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CHEYENNE, Wyo. — The Wyoming Legislature’s Joint Appropriations Committee starts three weeks of agency budget work Monday with the cloud of more dour fiscal news looming.

The agencies were told earlier to come to the hearings with budgets reflecting cuts of 2, 5 and 8 percent.

The directive came after the Consensus Revenue Estimating Group in October predicted a future flattening or drop in revenues.

Gov. Matt Mead, who recommended the 2 percent cut be considered, said action is needed because the standard agency budget more than doubled over the past decade.

The new January CREG estimates to be released late this week will guide how the Joint Appropriations Committee proceeds, said committee co-chairman Sen. Phil Nicholas, R-Laramie.

Legislators last week said they expect the new report will reflect lower natural gas prices and the resulting large gas surplus.

Natural gas accounts for about one third of the state’s assessed valuation.

The Consensus Revenue Estimating Group includes fiscal experts from the legislative and executive branches of government.

Their report in October noted that a reduction in industrial demand for electricity and natural gas as a raw material impacted overall production while storage levels were higher than they have been historically.

The report also said that new geographic areas of natural gas production are playing larger roles in Wyoming’s traditional markets.

The October CREG estimates for calendar years 2012 through 2016 were based on a natural gas price of $4.10 per thousand cubic feet, commonly abbreviated Mcf.

According to the state’s economic analysis division website, the price at Henry Hub in December was $3.23 per Mcf.

It is expected to drop to $3.21 in February.

“We’ll have to hit the reset button,” said House Speaker Ed Buchanan, R-Torrington. “The challenging part of the budget session is figuring out where we really are as far as our revenue forecast,” and how much should be cut from the budgets.

House Majority Floor Leader Tom Lubnau, R-Gillette, said the long-term forecast for the state isn’t as rosy as it’s been in the past.

Every $1 mcf change in the price of gas translates into $1 billion in state revenues, he said.

“I think we’ll spend money on the things we need to spend money on,” Lubnau said. “What we’re trying to do is look to the long term and try and put our fiscal house in order so that if the fiscal declines on the horizon happen, we won’t have to do more catastrophic cuts.

“We can take a more measured approach.”

Because a lot of people who were using either gas or coal from Wyoming are converting to gas produced in their own state, Wyoming needs to shift its focus from the domestic market to participation in the global market, he said.

Senate Minority Leader John Hastert of Green River, a JAC member, said he wasn’t surprised that the numbers in the CREG report are expected to slip.

He said that while revenue projections may show a projected loss of about $140 million, the state is expected to have a surplus of roughly $450 million.

Hastert believes the Legislature could hold the line on spending and use one-time surplus money on infrastructure.

“People have been talking to me about the fact we’re going to be putting about $1.2 billion into savings between two accounts,” he said.

He added that he is concerned about the damage taking that money off the table would do to the rest of the budget and to state programs.

Hastert is opposed to cutting agency budgets across the board.

Some agencies can afford to cut spending a bit while others will be devastated with even a 2 percent cut, he said.

Rep. Elaine Harvey, R-Lovell, said that because of the new makeup of the Legislature as the result of the 2010 election, she expects a strong push for savings this session.