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Wyoming revenue projections see $82.2 million boost buoyed by better energy, sales tax outlook

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CASPER, Wyo. — Wyoming is looking at a more promising revenue picture than projected in the fall, buoyed by improved sales and use tax forecasts and increased oil and coal production estimates.

The Consensus Revenue Estimating Group’s (CREG) January report forecasts an increase in revenues for the state during the fiscal year 2021-2022 biennium of $82.2 million compared with their October projections.

The January CREG report forecasts a total of about $2.3 billion in revenues for the state during the biennium. The report increased projections for the General Fund by $58.1 million and for the Budget Reserve Account of $24.1 million.

The improved sales and use tax collection picture adds $32.2 million for the state compared with the October CREG projections.

While the outlook is improved, twelve counties in the state have reported year-over-year losses in sales and use tax collections through the first five months of fiscal year 2021 (which began on July 1, 2020), according to the January CREG report.

Sublette County collections were down 53.2%, Converse was down 41.2% and Campbell was down 33.1%.

“Hot Springs, Niobrara, and Sweetwater counties also experienced year over-year contractions of at least 21 percent,” the CREG report states. “The primary reason for the hefty declines was reduced oil and natural gas drilling activities in the worst performing locations.”

“Though improved, recent active oil and natural gas rigs in Wyoming are still in single digit, well below the pre-COVID counts. As a result, the share of sales and use tax collections from the mineral extraction industry became the smallest since 2003, and have shrunk an historical 65.9 percent from a year earlier.”

However, wind energy projects have boosted sales and use tax collections in Carbon (up 75.5%), Albany (up 34.3%) and Laramie County (up 20.2%), according to the report.

“The retail trade sector, the largest sector in terms of sales and use tax collections, showed a slight increase compared to FY 2020,” the report adds. “Wyoming’s sales and use tax collections for FY 2021 are tracking below FY 2020 levels. However, the forecast decline has not been as severe as CREG projected in the October 2020 forecast. Collections for FY 2021 are ahead of pacing.”

CREG identified the following reasons why sales and use tax collections have outperformed their October projections:

(1) the CARES Act stimulus funds for businesses continue to flow into the local economies;
(2) the second round of pandemic relief enacted at the federal level will aid Wyoming’s economy and in turn keep taxes flowing, particularly from home improvement, automobile, sporting goods and on-line purchases;
(3) tax collections from the mineral extraction industry have increased from the lows experienced in the second quarter of CY 2021, and improvement in oil and natural gas drilling activity are anticipated, by CREG, to help the recovery
(4) the flow of tax revenue from current wind power projects is expected to continue.

January CREG report

The second largest area which is driving improved projections in the January CREG report is increased oil and coal production projections.

CREG increased their oil production projections by five million barrels in 2020, 2021 and 2022. Surface coal production projections were increased by 10 million tons for 2020 and 2021 compared with the October projections.

“The higher oil and surface coal production projections increased the estimated total severance taxes (to all funds) by $31.0 million for FY 2021-22 biennium and $6.1 million for FY 2023,” the CREG report states. “Additionally, the changes to the oil and surface coal production forecast result in an estimated increase of total Federal Mineral Royalties (FMR) to all funds, which is partially offset by the reduction in the federal royalty rate for soda ash (product of trona mining).”

“The federal royalty rate was reduced from 6 percent to 2 percent. The net increase of these revisions to forecast FMRs is $17.4 million for FY 2021-22 biennium and a net decrease of $6.1 million for FY 2023-24 biennium. Similarly, the revisions increased the FMR distribution to the BRA by $11.6 million for FY 2021-22 biennium but decreased the distribution by $4.1 million for FY 2023-24 biennium.”

Projected investment income increases also led CREG to improve the outlook for the state by $19.7 million during the fiscaly year 2021-2022 biennium.

“In addition (outside of CREG revenue forecasts) reversions and CARES Act funding transfers increased available revenue in the General Fund by $43.9
million and increased available revenue in the Budget Reserve Aaccount by $5.7 million,” the January CREG report adds. “The total General Fund impact is $102.0 million and the total Budget Reserve Accounty impact is $29.8 million for FY2021-22 biennium.”

“The increase to total General Fund and Budget Reserve Accounty funds available for appropriation, including the reversions and federal funds transfers is $131.8 million for the FY 2021-22 biennium, and an increase of $32.5 million for the FY 2023-24 biennium, as compared to the October 2020 report,” CREG said.

The full January CREG report is available online.

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