<DOC> [108 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:87197.wais] S. Hrg. 108-67, Pt. 1 INDIAN GAMING REGULATORY ACT ======================================================================= HEARING BEFORE THE COMMITTEE ON INDIAN AFFAIRS UNITED STATES SENATE ONE HUNDRED EIGHTH CONGRESS FIRST SESSION ON OVERSIGHT HEARING ON INDIAN GAMING REGULATORY ACT: ROLE AND FUNDING OF THE NATIONAL INDIAN GAMING COMMISSION __________ MAY 14, 2003 WASHINGTON, DC __________ PART 1 __________ 87-197 U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2003 ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpr.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 Statements: Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, chairman, Committee on Indian Affairs...................... 1 Choney, Cloyce, commissioner, National Indian Gaming Commission, Washington, DC................................. 1 DeRosier, Norm, Viejas Gaming Commission..................... 13 Hogen, Phil, chairman, National Indian Gaming Commission, Washington, DC............................................. 1 Stevens, Jr., Ernest L., chairman, National Gaming Association, Washington, DC................................ 13 Van Norman, Mark, executive director, National Indian Gaming Association................................................ 13 Westrin, Nelson, vice chairman, National Indian Gaming Commission, Washington, DC................................. 1 Appendix Prepared statements: Hogen, Phil (with attachments)............................... 27 McCain, Hon. John, U.S. Senator from Arizona................. 25 Stevens, Jr., Ernest L. (with attachments)................... 39 INDIAN GAMING REGULATORY ACT ---------- WEDNESDAY, MAY 14, 2003 U.S. Senate, Committee on Indian Affairs, Washington, DC. The committee met, pursuant to other business, at 9:55 a.m. in room 216, Hart Senate Building, the Hon. Ben Nighthorse Campbell, (chairman of the committee) presiding. Present: Senators Campbell, Inouye, and Akaka. STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR FROM COLORADO, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS The Chairman. The Committee on Indian Affairs will be in session. We will now proceed to the oversight hearing on the Indian Gaming Regulatory Act: The Role and the Funding of the National Indian Gaming Commission. We have just one panel, and that will be Phil Hogen, chairman, National Indian Gaming Commission, Washington, DC, accompanied by Nelson Westrin and Chuck Choney. Next we will have Ernest Stevens, chairman, National Indian Gaming Association, Washington, DC. He will be accompanied by Mark Van Norman. Mr. Hogen, please come up and have a seat. Your complete written testimony will be included in the record. If you would like to abbreviate your remarks, please feel free to do that. Welcome to the committee. STATEMENT OF PHIL HOGEN, CHAIRMAN, NATIONAL INDIAN GAMING COMMISSION, WASHINGTON, DC, ACCOMPANIED BY NELSON WESTRIN, VICE CHAIRMAN, NATIONAL INDIAN GAMING COMMISSION; AND CLOYCE ``CHUCK'' CHONEY, COMMISSIONER, NATIONAL INDIAN GAMING COMMISSION Mr. Hogen. Good morning. Thank you, Mr. Chairman. We much appreciate the opportunity to come tell the story of the National Indian Gaming Commission this morning. We have a lot to say, and we know we do not have a lot of time to do it, so I will try to get right to it. But first I would like to introduce the other members of the National Indian Gaming Commission who are with me here today. Our vice chairman is Nelson Westrin. Nelson is the former executive director of the Michigan Gaming Control Board. He was there when that gaming regulatory body started. He put it together and he brings a great deal of expertise to our body. We really appreciate having him on board. Cloyce ``Chuck'' Choney is the other member of the Commission. Chuck is a Comanche from Oklahoma. He spent 26 years with the Federal Bureau of Investigation. He knows his way around Indian country and investigations. We are just delighted to have him part of our team. That has really strengthened our relationship with members of the Federal law enforcement family. We want to talk about basically three areas today. We are bureaucrats so we are going to talk about our funding and our budget. We want to talk about the mission that we have and how we attempt to perform that mission. Finally, we want to talk about what we view are some shortcomings in the Indian Gaming Regulatory Act that tend to complicate our performance of that mission. Before I launch into that, I want to say that we think we know our place within the Indian gaming scheme of things. We would not be here if it were just for the Federal Government. Indian gaming was created by Indians, by leaders that brought economic development to their reservations where that was desperately needed. Without their vision and without their leadership, there would not be an industry. We would not be here. With respect to the gaming that is occurring out there, there are several key players that perform the regulatory functions. The front line, all day, every day regulation is performed by tribal regulators. We think they do that job very well. Our role is rather a secondary role. We support and provide oversight of that regulation, that tribal gaming commissions perform for their tribes. Of course, under the tribal-State compacts for class III gaming, States, too, can and do play supporting roles. But most of the manpower, and all of the money that is spent to regulate Indian gaming, is provided by the tribes. They are doing a commendable job. Our oversight, we hope--and we think it does--tends to lend credibility to that first line regulation that tribes do. There is a dynamic tension that exists between these levels of regulators, but we think that is to be expected in that kind of a relationship. But we think we have a good and positive relationship with tribes and their tribal regulators. Now, getting to the funding part of the presentation, since 1997, the National Indian Gaming Commission's operations have been funded solely by tribes--fees that are collected on class II and class III gaming, as well as some lesser amounts that are collected for services, particularly the fingerprint processing that we do for tribes in cooperation with their background investigations. We also charge some fees in connection with the background investigations we conduct when we are doing management contract reviews. The fees that we collect, of course, are capped by the statute, capped currently at $8 million. Exhibit number 2 of our written statement is a pie chart that shows that about 85 percent of the dollars that we current spend are basically fixed costs--salaries and money we spend to keep the doors open at our office here in Washington and our five field offices. The Chairman. Is that the red portion of your chart? Mr. Hogen. Yes; the lion's share is basically uncontrollable, so to speak. We have to pay that whether or not we are working hard. The Chairman. You had better be working hard. Mr. Hogen. We absolutely try to do that. That is the picture. Right now we are spending the full $8 million basically to do that. Of course, the industry itself, as this chart demonstrates, is on an upward trend. We do not know that it will always go at that level or at that rate, but recently that is the way it has been going. That is good. That means that puts dollars on reservations where they are supposed to go. But it also means that we have more to do. With the same amount to do more, we have to be creative. But during this period of time, there have been more tribal gaming operations and there have been larger tribal gaming operations. We have come up with some more requirements that we have to get out there and verify, such as our minimal internal controls standards and the environment, health, and public safety provisions that we are responsible for overseeing. The gaming itself is becoming more complex. It is a more technical industry. We have to be better at what we do. In 2001, NIGC spending to hit the ceiling. We collected all the $8 million. We could not hire any more people or do anything more. So we had to put in place a hiring freeze. We had to restrict the travel of the investigators and the auditors. We had to suspend a consultation circuit riding program where they would go out around Indian country. We have been able to only minimally upgrade equipment, training, and the technology that we utilize. We are in a bind over there. Also appended to our testimony is a copy of our organizational chart. It shows who works for us and what they do. It also shows the vacancies. We have 19 field investigators in our five field offices and here in our Washington office. Right now, three of those positions are vacant. We have seven auditor positions; three of those positions are vacant. The Chairman. Those are positions all in the Washington office? Mr. Hogen. No; these are the whole team; five field offices and the Washington office. The Chairman. The positions that are vacant. Are they out in the field are they mostly here in Washington? Mr. Hogen. They are both. It is probably weighted a little more to the field because that is where the people are. But if and when we get dollars to fill positions, the field positions will be the first ones that we will backfill. We also have had some senior positions open. We currently do not have a general counsel. We do not have a director of Congressional affairs. We have folks acting in that capacity. That means that those acting folks cannot do the jobs that they were doing before. The good news in connection with that, and the fact that there were vacancies in our positions in the Commission