[Senate Hearing 107-100]
[From the U.S. Government Publishing Office]



.                                                       S. Hrg. 107-100
  INDIAN TRIBAL GOOD GOVERNANCE PRACTICES AS THEY RELATE TO ECONOMIC 
                              DEVELOPMENT

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                                   ON

 TO PROVIDE INFORMATION ON INDIAN TRIBAL GOOD GOVERNANCE PRACTICES AS 
                  THEY RELATE TO ECONOMIC DEVELOPMENT

                               __________

                             JULY 18, 2001
                             WASHINGTON, DC












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                                WASHINGTON : 2002
____________________________________________________________________________
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                      COMMITTEE ON INDIAN AFFAIRS

                   DANIEL K. INOUYE, Hawaii, Chairman
            BEN NIGHTHORSE CAMPBELL, Colorado, Vice Chairman

FRANK MURKOWSKI, Alaska              KENT CONRAD, North Dakota
JOHN McCAIN, Arizona,                HARRY REID, Nevada
PETE V. DOMENICI, New Mexico         DANIEL K. AKAKA, Hawaii
CRAIG THOMAS, Wyoming                PAUL WELLSTONE, Minnesota
ORRIN G. HATCH, Utah                 BYRON L. DORGAN, North Dakota
JAMES M. INHOFE, Oklahoma            TIM JOHNSON, South Dakota
                                     MARIA CANTWELL, Washington

        Patricia M. Zell, Majority Staff Director/Chief Counsel
         Paul Moorehead, 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, 
      vice chairman, Committee on Indian Affairs.................     1
    Cantwell, Hon. Maria, U.S. Senator from Washington...........     9
    Chambers, Ardith Dodie, councilwoman, Grand Traverse Band of 
      Ottawa and Chippewa Indians of Michigan, Suttons Bay, MI...    23
    Cladoosby, Brian, chairman, Swinomish Tribe, Washington......    19
    Lee, Andrew, executive director, the Harvard Project on 
      American Indian Economic Development, John F. Kennedy 
      School of Government, Harvard University, Cambridge MA.....    28
    Masten, Susan, president, National Congress of American 
      Indians, Washington, DC....................................    15
    McCaleb, Neal, Assistant Secretary for Indian Affairs, 
      Department of the Interior, Washington, DC.................     2
    Reynolds, Jerry, associate director, Informational Services, 
      First Nations Development Institute, Fredericksburg, VA....    30

                                Appendix

Prepared statements:
    Chambers, Ardith Dodie (with attachments)....................    55
    Cladoosby, Brian.............................................    50
    Inouye, Hon. Daniel K., U.S. Senator from Hawaii, chairman, 
      Committee on Indian Affairs................................    37
    Lee, Andrew (with attachments)...............................    96
    Masten, Susan................................................    40
    McCaleb, Neal................................................    38
    Tomhave, Jeff, executive director, Tribal Association on 
      Solid Waste and Emergency Response (with attachment).......   123
Additional material submitted for the record:
    Adamson, Rebecca L., Foundation News and Commentary 
      (articles).................................................   125
    Cornell, Stephen, Sovereignty and Nation-Building: The 
      Development Challenge in Indian Country Today (with 
      attachment)................................................   137
    Kalt, Joseph P., Sovereignty and Nation-Building: The 
      Development Challenge in Indian Country Today (with 
      attachment)................................................   137













                     INDIAN TRIBAL GOOD GOVERNANCE
                  PRACTICES AS THEY RELATE TO ECONOMIC
                              DEVELOPMENT

                              ----------                              


                        WEDNESDAY, JULY 18, 2001


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:30 a.m. in room 
485, Senate Russell Building, Hon. Ben Nighthorse Campbell 
(vice chairman of the committee) presiding.
    Present: Senators Inouye, Cantwell, and Campbell.

 STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR FROM 
      COLORADO, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

    Senator Campbell. The hearing will come to order. We are 
meeting today to discuss Indian tribal good governance 
practices as they relate to economic development.
    The economic and social statistics on the Indian 
communities are well known. Unemployment is around 50 percent; 
social problems like alcohol and drug abuse, poor educational 
opportunities, ill health and many other things.
    To reverse these trends, I believe there is no more 
pressing matter than assisting the tribes in building Indian 
economies that are strong and sustainable into the future. 
Achieving this involves many different factors like physical 
infrastructure, human capital and skill development, financial 
resources and a host of other things.
    In addition to these building blocks, it is increasingly 
apparent that the kind of governing environment that a tribe 
has in place will determine whether or not businesses will 
prosper and jobs and income will flow.
    The problems with undeveloped tribal economies do not all 
originate in Washington, DC. I believe that tribal leadership 
has a difficult, but critical role in making sure their tribe 
is doing all it can do to create business friendly 
environments. Some tribal leaders have done so and we will hear 
from several of them today on what good governance means. By 
``good governance'' I mean stable institutions with 
administrative capacity, fair and effective dispute resolutions 
with an appeals process, a separation of politics from business 
management and transparency in government, to name a few.
    Today we will hear from tribal leaders, researchers and 
others about what good governance means and how it affects the 
ability of tribes to attract and retain economic activity and 
the benefits that 9come from that activity.
    We will go ahead and proceed since we have a little bit of 
limited time this morning. We will proceed with Neal McCaleb, 
Assistant Secretary for Indian Affairs. Neal, I believe this is 
the first time you testified before the committee since being 
confirmed by the Senate. We are very happy to have you with us.
    By the way, to all the people who are testifying, your 
complete written testimony will be included in the record. If 
you would like to abbreviate or change your oral testimony, 
that is fine.

