WINDOW ROCK — Leaders on the Navajo Nation were building their 2020 budget as the shutdown loomed for the Navajo Generating Station and the Kayenta Mine.

Facing a multimillion-dollar loss in revenue from coal-related operations, they tapped into government reserves to bridge the gap.

That cushioned the blow for the Navajo Nation, with usual government spending protected for now. It appears the tribe will need to continue to use reserves in future budgets.

But leaders said the tribe must try to replace its coal revenue with new ventures, possibly tied to renewable energy or tourism.

Leaders estimated a $30 million to $50 million decline in coal revenues for 2020, and Navajo Nation President Jonathan Nez said they took that responsibility "head on."

"We didn't ignore it. We sat down. We discussed how we're going to get past the $30 million to $50 million reduction in our budget," Nez said.

The Hopi Tribe has a budget that’s even more dependent on coal revenue. The tribe so far has not publicly stated what plans they have to adjust their annual finances. Hopi officials did not respond to repeated requests for comment.

What the Navajo government approved

Dominic Beyal's desk at the Office of Management and Budget in Window Rock is covered with stacks of paper.

Beyal is executive director for the office, which is responsible for all facets of the Nation’s budget.

He explained that a legal settlement from more than 30 years ago, put away for a rainy day, gave the government the transitional funds it needed.

In 1985, the Navajo Nation received $217 million from a lawsuit the Kerr-McGee Corp. filed against the tribe for imposing taxes on the company.

The U.S. Supreme Court ultimately ruled that tribes have the authority to tax non-Indians conducting business on tribal lands.

The high court decision resulted in the payment and in the creation of the tribal holiday, Navajo Nation Sovereignty Day.

That same year the Navajo Tribal Council used the $217 million to create the Permanent Fund, along with the stipulation that no income be expended for 20 years and until after a five-year expenditure plan is adopted by the council.

In April 2016, members of the 23rd Navajo Nation Council approved an expenditure plan to use $150 million from the fund's income over a five-year period to pay for economic development projects on the reservation.

According to the expenditure plan, about $30 million has been allocated annually and the amount left at the end of a fiscal year goes into the general fund.

Controller Pearline Kirk reported in March that the income available for fiscal year 2020 was $19.2 million.

The three branch leaders agreed to use a portion of the amount for the budget.

They also agreed to use $3.9 million from a one-time payment of $18.1 million from the owners of the Navajo Generating Station.

The $18.1 million will be paid in December as part of the extension lease agreed to by power plant owners and the tribe in 2017.

Since the tribe is keeping certain assets of the Navajo Generating Station, including the railroad that delivered coal from the Kayenta Mine to the power plant and some structures at the site, Salt River Project agreed to pay that amount because it's what the company will save by not demolishing those structures and facilities.

The extension lease also stipulates that the owners will pay approximately $110 million over a 35-year period to the tribe.

With the 2020 budget settled, leaders are planning for the future.

Using the Permanent Fund income to boost the general fund is a move the tribe could continue for future budgets, but that depends on how the tribal council devises the next five-year plan for the fund.

Nez talks about opportunities

Developing the next plan was among the topics President Nez talked about during a Sept. 13 interview at his office in Window Rock.

Earlier that day he was joined by Vice President Myron Lizer and others when signing the 2020 budget at an event at Veterans Memorial Park.

The tribal council could decrease the amount available for economic development projects and allocate more to the general fund, the president said.

If delegates support such a plan, then the general fund would hover at about $167 million each year, he said.

"That'll give us some time to find ways to bring in additional revenue, maybe from tourism, maybe from renewable-energy projects. Royalties that can come in from that," Nez said.

As head of the executive branch, Nez is thinking about additional cost saving measures including restricting travel to locations away from the Navajo Nation and restructuring the branch by consolidating programs and eliminating duplicate services.

"We need to reevaluate that chain, those plans of operations, so we can have a more efficient run government," he said.

While it will not be easy to replace coal royalties, officials are reviewing opportunities to boost revenue, like tourism.

Nez said the tribe has the potential to develop its own travel agency that can offer tour packages to popular designations on the reservation, similar to businesses that operate in Las Vegas.

"When you look at Page, there are visitors from all over the world that go there, that go to Horseshoe Bend, that go to the slot canyons and to the lake. We could capitalize on that," the president said.

With states surrounding the Navajo Nation moving from fossil fuels to renewable energy, the tribe is working toward developing projects that meet those demands, he said.

"Here's a great opportunity for Navajo to put more renewable energy projects on their land, so we can sell it. The demand is there. We can get revenue from it," Nez said.

The extension lease approved in 2017 furnished the tribe access to 500 megawatts of transmission line provided by the federal government, which is valued at $80 million, according to Salt River Project.

Nez mentioned the transmission line and how utilizing it to deliver power from a renewable energy source could provide revenue.

Uncertainty remains

The uncertainty of the tribe's economic outlook bothers tribal council Delegate Nathaniel Brown.

Brown is a two-term delegate who represents three chapters — Chilchinbeto, Dennehotso and Kayenta — located near Black Mesa, where the Kayenta Mine is.

He said the tribe does not have a backup plan for the mine and power plant closures, despite him asking for one.

"There really is no action," he said.

Brown said that after listening to his community and the workers who are directly involved, the decision to shut down hit him emotionally and mentally.

"I feel like the Nation was not acting in the best interest for them (the workers) because there is no plan. We're going to see a ripple effect," he said.

He added that he advocated to keep both operations open because there was no solid plan to replace them, hundreds of people would be impacted and the Nation would lose millions of dollars.

"Our chapter houses are going to be the first to get hit," Brown said. They are going to experience shortfalls in their annual allocations, which are distributed by the Division of Community Development, he said.

The amount of money each chapter government receives varies and depends on the number of registered voters — meaning the more voters a chapter has, the more funding it receives, Brown explained.

The drop in registered voters and its effect on funds from the central government is the same concern LeChee Chapter president Jerry Williams has.

The chapter is located less than 10 minutes from the Navajo Generating Station near Page.

According to Williams, the chapter received approximately $220,000 from the tribe in fiscal year 2019. Such funding typically helps cover operating expenses for chapters.

"We're going to have to tighten our belt a little bit," Williams said.

Closures to affect Hopi Tribe

The Hopi Tribe also will be impacted by the closure of the coal plant and mine, and it doesn't have many other sources of revenue to make up the loss.

A 2018 economic study by the tribe said it "will essentially face a collapse of its economy" if the mine and power plant close.

The Navajo Nation has casinos and part ownership of a coal plant and a mine in New Mexico, not to mention a variety of tourist businesses across the vast reservation.

The Hopi have some commercial buildings outside the reservation and a gaming compact that one day could allow them to run slot machines in another tribe's casino. They have no casino of their own.

Tribal-owned businesses include the KoKopeli Inn in Sedona and Moenkopi Legacy Inn near Tuba City.

Coal has made up the biggest chunk of the Hopi Tribe's general fund.

In fiscal 2018, the tribe's total revenue was about $17.3 million and $14.3 million, or 83%, came from coal and related revenue from the mine and power plant.

The tribe's hotels, cell tower leases and other business ventures brought in about $720,000, while court fees and other government fees brought in $430,000.

The Hopi Tribe has more than 14,000 members but only about 8,000 on the reservation, where few jobs exist.

While the Navajo Generating Station is somewhat far from the Hopi lands for workers to travel there, many Hopi worked at the Kayenta Mine before it closed in August.

Because the tribe gets so much of its revenue from the coal operations, the closures jeopardize the 350 or so jobs in tribal government, which could see cuts when the coal revenue stops.