membership means that we saved some dollars. We were not paying those big salaries. With those savings, we were able to hire some of the people and fill some of the slots that we had not filled before. But notwithstanding the shortage of folks that we have, we are still doing a lot of work. We made 329 ``routine'' site visits to field offices during 2002. We conducted 75 training sessions out at reservations or in tribal facilities. We made 226 visits that were made to address specific problems. That is not across the board because 148 of those occurred at our Tulsa office where we have struggled with where you draw the line between class II and class III gaming. Indian gaming is extremely diverse. In some cases it is far flung and remote. Geography and special circumstances tends to influence how we distribute those field visits and so forth. If you are in Tulsa and you need to go to the Muskogee Creek facility, you are ten minutes away. If you are in the St. Paul office and you need to go to Pine Ridge, you have to spend $1,000 and a lot of time on the airplane and behind a steering wheel. So it is not all divided up the same way, so to speak. We have a strong audit team. The audit function is probably the newest group that has been developed at the National Indian Gaming Commission. First of all, they review the audits that all tribes have to have performed and send to NIGC. Those audits are helpful, but of course, they basically show the financial position of the facility. They do not say that they have looked under every rock to see if anything was wrong. But occasionally we do that kind of an audit as well, a fraud or an investigative audit. Most recently we have been doing minimal internal control audits which have been extremely productive. We came out with these minimum internal control standards that say things like: When you take the money out of the slot machine you have to have somebody from security there. You have to have somebody who is going to account for the money. You have to have a witness. They all have to sign the paper. There are things like that. You have a track record on these undocumented cash transactions. When we do a MIC audit, we go out and look at the paper trail for those things and try to see how the operation is running. This provides great oversight from our perspective. I think the tribes are extremely well served when we look at them and tell them where there are some shortcomings. Ideally, our auditors tell us we would do one of those MICS audits at each facility about every 5 years. Last year, 2002, we were only able to do five of those. That is 5 out of 300 operations. At that rate it would be a long time to make the full circuit. We cannot do that with the staff that we currently have. In terms of the background investigation process that the tribes initially perform and do well, we help process those fingerprints. In 2002, we processed 30,000 fingerprints, sending them on to the FBI and sending the results back to the tribes. We looked at over 24,000 employee background investigations. We are part of that team, and that keeps us busy. We also, of course, review and approve the tribal gaming ordinances. You might think that would be something that would just be a one-time deal from each tribe, but there are changes. For example, Arizona not long ago, expanded gaming to include black jack. Each of the tribes had to revise its ordinance, send it in to us, and we reviewed it. Of course, there are new operations where they send in new ordinances. We also review and approve management contracts. That is a slow but a very thorough process. That keeps us busy. Like other agencies, we get a lot of Freedom of Information Act requests. We spend a lot of time and resources responding to the FOIA requests. To do all of the things we are supposed to do, frankly with the growing industry, we need more resources and we need more money. The way we are funded now is exclusively by the fees that we get from class II and class III gaming. The good news for the tribes, of course, is as those total dollars expand, the rate that they have to pay us to fund that $8 million goes down. The first thing the three new Commissioners did when we came on board was to set the rate for calendar year 2002. You cannot do that until the end of the year because you do not know exactly how much money has been generated out there. We set the rate. We lowered the rate. It was set at 65 cents per thousand dollars. For every thousand dollars of tribal revenue out there, they sent us 65 cents. When we set the rate for this year, 2003, because we could see the expanding industry, we were able to reduce that to 59 cents per thousand dollars. In the 2003 budget, the President had requested $2 million in appropriated taxpayer dollars to supplement our $8 million for the operation. Of course, when Congress put the budget to bed here with the Omnibus Funding Bill earlier this year, there was a deficit looming and they did not appropriate that money. We are still at the status quo, or the $8 million fee cap level. However, the Omnibus Funding Bill did raise the cap for 2004, raising it from $8 million to $12 million. That was the appropriators' vision or view of how to address this situation. We further understand that that was a message to you, to this committee, saying, ``If you want to change or fix the way NIGC is funded, you have a window of opportunity to do this.'' We understand that you folks can wave the wand. Maybe when we get to 2004, that $12 fee cap will not be there or maybe you will change the structure. As we understand the $12 million fee cap, it is a one-time deal. It is not changed forever; it is changed for 2004. You might make that permanent, or you might entirely change the formula. That puts us in a little bit of a bind in terms of what to do when. If we go out and hire more people who we would expect to pay over the years and we spend part of $12 million, if it is not going to be there in the out years, we are in trouble. We will have to RIF those people and that would not be good. We can buy some new equipment and get some needed training and so forth, but we are hesitant to open more doors or hire a lot more people. We want to know what the stability of that funding will be. In terms of what we would do if we had more money, this is how we would spend the money if we had $10 million instead of $8 million. We would hire more auditors. We would hire more investigators. The Chairman. My old eyes can barely see that chart let alone the printing on that chart. Do you have those printed up for the committee? Mr. Hogen. Yes; I believe it is attached to the statement. The Chairman. We do not have any of those charts you have shown so far. Mr. Hogen. I apologize for that. The Chairman. Provide those for the committee, if you would. Mr. Hogen. We certainly will. In addition to that, we have a copy of our budget showing how we spend it by the month and by the item. We will provide it to the committee and, of course, we have provided it to the tribes. How can we maybe better set the rate of the fees? Here is what I think you should do. I think rather than setting a finite number there--$8 million, $10 million, $12 million--set it at a percentage rate. If the industry grew, so, too, would the fees to regulate that industry. If it contracts, we need less money and it would go down. Right now the maximum for the fees is 5 percent. Well, of course, given the experience we have had since 1988, that is an outrageously high fee. We would never need that much money. If we had one-fiftieth of that; if we had one-tenth of a percent as the fee cap--that is not the budget; that is just the maximum--then if you had a $12-billion industry, then we would get $12 million. If you had a $13-million industry, we could get $13 billion. We think that would be an approach that you might want to consider in terms of giving us some stability so that as the industry grows we could grow and we could make some long-term plans. The last thing I want to say about that is that fee cap is just that. That is not the budget. In 2004, we have a fee cap of $12 million. I do not think we could intelligently spend that much money if we wanted to; $10 million, yes. We have a plan for that. But just because the fee cap is there, that does not mean that we would seek all of that money. So that is our story with respect to our budget and our funding. At the conclusion of my statement, I will try to respond to any questions you might have. Before we conclude, I want to talk about things that we think might be changed in the Indian Gaming Regulatory Act that would assist us. There are probably a couple of things that everybody who is in Indian gaming agree on with respect to IGRA. No. 1, is that it is not perfect. No. 2, everybody is afraid that if it is ever amended, it will be amended in a way they will not like. There is not much impetus to change it. In years past, ordinarily there has been a bill introduced to amend the Indian Gaming Regulatory Act. The National Indian Gaming Commission has most often been in the reactive posture. They were asked after it was introduced, ``what did we think''. Typically, NIGC said, ``Well, we do not like it exactly that way.'' We are here to offer some suggestions that we think might be considered before a bill like that gets introduced. First of all, with respect to the authority of the National Indian Gaming Commission with respect to class III gaming, the lion's share of Indian gaming revenue is in class III. The scenario is that there is a tribal State compact that will be negotiated which will, in part, address the structure of the regulation. Yet, the Chairman of the