 STATEMENT OF NEAL A. McCALEB, ASSISTANT SECRETARY FOR INDIAN 
      AFFAIRS, DEPARTMENT OF THE INTERIOR, WASHINGTON, DC

    Mr. McCaleb. Thank you very much, Mr. Chairman. It is a 
delight to be here this morning, especially on this subject.
    I want to thank you for the opportunity to appear today to 
speak about tribal government practices and how those influence 
economic development in Indian country. The development of a 
stable and responsive tribal government with a sound strategy 
for and a deep commitment to economic growth is a prerequisite 
for prosperity and economic opportunity in Indian country.
    There are many contributing elements to economic success, 
including access to markets, access to capital, natural 
resources, human resources, governing institutions, and tribal 
culture.
    But there has been tribal success where there was a lack of 
natural resources, minimally skilled human resources and even 
poor access to markets. These successes have been in spite of 
these economic liabilities and have been accomplished by 
determined tribal leadership committed to building stable and 
effective sovereign governmental institutions.
    The policies contained in the Self-Determination and the 
Self-Governance Acts have been the seedbed of growth for de 
facto sovereignty and the development of strong and effective 
tribal governments are essential for sustainable economies.
    Even now, tribes are asserting their self-governance 
influence through the Economic Development Subcommittee of the 
Joint BIA Tribal Budget Advisory Committee by developing 
strategies on how the BIA and other Federal agencies can be 
more effective in encouraging prosperity and economic parity 
for American Indian tribes within these United States.
    Conversely, it requires a viable and vigorous economy to 
provide sovereign governments with a tax base from which to 
fund essential infrastructure and services required by their 
constituents and businesses.
    With that in mind, I would like to briefly talk about some 
of the successful enterprises that exist in Indian country and 
their vision in making things happen. I am not going to go into 
great detail about each one of these, but I will just mention 
them.
    One of the more notable is the Mississippi band of Choctaw 
Indians. The Mississippi Choctaws were federally recognized in 
1945. By 1960, the tribal leaders were still unimpressed with 
the improvement, despite over 15 years of effort by the BIA and 
other Federal agencies to assist them.
    The Mississippi Choctaws remained the poorest tribe in the 
poorest county in the poorest State. The tribal leaders took 
responsibility and initiated projects designed to create jobs 
for the Mississippi Choctaw members.
    The first enterprise was a tribal undertaking called the 
Choctaw Development Company, a construction company to build 
houses under Low-Income Housing Programs for a small profit, 
while also training and employing tribal members.
    From this modest beginning, the tribe began tackling other 
ventures and in some cases seeking and obtaining Federal 
assistance through the Indian Finance Act. The Mississippi 
Choctaws are now a major economic engine in northeastern rural 
Mississippi, providing a total direct and indirect impact of 
over 12,112 jobs and $173 million in wages, $16.7 million a 
year in taxes and $9.1 million a year in rent payments.
    Currently, the tribe is engaged in the development of its 
own natural gas-fired electrical generating plant. Williams 
Energy is conducting a feasibility study. Based on the result, 
they anticipate construction to begin shortly after the first 
of the year.
    Another success story is told by the Confederated Tribes of 
the Umatilla Indian Reservation located in rural northeast 
Oregon. Their original economy was based upon agricultural and 
natural resources, primarily fishing, grain, and timber.
    Today the tribe has diversified into commercial 
developments such as a trailer court, a grain elevator, the 
Wildhorse Casino, a hotel, a RV park, a golf course, and a 
solid waste transfer station.
    The tribe is now the second largest employer in Umatilla 
County, following only the State of Oregon. Their operating 
budget has increased from $7.6 million to $94.2 million in the 
last 9 years.
    The Southern Ute Tribe, which you are very familiar with, 
Mr. Chairman, which is located, for those who don't know, in 
rural southwestern Colorado and northern New Mexico, provides 
another model of economic success. The tribe has taken control 
of its own oil and gas extraction activity.
    In 1992, the tribe established a tribal production company 
called Red Willow Cooperative. In 1994, it acquired a majority 
interest in the gathering pipeline system called Red Cedar. In 
addition, the tribe has expanded by investing in other oil and 
gas properties in the West and investing its energy fuels 
revenues into other commercial enterprises.
    Using the knowledge gained from managing and operating its 
own reservation companies, the tribe has acquired additional 
production properties in Texas that produce 20 million cubic 
feet of gas a day.
    It has invested in an offshore well in the Gulf of Mexico 
and has entered into a partnership with northern Ute and the 
Dominion Oil Company to explore and develop their oil and gas 
reserves.
    The tribe is evaluating the purchase of shopping malls and 
a drug store chain in Texas and Arizona. The tribe has not 
released its financial information, but it is reported that the 
income of the tribe is in excess of one-quarter of a billion 
dollars, that is with a ``b,'' billion dollars a year.
    The Wall Street rating houses that rate debt, Standard & 
Poor and Fitch, have given the Southern Ute Tribe a triple A 
rating for their proposed development bonds.
    I submit that is an historic first for Indian enterprises. 
I also submit that the successes that I have just gone over as 
well as many others are not primarily the result of initiatives 
of the Federal Government, or the BIA.
    They are the result of initiatives and leadership by the 
tribal governments themselves and the determination that they 
have had.
    The role of the Federal Government should be to remove 
obstacles to economic development, especially those that we 
have created ourselves through our own rules and actions. We 
need to create incentives and provide technical and financial, 
and other assistance to tribes and tribal members and public 
and private investment businesses that are willing to promote 
economic activities in Indian country.
    The initial priority for the Federal Government is to come 
together with the tribes to develop a straightforward approach 
on how we can all work together on the integration of program 
services and coordinate activities in the pursuit of economic 
parity for Indian country.
    Congress has provided us the mandate and the authority 
under the Indian Employment, Training and Related Services 
Demonstration Act of 1992, the Native American Business 
Development, Trade Promotion, and Tourism Act of 2000, and the 
Indian Tribal Regulatory Reform and Business Development Act of 
2000, from the 106th Congress.
    The goal of the subcommittee that I mentioned earlier, 
which is working in conjunction with the BIA and the Tribal 
Budget Advisory Committee is to develop a strategy to 
coordinate and integrate all available resources from the 
tribal, Federal, private and public sectors into one 
comprehensive approach that will provide a business resource 
for enterprises and tribal government services and ultimately 
provide a living wage and employment in Indian country.
    The subcommittee has identified 10 major tasks to be 
accomplished. Each of these tasks is to be examined by the 
subcommittee from past studies and recommendations. They are 
currently working models, available resources, legislative and 
regulatory authorities, budget and resource coordination and 
integration.
    These subcommittees are named for the general subject 
matter and are as follows: Tribal Business Development 
Corporations and Tribal Venture Capital Funds; Taxation and 
Incentives; Tribal Economic Development Models; the Indian 
Finance Act; Tribal Courts; Federal Set-Aside Procurement; 
Technical Assistance Centers; Natural Resources and Energy 
Development; and Tribal Infrastructure and Employment 
Development.
    The first of these working meetings of the subgroup was 
held this week. The first action was to contact representatives 
from all Federal programs, including HUD, SBA, ANA, Census, 
EPA, Energy, and others that provide economic development 
assistance to tribes and invite them to participate in this 
effort. The meeting was extremely well attended by all the 
Federal agencies.
    The subcommittee is planning on providing its initial 
findings and recommendations to the full committee and the 
participating tribes in October.
    The BIA's Office of Economic Development is committed to 
economic enterprise that enhances the lives of Indians and 
stabilizes the future of Indian tribes. In the more successful 
tribes in Indian business enterprises around the country, the 
BIA has observed some common elements.
    The BIA has also noticed some themes where Indian economic 
development is lacking or has failed, and with study and 
consolidation with tribal leaders, we believe that a few 
initiatives would significantly improve the current disparity 
between the few American Indian tribes that have had success 
and the many that have not.
    Ultimately, the relative economic success and vitality of 
any nation is the public-private effort that combines the 
resolve of government policymakers and the imagination and 
appetite for risk of independent entrepreneurs to create a 
healthy environment for enterprise and respect for each other's 
unique point of view.
    The Government will always be focused on the ``common 
good,'' while the entrepreneur has to be driven by an 
anticipation of profits as a reward for his risk.
    Thank you again for the privilege and the opportunity to 
speak on this subject that is near and dear to my heart. I will 
be happy to answer any questions that you may have.
    [Prepared statement of Mr. McCaleb appears in appendix.]
    Senator Campbell. Thank you, Neal.
    I have a couple of questions. Before I go to them, I would 
like to yield to the chairman if he has some comments.
    The Chairman. Mr. Chairman, I have a statement. If I may, I 
would like to submit it for the record.
    Senator Campbell. Without objection.
    [Prepared statement of Chairman Inouye appears in 
appendix.]
    Senator Campbell. Neal, you mentioned the Southern Utes. 
Since I live there, I saw you on the plane the other day, in 
fact, coming from the Southern Utes to your new job in 
Washington, that Standard & Poor rating, the three-star rating, 
I understand the Southern Ute Tribe is the only tribe in the 
Nation that has that rating. Is that correct?
    Mr. McCaleb. That is my understanding, both Standard & Poor 
and Fitch.
    Senator Campbell. They have also become, through their 
success in energy and a number of other things, the largest 
employer in the Four Corners area of Colorado, larger than the 
school districts, the hospitals, literally any business.
    But the interesting thing to me is that probably half, of 
the employees of their enterprises since they have grown and 
developed, are non-Indian. So, the success of that tribe, like 
many other tribes, is a shared success.
    When they are successful, it is amazing how it helps the 
whole area. So there is more than one facet of why we need to 
help Indian tribes become successful, because they have this 
terrific history of sharing that success in terms of jobs.
    Let me ask you just two or three things. In tribal self-
determination contracting, Indian tribes who provide services 
to their members by way of the 638 contracting and self-
governance compacting have been found to be more effective. We 
know that. Yet, some tribes are somewhat reluctant to do it.
    I have heard some of them in private saying they worry 
about whether it will erode the Federal trust responsibility.
    Do you have any ideas how we can make incentives for the 
tribes to try that? I would like to know your views about that 
and realize that you are just getting settled in your job.
    Mr. McCaleb. Well, I am familiar with the fact that there 
are a number of tribes that we call direct services tribes that 
still want to rely on the BIA to provide direct services to 
them rather than contracting or compacting for those who take 
over those services themselves.
    Clearly the Self-determination Act and the Self-governance 
Acts provide for them to make that decision. That doesn't 
answer your question about what we can do to incentivize them 
to take a more assertive role in that area.
    In fact, there are a number of incentives under the Self-
governance Act. I think, in my mind, there are still a certain 
residual anxiety that these two acts and these two provisions 
are an attempt to step back from the trust responsibility, the 
Federal responsibility and a lot of the direct services tribes 
hold tenaciously to that.
    That is their judgment and that is the decision that they 
make. Under the provisions of Self-determination, I guess we 
should allow them to do that, notwithstanding the fact that 
might not seem the best in our judgment.
    Senator Campbell. Well, my interest in it is how we 
actually encourage them to do it.
    Mr. McCaleb. I understand. I probably danced around that 
answer because I don't know the answer, Mr. Chairman.
    Senator Campbell. I don't either. If you find it, share it 
with us. Because we know it is a much better use of Federal 
money, obviously, if we can send that money through compacts or 
contracts directly to them rather than through the bureaucracy 
in Washington, they are going to get more bottom line dollars 
to use toward the problems they are trying to address.
    Mr. McCaleb. Absolutely. More importantly, it is a more 
effective use of the money when it gets there. They place it, 
as all local governments do, where they perceive the need to be 
the most urgent and they are the best judges of that.
    Senator Campbell. That is right.
    Maybe one other question. I am sure you, like all 
Americans, are aware of the energy crunch, whether it is 
electricity in California or hydrocarbon fuels in the rest of 
the country. It kind of goes up and down. Right now gasoline is 
going down a little bit, but it is only a matter of time before 
it goes back up. It is kind of a roller coaster, but the roller 
coaster, little by little over a period of years, the valleys 
are higher and the peaks are higher, too. So, it is little by 
little going up.
    I happen to think that puts Indian tribes that have 
resources, coal, oil, oil shale, natural gas, coalbed methane, 
and so on, really in an opportune situation in this country 
because they have the resources that can help us get away from 
foreign dependency on energy.
    We need to find a better way of helping them help develop 
their resources. In any of the discussions you have had so far, 
and I know it has been a very short period of time, have you 
found any ways to perhaps streamline or eliminate some of the 
Federal regulations that impede tribes in energy development?
    Mr. McCaleb. I can't cite any particulars in that area. I 
can cite a bright spot in this area of energy development. That 
has to do with the Three Affiliated Tribes that are looking 
very seriously right now, to moving toward the development of a 
refinery near Fort Berthold.
    Senator Campbell. The Three Affiliated?
    Mr. McCaleb. Yes; in North Dakota. Historically, tribes at 
best have been like Third World Countries exporting a 
commodity, that being the raw crude. The refinery is a value-
added activity in which they would increase the employment, as 
well as the capital investment on the reservation and who has a 
big multiplier in terms of the economy, as well as the 
experience in managing this kind of facility.
    They are developing a management contract to give them 
experience. I think that is the route, where tribes become 
value-added enterprises instead of just exporting a commodity.
    Senator Campbell. Well, last week in a committee hearing, 
just by chance, we heard that the Three Affiliated Tribes have 
also entered into an agreement with the manufacturers of wind-
collecting systems, and with these great big fans, to build 
some on the reservation. The estimate is that they may make as 
much as $1 million a year from wind that is always in the 
Dakotas.
    So, there are a lot of opportunities if we can figure out a 
way to make it a little easier for them to get through the 
permitting process.
    Let me yield to the chairman.
    The Chairman. Mr. Secretary, I am sorry I wasn't here to 
receive your testimony, however, I have a few questions from 
reading your prepared statement.
    You speak of the BIA noting that among Indian nations are 
lacking in economic development there are common themes. I 
think that is the phrase you used. You said that the disparity 
between the ``have'' and the ``have-not'' nations can be 
addressed by ``a few initiatives.''
    What are these common themes you speak of?
    Mr. McCaleb. Well, I think one of the common themes is that 
the tribes that are doing well economically have strong, well-
developed, de facto sovereign governments. They have taken 
possession and built the government institutions and mechanisms 
that create an environment that is attractive to industry so 
that entrepreneurial people or investors are able to make an 
investment in that area with the expectation of a reasonable, 
if not handsome return on their investment.
    It has to do with the court systems, judicial systems, the 
overall nation building. I think the tribes that have done well 
economically have been successful in nation building. That is 
one of the first ones.
    The Chairman. You have touched upon a theme that many 
business people are quite concerned about, the constant 
turnover in tribal governments. Do you have any suggestions 
about how to bring about greater stability in tribal government 
administration?
    Mr. McCaleb. Well, I think my answer is probably kind of a 
circuitous answer in that when you have economic stability and 
economic growth, we also observe that people are ready to re-
elect their tribal leaders in anticipation of the projection 
and extension of that tribal expansion and tribal growth.
    There is the greatest turnover in tribal governments, I 
think, where the poverty and the economic deprivation is the 
greatest. You know, it is the chicken and the egg conundrum; 
how do you get started? Well, you get started, I think, by 
building strong, sovereign tribal governments.
    That is clearly a local initiative. That is not something 
that is done from Washington.
    The Chairman. What are the initiatives that you suggest to 
bring about less disparity?
    Mr. McCaleb. Well, I think we can assist in the area of 
making capital investment more attractive by expanding the 
Indian Finance Act, for one thing. We have a loan limitation of 
$60 million a year, which is fully subscribed now and has been 
every year for some time.
    There is an appetite for Indian businesses to fully utilize 
that and more. So, I think probably that it is time to expand 
the cap on the Indian Finance Act, the Loan Guarantee Program.
    Another is to secure the tax incentive for rapid write- 
down on capital investment that is due to expire here in two 
years because industry is just now becoming acquainted with 
that and beginning to make use of it. It is one of the things 
that attracted this refinery that I was talking about, that 
they are able to write-down their capital investment rather 
rapidly.
    That is due to sunset here in the next couple of years. I 
think that we should look at other tax incentives to attract 
capital to Indian country. So, there is money, strong local 
governments and education, I think. Those are the three things. 
Education is largely in reservation country Indian education. 
We need to strengthen that. One way we can do that is by 
expediting the construction program for Indian schools.
    The Chairman. Would you also consider, Mr. Secretary, the 
necessity for a land base for these nations?
    Mr. McCaleb. Yes; I think that you state the obvious that I 
did not state, that most of the tribes that have done very well 
economically have a well-established land base.
    The Chairman. Well, I ask this because, as you know, there 
are many Indian nations that have been denied and deprived of 
land bases, especially in California, for example, because of 
the number of treaties that we in the U.S. Senate have either 
refused to ratify or have just bypassed the ratification of 
treaties.
    Therefore, these nations are now coming forth seeking your 
assistance in having these lands taken in trust. How can we 
expedite this process?
    Mr. McCaleb. Well, first of all, I would like to point out 
that just having a large land base is not a formula for 
success. I think it is important to point out that we have a 
number of tribes with large land bases. Some of them are direct 
service tribes that we were talking about earlier, that have 
some of the poorest economies.
    So, although I think it is important, I don't think it is 
the essence or absolutely essential ingredient for the economic 
dollar. The question is: How do we expedite the land under 
trust.
    I think the new regulations that have been imposed that are 
under review currently provide for expediting land under trust 
for lands that are immediately adjacent to or within the 
reservation boundaries. I think it clearly expedites that. 
Those regulations are a little more deliberate about taking 
land into trust that is removed from the reservations.
    That is directly tied to the whole gaming issue. I think 
the regulations, proposed regulations, do in fact expedite 
taking land into trust that is within or immediately adjacent 
to the reservations.
    The Chairman. Do you have sufficient staff to process these 
claims and applications?
    Mr. McCaleb. Mr. Chairman, I really can't answer that 
question, give you an enlightened answer on that. I have just 
been on the job 2 weeks now. It is kind of like taking a drink 
out of a fire hydrant. I hope I can give you a more enlightened 
answer on those kind of staffing questions later on.
    The Chairman. Then, if I may, Mr. Secretary, I would like 
to submit for your consideration questions that you can answer 
for the committee.
    Mr. McCaleb. Thank you very much, sir. I will do that 
promptly.
    The Chairman. I appreciate that. Thank you very much.
    Senator Campbell. Well, the Senator touched on some of the 
things that have stymied us for an awful long time. We know 
that in order to increase economic opportunities we have to 
have stable tribal governments. Yet, in order to have stable 
governments, we have to have better economic opportunities.
    Our troubles are obviously how to get them both improved. 
But you are going to have a plateful. Do you still want the 
job?
    Mr. McCaleb. Yes, sir.
    Senator Campbell. Now I will yield to Senator Cantwell. 
Senator Cantwell is new to our committee from the State of 
Washington. She has a very large Indian constituency; I believe 
maybe 27 or 28 tribes.
    Senator Cantwell. We have 28 tribes.
    Senator Campbell. Twenty-eight tribes. We are delighted to 
have her with our committee.

 STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Thank you. Thank you, Mr. Chairman, I 
guess. I have an understanding that the committee works in a 
very cooperative manner here. I appreciate that.
    Senator Inouye, thank you for the opportunity to ask 
questions of Mr. McCaleb. I guess I would say I am very 
fortunate to be on this committee. I appreciate the assignment. 
There are 28 tribes in the State of Washington. As the only 
member from the Pacific Northwest on the committee, I hope that 
I can bring some insights to the challenges that we are facing 
throughout the entire Northwest in that population.
    There are very important issues we need to work on, 
obviously, with health care, job training and economic 
development, some of the subjects that you were talking about 
this morning. I look forward to working with the committee on 
those issues.
    Mr. McCaleb, I apologize, too, for not being here to hear 
your testimony, but I have reviewed it. Congratulations on your 
recent swearing in, as well.
    I had a couple of questions about economic development as 
it relates to some of the subjects that you brought up. First 
of all the area of human resources and job training. You 
mentioned the Indian Employment Training and Related Service 
Demonstration Act that was passed in 1982.
    Can you update us on how you think the workforce 
preparedness issues are being addressed by the agency and 
whether we need to significantly enhance that at a time when 
our economy is changing drastically and even the most prepared 
people are finding that they need to upgrade their job skills. 
So, how are we doing on the issue of job training and access to 
resources?
    Mr. McCaleb. Our whole economy is in a transition, as you 
stated, from an industrialized economy to a knowledge based 
economy. To be frank, I don't think our BIA-operated school 
systems, known to be consistent with most rural described 
systems, have been able to keep pace with the velocity of 
change and the acceleration and training needs for a knowledge-
based economy.
    We could start with computer skills. I think there needs to 
be a focused effort in math, science, and communication skills. 
In fact, that is the goal of the BIA, to bring our students and 
our educational system up to a minimum of a 70-percent 
proficiency in math and science and also communication skills.
    We are not there. We are probably at 50 percent efficiency 
at this time.
    The other programs that are for adult education need to be 
rifle-shot focused on computer literacy and on the ability to 
operate in an economy that is going to be driven by computers, 
is driven by computers, whether you are buying an airline 
ticket or checking out at the grocery store; it is computers 
that handle the transaction.
    Those are the kinds of skills and understandings that I 
think will be essential in the future.
    Senator Cantwell. So, you were say that we have adequate 
programs or in adequate programs?
    Mr. McCaleb. I would say our programs need to be improved. 
We are focusing on the need for math, science, and 
communication skills. But I am also saying that our results are 
well below our goal. So, they need to be improved. Our results 
need to be improved. We have set the goal well above the mark 
where we are right now.
    Senator Cantwell. Given the number of the locations of the 
reservations throughout the country, and sometimes they are 
adjacent to urban areas, sometimes they are more remote, does 
the BIA have any kind of policy on the delivery of high speed 
access to Indian reservations?
    Mr. McCaleb. Definitely we do. We are trying to optimize 
the high-speed access, first to our schools and then to the 
reservation in general. It is going to require some work with 
the Federal Communications Commission [FCC] and private 
investment, to attract private investment to wire the 
reservations, if you please, for high-speed access.
    One of the problems that has held reservations back in 
economic development is the lack of access to markets. With few 
exceptions, they are largely rural and remote. That makes them 
remote to the large markets.
    In a knowledge-based economy, the distance doesn't really 
matter, as long as you are hard-wired to your customers. 
Computers, fiber optics, wireless communications, I think, 
present literally a world of opportunity for economic 
development, in rural America in general and on reservations in 
particular.
    Senator Cantwell. So, you would say that, again, the 
percentages of reservations having that kind of access----
    Mr. McCaleb. It is low. I think that is not 
uncharacteristic with rural America in general. In my own 
experience in my home State of Oklahoma, most of our rural 
towns do not have good access to the high-speed broadband 
communications system, fiber optics, if you please. I think 
that is characteristic of rural America. The tribes fall in 
that communication area.
    Take basic communications, like the telephone, there are 
fewer Native Americans who have telephones in their homes 
percentage-wise than the rest of the larger economy.
    Senator Cantwell. Mr. Chairman, if I could, one more 
question. Perhaps we can follow up with some additional 
questions about those programs, both for job training and for 
high-speed access.
    I am curious, given our experience in the State of 
Washington where the Tallalah Tribe had a joint effort on 
economic development with their adjacent city, the city of 
Marysville. They both had a desire to develop land in an 
industrial way, requiring huge investments of sewer and water 
that were not currently there in the community.
    So, they worked jointly on that from an economic 
development perspective and then later created the Tallalah-
Marysville Chamber of Commerce. So, they joined together in an 
economic development effort.
    Are there other instances of that around the country where 
the formal economic development mission has been, you know, 
joined with other organizations?
    Mr. McCaleb. Well, I am personally aware of a few in 
Oklahoma that are, the Chickasaw Nation in the city of Ada and 
the Industrial Development Authority of Ada cooperated in 
industrial development activities.
    This business of making a joint effort where you actually 
finance major capital improvements for infrastructure, that is 
the first time I have heard of that. That is remarkable and it 
is very important.
    When tribes and local governments can cooperate like that, 
a lot of the other barriers will melt away.
    Senator Cantwell. Thank you.
    Senator Campbell. Thank you, Neal. You know, I might 
mention before you leave that the people on this committee all 
serve because every one of us is trying to make things a little 
bit better for Indian people.
    But, as a Government, we are doing a poor job of networking 
our different agencies. Too many times, in my view, the left 
hand doesn't know what the right hand is doing. Maybe you are 
following this huge question. In the last couple of days there 
is a hearing going on, in fact, right now here on the Hill 
dealing with the access for Mexican trucks and drivers to the 
United States under the NAFTA agreement.
    We are going to face a big, billion dollar fine if we do 
not allow them access in the United States. Well, when we 
signed that NAFTA agreement, we knew, according to the American 
Trucking Association and a number of other groups that we are 
short of drivers, between 250,000 and 300,000 drivers.
    We have unemployment on reservations between 60 and 70 
percent and we can't seem to put it together that we have 
people that need the jobs in this country, and yet we are going 
to open access to foreign drivers. I am not against foreign 
drivers.
    What I am saying is that we are doing a better job for them 
than we are doing for our own people. It just seems to me that 
we have a long way to go in trying to make sure that our 
agencies recognize and in our international trade agreements 
and things of that nature that we have people that need the 
jobs.
    These are good jobs, $50,000 a year jobs. A lot of Indian 
people would love to have those jobs, and yet we are just 
bypassing them. That is an example of some of the dumb things 
we do here in Washington when we are trying to make things 
better.
    I do appreciate your being here this morning. If any other 
committee members have questions, they may send them in 
writing.
    Mr. Chairman.
    The Chairman. Mr. Secretary, if I may ask one question 
before we proceed, the prepared statement of the president of 
the NCAI is a very interesting one. I hope you will read and 
study that statement. She speaks of devolution or the 
decentralizing of policy on the part of the United States.
    Devolution is the philosophy that by providing assistance 
to States you might bring the activities closer to the people. 
Well, it happens that history has shown us that whenever we 
call upon the States to provide services to Indian country the 
services are not forthcoming. They are rather lacking at times.
    For example, just a few days ago a court issued a judgment 
in which it is stated that the tobacco payments will be made to 
States and tribal governments will not receive any payments, on 
the premise that the States will be responsible for all the 
people living within the borders of that State.
    Would the BIA make certain to monitor this so that Indian 
nations and the Native Americans will get their fair share? 
Otherwise, I think that just the non-Indians will get the 
tobacco benefits.
    Mr. McCaleb. Mr. Chairman, that is a large task that you 
just carved out there for the BIA. You know, I come from a 
State that has maybe the second or third largest Native 
American population in the United States. I was privileged to 
serve in the legislature there for a number of years. They had 
a large number of Native American members in the legislature.
    Fundamentally, States historically have not been responsive 
to Indian interests. I agree with the principle of your 
statement. I am not sure how the BIA can regulate or 
incentivize the States to better perform their role with people 
who are already their constituents.
    The fundamental problem here is that the larger portion of 
the population does not understand nor respect the sovereignty 
of the several American Indian nations of this country.
    When I served in the legislature, I remember our Organic 
Act clearly provides that the treaty rights will be protected 
when we became a State. Of course, part of the treaty rights 
were basically unrestricted hunting and fishing.
    I brought the modest bill to exempt Native Americans with a 
Certificate of Blood card, from having to buy hunting and 
fishing licenses, which I thought, was already provided for in 
the Organic Act. I worked for four years trying to get that 
bill passed and I never did. I don't think it was because of 
racism. I think it was because of insensitivity to the 
fundamental rights of Native American people that are provided 
in the Constitution of the United States.
    That is a huge education job. I would certainly see the BIA 
assisting in whatever effective way we can in seeing that 
Indian people and Indian tribes get their appropriate share of 
Federal moneys that are dispersed directly to the States.
    But that, in my judgment, is a huge job and one; again, 
that I think most effectively will be done in partnership with 
the local tribal sovereign leaders because they are the ones 
that understand those issues the best. They are the voters of 
the legislators. They are becoming more influential in every 
State.
    I have been observing this now for over 30 years; 30 years 
ago Indian interests were totally disregarded in most State 
legislatures. If they were regarded at all, it was one of 
hostility.
    That has changed. It has changed for the good. It has 
changed largely because of the policies of the Congress through 
the Indian Self-Determination Act and in many ways the 
subsequent amendment titles in the Self-Governance Act. We are 
developing strong tribal governments with articulate and 
thoughtful leaders who are able to present their cases most 
eloquently and most forcefully with their State legislators.
    So, notwithstanding, you know, we kind of drown in the 
negative statistics that we have, and they are dismal and they 
are disheartening, but we have made great progress in the last 
30 years. It has not been a straight line.
    Starting 30 years ago, our progress plotted against time 
was flat and almost nothing was happening. It began to pick up 
and it is going up almost vertically. Our challenge is that it 
doesn't become an S-curve and level off at a plateau and 
doesn't go further.
    One of the reasons that I am very pleased to have the 
position that you all have confirmed me in is the opportunities 
that I think are present in America today.
    The Chairman. Just one final question, if I may, Mr. 
Secretary. Whenever I enter into discussions with tribal 
leaders, certain words come up most frequently. One is 
sovereignty. Another is trust reform. Another is consultation 
and also economic development. These are the four words and 
phrases that the come up more often than anything else.
    According to the testimony of the president of the NCAI, 
tribal leaders have been advised by BIA that whenever they ask 
for consultation on trust reform the response has been ``These 
are internal matters, therefore we need not consult with you.''
    Do you have any response to that?
    Mr. McCaleb. Well, I reject that premise, Mr. Chairman. 
Trust is about communication. You can only have trust when 
people can openly address or discuss issues that are of mutual 
concern to them. The trust issue is not just whether some money 
has been misplaced or not distributed appropriately.
    The trust issue, to me, is much deeper. It is about the 
whole issue of the competence of the Indian community in the 
larger sense with the BIA. I am not trying to say anything 
negative about the BIA, I am just saying that I trust the count 
at the bank is dangerously low and we have overdrawn it, if you 
please.
    Trust, like respect, can only be given. It can't be 
demanded. We have to rebuild that trust. It is going to be a 
long and arduous climb. We will take it one step at a time. But 
the first step is open, unrestricted communication. I am trying 
to say in many words that I agree wholeheartedly.
    The Chairman. I am certain that Indian leaders would be 
most pleased to hear that, sir.
    Thank you very much.
    Senator Campbell. I am also delighted to hear that because 
in my view, agreements between the Federal Government and 
tribes are like Federal government and States or the Federal 
Government and other nations. You can't have a good agreement 
if only one party sits at the table.
    You have to have trust built on the fact that both of them 
are there to provide input. I might mention just for your own 
information, on the tobacco settlement, we have a bill that 
collapsed of its own weight around here.
    The question Senator Inouye posed might be better posed to 
the Department of Justice. But there were very, very good 
Indian sections in that bill when it was here in the Senate and 
primarily because of your boss, Secretary Norton, who was the 
Attorney General of Colorado in those days. She came in and 
testified several times to make sure that Indians had language 
in that bill that would enable them to receive some of the 
settlement money that would have gone to health care, to 
education to different kinds of ceremonial use and things of 
that nature. It obviously fell apart, but you might dig that 
old bill up and look it up.
    Mr. McCaleb. I will go to school at my boss's side on that.
    Senator Campbell. Thank you.
    Our next panel will be three witnesses: Sue Masten of the 
National Congress of American Indians; Brian Cladoosby, 
chairman of the Swinomish Tribe of Washington; and Ardith 
``Dodie'' Chambers, councilwoman of the Grand Traverse Band of 
Ottawa and Chippewa from Michigan.
    We give a great deal of latitude to the administration 
witnesses. We ask other witnesses, though, to keep their 
comments a little more brief. So, if you would like to proceed.

