SHERIDAN — The latest forecast from Wyoming’s Consensus Revenue Estimating Group suggests the state will pull in roughly $77 million less than previously predicted over the next biennium, the group’s co-chairman told the Legislature’s Joint Appropriations Committee Friday.

The report revises and adds to the revenue declines forecasted in CREG’s October report, which predicted a $185.4 million drop in state revenue over the next three fiscal years. The change is primarily the result of drops in natural gas prices and sales tax revenues, the report says.

The news comes as the JAC prepares to draft a state budget for the coming biennium next week and will affect how the committee decides to suggest state funds are doled out among state agencies.

CREG Co-Chair Don Richards told the committee the $3 billion budget Gov. Mark Gordon has proposed would still balance with the anticipated revenue reductions, but the decline would eliminate most of the funds the proposed budget would funnel into the state’s reserve accounts.

With the state’s future revenues expected to continue declining in conjunction with waning energy markets, though, lawmakers said growing the state’s reserves is a priority.

“We need to be very careful and not burn through our cash and then take away options later,” said Rep. Mark Kinner, R-Sheridan, who sits on the JAC.

The projected revenue drop could prove to be a particular challenge when it comes to education funding. The governor’s budget already calls for the state to draw on reserves to fund education in the next biennium, and dwindling reserves would limit the long-term viability of that plan.

A decline in revenues would also be compounded by increases in education costs, Kinner said. A report released by the Wyoming Department of Education this week showed the state’s K-12 enrollment increased by 803 students in the 2019-2020 school year and Kinner said that growth will cause a corresponding hike in the price of Wyoming’s education system.

The JAC will take the first crack at contending with the challenges posed by the state’s falling revenues when it compiles its draft budget during a series of meetings next week. The Legislature as a whole will consider that budget when it convenes Feb. 10 for a session that will be primarily devoted to passing a state budget for the next biennium. The results of the latest CREG report will undoubtedly shape that budget and could represent a challenge the Legislature will wrestle with for years to come.