WYOMING STATE LEGISLATURE

     Legislative Service Office

       213 State Capitol  Cheyenne, WY 82002

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July 30, 2004

To:          Members, 57th Legislature

From:      Steve Sommers

Subject:  July 2004 Revenue Update

The information presented in this report constitutes the July 2004 revenue update. This report and the April revenue update, together with the October and January CREG reports, provide revenue information on a quarterly basis.  Please note this report does not change the January 2004 CREG projections or the goldenrod dated July 17, 2004. Those are still the official fiscal documents. This report is simply intended to provide a basis of comparison of actual revenues as they currently stand, to the projections made in January.

General Fund

Presented in Table 1 of this report is the general fund revenue analysis. The three major sources of general fund revenue are shown individually as follows: severance taxes; sales and use taxes; and interest income.  All other sources are grouped together.

Presented in Column 1 is the total FY 2004 projection of revenue from each source. This is the current official CREG projection of revenue to the general fund. Column 2 provides the actual YTD revenue received from each source. Column 3 is the percentage of the projection that has been received (column 2/column 1), and column 4 is the percentage of the projection that we normally expect to have received at this point in the fiscal year. Column 5 compares what we have actually received to what we expect to have received (column 3-column 4).

As you can see from column 5 in Table 1, actual total revenues received are currently 7.9% ahead of expected levels with all major categories ahead of projections.

Sales and use taxes are very close to estimates, and should not differ significantly from projected levels for FY 2004. Severance taxes, investment income and miscellaneous sources are ahead of projected levels and should exceed projections for FY 2004.

With respect to severance taxes, current receipts are 15.1% ahead of projections.  However, the cap on standard distributions of $155M has been reached, therefore the general fund will receive a smaller percentage of any additional severance tax revenue received over the remainder of the fiscal year. Given the current price levels of oil and natural gas, the general fund share of severance tax will more likely be 15.5% or $25M above projected levels.

Of the $126.8M actually received from investment income, $98.1M is from the investment of the PMTF and $28.7M is from pooled investments. With respect to the PMTF income, the $98.1M exceeded the projection of $73M by some $25M, and for pooled interest, $28.7M exceeded the projected amount by $11.5M. All of the excess pooled income remains in the general fund, but the PMTF income exceeded the spending policy amount of $85M by $13M, and this amount in excess of the spending policy amount was transferred from the general fund to the spending policy reserve account (SPRA) pursuant to W.S. 9-4-713. The remaining $85M stays in the general fund resulting in an extra $12M in net revenue over projections.  So when it’s all said and done, PMTF and pooled investment income to the general fund exceeded projections by a net of $23.5M ($11.5M + $12M).

Additionally, miscellaneous revenue sources are $10.2M ahead of projections and I think this figure will hold after all final adjustments are made.

Bottom-line - General Fund

Potential total general fund bottom-line at this point would then be approximately $25M from severance tax, $23.5M from investment income and $10.2M from miscellaneous sources for a total of $58.7M in actual revenue over projected levels for FY 2004.

Mineral Severance Taxes

As presented in Table 2, total severance tax revenues are 12.7% ahead of FY 2004 expected levels with all minerals ahead of projections. These figures represent receipts for production through April 2004.

Bottom-line - Severance Taxes

At this point, 12.7% appears to be conservative, as prices for oil and gas have continued to significantly exceed projected levels. My guess is we will exceed projections by an amount closer to 21% or approximately $100M. Note that approximately 25% of the excess would flow to the general fund ($25M), 50% to the budget reserve account ($50M) and 25% to the permanent mineral trust fund ($25M). 

Federal Mineral Royalties

Also presented in Table 2 of this report is the federal mineral royalty analysis. The columns in this table are identical to those in Table 1, with column 5 indicating that currently we are 11.1% ahead for the year. If we continue at that rate, we will exceed projections by $50M. Just as with severance taxes, that level appears to be conservative for FY 2004.  At this point, I expect actual revenues to exceed projections by 14.5% or approximately $65M. One-third of any excess, or $22M would flow to the school foundation program account and two-thirds, or $43M would flow to the budget reserve account.

Common School Land Income

Presented in Table 3 is the common school land income fund distribution analysis. As you can see from this table, income to the common school land fund has exceeded the projection by approximately $17.7M. Of the total $61.7M CSLI revenue received, $48.2M is from investment income and  $13.5M is from mineral and grazing leases and other miscellaneous surface uses of state school trust lands. Just as with the PMTF, the income from investments exceeded the spending policy amount, in this case by $3.2M. This resulted in a transfer of $3.2M from the general fund to the CSPLF spending policy reserve account pursuant to W.S.9-4-713. So, net income to the CSLI exceeded projections by $14.5M for FY 2004.

Other Issues

The first of several planned federal coal lease bonus sales was made in June, resulting in a bid of $.92 per ton. The state’s share of this sale will be $27.4M per year for five years. We have not yet received the first payment, and if it arrives with the August payment from MMS, we will book the first payment as FY04 revenue. If it arrives after August, we will book the first payment as FY05 revenue. If we receive the first payment in August, it will add $82.2M to our FY05-06 school capital construction profile (FY04,FY05 and FY06), and if it arrives after August, it will add $54.8M (FY05 and FY06) to our FY05-06 school capital construction account profile.

Conclusions

Summing my bottom-line expectations for the general fund and the budget reserve account results in actual revenues exceeding projections for FY04 by $148.5M ($58.7M + $50M + $43M - $3.2M), but we won’t have the final results until the first part of September after all severance taxes and royalties are received at the end of August.

As always, we will continue to monitor the revenue picture and keep you informed of any major developments.

July 2004 Revenue Update

Table 1 - FY 2004 General Fund Revenue Update

(Revenues received from July 1, 2003 through June 30, 2004)

* Note that $13,289,433 of this amount exceeds the spending policy amount and will be
  transferred to the PMTF Spending Policy Reserve Account.

Table 2 - FY 2004 Mineral Severance Tax & Federal Mineral Royalty Revenue Update

(Revenues received from September 1, 2003 through June 30, 2004)

Table 3 - FY 2004 Common School Land Income Fund Distribution Update
(Revenue generated from investments/state lands  from July 1, 2003 through June 30, 2004)

* Note that $3,204,370 of this amount exceeds the spending policy amount and will be

  transferred to the CSPLF Spending Policy Reserve Account.