Wyoming State of the State Address 2001
By Stateline Staff
CHEYENNE, Wyoming - Jan. 10 - Following is the partial text of Gov. Jim Geringer's 2001 State of the State Address:
Building Capacity Through Community Connections
Speaker Tempest, President Coe, First Lady Sherri, Supreme Court Justices, Tribal Leaders, distinguished legislators, our staff, students, teachers and others watching by TV, listening statewide on the radio, or downloading from the Internet -Good Morning!
Mr. Speaker, thank you and your fellow House members for your hospitality in hosting us this morning. Chief Justice Lehman, I acknowledge you and the third branch of our government, the judiciary. Welcome to the General Session of the 56th Wyoming Legislature!
Welcome to Cheyenne and to the State Capitol. Samuel Butler once said "Man is the only animal who laughs and has a state legislature." Well you're here. We might as well share a laugh or two over the next eight weeks.
Tribal Chairmen Mr. Speaker and Mr. President, this year I again am pleased to acknowledge two honored guests from the Wind River Reservation - Al Addison, Sr., Chairman of the Northern Arapaho Tribe, and Ivan Posey, Chairman of the Eastern Shoshone Tribe. I am honored to give them my respect and friendship.
By their special presence here today, we hope to continue a dialog of trust and understanding. These leaders have come to meet with you to share the hopes and dreams of their people. The issues that I will discuss with you, today, are just as important to the Tribal authorities as they are to you, the elected and appointed leaders of the State. Their concerns include water rights and water storage, jobs and taxation, along with making a better future for our children, enabling affordable housing, providing excellence in education, and assuring the availability of and access to health care. These are goals that we find easy to share. We need the help and action of the Legislature to solve some of the problems that have been brought to my attention. Your help will be greatly appreciated.
The State of our State
Building Wyoming's capacity to grow. That is the heart of my message this year. Building capacity means investing in programs and activities that enhance our equity, that energize our effort.
During the past six years, you and I and your predecessors have worked together to develop long-term solutions to benefit our people. We have adopted strategic planning that pays attention to people, not processes, a planning approach that values results over bureaucracy. We have reviewed all state programs, targeted spending by priorities, renovated state agencies and evaluated our tax structure. We continue to put more power in the hands of our citizens instead of in the hands of government.
We have taken these actions to enable our citizens to assume responsibility for themselves for the betterment of their communities. Each of us should have a chance for success that depends on our own initiative and not the largess of a patronizing government.
We have adopted programs for better health for kids, for care of the elderly, to enhance mental health services and in support of educational excellence. Our people have a reputation for joining together to support teachers, to speak out on land management issues, to help expand businesses, and to send one of our best and brightest Wyoming citizens to Washington to help lead our nation. In Wyoming, we are not just communities of place; we are communities of interest and spirit!
Focusing on Wyoming's Future
We can and we will work to:
- Improve the quality and quantity of jobs
- Continue to increase opportunities for young people to live and work in Wyoming
- Invest in Wyoming for the long-term
Where might we most effectively invest our time and other resources?
- Improving the quality of education and enhancing delivery of educational products and services
- Creating greater access to quality health care
- Developing and sustaining infrastructure that will encourage and support the new economy
- Protecting and improving our quality of life while effecting the changes needed to promote sustainable economic growth
Your support is needed in each of these areas that dominate our interest and shape our future. Today, I'll address most of these as well as comment on actions of the federal government that have a lasting effect on Wyoming. We have had many successes but still face a variety of challenges.
One year ago, the last thing I would have talked about would have been a surplus. Today the last shall be first, given the dramatic news yesterday from the Consensus Revenue Estimating Group (CREG). Last October's forecast of a $410M surplus was a most pleasant shock and far exceeded what we could have imagined. But then came yesterday's news: the surplus had been revised to an astonishing $695M, a figure that is nothing short of phenomenal! This surplus is greater than the average total yearly income to the General Fund. It's like having a year's income in advance. It doesn't take a rocket scientist or even a governor to figure out that this session will focus on budget issues far more than you would expect in a general session.
