SUBLETTE COUNTY – Two months ago Vern McAdams and Amy Anschutz approached the Sublette County Board of Commissioners, concerned about the future of their respective school districts.
McAdams, the director of business and operations at Sublette County School District 1, and Anschutz, chief financial officer at SCSD 9, were both invited to speak during a commissioners’ meeting discussion on possible ad valorem tax exemptions for oil and gas producers in Sublette County. As representatives from two of the largest tax-funded entities, they were in the vulnerable position of explaining the harsh realities schools in the county face.
Sublette County’s two school districts are among the six recapture districts in Wyoming. Those recapture districts are, essentially, responsible for rebating the rest of the state’s district funding because their counties get the most from energy tax revenue – the basis upon which Wyoming’s funding model has been built on for generations.
The issue, as McAdams and Anschutz pointed out, is Sublette County might not have enough funds to cover the gap.
The core of the issue can be traced to the downturn in Wyoming’s energy economy. Long powered by coal, the state’s coal sector hasn’t recovered from the events of 2015. The Blackjewel bankruptcy of 2019, which left Campbell County (not a recapture district for the first time in over a decade) without millions of dollars in tax revenue, started the conversation among lawmakers to put safeguards in place. The solution, a patch to the leaking tire tube, was Senate File 60.
Despite its intentions, the bill has created some confusion. Anschutz said during that meeting that the Wyoming Department of Education is struggling to find ways to make the funding model work with SF 60. First came talk of CREG report funding, which she said has been “doom and gloom estimates and then it’s better,” in her experience.
At its crux, under this bill, recapture districts have no idea how to budget. As the number of active rigs in Sublette County has started to recover from rock bottom a year ago, there’s no way for the districts to estimate how much revenue they’ll receive, let alone how much they’ll have to send back to the Wyoming Department of Education for redistribution. The bill also created a short-term gap of two years, where revenue will be essentially nonexistent.
“This is possibly the most scary bill that we have faced short of mass cuts in funding for the simple fact that the period of adjustment has the potential of us to lose cash flow during those two years,” Anschutz said in that commissioners’ meeting. “And bankruptcy could cause that cash flow to never be seen again.”
Anschutz said when she brought up a possible shortage of funds to the state board of education, she was told to “get a loan.”
So what do the numbers look like? In May 2020 the county was at 67 percent revenue. This May, the county was at 61 percent. Those statistics scared Anschutz – especially with the looming $3.7 million recapture payment due back to the state regardless. She said it’s been made clear to her that the state expects full payment on its typical schedule regardless if it takes producers over a decade to make payments based on the schedule set forth by SF 60.
Also, because the bill failed to acknowledge a drop in energy revenue also means a drop in cash reserves, there’s the potential that SCSD 9 couldn’t meet payroll for a full staff, Anschutz said. While SCSD 9 doesn’t have the cash reserves that SCSD 1 has, SCSD 1 is required to make a much larger recapture payment.
Of course, there’s the difference in enrollment. SCSD 1 has seen an overall rise in enrollment within the past decade while SCSD 9 has regularly seen declining numbers. That trend has continued going into the 2021-22 budget, where SCSD 9 is set to experience a drop of 51 kids.
“This is the first time I ever felt like I built a budget with a magic eight ball,” Anschutz said.
Anschutz and McAdams agreed that an exemption, at least to cover the two-year gap created by SF 60’s structure, was the best solution for districts. They liked the idea of scheduled payments to cover the short-term worries. Both of them, the commissioners and representatives from Jonah Energy, were vocally critical of the solution left by the end of the Legislative Session.
“If the legislators wait until the 2022 session to fix this,” McAdams said, “it’s too late. We’re already going to be through the problem. Leave it alone at that point in time.”
McAdams said revisiting the issue in July could be beneficial. Of course, the legislature announced it wouldn’t hold a special summer session, leaving the state without a legislative fix for K12 funding or a budget overhaul.
Instead, the onus has been placed on local governments to make the difficult decisions to keep doors open.
Among the Biden administration’s economic stimulus packages in light of the COVID-19 pandemic came the recently announced $129 billion to be allocated to schools across the country. But those funds are limited in their implementation, meant specifically to hire tutors, hire social workers, enlarge enrichment programs and reduce class sizes – infrastructure funding is off the table, in most cases.
Commissioners voted to start the process of drafting exemption forms at that May 18 meeting, reversing course from their previous stance of going with what the legislature created in SF 60. The topic of exemptions has been revisited at nearly every commissioners’ meeting since, leading to nine companies to apply for exemptions. The topic will be revisited once again at the July 20 meeting after the board elected to table discussion at its July 6 meeting about approving those applications.