[Senate Hearing 107-647]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-647
 
      INDIAN TRUST ASSET AND TRUST FUND MANAGEMENT AND REFORM ACT
=======================================================================



                                HEARING

                               BEFORE THE

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   ON

                                S. 2212

TO ESTABLISH A DIRECT LINE OF AUTHORITY FOR THE OFFICE OF TRUST REFORM 
 IMPLEMENTATION AND OVERSIGHT TO OVERSEE THE MANAGEMENT AND REFORM OF 
INDIAN TRUST FUNDS AND ASSETS UNDER THE JURISDICTION OF THE DEPARTMENT 
  OF THE INTERIOR, AND TO ADVANCE TRIBAL MANAGEMENT OF SUCH FUNDS AND 
         ASSETS, PURSUANT TO THE INDIAN SELF-DETERMINATION ACT

                               __________

                             JULY 30, 2002
                             WASHINGTON, DC












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___________________________________________________________________________
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                      COMMITTEE ON INDIAN AFFAIRS

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

KENT CONRAD, North Dakota            FRANK MURKOWSKI, Alaska
HARRY REID, Nevada                   JOHN McCAIN, Arizona,
DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
PAUL WELLSTONE, Minnesota            CRAIG THOMAS, Wyoming
BYRON L. DORGAN, North Dakota        ORRIN G. HATCH, Utah
TIM JOHNSON, South Dakota            JAMES M. INHOFE, Oklahoma
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
S. 2212, text of.................................................     2
Statements:
    Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, 
      vice chairman, Committee on Indian Affairs.................    20
    Conrad, Hon. Kent, U.S. Senator from North Dakota............    21
    Inouye, Hon. Daniel K., U.S. Senator from Hawaii, chairman, 
      Committee on Indian Affairs................................     1
    Jandreau, Michael, chairman, Lower Brule Sioux Tribe.........    26
    Johnson, Hon. Tim, U.S. Senator from South Dakota............    19
    Manuel, Edward, chairman, Tohono O'odham Nation, Sells, AZ...    28
    Martin, James T., executive director, United South and 
      Eastern Tribes, Nashville, TN..............................    31
    McCain, Hon. John, U.S. Senator from Arizona.................    19
    McCaleb, Neal, assistant secretary for Indian affairs, 
      Department of the Interior, Washington, DC.................    21
    Small, Geraldine, president, Northern Cheyenne Tribe and 
      chairperson, Montana-Wyoming Tribal Leaders Council, Lame 
      Deer, MT...................................................    23

                                Appendix

Prepared statements:
    Daschle, Hon. Tom, U.S. Senator from South Dakota............    39
    Intertribal Monitoring Association on Indian Trust Funds.....    47
    Jandreau, Michael............................................    55
    Johnson, Hon. Tim, U.S. Senator from South Dakota............    41
    Manuel, Edward,..............................................    61
    Marshall, Clifford, chairman, Hoopa Valley Tribe of 
      California.................................................    42
    Martin, James T..............................................    70
    McCain, Hon. John, U.S. Senator from Arizona.................    41
    McCaleb, Neal................................................    45

Note: Other material submitted for the record retained in 
  committee files.











      INDIAN TRUST ASSET AND TRUST FUND MANAGEMENT AND REFORM ACT

                              ----------                              


                         TUESDAY, JULY 30, 2002


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The committee met, pursuant to other business, at 11:35 
a.m., in room 106, Dirksen Senate Building, Hon. Daniel K. 
Inouye (chairman of the committee) presiding.
    Present: Senators Inouye, Campbell, Conrad, Johnson, 
McCain, and Thomas.

 STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM HAWAII, 
             CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

    The Chairman. The Committee on Indian Affairs meets again 
this morning to receive testimony on S. 2212, the Indian Trust 
Asset and Trust Fund Management and Reform Act of 2002.
    This measure was introduced on April 18, 2002 by Senator 
John McCain for himself and Senators Daschle and Johnson as a 
discussion draft bill.
    The stated purpose of this bill is to establish a direct 
line of authority for the Office of Trust Reform Implementation 
and Oversight to oversee the management and reform on Indian 
trust funds and assets, and to advance tribal management of 
those trust funds and assets.
    [Text of S. 2212 follows:]
      
      

  
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The Chairman. Now, I am pleased to call upon a 
distinguished member of the committee, the former chairman of 
the committee, and the principal sponsor of S. 2212, Senator 
John McCain.

    STATEMENT OF HON. JOHN McCAIN, U.S. SENATOR FROM ARIZONA

    Senator McCain. I thank you, Mr. Chairman, and Mr. Vice 
Chairman. I thank you for scheduling today's hearing on S. 2212 
that I sponsored with Senators Daschle and Johnson in response 
to continuing problems plaguing the Department of the 
Interior's management of Indian trust funds.
    Mr. Chairman, since we have been discussing the same issue, 
I would like to have my complete statement be made a part of 
the record so that we can move forward with the hearing, except 
a comment that Senators Daschle and Johnson and I recognize 
that legislation can and should be modified and it was 
certainly our intention to be open to proposed changes based on 
the recommendations of the tribal task force and others.
    Some of the recommendations require additional 
deliberation, but I don't think we should hold back on 
modifications. It is clear to even the most casual observers 
that change in the underlying laws is needed and it is needed 
now.
    We have been through countless hearings, GAO 
investigations, court battles, further delays in the changes we 
know we can make now will continue the long and sorry history 
of mismanagement and as has already been mentioned, in recent 
days the Federal courts are finding it necessary to accept an 
even larger role in dealing with the consequences of 
mismanagement by the Department and Congressional inaction.
    The bottomline is status quo is unacceptable and I hope we 
can move forward on this very important issue.
    I thank the witnesses for being here today. I thank Mr. 
McCaleb and the other witnesses and I thank you, Mr. Chairman.
    The Chairman. Your full statement will be made a part of 
the record, Senator McCain.
    [Prepared statement of Senator McCain appears in appendix.]
    The Chairman. I will now call on Senator Johnson.

 STATEMENT OF HON. TIM JOHNSON, U.S. SENATOR FROM SOUTH DAKOTA

    Senator Johnson. Thank you, Mr. Chairman for holding this 
timely hearing. I want to commend my friend and colleague, 
Senator McCain as well for the extraordinary leadership that he 
has exhibited on this chronic and long-standing problem.
    I want to acknowledge that on the panel today is Chairman 
Mike Jandreau of the Lower Brule Sioux Tribe. Mike has served 
on the Department of the Interior's Trust Fund Reform Task 
Force. He provided outstanding leadership in a wide range of 
Native American issues over the years in my State of South 
Dakota and has brought his talent to bear on this particular 
issue as well, and I am grateful for that.
    Also I notice that in the audience is Phil Hogan. Phil is 
another South Dakotan. We are proud of his work. He previously 
was an U.S. attorney and is now with the Department of the 
Interior. We appreciate his presence here as well.
    I will submit a statement in full so we can get to the 
panel. I apologize for having been late. Earlier today I had to 
be at the White House at a bill signing for the Corporate 
Accountability legislation on which I served on the Conference 
Committee.
    I very shortly need to leave to be on the floor of the 
Senate, but I will submit a statement in full and simply 
confirm some of the same views that Senator McCain has 
expressed, that I think it is important that this legislation 
be here as a starting point.
    It is subject to some modification and we need to continue 
to keep in mind that if we are going to make progress on this 
issue it is going to be because we arrive at a resolution 
through very close consultative process with tribes; that the 
tribes role in all of this is as an equal, as part of a 
government-to-government relationship and that there is no 
resolution possible unless it comes through the tribes 
themselves as a consequence of their discussions that they have 
internally.
    So, I think this task force is a very important entity. It 
is my hope that we can at least break this gridlock through the 
help of this legislation and modifications that will be forth 
coming, that we can make some things happen.
    I think it was very well said that we act very quickly when 
there is a crisis on Wall Street, but our actions have not been 
as expeditious when it has been a long-standing problem that 
has been of devastating consequences in Indian country.
    We need to change that and change that now. This hearing, I 
hope, will move us in that direction.
    Thank you, Mr. Chairman.
    The Chairman. Your full statement will be made part of the 
record. I thank you.
    [Prepared statement of Senator Johnson appears in 
appendix.]
    The Chairman. Mr. Vice Chairman.

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

    Senator Campbell. Thank you, Mr. Chairman.
    Well, we have just heard from the four folks on the task 
force that there is a lot of hard work that remains to be done 
before we can have a concrete, workable proposal that has the 
input and the blessing of both the administration and the 
tribes.
    I think all of us on this committee are interested in 
making sure that we get a bill that we can get signed into law 
and one that has broad-based support among the tribes, too.
    I have said consistently, in fact, that I would oppose any 
bill that didn't have involvement of the tribes in the drafting 
of the legislation.
    But I would like to commend Senator McCain, Senator 
Johnson, and Senator Daschle for bringing this bill to us 
because if nothing else, it has focused the attention on the 
problem and I think it keeps the administration engaged with 
the problem.
    But I would maybe finally say that I am more interested in 
doing things right than I am in doing things fast. Whatever 
time it takes, we ought to bring this thing to a conclusion. If 
we can do it this year, fine. I frankly doubt if we are going 
to be able to do it in just the last few weeks.
    But, hopefully, when we do pass something it will be the 
kind of bill we are all going to be proud of.
    Just as a side note, Mr. Chairman, I would like to note 
that with the single exception of the panel that will be 
testifying is the Geri Small, who is the first president of the 
Northern Cheyenne and who is a woman. She has done a fine job 
up there. She is also the chairman of the Montana-Wyoming 
tribal leaders association. I am just delighted to see her 
here. She is a good personal friend.
    The Chairman. She is your boss.
    Senator Campbell. She is my boss. In some respects that is 
correct. Thank you.
    The Chairman. Senator Conrad.