   STATEMENT OF SUE MASTEN, PRESIDENT, NATIONAL CONGRESS OF 
                AMERICAN INDIANS, WASHINGTON, DC

    Ms. Masten. Good morning, Chairman Inouye and Vice Chairman 
Campbell.
    I want to thank you for the opportunity to address you this 
morning on this critical issue.
    For the record, I am Susan Masten, president of the 
National Congress of American Indians, the oldest and largest 
organization representing tribal government. I also serve as 
the chairperson for the Yurok Tribe, located in Northern 
California.
    I am here today to present testimony on the relationship 
between tribal governments and economic development on Indian 
reservations. As you know, economic development is perhaps the 
leading concern in Indian country today.
    It is heartbreaking, as a tribal leader, not to be able to 
address the social problems that plague our communities. Our 
people are still dying of preventable diseases. We still have 
substandard housing, high dropout rates, substance abuse, 
suicide, teen pregnancies, and there is a high rate of crime 
against our people, all of which is relative to the 
overwhelming poverty on reservations.
    Reducing unemployment rates as high as 80 percent, 
eliminating homelessness, decreasing dependence on welfare and 
increasing education opportunities are all linked to building 
economic activity within our communities.
    Tribes face many obstacles to economic development, 
including lack of infrastructure, poor access to training and 
technical assistance, the shortage of equitable financing 
mechanisms, remote locations, and dual taxation, to name a few.
    Although many tribes have found ways to remedy these 
problems through creative means to overcome the barriers to 
economic development, the incomparable structural and legal 
obstacles that tribes face are simply too large.
    NCAI is poised to make the issue of economic development in 
Indian communities paramount in our work to promote and defend 
the concerns of our people. As such, my testimony today will 
focus on policy changes that we believe Congress should 
consider in order to reduce the barriers we face.
    Successful economic development in Indian country is 
directly tied to strong, independent, culturally appropriate 
tribal government structures. Congress has the authority to 
support tribal authority or to impede it. All too often our 
authority is limited in ways that impede our ability to 
effectively contribute to economic development.
    By passing sound Federal Indian policy, Congress will 
provide us with the key to create change in our communities. 
There have been many examples of positive and progressive 
Federal Indian policy, most notably Public Law 93-638. It is 
through self-determination and self-governance that tribes have 
been able to prioritize funding to meet our community's needs.
    It is through these policies that tribal leaders and tribal 
staff have gained valuable management experience in 
decisionmaking while becoming accountable to our people through 
sound governmental procedures.
    While self-determination has been a successful form of 
decentralization in matter involving the BIA and the Indian 
Health Service, there is still much to be done. For example, we 
are concerned about the recent actions taken by the Department 
of the Interior regarding reform efforts which may result in a 
departure from the policy of self-determination. By moving 
trust records away from tribal governments, this limits our 
ability to access information regarding our land and our 
resources.
    Tribes own four-fifths of the trust property. We have the 
greatest interest in ensuring that there is proper accounting 
and management. If there is ever going to be trust reform, we 
must be actively involved by consulting with those who are 
making the decisions that impact us, as it is at the heart of 
our sovereignty.
    NCAI would welcome the opportunity to assist and facilitate 
the government-to-government relationship between the 
Department of the Interior and the tribes on this critical 
issue. We also seek the committee's continued guidance to 
ensure that BIA and the Office of Special Trustee proceed with 
full respect for tribal self-determination in every area of 
trust reform.
    NCAI is also greatly concerned about the Federal policies 
that are outside the scope of the BIA and Indian Health 
Service, including commerce, agriculture, taxation, human 
services, education, energy transportation, and environmental 
protection.
    In general, there is a trend for the Federal Government to 
decentralize and to devolve many Federal authorities to State 
and local governments. Unfortunately, this trend has often 
negatively affected tribal governments. Most often, we are not 
recognized as units of government with authority to directly 
receive programs and funds.
    Even when tribes are authorized to administer programs 
directly similar to States, often we are afforded 
proportionately fewer resources and are subject to greater 
oversight than the States are.
    Devolutionary policies also raise questions about 
diminishment of Federal treaty and trust responsibility to 
tribes and a reduction of Federal responsiveness to tribal 
needs. State governments do not have the same legal obligations 
and it is of great concern that States will simply overlook the 
tribe's interest in their administration of Federal programs.
    We also note that when State governments receive dollars 
they often do not regard tribal governments on a government-to-
government basis, but view tribes merely as a part of the 
service population or as local interest groups.
    If Congress is to fulfill its responsibility to Indian 
tribes by supporting tribal self-government, it must create 
Federal policies that support tribal government's authority and 
protects tribal self-determination.
    There must also be clear definition of the roles of the 
Federal Government, the State government and the tribal 
government. Tribes are supportive of devolution that provides 
for increased authority and flexibility to tribes in the 
context of a respectful government-to-government relationship.
    As devolution of programs to tribe is one of the surest 
ways to engage tribes in capacity building and economic 
development, NCAI believes that the following principles may 
serve as a starting point for the development of sound Federal 
policies.
    No. 1, as a basic exercise of tribal sovereignty, tribal 
governments should have the option to control any programs, 
functions, services or activities that are intended to benefit 
tribes and tribal service populations at the same level of 
authority and control as State governments.
    No. 2, Federal policy should preempt the application of any 
State law that imposes a dual burden to comply with both tribal 
law and State law within the boundaries of Indian country.
    No. 3, duplicative State regulation or taxation will drive 
economic development away from Indian lands.
    Where tribal governments opt not to administer particular 
programs and functions, service and activities, State or county 
governments or private contractors who administer the programs 
must consult with tribes over the delivery of services to 
tribal members.
    States must be encouraged through Federal policy to relate 
the tribal governments on a government-to-government basis, as 
do contractors. Federal policy should encourage the use of 
negotiated agreements between States and the Federal Government 
or State governments so that each tribe can address its unique 
needs.
    Federal standards must give tribes enough leverage to reach 
a successful and enforceable agreement. Tribal governments 
should have a right to all documentation or studies held by the 
State governments or other institutions that are relevant to 
the sustainability, fairness and safety, et cetera.
    Tribal governments should have their own independent 
experts present at the table as needed during negotiations and 
assessment processes. Tribal governments must be provided with 
adequate technical and financial support for administration of 
programs. Policies should protect Federal treaty and trust 
responsibilities.
    Unfortunately, Indian country still lives in Third World 
conditions, lacking basic infrastructure in this time of 
prosperity. We have little hope of economic development unless 
funding for projects for future development becomes a priority.
    The creation and maintenance of a viable infrastructure is 
the first step tribes must take to foster a positive business 
environment that will attract outside sources of investment as 
well as local business partners.
    As such, Congress needs to work with us to develop policies 
that include infrastructure development. We need projects that 
construct or upgrade our roads, water and sewer systems, 
utility systems and electrical grids, commercial codes, 
licensing programs, phone systems and technology improvements.
    All too often Indian nations are prohibited from receiving 
training and technical assistance to conform with new Federal 
statutes, while some appropriations have provisions for such 
measures, most are under funded.
    If a tribe is not provided with the knowledge and expertise 
to administer a program, it is usually doomed to be 
unsuccessful. There is a funding shortfall in the 
administration's budget that impacts technical assistance, 
feasibility studies, business infrastructure and research for 
legal code issues that creates a gap that Indian country is 
often unable to fulfill.
    Technical assistance can also address other important 
issues, for example empowerment zone technical assistance is a 
great example of a successful process. During the course of the 
program, implementation that technical assistance provided for 
grass roots structure to communities to talk about governance. 
Community members involved provided much needed input to ensure 
stability within their own government, furthering the idea that 
good governance is a result of good policy.
    The premise of providing equity in opportunity to financial 
resource is also imperative for self-determination. Tribes 
often are left out of opportunities for obtaining bond 
financing and loan guarantee components.
    State and local governments have long enjoyed the authority 
under Federal tax law to use tax-exempt bonds to fund a variety 
of governmental projects. We need to remove restrictions 
imposed on tribal governments to provide the same opportunities 
that other governments enjoy.
    Loan guarantee components are vital for the success of 
tribal businesses, as many of our tribal members do not have 
the collateral for fully funded, fully secured loans during the 
start-up period of a business.
    Economic development in Indian country requires not only 
successful tribal government businesses in economic development 
initiatives, but efforts to foster successful small businesses 
for tribal members also.
    The problem that most banking institutions face when 
dealing with tribal members who reside on the reservation is 
the uncertainty of enforcement jurisdiction if the borrower 
defaults on the loan. To address this recurring issue, NCAI 
encourages hearings and briefings to be arranged between Indian 
nations and off-reservation commercial banks, as banks are 
reluctant to lend in this high-risk environment.
    Good governance is not dependent upon quick fixes. Rather, 
good governance is dependent upon good policy that promotes 
long-term solutions. The application of these tenets, among 
others that will be uncovered in the policy consultation 
sessions that will occur before the drafting of legislation 
create a secure environment for tribal governments and 
investment.
    By enacting these policies, the government is not only 
fulfilling their trust and treaty obligations, but is also 
giving the tribes some of the tools they need to build their 
own capacity to govern.
    It has been the experience of NCAI that tribes who are best 
able to address the issues of economic development in their own 
communities are the ones who have comprehensive strategies that 
incorporate all the resources that the tribe has at its 
disposal.
    Tribal plans that engage all the key players in their 
communities, capitalize upon the interests and strengths of 
community members is a key way to jumpstart economic 
development on Indian lands and ensure that economic 
development is spread throughout all public and private sectors 
of the tribal economy.
    By creating policies that will enable tribes to use all of 
their resources together, the committee also creates an 
environment that is good for development in general. While it 
is good that the governmental agencies have programs that offer 
incentives for business or companies who subcontract with 
tribes, these programs need to be evaluated for effectiveness.
    Tribes have voiced concern that programs such as the 
Department of Defense 5 percent tribal incentive programs lack 
clear goals to ensure that the Department markets and promotes 
the program in the same manner as other incentive programs. We 
recommend that the committee commission evaluations of programs 
such as this to make sure they are proficient in serving the 
needs of Indian country.
    Public Law 106-447, the Indian Tribal Regulatory Reform and 
Business Development and Public Law 106-64, the Native American 
Business Development Trade Promotion and Tourism Act of 2000, 
need to be implemented as soon as possible to help reduce the 
barriers that Indian country faces for economic development.
    In closing, capacity building is the first step toward good 
governance. Only when Indian tribes have the ability to 
administer our programs and manage our affairs for our people 
will we be able to move to the path of self-determination by 
allowing tribes to engage in economic development initiatives, 
by enabling the expansion of tribes' capacities to govern is 
directly linked to tribal sovereignty and self-determination.
    The establishment of clear policies that define the roles 
of Federal, State, and tribal governments that give tribes 
authority to self-regulate, that develop infrastructure and 
human resources, eliminate disincentives to investment such as 
dual taxation, create programs that are designed for the long- 
term direct resources to set a high standard of action and that 
preserve the Federal trust and treaty responsibilities is the 
most effective means by which the Federal Government can 
support good governance with tribal nations.
    There is a need to work with Indian communities to develop 
comprehensive policies and analyze existing programs. NCAI is 
always available to cultivate the government-to-government 
relationship between tribes and Federal Governments. We are 
ready to help you facilitate any discussions that will need to 
take place in order to create effective Indian policies.
    Thank you for this opportunity.
    [Prepared statement of Ms. Masten appears in appendix.]
    Senator Campbell. Chairman Cladoosby.