How do you explain $695M to anyone? Who wants to be a millionaire? I note that Ranchester has a population somewhere around 695. We could make millionaires out of everyone in Ranchester. Too much in one place? Well, how about if we take Fort Laramie, Kaycee and Rock River. Add up all their population and we could make each of them a millionaire with the surplus. Not fair, you say? Well, maybe we should take a little extra time and figure out how to do this the right way.
One year ago, as I prepared my budget message, state revenues were just beginning to increase, with most of the attention given to rising oil prices and lesser attention to gas prices. We weren't at all sure that the increases could be sustained. Our best estimate one year ago was that the State would experience a recurring underlying deficit of $160M per biennium within four years. By the time the 2000 legislative session was complete, the revenue picture had improved, first because of increases in revenues and, second, because you, the Legislature, postponed action on some agency requests. You had good reason to defer some spending - you wanted to get a better idea of the revenue picture and its sustainability. By the time you adjourned, the cash balance on the table was $115M.
So, what's your problem, governor? There's nothing wrong with a surplus, is there?
No. Not at all! Back in the early nineties, there was a popular bumper sticker that read: "Dear God, Please give us just one more boom and this time we won't screw it up!" Our prayers have been answered. Now let's not screw it up. We do have the return to prosperity that we dreamed of. But, we must gain a better understanding of how long this newfound prosperity will last. We must know what we can expect in the longer term for Wyoming.
Back in the early 1980's, Wyoming had a big surplus. The Legislature had adopted severance taxes not long before and federal mineral royalties had been approved for the state. We had a big surplus back then, almost as big as now. So large for the time in fact, that the Legislature put much of it in reserves and set up the Water Development Program. Total reserves were well over $500M. Then when the energy crash came in the mid 80's, the state did not scale back on spending. For the next ten years, spending exceeded revenues by almost $100M per year. Where did the money come from?
Much of it came from reserves. Some came from a change in the state's accounting system. Whether it was outstanding judgment on the Legislature's part or just a healthy dose of good luck, setting up reserves back in the early 80's turned out to be a good decision.
The increase in spendable revenues came from three areas of new revenue and one of reallocated funds. The volatile one, mineral income, is up for both severance taxes and federal mineral royalties, due to rising energy prices, especially for natural gas. Especially for natural gas! We love gas! Nearly all of the increase in the January update is due to a combination of higher prices and increases in the production level of natural gas. We expect this increase will be sustained for perhaps the next ten years. Our old reliable, sales tax revenue, has increased due to the rise in spending for methane gas development, increased construction activity, and increased spending from the rise in average personal income. This growth simply reflects an overall improvement in our state's economy.
Investment income continues to be a bright spot in increased revenues due to the investment choices made by our State Treasurer, Cynthia Lummis. You provided her with the flexibility to increase investment in equities during the 1999 Legislative Session. This was an excellent decision. Even with the collapse in many stock prices, our state investments are well managed and the returns continue to be solid.
The other source of income on the fiscal profile needs special comment, however. It is important to understand the impact of the de-earmarking bill, HB195. This bill, which was passed last year, moved an additional $97M into the budget profile. This is simply a reallocation. The extra money from de-earmarking is not just for the benefit or use by the State. The intent of de-earmarking was to allow for flexibility by the Legislature in appropriating funds. However, because no process for review, for prioritization, or for appropriation is being recommended to replace the old system of funding, we still have not been able to address the core issue. What we've learned over the past two years is that the State isn't the only level of government that needs a more stable tax system. Local governments need help with their revenue systems too. I support a one-year delay in implementing HB195. But let's not just procrastinate. Let's actually do something to overhaul local government finance.
