Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

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

SPONSOR Martinez

ORIGINAL DATE

LAST UPDATED

02/10/06

HB 662

SHORT TITLE

NAVAJO NATION CAPITAL PROJECT

CONDITIONS

SB

ANALYST Weber

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

None

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Attorney General Office (AGO)

Department of Finance and Administration (DFA)

Indian Affairs Department (IAD)

SUMMARY

Synopsis of Bill

House Bill 662 in Section 1 notes a variety of conditions that will be addressed. Among the

problems that need recognition are the following:

•

The legislature finds that many residents of this state living within Indian country are

impoverished and are involuntarily living without electric service, indoor plumbing,

adequate potable water, telecommunications or related infrastructure due to federal

government policies over the decades. Living under such adverse circumstances has a

negative impact on the education of children at the elementary and secondary school

levels and on the health and welfare of Native Americans in general.

•

Since statehood New Mexico has had a responsibility for its Native American residents.

•

The New Mexico policy is to improve the basic quality of life of residents within Indian

country through the use of any means available.

•

The purpose of this act is in part to enable the state, in compliance with the provisions of

the constitution of New Mexico, to provide financial assistance to residents within Indian

country to improve infrastructure.

•

After development of government-to-government relationships many state agencies have

designated divisions or liaisons to work with the nations, tribes and pueblos.

House Bill 662 – Page

2

•

The state has worked with Indian nations, tribes and pueblos, of which the Navajo Nation

is the largest tribal government, and recognizes that the Navajo Nation is divided into

political subdivisions designated as chapters.

•

Due to federal, state and tribal policies related to the implementation of capital outlay and

other projects, delays in implementation due to bureaucratic red tape have resulted in the

reversion of millions of dollars in capital outlay funds designated for projects in Indian

country.

•

Tribal governments and their subdivisions have, through the years, organized nonprofit

entities to assist in the provision of education and other basic services.

Section 2 notes the state recognizes the chapters of the Navajo Nation as local tribal entities

having the capability and capacity to apply for and implement capital improvement projects. The

state also recognizes as local tribal entities those nonprofit entities organized under the

supervision of tribal governments whose mission or objective is to provide education and other

basic services and who may apply for and implement capital improvement projects. Therefore,

the state may contract through a fiscal agent other than the Navajo Nation for the expenditure of

state funds on behalf of local tribal entities of the Navajo Nation. Unless otherwise negotiated, an

administrative fee of no more than five percent of a project's cost may be charged by the entity

that serves as fiscal agent.

Section 3 states local tribal entities may be considered as vendors when they utilize their own

resources to implement capital improvement projects.

Section 4 addresses the issue of direct payments.

•

In the case of capital outlay projects located within Indian country and authorized

through the Indian Affairs Department or other state agencies working through the

Indian Affairs Department the state may make payments directly to third-party

contractors for services rendered or goods supplied. Upon approval by the Indian

Affairs Department of a billing statement submitted on behalf of a vendor by a tribal

government or a local tribal entity, the department may arrange for payment of that

statement directly to the vendor. Capital outlay projects may be invoiced and paid in

phases.

•

The department of finance and administration is authorized to make payments directly to

third-party contractors for services rendered or goods supplied regarding capital outlay

projects located within Indian country and authorized to the Indian Affairs Department.

Section 5 focuses on Navajo Nation state general fund projects. Money appropriated from the

general fund to several chapters of the Navajo Nation located in New Mexico for the same or

similar purposes may be pooled by those chapters to create a regional or centralized project upon

review of the Indian affairs department and approval by the state board of finance.

Section 6 provides that provisions of this act also may be used to implement the provisions of the

Tribal Infrastructure Act.

Section 7 indicates that for the purposes of capital outlay projects located within Indian country

and authorized to the Indian Affairs Department, pursuant to Subsection A of Section 14 of

Article 9 of the constitution of New Mexico, persons who reside in Indian country who are not

served by electric service, water service, indoor plumbing, sewers, telecommunications or related

House Bill 662 – Page

3

infrastructure are presumed to be indigent. State agencies may contract with and make payment

to local tribal entities to assist the indigent in local tribal entities.

Section 8 instructs the Department of Finance and Administration or the Indian Affairs

Department to promulgate rules necessary to implement the provisions of this act.

Section 9 is an emergency clause making the act effective immediately.

SIGNIFICANT ISSUES

The Attorney General contributes the following but with the understanding that the analysis is

neither a formal Attorney General’s Opinion nor an Attorney General’s Advisory Opinion letter.

This is a staff analysis in response to the agency’s, committee’s, or legislator’s request.

HB 662 may violate principles of sovereignty by authorizing the state to recognize and

conduct business with local chapters of the Navajo Nation, in the absence of any

recognition or authorization from the Navajo Nation itself.

This bill, by authorizing appropriations for certain capital outlay projects to local chapters

of the Navajo Nation and nonprofit entities organized under tribal supervision, may

violate Article IV, sec. 31 of the New Mexico Constitution, which prohibits

“appropriations for charitable, educational or other benevolent purposes to any person,

corporation, association, institution or community not under the absolute control of the

state . . . .” (emphasis added).

