NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used for other purposes.

 

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F I S C A L   I M P A C T   R E P O R T

 

 

 

SPONSOR:

Tsosie

 

DATE TYPED:

02/26/03

 

HB

 

 

SHORT TITLE:

Navajo Nation Capital Outlay Reserve Fund

 

SB

826

 

 

ANALYST:

Kehoe

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

 

 

 

 

See Narrative

 

Recurring

New-Navajo Nation

Capitol Outlay Reserve Fund

 

 

 

 

 

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

 

LFC Files

Department of Finance & Administration (DFA)

Board of Finance (BOF)

 

No Response

 

Office of Indian Affairs (OIA)

 

SUMMARY

 

     Synopsis of Bill

 

Senate Bill 826 creates a Navajo Nation capital outlay reserve fund within the state treasury. 

 

     Significant Issues

 

Senate Bill 826 creates a Navajo Nation capital outlay reserve fund consisting of money appropriated for capital projects for the Navajo Nation that would be administered and disbursed by the Office of Indian Affairs (OIA) for the purpose for which the appropriations are made.  Senate Bill 826 would allow OIA to disburse up to 10 percent of the appropriation to the Navajo Nation for capital projects before work commences, with the balance of the appropriation made on a cost-reimbursement basis.  The bill requires OIA to maintain a separate accounting of both advance and cost-reimbursement payments made to the Navajo Nation for each capital project, and in cooperation with the State Board of Finance, promulgate rules for implementing the provisions of the bill.

 

Under current law, appropriations made to the Navajo Nation are deposited in capital accounts within the state treasury and are monitored by OIA and the Board of Finance if projects are financed with proceeds from Severance Tax Bonds.  Payments of all capital project expenditures, regardless of the funding source, are administered by state agencies and are made solely on a cost-reimbursement basis when agencies certify that the expenditures are within the letter of the law.  Upon certification of a legitimate expenditure or completion of a project by the state administering agency, payment is made either by a warrant issued by the Financial Control Division of the Department of Finance and Administration, or BOF transfers funds to the state agency’s capital project fund within the treasury, and the agency can make a wire transfer from the capital fund directly to an account of a government entity or a contractor.  Capital outlay project managers at each state agency are responsible for verifying reimbursable expenditures and completion of a project.   

 

FISCAL IMPLICATIONS

 

Senate Bill 826 would allow OIA to disburse up to 10 percent of an appropriation to the Navajo Nation for capital projects prior to work commencing, with the balance of the appropriation made on a cost-reimbursement basis.  According to BOF, if an appropriation is authorized from severance tax bonds, bond counsel has concerns regarding the issuance of tax-exempt bonds for advance funding.  It is uncertain how the state would recover the 10 percent of tax-exempt bonds if the project does not proceed as planned.

 

LMK/njw:yr