The funding picture for Wyoming’s state government just got a lot rosier.
Driven once again by higher-than-expected mineral revenues, Wyoming enjoyed a more profitable 2023 than financial forecasters predicted, and similar forces are expanding revenue expectations for the next three years.
Nearly all major state revenue streams exceeded January estimates, according to the latest Consensus Revenue Estimating Group report released Wednesday, bringing in $177.3 million more in 2023 than lawmakers planned for when writing the budget.
The same report also adjusted future revenue forecasts upward. Monies flowing into the General Fund and the Budget Reserve Account — the state’s primary accounts used for programs and services — in the next three years are expected to increase by $251.8 million.
Taken together, the positive balance on 2023’s actual revenues and the newly expanded forecast revenues will give budgeters an additional $429.2 million to work with for the remaining year of the current budget cycle and the 2025-26 plan.
Each January, representatives from several state offices and the University of Wyoming work together as part of the state’s official estimating process, also known as CREG. The October report acts as a revision with updated information.
Natural gas prices played a significant role in boosting mineral revenue, particularly due to extreme temperatures that catapulted demand and prices last December and January.
“[Natural gas prices] were extraordinary,” CREG co-chair Don Richards told the Legislature’s Joint Appropriations Committee on Wednesday. “They were something that has never been seen in the state of Wyoming’s history in terms of those prices, we really generated a lot of revenue.”
Despite the high prices, however, natural gas production was lower than predicted in January.
Last October, revenue also exceeded 2022 expectations, partly on account of prices that pained residents at the gas pump.
This and last year’s October CREG reports both took pains, however, to indicate that the newfound bounty should not be expected to continue and that Wyoming’s long-term financial footing remains shaky.
“If I had to pick one theme for today’s CREG report, it would be persistent and elevated inflation, and it is evident in multiple areas,” Richards told the committee. “It’s evident in our sales-and-use-tax forecast. It is evident in our investment forecast. It is evident in our non-mineral assessed value — that’s residential property taxes.”
The report also addresses inflation in relation to federal stimulus dollars. Those funds will continue to provide support to Wyoming through fiscal year 2024, but in the meantime are contributing to inflated costs, according to the report.
Second, while the state’s primary revenue streams appear to have rebounded from 2016’s near-term lows, long-term problems persist.
“Wyoming coal and natural gas production continues to follow broad downward trends interrupted with occasional increases, which are not sustained,” the report states. “These trends leave the state relying more heavily on oil production and dependent on world prices.”
Lastly, the report highlights how the state’s commodity dependence can lead to extreme swings. Severance tax collections in 2020, for example, hit a 16-year low then rebounded to the third highest all-time level in 2023.
“In the past four years, Wyoming has experienced two opposite amplitudes of the proverbial revenue pendulum,” the report states. “External factors, including, but not limited to, geopolitical events, including recent developments in the Middle East, changes in energy markets and demand preferences, weather, available infrastructure and infrastructure outages, world financial markets, pandemics, monetary policy, federal regulations, and federal fiscal policies, continue to dramatically influence fluctuations in Wyoming’s revenue.”
CREG will provide an update in January ahead of the budget session that begins the following month. For now, Gov. Mark Gordon will use this week’s report to shape his budget recommendations. He’s expected to present those to the Legislature on Nov. 15.