A couple of news items caught our eye this week and are worth noting.
Last Friday, due to continuing low prices for natural gas produced in Wyoming, Gov. Matt Mead ordered directors of state agencies to prepare for an 8 percent budget cut for the fiscal year that begins July 1, 2013 – twice what the governor and Wyoming Legislature asked agencies to prepare for during the 2012 budget session, though agency heads were warned about the possibility of the deeper cuts at the time.
When Gov. Mead prepared his 2012-14 biennial budget last fall, he based his revenue estimates on an estimated price of gas of $4 per thousand cubic feet, but by January, the price had fallen to $3.25 per mcf at the Opal Hub in Southwest Wyoming.
On Monday, natural gas was trading at $1.80 per mcf, with continuing low prices triggering the response from the governor. The state loses $200 million in tax revenue for every dollar drop in the price of natural gas.
That belt-tightening is fiscally prudent. Given the glut of natural gas in the market and not wanting to dip into reserves, the governor has asked agencies to prepare to cut their budgets and also enacted a hiring freeze. There could be further cuts ahead.
Wyoming is taking a reasonable, though sometimes painful, approach to a difficult fiscal situation. Contrast that to the federal government, which is spending money like a drunken sailor.
The other news item that caught our eye was a report that the poor state of the economy has worsened the outlook for the Social Security Trust Fund. According to a report by the trustees who manage the fund, Social Security trust funds will run out in 2033, three years earlier than previous estimates. That’s 21 years from now, but according to the report, the disability portion of the fund is set to run dry in just four years, though money within the fund can be reallocated.
Even worse, Medicare is projected to run out of money by 2024 – just 12 years from now.
Of course, the U.S. Congress has raided the trust funds for decades and has basically ignored the problem, placing the future of the programs in serious jeopardy.
In their report this week, the trustees stated that Congress should address the problem “as soon as possible,” but Tuesday’s story said that no action is expected before the November election.
Well, of course not. The first priority of most, if not all, members of Congress is to be re-elected, and that usually means putting off tough decisions, and decisions to preserve Social Security and Medicare have been put off for years and years. We can remember Sen. Alan Simpson warning 25 years ago about the trust funds eventually running out of money.
Meanwhile, the federal debt has risen to a staggering $15.6 trillion and is growing at the pace of nearly $4 billion per day.
Sen. John Barrasso often says how Wyoming gets it when Washington doesn’t, noting that Wyoming’s constitution requires a balanced budget, lawmakers are fiscally conservative and the governor wields the power of the line-item veto.
This week’s news out of Cheyenne and Washington hammers that point home.