<DOC> [108 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:92790.wais] S. Hrg. 108-475 INDIAN GAMING REGULATORY ACT AMENDMENTS ======================================================================= HEARING BEFORE THE COMMITTEE ON INDIAN AFFAIRS UNITED STATES SENATE ONE HUNDRED EIGHTH CONGRESS SECOND SESSION ON S. 1529 TO AMEND THE INDIAN GAMING REGULATORY ACT TO INCLUDE PROVISIONS RELATING TO THE PAYMENT AND ADMINISTRATION OF GAMING FEES __________ MARCH 24, 2004 WASHINGTON, DC U.S. GOVERNMENT PRINTING OFFICE 92-790 WASHINGTON : DC ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800 Fax: (202) 512ÿ092250 Mail: Stop SSOP, Washington, DC 20402ÿ090001 COMMITTEE ON INDIAN AFFAIRS BEN NIGHTHORSE CAMPBELL, Colorado, Chairman DANIEL K. INOUYE, Hawaii, Vice Chairman JOHN McCAIN, Arizona, KENT CONRAD, North Dakota PETE V. DOMENICI, New Mexico HARRY REID, Nevada CRAIG THOMAS, Wyoming DANIEL K. AKAKA, Hawaii ORRIN G. HATCH, Utah BYRON L. DORGAN, North Dakota JAMES M. INHOFE, Oklahoma TIM JOHNSON, South Dakota GORDON SMITH, Oregon MARIA CANTWELL, Washington LISA MURKOWSKI, Alaska Paul Moorehead, Majority Staff Director/Chief Counsel Patricia M. Zell, Minority Staff Director/Chief Counsel (ii) C O N T E N T S ---------- Page S. 1529, text of................................................. 3 Statements: Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, chairman, Committee on Indian Affairs...................... 1 Hogen, Phil, commissioner, National Indian Gaming Commission. 26 Skibine, George T., acting deputy assistant secretary, Policy and Economic Development, Department of the Interior....... 33 Stevens, Jr., Ernest, chairman, Natinal Indian Gaming Association................................................ 36 Van Norman, Mark, executive director, National Indian Gaming Commision.................................................. 36 Appendix Prepared statements: Hogen, Phil (with attachment)................................ 52 Skibine, George T............................................ 49 Stevens, Jr., Ernest (with attachment)....................... 88 INDIAN GAMING REGULATORY ACT AMENDMENTS ---------- WEDNESDAY, MARCH 24, 2004 U.S. Senate, Committee on Indian Affairs, Washington, DC. The committee met, pursuant to notice, at 11:00 a.m. in room 562, Dirksen Senate Building, Hon. Ben Nighthorse Campbell (chairman of the committee) presiding. Present: Senators Campbell, Inouye and McCain. STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR FROM COLORADO, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS The Chairman. The committee will be in order. Good morning and welcome to the Committee on Indian Affairs' hearing on S. 1529, a bill that I, along with my vice chairman, Senator Inouye, introduced in July 2003 after we held two hearings on these matters. I have to say at the outset, Mr. Vice Chairman, I am very pleased to see such a large turnout. I would also like to say I would like to see this kind of participation when we talk about Indian nutrition or care of elders or education for Indian kids. Clearly, when it has to do with money, it excites a lot of people because we have a very full house today. If enacted, the bill will amend the Indian Gaming Regulatory Act of 1988 to, clarify that when a class II game is used with electronic aids it is still a class II game for purposes of the Johnson Act; to require the National Indian Gaming Commission to be more transparent and open to the regulated community. It clarifies the Commission's authority with respect to class III gaming. It provides much-needed guidance to tribes and States when they are negotiating a revenue-sharing agreement, and provides certainty and stability to tribes regarding the amount of gaming fees the Commission can charge. We have a vote scheduled at 11:30, so we will get through as much as we can. We will have to take a few minutes' break and then we will continue after that. Other members have notified us that they will be coming and going throughout the meeting. With that, Senator Inouye, did you have an opening statement, sir? Senator Inouye. All I can say is that much has happened since the U.S. Supreme Court's ruling in the Cabazon case and I think the crowd here today so indicates that. I look forward to hearing the testimony. [Text of S. 1529 follows:] <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT> The Chairman. We will start with the first panel. I think we will have all three of our people testifying sit at the same time: Phil Hogen, the commissioner for the National Indian Gaming Commission from Washington; George Skibine, the acting deputy assistant secretary for Policy and Economic Development with the Department of the Interior; and Ernie Stevens, Jr., the chairman of the National Indian Gaming Association. Ernie, nice to see you. Mark Van Norman will accompany Ernie Stevens. That will be fine. Why don't we go ahead in that order. If you would like to start, Commissioner Hogen, we will be happy to take your testimony and you may abbreviate if you like. STATEMENT OF PHIL HOGEN, COMMISSIONER, NATIONAL INDIAN GAMING COMMISSION Mr. Hogen. Thank you. Good morning, Mr. Chairman, Senator Inouye. We thank you very much for the opportunity to appear before you with respect to this very significant measure that you are considering. With me here today are the other members of the National Indian Gaming Commission. I am Phil Hogen, Oglala Sioux from South Dakota. Chuck Choney is also present. Mr. Choney is Comanche from Oklahoma. He is a veteran of the FBI, for 26 years he served as a special agent with the Federal Bureau of Investigation [FBI]. One of his pet projects in terms of what we are doing is trying to enhance the sensitivity that Federal investigators, Federal prosecutors give to crime that occurs against Indian gaming facilities or at gaming facilities. In this connection, we have orchestrated with the help of the FBI, the Internal Revenue Service [IRS], the Department of the Interior's Inspector General, a Federal law enforcement working group. One of the recent efforts in that regard was last month, we held, at the Mohegan Sun facility in Connecticut, a 1-week-long training, attended by more than 100 FBI agents, IRS agents, and assistant U.S attorneys, to educate them with respect to Indian gaming. Hopefully, now when an offense is perpetrated against a facility, the Federal law enforcement family will be more attentive and we will get those cases prosecuted, and there will be better cooperation and communication. Commissioner and Vice Chairman Nelson Westrin is also present with me. Commissioner Westrin was formerly with the Michigan Gaming Control Board. We, the three of us, I think make a good team. One of the strengths that Nelson brings to our Commission is his organizational ability. We have, and we have distributed to the committee our annual report for 2003 that is before you. Nelson was one of the guiding forces in getting this put together. It really does a good job of reflecting where we have been, what we have done, how we have used the resources that we have to play our important role in the oversight of Indian gaming. Also, our new chief of staff, Gary Pechota, and our new director of Congressional Affairs, Affie Ellis, played a significant role in putting that together. This report discusses our mission, our structure, our revenues, our budget, and our staff. Of course, what we are primarily here to tell you about today is what we think of the legislation that has been proposed, as well as some companion legislation or proposed legislation that the Administration has submitted. I will not tell you all of the things you already know about the context of Indian gaming, but it is important to keep that in mind. Both we, as we do our job, and Congress as it enacts legislation, must keep in mind that Indian gaming is not a Federal program. This is not something that the Great White Father did for the Indians. Rather, Indians invented Indian gaming. They have made it work and it has indeed been a very significant and useful economic development tool in Indian country. IGRA, of course, when passed in 1988 set up the framework that is now utilized to oversee, to operate Indian gaming. It was put in place for a number of reasons. Congress wanted a place in Federal law that tribes could point to to say, yes, we can continue with this important economic development tool. Like all gaming that is sanctioned, it provided that those who are involved in Indian gaming be examined for their suitability; that the fairness of play at the casinos, at the bingo halls be fair, both by the operation and by the customers, and that the money goes where it is supposed to. It has to be the tribes that benefits primarily from those operations. Finally, a Federal regulatory mechanism was set up, a Federal agency was created. That is us, the National Indian Gaming Commission, to among other things establish Federal standards for the regulation of Indian gaming. Now, of course, we are looking at an opportunity to revisit that act, to make some adjustments. I would like to comment on the funding aspect with respect to NIGC, some of the housekeeping measures contained in the proposed legislation regarding NIGC's authority, the tools that we have to deal with those who attempt to deal unfairly with gaming tribes, how we attempt to distinguish between class II and class III gaming, the minimum internal control standards we have established that set the rules by which Indian gaming must be conducted, the use made of the proceeds from civil fines that we assess and collect, and how we consult with Indian tribes in the course of all of this. In 2003, Congress provided that the National Indian Gaming Commission can collect from Indian tribes on the Indian gaming revenues from class II and class III gaming up to $12 million. Those fees that we assess, those fees that we collect are the only revenues we have. We do not get any appropriated money to do our job. So this represented an increase of some $4 million in the cap, from $8 million up to $12 million. This fiscal year 2004 is the first year that we are now operating under this $12 million cap. We have established the fee rate, the rate that we assess our fee on Indian gaming at .69 percent [.069]. In other words, for every $1,000 of gross gaming revenues, each tribe has to send NIGC 69 cents. This is a moderate increase from what it was before when we had the $8 million cap. The reason it is not a large increase to make a big step in revenue is the industry itself continues to grow. So we have a bigger base that we are assessing fees on. We do not think that we need or could appropriately spend $12 million this year, or probably even next year. This year, we anticipate we will collect and spend about $10.7 million, so we are staying well under that cap. The additional funding that we now have over that $8 million has permitted us to fill a number of vacancies, particularly in our audit positions, the auditors that we have in the field, and our inspectors that are our in our five field offices. This has permitted the staff to make more frequent, more thorough visitations at the tribal gaming operations sites, and to provide training to tribal regulators and gaming commissioners. We have a lot of information at the National Indian Gaming Commission. We get audits from tribes. We review their background investigation reports. That information could be very useful to all of those that have a role to play, but right now the way we handle that information probably is inefficient. Without increased funding we are going to upgrade our information management system, the computers that we use to deal with this, and of course we are not unaware of the scrutiny that the Department of the Interior's trust fund information has been given. We want to make sure our computers are indeed secure and that, first of all, the information is protected as it should be, and secondly, someone does not come along and in effect kick us off the Internet and hamper our ability to do our job. Another computer-related tool that we are using is Live Scan to communicate fingerprint information the tribes collect at the tribal level when someone applies for a tribal gaming license. In the old days, they would do it on a cardboard fingerprint card and send it to us. We would sent it to the FBI and the FBI would send the results to us. We would send it back to the tribe and that could take months. Now, electronically in a heartbeat, that information can be beamed from the tribal office to the NIGC, then to the FBI, and the results can be returned. This is much more efficient in that you can tell right there in minutes if your applicant has a criminal record and maybe should not be further considered. You do not have to give him or her a temporary gaming license. It will be extremely efficient, both at the tribal and at the NIGC level in terms of the background investigation process. We do not have all tribes on line yet, but we are now set up so that we can make this opportunity available to all the tribes. That follows a pilot project that was successful that involved a number of tribes. In terms of setting a fee schedule, any fee schedule that Congress sets for NIGC needs to keep us somewhat proportionate to the size of the industry. If the industry grows faster than we do, we cannot do the job that we are assigned under the Indian Gaming Regulatory Act [IGRA]. What we have suggested in the Administration's proposal is that the fee cap be set as a percentage of gross gaming revenues. We have suggested not to exceed .8 percent [.08], or 80 cents per $1,000. That way, we would not have to revisit from time to time what that level would be, with congressional action. However it is done, it is important that we look down the road. We know what our future is going to hold. So the proposal S. 1529 that would set up funding through fiscal year 2008 is certainly a step in the right direction. S. 1529 proposes a fee reduction proposal, in effect to reward tribes that do an excellent job of regulation at the tribal level by assessing a reduced fee. Certainly, there is some merit to that. The problem that we have is that we spend a disproportionate amount of time working with tribes that are not well equipped to pay a fee because they have problems. We would like to be like the Maytag repairman and have our phone not ring because everything is going smoothly. It does ring occasionally, and I think what we are more like is the fire department. That is, while we hope we do not have to go do enforcement and things like that at tribal gaming facilities, when we do go, we want to know what is going on; we want to be well prepared. Nobody likes having to pay for the fire department, but they want them there when they need them. We think that is sort of a parallel that can be drawn with respect to fees the tribes pay. The whole Indian gaming industry is well served if there is a sound, adequately funded regulatory oversight body at the national level. With the fee proposal that we have suggested and perhaps with the one contained in S. 1529, we can stay at that level. In terms of the housekeeping measures with respect to NIGC's authority, we think it is appropriate that NIGC develop, provide to the tribes, and provide the Congress a strategic plan. There are some corrections or clarifications that need to be made with respect to how vacancies on the Commission are filled and how the Chairman at the National Indian Gaming Commission delegates his authority, and then the pay level specified in the IGRA are obsolete. That needs to be made consistent with the current Federal employment pay structure. We strongly support the language that will clarify our authority to play a role in the regulation of class III gaming. If all of those things are enacted, we think we will be a better, stronger Commission. In terms of the tools that we have to deal with those who might deal unfairly with gaming tribes, we have a role to play with respect to management contractors. In the old days when unscrupulous traders swindled Indians, Congress quickly enacted Section 81 of Title 25 that says the Federal government has to approve a contract with the tribe if it affects Indian lands. When IGRA was enacted in 1988, recognizing that gaming is kind of specialized, they farmed that out, that role, the approval of management contracts to NIGC. So we do that. We review and approve the backgrounds, the management contracts the tribes have with those who run their facilities. However, a large number of individuals and firms that deal with tribes are not management contractors per se. Rather, they style themselves as consultants, as lenders, as lessors of machines, and they do not get that same scrutiny. We think in the Administration proposal whereby we set up a category of ``regulated individuals,'' that whereby NIGC when necessary, would have the authority to reach out and require that those non-management contractors make corrections, perhaps make refunds to tribes, would be appropriate and would actually comply with the spirit of what Congress had in mind in the IGRA. Distinguishing between what is class II, bingo, and what is class III, casino-type gaming that you have to have a compact with the State to do, continues to be a real challenge for the National Indian Gaming Commission. We spend a disproportionate amount of our time trying to sort out, whether a particular machine is one that can be played without a compact, or is it indeed a class II bingo or pull-tab-type machine that the tribe does not have to have a compact for. We are trying to meet this challenge. We recently appointed or selected the nomination of tribes, membership to a tribal advisory committee that will help us establish class II standards so that if a game meets those standards, then it can be used without a class III compact. The process we are now using of offering informal advisory opinions with respect to each machine, often results in extended, costly litigation, and we do not really give the tribes or the vendors a clear path. Once we have these standards in place, we think that will be workable and will be a service to tribes, as well as those who provide these devices to the tribes. S. 1529 takes a look at the minimum internal control process. Minimum internal control standards are basically universal for all commercial legalized gaming. The State of Nevada, the State of New Jersey, all the jurisdictions that have gaming have some standards that facilities must meet so that they track the dollars as they go through the machine to the cage, to the count room and eventually in some cases to State coffers if there are taxes, or to the casino proprietor, or in the case of Indian gaming, to the tribe. We promulgated minimum internal control standards. They are in effect. They have been revisited once in 2002. A tribal advisory committee was assembled. We revised them. We are currently in the process of doing that again. Not only have we appointed a tribal advisory committee to help us do that, but it is a standing tribal advisory committee. You cannot just get it done once and solve the problem. Given the changes in technology and so forth, you have to keep up with this. With the assistance of this tribally nominated tribal advisory committee, we will be again revising the minimum internal control standards. S. 1529, as we read it, would in effect send us back to the drawing board. The good news is it would clearly in Federal law say we have the authority to do this. The problem as I see it is we would have to in effect throw out the progress we have made, the minimum internal control standards we now have in place, and in effect start over, do negotiated rulemaking to come up with a new set of minimum internal control standards. I think the adage, ``if it ain't broke, don't fix it,'' ought to apply here. I think our present standards are workable. I think we continue to get tribal input with respect to those standards. We hope that is a tack that the committee will take as