[Senate Hearing 108-67]
[From the U.S. Government Publishing Office]



                                                  S. Hrg. 108-67, Pt. 1

                      INDIAN GAMING REGULATORY ACT

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                   ON

OVERSIGHT HEARING ON INDIAN GAMING REGULATORY ACT: ROLE AND FUNDING OF 
                 THE NATIONAL INDIAN GAMING COMMISSION

                               __________

                              MAY 14, 2003
                             WASHINGTON, DC

                               __________

                                 PART 1

                               __________




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                            WASHINGTON : 2003
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                      COMMITTEE ON INDIAN AFFAIRS

              BEN NIGHTHORSE CAMPBELL, Colorado, Chairman

                DANIEL K. INOUYE, Hawaii, Vice Chairman

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

         Paul Moorehead, Majority Staff Director/Chief Counsel

        Patricia M. Zell, Minority Staff Director/Chief Counsel

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page
Statements:
    Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, 
      chairman, Committee on Indian Affairs......................     1
    Choney, Cloyce, commissioner, National Indian Gaming 
      Commission, Washington, DC.................................     1
    DeRosier, Norm, Viejas Gaming Commission.....................    13
    Hogen, Phil, chairman, National Indian Gaming Commission, 
      Washington, DC.............................................     1
    Stevens, Jr., Ernest L., chairman, National Gaming 
      Association, Washington, DC................................    13
    Van Norman, Mark, executive director, National Indian Gaming 
      Association................................................    13
    Westrin, Nelson, vice chairman, National Indian Gaming 
      Commission, Washington, DC.................................     1

                                Appendix

Prepared statements:
    Hogen, Phil (with attachments)...............................    27
    McCain, Hon. John, U.S. Senator from Arizona.................    25
    Stevens, Jr., Ernest L. (with attachments)...................    39

 
                      INDIAN GAMING REGULATORY ACT

                              ----------                              


                        WEDNESDAY, MAY 14, 2003


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The committee met, pursuant to other business, at 9:55 a.m. 
in room 216, Hart Senate Building, the Hon. Ben Nighthorse 
Campbell, (chairman of the committee) presiding.
    Present: Senators Campbell, Inouye, and Akaka.

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

    The Chairman. The Committee on Indian Affairs will be in 
session.
    We will now proceed to the oversight hearing on the Indian 
Gaming Regulatory Act: The Role and the Funding of the National 
Indian Gaming Commission. We have just one panel, and that will 
be Phil Hogen, chairman, National Indian Gaming Commission, 
Washington, DC, accompanied by Nelson Westrin and Chuck Choney.
    Next we will have Ernest Stevens, chairman, National Indian 
Gaming Association, Washington, DC. He will be accompanied by 
Mark Van Norman.
    Mr. Hogen, please come up and have a seat.
    Your complete written testimony will be included in the 
record. If you would like to abbreviate your remarks, please 
feel free to do that. Welcome to the committee.

   STATEMENT OF PHIL HOGEN, CHAIRMAN, NATIONAL INDIAN GAMING 
COMMISSION, WASHINGTON, DC, ACCOMPANIED BY NELSON WESTRIN, VICE 
    CHAIRMAN, NATIONAL INDIAN GAMING COMMISSION; AND CLOYCE 
    ``CHUCK'' CHONEY, COMMISSIONER, NATIONAL INDIAN GAMING 
                           COMMISSION

