Wyoming’s budget is projected to shrink more than previously expected to the tune of an additional $32 million for the current biennium and an additional $46.4 million for the next biennium. According to the latest report from the Consensus Revenue Estimating Group, Wyoming’s budget is set to drop from $4.01 billion in 2013-14 to $3.44 billion for 2015-16 and $2.89 billion for 2017-18.

The January CREG report was released Thursday as a final prediction for the Legislature to keep in mind over the coming weeks as the next biennium’s budget is set. The October CREG report painted a grim picture for Wyoming through 2020 — January’s report took it a step further.

“We knew it was coming,” said Rep. Tim Stubson, R-Casper, a member of the Appropriations Committee. “It is difficult to say what will get cut.”

 One of the biggest challenges is a $600 million shortfall in the coming biennium for education, and that’s with no capital construction, Stubson said.

“Schools are going to see an incredible change in revenues,” said Sen. Hank Coe, R-Cody.

The Legislature is constitutionally required to adopt a balanced budget and some representatives are predicting the elimination of some state programs entirely.

“We haven’t seen that in a long time,” Stubson said. “Normally, you cut budgets in programs — but we will have to make priorities and you will see the elimination of some programs. You will find that every program has a constituency and there are no bad ideas and there are needs and wants —and I think some of the ‘wants’ will go away.”

“It is going to be a struggle, no doubt about it,” said Sen. Ray Peterson, R-Cowley. “I look forward to the challenge and bringing us back to Earth on what we can maintain on the budgets. That has been my concern with the years of high revenue, building a false floor and a baseline we can’t maintain and now we have to turn it around and bring the floor back to where it should have been all along.”

Two of Wyoming’s biggest budgetary items are healthcare and education and Coe said both would get a “reality check.”

“We have been really comfortable on the education side for years and years, it is no longer that way,” Stubson said, noting that capital construction will slow down around the state but the question of how to deal with it in the long-term remains unknown. 

 Coe also said it’s unlikely legislators will approve seeking federal aid by expanding Medicaid.

“I just don’t think there is support for it, or trust in the federal government,” Coe said. “We bought into programs before and funds weren’t there.”

The price of oil declined an additional 18 percent in the time it took to compile the data for the latest CREG report. Oil was hovering around $30 per barrel when the January CREG report was released, a massive decrease from the peak price of $107 per barrel in July 2014. 

Decreases in natural gas and surface coal also played a role in the larger revenue decrease prediction in the report.  

“The bottom line is that FY 2015-16 general fund revenues are expected to be $5.1 million less than projected in October, while FY 2015-16 budget reserve account revenues are projected to be $26.9 million lower,” the report said. 

It is likely the Legislature will use the state’s reserve account and arrange a payback plan, Peterson said.

“I hear talk from legislators that it is not raining yet and they oppose tapping it and that will be the first discussion,” Peterson said.

Severance tax revenues for the general fund were reduced an additional $6.8 million for fiscal year 2017-18. The state’s budget reserve account was also projected to decrease by $13.8 million due to lower severance taxes and drop by $25.8 million from lower federal mineral royalties. 

 “It is just more of a reality check than we had before and it will be on everyone’s mind,” Coe said.  “I went through it in the early ’90s and it is difficult. You have to make informed decisions and be willing to do it.”

Natural gas changes the most since October

The biggest change since October’s report was in the projected price of natural gas due to an imbalance in supply and demand that was magnified by an “unusually mild winter,” according to the January CREG report. 

Through December 2015, natural gas prices remained at historically low levels when adjusted for inflation. 

Without major reductions in production and continued growth in demand, the report predicts natural gas prices will continue to stay near historic lows. About two years ago, natural gas was around $4 or more per thousand cubic feet and had hovered between $4-5 since late 2009. Now it’s about half that price.  

Since October, forecasted prices were reduced from: 

• $2.85 per thousand cubic feet to $2.75 per thousand cubic feet in 2015

• $3.20 per thousand cubic feet to $2.85 per thousand cubic feet in 2016

• $3.25 per thousand cubic feet to $3.00 per thousand cubic feet in 2017

Projections for oil production and price remain relatively unchanged since October’s CREG report. The following are the most recent predictions for Wyoming’s oil production and prices through 2020:

2015 — 85 million barrels, $40 per barrel

2016 — 75 million barrels, $42 per barrel

2017 — 67 million barrels, $50 per barrel

2018 — 65 million barrels, $55 per barrel

2019 — 65 million barrels, $55 per barrel

2020 — 65 million barrels, $55 per barrel