it pursues this. We are not without challenges in this area. At the Colorado River Indian Tribe in Arizona, we went out to do a MICS audit, minimum internal control standard audit. That was going pretty well until our Regional Director said, okay, let's go take a look at the slot machines. The tribe said, no, you do not have authority to look at class III. We said, well, yes we do. As a result, the audit came to a stop. Eventually the Commission issued a violation notice, assessed a fine because the audit process had been disrupted. Eventually we got that sorted out. We have been to Colorado River Indian Tribe. We have done an audit. Things look pretty good out there. But they reserved the right to challenge whether we have that authority, the proposition being tribes and NIGC will regulate class II; class III will be regulated pursuant to Tribal-State compacts. Well, that case is now working its way through the court. If in fact the court disagrees with us and says, no, even though IGRA says we have the right to promulgate standards, even though the chairman of the National Indian Gaming Commission has the right to assess fines for violations of the IGRA, of NIGC's regulations, of the tribal gaming ordinance, you have to stay out of class III, that is where most of the ballgame is. Class III is where all of the money, or not all of the money, but most of the money in Indian gaming is. All day every day, that is what we are currently doing now. This act would clarify that we have that authority. However, if we have to go back and rewrite the MICS, we think it is a step forward and maybe also a step backward. There is a provision in S. 1529 that addresses the use of the fines that NIGC collects for violations of IGRA and the regulations and so forth. It would in effect say, NIGC, you set up a separate fund; put those proceeds in that fund; and there are some special uses you can make of those funds. We do not think that is good business. That is, we do not think that the body that assesses the fines should be the one that gets to decide or decides in part where to spend it. Right now, those fines that we collect, and in this last year we collected about $4 million in fines, go into the general fund of the U.S. Treasury. There is probably a way to do both of these things. That is, get the benefits of what money like that would provide for, such as additional training for tribal gaming regulators, things of that nature, but money for those purposes could be appropriated. Maybe they could look as they do that, to see how much the fines were that came in. But to say to us, you go out there and collect fines and then use that money, I think raises a red flag with respect to the credibility of the NIGC when we assess those fines. The consultation provision of S. 1529 is something we certainly agree with. We have promulgated for the first time at NIGC a consultation policy. It will be published in the Federal Register the first week in April. It specifically sets forth how NIGC should and will consult with tribes when we consider changing policy that relates to Indians and Indian gaming. We have held five regional consultations this past year, and almost on a weekly basis we are engaged in consultation of one sort or another, meeting with tribal leaders and addressing the issues that arise as we play our regulatory role. Finally, let me say we want to continue to play an important role in the regulation of Indian gaming that makes it a strong economic development tool. We want to continue to help tribes scrutinize the individuals that participate in Indian gaming. We want to monitor with them the fairness of the play. We want to make sure that the money goes where it is supposed to. We fully understand that tribes do the heavy lifting. They are out there all day every day. We merely come along and look over their shoulder. But by looking over their shoulder, we give credibility to what they are doing, to the gaming public, to know that there is somebody here that is talking to you, talking to Congress, talking to the tribes with respect to how it works. I think it also fortifies the trust that tribal members themselves have that their assets are being adequately protected; that their economic development in the way of gaming is being run the way it should. There certainly will be new challenges that will come along. We are seeing more and more questions about our tribes making proper utilization of their gaming revenues. NIGC will continue to try and address those issues that come our way. We need to have the tools to do that, enough resources in the way of dollars and staff. We need to have a viable, modern, current, organic Act, the [IGRA]. When we have that, we think we can play the role that is expected of us. That basically concludes what I have to say, Mr. Chairman. But before concluding, we may not have the opportunity during your tenure to come before you again, Senator Campbell. I want to thank you so much for the attention you have given to us. It has been a privilege to appear before you. From one Indian to another, you make us proud that the Indians know how things ought to work. Thank you, sir. [Prepared statement of Mr. Hogen appears in appendix] The Chairman. The three of us here in attendance today, we were all active in 1988 in helping write IGRA. I do not think any of us, or anybody in Congress, had any idea of the growth that was going to happen after we passed that bill. In my view, I think Indian gaming has done a world of good for communities around reservations, and particularly for tribes that have invested in gaming, but it has had some complications, and that is what this bill is about. Before we go to Mr. Skibine, I would like to ask Senator McCain if had an opening statement or any comments to make. Senator McCain. No, Mr. Chairman; except to thank you for holding this hearing. I think it is important after 15 years that we review IGRA. As you mentioned, and I think Senator Inouye would agree, we had no idea that it would be this large a situation. I was reading the opening statement of Mr. Stevens, who said that IGRA is a result of lobbying efforts by State governments and the commercial gaming industry in response to the Supreme Court's holding California v. Cabazon Band of Mission Indians. I do not know where you were at that time, Mr. Stevens. It had nothing to do whatsoever with anybody's lobbying. It had a lot to do with our abiding commitment to try to see that a Supreme Court decision, which we all supported, certainly Senator Inouye and myself and Senator Campbell, was translated into some kind of reasonable process so that we would be in compliance with a U.S. Supreme Court decision, and allow as much as possible Indian tribes to engage in gaming. To allege that somehow that this was a result of lobbying efforts is a bit insulting to those of us who worked so hard on behalf of Native Americans and have continued to work on behalf of Native Americans' right to engage in gaming. Thank you, Mr. Chairman. Mr. Stevens. Senator, if I could? The Chairman. Yes; go ahead, if you would like to respond to that. Mr. Stevens. I apologize if I offended you in any way, shape or form. Senator McCain. You did not offend me. I was just correcting the record. Mr. Stevens. It is not my intent, and certainly we feel that there was a lot of lobbying efforts that took place. We certainly take the position that tribes did not write this and we were not the champions of this until it was installed. Senator McCain. This law was passed in complete consultation with Indian tribes. It was extensive for a long period of time. I will engage in that later on, Mr. Chairman, but I thank you, Mr. Chairman. Mr. Stevens. I would welcome the opportunity to try to clarify my record on that, Senator. Senator McCain. Thank you. The Chairman. Mr. Skibine, if you would continue. STATEMENT OF GEORGE T. SKIBINE, ACTING DEPUTY ASSISTANT SECRETARY FOR POLICY AND ECONOMIC DEVELOPMENT, DEPARTMENT OF THE INTERIOR Mr. Skibine. Thank you, Mr. Chairman. Good morning, Mr. Chairman, Mr. Vice Chairman, Senator McCain. I am pleased to be here to present the Department of the Interior's view on S. 1529, the Indian Gaming Regulatory Act Amendments of 2003. My comments this morning will focus on section 2(f)(2) of the bill, which is the only section that directly affects the Secretary's statutory duties under the IGRA. As you know, in July of last year the principal deputy assistant secretary, for Indian Affairs testified before this committee on the concerns we had with revenue-sharing provisions in class III gaming compacts. We talked about the growth of revenue-sharing provisions in the compacts; about how the 1996 Seminole decision affected this by giving States the upper hand in compact negotiations; how there has been a rise in revenue-sharing provisions in general in compacts and, also, how there has been a rise in the percentage of revenue that the states receive under these compacts. Back in 1994, we approved the Mohegan compact. It was the beginning of the era for revenue-sharing provisions in compacts. We also you, a book with a compendium of our decisions regarding revenue-sharing payment. Our position has been that as long as these payments are not a tax, then they are okay, as long as they are viewed as the purchase of a valuable economic benefit in exchange for the payment. We require that the economic benefit be quantifiable and we have also insisted that it be for a benefit that the state is not required to negotiate in good faith. Our thinking there is that we do not believe it was the intent of IGRA to have all the provisions up for sale. We wanted to make sure that it is like substantial exclusive rights to certain forms of class III gaming, something that the State is not required to offer in good faith. As a result, we support the thrust of section 2(f)(2)(a) because it provides a statutory basis for the inclusion of revenue-sharing provisions in class III gaming compacts. We think that this is welcome because the