CASPER, Wyo. — Wyoming’s economy may be slowing in some sectors, particularly parts of the energy sector and the state is still facing a budget shortfall, but declines have not been as severe as the state’s Consensus Revenue Estimating Group (CREG) forecast in May.
In particular, retail trade is posting some positive sales and use tax revenue numbers for the state. Oil and gas are seeing declines, but not at the pace expected.
CREG provided a July update following their May report on Thursday, July 29. The report found that “actual total revenues” for the state’s general fund received through June 30 are outpacing the pessimistic May forecast.
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The state has received $1,129,381,055 through the end of June for the General Fund (counting capital gains) which is about $112.8 million more than the forecast pace for the year. The largest sources of revenue for the general fund are sales and use taxes, investment income and severance taxes, according to CREG.
CREG’s July report says that sales and use taxes and severance taxes from oil prices and production are two of the main reasons the state is outpacing the May forecast numbers.
Sales and use taxes
The May CREG report forecasted that the state would see a year-over-year decrease in statewide sales and use tax collections of 9.5%.
“However, actual sales and use tax collections are outpacing this projection by 4.8%, or $22.7 million,” the July CREG report states. “This outpacing of the forecast is occurring despite impact assistance payments to local governments of nearly $30.3 million.”
Sales and use tax collections have even demonstrated growth in some major industrial sectors compared with fiscal year 2019. That includes retail trade, which CREG says is the largest sector in terms of sales and use tax collections:
- Retail trade sales tax collections are up 12.6% compared with the same period in FY 2019
- sales and use tax collections from online shopping was up 152% (through June)
CREG says that this jump in online shopping sales and use tax collection numbers is largely due to “new legislation regarding tax collections from remote sellers and market facilitators (effective on July 1, 2019).”
“In addition, even during the darkest economic period of pandemic to date – the second quarter of 2020 – certain retail trade businesses such as building material & garden supplies, grocery stores, sporting goods stores, warehouse club & super centers still demonstrated year-over-year growth in sales, offsetting some of the substantial declines in leisure and hospitality services.”
While retail has been a bright spot in terms of revenues generated for the state, mining, which CREG calls “Wyoming’s pivotal industry” experienced a decline of 17.2% in sales and use tax revenues “due to the reduction in exploration activities.”
14 counties in Wyoming were experiencing higher year-over-year statewide sales and use tax collections through June. Carbon County’s sales and use tax collections were up 53.4%. CREG said this is mostly due to utility projects in Carbon County, such as wind turbine and power transmission line construction projects.
Severance taxes: oil and gas declines slower than projected
Severance tax collections for the fiscal year 2020 General Fund are outpacing the May forecast by $11.5 million or 5.5%, according to CREG.
While Wyoming oil production has been declining, CREG says that is happening “at a much slower pace” than they expected in their May forecast.
“Both Wyoming oil production and prices are on pace to exceed the forecast levels,” CREG said. “It appears that oil producers did not shut-in as many oil wells as CREG projected, or producers reopened some wells quickly as prices rebounded since early May, particularly the lucrative horizontals wells.”
While CREG says that a number of factors are reducing the demand and price of natural gas, “the decline in natural gas production has not yet accelerated as expected by CREG, possibly attributable to less well shut-ins (similar to the shut-in trend of oil wells).”
While oil and gas are not declining at the pace CREG expected, they say that surface coal production is “experiencing significant contraction, and the pace of decline accelerated this spring.”
“Severance tax collections from trona are marginally lower than forecasts, with price, in particular, somewhat lagging expectations,” CREG added.
Governor urges caution about CREG’s July update
While the CREG report indicated that their May projections may have overestimated the pace of decline in Wyoming’s revenue collections, Wyoming Governor Mark Gordon said on Thursday that the state’s economic outlook is still a problem.
“Even if this report suggests moderate improvement over the May CREG, our state’s fiscal situation remains dire,” Gordon said in a press release from his office. “We still must exercise budget discipline to balance our budget. It is nice to see the small lift in oil that underpins these new projections, but we are still well below what we budgeted for in January.”
“We will continue to face significant challenges going forward and will need to continue to make tough decisions about how we meet this budget shortfall.”
Gordon’s office noted that the CREG report still shows revenue collections for the General Fund and Budget Reserve Account are down 17.6% compared with the same period in fiscal year 2019.
“Wyoming’s budget shortfall is still estimated at more than $750 million,” the governor’s office said.
The full July 2020 CREG report can be found online.
This article originally appeared on Oil City News. Used with permission.