Diversifying local revenue streams has never been more important as Laramie faces a potential 20% reduction from state funding. Governor Mark Gordon’s supplemental 2021-22 biennium budget proposal recommended a $10.5 million cut per year for local government distribution payments, according to the Wyoming Association of Municipalities (WAM).
The latest bill approved by the Senate on Jan.29 will reduce the 2022 direct distribution of $52.5 million (authorized in 2020) to $47.25 million.
In an email, WAM Executive Director Dave Faser said a majority of state municipalities have already reduced local budgets by 10-35%; cutting local government direct distributions will not remedy the state’s general fund budget.
Senator Chris Rothfuss (D-Ninth District) of Laramie has a similar view and said in an interview Thursday a 20% cut in state-to-city funded counties for the next fiscal year would be crippling.
Much of Laramie’s expenditures are on personnel. Cutting such a drastic amount will subsequently lead to loss of jobs, primarily those in essential services (i.e. police and fire), he said. “It would lead to circumstances that affect the health and safety of the [legislatures] constituents,” he said.
Rothfuss, who has criticized Wyoming’s tax revenue structure in the past, said most of Laramie’s revenue comes from sales and use taxes, but that isn’t enough to supplement another decrease in local funding.
He suggested Laramie find more “tools for the toolbox” and devise more ways for local government to implement better and more diverse revenue tactics.
“It’s difficult to plan and budget long-term (in Laramie) because legislative distribution payments change from year to year,” Rothfuss said.
AN INCONSIDERATE FORMULA
City Manager Janine Jordan and Malea Brown, chief operating officer for the City of Laramie, said the state legislatures calculate direct distribution payments to cities through a formula that is based on current economic allocations and changes in sales and use tax.
“We’re pretty steady in our sales tax,” said Brown, who added because of this, Laramie might receive additional cuts based on how the formula works.
Statistically, Albany County is consistently among the lowest in the state for per capita sales and use tax and maintains a low, but steady revenue income. Jordan said the formula tends to consider local economies that flux.
She gave as an example Gillette and said as the mineral industry booms and busts, it creates a volatile economy; the formula effectively reallocates funds to volatile economies to compensate for the drop in sales tax.
But for cities like Laramie — which averaged $199 per capita in sales and use taxes in FY2019 — a fluctuation in revenue isn’t likely and neither is a bigger budget.
“We are never high … so because our sales tax doesn’t change year to year in a dramatic way, when other parts of the state do change … they get more money,” Jordan said.
Jordan put the formula into perspective and provided actual amounts of Laramie direct distribution per year. In 2014, Laramie received $5.5 million from state funding; in 2020, this number reduced to $4.1 million.
She noted the overall decrease in the past seven years and said if the latest budget proposal passes, Laramie will likely experience even more reductions and receive approximately $3.6 million in 2023.
DIVERSIFYING LARAMIE REVENUE
The inherent solution to increase revenue, said Jordan, is to increase taxation rates. But the tax rates in Laramie have remained relatively the same for decades.
Jordan also said the current tax structure is maxed out according to state caps, and Laramie legally cannot raise any rates. This reality doesn’t deter her though and she suggested a couple of viable solutions, the first being the implementation of more taxes to strengthen economic activity.
She also said lifting exemptions of professional services could help buffer future state reductions.
“If [Wyoming] lifts those exemptions and actually taxed those services, in this community we would see more revenue come in,” Jordan said.
She added that Laramie’s local economy is dominated by human services industries (engineering companies, legal and accounting firms, etc.).
Implementing the Seventh Cent Sales and Use Tax — optional and available to local governments for general or specific purposes — can drastically strengthen economic development. It isn’t currently levied by Albany County but if adopted could help fund the construction of buildings and expand economic activity in Laramie.
“It’s been put in front of the voters twice to increase the rate of taxation by a penny, and they rejected it both times,” Jordan said, adding the city can only instate the Seventh Cent tax with voter approval.
THE RESULT OF CUTS
Brown said this biennium’s budget and direct distribution payments are provided through the state Legislative Stabilization Reserve Account, also known as a rainy day fund, and to her knowledge reductions will increase in the second year of the biennium budget cycle.
Jordan and Brown’s biggest concerns should the 20% reduction in local funding occur is construction.
“Our capital and equipment programs would probably be cut out,” Brown said. This includes road maintenance, expanding the greenbelt or replacing play set structures at public parks.
“As we see those numbers declining, it continues to squeeze out street repairs and maintenance budget and limits what recreation projects we can do,” said Jordan.