    Mr. Hogen. Good morning. Thank you, Mr. Chairman. We much 
appreciate the opportunity to come tell the story of the 
National Indian Gaming Commission this morning. We have a lot 
to say, and we know we do not have a lot of time to do it, so I 
will try to get right to it.
    But first I would like to introduce the other members of 
the National Indian Gaming Commission who are with me here 
today. Our vice chairman is Nelson Westrin. Nelson is the 
former executive director of the Michigan Gaming Control Board. 
He was there when that gaming regulatory body started. He put 
it together and he brings a great deal of expertise to our 
body. We really appreciate having him on board.
    Cloyce ``Chuck'' Choney is the other member of the 
Commission. Chuck is a Comanche from Oklahoma. He spent 26 
years with the Federal Bureau of Investigation. He knows his 
way around Indian country and investigations. We are just 
delighted to have him part of our team. That has really 
strengthened our relationship with members of the Federal law 
enforcement family.
    We want to talk about basically three areas today. We are 
bureaucrats so we are going to talk about our funding and our 
budget. We want to talk about the mission that we have and how 
we attempt to perform that mission. Finally, we want to talk 
about what we view are some shortcomings in the Indian Gaming 
Regulatory Act that tend to complicate our performance of that 
mission.
    Before I launch into that, I want to say that we think we 
know our place within the Indian gaming scheme of things. We 
would not be here if it were just for the Federal Government. 
Indian gaming was created by Indians, by leaders that brought 
economic development to their reservations where that was 
desperately needed. Without their vision and without their 
leadership, there would not be an industry. We would not be 
here.
    With respect to the gaming that is occurring out there, 
there are several key players that perform the regulatory 
functions. The front line, all day, every day regulation is 
performed by tribal regulators. We think they do that job very 
well.
    Our role is rather a secondary role. We support and provide 
oversight of that regulation, that tribal gaming commissions 
perform for their tribes. Of course, under the tribal-State 
compacts for class III gaming, States, too, can and do play 
supporting roles. But most of the manpower, and all of the 
money that is spent to regulate Indian gaming, is provided by 
the tribes. They are doing a commendable job. Our oversight, we 
hope--and we think it does--tends to lend credibility to that 
first line regulation that tribes do.
    There is a dynamic tension that exists between these levels 
of regulators, but we think that is to be expected in that kind 
of a relationship. But we think we have a good and positive 
relationship with tribes and their tribal regulators.
    Now, getting to the funding part of the presentation, since 
1997, the National Indian Gaming Commission's operations have 
been funded solely by tribes--fees that are collected on class 
II and class III gaming, as well as some lesser amounts that 
are collected for services, particularly the fingerprint 
processing that we do for tribes in cooperation with their 
background investigations. We also charge some fees in 
connection with the background investigations we conduct when 
we are doing management contract reviews.
    The fees that we collect, of course, are capped by the 
statute, capped currently at $8 million. Exhibit number 2 of 
our written statement is a pie chart that shows that about 85 
percent of the dollars that we current spend are basically 
fixed costs--salaries and money we spend to keep the doors open 
at our office here in Washington and our five field offices.
    The Chairman. Is that the red portion of your chart?
    Mr. Hogen. Yes; the lion's share is basically 
uncontrollable, so to speak. We have to pay that whether or not 
we are working hard.
    The Chairman. You had better be working hard.
    Mr. Hogen. We absolutely try to do that.
    That is the picture. Right now we are spending the full $8 
million basically to do that. Of course, the industry itself, 
as this chart demonstrates, is on an upward trend. We do not 
know that it will always go at that level or at that rate, but 
recently that is the way it has been going. That is good. That 
means that puts dollars on reservations where they are supposed 
to go.
    But it also means that we have more to do. With the same 
amount to do more, we have to be creative. But during this 
period of time, there have been more tribal gaming operations 
and there have been larger tribal gaming operations. We have 
come up with some more requirements that we have to get out 
there and verify, such as our minimal internal controls 
standards and the environment, health, and public safety 
provisions that we are responsible for overseeing.
    The gaming itself is becoming more complex. It is a more 
technical industry. We have to be better at what we do. In 
2001, NIGC spending to hit the ceiling. We collected all the $8 
million. We could not hire any more people or do anything more. 
So we had to put in place a hiring freeze. We had to restrict 
the travel of the investigators and the auditors. We had to 
suspend a consultation circuit riding program where they would 
go out around Indian country. We have been able to only 
minimally upgrade equipment, training, and the technology that 
we utilize. We are in a bind over there.
    Also appended to our testimony is a copy of our 
organizational chart. It shows who works for us and what they 
do. It also shows the vacancies. We have 19 field investigators 
in our five field offices and here in our Washington office. 
Right now, three of those positions are vacant. We have seven 
auditor positions; three of those positions are vacant.
    The Chairman. Those are positions all in the Washington 
office?
    Mr. Hogen. No; these are the whole team; five field offices 
and the Washington office.
    The Chairman. The positions that are vacant. Are they out 
in the field are they mostly here in Washington?
    Mr. Hogen. They are both. It is probably weighted a little 
more to the field because that is where the people are. But if 
and when we get dollars to fill positions, the field positions 
will be the first ones that we will backfill.
    We also have had some senior positions open. We currently 
do not have a general counsel. We do not have a director of 
Congressional affairs. We have folks acting in that capacity. 
That means that those acting folks cannot do the jobs that they 
were doing before.
    The good news in connection with that, and the fact that 
there were vacancies in our positions in the Commission 
membership means that we saved some dollars. We were not paying 
those big salaries. With those savings, we were able to hire 
some of the people and fill some of the slots that we had not 
filled before.
    But notwithstanding the shortage of folks that we have, we 
are still doing a lot of work. We made 329 ``routine'' site 
visits to field offices during 2002. We conducted 75 training 
sessions out at reservations or in tribal facilities. We made 
226 visits that were made to address specific problems. That is 
not across the board because 148 of those occurred at our Tulsa 
office where we have struggled with where you draw the line 
between class II and class III gaming.
    Indian gaming is extremely diverse. In some cases it is far 
flung and remote. Geography and special circumstances tends to 
influence how we distribute those field visits and so forth. If 
you are in Tulsa and you need to go to the Muskogee Creek 
facility, you are ten minutes away. If you are in the St. Paul 
office and you need to go to Pine Ridge, you have to spend 
$1,000 and a lot of time on the airplane and behind a steering 
wheel. So it is not all divided up the same way, so to speak.
    We have a strong audit team. The audit function is probably 
the newest group that has been developed at the National Indian 
Gaming Commission. First of all, they review the audits that 
all tribes have to have performed and send to NIGC. Those 
audits are helpful, but of course, they basically show the 
financial position of the facility. They do not say that they 
have looked under every rock to see if anything was wrong. But 
occasionally we do that kind of an audit as well, a fraud or an 
investigative audit.
    Most recently we have been doing minimal internal control 
audits which have been extremely productive. We came out with 
these minimum internal control standards that say things like:

    When you take the money out of the slot machine you have to 
have somebody from security there. You have to have somebody 
who is going to account for the money. You have to have a 
witness. They all have to sign the paper.

