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Pinedale Online > News > June 2009 > Governor reduces budget by $231.6 Million
Governor reduces budget by $231.6 Million
by Governor Freudenthalís office
June 8, 2009

(Cheyenne, Wyo) - The state must reduce spending now to address forecasts of significantly lower revenues over the next three years, Gov. Dave Freudenthal said in announcing $231.6 million in budget cuts for the fiscal year which begins next month.

The reductions reflect efforts to cut ten percent of state agency budgets, with a particular emphasis on reducing ongoing operating expenses.

"These are significant, often painful cuts," Freudenthal said. "You can't cut more than $230 million out of one fiscal year's budget without affecting worthwhile programs, but it needs to be done. Wyoming has been fortunate to experience dramatic increases in revenues in recent years, but we have to tighten our belts to address changes in revenues."

The largest agency budget reductions include: $43 million from the Department of Health, $18.4 million from the School Facilities Commission, $18.3 million from the University of Wyoming, $13.8 million from the state's community colleges and $14.9 million from the Department of Corrections. Freudenthal has placed a hold on the distribution of over $25.2 million to water development accounts, and reduced capital construction spending by $17.1 million.

"Money saved in the current biennium is money available to meet the approaching shortfall" over the next three years, the governor said in a letter to the co-chairmen of the Legislature's Joint Appropriations Committee.

Freudenthal's Fiscal Year 2010 adjustments would trim $205.4 million in General Fund appropriations, $22.7 million in school foundation appropriations largely related to school facility construction, and $3.5 million in appropriations from other funds.

The complete budget document, which lists all agency reductions, is available online:

The changes are, in part, a response to the projected $61.6 million reduction in General Fund/Budget Reserve Account revenues outlined in the May, 2009 Consensus Revenue Estimating Group (CREG) report. The reductions also serve to partially address a "sobering" projected $517.3 million drop in General Fund/BRA revenues for the next biennium, as well as anticipated shortfalls in school funding, Freudenthal said.

While the CREG report cut revenue projections for FY 2010 less than some had anticipated, Freudenthal noted a warning from the report's authors that they are "quite a bit more pessimistic" than the near-term change in the bottom line implies.

The Governor will discuss the reductions with the Joint Appropriations Committee when it meets in Cheyenne on June 18.

The text of the Governorís letter follows:

June 4, 2009

The Honorable Philip Nicholas
The Honorable Rosie Berger
Joint Appropriations Committee
State Capitol, Room 204
Cheyenne, WY 82002

Subject: Amended 2010 State Budget

Dear Senator Nicholas and Representative Berger:

Pursuant to Section 311 of the 2009 Wyoming Session Laws, Chapter 159, I am reducing state agency appropriations in the manner described in the attached documents. The reductions reflect efforts to cut ten percent of state agencies' FY 2010 budgets, with a particular emphasis on General Fund appropriations.

I have identified changes in FY 2009-2010 appropriations which total $231.6 million, of which $205.4 million is from the General Fund, $22.7 million is school foundation funding and $3.5 million in other funds.

These changes are, in part, a response to the projected $61.6 million reduction in General Fund/Budget Reserve Account revenues outlined in the May, 2009 Consensus Revenue Estimating Group (CREG) report. I would also point to unprecedented language in the report which warns that the state's revenue generating ability is "quite a bit more pessimistic than this FY 2009-10 bottom line change implies." Further changes to FY 2010 revenue projections are therefore possible--if not likely--and necessitate significant additional spending reductions in light of the report's cautionary narrative.

Even more sobering projections, however, involve revenues in the next biennium. Money saved in the current biennium is money available to meet the approaching shortfall. The reductions in FY 2010 appropriations outlined in the attached document serve to partially address a projected $517.3 million drop in GF/BRA revenues for FY 2011-12, as well as anticipated shortfalls in school funding.

A partial outline of the budget reductions follows:

Education. I have followed Superintendent McBride's recommendations for a relatively small reduction in the foundation program. The School Facilities Commission faces a more substantial cut of $18.4 million.

These reductions are only a first step, as forecasts suggest a shortfall of nearly $100 million in the foundation program next biennium, a figure which does not factor in an additional shortfall of approximately $230 million were we to attempt to maintain our current level of school construction spending. Clearly, changes to the makeup of the foundation formula and our school facilities construction targets will have to be considered.

The state will seek additional Federal school funding via the American Recovery and Reinvestment Act, but it is important that the state be given the flexibility to time the distribution of ARRA education dollars to offset reduced state revenues, beginning in the next biennium.

