Wyoming revenue may slide 23 percent as prices and production in the mineral economy remain low, the state Consensus Revenue Estimating Group said Monday.
According to CREG’s numbers, Wyoming state government faces an estimated 23 percent revenue decline for 2017-2018. That’s based on projected revenue of $4.45 billion to general government and schools for 2017-2018, compared to $5.75 billion in projected revenue for the current 2015-2016 fiscal cycle. In all, the report forecasts a $1.3 billion decline.
CREG is made up of nine state revenue experts, who have privileged access to mineral production data from Wyoming’s top producers, plus up-to-date reports on sales and property taxes. The group’s October revenue forecast sets the starting point for the budget debate in the upcoming 2016 legislative session, which begins in February.
There were many signs of faltering revenue since the last CREG report released in Jan. 2015. Low oil and gas prices led Gov. Matt Mead (R) to write agency heads in June warning them to be frugal in drafting budgets for 2017-2018. By September a potential 10 percent budget decline seemed possible, based on spot prices and state charts that show the revenue impact of price declines for oil, gas, and coal.
Now CREG’s projections show the revenue shortfall may be even worse — up to 23 percent — unless there is a turnaround in oil and gas prices and/or production. To balance the budget in 2017-2018, the state may need to make cuts, spend from savings such as the $1.8 billion “rainy day” account, or pursue a mixture of both options.
But first the state needs to address a forecasted $159 million shortfall in its current 2016 fiscal year, which ends June 30. Part of that shortfall comes from a projected decline of $78 million in sales and use tax collections for 2016. A decline in this revenue stream may indicate that the mineral slowdown is now hitting other sectors of Wyoming’s economy.
That bad news for 2016 comes with a small bright spot for the 2015 fiscal year, which closed with $346.4 million in revenue above projections, mostly from state investment earnings, which CREG does not project in its forecasts.
However, those investment gains won’t be immediately available to offset the 2016 downturn. By law, the earnings were transferred to various accounts, largely to pay for $113.2 million in contingent appropriations lawmakers made during the 2015 session, and a $210 million transfer into short-term and permanent savings accounts.
Perhaps the most readily accessible balance to address the shortfall for 2016 is $109 million in the Budget Reserve Account, which is set aside as a contingency in every budget session. Mead has already instituted a statewide hiring freeze, and he’ll likely pursue further cuts to offset the $159 million projected shortfall for 2016.
“The projection for the present fiscal year – FY 2016 – requires me to reduce appropriations to ensure spending does not exceed projected revenue,” Mead said in a statement. “By state law, we cannot overspend.”
Mead said he will continue to advocate his policies of putting money in savings and supporting education. He also said he hopes to continue state aid for local governments and economic development, while maintaining services for the most vulnerable in the state. He’s previously said he’s interested in taking another look at Medicaid expansion.
“We have worked on fiscal policy that grows Wyoming’s economy, creates opportunities, and allows us to move steadily forward in all revenue climates,” Mead said. “We have established and grown savings and permanent funds. We must steer a steady course now as we navigate a period of diminished revenue.”
Flickr Creative Commons photo by Ken Lund.