wants their recommendations within the month.
If the revenue shortfall is prolonged or steep, budget cuts likely won’t be enough, Meacham said. When cuts start affecting employees and vital services, the Rainy Day Fund has to be considered.
"It is a Rainy Day Fund,” Miller said. "If the revenue picture dramatically deepens, then we’re going to have at some point say it’s a rainy day, but I’m not prepared to do that yet.”
It would take legislative approval to spend money from the Rainy Day Fund. A special session could be avoided if budget cuts are sufficient to get the state through until February when lawmakers return.
Lawmakers may use only 37.5 percent of the money in the Rainy Day Fund, or about $225 million, in any fiscal year to make up for revenue shortfalls. Another 37.5 percent can be used to stabilize the budget in another fiscal year; the remaining 25 percent may be spent on projects labeled as emergencies.
Natural gas prices
The main factor affecting the state’s economy is the price of natural gas, Meacham said.
While total 2009 fiscal year gross production collections, which consist of taxes paid on natural gas and oil production, were 5.5 percent below the estimate, in June they were off the estimate by 81.7 percent, reports show.
In June 2008, the state collected $105 million in gross production taxes. A year later the state collected $13 million.
"Until we see a firming of natural gas prices, things are going to stay pretty tough,” Meacham said.
A rebound doesn’t seem immediate. Natural gas prices remain well below $4 per 1,000 cubic feet. The budget for this fiscal year is based on gas prices averaging $5.22 per 1,000 cubic feet.
State revenue estimates are based on production levels, which have fallen.
"It’s not just price,” Meacham said. "It’s price and volume. What happens with oil and gas is when price goes up, then volume produced goes up. When price goes down, volume produced goes down so it’s sort of a double hit.”