NAVAJO COUNTY — Navajo County has crawled out of the budget pit – but must be careful to avoid toppling backwards into renewed trouble.

And that means building on the county’s economic strengths to make up for the losses since the recession.

That message emerged last week from a budget study session for the board of supervisors offered by economic development director Paul Watson.

The county’s sales tax revenue has finally inched back up to pre-recession levels and voters just approved a new jail district that will generate $2.5 million in revenue to hold the line on county staffing.

However, challenges remain. In the upcoming budget year, the county’s $48 million operating budget must absorb a $500,000 increase in the county’s share of healthcare for the impoverished elderly and a $500,000 increase in payments to the Public Safety Personnel Retirement Fund (PSPRS), the county has an unaddressed $12 million debt to that fund. The county must also come up with money for a phased-in, 50 percent increase in the minimum wage for workers at the bottom of the salary schedule.

On the bright side, the county has managed to maintain health benefits for its workers and averted a significant premium increase for the past three years, Layton told the board at a study session at the Ak-Chin Casino in Maricopa last week. The board decided to have a study session on a range of issues prior to the start of the Arizona County Association’s convention there, since the supervisors and top officials were attending the convention anyway.

Watson’s summary offered mostly good news when it comes to prospects for the 2020-21 budget. In fact, barring a recession and another big drop in sales tax – the five-year budget prospects look stable for the first time in years.

But don’t get too comfortable, warned Watson.

The county’s economy and job base has changed a lot since the 2009 recession slashed both state and county revenues and forced a big reduction in the Navajo County workforce.

“Navajo County employment – government-related employment – is down and hasn’t recovered. We’ve seen a big decrease, reflective of the county itself,” he said.

Before the recession, Navajo County’s job base was perking along – with a growth rate in many sectors better than the statewide average. The county had a healthy manufacturing sector, with a paper mill and array of forest products business, plus employment at the Cholla coal-burning power plant.

Along came the recession in 2009.

State revenues dropped by a third, due to the state’s heavy reliance on the sales tax. The state legislature responded with sweeping cuts – mostly to education. It also transferred millions in costs to the counties, which administer many state-mandated programs.

The state has largely recovered, with jobs and revenues well above pre-recession levels in almost every sector. However, the state hasn’t fully restored the cuts that affected local governments and schools. Instead, it has enacted tax cuts and stashed money in a growing reserve fund.

The counties have struggled to recover – especially rural counties like Apache and Navajo. Total employment in Navajo County didn’t drop as much as it did statewide in 2009. However, it has remained almost flat since then – while statewide employment growth resumed, according to the charts in Layton’s presentation to the board.

In certain sectors, Navajo County employment plunged – dropping far more on a percentage basis than the state.

Government employment dropped much lower and stayed low in Navajo County as compared to the state.

Meanwhile, manufacturing employment plunged with the shutdown of the paper mill and two units at the Cholla power plant. Manufacturing employment has inched up since 2015, but remains far below the 2009 level.

The remaining manufacturing jobs mostly focus on forest products, including the sawmill and Novo Power’s biomass burning power plant. The 4-Forests Restoration Initiative could revive that sector, with the Forest Service getting ready to seek contractors to thin 1.2 million acres of overgrown, fire-prone forest – including most of the White Mountains. However, the refusal of the Arizona Corporation Commission to require utilities to buy power from biomass could not only blight prospects for more thinning, but force the shutdown of the existing biomass-based industry.

So with prospects for manufacturing still uncertain, Watson focused on tourism and healthcare and education.

In fact, those sectors account for most of the job growth since the recession.

The healthcare job base has risen steadily since 2001, with barely a dip during the recession. This mirrors the trend statewide. More than twice as many people have jobs in education and health services in Navajo County as in 2005.

The job base in leisure and hospitality has also held up, with only a brief dip during the 2009 recession. Employment in that sector has increased by about 30 percent since the recession – offsetting losses in government and manufacturing, said Watson, who recently retired but remains on a contract to deal with economic development issues for the next six months.

“Healthcare is growing,” he said. “We’re seeing Baby Boomers with more and more medical needs. Basically, about 90 percent of healthcare occurs in the last 10 percent of a person’s life. When you think about Baby Boomers and where they’re getting in age – you’d expect to see a continued increase in healthcare.”

He noted the Summit Healthcare in 2002 had 600 employees. Now, it has 1,300.

The other big growth sector for Navajo County remains tourism.

“It’s been trending steadily upward since 2001, with only a modest decrease in the recession,” said Watson.

County Manager Glenn Kephart said the total number of jobs in the county hasn’t changed much in the last couple of years, but the sales tax revenue has increased steadily. “So we don’t have more jobs – but people are spending more money. How is that? Either people are going further into debt – or people are coming here more often and bringing more money. We think that’s in play.”

Watson said in order to play to its economic strength, the county needs to come up with a clear and consistent marketing and branding strategy to drive tourism, now one of the core economic drivers.

“I’d like us to think out loud about what are the things we see as our regional identity: From there, were’ going to talk about a regional logo that highlights that identity,” he said.

Peter Aleshire covers county government and other topics for the Independent. He is the former editor of the Payson Roundup. Reach him at paleshire@payson.com

Peter Aleshire covers county government and other topics for the Independent. He is the former editor of the Payson Roundup. Reach him at paleshire@payson.com

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