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Soft energy markets mean more financial trouble for Wyoming

October 24, 2016

CHEYENNE, Wyo. (AP) — Wyoming Gov. Matt Mead intends to call on lawmakers to draw an undetermined amount from the state’s $1.5 billion rainy day fund to cover government operations in the face of sagging energy revenues, he said Monday in response to the latest state revenue forecast.

But while Mead said he’s confident Wyoming will get through the current two-year budget cycle, neither he nor state lawmakers have identified how it will continue to fund its K-12 school system in coming years given falling coal revenues.

The state’s Consensus Revenue Estimating Group, a panel of financial experts, released its annual revenue forecast Monday.

The group projects revenues will fall about $156 million short of covering the two-year, $3-billion general fund budget that started in July. The projected shortfall comes despite Mead’s cutting $250 million from agency budgets this summer.

Mead emphasized to reporters in Cheyenne Monday that roughly two-thirds of the $156-million shortfall is money that state law requires to be deposited in a reserve fund. Discounting that, he said the actual shortfall facing the state to continue to fund the ongoing budget is just over $50 million.

Mead said he won’t propose any additional cuts to state agency budgets in response to the revenue forecast but will present a draft budget to lawmakers in early December. The Legislature will convene in January.

State lawmakers early this year approved spending roughly $300 million from the state’s so-called rainy day fund, leaving about $1.5 billion. Mead said he doesn’t know yet how much he will propose the state should spend from the fund next year.

“We have to be conservative in the use of the rainy day fund, but we are not going to cut our way back into prosperity,” Mead said. “When 70 percent of your revenues come from minerals, you have to recognize that is a big deal.”

Mead said he will ask lawmakers again to expand the Medicaid program in the state to offer health insurance to about 20,000 uninsured adults, a move his administration says would save the state millions on other health programs. Lawmakers have shot down the expansion proposal repeatedly, saying they don’t trust federal promises to continue to pay for expanded coverage.

Democratic Sen. Floyd Esquibel, of Cheyenne, said Monday he appreciated Mead’s support of Medicaid expansion. “Some people are really hurting,” Esquibel said.

The CREG report states that the decline in coal production that Wyoming has experienced so far this calendar year has been unprecedented. “Surface coal production in Wyoming declined by 58 million tons, or 31.8 percent, year-over-year for the first six months of calendar year 2016,” it states.

“There is not a lot of optimism in any of the three major commodities, oil, coal and natural gas,” said CREG Co-Chairman Alex Kean said Monday. “And what the state experienced in 2016 is decreasing in price and production in all three of those at the same time.”

Wyoming, the nation’s leading coal-producing state, has seen federal coal-lease bonus payments and mineral royalty payments drop by roughly 50 percent, or $500 million a year, over the last decade.

Mead said it’s not clear how the state will fund schools in response to lost coal revenues. “We don’t have that answer yet, but it is a looming problem,” he said.

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