CHEYENNE, Wyo. (AP) — Wyoming’s governor urged legislators Monday to work with him to lower state spending while a report predicted ongoing weak revenue from the oil, natural gas and coal industries.

The Consensus Revenue Estimating Group report released Monday forecasts a $451 million revenue shortfall for the fiscal cycle ending in 2022, much less than an $877 million revenue shortfall that the group predicted in a report in May.

“It’s an improvement. But I think all of us know we aren’t even close to recovering and our budget still needs attention," Gov. Mark Gordon, a Republican, told the Legislature's Joint Appropriations Committee.

Some areas of Wyoming's economy including retail sales and wind energy development have done relatively well during the coronavirus pandemic, the report said.

“However, other data elements such as oil, natural gas, and coal production, employment, and tax collections, stand in stark contrast to the pockets of positive news,” the report added.

Gordon last summer responded to falling revenue by freezing state government hiring and major contracts and by cutting state agency spending about 10%. He has told agency directors to prepare for another round of 10% cuts and possibly more after that.

"These are times to reshape and reformulate government in our state,” Gordon told lawmakers in Monday's video conference meeting.

Looming deficits in education spending, meanwhile, are a “ticking time bomb” that can't easily be defused because of Wyoming's legal obligations for funding public education, Gordon added.

At what point state cuts will catch up with declining revenue remains to be seen, though the effects of the coronavirus pandemic and low oil prices on Wyoming's economy have become clearer since the May report by the nonpartisan Consensus Revenue Estimating Group.

Federal coronavirus aid to people and businesses and record-setting late-summer tourism to Yellowstone and Grand Teton national parks helped boost state revenue above what the group predicted in May, the report said.

Low oil prices continued to take a toll on state revenue, however, after an oil-price war between Russia and Saudi Arabia last spring and an overall downturn in travel and fuel demand because of the coronavirus.

Last summer, the number of drilling rigs exploring for oil and natural gas in Wyoming fell to zero for the first time in modern history. Since then, Wyoming's rig count has recovered to three rigs, down from 32 a year ago.

The state's coal and natural gas industries, meanwhile, remain stuck in a more than decade-long decline, the report pointed out. Abundant supply has kept gas prices low and discouraged new gas production. Low gas prices and falling costs for renewable energy have encouraged utilities to retire coal-fired power plants or modify them to burn gas.

Legislators asked Gordon about St. Louis-based Arch Resources' plans to divest itself of Wyoming coal mines after a court upheld a Federal Trade Commission decision to block Arch and St. Louis-based Peabody Energy from merging their Powder River Basin operations.

“We’ve been very active in trying to make sure that people don’t write off coal prematurely and we will continue those efforts, but so far we have seen a continued decline in demand,” Gordon said.

Wyoming faced a tight budget even before this year but made ends meet with state savings. Contrary to what some people seem to think, Wyoming won't be able to keep doing that indefinitely, said committee co-chairman Sen. Eli Bebout, a Republican from Riverton.

“When you talk to the average citizen in Wyoming, they really don’t think we have a problem and we really do. It’s serious as the dickens," Bebout told Gordon.

It's important for Wyoming officials to look past just the year ahead when thinking about the state budget, Gordon said.

“If we cannot find a sustainable level of government that makes sense and that we can afford under the circumstances that we see coming, no one is going to move here, nobody is going to want to move their business here," Gordon said.

Gordon in March approved a two-year state budget after a month-long legislative session devoted mainly to the budget. Legislators will revisit some spending issues during this winter's two-month session devoted mainly to non-budget matters.

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