Department has been challenged over its approval of such provisions in court, and we have not lost litigation there, but we feel that it is an ongoing concern and that if that can be clarified by an amendment to IGRA I think it will resolve all these doubts about whether you can or cannot make those revenue-sharing payments. We believe that the conditions for revenue-sharing payments in the bill should be, modified and that the bill should contain very clear language that specifies exactly what economic benefits may be conferred in exchange for the payment, and perhaps even to provide a cap on the percentage of net revenues that can be made so that there will not be a tendency to have the percentage that the States require be increased over time. This is something we have seen, and with direction from Congress as to the cap, that we would essentially help promote the notion that the gaming activities are mainly for the tribes' economic development and tribal programs, that it will not see more and more of these revenues going to States under these compacts. We think that this clear statutory guidance, in this respect, will provide a transparent process for reviewing these provisions at Interior and will help states and tribes know exactly what is on the table for them to negotiate. It will also eliminate the uncertainty surrounding the approval or disapproval of these provisions at Interior. Usually, I can tell you that when we have to make a determination on a compact that contains revenue-sharing provisions, we do a lot of hand- wringing and a lot of analysis, and we are usually not done with our analysis until the 44th day when we actually issue the decision because it is a very difficult process to try to figure out exactly what is the value that the tribe is receiving in exchange for the payment. With respect to the promulgation of regulations included in section 2(f)(2), we believe that if the statute itself clearly articulates the criteria for revenue-sharing payments, then regulations may actually not be necessary. Actually, if the committee believes these regulations are necessary, we think in our testimony we said that the timeframe seems unrealistic and we suggest 18 months, rather than the 90 days that are in the bill. Also, we think that the inclusion of a 90-day timeframe for issuing class III procedures in section 2(f)(2)(b) is insufficient. We would recommend the doubling of that deadline of the timeframe at the very least. In our experience, we have had very few instances of reviewing class III procedures under the scheme outlined in IGRA. We are in the process of doing that now. I can tell you that the timeframe, presents very difficult questions, especially in the scope of gaming, that would require us to study this very diligently. Now, I note that last July our principal deputy assistant secretary for Indian Affairs was asked whether the committee should consider any other modifications of IGRA. She responded that the 45-day deadline for approval of compacts was too short. I cannot find that provision extending that timeframe in the bill. We continue to believe that the 45-day timeframe is short. What happens a lot of times is we have a compact that is submitted and when we examine it, we notice that there are some glitches. We ask within the timeframe for the tribe and the State to modify that section, to provide us with something that would comply with IGRA. The back-and-forth negotiation that we are doing takes time. As a result, we always bump up against that 45 days, in most cases. We notice that in section 2(f)(2)(b) there is a requirement that the net revenues from gaming activities of the tribe that may be in the compact be allocated to another tribe or a portion to another tribe and not be used on a per capita basis. I think I should make the committee aware that at Interior, we do not believe that these funds are subject to the revenue allocation plan requirements currently under IGRA. We do not consider those to be the net revenue of that tribe, and as a result in states that authorize that, they are using those funds for tribal governance purposes or whatever purpose they need without having to come to Interior to submit a revenue allocation plan. So we have not considered these particular funds to be subject to IGRA. Let me also, mention that the 6-month extension of compacts contained in section 2(f)(2)(c) is a concept that we do like, but we were made aware by the Justice Department that there may be 10th Amendment problems with this provision. We think this issue should be examined in more detail. Finally, the Department requests the committee examine two additional issues which are of concern to us. The first is the inclusion of anti-competitive provisions in compacts that are directed at other Indian tribes. Secretary Norton is very concerned about that and we have seen that in the last 2 years in a compact where the compact would provide exclusive rights to game on a geographical basis, or substantial exclusivity to tribes against non-Indian gaming. It also gives a tribe the right to game in a geographical area to the exclusion of other Indian tribes. We have noticed a rise in these provisions that set tribes against tribes, and we are very concerned about it. Our lawyers have told us that they do not feel that such a requirement violates any requirement of IGRA, but yet, we feel as a policy matter that it is something that gives us pause. In fact, we have been sued in Wisconsin by two tribes over the decision not to disapprove the Ho-Chunk Nation compact that contains such a provision, so there is ongoing litigation on that. The second issue that we raise involves section 20(b)(1)(a) of IGRA and the submission of applications to take land into trust for gaming on what we call ``far flung'' lands. We discussed this in our appearance last summer with the committee. We have come to the conclusion that section 20 of IGRA does not prohibit gaming on off-reservation land under section 20(b)(1)(a) of IGRA and there is nothing in IGRA that prohibits it. In fact, it is contemplated that it does occur. Yet, when we are seeing the rise of applications from tribes for land that is hundreds of miles from the reservation, or from lands that are in another State, we are often contacted by congressmen that are essentially outraged that this can happen under IGRA and that in fact they feel that it was never the intent of Congress to permit it. We believe the committee may want to consider clarifying this area since it is raising a lot of concerns, not only with congressmen, but also with the communities that are affected by these applications that we continue to process. This concludes my remarks. I will be happy to respond to any questions you may have. Thank you very much. [Prepared statement of Mr. Skibine appears in appendix.] The Chairman. We will look forward to working with the Department in trying to improve this bill as we go along. I do not think any of us had any idea in 1988 about some of the complicated things that are coming up now as the industry grows. In my view, having been one of the people that worked on it in 1988, I was not concerned about the states at all. They are doing great compared to the tribes. When you compare unemployment as an example, State unemployment and tribal unemployment, it is just as different as night and day, as well as many things like the suicide rate among youngsters or high school dropout rate or so on. My original intent was to try to help tribes, and certainly the peripheral benefits have gone to States or communities. That is fine, but right from the beginning I was concerned more about tribes than I was States. Who would have known that when we thought we would put something in place in 1988 that would allow people of good faith to reach an agreement between the states and the tribes, and then after the Seminole decision we found out that one of the participants did not have to participate if they wanted to hold out and basically put tribes, in my view, in a real subjective position. Now, we find that when many States have deficits, they are looking to tribes to bail them out, when they were not there in the beginning to help them pass IGRA to help tribes. In those days, if anything, they dragged their feet, if you remember. We will go ahead to Mr. Stevens' testimony. STATEMENT OF ERNIE STEVENS, Jr., CHAIRMAN, NATIONAL INDIAN GAMING ASSOCIATION, ACCOMPANIED BY MARK VAN NORMAN, EXECUTIVE DIRECTOR Mr. Stevens. Mr. Chairman, members of the committee, I just want to clarify. I reviewed the statement regarding Senator McCain's concern and clarify that in my record. The Chairman. Okay, that will be fine. Mr. Stevens. I get a lot of my information from my elders and they have made it clear to me that in working with that process, it was not completely Indian country's baby, but we have championed that from day one and done a great job of doing that. I apologize if my statement was a little bit aggressive in that regard. Senator McCain. That is not an important item, believe me. Thank you. Mr. Stevens. Thank you, Senator. Good morning Chairman Campbell and Vice Chairman Inouye and Senator McCain, members of the committee, on behalf of NIGA's member tribes, I want to thank you for providing me the opportunity to testify before you this morning. My name is Ernie Stevens, Jr. and I am a member of the Oneida Nation of Wisconsin and chairman of the National Indian Gaming Association. With me this morning is Mark Van Norman, a member of the Cheyenne River Sioux Tribe and NIGA's executive director. I first want to commend your efforts in crafting S. 1529. NIGA fully supports a number of provisions that would make positive technical corrections to the IGRA. However, as you know, Indian country has a number of concerns with this bill and we appreciate the continuing dialog with you and your staff over the past year. Most importantly, we welcome the opportunity to formally provide our views. Mr. Chairman, before I speak from the text, I want to speak from