There is hope for local government, though. Cities and counties each adopted their budgets last July. Since then, the combined increase in revenues for cities and towns for 2000 and 2001 has increased by over $20M. Counties will see an increase of over $9M and that's just for royalties and severance tax. Many counties will see a big boost in their income due to the dramatic rise in local assessed valuation
Back in the early 1980's the total state assessed valuation peaked at $8.4B in 1984. The valuation then declined sharply to $5.9B just two years later. Then the valuation just kind of hovered in the $6B range for several years and climbed slowly to what CREG predicted would be $8B last February 2000. Now the CREG predicts that the state's assessed valuation in 2001 will be over $10.6B!!!! If statewide our counties levy just 10 of their 12 mills on the average, their increased income from last year alone will be over $26M. All totaled then, cities, towns and counties could see over $55M windfall by the time they re-evaluate their budgets next July. Not all cities and counties will benefit equally, however. Not all of our counties have natural gas.
Mineral income and property taxes for local school accounts have increased, and at the same time, we continue to experience a decline in student enrollment in our public schools. This has lessened the amount to be drawn down from the General Fund to meet the guarantee for the School Foundation Program. This, too, can mask the underlying weakness in what is otherwise a very large surplus.
We must be responsible in how we deal with the forecast surplus. I recommend that we agree on a process to determine how much of the surplus can be sustained year after year and only allocate sustainable funds to on-going programs. Use one-time funds to cover unique or non-recurring obligations. Set up a process for review as you debate what to fund and for how much. Develop a mechanism to track your decisions so that obligations will be within our means. I ask your support to do the following:
- Determine how much of the surplus is sustainable beyond the next two biennia. I recommend that you consider what's available in FY2005-2006 as a reasonable estimate of what is sustainable income. With this baseline, I estimate that long-term sustainable revenues will support about $198M per biennium of new spending. Any amounts that you add this session will double in the next budget. Additions in this session are for only one year, not for a biennium.
- Set aside reasonable and prudent reserves. W.S. 9-2-1012(e) requires that a statutory reserve be established at not less than five percent (5%) of estimated general fund receipts for the biennium. That amount would be $72M for this biennium.
- Expand the Spending Policy Reserve in W.S. 9-4-712 to include mineral income. HB21 from the 2000 Budget Session set up a spending policy for earnings on permanent fund investments as a way to provide greater predictability for expenditures by tucking away amounts above a designated level of income. These could then be applied in years when actual income fell below the target amount. Both minerals and investments are significant contributors to our state revenues. By expanding the spending policy reserve to include minerals, we can thereby enable greater predictability of what spending levels could be maintained in the future, especially for education.
- Put some seed money into the spending policy reserve. For this session, allocate at least $50M. Another area to place some of the surplus would be a partial restoration of funds lost by the Water Development Accounts over the past few years. I recommend that you allocate $75M of the one-time funds. I have recommended $65M for endowment funds for the University and our Community Colleges. These recommendations are not expenditures. Rather, they fit the definition of reserves since only the income earned would be spent by the institutions and then only if the various institutions can raise a dollar-for-dollar match. Three years from now, our reserves would be increased even more with the expiration of the so-called Budget Reserve Diversion. W.S. 39-14-111 diverts a portion of the coal severance tax away from the Permanent Wyoming Mineral Trust Fund until June 30, 2004. On a biennial basis, $68M would go into the PWMTF thereafter.
- Spend one-time revenue on one-time expenditures. Don't fund on-going obligations without the assurance of future revenue. If we have at least $35M of unobligated funds in the General Fund by March 31, I recommend that W.S. 39-15-104(d) and W.S. 39-16-104(d) be invoked to reduce statewide sales and use taxes by a half percent, effective during FY2001 only.
On the spending side, focus your decisions on three main areas.
First, invest in programs and facilities that increase capacity for the state to grow, to enhance our equity in opportunity. One example would be to add extra funds to the workforce development account set up by you in the 1999 legislative session.
