Monday, December 26, 2016

Feeling Guilty Enough to Pay More Taxes?

On Christmas Eve, the Casper Star Tribune ran another story about how the state's budget deficit is really a problem with funding education:
In 2016, Wyoming’s education funding slid into full crisis. With the state in an energy slump stretching into its second year, schools face shortfalls of roughly $700 million in the next two-year budget cycle. Roughly 70 percent of Wyoming’s tax base comes from minerals. When oil, gas and coal prices fell, local and state funding for education fell with them. 
There is no doubt anymore that this is a well-orchestrated messaging effort, pumped out through a central-heating system like the hot air warming your house on a winter night. 

The quote above is eerily similar to several other stories with the same inaccurate narrative, namely that the state's budget crisis is just a matter of funding our schools.  

There is a reason why the general budget crisis is being sold as a crisis in funding schools. Six months ago, leading lawmakers and the governor all ignored the structural deficit problem, hoping it would turn out to be just another blip on the budget radar. When they realized that was not the case, they panicked. 

Governor Mead woke up first, taking some prudent yet very inadequate steps toward some sort of responsible fiscal policy. 

Then our leading legislators came onboard. But rather than admitting their Johnny-come-lately approach to the deficit and proposing the right kind of solutions, they decided to live by the credo "cutting spending, like eating children, is wrong". 

But how do you sell higher taxes to a populace that has gotten used to living without income tax - and whose jobs don't pay well enough to pay an income tax on top of all other taxes?

I know! Let's turn this into an education-funding crisis. If we paint our schools in depressing shades of gray, parents will look at them and no longer be able to hold back tears.  

Governor Mead has made his contributions to this narrative. Here is what I wrote on December 12 about his budget address to the Joint Appropriations Committee:
The governor referred to predictions by the Legislative Service Office (LSO), which apparently puts the deficit at $720 million in 2020. In my predictions six months ago, shared with the Appropriations and Revenue committees, I forecasted a deficit of "at least" $700 million in 2020. ... It still baffles me, though, that the governor, and leading legislators like House Speaker-elect Harshman, keep stashing away this deficit in the education section of the budget. As members of the JAC openly admitted during the question time after the governor's budget presentation, the $400-million deficit is an operational-cost deficit - in other words a deficit in funding ongoing government operations. It comes from a decline in general tax revenue, in other words revenue designated to pay for government in general, not just for education. 
I have gloated enough about predicting the budget deficit way before anyone else did. What matters now is to turn this debate away from "funding education" to the fact that we have a government sector in Wyoming that is bigger than in any other state. Just one example: if we adjusted the size of our state and local governments relative our private sector, to the size of government in Nebraska, we could save taxpayers as much as $1.5 billion per year. Please note that this number does not take into account the dramatic dynamic effects of the tax cuts allowed by such a reduction in government spending. 

This, of course, is not what those marketing the education-funding crisis story want to hear. However, to keep their narrative going, they have to get themselves involved in increasingly complicated arguments. This quote from the Tribune's December 24 article reminds me of the "elliptical orbits" once invented to save the terracentric theory of the universe:
Local and state revenue streams are intertwined, which means when the former falls, the latter isn’t strong enough to top off districts who need more funding. In good years, districts like Campbell County No. 1, which produces more in tax revenue than it needs, send money to Cheyenne. The state then distributes that money to areas that need it, like Natrona County and the majority of Wyoming’s districts. In those good years, Wyoming has been able to fund its education above the level required. 
OK, so now we are supposed to believe that a looming $720-million budget deficit is caused by one school district sending less tax revenue to the state for the purposes of education funding. 

Are there no fact checkers left in media these days? 

Yes, the state government gets money from local governments, but that amount is so small that it has absolutely no impact whatsoever on the state's ability to pay for its outlays. It is about one tenth of the money that the state sends down to local governments each year. 

Put differently: the state government receives less than three percent of its general revenue from local governments; even if all local governments in Wyoming stopped sending any money whatsoever to the state, it would not even come close to a deficit of $720 million. 

The education-funding story just hit another iceberg. But just like Mr. Ismay declared aboard the M/S Titanic - "this ship can't sink" - there is always someone out there willing to keep throwing coal into the boilers of the education-funding story. Alas, on November 15 the Tribune reported that education funding could be $1.8 billion in the hole by 2022.

Six months ago the official story was that there was no deficit to worry about in the state budget. Now, there is no limit to that deficit. Why? Let us get back again to the Tribune's December 24 story:
Gov. Matt Mead and lawmakers have said the state can’t cut its way out of the funding crisis, and educators warned that any more cuts could have dire consequences on programs, staffing levels and academic success. “I’m very concerned and not feeling very good about (cuts) at all,” said Laramie County School District No. 1 Superintendent John Lytte. “We’re getting some fantastic results (from education programs), and it feels like the rug is being pulled out from underneath us.”
There you have it. We, Wyoming parents, are supposed to connect the alleged $1.8 billion education-funding deficit with "academic success" and "fantastic results" and an image of our children walking in through the front doors of our schools with hanging heads, tears pouring down their cheeks and nobody there to greet them except empty hallways echoing of your guilty conscience. 

We the taxpayers are supposed to agree with the governor and leading legislators when they say that "the state can't cut its way out of the funding crisis". We are supposed to fall on our knees and beg them to raise every tax they can, and when higher property taxes have made our homes unaffordable; when higher sales and excise taxes have gobbled up our slim financial margins; then we are supposed to beg the legislature to slam an income tax on top of whatever money we have left. 

We are not supposed to remind the legislature and Governor Mead that the average non-minerals private-sector job in Wyoming pays $36,000 per year. We are not supposed to ask them what a person working one of those jobs should give up in order to pay higher taxes.

And most of all: we are not supposed to suggest that we somehow could get by here in Wyoming with a government of the same size as they have in other states.

All we should is accept the mantra: cutting spending, like eating children, is wrong...

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