National Indian Gaming Commission has the authority and the responsibility to close or to fine a facility if it is not operating correctly or in compliance with the Indian Gaming Regulatory Act, or the NIGC regulations, or the ordinance that the tribe passes. I construe that to be authority over all the gaming--class II and class III. But if you comb through the act, it does not clearly say that we have authority over class III activities. Sometimes when we knock on a tribe's door, doing our oversight, and we say, ``We would like to look at those records,'' they say, ``Wait 1 minute. Those are class III gaming records. You do not have the authority to look at those.'' Then we end up in the court hassling about that. Someday if there is no change in the law, the court will clarify that. I think they will find that we have that authority. But with the stroke of a pen, I think Congress could clarify that and that would be of assistance to all. I would like to move on to folks that do consulting, vending, development agreements, and so forth, for tribes. Under the current structure, we have authority to oversee management contracts. If a tribe and a developer want to set up an arrangement whereby the group manages the facility for the tribe, they send us that contract. We look at it in the role of the Federal trustee to make sure that the tribe is not being taken advantage of. We put our stamp of approval on it if it passes that review. If, in fact, management contractors are out there and they run afoul of what they have agreed to or any of the acts we are responsible for enforcing, we can penalize them. We can suspend the contract. We can impose a fine. We think that is helpful to tribes. There are not very many management contracts out there. There are over 300 operations but there are only 15 of those that are run pursuant to a management agreement. In the history of the National Indian Gaming Commission, only 40 management contracts have been approved. There are 21 currently in our pipeline or under consideration or review. It is easy to see that is the exception and not the rule. I am not here to say that is a bad deal. In many cases the tribes are doing the right thing managing operations by themselves. The Chairman. 300 are managing their own operations? Mr. Hogen. There are 300 total, and only 15 of those are under a management contract. There are 285 without a management contract. But of that 285, there are a large number where somebody else is really doing part of the operation--a third party consultant, a third party vendor, a third party developer. They have not entered into a classic ``management contract'' that we have reviewed and approved. There are a couple of things that concern us about that. First of all, when it is not a management contract, we have no role in looking at their background. They may be perfectly suitable people, but we, at this level, have never had an opportunity to check into that like we could do if it were a management contract. The Chairman. That means some tribes are hiring groups under a consultant capacity or some other name rather than a management group? Mr. Hogen. Right. I am sure one of the reasons that tribes and developers do that is that it is such an onerous process to go through our management contract review process. I am hoping we can streamline that. There are people out there that are determining who wins and loses the bets, that handle the money, that are not under our review, and in some cases, are not even subject to even tribal background reviews. If, in fact, those folks run afoul of the rules and run off with the tribe's money, we have no authority over them. What I would like to see is an amendment that would give us a role to do that, whether it be licensing or oversight. And, also to say that if, in fact, they do make off with the tribe's money, there would be an arrangement for them to disgorge or refund what they defrauded the tribe. We think we could clean up the industry. We do background investigations for management contracts, but in many cases that is the cream of the crop. These people can pass muster. The people who want to sneak in under the cover of darkness would want to avoid a management contract. Moving on to the Supreme Court's 1996 Seminole decision which said tribes cannot sue States if States refuse to negotiate in good faith, I think everybody from the tribal side would agree that has been problematic. Of course, the Secretary of the Interior is now working through procedures in a couple of situations to try to come up with rules for a compact that can occur where the States have not agreed. There are challenges and there will be continued challenges to that process. Our concerns are twofold: First of all, we think that the playing field should be leveled again so that the States and the tribes are on the same footing. Right now the States cannot get sued, so they have an advantage. Second, in those environments where there is obviously a question about the fairness of the State refusing to negotiate, you have gaming activities by tribes that probably enters into the class III territory. If we go out there and try to enforce against that, shut it down or whatever, if and when we get to court, the court says, ``Well, it looks like these folks should be able to get a class III compact. They have not.'' Then this litigation comes to a standstill. That means that you get less clarity in the regulation and the operation of gaming. If we could restore that balance, if you could perhaps give the Secretary clear authority to impose Secretarial procedures where tribes cannot negotiate a compact, that would put us back where I think Congress intended to go in the first place. When I had the privilege of appearing before the Committee during my confirmation, I was asked, ``Do I intend to consult with tribes.'' I do intend to do that. I think we have been doing that. We certainly intend to continue to consult with tribes as we spend their money and partner with them in the regulation of their industry. One of the things we are working on at the present time is setting up a more formal statement of how that consultation will be conducted. I came to this job from the Department of the Interior. The Bureau of Indian Affairs, of course, has a lengthy formal consultation process. In my view, we cannot afford to do anything quite that complex. I think that is too cumbersome when commissioners only have a 3-year term to do their job. By the time you get acquainted and then go out and start a long process like that, your term is up. We want to come up with a more flexible, more nimble approach, but we want it to be meaningful. We are resuming this circuit riding of consultation sessions that we started when I served on the Commission as an Associate Commissioner. We are going to be heading out to Minneapolis next week, the Great Plains and Midwest Indian Gaming Trade Show will occur there. We will follow that with a consultation session whereby we will invite all of the tribes to come to hear what we have to say and hear what they have to say. Then we will sit down with individual tribes with all the tribes that want to sign up or visit with us and hear not only about local concerns, but about their views on these big picture issues we are talking about right now. As we do this, of course, a couple of the key subjects we want to talk about are the changes that the past Commission made in the definitions regulations relating to aids for class II gaming, as well as facsimiles that constitute class III gaming, as well as our budget and our funding. In July we will be going out to the Northwest. The Northwest Gaming Association will be holding its meeting in Tacoma. We are going to piggyback on that, as we are doing in Minneapolis. A couple of weeks ago Commissioner Choney and I went to Oklahoma. It was short notice, but 150 tribal leaders and representatives of Indian gaming in Oklahoma showed up. We had a long, very productive discussion. We probably spent more time there talking about where you draw the line between class II and class III, and how you classify games, than we will in some of the other venues. That was a very productive session. We are on the consultation trail. We have had meetings. We have provided budget information. We want to continue to do that. Finally, before I conclude here, I want to acknowledge the dedication and hard work of the current team that we have at the National Indian Gaming Commission. In the face of these changes in leadership and shortfalls, and the rapid growth that the industry has experienced, our staff has been extremely professional and has worked extremely hard. They have bent over backward to try to be user friendly rather than use a traffic- cop approach when they run into a problem in Indian country. I am proud to be leading that team right now. I am also proud to say that we three new Commissioners are getting along great. We think that we each bring an unique prospective that is considered by one another as we do our job. We hope to move onward and upward. With that, I would be happy to respond to any questions you might have. I know that Vice Chairman Westrin and Commissioner Choney would also be happy to respond to any questions. I would ask that my statement be included in the record in its entirety. Thank you. The Chairman. Without objection, so ordered. [Prepared statement of Mr. Hogen appears in appendix.] The Chairman. Thank you. I am glad you are improving the relationship with tribes through consultation. As you know, we had some feedback early on from tribes that felt the Gaming Commission was somewhat punitive. When you say you are hearing what they have to