Gordon explains ARP fund plans, emphasizes long-term benefits

Gov. Mark Gordon and policy director Renny Mackay prepare to address the Wyoming Legislature’s Joint Appropriations Committee on June 15 in Cheyenne. Gordon said Wyoming should prioritize long-term goals rather than short-term wants when it comes to handling more than $1 billion in federal American Rescue Plan Act funds. (Joel Funk/WyoFile)

By Joel Funk, WyoFile

Wyoming should prioritize long-term goals rather than short-term wants when it comes to handling more than $1 billion in federal American Rescue Plan Act funds, Gov. Mark Gordon told the Legislature’s Joint Appropriations Committee Tuesday.

There is also an opportunity for the state, which made significant budget cuts in 2020, to make up for revenue declines with ARP funds according to the state budget director.

Gordon presented committee members with his initial recommendations for how Wyoming should appropriate the ARP relief funds, as well as remaining funds from the previous federal stimulus bill.

The governor’s recommended first phase of spending includes addressing mental health and substance abuse service needs, providing tax relief for businesses, closing broadband gaps, expanding Wyoming State Parks camping and aiding the oil and gas industry. Gordon emphasized a commitment to acting responsibly and thoughtfully in handling the funds.

“At its core, this strategy is based on the belief that since this money is essentially borrowed from our great-grandchildren, and our grandchildren, we have the obligation to be wise in providing lasting benefits to the state, so that they too can enjoy some of the benefits,” Gordon told lawmakers.

The American Rescue Plan Act, or ARP, passed earlier this year, is a $1.9 trillion relief and stimulus package to support the nation’s recovery from negative impacts caused by the COVID-19 pandemic. The previous stimulus legislation, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, is a $2.2 trillion bill signed by former President Donald Trump in March 2020. Wyoming has received $534 million in ARP funds to date, with another $534 million expected in 2022. Remaining CARES Act funds are estimated between $70 million and $150 million.

There were approximately 10 pieces of federal legislation providing some form of stimulus or recovery — of which the CARES Act, ARP and Consolidated Appropriations Act were the largest. Since March 2020 Wyoming businesses, families and citizens have received in excess of $8 billion, state Budget and Fiscal Administrator Don Richards said. While the CARES Act had a short timeframe to spend the money, ARP allows the state until Dec. 31, 2024, to obligate the funds and until Dec. 31, 2026, to spend them.

With that in mind, Gordon said, Wyoming has time to “do things with care.

“We do not need to be in a rush to spend these funds and, in fact, we would benefit from taking our time,” he said. “Taking our time will allow us to make wise decisions on how to use the money, but also because it allows the state to seek flexibility and clarity on the allowed uses of these funds.”

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The Wyoming Legislature had originally planned a July special session dedicated to appropriating the funds, but Gordon and leadership canceled it in light of the timeframe.

Specific spending goals 

With so many needs that would benefit from the federal monies, Gordon said it will be important to avoid “trying to sprinkle pixie dust on every little problem” and focus on ways the money could have long-term benefits. Backfilling recent state budget cuts that cannot be sustained once the federal  money has dried up would not be appropriate, he said.

Randall Luthi, Chief Energy Advisor (Photo: Wyoming Governor Staff)

The governor in early June announced he had created a “strike team” to devise how to spend the dollars. That team includes Randall Luthi and Renny MacKay from the governor’s office; Department of Family Services Director Korin Schmidt; Department of Workforce Services Director Robin Cooley; Wyoming Business Council CEO Josh Dorrell; Department of Health Interim Director Stefan Johansson; Wyoming Senate President Dan Dockstader (R-Afton); Wyoming House Speaker Eric Barlow (R-Gillette); Sen. Ogden Driskill (R-Devils Tower); House Appropriations Committee chairman Bob Nicholas (R-Cheyenne); Wyoming County Commission Association President and Converse County Commissioner Jim Willox; and Wyoming Association of Municipalities President and Cody Mayor Matt Hall.

On Tuesday, Gordon unveiled a three-phase strategy for the taskforce to pursue: Survive, Drive and Thrive. The Survive phase has been ongoing and will continue through the 2022 legislative session. The Drive portion is underway and should culminate with recommendations for funding throughout the 2022 legislative process. Thrive will be focused on actions with long-term impacts and will be explored comprehensively later.

Gordon highlighted immediate work being done in the COVID-19 response vein:

  • The Wyoming Department of Health has received around $220 million through direct federal funding
  • The Wyoming Department of Education, local school districts, community colleges and the University of Wyoming are using direct federal grants to address the pandemic and help students.
  • Gordon added $12 million to the  Energy Rebound Program for a total of $42 million set aside to aid oil and gas employment. $5 million in CARES Act funding has gone to tourism with another $6.5 million into supporting outdoor recreation.
  • $2 million in CARES Act dollars were put toward agriculture and meat processing.

Beyond that, Gordon said a great deal of planning is going into preparing for Federal Emergency Management Agency reimbursement. Renny Mackay, Gordon’s policy advisor, said staff will continue to work on FEMA applications in June, with the hope that the state will know the level of reimbursement in September.

Wyoming has somewhere between $70 million to $150 million in CARES Act funds to spend. Richards said there are many reasons for the broad range and the uncertainty. For one, there are allocated funds that are unspent and haven’t been returned to the system. There are also programs that could return funds voluntarily or through an audit.. The biggest variable, however, is the potential for FEMA to reimburse the state for CARES dollars spent on emergency response. Those reimbursements could give Wyoming a second crack at spending up to $70 million.

The ARP funding is divided into five categories: state fiscal recovery ($1.1 billion); capital facilities ($109 million); local fiscal recovery ($182 million); ESSER III, or money for K-12 school districts ($303 million); and higher education ($44 million).

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Categories come with different requirements, timing, funding flows, status and guidance, Richards said. Those amounts do not include specific grants to agencies that are not discretionary funds of the state, which exceed $100 million in ARP funds alone, he said. Tribal funds are received directly from the federal government and will not pass through the state. The figures also do not include approximately $710 million in direct payments to businesses and citizens, nor the $200 million in rental and utility assistance from the 2021 Consolidated Appropriations Act.

Ongoing state revenue crisis

Wyoming continues to struggle with a revenue decline that began in late 2014 and was exacerbated by the pandemic. But with ARP comes the ability to funnel federal funding toward revenue shortfalls.

The Biden administration, Richards said, has given fairly wide-reaching latitude to states when it comes to using ARP money for revenue shortfalls.

“They’ve recognized the broad-based economic challenges that have been experienced by all states, political divisions, businesses and families,” Richards said.

Richards estimated Wyoming is one of only 20 states that could demonstrate a revenue shortfall as one of the categories eligible for ARP funding.

“It opens up a lot of potential expenditures for general government services,” he said. “For example highways could not be constructed under the general ARP requirements, but to the extent, you can show a revenue shortfall, then it opens up new opportunities for the potential of expenditure up to the revenue shortfall amount.”

Wyoming would be allowed to calculate the extent of reduction at four points, starting Dec. 31, 2020. The state budget office, Economic Analysis Division, state auditor’s office and governor have worked to come up with a figure of approximately $300 million revenue shortfall for the first year of the calculation.

Richards said he would “not bet the revenue shortfall will be replicated in the next three years,” a point on which he and executive branch colleagues disagree. As such, he said the $300 million shortfall for the Dec. 31, 2020, date might be the state’s only chance to qualify for the revenue shortfall provision in ARP.

“We could have a downturn, and I could be wrong, but that’s a pretty risky bet,” he said.

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