In the wake of President Obama’s reelection last November, more than 9,000 people signed an online petition for Wyoming to secede from the United States.

Regardless of whether you consider the petition serious or silly, Wyoming budget experts say seceding is not a good idea from a fiscal standpoint.

Wyoming is significantly dependent on federal money. WyoFile’s calculations show that the state relied on federal money for 41 percent of the state’s spending for the 2011-2012 biennium.

State and local government budgets draw more than $2.356 billion from Washington annually. Wyoming receives an additional $3.855 billion in support for things like federal mineral royalty payments, federal land management programs, and payroll to approximately 13,626 federal employees in Wyoming who account for 5 percent of all people employed here.

The total for all federal expenditures to Wyoming state government — and its private residents — amounted to $6.211 billion in 2010, according to the U.S. Census Bureau.

Other states may get more total dollars, but because Wyoming’s state spending and population are small, few other states are more dependent on federal funds.

Bill Mai is administrator for the Economic Analysis Division at the Wyoming Department of Administration and Information. He said Wyoming would go into a “tailspin” without federal funds.

“To think you can walk away from all that federal money — absolutely not. It’s not possible,” Mai said.

“If you turn your back and say, ‘We don’t want your money, and we’re not going to follow your rules,’ the state can’t afford to do that, plain and simple,” Mai continued. “It’s just not economically feasible.”

Getting more than we pay in

In the background of Wyoming’s independent Western ethos is the fact that the state benefits enormously from its connection to the federal government.

“We get a lot of federal money, and a lot of our income is generated by other states,” said Rob Godby, economist at the University of Wyoming.

Godby said the country runs on a system of fiscal transfers in which large, economically advantaged states like New York and California help support states with less money. In fact, most states in the country receive more federal money than they pay in.

According to figures compiled for all states by the Economist  magazine, from 1990 to 2009 Wyoming paid in about $51.3 billion in federal taxes, and received about $70.4 billion in federal spending. That’s comes out to roughly $1.37 of federal spending in Wyoming for every $1 Wyoming pays in federal taxes.

On shorter time horizons, the Tax Foundation found that Wyoming receives $1.11 in federal funds for each dollar paid in federal taxes.

On a per-capita basis, the average Wyoming resident paid about $6,795 in federal taxes in 2010. In return, each resident received, or benefited from an average $11,019 in federal spending, with a large chunk of that coming from the federal stimulus bill.

Federal mineral royalties

None of these calculations so far take into account the non-tax revenue that goes to Washington D.C. in the form of royalties for energy production on land within Wyoming. Each year, the federal government gets about $1 billion in royalties for coal, natural gas, and oil production in Wyoming.

Adding those federal mineral royalties to the 20-year numbers tallied by The Economistmight come close to balancing out the federal revenue and spending for Wyoming. But the fact remains that Wyoming’s individual residents carry a light tax burden in comparison to what they receive.

The federal ‘strings’ factor

Rancher and state senator Charlie Scott (R-Casper) said he isn’t surprised Wyoming gets more in spending than it pays in, even with royalties included in the revenue tally. “I think overall, because we are such a small state, we probably do take in more,” Scott said.

Despite this net-positive arrangement, Wyoming leaders, including Scott, are critical about how that federal money gets spent. Much of the money comes with strings attached, or flows to programs that the state of Wyoming had no role in creating.

“There is a conflict because the feds insist you do things that just don’t make sense here in Wyoming,” Scott said.

As an example, Scott said he believes Affordable Care Act requirements that health insurance exchanges be self-financed may not work for Wyoming’s low population.

“You’re seeing one-size-fits-all regulations, and I think a lot of them aren’t going to work for a small state like Wyoming,” said Scott.

Still, it can’t be ignored that Wyoming has seen some federal outlays as good news.

“Even though people speak against the federal government, the state legislature has opted-in to a huge number of federal programs because they benefit the residents of the state,” Mai said.

One example is money from the Clean Drinking Water Act that flows to the state Department of Environmental Quality. The agency uses the federal money for municipal drinking water projects.

Federal funds for Wyoming state and local government

How much does Wyoming government really get from the feds?

Wyoming state and local governments received $2.356 billion in federal aid in 2010, the last year for which data was available.

For the state’s population of 563,000, that comes out to $4,180 per-capita in federal aid to state and local governments, ranking second in the nation behind only Alaska, according to the U.S. Census Bureau. Alaska’s state and local governments received $4,682 per person, or $3.3 billion for 710,000 residents. (See chart.)

Notably, in 2011 Wyoming took the No. 1 spot in federal spending per-capita, according to anarticle by the Pew Charitable Trust.

Of course, it’s a little unfair to compare Wyoming to other states on a per-capita basis since the state’s low population is widely distributed, making it a statistical outlier. Mai noted that the basic structures of government require a minimum amount of spending, and Wyoming’s long highways between small towns do a lot to increase the cost of providing service.

