Wednesday, December 14, 2016

Fiscal Reforms and Legislative Mechanics

I receive comments and correspondence from legislators on a regular basis. This morning one of the e-mails asked me about the legal side of privatizing the University of Wyoming. The prevailing opinion is that since it is a land grant university, it should be impossible to privatize. My answer to the legislator could interest all readers of this blog, so here it is.

Since I am not a lawyer, I do not look into the legal matters of reforms. I leave that to lawyers and politicians. I do not disregard those aspects - I have been active in politics and public policy for too long to do so - but I deal with them in a different way than lawyers do. Back to that in a moment. As an economist, I develop policy reform ideas that can match our permanent, and escalating, budget deficit. In the very serious budget situation we are in today, we cannot sit around and rely on conventional wisdom. We have to look at fiscal solutions that go outside of what has been done traditionally. Some of those solutions are controversial and unconventional. 

The governor and the newly elected legislative leadership appear to be looking for their own unconventional fiscal solution, namely higher taxes and ostensibly a corporate income tax. (I would not be surprised if they also try to create a personal income tax on high incomes.) Since any tax increase would be bad for Wyoming, we need to look for out-of-the-box solutions on the spending side. Privatizing UW is one of them

Again, I realize there are important legal issues to be considered, but in all my years in politics and public policy I have learned one thing about lawyers. You don't let them get away with telling you "it's impossible". You ask them why something is impossible, and they will tell you that it is impossible because "you would have to do this and that". Well, they just explained how to get it done. Then you put them to work to make it happen. 

The question is not whether privatizing UW is impossible. It is not. The question is if it is so difficult that it is not worth pursuing compared to other spending reforms of similar fiscal value. If you have to spend X amount of legal work, legislative time and political capital on privatizing UW, for a fiscal value of $250m/yr, and another reform only requires half of X with the same fiscal value, then obviously you go for the second reform. 

The important part of this is that the spotlight is taken off tax increases and concentrated on spending reforms and permanent government downsizing. Regarding that, I am still looking for an answer to this question: Nebraska has one third fewer state and local government employees relative their private workforce than we do in Wyoming. If we downsized our government workforce to the same parity, we could save taxpayers up to $1.5 billion per year. What is it that we get from government that the Nebraskans have to suffer without?

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