- Associated Press - Saturday, February 6, 2016

CHEYENNE, Wyo. (AP) - Only a few senior Wyoming lawmakers have served long enough to remember the last time the Legislature had to make hard decisions on how to cut spending.

For the last decade or more, the toughest call facing Wyoming lawmakers has been how much of the state’s windfall energy revenues to spend and how much to salt away in savings. As things stand now, the state has no debt and its “rainy day fund” stands at $1.8 billion.

Over these recent, flush years, local governments in Wyoming have become accustomed to receiving direct payments from the state. And Wyoming residents - who already pay no state income tax - now take it for granted that the state’s coal industry will foot the bill for school construction.

But now, falling energy prices combined with bleak revenue forecasts for coming years are bringing Wyoming back to the down side of the boom-and-bust cycle.

“It is unfamiliar territory to the majority of the members,” Sen. Charles Scott, R-Casper. He has served in the Legislature since 1979 and recalls the lean years of the 1980s, when a collapse in oil prices and other factors left the state broke.

“If we had not built those reserves, you would be seeing an absolute massacre of programs that we very much need and that a lot of people depend on,” Scott said. “Fortunately, we’re not in that kind of circumstance. But it’s going to be pretty tight.”

Wyoming remains the nation’s leading coal-producing state, but the industry increasingly is on the ropes.

Major coal companies have seen their stock values plummet in recent years, a handful of major companies are in bankruptcy, and federal regulators recently announced they’re suspending new coal leases.

State fiscal analysts recently warned that state revenues from federal coal leases are likely to fall from nearly $740 million in the two-year state funding cycle that covered 2013-14 down to just $26 million in 2019-2020. The current two-year state general fund budget is about $3.5 billion.

Wyoming has used federal coal lease bonus payments to fund school construction.

Senate President Phil Nicholas, R-Laramie, has proposed that Wyoming increase property taxes to raise the nearly $600 million per biennium the state spends on school construction, maintenance and associated administrative costs.

“The sooner you pass a mill levy and begin collecting those revenues, the smaller the problem is going to be,” Nicholas said. “So it would be warranted.”

Wyoming’s predicament hasn’t escaped the notice of Wall Street. The national financial firm Standard & Poor’s early this month lowered its overall outlook rating on the state from “stable” to “negative.” The firm didn’t change its “AAA” credit rating for the state.

Gov. Matt Mead in December recommended the state balance the budget by reducing the flow of severance tax revenue that currently goes into permanent savings and directing it instead into the state’s “rainy day fund.” He proposed spending nearly half a billion dollars out of the fund over the next two years with the understanding that the increased severance tax deposits would keep the fund whole.

The Legislature’s Joint Appropriations Committee has rejected much of Mead’s proposed budget, and instead is recommending broad cuts to state agency spending while calling for spending only about half the amount Mead recommended out of the “rainy day fund.”

The committee has endorsed a plan to cut most state agency budgets 1.5 percent over the coming two-year budget cycle. The Wyoming Department of Health would be exempt from the blanket cuts.

House Minority Floor Leader Mary Throne, D-Cheyenne, said she believes many legislators have concerns about the Joint Appropriations Committee approach and instead favor spending more from the rainy day fund.

“As I understand their process, they identified an amount of money that they felt needed to be cut, and then just sort of slashed and burned through agency budgets without any consideration of the ongoing value of those programs, or whether the money was wisely spent or whether it was still needed,” Throne said.

The committee also rejected Mead’s recommendation that lawmakers approve expansion of the federal Medicaid program to offer health insurance to some 20,000 low-income adults. His administration estimates the expansion would save the state roughly $30 million over the next two years by reducing demand on other health programs.

The Legislature could still consider Medicaid expansion, either through a separate bill or through a budget amendment. The Wyoming Association of Churches, the Wyoming Hospital Association and other groups are continuing to lobby for Medicaid expansion, saying it would bring money and jobs to the state.

The Legislature is meeting this year in an office building across town from the historic state Capitol, which is in the first stages of a $300-million renovation project that’s set to last a few years.

House Speaker Kermit Brown, R-Laramie, said the temporary building will afford more space to legislative staff than they had in the Capitol.

“I think we’re going to be able to do our business very well and very efficiently,” he said.

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