Governor Mark Gordon urged legislators Monday to work with him to lower state spending after a newly published report predicted ongoing revenue deficits for the state’s oil, natural gas and coal industries.
Managing the state’s fiscal crisis has been Gordon’s top priority since March, he stated in an Oct. 26 release issued in response to the October publication of the Consensus Revenue Estimating Group’s (CREG) Wyoming State Government Revenue Forecast.
Gordon cautioned lawmakers about the state’s bleak revenue outlook, which remains “deeply concerning,” he said Monday during a video conference meeting with the Legislature’s Joint Appropriations Committee (JAC).
The October 2020 CREG forecast, which was preceded by the minerals valuation subgroup meeting Sept. 30, shows a $451 million revenue deficit for the cycle ending in 2022, significantly less than the $877 million shortage the group had predicted in their May report.
Despite the much-improved forecast, the Governor doubled down on the need to continue cutting state funding.
“It’s an improvement,” Gordon said. “But I think all of us know we aren’t even close to recovering and our budget still needs attention.”
Members of the JAC acknowledged the scope of the problem the state is facing, per the release.
“We are now $400 million closer to a solution,” said Bob Nicholas, JAC co-chairman in the release.
Concerning traditional state accounts, the report stated that the overall FY 2021-2022 forecast balance of the General Fund (GF) and Budget Reserve Account (BRA) improved from $877 million in May to $451.1 million as of Monday, before accounting for the $113.2 million statutory reserve amount, per the forecast. This represents an overall improvement of $425.9 million.
However, education is an area of concern, as identified by the report, which predicted a roughly $300 million shortfall in school funding. And when considered alongside historically low mineral prices and production estimates, GF revenues, severance taxes and federal mineral royalties, school funding cuts such as these represent an unprecedented economic downturn for Wyoming.
Wyoming must “live within our means,” Gordon said, noting the state has suffered its greatest budget shortfall in history this year, just six years after the previous record low in 2016.
Despite performing above May’s stark forecast from the group, the more recent CREG report shows that the state’s revenue collections have also experienced a significant decline in recent months. Gordon acknowledged these falling numbers when addressing the committee.
“By any stretch of the imagination this crisis is unique,” he said. “But it is real, and we must be prepared.”
Gordon also stressed the importance of Wyoming’s elected officials’ abilities to look forward beyond the current health crisis and economic picture when thinking about the state budget.
“I am not interested in building a budget that just tries to get us to next year,” he said. “Wyoming, if she wants to remain competitive and productive, must live within her means and structure herself for economic opportunity.”
Still, some Wyoming industries have held up relatively well in the face of the pandemic, per the report, which cited retail sales and wind energy development in particular.
“However, other data elements such as oil, natural gas and coal production, employment and tax collections stand in stark contrast to the pockets of positive news,” the report stated.
The forecast incorporated the higher than anticipated tax revenue of the past four months into its forward-looking projections, per the report. However, it stated, significant areas of uncertainty and concern remain. For example, future federal responses, if any, are unknown.
The Governor will release his Fiscal Year 2021-22 Supplemental Budget on Nov. 16.