say, that is great, because if you do not, we are going to hear what they have to say. I appreciate your doing that. Let me ask you a few questions particularly about California. I keep hearing about the explosive growth in California of gaming tribes. How many California tribes now are into gaming presently? What is the projection of the number of tribes that will be starting? Do you have a number? Mr. Hogen. In our office we know, and our field office in Sacramento could tell me in a heartbeat. There are about 60 tribes that are actively engaged in gaming right now. There are a number of them that are negotiating compacts. It is in that ballpark, I believe. The Chairman. Some of the California tribes use the so- called ``model compact'' that Governor Davis negotiated. Are there variations of that in the duties that the Commission has to perform? Mr. Hogen. It is pretty much a standard cookie cutter compact, so to speak, for all the California operations. One tribe, Coyote Valley, is holding out and in litigation with respect to whether they have to play by those same rules. I think all of the tribes that currently are operational pretty much have the same identical compact. The Chairman. I see. You mentioned the fee assessments are about 59 cents per thousand dollars. Do you have any evidence that that fee level, that assessment level, has caused any hardship to tribal operations? Mr. Hogen. As far as I know, there are a number of tribes that are late in paying their fees, or have not paid their fees. But ordinarily that is an oversight. It is not because they did not have the money to do that. The first $1.5 million generated by every operation is not subject to the fee. If you have a really small operation, they get our service but they do not have to pay any fee. In the scheme of things, I do not think that is overly burdensome. But in the same breath I want to say that Indian gaming's regulation is probably less efficient than some other gaming regulation in that we necessarily have these three levels. You have the tribes that do basically all the work on the floor, on the ground. The States partner in that. Then we provide oversight. A reason for that is, there is a perception by some, that if the tribe regulates its own gaming, it is the fox watching the hen house. I think tribes should be trusted to do that. But to give them credibility, we can come up here and say, ``We have been out there. We looked at it. We know it is squeaky clean.'' We think that strengthens what they do. But they also have the luxury of looking just at one or two operations very intensely. They are not looking at the number of facilities that the Nevada Gaming Commission would have. It is going to be a little expensive, but we think it has been worth that investment so far. The Chairman. You also get $2 million in reimbursement costs. You mentioned the fingerprinting and background checks. First of all, could those activities be outsourced? Mr. Hogen. Well, with respect to the fingerprint activity, that is probably a critical role for us to play in that the FBI is quite selective with whom they do business. The Chairman. How about doing background checks and things of that nature? Mr. Hogen. Well, we get reimbursed. If Bally's Gaming comes to us and says, ``We want to do a management contract----'' The Chairman. If you are reimbursed for that, does that need to be part of your budget needs? Mr. Hogen. We put that in a separate category. It pays for itself. You are right about that. We do not need to get more money to do that because it is pay-as-you-go. It is the other stuff that we need the money for. The Chairman. For a number of years, the tribes and the Committee have not received information that we think needs to be provided to the Committee and the tribes. We have mentioned this a couple of times in the past when you have been in here. You did mention your trying to improve your consultation with tribes. Do you have a policy of consultation? Mr. Hogen. We have been doing it tribe-by-tribe, but Vice Chairman Westrin has taken upon himself the task to propose for us a consultation process. I learned when I was at the Department of the Interior the lesson of BITAM. Secretary Norton came out with the plan. The tribes said, ``We are not talking about that. You did not talk with us first.'' This is one of the things that we are going to talk with the tribes about when we go to Minneapolis and when we go to Tacoma to get their input before we put it in bold type and say, ``Here it is.'' The Chairman. The Departments should all learn from BITAM. In some parts of the country, particularly Oklahoma, I think you mentioned there is a lot of litigation regarding the use of technological aids for class II gaming and the application of the Johnson Act. In your opinion, are the class II definitions in need of change or modernizing? Did the action taken by your predecessors sufficiently clarify the definition? Mr. Hogen. I think it did bring considerable clarity to that. In two recent Court of Appeals decisions--Santee Sioux v. National Indian Gaming Commission decision of the Eighth Circuit on New Year's Eve of last year, and the recent decision of the Seneca Cayuga case--found that devices that used spools of pull tabs, although they had electronic card readers and video displays, were class II. In those decisions, they addressed the new regulations of the Commission. In other words, they said: This brings some clarity to this. The Commission is in the business of regulating gaming. They are entitled to some deference. This gives us a brighter line. Yes; I think the regulation has considerably helped clarify the picture. What we need to continue to remind ourselves is that given the advance of technology, this is a dynamic area. I do not think we can ever sit back and say that we do not ever have to change that again. The Chairman. Thank you. We are still dealing with the Seminole decision. Basically it stripped the tribes of any leverage they had in getting the States to negotiate. Without amending IGRA, are there any other ways that you think we could resolve the impasses that we have between tribes and States? Obviously, if we tried to amend IGRA, the States may oppose any changes that would take away their ability to do what they have already won in Court. Mr. Hogen. Secretary Norton has been working with the Santee Sioux Tribe in Nebraska and with the Seminole Tribe in Florida with respect to trying to come up with a compact. That is a long tedious process, but progress is being made. I know that based on the conversations we have recently had. I was over there when that process was ongoing. If and when that process gets finished and we have a model to work from, then I think that will be addressed in large part. But it will perhaps take longer than an amendment to IGRA might take. The Chairman. We probably will not be able to amend IGRA if it looks like a threat to the States. We just would not get the thing through. I understand that some of the new regulations that you are developing have to do with environmental health and safety regulations. I think I can understand safety, but what kind of regulations are you developing that have to do with environmental health in a casino? Mr. Hogen. If a casino were proposed to be built on a fragile river bank and it would crash into the river or pollute the river, we would probably say, ``Hey, take another look at this.'' The Chairman. I see. Mr. Hogen. We have issued some regulations that are basically advisory. There is some term of art that I cannot think of right now that we call that. But basically what we say is: We are not setting the rules of what you have to do for environment. But you do have to look at this. You have to make your own plan. Go by your own tribal code, or whatever. If and when we find a situation where there is imminent danger, we can take action. We have never had to do this. The Chairman. Do you not have the legal authority or experts on your staff to deal with safety regulations, like OSHA does, or like EPA does with environmental health; do you? Mr. Hogen. We do not have safety experts, so to speak. With respect to environmental issues, when we review and approve management contracts, that is a major Federal action that triggers NEPA. An environmental assessment may have to be made. We have to look intelligently at that. The Chairman. You work with these other agencies when you have to make that assessment or decision? Mr. Hogen. We do that. We work with the folks in Bureau of Indian Affairs and the Department of the Interior. Of course, we also want to be sure we understand what they are telling us. We have some of that experience in-house. The Chairman. Thank you. I have no further questions. Senator Inouye or other members may have questions. If they do, they will probably submit them in writing. I would appreciate it if you could get answers back to the committee. Mr. Hogen. I would be very happy to do that. Thank you for this opportunity. The Chairman. While our panel is coming to the table, we will stand in recess for just a couple of minutes. [Recess.] The Chairman. The committee will come back to order. Our next panel will be Ernest L. Stevens, Jr., chairman, National Indian Gaming Association, Washington, DC. He is accompanied by Mark Van Norman, executive director, National Indian Gaming Association, Washington, DC, and Norm DeRosier, Viejas Gaming Commission. If your colleagues are going to speak, please have them identify their names for the record. As with the other witness, if you would like to turn your complete written testimony in, that will be fine. You can abbreviate it, if you would like to. STATEMENT OF