Permanent Trust Fund — save it or use it?

By John Christian Hopkins
Diné Bureau

WINDOW ROCK — When it comes to protecting the Navajo Nation's Permanent Trust Fund, the motto of the Budget & Finance Committee seems to be: in guard we trust.

But guarding the fund may not be as simple as it sounds.

As the fund nears the $1 billion mark, some delegates are mumbling about spending some of that principle; other political leaders are willing to leave the principle untouched but want to carve up the $16.8 million the fund has generated through interest.

"You've got the president saying reinvest, you've got the judicial branch saying they need new facilities and you've got the council 88 marbles all rolling in different directions," said B & F Chairman LoRenzo Bates.

Under the Nation's law, 95 percent of the trust fund's interest can be spent; with five percent to be reinvested.

Back to the future
Two decades ago, the council set up a committee, led by former tribal Chairman Peterson Zah, to determine the best course of action for the Nation to safeguard its future. It was assumed that the Nation's natural resources would peter out and more revenues needed to be generated.

The council approved the committee's recommendation to set up the Permanent Trust Fund, where money would be put into it every year from a percentage of the tribe's revenues.

The fund was to remain untouched for 20 years, and after that the annual interest generated by the fund could be used to better life in the Nation.

As the 20 year date drew closer, council authorized B & F to create a Permanent Fund subcommittee to develop a five-year plan for spending the interest.

The B & F from the 20th Navajo Nation Council put together a plan that made the entire $16.8 million available for general budget in Fiscal Year 2006 the first year the interest could be spent. But, after that the interest would be equally divided annually between the general fund and Local Governance department.

But council did not approve the five-year plan, instead tabling it during the summer session and giving it back to B & F to tweak for this year's summer session which begins July 16.

But B & F never touched it again, said Arbin Mitchell, director of the Division of Community development.

The original purpose for the fund was to generate funds to replace revenues that were expected to be lost by dwindling natural resources, said B & F's Nelson Begaye.

Maybe, since the resources coal, gas and oil, for example have not yet been depleted, it would be best to just keep reinvesting back into the trust fund, Begaye suggested.

To have and have not
Is there $16.8 million available for spending, or not? Legislation approved by council only allows the interest from the Permanent Fund to be spent if there is a five-year spending plan in place, explained Controller Mark Grant.

Since council never accepted the five-year plan the interest from the fund cannot be touched.

But the principle isn't under that five-year plan provision.

The fund holds approximately $980 million, Grant said. Left untouched, it will surpass the $1 billion goal this fiscal year, he added.

But council is expected to hear legislation introduced by Delegate Kee Allen Begay seeking $244,000 from the Unreserved, Undesignated Fund to pay for a special referendum that would ask Navajo voters whether to use $153 million from the Permanent Fund to build new judicial and public safety facilities in each of the five agencies.

"Thanks to Kee Allen Begay, we're pressed for time," Vice Chairman Leonard Chee said.

Last week, B & F tabled Begay's legislation, but, under council rules, it still advances along the process.

President Joe Shirley Jr. believes that the interest from the fund alone would not be enough to meet the Nation's needs, Mitchell said. He favors using the money to leverage a $100 million loan, Mitchell said.

At a 5 percent interest rate, the $100 million loan could be repaid by the money generated from the Permanent Fund, Mitchell said. It would take about 50 years to repay the $100 million.

Gone with the whim
Bates doesn't think the council will support Kee Allen Begay's referendum bill.

"I'm concerned about the way we're doing business," Nelson Begaye said.

The Permanent Fund was set up to be an insurance policy for the Nation's future, said B & F's Hoskie Kee. "Let's not spend that insurance."

Once it's gone, that money cannot be replaced, he added.

When the Zah committee looked into creating the trust fund, it operated under the assumption that in 20 years the fund would be generating between $30 million and $50 million in interest, Grant said. Obviously, it falls short of that projection, he said.

"How can we get it to generate $50 million?" Kee asked. "Fifty million, that's real money; $20 million is just pocket change."

The Nation has generally been very conservative with its investments, Grant said. The riskier the investment, the greater the potential reward or loss, Grant said.

In recent years, the Nation has been expanding its investments, including some real estate and looking at international investments, he said.

The figures in this old five-year plan are two years old, Chee said. Before any decisions are made, updated figures need to be provided, he said.

"A lot has changed," Bates agreed. The old five-year plan is useless, he said. "This is pretty much a done and gone situation."

Neverending story
The Nation needs to manage its resources better, Bates said.

"We spent $137 million in general funds last year, and what do we have to show for it? I don't see anything, especially in my chapter," Bates said.

"We need to look at the common good," Chee said.

The problem is that too many funds are wasted, Chee said. If a spending bill comes up in council, the first thing delegates do is look to see if their chapters get anything if not, they don't support it, Chee explained.

"We have our priorities all 88 of us," Bates said. "We've got to somehow tie them together. That's going to take a meeting of the minds."

Too much money is frittered away because of a lack of foresight and planning, said Scott House, a project manager from the community development division.

Too often projects get started and left incomplete because funds ran out, House said.

"These projects are 'pay as you go' and the money runs out, so they never get completed," House said. "It's an embarrassment."

Grant agreed with that, and added that often the tribe is so disorganized that by the time it gets ready to start a project, the funding period has ended and the federal grant money goes unspent.

"Often, the Navajo Nation provides insufficient funds to complete projects," Grant said.

Maybe, all departments should re-examine how they are spending funds, Begaye said. He said, for example, he was told that many of the tribe's police departments are buying motorcycles for patrol but there is no money for maintenance, to replace tires and spark plugs.

It makes no sense for departments to purchase equipment it cannot maintain, Begaye added.

John Christian Hopkins can be reached at hopkins1960@hotmail.com.