 STATEMENT OF HON. KENT CONRAD, U.S. SENATOR FROM NORTH DAKOTA

    Senator Conrad. Mr. Chairman, I just wanted to thank 
Senator Johnson, Senator McCain, and Senator Daschle for coming 
forward with legislation. We know that it is a work in 
progress, that it is open to amendment and discussion. But I do 
want to thank them for moving the ball forward because it 
focuses the debate and the discussion and I think there are 
many useful ideas in this bill.
    As I have reviewed the major elements, I think it touches 
on all those things that most of us share the frustration 
expressed by Senator McCain and Senator Johnson. You know, this 
has just been going on and on and on and it never seems to 
reach a conclusion. Part of that gets before the courts and we 
all know what happens there.
    But it is really time to reach a conclusion on these 
issues. It is only fair to the Indian peoples whose money is at 
issue. It is their money. If ever there was a case where we 
have a circumstances in which it really is the peoples' money, 
this is it.
    They deserve an answer and an accounting of what has 
happened to their money. So, I want to commend our colleagues 
for taking the initiative on this is matter.
    The Chairman. Thank you very much.
    We have a panel of five witnesses today. First is the 
assistant secretary of Indian affairs, Neal McCaleb; president 
of the Northern Cheyenne Tribe and chairperson of the Montana-
Wyoming Tribal Leaders Council of Montana, Geraldine Small; the 
chairman of the Lower Brule Sioux Tribe of South Dakota, 
Michael Jandreau; the chairman of the Tohono O'odham Nation, 
Sells, AZ, Edward Manuel, and the executive director of the 
United South and Eastern Tribes of Nashville, Tennessee, Tim 
Martin.
    I call upon Secretary McCaleb.

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

    Mr. McCaleb. Thank you very much, Mr. Chairman and members 
of the committee. I am very pleased to have the opportunity to 
appear before you this morning along with the tribal leaders 
arrayed before you at this table who I have been privileged to 
work with since the first of the year on our tribal task force.
    I think that is significant in consideration of the remarks 
that I am going to make right now. First of all, the 
administration is unable to support S. 2212 in its current form 
and recommends, instead, that we look to the recommendations of 
the Joint Tribal Task Force and the Department of the 
Interior's efforts toward recommendations in those areas where 
there is agreement.
    While well-intended, and much appreciated, this bill does 
not reflect the consensus of the opinions that have been 
reached by the task force over the period of the last 7 months.
    I want to express my appreciation to Senators McCain, 
Johnson and Daschle for the initiative they have shown in 
filing the bill because at our San Diego meeting in April, we 
began the discussion of the bill along with 28 other proposals 
that had been laid on the table for the task force members, a 
different array of tribal leaders, and Indian organizations.
    I pointed out that in Senator McCain's remarks, when he 
introduced the bill, he stated that the bill was an initiative 
to focus attention on this issue and that he fully intended to 
give careful consideration to the recommendations of the task 
force which was then in progress.
    We have had four Tribal Task Force multi-day meetings since 
April when the bill was first discussed along with the other 28 
proposals that were laid on the table. The Tribal Task Force 
has not endorsed the bill to this date. In fact, it has come up 
with other recommendations that are in ways in tension with the 
recommendations of the bill.
    For example, the bill recommends the creation of a Deputy 
Secretary position and after careful discussion of this matter 
by the Tribal Task Force and the Department of the Interior, we 
agreed by consensus last week at our meeting in Portland to 
support the concept of utilizing an Under Secretary. It was 
after a full discussion of what those two offices meant that 
that consensus was reached.
    As I indicated in my earlier testimony before this 
committee, we did reach a consensus on the adoption of the 
model for trust reform which was contained in option 5 of the 
proposal that was presented on June 4. This had other aspects 
that were in tension with S. 2212.
    We have indicated earlier that we would be happy to provide 
the committee with draft legislation that embodies the duties 
upon which the department and the tribal leaders and the task 
force have agreed upon.
    We also object to the creation of the Office of Trust 
Implementation and Oversight and the proposed 10-year Indian 
Trust Fund and Asset Management and Monitoring Plans. There is 
one specific recommendation in section 307(e)(3)(H) which 
specifically says that the duty of this management reform group 
is to ``ensure the greatest return on those funds and assets.''
    This is in tension, I think, with the concept of tribal 
self-determination. I will try to use an example that I have 
used before. There is no question that in the management of 
forest assets, which many of our tribes have, the greatest 
return on the asset is clear-cutting.
    Not one of the tribes that I am aware of that has timber 
resources have opted to clear-cut. They have all been 
supporters of selective cutting because of their perception 
that clear cutting does great damage to the environment and to 
the wildlife, although it yields the highest return on the 
investment.
    On the one hand, S. 2212 is encouraging tribes to develop a 
plan under the self-determination option and I do support that 
idea. That is the reason I am here to try to emphasize and to 
optimize the opportunity for self-determination and self-
governance.
    But on the other hand, when you vest in another separate 
entity the responsibility statutorily to ensure the greatest 
return on investment, that language is clear and unambiguous, 
but it is in tension with the aspect of self-governance and 
self-determination.
    My point is that the tribes should decide whether they want 
to maximize the investment or optimize the investment. There is 
a substantial difference in those two.
    In short, the administration recommends that the committee 
put aside S. 2212 and consider instead the legislation that 
reflects the recommendations of the task force. As I have said, 
these recommendations include the consideration of an Under 
Secretary position, the creation of a new Office of Self-
Governance and Self-Determination that reports directly to that 
Under Secretary and the creation of a Director for Trust 
Accountability.
    With the permission of the chair, I will ask that my 
complete written testimony be included in the record and answer 
any questions when the time is appropriate.
    The Chairman. Without objection, Mr. Secretary, your 
statement will be made part of the record.
    [Prepared statement of Mr. McCaleb appears in appendix.]
    The Chairman. Now, may I recognize President Small?

  STATEMENT OF GERALDINE SMALL, PRESIDENT, NORTHERN CHEYENNE 
TRIBE AND CHAIRPERSON, MONTANA-WYOMING TRIBAL LEADERS COUNCIL, 
                         LAME DEER, MT

    Ms. Small. Thank you. Chairman Inouye, Vice Chairman 
Campbell, and committee members, thank you for inviting me here 
today to testify on S. 2212. I am honored to appear before you 
today to testify on this very important legislation on trust 
reform.
    I am especially proud to be testifying by the Honorable Ben 
Nighthorse Campbell, the tribe's most esteemed member. Besides 
serving as president of the Northern Cheyenne Tribe, I also 
serve as the chair of the Montana-Wyoming Tribal Leaders and as 
a Delegate to the Trust Reform Task Force.
    Today I am speaking to you as the president of the Northern 
Cheyenne Tribe. I have not had time to consult with the tribes 
from my region to get a consensus on my testimony.
    As you know, S. 2212 was introduced on April 18, 2002 by 
Senators McCain, Daschle, and Johnson at the urging of the 
tribes from Great Plains region. I was at a meeting with the 
Great Plains and Rocky Mountain region tribes on April 17, 2002 
when I learned of the legislation.
    The Great Plains and Rocky Mountain Tribes discussed the 
legislation at length that day and worked feverishly to submit 
a preliminary response generally supporting the legislation. I 
understand that the introduction of S. 2212 was not popular 
with the Department of the Interior, some of the Senators 
sitting on this committee and some tribal leaders.
    However, the introduction of legislation was needed to 
impress upon Interior that legislation is absolutely necessary 
to resolve trust management problems. I believe that S. 2212 
has served that objective effectively and that it has provoked 
lively discussion concerning trust reform legislation.
    According, I thank Senators McCain, Johnson, and Daschle 
for sponsoring S. 2212.
    There are some issues that ascend above party lines and 
personal agendas. Trust reform is such an issue. It is time to 
roll up our sleeves and develop administrative and legislative 
solutions to resolve the long history of mismanagement and 
Indian trust assets.
    With respect to the administrative solution, I have 
attended every task force meeting and I am impressed by the 
commitment by the tribal leaders and Interior officials on the 
task force. I believe the task force is close to creating a new 
organizational structure that will improve the management of 
trust assets by the Bureau of Indian Affairs.
    Consequently, I believe it is time for this committee to 
start working closely with the task force to develop trust 
reform legislation. Tribal leaders have advanced certain things 
at the task force meetings that I believe must be supported by 
trust reform legislation. These things are the creation of an 
independent regulatory commission that will oversee Trust Fund 
management including the sale and lease of trust resources.
    The creation of a new position, either a Deputy Secretary 
or an Under Secretary that reports directly to the Secretary 
that will, among other things, coordinate trust reform efforts 
of all effected agencies; the development of trust standards to 
guide the BIA in managing trust accounts and resources; the 
concentration of resources at the local agency level; 
legislation that addresses the problem of land fractionation; 
deference to tribal laws regulating trust resources; the 
continuation of the task force or a task force to work out the 
details of the implementation of the new organizational 
structure and trust reform legislation; direct oversight of 
BLM, BOR and MMS trust management.
    Trust reform shall not restrict the tribe's ability to 
compact. Most importantly, adequate funding.
    I will address each of these themes and how S. 2212 deals 
with them. The creation of an independent regulatory commission 
that will oversee trust fund management, including the sale and 
lease of trust management.
    I believe that trust principles require that an independent 
regulatory commission be created to oversee the management of 
trust funds including the sale and leave of trust resources. 
Congress needs to create a check and balance to ensure proper 
trust management.
    Tribes and Indian individuals should not have to run to 
Federal court every time they suspect their accounts have been 
mismanaged. Rather an independent regulatory commission should 
be created to establish trust fund management regulations and 
to investigate allegations of mismanagement and enforce 
violations and conduct audits.
    S. 2212 creates an Office of Trust Fund Reform 
Implementation and Oversight that is not independent of 
Interior nor regulatory in nature. An independent regulatory 
commission that would oversee and enforce trust management is a 
better alternative, in my view.
    The creation of a new position, either Deputy Secretary or 
Under Secretary that reports directly to the Secretary that 
will, among other things, coordinate trust reform efforts of 
all effected agencies.
    S. 2212 creates a Deputy Secretary position that will 
coordinate trust reform efforts throughout Interior and will 
report directly to the Secretary. I believe that tribes would 
prefer a Deputy Secretary as opposed to an Under Secretary, 
however, Tribes may settle for the Under Secretary as long as 
the Under Secretary reported directly to the Secretary of the 
Interior.
    S. 2212 is silent on trust standards, however the 
jurisdiction of the Independent Commission and Trust Officers 
are limited to trust fund management and the sale and lease of 
trust resources. The standards for management should be the 
highest fiduciary standard realized by normal banking 
standards.
    This standard should be confirmed in trust reform 
legislation. The standard for the management of trust resources 
is a more difficult question. If the standard is not developed 
in the trust reform legislation, it should be developed in 
separate legislation in the near future.
    The concentration of resources at the local agency level: 
S. 2212 does not address this issue and I am not certain how 
this issue can be addressed legislatively. However, I know that 
trust funds and resources cannot be managed from afar. Human 
resources must be available at the local agency level in order 
to manage trust funds and resources.
    Legislation that addresses the problem of land 
fractionation: S. 2212 does not address the enormous problem of 
the land fractionation. I understand that the separate 
legislation is pending concerning land fractionation. It is 
imperative that the fractionation problems be resolved 
legislatively in order to make land and resource management 
more manageable.
    Deference to Tribal laws regulating trust resources: S. 
2212 does not address this theme directly. However, Rocky 
Mountain and Great Plains Tribes have identified situations 
where the implementation of the highest trust standards and 
trust resources could infringe on tribal regulations.
    For instance, the Northern Cheyenne Tribe has set grazing 
rates on the Northern Cheyenne Reservation. The Great Plains 
and the Rocky Mountain Region Tribes are concerned that the 
highest trust standards could require the BIA to obtain the 
highest price for the resource. This could conflict with the 
tribe's decision to subsidize tribal cattle operators.
    Also, from an enforcement standpoint a trust officer 
operating under the highest trust standards may remove an 
operator from a tribal range unit he believes is being over-
grazed. The tribe may not agree with the trust officer's 
assessment or believe that the trust standard is a lesser 
standard.
    In other words, the tribe would like to reserve these 
decisions for themselves and avoid interference from the trust 
officer. Trust reform should not interfere with the tribe's 
right to regulate trust resources.
    The continuation of a task force to work out the details of 
the implementation of the new organizational structure and 
trust reform legislation: S. 2212 creates an advisory board to 
provide advice on all matters within the jurisdiction of the 
Office of Trust Reform. The purpose of the task force after the 
proposal is adopted is two-fold. The first reason is to work 
out the details of the new trust reform organization and 
regulations for the trust reform legislation. The second would 
be to work with the independent regulatory commission on trust 
fund management regulations.
    Direct oversight of BLM, BOR, and MMS: S. 2212 provides 
that the Office of Trust Reform would supervise the Director of 
BLM and MMS the extent that they administer any Indian trust 
assets or funds. This is consistent with what tribes would 
like, except oversight responsibility would rest with the 
Deputy Secretary or the Under Secretary, whichever position is 
created, instead of the Office of Trust Reform. Tribes would 
also like to have BOR included in the oversight to the extent 
that it administers Indian trust assets.
    Trust reform should not restrict a tribe's ability to 
compact. Self-governance tribes are concerns that the trust 
reform legislation will negatively impact their compacts with 
the Federal government. S. 2212 supports a tribe's ability to 
directly manage trust funds or assets themselves through self-
governance laws. Any legislation adopted by Congress should 
provide the same support.
    Adequate funding. Trust reform legislation and the efforts 
of the task force will prove futile unless Congress commits to 
adequately funding the BIA. In each task force session, I hear 
tribal leaders state the resolution of this problem really 
comes down to adequate funding. I agree with this assessment.
    Funding is needed to employ additional quality people, 
properly train all employees and to purchase the necessary 
equipment. S. 2212 does not address this issue, as it isn't an 
appropriations matter.
    I raise it today to stress this point. Congress must 
realize that mismanagement cost Congress money. We would be 
better off paying what is necessary to manage properly than to 
pay for the mistakes later.
    This concludes my testimony. Thank you for your patience 
and for allowing me to testify today.
    The Chairman. Thank you very much, President Small.
    May I now call upon Chairman Jandreau.