But the fact remains that Wyoming’s state government is one of the most federally supported in the nation. From 2008-2010, Wyoming ranked in the top ten states for federal aid to its budget, according to State Budget Solutions.

“That (federal) money is critical to the function of this state,” Mai said. He estimates that all federal funds, plus state-collected ad valorem taxes and severance taxes for minerals produced on federal lands, account for 60 percent to 70 percent of the state’s total revenue.

Following the money

In the current 2013-2014 biennium, Wyoming’s budget looks like this:

  • General Fund Appropriations – $3.22 billion
  • Federal Fund Appropriations – $1.6 billion
  • Other Funds (includes some federal money) – $3.35 billion
  • Total appropriations in the 2-year budget bill – $8.17 billion

Many of Wyoming’s largest government agencies, such as the Department of Health and the Department of Family Services, get a substantial amount of their money from the federal government. Out of the $1.6 billion listed above, the Department of Health accounts for about $761 million. (See pie chart.)

Federal revenue isn’t evenly distributed across all programs. Some key state agencies receive very little in federal funds. For example, the state pays $324 million for the Department of Corrections, $261 million for the Community College Commission, and $78 million for the Wyoming Business Council. Federal money that goes to those agencies amounts to about $10 million total.

The $1.6 billion in federal funds doesn’t tell the full story, because part of the $3.35 billion in “Other Funds” also comes from the federal government. The “Other” category includes federal mineral royalties and federal coal lease “bonuses” that contribute about $1 billion each year.

A projected $558 million in federal mineral royalties will go to the School Foundation Program in 2013-14, helping to pay for K-12 education. Another $458 million is projected to flow to the School Capital Construction Account. If those monies were to dry up, education money would have to come from the General Fund, which also draws a significant amount of mineral royalties.

Significant amounts of federal funds go straight to agencies without going through the legislative appropriation process:

  • In 2013, the Wyoming Department of Transportation expects to get about 47 percent of its $588 million annual budget from federal aid. That’s $278 million in federal funds for maintaining Wyoming’s roads.
  • The Game and Fish Department relies on federal revenue for a significant portion of its budget. In 2012, federal funds and grants accounted for $10.8 million of the department’s $68.2 million in total revenue. Only license fees contributed more, bringing in $32.2 million.

Still other funds flow into the state via federal grants to specific projects. The University of Wyoming received about $49 million in federal research and development funds in 2011, according to the National Science Foundation. (More detailed information about Wyoming’s federal spending data is available at the U.S. Census website.)

Federal spending on individuals and federal agencies

Outside of federal aid to Wyoming’s state government, a host of other federal programs pay out an additional $4 billion in grants and direct payments to individuals, programs, and federal agencies like the Forest Service and the BLM each year.

That put total federal spending in Wyoming at $6.2 billion for fiscal year 2010. Recall this is that big number mentioned at the top of this article.

If you receive social security payments or disability assistance, earned income tax credits, unemployment compensation, student loans, or an agricultural subsidy, some of that $6.2 billion ended up in your bank account. You also benefit if you drive on interstate highways, or send your kids to public schools.

Wyoming’s non-governmental federal expenditures for 2010 went primarily to disability and social security programs ($1.64 billion), direct payments ($1 billion), procurement ($560 million), and salaries for government jobs ($709 million).

Federal employment

It’s also worth noting the impact of federal government employment in Wyoming. Wyoming had 13,626 federal workers in 2012. The top categories included:

  • 5,481 federal retirees
  • 2,590 in the Department of Interior (BLM, National Park Service, Bureau of Reclamation, Bureau of Indian Affairs etc.)
  • 1,329 in Veterans Affairs
  • 1,266 for USDA (includes Forest service)
  • 1,200 at the Department of Defense
  • 1,200 at the Postal Service

By contrast, Wyoming state government employed 7,697 people in 2012.

Government employment is an important sector in Wyoming’s economy — the largest workforce sector in the state, in fact. When government-funded public school, college, and hospital workers are counted, along with the state employees and federal employees noted above, about 64,000 Wyoming residents worked in government-funded jobs of one kind or another.

All told, the government employed more than 20 percent of Wyoming’s 2010 workforce of 290,000 people, according to a 2010 report from the Wyoming Department of Employment.

Stimulus

If Wyoming does so well at getting federal funds under normal circumstances, you might wonder how the state made out in the federal stimulus program of 2009-2010. As might be expected, Wyoming exceeded the national average for American Relief and Recovery Act (ARRA) money received after the recession of 2008.

The ARRA granted Wyoming $1,928 in per-capita spending, compared with a national average of $1,691 per-capita. Those numbers come from data compiled by ProPublica, an independent investigative news organization.