my heart. Tribal government gaming is working. Before Indian gaming, my people had few jobs. Indian gaming has created 500,000 jobs. Before tribal gaming, Indian people when they were sick they could not find a doctor. Now, we are building health clinics. Before tribal gaming, Indian children had little chance for an education, and now we are building schools. Before tribal gaming, Indian people had few opportunities. Now we have a bright future for our children. Gentlemen, tribal government gaming is the Native American success story. I will turn to the specifics of my presentation. I would ask that I am able to provide my full statement for the record. The Chairman. It will be included in the record. Mr. Stevens. Thank you, sir. It has been 15 years since Congress enacted IGRA. Indian gaming is a tool that tribal governments have used for more than 30 years now. IGRA was the brainchild of many different efforts, but as I said previously before Senator McCain left, it was not ours, but we are very proud of what we have done to champion that law and we are very proud of what we have done to contribute to this industry. Indian tribes use gaming just as state governments use lotteries, to build infrastructure and provide essential services for their citizens. In just 30 years, Indian gaming has helped tribes begin to rebuild communities that were all but forgotten. Indian country still has a long way to go. Too many people continue to live with disease and poverty. Indian gaming has proven to be the best available tool for tribal economic development. I appreciate your efforts through S. 1529, which would bring clarity to several areas of the law. These are some of the provisions we support. First, the Johnson Act clarification. The Supreme Court brought stability to this area of law by rejecting the Department of Justice review to two appellate court decisions that found the Johnson Act did not apply to IGRA class II technological aids. This bill's provisions would help prevent any future confusion. Second is NIGC's accountability. This bill would require NIGC to adopt a 5-year strategic plan, and in addition would propose section 20 which will require the Commission to involve and consult with Indian tribes. We kind of look at the record regarding this, and we are not so excited about that. We are appreciative of the efforts more recently on consultation and we are encouraged by the way this process is growing in Indian country by NIGC. NIGA asks the committee to consider requiring the NIGC to develop its plans in accordance with the limited powers pursuant to IGRA. Despite our strong support for these important clarifications, Chairman Campbell, NIGA has three concerns. It authorizes the NIGC to regulate class III gaming. It authorizes NIGC to do background checks on tribal gaming commissioners. And it does not provide a Seminole fix. The authorization will burden the tribal-State compacting process pertaining to class III authorization. It will create conflict and only serve to create confusion and a duplication of effort. Congress considered NIGC authority over class III gaming, but decided against it. Our elders have fought against it as well. Our elders have told me on more than one occasion that is a sovereign right and we need to stand by that. As Congress and the Department of Justice expected, tribal- State compacts are working to provide a strong regulatory regime backed up by Federal agencies like the FBI, FinCEN, IRS and others. In total, Indian tribes invest over $262 million annually for the regulation of Indian gaming. Against a backdrop of comprehensive regulation, the FBI and the U.S. Department of Justice have testified repeatedly that this regulatory scheme is working well to prevent the infiltration of crime and protect the integrity of games played at all tribal operations. Next if I could just talk real briefly about NIGC licensing authority. NIGA objects to the provision requiring Federal background checks for tribal gaming commissioners. Unlike management and other key gaming personnel, tribal gaming commissioners are tribal government officials and the selection of tribal government officials must be left to the sovereign authority of tribal governments. NIGC should not be permitted to infringe on tribal government authority in this manner and we ask that you consider deleting that provision from the bill. One thing we are very concerned about is the lack of a Seminole fix. I think everybody is aware of that. For the past 8 years, NIGA, NCAI and tribal governments throughout the Nation have all stated that any IGRA amendment must contain a Seminole provision. When I spoke before this committee in 1997, then as First Vice President of the National Congress of American Indians, that was our stance, and those resolutions stand firm today. Today, I must again ask that the committee consider adding a provision to address this longstanding wrong. States are using Seminole to impose unreasonable demands on tribal governments through the compacting process. Last, before I close, I would like to address the revenue- sharing provision. NIGA fully supports this concept. The burdens of homeland security, the economic downturn nationwide, the loss of jobs and very poor financial planning are all reasons for State budget shortfalls. Indian gaming, however, is not a reason for State budget problems and should not be used as a way out. Shifting the burden to tribal governments is neither reasonable or fair. Why? Because these proposals burden only the industry that is producing jobs and generating economic development. They also ignore a significant benefit that Indian gaming currently provides to State and local communities. Finally, these proposals violate Federal law and ignore the status of Indian tribes as governments. As I mentioned earlier, tribal government gaming has created 500,000 American jobs and three-fourths of those jobs are held by non-Indians. Indian gaming also creates a substantial revenue stream for the State and local units of government. In 2003 alone, Indian gaming provided for about $7.6 billion in added revenue to Federal, State and local governments. These provisions do not make good financial sense and most of them violate Federal law. Indian tribes conduct gaming for the same purpose that State governments operate lotteries: To generate revenue, to fund infrastructure and essential government programs. Congress enacted the IGRA to promote tribal economies and strengthen tribal governments. As a result, IGRA requires that Indian gaming revenues be used first and foremost to address the governmental, economic and social problems of Indian country. Until these needs are fully addressed, Federal law prohibits the use of gaming revenues for any other purpose. I understand that an amended version of S. 1529 includes a savings clause to protect the effect of existing tribal-State compacts that are working well for the tribes and States involved. Again, NIGA fully supports this provision. In closing, Mr. Chairman and Senator, I again thank you for your dedication and interest in tribal government gaming and Native Americans. We want you to know that we appreciate the hard work that the committee and its staff have done in regards to this legislation. Senator Campbell, this may be the last time that I have the privilege of testifying before you as one chairman to another. I was saddened to hear you will be leaving the committee. You have been an inspiration to all Native Americans. We are deeply and eternally grateful. Mr. Chairman and members of the committee, this concludes my remarks this morning, and once again I thank you for providing me with this opportunity. I am available for any questions. [Prepared statement of Mr. Stevens appears in appendix.] The Chairman. Thank you, Ernie. I am going to run and vote. Senator Inouye will chair. Don't be a little bit embarrassed about your confusion with which one of us is Inouye and which one is Campbell. We have worked together for so many years and been friends for so many years that we are like an old married couple sometimes. We begin to look alike. [Laughter.] Mr. Stevens. I am very clear, Chairman Campbell. Again, we are excited to come before you on this important matter. You two are great gentlemen and friends I have inherited from my father. I am very clear the difference. I am a little bit nervous trying to clarify for Senator McCain this morning, but I hope my position here this morning stands clear. Senator Inouye. Thank you very much. I am sorry I was not here for the past 10 minutes. Since this issue has been brought up, when the U.S. Supreme Court issued its ruling in the Cabazon case the committee was faced with a problem. We approached the Administration to suggest that they should carryout its responsibility on a government-to-government relationship with sovereign nations, but as some of you recall, our Government, our Attorney General adamantly refused to participate and said, no, we do not want to have any part of this. As a result, the Congress had to enact laws and delegate this government-to-government role to the States. We know that the Constitution did not contemplate such a rule for the States but what choice did we have? It was either that or chaos, and we could not countenance that. So that is why we have this law today. I am glad that the Federal Government is involved now to some extent. If I may, I would like to ask a few questions. I believe the Deputy Assistant Secretary brought up the matter of caps. Mr. Skibine. Yes. Senator Inouye. At the present time, there are no caps. When the first compact was put into effect, I believe that was the Mashantucket Pequots. Mr. Skibine. The Mashantucket Pequots were actually procedures under IGRA. The first compact with a revenue-sharing payment that we approved was the Mohegan compact. Senator Inouye. For that revenue-sharing agreement, the Connecticut tribes got some monopolies. Isn't that correct? Mr. Skibine. That is correct. Senator Inouye. Do the other tribes