  STATEMENT OF MICHAEL JANDREAU, CHAIRMAN, LOWER BRULE SIOUX 
                     TRIBE, LOWER BRULE, SD

    Mr. Jandreau. Hello. Chairman Inouye, Senator Campbell, 
Senator McCain, it is my honor to address you today. It is my 
hope that my testimony will be made a part of the record.
    The Chairman. Without objection, it is so ordered.
    Mr. Jandreau. I would like to informally address those 
parts of my testimony that I wish to accent.
    I have been involved in tribal government for 30 years now, 
directly, as either a councilman or the chairman. For 23 of 
those years I have been a chairman of my tribe. I was on the 
first task force that was developed under President Bush, 
Senior. I served on there approximately 1\1/2\ years.
    I have had the opportunity to be appointed by my peers to 
serve on this task force. This time I am the only one from 
Sioux country. I am also chairman of the United Sioux Tribes. 
The Sioux feel that a Deputy Secretary is essential to elevate 
the position of Indian Affairs to a level that is commensurate 
with their standing as citizens of the United States and as 
individual tribal groups who have given much for the 
development of this country.
    We also feel that there should be Deputy Secretary of the 
Interior that would handle the trust assets and the Indian 
programs. There are many other issues in relationship to the 
total development of S. 2212 that we need to occur.
    But unless it is enacted into law, unless it becomes 
something that we as tribes can build on, we really have 
nothing but good faith.
    I have attended every task force meeting, however, I missed 
the one important one. As you know, I listened to the testimony 
this morning and I was amazed because it seems like in Portland 
when I wasn't there everything worked out. So, I got to feeling 
a little guilty. Maybe I am a part of the impediment. I don't 
really feel that way.
    But there are many issues regarding 2212 that we have dealt 
with in conversations in the Indian Caucus task force. One of 
the matters was that in Bismarck we agreed to ask for hearings. 
The tribal member portion of the task force caucus all agreed 
to it. But when we went into joint session, there seemed to be 
a huge confusion that pervaded the room.
    Finally, we did get a letter from the chairman or one of 
the cochairs sent to Congress saying that we did wish hearings. 
We were told by the administration that we were jointly going 
to have testimony prepared that would adequately reflect both 
the administration and the tribal consultees' position.
    You know, the ironic part is this last week or so there was 
language attached to an appropriation bill in the House that 
talked about some very interesting things in which none of the 
administration knew anything about.
    I find it very difficult, after all the years that I have 
been involved, to say that we can really consistently develop 
something that has a true tribal complexion, that has a true 
tribal ideal that is not meant for and somehow ameliorating 
what the administration wants.
    I believe in self-determination. I work very hard on my own 
reservation to make self-determination a reality. I find it 
doesn't matter whether you are a Democratic or a Republican. 
But if you are an Indian, your rights just seem to mean a 
little less.
    Thank you.
    [Prepared statement of Mr. Jandreau appears in appendix.]
    The Chairman. I thank you very much, Mr. Chairman.
    Now I will call on Chairman Manuel

