*Governor's prepared remarks. Actual remarks vary and are not produced here.

Introductory Remarks

Mr. President, Mr. Speaker, members of the 62nd Wyoming Legislature, Secretary Maxfield, Auditor Cloud,

Superintendent Hill, Chief Justice Kite and members of the judiciary, military members -- all veterans, citizens of Wyoming. Good morning.

Good morning and a special welcome to new Treasurer Mark Gordon. You take the place of Joe Meyer who was a dear friend to us and to all of Wyoming. Joe, we miss you. Mark, we look forward to your good work.

And a good morning to my family. We are hoping the kids have a valid excuse for missing school.

Overview

We begin 2013 with optimism, with this new Legislature -- our 62nd, we have another opportunity to work on the 2013-14 budget and other significant issues we face.

We have the opportunity to take steps to position our state well for either boom or non-boom times.

We should:

build savings;

reduce the standard budget;

cut the size of government and streamline state regulations;

decide on the funding mechanism for our highways;

change some fiscal policies; and

provide funding for major items -- wildfire expenses, landfills, assistance to local government, the Gillette-

Madison water project, the UW School of Engineering, and recognition of employee performance, to name a few.

Unlike the federal government, we will continue to live within our means. We will keep our standard budget as flat as possible, not doubling every 10 years as it did the past decade. We will fund important items that position Wyoming well for the future, but draw the line on overspending.

There will be difficult decisions to be sure but what we do this session is all about progress for our state, not about our personal popularity.

By making the difficult decisions we have the chance to leave a better legacy for Wyoming.

Whatever decisions we make this session, we are in the best place to make them-- because I'm pleased to report the state of our state is strong.

That's such a simple but significant observation . . . the state of our state is strong. We are fortunate to be able to say that -- not everyone can.

We are thankful for our energy resources, our tourism, our agriculture, our natural treasures, our businesses, and our greatest strength -- our citizens.

Before I get farther along, I'd like to recognize some of our remarkable citizens today.

Recognitions

Representatives of the Eastern Shoshone & Northern Arapaho Tribes

I very much appreciate the close relationships with the Tribes.

We work together with a shared recognition that the Reservation faces many of the challenges and many of the opportunities as the rest of Wyoming. Our cordial relationship will benefit both the Reservation and the State.

Tribal members, please stand.

The Wyoming National Guard

The Guard continues to be deployed overseas. Men and Women of the Wyoming National Guard serve in a way that honors our state and country.

The Guard also continues its important work here at home. In 2011, the Guard distinguished itself for helping with floods. In 2012, the Guard again stood out for helping with wildfires.

General Reiner, the Adjutant General of the Wyoming National Guard, please stand. General, we appreciate you and all that our Guard does.
2013 Wyoming Teacher of the Year

Because we recognize education as one of our highest priorities, we remember the key to education is great teachers. One teacher can make a positive difference in so many lives and in our society. It is most appropriate that we recognize their excellence.

We have with us today Laura Drake. Laura is a 3rd grade teacher at Goins Elementary School in Cheyenne. Laura is the 2013 Wyoming Teacher of the Year.

She started her career in Campbell County 23 years ago and has taught 11 years at Goins.

Laura, please stand as we congratulate you for this honor and for all the positive difference you make in the lives of our children.

Outstanding Students go hand in glove with outstanding teachers.

Felix Weese, as a student at Greybull High School, received 1st place in Mathematics at the 2012 Wyoming State Science Fair. His winning project was titled: Frequency and Distribution of Permutational and Cyclic Primes.

Felix, I will leave it to you to explain your project. I'm certain more mathematics and many opportunities lie ahead for you. We wish you the best as you continue your education at the University of Wyoming.

Felix, please stand.

President of the University of Wyoming

I am pleased to have the President of the University, Tom Buchanan, with us today. Tom is retiring from his long and successful career at the University.

During his tenure we have seen an amazing strengthening of UW. We have outreach to our community colleges rising to an unprecedented level. He has built areas of distinction in energy, the arts and business.

I observe that being President is a very difficult job but one that Tom, with his wife Jacque, accomplished with great dedication and skill for the benefit of all the students and all of Wyoming.

Tom, please stand. Thank you for your dedication to our University. I note that the successful UW basketball teams seem to be giving you a wonderful send-off.