Laramie County got a whopping $344 million in federal stimulus money. Natrona County pulled in $85 million while Albany County (home of the university) received $82 million. Fremont County (home of the Wind River Indian Reservation) received $70 million in stimulus money.

Park County, home to one of the state’s largest federal reclamation projects (not to mention Yellowstone National Park) pulled in $57 million from ARRA.

Economist Rob Godby said that much of the stimulus money went toward road building that helped support the state’s construction industry after the 2008 recession.

“That cushioned the blow. As the stimulus funds went away the construction industry has declined significantly because that was a major portion of the highway funds in the state,” Godby said.

The cowboy way

When it comes to Wyoming’s relationship with the federal government, some see Wyoming as the net beneficiary of federal largesse, while others think the state suffers from unfair fiscal treatment at the hands of Congress.

The difference is essentially an argument over how much Wyoming and the federal government should each benefit from the immense energy resources in the state.

”We have 50 percent of our land controlled by the federal government, and we produce about 10 percent of the Btus for the country. There is a lot of money involved,” said state Rep. Steve Harshman (R-Casper), adding that he thinks Wyoming is pulling its weight.

“If you look at the amount of energy and the dollars produced, and the revenue sent to the government, it’s probably the largest per-capita,” he added.

The difference is that other states with larger populations don’t have as much federal land, like Texas, Pennsylvania, or North Dakota, or they legally get to keep a larger share of their mineral wealth, like Alaska, which sends only 10 percent of royalties to Washington D.C.

Yet some states produce far more federal royalty revenue than Wyoming. Louisiana sends about $3 billion in royalties to the Washington D.C. each year, and receives only about 5 percent of the royalties granted to the Western states.

What’s certain is that federal ownership of land and minerals in Wyoming has directed the course of development.

“They have a big influence on how well this state does,” said Sen. Charlie Scott. “I can remember 50 years ago, Governor Milward Simpson introduced the Secretary of the Interior as ‘the governor of the other half of Wyoming’ and there is a certain amount of truth in that.”

Scott said the federal ownership of lands is a problem for Wyoming’s economy, because regulations can restrict economic activity or make business more expensive.

“The fact that we have so much federal land is one of the reasons you see so much federal tax money coming here,” said Scott. He noted some of the money goes back into management of federal lands.

Harshman said he believes Wyoming is right to receive the share of federal money that it gets. “A lot of those funds, those taxes we pay the federal government, we should get them back,” he said.

But others say Wyoming’s revenue structure has created a sense of entitlement in the state.

“We have the ‘it’s nice to have someone else pay the bills’ mentality that comes from having extractive industries,” said Erin Taylor, director of the Wyoming Taxpayers Association, which lobbies for energy producers and utilities.

That’s not a new perspective. In 1998, Wyoming author Sam Western argued in The Economist that Wyoming residents are used to having someone else pay their way:

“… Wyoming coasts along on federal largesse and the trust fund, its citizens barely contribute to the running of government. They pay no state income tax, a five-cents-on-the-dollar sales tax, rock-bottom cigarette, alcohol and fuel taxes, and some of the lowest property taxes in the country,” Western wrote.

Western and others say Wyoming’s cowboy mythology has helped its residents ignore the dynamic of federal reliance.

“Our (cowboy) symbol is romantic, independent, self-determining, not answering to anyone,” said economist Rob Godby. “It’s a good metaphor for how we would like to deal with the federal government.”

Western pointed out the cowboy myth did not mesh with historical reality of the 1880s cowhand: “In real life, the famous Wyoming cowboy was an itinerant, landless, poverty-stricken soul, dependent upon the rancher for bread and shelter.”

To some, Wyoming still is that hungry cowhand, while the federal government is the cattle baron who controls the land, its products, and the wages.

“Maybe we are more like the cowboy than we like to admit sometimes, that we do depend on the help of others,” Godby said.

Some observers take the view that Wyoming has come out ahead in its dealings with the federal government.

“If you want to call it a partnership, we are certainly the biggest beneficiaries in the partnership,” said Dan Neal, director of the Equality State Policy Center, which keeps close tabs on state policy, including how taxes are spent in Wyoming.

“The reaction of the state to the federal government is like a teenager who depends on the parents for money. There is some resentment about how things are done,” Neal said.

But unlike a youth who quarrels with a parent, Wyoming doesn’t have the option of running away from the higher authority.

“It’s pretty hard to separate yourself from the federal government when they own half of your land,” Mai said. “The bottom line is those guys have a lot of control over what [Wyoming] is going to do.”

— Gregory Nickerson is the government and policy reporter for WyoFile. Originally from Big Horn, he holds an MA in history from the University of Wyoming and currently lives in Laramie. Contact him at greg@wyofile.com.

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