Joint Revenue Committee Report, Part 1
By: Pete Obermueller, WCCA Executive Director
The Joint Revenue Committee met in Saratoga on May 11 and 12. They have been tasked by leadership to develop revenue options that would raise $100, $200 and $300 million. It's a task many of the committee members do not relish because they do not have an appetite for raising taxes at all. The co-chairmen repeated often that other committees are looking at further ways to reduce spending at the state level, but that they are the revenue committee. Additionally, it was pointed out that of the 4 main sources of savings over which the legislature has control, they have already spent $1 billion of the $2.8 billion available. I'm going to write this report in two parts. Part 1 will cover the discussion specific to local governments, and part 2 will outline the other critical topics of interest.
In the morning of the first day of hearings, the committee meeting kicked off with a discussion of fees levied by state agencies typically overseen by the Revenue Committee. Those agencies are limited to the Department of Revenue, the Department of Audit, the State Auditor's Office, and the State Board of Equalization. Perhaps most notable to us is the fee collected from local governments to offset the costs of collection and remittance of sales tax revenue. Reminder, Q&A written in these posts are paraphrased, not verbatim quotes. I do not record these sessions.
Rep. Furphy to the Dept. of Revenue: How much does it actually cost you to collect and remit sales tax to local government? Is there a nexus between the costs and 1% administrative hold-back?
Answer (Kim Lovett, Dept. of Revenue): Collection and remittance of taxes is our primary function. It costs us between 4 and 5 million for the total function, but we cannot break it out in terms of which collection costs what.
Following this I testified regarding the three fee increases we are seeking at the legislature this year. I briefly explained the upward pressure on us from courtroom technology expenses, and the potential WyoLink user fees and spoke of fee increases to help offset that pressure. I then explained the history of death certificate fees and offered a suggestion for increasing the fee from $5 to something larger to cover the costs of indigent burials in Wyoming. At $20 per certificate, the fee would raise approximately $600,000 annually. This is small dollar stuff here and won't save county budgets, but is a way to offset a particular cost, albeit a small one, and set it up to be a long term source of revenue for the future.
Senator Case: I don't see any nexus whatsoever between a death certificate fee and covering the cost of indigent burials. I'm sympathetic to the budget pressure on counties, but why should someone who's family member has died also need to pay the cost of someone else's burial?
Answer (Pete): The real question is whether or not dealing with deaths of indigent persons is a government function or not. If it is a function of government, then there really is no tax or fee with a perfect nexus. Also, we're not really talking about reimbursements for us, but for the private businesses that deal with the burials. It’s the funeral homes that are getting the squeeze.
Senator Peterson: Is there a reason you picked $20?
Answer (Pete): Two reasons, first, $20 was the bill before you last session that passed the House and failed the Senate, so it is clearly a threshold that seemed to be about the upper limit. Second, I wanted a fee that would annually cover the approximately $400,000 the counties and state spend on reimbursements. At $20 we would collect approximately $600,000, covering our expenses and reducing the general fund for Vital Records.
Ultimately the committee did not move a bill to increase this fee, but rather leaving it to us to draft a proposal and bring it back. I plan to do that prior to Revenue's fall committee meeting.
We then moved into a two-hour conversation on local government revenue status and options. The newly minted Executive Director of WAM, former Cheyenne Mayor Rick Kaysen, along with the Mayor of Douglas, City Treasurer of Lander, and City Administrator of Kemmerer spoke and took questions for nearly an hour and a half regarding the status of cities and towns in Wyoming. Linked here is WAM's presentation that begins with the basic state of the cities, and making the point that Wyoming's municipalities have the least revenue raising autonomy of any state's municipalities. Following this discussion WAM members moved into a discussion of the difficulties they face funding projects, and the potential revenue options to help cities improve their situation, laying out four major options:
- Increasing the cap on severance tax distributions. Note: severance distributions are capped at $155 million, with that amount distributed to many recipients including counties. Anything over the cap goes to the state's general fund.
- Making the 5th penny permanent.
- Instituting a municipal only optional tax.
- Instituting a “barometer” sales tax that kicks in only when savings reach a certain level.
Rep. Connolly: Regarding the severance tax distributions. I can see how that helps municipalities, but how does that help anyone else?
Answer: Raising the cap increases distributions to all the recipients, not just the municipalities.
Rep. Connolly: What statutes obligate cities to be inefficient? What can we help you with to promote efficiency?
Answer: The best thing you can do for us is to introduce and pass the $105 million in direct distribution. That will help us stay solvent and avoid layoffs.
Rep. Madden: How does the idea of a municipal only tax dovetail with county optional taxes? Can they work together?
Answer: It will take further discussion with the WCCA, but cities do not have the autonomy to raise revenue and this would be another option to let city residents choose for themselves the level of service they would like. Cities only control 20% of their revenue.
Sen. Peterson: It appears to me that what you are asking is for the state to cover your needs – roads, etc. – while you want more flexibility to cover your wants.
Answer: Street repair and maintenance is very expensive. Half a million for every mile. We simply can’t do that ourselves and need the states partnership to make that happen.
We testified next for about 30 minutes. Many thanks to Commissioners Ash (Laramie), Bell (Campbell) and Novotny (Johnson) for their help with testimony, and the Carbon County Commissioners for showing up in force, and to Commissioner Wendling (Sweetwater) for backing us up. I began with a brief presentation using the data linked here about the status of counties, and indicated that the revenue we were seeking is in the fees I had already discussed, that we are not seeking broad tax increases for local governments. Commissioner Novotny argued for inclusion and passage of the $105 million direct distribution, indicating that for counties that amounts to only $18 million dollars. Not enough to turn our budget situation around, but helpful in smoothing out the peaks and valleys of our budgets. Commissioner Ash explained the close general purpose election in Laramie County and argued that those propositions would likely have failed if the state had imposed a state-wide sales tax. Per our discussion in Gillette, Commissioner Ash said that the WCCA would oppose a sales tax increase to solve the school funding shortfall. Commissioner Bell talked further about the county relationship vis-à-vis the schools, and argued that it is time for the school districts and administrators to take the same sacrificial attitude toward our budgets as counties and others have already displayed.
Rep. Connolly: I’m very disappointed in your stance on sales tax. We need to be able to close this gap somehow and so I wonder what the mood in your counties are for revenue increases of any kind?
Answer (Ash): During the run up to the 6th penny election, the Commissioners were everywhere in the county meeting with people. We spoke to many who were worried about additional taxes that would make the 6th penny a 7th or 8th. It was a real concern. (Novotny): Regarding using sales taxes to solve the school funding, not only does it jeopardize our revenue, but it also is a very volatile source of revenue. What the schools need is a stable source that is not as subject to the wild fluctuations from year-to-year that happens with sales tax. (Bell): The fragile energy industry in Wyoming is not interested in any additional taxes. The common person on the street may be more open to the discussion of revenue increases if they first saw any sort of commitment to austerity from the school districts.