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Gov. Matt Mead says he's not ready for tax increases to cover expected decline in coal


CHEYENNE, Wyoming — Gov. Matt Mead says he's not ready to support other tax increases to cover what state analysts say will likely be a steep decline in coal revenues over coming years.

Mead is scheduled to present his draft budget for the coming two-year funding period to state lawmakers on Dec. 7. In anticipation of falling state revenues, he already has imposed a state hiring freeze and ordered cost-cutting measures.

Although Mead declined to go into detail about his budget recommendations before his briefing to lawmakers, he said this week that the budget takes into account lower prices of coal, natural gas and other commodities.

"There's more natural gas being stored than ever in our history nationwide, which is going to add to the suppression of the price," Mead said. "So, we're going to be conservative."

Mead said he may change his budget recommendations depending on revenue estimates that will be released in January. "But I think it's a little better to start lower and be able to go up rather than starting too high and having to go back down," he said.

Over recent decades, Wyoming has directed billions in bonus funds from the sale of federal coal leases to support state school construction. But coal demand has been falling nationwide in recent years in response to low natural gas prices and stiffer federal emissions regulations on coal-fired power plants.

State financial analysts last week briefed members of the Legislature's Joint Revenue Interim Committee on the coal issue, saying falling demand means funding for Wyoming school construction is drying up.

The analysts warned that state coal revenues are likely to fall from nearly $740 million in the two-year funding cycle that covered 2013-14 down to just $26 million in the 2019-2020 funding cycle. The state has relied heavily on coal revenues to fund its K-12 school system.

Senate President Phil Nicholas, R-Laramie, is among those pushing for the Legislature to consider tax increases to cover the expected shortfall in coal revenues.

"If we think that we're going to wait five years and then we're going to pay the bill, there aren't enough people, unless we go to an income tax, there aren't enough people in Wyoming who pay taxes" to cover it, Nicholas told members of the interim committee last week. He said the state's best course would be to act fast to enact sales tax or property tax increases.

Committee members voted not to act on the matter in the legislative session that starts in February, but instead to study it after the session.

In an interview this week, Mead said, "We're headed to a point on the graph where the money required is not going to be there, so some in leadership are talking about raising mill levies or taxes.

"I'm listening to that, but I'm not prepared to go there as we sit here today," Mead said. "I think it's hard for the state to look at that as we've doubled our rainy day fund and increased our permanent fund by 55 percent."

Wyoming currently has just over $1.8 billion in its Legislative Stabilization Reserve Account, the so-called "rainy day fund" that lawmakers have built up in recent years to cover anticipated downturns in the energy markets. The state has billions more in permanent funds that can't be spent but which provide interest income to fund state operations.

In another aspect of Mead's budget recommendations to lawmakers, he said he plans to call on state lawmakers to accept federal funds to expand the Medicaid program.

Expansion of Medicaid is a cornerstone of the federal Affordable Care Act, which many Republicans in Congress have tried unsuccessfully to overturn.

Wyoming lawmakers in recent years have resisted any expansion of the program, saying they don't trust federal promises to maintain scheduled payments of more than $100 million a year in federal funding to extend health insurance to 17,600 low-income adults.

The Wyoming Legislature is overwhelmingly Republican. Mead, also a Republican, said that while he personally shares the dislike that many in state government feel for the Affordable Care Act, he intends to ask lawmakers to support the expansion. "It's going to be primarily presented as black and white — a revenue issue at this time, when we're struggling to get the revenue we'd like to have," he said.

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