 STATEMENT OF EDWARD MANUEL, CHAIRMAN, TOHONO O'ODHAM NATION, 
                           SELLS, AZ

    Mr. Manuel. Chairman Inouye, Vice Chairman Campbell, my 
name is Edward D. Manuel. I am chairman of the Tohono O'odham 
Nation which is located in south central Arizona. It consists 
of 25,000 members and a land base of 2.8 million acres.
    I am also a Western Region Tribal Representative serving on 
the Tribal Leader/Department of the Interior Trust Reform Task 
Force.
    I am honored to be here and I thank you for the invitation 
and I appreciate the opportunity to testify before the 
committee on S. 2212. I will summarize my testimony, if I may, 
and submit it for the record.
    The Chairman. Without objection, your full statement will 
be made part of the record.
    Mr. Manuel. The first point I want to make on S. 2212 is 
that it provides the incentive for the administration and the 
tribes to stay engaged to bring about a much needed trust 
reform. Reform of the Federal Government to meet its duty of 
trust responsibility to American Indian tribes is a complicated 
and difficult task. Previous efforts of reform have fallen 
victim to one or a combination of political, financial, legal 
or intellectual factors.
    Everyone including Congress, the Executive, the Judiciary, 
the tribes and individual beneficiaries recognize the need for 
change. However, what that change should entail at times 
creates disagreement among the parties involved.
    One point is certain. S. 2212, along with other 
Congressional interest shown in trust reform, has provided the 
incentive to keep the Bush administration engaged with the 
tribes on reform discussions. To this end, the active 
participation of this committee and the Congress, whether 
during this legislative session or the next, is crucial.
    Continued Congressional participation is critical not only 
with development of the trust reform plan, but in the 
successful implementation of a plan as well. This committee is 
encouraged to keep trust reform at the top of its agenda during 
the next Congressional session.
    S. 2212 serves as a basis to start the discussion of trust 
reform and provides a foundation to keep the discourse 
continuing.
    The second point I want to make is that S. 2212 encompasses 
many worthwhile ideas needed for legislation. As written, the 
American Indian Trust Fund Management Act of 1994 may have been 
successful in the implementation of trust reform. The act 
contains many wonderful phrases and requirements.
    Those requirements, amongst other things, are all elements 
which the tribe wants to see implemented in the current reform 
effort. The question is: What went wrong with the 1994 reform 
act?
    The tribes maintain that the lack of success of the 1994 
Reform Act was that the inability of the Special Trustee to act 
independently of the actions of the Department of the Interior. 
Thus, difficult changes, crucial for reform, were never 
identified, or if identified, never implemented.
    While tribal leaders had input in the drafting of the 1994 
reform act, the original intent was to place the Office of 
Special Trustee outside of the control of the Secretary of the 
Interior. The tribe wanted an independent external office with 
authority to address the trust issue. This particular element 
of the 1994 Reform Act was compromised politically and trust 
reform was not successful as a result.
    S. 2212 needs a provision that would create an independent, 
external enforcement and oversight body to ensure the 
Department of the Interior's proper performance of the Federal 
Government's fiduciary or trust responsibility to the American 
Indian tribes are carried out.
    The tribal leaders of the Trust Reform Task Force believe 
an independent body is absolutely necessary for successful 
trust reform to occur. Should S. 2212 prove to be the vehicle 
for trust reform, the bill should be amended to provide for 
this independent body.
    Another crucial problem of the 1994 Reform Act was the fact 
that tribes, especially those who had the capability of 
managing their own trust assets, funds and resources, were 
forced to comply with national ``one-size-fits-all'' standards. 
No adjustments were allowed to account for the local variations 
most tribes encounter when meeting the needs of local 
constituents.
    Many tribes ended up politically opposing the reforms 
suggested by the Special Trustee due to this lack of 
consideration for local concerns.
    S. 2212 helps face this issue by allowing each tribe the 
ability to create an ``Indian Trust Fund and Trust Asset 
Management and Monitoring Plan.'' The plans, once approved, 
will take local needs into account by providing for the 
management and administration of funds and assets held in trust 
by the Bureau and the tribes.
    Furthermore, S. 2212 requires the Secretary to comply with 
tribal law in relation to the management of trust funds and 
assets unless prohibited by Federal law. This is tribal self-
determination at the most fundamental level. Such provisions 
are critical to the success of any trust reform and must be 
included in any legislation passed to address the situation.
    My third point is that an independent oversight commission 
is legally plausible. There was a lot of discussion this 
morning regarding the independent oversight commission. We had 
looked at the separation of powers of the three branches. We 
looked at the court's past decisions. We looked at the unique 
trust relationship, and guardianship principles. We looked at 
the plenary powers doctrine and we believe that it would stand 
judicial scrutiny in the creation of this independent body.
    My fourth point is that the union and Civil Service 
protections must not present obstacles to reform. During our 
discussions in the Tribal Leaders/Department of the Interior 
Joint Task Force, there were many issues brought out regarding 
Bureau employees who hamper local tribal government self-
determination initiative.
    We request that in the legislation dealing with trust 
reform, the issue of Civil Service protection and incompetent 
employees should be scrutinized to be sure that tribes and 
their members are being provided trust services by individuals 
who will be held accountable for their actions.
    Further, this Civil Service protection should not be the 
foundation for career oriented but non-dedicated employees to 
derail trust reform. Employees need to have access to training 
and experience to properly carryout their trust function. But 
once that training and instruction is provided and employees 
make the conscious choice not to perform properly or simply 
cannot perform properly, then these employees should be 
relieved of their employment and not be able to hide behind 
Civil Service law or even union agreements to protect such 
employment.
    Tribes must continue to be involved with the implementation 
of reform. Over the years, tribal leaders have participated in 
many efforts to reorganize or reform the Federal Government's 
provision of services to Indian country. Many of these plans 
produced positive and concrete ideas which, if implemented, 
would have resulted in greatly improved services. However, none 
of these plans were totally implemented.
    Tribal leaders must continue to have a voice in the trust 
reform efforts in order to compel implementation of the plan, 
thereby ensuring the successful reform of the Bureau of Indian 
Affairs.
    While S. 2212 calls for the creation of an Advisory Board, 
the constituency of which will contain tribal people, the Board 
will simply not have the authority to mandate implementation of 
any particular aspect of reform should such be necessary. The 
same now holds true for the Advisory Board created in the 1994 
Reform Act. Complete change did not occur under the 1994 Trust 
Reform Act because the Board did not have the proper authority 
to make change happen.
    The tribal leaders on the current Trust Reform Task force 
are advocating for the creation of an independent oversight 
commission having the authority to ensure the Federal 
government's trust functions and fiduciary responsibilities are 
properly performed.
    This oversight mechanism will only become effective if 
trust reform legislation is fully implemented. Tribes, as a 
whole, must continue to be engaged, through the Task Force or 
another body, to ensure that the entire reform plan, which 
includes an independent oversight commission, is completely 
implemented. Only thereafter can the independent oversight 
commission take control and provide the continuous tribal input 
needed for the successful provision of trust services.
    In conclusion, the Tribal Leader/DOE Trust Reform Task 
Force continues to develop the crucial elements needed to bring 
about reform of the Federal Government's trust services to 
Indian country.
    Eventually, legislation will be needed to implement this 
reform. The task force envisions that the position of Under 
Secretary be created. This position will be the focal point and 
responsible for the Federal Government's trust obligation. This 
person will have line authority over all Department of the 
Interior trust functions. This is similar to, but not identical 
with what is contemplated in S. 2212.
    The task force believes that all, not some, of the agencies 
within the Department of Interior should be subject to the 
Under Secretary's control in relation to trust responsibilities 
for Indians.
    Furthermore, the tribal leaders on the task force insist 
upon the creation of an independent oversight commission. S. 
2212 does not contain this element. If S. 2212 is the vehicle 
to be used for trust reform, the task force requests that the 
concept of an independent oversight commission as developed by 
the task force, be placed in such legislation.
    Thank you for the opportunity to provide testimony here 
today on this very important topic. I will be happy to answer 
any questions from the committee.
    The Chairman. I thank you very much, Mr. Chairman.
    May I now recognize Mr. Martin.

