Legislative Service Office budget and fiscal manager Don Richards delivered a revenue update showing Wyoming has a projected $222 million deficit. Legislative leaders are confident the state has enough money to cover immediate funding needs. (WyoFile/Gregory Nickerson)

Wyoming faces a budget deficit of $222 million for the 2016 fiscal year, budget manager Don Richards told lawmakers on Friday. Low oil prices and a falloff in natural gas prices accounted for most of the decline in projected revenue.

Despite the bad news, legislative leaders seemed assured that Wyoming has enough money to cover near-term spending proposals.

Rep. Steve Harshman, House Appropriations chairman. (WyoFile/Gregory Nickerson — click to enlarge)
Rep. Steve Harshman, House Appropriations chairman. (WyoFile/Gregory Nickerson — click to enlarge)

“We’ve saved enough,” said Rep. Steve Harshman (R-Casper) chairman of the House Appropriations Committee. “We’ll survive this. There have been tougher times, certainly, in Wyoming.”

Senate Appropriations Committee chairman Tony Ross (R-Cheyenne) also remained optimistic. “We can dig out of the hole. I mean, we have money,” he said.

Possible sources for covering the projected deficit include savings and funds left over from previous years that agencies did not spend.

Gov. Matt Mead anticipated $140 million in leftover funds, and the state has $190 million in the Permanent Mineral Trust Fund Reserve Account. Lawmakers could also divert $184 million they had previously planned to transfer to the Legislative Stabilization Reserve Account, also known as the “rainy day” fund. The projected deficit appears because these accounts are not included in the traditional spending accounts. It would require legislative action to spend money from the savings accounts.

Even so there is more than enough money to cover the projected deficit of $222 million, Ross said.

“We have the ability not only to fill the hole, but to consider which projects we wish to fund,” he said in an interview with WyoFile. Lawmakers will bring their own spending proposals in addition to those Gov. Mead (R) recommended in his supplemental budget proposal in December.

Mead proposed adding $156 million to the $3.5 billion in spending for the 2015-2016 biennium, passed by the legislature in 2014. The additional spending would fund big-ticket items such as new passing lanes on highways, aid to local governments, and special projects at the University of Wyoming, among other items.

Wyoming’s Consensus Revenue Estimating Group notes the the price of oil has dropped from more than $100 to $39 per barrel. The projected deficit of $222 million is based on average oil prices of $50 per barrel for the 2015 fiscal year.

Mead stood by his spending increase recommendations in his State of the State address Wednesday, despite the downturn in oil prices, noting Wyoming’s massive savings accounts.

“I think the governor is correct that it is not time to hide our heads in the sand,” Ross said.

Senate Appropriations chairman Tony Ross (R-Cheyenne). (WyoFile/Gregory Nickerson — click to enlarge)
Senate Appropriations chairman Tony Ross (R-Cheyenne). (WyoFile/Gregory Nickerson — click to enlarge)

Lawmakers say the revenue decline won’t make them shy away from “one-time” expenditures. Typically such spending goes to construction, savings, or one-time bonuses, but not to expanded programs or ongoing salary raises.

“Those things I look upon favorably, and I think many members do,” Harshman said. However, the state must work hard to avoid “budget creep” of ongoing expenditures for personnel and programs, he said.

Republican leaders from the House and Senate also took an optimistic tone in a press conference held after the State of the State address Wednesday.

“I am glad that (Gov. Mead) is not backing down on financial commitments that have previously been made based on the anticipated downturn in energy prices,” said Senate President Phil Nicholas (R-Laramie).

Some of those commitments include funding more than $259 million in renovations of the state Capitol Building, and a final payment of $12 million to complete the Gillette Madison Pipeline project.

At center left, Senate Majority Floor Leader Eli Bebout (R-Riverton) and Senate President Phil Nicholas (R-Laramie). (WyoFile/Gregory Nickerson — click to enlarge)
At center left, Senate Majority Floor Leader Eli Bebout (R-Riverton) and Senate President Phil Nicholas (R-Laramie). (WyoFile/Gregory Nickerson — click to enlarge)

“We are in a much better position than we have been in the past to ride out this downturn in oil and gas prices,” said Senate Majority Floor Leader Eli Bebout (R-Riverton). “We have a smaller and more efficient government and have made good investment and saving decisions.”

House Speaker Kermit Brown (R-Laramie) and House Majority Floor Leader Rosie Berger (R-Big Horn) noted agency cuts aren’t on the table. The state already has enough money to fund general government operations for the biennium.

“I look forward to a healthy discussion on where our spending priorities should be with the funds that are available,” Berger said.

Despite the confidence among leaders that Wyoming has enough to spend this session, Wyoming’s budget could suffer if the downturn in energy prices continues into the 2017-2018 budget cycle. Low energy prices today may affect property valuations in the years to come.

That, in turn, could put a strain on K-12 school funding, which is separate from the $3.5 billion General Fund. School funding amounts to an additional $2 billion a year and relies on its own revenue stream — largely from federal mineral royalties and property taxes. If local assessed valuations and tax collections for schools fall too far, that would trigger a constitutional provision for the General Fund to cover the shortfall.

Current projections show Wyoming will receive about $52.4 million less than previously projected in K-12 education revenue for 2016. If mineral prices do not rebound, Wyoming may collect nearly $250 million less education revenue for the 2017-2018 biennium. Funds for building new schools, which come from sale of federal coal leases, are expected to dry up in 2018 because mining companies aren’t buying new coal leases.

Lawmakers will likely take an in-depth look at spending and savings policies after the legislative session ends. Senate President Nicholas and House Speaker Brown are championing the effort, which they call Vision 2020.

For now, lawmakers will focus on immediate spending proposals, while bracing for continued uncertainty caused by Wyoming’s boom and bust economy.

“That’s the way economies work,” Harshman said. “There’s nothing guaranteed in life, and certainly not in our state budget.”

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Gregory Nickerson

Gregory Nickerson worked as government and policy reporter for WyoFile from 2012-2015. He studied history at the University of Wyoming. Follow Greg on Twitter at @GregNickersonWY and on www.facebook.com/GregoryNickersonWriter/

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