CASPER — Upcoming cuts to state spending will “likely lead to some employees losing their jobs” as Wyoming continues to grapple with the economic fallout of COVID-19, collapsed oil prices and continuing declines in natural gas and coal, Gov. Mark Gordon said Thursday.
Gordon — who has already ordered state agencies to identify potential spending cuts — said he was calling on agency heads to consider other possibilities to lower spending within their budgets, with solutions ranging from salary reductions and furloughs to reductions in benefits and other options.
The announcement comes as the state anticipates revenue declines of approximately $1.5 billion over the next two-year budget cycle — a number Gordon said could potentially worsen when updated projections are released in July and October.
“To be sure, the data that we used to model these revenue shortfalls are preliminary,” he added, “and therefore still a bit unclear, but there can be no doubt we will see a continuing steep decline. In any event, our approach to the significant cuts we will have to make must be done strategically, with purpose and in a manner that assures Wyoming can recover rapidly.”
State agency directors, according to an announcement from the governor’s office, will be required to identify specific programmatic spending reductions by July 1, as well as the potential implications of those reductions.
Gordon urged that any reductions in spending will likely be conducted in a concerted effort with the Wyoming Legislature, which in recent weeks has grappled with the question of diversifying the state’s revenue streams at a critical political juncture and during a time of immense economic hardship. The situation facing the state is a sobering one, Gordon said, and one deserving immediate attention of lawmakers.
“This is a serious conversation,” Gordon told reporters Thursday. “And I’m very happy that it is happening in an election year. Because unlike other elections – where people talk about waste, fraud and abuse – we know that if we fired every single Wyoming employee, every state employee, we would not change the course we are on. We know that if we let all of our prisoners out of prison, we know that would not change this particular crisis we’re in. So stay tuned.”
While details of what the Legislature intends to do in the coming weeks are scarce, they face a bleak reality. Projections show structural revenue declines and a two-year lifespan for the state’s rainy day fund without fundamental change to the state’s tax structure. This is particularly true as the state — under current practices — has already relied on the state’s savings for several years to balance the budget, despite regular reductions in spending.
Though Gordon said that his approach would be phased in and methodical, further reductions in spending could prove painful as well. While K-12 education funding will likely be a major point of debate in the coming months, the state’s social services are anticipated to be overwhelmed with demand in the near future as they deal with additional fallout from the COVID-19 pandemic.
According to a spokesperson for the governor, while no blueprint for those reductions has been completed, the governor has been working closely with a small team of lawmakers including Senate President Drew Perkins, House Speaker Steve Harshman and Joint Appropriations Committee chairs Sen. Eli Bebout and Rep. Bob Nicholas on the proposed budget cuts. Meanwhile, solutions on revenue have been elusive. While the Joint Revenue Committee has taken on a number of tax proposals in its interim meetings, Gordon had declined to endorse specific solutions, saying only that “all options” remain on the table and, if any proposals rise to the top, they be broad-based.
On Thursday, however, Gordon told reporters he would be willing to support the elimination of a number of exemptions in the state’s existing sales tax code, a proposal that – while a political nonstarter for years – could potentially raise $186 million in new revenues for the state by 2022, according to recent estimates by the Legislative Service Office.
While the governor highlighted some bright spots – particularly, visitation to Yellowstone National Park seemingly stable despite the pandemic – he warned that greater economic forces will likely force more conversations on revenue to take place.
“In a safe way, in a very cautious way, we’re hopeful that this economic recovery will help to start allay some of the fears that we have,” Gordon said Thursday. “But I have to be honest – these are scary times.”