STATEMENT OF JAMES T. MARTIN, EXECUTIVE DIRECTOR, UNITED SOUTH 
               AND EASTERN TRIBES, NASHVILLE, TN

    Mr. Martin. Chairman Inouye, Vice Chairman Campbell, Senate 
Committee on Indian Affairs: I have submitted a written 
testimony and I would like that to be made part of the record.
    The Chairman. Without objection it is so ordered.
    Mr. Martin. I would like to further comment on that 
testimony and highlight some of the key components of that 
testimony and some of the discussion that has already occurred 
today and reflect on hopefully some of the discussion that 
should occur in the future.
    I am here today before you, James Martin, enrolled member 
of the Poarch Band of Creek Indians. I serve as executive 
director of United South and Eastern Tribes. As executive 
director, I was appointed by the 24 member tribes of our region 
to represent them on the tribal task force on trust reform.
    Going to the task force meeting and working within that 
task force, I was appointed by that task force along with Ross 
Swimmer, to cochair a subcommittee of that task force on EDS 
As-Is Business Process Modeling.
    On behalf of our 24 member tribes, I would like to express 
our appreciation to be able to come and to express our views on 
Indian trust management reform. I would also like to express my 
appreciation to the task force, both the tribal and Federal 
members of that task force, for the work that has been done to 
date to bring about a structure that protects the Government's 
fiduciary responsibility to tribes and promotes accountability 
at all levels of the Department of the Interior and the Bureau 
of Indian Affairs.
    I would like to thank Senators McCain, Daschle, and Johnson 
for introducing S. 2212 as a mechanism to assist the task force 
in this monumental task. This group, this panel, that is before 
you today are here walking a tightrope.
    I want to be able to honor my commitment to the task force 
and honor the consensus that have been made in those 
deliberations, but at the same time, be able to comment from 
our tribe's perspective on S. 2212.
    There are some differences and there are some similarities. 
I would like to be able to highlight some of those. Before I do 
that, though, I would like to talk about our region and our 
perspective in our region.
    The USET tribes vary differently. We have very wide 
differences in population, the governmental infrastructures, 
economic development. And the endowments of natural resources 
vary widely. However, we are deeply committed to self-
determination.
    We are committed to exercise our right to sovereignty 
through the self-determination by 638 contract. In our region 
over 95 percent of the resources that go into our region is 
contracted out either by 638 contracting or by compact.
    By and large, the only services rendered by the Bureau of 
Indian Affairs at the regional level are the inherent Federal 
functions. So, all of the functions that we are talking about 
are being performed by the tribes. That is a testament to our 
commitment to self-determination.
    Our tribes have engaged frequently in conversations 
regarding trust resource management, trust asset management, 
and this reform effort, ever since the Secretary introduced it 
last November.
    Our tribes first expressed our recommendations to the 
Secretary on February 1, when USET proposed an alternative to 
BITAM. I also testified before this committee on February 26, 
where I outlined our proposal.
    Earlier this month, July 8, our tribes came together again 
in consultation to deliberate over the task force's 
recommendations at that time, the different 29 proposals that 
had been dwindled down to four different options. Our tribes 
deliberated over those options. We looked at our proposal and 
we made adjustments to our proposal.
    But our tribes unanimously and unequivocally asserted that 
regardless of whatever structure is finally settled upon, that 
a single point of decisionmaking authority still has to occur 
at the local level for all Indian programs. And I want to 
reiterate that point and emphasize that point from the outside 
because the tribes of our region believe that it is getting 
missed, that it should not be overlooked any longer.
    Our tribes have the day-to-day experiences showing that 
trust management systems are working. When it comes to 
affective delivery of Indian trust services and the proper 
execution of the fiduciary trust responsibilities, the current 
bureau structure that unites both the trust accounting and 
trust services personnel at the region and tribe agency level 
that assures tribes have direct access and interaction with 
decision makers responsible for the programs.
    Based upon our experience in our region, this access is 
essential whether those Federal responsibilities are 
administered pursuant to self-determination contracts or 
compacts or delivered directly by the Bureau of Indian Affairs.
    This structure provides a bottom-up accountability that is 
as important to the trust beneficiaries as the structure of the 
single executive is to the Department of the Interior. This 
point has been identified and articulated by our tribes from 
day one as we learned about the Secretary's BITAM proposal.
    At the local level we need to improve accountability and 
eliminate inefficiencies. This can be done by the improvement 
of trust standards, trust policies and trust procedures. A key 
problem is excessive delay in working through the various 
levels of the bureaucracy.
    But to the extent tribes had administered 638 programs 
through contracts and provided that the regional office is set 
up to offer tribes one-stop shopping to contract those 
programs, the system works.
    Department of the Interior representatives on the task 
force continue to demand additional layers of bureaucracy that 
duplicate authority at the local level. Such a structure would 
impede tribes' efforts by adding excessive, ineffective and 
costly administrative procedures to a system that is overly 
bureaucratized to date.
    In order to maintain and expand tribal involvement and to 
enhance opportunities for tribes and include individuals to 
exercise bottom-up accountability, the Federal government needs 
to streamline the trust asset management, not bureaucratize it.
    Now to the key elements to which I believe the task force 
and S. 2212 do agree on. The task force has reached consensus 
on the senior executive leadership structure, consistent with 
what was proposed in S. 2212. Both the task force and S. 2212 
elevate the senior executive within the Department of Interior.
    The senior trust executive reports directly to the 
Secretary and has direct line authority over the assistant 
secretary of Indian affairs and over the assistant secretaries 
of each of the bureaus that perform functions and/or 
administered trust assets. This line authority would serve to 
protect the full range of trust funds and assets managed by the 
Federal Government and institute the call for a single 
executive to ensure that the trust obligations are met.
    The task force has selected the concept of an Under 
Secretary rather than a Deputy Secretary based on the view that 
establishing an Under Secretary would run into political 
objections that might arise with proposing what appears to be 
an unprecedented second Deputy Secretary within the Executive 
Department.
    Now, to ensure that trust policy is properly implemented at 
the regional and agency level, USET has suggested that five 
commissioner positions be established as Civil Service posts 
under the Assistant Secretary for Indian Affairs. These five 
commissioners would have the responsibility to ensure the 
proper execution of trust responsibilities at the regional and 
tribe agency level.
    The Commissioner for Indian Services and the Commissioner 
for Trust Management would have quality assurance and oversight 
authority with respect to the trust functions pertaining to the 
regional director.
    This authority over trust functions at the central office 
to regional office level would parallel the Under Secretary's 
authority over trust functions pertaining to the Assistant 
Secretary in the other Department of Interior bureaus. 
Meanwhile, the line of authority over the operational 
responsibilities of the regional director would run from the 
Assistant Secretary to the Commissioner of Regional Operations.
    All 12 regional directors would answer directly to the 
Commissioner from Regional Operations. For reasons I have 
mentioned above, the Eastern Region Tribes urge that all trust 
services and resources remain at the regional level under the 
direction of a single line of authority.
    Below the regional directors is where the performance and 
authority over trust services and trust resources would divide. 
For example, through a deputy regional director for trust 
services and another for trust resource management, the agency 
supervisory level would replicate the same structure, one 
single line of authority, the agency superintendent, with 
authority over all trust services and trust resources at the 
agency level.
    You separate the functions. You separate the personnel. But 
there is nothing to date to indicate that those separated 
personnel cannot still report in to a single line of authority 
when you have clearly delineated out the policies, the 
procedures and the standards that those two sets of personnel 
have to adhere to.
    A key point is to have one individual decision maker at the 
level of the bureaucracy to whom the tribes have access to 
agree on. Another component that both the task force and S. 
2212 involves corresponding elevation of the policy of Indian 
self-determination.
    Both the task force and S. 2212 proposals place 
responsibility to self-determination contracting and compacting 
within the domain of the senior trust executive.
    While S. 2212 authorizes the deputy secretary to enter into 
self-determination contracts, the task force proposes the 
establishment of an Office of Self-Determination Policy in the 
Office of Under Secretary.
    At the strong request of tribal representatives, the task 
force agreed that while policy formulation regarding self-
determination shall be elevation to the under secretary level, 
the implementation of self-determination agreements must remain 
at the level most appropriate to ensure the tribe's greatest 
access.
    Independent oversight: Both S. 2212 and the Trust Reform 
Task Force coincide in the view that establishing 
accountability for the Department of the Interior trust 
management requires independent oversight. However, the task 
force has not reached a consensus regarding the scope and 
powers to be delegated to this independent commission.
    Both the tribal and Federal representative agree that the 
commission should have powers to audit trust accounts, 
investigate allegations of accounting failures, and agency 
action inconsistent with the trust responsibilities, and 
analyze budget needs.
    There also appears to be, however, general agreement that 
the oversight commission would perform quality assurance and 
accountability through the under secretary and on down the 
chain of command. Quality assurance is understood to be trust 
management oversight functions, not administration and 
implementation.
    One of the failures that our tribes see in the functions to 
date is that the people and offices that were put into place to 
oversee the dealings of trust management actually got involved 
in performing them. To me, that is a fundamental flaw of all of 
the transactions and the reorganizations that have appeared to 
date.
    The main disagreement on the commission is to tribal and 
Federal representatives disagree to the nature of the 
commission's enforcement authority and regarding the delegation 
of rulemaking authority.
    I have agreed to cochair a task force sub-work group to 
seek resolution to these differences. To sum up these 
differences, the Federal representatives have suggested that 
the commission should exercise its enforcement authority by 
referring findings of non-compliance to the Treasury 
Comptroller of the Currency for it to determine what sanctions 
and/or remedies to apply.
    The tribes wish to empower the commission with the range of 
enforcement mechanisms available to the Comptroller, so as to 
retain full discretion and authority to independently take 
actions and bring about corrective actions on whatever issue is 
at hand.
    As regards to rulemaking, the tribes want the commission to 
be able to promulgate rules. The Federal representatives have 
objected to having a commission take the rulemaking outside of 
the Secretary's own discretion of rulemaking.
    Let me also note that S. 2212 retains and rebuilds the 
Office of Special Trustee [OST]. The view of the tribes in the 
eastern region is that the commission would assume most of the 
functions now changed to OST.
    We believe legislation will be required to provide for a 
transition of functions from the Special Trustee to the 
independent commission.
    Establishing clear trust standards: In testimony before 
this committee last month, the Deputy Secretary of the 
Department of the Interior stated that he was not able to 
define the standards governing Indian trust responsibility. The 
tribal members of the task force and the Eastern Region Tribes 
urge this committee and Congress that it is time for Congress 
to establish statutory standards governing the trust 
responsibilities.
    If the senior officials from the Department of the Interior 
responsible for overseeing the trust responsibility is not able 
to articulate the standard, then the Department of the Interior 
is not well positioned to execute that responsibility.
    Our tribes believe a starting point for legislating this 
definition can be found in the Department of the Interior's own 
policy manual which provides under part 303, section 2.7, it 
delineates out the secretary's responsibility.
    I will not go into that. That is in my written testimony. 
It has already been articulated. It had also captured in the 
secretarial order, talking about trust principles. I would 
refer the committee to both the manual and the secretarial 
order.
    The tribal representatives on the task force believe that 
the secretary's accountability for trust responsibility would 
markedly improve if legislation modeled on these guidances in 
the departmental manual were enacted into law to provide a 
basic definition for trust responsibility and the secretary's 
corresponding duties to carryout that responsibility.
    Under standards, the tribes and the Secretary have 
disagreed on different views about standards and how far that 
these standards should go.
    The tribes have discussed the possibility of permitting the 
development of standards governing tribal implementation of 
trust duties. The idea that tribal standards might be different 
from the Secretary's does not imply that the standards would be 
lower. Rather, the separate standards simply knowledge that 
different policy considerations are at play. For instance, 
rather than a standard requiring that the resources be leased 
for their highest market value, a tribal standard may be to 
assure the resource's protection and preservation in order to 
fully reflect the asset's cultural and spiritual value.
    From the perspective of USET tribes, the proper execution 
of the trust responsibility is achieving a balance that 
maximizes the utilization of trust resources and protects those 
trust resources for future generations.
    No structure can work without sufficient resources to drive 
it. Lack of funding and personnel, particularly at the regional 
level, account for a significant portion of the Secretary's 
failure to properly discharge the Federal Government's trust 
duties.
    We ask this committee, in reviewing the Task Force's 
proposal, to bear in mind that new structures and functions 
will be replacing the existing offices within the Department of 
the Interior. The President has proposed significant budget 
increases for trust reform. We believe they should be targeted 
to the trust reform efforts currently being proposed by the 
Task Force.
    In closing, I would like to reflect and express our tribe's 
sincere appreciate for the Department of the Interior, Deputy 
Secretary Griles, Assistant Secretary McCaleb, and their staffs 
for engaging in an unprecedented historic level of consultation 
on this issue.
    Have we had problems? As Senator Inouye said, ``Is it a 
lovefest?'' No, it is not. These last meetings have been hard. 
They have been gut wrenching. I believe, though, I can say with 
sincerity that both parties are sincere in trying to accomplish 
something and we stand on the brink of an opportunity for that 
to come out.
    I would sincerely ask this committee to continue to engage 
your staff in coming to the meetings and offering solutions to 
these problems as we engage them.
    I would invite, and I hope you have reserved all the good 
questions for us.
    The Chairman. I thank you very much, Mr. Martin.
    [Prepared statement of Mr. Martin appears in appendix.]
    The Chairman. The Task Force was established in January 
this year. Since its establishment, seven formal meetings have 
been held. The eighth will be in Anchorage, AK in late August.
    Between these formal meetings numerous caucuses and 
conference calls, and subcommittees of the task force have met. 
Many hours have been expended. I gather that all of you are 
members of the Task Force. Am I not correct?
    The general tone of the testimony I have heard among the 
Indian witnesses is that you approve of the process and 
procedure adopted by the Task Force in carrying out its mission 
to resolve these long standing issues; am I correct?
    Mr. Martin. Chairman Inouye, I think you are correct in 
those things. I think I can say to you on behalf of the other 
people here that we are in agreement on the recommendations 
that have been made thus far from the tribal and Department of 
the Interior Task Force.
    The outstanding issues, as in any give and take and 
deliberations of parties coming from different viewpoints, even 
though they are few in number, we are still in monumental 
disagreements on some of the issues. But I believe that we have 
the mindset, we have the people at the table, that we can come 
back to this committee with some concrete recommendations on 
the outstanding issues.
    Is it going to solve all of the problems? Is everybody 
going to be 100 percent unanimous for it? No, sir. I don't 
believe that was ever envisioned by anybody who sat down at 
those tables when we began.
    The Chairman. I gather that this Task Force is an historic 
one in the sense that there has been more consultation and 
joint work than any other task force in the history of Indian 
relationship with the Government of the United States.
    This, but this committee has held more meetings than any 
other committee in the Congress of the United States. In the 21 
weeks of legislative work, we have already held 48 meetings, 
including this one. We have held five on the work of the Task 
Force. We look forward to the next one.
    I can assure you that we are intent on bringing forth the 
statute that will incorporate your recommendations. So, we are 
serious in our work.
    We have two measures before us, S. 2212 and the work of the 
Task Force. But I gather that if the Task Force carries out its 
mission, all of you will be satisfied.
    I thank you all very much.
    Mr. Martin. You would be welcomed, Senator.
    The Chairman. The hearing is adjourned.
    [Whereupon, at 12:47 p.m. the committee was adjourned, to 
reconvene at the call of the Chair.]
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                            A P P E N D I X

