Wyoming lawmakers are short $156.6 million for the current two-year funding cycle, according to a report released Monday morning.
That means when legislators convene in January in Cheyenne, they will have to make up the difference through program cuts, tax increases or spending the rainy day fund.
The current shortfall is the result of the largest revenue decrease in recent memory.
The report was released by the Consensus Revenue Estimating Group. CREG is composed of economists and fiscal analysts from the executive and legislative branches, a common practice among states to ensure revenue projections are not politicized.
Don Richards, a legislative employee who is a member of the group, presented most of the report to members of the Legislature’s Joint Appropriations Committee, which was meeting in Casper.
When the Legislature adopted the roughly $3 billion budget in March, it balanced: Spending matched revenue expectations. But in the months since the Legislature adjourned, revenues continued to fall.
In the spring, there was an unprecedented decline in coal production, Richards said.
That, combined with low oil and natural gas prices throughout the year, resulted in minerals taxes dropping to lows not seen since 2003. Sales taxes were 20 percent lower in the fiscal year that ended June 30, compared with the previous fiscal year.
The state saw no capital gains, which can be a lucrative source of income on the state’s investments.
As a result, this is the largest documented single drop in revenue over the course of a fiscal year since CREG was established in 1983, the report states.
The shortfall would have been worse had Gov. Matt Mead not made budget cuts over the summer, which amounted to saving $250.7 million, the CREG report states. Wyoming also will receive an estimated $61 million from a portion of the severance tax, known as the 1 percent diversion, which will be available for state government, instead of stashed away in savings. The Legislature decided to not save the 1 percent this year.
The report also announced the final number of the shortfall from last fiscal year, which policymakers had tried to estimate for months: $148.3 million.
Lawmakers were digesting the report Monday.
Rep. Steve Harshman, a chairman of the Appropriations committee, said his colleagues have no appetite for raising taxes.
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“I think they’re more on the reduction side, and spending the savings,” the Casper Republican said.
In Wyoming, public schools are not paid for from the state’s general fund, as in some other states. Instead, there is an account that pays for K-12 operations. In recent years, lawmakers spent $3 billion during each two-year budget cycle on schools. But the shortfall for that account is expected to be $370 million a year, over $700 million for a biennium, if the Legislature continues to use the current funding method to educate children.
In addition to the JAC, over 60 people filled the room, including many lobbyists from Cheyenne as well as lawmakers from Casper, Cheyenne, Lingle and Sheridan.
Sen. Ogden Driskill, R-Devils Tower, woke up at 5 a.m. to drive three hours to Casper for the presentation.
“This is our bible for the session,” he said.
About 50 percent of the state’s operating funds come from coal, oil and natural gas. CREG projected production levels and prices into the future.
The state’s economy may be stabilizing, although the new norm may be lower than in recent years.
Richards noted natural gas prices have begun to climb.
“The number of rigs operating in the state have rebounded significantly,” he said.
In September, there were 16 rigs drilling for oil and gas in Wyoming, up from seven in June. However, in August 2015, there 25 rigs and in August 2014, there were 56 rigs, he said.
In the fiscal year that ended in June, 300 million tons of coal were produced in the Cowboy State at a price of around $13.50 a ton. That is decreasing, according to the CREG report. Projections show by 2022 the state will produce just 275 million tons of coal at about $13.25 a ton.
Wyoming is the nation’s top coal-producing state. However, low natural gas prices have hit coal hard. Over the long term, regulations combating climate change will force utilities to create more electricity from natural gas power, which will decrease demand on coal.
The CREG report also found that last fiscal year, 70 million barrels of oil came from Wyoming at an average price of $36 a barrel. While production will decrease, prices will climb, the report states. By 2022, Wyoming will produce 62 million barrels. But the price will be $50 a barrel.
Natural gas prices will also increase, while production will decrease, the report projected. In 2016, Wyoming produced about 1.9 billion British thermal units at a price of $2.50 per BTU. By 2022, the state will produce about $1.7 billion per million BTUs at a price of $3.25 a million BTU.