Driskill: property tax will be a focus during budget session

All eyes are on the question of increasing property taxes – with the 2024 Budget Session coming up, especially those of Wyoming's legislators.

The ideas are already flowing, says Senate President Ogden Driskill, who hopes a solution can be found that assists this state's citizens while maintaining the proper function of its governments.

Finding that solution will be no simple task.

Follow the Money

The most obvious hurdle to reforming property tax is simple cause and effect: cutting taxes reduces the revenue received from them. A common misconception, says Driskill, is that state government would take this hit.

Actually, he says, it would mainly impact municipalities and schools.

"The state gets no money out of property taxes," he says. "Depending on the county, 60 to 70% goes to education."

This includes K-12 and community colleges, as well as the university. Education funding levels are obligated via the Wyoming Constitution and Supreme Court decision.

"The other 30% funds your local government, which is your cities, towns and counties. It pays for all the salaries and the money in the courthouse, and it pays for big chunks of [city and town] budgets," he says.

"If you cut those taxes, you've either de facto cut what those cities and towns can do or you're going to create [the need for] a means to go do it, and obviously those cities and towns are going to ask for more help if they're short – and the state doesn't have the money."

Unlike education, he points out, the Legislature is not obligated to fund local governments.

"The big cities and towns would probably get by, but the little towns are going to be the ones that really suffer, and the counties that suffer the most are the ones with no mineral income," he says.

"If you don't have mineral income then property taxes fund most everything in your county."

So if school budgets cannot be cut by statute and local governments cannot afford to lose their income, what happens?

"Any time you shrink money out of something, you've either got to backfill it from somewhere else or you have to cut budgets," Driskill says. "You only have those two choices."

A 50% cut to residential property taxes, as has been suggested via a citizen-led ballot initiative, would be a total loss of somewhere between $200 and $300 million.

"Of that, at least $100 to $150 million is going to be education funding and we're going to have to find some way to pay that back," he says.

Finding Revenue

While there are several potential ways to recoup the lost millions, each has their own unique drawback, says Driskill.

It has been pointed out, for example, that the Legislature continues to put money into savings. If it can be put away for later, that money clearly isn't needed right now, so why can't we use it to provide some relief on property taxes?

The reality, says Driskill, is that Wyoming's savings account was set up at a time when mineral incomes were plentiful and formed the backbone of the state's funding.

The Legislature created these accounts and continued to add to them over the years with the idea that, one day down the road, mineral revenues would dry up. When that happened, the interest on those savings would make up a significant portion of the difference.

In other words, the Legislature wanted to make sure Wyoming could live off the interest from its savings.

The way things were set up, Driskill says, the Legislature cannot touch these funds if it wanted to – and it probably wouldn't want to.

"It's working exactly as planned," Driskill says. "Of our general fund spending in the State of Wyoming, 30% of those dollars come from that savings account in interest, income and dividends. One dollar in three that we spend now comes from the money we saved – that's a 30% tax cut right there."

The percentage of the general fund that comes from this source is increasing over time, he adds.

"Next to Alaska, it's the best in the nation, and it's part of why we're able to do what we've been doing. As mineral income has gone down, the interest income has helped pick it up," he says.

This, Driskill says, is why the Legislature continues to add to the savings fund. Last year, $1.4 billion was added, which is income of around $70 million every year through the interest, he says.

"That's $70 million we don't have to go tax somebody or take away from somebody to get," he says.

Cutting the budget is also not an easy task any more, he continues; after years of trimming, belts are tighter than ever. The state budget is $800 million less than it was 12 years ago and hundreds of jobs have been removed.

"We've cut more than any state in the nation, I believe," Driskill says. "It's a pretty lean government."

The senator says he'd be happy to make additional trims wherever they can be found, but it would likely mean cutting services. These days, he says, the questions have become, "Do you want to cut funding for the senior centers? Do you want to cut funding to cities and towns? Do you want to cut back on the subsidies we give so that nursing homes can operate?"

