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Wyoming revenues on track, but shortfalls loom

June 5, 2012 in Events, Features, News, Opinion

CHEYENNE — Wyoming’s revenues are running slightly ahead of projections for the fiscal year that ends this month, but state officials are still bracing for a hit as the effect of recent lower natural gas prices filters through the tax collection system.

A recent state report shows revenues to the state’s general fund were 5.7 percent, or $58 million, ahead of projections through April. However, state officials warn that natural gas production tax revenues are likely to continue to slide.

Prices for natural gas in Wyoming dipped below $2 per thousand cubic feet in April but have since climbed up to roughly $2.25.

State budget analysts in January predicted natural gas would average $3.25 this year. Each dollar drop in gas prices costs the state roughly $113 million a year in lost general fund revenues.

Chris Boswell, head of the Wyoming Department of Administration and Information, said Monday it appears likely budget analysts may have to lower their state income projections again when they meet this fall. The state’s Consensus Revenue Estimating Group makes forecasts of the performance of energy markets and other factors.

“When you look at what the natural gas prices forecasts were built on, they were prices for gas that were considerably higher than the prices we’re experiencing now,” Boswell said. “Now, as with anything, opinions vary on what’s going to happen with natural gas prices over the next 24 to 36 months, but I think it is reasonable to consider that prices may not be as high as had been forecast in the CREG, but we’ll see.”

Gov. Matt Mead has ordered state agencies to prepare for budget cuts in the face of declining revenues. He sent a memo to most state agency directors in April, directing them to prepare for 8 percent cuts in the fiscal year that starts July 2013. That cut is twice what the Wyoming Legislature had directed state agencies to prepare for earlier this year.

In addition, Mead ordered state agencies not to increase their total number of employees starting immediately.

State agencies have submitted draft budget documents to Mead’s office in recent weeks, projecting that 8 percent cuts next year would force them to cut more than 50 full-time employees out of the state’s current workforce of more than 7,300. The University of Wyoming, which is funded by a block grant, has projected that budget cuts might force it to cut another 80 to 125 faculty and staff positions.

Jim Robinson, senior economist with the state, said Wyoming already is seeing a reduction in revenues on natural gas production as a result of the lower prices this year.

“The slowdown in revenues that we’re anticipating would be for severance taxes and royalties,” Robinson said Monday. “We’ll still see some of that take place in the next several months, particularly as the lower price that we’ve been hearing about for natural gas start working their way through the state revenues.”

Robinson said it was good news for the state when natural gas prices rebounded back above $2 in May. “There was some concern in the spring about gas plunging to $1 per (thousand cubic feet),” he said. “I don’t think that’s going to happen. Our lowest month was April, where we averaged about $1.88 per (thousand cubic feet), and then we rebounded back above $2 in May.”

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