Second, we have state and federal mandates that need to be met. It is important that we support funding for programs, not simply because we are required to do so by law but, more importantly, because it is the right thing to do. This support includes a variety of health services to the elderly and children who are Medicaid qualified.
Third, provide funding now for specific discretionary programs. While funding for these programs could wait for the next budget cycle, Wyoming people would be better served if these programs received funding approval this year. An example would be the funding needed by the Department of Agriculture for measurement equipment used to assure accurate delivery of commodities. I have heard quite a range of suggestions as to how we might spend part or all of the surplus. Certainly, there are some suggestions worth approving this session. However, I recommend that we defer most of these decisions until next year's Budget Session. In the meantime, we can use the next few months to identify, more clearly, the needs of the state and the priority for funding.
The number one priority given to us by the people of Wyoming is to take actions that can help increase the quantity of jobs and the quality of income. What are the conditions that can help foster and sustain growth throughout Wyoming?
- Businesses that can add high value through highly skilled labor
- Broadband connectivity and Internet access
- More certainty in the cost of doing business, such as simplified tax structure; workforce training programs; predictable labor costs; favorable business climate; proximity to excellent higher education institutions including research; increased access to venture capital.
The growth in the national economy has been amazing, with ten years of strong, sustained growth. Much of that new growth has been attributed to what's called the new economy. The new economy depends heavily on people, their skills and their education. Businesses are now much more focused on workers' knowledge and on how they apply it. If we want to diversify our economy, we will have to meet the expectations of the business community.
Wyoming has typically lagged the trends in the national economy and this year is no exception. We were behind the curve in growth nationally, and now as the national economy is starting to slow down, Wyoming's economy is just beginning to strengthen. Let's make decisions today that will take advantage of the current momentum and diversify our opportunities for the future. If we wait a year, we will lose part of that momentum. I have recommended several areas for investment now in programs to enhance our capacity in the future.
Strong energy prices and new production of natural gas have helped raise income levels, both for individuals and for state government. Exploration, drilling, production facilities and pipelines are boosting employment and income. Increases in federal funding, particularly for highways, have boosted construction activity along with several state construction projects such as the new state prison in Rawlins. The movement of our Rocky Mountain region into the new economy and heavy use of technology has spawned added economic growth in Wyoming.
Wyoming's economy is expanding. Wyoming's employment growth increased to 2.1 percent in October and surpassed the U.S. growth of 1.8 percent. Data shows that 4,900 more jobs were created in Wyoming during October 2000 as compared to October 1999.
Wyoming's seasonal adjusted unemployment rate fell to 3.8 percent from 4.4 percent in September and 4.7 percent a year before. The U.S. unemployment rate remained unchanged at 3.9 percent.
Small in Number; Big in Opportunity
We just received preliminary estimates from the U. S. Bureau of the Census showing that Wyoming's population has grown to nearly 494,000 people. That's an increase of nearly nine percent from 1990. Frankly, we hadn't expected the number to be quite that high, since as recently as 1999, the Bureau of the Census had estimated that Wyoming's population was declining. Wyoming may be the least populated state, but we have the greatest opportunity to control our growth and to guide our future. How would you like to experience a 66% increase in population over ten years? Our neighbor to the west, Nevada, has. The good news is that we are growing in quality as well as quantity. The challenge will be to keep enough of each to sustain the kind of growth we desire.
Most fast growing states are challenged to find ways to preserve open spaces. Wyoming can still work to allow planned and largely voluntary efforts to maintain open space. I am interested in a bill sponsored by Representative Luthi with the catch title of Agricultural Preservation Act. My conditional support would be predicated upon requiring county commissioners to develop county-wide land use plans before implementing the option of development rights.
Building Wyoming's Capacity to Grow
The most influential factor in attracting new and expanding business to Wyoming will be the quality of our people and their skills. Our challenge is to continue to provide enough skilled labor that meets business needs. We are achieving the diversity of economic growth we always hoped for and now find ourselves competing in a regional and national market for the most valuable resource people with the right skills.