ERNEST L. STEVENS, Jr., CHAIRMAN, NATIONAL INDIAN GAMING ASSOCIATION, WASHINGTON, DC, ACCOMPANIED BY MARK VAN NORMAN, EXECUTIVE DIRECTOR, NATIONAL INDIAN GAMING ASSOCIATION, WASHINGTON, DC; AND NORM DeROSIER, VIEJAS GAMING COMMISSION Mr. Stevens. Thank you, Mr. Chairman. Good morning, Senator. Thank you for allowing me to be here today. I will summarize my statement. I would ask that my statement be included in the record in its entirety. The Chairman. Without objection, so ordered. [Prepared statement of Mr. Stevens appears in appendix.] Mr. Stevens. With me today are Mark Van Norman. He is a member of the Cheyenne River Sioux Indian Tribe. He is NIGA's executive director. Also here is Norm DeRosier, a gaming commissioner from the Viejas band of Kumeyaay Indians. I am an Oneida from Wisconsin. I serve as the chairman of the National Indian Gaming Association. I want to say, Senator, that I am honored to be here to share this information with you on the regulation of Indian gaming, and to discuss the role of funding at NIGC. As you know, Senator, tribes have survived a history of genocide, oppression, and dispossession. In the early 1970's we were number one in everything that was bad--unemployment, poverty, dropout rates, and substandard health care. At that time, a number of tribes began to turn to gaming as a way out. Tribal governments use gaming like States use lotteries, to build infrastructure and provide essential services for their citizens. We believe that is working. In just 30 years, Indian gaming has helped tribes to begin to rebuild communities that were all but forgotten. Where once there was poverty and unemployment, Indian gaming provides more than 300,000 American jobs. Where once tribes suffered disease and lack of health care, Indian gaming helps to build clinics, and provides health care to the sick and to the elderly. Where once tribes faced epidemic suicide and dropout rates, Indian gaming builds schools, funds scholarship programs, and provides hope for the entire generation of our Indian youth. Indian gaming is all of this and a lot more. Our tribal governments are stronger and our people are stronger. Indian country still has a long way to go. Too many of our people continue to live in disease and poverty, but Indian gaming offers hope for a better future for our tribal communities. The great irony now is that Indian tribes are helping non- Indian communities as well. We are very proud of that, sir. We provide jobs for non-Indians nationwide. In fact, you may not know this, but over 75 percent of the 300,000 Indian gaming jobs go to non-Indians. The Chairman. 75 percent? Mr. Stevens. 75 percent of over 300,000 jobs go to non- Indians. We have to work together. In spite of our history, we move forward without any issues. We have tremendous working arrangements with the municipalities. We have a common bridge because most of the people that live and work in the communities around us are working and are interacting in our facilities. So we walk together hand-in-hand. Again, I will not go into long detail about how these initiatives in Indian Country have assisted the welfare-to-work initiatives that have been so common nationwide, but assisting them with well-paid jobs with good benefits such as health care and a lot of times even child care. We are real proud of how we walk together with our neighbors in our surrounding municipalities. We get a lot of isolated stories out there in different regions because there is so much going on. But the majority of us have great stories to tell in Indian country. Tribes also add to the Federal, State, and local revenues. Let me also add the ``T'' word up front. Indians pay taxes. People who work at Indian casinos and those who do business with Indian casinos, and those who get paid by and win in any casinos, pay Federal income taxes. They pay taxes just like the folks who work at the State lotteries. As employers, tribes pay taxes to fund Social Security and participate as government's in the Federal unemployment system. Economists estimate that Indian gaming provides Federal, State, and local governments with more than $6 billion in increased income sales and other taxes and revenues. That is $6 billion in Federal, State, and local revenue. We realize that the benefits of Indian gaming would not be possible without good regulation. Successful operations require solid regulation. Tribal governments understand and abide by this principle, and gaming has been the best opportunity in 200 years to bring us out of poverty. Without question, tribes are committed to regulation. Working in cooperation with tribal, State, and Federal Governments all play in a role in regulation of Indian gaming. This system is costly. It is comprehensive. It is working. We are very proud of it, Senator. Is our regulatory system different from other gaming operations? You bet it is. No Federal commission oversees the State lotteries, horse and dog track wagers, jai alai, or commercial river boat gaming industries. But Federal oversight of Indian gaming is extensive. Anyone who commits a crime against Indian gaming facility has committed a Federal offense. They have, and they will continue to go to jail. If you want to visualize the structure of Indian gaming regulations, it is like a wedding cake. The bottom layer, or tribal regulation, is the primary and the largest with the most resources and the most manpower. The second layer is State regulators which come in through the tribal-State compact process. They provide help with background checks, investigation, and oversight. Of course, the top layer is NIGC and other Federal agencies that work in Indian gaming. In addition to the NIGC is the FBI, the Department of Justice, Treasury, the Interior Department, and everybody's favorite, the IRS. Any way you slice the cake, you are going to get a regulator. Sometimes that can be cumbersome, but we would rather be cumbersome and thorough than have any of these issues. That is why we get so much back-up out there that says, ``Indian gaming is strongly regulated.'' That is because we have so many checks and balances in this system. We are very proud of that. In total, tribes invest over $212 million annually for the regulation of Indian gaming. That includes $164 million for tribal gaming regulation. Over $40 million is for reimbursement of State regulatory agencies for their support, and $8 million is to fund the National Indian Gaming Commission. In addition, the Commission collects another million dollars for processing fingerprints and background checks for a $9-million budget. Under IGRA, Congress intended for three sovereigns to work in cooperation on the regulation of Indian gaming. Each regulatory body has a distinct and supportive role for the three different classes of Indian gaming. The idea was to avoid duplication, but provide comprehensive oversight. Through IGRA, Congress made it clear that tribal regulatory agencies are the primary regulators of Indian gaming. Indian country takes that role very seriously, Senator. As the primary regulators, tribal regulatory agencies have the largest budget for Indian gaming regulation. Tribes spend over $164 million annually on self regulation. Our system includes over 2,800 tribal gaming commissioners and regulatory personnel. In addition to employing top-notch personnel, tribes use state-of-the-art regulatory surveillance and security equipment to support the regulatory operations. We are very excited in this day and time when we have facial recognition. We have cameras that can look underground and tell you whether a penny is heads up or tails. We really have some outstanding technology out there. We are proud of that. We are upgrading it every day. Everything that becomes available, Indian tribes are working together to establish the best. State regulatory agencies assist tribal agencies with background checks, licensing inspections, and review of class III Indian gaming operations. Tribes reimburse States over $40 million annually for those regulatory services. At the Federal level, the NIGC shares the responsibility for regulation with other government agencies. The NIGC defers to State gaming agencies on background checks, licensing decisions, and compact enforcement for class III gaming regulation. NIGC works in partnership with tribal gaming regulatory agencies on class II gaming regulation, and provides background oversight for class III gaming regulation. NIGC also acts as a facilitator to help build strong relationship between the three sovereigns to further strengthen Indian gaming regulation. In fact, a couple of months ago, NIGC hosted a meeting to discuss the formation of a national Indian gaming intelligence network to share information and to provide technical assistance to tribal regulators nationwide. Participants included the chairman of Attorney General Ashcroft's Native American Issues Subcommittee, officials from the FBI, Treasury's Financial Crimes Enforcement net worth, North Dakota's attorney general, the NIGC, and tribal gaming regulators throughout the country. As I stated above, the systems of checks and balances in a cooperative regulation has proven effective. Much of the credit for the success in regulation should go to tribal governments and the tribal leaders who recognize the need for solid regulation, and who took the initiative to provide the funding. Against the backdrop of comprehensive regulation, the FBI and the U.S. Justice Department have testified repeatedly that there has been no substantial infiltration of organized crime on Indian gaming. In fact, the last time the chief of the Department of Justice's Organized Crime Division testified before this