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State revenue forecast improves, but budget cuts still anticipated

Oct 23, 2012 By Ben Neary, The Associated Press

CHEYENNE -- Wyoming Gov. Matt Mead says he's still requiring state agencies to prepare for 8-percent budget cuts even though the latest state revenue projections show improvement.

The state's Consensus Revenue Estimating Group on Monday released a report projecting an extra $85 million in state revenues for the two-year budget cycle that runs through mid-2014. Extra money, only a fraction of the $3.2-billion budget the Legislature approved early this year, is still about $30 million behind the projections the group issued last October.

Monday's report also said Wyoming finished the last budget cycle with more than $200 million more than analysts had predicted early this year.

"I think that it's going to be OK," Mead said of the state's financial future. "I don't think we're going to have any big plunge, but I think for the next 18 months to two years we're going to remain relatively flat. That's my crystal ball."

Mead has been in budget meetings with state agency directors recently preparing to submit a draft budget ahead of the legislative session that starts in January.

In an interview with The Associated Press, Mead said he's proceeding to require state agencies to outline how they can make the 8-percent cuts. The Legislature this spring required state agencies to prepare for 4-percent cuts and the governor tacked on the additional 4-percent cut requirement.

Wyoming, which has no corporate or personal income tax, derives most of its revenue from taxing mineral production. State revenues are closely tied to the rise and fall of the energy industry's perpetual boom-bust cycle.

Mead said people in the oil and gas industries tell him that an increase in natural gas prices and the demand for oil is likely over the next 18 months. However, he said the demand for coal may continue to sag.

The revenue forecast generally calls for Wyoming's General Fund revenues to remain flat from the 07-08 biennium through the 17-18 biennium. Meanwhile, Mead pointed out that Congress recently voted to strip more than $700 million over the next 10 years from the state by cutting abandoned mine cleanup funds.

While revenues promise to be flat, Mead said Wyoming also faces some big-ticket items, including an annual tab that's been running about $40 million for wildfire suppression and the need to address landfills in the state, a task that could cost up to $400 million over several years. "Then, we've got roads that we've got to be concerned about, and local governments are still a priority for me -- the infrastructure needs of local governments," he said.

Mead said he may suggest that state lawmakers reduce the amount of money from mineral taxes that the state puts into permanent savings. Currently, the state Constitution requires 1.5 percent of state mineral tax dollars into permanent savings. State law requires saving another 1 percent, currently more than $100 million a year.

"Is it appropriate to consider continuing saving at a robust rate, but slowing it down from where we were at the boom times, and using a portion of that 1 percent for some one-time expenditures?" Mead said.

Sen. Phil Nicholas, R-Laramie, is chairman of the Senate Appropriations Committee. He said Monday he agrees with Mead that the state needs to proceed with the 8-percent budget cuts.

"The good news is that our budget for this biennium is still intact," Nicholas said.

He said nothing in the new forecast changes the outlook for the next two-year state funding cycle.

Nicholas said it's too early to say how the Legislature may view Mead's suggestion to cut the amount of state revenues going into savings. However, he said the proposal would likely be hard to sell to veteran lawmakers who were around for the last decline in state revenues.

"That is your last lifeline for resources available to manage your budget," Nicholas said. He said the state needs to arrest the recent dramatic increase in government spending, not continue increasing budgets until the state has no lifeline left.

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