We appreciate all that UW has to offer as well as our great community colleges. We recognize in Wyoming the importance of higher education whether it is a four-year or two-year degree. And we also recognize the value of career and technical education.

Coal Miners

I would like to recognize those with technical training who roll up their sleeves every day to do the hard work. We too often take their contribution for granted.

Our plumbers, welders, technicians, custodians, carpenters, heavy equipment operators -- these are the people who do not always get the credit they deserve in building our state.

Last year I was fortunate to have had an opportunity to tour a coal mine. I talked that day to several coal miners, including an incredible woman who drove me in a truck as big as a house. She told me how proud she is to work in a coal mine, to be able to provide for her family and to be able to tell her kids that her work helps build Wyoming and powers the country providing jobs for many others. Her story is not unique. It is the story of coal.

We are fortunate to have two people who represent coal mining here today. Nicole and John Japp also represent the value of technical career education and all that coal mining means to our country. This team has a total of about 45 years of mining work, helping to provide the billions of dollars and 42% of the electricity for the nation. They also care for 4 children and 2 Irish Wolfhounds. Nicole's mother was a miner as is her daughter.

Please join me in welcoming two people who help keep us warm in the winter and cool in the summer. Nicole and John, please stand.

Entrepreneurs/Tech Business

Some of the very good news of the last two years is our exponential growth in broadband connectivity, and in keeping and recruiting data centers and other high tech companies. We have a supercomputer, we have a Microsoft data center under construction, and we have small and medium size tech companies popping up all over our state.

You don't have to look far to see that we have an emerging tech sector that will begin to diversify our economy and provide another option for our young people.

One such company is Ptolemy Data Systems which opened its 6000 sq. ft. data center facility in Sheridan last fall.

The company is the brain child of Ryan Mulholland.

Tech is taking hold in Wyoming thanks to entrepreneurs like him. My broadband conference this year was packed to the walls with amazing people just like Ryan.

Ryan, we look forward to see all that you and others like you accomplish. Please stand.
Compassionate Citizen

We as a state have struggled with the issue of suicide. My office and the Department of Health have been working to formulate a plan on how we can make improvements.

One person who has been leading the way in this effort is BJ Ayers, Creator and Executive Director of Grace For 2 Brothers Foundation.

BJ is a strong advocate for suicide prevention initiatives. She lost two sons to suicide, thus the creation of her foundation. She is recognized statewide as being an authority in suicide prevention. She does great things locally and participates as much as she can statewide.

BJ, we appreciate the courage you have shown helping to prevent the tragedy of suicide. BJ, please stand.

Those recognized today are representative of the great citizens we have in Wyoming.

When I say the state of the state is strong, it is more than dollars and cents -- it is because of our people.

We are small in population, big in talent and potential, and know that our people are Wyoming's very best resource.

Supplemental Budget

On November 30th, I submitted my supplemental budget for fiscal year 2014.

It is a balanced budget and reflects the hard work of state agencies and legislative committees. State agencies had to come up with budget reductions -- 4% at the Legislature's request. I doubled the request based upon low natural gas prices to 8%.

Based on the reduced revenue forecast in January 2012, we all hoped for the best but planned for the worst.

Our efforts paid off.

While the revenue forecast of October 2012 showed more revenue than previously forecast, largely due to capital gains and other investment income, our planning for budget reduction was timely. Here are some of the reasons:

We incurred unexpected and major wildfire expenses during last year's severe fire season. We need to pay for the fires of 2012 and prepare for the next fire season.

We are losing $700 million in Abandoned Mine Land money which had been federally committed to Wyoming.

With the U.S. Supreme Court's decision, implementation of the Patient Protection and Affordable Care Act (ACA) and associated costs are on the way.

Additional reasons the reductions are timely:

The state's standard budget has more than doubled over the last decade and that's an unsustainable trajectory.

There is uncertainty about the country's debt and deficit and how it will affect states, businesses, and individuals. Congress has failed to pass a budget in years. Uncertainty alone affects us.

And if revenue fluctuations from the last few years teach us anything, it's that revenue (especially mineral prices) fluctuate and we need to be ready.

So, caution is in order and budget cuts are in order.

