Wyoming’s revenue structure is evolving as the state becomes increasingly dependent on oil and gas production, a change highlighted in a recent report to the Legislature’s Joint Appropriations Committee, Casper Star-Tribune reports.
During a presentation on Thursday, Don Richards, co-chair of the Consensus Revenue Estimating Group (CREG), outlined the state’s gradual shift away from coal, which once dominated Wyoming’s economic foundation.
From 2005 to 2014, minerals like coal contributed about 60% to Wyoming’s assessed valuation. Today, however, the revenue from minerals has dwindled, with federal mineral royalties and severance taxes making up 28% of the General Fund last year, compared to just over 40% at peak periods within the last decade. This annual CREG report often guides lawmakers as they prepare for the upcoming legislative session.
According to Richards, Wyoming’s revenue sources are diversifying, though this brings a new reliance on oil and gas production, as well as the state’s investments, which tend to be more volatile than coal. These revenue sources, including sales and use taxes, are becoming increasingly significant. While oil prices remain relatively strong, with production up 10% over the past year, Richards noted that the market is unpredictable, influenced by global factors like Middle Eastern politics and Chinese energy demand. The CREG forecast assumes oil prices of $70 per barrel, but even minor shifts in price can have significant implications for the state’s finances. A change of just $5 per barrel, for example, could alter Wyoming’s budget by approximately $50 million annually.
State Senator Dave Kinskey, who chairs the Joint Appropriations Committee, underscored the risks associated with Wyoming’s reliance on oil, which is known for price volatility. Richards acknowledged these risks, noting that a $10 shift in oil prices could impact the state’s biennial budget by up to $200 million.
Natural gas, another revenue source, is similarly volatile. This year, prices have fluctuated between $2 and $4, with CREG forecasting an average of $3.50. Wyoming’s coal industry faces ongoing challenges as well, with projections suggesting that statewide production may drop below 200 million tons this year—a level not seen in 30 years. Declining coal production has broader economic impacts, reducing not only sales tax revenue from equipment but also consumer spending in retail.
Sales tax revenue has shown slow to moderate growth, with significant contributions from retail, hospitality, and vehicle sales. These three sectors combined make up about 75% of the state’s sales tax revenue, with smaller contributions from mining, manufacturing, utilities, and construction.
Despite challenges, Wyoming has benefitted from strong investment revenues. Last fiscal year, income from the state’s Permanent Wyoming Mineral Trust Fund exceeded projections by $122 million. Wyoming’s outgoing Chief Investment Officer, Patrick Fleming, played a pivotal role in this success, connecting CREG to global commodity price forecasters and enhancing the group’s analytical capabilities.
The full CREG report, which will continue to shape state policy in the coming legislative session, is available online for public review.
