Trends (p. 3)
II. Recap - Volatility of Major State Revenue Sources
(p. 11)
III. State & School Appropriation & Funding Trends (p.
12)
IV. Reserves (p. 19)
V. FY2021 Preliminary Cashflow Analysis (p. 22)
VI. Takeaways (p. 23)
2
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
I. Major Sources of
WY Revenue & Trends• Sales and use taxes
• Ad valorem taxes (considered through changes in assessed valuations)
• Investment income
• Mineral taxes and payments (Severance, Ad valorem, Royalties)
• Oil
• Natural gas
• Coal
• Technical notes:
• Hashed bars or dashed lines reflect projections
• “Measure of volatility” for this presentation uses the standard deviation of the
annual percentage change in collections. The higher the measure, the greater
the annual variation (up and down) of the State’s major revenue streams.
3
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Summary: Revenue Volatility and
Revenue Decline Contribution Revenue Source Estimated Long-term
Volatility Measure
Contribution to May 2020
CREG Revenue Decline
(April 2020 – June 2022)
Sales and Use Tax ~11% ($387 million)
Investment Income ~32% ($20 million)
Oil ~29% ($798 million)
Natural Gas ~35% ($233 million)
Coal ~24% ($213 million)
Non-mineral A.V. ~4% $0
Other NA ($192 million)
TOTAL* ~13% ($1,843 million)
3a
*Note: Total includes $352 million impact to the PWMTF from
all minerals, without which the impact is $1,491 million.
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Revenue by Major Source
3b
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
198
0
198
1
198
2
198
3
198
4
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0 e
st
202
1 e
st
202
2 e
st
202
3 e
st
202
4 e
st
BIL
LIO
NS
FISCAL YEAR
Other GF Revenue
Non-mineral Ad Valorem
Coal Lease Bonus
FMRs
Trona (Severance and Ad Valorem)
Coal (Severance and Ad Valorem)
Natural Gas (Severance and Ad Valorem)
Oil (Severance and Ad Valorem)
PWMTF and GF (Pooled Income)
State Sales and Use Tax
Notes: Ad valorem taxes only include
only the 43 base mill levy for K-12
education. FMRs not yet disaggregated
by mineral.
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
GF Share: Sales and Use Taxes
Note: The percent change in FY 1994 for measuring volatility has been removed due to the statewide sales and use tax rate change from 3 to 4
percent.
$0
$100
$200
$300
$400
$500
$600
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
ES
T
20
21
ES
T
MIL
LIO
NS
FISCAL YEAR
Measure of volatility: 11%
4
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Assessed Valuations
$0
$5
$10
$15
$20
$25
$30
$35
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
ES
T.
20
20
ES
T.
BIL
LIO
NS
CALENDAR YEAR, REPRESENTING YEAR OF MINERAL PRODUCTION
Minerals Totals
Total Mineral Assessed Valuation Volatility: 23%
Non-Mineral Assessed Valuation Volatility: 4%
Total Statewide Assessed Valuation Volatility: 14%
5
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Investment Income
$0
$100
$200
$300
$400
$500
$600
$700
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
MIL
LIO
NS
FISCAL YEAR
PWMTF Income GF Portion of Pooled Income
PWMTF Income Volatility: 38%
GF Portion of Pooled Income Volatility: 45%
Total Investment Income Volatility: 32%
Note: Calculation of PWMTF investment income volatility does not include FY1970 through FY1977.
6
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
PWMTF Investment Earnings by Type and
Spending Policy Amount
6a
-$200
-$100
$0
$100
$200
$300
$400
$500
$600
MIL
LIO
NS
Net Realized Capital Gains (Losses), grossof fees
Interest and Dividends
5% Spending Policy
Source: LSO analysis of
Wyoming State Treasurer's
Office Annual Reports
Average annual net realized capital gains FY07 – FY19:
$142 million; 48% of total investment earnings;
Average annual percent of rolling 5-year corpus: 2.9%
Average annual interest and dividends FY07 – FY19:
$152 million; 52% of total investment earnings;
Average annual percent of rolling 5-year corpus: 3.4%
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Mineral Taxes and Payments
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
ES
T.
