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Mineral wealth bloats Wyoming's budget

Mineral wealth bloats Wyoming's budget

Associated Press

CHEYENNE - Budget crunch? Program cuts? New taxes?

Not in Wyoming, where record surpluses prompted an unprecedented spending spree by lawmakers the past two sessions.

"It seemed like they were spending like drunken sailors," said Rawlins resident Nancy Harris.

Spurred by a huge windfall from mineral taxes, lawmakers boosted state spending on government operations from $1.6 billion to $2.5 billion in two years, an eye-popping 56 percent jump.

"It is alarming, absolutely," House Speaker Randall Luthi said. "We put more money into some government programs, probably more than we realized."

Luthi and other state officials were quick to point out that a significant amount also was socked into savings, allocated toward replacing dilapidated schools and public buildings, and shared with income-strapped cities and towns for street, water and sewer repairs.

"For years, when we weren't in such an enviable position, we accumulated quite a backlog of capital construction," said Mike McVay, budget director for Gov. Dave Freudenthal. "So we've tried to address that, and I think the Legislature and the governor have done a good job of addressing that."

Larger amounts went for a new prison, teacher raises, a wildlife trust fund, a college scholarship endowment, an expansive University of Wyoming library complex and new four-lane highways.

Money also was allocated to study a possible graduate business school in Jackson Hole, encourage foster parents to be tobacco-free, establish a historic mine trail system and even replace chipped china at the governor's residence.

Although Luthi said the spending could be justified, he charged the Appropriations Committee with determining exactly how many new dollars have been committed to ongoing programs.

"I think we're going to be surprised," he said.

Wyoming is among a handful of states which are outperforming the rest of the nation, according to Arturo Perez, fiscal analyst for the National Conference of State Legislatures. Also on his short list are Alaska, Montana, South Dakota, West Virginia, Delaware and Florida.

"States that are heavily dependent on energy, more so than other states, have gotten by to a much better degree, and the energy prices being the primary reason for that," he said. "But on a percentage basis, no other state came close to matching Wyoming's surplus this past year."

It hasn't always been so.

In 1999, Wyoming faced a $127 million deficit due to expensive court-ordered education reform and a decade-long slump in prices of minerals, which provide roughly half the state's operating revenue. The shortfall, while it would be considered small in many states, was equivalent to a fifth of annual state general fund revenues.

But energy prices started rising, fueling a breathtaking turnaround. Natural gas, which Wyoming possesses in colossal amounts, is the main driver.

Consider that in 1999, the average nationwide price of natural gas at the wellhead was $2.19 per thousand cubic feet, according to the U.S. Energy Information Administration. In 2004, the price reached $5.49, a 150 percent increase.

The jump in income - about $2 billion more than anticipated two years ago - made it easier for lawmakers to increase spending.

But Tom Kinnison, a former state senator, said little has been done for the average citizen.

"Are they helping us on our health insurance? No. Are they giving us any kind of refund as our property taxes creep up? No," he said. "It just seems like everybody talks about spending money and patting each other on the back."

Lawmakers considered two bills this year that would have reduced the sales tax - one across the board, the other on food - but both failed.

Failure to remove the tax on groceries surprised Laree Fedderson, a Gillette resident.

"It would give every single person in the state a break on that, so I'm kinda amazed," she said.

Luthi said that reducing the sales tax would have hurt local governments, which rely heavily on that revenue.

"A big portion is set aside for them, and that's why we've been somewhat hesitant to reduce the sales tax, but we haven't made any effort to raise it either," he said.

Indeed, the Legislature hasn't approved any major tax increase since 1998, when the fuels tax was raised by a nickel a gallon.

And given the history of mineral price swings, lawmakers are reluctant to give a share of the surplus directly back to taxpayers.

"With our boom-and-bust cycle, we're frankly just too conservative to do that right now," Luthi said, adding that such breaks are also politically difficult to reverse.

The philosophy of Republican leadership, he said, has been to put more money into untouchable long-term savings and let the interest help fund state government.

In fact, an extra $690 million - above automatic deposits - has been put into savings over the last two years, the bulk in the state's Permanent Mineral Trust Fund, of which only earnings can be spent.

"The more money you put into the Permanent Mineral Trust Fund, the more interest you will raise, and the less likely we'll have to raise taxes," Luthi said.

Copyright © 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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