    There are things like that. You have a track record on 
these undocumented cash transactions. When we do a MIC audit, 
we go out and look at the paper trail for those things and try 
to see how the operation is running. This provides great 
oversight from our perspective. I think the tribes are 
extremely well served when we look at them and tell them where 
there are some shortcomings.
    Ideally, our auditors tell us we would do one of those MICS 
audits at each facility about every 5 years. Last year, 2002, 
we were only able to do five of those. That is 5 out of 300 
operations. At that rate it would be a long time to make the 
full circuit. We cannot do that with the staff that we 
currently have.
    In terms of the background investigation process that the 
tribes initially perform and do well, we help process those 
fingerprints. In 2002, we processed 30,000 fingerprints, 
sending them on to the FBI and sending the results back to the 
tribes. We looked at over 24,000 employee background 
investigations. We are part of that team, and that keeps us 
busy.
    We also, of course, review and approve the tribal gaming 
ordinances. You might think that would be something that would 
just be a one-time deal from each tribe, but there are changes. 
For example, Arizona not long ago, expanded gaming to include 
black jack. Each of the tribes had to revise its ordinance, 
send it in to us, and we reviewed it. Of course, there are new 
operations where they send in new ordinances. We also review 
and approve management contracts. That is a slow but a very 
thorough process. That keeps us busy. Like other agencies, we 
get a lot of Freedom of Information Act requests. We spend a 
lot of time and resources responding to the FOIA requests.
    To do all of the things we are supposed to do, frankly with 
the growing industry, we need more resources and we need more 
money. The way we are funded now is exclusively by the fees 
that we get from class II and class III gaming. The good news 
for the tribes, of course, is as those total dollars expand, 
the rate that they have to pay us to fund that $8 million goes 
down.
    The first thing the three new Commissioners did when we 
came on board was to set the rate for calendar year 2002. You 
cannot do that until the end of the year because you do not 
know exactly how much money has been generated out there. We 
set the rate. We lowered the rate. It was set at 65 cents per 
thousand dollars. For every thousand dollars of tribal revenue 
out there, they sent us 65 cents.
    When we set the rate for this year, 2003, because we could 
see the expanding industry, we were able to reduce that to 59 
cents per thousand dollars. In the 2003 budget, the President 
had requested $2 million in appropriated taxpayer dollars to 
supplement our $8 million for the operation. Of course, when 
Congress put the budget to bed here with the Omnibus Funding 
Bill earlier this year, there was a deficit looming and they 
did not appropriate that money. We are still at the status quo, 
or the $8 million fee cap level.
    However, the Omnibus Funding Bill did raise the cap for 
2004, raising it from $8 million to $12 million. That was the 
appropriators' vision or view of how to address this situation. 
We further understand that that was a message to you, to this 
committee, saying, ``If you want to change or fix the way NIGC 
is funded, you have a window of opportunity to do this.''
    We understand that you folks can wave the wand. Maybe when 
we get to 2004, that $12 fee cap will not be there or maybe you 
will change the structure. As we understand the $12 million fee 
cap, it is a one-time deal. It is not changed forever; it is 
changed for 2004. You might make that permanent, or you might 
entirely change the formula.
    That puts us in a little bit of a bind in terms of what to 
do when. If we go out and hire more people who we would expect 
to pay over the years and we spend part of $12 million, if it 
is not going to be there in the out years, we are in trouble. 
We will have to RIF those people and that would not be good.
    We can buy some new equipment and get some needed training 
and so forth, but we are hesitant to open more doors or hire a 
lot more people. We want to know what the stability of that 
funding will be.
    In terms of what we would do if we had more money, this is 
how we would spend the money if we had $10 million instead of 
$8 million. We would hire more auditors. We would hire more 
investigators.
    The Chairman. My old eyes can barely see that chart let 
alone the printing on that chart. Do you have those printed up 
for the committee?
    Mr. Hogen. Yes; I believe it is attached to the statement.
    The Chairman. We do not have any of those charts you have 
shown so far.
    Mr. Hogen. I apologize for that.
    The Chairman. Provide those for the committee, if you 
would.
    Mr. Hogen. We certainly will.
    In addition to that, we have a copy of our budget showing 
how we spend it by the month and by the item. We will provide 
it to the committee and, of course, we have provided it to the 
tribes.
    How can we maybe better set the rate of the fees? Here is 
what I think you should do. I think rather than setting a 
finite number there--$8 million, $10 million, $12 million--set 
it at a percentage rate. If the industry grew, so, too, would 
the fees to regulate that industry. If it contracts, we need 
less money and it would go down.
    Right now the maximum for the fees is 5 percent. Well, of 
course, given the experience we have had since 1988, that is an 
outrageously high fee. We would never need that much money. If 
we had one-fiftieth of that; if we had one-tenth of a percent 
as the fee cap--that is not the budget; that is just the 
maximum--then if you had a $12-billion industry, then we would 
get $12 million. If you had a $13-million industry, we could 
get $13 billion.
    We think that would be an approach that you might want to 
consider in terms of giving us some stability so that as the 
industry grows we could grow and we could make some long-term 
plans.
    The last thing I want to say about that is that fee cap is 
just that. That is not the budget. In 2004, we have a fee cap 
of $12 million. I do not think we could intelligently spend 
that much money if we wanted to; $10 million, yes. We have a 
plan for that. But just because the fee cap is there, that does 
not mean that we would seek all of that money.
    So that is our story with respect to our budget and our 
funding. At the conclusion of my statement, I will try to 
respond to any questions you might have.
    Before we conclude, I want to talk about things that we 
think might be changed in the Indian Gaming Regulatory Act that 
would assist us. There are probably a couple of things that 
everybody who is in Indian gaming agree on with respect to 
IGRA. No. 1, is that it is not perfect. No. 2, everybody is 
afraid that if it is ever amended, it will be amended in a way 
they will not like. There is not much impetus to change it.
    In years past, ordinarily there has been a bill introduced 
to amend the Indian Gaming Regulatory Act. The National Indian 
Gaming Commission has most often been in the reactive posture. 
They were asked after it was introduced, ``what did we think''. 
Typically, NIGC said, ``Well, we do not like it exactly that 
way.''
    We are here to offer some suggestions that we think might 
be considered before a bill like that gets introduced.
    First of all, with respect to the authority of the National 
Indian Gaming Commission with respect to class III gaming, the 
lion's share of Indian gaming revenue is in class III. The 
scenario is that there is a tribal State compact that will be 
negotiated which will, in part, address the structure of the 
regulation.
    Yet, the Chairman of the National Indian Gaming Commission 
has the authority and the responsibility to close or to fine a 
facility if it is not operating correctly or in compliance with 
the Indian Gaming Regulatory Act, or the NIGC regulations, or 
the ordinance that the tribe passes.
    I construe that to be authority over all the gaming--class 
II and class III. But if you comb through the act, it does not 
clearly say that we have authority over class III activities. 
Sometimes when we knock on a tribe's door, doing our oversight, 
and we say, ``We would like to look at those records,'' they 
say, ``Wait 1 minute. Those are class III gaming records. You 
do not have the authority to look at those.'' Then we end up in 
the court hassling about that.
    Someday if there is no change in the law, the court will 
clarify that. I think they will find that we have that 
authority. But with the stroke of a pen, I think Congress could 
clarify that and that would be of assistance to all.
    I would like to move on to folks that do consulting, 
vending, development agreements, and so forth, for tribes. 
Under the current structure, we have authority to oversee 
management contracts. If a tribe and a developer want to set up 
an arrangement whereby the group manages the facility for the 
tribe, they send us that contract. We look at it in the role of 
the Federal trustee to make sure that the tribe is not being 
taken advantage of. We put our stamp of approval on it if it 
passes that review.
    If, in fact, management contractors are out there and they 
run afoul of what they have agreed to or any of the acts we are 
responsible for enforcing, we can penalize them. We can suspend 
the contract. We can impose a fine. We think that is helpful to 
tribes.
    There are not very many management contracts out there. 
There are over 300 operations but there are only 15 of those 
that are run pursuant to a management agreement. In the history 
of the National Indian Gaming Commission, only 40 management 
contracts have been approved. There are 21 currently in our 
pipeline or under consideration or review. It is easy to see 
that is the exception and not the rule.
    I am not here to say that is a bad deal. In many cases the 
tribes are doing the right thing managing operations by 
themselves.
    The Chairman. 300 are managing their own operations?
    Mr. Hogen. There are 300 total, and only 15 of those are 
under a management contract. There are 285 without a management 
contract. But of that 285, there are a large number where 
somebody else is really doing part of the operation--a third 
party consultant, a third party vendor, a third party 
developer. They have not entered into a classic ``management 
contract'' that we have reviewed and approved.
    There are a couple of things that concern us about that. 
First of all, when it is not a management contract, we have no 
role in looking at their background. They may be perfectly 
suitable people, but we, at this level, have never had an 
opportunity to check into that like we could do if it were a 
management contract.
    The Chairman. That means some tribes are hiring groups 
under a consultant capacity or some other name rather than a 
management group?
    Mr. Hogen. Right. I am sure one of the reasons that tribes 
and developers do that is that it is such an onerous process to 
go through our management contract review process. I am hoping 
we can streamline that.
    There are people out there that are determining who wins 
and loses the bets, that handle the money, that are not under 
our review, and in some cases, are not even subject to even 
tribal background reviews.
    If, in fact, those folks run afoul of the rules and run off 
with the tribe's money, we have no authority over them. What I 
would like to see is an amendment that would give us a role to 
