CHEYENNE — Sagging natural gas prices could force Wyoming lawmakers to impose spending cuts on state agencies in the legislative session that starts next month, Gov. Matt Mead said Friday.
Mead announced Friday that the latest state revenue projections for the two-year budget cycle that begins next July are more than $100 million less than the state anticipated in its last revenue projection released in October.
Mead in December proposed a $3.4 billion state funds budget for the biennium that called for leaving more than $87 unappropriated for legislators to spend as they saw fit. But Friday's revenue projections from the state's Consensus Revenue Estimating Group wipes out that extra funding and still leaves Mead's proposed budget more than $20 million underwater.
The lower revenue projections heighten the likelihood that state lawmakers will push state agencies for cuts to their existing budgets.
The Joint Appropriations Committee is in the middle of two weeks of hearings on state agency budget requests. The committee chairmen, Rep. Rosie Berger, R-Big Horn, and Sen. Phil Nicholas, R-Laramie, last year wrote to state agencies asking them to come to hearings prepared for budget cuts of 2, 5 and 8 percent.
"The fact is, because natural gas prices continue to fall, all of us are going to have to take a strong look at the budget, including the budget that I proposed and including perhaps the 2 percent cut," Mead said Friday in Laramie. "So it puts us in a difficult situation in sort of a short time frame as we look at that. But we have to, as a state, make sure we never go into the hole."
Mead said that if cuts are necessary, he would ask the Joint Appropriations Committee to give him the time to make them with precision.
Bill Mai and Buck McVeigh, co-chairmen of the state's revenue estimating group, briefed the committee Friday afternoon on the lower revenue projections in Cheyenne.
Mai said projections call for $113 million less revenue from federal mineral royalties and severance taxes in the coming two-year funding cycle. That reduction comes out of a state funds budget of roughly $3.5 billion.
Mai said projections for the current two-year funding cycle, which runs through next June, are also coming in $51 million lower than October's projections.
The state had made its earlier budget projections based on natural gas prices at $4 per thousand cubic feet. Mai said mild weather this winter and increased gas production in other states have combined to push prices lower. He said the state now projects prices averaging $3.25 per thousand cubic feet this year and only rising to $4 a few years from now.
Mai and McVeigh also warned the committee in their written report that continued mild weather and low demand for natural gas for heating could drive prices lower this year.
Nicholas said he and Berger had talked about the possibility of budget cuts in their earlier letter to state agencies to prepare the state for expected lower revenues in 2015 and 2016.
"The budget cuts we were looking at were simply to pay for '15 and '16 with our current revenue forecast, and now you've lowered that and you've got a warning," Nicholas said.
Mai, who works for the Legislative Service Office, warned lawmakers that the rising cost of the state's basic budget is closing in on its projected revenues.
"It's not to over-ring the alarm bell," Mai said. "You've got some money in reserves, and you've got some coal lease bonuses coming in, and things look pretty good. And you're in the catbird seat compared to almost every other state in this country. But don't take your eyes off it."