CHEYENNE - Gov. Dave Freudenthal Wednesday vetoed three small parts of the $3.5 billion state budget for the coming two-year biennium before signing it into law.

The co-chairmen of the Joint Appropriations Committee, Sen. Phil Nicholas, R-Laramie, and Rep. Frank Philp, R-Shoshoni, who witnessed the signing ceremony in the State Capitol rotunda, said they did not expect the House or Senate to try to override the governor's vetoes.

Freudenthal noted that the budget maintains significant initiatives begun last year, such as money for the Wyoming Wildlife and Natural Resource Trust Fund.

Because the budget this year included money for highways and local government that previously had been handled in separate bills, the process went relatively smoothly, he said.

Lawmakers were able to see early on in the session that there was little money available for separate projects and legislation.

"If you wanted to add money for highways, you had to take it from someplace else," Freudenthal said. "I think this is the way we should do a budget."

The Legislature's budget included items he supported but didn't recommend because he was unsure of coal bonus revenue when he prepared the budget last fall. The governor must by law submit a budget to the Legislature by Dec. 1.

The committee and the Legislature, assured of the coal bonus money, added $50 million to the corpus of the Hathaway Scholarship foundation and to the water accounts and the Legislature's reserve fund.

If natural gas prices stay as they are now, the people who were turned down this year will be back next year, he said.

Freudenthal said he would have liked to have a permanent source of money for cities, towns and counties to make up their losses from the sales tax exemption on groceries. But he said he believes the Legislature tried to address the problem in the formula for distribution of $350 million to local governments.

"On balance, what we didn't do was end up with an impasse," Freudenthal said.

The budget items vetoed by the governor were:

* A section that added regional field offices for the Wyoming Business Council. Freudenthal said he remained unconvinced of the need for the regional field offices.

* A footnote on the allocation of $200 million to the Department of Transportation to pay for highway construction and maintenance.

Although the budget appropriates the full $200 million, the footnote would have removed $100 million of the total from the department's standard budget. This would require the department to request the appropriation again in the next budget for 2011-12.

The footnote, the governor wrote, was inconsistent with the intent of the budget statutes which say the standard budget shall disclose the money needed to provide the same level of services in the coming biennium. The veto means the department won't have to request the appropriation again.

"By this veto, I intend to follow both the letter and spirit of the law," the governor wrote.

If revenues drop, the governor said, the first cuts will be made to big-ticket items like highways.

If revenues are maintained, he said, the additional $100 million will be spent on highways during the next biennium.

Freudenthal said the Legislature has allocated money for the program repeatedly and it is clear it will continue to be part of the budget.

Contact Joan Barron at joan.barron@trib.com or by phone at 307-632-1244.