do that, whether it be licensing or oversight. And, also to say 
that if, in fact, they do make off with the tribe's money, 
there would be an arrangement for them to disgorge or refund 
what they defrauded the tribe. We think we could clean up the 
industry.
    We do background investigations for management contracts, 
but in many cases that is the cream of the crop. These people 
can pass muster. The people who want to sneak in under the 
cover of darkness would want to avoid a management contract.
    Moving on to the Supreme Court's 1996 Seminole decision 
which said tribes cannot sue States if States refuse to 
negotiate in good faith, I think everybody from the tribal side 
would agree that has been problematic. Of course, the Secretary 
of the Interior is now working through procedures in a couple 
of situations to try to come up with rules for a compact that 
can occur where the States have not agreed. There are 
challenges and there will be continued challenges to that 
process.
    Our concerns are twofold: First of all, we think that the 
playing field should be leveled again so that the States and 
the tribes are on the same footing. Right now the States cannot 
get sued, so they have an advantage.
    Second, in those environments where there is obviously a 
question about the fairness of the State refusing to negotiate, 
you have gaming activities by tribes that probably enters into 
the class III territory. If we go out there and try to enforce 
against that, shut it down or whatever, if and when we get to 
court, the court says, ``Well, it looks like these folks should 
be able to get a class III compact. They have not.'' Then this 
litigation comes to a standstill.
    That means that you get less clarity in the regulation and 
the operation of gaming. If we could restore that balance, if 
you could perhaps give the Secretary clear authority to impose 
Secretarial procedures where tribes cannot negotiate a compact, 
that would put us back where I think Congress intended to go in 
the first place.
    When I had the privilege of appearing before the Committee 
during my confirmation, I was asked, ``Do I intend to consult 
with tribes.'' I do intend to do that. I think we have been 
doing that. We certainly intend to continue to consult with 
tribes as we spend their money and partner with them in the 
regulation of their industry.
    One of the things we are working on at the present time is 
setting up a more formal statement of how that consultation 
will be conducted. I came to this job from the Department of 
the Interior. The Bureau of Indian Affairs, of course, has a 
lengthy formal consultation process. In my view, we cannot 
afford to do anything quite that complex. I think that is too 
cumbersome when commissioners only have a 3-year term to do 
their job. By the time you get acquainted and then go out and 
start a long process like that, your term is up.
    We want to come up with a more flexible, more nimble 
approach, but we want it to be meaningful. We are resuming this 
circuit riding of consultation sessions that we started when I 
served on the Commission as an Associate Commissioner. We are 
going to be heading out to Minneapolis next week, the Great 
Plains and Midwest Indian Gaming Trade Show will occur there.
    We will follow that with a consultation session whereby we 
will invite all of the tribes to come to hear what we have to 
say and hear what they have to say. Then we will sit down with 
individual tribes with all the tribes that want to sign up or 
visit with us and hear not only about local concerns, but about 
their views on these big picture issues we are talking about 
right now.
    As we do this, of course, a couple of the key subjects we 
want to talk about are the changes that the past Commission 
made in the definitions regulations relating to aids for class 
II gaming, as well as facsimiles that constitute class III 
gaming, as well as our budget and our funding.
    In July we will be going out to the Northwest. The 
Northwest Gaming Association will be holding its meeting in 
Tacoma. We are going to piggyback on that, as we are doing in 
Minneapolis. A couple of weeks ago Commissioner Choney and I 
went to Oklahoma. It was short notice, but 150 tribal leaders 
and representatives of Indian gaming in Oklahoma showed up. We 
had a long, very productive discussion. We probably spent more 
time there talking about where you draw the line between class 
II and class III, and how you classify games, than we will in 
some of the other venues. That was a very productive session.
    We are on the consultation trail. We have had meetings. We 
have provided budget information. We want to continue to do 
that.
    Finally, before I conclude here, I want to acknowledge the 
dedication and hard work of the current team that we have at 
the National Indian Gaming Commission. In the face of these 
changes in leadership and shortfalls, and the rapid growth that 
the industry has experienced, our staff has been extremely 
professional and has worked extremely hard. They have bent over 
backward to try to be user friendly rather than use a traffic-
cop approach when they run into a problem in Indian country.
    I am proud to be leading that team right now. I am also 
proud to say that we three new Commissioners are getting along 
great. We think that we each bring an unique prospective that 
is considered by one another as we do our job. We hope to move 
onward and upward.
    With that, I would be happy to respond to any questions you 
might have. I know that Vice Chairman Westrin and Commissioner 
Choney would also be happy to respond to any questions. I would 
ask that my statement be included in the record in its 
entirety.
    Thank you.
    The Chairman. Without objection, so ordered.
    [Prepared statement of Mr. Hogen appears in appendix.]
    The Chairman. Thank you. I am glad you are improving the 
relationship with tribes through consultation. As you know, we 
had some feedback early on from tribes that felt the Gaming 
Commission was somewhat punitive. When you say you are hearing 
what they have to say, that is great, because if you do not, we 
are going to hear what they have to say. I appreciate your 
doing that.
    Let me ask you a few questions particularly about 
California. I keep hearing about the explosive growth in 
California of gaming tribes. How many California tribes now are 
into gaming presently? What is the projection of the number of 
tribes that will be starting? Do you have a number?
    Mr. Hogen. In our office we know, and our field office in 
Sacramento could tell me in a heartbeat. There are about 60 
tribes that are actively engaged in gaming right now. There are 
a number of them that are negotiating compacts. It is in that 
ballpark, I believe.
    The Chairman. Some of the California tribes use the so-
called ``model compact'' that Governor Davis negotiated. Are 
there variations of that in the duties that the Commission has 
to perform?
    Mr. Hogen. It is pretty much a standard cookie cutter 
compact, so to speak, for all the California operations. One 
tribe, Coyote Valley, is holding out and in litigation with 
respect to whether they have to play by those same rules. I 
think all of the tribes that currently are operational pretty 
much have the same identical compact.
    The Chairman. I see. You mentioned the fee assessments are 
about 59 cents per thousand dollars. Do you have any evidence 
that that fee level, that assessment level, has caused any 
hardship to tribal operations?
    Mr. Hogen. As far as I know, there are a number of tribes 
that are late in paying their fees, or have not paid their 
fees. But ordinarily that is an oversight. It is not because 
they did not have the money to do that.
    The first $1.5 million generated by every operation is not 
subject to the fee. If you have a really small operation, they 
get our service but they do not have to pay any fee. In the 
scheme of things, I do not think that is overly burdensome.
    But in the same breath I want to say that Indian gaming's 
regulation is probably less efficient than some other gaming 
regulation in that we necessarily have these three levels. You 
have the tribes that do basically all the work on the floor, on 
the ground. The States partner in that. Then we provide 
oversight.
    A reason for that is, there is a perception by some, that 
if the tribe regulates its own gaming, it is the fox watching 
the hen house. I think tribes should be trusted to do that. But 
to give them credibility, we can come up here and say, ``We 
have been out there. We looked at it. We know it is squeaky 
clean.'' We think that strengthens what they do.
    But they also have the luxury of looking just at one or two 
operations very intensely. They are not looking at the number 
of facilities that the Nevada Gaming Commission would have. It 
is going to be a little expensive, but we think it has been 
worth that investment so far.
    The Chairman. You also get $2 million in reimbursement 
costs. You mentioned the fingerprinting and background checks. 
First of all, could those activities be outsourced?
    Mr. Hogen. Well, with respect to the fingerprint activity, 
that is probably a critical role for us to play in that the FBI 
is quite selective with whom they do business.
    The Chairman. How about doing background checks and things 
of that nature?
    Mr. Hogen. Well, we get reimbursed. If Bally's Gaming comes 
to us and says, ``We want to do a management contract----''
    The Chairman. If you are reimbursed for that, does that 
need to be part of your budget needs?
    Mr. Hogen. We put that in a separate category. It pays for 
itself. You are right about that. We do not need to get more 
money to do that because it is pay-as-you-go. It is the other 
stuff that we need the money for.
    The Chairman. For a number of years, the tribes and the 
Committee have not received information that we think needs to 
be provided to the Committee and the tribes. We have mentioned 
this a couple of times in the past when you have been in here.
    You did mention your trying to improve your consultation 
with tribes. Do you have a policy of consultation?
    Mr. Hogen. We have been doing it tribe-by-tribe, but Vice 
Chairman Westrin has taken upon himself the task to propose for 
us a consultation process. I learned when I was at the 
Department of the Interior the lesson of BITAM. Secretary 
Norton came out with the plan. The tribes said, ``We are not 
talking about that. You did not talk with us first.''
    This is one of the things that we are going to talk with 
the tribes about when we go to Minneapolis and when we go to 
Tacoma to get their input before we put it in bold type and 
say, ``Here it is.''
    The Chairman. The Departments should all learn from BITAM.
    In some parts of the country, particularly Oklahoma, I 
think you mentioned there is a lot of litigation regarding the 
use of technological aids for class II gaming and the 
application of the Johnson Act. In your opinion, are the class 
II definitions in need of change or modernizing? Did the action 
taken by your predecessors sufficiently clarify the definition?
    Mr. Hogen. I think it did bring considerable clarity to 
that. In two recent Court of Appeals decisions--Santee Sioux v. 
National Indian Gaming Commission decision of the Eighth 
Circuit on New Year's Eve of last year, and the recent decision 
of the Seneca Cayuga case--found that devices that used spools 
of pull tabs, although they had electronic card readers and 
video displays, were class II.
    In those decisions, they addressed the new regulations of 
the Commission. In other words, they said:

    This brings some clarity to this. The Commission is in the 
business of regulating gaming. They are entitled to some 
deference.

    This gives us a brighter line.
    Yes; I think the regulation has considerably helped clarify 
the picture. What we need to continue to remind ourselves is 
that given the advance of technology, this is a dynamic area. I 
do not think we can ever sit back and say that we do not ever 
have to change that again.
    The Chairman. Thank you. We are still dealing with the 
Seminole decision. Basically it stripped the tribes of any 
leverage they had in getting the States to negotiate. Without 
amending IGRA, are there any other ways that you think we could 
resolve the impasses that we have between tribes and States? 
Obviously, if we tried to amend IGRA, the States may oppose any 
changes that would take away their ability to do what they have 
already won in Court.
    Mr. Hogen. Secretary Norton has been working with the 
Santee Sioux Tribe in Nebraska and with the Seminole Tribe in 
Florida with respect to trying to come up with a compact. That 
is a long tedious process, but progress is being made. I know 
that based on the conversations we have recently had. I was 
over there when that process was ongoing.
    If and when that process gets finished and we have a model 
to work from, then I think that will be addressed in large 
part. But it will perhaps take longer than an amendment to IGRA 
might take.
    The Chairman. We probably will not be able to amend IGRA if 
it looks like a threat to the States. We just would not get the 
thing through.
    I understand that some of the new regulations that you are 
developing have to do with environmental health and safety 
regulations. I think I can understand safety, but what kind of 
regulations are you developing that have to do with 
environmental health in a casino?
    Mr. Hogen. If a casino were proposed to be built on a 
fragile river bank and it would crash into the river or pollute 
the river, we would probably say, ``Hey, take another look at 
this.''
    The Chairman. I see.
    Mr. Hogen. We have issued some regulations that are 
basically advisory. There is some term of art that I cannot 
think of right now that we call that. But basically what we say 
is:

    We are not setting the rules of what you have to do for 
environment. But you do have to look at this. You have to make 
your own plan. Go by your own tribal code, or whatever.