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              Additional Material Submitted for the Record

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 Prepared Statement of Hon. Tom Daschle, U.S. Senator from South Dakota

    Chairman Inouye, Vice Chairman Campbell and members of the 
committee, thank you for holding this hearing on S. 2212, the Indian 
Trust Asset and Trust Fund Management Reform Act of 2002. Trust reform 
is a critical issue for the Native American community nationwide, and I 
am pleased to have joined with Senators John McCain and Tim Johnson in 
sponsoring this legislation.
    Indian country has faced many challenges over the years. Few, 
however, have been more important, or more difficult, than ending the 
mismanagement of the Indian trust fund and restoring integrity to this 
administrative process. The Indian Trust Asset and Trust Fund 
Management Reform Act is intended to focus attention on solutions to 
the longstanding problem of inefficient management of the assets and 
funds held by the United States in trust for federally recognized 
Indian tribes and individual American Indians.
    For over 100 years, the Department of the Interior has been charged 
with the responsibility of managing a trust fund containing the 
proceeds of leasing of oil, gas, land and mineral rights for the 
benefit of Indian people. Today, that trust fund may owe as much as $10 
billion to as many as 500,000 Indians.
    To give some perspective, the 16 tribes of the Great Plains in 
South Dakota, North Dakota, and Nebraska comprise 10 million acres of 
trust lands representing over one-third of the trust accounts. Many 
enrolled members of the nine South Dakota tribes have trust accounts.
    How these trust funds have been, and will be managed is being 
litigated in Cobell v. Norton, and the resolution of this lawsuit will 
have far-reaching ramifications throughout Indian country. It is 
impossible not to evaluate potential legislative responses in the 
context of this lawsuit.
    There is clear consensus in Indian country that the current 
administration of the trust fund is a failure. The vexing question has 
always been how to reform it.
    Last fall, the Secretary of the Interior unveiled plans to 
reorganize the Bureau of Indian Affairs [BIA] and segregate the 
oversight and accounting of trust-related assets in a new Bureau of 
Indian Trust Asset Management [BITAM]. In testimony before the U.S. 
District Court, she acknowledged that, ``We undoubtedly do have some 
missing data--and we are all going to have to find a way to deal with 
the fact that some information no longer exists.''
    The Secretary's controversial reorganization proposal was presented 
to the court with minimal consultation with the tribes or individual 
Indian account holders, not to mention Congress. In South Dakota, 
tribal leaders communicated to Tim Johnson and me their concern that 
the Secretary's solution appeared to be a fait accompli, conceived 
without meaningful participation of the stakeholders most directly 
affected by it. They felt strongly that this proposal should not be 
implemented without further consultation with the tribes.
    Earlier this year, in the face of Administration assurances that 
its reorganization plan was not set in stone, the Interior Department 
requested that $200 million from the BIA and $100 million from the 
Office of the Special Trustee, be reprogrammed to ``a single 
organization that will report to the Secretary through an Assistant 
Secretary, Indian Trust.'' This contradiction set off red flags in 
Congress, and a clear and direct message was sent to Secretary Norton 
by Senators Inouye, Campbell, Byrd, Johnson, and others that no action 
should be taken to implement her proposed reorganization plan 
administratively.
    Given these developments, Senators McCain, Johnson, and I felt that 
Congress should be more assertive in forcing discussion of what role 
Congress might play in ensuring that tribes and individual Indian 
account holders have a voice in shaping trust reform policy. It is our 
hope that this bill will stimulate better dialog among the Congress, 
the Department of the Interior, and Indian country on this problem.
    With that goal in mind, the Indian Trust Asset and Trust Fund 
Management Reform Act was reviewed by representatives of the Great 
Plains tribes at a meeting in Rapid City in April. Mike Jandreau, 
chairman of the Lower Brule Sioux Tribe, has been an effective advocate 
and champion of trust reform, not only for his tribe, but for all 
Indian people. Mike and Tom Ranfranz, chairman of the Flandreau-Santee 
Sioux Tribe and president of the Great Plains Tribal Chairmen's 
Association, led a very productive working session with tribal leaders 
from South Dakota, North Dakota, Nebraska, Montana, and Wyoming that 
both raised awareness of the stakes of this issue and built support for 
the McCain/Johnson bill.
    I commend the willingness of tribal leaders to be a part of a 
public process that will hopefully will not stop until Indian country 
feels comfortable with a final trust reform product. The McCain-
Johnson-Daschle bill is intended to be a starting point for promoting 
greater understanding of what needs to occur to achieve meaningful 
trust reform and for focusing attention on concrete solutions to the 
problem.
    At this point, I would like to share with my colleagues some 
initial observations on this proposal that were raised by participating 
South Dakota treaty tribes and tribes of the Great Plains and Rocky 
Mountain regions. These comments demonstrate how thoughtfully Indian 
leaders are approaching the trust problem, and I encourage the 
committee to consider their suggestions as it addresses the trust 
reform challenge.
    The following issues are of great importance to the Great Plains 
Tribal Chairman's Association:
    Providing the Deputy Secretary with sufficient authority to ensure 
that reform of the administration of trust assets is permanent; They do 
not believe the bill at present gives the Deputy Secretary the full and 
unified authority needed;
    Including cultural resources as a trust asset for management 
purposes;
    Incorporating the Office of Surface Mining and Bureau of 
Reclamation and other related agencies within the Department of the 
Interior and the Federal Government under the purview of the Deputy 
Secretary;
    Assuring that the legislation not infringe on tribal sovereignty by 
interfering with tribal involvement in the management of individual 
trust assets or tribal assets, or both;
    Maintaining the Bureau of Indian Affairs's role as an advocate for 
tribe;
    Providing in law that Bureau of Indian Affairs funds not be used to 
fund the Deputy Secretary appointed by the legislation;
    Stressing the importance of appropriating adequate funding allow 
reform to succeed;
    Reflecting in the legislative history that much of the funding 
needed for real trust reform be allocated at the local agency and 
regional levels of the Bureau of Indian Affairs;
    Since bill introduction in April, revelations of corporate 
mismanagement and its consequences for the pensions of individual 
American workers have sent shockwaves through the country. Lawmakers, 
economists and academics, appalled by the Enron and MCI/WorldCom 
experiences, have called for swift and decisive action to strengthen 
corporate accounting practices and protect employee pension accounts. 
And Congress has responded. Earlier today, in the East Room of the 
White House, with great fanfare surrounded by congressional leaders, 
President Bush signed corporate accountability legislation.
    Unknown to many of these lawmakers, economists and academics, a 
similar injustice is occurring out of the public spotlight to many 
American Indians. And the responsible party is not corporate 
management, but rather the Federal Government.
    The issues of trust reform and reorganization within the BIA are 
nothing new to members of the committee, or to Indian country. 
Collectively, we have endured many efforts--some well intentioned and 
some clearly not--to fix, reform, adjust, improve, streamline, 
downsize, and even terminate the Bureau of Indian Affairs and its trust 
activities.
    These efforts have been pursued in both Republican and Democratic 
administrations. Unfortunately, they have rarely sought meaningful 
involvement from tribal leadership, or recognized the Federal 
Government's treaty obligation to tribes.
    Both meaningful consultation and acceptance of tribal status are 
essential if we expect to find a workable solution to the very real 
problem of trust management. The bill Senators McCain, Johnson, and I 
have introduced reflects this conviction.
    There is no more important challenge facing the tribes and their 
representatives in Congress than that of restoring accountability and 
efficiency to trust management. And nowhere do the bedrock principles 
of self-determination and tribal sovereignty come more into play than 
in the management and distribution of trust funds and assets.
    This measure recognizes that the only effective long-term solution 
to the trust problem must be based on government-to-government dialog. 
I am hopeful the discussion the Indian Trust Asset and Trust Fund 
Management Reform Act generates today will not only provide the 
catalyst for meaningful tribal involvement in the search for solutions, 
but also form the basis for true trust reform. I look forward to 
participating with tribal leaders in pursuit of this important 
objective.
    Thank you.
                                 ______
                                 

 Prepared Statement of Hon. Tim Johnson, U.S. Senator from South Dakota

    Chairman, Inouye, Vice Chairman Campbell, and members of the 
committee, thank you for holding this hearing. Also, thank you, 
Chairman Inouye, for your leadership on this issue. First, I'd like to 
welcome all the tribal leaders who have traveled to Washington, DC to 
address this committee on these important issues of trust reform. I'd 
like to especially thank Chairman Jandreau of the Lower Brule Sioux 
Tribe for giving his insights into this critical issue. Chairman 
Jandreau is from my home State of South Dakota and has served the 
Department of the Interior's Trust Fund Reform Task Force. Mike is the 
longest serving tribal chairman in South Dakota. As always, Mike has 
risen to the occasion and offered outstanding leadership, this time on 
the issue of trust reform.
    I apologize for missing today's earlier hearing pertaining to the 
Tribal/Interior Trust Fund Task Force's findings. I was unable to 
listen to the testimony in person because as a senior member of the 
banking committee and chairman of the financial institutions sub-
committee, I was pleased to serve on the accounting reform and 
corporate responsibility conference committee. The President signed 
that legislation into law today and I attended that signing. I find it 
ironic, that fixing private sector corporate mismanagement was viewed 
with such urgency, yet fixing public sector mismanagement of funds has 
yet to be done.
    As I've said again and again, the issue of trust fund mismanagement 
is one of the most urgent problems we are faced with in Indian country. 
It is also one of the most complex and difficult. But the time to act 
is now. This has gone on for far too long. I hope that the Trust Fund 
Task Force will soon put forth recommendations that the Congress can 
take to heart, review, and act on. I look forward to reading the 
testimony and the report issued by the Task Force and listening to the 
testimony of the witnesses here today.
    I've indicated previously that S. 2212 can be the vehicle for 
implementing needed change. 1, along with my distinguished colleagues 
Senator Daschle and Senator McCain, want this bill to be the starting 
point. I look forward to working with other members of this committee, 
the Department of the Interior, and the tribal leaders in reaching an 
appropriate solution to this critical problem. I feel strongly that we 
need to work at getting some resolution by the end of this Congress. I 
hope today's hearing on S. 2212 and the testimony of our witnesses will 
play a role in passing these important reforms. Thank you again for 
holding this hearing today.
                                 ______
                                 