committee, he stated that, and I quote: Indian gaming has proven to be a useful economic development tool for a number of tribes who have utilized gaming revenues to support a variety of essential services. While there has been isolated occasions when a crime has occurred at Indian gaming facilities, the Department of Justice found that coordination between tribal, State, and Federal regulators and law enforcement ensure that offenders are caught, prosecuted, and punished. Indian gaming has a good track record because tribes hire the most highly qualified people from tribal, State, and Federal law enforcement regulatory agencies. Again, tribes spend $212 million on regulation each year. That is a lot of money that could go to fund sorely needed programs. But tribes realize that regulation is the cost of a successful operation and it is needed to protect our resources. I would like to take a moment to recognize our tribal regulator that makes gaming work. Mr. DeRosier has 9 years of service in State law enforcement prior to his 11 years of service in tribal regulation. He also serves as the chairman of the National Tribal Gaming Commission and Regulatory Association that worked actively throughout Indian country. Finally, that brings me to the issue of funding for the NIGC. NIGC and our member tribes hold the NIGC and its Commissioners in high regard. The current Commissioners have outstanding credentials and complement each other. I just want to make it clear, Senator, we do not always agree on everything, but we know that we have a mutual job to do. It is just as I stated. The tribal leaders trust us to protect this operation. All of this country count on us. If you could select the best three people to do that job, and if I had my choice, I would select the ones that have been selected to do this job. We do not always agree, but you have three outstanding professionals in this capacity. They testified just prior to my coming up here. The NIGC serves a sound purpose and for the most part has provided tribal governments with solid background oversight to ensure the continued integrity of Indian gaming. For the past five years, NIGC was funded at a level of $8 million each year based on fees paid by tribal governments. Last year President Bush included a $2-million request for a one-time appropriation for NIGC, with the direction to NIGC to work with tribes on future increases. NIGC supported this Federal appropriation for fiscal year 2003. We want to thank the chairman and the vice chairman of this committee for supporting the President's request as well. Regrettably, the President's request was ignored, and instead Congress authorized an immediate increase in the NIGC fee cap from $8 million to $12 million in fiscal year 2004--a $4-million increase that tribal governments will pay for. We believe that was the wrong way to do business. The action by- passed this committee. It violated the legislative process, and ignored the government-to-government consultation process. While Congress did direct NIGC to consult on the implementation of their budget increase, it will come after the fact. We believe consultation should come before any policy changes. It just makes sense to us. We agree that the NIGC must receive adequate funding to do its job. However, as a Federal partner in the system, NIGC must strive to support and complement, but not duplicate, tribal and State regulatory activities. As for the NIGC's direction to consult on the increase to $12 million for fiscal year 2004, I urge the Commission to take five steps: First, formally adopt the policy of government-to- government consultation in accord with the recent Presidential Executive Orders; Second, propose a schedule of consultation meetings with Indian country immediately. We believe that they are beginning to adhere to some of these concerns as stated in Chairman Hogen's presentation, but we are not satisfied up to this point; Third, provide a detailed proposed budget to NIGC, our member tribes, and this committee; Fourth, use a portion of these funds to increase self regulation for class III tribes, and; Fifth, we ask that the Commission resume quarterly consultation with tribal regulators which will include providing tribes with training and technical assistance. Use of this Commission's increased funding in this way will prevent duplication and will focus on the Commission's resources on its core mission, which is to provide technical assistance to tribal gaming commissions. Finally, before I close, Senator, I would like to comment on Chairman Hogen's proposed IGRA amendments. First, he has asked to complete elimination of a fee cap. As I just stated, the cap has already been raised $4 million. That is an increase of 50 percent. Do you know of any other Government agency that get an increase of 50 percent in 1 year? Nevertheless, we are not asking Congress to roll it back. This is not the time to start talking about a fee increase. The Commission got what it wanted last year. It should now consult with the tribes on what it plans to do with this increase that it is already getting. It should provide a detailed report to Congress. Then next year, if the NIGC wants to ask for a further increase, it should be required to justify it to the tribes and to Congress. That is what accountability is all about from our perspective. Second, the chairman has asked for an amendment to require any person associated or seeking to become associated with the tribal gaming operation, to first obtain a license with the NIGC. This proposal would grind activity in tribal operations to a halt. Tribes already conduct investigation and background checks on their employees and contractors. NIGC should not impose a new barrier to economic activity in Indian country. NIGC has moved too slow in reviewing management contracts. Adding this responsibility would prove too burdensome for both the Commission and tribal gaming operations. Instead, the Commission should recommend guidelines for tribal regulators and operation managers to look to when considering new employees or contractors. Third, the chairman has asked for an amendment to clarify the Commission's authority over class III gaming. IGRA expressly established the tribal State compact process to set regulatory framework for class III gaming. IGRA requires NIGC to approve class III ordinances as long as they meet the minimum statutory requirements. Accordingly, NIGC should instead clarify through regulation that it will defer to tribal State compacts to govern class III gaming with a few narrow exceptions. Finally, I want to mention a note on the Supreme Court's decision in Seminole Tribes v. Florida. I applaud the Commission for its intent to seek an amendment to correct this decision. Today I want to state for the record that any bill to amend IGRA should include an amendment to provide a correction to the Seminole case. The case was decided in 1996 and still haunts a number of tribes. The Seminole decision frustrated Congress' intent by effectively giving States veto power over the compacting process. The Interior Department promulgated regulations for alternative procedures for class III compacting. Now may be the appropriate time for Congress to legislatively affirm those regulations. I hope that the committee will consider including such a provision in any IGRA amendment that is introduced this session. Senator if I may, I would like to briefly summarize my three points today: First, Indian gaming is working. It is rebuilding tribal economies, benefiting non-Indian communities, and providing hope for future generations of Indian people. Second, Indian gaming is fully regulated. We should all take note of the hard work, tireless hours, and hundreds of millions of dollars that tribal governments and their employees spend on regulating Indian gaming operations. The ethocentric view that Indian gaming is only regulated by 70 employees and $8 million that fund the NIGC is just plain wrong and should be put to rest. Indian tribes are responsible, accountable, and are working in partnership with Federal and State governments. Finally, I would ask that NIGC also be held accountable. I urge NIGC to adopt and adhere to a formal policy of government- to-government consultation and increased communication between tribes and the NIGC. Such a practice will only serve to further strengthen the regulation of Indian gaming. Again, Senator, we feel we have made progress on that, but I cannot tell you that we are satisfied up to this point. I think we need to continue to strengthen that intent. Mr. Chairman, I want to thank you for providing me this opportunity to testify. I want to ask Mr. Van Norman if he could just briefly tell you about the two charts we brought this morning. Mr. Van Norman. Mr. Chairman, my name is Mark Van Norman. I am the executive director of NIGA. The first chart demonstrates the different budget investments annually in Indian gaming. It shows that tribes are the primary regulators. We have $164 million each year that tribes invest for their own regulations. They reimburse States $40 million, and the NIGC has a budget of $8 million. Clearly we need coordination and we need to leverage the tribal resources so that we are not duplicating efforts at the NIGC level. I also want to show you an example of our advancing technology. This comes from the Viejas Tribe where Mr. DeRosier is the Gaming Commission. They are now employing electronic fingerprint technology. When folks come in, instead of putting ink on their fingers, they put it across the computer screen. It is immediately sent over to the National Indian Gaming Commission. The FBI can turn this around and give you a criminal