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Falling energy prices increasingly are threatening funding for Wyoming state government

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CHEYENNE, Wyoming — Wyoming fiscal analysts are warning lawmakers that the state faces an increasingly bleak financial future as energy prices continue to fall.

Officials say they need to devise a plan quickly to address a looming shortfall in state education funding that soon could amount to hundreds of millions of dollars a year.

The state's Consensus Revenue Estimating Group released updated revenue projections on Thursday. The figures will guide the Legislature when it convenes next month to craft a state budget for the coming two years.

Don Richards, co-chairman of the estimating group, warned lawmakers Thursday in Cheyenne that the state's general fund revenue is on track to fall from $1.5 billion in the last fiscal year to $1 billion in the current fiscal year that runs through June.

Keying in on energy revenues, Richards said the state collected nearly $960 million in severance taxes on energy production in FY 2014 — the year energy prices started the drop that continues to roil markets today. For the current fiscal year, he said the group estimates the state will collect only $625 million.

"That's a difference of $335 million, or a 35-percent decline over the last two years. This is a substantial decline," said Richards, who also works for the non-partisan Legislative Service Office. "Certainly these are unusual times, and this is substantial."

Thursday's projections were slightly worse than the estimating group's last figures, released in October.

For the current fiscal year, the group now predicts that the general fund budget shortfall will stand at just over $190 million — about $30 million worse than the group predicted in the fall.

Gov. Matt Mead late last year announced a state hiring freeze and other cost-cutting measures to address the shortfall in the current fiscal year.

Mead's proposed budget for the coming two-year funding cycle calls for cutting the percentage of severance tax money going into permanent savings to free up money for state projects.

In an interview this week, Mead said he's hopeful that the state will be able to rely on money from the federal Abandoned Mine Lands program to offset some of the decline in energy revenues.

Congress passed a bill in December that could put up more than $200 million that Wyoming could apply for under the reclamation program. If the money comes through, it would restore Abandoned Mine Lands funding that Congress cut a few years ago.

Matthew Willmarth, school finance analyst at the Legislative Service Office, told lawmakers that the sinking fortunes of the state's coal industry in particular threaten to hit state school funding hard in coming years.

Wyoming has directed billions in bonus funds from the sale of federal coal leases to support state school construction in recent decades. But demand for coal has been falling nationwide, and the state predicts revenues will drop off steeply.

For the two-year funding cycle that covers fiscal years 2019-2020, Willmarth said the state expects to face revenues for its school foundation program of just under $1.4 billion while expenditures will run $1.95 billion — leaving a shortfall of $515 million.

Senate Appropriations Committee Chairman Sen. Tony Ross, R-Cheyenne, said after the meeting that state's position looks bleak. "You've got a $500-million, maybe up to a $700-million deficit for schools and there's not much in the way of revenue sources that go to that," Ross said.

Ross said lawmakers have an obligation to consider the state's long-term funding options at this year's legislative session

Rep. Cathy Connolly, D-Laramie, said the state's financial position should prompt lawmakers to vote to expand the federal Medicaid program. State lawmakers repeatedly have rejected Medicaid Expansion — a move that would bring federal funds and extend health care coverage to nearly 20,000 low-income workers under the federal Affordable Care Act. Mead this year is calling on lawmakers to accept the money.

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