CHEYENNE — Most expected Gov. Mark Gordon’s first budget of his administration to be defined by significant spending cuts and reduced services across the board.

Instead, citizens of Wyoming were greeted Monday morning with a budget containing an increase to education funding, few programmatic cuts and a warning: Though Wyoming has enough money to pay its bills today, its traditional revenue sources are changing – meaning the state must focus on finding new revenue or expect cuts later.

Gordon’s budget increases the state’s education funding where it was expected to be cut, and proposes little reduction in ongoing spending. Noting the state’s changing future, however, Gordon insisted on working with the money Wyoming does have, declining to fund 127 positions that were requested across state government while slashing the state’s capital construction funding by roughly one-third – a reduction of $55.3 million.

Though Wyoming has found relative stability for now, one thing is clear: “Additional spending cuts are on the horizon and appear imperative to keep Wyoming moving forward,” Gordon wrote in his budget message.

While state agencies remain largely unscathed, an October report by the Consensus Revenue Estimating Group showed that revenues are expected to fall by more than $185 million over the next three years, while investment income – another significant driver for the state’s budgets – is projected to level out over the coming decade.

“I have spoken about the changes that have taken place in the energy industry, changes including declining coal production and low natural gas prices,” Gordon said in a Monday morning press conference. “Those changes will impact how we fund government services over the next year and into the future.”

Monday’s budget release come amid a 35 percent decline in coal production over the last decade, a trend illustrated by a string of bankruptcies to coal producers in the Powder River Basin over the past year. To buffet these declines, Gordon’s budget institutes a hard limit on the use of Wyoming’s rainy day fund, a jack-of-all trades account in the state’s back pocket that from now on will exclusively be used to fund the state’s educational needs and municipal governments.

While Gordon’s budget effectively maintains the status quo for now, it does start to address issues of spending within the bureaucracy called for by fiscal conservatives across the state. His proposal employs a new approach to one-time spending and, moving forward, will continue to incorporate his newly-imposed mandate of reducing agency budgets internally; a nod to the paltry $23.5 million in ongoing funding available this two-year budget cycle to any entity in state government.

For now, Wyoming is cash rich, with Gordon’s budget including roughly $70 million in “buffer” funding to allow the state to absorb small cuts to offset future declines and an estimated $200 million available for the Legislature to deploy from the state’s severance tax revenues. The governor’s budget also highlights efforts to cut government spending through the Legislature’s Spending and Government Efficiency Commission, which is expected to move ahead with a list of recommendations later this month that Gordon’s office believes could generate approximately $50 million in savings or additional revenue per year, according to his letter.

However, some of his budget denials – like a nearly $25 million appropriation for long-term mental health care – come with caveats: finding the money for projects like that fall on the Legislature, not the governor’s office, either through appropriating new money or by cutting funding elsewhere. “To fund projects like this,” Gordon wrote, “new revenue must be found or cuts identified.”

“I have said consistently that we need to address these long-term care needs for psychiatric health; we were just unable to find the funding at this point,” he said in his press conference. “So I think the Legislature will look at ways they can make adjustments. Looking forward, we will continue to work on this, but the challenge for us has been how to set this budget up to prepare for potential cuts in the future and better aligned to meet the challenges.”

Where that conversation is in the Legislature is questionable. The Joint Committee on Revenue declined to pursue a number of major revenue-raising proposals throughout the interim session, and many lawmakers have expressed a reluctance to introduce any new taxes.

Even champions of spending cuts, like the Legislature’s Joint Appropriations Committee co-chairman Sen. Eli Bebout, R-Riverton, have maintained that both spending and revenues need a hard look, particularly given the number of built-in spending obligations that are mandated by the state’s constitution.

“I’ve consistently said we need to look past this next week, this next month, this next budget session,” Bebout said. “Just like we do in our personal lives, we need to plan for our future, and just down the road we’re going to continue to have structural deficits. That’s an overriding factor in all of the decisions we make.”

Though this session’s budget talks are likely to be as contentious as those in the second half of Gov. Matt Mead’s administration, some of Gordon’s proposals will likely have their challenges when preliminary discussions in the Appropriations Committee begin next month in Cheyenne. New taxes to pay for popular programs and agencies — like a corporate income tax or a property tax increase — have mixed support among leadership.

On the appropriations side, increases to K-12 education funding, a lack of raises to state employees and some lower-than-expected appropriations to higher education are likely to merit some discussion, particularly given the governor’s deep reductions to the state’s capital construction budget.

“I anticipate some very tough questions from members of both the Senate and House in terms of any exception requests,” Bebout said. “Five percent of the budget is either in education, or corrections, or health or the Department of Family Services. That’s the biggest part of our budget, so we ought to have tough questions on all those agencies and see if we’re spending the money in the most cost-effective way and see if there are some better ways to spend that money.”

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