that are being forced to accept high percentages of revenue-sharing, they get monopolies as well? Mr. Skibine. In some cases they do. What they get is a substantial exclusivity to certain forms of tax-free gaming. So it is not as broad as the exclusivity that the Mohegan Tribe got in Connecticut, which is a total monopoly on slot machines, but it is still a substantial exclusivity. We believe that the form of class III gaming has to be authorized somehow within the State so it is not a total exclusivity anymore, but it is a substantial exclusivity. We have in fact, for a while, insisted on a statewide exclusivity. With the Seneca compact in New York, we agreed to a substantial exclusivity that is geographic, so that the Seneca Tribe has essentially substantial exclusivity on forms of machines in Western New York, but not over the whole state. The tribe persuaded us that it was significant enough to provide payments to the State. Senator Inouye. Do you believe it is your responsibility to, quote, ``protect'' Indians from being shortchanged or conned by some of these dealers? Mr. Skibine. What we believe is that in order for the compact not to violate IGRA, and especially not to violate the taxation provision of IGRA, the payment has to be something that is a payment in exchange for a benefit. If the payment greatly exceeds the value of the benefit, our view is that the difference between what the benefit is worth and the payment that the tribe would agree to make, that is a tax and that is prohibited by IGRA. So to that extent, that is what we look at. Senator Inouye. Who determines what is a tax or is a benefit? Mr. Skibine. We ask the tribe and the State to provide us with an economic analysis that outlines what is the benefit that is conferred and essentially what is the value of the benefit, as compared to the payment that is provided. Based on this analysis, we make a decision as to whether it is not a tax and in fact is a payment that is authorized as the purchase of a valuable economic benefit. It is a difficult analysis and that is why we welcome the provision that would clarify that it is authorized, and under what circumstances. Senator Inouye. I have been advised that New Mexico Indian tribes originally were forced to accept 16 percent revenue- sharing with the State. Mr. Skibine. No; they pay 8 percent. Mr. Van Norman. Could I just add. There are two that remain under the former regime, Mescalero and Pojoaque Pueblo. Mr. Skibine. Yes; right. Senator Inouye. Do they receive any exclusivity? Mr. Skibine. Under the previous---- Senator Inouye. Under the 16 percent. Mr. Skibine. Under the 16 percent, they receive some exclusivity, however the Department never affirmatively approved the compact for these two tribes, or for the other tribe. We did not approve it because we felt that it was not arms length negotiations with the State and therefore, the payment was more likely to be a tax than a payment in exchange for a bargain a benefit. At the time, from what I recall, we felt that the tribes were between a rock and a hard place. If they did not have a compact, I think the U.S. Attorney at the time had filed to close them down, and yet they were faced with a legislative compact that they did not negotiate. The tribe sent us a resolution urging us to neither approve nor disapprove this compact because in fact they felt that they wanted to be able to test their legality in court. So we ended up following that request. Senator Inouye. Would you recommend that this bill contain a cap? Mr. Skibine. Yes; I think that we should explore having a cap on the payment of net revenues. Senator Inouye. From your experience, what would be a reasonable cap? Mr. Skibine. I think it should be single-digit, maybe, or 10 percent. I think that has yet to be looked at. I think that if it goes above that I think it is maybe problematic for the tribes. Senator Inouye. We will consider that. Mr. Stevens, Mr. Chairman, you have indicated that you are not happy with the bill requiring personnel to be investigated because of your sovereign nature. Is that correct? Mr. Stevens. Tribal gaming commissioners that are appointed by the tribes, we think that is a tribal council right, only for tribal gaming commissioners. Senator Inouye. And you do not want the Government of the United States investigating them? Mr. Stevens. I am saying that it is our position that that is first and foremost the right of the tribal government. That is my only statement. Senator Inouye. How can you assure your tribal members and the Government that your commissioners are free of a criminal background? Mr. Stevens. I think that we have a demonstrated experience with our background investigation through our tribal governments. As I reflected in our numbers, our numbers are for regulation nationwide is $272 million. That is reflective of our tribes' background investigations. So I would say that our tribal governments would be able to do adequate background investigations on those commissioners. Senator Inouye. Mr. Hogen, do you believe that you and your Commission should have the right to investigate? Mr. Hogen. Senator Inouye, as I read the proposed legislation, it would not give us the primary task of investigating tribal gaming commissioners. Rather, they, the tribal gaming commissioners, would have to be backgrounded just as all of the licensed employees are. We play a role in that in that the tribes first do that, then they send their investigative report to us. We review that, and only if we object to what they have done do we take any action. That action would be, for example, to ask them to reexamine or to object to that. They have the ultimate decision as to whether they are going to license those individuals. I think it is good business to have those who do the licensing at the tribal level subject to the same scrutiny as those that they are going to license. I do not think it would be good to have a tribal gaming commissioner with a felony record sitting there looking over applicants from blackjack dealers and be in a position to veto their qualification because they may have a conviction. So we do not want to be intrusive, and I agree that the record of tribal gaming commissions is good, but I think putting everybody on that same level has merit. Senator Inouye. If you object, do the commissioners get thrown out? What is the outcome? Mr. Hogen. I believe, and I would have to look at the statute to be absolutely clear, that the tribes are obligated to re-examine, they look at it, and I think they may have to suspend that license that is in place for a period of time, but they make that ultimate decision. Senator Inouye. Notwithstanding your objection? Mr. Hogen. Right. Senator Inouye. Do you believe that this is what you want? Mr. Hogen. It has worked pretty well so far. We have been troubled occasionally, but it has been very isolated. Mr. Stevens. Vice Chairman Inouye? Senator Inouye. Yes? Mr. Stevens. I just want to make sure I clarify for the record that in no way, shape or form do we advocate that we should not do a background or a review. We just want to make sure that we clarify that it is a sovereign right of our tribal governments to do so for their regulators. Senator Inouye. I fully support your sovereignty, as you know, but I want to also make certain that gaming is conducted in a manner that would be approved by the public at large because we are constantly pressured by members of the Congress, members of the Senate to close tribal gaming. They pick on everything that they can find. A little thing can be a big thing for you. So with that, I thank you very much. Mr. Chairman. The Chairman. Thank you, Senator Inouye. We are all double- or triple-booked today, so I apologize for that, but those of you who have been here before, you know it comes with the deal here in the Senate. I do not know what Senator Inouye already asked you, so hopefully I will not duplicate that. Let me start with you, Phil. You indicate that this roller- coaster appropriations cycle is not the best way to go, and that is certainly what we have had. I understand that. In your testimony you express concern about having to consider factors such as level and quality of State and tribal regulation in determining fees imposed on individual tribes. It just would seem to me those are reasonable things to consider. Do you disagree with that? Mr. Hogen. No; I think as a general proposition, to decide how much we have to do and what we need to do that, we need to kind of be very cognizant of the environment that we are looking at. If tribes are doing a super job and we find out that they are doing that by going to their facility twice a year, that is great. If we find out that it is not working very well, we need to be there more often. So we need to be aware of what they are doing, how they are doing it, and are there any holes that we need to try and plug in the role that we play. The Chairman. I see. Okay. I think we are probably close to the same track. In your testimony, you mention that tribes can reduce their fees by obtaining a certificate of self-regulation. Are there any tribes that do that now or have applied for that? Mr. Hogen. The only two tribes that do that, I believe are the Menominee Tribe in Wisconsin and the Grand Ronde Tribe in Oregon. However, under the current IGRA, that only applies to the class II gaming. As I mentioned before, that is a small chunk of the action, so there is really not much reward to a tribe for doing that. The Chairman. Should we apply that to class III gaming? Mr. Hogen. If everybody is self-regulated, then NIGC is probably going to be left with very little resources, and must still spring into action when they need to. I have concerns about that, not only dollars and cents, but as Senator Inouye mentioned 1 minute ago, we are under a great deal of scrutiny. If we say to those who are complaining about the extent of the regulation of tribal gaming, well, now they are self-regulated, I expect we might hear some increased concerns