Wyoming Gov. Matt Mead has placed a freeze on state hiring in the face of an expected budget shortfall he predicts could approach $200 million by next summer.
Falling energy prices have undercut the revenue projections that Wyoming lawmakers relied on in crafting the current budget. That leaves Mead and other state leaders on edge as they wait to see how much lower new revenue estimates will be when they're released later this month.
"We're going to have to make a lot of tough choices," Mead told reporters Wednesday in Cheyenne. He said he won't make specific cuts until he sees the numbers, but he stressed that state law doesn't allow the state to operate in the red.
A shortfall of up to $200 million represents a substantial chunk of the state's roughly $3.5 billion general fund budget for the current two-year cycle that runs through next June.
In addition to the hiring freeze projected to save the state $18 million through next June, Mead announced that he has ordered state agencies to review their programs and look for savings. The financial scrutiny extends as far as delaying the routine replacement of state vehicles and computer equipment, he said.
Mead said he's not considering layoffs for state employees. He said that trying to make up such a large anticipated shortfall through layoffs would require such deep cuts that it would disable state government.
Mead added that he's not considering any tax hikes to increase revenues. He said they would be hard to make a case for raising taxes when the state has significant savings. The state imposes no personal or corporate income tax.
Wyoming, however, should consider dipping into its $1.8-billion rainy day fund, Mead said.
"I think the rainy day fund is appropriate because, in my view, and even more so when I talk to counties and towns, it's raining," he said. Money from reserves would help the state continue to pay for education and other programs, he said.
Mead said he will recommend the state continue to fund local governments. The current budget put up $175 million for that purpose. He said the state needs to guard against stopping all capital project spending, which has a multiplier effect in the state economy.
The Legislature this year rejected Mead's call to accept federal funding to expand the Medicaid program to offer health insurance coverage to about 17,000 working poor in the state. Many lawmakers said they didn't trust federal promises to maintain scheduled payments of more than $100 million a year for the program.
Mead said he has instructed the Wyoming Department of Health to prepare two proposed budgets for lawmakers to review when they convene for their budget session early next year in Cheyenne: one with and one without the federal funding for Medicaid expansion.
"As we are struggling revenue-wise, are we as a state again going to make a decision to send whatever that amount is, $40- to $60 million, to other states for the benefit of their citizens?" Mead said. "That doesn't make sense to me."
The state's Consensus Revenue Estimating Group, made up of agency heads and financial experts, issued revenue projections in January betting that natural gas prices would average $3.80 per thousand cubic feet this year. The state is a major producer of natural gas.
Gas was trading in the neighborhood of $2.60 per thousand cubic feet on Wednesday in the state.
Wyoming's coal industry, another mainstay of the state's economy, also has taken a beating in recent years. Coal production in Wyoming has fallen by 17 percent since 2008, according to a report by the University of Wyoming issued this spring.
Sen. Tony Ross, R-Cheyenne, chairman of the Senate Appropriations Committee, said Wednesday that he understands the state could be facing a shortfall of up to $400 million for the 2017-2018 standard budget.
Among other options, Ross said the state could consider ending its current practice of sending an extra 1 percent of severance tax revenues from mineral production to permanent savings, which he said represents $100 million or more annually.
"There's no doubt that this is going to be a tough budget cycle in which everybody's going to have to tighten their belts," Ross said.