Wyoming’s governor warns of budget cuts

Wyoming has been an economic powerhouse for most of this decade. Fueled by its extraordinary wealth in coal, natural gas and oil, the state has socked away billions of dollars in budget surpluses, recruited workers from the Rust Belt and constructed dozens of new schools wired for the Internet.

As recently as last month, the state reported an unemployment rate of 3.4%, less than half the national number.

But it is no longer immune to hard times.

This week, Gov. Dave Freudenthal’s office said that he had warned state agencies to prepare for possible 5% budget cuts in the fiscal year starting in July, signaling that the good times are coming to an end in one of the states that enjoyed them the longest.

“We’re not in any way, shape or form insulated from this recession,” said Buck McVeigh, administrator of the state’s Economic Analysis Division.

Almost every state is facing a budget deficit as the nation confronts its most severe economic downturn in nearly 70 years. But Wyoming’s deterioration is a troublesome sign, said Arturo Perez, who tracks state budgets for the National Conference of State Legislatures.

“It just shows that everybody’s in this together,” Perez said, calling the current downturn “one for the record books.”

Wyoming’s financial health is tied closely to revenue from energy exploration. That has dried up as companies cut back drilling due to plunging energy prices. Oil is hovering around $40 a barrel after a run at more than $100 a barrel, and natural gas prices are half of what they were last summer.

The state, which has no income tax and low property taxes, is accustomed to riding out booms and busts, and carefully tracks revenue to keep from getting caught flat-footed. Its Consensus Revenue Estimating Group, which McVeigh co-chairs, predicted a $900-million surplus for this fiscal year when it met in October. But, watching a sudden deterioration in the economy, it pulled that estimate back to $200 million in January.

Next year, McVeigh said, could be bleak. “We’re just at the tip of the iceberg,” he said.

Robert Godby, an economics professor at the University of Wyoming, said he thought Freudenthal’s move might be partly political, meant to head off persistent requests for new programs from a bureaucracy accustomed to years of plenty.

The Democratic governor is “weaning them off what’s been a really great five years,” Godby said.

He said he believed the cuts may not prove necessary because most analysts predict an eventual rise in energy prices.

And it could be worse, he added. Most states already are making deep cuts just to get through the current fiscal year.

“We’re still glad to be in Wyoming relative to anywhere else,” Godby said. “The good thing is, [Freudenthal] is asking us to think about it, and everybody around us has already been doing it.”

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nicholas.riccardi@latimes.com