expressed. The Chairman. I understand. I am interested to see that the legislative proposal that you have mentioned includes long-term planning similar to the Government Performance Results Act that applies to most other agencies. Can you tell me if that change is also a position of the National Indian Gaming Commission? Mr. Hogen. We have always done some planning, and it has probably been less formal than is required of other, and particularly larger agencies. This GPRA that I do not know all the details about, but I do know that it is fairly bureaucratic and complex, we think that there are aspects of that that we can comply with that will tell this committee, tell Congress what they need to know about where we are going, tell tribes where we are going, and fully be transparent. Maybe we do not need to jump through all the hoops that GPRA itself would require, but still accomplish that. The Chairman. I am not an expert on the technology that is changing so fast with any kind of gaming, but clearly there is some difference of opinion about what should be class II and class III. I guess with some of the new machines that are coming out, it is difficult to determine. In your opinion, is the NIGC the best agency situated to determine whether a particular game is class II or III? Mr. Hogen. I think we are the best agency to set the rules or the standards as to what the machine has to comply with. Once those are clear, then tribal gaming commissions themselves can examine those devices and decide whether to permit them on their floor. I think the buck, in terms of what those standards are, needs to stop someplace. I think having some national consistency to that has merit. So for that reason, I think that is a role that the NIGC ought to be playing. The Chairman. Do you think that would also be tested in court, if you did have that legislative authority? Mr. Hogen. I would not be surprised. We very seldom go someplace without having somebody file a lawsuit. But I think if there is a strong statutory basis, we would prevail. The Chairman. Let me move on to Mr. Skibine. You state that the Seminole decision created, in your written testimony, uncertainties in compacting between tribes and States. I believe that, too. But several attorneys general believe there is no problem because, and I am quoting from a letter from the Conference of Western Attorneys General, ``tribes do not have to sign these compacts if they don't want to.'' What has been the impact of the Seminole decision on revenue sharing? Mr. Skibine. As I said in my comments, I think the impact of the Seminole decision on revenue sharing has been to increase the number of revenue-sharing provisions in compacts, and we have seen an increase in the percentage that the tribes are required to pay. If the tribes do not sign these compacts, then there is very little remedy available. The Chairman. I do not know if it is connected, but it seems like since the Seminole decision that more and more States have made higher demands and held out. Is that my imagination or is that true? Mr. Skibine. No; that is true. The Chairman. What recourse do the tribes have now if they do not want to share revenue with the State? Mr. Skibine. If they do not want to share revenue with the State and the State refuses to negotiate, what can happen is they can sue the State for a bad-faith negotiation. If the State raises its 11th Amendment defense, then the suit will be dismissed. Then the tribe may come to the Department and apply for class III procedures under our regulation in 25 CFR part 291. We are entertaining a proposal right now from a few tribes, but our authority to promulgate these regulations has been challenged so that we have actually not issued regulations, procedures for these tribes. So it is up in the air. The Chairman. Do you know the number of States, in lieu of a compact, are there regulations now that states have dealing with them? Mr. Skibine. No; not under our regulations. The Chairman. I had my notes all mixed up here, but one of you mentioned the example of $4 million of fines that have been assessed to tribes. Mr. Hogen. I brought that up. The Chairman. What were most of those fines for? Mr. Hogen. Most of those fines were assessed against tribes that were operating class III devices when they did not have a compact. We attempted, and most of those fines were assessed by the Commission that preceded ours, but they tried to equate the amount of the fine to the ill-gotten gain, so to speak, the amount that the tribe made by playing illegal machine. The Chairman. I see. Let me go back to Mr. Skibine. Do you think, Mr. Skibine, that State consent to off- reservation gaming would be another relevant substantial economic benefit to tribes? Mr. Skibine. It would definitely be an economic benefit to tribes. The Chairman. This bill that we are talking about would require tribal-State compacts to address tribal government needs, which is something we probably should have done in the first bill in 1988, but did not. That deals with the general welfare of tribes, and its members too, before the State can share in the revenue. I would guess just off-hand that that is not a provision that the States would be very supportive of. In the view of the Department, or do you have a view on that, in fact? Mr. Skibine. In the provision of the bill? The Chairman. Yes. Mr. Skibine. We would prefer to see a clear direction in the bill on what is allowable in terms of revenue-sharing payment and what the criteria are. In terms of that provision in this bill, we think that would be difficult for us to look at because when we receive those compacts, usually the revenue- sharing provision is expressed in terms of a percentage of net revenues. We do not know whether the needs of the tribes are met. In fact, it is likely that the needs of many of these tribes are not met. There are unmet needs with tribal governments, as you know, for many, many tribes. If that is the case, then there will never be revenue sharing if we have to address the unmet needs of the tribes. The Chairman. You also mention in your testimony the Department's concern with anti-competitive provisions in compacts that may prevent some tribes from operating gaming in specific geographic locations. First of all, will you tell the committee, are there many of those compacts with those provisions? Mr. Skibine. In the last 2 years or 1\1/2\, we have seen more and more of these provisions. The Chairman. Have they been suggested between tribes, that one tribe is concerned that another one may leap-frog over them closer to a metropolitan area, and therefore cut off the benefits of the first tribe? Mr. Skibine. That is correct. The Chairman. How do you address that in lieu of what some might say that that is a violation of a trust responsibility to those tribes that you put some restrictions on? Mr. Skibine. The Secretary is very concerned about these provisions from a policy standpoint. But our legal position is that these provisions do not violate IGRA or our trust obligation to Indians, principally because we do not think that tribes have a statutory right to off-reservation gaming, so we have not disapproved these compacts. The Chairman. I see. Let me ask another question or two. I just got a note. The Energy Committee is waiting to establish a quorum and I have to leave, so I am going to submit most of my further questions of all three of you in writing, if you would, so that I can get to the next committee. Over the past couple of years, Ernie, the NIGC has been able to obtain increased fee authority through the appropriation process. As I remember, some tribes were concerned that that would translate into more punitive action by the NIGC. Did the NIGA oppose those efforts when we were dealing with increased fee authority? Mr. Stevens. I want to hand this to Mark real quick, but I just want to make sure, the main thing that we want to do through that process is that they consult with tribes while they are going through that process. I will let Mark handle the technical side of that. Mr. Van Norman. Mr. Chairman, yes, we did oppose the increase from $8 million to $12 million because that was a 50- percent increase. We thought a much more measured increase would have been appropriate and that we should have had a direction that the NIGC work with us on a government-to- government basis to accompany that, and that it should go through the authorizing committees. The Chairman. Okay. Your testimony, Ernie, states an objection to a provision in our bill requiring background checks on tribal gaming commissioners as an intrusion on tribal government decisionmaking. As I read the language that we framed up, the decisions on background checks on gaming commissioners is still left up to the tribe, as they do with people who run for tribal council and that that happens to be in their constitution. The only requirement, as I read our language, is that some provision should be for background checks instituted by the tribe. Mr. Stevens. The only clarification, and I clarified that for Senator Inouye, is that we are not saying that our commissioners should not do a background investigation, but we are saying that that right should be left to the tribal government; only to that extent. The Chairman. I see. Perhaps the last question, NIGA has long objected to amending IGRA if a fix for the Seminole decision is not included. You probably know, with states' rights folks around here, that might be a very difficult thing to include and still get the thing passed. That was one of the problems we had in 1988. The way it works in the Senate, of course, is you get things done by consensus, and when you have 100 flaming egos, it is difficult to get them all to agree on anything. I happen to agree with you personally, but I think that that might be a very difficult thing to get into this bill to actually get it passed. It is something that we will certainly look at. Mr. Stevens. Let me just say, Chairman Campbell, I appreciate it. I think that tribal