    If and when we find a situation where there is imminent 
danger, we can take action. We have never had to do this.
    The Chairman. Do you not have the legal authority or 
experts on your staff to deal with safety regulations, like 
OSHA does, or like EPA does with environmental health; do you?
    Mr. Hogen. We do not have safety experts, so to speak. With 
respect to environmental issues, when we review and approve 
management contracts, that is a major Federal action that 
triggers NEPA. An environmental assessment may have to be made. 
We have to look intelligently at that.
    The Chairman. You work with these other agencies when you 
have to make that assessment or decision?
    Mr. Hogen. We do that. We work with the folks in Bureau of 
Indian Affairs and the Department of the Interior. Of course, 
we also want to be sure we understand what they are telling us. 
We have some of that experience in-house.
    The Chairman. Thank you. I have no further questions.
    Senator Inouye or other members may have questions. If they 
do, they will probably submit them in writing. I would 
appreciate it if you could get answers back to the committee.
    Mr. Hogen. I would be very happy to do that. Thank you for 
this opportunity.
    The Chairman. While our panel is coming to the table, we 
will stand in recess for just a couple of minutes.
    [Recess.]
    The Chairman. The committee will come back to order.
    Our next panel will be Ernest L. Stevens, Jr., chairman, 
National Indian Gaming Association, Washington, DC. He is 
accompanied by Mark Van Norman, executive director, National 
Indian Gaming Association, Washington, DC, and Norm DeRosier, 
Viejas Gaming Commission.
    If your colleagues are going to speak, please have them 
identify their names for the record. As with the other witness, 
if you would like to turn your complete written testimony in, 
that will be fine. You can abbreviate it, if you would like to.

STATEMENT OF ERNEST L. STEVENS, Jr., CHAIRMAN, NATIONAL INDIAN 
  GAMING ASSOCIATION, WASHINGTON, DC, ACCOMPANIED BY MARK VAN 
NORMAN, EXECUTIVE DIRECTOR, NATIONAL INDIAN GAMING ASSOCIATION, 
  WASHINGTON, DC; AND NORM DeROSIER, VIEJAS GAMING COMMISSION

