Wyoming s Economy Today and Beyond

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1 Wyoming s Economy Today and Beyond Presented by: Buck McVeigh Economic Analysis Division Wyoming State Government Current Economic Conditions Favorable: Energy: production and prices State revenues: primarily being driven by mineral income and sales tax (retail trade). Employment: year-over-year growth, low unemployment Construction: housing, highways, K-12 schools, UW, and prisons. Personal income: the state has done well compared to the region and the U.S. Consumer sentiment: retail sales, housing, and autos 1

2 Current Economic Conditions Unfavorable: Population: low growth rate and low net-migration. Uneven growth: energy boom is spreading wealth unevenly across state. Undiversified employment base Workforce availability: indications of strong regional competition for construction labor. The construction industry also facing in-state competition from growing mining industry. Drought: continues to impact farms and ranches, and recreational activities. Brucellosis: Wyoming lost its brucellosis-free status in February 2004, negatively impacting cattle ranchers. Inflation is returning. Population Wyoming - more attractive during the economic slowdown following 9/11. Remained relatively insulated. Net migration - positive last 3 years. Gained (net in-migration) from the states of California, Colorado, Nevada, North Dakota, Texas, and Utah. Lost (net out-migration) greatest number of people to Arizona and Idaho. After U.S. economy recovers, net migration zero. Population is expected to grow at an annual rate of 0.5%. 2

3 Population Wyoming Population and Net Migration: 1970 to , ,000 Population Net Migration 20,000 15, ,000 10, ,000 5, , , , ,000-10,000 Net Migration 375,000-15, ,000-20, ,000-25, ,000-30,000 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 Net Migration = Inmigration - Outmigration Source: U.S. Census Bureau Wyoming Decennial Population and Projections 900, , , , % (most likely) 1.0% 2.0% 800, , , , , ,000 Annual increase from 1960 to 2000: 1.0% 500, , , , , , , ,

4 Median Age U.S. Wyoming Source: U.S. Census Bureau and Wyoming Economic Analysis Division 4

5 Number of Births and Deaths in Wyoming: 1970 to ,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Births Deaths Source: Wyoming Department of Health Births and Deaths for 10 Small Counties: 1971 to ,000 1,800 1,600 1,400 1,200 (BH, CR, GO, HS, JO, NI, PL, SU, WA, WE) Births Deaths Pop in 1970: 19.0% Pop in 2003: 14.6% Area: 29.4% 1, Source: Wyoming Department of Health 5

6 Wyoming Employment Issues with an Aging Population Wyoming not unique Trend is evident nationally. Baby Boomers (born ) retiring soon. Large proportion of Wyoming population (30%). Disruption/ brain drain in the workplace. Managers and skilled workers Labor shortage? Generation X follows boomers with much fewer members. Change of thinking on traditional retirement? Most boomers want to continue working. Demand for health care and social services will increase. Total Employment for Wyoming and U.S.: (Number of full and part-time jobs) 360, ,000 Wyoming US 180, , , , , , , , , , , ,000 U.S. Employment (in thousands) 220, , , ,000 Source: U.S. Bureau of Economic Analysis Wyoming Economic Analysis Division 6

7 Percent 10.0 Wyoming and US Unemployment Rates: Annual Average U.S Wyoming Source: Wyoming Employment Department Employment Anomalies in Wyoming 2003 Wyoming s largest employer is Government at 25.2% (2 nd only to Alaska). National percent is 16.5%. Mining employment, at 7.2%, is ranked 1 st in U.S. National percent is 0.4%. Manufacturing employment is less than 4% (ranked 50 th in U.S.). National percent is 11.1%. Prof. and Business Services employment, at 6.1%, is ranked 42 nd in U.S. National percent is 12.5%. 7

8 Number and Percent of Engineers: Percent Wyoming = 0.9% U.S. = 1.3% 0 50 Miles N W E S Source: U.S. Census Bureau Non-Agr Employment by Industry (NAICS) for Wyoming: number of jobs (in thousands) Government Other Services Leisure & Hospitality Edu & Health Services Prof & Business Services Financial Activities Information Transp, Wareh, & Util Trade Manufacturing Construction Natural Res & Mining Source: Wyoming Economic Analysis Division 8

