- Associated Press - Monday, January 9, 2017

CHEYENNE, Wyo. (AP) - Plummeting fossil-fuel revenues are forcing the nation’s most Republican legislature to consider raising taxes if worst comes to worst.

So far, Wyoming has been able to cut spending to keep up with falling revenue from depressed coal, oil and natural gas markets over the past couple years. How long the state can keep doing that is a big question, especially for the state’s public school system.

Lawmakers and Republican Gov. Matt Mead say tackling that problem is their top priority for a two-month legislative session that begins Tuesday. One idea is to convene a special panel of veteran legislators to brainstorm new revenue sources.

“I don’t think he has a specific plan that he’s pushing. He wants to visit with the legislators and get some ideas from them,” Mead spokesman David Bush said Friday.

“There’s no silver bullet plan or anything like that out there anybody’s pointing to.”

Funding for Wyoming’s K-12 schools faces a $400 million annual shortfall which, barring some intervention or major shift in the fossil-fuel markets, will set in after the state finishes spending $600 million in education reserve funds next year.

That’s on top of school construction funds that are drying up amid a halt in federal coal leasing. For years, starting in the early 2000s, school construction in Wyoming boomed amid strong revenue from coal leasing and robust gas development.

Federal coal leasing in the Powder River Basin began tapering off a few years ago, as cheaper and cleaner-burning natural gas became a more attractive option for utilities to fuel their power plants. Then a year ago, the Interior Department announced a three-year federal coal leasing moratorium while the government studied whether it was getting a fair return on those leases.

Essentially all coal mined in the Powder River Basin, the nation’s top coal-mining area, is leased from the federal government.

President-elect Donald Trump could lift the moratorium right after taking office but even then getting school construction money flowing again would take years, said Republican state Rep. Hans Hunt of Newcastle, a rancher and member of Trump’s agriculture advisory committee.

“Do we discuss a state income tax? Do we raise property taxes at the state level? I think a more realistic approach would be closing some of the tax loopholes and tax exemptions and things like that,” Hunt said.

Wyoming is one of just seven states without an income tax. Lawmakers here last considered one in the late 1990s, before a boom in coal-bed methane and conventional gas drilling replenished state accounts and then some.

These days, the Wyoming Legislature has a larger share of Republicans than any other statehouse in the country, and one of the largest Republican majorities at any time in its history. Republicans, who outnumber Democrats 51-9 in the Wyoming House and 27-3 in the Wyoming Senate, remain loath to consider major new taxes as anything other than a last-ditch option.

One reason is the state still has massive reserves: A $1.5 billion rainy day fund from which Mead proposes to allocate $140 million for critical state programs if necessary.

Last summer, Mead cut the state’s $3.1 billion budget for the biennium, which began in July, by over $250 million. He’s now proposing a modest $8 million in new supplemental funding.

He also seeks to set aside $19 million in case a catastrophic structural failure forces the state to move prisoners out of the Wyoming State Penitentiary. Worsening structural problems have left the state with an $80 million bill to repair the 15-year-old facility, assuming that replacing the building doesn’t turn out to be a better option.

Overall, though, Mead wants the Legislature to keep spending more or less steady after an October forecast that revenues would fall $156 million short of covering the two-year budget.

So far, Wyoming hasn’t tapped its rainy day funding. All the same, Mead wants lawmakers to develop rules for using the money when times are tough.

“When is it raining? I think he would like to get something like that out of the session as well,” Bush said. “The people of Wyoming find it difficult to see that we are cutting services while we are putting away savings.”

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Follow Mead Gruver at https://twitter.com/meadgruver

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