- Associated Press - Tuesday, December 1, 2015

CHEYENNE, Wyo. (AP) - Responding to falling energy revenues, Wyoming Gov. Matt Mead is proposing to reduce the rate at which the state puts money into permanent savings to free up funds for state projects.

Mead released his proposed budget for the coming two-year funding cycle on Tuesday. He’s calling for a $3.4-billion general fund budget - down about $200 million from the current budget. His budget recommends no pay raises for state employees.

Mead recently imposed a state government hiring freeze and called on state agencies to cut spending in response to falling revenue projections.

Wyoming lawmakers passed a law increasing the state’s permanent savings rate on tax revenues from energy production in 2006, when state coffers were overflowing with energy revenues. That statutory savings - which is in addition to savings required by the state constitution - is projected to generate just over $204 million over the two-year funding cycle that starts next July.

Mead proposes to change state law to put the money into the state’s Legislative Stabilization Reserve Account, the state’s so-called rainy day fund. Unlike permanent savings, the state may opt to spend the principal balance of the rainy day fund, which now stands at about $1.8 billion.

Mead said he wants to spend money from the rainy day fund up front and replenish the fund as the state receives tax revenues on energy production. Including other projected revenues from state investments, he proposes to spend nearly $450 million from the fund.

Mead said Tuesday he believes that state residents will support the notion of state government tightening its belt in hard times, but he said they won’t support seeing the state cut programs while continuing to save at the same rate it did in good times.

State financial analysts recently briefed members of the Legislature’s Joint Revenue Interim Committee on the coal issue, saying falling demand means funding for Wyoming school construction is drying up.

Analysts warned state coal revenues are likely to fall from nearly $740 million in the two-year funding cycle that covered 2013-14 down to just $26 million in the 2019-2020 funding cycle. The state has relied heavily on coal revenues to pay for its K-12 school system.

State revenues are also taking a hit from low oil and natural gas prices.

Senate President Phil Nicholas, R-Laramie, said Tuesday that he regards the state’s looming revenue shortfall from declining coal production as, “the big gorilla in the room.” He said lawmakers will have to address what appears to be the likely disappearance of coal revenues.

Mead will present his budget recommendations to the Legislature’s Joint Appropriations Committee next week in Cheyenne. The panel will propose its own budget bill for the legislative session that begins in February.

Rep. Steve Harshman, R-Casper, chairman of the House Appropriations Committee, said Tuesday that lawmakers will consider Mead’s proposal.

“Things have changed dramatically in the last six or seven months,” Harshman said of the state’s financial position. He credited Mead and his staff for addressing the deficit in the current fiscal year.

Sen. Tony Ross, R-Casper, chairman of the Senate Appropriations Committee, said Tuesday he believes Mead’s approach to the state’s rainy day fund appears workable.

“There will be naysayers that say, don’t touch the LSRA at all. But I think the way he’s approached it, if everything pans out, it will be back-filled, and that’s why we have the LSRA,” Ross said.

Mead also is proposing that lawmakers approve expansion of the federal Medicaid program, saying it could save the state over $34 million. The state has repeatedly rejected expansion, which would offer federally subsidized health insurance to about 17,000 people in the state.

Wyoming lawmakers have said they don’t trust federal promises to maintain scheduled payments of more than $100 million a year in federal funding. Medicaid expansion is a provision of the federal Affordable Care Act.

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