20
21
ES
T.
BIL
LIO
NS
FISCAL YEAR
FMRs Coal Lease Bonus Severance Taxes
FMR Volatility: 23%*
Coal Lease Bonus Volatility: NA / (2,569%)
Severance Tax Volatility: NA / 50%**
Notes: “Volatility” defined as the standard deviation of the annual percentage change
in collections.
*FMR volatility does not include FY 1978 since Wyoming’s share of FMRs was
increased from 37.5% to 50% on January 1, 1977.
**Severance tax volatility does not account for numerous revisions in tax rates,
therefore should not be relied upon.
7
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Oil Production / Assessed Value
(20)
(15)
(10)
(5)
0
5
10
15
201
98
0
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
MIL
LIO
NS
OF
BA
RR
EL
S
CALENDAR YEAR
YEAR-OVER-YEAR CHANGE IN OIL PRODUCTION
$0
$1
$2
$3
$4
$5
$6
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
BIL
LIO
NS
CALENDAR YEAR OF PRODUCTION
ASSESSED VALUATION OF OIL
8
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Natural Gas Production / Assessed Value
(250,000,000)
(200,000,000)
(150,000,000)
(100,000,000)
(50,000,000)
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
MC
F
CALENDAR YEAR
YEAR-OVER-YEAR CHANGE IN NATURAL GAS PRODUCTION
$0
$2
$4
$6
$8
$10
$12
$14
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
BIL
LIO
NS
CALENDAR YEAR OF PRODUCTION
ASSESSED VALUATION OF NATURAL GAS
9
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Coal Production / Assessed Value
(100)
(80)
(60)
(40)
(20)
0
20
40
601
97
0
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
MIL
LIO
NS
OF
TO
NS
CALENDAR YEAR
YEAR-OVER-YEAR CHANGE IN COAL PRODUCTION
$0
$1
$1
$2
$2
$3
$3
$4
$4
$5
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
BIL
LIO
NS
CALENDAR YEAR OF PRODUCTION
ASSESSED VALUATION OF COAL
10
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
In order of approximated volatility,
Wyoming’s major revenue sources are as
follows:
• Natural gas ~35%
• Investment income ~32%
• Oil ~29%
• Coal ~24%
• Sales and use taxes ~11%
• Non-mineral property taxes ~4%
II. Recap - Volatility of Major
State Revenue Sources
11
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
III. State & School Appropriation
& Funding Trends• Wyoming’s traditional state revenue increased by 300% in a decade
($528 M in FY1999 to $2.2 B in FY2008)
• Similarly, State K-12 Revenue - School Foundation Program (SFP)
and School Capital Construction Account (SCCA) – increased by
more than 300% in a decade ($500 M in 1999-2000 to $2.26 B in
2009-2010)
• Over the next twelve fiscal years, traditional annual revenues
averaged 17 percent lower than the peak of FY2008; biennial K-12
state revenues averaged 20 percent lower than the peak
• State support for K-12 school districts exceeded local support in
FY2017, FY2018 and is forecast to do so in FY2021 and beyond.
This means the majority of K-12 funding is from the State.
12amdt
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Traditional State Govt. Revenue
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
198
0
198
1
198
2
198
3
198
4
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0 e
st
202
1 e
st
202
2 e
st
202
3 e
st
202
4 e
st
BIL
LIO
NS
FISCAL YEAR
GF TOTAL LRI, BRA, OPSTA TOTAL
13
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
SFP and SCCA Revenue
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0B
ILL
ION
S
FISCAL YEAR
SFP SCCA
14
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
State and K-12 Budgets
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Est.2023
Est.2024
BIL
LIO
NS
FISCAL YEAR
K-12 LOCAL AND STATE APPROPRIATIONS TRADITIONAL STATE APPROPRIATIONS WITHOUT SAVINGS
15
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Est.2021
Est.2022
Est.2023
Est.2024
BIL
LIO
NS
FISCAL YEAR
GUARANTEE + OFF-MODEL STATE SHARE LOCAL SHARE
School Foundation Program Funding
16
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Historical “Guarantee”
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20
MIL
LIO
NS
TEACHERS NON-TEACHERS DISTRICT PERSONNEL NON-PERSONNEL REIMBURSEMENTS
17
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Estimated State and K-12 Revenue
