Gordon: Despite continued challenges, Wyo economy beginning to improve
Casper – “First and foremost, the industry that is here, good and bad, is agriculture. It’s going to pull us through as it has before. It’s the skeletal structure that makes this state run,” said Wyoming State Treasurer Mark Gordon.
Gordon spoke about the current state of Wyoming’s economy on April 19 at the Natrona County Fairgrounds during a cattle business update sponsored by Superior Livestock Auction, Zoetis and First Northern Bank of Wyoming.
Then and now
Over the last two years, Gordon explained that Wyoming’s economy saw oil prices drop from $100 to $26 at the low.
“We were supposed to have all of these great resources, and the economic market was supposed to counteract that, but markets did the same thing,” he continued.
Since 1926, Gordon explained that there have only been two worse years to be a broad investor, which was in 1931 and 1937.
“Wyoming had the largest drop in revenue that it has ever seen,” he commented.
Last year, severance tax levels were not low when compared to tax returns over the last five years, and sales and use taxes trended to the lowest ever seen.
“In fact, there were only two counties in the last three quarters with positive sales tax numbers,” noted Gordon.
He continued, “The state has big problems and big challenges, and the House and the Senate both spent a lot of time trying to figure out how we can bring that down without causing too much pain.”
In good news, Gordon commented that 2017 looks like it will be a more stable year.
“Severance tax is almost back to that five-year average because we’ve seen a little bit better return on gas and oil,” said Gordon. “More rigs are working, and we’ve seen more coal moving, but these things can’t be counted on as predictable for the future.”
“The other challenge we have is a global financial market that is incredibly complicated,” said Gordon. “It used to be, when the Federal Reserve said something, everybody did it.”
Now, he explained that global market decisions are based largely on politics.
“Markets go up and down with politics now. It’s very uncertain,” continued Gordon.
He gave the example of the impact of the recent presidential election on markets.
“One thing that has happened and helped is regulatory change,” commented Gordon. “We’re starting to see those changes come into effect, and that’s going to have a really positive effect on the agricultural industry and on our mineral industry.”
He cautioned, however, that Wyoming should “mind our P’s and Q’s.”
Gordon explained, “For the last several years, we had people in the legislature and people generally in the state who started to say, ‘We’ll make up declines on capital gains.’”
However, the state actually experienced capital losses in 2016, noted Gordon, saying, “This is a really good reality check for Wyoming.”
Gordon noted that he is often asked, “If we have $20 billion, how can we be broke?”
He explained that the state has permanent funds to be used for specific purposes.
For example, the Permanent Mineral Trust Fund accounts for approximately $7 billion.
“We’ve changed it a little bit. We’re going to try and take a little more risk with that because we can get a better return over time,” said Gordon.
Some other funds include the University Permanent Fund and the Common School Permanent Fund.
“We changed asset allocation to deliver more income,” he continued. “We’ll help to bring more income into the school system, but that comes at a cost to future generations, so we’re trying to balance that.”
Less than one-third of the $20 billion in state money is for the state agency pool, which is what Wyoming government officials are most concerned about, said Gordon.
“Normally, we would think that means there’s less risk for agencies,” commented Gordon, “but when we saw rates start to increase with the Federal Reserve, the appropriation challenges the value of that state agency pool.”
He concluded, “That means the value we hold actually starts to shrink. That’s the biggest challenge that we have for the state.”
Emilee Gibb is editor of Wyoming Livestock Roundup and can be reached at firstname.lastname@example.org.