   STATEMENT OF BRIAN CLADOOSBY, CHAIRMAN, SWINOMISH TRIBE, 
                           WASHINGTON

    Mr. Cladoosby. Chairman Inouye, Senator Campbell, members 
of the Committee on Indian Affairs, guests and staff: I am 
honored to have the opportunity to appear before you and share 
my thoughts on good governance and economic development in 
Indian country.
    I would also like to take this opportunity to welcome 
Senator Maria Cantwell to the Senate Committee on Indian 
Affairs. We in Indian country, especially those of us from the 
great State of Washington, look forward to working with her in 
her new capacity and thank her for her support that she has 
shown us thus far.
    For the record, my name is Brian Cladoosby. I am the 
chairman of the Swinomish Indian tribal community. I am also 
the president of the association of Washington tribes.
    Our tribe is located about 70 miles north of Seattle. We 
have about 800 members in our tribe. My tribe is composed of 
descendants from the Swinomish, Samish, Lower Skagit, and 
Kikialus Tribes, which lived in the Skagit Valley region and 
the islands that are now Woodby Island and Camano Island.
    We are a treaty tribe. I am proud to say that my 
grandfather's grandfather signed the treaty for our tribe in 
1855. His Indian name Washington Kalkultsic and his x appears 
in the Point Elliot Treaty.
    Our reservation was set aside by Executive order in 1873 
and it has been the homeland of the Swinomish people for many 
generations. However, today, as a result of the General 
Allotment Act of 1887, also known as the Dawes Act, our 
homeland has been reduced to just over one-half the area of the 
reservation. Our exclusive homeland is now also home to more 
non-Indians than tribal members.
    You are all familiar with the devastating impacts of this 
ill-conceived legislation. Other tribal leaders have told you 
of the multiple problems created by the checkerboard lands 
within the reservations across the United States, the 
fractionated ownership of Indian allotments and the 
jurisdictional conflicts generated by this failed strategy of 
assimilation.
    We have heard these accounts of lost lands, unmanageable 
resources and eroded sovereignty on many occasions. The 
Swinomish people have lived it on a daily basis.
    Over the years the Swinomish people have been involved in a 
variety of conflicts and confrontations over fishing and 
hunting rights, criminal jurisdiction, taxation and gaming 
issues and the regulation of reservation land use.
    Our inherent right to exert jurisdiction over the lands we 
reserved in our treaty is constantly being questioned and 
threatened.
    Recognizing that the your hearing today is about good 
governance and economic development, I would like to turn my 
remarks to my tribe's efforts to make the best of the 
challenging context in which we now live.
    In recent years the Swinomish Tribe has viewed inter-
governmental cooperation as an important vehicle for increasing 
tribal self-determination and expanding our capacity for good 
governance. We truly believe that cooperation and communication 
go a lot further than confrontation and litigation.
    We have entered into a number of agreements with 
neighboring jurisdictions for the provision of major public 
services. There are two major water purveyors in Skagit County, 
the city of Anacortes and the Skagit County public utility 
district. They used to be the main purveyors of water within 
the Swinomish Reservation. We signed an agreement with them and 
they agreed that the Swinomish Tribe would be the only purveyor 
of water within the reservation's boundaries.
    We signed a wastewater treatment agreement with the town of 
LA Conner. We have a police cross-deputization agreement with 
the Skagit County Sheriff's Department. We have a first- of-
its-kind in stream flow water agreement with the Skagit County 
PUD and the city of Anacortes.
    As many of you are aware, there are many disputes involving 
water issues with Indians and non-Indians across the United 
States. Of course, we have the Swinomish Cooperative Land Use 
Program, which I am here to talk about today.
    We have a long history of working well with our neighbors 
and believe firmly that respectful cooperation and coordination 
with other governments are central to our expansion of self-
determination.
    Like many of you, our tribe spends countless hours in 
deliberations, negotiations and policy development to devise 
dynamic forms of conflict resolution. Perhaps slightly 
different than many of you, most of our work is focused on the 
complex and often contentious historic divisions existing 
between jurisdictional interests operating within or around the 
boundaries of the Swinomish Indian Reservation.
    An important outgrowth of these efforts has been the 
Swinomish Cooperative Land Use Program. The program provides a 
framework based on a memorandum of agreement between the tribes 
and Skagit County for conducting activities within the 
boundaries of our checkerboard reservation and a forum for 
resolving conflicts that might arise during the process.
    Land use issues confront virtually every tribe that has 
been impacted by the Allotment Act. This program provides a 
potential model for resolving those issue through a 
collaborative and cooperative process. Our Cooperative Land Use 
Program received a high honors award from the Honoring Nations 
Program administered by the Harvard Project on American Indian 
Economic Development.
    We are grateful for the recognition of the Harvard Project. 
In addition to providing encouragement to other governments 
with whom we might negotiate future agreements, participating 
in the Honoring Nations Program has given us the opportunity to 
learn about the great work being done by Indian communities all 
across the country.
    We believe this MOA is a first of its kind between tribal 
and county governments in the United States. Whether it is the 
first of its kind or one of a proud few, we hope that it 
indicates a growing belief in the benefits of working together 
rather than against each other.
    Establishing a viable, self-sustaining reservation economy 
is a primary goal of our tribe. Unresolved jurisdictional 
issues arising from checkerboard land tenure patterns can be a 
serious obstacle to economic development by deterring 
investment and limiting the tribe's ability to achieve our 
development goals.
    These conflicts impede our tribe's ability to use our land 
and natural resources effectively and in a manner that fully 
benefits our tribal members and indeed benefits all members of 
our reservation, Indian and non-Indian alike.
    Only when our sovereignty is supported by sustainable 
economic development can the goals of self-government be fully 
realized.
    The Cooperative Land Use Program is still a work in 
progress with a long history, and hopefully, with more effort 
and continued cooperation from Skagit County, a bright future.
    The work actually began in the mid-1980's when the tribe 
and the county found themselves in the midst of a 
jurisdictional conflict. Both governments were administering 
zoning, permitting and regulation enforcement programs that 
affected non-Indian fee simple owned lands within the 
reservation's boundaries.
    The resulting confusion over jurisdiction and allowable 
land use engendered skepticism, anti-Indian and anti non-Indian 
sentiments, a litigious atmosphere and serious difficult in 
attracting investment. Rather than litigating these 
jurisdictional issues, the tribe and the county agreed in 1986 
to attempt to resolve the conflict by embarking on a joint 
planning program.
    The philosophy guiding the effort was to overcome 
inconsistencies through mutually agreed land use policy for the 
reservation. Assisted with funding from a northwest area 
foundation and a facilitator from the Northwest Renewable 
Resources Center, representatives from the tribe and county 
began discussions on the issues of mutual concerns related to 
land use.
    We agreed that it would be mutually advantageous to avoid 
costly litigation by resolving differences under a formal 
government-to-government relationship. While the talks 
proceeded slowly, they proved useful. Ultimately, our 
governments were able to craft a series of agreements, 
including a 1987 Memorandum of Understanding recording our 
commitment to work together on a comprehensive land use plan.
    In 1990, we created a draft Comprehensive Use Plan, which 
was the first comprehensive planning effort, attempted by a 
tribe and a county. In a 1996 Memorandum of Agreement between 
the Swinomish Tribe and Skagit County, which delineates a set 
of procedures for administering the Comprehensive Land Use 
Plan, in particular the MOA requires joint reviews of 
proposals, provides dispute resolution mechanisms and affirms 
that cooperative problem solving is the preferred means of 
decision making. A copy of the MOA is attached to the text of 
my comments.
    Because of time, I will spare you the reading of the MOA, 
but I hope you and your staff have an opportunity to review it.
    Where the Cooperative Land Use Program has succeeded, one 
of
    the fundamental reasons for the success of the program is 
that it has institutionalized a process of collaboration. We 
truly believe that we need to institutionalize these agreements 
because we know that elected officials come and go.
    So, in closing, I would just like to thank you for allowing 
me to share with you a little bit of the work that the 
Swinomish Tribe has done in trying to work out cooperative 
agreements with other governments in trying to create an 
economic development base.
    In closing I would also like to thank you for bringing up 
the issue of how the recent court decisions are affecting 
Indians in Indian country. I hope we can work with our 
representatives to figure out a way that we can look at those 
decisions.
    Thank you.
    Senator Campbell. Thank you.
    Ms. Chambers.

  STATEMENT OF ARDITH ``DODIE'' CHAMBERS, COUNCILWOMAN, GRAND 
   TRAVERSE BAND OF OTTAWA AND CHIPPEWA INDIANS OF MICHIGAN, 
                        SUTTONS BAY, MI

    Ms. Chambers. Good morning. I want to thank the chairman 
and the vice chairman for inviting the Grand Traverse Band to 
speak today.
    The issues we are going to talk about are tribal courts and 
issues of separation of power.
    My name is Ardith ``Dodie'' Chambers, the treasurer of the 
Grand Traverse Band of Ottawa and Chippewa Indians, 
Peshabestown, MI. I have served our tribe all of my adult life. 
I was one of the original group of people to bring our petition 
for Federal recognition to Washington in 1978.
    On May 27, 1980, the Grand Traverse Band of Ottawa and 
Chippewa Indians became the first tribe in the United States to 
successfully petition for Federal recognition under the new 
process. Shortly thereafter, I became our tribe's first tribal 
chairperson.
    I am a descendent of Chief Peshabe, who founded the village 
of Peshabetown in 1852, along with other groups of Ottawas. The 
Grand Traverse Band consists of 3,682 members. One-half of our 
members live in our six-county area. The others are scattered 
nationwide and worldwide, because we have some members in 
Germany, as well.
    Today, I will speak on the issue of separation of power in 
our tribe's governing structure. But keep in mind as I testify, 
that I am neither a judge nor an attorney. By a vote of 376 to 
47, tribal members ratified our constitution on February 24, 
1988.
    The U.S. Secretary of the Interior, Donald P. Hodel, 
approved our constitution on March 29, 1988. In chapter 6 of 
our tribe's history book, chapter 6 is entitled ``Tribal Courts 
and Law Enforcement.'' Our history book is called the Mem-ka-
weh, Dawning of the Grand Traverse Band of Ottawa and Chippewa 
Indians by George Weeks. That chapter 6 defines our judicial 
system.
    Significantly, the Grand Traverse Band is one of the few in 
the country that has mandated a separate branch for it's tribal 
court system. It is the only one in Michigan that mandates that 
the appellate structure be part of the independent judicial 
system. Our appellate court consists of three judges.
    Article V, section 6 of our tribal constitution states:

    The tribal judiciary shall be independent from the 
legislative and executive function of the tribal government and 
no person exercising powers of the legislative or executive 
function of government shall exercise powers properly belonging 
to the judicial branch of government.