    Mr. Stevens. Thank you, Mr. Chairman.
    Good morning, Senator. Thank you for allowing me to be here 
today. I will summarize my statement. I would ask that my 
statement be included in the record in its entirety.
    The Chairman. Without objection, so ordered.
    [Prepared statement of Mr. Stevens appears in appendix.]
    Mr. Stevens. With me today are Mark Van Norman. He is a 
member of the Cheyenne River Sioux Indian Tribe. He is NIGA's 
executive director. Also here is Norm DeRosier, a gaming 
commissioner from the Viejas band of Kumeyaay Indians.
    I am an Oneida from Wisconsin. I serve as the chairman of 
the National Indian Gaming Association. I want to say, Senator, 
that I am honored to be here to share this information with you 
on the regulation of Indian gaming, and to discuss the role of 
funding at NIGC.
    As you know, Senator, tribes have survived a history of 
genocide, oppression, and dispossession. In the early 1970's we 
were number one in everything that was bad--unemployment, 
poverty, dropout rates, and substandard health care. At that 
time, a number of tribes began to turn to gaming as a way out. 
Tribal governments use gaming like States use lotteries, to 
build infrastructure and provide essential services for their 
citizens. We believe that is working.
    In just 30 years, Indian gaming has helped tribes to begin 
to rebuild communities that were all but forgotten. Where once 
there was poverty and unemployment, Indian gaming provides more 
than 300,000 American jobs. Where once tribes suffered disease 
and lack of health care, Indian gaming helps to build clinics, 
and provides health care to the sick and to the elderly.
    Where once tribes faced epidemic suicide and dropout rates, 
Indian gaming builds schools, funds scholarship programs, and 
provides hope for the entire generation of our Indian youth. 
Indian gaming is all of this and a lot more. Our tribal 
governments are stronger and our people are stronger.
    Indian country still has a long way to go. Too many of our 
people continue to live in disease and poverty, but Indian 
gaming offers hope for a better future for our tribal 
communities.
    The great irony now is that Indian tribes are helping non-
Indian communities as well. We are very proud of that, sir. We 
provide jobs for non-Indians nationwide. In fact, you may not 
know this, but over 75 percent of the 300,000 Indian gaming 
jobs go to non-Indians.
    The Chairman. 75 percent?
    Mr. Stevens. 75 percent of over 300,000 jobs go to non-
Indians. We have to work together. In spite of our history, we 
move forward without any issues. We have tremendous working 
arrangements with the municipalities. We have a common bridge 
because most of the people that live and work in the 
communities around us are working and are interacting in our 
facilities.
    So we walk together hand-in-hand. Again, I will not go into 
long detail about how these initiatives in Indian Country have 
assisted the welfare-to-work initiatives that have been so 
common nationwide, but assisting them with well-paid jobs with 
good benefits such as health care and a lot of times even child 
care.
    We are real proud of how we walk together with our 
neighbors in our surrounding municipalities. We get a lot of 
isolated stories out there in different regions because there 
is so much going on. But the majority of us have great stories 
to tell in Indian country.
    Tribes also add to the Federal, State, and local revenues. 
Let me also add the ``T'' word up front. Indians pay taxes. 
People who work at Indian casinos and those who do business 
with Indian casinos, and those who get paid by and win in any 
casinos, pay Federal income taxes. They pay taxes just like the 
folks who work at the State lotteries.
    As employers, tribes pay taxes to fund Social Security and 
participate as government's in the Federal unemployment system. 
Economists estimate that Indian gaming provides Federal, State, 
and local governments with more than $6 billion in increased 
income sales and other taxes and revenues. That is $6 billion 
in Federal, State, and local revenue.
    We realize that the benefits of Indian gaming would not be 
possible without good regulation. Successful operations require 
solid regulation. Tribal governments understand and abide by 
this principle, and gaming has been the best opportunity in 200 
years to bring us out of poverty. Without question, tribes are 
committed to regulation.
    Working in cooperation with tribal, State, and Federal 
Governments all play in a role in regulation of Indian gaming. 
This system is costly. It is comprehensive. It is working. We 
are very proud of it, Senator.
    Is our regulatory system different from other gaming 
operations? You bet it is. No Federal commission oversees the 
State lotteries, horse and dog track wagers, jai alai, or 
commercial river boat gaming industries. But Federal oversight 
of Indian gaming is extensive. Anyone who commits a crime 
against Indian gaming facility has committed a Federal offense. 
They have, and they will continue to go to jail.
    If you want to visualize the structure of Indian gaming 
regulations, it is like a wedding cake. The bottom layer, or 
tribal regulation, is the primary and the largest with the most 
resources and the most manpower. The second layer is State 
regulators which come in through the tribal-State compact 
process. They provide help with background checks, 
investigation, and oversight. Of course, the top layer is NIGC 
and other Federal agencies that work in Indian gaming. In 
addition to the NIGC is the FBI, the Department of Justice, 
Treasury, the Interior Department, and everybody's favorite, 
the IRS.
    Any way you slice the cake, you are going to get a 
regulator. Sometimes that can be cumbersome, but we would 
rather be cumbersome and thorough than have any of these 
issues. That is why we get so much back-up out there that says, 
``Indian gaming is strongly regulated.'' That is because we 
have so many checks and balances in this system. We are very 
proud of that.
    In total, tribes invest over $212 million annually for the 
regulation of Indian gaming. That includes $164 million for 
tribal gaming regulation. Over $40 million is for reimbursement 
of State regulatory agencies for their support, and $8 million 
is to fund the National Indian Gaming Commission.
    In addition, the Commission collects another million 
dollars for processing fingerprints and background checks for a 
$9-million budget. Under IGRA, Congress intended for three 
sovereigns to work in cooperation on the regulation of Indian 
gaming. Each regulatory body has a distinct and supportive role 
for the three different classes of Indian gaming. The idea was 
to avoid duplication, but provide comprehensive oversight.
    Through IGRA, Congress made it clear that tribal regulatory 
agencies are the primary regulators of Indian gaming. Indian 
country takes that role very seriously, Senator. As the primary 
regulators, tribal regulatory agencies have the largest budget 
for Indian gaming regulation. Tribes spend over $164 million 
annually on self regulation. Our system includes over 2,800 
tribal gaming commissioners and regulatory personnel.
    In addition to employing top-notch personnel, tribes use 
state-of-the-art regulatory surveillance and security equipment 
to support the regulatory operations. We are very excited in 
this day and time when we have facial recognition. We have 
cameras that can look underground and tell you whether a penny 
is heads up or tails. We really have some outstanding 
technology out there. We are proud of that. We are upgrading it 
every day. Everything that becomes available, Indian tribes are 
working together to establish the best.
    State regulatory agencies assist tribal agencies with 
background checks, licensing inspections, and review of class 
III Indian gaming operations. Tribes reimburse States over $40 
million annually for those regulatory services.
    At the Federal level, the NIGC shares the responsibility 
for regulation with other government agencies. The NIGC defers 
to State gaming agencies on background checks, licensing 
decisions, and compact enforcement for class III gaming 
regulation. NIGC works in partnership with tribal gaming 
regulatory agencies on class II gaming regulation, and provides 
background oversight for class III gaming regulation.
    NIGC also acts as a facilitator to help build strong 
relationship between the three sovereigns to further strengthen 
Indian gaming regulation. In fact, a couple of months ago, NIGC 
hosted a meeting to discuss the formation of a national Indian 
gaming intelligence network to share information and to provide 
technical assistance to tribal regulators nationwide.
    Participants included the chairman of Attorney General 
Ashcroft's Native American Issues Subcommittee, officials from 
the FBI, Treasury's Financial Crimes Enforcement net worth, 
North Dakota's attorney general, the NIGC, and tribal gaming 
regulators throughout the country.
    As I stated above, the systems of checks and balances in a 
cooperative regulation has proven effective. Much of the credit 
for the success in regulation should go to tribal governments 
and the tribal leaders who recognize the need for solid 
regulation, and who took the initiative to provide the funding.
    Against the backdrop of comprehensive regulation, the FBI 
and the U.S. Justice Department have testified repeatedly that 
there has been no substantial infiltration of organized crime 
on Indian gaming. In fact, the last time the chief of the 
Department of Justice's Organized Crime Division testified 
before this committee, he stated that, and I quote:

    Indian gaming has proven to be a useful economic 
development tool for a number of tribes who have utilized 
gaming revenues to support a variety of essential services.

