Wyoming Gov. Matt Mead has called for increasing spending on various social services in the state, saying that cuts made to weather the economic downturn caused by the energy bust have gone too far.

Mead made the recommendations as part of his budget presentation Thursday morning.

The governor has recommended that state lawmakers increase the Department of Health’s budget by $48 million and argued against allowing $17 million in cuts proposed by the department as part of a cost-saving effort. He also called for the Legislature to boost spending for the Department of Family Services.

While Mead accepted the Legislature’s decision last year to cover the education funding shortfall — up to $282 million — with reserve dollars, he said that even with a boost in spending for certain agencies his budget proposal entirely covered state government operations with money to spare.

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“We were able to put together a budget in its entirety without using any rainy day funds,” Mead said at a press conference. The budget totals about $2.9 billion, with $24 million left over.

Many of the cuts to both social services, as well as other departments including agriculture and corrections, had been implemented for long enough to determine that they were hurting those agencies’ ability to deliver services, he said.

The governor noted that he had declined to accept proposed cuts to the health and some other departments that had been proposed by the agencies themselves. However, he said the proposed cuts came at the request of the Legislature, which sought to reduce state spending by $13 million last year.

Mead said that he had found about $9 million in cuts but rejected additional spending reductions that would have reduced services too severely. Some suggestions went too far, he said, such as allowing the Department of Health to privatize a state-run assisted living facility and nursing home.

“I think before any of us go down that road to privatize those two places we would need a solid plan with assurances for long-term care,” he said.

Mead also rejected a request to eliminate spending on immunizations, among other items.

Other notable parts of the budget proposal include:

  • Allocating $500,000 to the state’s Homeland Security emergency fund, which currently has just $695;
  • reinstating and increasing funding for the Wyoming State Fair to $1 million over the next two years;
  • allocating an additional $500,000 for brand inspection by the state livestock board following cuts last year;
  • allowing the Department of Health to collect $1.7 million in federal funding for community mental health and substance abuse programs;
  • allocating $8.3 million for the Department of Family Services to renew contracts with the two tribes on the Wind River Reservation;
  • boosting the State Public Defender budget by $1.9 million;
  • increasing the Department of Corrections budget by $1.4 million to allow raises for employees
  • spending $37.5 million in rainy day funds on Endow, Mead’s economic diversity initiative.

Mead noted that his proposed budget represented $400 million less in spending than 10 years ago, when his predecessor Dave Freudenthal, a Democrat, was in office.

Just a recommendation

It is unclear whether lawmakers will go along with the exception requests in Mead’s proposed budget, though the core of the budget provides a useful starting point for the Legislature to fund state government. The body convenes in February for a short, four-week session to set the budget for 2019-2020.

House Speaker Steve Harshman, R-Casper, said that he was largely supportive of reversing cuts to the health department and believed other lawmakers were as well.

“Budgets are people and 40 percent of our budget is the Department of Health and it goes directly to people and those cuts are being fully felt across the state,” Harshman said. “So I think folks are going to be really open to those proposals.”

Senate President Eli Bebout, R-Riverton, has been more critical of state spending. Bebout was traveling and did not respond to a request for comment Thursday.

But Harshman said that where Mead’s budget proposal relies on several sources of one-time funding, including unspent funds rolled over from last year, he expects the Legislature to seek more stable funding models.

The governor’s budget finds funding in a handful of somewhat unique ways. For example, it calls for using $80 million in leftover severance tax dollars from the current two-year budget cycle, using $10 million of previously allocated school construction funding and eliminating a cap on state royalty deposits into the construction account, a boost of $80 million that has also been discussed by the Legislature’s revenue committee.

Mead said that revised revenue projections for the next two years eased the process of making a budget.

“We do have some challenges, but because revenue has improved the challenges have not been as bad as we thought they were going to be,” he said.

CREG eased woes

In October, the Consensus Revenue Estimate Group estimated the state will have $200 million more than anticipated to spend over the coming budget cycle. That increase fully covers the cost of state government operations, the Legislative Service Office said at the time. However, it does not fully close the funding gap for K-12 education in the state or take into account other expenses like discretionary payments to local governments.

The education account has a $340 million deficit over the next two years. Earlier this year, state lawmakers passed legislation that would cover any shortage through the rainy day account. Mead said that while he does not support spending reserves as a long-term strategy for education funding, he did not propose an alternative in his budget.

“It’s an OK option for this biennium,” Mead said. “We’re not just going to short (schools).”

Mead also said it was hard to decide what to spend on schools, or where those dollars should come from, before the report on education funding recalibration is complete. A draft of the report was presented to lawmakers this week but the final copy is not due until January.

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The governor has requested that the Legislature distribute $105 million to local governments, a payment that was initially discretionary but that cities and counties have begun to rely upon. However, after the drop in revenue last year, the Legislature was forced to pay the $105 million out of its rainy day fund. Harshman said that Mead’s request that the money come from the general fund rather than the Legislative Stabilization Reserve Account was not a true solution to the question of how to fund local governments.

“We’ll fix the local government issue,” Harshman said. “But rolling it into the general fund and not spending it out of the LSRA doesn’t fix it.”

Bebout and Harshman have directed the Legislature’s Revenue Committee to propose plans to raise revenue by $100 million to $300 million ahead of the budget session in February with an eye toward closing the education funding gap.

But Mead said he believes it is now unlikely that any of the more dramatic revenue proposals that have been considered, such as statewide increases to sales tax or property tax, will pass. The increased revenue projections mean lawmakers may accept smaller increases to specific taxes, such as tobacco or lodging, but may be unwilling to do more.

Mead said he hopes the discussion on tax reform continues. The state currently receives roughly 70 percent of its public revenue from various taxes levied on energy companies, a tax structure that makes the state highly susceptible to booms and busts in the commodity market and poses a challenge for economic diversification.

“We’re a very conservative state. Nobody wants to raise taxes,” Mead said. “At the same time, I think the Legislature ... should continue to work on it along with all of us.”

Harshman said that he was largely supportive of the substance of Mead’s budget, even if he differed on some of the funding sources suggested. He also acknowledged that some of the disagreement on funding was likely due to the fact that the governor is less able to make policy recommendations on reallocating funds or changing investment strategies in the same way that the Legislature can choose to do.

“We’ll probably get to a similar point just maybe through different roadways,” Harshman said.

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