Economic diversification: a topic that deserves attention

By: 
Khale D. Lenhart – Guest Column

The Wyoming legislature begins its biennial session in just a few days. With a large crop of new legislators joining, the legislature is bound to see its priorities shift. New members will bring their views to the table, including their views about what are the most important issues for the legislature to address. 

One issue that is not new, however, is the issue of economic diversification. Even though we have all heard talk of it before, this legislature would do well to spend some time on the topic.

Wyoming is at an important point in its history. We have spent much of our time as a state supported by the extraction industry. Severance taxes and federal mineral royalties are a major part of our state budget, not to mention the impact that extraction industries have on sales and property taxes. Oil, gas, and mineral extraction industries have provided jobs and supported communities.   It will undoubtedly remain a major industry in Wyoming for the foreseeable future. However, the natural resource market is a global market, and that market is changing.  Demand for coal is declining — especially in the United States — and we have limited access to overseas markets. Even as extraction industries remain a major part of Wyoming’s economy, they are likely to decline relative to where they have been in the past.

As a result, economic diversification efforts are more important than ever. We have talked about economic diversification for decades, without a lot of success. Many of us have become jaded and dismiss talk of economic diversification, seeing it as pipe dream. While this is understandable, just because we have not made progress so far does not mean we should give up. The problem has not gone away just because our efforts to address it have been lacking. The day is still coming when Wyoming will need new industries to support our population.

At the same time, we must also remember that government itself cannot diversify the economy. It can only set the conditions. Private enterprise is the actual source of economic diversification. The state can set conditions such as favorable tax rates and infrastructure that allows business to thrive, but new industries require entrepreneurs and risk-takers to make the difference. 

Perhaps the biggest obstacle to economic diversification is the need for more entrepreneurs to undertake the actual work of growing new businesses. Wyoming’s population migration statistics cast a particularly daunting shadow in this regard and deserve careful consideration. 

In the most recent census, more people moved out of Wyoming than moved in. This is not a good trend for economic diversification. Even worse, the population that moved out of state tended to be significantly younger than the population that moved in. Wyoming is a favorable place for retirement, but an unfavorable place for ambitious young people. This trend has to change, for the good of our state.

The future of Wyoming is going to require adjustments to how we currently do things. Economic diversification will require a change to how our state sees itself with relation to the extraction industries. They have carried the load for a long time, and the time is coming when they no longer will be able to provide the tax income that our state requires to function. With an older population base, we will see a higher demand for government services but a generally lower tax base to pay for those services. Barring major changes, the only solution on the horizon is a change to our tax system. Hopefully, we can keep the changes to tweaks rather than a system-wide overhaul, but the day is coming when a change will have to happen.

Preparation now as to what that looks like will pay major dividends in the future.

Our state has its share of both challenges and advantages. We are geographically large, but with a small population. Our costs are high, but our tax base is low. At the same time, we have an advantageous tax climate and plenty of room for growth and for ambitious individuals and companies to make their mark.  

It is in the weighing of these advantages and disadvantages that the legislature must set its priorities. This is not the time for legislators to waste their time on topics that do not set Wyoming up for future challenges. The time is too important. Instead, the legislature must do what is best for the state and try to put our state in the best position to thrive for the decades to come. A major part of that is the economic future of Wyoming. Even though our progress has been slow, we have no choice but to keep trying.

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