Latest forecast: $13.3M less available for state spending

CHEYENNE — In advance of the upcoming budget session, the Wyoming Legislature’s wallet to appropriate funds for budget requests is expected to shrink by $13.3 million.

An updated Consensus Revenue Estimating Group (CREG) report informed members of the Legislature’s Joint Appropriations Committee they had $37.3 million in discretionary funds to spend this year.

The CREG report is a forecast of the state’s total revenue and assets. It includes estimates of Wyoming’s mineral prices and production, General Fund revenues, severance taxes, federal mineral royalties, the Common School Land Income Account and state royalties.

CREG co-Chair Don Richards said this was a “modest” update to the revenue forecast.

“More than one CREG member or associate reflected in early January whether an update was needed at all,” Richards told lawmakers Friday.

However, a snowball of different adjustments to the report within CREG showed a need for an update, where Richards explained the significant changes that impacted the reduced forecast.

Sales and use tax

The CREG forecasted an increase of General Fund sales and use tax collections by $10 million in its latest report, totaling $651.7 million for the current fiscal year.

Industrial projects, such as the construction of windmills in different counties, strengthened sales and use taxes in the first six months of FY 2024. Windmill projects in Albany County have “largely driven” the robust pace, according to the report.

The state has paid out $13.3 million worth of sales and use taxes to impacted local municipalities during the first five months, from July through November, and Richards said the state is “on pace” to pay out anywhere from $20 million to $30 million this fiscal year.

Mineral price and production

Oil production is projected to increase by 5 million barrels through the end of the 2023 calendar year, to a total of 95 million. CREG had already forecasted a production of 95 million oil barrels per year, but Wyoming “just got there a year quicker,” Richards said.

“In the (past) calendar year, we’re highly confident we’ll hit that 95 million, as there’s only a couple months left to report,” Richards said.

Oil prices, on the other hand, are expected to decrease in the 2024 calendar year, from $80 a barrel to $75. Richards said oil prices have decreased steadily since the October CREG report.

The limitations of the Organization of the Petroleum Exporting Countries (OPEC) have not impacted market prices, Richards said. Rep. Lloyd Larsen, R-Lander, asked if production was influenced by changes largely seen in South Africa and Venezuela.

“Does that kind of offset some of that decline we thought we would see from OPEC?” Larsen asked.

Richards confirmed it did, including “record production” from the U.S.

“We appear to have soft demand, although there is strong production in the U.S. and other non-OPEC nations,” he said.

CREG forecasts are in line with other forecasters, such as Wall Street investment firms.

“At some point over the next year, something has to give. Either the prices do have to edge up, recognizing limitations on supply, or the five forecasters writ large are wrong,” he said.

K12 education funding, state royalties

Funding for K-12 education is, in part, dependent on the assessed valuation of minerals, known as the mineral ad valorem tax. Revisions in this tax revenue showed an increase for the 2023 calendar year of $8.9 million, but an anticipated decrease for the 2024 calendar year by $26.9 million.

CREG forecasted bonuses totaling $3.1 million on school lands in the current fiscal year, based on actual receipts from the first six months that are higher than anticipated. However, state mineral royalties collected on school lands “are demonstrably behind the October 2023 forecast.”

As a result, CREG decreased its forecast by $10 million for the actual first six months of collections.

The decrease in these mineral prices and adjustments also decreased federal mineral royalties by $10.2 million in the 2023-24 biennium, split between the Budget Reserve Account (-$6.1 million) and the School Foundation Program Reserve Account (-$4.1 million).

The School Foundation program account, Richards said, is “kind of the funnel where all the ultimate actions of savings and spending reside.”

In response to the updated CREG report, Gov. Mark Gordon said, “The January CREG forecast reinforces the importance of a conservative approach to budgeting. With the possibility of our minerals commanding lower prices, leading to reduced severance tax revenue, Wyoming may need to lean harder on investment income.

“Placing surplus revenues into savings ensures Wyoming is well prepared for the challenges facing our legacy industries due to Biden administration policies.”

The budget session begins at the Wyoming State Capitol on Feb. 12.