Senate Chambers

Senators work in the Wyoming Senate chambers on Jan. 11 at the Wyoming State Legislature in Cheyenne. The most recent report showing what Wyoming can expect in revenue is better news than predicted.

File, Star-Tribune

CHEYENNE – Wyoming has slightly more cash than previously estimated because of a prediction that natural gas and coal are increasing in price and production, according to a new revenue report presented Monday morning.

But even with $900,000 more in the fund that pays for general government operations, the state is still in the hole in the current two-year, $3 billion budget cycle by $156 million.

The Consensus Revenue Estimating Group presented the report to the Joint Appropriations Committee on Monday morning in Cheyenne. CREG is composed of fiscal experts from the executive and legislative branches so as to not politicize revenues.

The annual January report is key for the Wyoming Legislature, which is meeting through March and must make adjustments to the state’s budget based on the CREG estimates.

Legislators on the appropriations committee had technical questions about interest rates and asked for repeated explanations of some parts of the report. They did not give any indication, as they go to work on the budget, whether they will save the $900,000 or use it to fill the budget gap and restore state programs.

The report was encouraging, said Sen. Bill Landen, a Casper Republican who is a member of Appropriations.

“Any good news at this point is a drink of fresh water,” he said. “The caution is that the deficits far outdistance the gains. So we still have a lot of work to do.”

Earlier this year, Gov. Matt Mead made $250 million in state cuts, as energy revenues plummeted.

The state is expected to see a sizable reduction in investment earnings — $18.8 million – in the accounts that fund state agencies, including the $1.6 billion rainy day fund.

“There’s less to invest every month,” which results in lower returns, said Don Richards, a staffer for the nonpartisan Legislative Service Office.

Projections show there will be a modest reduction in sales taxes in Wyoming of about $8.1 million of a projected $405 million in collections.

The drop is attributed to a decrease in Wyoming’s population. While drilling has increased, employment hasn’t risen much. People are spending less, Richards said.

“Personal income continues to be weak in Wyoming, and oil and gas employment has not increased,” he said.

Despite the lower investment income and sales tax drop, the revenue report showed an overall increase of nearly $1 million in the government operations fund.

“Those are offset by increases in severance taxes, primarily due to coal and natural gas,” Richards said.

The revenue estimating group believes natural gas prices will increase. In November, natural gas sold on average $2.25 per 1,000 cubic feet. In 2017, it’s expected to sell for $3.

In 2017, coal production is expected to increase by 10 million short tons to 310 million, Richards said.

“All of this points toward some optimism,” Richards said. “We look forward to potential increases in the future, but we largely maintain our price and production estimates.”

In Wyoming, K-12 education is funded separately from general government operations.

In October, CREG predicted a $58 million decrease in the two-year, $3 billion education operations budget. Now it estimates a $72 million deficit. The increase is mostly due to the department owing interest on a large loan.

The Wyoming Department of Education borrowed over $400 million to keep schools running this year from another state education account. The department must repay the loan plus 6 percent annual interest.

A bill wending through the Wyoming Legislature this year would eliminate the interest rate.

“Tomorrow’s (education shortfall) would look completely different if that passes,” Richards said.

School construction and major maintenance is paid through a separate account that’s going to be down $700,000 – a relatively low amount for the $228 million fund.

However, the fund will soon be dry. Coal lease bonuses on federal public land fill the account. And coal companies in northeastern Wyoming are not bidding on land to expand mines.

Next year, the state will receive just $5.8 million in coal lease bonuses. The money would have normally been transferred to Wyoming this year, but it is delayed, the result of sequestration in Washington. Coal companies pay the bonuses to the federal government, which distributes them to Wyoming. During sequestration, the feds withheld money for several government programs.

Richards is not optimistic that more coal lease bonus money is coming to Wyoming soon. Many coal companies in Wyoming are struggling, he noted.

“They would have to, of course, have the cash to make those future payments,” he said. “And several of the coal companies are either coming out of bankruptcy or facing a challenging commodity environment.”

Follow political reporter Laura Hancock on Twitter @laurahancock

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Star-Tribune reporter Laura Hancock covers politics and the Wyoming Legislature.

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