State government will soon experience “profound” budget cuts because of a global pandemic and oil market crash, Gov. Mark Gordon said on Wednesday, though to what degree, when and how they will be applied remain to be seen.
Gordon has told lawmakers those cuts could be in the range of 30% of current agency budgets, a figure that would have severe ramifications across the state. On Wednesday, he told reporters he has asked agency heads to consider 20-30% cuts in “contingency plans” and that the numbers should come into focus in the next few months.
Wyoming lawmakers, who write their state budgets based on projected revenues, do not yet have a clear picture of just how much they’ll need to cut. But it’s certain to be dire, several said.
“By all accounts it looks really bad, incredibly bad,” said Rep. Albert Sommers (R-Pinedale) a member of House leadership and the House Appropriations Committee.
Senate President Drew Perkins and Speaker of the House Steve Harshman (both R-Casper) have pointed to an estimate made by the Legislative Service Office earlier this summer that would knock $600 million a year out of the general fund, which supplies state agencies besides public education. The school budget, which is already running at a deficit, faces a $200 million a year drop of its own under that projection.
Lawmakers in early March passed a budget that spent $2.9 billion on general government for the next two fiscal years. A $600-million-per-year cut would equate to well more than a third of that budget.
The state should let the fate of volatile oil markets — which energy-dependent Wyoming has been relying on in the face of a sustained coal downturn — become clearer over the summer before it makes cuts, Sommers said. But the impacts of $600 million a year less in state funding will impact state residents, he said.
“There’s no way to hide it,” Sommers said. “That’s like we get rid of all the mental health services in every county and that’s just a start. You could go so far as to say maybe we don’t do Medicaid. We don’t take the federal dollars. There’s some really hard decisions to be made.”
Perkins likened cutting $600 million a year to “basically cutting everyone that works for the state government,” he said, “The entire payroll.”
Wyoming’s last experience with emergency cuts — though not nearly as sizeable — happened in 2016. When energy markets suddenly crumpled that year, Gov. Matt Mead sliced an emergency cut of almost $250 million from state budgets. Those cuts drove hundreds of private-sector job layoffs by companies that do business with the state.
Neither coal nor natural gas revenues have significantly recovered since then, and both industries are in deep trouble today.
Lawmakers have since replaced some of the money Mead cut in areas where the cuts were budgetarily counterproductive or hurt state goals too deeply. They have also made trimmings of their own.
The state does have significant savings. The Legislature’s “rainy day fund,” its most accessible pot of money, held $1.4 billion even after lawmakers again drew on it during the 2020 Legislative session to cover ongoing budget deficits.
In its April memo, which was obtained by WyoFile, the LSO forecast three scenarios analysts characterized as rough estimates. The numbers cited by Perkins and Harshman come from the middle scenario. The pessimistic scenario, which included the potential of a resurgence of COVID-19 cases in the fall and a slower economic recovery, was for a $2.8 billion loss.
The figure is approximately $100 million shy of the entire general government budget for the next two fiscal years.
Federal help mired in partisanship
The Legislature did not address declining tax revenues in its May 15-16 special session, which focused on distributing federal CARES Act funding. The federal government restricted that money to spending on impacts of combatting COVID-19 over the last few months, leaving it unavailable for general government spending even as state revenues tanked in the wake of a pandemic-related economic slowdown.
The U.S. House of Representatives passed a new, $3 trillion relief plan on May 15 that includes $1 trillion in aid for tribal, state and local governments. The House narrowly passed the measure along partisan lines, but the bill has little chance of passing the Republican-controlled U.S. Senate as it stands, the New York Times reports.
The House bill is full of “irresponsible proposals that would reward illegal immigrants, release prisoners, and fulfill other liberal priorities that have nothing to do with combatting COVID-19,” Rep. Liz Cheney wrote in a May 18 website post. “We should be focusing on helping our frontline workers, providing additional support for our communities and rural hospitals, and reopening our economy.”
Republican leaders, including Trump, have indicated further relief of some fashion will come for the nation, but have not yet put forth a counterproposal to the Democrat’s sweeping spending. Conservatives have decried the idea of aiding Democrat-leaning states hit hard by the virus, suggesting those states are seeking bailouts for fiscal irresponsibility.
Harshman and Perkins said they are communicating with Wyoming’s congressional delegation and had previously joined other state legislative leaders to ask the U.S. Congress to provide more flexibility for the CARES Act funding. Harshman is optimistic for additional relief legislation, he said.
It was unclear at a Friday press conference if the men had asked Wyoming’s congressional delegation to support more direct aid to stave off dire budget cuts.
Will Gordon take the lead?
Lawmakers are gearing up for additional special sessions, with the next one likely to come at the end of June, according to legislative leaders. They offered mixed predictions on how the process could proceed. Senate Appropriations Committee Chairman Eli Bebout (R-Riverton) said he wants the Joint Appropriations Committee to begin examining options before the next special session but that committee leaders are still deliberating.
Others said it’s likely the executive branch would begin cutting sooner than lawmakers can act.
“The governor’s office is going to have to take the lead on this and get a handle on it,” Perkins said. “At that point the Legislature will take some action.” Perkins suggested legislative budget hearings are more likely in August or September.
Though lawmakers pride themselves on being the state’s appropriators, several recent governors have guided the process when it came time to slice deep into agency budgets.
“The executive branch is the only [one] with enough resources to go in and make any kind of strategic and focused cuts on things,” Perkins said. “The Legislature has very little ability to do anything other than a blunt instrument.” Across-the-board percentage cuts handed down by lawmakers “never work out the way you hope they will,” Perkins said.
Gordon did not offer a clear answer as to when he might start making cuts during Wednesday’s press conference.
“This isn’t the sort of thing you can go in and lop off an arm and a leg and say that’s good,” he said “It is really systemic and it’s going to take a really concerted, thoughtful effort at how we reduce the size of government.”
Gordon was looking at short-, mid- and longer-term reductions, he said. “Short term there may be some things we absolutely have to do,” he said, “Long term it’s a little bit unclear.”