The past fiscal year was much more lucrative for Wyoming than financial forecasters predicted.
All major state revenue streams exceeded what was estimated in January, according to the October Consensus Revenue Estimating Group report. The new CREG report, released on Wednesday, partially credited high oil and natural gas prices for the bolstered revenue that feeds the state’s primary operating accounts.
In a press release, Gov. Mark Gordon called it welcome news but cautioned against excessive celebration. “This is the time when Wyoming must look to her future and make wise investments that will bear fruit for future generations,” he said.
That caution is rooted in the reality “that there has been a lot of volatility in our mineral revenues over the past few years,” Gordon said. In 2020 the pandemic and a downturn in oil and coal production spelled a projected $1.5 billion shortfall for Wyoming. But revenues rebounded in 2021 into 2022 as markets for coal, oil and natural gas came back to life.
COVID-related funding from the federal government also provided support, but the intense swings of the last three years for Wyoming are indicative of a state economy overly reliant on unstable revenue streams, the report states.
“Wyoming’s state revenue streams are volatile,” according to the CREG report. “In the last biennium this has become even more pronounced and is unlikely to abate.”
Legislative Service Office Budget and Fiscal Manager Don Richards echoed that to lawmakers Wednesday.
“I know I sound like a broken record. But soon, I will have somewhere between 25 and 35 new legislators that I can reiterate that point to,” Richards said during a Joint Appropriations Committee meeting in Cheyenne.
As an example of the wild swings, in 2020, severance tax collections were the lowest level in 16 years, according to the report. In 2022, severance tax collections were the second highest in the past decade. The group expects volatility in oil and natural gas markets to “have an outsized impact on state revenue collections,” and despite the recent rebound in both coal production and pricing, the group forecasts that coal will continue its overall downward trend.
“External factors, including, but not limited to, geopolitical events, changes in energy markets and demand preferences, weather, available infrastructure and infrastructure outages, world financial markets, pandemics, monetary policy, federal regulations, and federal fiscal policies, continue to dramatically influence fluctuations in revenue,” according to the report.
By the numbers
Revenue for the General Fund and the Budget Reserve Account — the primary accounts used for state programs and services — exceeded the January forecast by a combined $329.4 million, according to the report. The group also revised its revenue forecast for fiscal years 2023-24 upward by $738.8 million since January.
Federal mineral royalties ($109.4 million) and severance taxes ($103.5 million) drove most of the higher-than-forecast revenue, while sales and use taxes ($49.4 million) and investment income ($45.8 million) also contributed.
The October report is part of the state’s official fiscal estimating process, which entails extensive data compilation and analysis done by CREG. The governor and lawmakers rely on the annual report to craft a budget. Each January, in order to consider the latest available data, an additional report is usually released with some revisions.
For now, Gordon will rely on the October report to prepare his supplemental budget, which points to $912 million available for him to make recommendations.
Gordon is expected to release his supplemental budget proposal on Nov. 18.