v. Budgets
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
2017-2018 EST. 2019-2020 EST. 2021-2022 EST. 2023-2024
BIL
LIO
NS
SFP AND SCCA BUDGETS TRADITIONAL STATE APPROPRIATIONS WITHOUT SAVINGS
SFP AND SCCA REVENUE TRADITIONAL STATE REVENUE
18
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
IV. Reserves.
State Agency Pool Beginning Balance
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
BIL
LIO
NS
FISCAL YEAR
STATE AGENCY POOL (INCLUDING TOBACCO TRUST) BEGINNING FY BALANCE
First transfer to LSRA occurred in FY2005.
State operating balances increased steadily from FY2004
through FY 2016. Since then, balances have trended
downward, though unevenly.
19
Examination of the State Agency Pool balance (including the Tobacco
Trust and LSRA) allows consideration of a high level trend without the
“noise” of transfers between accounts, elimination of accounts and
creation of new accounts.
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Spending Policy Reserve
Beginning Balances
$0
$50
$100
$150
$200
$250
$300
$350
MIL
LIO
NS
CSPLF RESERVE ACCOUNT
$0
$50
$100
$150
$200
$250
$300
$350
$400
MIL
LIO
NS
PWMTF RESERVE ACCOUNT
20
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Legislative Stabilization
Reserve Account
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
BIL
LIO
NS
BIENNIUM
BIENNIAL BEGINNING BALANCE
($0.8)
($0.6)
($0.4)
($0.2)
$0.0
$0.2
$0.4
$0.6
$0.8
BIL
LIO
NS
REVENUE AND EXPENDITURES
REVENUES AND TRANSFERS IN
APPROPRIATIONS AND TRANSFERS OUT
21
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Legislative Savings to LSRA and
PWMTF
21a
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
05-06 07-08 09-10 11-12 13-14 15-16 17-18 19-20 21-22
MIL
LIO
NS
BIENNIUM
PWMTF CORPUS LSRA - NET APPROPRIATIONS IN/OUT LSRA - SPENDING POLICY AND DIRECT REVENUE
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
V. FY2021 Preliminary Cashflow Analysis
-$100
$0
$100
$200
$300
$400
$500
$600
BeginningJune
End June July August September October November December January February March
MIL
LIO
NS
ESTIMATED RUNNING BALANCE ESTIMATED OUTLAYS ESTIMATED INCOME
Based upon May 2020 CREG without any budget reductions or administrative actions,
State cashflow concerns present as early as December 2020.
22
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
• Wyoming’s revenue sources are highly volatile –
individually (and compared to other states)
• Revenues increased dramatically in the first decade of
this century, followed by variable, but lower overall
levels
• Over the last decade state appropriations (not including
savings) have been steady to slightly declining
• K-12 total budgets have been steady to slightly
increasing in most years
• Wyoming policymakers exercised six forms of savings:
(1) constitutional severance taxes; (2) constitutional
royalties; (3) statutory severance taxes (at times); (4)
statutory reserve amount in budgeting; (5) investment
spending policies; and (6) ad hoc tips, reversions and
direct appropriations
VI. Takeaways
23
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
• Overall reserves were modestly declining prior to
COVID-19; “rainy day” funds were being expended
• Economic ramifications of COVID-19 and
associated policies are accelerating the
underlying revenue-expenditure structural
disconnects
• May 2020 CREG revenue forecast indicates
substantial declines in both state government and
K-12 school district projected revenues (Some
near-term actual results are somewhat more
optimistic)
• Regardless, the revenue-expenditure disconnect
is growing, unsustainable, and with history as a
guide may have stints of sizeable volatility
Takeaways
24
July 13-14, 2020
Joint Appropriations CommitteeWyoming Legislative Service Office
Questions?
25