I am recommending increases in several key areas to attract and keep our citizens' professional and vocational skill levels highly competitive.
- Workforce development funds for company specific training $6M
- Wyoming National Guard Education Assistance Plan $2M
- The Horizon Merit Scholarships for students attending UW and the Horizon Careers Scholarships for students attending community college $10M
- Funding for the Community College Workforce Training Compact $0.3M
- Upgrading our teachers skills in education technology $4.2M
- State employee training $3.7M
These recommendations help build our capacity to succeed.
The dilemma facing Wyoming's labor market is demand. With the strong economic growth nationally, the labor shortage in nearly every region and skill area is drawing more attention to Wyoming.It used to be that location mattered. Workers had to go where business was. Today, business is coming to where the workers are, and Wyoming has a great competitive edge provided that we have the funds to do custom training for each company. Workforce training money has been the deal-closer for several top companies and kept existing companies operating in Wyoming. Sento in Evanston has expanded into Wyoming in a big way. StarTek in Laramie is flourishing. Becker Fire Equipment will make a major expansion in Casper. I am requesting your support for a total of $6M for additional workforce development.
We must attract and retain the best people we can to fulfill the missions given to our Wyoming National Guard. I support the concept of tuition assistance as outlined in HB88. This legislation, sponsored by Representative Illoway, will provide tuition assistance for those who serve us through their service in the Wyoming National Guard. Improving the skill and education levels of these men and women will improve the overall readiness of our National Guard. A strong National Guard will ensure that we are better prepared in times of emergency within our state, such as this year's wildfires, or for a national or global contingency.
Our University and our community colleges have a significant capacity to enroll more students. We need to provide greater incentives for our young people to achieve their personal and professional goals through higher education. We hope to attract as many as 80 per cent of our top Wyoming high school graduates through academic and career enhancing scholarships. Initially, the program would cost $5M per year, increasing to $10M per year once fully implemented.
Workforce Training Compact
Wyoming Community Colleges are a key component in our ability to ensure businesses that employee skills will be available when and where they are needed.
Teaching Through Technology
Many of our teachers need additional support and assistance in upgrading their own technology capabilities. They need to be better prepared, through additional instruction and hands-on experiences, in order to effectively use and integrate today's technology and web based instruction into their classroom activities.
State Employee Training
Last year, your Management Audit Committee found that a disproportionate number of state employees were leaving state government for jobs in the private sector. I have recommended a training program for our employees that will both recognize the value of our workforce and support the desire of individuals to build additional work skills. This is just one of several programs targeted at recruitment and retention of quality employees.
Legislation to Enhance Economic Opportunity
- Challenge Loan Program: Add an option to allow the Wyoming Business Council to make direct loans to qualified businesses. Require participation by banks for at least 50 per cent of financing with no more than 35 per cent coming from state and local funds, and requiring at least 15 per cent participation by the business developers.
- Expanded Authority for Industrial Development Bonds: Amend W.S. 9-4-701 to make IDB's more accessible through the State Treasurer for business financing. Extend the bonding authority and the current sunset date.
- Sales Tax Reduction: As I mentioned, the tax statutes provide criteria for the Governor to order a half percent reduction in sales and use taxes if general fund balances meet certain criteria. The reduction would be only for one year, and even though it might make sales tax accounting for our retailers difficult, it would put some $80M back in the pockets of the people who have earned the money. I will support a reduction in the sales tax if the Legislature leaves the required balance in the General Fund. We can help our citizens and businesses during this time of high-energy prices and utility bills.
- Technology Incubator in Laramie: Other states are achieving considerable growth by fostering new business development through incubators that are located near research universities. The University of Wyoming has the capacity and expertise to partner with new start-up companies that would use the incubator to commercialize basic research. The Wyoming Business Council, specific businesses, and the University would be partners in providing support.
