Tax expert: Latest federal stimulus package brings temporary “reprieve” to Wyoming

Tom Coulter, Wyoming Tribune Eagle via Wyoming News Exchange
Posted 4/21/21

The federal stimulus money headed to Wyoming later this year will buy some additional time for lawmakers to sort through the state’s structural revenue challenges, and that period of respite should be used to determine precisely what kind of stable tax structure would best suit the state.

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Tax expert: Latest federal stimulus package brings temporary “reprieve” to Wyoming


CHEYENNE – The federal stimulus money headed to Wyoming later this year will buy some additional time for lawmakers to sort through the state’s structural revenue challenges, and that period of respite should be used to determine precisely what kind of stable tax structure would best suit the state.

That was one of the main takeaways from a discussion Tuesday led by Jared Walczak, a state-level tax expert with the national Tax Foundation. His talk, which was organized by the Wyoming Taxpayers Association, largely focused on the roughly $1.1 billion in state aid heading to Wyoming through the passage of the federal American Rescue Plan last month.

Even before the federal funding’s official arrival to Wyoming, the aid has already made an impact during the state’s legislative session, allowing lawmakers to reach a budget compromise with far more ease than expected.

Aside from the direct aid, Wyoming school districts are slated to receive $273 million under the stimulus package, money that lowered some of the urgency driving calls to make budget cuts to the state’s K-12 education system.

Unlike the previous stimulus money that went to states under last year’s CARES Act, this round of federal relief grants more time to state and local officials to determine how best to spend the money, with a December 2024 deadline for the funds to be used. In Wyoming, where lawmakers have been mulling changes to the state’s fiscal structure in response to structural downturns in coal and other energy industries, Walczak said that extended spending deadline could be a blessing.

“We’ve seen proposals for a corporate income tax. We’ve seen discussions of whether the sales tax base can get any broader and a variety of other things. Those are discussions that are not going to end, and maybe don’t need to end,” Walczak said. “But I think there’s a reprieve here, not to avoid the questions, but to address the questions in a way that can be very deliberative, because you will have revenue offsets for several years ... that are much larger than anything that you could realistically hope to raise with any of those taxes.”

Ultimately, that timeframe will give lawmakers an opportunity to determine what aspects of Wyoming’s economy — such as tourism — took hits largely as a result of the COVID-19 pandemic, versus other areas that could remain in structural decline, Walczak said.

“If the concern is that oil revenue is just in decline over the long term and that there needs to be offsets, then those discussions don’t need to end, but I think this is a very good opportunity to think very deliberately over the course of a couple of years about what the tax code should look like, coming out of this covered period and entering into calendar year 2025,” Walczak said.

So far, Wyoming’s elected leaders have reiterated the need to take a long-term approach in using the federal aid. 

In a statement earlier this month announcing plans to develop a blueprint for the latest relief money, Gov. Mark Gordon said it is “imperative to emphasize long-term benefits, because this funding has increased the debt for future generations.”

“I am committed to working with the Legislature to ensure that we use the funds effectively and responsibly, and that we seek to develop big ideas that will have significant and long-lasting impacts,” Gordon said. “Wyoming won’t see these funds for some time, allowing us to develop a plan to ensure these dollars benefit citizens for years to come.”

Legislative leadership has already discussed mid-July – specifically July 12-16 – as a potential time frame to hold a special session focused on distributing that federal money, much like the Legislature did last spring for the CARES Act money. Whenever they reconvene, they will face fewer restrictions on what they can spend the federal aid on than with the CARES Act, though some restrictions on permitted spending have yet to be finalized.

“Within the American Rescue Plan, you get four things you can spend the money on. You can do it in the economic and public health responses to the pandemic, that’s CARES Act-like. You can do it to enhance pay for essential employees. You can use it for limited infrastructure – we’re talking about water, sewer and broadband,” Walczak said.

“And you can – I think most importantly for you – use it for general spending that is in direct offset to revenue reductions that you can certify,” he continued. “That’s where most of this is going to come in, because unlike a lot of states, you have seen substantial revenue losses, so basically you can backfill all of it, and that’s something you couldn’t directly do with the previous (stimulus packages).”

While that provision won’t apply in many parts of the U.S. – some 30 states have not seen revenue losses from the COVID-19 pandemic, Walczak said – Wyoming saw significant drops in revenue last year, and it could likely see additional revenue declines between now and 2024. 

However, several details of the relief plan, such as precisely what kind of projects and essential employees could receive the stimulus money, have yet to be finalized, with Gordon’s office expecting additional guidance from the federal government to be released next month.

With a handful of state officials on the call with Walczak, one lawmaker, Rep. Pat Sweeney, R-Casper, asked whether any of the federal money could be set aside to establish a long-term account to cover the state’s share of Medicaid expansion over the next decade. In Walczak’s opinion, such an approach would not meet the federal guidelines, though the Tax Foundation expert added there could be “creative ways” to address legitimate needs in the state.

“For instance, you can pay salaries of public health employees, so I would think that you can take just about everyone who’s working in that department, and pay their salaries for the next three years out of that,” Walczak said. “If that freed up funding that you could put into something else, I would think that even if there’s this obvious linkage, it just doesn’t matter because we have a direct statement that says you can pay for their salaries.”

Early next year, the Wyoming Legislature will reconvene for its 2022 budget session, in which lawmakers will consider whether to pursue any additional cuts after passing roughly $430 million in general fund reductions this session. Walczak said the federal stimulus package will give legislators more time to consider their options moving forward.

“Revenues are down, which is not good, but you will have federal aid in excess of those revenue losses,” Walczak said. “This probably staves off any need for tax increases during that period, and it also provides this window to talk about what they should be, not to do it with your back to the wall with the urgency of ‘we need revenue, and therefore it doesn’t matter how poorly structured it is.’ … It offers you an opportunity to have these more deliberative conversations that I know lawmakers have been trying to have for a while.”