Good news, bad news in Shirley's report

Thanks, but we'll wait till it comes out in paperback.

That was the message, more or less, from the Navajo Nation Council to both President Joe Shirley Jr. and Speaker Lawrence T. Morgan, who stood by Monday to deliver their quarterly reports on the first day of the council's summer session.

The council waived oral presentation of the reports, asking instead for the written version to be distributed to delegates. The Shirley camp took it as a slight, and quickly issued a news release chiding the council and listing the highlights that he had intended to discuss.

These included good news - major movement forward on much-needed jail and court construction - and bad - the tribe is once again facing a budget deficit.

Shirley pointed to an unprecedented $60 million loan agreement with Cleveland-based Key Bank to fund construction of justice complexes in Crownpoint and Tuba City.

Shirley signed the agreement, which had previously been endorsed by the council, with KeyBank on June 24. This marks the first time that the tribe has made this kind of arrangement with a bank and assigned tax revenues to pay for it.

"This signing comes six years after discussions first began and fulfills our vision to see these needed facilities built on Navajoland to combat the rising crime rates," Shirley said.

He noted that the bank had agreed to respect the tribe's sovereignty, including a pledge to use the tribal courts in case of a dispute.

Shirley said KeyBank agreed to the provision after doing its own evaluation of tribal court rulings.

"KeyBank took the time to conduct research and determined that our Navajo legal system is strong and stable," he said.

About 20 years ago, a similar study was done and determined that in cases involving a dispute between the tribe and an outside entity, the Navajo Nation Supreme Court ruled for the Navajo side in all but one instance. In the one case won by a non-Navajo plaintiff, the company was never able to collect the money it was owed.

Key Bank officials, however, determined that the decisions in the tribal court system went about half the time to the tribe and the other half to the non-Navajo entity.

The agreement does not prevent the bank from appealing an adverse decision in tribal court to the federal courts although the federal courts would rely on tribal jurisdiction except in major cases.

"For our Navajo court system and judicial branch to be recognized in this way by outside business organizations like KeyBank is another testament to the quality and stability our judiciary has developed over many years," Shirley said.

The $60 million will provide funding for not only new courtrooms but also for new jails, police headquarters, and office space for prosecutors and probation officials, said Ed Martin, judicial branch spokesman.

The total cost will exceed $60 million but Martin said there are other funds, including federal stimulus money, to help pay for it. The Tuba City facility, which will have a much larger jail than Crownpoint, will cost more.

The financing coupled with the availability of other funds probably means that Crownpoint and Tuba City won't need the entire $60 million, which will allow some of the money to go towards a third justice complex in Chinle, Martin said.

Construction is expected to start late this year or early next year on both facilities.

Tuba City, Crownpoint and Chinle were all listed in that order as top priorities for new jail and judicial facilities, Martin said. When funds become available, the tribe will then tackle the need for similar facilities in Shiprock and Fort Defiance.

Martin said the loan will be repaid with revenue from the 1-cent sales tax increase approved by the council two years ago.

Spending cuts ahead

For the second year in a row, the Navajo Nation will be going into a budget session facing an expected shortfall in revenue that will necessitate spending cuts.

Shirley said the three branches of government will have to trim about $16 million off of the current spending level, with $11 million in cuts from the executive branch, $4.4 million from the legislative branch and $600,000 from the judicial branch.

This may not be as hard for the legislative branch, which will undergo a dramatic decrease in payroll when the council goes from its current 88 members to 24 in January 2011. The new budget year takes effect Oct. 1.

Shirley said the executive branch, which he heads, is already working on cuts. All programs have been instructed to reduce their budgets by 10 percent, while still maintaining direct services as much as possible, he said. Cuts will be mostly for travel, supplies and equipment purchases.

Dominic Beyal, director of the Office of Management and Budget, said the tribe is looking at $148 million in projected revenues for the coming fiscal year (not counting grant funding for federal programs administered by the tribe, which constitute about 75 percent of tribal operations).

The tribe's own revenue generation was $161 million for this year, leaving it with a current shortfall of $22 million.

On July 6, the three branch chiefs proposed to the tribe's Budget and Finance Committee that no cuts be enacted in October.

Instead, they proposed that council pass a continuing resolution to allow spending to continue at the current rate for the first four months of fiscal 2011. Then, when the new president and council take office in January, a new budget could be approved.

The B&F committee rejected this proposal, in part, because of concerns that budget cuts that far into the fiscal year would have to be higher than they would have been if the cuts had taken place earlier.

The tribe's main revenue issue is the price of oil, which has remained stable at between $60 and $70 a barrel for almost two years, Beyal said.

Before that, the price had gone over $100 a barrel, resulting in millions of additional dollars in revenue from oil and gas royalties. This ended up in an expanded tribal budget, which now has to be scaled back.

The tribal government, however, still has a number of options when it comes to finding money to make up the shortfall, including borrowing from itself.

For example, revenues from the tribe's casino operation could be diverted to the operating budget, suspending or reducing repayments to the tribe's Land Acquisition Fund.

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