This bill, by authorizing appropriations for certain capital outlay projects to nonprofit

entities organized under tribal supervision, may also violate Article IX, sec. 14 of the

New Mexico Constitution (the “Anti-donation Clause”), although the bill does provide a

statutory presumption of indigence for certain purposes that may address a proper anti-

donation clause exception

Section 7 of HB 662 creates the statutory presumption of indigence for persons residing

in Indian Country who do not have electric service, water service, indoor plumbing,

sewers, telecommunications or related infrastructure “pursuant to Subsection A of

Section 14 of Article 9 of the constitution of New Mexico.” This may, however, violate

the Anti-donation Clause in that the constitutional provision does not make exceptions for

statutory presumptions.

The Department of Finance and Administration offers the following analysis.

In the past, if the State wanted to provide funding to residents of Indian nations, to

improve the basic quality of life or support capital outlay projects (electric, indoor

plumbing, sewer, potable water, tele-communications), the Indian Affairs Department

would receive the appropriations. Then IAD entered into Joint Powers Agreements with

the Indian entity. The entity would then hire third party contractors to perform the work.

The problem has been that due to federal, state and tribal policies related to the

implementation of capital outlay and other projects, delays in implementation due to

bureaucratic red tape have resulted in the reversion of millions of dollars in captial outlay

funds designated for projects in Indian country. HB 662 streamlines the flow of money

House Bill 662 – Page

4

in 2 ways--1) it permits the State to contract with the Chapters of the Navajo Nation (not

just the Navajo Nation itself) and permits the state to contract with other fiscal agents

(nonprofit entities organized under the supervision of tribal governments whose mission

or objective is to provide education and other basic services and who may apply for and

implement capital improvement projects); 20 it permits the State to make payments

directly to third party contractors for services rendered or goods supplied regarding such

projects.

Also, by defining persons who live in Indian country (who lack water and electricity and

indoor plumbing) as "indigent" for purposes of the anti-donation clause (Art.IX, Sec.14,

NM Constitution) it clears up a current problem when the State desires to upgrade these

persons homes for the above mentioned basic services. The homes are most often leased

by the person residing in Indian country for 99 years-- but owned by the federal

government.

Another issue remains. Is it legal for the State to directly pay third party contractors

procured by the Pueblo and with whom the State has no legal obligation to pay (other

than an agreement with the Pueblo). This could be a problem if the State makes a

payment and then the Pueblo states the work should not have been paid for. Also, the

State can not directly pay a contractor hired by a nonprofit corporation. HB 662 needs to

be made clearer on this point.

The Department of Indian Affairs offers the following:

There appears to be several inconsistencies throughout the document. For example,

though the intent of the legislation may be to provide Navajo Nation local chapters with

capital expenditures, Navajo Nation local chapters are not designated as fiscal agents

with which the state may contract. Additionally, though certain non-profit entities may

provide various services to the local chapters and/or the Navajo Nation government, they

nonetheless are usually bound by terms and conditions stipulated in an agreement with

the Navajo Nation government; this may still bring the proposed funding mechanisms in

HB 662 under the control of the Navajo Nation government. Finally, without any

definitive language that would identify the qualifications and characteristics of a fiscal

agent, the bill is rather vague in determining who or what entity would be a qualified

fiscal agent for the Navajo Nation local chapters.

Additionally, under the current terms of the bill, vendors would be required to provide

services to Navajo Nation local chapters and be reimbursed for services upon the

submission of a billing statement provided by the Navajo Nation local chapter. This does

not address a central issue mentioned in the bill - tribal bureaucratic “red tape.” In

submitting various billing statements for payment to third party vendors, Navajo Nation

local chapters may still be required to work with the Navajo Nation government by

Navajo Nation law/code/regulations. This brings up a last consideration: for funding that

may require a tribal match, the Navajo Nation government will necessarily be involved in

providing matching funding and oversight to ensure that such funds are spent according

to Navajo Nation government law/code/regulations.

Also, in Section 4, Subsection A, the Indian Affairs Department (IAD) or other state

agencies working through IAD are authorized to make payments directly to third-party

contractors for capital outlay projects. Because some state agencies work directly with

the Navajo Nation Chapters and other non-profit entities, it may be appropriate to allow

House Bill 662 – Page

5

other state agencies to implement a direct pay process as well and not have to work

through IAD.

There is a great need for the direct pay process as it will help facilitate completion of

projects for tribes with limited resources. IAD attributes much of its current back log of

capital outlay projects to this issue. Currently, the Department of Finance and

Administration (DFA) and IAD are developing a direct pay process proposal for all

Indian capital outlay projects.

Direct pay to third-parties would streamline the capital outlay process and allow these

projects to be completed and closed out more efficiently. Through a direct pay program,

the IAD would assist the tribal entity in completing the project in a timely manner. The

tribal entity would provide documentation to IAD certifying that the tribe’s procurement

process had been followed. The tribe would also provide an invoice from the vendor to

IAD for the exact cost of the goods or services provided for the capital outlay project.

The IAD would then wire the funds to the vendor through the New Mexico State

Treasurer’s office (similar to the process already utilized by the IAD for projects financed

with STB proceeds).

TECHNICAL ISSUES

The term “fiscal agent” needs clarification.

MW/mt