    Two opinions from our tribal court will demonstrate the 
separation of power and the independence of the judiciary.
    Opinion no. 1. Tribal councilor removed from office, 
conflict of interest. In Re: Referral of John McSauby, Tribal 
Councilor to Tribal Judiciary for Removal from Office. A tribal 
councilor was ordered removed from the tribal council for 
misconduct in office.
    In the GTB constitution, article VII, section 2(a)(3), 
which is your exhibit C, Mr. McSauby sold a piece of his 
property to the tribe while he was a member of the tribal 
council. The judiciary meeting en banc found that he violated 
the constitution, article XII, and section 1 in that his 
personal financial interest in the property sale amounted to a 
prohibited conflict of interest.
    While the judiciary ordered him removed from office, it did 
allow reasonable attorney fees and costs to be awarded to 
Councilor McSauby's attorney.
    Opinion no. 2. Due Process Required Before Disenrollment 
Tribal Membership Upheld. In this appellate decision, Angus A. 
DeVerney, Sr., et al, exhibit E, the court affirmed the lower 
court's decision that a member, once enrolled, is entitled to 
due process before he can be disenrolled. There is no automatic 
disenrollment.
    Mr. DeVerney enrolled himself and his children as minors in 
1982. An adult child attempted to enroll at a later date. The 
membership office discovered that Mr. DeVerney and his children 
had been enrolled with another tribe since 1976. In 1996, the 
membership office attempted to automatically remove the family 
from the membership rolls.
    On appeal, the court found that the lower court's decision 
was not a violation of sovereign immunity as a direct grant of 
right under the constitution was involved. As persuasive law, 
the court looked into the 6th Circuit Court of Appeals, Bartell 
v. Lohiser.
    The court also found that the lower court's ruling to pay 
the per capita funds to the DeVerneys did not violate sovereign 
immunity because the money was not damages, but rather it was 
an entitlement under the Claims Commission docket funds to 
members.
    In reaching its decision, the court cited tribal 
constitution article II, section 2, Dual Membership 
Prohibition, in tribal ordinance 7 GTBC, section 202(b), 
Incorrectly Enrolled Members.
    The Peace Makers Court. In 1999, Harvard University, John 
F. Kennedy School of Government, sponsored Honoring Nations: An 
awards program that identifies, celebrates and shares 
outstanding examples of tribal governance. The program 
conferred an award on our tribal court, Exhibit H. The group 
specifically mentioned our Peace Makers Program.
    In the materials I have submitted with this testimony, I 
have included a description of our Peace Makers Program. That 
is in your exhibit I. The Peace Makers work with children and 
juveniles who are at risk or who commit criminal offenses. The 
unit is a division of our court system.
    The Peace Makers utilize alternative conflict resolution 
strategies to assist young juveniles to accept responsibility 
for their actions and to restore to society what is due it. 
Community service and restitution are important. A recent 
report from our Chief Peace Maker, Paul Raphael dated June 1, 
2001 indicates that he works with 42 youths a week. There were 
seven referrals from the court of tribal prosecutor.
    The Peace Makers have been called to the local public 
school to help resolve conflicts between native and non-native 
students. Young couples with marital problems utilize the Peace 
Makers. Landlord and tenant issues are also resolved.
    For the period of January 2000 through January 2001, Peace 
Maker handled 14 court referrals involving four retail fraud, 
five assaults and two minor in possession. A sample Peace Maker 
agreement is attached as exhibit L.
    I hope this brief summary has informed you of the workings 
of our court. We seek, as a people, to serve justice and to 
promote dispute resolution in a cultural context. Thank you.
    [Prepared statement of Ms. Chambers appears in appendix.]
    Senator Campbell. Thank you. I have a couple of questions. 
Let me start by telling you that we do hearings for two 
purposes. We do them to try to define the problem and the 
second is to try to find some solutions. Boy, since Senator 
Inouye and I have served together, we have heard the problems. 
We know there are a lot more problems than we have solutions. 
You deal with them in the sense of sovereign and good 
governance and self-determination and jurisdiction and all 
those things. They are great big pictures.
    We can pass, I mean with the help of other people in 
Congress, literally any bill that helps Indian people. Getting 
it through the whole process, through the Senate and the House, 
as Sue knows, is a little tougher.
    If we have a friendly administration, we can get it signed. 
But that doesn't mean our job is finished, because the agencies 
sometimes don't implement it in the way we meant. We face that 
all the time. Or they will say there is no money to implement 
it and we come back and we have to go through the whole thing 
again to provide the money so they can implement the darn 
thing.
    Sometimes they don't have the will. Sometimes they don't 
have tribal input. Sometimes they don't notify the tribes of 
the opportunities there under the bill. But we are trying.
    Susan, you spoke of a lot of the problems that we have 
heard many, many times. But in your capacity at NCAI, I would 
really challenge you to try to find specific language to help 
us resolve the problems.
    We have a great staff. Senator Inouye does and I do, too. 
They work together. We are desperate, literally, to try to find 
specific language to resolve some of the things that Indian 
country faces.
    We have had a great few years, the last few years, when I, 
Senator Inouye, and the other members have passed a lot of 
legislation in this committee. You mentioned some of it in your 
testimony.
    There is still a lot more to be done. But come up with 
specific language, if you can, about how we can fix things.
    I certainly was interested in hearing Chairman Cladoosby's 
comments because I think we have to go a long way in looking at 
the effective models that some tribes are already doing. 
Sometimes they are doing it totally without the help or input 
of the Federal Government. They are doing it almost in spite of 
the Federal government and sometimes they are doing it because 
we opened an avenue with some legislation where they have taken 
advantage of it.
    We need to have a better way that we can share those 
things. We hear about it when you come in here. But we don't 
have a real good way of sharing those opportunities or those 
success stories, so to speak, with other tribes.
    Two days ago, I had a meeting with the Northern Cheyenne, 
where I am enrolled. I told them about the successes of the 
Southern Utes that our assistant secretary mentioned. They are 
going to make a trip this October and spend time with the 
Southern Utes to study some of their successes. Some of the 
experiences might not be transferable, but I think some of them 
are.
    We can't really do that here in Washington. That has to be 
done tribe by tribe and it has to be done with some kind of an 
intermediary agency like NCAI that will help network where the 
tribes who have the needs can benefit from the experiences that 
have been successful with the tribes that have already done it. 
That has to be played more on your ball field.
    Ms. Masten. Senator, if I might, we did have some success 
with developing a tribal-State relations brochure that 
showcased best practices. Maybe that is something that Harvard 
and us could partner up with for showcasing the best practices 
in Indian country for economic development. I would be 
interested to talk more about that and possible funding sources 
to support that initiative.
    We would be happy to step forward. I personal am committed 
and our new executive director, Jackie Johnson, has a similar 
commitment to prioritize economic development and 
identification and reduction of barriers in working with the 
agencies to ensure that, you know, those that we can remove 
without legislation, we do, and identification of the barriers 
so that we can pursue legislation to remove those that still 
exist.
    Senator Campbell. I would encourage NCAI to do that and 
share with us specific information that we can try to put in 
bill form.
    Senator Inouye, may I yield to you?
    The Chairman. I thank you very much, sir.
    About 15 years ago, I believe tribal leaders throughout 
this land looked upon the U.S. Supreme Court as the court of 
last resort and believed that they could depend upon the 
justices sitting there to uphold their rights.
    Their rights were denied or abridged, tribes believed that 
they could always go to the Supreme Court and get some relief.
    In recent days, we have noted the development of a trend in 
court decisions that would suggest that this has changed. For 
example, several weeks ago in Nevada v. Hicks, the Supreme 
Court held that tribal courts are not courts of general 
jurisdiction and are not vested with authority to determine 
whether State law enforcement officers who come on their 
reservations to search tribal members homes located on trust 
land are acting within the scope of their authority.
    This is a dramatic departure from what we have considered 
to be the sovereign powers of Indian nations. They also 
declared that exhaustion of tribal court remedies is not 
required before proceeding to Federal court. Now this has been 
the rule for many years, that before you can go to Federal 
court you have to exhaust all remedies before the tribal court. 
But now, the Supreme Court says that, that is no longer the 
case.
    Several weeks ago, in the Atkinson Trading Post case, the 
Supreme Court held that the Navajo Nation has no authority to 
impose hotel occupancy taxes even though the Navajo Nation 
provides fire and police protection and emergency medical 
services to the hotel and its patrons.
    You know, that is a real departure from accepted principles 
of sovereign rights. I could go on and on because there are 
other cases, and these are not cases from 50 years ago. These 
are just cases within the last several years.
    I think the time has come for the Congress to address these 
rulings of the Supreme Court because we are at a very critical 
juncture, and therefore I welcome the nine principles that the 
NCAI has enunciated in their statement. I think that this could 
be a basis of a discussion between tribal leaders and this 
committee to come forth with a comprehensive law setting forth 
basic standards or principles because, if not, this trend will 
continue.
    If this trend continues, then Indian country will no longer 
be Indian country.
    So, I commend the NCAI for coming forth with the nine 
principles. I would like to arrange a meeting soon with Indian 
leaders to begin discussing this because I think time is of the 
essence.
    Mr. Vice Chairman, I have many questions.
    I would like to commend Chairman Cladoosby on receiving the 
high honors from Harvard.
    I will be submitting a question to you, asking your opinion 
on how we can apply your principles on bringing about better 
relations.
    Mr. Vice Chairman, before I relinquish the Chair I would 
like to note the presence of the assistant secretary. I do not 
know if the witnesses realize that he has been sitting here 
listening to all of you.
    In all the years that I have been a member of this 
committee, I think this is the first time that the Assistant 
Secretary of the Interior in charge of Indian Affairs has 
stayed to hear testimony of Indian leaders without being urged 
to do so.
    I wish to commend you, Mr. Secretary.
    [Applause.]
    The Chairman. I believe that you can tell by the applause 
that they appreciate your presence here, sir.
    So, Mr. Vice Chairman, I would like to submit questions to 
the three witnesses and ask them to respond with their thoughts 
on my statement here. I think it is very urgent that we get 
together.
    Ms. Masten. Senator, I just wanted to add that we are 
planning for a forum with tribal leadership the week of 
September 11 to do just that. So, we welcome you. We will have 
further discussions. We have had initial discussions with your 
staff with regard to that. We will continue to keep them 
informed on our progress toward that.
    Senator Campbell. Did you have something final to say, 
Chairman Cladoosby?
    Mr. Cladoosby. Yes; two things. Our program that we have 
initiated with Skagit County is a model. I cannot thank Harvard 
enough. I think these models need to be proven to the Indians 
and non-Indians around the United States that it can work. Like 
you said, Senator Campbell, it might not work for your tribe 
exactly how it works for ours, but it is a start. It is a basis 
and a foundation.
    In response to Senator Inouye's remarks about the recent 
Supreme Court decisions, they do seem out of step with the 
support that we have received recently from Congress and in 
recent Executive orders for tribal sovereignty and self-
government.
    When courts do question tribal regulatory authority on our 
reservations, they do undermine the economic vitality and 
social development that has emerged from tribal self-
government. So, those are very, very serious cases.
    We look forward to working with you to ensure that the good 
governance that we celebrate today will be strengthened and 
that economic development, so long coming in Indian country, 
will continue. We need to work together somehow to try to look 
at these cases.
    I agree with Senator Inouye that a meeting with leaders is 
needed.
    So, I thank you for the time that you have given the 
Swinomish Tribe today. I appreciate all your comments.
    Senator Campbell. We thank you. We will submit some 
questions in writing, too.
    We will now go to the last two people testifying. That will 
be Andrew Lee of the Harvard Project and Jerry Reynolds, 
associate director of Informational Services, First Nations 
Development Institute, Fredericksburg, VA.
    Go ahead, Mr. Lee.

   STATEMENT OF ANDREW LEE, EXECUTIVE DIRECTOR, THE HARVARD 
   PROJECT ON AMERICAN INDIAN ECONOMIC DEVELOPMENT, JOHN F. 
KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY, CAMBRIDGE, MA

