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Last week I explained that the pending revenue dry-up is putting the Wyoming state government in a problematic situation. If General Fund spending grows by as little as two percent per year, the General Fund will $312 million short by the time we get to the 2019-20 biennium.
With a three-percent annual spending growth, the deficit will exceed half a billion dollars.
The Appropriations Committee has begun its week-long meeting in Cheyenne. Its focus is on Governor Mead’s supplemental budget, which the governor presents with the usual verbal fireworks to celebrate the state’s strong finances:
Wyoming is fiscally strong. In the last fiscal year, state revenue exceeded projections, including more than $260 million in capital gains. We are on track to see many millions more in capital gains this year. Last year the State added more than a billion dollars to savings … The Rainy Day fund (LSRA) has nearly doubled during my time in office and the PWMTF has grown by more than 55% - remarkable increases. The State has over $12 billion in savings in permanent and liquid accounts.
The growing concerns about our state government’s revenue future is well founded. Severance tax revenue will likely stagnate over the next few years, due partly to the federal government’s “war” on coal, partly to growing domestic oil production and thus a decline in oil prices. Globally, the other major economies of the world are in recession mode, with flat or even declining consumption of energy. This reinforces the downward trend in oil prices and makes it more difficult for Wyoming to find replacement buyers for coal.
Falling oil prices have pushed gasoline prices down by as much as 66 cents in three short months. This means that, by a rough estimate, America's drivers save $231 million per day. If that went straight out in consumer spending, then theoretically the U.S. economy could create another million or so jobs - thanks to the oil price decline alone.
In the real world, things are not that simple. People have to pay taxes, some choose to pay down debt - and we do not know how long these lower oil prices prevail. Uncertainty alone could send a sizable part of the cash not spent at the pump into savings accounts. But regardless of how consumers choose to use the savings from lower gas prices, it is a winner for our economy. Even if consumers put every dollar into savings and debt repayment, it would boost their balance sheets, improve credit scores, and eventually make them feel confident enough to spend more on big-ticket items, such as new homes, new cars, appliances, furniture, etc.
Dear rest of the country: Spare a thought for oil country. Your cheap gas comes at a cost. The national average gas price hit $2.75 a gallon last week, the lowest price for fuel since late 2010 and more than 50 cents a gallon cheaper than a year ago. Consumers' cheers are echoing from sea to shining sea. But here in oil country, a low oil price also casts a shadow over an industry that employs thousands in the states and injects millions of dollars into our economy and government coffers.