   Prepared Statement of Hon. John McCain, U.S. Senator from Arizona

    Mr. Chairman and Vice Chairman, I thank you for scheduling today's 
hearing on S. 2212, legislation I sponsored along with Senators Daschle 
and Johnson, in response to continuing problems plaguing the Interior 
Department's management of Indian trust funds. I would also like to 
thank the witnesses for appearing today and for their commitment to 
work toward a meaningful legislative reform proposal.
    As I stated upon introduction of this bill in April, the purpose of 
this legislation is to serve as a ``place-holder'' bill that can be 
modified or expanded as the dialog to consider reform alternatives 
ensued between the Interior Department, the Tribal Task Force and the 
Congress. I, as well as Senators Daschle and Johnson, thought it 
critically important to voice the concerns of the Congress in this 
process and to stand ready with a legislative remedy. I don't think 
there can be any doubt that a legislative remedy is required.
    S. 2212 focuses on two primary changes to the 1994 American Indian 
Trust Fund Management Reform Act, the underlying law governing Indian 
trust funds management. First, it creates a single line-of-authority in 
the Interior Department by establishing a Deputy Secretary for Trust 
Management and Reform; and second, the bill strengthens provisions for 
Indian tribes and beneficiaries to directly manage or comanage with the 
Interior Secretary trust funds and assets, based on successful self-
determination policies.
    Obviously, this legislation does not address every issue or problem 
inherent in trust funds or trust assets management, but it deals with 
two of the primary issues that are important to true reform--a single, 
high-level policy official responsible for oversight of trust funds and 
assets management and, authorizing the Secretary to contract with 
Indian tribes to directly manage trust funds or assets themselves 
through self-governance laws--concepts embraced by tribes, the Congress 
and eight presidents of both parties for more than three decades.
    I, along with Senators Daschle and Johnson, recognize that S. 2212 
as currently drafted, can and should be modified--it was certainly our 
intention to be open to proposed changes based on the recommendations 
of the Tribal Task Force and others. As the discussions between the 
Task Force and the Department have matured, it has become clear that 
this legislation responds in a very appropriate way to the structural 
and policy changes needed in the Interior Department's management of 
trust funds. The changes that need to be made in the bill can now be 
made rather quickly and should enable us to move the bill prior to 
adjournment of the 107th Congress.
    Some of the major policy recommendations of the Task Force, 
including establishment of an independent trust commission and 
development of fiduciary standards, obviously require additional 
deliberation, as stated by the Tribal Task Force cochairs in the 
hearing earlier this morning. While most generally agree that 
independent oversight is necessary, including myself, the best way to 
structure that oversight is still open to considerable debate. If such 
a proposal can be readied for enactment this year, I will do everything 
in my power to support that action.
    However, I do not believe we should hold back on modifications to 
S. 2212. It is clear to even the most casual of observers that change 
in the underlying law is needed and it is needed now. We have been 
through countless hearings, GAO investigations, and court battles on 
this matter. Further delay in the changes we know we can make now will 
only continue the long and sorry history of mismanagement.
    In recent days the Federal courts have found it necessary to accept 
an even larger role in dealing with the consequences of mismanagement 
by the Department and Congressional inaction. In the absence of 
congressional action this year, the Courts will become increasingly 
more involved and exercise more authority in areas entrusted to the 
Congress under the Constitution.
    The bottomline is, the status quo is unacceptable. S. 2212 provides 
significant reform and a framework for the tribes, the Department and 
the Congress to continue to work toward a full solution to the problems 
involved in the management of Indian trust funds and assets. S. 2212 
embodies a structural reform proposal that can be modified and enacted 
this year. I, along with Senators Daschle and Johnson, stand ready to 
work with you to make it happen.
                                 ______
                                 

 Prepared Statement of Clifford Marshall, Chairman, Hoopa Valley Tribe 
                             of California

    I am Clifford Marshall, chairman of the Hoopa Valley Tribe. I 
appreciate the opportunity to submit my testimony for the Senate 
Committee on Indian Affairs hearing record regarding the trust reform 
and related matters. Because trust reform will effect the ability of 
tribes to develop stable governments for the next several decades, I 
urge the committee to take the necessary time to assess the impacts on 
Indian country before moving forward with proposals that are based on 
vague short term concepts rather than addressing longstanding problems.
    There have been two forms of trust reform that have been underway 
for the past several years, one initiated by tribes and the other by 
the Federal Government. These are two very different approaches. The 
tribal approach focuses on Indian country, while the Federal approach 
has been one focused on inside the Beltway using consulting firms that 
have little experience in Federal Indian trust and tribal government 
matters.
    Regarding tribal efforts, tribes have been involved in various 
forms of trust reform activities since the first treaty was entered 
into and the trust relationship was established. At least part of the 
tribal trust reform efforts have been designed to address problems 
associated with the underfunded BIA Indian programs. For example, 
comparisons between the budgets of Indian programs to those for 
federally owned lands and resources demonstrate that Indian forest 
programs receive only 35 percent of the funds appropriated for 
management of the United States' own lands and that Indian roads 
maintenance programs only receive 30 percent of Indian road maintenance 
needs. It was this type of underfunding, coupled with the lack of local 
tribal control over management of reservation affairs, that led to the 
development of such laws as the Indian Self-Determination and Tribal 
Self-Governance Acts.
    Information that was submitted to the Task Force by the tribe 
demonstrates that tribal and individual Indian beneficiaries, as well 
as the United States, receive a benefit of $3 of non-BIA funds for 
every $1 of BIA compacted/contracted funds as a direct result of the 
tribal efforts in furthering tribal trust reform activities (SEE 
ATTACHMENT). Clearly, this information indicates that the Tribal Self-
Determination and Self-Governance initiatives are very beneficial to 
the goals of reforming Indian trust programs.
    Regarding Federal trust reform efforts, it has been both 
frustrating and costly for tribal governments over the past few years 
to chase around Indian country the most recent recommendations of 
consulting firms who've been awarded multi-million dollar contracts by 
DOI. It certainly is very revealing of the Federal efforts to have 
spent over $760 million thus far, but we have yet to find meaningful 
solutions and many of the consultant proposals have been universally 
rejected by the tribes. Unfortunately, the most recent Federal trust 
reform efforts have focused almost entirely on restructuring or 
eliminating the BIA's trust management functions without spending any 
time to analyze whether the new organization will simply fall into the 
same old problems that brought us to where we are today.
    DOI officials say that status quo of the BIA is unacceptable, and 
restructuring is necessary if trust reform is to be successful, 
including ``realignment'' of the lower levels of the BIA. (Task Force 
Report, p. 27). This proposed realignment initiative includes the 
probability of segregating trust asset management functions and budgets 
from the BIA Regional, Agency and Sub-agency offices for transfer to a 
trust service centers. While there has been discussion about the local 
BIA Regional and Agency offices ``contracting'' with the trust service 
center to maintain local trust asset management functions, it is more 
likely that these functions will be permanently removed from the local 
offices since the budgets will no longer be available to support them.
    The American Indian Trust Funds Management Reform Act of 1994 
(Reform Act) established the Special Trustee for American Indians and 
gave that position a significant amount of control over trust reform 
efforts. Despite the fact that Office of Special Trustee (OST) was 
supposed to only provide an oversight function--not a program 
implementation function, Congress began appropriating substantial 
amounts of funds for the OST budget. OST then assumed control over the 
BIA Office of Trust Funds Management, then assumed control of the 
historic accounting functions, most recently appraisals, and probates 
are expected to follow. Today, OST has stopped being the oversight 
function as originally contemplated in the Reform Act and has now 
become part of the problem. In effect, OST is now what the BIA was 12 
years ago--and the problems continue to escalate and few are being 
resolved. For example, it was the failures of the OST's Office of Trust 
Funds Management system that resulted in the complete shut-down of the 
DOI computer systems that were connected to the OTFM systems. In 
effect, the DOI computer systems had to be disconnected because proper 
safeguards were not incorporated in the OTFM systems that would prevent 
outsiders from improperly accessing trust information. Clearly, OST has 
now become a major part of the problem that must be fixed if trust 
reform is ever to be successfully implemented.
    Congress mandated in the Reform Act that a comprehensive plan be 
developed, in consultation with tribes, and submitted to the House 
Resources and Senate Indian Committees for review. To complete the 
framework for trust reform, the Reform Act also contains a mandate that 
the Special Trustee certify in writing the adequacy of the trust reform 
budgets. of the BIA, BLM, and MMS. Unfortunately, neither of these, 
statutory requirements has been complied with. I believe that the 
present state of the Federal trust reform is in the state of chaos that 
we see today largely because of these critical failures by OST in 
complying with these legal mandates.
    To address trust asset management, DOI has proposed to fragment 
Indian services into two or more agencies. If one fully implemented 
these proposals, Indian country would become the only place in the 
Nation where a tribe or individual Indian will be required to go to 
multiple agencies just to get permission to start businesses, create 
employment, implement welfare reform programs, build roads, have 
adequate housing fight fires, use resources and lands, and so on., 
Despite the fact that Indian people today are more regulated than any 
other group around the Nation, separating BIA functions into multiple 
organizations will require a substantial amount of new funds just to 
maintain the same level of services that are being provided today. 
Indian services will be reduced in favor of paying for more Federal 
bureaucracy. Unfortunately for tribes, none of the proposals analyzes 
what impacts will occur to the regional and agency offices where 95 
percent of the services in Indian country are provided.
    Based on an analysis of BITAM submitted earlier by the tribe, any 
option that separates the BIA functions into multiple organizations 
will cost at least $10 million of new or reprogrammed funds just to 
hire additional supervisors, assuming that the same level of BIA 
employees will be maintained. Additional funds will likely be necessary 
once the new organization determines what service it will provide to 
tribes and individual Indians. With respect to contracting and 
compacting with tribes, there will likely need to be amendments to 
various Federal statutes, including the Indian Self-Determination and 
Self-Governance Act, to provide for mandatory contracting/compacting 
requirements for any new non-BIA organization.
    Restructuring of the any Federal agency must be done in accordance 
with pre-determined plans, with identified and measurable goals and 
specific timeframes, none of which presently exist for restructuring 
Indian affairs today. Restructuring for the sake of restructuring is 
typically not the best use of limited resources, funds or time. Quite 
simply, changing employee name tags and agency addresses will not fix 
trust problems. Over three-quarters of a billion dollars have been 
spent by Federal officials and numerous consultants in the name of 
trust reform and little benefits have been demonstrated from the 
results. Yet tribes continue to struggle with underfunded programs, 
largely because of the unwillingness of Federal officials to provide 
funding and resources at the local tribal government levels, where 
clear progress is being made as tribes have consistently corrected 
problems and brought stability to local trust services under the Self-
Determination and Self-Governance Acts. It seems clear that the Federal 
Government has simply been investing in the wrong solutions.
    With respect to the DOI consultation process for the Task Force 
report, we are concerned that the process is not proceeding in a manner 
that will provide meaningful input from tribes and individual Indians 
regarding trust reform activities. Quite simply, DOI cannot expect that 
having just over 30 days for review and comment on such a major effort 
provides any level of reasonable consultation with tribes across the 
Nation, even if the Task Force report were to be expanded to include 
sufficient information with which to make an independent assessment of 
the Task Force's recommendations. It has also been explained that the 
EDS contract is supposed to provide additional substantive information 
regarding how the options will impact the local levels of the BIA. 
Further, no explanation has been provided to reconcile the fact that 
the Task Force's report to the Secretary will be submitted in July 
while the EDS analysis won't be completed until December.
    Trust Reform Budget Requests. The tribe does not believe that DOI 
has given fair consideration of budget needs to implement trust reform 
measures. Past needs-based budgets submitted to tribes during national 
budget meetings indicate that there is a need of approximately $7.0 
billion to adequately fulfill the trust obligations to tribes and 
individual Indians, as compared to the existing BIA budget of 
approximately $2.2 billion. Instead of dedicating more limited funds 
and resources toward reorganization of the BIA, the Hoopa Valley Tribe 
believes that DOI must aggressively work toward securing adequate funds 
and resources to implement the Federal trust obligations to tribes and 
individual Indians. Without both adequate funds and commitment to 
engage tribes into every phase of the trust reform efforts, no trust 
reform plan can be successfully implemented.
    With respect to S. 2212, the tribe strongly believes that there 
must be a legislative solution to trust reform problems if they are 
ever going to be resolved. Quite simply, there is presently 
insufficient legal guidance and authority to address the trust 
management issues that we are confronted with today. S. 2212 provides a 
sound beginning point for the legislative package.
    Our comments on S. 2212 are as follows:
    No. 1. We agree with S. 2212 that the BIA structure must be kept in 
tact. Besides not having the time or funds to construct a new Indian 
agency, the exercise of separating trust functions between resource 
management and other trust services will undoubtedly become an 
insurmountable task. The Hoopa Valley Tribe opposes DOI proposals that 
fragment the BIA into two or more agencies because we believe that it 
will ultimately lead to the destruction of Indian services and 
diminishment of trust responsibilities owed to tribes and individual 
Indians by the United States.
    No. 2. We disagree with section 307 of the bill that there is a 
need for a new Deputy Secretary for Trust Management and Reform. We 
believe that the bill correctly defines the trust duties for trust 
asset management and that the existing Assistant Secretary for Indian 
Affairs can appropriately address trust reform issues provided that the 
necessary funding and resources are made available to the BIA.
    No. 3. We wholeheartedly agree with the provision contained in the 
bill that provides for the development of resource management plans. We 
believe that this is one of the key cornerstones to ultimately 
resolving the differences between tribes, individual Indians and the 
United States with respect to management of trust lands and resources. 
Again, adequate funding must be made available to accomplish this goal 
and adequate flexibility must be provided to tribes and individual 
Indians to contract for the development of the plans.
    No. 4. We recommend that a provision be added to the bill that will 
facilitate the development and submission of adequate budgets necessary 
to properly manage trust assets and to fulfill the trust 
responsibilities of the United States to tribes and individual Indians. 
We suggest that language be included that mandates that the annual BIA 
Unmet Needs budget be reviewed so that annual budgets provide a 
reasonable method of increasing the funding levels of the BIA on a 
regular basis to meet the unmet needs.
    No. 5. We recommend that a section be added that would establish a 
new Division of Indian Claims within the DOI Office of Hearings and 
Appeals. Throughout the years of tribal deliberations regarding trust 
reform, tribes have expressed frustration from not having access to 
information that is controlled by the United States that would help to 
facilitate the development of claims, in order to resolve these claims 
through mediation, negotiation, litigation or legislation.
    No. 6. We recommend that provisions be added to the bill that would 
facilitate resolution of the breaches of trust that have been 
identified by the Cobell Court.
                                 ______
                                 