history within 24 hours. The Chairman. These are for potential employees? Mr. Van Norman. These are for potential employees. The Chairman. Is that the same system that the big casinos in Atlantic City or Las Vegas would use? Mr. Van Norman. I believe it is. The situation that we are in is that it speeds the background checks so that they can be done in 24 hours. Tribes can go ahead and issue a license with the knowledge of the criminal history. This is new technology. We may be ahead of some of the casinos in Nevada and New Jersey. The Chairman. You heard the NIGC speak about background checks. Do you think this supplements what they are doing, or actually is a better system because it is faster? Mr. Van Norman. This system has worked in coordination with NIGC. They forward the fingerprints to the FBI for the criminal background check. We think it would be important for the NIGC to use part of their new budget increase to invest in this technology so that it is available at their regional offices. Mr. Stevens. Just to give you a lighthearted example of the intensity of gaming commissioners, in my previous capacity as a gaming consultant, I had to do a background check in some place in California. Previous to that, I served as a tribal councilman for the Oneida Nation in Wisconsin. I was also a member of the Native American Rights Fund Board and the National Congress of American Indians. We staged a very respectful and rehearsed demonstration, hoping to educate the Supreme Court about tribal issues. That demonstration, I believe, was called Civil Disobedience. We were incarcerated briefly for being on the Supreme Court's steps. It was all rehearsed. We got $50 and were bailed out of jail. It was a lighthearted thing except that the guys that asked me to do, I thought they were going with me. It was just Chief Blue and me from Catawba that went. But the tribal regulators did not want to hear anything about lightheartedness. They scrutinized me heavily to think that I was arrested at the Supreme Court steps. The Chairman. Was there some kind of a record of that kept? There was nothing put on any police record if it was rehearsed and planned; was there? Mr. Stevens. I was convicted of a misdemeanor in the District of Columbia. I am not ashamed of that. It just shows the intensity of our regulators out there in Indian country to bring that forward and scrutinizing that heavily. They are very thorough and they are very complete. These checks and balances complement one another. We are very proud of the Indian regulators out there. The Chairman. Let me ask you a few questions about gaming in general. I am sure you read the two-part Time Magazine articles? Mr. Stevens. Yes, sir. The Chairman. They were very in-depth but probably stilted to one side of the issue. I think it has driven some concerns by some of my colleagues about Indian gaming. I have mentioned that to you before. I have never heard you say on the record your view of those articles. Would you like to do that? Mr. Stevens. I am reluctant to, Senator. I sent you the letter asking that we could engage in this protection of Indian gaming. We want to sit before you today to strengthen what we have out there. We do not want to sit before you or anybody else in response to this type of publications and to try to give the benefit of the doubt. We responded to all those issues. The Chairman. Did you respond to Time Magazine? Mr. Stevens. Yes; they gave me about that much [indicating] to their two articles. We felt we were successful in doing so. We responded to many magazines. We responded through ads. The tribal leaders came to Washington, DC and talked about this. Basically what they said was that even good publications sometimes have bad reporting. You and I both have had to deal with publications and news sources that report in an unfortunate and sometimes an unethical manner. I just think that what we have been told by tribal leaders is that we respond. The issues centered around Time Magazine were either mistruths or half reporting without getting the whole story. The Chairman. Did anybody when they were writing those articles, talk to anyone in NIGA before they were written? Mr. Stevens. No; as a matter of fact, not only did they not talk with NIGA, they were very selective and almost non- existent in talking with any tribal leaders throughout all of Indian country. It was very carefully rehearsed and very carefully written in a very negative way. They were very careful about finding any truth in Indian County. As a result, of course, they did not. Mr. Van Norman. Mr. Chairman, could I add something? The Chairman. Yes, sir. Mr. Van Norman. We have an appendix to Chairman Stevens' testimony that we would like to have included in the record. The Chairman. Without objection, so ordered. Mr. Van Norman. It includes a more recent article from the Atlanta Journal Constitution from April 27. We felt that was a little more reflective because that article was based on Census numbers. The Census is something that you can rely on. The Census showed that for tribes with gaming, average per capita income increased by about 50 percent. For tribes without gaming, average per capita income increased only by about 16 percent. But even with the 50-percent increase in per capita income among the gaming tribes, we only went up to $13,500 average per capita income in 2000. That compares to $21,500 average per capita income nationally. We are still 60 percent below the average per capita income looking across Indian country. The Chairman. Along that line, in California the tribes contribute to a development fund because some tribes are doing well and some not doing so well. Do you believe that the wealthier gaming tribes have any obligation to help or contribute to those less fortunate tribes? I have visited a number of tribes that have gaming operations and it seems to me that the ones that are doing really well are the ones that are in close proximity to a metropolitan area, and easy to get to by people who enjoy gaming. But the ones that are on reservations that are way out, like Pine Ridge or Lame Deer, there are very few people who want to go that far for an evening of gaming. The casino is generally very small and the only people in them are a few of the tribal members and maybe a truck driver or two that happens to stop on the way by. Some of them, in fact, have actually gone to receivership, as you know. It is not the answer for all tribes. How do you feel about sharing the wealth, as they do in California? Maybe that is the wrong word for it, but having a fund to contribute to less wealthy tribes? Mr. Stevens. As you know, Senator, being a Native American yourself, we have a long history of looking out for one another. I think those examples exist in Indian country. In South Dakota we really have to be able to get those tribes a better location, some more games, and support for their industry out there. There is no question that we need to do more to support them. I was just at Four Bears Casino in Fort Berthold Indian Reservation. They are pretty far out. They are doing some real good business initiatives out there. They are really doing good to not just employ their own people, but people from the surrounding communities. I talked with a lady there from Canada. She just loves the place. I think once the people understand that once people understand this, they will be in a better place and understand what we have to do in Indian country. These are governments working to enhance government services and build for their future versus a few rich investors running the business for their own personal income. Another example is down in Milwaukee at the Potawatomi Bingo Casino. They put millions of dollars into that economy there. I have personally toured the quadrants of the inner city where there is a strong need and where the Potawatomi Casino pumps millions of dollars into there and into other charities. In addition to all that, every holiday they put in over $700,000 to 16 programs. It is called ``The Miracle on Canal Street.'' In addition to that, they send a regular lump sum payment to the Bad River and Red Cliff Indian communities who have pretty much a tourism industry in Northern Wisconsin. I just wanted to highlight that example. Nationwide, our figure is somewhere between $68 million to $70 million that Indian tribes give to charities, Indian and non-Indian alike. That is our latest figure. The Chairman. I would certainly encourage you to continue to pull together any statistics like that. I think it gives Indian tribes a clear defense against some of the accusations that I think are unfair accusations. I was not very happy with that Time Magazine article either. It was rather one-sided. Mr. Stevens. President Tex Hall, Chairman Ron Allen, Chairman Anthony Pico, and I personally went to the Boston Globe, sat with them, and tried to provide them with the best education we could. Business Weekly just wrote a very narrow article recently. The unfortunate part about that is that Time avoided us and avoided the truth. These people talked with us for 1 hour and still wrote a story about isolated incidents and refused our references to give them the story. The Chairman. Do you have any kind of a public relations plan, for lack of a better word, or a contract with anyone to try to get the truth out or put a better face on Indian gaming? Mr. Stevens. Absolutely. I was actually trying not to talk about Time Magazine today. I was just trying mostly to talk about that initiative. It is a national public relations initiative. It is cochaired by Mark Brown from Mohegan and Darren Marques from San Manuel. We have been in operation for 5 months. We