9 Wages in Wyoming In 2002, Wyoming s average annual wage level was $28,975 (42 nd in the U.S). Percent change between 2002 and 2001 was 3.3% (tied for 6 th in the U.S.). Colorado, Utah and Nebraska ranked 11 th,35 th, and 40 th, respectively ($38,005, $30,585, $29,448). Idaho, No. Dakota, So. Dakota, and Montana ranked 45 th, 48 th, 49 th, and 50 th, respectively. The national average was $36, 764. Wyoming Average Wage Per Job: 1992, 2002, 2012 $85,000 $85,000 $80,000 $75,000 $70,000 $65, $80,000 $75,000 $70,000 $65,000 $60,000 $55,000 $60,000 $55,000 $50,000 $50,000 $45,000 $40,000 $45,000 $40,000 $35,000 $30,000 $35,000 $30,000 $25,000 $25,000 $20,000 $15,000 $20,000 $15,000 $10,000 $5,000 $10,000 $5,000 Total Mining Construction Manufacturing TCPU* Wholesale trade Retail trade FIRE* Services Government * TCPU = Transportation, communications, and public utilities; FIRE = Finance, insurance, and real estate 9

10 Personal Income Per Capita PI % Change Year Ago Wyoming 1 $32,808 (15) $31,021 (16) +5.8% Rocky Mountain $29,974 $29, % U.S. $31,632 $30, % 1 Numbers in parentheses are U.S. rankings Gross State Product by Industry (NAICS) for Wyoming and U.S. Agriculture U.S. $10.4T Mining Construction Wyoming $20.3B 2.4% 3.6% 7.6% 12.0% 1.0% 0.9% 4.5% 13.0% Manufacturing Wholesale & Retail Trade Transportation, Warehousing, and Utilities Information 1.9% 3.8% 4.6% 14.7% 1.6% 21.5% 13.3% Financial Activities 4.7% 5.7% 11.7% 20.4% 4.7% 4.8% Professional & Business Services Educational and Health Services Leisure & Hospitality 13.0% 1.7% 10.2% 6.2% 10.3% Other Services Government Source: U.S. Bureau of Economic Analysis 10

11 Housing Monthly residential building permits were on the rise in June and July 2004 single-family permits had year-over-year changes of +27.6% and +56.1%, respectively. June and July 2004 multifamily permits had yearover-year changes of % and %, respectively. Price appreciation in housing during 2004 averaged 7.8% compared to 6.3% in Affordable housing is a problem in many areas. Mineral Income and State Finances The reason for the volatility is simple: We are a commodity market, and volatility is inherent in competitive commodities. - R. Skip Horvath, president of the Natural Gas Supply Association 11

12 Natural Gas Price ($/mcf): May Dec 2004 $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 Differential Opal Hub Henry Hub $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 May- 00 Aug- Nov Feb- May Aug- Nov Feb- May Aug- Nov Feb- May Aug- Nov Feb- May Aug- Nov Traditional State Funding Main revenue sources: Sales and use taxes Property taxes Investment income Federal mineral royalties Severance taxes Three major funds: General Fund Budget Reserve School Foundation Did you know? Mineral income as a % of all revenue to the state was: FY % FY % 12

13 Energy Multipliers Price Changes Coal [.25 per ton price change ] $13.3 million revenue change. Natural Gas [.10 per mcf change ] $19.7 million revenue change. Crude Oil [ $1.00 per bbl. change ] $6.1 million revenue change. Note: revenue sources include severance taxes, federal mineral royalties, and the school foundation portion of ad valorem taxes (based on FY05 projections). Source: January 2005 CREG Forecast and Legislative Services Office. $1,500 Wyoming State Fiscal Profile Surplus or Shortfall (in millions of current dollars) $1,219 $1,000 $965 $695 $500 ($200) ($54) $135 $178 ($500) Projected biennium balance on January 1 of each year 13