The University of Wyoming was able to reach its target of $18.3 million in part through the use of "bridge funding," including a reduction of $4.7 million in endowment matching funds. I would note the university president's firm grasp on managing the challenges which leaner economic times present. The planning budget for a new fine arts building is unaffected by these reductions.

Wyoming's community colleges also receive a ten percent reduction, yet their endowment matches have not been touched.

Health. The Department of Health has identified nearly $43 million in General Fund reductions, most of which come in the Medicaid budget, since it makes up the largest program within the department, and in provider reimbursement rates. While we have made some substantial increases in provider reimbursement during the past several years, there is no doubt that these budget cuts will have a significant impact on the provider community.

Reductions to public health programs include a cut in funding to counties for maternal and child services but should not affect other mandatory programs. I am recommending that enrollment in the SCHIP KidCare program be capped at 5900 (as of June 1, 2009 enrollment was 5517) and that both adult and childrenís DD waivers be maintained at the current levels although emergencies will be funded.

Provider reimbursement in the Medicaid Adult and Childrenís Services, Mental Health and Substance Abuse treatment services, and Adult and Childrenís DD programs will be reduced to meet the 10% target. I am not recommending a reduction in nursing home reimbursement rates at this time. In addition to these cuts, I have also approved a B-11 transfer of $2.7 million in tobacco settlement funds from the Department of Health to the Department of Corrections to allow continuation of certain treatment programs.

Corrections. With the opening of the new prison in Torrington next year, all out of state inmates should be returned to Wyoming by the end of February, 2010. This is a slight delay from earlier schedules, and one which requires adjustments to the agency's budget. While the department will see its General Fund appropriation reduced by $14.9 million, the agency's flexibility in cutting budgets is limited by the need for full staffing and operation of the new facility during FY 2010.

Family Services. The Department of Family Services budget reduction is made up of reductions in two areas--grants to child care providers and the Low Income Energy Assistance/Weatherization program--which were not expected to access their full appropriations.

Water. I have asked the State Treasurer to hold the 2009 Legislature's $3 million appropriation to the Water I account, as well as the remaining $22.5 million of the 2008 appropriation to Water III, until the next biennial budget comes into focus.

Transportation. The Wyoming Department of Transportation's General Fund appropriations typically fund highway and airport construction projects. Those appropriations have been committed for the remainder of the current biennium, thus I have made no changes to the department's budget. Those construction funds will likely be severely diminished in the next biennium.

Local Governments. While our cities, towns and counties fared exceptionally well in recent state budgets, they, too, must participate in the reduced flow of state funds through a $3.2 million reduction in the annual formula-based distribution to local governments included in the biennial budget. This represents a 5 percent reduction of this single distribution. Other local government funding through the state is essentially unaffected, although the Business Ready Communities and Community Facilities programs are reduced by $4 million and $3.5 million, respectively.

State Employees. This budget eliminates 22 state FTEs, three part-time positions, and 15 AWEC positions. The executive order restricting both the hiring of new state employees and agency position reclassifications remains in effect. The 4 percent external cost adjustment for state employees remains in agency budgets, although several have modified the adjustment for their X-band employees, which are typically management positions.

Capital Construction. Much of the reduction in the Department of Administration and Information budget comes in a $17.1 million cut to state Capital Construction funding. Planning for a new state office building will have to be delayed, and major maintenance spending for state buildings and parks projects is reduced. As a result of lower bids, construction of the new dorm at the Girls School can move forward with a reduced appropriation.

Tourism. This department surpassed the 10 percent reductions target, in large part because cuts in the film incentive budget reflect both the limited levels of current activity coupled with past carryover funding. While a total of nearly $2 million has been cut from the agency's FY 2010, the expanded advertising effort is maintained. Certain 2009 tourism numbers in Wyoming are encouraging, despite the national economy's struggles.

I should note here that the improved short-term revenue picture allowed me to keep budget cuts below 10 percent for several agencies, including the Office of the Public Defender, the Attorney General, District Attorneys and District Courts. All have limited budget flexibility short of relying on significant staff reductions, but history suggests that demand on these offices will increase during the economic downturn.

To the greatest extent possible, the cuts to agency budgets will be incorporated into the 2011-2012 biennial budget which I will submit to you on or before December 1, 2009.

I look forward to discussing these reductions with the Joint Appropriations Committee when it meets in Cheyenne on June 18, 2009.

Best regards,
Dave Freudenthal

Pinedale Online > News > June 2009 > Governor reduces budget by $231.6 Million

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