Budget Highlights

Overall, I have recommended a reduction to the standard budget of over 6%. This reduces ongoing spending by over $60 million a year. I took it agency by agency -- not an across the board cut.

I wanted to lead by example, so my proposal has a 10% reduction for the Governor's Office and Governor's Residence -- hard to do but doable. Some state agencies have 8% reductions, some less. For community colleges and the University, the reduction is about 6%.

My recommendations also reduce the size of government, eliminating 86 vacant positions.

Regarding budget reductions, we know that some feel they are too deep. We also know that some in the Legislature feel they need to be deeper. For those who feel more cuts are needed, this session is the time to weigh in, not with conceptual ideas, but with specific cuts to specific agencies and programs.

I have made my recommendations and I look forward to seeing your budget reductions, as well as seeing what you do with the $20 million I left on the table remains at the close of the session.

I have recommended funding for a rules revision project, aimed at reducing and simplifying the nearly 18,000 rules on our books. We have far too many rules and these continue to grow. Too many rules are cumbersome and not business friendly.

Some Other Highlights

As I mentioned, we have the opportunity to reduce the standard budget in a deliberate, considered way -- at a time when revenue is flat but stable and our state continues to grow. In fact, we were the 4th fastest growing state this past year. We face no immediate economic crisis. This is an opportunity we should take -- not miss. In making cuts now, we will be prepared for what happens next -- whatever that might be.

My budget recommendations also include:

$8.5 million for salary increases and $2.5 million for one-time merit-based bonuses for state employees, which include UW and community college personnel;

we implemented a new performance management system for the executive branch last year;

we invested in the Hay study regarding compensation;

we want to keep the expertise in our state workforce, and we want to motivate the good achievers.

I have also included:

$5 million to replenish the data center recruitment fund -- we want to build on our successes;

$5 million in added funding to the Wildlife and Natural Resource Trust -- we want its important conservation work to continue, we want to recognize the value of balance; and we forever want to have ranching and farming a big part of our Wyoming landscape;

if our state is a team, each community is an important player. To give our team, the State of Wyoming, the best future each community should be strong; therefore, I have recommended up to $25 million for local governments;

to live up to the legislative commitment, I have asked for money for the completion of the Gillette-Madison water project -- we want to encourage infrastructure development and communities planning for their future.

I have also included up to $20 million for landfills and if funds are available, up to $30 million for energy projects of a transformational nature.

The source for the majority of these recommendations is 2013 capital gains income. This is one-time money, and these are one-time expenses -- they will improve our future without growing the next budget.

Last year, because of the rather gloomy revenue forecast, the Legislature had the foresight to reserve $150 million out of the rainy day fund. I recommend $60 million of that amount go to cover last year's fire expenses and prepare for this year.

Taken altogether, my budget recommendations leave over $19.8 million, which is available for legislatively driven priorities.

The Tier I School of Engineering at UW deserves special mention. The school offers a great opportunity for our state -- it will include a high level program to be integrated with the Enzi STEM facility, NCAR Supercomputer and the School of Energy Resources.

I appointed an outstanding task force to help define what a Tier I school would look like. You will see their report and note that they recommend building the school from the inside out, not the outside in. In other words, before a brick is placed we must develop what happens inside the building to be able to compete with any university in this country and beyond in certain specialty areas.

I thank the task force for their continued work. And I was confident enough in their work to build on the legislative initiative and include significant money for this school.

Additional Matters

Fiscal policy

I have recommended some changes in fiscal policy.

The Legislature has done yeoman's work over the years, building a Permanent Mineral Trust Fund that now totals over $5 billion. Under our state Constitution, 1.5% of severance taxes must go into this fund.

By a relatively new statute, an added 1% of severance taxes is directed to the mineral trust fund. The Legislature can change the statute, and I propose now is the time for a change.

My proposal is for the statutory 1% of severance taxes to be redirected to the Legislative Stabilization Reserve Account, commonly called the "rainy day account", an account that can provide for emergencies (as was done last year) for unanticipated tough economic times.

We have built many school facilities in the last decade, and if my budget is accepted it will provide roughly $600 million for new schools over the next five years. So I have also proposed that new coal lease bonuses go into rainy day savings rather than automatically be spent on new schools.

Under my proposal, we will continue to save more in the stabilization account. And by doing so, we will strengthen our ability to weather tough times as well as add transparency.