sovereignty and tribal governments have evolved around consensus from the beginning of time, and I appreciate that encouragement. I think to that extent, what we would do is, and we have pledged to other tribal leaders that have brought this up, that we will bring this before our executive committee meeting coming up next month. We would like to discuss it. I appreciate your asking the question, because it is the only way I could really clarify, but what we have told to this extent is that is our position. However, we will bring this before the tribal leadership. The Chairman. I would appreciate your getting back to the committee when they do address that, and perhaps tell the committee if we cannot get that provision, if we cannot keep that provision in, would you still support the bill? I would like to know that. Mr. Stevens. I will have the information for you in April. The Chairman. Okay, that will be fine. With that, I will include the rest of my questions to all three of you in writing. If you would get back to the committee, I would appreciate it. We will keep the record open for 2 weeks, if you can get back to us within 2 weeks. This committee is adjourned. [Whereupon, at 12:20 p.m. the committee was adjourned, to reconvene at the call of the Chair.] ======================================================================= A P P E N D I X ---------- Additional Material Submitted for the Record ======================================================================= Prepared Statement of George Skibine, Acting Deputy Assistant Secretary for Policy and Economic Development, Office of the Assistant Secretary, Department of the Interior Good morning, Mr. Chairman, Mr. Vice Chairman and members of the committee. My name is George Skibine, and I am the acting deputy assistant secretary for Policy and Economic Development in the Office of the Assistant Secretary--Indian Affairs at the Department of the Interior [Department]. I am pleased to be here today to offer the Department's views on S. 1529, the ``Indian Gaming Regulatory Act Amendments of 2003,'' as well as express our support for the Administration's proposal, the ``Indian Gaming Regulatory Act Amendments of 2004.'' The Department believes legislation in this area could provide a unique opportunity to address some of the uncertainties created by the U.S. Supreme Court's decision in the Seminole v. Florida case and existing revenue-sharing schemes adopted by tribes and States and approved by the Department. It allows us to take a step back from the present situation and create a process that is transparent to all parties involved in the process, provide clear guidelines regarding allowable benefits that may be negotiated by the parties and limits the percentage of net revenues that may be allocated to revenue-sharing schemes., This clarity is good, would benefit all parties, and can take. much of the guesswork out of the already time-consuming and highly sensitive process of tribal-State negotiations. There are five provisions of this bill which directly affect the duties of the Secretary as originally laid out in the Indian Gaming Regulatory Act [IGRA]. These include the provisions relating to revenue-sharing between tribes and State and local governments; promulgation of regulations regarding revenue-sharing provisions; timeframes for the Secretarial issuance of class III gaming procedures to a tribe after a mediator's notification of his or her determination; and the extension of expiration dates of compacts between tribes and states who are negotiating compact renewals. Section 2(f)(2)(A) of the bill amends section 11(d)(4) of IGRA, 25 U.S.C. 2710(d)(4), by adding a new subparagraph (B) that provides a statutory basis for apportioning net revenues to a State, local government or other Indian tribes in a class III gaming compact, but imposes several conditions on apportionment and requires the promulgation of regulations to provide guidance on the allowable assessments within 90 days of the enactment of this bill. This provision provides express authorization for revenue-sharing by tribes. These provisions provide clarity to an area which has become increasingly complex. In the past, the Department has provided approval to revenue-sharing agreements between tribes and States where the tribe has received the substantial economic benefit of exclusive authorization to operate class III games within a State. The Department has also approved agreements which authorize payments to local governments to offset the costs it may incur as a result of the operation of class II gaming in a municipality. Generally, we support- this new provision because it provides a statutory basis for revenue sharing provisions in class III gaming compacts. However, we believe that the conditions for apportionment should be modified. We believe that the proposed amendments to IGRA should provide a clearer definition of the substantial benefits that Congress determines are appropriate in exchange for revenue-sharing. Until now, the Department has considered the exclusivity of class III gaming the only substantial economic benefit that merits revenue sharing between a tribe and a State. The exclusivity may be limited to specific types of class III games or to specific geographic areas within a State. If the committee contemplates that other benefits may be negotiated, the Department requests that Congress define in more detail the items it believes are appropriate. Additionally, the Department believes that the legislation should provide guidance regarding the amount of revenue-sharing that may be authorized. Tribes and states are making agreements for increasing percentages of net revenues. More and more, we are seeing agreements that call for 15 percent to 20 percent of a tribe's net win to be paid to State and local governments. We expect to see agreements soon which are in excess of that, possibly as much as 25 percent or more of a tribe's net win. One of the stated purposes of IGRA is to provide ``a means of promoting tribal economic development, self-sufficiency, and strong tribal governments.'' The Department recommends that Congress consider whether these percentages are allowable and specifically authorize a limit on the percentage if it deems necessary. Section 2(f)(2)(A) would also amend Section 11(d)(4)(C) by requiring regulations regarding revenue sharing payments be promulgated within 90 days of enactment of the bill. The process of rulemaking is lengthy, and 90 days is not enough time to finalize regulations. We recommend that a more realistic timeframe be identified for the promulgation of the regulations, and that 18 months is a reasonable amount of time. Section 2(f)(2)(B) of the bill would modify section 11 (d)(7)(B)(vii) of IGRA by requiring the Secretary to prescribe class III procedures within 90 days after notification is made by the mediator. Again, we believe this timeframe is too short, and recommend the words ``180 days'' be substituted instead of ``90 days'' to give the Secretary enough time to carefully examine difficult questions of State and Federal law that are usually involved in this process. Section 2(f)(2)(C) of the bill would create a new subparagraph 11(d)(10) providing that an approved compact will stay in effect for up to 180 days after its expiration if the tribe certifies to the Secretary it has requested a new compact no later than 90 days before the compacts' expiration, and a new compact has not been agreed on. We support a concept that allows tribes and states a window in which they may negotiate compact renewals. The Department of Justice has advised us that there may be constitutional limitations on the Federal Government's authority to extend compacts that require State regulation of tribal gaming. Further, we note that the bill states that it adds a new paragraph (10) at the end of section 11 that should read that it adds a new paragraph (10) at the end of section 11(d) of IGRA. Finally, the Department requests that the committee examine two issues we believe would improve its ability to review and analyze compacts and gaming related fee to trust transactions. First, the Department is increasingly encountering tribes who are interested in developing gaming sites which are far away from their homelands, in some cases in States other than where they are located, and in other cases on lands which are hundreds of miles from the tribe's homelands. We have researched the issue internally, and can find no limitation in IGRA or its legislative history that would lead us to believe that it is prohibited. At the same time, we receive numerous communications from Congressmen from around the country who express this as their greatest concern. The Department believes Congress should consider clarifying the ability of tribes to locate gaming operations far from their homelands, particularly in cases where the lands at issue are located in another State. Second, the Department has received several compacts over the past 2 years which contain ``anticompetitive'' provisions. These provisions generally provide a tribe with a protected territory, outside of its reservation, in which they may game and create a disincentive for states that may otherwise be willing to negotiate for off-reservation sites with other tribes. Especially in cases of off-reservation casinos, it provides guaranteed exclusivity, possibly at the expense of other tribes who might otherwise desire to locate a facility in an off- reservation location. This limitation as applied to other tribes appears to violate the spirit of IGRA, but there is not express prohibition contained in the act. The Department believes Congress should consider clarifying this matter. Although we prefer the Administration's proposal, we would be happy to work with the committee and to participate in further discussions with regard to our comments. Thank you for the opportunity to testify on S. 1529. I will be happy to answer any questions you may have. 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