    Mr. Lee. Good morning, Mr. Chairman and Mr. Vice Chairman. 
Thank you for the opportunity to be here with you today. My 
name is Andrew Lee. My Seneca name is Ono-dah-geyh. I have the 
pleasure of serving as the executive director of the Harvard 
Project on American Indian Economic Development, which is 
housed at the John F. Kennedy School of Government at Harvard 
University.
    For the past 15 years, the Harvard project has been working 
to understand the conditions under which sustained, self-
determined social and economic development is achieved on 
American Indian reservations.
    Collaborating with the Udall Center for Studies in Public 
Policy and the Native Nations Institute, both at the University 
of Arizona, our activities include research, advisory services, 
and executive education for tribal leadership.
    Additionally, the Harvard Project administers Honoring 
Nations, a national awards program that identifies, celebrates, 
and shares outstanding examples of good governance.
    Mr. Chairman, I believe the most ambitious challenge facing 
the Indian country today can be posed in a single question: How 
can tribes build and sustain healthy, prosperous Indian 
nations?
    Certainly there are no easy answers, but the Harvard 
Project's research points out very clearly that successful 
Indian nations assert the right to govern themselves and 
exercise that right effectively by building capable and 
culturally appropriate institutions of self-governance.
    Governance goes a long way toward explaining why some 
tribes are able to break poverty, dependency and their related 
social ills while other languish. Fortunately, a growing number 
of tribal success stories are emerging from Indian country.
    As director of Honoring Nations, I have witnessed the 
astonishing success that tribes achieve when they put 
themselves in the driver's seat for decisionmaking. I have been 
inspired by those tribes that stop insisting others are 
responsible for solving their problems and instead craft 
sovereign solutions.
    I have seen how program success hinges on such attributes 
as accountability, performance-based tracking and 
institutionalization. In sum, Honoring Nations' 32 award-
winning programs give us many reasons to be optimistic about 
the future of Indian country.
    Now, in discussing economic development specifically, the 
importance of tribal governance cannot be overstated. Let me 
explain. In our work at the Harvard Project, we often encounter 
two different approaches to economic development. The first is 
a ``planning and projects'' approach, grounded in the idea that 
economic development is about getting the next big Federal 
grant or picking the one winning project that will magically 
solve the reservation's economic problems.
    This is approach is destructive and shortsighted. It 
encourages tribes to become expert grant-seekers. It engenders 
institutional dependency whereby tribal governments become mere 
appendages of the Federal apparatus.
    And history demonstrates that this approach produces 
economic development failures.
    The second approach is a ``nation building'' approach. 
Nation building tribes recognize that economic development is 
first and foremost a political challenge and that the task is 
to create an environment where businesses and people can 
flourish. These tribes displace the role of Federal agencies, 
focus on the exercise of sovereignty and create capable 
institutions of self-governance.
    Critically, these nation-building tribes are the ones that 
are breaking away from the pack economically, socially, 
politically and culturally.
    So what institutional attributes characterize nation 
building and serve as the underpinnings for economic 
development? Our research points to at least five. First, 
tribes must have stable institutions and policies. The 
experience of the developing world demonstrates that unstable 
institutional environments fail to attract investment both 
within and outside the nation. The same holds true for Indian 
country.
    Second, tribes need to establish fair and effective dispute 
resolution mechanisms. We find that the unemployment rate among 
tribes with independent judicial systems is on average five 
percentage points lower than those tribes that don't have 
independent judiciaries. Why? Investors tend to look for court 
systems that will give them a fair shake. They tend to shy away 
from places where court decisions are arbitrary or the courts 
are controlled directly by politicians.
    Third, economically successful tribes tend to have a clear 
separation of business and politics. Tribal enterprises that 
are formally insulated from political interference are four 
times as likely to be profitable from those that are not.
    Fourth, tribes must have capable bureaucracies. Contracting 
and compacting place a premium on efficient bureaucracies that, 
at the most basic level, can get things done.
    Finally, successful economies in Indian country stand on 
the shoulders of culturally appropriate governing institutions. 
It is no coincidence that tribes functioning under essentially 
foreign governing systems have a long history of economic 
failure. The task for tribes is to equip themselves with the 
institutional tools that fit their unique societies.
    To conclude, our research, coupled with the lessons taught 
by our Honoring Nations winners, suggests that the Federal 
Government has a role in fostering economic development on 
Indian reservation. Of primary importance, self-determination 
should remain the cornerstone of Federal Indian policy. It is 
the only policy in over a century that has brought improvement 
to the material health of Indian country.
    To withdraw from self-determination would not only reverse 
the successes of the past 30 years, but it would ultimately 
burden the Federal Government and America at large.
    Moving forward, we urge the Government to expand 
opportunities for tribes to control programs through compacting 
and contracting, and fully break away from the ``planning and 
projects'' mentality by supporting institutional capacity 
building for tribal governments.
    If there is one thing I would stress, Mr. Chairman, and Mr. 
Vice Chairman, it is that governance matters and self-
governance works.
    Thank you for the opportunity to be here today.
    [Prepared statement of Mr. Lee appears in appendix.]
    Senator Campbell. Mr. Reynolds, why don't you go ahead? I 
have some questions of Mr. Lee. I will hold them until you are 
finished.

      STATEMENT OF JERRY REYNOLDS, ASSOCIATE DIRECTOR OF 
 INFORMATIONAL SERVICES, FIRST NATIONS DEVELOPMENT INSTITUTE, 
                       FREDERICKSBURG, VA

    Mr. Reynolds. Very well. Thank you, Senator. Greetings, Mr. 
Chairman and Mr. Vice Chairman. Members of the committee and 
staff: My name is Jerry Reynolds. I am with First Nations 
Development Institute. For the second time before the 
committee, I think, I am pinch hitting for our president, 
Rebecca Adamson and vice president, Sherry Salway Black, who 
are engaged in other First Nations obligations.
    We are pleased and privileged to take part. We know how 
hard you work and how hard you try. We take note of your 
successes and all that you do. Please include us if we can help 
you in the important work that you do.
    We felt that the contribution that we could make today was 
to emphasize the role of philanthropic, nonprofit activity on 
good governance and economic development in Indian country. I 
don't think I have to tell anyone here that the demands on 
tribal government often exceed the demands on other forms of 
government.
    I was a reporter at Indian Country Today from 1988 to 1993. 
I would often go over to talk with the late, lamented Alex 
Lunderman, Sr., chairman of the Rosebud Sioux Tribe. In the 
course of 1 hour, he might have people coming in to help him 
with commodities or women, infant, and children benefits. He 
might give someone some money. He might be on the phone with a 
congressman. He might be making a decision about the tribe's 
economic future.
    So, that was a first-hand lesson on the enormous demands on 
tribal governments and tribal leaders. I think everyone here is 
well aware, too, that those demands are increasing between 
Federal devolution and the rising in youth population on 
reservations.
    I had the opportunity to be in Seattle at the beginning of 
April at the Wisdom of the Give Away Conference that First 
Nations held. It was on Native American philanthropy. The 
Umatillas have been mentioned.
    At that meeting, Les Minthorn, a tribal councilman with the 
Confederated Tribes of Umatilla Indians said something I think 
is very worth noting. He said that as the demands increase on 
tribal governments, whether you can fulfill those demands or 
not, you need to deal with them one way or another.
    Well, First Nations has teamed up with the National Indian 
Gaming Association for the first, we believe, national survey 
of Indian gaming nation charitable giving. It is in a late 
draft stage and I will submit it to the record when it is in 
final form or if the record is not open, I will get it to your 
staff.
    Senator Campbell. That will be fine.
    Mr. Reynolds. Among the findings that I know will not 
change are that a majority of Indian gaming nations make 
charitable contributions without a formalized process or 
structure and that the majority of recipients of tribal 
contributions are non-Indian nonprofit organizations. We 
believe this reflects the limited number of native nonprofit 
organizations operating within some Native American communities
    In conclusion, I think that I would simply like to 
emphasize the role of nonprofit intermediaries, native 
nonprofit intermediaries and their potential role in 
stabilizing governments and providing for economic development 
by taking away some of the demands that are made on tribal 
governments. They can meet some of those demands.
    In fact, among the many outstanding case studies that the 
Harvard Native American Project has put together, and you can 
read about them in the book that is back on the mantle, in 
many, many cases you will find that it is nonprofits that are 
working with tribal governments and other organizations, State 
and Federal agencies and helping to facilitate this economic 
development.
    I would mention in particular the Yukana Development 
Corporation in Alaska where actually the tribe's willingness to 
create a corporation enabled the tribal government to 
concentrate on politics while others concentrated on business. 
This is the kind of process that nonprofits and tribal 
government created, governmental entities--I won't get into all 
the details of tax law at this point in the day.
    We know that these considerations are often not noted. They 
seem to have a little bit of a low profile when we discuss 
economic development. So, we felt that our role should be to 
emphasize what nonprofits can do and their value to good 
governance, stability of governance and economic development.
    I will be very happy to answer any questions. As I say, I 
will fill out the record when this survey becomes final.
    Senator Campbell. Thank you.
    Let me start by telling you, Mr. Lee, that I have briefly 
read your testimony. I have to tell you, it is terrific 
testimony. I have always been very impressed with the Harvard 
Project. I guess it is because you share my philosophy about 
how to make things better in Indian country.
    I have never believed that the way you help make Indian 
country better is to make them more dependent on the Federal 
Government.
    You mentioned in your testimony that some people have 
become expert grant seekers. There is no question about it. 
There is a keen competition about getting grant money. To me it 
flies in the face of sovereignty. How can a nation dependent on 
another nation and still declare itself sovereign?
    We have the problem, of course, of fitting that into the 
trust responsibility that we are obliged to provide the tribes. 
So, we have to find a balance, you know that. But there is no 
doubt that just depending on grants for jobs, we have something 
backward.
    You know, in the free enterprise system, it seems to me 
what you do is provide a service. You provide a product and 
then you compete out there and you get the thing sold or you do 
whatever you have to do. That provides jobs.
    But in some conditions with some tribes, the way to create 
the jobs is to get a grant and that grant provides the jobs for 
the duration of that grant. I mean you have explained that very 
carefully. It is not very far-sighted, as I think your 
testimony indicates.
    It seems to me as a Federal Government, what we need to do 
is help provide the conditions for growth. The tribes can 
flourish in a democratic market-based system. I know they can 
do it. The places where they have had some successes, they have 
proven over and over they can do it if they are given the 
opportunity to do it.
    So, it is really a tough question, but one of the things 
that makes this tough is that we have an institutionalized 
bureaucracy that is afraid of letting tribes be too 
independent. You know that. I don't mean to say it to our new 
Assistant Secretary, but you know, we have known that for years 
that in some cases the agencies that are authorized and 
empowered to help Indians become more independent in fact put 
some roadblocks in there because they worry about the loss or 
authority or turf or jobs or whatever the reason is. We have to 
get away from that mentality, too, if we are truly going to let 
tribes be free.
    I just wanted to tell you that I don't really have any 
questions. I want to submit some in writing to both of you. But 
that testimony really hits the nail on the head. Unfortunately, 
in some circles it probably offends some people because 
somebody probably could misconstrue that to mean, ``Do you mean 
you are going to pull the rug out from under the tribes?''
    It is not that at all. We have to have a new way of 
thinking and get away from this mindset that somehow government 
has all the answers. Most tribes don't want the government to 
have the answers to their problems. They want to have the 
answers to their problems.
    We have to help create conditions so that tribes cannot 
only define the problems, but find solutions and give them the 
opportunities to be able to do it.
    Senator Inouye, do you have any questions or comments 
before we close down?
    The Chairman. Thank you. I would like to join you in 
commending Mr. Lee for his testimony. I have always maintained, 
especially in the last 15 years or so, after serving on this 
community for some time, that the best laws are laws made my 
Indians in Indian country for Indians, because all to often, 
well-meaning non-Indians living in Washington, living in air-
conditioned homes, not really knowing the conditions in Indian 
country, draft laws that do not serve Indian country well.
    So, your statement is right on target. However, as you 
indicated, if there are to be successful governments, there 
must be an environment that would be conducive to success. When 
one looks at some of the conditions in Indian country, you see 
conditions that are just horrendous, conditions which would be 
unacceptable, even in Third World countries.
    Having said that, many of those who want to do business 
with Indian country have repeatedly suggested that it would 
help if Indian nations had stable governments. They frequently 
cite one example. The turnover is too high. Every year there is 
a change of government.
    Do you have any suggestions at to what can be done? I 
realize that Indian governments have to be relevant to their 
conditions. For example, there is a tribe in New Mexico where 
families take turns in governing.
    Other than that, do you have any suggestions?
    Mr. Lee. I am very glad you asked that question, Mr. 
Chairman. Let me suggest that the problem has less to do with 
turnover in tribal government as it does with inconsistent 
policies or institutions that change rapidly.
    The problem is not necessarily the politicians themselves 
and their turnover, but the institutions. We work with a number 
of the Pueblos in New Mexico. They have rapid turnover. Some of 
those Pueblos, like the Cochiti Pueblo, Pueblo of Pojoaque, and 
many other Pueblos have elections every year.
    What they have there, in the ones that are economically 
successful, is stability in institutions. The policies don't 
change from administration to administration. So, I think the 
appropriate way to frame this issue is stable institutions, 
rather than turnover in government.
    That said, I think there are a number of things that tribes 
should be thinking about. I think Mr. Reynolds has it exactly 
right. The civil society sector should be holding tribal 
governments accountable.
    What the Federal Government can do, I think, is change the 
incentive structure. If it is true that many tribal governments 
are experts in the grantsmanship game, then their incentive is 
to perform according to how the Federal Government wants them 
to perform rather than how their citizens demand that they 
perform.
    I think shifting around that incentive structure will have 
a tremendous difference. The implications for policy are that 
block grants might be the appropriate way to go. I very much 
see devolution as providing good opportunities if it is done 
properly.
    Another way the Federal Government can help in this regard, 
is to have performance-based grants rather than having a 
checklist of boxes that a tribe must go through before a grant 
is made. The Federal Government might consider doing midstream 
and post-investment appraisals.
    Those kinds of things shift the accountability to the 
people and the tribal governments, and I think, with more 
accountability, we will eventually see less turnover and 
greater stability in the vary institutions that we are talking 
about today.
    The Chairman. Mr. Reynolds, you submitted a couple of 
articles that speak of section 7871 of the Internal Revenue 
Code.
    Mr. Reynolds. Correct.
    The Chairman. What are some of the benefits that Indian 
country can derive from the application of that section?
    Mr. Reynolds. Yes, thank you, Senator. The section 7871 
determination is for tribal government entities. Often people 
say it is nonprofits, but that is a little tricky terminology. 
It is for tribal governmental entities. It assures grant makers 
that the grant they made counts toward their payout. In other 
words, a simple way to say it is that it is tax deductible.
    Tribes have the benefit of not having to file with the 
State Secretary of State in their State if they get a section 
7871 determination. This is helpful because if the tribe ever 
wants to change the charter of that organization, it will not 
risk running into some problem within the State where they 
maybe don't want to see that charter changed for various 
reasons. They will just be able to do it. They won't have to 
answer to that Secretary of State.
    In other words, they are not under the oversight of State 
government. They answer to Federal law. So, we consider it as 
an extension of sovereignty to do that.
    They also have much less of a compliance burden because 
they do not have to file Form 1023 initially or Form 990 every 
year thereafter, reporting on their activities to the State. 
Now, we always advise that because compliance and reporting is 
the comfort zone for grant makers and philanthropic community 
as a whole, shall we say, we always advise that tribes should 
acknowledge donations and report on them publicly, maybe in an 
annual report.
    However, it is quite an advantage in terms of the 
compliance burden not to have to constantly report to the 
State. So, those are two of the major advantages that tribes 
can realize from section 7871 for their government entities.
    The Chairman. If the Navajo Nation decided to use section 
7871 and set aside a large parcel of land within their 
reservation borders and this section 7871 organization leased 
this property to a hotel operation to conduct hotel business, 
would the terms of the contract be subject to State scrutiny or 
approval or disapproval?
    Mr. Reynolds. That is a fascinating question. I think we 
are getting into Atkinson here, maybe. It is fascinating. I am 
not normally known for holding back when I can plunge over the 
verge. I am tempted to do so here. I don't know the exact 
answer to that, but I think the possible answer is that there 
are real possibilities there.
    I think the tribes should explore those possibilities. I 
guess part of what we hope to accomplish today is to urge the 
committee and the Congress at large to help them explore those. 
I think it might make a good topic for your conversations with 
NCAI.
    We would be very happy at First Nations to provide you 
references to the tax attorneys that we have used who could 
give you truly reliable information. I am a little bit worried 
about myself there. I know some, but not enough.
    The Chairman. We will be calling upon you, sir.
    Mr. Reynolds. I hope so. I just can't predict this Supreme 
Court, Senator.
    The Chairman. If I may, I would like to submit a few 
questions to Mr. Lee and Mr. Reynolds.
    Senator Campbell. Please do.
    The Chairman. Thank you very much.
    Mr. Secretary, you have established a new record and a new 
standard, sir.
    Mr. McCaleb. After you gave me that ``atta boy,'' I had to 
come back.
    The Chairman. Thank you very much.
    Senator Campbell. With that we will keep the hearing record 
open for 2 weeks. If anyone has additional things they would 
like to comment on to be included in the record, do so in the 
next 2 weeks.
    We thank all the witnesses.
    The hearing is adjourned.
    [Whereupon, at 11:38 a.m. the committee 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. Daniel K. Inouye, U.S. Senator from Hawaii, 
                 Chairman, Committee on Indian Affairs

