CHEYENNE - Wyoming's financial experts on Friday reduced their estimate of how much money the state will have to spend over the next year by more than $650 million. They blamed the current economic crisis and lower energy prices for the downturn.

Wyoming's Consensus Revenue Estimating Group projected in October that Wyoming would have $900 million to spend when the Legislature convenes next week. But Friday's report revised that projection to just less than $260 million. That money is in addition to the $8 billion, two-year state budget approved early last year.

Gov. Dave Freudenthal said Friday he was working to trim his supplemental budget recommendations for the upcoming session in response to the new numbers.

"We are not cutting the biennial budget that was adopted last session," Freudenthal said Friday. "We're really talking about reducing the amount we might have added in a supplemental budget."

Freudenthal has warned for months that the January numbers would likely be far lower than the October projections, and he limited his supplemental budget proposal late last year to about $500 million in new spending.

Speaking of his general priorities, Freudenthal said Wyoming should focus its spending on highways and capital construction projects - things that keep people working. He emphasized that Wyoming, unlike most other states, has enough money to fully fund the existing state budget.

Rep. Rodney "Pete" Anderson, R-Pine Bluffs, chairman of the House Revenue Committee, said Friday that the revised figures show that Wyoming is going to have to watch its spending closely.

Anderson said he sees no way the state can afford to fund a residential property tax cut in the coming year. Freudenthal had proposed a $38 million property tax cut that would give qualifying homeowners an average tax break of $278.

Another key legislator, Sen. John Schiffer, R-Kaycee, said the Legislature will have to weigh its priorities as it considers whether to fund a property tax cut.

Schiffer, chairman of the Senate Revenue Committee, said he would favor gearing any such relief program toward helping lower income people. He said lower-income people tend to spend more of the money they receive, which would help the state economy.

Freudenthal said he still wants the state to fund the property tax cut. However, he said the state will have to make a hard decision in coming months whether it can afford to do so.

Steve Sommers, co-chairman of the CREG group, is budget and fiscal manager for the state Legislative Service Office. He said Friday that the group took a conservative approach in estimating state revenues, including the income Wyoming receives from severance taxes on energy resources.

The report projected Wyoming will receive about $875 million in severance tax revenues from mineral production in the coming fiscal year, down from October's projection of $1.1 billion.

Sommers said the group estimated that natural gas prices would be $3.75 per thousand cubic feet for calendar 2009, rising to $4.25 for 2010. Gas was trading at $4.14 on Friday at the Opal hub in Wyoming.

The group pegged oil prices at $40 a barrel for next year, rising to $50 a barrel in 2010, he said. Crude oil was trading around $40 a barrel in national markets on Friday.

The report also predicted that Wyoming will receive nearly $225 million in income on its investments in the coming fiscal year, down from October's projection of $370 million. Federal mineral royalties were projected to be just more than $740 million, down from October's projection of $975 million.

Friday's CREG report noted that state General Fund revenues were $1.3 billion in the 2008 fiscal year. It predicted they will fall to $941 million in fiscal year 2009, climb to $985 million in fiscal year 2010 and will still be just below the $1.3 billion level by fiscal year 2014.

Buck McVeigh, the other CREG co-chairman, works in the Economic Analysis Division of the Department of Administration and Information. He said Friday that Wyoming is affected by the extreme volatility of worldwide energy markets.

"What we do know right now is that we have energy conservation on the rise, resulting in basically demand falling way off," McVeigh said. He said federal reports show that natural gas storage is much higher than normal for this time of year.

McVeigh said the CREG group predicted that the current downturn should affect Wyoming mainly in 2009.

"If we can get through that particular year, we look for the economy to start making improvements in 2010," he said. "I don't see any signs out there that we have reason to believe it's going to happen any sooner than 2010."