‘One-Third of Our Income Is Gone’: A Rural State Faces a Big Budget Gap

This 2019 photo shows the Eagle Butte mine just north of Gillette, Wyoming. A downturn in the coal sector is one issue contributing to the state's financial woes.

This 2019 photo shows the Eagle Butte mine just north of Gillette, Wyoming. A downturn in the coal sector is one issue contributing to the state's financial woes. AP Photo/Mead Gruver

 

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Fallout from the coronavirus pandemic and downturns with oil, gas and coal have left Wyoming in a tough financial spot, with deep agency cuts and layoffs on the horizon.

Wyoming is reckoning with a huge budget shortfall that will require sharp cuts, furloughs and layoffs to deal with in the months ahead, the state’s Republican governor is warning.

The state, one of the nation’s least populated and most politically conservative, is bracing for a sharp drop in revenues over the coming two years as the coronavirus continues to disrupt the nation’s economy and as oil and gas production and coal mining in the state falter. Wyoming depends heavily on those industrial and energy sectors to fuel the state’s budget.

"One-third of our income is gone. I have no way to raise revenue. I have to make cuts because I have to balance the budget,” Gov. Mark Gordon said during a news conference on Wednesday.

Responding to suggestions that the state tap its rainy day fund to deal with the budget gap, he added: "That might last for about a year, and then we have nothing to fall back on."

Wyoming’s financial health has for years been deeply intertwined with how the mining and oil and gas industries are performing. The state collects not only severance taxes on fossil fuel production, but also revenues like mineral royalties from production on in-state federal lands and sales and use taxes that flow from the energy sector.

Minerals directly contribute roughly two-thirds of the state's revenue, according to estimates cited by the Wyoming Taxpayers Association, although that figure has fluctuated over the years.

The number of oil and gas rigs in the state had fallen to just one in June, down by 31 from a year earlier, according to a report from the state’s Department of Administration and Information.

Coal production was down 35.6% in April compared to 2019, the department said. Even before the coronavirus downturn, coal mines in Wyoming had fallen on hard times as power plants across the U.S. have shifted to other fuels, like natural gas. 

Plans to ship coal from Wyoming by rail and then boat to other countries have been stymied as coastal states have denied environmental permits and other approvals required to build and operate export terminals. Some experts have questioned how much of a boost exports can even provide to the state’s struggling coal mines.

The state in May had about 4,900 fewer mining jobs than it did the year before, while leisure and hospitality jobs were down about 10,500, the Department of Administration and Information report said. Sales and use tax revenues for those sectors had also plummeted.

In May, the state’s Consensus Revenue Estimating Group released a forecast showing that combined revenues flowing to Wyoming’s general fund, school funds, and other accounts would be nearly $1.5 billion lower than expected between March 2020 and June 2022. 

Total general fund revenues for the 2021-2022 budget biennium were forecast to reach $1.8 billion, a $448.5 million, or 19.8%, decrease from January 2020 projections. And general fund revenues for fiscal year 2020 were also slated to be down by $108.6 million, or 9.1%.

Gordon, who previously served as the state’s Treasurer, earlier this week announced more than $250 million in cuts. These included stripping  $90 million, or 9%, from the state’s health department budget. The governor approved 10% cuts for most state agencies, boards and commissions, his office said.

He explained Wednesday that he’s asked agencies to identify further cuts to their budgets, which would come on top of a hiring freeze.

“Ask me what part of government and I will tell you where the pain comes,” the governor said.

The governor's office has said that the cuts will mean fewer state dollars flowing towards contracts with private businesses, as well as curtailed services for elderly, disabled and low-income residents.

Gordon pointed out that his administration is moving ahead with plans to furlough state employees earning over about $65,000 a year for one day per month. But he emphasized that furloughs were just one step. 

“I'm the first governor in quite a while who’s actually going to have to lay off people,” he said. He noted that the ranks of the state’s employees were already thinner today than in 1998—with about 7,000 full-time equivalent positions versus a little over 10,000.

On Monday, he told state lawmakers in a hearing that even if the state laid off all of its employees, it would not solve Wyoming’s current budget woes. The governor suggested Wednesday that legislators may need to revisit past mandates they’ve imposed that require state spending. “Put simply, we don't have enough income,” he said.

Bill Lucia is a senior reporter for Route Fifty and is based in Olympia, Washington.

NEXT STORY: How the End of the Federal Unemployment Boost Will Hurt the Economy

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