14 millions of barrels billions of cubic feet Wyoming Natural Gas Production and Prices 1, ,600 Production Price 7.0 1, ,200 1, dollars per MCF Source: Wyoming State Geological Survey Wyoming Oil Production and Prices 160 $40.0 Production Price 140 $ $30.0 $25.0 $20.0 dollars per barrel 60 $ $10.0 Source: Wyoming State Geological Survey 14

15 millions of short tons Wyoming Coal Production and Prices Production Price $12.0 $ $10.0 $9.0 $8.0 $7.0 dollars per short ton 100 $ $5.0 Source: Wyoming State Geological Survey $600 $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 Mineral Severance Taxes: FY FY2004 (in millions of dollars) Other Coal Natural Gas Crude Oil Wyoming Economic Analysis Division 15

16 Distribution of Federal Mineral Royalties: FY FY 2004 (in millions of current dollars) $600 $600 $500 $500 $400 $400 $300 $300 $200 $200 $100 $ Other Local Gov't & Cap Constr LRI/BRA Highway Fund Schl Foundation LRI/BRA = Legislative Royalty Impact Assistance Account/ Budget Reserve Account. $14,000 Total Local and State Assessed Valuation (in millions of current dollars) $14,000 $12,000 $10,000 Other Oil Gas Coal $12,000 $10,000 $8,000 $8,000 $6,000 $6,000 $4,000 $4,000 $2,000 $2, * Other includes other minerals, real and personal property Wyoming Economic Analysis Division 16

17 $2,500 $2,250 $2,000 Appropriations from General Fund and Other Reserve Accounts (in millions of current dollars) Other Public Safety Health and Family Service Higher Education K12 Education $2,500 $2,250 $2,000 $1,750 $1,750 $1,500 $1,500 $1,250 $1,250 $1,000 $1,000 $750 $750 $500 $500 $250 $250 FY93-94 FY95-96 FY97-98 FY99-00 FY01-02 FY03-04 FY05-06 Source: LSO Wyoming Tax Paradox On a per capita basis, Wyoming ranks 2 nd and 3 rd highest, respectively, in state and local government revenue and expenditures. Yet, household tax burden ranks among the lowest in nation. No personal income tax. Mineral taxes, which residents do not pay, significantly ease tax burdens. 17

18 Direct Tax Collections and Public Service Costs: 2001 (For a 4-person family with household income of $40,000 and own home valuing $100,000) Personal Tax Collections Public Service Costs $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 Property Tax Vehicle Registration Alcohol Cigarettes Gasoline Retail Sales $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 State Services K12 Education City/Tow n County Retail Sales $1,320 Gasoline $126 Cigarettes $85 Alcohol $1 Vehicle Registration $475 Property Tax $750 TOTAL: $2,757 County $2,400 City/Tow n $3,600 K12 Education $5,360 State Services $4,440 TOTAL: $15,800 Wyoming s Economic Future? What s the future of energy production and revenue? Outlook for near term is positive. Supply, production, price Coal Bed Methane impacted by permitting/environmental regulations. Is our existing tax structure adequate? Reliant on income from mineral taxes burden largely exported out-of-state. Mineral tax revenue not responsive to changes in total personal income (TPI). No personal income tax Sales taxes are income inelastic (grow 8.9% for every 10% increase in TPI). Currently most businesses exempted or excluded from sales taxes. What about job growth and income? Services and Retail Trade forecast to account for 3 out of every 4 new jobs. TPI is forecasted to grow at an annual rate of 4.2%. How will population growth affect our current tax structure? Jobs boost TPI but have little effect on our state tax revenues. More people, more pressure on the demand for public services. Not a problem as long as mineral income remains strong. Health care: Increasing demand; personnel/facilities shortages Availability/affordability 18

19 Economic Analysis Division EAD Dept. of Administration & Information Wyoming State Government