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CHEYENNE (AP) — Wyoming Gov. Matt Mead says he believes the state can pay for government operations over the next two years without raising taxes despite the recent downturn in energy prices.

But Mead told state lawmakers in Cheyenne on Monday that Wyoming needs to figure out how it’s going to fund school construction and maintenance in coming years considering the soft market for coal.

“The longer coal is depressed, the more difficult this problem will become,” Mead told members of the Legislature’s Joint Appropriations Committee.

Mead’s budget presentation kicked off two weeks of committee hearings. The committee plans another two weeks of hearings in January ahead of the legislative budget session set to start in mid-February.

Mead is proposing a $3.4-billion general fund budget — down about $200 million from the current budget. His budget recommends no pay raises for state employees.

Mead proposes changing state law to reduce the current flow of state energy revenues into state permanent savings by about $204 million over the next two years. He proposes redirecting that money into the state’s $1.8-billion “rainy day fund.”

Putting more money into the rainy day fund, together with anticipated returns from state investments, would allow the state to spend nearly $450 million on projects over the coming two years while still keeping the rainy day fund balance level or possibly increase it, Mead said.

School funding presents a more difficult problem.

Wyoming has directed billions in bonus funds from the sale of federal coal leases to support state school construction in recent decades. However, state analysts are warning that money is drying up.

Don Richards, the Legislative Service Office’s budget and fiscal administrator, said recently that the state’s School Capital Construction Account, which relies on coal lease bonus funds, received $736 million in the two-year funding cycle that covered 2013-14. He said the current estimate for the 2019-2020 funding cycle is just $26 million.

Mead said he and his budget advisers considered a property tax increase to make up for falling revenues, but they rejected the idea.

Wyoming has directed billions in bonus funds from the sale of federal coal leases to support state school construction in recent decades. However, Mead told lawmakers, “we know there’s no way to sustain that trend.”

In an interview after Mead’s briefing, Senate President Phil Nicholas, R-Laramie, said Mead’s proposal relies on lawmakers changing state law to reduce revenue flows into permanent savings to meet the requirement to achieve a balanced budget.

“Any time you have a statutory change as an issue to balancing your budget is tough,” Nicholas said. “The real gorilla in the room is still if you were to take all of our savings, and apply it on the school side to the operations, there’s simply not enough for capital construction.”