These are all dollars the Legislature doesn't have to spend, he says, but the consequences would be meaningful to citizens.

Finding Answers

With a number of bills focused on property tax set to vie for the Legislature's attention, Driskill says he fully supports the idea of property tax reform, but is very much opposed to any idea that would lead to increases in current taxes or new taxes.

"I truly believe that we do need to do something about property taxes," says the senator. "In the same breath, I think we need to be very cognizant of the impact."

He also believes that the relief offered by any legislative action needs to be directed to the citizens who need it most. He points out that around 25% of the residential property taxes collected in Wyoming come from Teton County.

"If you roll back the property taxes 50% statewide, in effect you're giving 25% of that cut to the billionaires that are moving into Teton County and are paying obscene amounts of dollars and will continue to do so. You're providing a subsidy to billionaires," he says.

"I think taxes need to be reasonably fair but I also think it's obscene that we've created incentives for billionaires to come to Jackson because the taxes are so cheap that they can build houses for free."

One of the bills that may appear on the floor this budget session is a homestead exemption, which Driskill feels would direct the savings to the right Wyomingites because it would exempt a certain amount of a home's value from being taxed. Suggested amounts at this time are around $100,000 to $150,000, he says.

For example, if you owned a home valued at $350,000 and the first $150,000 was exempted, you would only pay property tax on the remaining $200,000. This could slash property tax significantly on the average Wyoming home, but wouldn't make much difference to a $20 million house in Jackson Hole.

Another proposal would reduce property taxes by 50% for people over the age of 65 who have lived in their house for 30 years or more.

"That really rewards the people who really need it, which tends to be retirees on fixed incomes that are living in a house they've owned for a long time," he says.

What about reducing the property tax rate itself? There are two problems with this, says Driskill

The first is that the rate is not what caused the increase. Instead, from the influx of people moving to this state who are purchasing homes above market value.

"If you live in Sundance and the house next door that sold for $150,000 ten years ago sells for $400,000, they just helped move your taxes up by 30 to 50%," he says. "...The value of [that] home increased because somebody next door paid way more money for it than it was valued at."

Secondly, says Driskill, the Legislature can't simply change Wyoming's tax rates.

"The problem we've got with a lot of these is that a lot of our taxes are set by the Constitution, so the Legislature can't just pass a law [to reduce them]," he says.

On the other hand, it can cap them, and that's an idea that has already been put forward. One bill would cap increases, he says, such that the highest your property tax could go up in a year would be 5%.

Likely Outcomes

It's too early to tell which, if any, of these bills might gather momentum.

"There are lots of ideas out there. The question is, can we get enough people behind one of them to flesh it out so that we actually pass something?" Driskill says.

Driskill acknowledges that the Legislature was unable to reform property tax during the 2023 session, but says a lot of that has to do with the current divide among Wyoming's Republicans.

The Freedom Caucus, he says, was not prepared to negotiate. Property tax reform was on the floor of the House, having passed through the Senate, he says.

"I am bitter about it," Driskill says. "They had means and they had the ability to get there. It wasn't exactly what they wanted, but they had a bill that they could amend and work on and they chose to kill tax reform rather than take a chance on not having exactly what they wanted. That's not how we do government in Wyoming."

Compromise is a necessary part of legislating, he continues: almost nobody gets a bill through exactly the way they wanted it. Ideas are refined along the way.

The Legislature has more than one focus, he adds. As well as making decisions in the best interests of citizens, it must ensure government continues to function at all levels.

Driskill feels that some of the proposals made so far stand a better chance of keeping everyone as close to whole as possible than a straight cut to property taxes.

"You need to look at all the impacts of a bill, you can't just pass one and hope for the best. You really need to think it out and understand what the real ramifications are," he says.

On that note, Driskill says he intends to bring an amendment to any property tax bill that gains traction during the session. In case of unforeseen knock-on effects, he would like to see a two-year sunset date on any action taken to allow the Legislature to revisit the question without causing structural problems.