12/7/2015 8:46:32 AM Monday, December 7, 2015 2017 – 18 Biennial Budget, 2016 Budget Session 9:00 am – Governor’s presentation of the State Budget Request 12/7/2015 8:56:51 AM Roll Call taken by Don Richards, Chairman Ross excused. 12/7/2015 8:57:46 AM Chairman Harshman extends welcome to the Governor. 12/7/2015 8:58:06 AM Governor Mead: Opening remarks. Start with challenge for session – take care of current fiscal year, reduced revenue projections. Shortfall. Section 310 requirements. General concept is how to fund, looked through exception requests, reduced where appropriate, and added some things. Effectively takin exception requests from rainy day fund as borrow. Repay with severance tax monies and SIPA. Can fund request, refill rainy day fund. We are tightening belt but will continue to save in permanent fund and possibly in rainy day fund. Think it is right way to go. Some question taking from statutory reversion. Conservative by not speaking for 2 quarters from the current statutory reversion. Still waiting for January CREG. From large business recruitment, state facilities construction acct, ..Data center expansion, water account 3, school foundation reserve acct, dept. of insurance, dept. of transportation, dept. of health, office of state lands and investment, DOC, vacancy savings, total of about 160 million. Have identified more but section 310 does not allow or require going beyond zero dollars. Capital construction – need to invest in Wyoming, colleges, universities, state agency facilities. One project only for dept. of forestry, out of rainy day fund. Major Maintenance reduced percentage to 1.25. If we have additional monies flow into rainy day fund, would look at refilling that pot. Casper office slowing down project. CWC Ag facility recommended Jackson outreach, both college and rainy day funds, same for tech education project. Recommended LCCC residence hall, children’s center from other funds. NW residency hall from other funds. UW recommendation for campus science and engineering. DOC recommendation for build out of facility in Torrington, from other funds. WAMY, request from University of Wyoming, did not recommend building money, recommended money for a study. Cut programs for tobacco funds. Asked agencies receiving that money to identify cuts. There will be pressure and discussion on tobacco funds. Local govts. need additional funding. I am recommending 90 million this session. Highways recommendation of 25 million. Short sighted to get behind on bridges, highways. Data recruitment monies taken out to help balance budget. Would like discussion with JAC and business council to have funds available. 12/7/2015 9:10:16 AM Cuts made for this fiscal year are appropriate. Some legislatures think deeper cuts are needed. In the event of deeper cuts, every agency has prioritized their requests. Do not think we should do across the board cuts Tourism is 2nd largest industry. It continues to perform very well. 12/7/2015 9:11:36 AM Discussion points: AML funds returned. No discussion yet on how to spend. Need a thoughtful discussion. 12/7/2015 9:12:21 AM Questions: 12/7/2015 9:12:26 AM Harshman: Cuts – why didn’t we biennalize the cuts? 12/7/2015 9:13:30 AM Governor- Some cuts were savings on vacancies, some were big cuts like DOH, difficult to forecast. We projected for those that we had confidence that we could maintain, not for ones that were temporary circumstances. 12/7/2015 9:14:23 AM Harshman: Over 180 vacancies that are open for over a year, some difficult to fill, like DOT. Did you consider those? 12/7/2015 9:14:50 AM Governor: We did. We have a hiring freeze. Criteria to make it a permanent cut, ones held open for a long time. For highway patrol and DOC does not necessarily work. The longer we go with the freeze along with looking at the January CREG, will give us an idea of which of those to eliminate 12/7/2015 9:16:02 AM Kean: Budget profile. Split between GF and school foundation. Budget carryover, decrease from 15/16 budget reserve account. Total balance is approx. 3 billion. Gove app rec shows the operating piece for all 3 branches of govt. and ongoing exception requests. Line below is actual std. budget reductions. Total gov. rec. Approx. 29.4 million as bottom line. LSRA cash balance. Profiled 1% severance tax projection. 