CHEYENNE - Although Wyoming is in great financial shape, there won't be enough money for the Legislature to start anything new next year, Gov. Dave Freudenthal said Friday.

"We must live within our means," the governor said during a news conference where he unveiled his full budget proposal for 2009-10.

It totals $3.59 billion from traditional revenue sources, about a 3 percent increase, and leaves $13 million on the table for the Legislature to spend.

The budget includes 17 new full-time state government positions.

Two years ago, the governor's budget for the current biennium recommended $3.48 billion and left $140 million for the Legislature.

The budget, he said Friday, has grown significantly because of spending that is now built into the standard budget.

For example, he said, the mental health and substance abuse budget grew from $164 million to $225 million in two years. Community college spending went from $182 million to $216 million.

He also said there is $195 million in the standard budget from individual bills passed by the Legislature.

"The Legislature and the governor are going to argue about who did it," he said. "The truth is we did it together. They passed it. I signed it. So neither one of us can say it's not appropriate."

Although the spending recommendations from traditional revenue sources, including the general fund, are up, total spending, including federal and other funds, would decrease from $8.4 billion to $7.7 billion.

The reason is a reduction in money for capital construction, various endowments, and deposits to the Permanent Mineral Trust Fund.

The budget, he said, reflects a return to more stable revenues with a decrease in natural gas prices.

He emphasized that no agency budget was cut, but the agencies did not get everything they asked for.

He said he believes the Legislature will find as he did that there aren't that many options.

The large discretionary funding decisions come down to financing for local governments, highways and capital construction.

Other spending is mandatory, such as the increase in the state's share of Medicaid costs for nursing home beds.

The governor said he doubts that a bill to increase the fuel tax to pay for highways could get through the Legislature. He supports a matching loan program for community college construction.

"The state is in great shape," he said. As an example, he said that by April, the Hathaway Scholarship Program will be fully funded.

"The thing it spells for the session is we don't get to have a lot of new stuff," he said. "We must live within our means."

Freudenthal, a Democrat in his second term, noted savings in his budget was good given that the Permanent Mineral Trust Fund will exceed the goal of a $4 billion balance by 2010.

He said he also would support allocation of realized capital gains from the treasurer's rebalancing of the state's investment portfolio to the state's "rainy day" fund for future governors and legislators.

To bring spending for school capital construction up to $458 million, Freudenthal is recommending capturing $147 million that is scheduled to go into the Common School Permanent Fund at the end of the current biennium on June 30, 2008.

Senate President John Schiffer, R-Kaycee, had reservations about that move.

"I didn't know he was going to raid that account," Schiffer said. "I'm a little worried about that. We have tremendous expenditures in education. We need to be building that fund. The way to build it is to let the reserve account dump into the fund and let the treasurer invest it."

House Speaker Roy Cohee, R-Casper, noted there isn't much money left for increasing programs or new ones, "which could be a good thing."

He said he did not expect a lot of objections over taking the money for school construction that otherwise would go into the permanent school fund. The exception will be if there is so much school construction activity that contractors' prices increase.

Cohee said part of the public continues to favor saving from the state's revenues. Compared to the state's $4 billion goal for the Permanent Mineral Trust fund, New Mexico's fund totals $5 billion and Alaska's $26 billion, Cohee said.

Sen. Jayne Mockler, D-Cheyenne, said the budget process is a "cat and mouse" game which will begin when the Joint Appropriations Committee gets the governor's budget Dec. 10.

Capital bureau reporter Joan Barron can be reached at (307) 632-1244 or at joan.barron@trib.com.