SHERIDAN — The Wyoming Association of Municipalities’ Legislative Leadership Committee highlighted a familiar concern when it met at Sheridan College last week — state municipalities’ continued dependence on direct distribution funding.
Direct distribution funds are state subsidies that municipalities generally use for capital improvement projects. The state Legislature needs to vote to appropriate those funds each biennium, though, which means cities and towns are constantly at risk of losing them.
And while direct distribution funds are not guaranteed, Wyoming’s municipalities have become increasingly reliant on them.
During the Sheridan County Chamber of Commerce’s legislative forum in December, officials from Sheridan, Sheridan County, Ranchester and Dayton described direct distribution funding as critical to their operating budgets and urged local legislators to fight to maintain it.
But because of the volatility of the state’s economy, cities and towns do not know how much the state will appropriate to them for a given biennium and increasingly worry that the funding will be cut out of the state’s budget altogether.
WAM Executive Director J. David Fraser pointed out that five years ago, the state dispersed $175 million in direct distribution funding; in 2018, lawmakers appropriated $105 million to Wyoming’s municipalities.
“Our cities get asked to do more and more with less and less — and they’re very good at it — but it’s hard because they have to provide public services,” Fraser said after the meeting.
Given the state’s recent economic improvement, WAM members hope lawmakers will put more money toward direct distribution funding for the coming biennium.
“Our hope would be that as the economy is recovering, and the state is recovering from that downturn, that they’ll remember that we might need to recover a little bit too,” Fraser said.
While a bump in direct distribution funding will help Wyoming’s municipalities in the near-term, it would not address WAM’s fundamental concern; if the state takes another economic hit in two years, lawmakers can still vote to slash that funding or eliminate it entirely.
One way to at least mitigate municipal dependence on direct distribution funding, WAM argues, is to give Wyoming’s cities and towns the authority to levy local taxes. By creating local taxes, municipalities could establish reliable revenue streams that could be used to fund projects currently supported by direct distribution funding.
Sheridan Mayor Roger Miller, who is not a member of WAM’s Legislative Leadership Committee, said direct distribution funds and local tax options were frequent topics of discussion during WAM’s Summer Convention last week.
If the Legislature granted municipalities the authority to propose local taxes, Miller said Sheridan would have more revenue options to explore. Whereas currently a new tax — the Optional One-Cent Sales Tax, for instance — needs to be approved by all of the municipalities in Sheridan County and supported by Sheridan County voters, a local tax option would allow Sheridan officials to propose a tax that would only apply inside the city, and would only need to be approved by Sheridan voters.
Even advocates admit that enacting local taxes would be an imperfect solution. The amount of revenue a tax generates depends on the size of the population paying it and while Sheridan could potentially use revenues from a local tax to replace a portion of the state’s direct distribution funding, smaller municipalities — like Dayton and Ranchester — would still likely rely on state subsidies.
Miller, however, said reducing the demand for state funding among Wyoming’s larger cities would give lawmakers more money to put toward smaller towns.
Lawmakers have heard these arguments before, however; legislators shot down several bills that would have given municipalities authority to create local taxes during their latest session, despite WAM’s efforts.
The Legislature’s Joint Revenue Committee has decided it will discuss local taxing authority during this interim session. That committee is scheduled to meet July 8 and 9 in Cheyenne.