1st priority is to refill rainy day fund, all remaining lines are governor recommendations out of LSO. Final is one time funding out of LSRA. 448.5 million. Balance of 1.566 billion in LSRA. Gov. recommends investment income flowing into SIPA, goes into LSRA. Increase in LSRA at end of time. 12/7/2015 9:19:29 AM Governor: state facilities – Used some of state facilities money to cover shortfall, asked for 10 million to go back into that acct. We feel that we can do that without slowing down the process. Can keep important projects going without delaying the time frame 12/7/2015 9:21:17 AM Governor- Medicaid expansion – Pros and cons discussed last year, still exist, should consider Medicaid expansion this year. DOH has asked for considerable amount of money in exception request. If we don’t expand, money comes from general fund 330+ million. If approved, we can reduce DOH. If not approved, will have to come up with x million. Unique approach to this as well as to funding the budget. 12/7/2015 9:23:11 AM Perkins- GF appropriation –What increase to the std. budget, from current budget to this budget? Gain in the std. budget. 12/7/2015 9:24:05 AM Kean: increase around 193 million = 6.7%increase, largest was compensation increases over the last 2 years and health insurance costs for employees. 12/7/2015 9:24:40 AM Harshman: Shift to AWAC employees, quantify that. Any benefits to having AWAC employees? 12/7/2015 9:25:10 AM Governor: Alex will pull up on computer 12/7/2015 9:25:21 AM Kean: 284 AWAC in this budget. We would have to get back to you on historical information. 12/7/2015 9:25:45 AM Harshman- You do not know the increase? 12/7/2015 9:25:54 AM Kean: these are for all AWAC, not just GF. I believe there are 38 in the exception requests. 12/7/2015 9:26:23 AM Stubson: Fiscal profile, 18.7million in cuts. Is that a subset of the 52 million for the current year, carried into next biennium or separate? 12/7/2015 9:26:58 AM Governor-cuts rolling over into next budget? 12/7/2015 9:27:08 AM Stubson- some cuts carried forward, were they carried forward from the 52 million…? 12/7/2015 9:27:37 AM Kean: Some are consistent, a reduction in 15-16 carried forward into 17-18, I believe 16-17 Million. The remainder was unique. 7 months remaining in fiscal biennium different than planning ahead for a 2 year cycle. 12/7/2015 9:28:33 AM Stubson: UW initiative, prioritized by budget and your office. How did you approach those big initiatives? 12/7/2015 9:29:02 AM Governor- While revenue is down from record 2015 year, we are still in a place to live up to commitments to science and engineering. We did not fund at the level requested. Cash constrained. We put in enough money to move forward without delays. Same thought for highways and Casper College. Need to take a measured approach. My philosophy to tighten belt but do important projects for state. 12/7/2015 9:31:14 AM Burns: 18.7 million cuts – you said from std. budget but Kean said 6.5 million from this budget cycle so from base or std. budget. 12/7/2015 9:31:44 AM Kean– from std. budget, from 17-18 std. operating budget 12/7/2015 9:32:08 AM Burns- Medicaid. We have had increases in every budget. How do we save by going with the expansion, which is a different funding model? Where is the extra money? 12/7/2015 9:33:03 AM Governor- If we accepted the expansion, can replace state GF with federal funds. Net difference is reason we can reduce DOH budget but need to come up with x million 12/7/2015 9:33:59 AM out of GF or somewhere else Harshman: biggest unknown of budget is on school side. As district resources drop, state entitlements go up. Looked at over interim and during recalibration discussions. UW cap con, major maintenance, building schools in growing areas. PFL holding accts, SIPA. We have to delink cap con from school operations. The longer we wait, the options run out. What was the talk about options if we are doing something this budget session. 12/7/2015 9:36:36 AM Governor- More difficult question is schools. Operation side easier to deal with. Capcon more difficult to deal with. 1. Not funding additional cap con. My thought is that would be an overreaction. We discussed but did not go forward with mill levy tax increase. 87m cap con is less than what we have for major maintenance. Difficult to say no further cap con. Still have question on how to fund major maintenance. 2. Increase in taxes in some form. I think it is the wrong time to do that. Burden would be put upon struggling industries. No way to sustain trend of spending on cap con. Reduce new construction, look at capacity issues, at nature of buildings for savings, GF, funding of agencies is more difficult this year. Biggest issue is capcon for schools. We need all hands on deck to figure out a solution. First state of the state, suggested slowing down number of schools being built. We do not have a solution at this point. Sooner we find one, the better of we will be. 12/7/2015 9:41:29 AM Harshman 12/7/2015 9:41:34 AM Governor- UW and community colleges recommendation for a cut. We believe that is in accordance with the model they have said they need to go forward, will provide predictability. Same for UW, recommended a 5M cut, carried the cut forward. In parity with Com Colleges. 