The newspapers have been filled over the past week with articles on education and funding. The headlines have declared that there is a crisis looming or a showdown imminent for this session. Controversy sells newspapers but doesn't make for conscientious decisions.
Last December 1, 2000 when I submitted my supplemental budget request, I asked the Legislature to approve nearly $97M in new funding for our public schools. $97M. Let me say that again - $97M. Yesterday in my news conference I had just mentioned that same number $97M as new money for schools when a reporter asked me if I was going to recommend new funding for the schools now that the surplus had grown even larger. The number I've heard most about over the last week is $73M of new spending. It makes me wonder if the proponents of the $73M are telling me to cut my recommendation by $24M!
Education is the foundation upon which everything else is built. High quality teaching, challenging standards, and community support are all key to mastery of our societal, personal and economic goals for the new millennium. With the new economy creating tremendous competition for high quality human resources, no one can find enough skilled workers, whether it is business, education or government. These trends are challenging long held traditions in education.
The most important issue facing education is teacher quality. It is more important than class size, increased standards, and increased per-student spending. Quality teaching is the essential element for having better schools and achieving the high standards that are key to our success. While all of these are important, teaching is the most important. We can build on progress to date by finding out what works best to improve teacher quality and what is needed to give teachers the incentive to stay in the teaching profession.
What can be done to enhance teaching? Many of our teachers have received only minimal exposure to what technology and connectivity can do to enhance curriculum delivery and to ease the pressures of administrative tasks. Professional development and training are a must, but it's not just needed for our teachers. We need a new generation of administrators who are skilled in mentoring and supporting teachers, who are fluent in technology and connectivity integration, and who understand and can withstand the competitive forces that exist both within and outside of today's system of public education.
Do we face a crisis in education? No. But, we must approach education issues with a much greater sense of urgency than we have done in the past. Let's take a look first at the national situation. In 1989, the nation's governors met and issued a set of education goals that focused on achieving the highest academic standards in the world by the year 2000. Nearly twelve years later, only about one-third of students nationally are at or above proficiency in reading. Less than one-third are at or above proficiency in science, geography and history. Less than one-fourth are at or above proficiency in math. Those are the national trends.
In Wyoming, our Comprehensive Assessment tests have been in place for two years. Test scores in reading and writing indicate that nearly half of those tested are at or above proficiency. In math, nearly one-third of our kids are at or above proficiency. That's higher than the national trends unless you consider that the national trends and the Wyoming results are the same under the National Assessment of Educational Progress, or NAEP. According to a report in Education Week released today, Wyoming students scored about 20 percentage points below what the WyCAS tests indicate for reading achievement. NAEP scores indicate that proficiency in mathematics is a good ten percentage points below that reported through WyCAS testing. For those who believe the WyCAS tests are too difficult and not a fair indicator of student performance, the other widely used benchmark tests, such as NAEP, are far less comforting.
While our Wyoming kids are performing better than the national average, they cannot be assured of success unless we work to make their learning environments even better. We should never accept the fact that more than half of our kids aren't even at the proficiency level. We should expect greater accountability for the funds being spent.
Is there a teacher shortage? I know from my involvement in the Education Commission of the States and other national activities that the trends are not encouraging. Given the current age of our teacher corps, I understand that as many as one-third of our teachers will be eligible for retirement within five years. That statistic is true for nearly every profession, whether it be teachers, health care professionals or engineers. That means that the competition for professional skills will increase, and young people who might otherwise be drawn into teaching can easily choose to go elsewhere. The most notable shortages are for teachers of math, science, technology and special education. If we are to deal with the shortages, we need to change our approach on how we recruit, hire and compensate teachers. There is not a single profession called teacher. We have a complex combination of talent and alternative pathways to certification that must be encouraged and supported if we are to meet and beat the competition. Many states already pay more in hard to staff fields such as math and science. In order to gain and maintain competitiveness, Wyoming should do the same. There can and should be salary flexibility in district pay plans.