Coconino County braces as federal funding freeze clouds FY26 planning

Coconino County leaders told the Board of Supervisors on Feb. 11 that a newly announced federal freeze on disbursements has introduced short-term uncertainty for grants and pass-through programs that the county relies on.

County Manager Andy Bertelsen said the county learned the same morning that the Office of Management and Budget had issued a memorandum pausing federal disbursements to agencies, and that staff and outside advocates were immediately working to identify impacts to county programs and local partners. "In fiscal year FY25, we received $76,000,000," Bertelsen said. "So it's a significant amount." He noted the county's total budget is roughly $500 million, making federal funds a substantial share of resources for some departments.

The county's treasurer, Sarah Benatar, is tracking cash-flow effects for local entities including school districts, fire districts and special districts, while flood-control staff are reviewing post-fire mitigation grants, Bertelsen said. "Until we hear otherwise, services are continuing," he added, describing agreements the county has with federal agencies that, in staff's view, should preserve reimbursement once the administrative pause ends.

Chief Fiscal Officer Siri Millenia reviewed the county's long-running 10-year recessionary planning model. Millenia said Coconino adopted the model around FY2006 and has used it to align recurring revenues to ongoing services, reserving one-time federal funds for capital or temporary projects. "The line of sustainable revenues is dedicated to those essential services," Millenia said, describing the county's "above the line / below the line" approach that reserves one-time resources for nonrecurring expenditures.

Economist Alan McGuire, who has advised the county on forecasts, told the board that FY21'FY24 saw unusually high revenue growth tied to a mix of post-pandemic household spending patterns and capital-driven federal funds. "Those were temporary spendings...they're not gonna go on forever," McGuire said, urging caution in making long-term commitments based on the recent revenue spike.

On employee benefits and retention, Deputy County Manager Erica Philpott said the county's public employee benefits trust used reserves to limit this year's medical premium increase to a 1.5% weighted average. "The trust chose to spend $465,000 of reserves to buy down the rate across the trust," Philpott said, and described a trifurcation of plan rates so that each medical plan is priced closer to its true cost.

Supervisors pressed staff for a program-level inventory of federal-funded projects, including the number of full-time equivalents those grants support, and asked for regular updates on cash-flow exposure and contingency options. Supervisor Geronimo Vasquez requested "a list of the actual programs and projects that are funded" and the headcount tied to each so the public and supervisors can assess near-term effects.

Bertelsen and Millenia said the county is continuing internal analysis and working with state and federal advocates. They emphasized that the county has budgetary reserves, conservative forecasting, and an established approach to prioritize mandated services and protect employment during downturns. "This effort is never more important than today," Bertelsen said, urging continued use of the recessionary planning framework.

What happens next: county staff will produce a breakdown of federal grants and pass-through funds, evaluate service continuity and potential furlough/reimbursement scenarios, and return to the board with recommended actions and timing assumptions. Supervisors said they expect frequent updates while the freeze is in place.