1.1% cut. Net difference for UW from GF. 12/7/2015 9:43:26 AM Connolly- Positions freezing, cap, criteria for stopping the freeze? 12/7/2015 9:43:54 AM Governor- Oct CREG, there were calls for RIFing people, in appropriate. Freeze process allows for appeal and some positions filled. Through the Jan CREG or until I get a sense of the legislature direction, we will keep the freeze. GF budget doubled in decade before I entered office. It has been relatively flat, even with pay increases, since I have been in office. 12/7/2015 9:46:09 AM Nicholas- Outline thought process of capitol construction project and position of continuing funding. 12/7/2015 9:46:38 AM Governor- Legislature had vision to start putting money away for the capitol recognizing issues like ADA compliance, and fire safety. Building needs to be preserved. My personal view is would have been great to start project in 3 years. Questions on Herscheler. Legislature voted to build new state office bld. I vetoed it. Deferred maintenance on Herscheler, central plant in between and connectivity. More difficult to say do only the capital. How do we have more space for the public? Connector helps with more space and more openness. I recommended continuation for the funding. We believe we are within budget on the capitol. Have negotiated to get the Herscheler back on budget. Have heard that we should pull the plug on one or the other. How much money have we spent on the Jonah building, the Carey space? Difficult complex project. My view is that to pull the plug on half would diminish what we are trying to do on Central plant and connector and would come at a substantial cost. 12/7/2015 9:50:42 AM Nicholas- Your overall budget. Are you comfortable with the size of the budget, in terms of revenue projections? Two years from now, can we maintain that budget or not have cuts? 12/7/2015 9:51:36 AM Gov. – I am comfortable with the overall number. I have concerns with some of the funding levels, like local govts., highways, projects. One item I did not address is big tab for state pen in Rawlins, which has significant structural changes due to the soil. The expense may be high enough to question whether to refix or rebuilt, costs of sending prisoners out of state. What do we do with staff? If predications are correct on funds flowing in from LSRA and SIPA, should be enough money to address those issues. 12/7/2015 9:54:19 AM Nicholas- paying back funds, likelihood of economic downturn, realistic to be able to pay back x million? Rainy day fund down to x million. What projections are you putting on it, proper amount to take out, if revenues stay the same? 12/7/2015 9:55:21 AM Governor- Historically, 9 out of 10 years we meet the spending policy amount. This year we did not. We have never missed it two years in a row. We have a high degree of confidence that will come in. Longer term picture; I gather info as you do, from oil and gas and coal industry. Oil and gas comments indicated it will come back but don’t know when, a year or a year and half. If that does not come true, oil at 70 and gas at x, we should think about worst case scenario, one, two or three bienniums from now. We will have to look at rainy day fund and the burn rate. We never want to draw the corpus down but need burn rate to sustain us. Statutory provision. I am asking for the statutory provision to pay back. If things change, we can switch back to building up the funds. 12/7/2015 9:58:42 AM Greear- School side. 1% severance life line, moving into LSRA with hope we keep up with earnings to backfill it. Still not leaving a reservoir or pool for school to fill that. Prudent to plan for years of dealing with downturn. 12/7/2015 9:59:50 AM Governor- Confidence of meeting refill. School side, operations are easier. Cap con is more difficult. This session is opportunity to identify with you what the solution for long term is. Major maintenance is significant. Options include increasing the mill but I am not at that point yet. Long term, without good news from coal industry, gives us a tough situation. 12/7/2015 10:01:27 AM Harshman- anything else to share? 12/7/2015 10:01:49 AM Governor- I have tried to cover those points I thought your committee would be most interested in. Thank you to the committee and to my staff. 12/7/2015 10:02:21 AM Hastert- Logistics for upcoming meetings. Will there be budget staff here? Communication with your office. 12/7/2015 10:02:58 AM Governor – Currently moving out of the capitol. I am on the street. Looking for space here. Plan is to set up a conference area and place staff in the area. We will make sure we can get here as soon as possible. We do not have furniture in that office yet. Thanks to everyone. 12/7/2015 10:04:20 AM Harshman- closing the meeting.