    The committee meets this morning to receive testimony on the 
governmental practices that foster the potential for economic 
development in Indian country.
    I am pleased to know that the academic research conducted by the 
Harvard University Project on Economic Development has documented that 
the fundamental cornerstone of good governance is sovereignty.
    Without sovereignty, in all likelihood, Indian people would have 
long ago been assimilated into the dominant society and would no longer 
have any lands or communities that you have made your own. Your 
children would not know their culture, their traditions, their language 
or the great contributions their ancestors have made to America.
    All of this would have been wiped out over time, because American 
law draws a sharp distinction between those who have a government-to-
government relationship with the United States and those people who are 
defined by reference to their race or ethnicity.
    Although there are still many Americans who don't seem to 
understand this distinction. That which makes the indigenous, native 
people of this country unique.
    The members of this committee do understand this most fundamental 
of all principles, and we know that it is on this basis that the 
treaties with Indian nations were entered into, and that it is on this 
basis that the Congress has, for over 200 years, enacted legislation to 
address conditions in Indian country.
    But when we speak of good governance, we must be much more careful 
that we are not calling upon Indian governments to be a mirror 
reflection of other governments.
    As the Navajo Nation Supreme Court expresses so effectively, your 
traditional laws have governed the relations among people in your 
communities for hundreds of years before this country was ever founded. 
You have customs and mores and ways of resolving disputes that have 
proven effective over time, and have stood the test of time. So the 
dominant society must not rush to judgment if your governmental 
mechanisms may differ a little or even a lot from those they are 
accustomed.
    Having said that, I believe the Harvard Project has tried to 
examine those governance practices that are the most effective from the 
vantage point of what works in Indian communities because those 
practices have the greatest degree of acceptance from the citizens of 
the tribal government--and thereby, the consent of the governed.
    Indian nations that are strong and healthy will be those in the 
best position to shape the future of Indian country. Those of us on 
this committee who are dedicated to your cause want to do everything we 
can to assist you in building and maintaining governance structures 
that will serve your children and your grandchildren well.
                                 ______
                                 

  Prepared Statement of Neal McCaleb, Assistant Secretary for Indian 
          Affairs, Department of the Interior, Washington, DC

    Good morning, Mr. Chairman and members of the committee. I want to 
thank you for the opportunity to appear before you today to speak about 
tribal government practices and how that influences economic 
development in Indian country.
    The development of stable and responsive tribal governments, with a 
sound strategy for and commitment to economic growth, is a prerequisite 
for prosperity and economic opportunity in Indian country.
    There are many contributing elements to economic success including 
access to market opportunities, access to capital, natural resources, 
human resources, governing institutions and tribal culture. There have 
been tribal successes where there was a lack of natural resources, 
minimally skilled human resources and even poor access to markets. 
These successes have been in spite of these economic liabilities and 
have been accomplished by determined tribal leadership building stable 
and effective sovereign governmental institutions.
    The policies contained in the Self-Determination and Self-
Governance Acts have been the seed bed of growth for sovereignty and 
the development of strong and effective tribal governments that are 
essential for sustainable economies.
    Even now, tribes are asserting their self-governance influence 
through the Economic Development Subcommittee of the Bureau of Indian 
Affairs' [BIA] Tribal Budget Advisory Committee by developing 
strategies on how the BIA and other Federal agencies can be more 
effective in encouraging prosperity and economic parity for American 
Indian tribes within these United States.
    Conversely, it requires a viable and vigorous economy to provide 
sovereign governments with the tax base to pay for the essential 
infrastructure and services required by their constituents and 
businesses.
    With that in mind, I would like to talk briefly about some of the 
successful enterprises that exist in Indian country and their vision in 
making things happen. One of the more notable examples is the 
Mississippi Band of Choctaw Indians [MBCI]. MBCI was federally 
recognized in 1945. By the late 1960's, tribal leaders were unimpressed 
with their improvement, despite over 15 years of effort by Federal 
employees sent to help them. MBCI remained the poorest tribe in the 
poorest county in the poorest State. Tribal leaders took responsibility 
and initiated projects designed to create jobs for MBCI members. The 
first enterprise for the tribe was Chahta Development, a construction 
company that built houses under a low-income housing program for a 
small profit while also training and employing tribal members in a 
building trades skill. From this modest beginning, the tribe began 
tackling other ventures, in some cases seeking and obtaining Federal 
assistance through the Indian Finance Act. MBCI is now a major economic 
engine in northeast rural Mississippi, providing a total direct and 
indirect impact from MBCI and its affiliate companies of 12,112 jobs, 
$173M in wages, $16.7M in taxes and $9.1M in rent payments. Currently, 
the tribe is engaged in the development of its own natural gas fired 
electric generating plant. Williams Energy is conducting a feasibility 
study, and based on the results, construction could begin in 6-8 
months.
    Another success story is told by the Confederated Tribes of the 
Umatilla Indian Reservation, located in rural northeast Oregon. Their 
economy was based on natural resources, primarily fishing, grain and 
timber. Today, the tribe has diversified into commercial developments 
such as a trailer court, a grain elevator, the Wildhorse Casino, a 
hotel, an RV park, a golf course, a solid waste transfer station and 
the Tamastslikt Cultural Institute. The tribe is now the second largest 
employer [1,100] in Umatilla County, following only the State of 
Oregon. Their operating budget has increased from $7,559,950 in January 
1992 to $94,157,875 in January 2001.
    The Southern Ute Tribe, located in rural southwestern Colorado, 
provides another model of economic success. That tribe has taken 
control of its own oil and gas production. In 1992, the tribe 
established a tribal production corporation [Red Willow Cooperation], 
and in 1994 it acquired a majority interest in a gathering pipeline 
company [Red Cedar]. In addition, the tribe has expanded by investing 
in other oil and gas projects in the west, and is investing its energy 
fuels revenues into other commercial enterprises.
    Using knowledge gained from managing and operating it's own 
reservation companies, the tribe has acquired production properties in 
Texas that produce 20M cubic feet of gas per day. It has invested in an 
offshore well in the Gulf of Mexico, and has entered into a partnership 
with the Ute Indian Tribe of the Unitah and Ouray Indian Reservation 
and the Dominion Oil Company to explore and develop conventional oil 
and gas from the former Naval Oil Shale Reserve No. 2. The tribe is 
also evaluating the purchase of shopping malls and a drug store chain 
in Texas and Arizona.
    The tribe does not release financial information on their 
enterprises, but it's reported that the income to the tribe is in 
excess of $250M per year. The Wall Street rating houses of Fitch and 
Standards & Poor recently gave the tribe a triple A rating on the 
tribe's development bonds.
    The role of the Federal Government should be to remove obstacles to 
economic development [especially those created by Federal rules and 
actions], create incentives, and provide technical, financial and other 
assistance to tribes, tribal members and public and private sector 
businesses willing to promote economic activities in Indian country.
    The initial priority is for the Federal Government to come together 
with tribes to develop a straightforward approach on how we all can 
work toward the integration of program services and coordinate 
activities in the pursuit of economic parity for Indian country. 
Congress has provided us the mandate and authority under the Indian 
Employment, Training and Related Services Demonstration Act of 1992 
[Public Law l02-477], as amended; the Native American Business 
Development Trade Promotion and Tourism Act of 2000 [Public Law 106-
464]; and the Indian Tribal Regulatory Reform and Business Development 
Act [Public Law 106-477].
    The goal of the subcommittee, I mentioned earlier, is to develop a 
strategy to coordinate and integrate all available resources from the 
tribal, Federal, private and public sectors into one comprehensive 
approach that will develop businesses, enterprises, and tribal 
government services and provide meaningful living wage employment in 
Indian country. The subcommittee has identified 10 major tasks to be 
accomplished. Each of the tasks is to be examined by a sub-subcommittee 
for past studies and recommendations, current working models, available 
resources, legislative and regulatory authorities, budget and resource 
coordination, and integration. These sub-subcommittees are named for 
the general subject matter of their inquiries, as follows: [1] Tribal 
Business Development Corporations and Tribal Venture Capital Funds; [2] 
Taxation & Incentives; [3] Tribal Economic Development Models; [4] 
Indian Finance Act; [5] Tribal Courts; [6] Federal Set Aside 
Procurement; [7] Technical Assistance Centers; [8] Natural Resources & 
Energy Development; [9] Tribal Infrastructure; and [10] Employment 
Development.
    The first working meeting of the subgroup is being held this week. 
The? first action was to contact representatives from all Federal 
programs [HUD, SBA, ANA, Census, EPA, Energy, et cetera] that provide 
economic development assistance or statistical information to tribes 
and invite them to participate in the effort. The subcommittee is 
planning on providing its initial findings and recommendations to the 
full committee and the participating tribes in October.
    BIA's Office of Economic Development is committed to economic 
development that enhances the lives of Indians and stabilizes the 
future of Indian tribes. In the more successful tribes and Indian 
business enterprises around the country, the BIA has observed some 
common elements. BIA has noted some common themes where Indian economic 
development is lacking, and through study and consultation with tribal 
leaders, believes that a few initiatives would significantly improve 
the current disparity between the few American Indian tribes and 
businesses that are doing well, and those that are not.
    Ultimately, the relative economic success and vitality of any 
nation is a public--private effort that combines the resolve of the 
government policymakers and the imagination and appetite for risk of 
entrepreneurs to create a healthy environment for enterprise and 
respect for each others unique point of view. Government will always be 
focused on the ``common good'' while the entrepreneur has to be driven 
by an anticipation of profits as a reward for it's risk.
    Thank you, again, for the opportunity to speak on a subject that is 
near and dear to my heart. I will be happy to answer any questions you 
may have.
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