Navajo Nation faces possible layoffs with 2013 budget
By Marley Shebala
WINDOW ROCK, August 22, 2012
That's according to an Aug. 14 memo from Office of Management and Budget Executive Director Dominic Beyal to the Council's Budget and Finance Committee.
Budget and Finance Committee Chairperson LoRenzo Bates noted on Aug. 15 that the largest share of the possible layoffs came from reduced federal funding of the tribal government's indirect costs, or IDC.
Bates explained that the IDC is the federal government's payment to the tribe for administering the federal contracts and grant that the tribe applies for and receives.
In 2012, the IDC was $19.5 million but for 2013, it's been estimated at $10 million, a reduction of $9.5 million.
And on top of the $9.5 million, the B&F Committee narrowly approved another reduction in the annual budget of about $3 million on Aug. 15.
The initial vote was a tie vote of 2 in favor and 2 opposed, which Bates broke with his "yes" for a final vote of 3-2 in favor.
Bates explained that the committee had to reduce the annual budget from $175.8 million to $170.8 million after learning from President Ben Shelly that Arizona Public Service Company would be shutting three of its five coal-fired generating units at its Four Corners Power Plant near Farmington.
He said that Shelly's announcement came during an invitation-only meeting on Shelly's proposed energy policy early this month in Flagstaff.
"When the president's executive staff notified us, it dropped a bomb because we didn't know," he said. "And when I say, we didn't know, I mean Controller Mark Grant didn't know and the minerals department didn't know. And they are the ones, along with the Tax Office, that prepare the projected revenues."
At the beginning of the annual tribal government budget process, Grant presents the annual projected revenues to the committee, which is then used as the base amount for the annual budget.
Bates explained that the projected revenues include coal royalties and taxes.
The shutdown of three units at the Four Corner Power Plant would reduce the sale of coal that APS buys from Navajo Mine, which would reduce coal royalties, he explained.
He emphasized that APS notified the Council that they would be shutting down three of their units at the Four Corners Power Plant in 2014, not 2013.
And so Bates said everyone that's involved with the annual projected revenues and annual budget were preparing for the reduction in tribal revenues in 2014.
He added that it was fortunate that the committee took a conservative position in accepting the 2013 projected revenues and setting the base amount for 2013 budget.
Bates recalled that the 2013 projected revenues were estimated at more than $247.3 million and after the mandatory set asides of $57.2 million were subtracted, there was $190.1 million available for the 2013 budget.
The mandatory set asides consist of seven trust funds that receive a percentage of the projected annual revenues.
Bates said that the committee decided to set the 2013 budget at $173.8 million instead of $190.1 million because of a possible reduction in the federal funding of contracts and grants and a drop in tribal revenues.
The $16.1 million savings that resulted in the $173.8 million cap was put in the tribal reserves, he added.
"So it's fortunate that the B&F took a conservative position when it capped the annual budget at $173.8 million because if the committee had used the $190 million and this bomb was dropped then the entire budget would have had to be redone. So we're not so much in crisis management."
Bates said that the committee is scheduled to work on identifying an alternative source or sources of funding to cover the $9.5 million indirect cost shortfall on Aug. 21, which is also when the committee expects to take up legislation to rescind the 2013 $173.8 million budget and replace it with the new 2013 $170.8 million budget.
He emphasized that the committee is looking for new revenue sources so that there would be no layoffs.
But he said layoffs are in the hands of the three branch chiefs – Shelly, Chief Justice Herb Yazzie and Speaker Johnny Naize.
After the committee's vote to reduce the proposed annual budget from $173.8 million to $170.8 million, the committee directed the three branch chiefs to adjust their 2013 budgets accordingly and present them to their respective oversight committee for recommendation to the B&F Committee.
The tribal government started its annual budget process on June 26. By tribal law, the Council must approve an annual budget 20 days prior to the end of the fiscal year, which is Sept. 30.
Bates said he is encouraging the Council's oversight committees to recommend budget amounts for their respective oversight branches and divisions to the B&F, which would then develop the comprehensive 2013 budget and recommend it to the Council.
The council has the authority to amend the B&F Committee's recommended budget or vote it down, which would then initiate legislation to continue the 2012 budget until a 2013 budget is approved.
If the Council approves the annual budget, with or without amendments, it goes to the president, who has 10 days to decide whether to line-item veto budgets, veto the entire budget, sign off on the budget or no take any action which would automatically make the budget law.
Bates noted that the oversight committees could approve the adjusted budgets or vote to keep budgets based on the initial $173.8 budget amount.
Possible alternative funding sources mentioned by the B&F Committee included the estimated $20 million earned interest in the Permanent Trust Fund, the $57.2 million in set asides, the $16.1 million in reserves, and the $37 million in the Undesignated Unreserved Fund.
The Navajo Nation Permanent Trust Fund received 12 percent of the $190 million in projected revenues or more than $30 million.