currently have a plan that gets out there and tells the real story, a proactive story. We also do have a public relations director. When that Time article first hit, we papered the Hill with about everything we could get to tell people the true story. In our legislative summit this winter, legislators like yourself and others came and were a recipient of that clarification. Again, the tribal leaders refused to operate that way. They told us that this is a public relations initiative that we are going through right now. We raised somewhere between $400,000 to $500,000 to do ads and different types of things like that, to tell the proactive true story about Indian gaming. They have stepped up to the plate, but they do not want to step up in response to Time. They want to step up to enhance and talk about the good things that are happening throughout Indian country. The Chairman. Let me shift the questions to your relationship with NIGC. You mentioned that some of the consultation comes after the fact rather than before. Mr. Stevens. It was strictly regarding the budget request. The Chairman. Did I understand you to say that you think that the budget request should be disseminated to tribes before? Mr. Stevens. Absolutely. That is the strong point we are trying to make. We want those budget increases to come to the tribe. The Chairman. The budget requests are already a matter of record when they request them through this committee or through the Appropriations Committee. Mr. Stevens. The main thing is that they have to pay for it. That is the reason that I stand on that strong point that it has to come through the tribes. Mr. Van Norman. There was an unusual process last year. If you recall, the President came out with his appropriation request in January as normal. We relied on the Administration's request and talked to our member tribes about it. They supported the $2 million appropriation requested. Then there was a delay in the passage of that bill from its normal passage in September up until January. In a 1-month period between the end of December and January, frankly, the Appropriations staff changed gears. There was no real public acknowledgment of that until the bill became available, which was only a couple of days prior to passage. The Chairman. I have to tell you that last year was a really unusual year, as you probably know. It was the first time in 28 years that we did not finish our appropriations process. We had to do it the following year with some new members that were not even here when we framed up things the year before. You probably know that. We ended up passing a omnibus package of, I think, 10 of the 13 bills that we did get passed when we should have the year before. Everything was a little unusual. Very frankly, when you put that much paperwork together, no one--no single staff or no Senator--knows everything that is in there. Some things go through that should not. It is as simple as that. We dropped the ball in getting the job done in the Senate, and in the House, too. Hopefully that will not happen again. Mr. Van Norman. We want to thank you because we thought we had a clear statement from the authorizing committee over to the appropriators. We hope that this year the authorizing committee dialog will be heated by the appropriators. Mr. Stevens. We are not asking for a rollback on this thing. We want to move forward and help get our jobs done. We respect NIGC's role in this. We are not asking for a rollback. We are just asking for future increases and consultations with the tribes. The Chairman. Senator Inouye and I are on both committees, as you probably know. I know he will do his best, and I will certainly will, too. Let me ask about the consultation. Do you have some kind of a draft policy that you would like to give to us, or to the NIGC to start the discussion about consultation before the fact? Mr. Stevens. I think that we could provide it. I do not know that Phil would be excited about that. The Chairman. Well, you provide it to us and we will try to excite Phil. [Laughter.] Mr. Stevens. I think that we would love to do that. Again, with respect to Chairman Hogen, we would continue to assert that. If it would be more helpful in black and white, we would love to do that. The Chairman. If you would at least provide it to us, I would appreciate that. Mr. Stevens. We will make sure we do that. The Chairman. I think I have no further questions. If we do, I will send them to you in writing, if you would get back to us in writing. Other Senators may do the same. The Chairman. Thank you for appearing today. With that, this hearing is adjourned. [Whereupon, at 11:14 a.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 Hon. John McCain, U.S. Senator from Arizona Mr. Chairman and Vice Chairman, thank you for scheduling today's hearing to evaluate the role and funding of the National Indian Gaming Commission [NIGC], the Federal agency responsible for oversight of Indian gaming. It is critically important to check-in and continue congressional oversight on issues associated with the regulation of Indian gaming. Senator Inouye and I, as the original authors of the Indian gaming law envisioned that Indian gaming would grow exponentially, given the right political climate and economic opportunities. We instituted the National Indian Gaming Commission to be the official oversight agency, responsible for implementing and monitoring different regulatory aspects of the industry as well as enforcing against criminal activities. More than 14 years later, Indian gaming is a $13-billion industry and growing fast. The largest casino in the world is a tribal casino and many others are fast becoming world class casinos. By no means am I critical of that success. Indian gaming has afforded economic opportunity and success where the Federal Government has failed to meet its responsibilities to aid tribal communities for such fundamental services such as education and health care. Considering the steady growth, we also need to continually evaluate the Commission's ability to respond to that growth. It's been acknowledged in prior hearings before this committee that the NIGC has been limited in fully meeting its responsibilities by the lack of adequate resources to match the growth of the industry. The limitations on the agency have also been highlighted by several investigative reports, including those in recent Time Magazine profiles, which have characterized the National Indian Gaming Commission as ``the impotent enforcer'' with bare-bones resources and staff to fulfill its statutory responsibilities. Those of us most familiar with Indian gaming and the Indian gaming law recognize the bias of those reports. However, there is an underlying message in such reports that should compel our response and encourage all of us to provide a more informed status of the Indian gaming industry. The ability of the NIGC to fulfill its statutory role is very important, since the industry itself has changed dramatically since 1988. The NIGC is currently responsible for monitoring 300 gaming facilities with a current budget of $8 million and employing 77 staff. By way of comparison, the New Jersey Casino Control Commission spends $59 million and hires a staff of 720 to monitor 12 casinos in Atlantic City. This is an important point considering that Indian gaming is now believed to generate more revenue than Las Vegas and Atlantic City combined. If we are to defend the integrity of Indian gaming then we must defend it by ensuring the strongest possible regulation and highest standards, equal to the regulation of non-Indian gaming. An immediate point of concern from the NIGC's testimony today is the fact that the NIGC has only four auditors on hand to deal with what the NIGC describes as ``the only mechanism'' to determine ``with any certainty the extent to which specific operations are at risk of theft or loss or may be engaging in practices that jeopardize the integrity of the games conducted.'' The NIGC will also report today on its limitations in preventing any major criminal elements or individuals from unduly profiting from Indian gaming. Another point of discussion today is the funding for the Commission itself, which is 100 percent from fees assessed on gaming facilities. While the original Indian gaming law did set a limit of fees assessed on certain tribal facilities to support the operations of the NIGC, the Act has since been amended twice in recognition of the limitations facing the NIGC to carryout its responsibilities to match the growth of the industry. The latest change raises the agency's fee assessment ceiling to $12 million for fiscal year 2004, which according to the NIGC will provide significant help, but the agency anticipates that further resources will still be necessary for future years. My friends in Indian country know that I am a strong supporter of Indian gaming, and of tribal self-governance to increase self- sufficiency for tribal communities. I don't think anyone here would question the benefit of gaming revenues to support tribal economies and services. The issue at hand is whether we are sufficiently supporting the agency or hampering it by imposing restrictive limitations. The NIGC will testify today about the need to ``modernize IGRA'' to conform with the industry boom. I think there is merit to this discussion. I emphasize to the National Indian Gaming Association that the purpose of such discussion is not to compromise tribal regulation or sovereignty, but to strengthen it. I look forward to additional hearings by this committee to consider other regulatory issues association with Indian gaming. 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