CHEYENNE -- With the expectation of sharply declining mineral revenues, lawmakers could face some tough decisions about funding for teacher pay raises and public school construction in the coming legislative session.

Members of the Legislature's Joint Appropriations Committee are expected to recommend action today on a cost-of-living component for schools, largely for employee salaries.

After close to a decade of rising mineral prices and production that filled Wyoming government coffers, the national recession has resulted in a dramatic drop in tax revenue for school operations and construction. At the end of the 2011-12 biennium, the decline will result in a projected $37 million deficit in the state's school foundation program, which finances the K-12 public school system.

Sen. Phil Nicholas, R-Laramie, the co-chairman of the committee, asked Monday for numbers on the overall effect of a 4 percent increase in the so-called "external cost adjustment" for schools in the 2012 fiscal year, the second year of the biennium. That scenario will be presented to the committee today.

A total of 80 percent of the adjustment goes for teacher salaries.

"We will lose all our gains in salaries quickly if we can't maintain the external cost adjustment," Nicholas said.

Sen. Curt Meier, R-LaGrange, said he doubts that other states are increasing teacher salaries at this time with the ongoing recession dampening state and local revenues.

Sen. Mike Massie, D-Laramie, a JAC member who also is a member of the Select Committee on School Facilities, said the school foundation fund and the school facilities fund have "a symbiotic relationship."

While the school foundation fund has a projected $37 million deficit, the school facilities fund has a projected $49 million surplus. That works out to a $12 million surplus overall but doesn't take into account any cost-of-living increase for the schools, Massie said.

Massie and Nicholas said one solution would be to intercept money that will flow automatically into the common school permanent land fund on June 30, 2010, the end of the current biennium. The money that could be diverted consists of the amount over $100 million in unobligated dollars in the school foundation program account.

Nicholas said this is a policy decision for the Legislature to make.

Massie said the $354 million that will be swept into the permanent fund without legislative action is the only money available for school capital construction and the cost-of-living adjustment. Once the money is in the permanent fund, it can't be retrieved. Investment income from the permanent account is used to help fund schools.

Rep. Debbie Hammons, D-Worland, citing Wyoming Supreme Court decisions, said savings is a lower priority than schools.

The Legislature's Select Committee on School Finance recommended augmenting school construction money with the unobligated school foundation dollars. The select committee's major recommendation, Massie said, was reducing the budget for school capital construction from the request of $162 million to $82 million for 2011-12 for seven construction projects with focus on capacity.

Rep. Steve Harshman, R-Casper, chairman of the select committee, said this is the smallest budget for school capital construction since the program began.

The seven projects recommended:

* Uinta County School District 4, Mountain View Middle School.

* Uinta County School District 1, Evanston, Horizon Alternative High School.

* Campbell County School District 1, Gillette, Westwood High School.

* Sublette County School District 9, Big Piney elementary school.

* Natrona County School District 1, Casper, Southridge Elementary School.

* Laramie County School District 1, Cheyenne, Davis Elementary School.

* Laramie County School District 1, Cheyenne, Goins Elementary School.

In addition, the select committee recommended $18.5 million for a new financing component to fix schools that need more than major maintenance but less than new construction.

Contact Joan Barron by e-mail at joan.barron@trib.com or by phone at (307) 632-1244.