Health Care

The implementation of the ACA and associated costs are looming. Despite my strong objection to the ACA and my asking the Attorney General to fight the case in the U.S. Supreme Court, it is the law of the land.

We now have to play the cards in our hand. We have to make decisions regarding Medicaid expansion and insurance exchanges.

Last year the discussion on a state-based exchange was suspended. That and a lack of answers from the federal government mean the federal government will likely run an exchange for Wyoming when exchanges start operating in 2014.

But a federal exchange could be temporary because we can choose a state exchange down the road.
We should make an informed choice; therefore, one of my budget recommendations seeks $100,000 to assist in the process of deciding what exchange option is best for Wyoming.

In addition to the question of an exchange, we have before us the issue of Medicaid expansion. We must keep an open mind and review the work of Director Forslund and the Department of Health and other groups who want to weigh in.

I have asked for money for the mandatory expansion but not for the optional expansion.

The mandatory expansion is for those presently eligible but not on Medicaid for different reasons and will include 7,000 new children.

In preparation for this session I asked Director Forslund to prepare a budget asking for the full expansion, to evaluate the program on a cost benefit analysis and to make that information available for all of you. We must make our decision based upon what is best for Wyoming citizens.

Unfortunately there is no magic wand waving, there is no approach that will extricate us from the ACA. It is upon us and we must act.

Because of the enormity of the law, because so many questions need to be answered and so many federal rules still need to be promulgated, and because legislative spending authority is required, I have not committed the state. We have 12 months, until 2014, before full implementation.

So where do we go? The federal government has recently committed to flexibility but is still trying to put together the many needed rules.

I suggest we work now and over the next year preparing. We should continue to seek answers and we should look at the set of conditions we would need to accept an exchange and an expansion package.

Let's decide what we want and make the pitch to the federal government. In other words, let us try within the law that is upon us to find the best deal, the best fit for Wyoming.

To do nothing puts the full brunt of the ACA upon us -- everything is dictated by the federal government -- without an opportunity to tailor the law to our needs. Director Forslund is prepared to offer options.

This body has the opportunity to develop what it would like to see as we make our request. Perhaps the federal government will not agree to our terms. We can say no if they do not agree, but it is better we express our terms than make no request and get a package without our input. Let's take this as an opportunity for innovation.

Wyoming has led before with innovative health care and we can lead again to find state-specific solutions that are right for us.

One of Wyoming's noted historians recently informed me about an organization that existed in our territorial days.

Between 1885 and 1889, Wyoming cattlemen and cowboys formed and participated in the Fetterman Hospital Association in the small town of Fetterman (at the site of Ft. Fetterman). The Association has been described as the first cooperative health organization in the country. Cowboys subscribed individually through monthly pay deductions and cattlemen also subscribed to group memberships for their employees. In return for the subscribing fees, cowboys received a nearly full range of medical services.

This is an example of Wyoming leading -- early in our history -- to provide health care to a group that needed it.

We are challenged again now to find ways to provide access to health care for all Wyoming citizens. I believe we are up to the task.

Highway Funding

One of the concerns I hear about health care is we have too many people not paying a fair share of the services they are provided. I believe that is a fair concern. This can lead to bad policy. Does this notion translate to other areas of government?

With regard to roads, for example, we should recognize that for every dollar we pay in federal fuel tax we get over a $1.60 back. We are subsidized with federal dollars from other states. The flip side of that is when we drive a few miles south into Colorado or any other bordering state we pay more to drive on their roads. Those in Colorado drive a few miles north and pay less.

We've subsidized out-of-state drivers long enough for the privilege of driving on our roads.

It is a conservative principle to pay as you go rather than using savings to pay for an ongoing expense. It is a conservative principle to pay as we go rather than create a debt for others to fix. That is what Congress has been doing creating a debt for our kids and grandkids to pay. Not properly maintaining and funding our highways today is the same concept, we are creating a debt for those who come after us to pay.
We need a long-term funding source for roads.

A bit of history. My first session I asked this body to divert a portion of severance tax as a long-term funding source for roads. That suggestion was rejected. Some of your members proposed a bill to look at the option of toll roads. While I am not a fan of toll roads I agreed to support the bill. That too was rejected. This year the Department of Transportation has asked for $50 million in a supplemental budget from general funds. I rejected that request. So we are at an impasse.

