Representatives for Gov. Matt Mead’s economic diversification policy initiative pushed back against public perceptions they said aren’t accurate during a meeting with lawmakers Tuesday in Laramie.
ENDOW — which stands for Economically Needed Diversity Options for Wyoming — is Mead’s legacy policy mandating the state diversify its economy. As he prepares to leave office after his second and final term, Mead hopes ENDOW will be carried through multiple subsequent administrations — something he said will be critical for the 20-year strategy to succeed.
Though the initiative saw success during the Wyoming Legislature’s 2018 budget session, moving forward multiple ENDOW-related bills, the policy has been the ire of critics who see it as a big government, tax-and-spend approach to the state’s economic problems. Some of the defeated candidates in the GOP gubernatorial primary said they would not have carried it forward if elected. (The prevailing candidate, state Treasurer Mark Gordon, has seemed more open to moving ENDOW along if elected.)
Greg Hill, ENDOW executive council chairman, said negative characterizations of the initiative aren’t based in fact. First, he said the strategy isn’t being cooked up in “smoke-filled” rooms by elites or bureaucrats but instead is a product of input from about 145,000 Wyomingites and private industry representatives.
“We went through the effort to listen deeply to what the people of Wyoming wanted,” Hill said. “This isn’t a product of the executive council — it’s a product of the citizens.”
Hill spoke to lawmakers on the Legislature’s Minerals, Business and Economic Development Committee during the second of two meetings at the University of Wyoming.
Despite significant allocations of state funds in ENDOW-related legislation passed into law in 2018, Hill said the initiative is not a “big government program.” Hill said the council believes the private sector will drive economic diversification. However, achieving its goals will require support in the form of seed money and infrastructure investment.
“I’d like to recognize all of you for being supportive of bills sponsored and passed this year around infrastructure, but more needs to be done,” Hill said. “There’s more that needs to be done, and we recognize that with limited state resources, you can only do so much, but the way I like to think about this is Wyoming has a $20 billion surplus in coffee cans from the minerals industry.”
Hill referred to state savings and funds that are filled with revenue generated from Wyoming’s bread basket mineral industry. Around 70 percent of Wyoming’s revenue comes from the mining sector, so when commodity prices are down for oil, gas and coal, the economy suffers. In late 2014, prices slumped, putting Wyoming into a crippling revenue crisis it is still recovering from.
While the state’s savings account — the Legislative Stabilization Reserve Account, commonly called the rainy-day fund — is still fairly robust, many lawmakers issued dire warnings during the 2018 session that it won’t take long for it to dry up. With economists seeing no indication of a mineral sector boom that’s saved Wyoming’s bacon in the past on the horizon, lawmakers fear the state’s reserves will be depleted before a revenue boom emerges.
Investing some of that money to move the state toward economic diversification is a proper and critical use of the resources, Hill said.
“We’re going to have to take a little — not a lot, but a little — of that and invest it in getting the economy going,” he said. “The reason I say that is that’s what other states have done. They have proven you have to have some level of spark to get things going.”
Another perceived part of ENDOW that Hill said was a misconception was that the council would be proposing tax increases. The council’s strategy thus far has avoided advocating for specific tax policies, but the latest report did point out that its recommendations are only part of a bigger picture.
“What we did say is that ENDOW will be necessary, but not sufficient to solve the ultimate revenue problem the state faces,” Hill said. “In fact, if we don’t do anything, it’s going to exacerbate the revenue problems that will result in fewer jobs and less talent.”
Hill was referring to a report given to the Legislature’s Revenue Committee this year that reiterated what many already know: Wyoming’s tax structure relies so heavily on mining with other sectors untaxed that a diversified economy would create an increased need for services the state cannot support without broadening its tax base. So even if Wyoming attracted, say, a thriving tech sector, the workforce would bring families that need schools, roads, health care and more. If the mineral sector isn’t booming, the added population working in sectors that aren’t taxed will simply make the budget problems worse.
Tax policy is not the ENDOW council’s “gig,” Hill said. Any changes to Wyoming’s tax structure should be left to the Legislature — a sentiment Mead echoed recently, as reported in the Wyoming Tribune Eagle.
Senate President Eli Bebout, R-Riverton, isn’t on the minerals committee, but attended the important meeting. A stalwart ENDOW supporter and one who appreciates the problems laid out by experts on Wyoming’s tax structure, Bebout proposed a statewide lodging tax and voiced support for other measures that could broaden the tax base during the 2018 session, though all tax efforts failed.
However, Bebout told lawmakers Tuesday he “is not in favor of an income tax.”
One of the committee’s most staunchly conservative members, Rep. Chuck Gray, R-Casper, pushed back against any notion that taxes would increase in Wyoming. The fiscal uncertainty of the boom and bust cycle, he said, has hurt the state a great deal, but he differed in that he believed the state should save more and spend less.
“I take it from a different angle than this committee has,” Gray said. “In boom periods, we’ve spent too much.”
Gray suggested the ENDOW council should instead advocate for a constitutional cap on the state’s general fund spending. But the powerful Republican in Bebout pushed back. He said there were other ways the state could save more by implementing the recommendations of a recent efficiency study and scrutinizing expenditures.
“I don’t think a cap via a constitutional amendment is the way to go,” Bebout said.
While there seemed to be interest among some in the room to go down the tax debate road, chairman Rep. Mike Greear, R-Worland, put a stop to it.
“I don’t want a tax debate,” he said.
At the end, the committee supported two motions.
One reflected the ENDOW council’s only current ask of the state Legislature in 2019: to statutorily codify the appointment a Chief Economic Diversification Officer to be responsible for the development and execution of the ENDOW strategy. The committee supported a motion to direct the Legislative Service Office to draft a bill to that end, requiring no appropriation or position allocation.
Second, at the suggestion of Senate Minority Leader Chris Rothfuss, D-Laramie, the committee supported a motion directing the minerals committee chairmen work with the ENDOW council on potentially making improvements to two ENDOW-related bills passed in 2018. The legislation, Rothfuss said, was solid in principle, but needed some work on technicalities.
The minerals committee’s final meeting of 2018 is scheduled for Dec. 3.