It’s the beginning of the end of the federal funds that bailed Wyoming out of its last financial bust, according to Gov. Mark Gordon, who submitted his written budget recommendations to the Legislature on Friday and warned lawmakers of tough decisions that lie ahead in the 2024 legislative session.
“The Legislature has thoughtfully used some of the unprecedented congressionally mandated funding of the past few years to backfill many of the cuts we were compelled to make to balance our budget,” Gordon wrote in his budget letter.
Now, “as the federal stopgap funding tsunami recedes,” Gordon wrote, lawmakers are tasked with making a “responsible budget” and will have to reconsider “difficult cuts recommended just a few years ago.
“A realistic and conservative approach means Wyoming must strive to prepare for a future that could well see declining revenues and continuing inflationary pressures despite all our efforts to the contrary.”
While the financial short-term looks rosy for Wyoming, the state’s revenue streams, which are highly dependent on the fossil fuel industry, remain volatile. In just the last four years, Wyoming has “experienced two opposite amplitudes of the proverbial revenue pendulum,” according to the latest report by the Consensus Revenue Estimating Group, the body tasked with developing projections for the state.
One upswing was derived from extreme temperatures that catapulted natural gas demand prices, boosting what state forecasters had predicted for revenue in the short term.
Taking the long view, Gordon’s budget “proposes living within our means, not just in this biennium, but in those to come. It keeps ongoing spending at a level we can sustain.”
For Gordon, that includes socking away surplus revenue into savings, expanding property tax relief and the 988 suicide prevention hotline and increasing funds for Wyoming to defend its natural resource “interests” in court. It also means reducing funding for senior citizens, long-term care facilities, mental health services and people with developmental disabilities.
“These choices are painful and we must recognize they could be consequential for those who have come to rely on our state’s federally subsidized capacities over the past couple of years,” Gordon wrote.
As part of this year’s supplemental budget, the Legislature put a record $1.4 billion into savings — evenly splitting approximately $735 million into the Permanent Mineral Trust Fund and the Common School Permanent Land Fund, with the rest going into lower-earning but accessible reserve accounts. That largely reflected what Gordon had asked lawmakers to do.
Now, the governor is asking lawmakers to add $530 million split evenly between the two permanent funds and increase the rainy-day fund to $1.6 billion. That leaves more than $48.9 million for lawmakers to consider for other savings or investments.
Beyond savings, lawmakers have to contemplate the end of federal American Rescue Plan Act relief funds that helped “alleviate the need for further cuts beyond those significant reductions we made in 2020,” Gordon wrote.
“We now must come back to earth and take responsibility for our own future.”
Lawmakers will need to substitute general funds for relief dollars that were used as revenue replacement during the last two-year budget cycle. That spending accounts for $323 million, mostly in Department of Corrections and Department of Health funding.
State revenues were higher than expected — there’s an additional $429.2 million to work with for the remainder of the current budget cycle and the 2025-26 plan — meaning lawmakers have some flexibility.
“That provides a cushion to prevent huge cuts to programs, but allows us to address increasing costs of operation,” the governor wrote.
Gordon points to the Health Department as a key example. It would cost about $110 million in general funds to maintain the current level of services in the upcoming two-year budget cycle. In 2020, a revenue nose dive forced Gordon to propose cutting much of that, but one-time federal matching funding helped the state avoid severe reductions impacting senior citizens, long-term care facilities, mental health services and people with developmental disabilities.
“We will not enjoy the same opportunities today,” Gordon wrote. His budget proposes “some difficult reductions that are consistent with preserving ongoing spending at an appropriate level.”
In other health service areas, Gordon has called for maintaining community mental health centers and increasing funding for youth mental health providers. He also asked lawmakers to support expanding the 988 suicide prevention hotline capacities to add text and chat services. The service faces a fiscal cliff.
Other details and what’s next
To alleviate the pain of rising residential property taxes, Gordon is asking the Legislature to add $20 million to the refund program under the Department of Revenue. Separately, lawmakers will consider a bill to expand the program to more income levels. Last year, that program distributed $8.3 million to a record number of about 9,000 households.
Gordon is asking lawmakers for several funding items to allow Wyoming to defend its “interests” in court. That includes an additional $1 million to the Federal Natural Resources Planning Account and funding the Department of Environmental Quality with $3.4 million so that Wyoming may “control her own destiny in the current environment of federal activism.”
To continue the work of the Wyoming Innovation Partnership — an initiative intended to build workforce resilience and boost the state’s economy — Gordon is asking for $30 million, which was previously funded at $55 million.
The governor will make his budget presentation to the Joint Appropriations Committee on Dec. 12. From there, it’s up to the Legislature when it convenes next year for the budget session whether to follow his recommendations. The session begins Feb. 12.