Permanent Wyoming Mineral Trust Fund (PWMTF)

What Is the Permanent Wyoming Mineral Trust Fund (PWMTF)?

The Permanent Wyoming Mineral Trust Fund (PWMTF) is a investment fund owned and managed by the state of Wyoming. Laid out in 1975, It is the most seasoned and biggest government fund in the state, with assets of almost $8 billion as of June 30, 2020.

Understanding the Permanent Wyoming Mineral Trust Fund (PWMTF)

The Permanent Wyoming Mineral Trust Fund is a type of permanent fund called a sovereign wealth fund (SWF). SWFs are common government funding devices. They comprise of investments and assets that the government isn't allowed to cash out or drain. Notwithstanding, while it can't contact the principal, the government ordinarily has the privilege to spend any revenue these investments produce on fitting capabilities and expenses.

The Permanent Wyoming Mineral Trust Fund (PWMTF) is one of nine non-benefits funds managed by the State Treasurer's Office. It takes care of part of the costs of running Wyoming and acts as an endowment for the state. It pads the impact of the state's economic cycles. As Wyoming is luxuriously supplied with natural resources, its economy relies upon commodity prices, and subsequently is prone to boom and bust cycles. By rationing its wealth, the PWMTF guarantees people in the future share in the gains produced by these finite resources.

The PWMTF is funded by a portion of severance taxes on mineral revenues and periodic direct legislative assignments, while income from the fund goes to the state general fund. The biggest mineral severance tax supporters of the PWMTF since its initiation have been natural gas, coal, and crude oil.

Initially, the PWMTF just invested in bonds; as a matter of fact, the fixed-income requirement was revered in the state constitution. Be that as it may, in 1996, Wyoming citizens approved an amendment to allow the fund to invest in stocks too. Up to 70% of the PWMTF might be invested in equities.

35%

The percentage of the total market value of Wyoming's investment portfolio that the PWMTF addresses. As such, more than one-third of the state's wealth is produced by the Permanent Wyoming Mineral Trust Fund.

The PMTF has a 5% spending policy, and that means that the maximum amount accessible to the state lawmaking body to spend is 5% of a five-year average of the fund's market value. Notwithstanding, just income, dividends, and capital gains can be spent.

Performance of the PWMTF

The value of the PWMTF increased consistently from its beginning, earning twofold digit annual returns for its initial 11 fiscal years through 1986. The fund obscured $1 billion in assets in 1989 and has earned a positive return in each fiscal year of its presence. Through the fiscal year 2015, the PWMTF had created $4.5 billion in interest income for the state's general fund.

As of the fiscal year 2020 (ending in June), the PWMTF had a market value of $7,961,095,743 on a cost basis of $7,561,927,587. It earned $243 million in income, dividends, and capital gains.

For the decade 2010-2020, the PMTF returned 7.15%.

History of the PWMTF

The beginning of the Permanent Wyoming Mineral Trust Fund traces all the way back to 1968 when Wyoming Governor Stan Hathaway presented a bill in the state lawmaking body to institute a severance tax on minerals in the state. Hathaway made this move after the balance in the state's bank account had fallen to about $80. The bill passed in the 1969 legislative session, laying out a 1% severance tax.

Wyoming lawmakers tried to bring the tax up in 1974 yet Hathaway promised to reject the increase except if part of the tax revenues were set to the side in a permanent mineral trust fund, making ready for the entry of the PWMTF. It was formally made by an amendment to the state constitution in November 1974.

For its initial 13 years, 2% of severance tax revenues were utilized to develop the account. Afterward, the requirement was lowered to 1.5%, and 0.5% was redirected into the state's savings account. In 2005, an extra statutory 1% was added to the constitutional requirement, carrying the total to 2.5% of severance taxes which were kept in the PWMTF.

Illustration of the PWMTF

In 2016, a sharp decline in coal production combined with low oil and natural gas prices prompted a revenue shortfall for the state. The Wyoming State Legislature, during the 2016 budget session, accommodated a redirection of the 1% statutory severance tax from the PWMTF to the general fund to address the shortage.

Features

• The PWMTF invests in the two bonds and stocks, yet just its earnings, from capital gains, interest income, and dividends, can really be spent.
• Funded to a great extent by severance taxes on minerals and other natural revenues, the PWMTF acts as an endowment for Wyoming, covering the costs of running the state.
• The PWMTF is the state's greatest sovereign wealth fund, with a market value of around $8 billion.
• The Permanent Wyoming Mineral Trust Fund (PWMTF) is a investment fund owned and managed by the state of Wyoming.