CREG report shows budget deficits for upcoming yearWritten by Saige Albert
Cheyenne – On Oct. 24, Gov. Matt Mead reviewed the latest Consensus Revenue Estimating Group (CREG) report in a media call, noting that the shortfall for Fiscal Year (FY) 2015-16 reached $8.1 million and jump to $156.6 million for FY 2017-18.
“In my mind, it’s raining in Wyoming,” Gov. Mead commented. “This is a time to smooth out this downturn and use additional rainy day funds.”
He further noted that, as budgets continue to look glum, Wyoming will have to make some hard choices.
“With all of the cuts made by the Wyoming Legislature, which was about $125 million, we are still short $156 million,” he commented.
Alex Keene of the Administration & Information Division explained, “Both the 2015-16 numbers and the 2017-18 numbers are of great importance.”
Fiscal year 2016 revenues came in $143.8 million short of CREG report estimates.
“As a result of the shortfall coming in, the appropriations created a shortfall,” he said. “Part of that was covered with reversions of prior appropriations that were not expended totally.”
Additional reconciliations included an agency pool loss of $4.4 million, which is counted against the cash balance of the general fund, Keene explained. Investment income was also added to the Capital Restoration Account.
“Starting July 1, the Governor and Legislative leadership made budget reductions totaling $250 million, resulting in a general fund budget reserve balance of negative $52 million,” Keene said. “When we make all of the adjustments, including the statutory reserve amount, which is five percent of the projected revenue, that traditional funds available are negative $156.6 million.”
“Just to summarize,” said Mead, “with the cuts that were made by the Legislature, we are still short roughly $156 million.”
Mead further explained that of that $156 million, $104 million is a statutorily mandated to go to savings. Statutes require that five percent of general fund projected revenues are put away in reserve.
“There’s a statutory obligation to refill the savings accounts,” Mead said, “but we believe that the number to look at is $52 million.”
“To put this into perspective, we believe that – absent filling a savings account of $104 million – the cuts the Legislature made and cuts we made put us short of where we need to be,” he continued.
Rainy day fund
In light of shortfalls, Mead said that it would be a prudent time for the state to utilize the funds in the Legislative Stabilization Reserve Account (LSRA), known as the rainy day fund.
“We’re looking at the rainy day fund because we have had to make cuts that are difficult, and the full effect of these cuts hasn't been seen yet,” Mead commented. “People understand that we need to tighten our belts. But they may not understand that we make these cuts as we keep filling savings accounts.”
He continued, “We’re going to continue to sort through this shortfall, but my hope is we can work through the legislative cuts, recognizing that cuts we already made haven’t been fully felt.”
While utilizing the rainy day fund to supplement budgets, Mead also emphasized that it is important to use those funds judiciously.
“It would be ill advised to say we’re going to use all the rainy day fund in the next two to four years,” he said, noting that six years or longer is a more feasible horizon. “I think we need to be conservative. On the flip side, we can’t say we are going to make cuts of $250 million and use $104 million fill a savings account. I don’t think that’s conservative, either.”
“There is an appropriate burn rate,” Mead added. “We need to smooth out the waters now, but we don’t need – or want – to use it all.”
As Mead looks toward the future, he noted that there is some optimism for the recovery of energy prices, but relief won’t be felt in the near-term.
“We have to be conservative when using the rainy day fund to supplement our budget,” Mead said, “but we are not going to cut our way back into prosperity.”
With over 70 percent of the state’s revenues coming in the form of mineral revenues, Mead said he has seen positive signs as oil prices and natural gas prices are moving up.
“We are slowly on the way back in terms of commodity prices,” he commented, noting that oil is projected to rebound in the next 12 to 18 months. “Any money that would be used to grow the rainy day fund should be used to shore up the budget.”
“There is an appropriate amount of the rainy day fund that can be used during this time to ensure we take care of our roads, healthcare and other important services. Additional cuts to the Departments of Health and Corrections, for example, will be very difficult,” continued Mead. “My hope is that we can work closely with the Legislature to smooth out this downturn by using some of our savings – especially as those funds are growing.”