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

    Mr. Chairman and members of the committee, I am here today to 
provide to the committee the Administration's position on S. 2212, the 
proposed `` Indian Trust Asset and Trust Fund Management and Reform Act 
of 2002'' sponsored by Senators McCain, Johnson, and Daschle.
    The Administration is strongly opposed to the enactment of S. 2212, 
and recommends instead that the recommendations of the Joint Department 
of the Interior/Tribal Leaders Task Force on Trust Reform be enacted, 
where there has been agreement. While well intentioned, S. 2212 does 
not reflect the consensus of the Tribal Task Force.
    In the remarks Senator McCain made when the bill was introduced, he 
stated that Congress should give careful consideration to the 
recommendations of the Task Force. The Department learned a valuable 
lesson last year when it proposed the formation of a new Bureau of 
Indian Trust Asset Management prior to consulting with the tribes. This 
proposal was soundly rejected by tribal leaders. They were particularly 
concerned that the Department and the tribes had not sat down together 
to discuss the concept before it was proposed.
    Similarly, S. 2212 was introduced in the Congress without any 
discussions or review by the Department of the Interior or the broader 
tribal community. The provisions of S. 2212 are at odds with the work 
of the Task Force. Enactment of these provisions after the Department 
and tribal leaders have met at multi-day meetings in seven different 
locations over the past 7 months would seriously undermine the 
consultation process and the work of the Task Force.
    The Administration is strongly opposed to creating another Deputy 
Secretary position within the Department of the Interior. No other 
Department within the executive branch has more than one Deputy, or a 
Deputy with a particular mission other than the overall responsibility 
of the Secretary. We have reached agreement within the Task Force to 
recommend the creation of an Under Secretary for Indian Affairs who 
would be appointed by the President and confirmed by the Senate, the 
creation of a new Office of Self-Governance and Self-Determination that 
reports directly to the Under Secretary, and the creation of a Director 
for Trust Accountability.
    The Under Secretary would have direct line authority over all 
aspects of Indian affairs within the Department. This would include the 
coordination of trust reform efforts across the relevant agencies and 
programs within the Department to ensure these functions are performed 
in a manner that is consistent with our trust responsibility. This 
reorganization will require narrowly tailored legislation. We would be 
happy to provide to the committee draft legislative language that 
embodies the duties agreed upon by the Department and the Tribal 
Leaders on the Task Force.
    We also object to the creation of an Office of Trust Implementation 
and Oversight. This is not the model we have developed in our 
consultation with the tribes through the Task Force. Also, we do not 
believe that the proposed 10-year Indian Trust Fund and Trust Asset 
Management and Monitoring Plans authorized by the bill will meet their 
goal of assisting tribes in moving toward self-governance and self-
determination.
    In addition, we have concerns with the list of duties of the Office 
of Trust Reform Implementation and Oversight enumerated in section 
2(b), which adds a new section 307 to the American Indian Trust Fund 
Management Reform Act of 1994. Many of the duties in section 307(e)(3), 
as currently drafted, are overbroad and imprecise, and serve only to 
further confuse the issue of what obligations the trustee has. For 
example, section 307(e)(3)(H) imposes the duty to ``ensure. . .the 
greatest return on those funds and assets.'' The proposed language 
arguably does not permit the Government to analyze the claimed 
liquidity needs or to consider the compound interest needs of any 
particular individual or tribal owner of trust funds before it invests 
such funds. Additionally, the proposed language appears intended to 
extend the Government's responsibility regarding trust asset management 
beyond that established by Supreme Court precedent, with the potential 
to affect ongoing litigation over the scope of the government's 
fiduciary duties.
    We also have concerns regarding the obligation to manage the funds 
in accordance with all applicable tribal laws. This requirement carries 
the possibility of altering the trust duties of the Secretary in 
differing ways depending on which tribe's plan was involved, which 
could make the Department's administration of its ``inconsistent 
responsibilities'' practically very difficult and subject to litigation 
risk.
    For these reasons, we recommend that the committee put S. 2212 
aside, and consider instead legislation that reflects the 
recommendations of the Task Force. Those recommendations include 
creation of the Under Secretary position mentioned above, creation of a 
new Office of Self-Governance and Self-Determination that reports 
directly to the Under Secretary, and creation of a Director for Trust 
Accountability. The Task Force has also agreed on the concept of 
creating an independent commission that would provide oversight on the 
management of trust funds and other issues. Our work on that proposal 
is not yet complete. We are hopeful that we will finalize the 
commission proposal in August. We look forward to working with the 
Committee on these provisions during the next few weeks.
    This concludes my statement. I would be happy to answer any 
questions the committee might have at this time.




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