I don't want to continue every year to deplete large amounts of general funds that could be used for education, for savings, for health, for seniors, or the disabled -- in order to fund what is one of the most basic functions of government -- providing sound infrastructure. There is no sense in talking about economic development if you don't have water, sewer, basic infrastructure.

Roads are the backbone for so much of our commerce, our recreation and our day-to-day living. It is an issue of safety. If we fail to maintain our roads it is no different than failing to maintain a car or a home. The price goes up and a higher price will be paid for poor maintenance. That is not a plan for being fiscally conservative.

Is there room for improvement and savings within the Department of Transportation? Absolutely. Am I working with DOT to do just that? Absolutely. Is there sufficient savings to provide the $130 million plus per year that is needed? No. It is easy to talk about those cuts as a concept, and easy to speak of politically, but if you believe sufficient cuts can be found to fund roads, I need to see the proposal.

I propose an increase in the gas tax, and in the alternative what I proposed two years ago, the use of dedicated mineral money.

Our highway infrastructure needs attention, and we need action not more words.

We've talked this thing into the ground and haven't moved the needle. We are not Washington D.C., we are Wyoming, we get things done. Let's get this done.

Education

We have been fortunate that as a state we can identify our priorities and also have the financial means to support many of those priorities. Education is a top priority for me, for this body and the State Superintendent.

Wyoming has spent billions in recent years on education efforts. We spend more per student than nearly every other state. But we are not the best in terms of results. Dollars spent without design, without a shared game plan, will continue to be expensive and unproductive.

Without a common understanding and shared goals by the Legislature, the Department of Education and my office, we are working against one another or at least not with each other. We must be on the same sheet of music and it is clear we are not.

Discussions between the Department of Education, the Legislature and my office should focus on issues such as high school graduation rates, dual immersion language opportunities, charter schools, career technical education or how to minimize the potential for school violence. We instead are wasting time and money wrangling with problems that should and can be avoided.

Last session the Legislature, recognizing that we were not headed in the right direction, provided additional duties to my office and LSO to assist the Department of Education. This has not worked as we all hoped.

We have seen that siphoning off pieces of the Department of Education leads to inconsistency and to the friction we have seen over the last year. This friction may be regarding accountability, with substituting ACT testing for PAWS, or how we categorize positions at the Department of Education.

We are mired down with disputes that are not necessary. We are frustrated. More important than our frustration, much more important, is we are not setting the stage for the best education system possible for our children.

We've got the funding. We have great teachers. Now we need to increase high school graduation rates, improve college readiness, and have a long-term path to excellence. We owe it to our kids and our state.

There needs to be a clear message to people, administrators, everyone -- that Wyoming will not accept the status quo and that Wyoming will have a predictable, accountable, long-term path to educational excellence.

Our state's future literally depends on it because today's students are tomorrow's citizens, workers, and leaders.

Parents and teachers do not care about who is to blame -- they care about results. If we want accountability, we have to be accountable. We want our paper's headlines to speak of results, of innovation in education rather than name calling and blame or that our schools are getting an "F" grade. It is up to us to do the work to get the headlines we seek -- the headline that Wyoming is progressing toward excellence in education.

This is the session to get back on track.

Conclusion

We have faced a lot of challenges and have a lot of good news. Last year, we made headway with data centers and other business recruitment efforts. With broad public input, we are preparing a state energy strategy that with the Legislature's help will provide an action plan for the responsible development of our natural resources that makes it a priority to balance our energy, our economy and our environment. We are leading the charge.

We undertook state management of wolves and held our first wolf hunt.

We joined with other states to encourage the development of natural gas vehicle fleets.

We continued to lead the way in state regulation of hydraulic fracturing.

We have pursued litigation against the federal government to protect our state interests.

Year in and year out, we have great judges providing justice -- a citizen Legislature bringing expertise and common sense to Cheyenne.

We saw technology services consolidated in the Department of Enterprise Technology Services.

We remember our work here is not about us or our political careers. It is about our children, our families, our communities, the state we love, and our future.

If past is prologue, we will accomplish all that needs to be done.

Thank you, God Bless and God Bless Wyoming.

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