    While there has been isolated occasions when a crime has 
occurred at Indian gaming facilities, the Department of Justice 
found that coordination between tribal, State, and Federal 
regulators and law enforcement ensure that offenders are 
caught, prosecuted, and punished. Indian gaming has a good 
track record because tribes hire the most highly qualified 
people from tribal, State, and Federal law enforcement 
regulatory agencies.
    Again, tribes spend $212 million on regulation each year. 
That is a lot of money that could go to fund sorely needed 
programs. But tribes realize that regulation is the cost of a 
successful operation and it is needed to protect our resources.
    I would like to take a moment to recognize our tribal 
regulator that makes gaming work. Mr. DeRosier has 9 years of 
service in State law enforcement prior to his 11 years of 
service in tribal regulation. He also serves as the chairman of 
the National Tribal Gaming Commission and Regulatory 
Association that worked actively throughout Indian country.
    Finally, that brings me to the issue of funding for the 
NIGC. NIGC and our member tribes hold the NIGC and its 
Commissioners in high regard. The current Commissioners have 
outstanding credentials and complement each other. I just want 
to make it clear, Senator, we do not always agree on 
everything, but we know that we have a mutual job to do. It is 
just as I stated. The tribal leaders trust us to protect this 
operation. All of this country count on us. If you could select 
the best three people to do that job, and if I had my choice, I 
would select the ones that have been selected to do this job. 
We do not always agree, but you have three outstanding 
professionals in this capacity. They testified just prior to my 
coming up here.
    The NIGC serves a sound purpose and for the most part has 
provided tribal governments with solid background oversight to 
ensure the continued integrity of Indian gaming. For the past 
five years, NIGC was funded at a level of $8 million each year 
based on fees paid by tribal governments.
    Last year President Bush included a $2-million request for 
a one-time appropriation for NIGC, with the direction to NIGC 
to work with tribes on future increases. NIGC supported this 
Federal appropriation for fiscal year 2003. We want to thank 
the chairman and the vice chairman of this committee for 
supporting the President's request as well.
    Regrettably, the President's request was ignored, and 
instead Congress authorized an immediate increase in the NIGC 
fee cap from $8 million to $12 million in fiscal year 2004--a 
$4-million increase that tribal governments will pay for. We 
believe that was the wrong way to do business. The action by-
passed this committee. It violated the legislative process, and 
ignored the government-to-government consultation process.
    While Congress did direct NIGC to consult on the 
implementation of their budget increase, it will come after the 
fact. We believe consultation should come before any policy 
changes. It just makes sense to us. We agree that the NIGC must 
receive adequate funding to do its job. However, as a Federal 
partner in the system, NIGC must strive to support and 
complement, but not duplicate, tribal and State regulatory 
activities.
    As for the NIGC's direction to consult on the increase to 
$12 million for fiscal year 2004, I urge the Commission to take 
five steps:
    First, formally adopt the policy of government-to-
government consultation in accord with the recent Presidential 
Executive Orders;
    Second, propose a schedule of consultation meetings with 
Indian country immediately. We believe that they are beginning 
to adhere to some of these concerns as stated in Chairman 
Hogen's presentation, but we are not satisfied up to this 
point;
    Third, provide a detailed proposed budget to NIGC, our 
member tribes, and this committee;
    Fourth, use a portion of these funds to increase self 
regulation for class III tribes, and;
    Fifth, we ask that the Commission resume quarterly 
consultation with tribal regulators which will include 
providing tribes with training and technical assistance. Use of 
this Commission's increased funding in this way will prevent 
duplication and will focus on the Commission's resources on its 
core mission, which is to provide technical assistance to 
tribal gaming commissions.
    Finally, before I close, Senator, I would like to comment 
on Chairman Hogen's proposed IGRA amendments. First, he has 
asked to complete elimination of a fee cap. As I just stated, 
the cap has already been raised $4 million. That is an increase 
of 50 percent. Do you know of any other Government agency that 
get an increase of 50 percent in 1 year?
    Nevertheless, we are not asking Congress to roll it back. 
This is not the time to start talking about a fee increase. The 
Commission got what it wanted last year. It should now consult 
with the tribes on what it plans to do with this increase that 
it is already getting. It should provide a detailed report to 
Congress. Then next year, if the NIGC wants to ask for a 
further increase, it should be required to justify it to the 
tribes and to Congress. That is what accountability is all 
about from our perspective.
    Second, the chairman has asked for an amendment to require 
any person associated or seeking to become associated with the 
tribal gaming operation, to first obtain a license with the 
NIGC. This proposal would grind activity in tribal operations 
to a halt. Tribes already conduct investigation and background 
checks on their employees and contractors. NIGC should not 
impose a new barrier to economic activity in Indian country.
    NIGC has moved too slow in reviewing management contracts. 
Adding this responsibility would prove too burdensome for both 
the Commission and tribal gaming operations. Instead, the 
Commission should recommend guidelines for tribal regulators 
and operation managers to look to when considering new 
employees or contractors.
    Third, the chairman has asked for an amendment to clarify 
the Commission's authority over class III gaming. IGRA 
expressly established the tribal State compact process to set 
regulatory framework for class III gaming. IGRA requires NIGC 
to approve class III ordinances as long as they meet the 
minimum statutory requirements. Accordingly, NIGC should 
instead clarify through regulation that it will defer to tribal 
State compacts to govern class III gaming with a few narrow 
exceptions.
    Finally, I want to mention a note on the Supreme Court's 
decision in Seminole Tribes v. Florida. I applaud the 
Commission for its intent to seek an amendment to correct this 
decision. Today I want to state for the record that any bill to 
amend IGRA should include an amendment to provide a correction 
to the Seminole case. The case was decided in 1996 and still 
haunts a number of tribes.
    The Seminole decision frustrated Congress' intent by 
effectively giving States veto power over the compacting 
process. The Interior Department promulgated regulations for 
alternative procedures for class III compacting. Now may be the 
appropriate time for Congress to legislatively affirm those 
regulations. I hope that the committee will consider including 
such a provision in any IGRA amendment that is introduced this 
session.
    Senator if I may, I would like to briefly summarize my 
three points today:
    First, Indian gaming is working. It is rebuilding tribal 
economies, benefiting non-Indian communities, and providing 
hope for future generations of Indian people.
    Second, Indian gaming is fully regulated. We should all 
take note of the hard work, tireless hours, and hundreds of 
millions of dollars that tribal governments and their employees 
spend on regulating Indian gaming operations. The ethocentric 
view that Indian gaming is only regulated by 70 employees and 
$8 million that fund the NIGC is just plain wrong and should be 
put to rest. Indian tribes are responsible, accountable, and 
are working in partnership with Federal and State governments.
    Finally, I would ask that NIGC also be held accountable. I 
urge NIGC to adopt and adhere to a formal policy of government-
to-government consultation and increased communication between 
tribes and the NIGC. Such a practice will only serve to further 
strengthen the regulation of Indian gaming.
    Again, Senator, we feel we have made progress on that, but 
I cannot tell you that we are satisfied up to this point. I 
think we need to continue to strengthen that intent.
    Mr. Chairman, I want to thank you for providing me this 
opportunity to testify.
    I want to ask Mr. Van Norman if he could just briefly tell 
you about the two charts we brought this morning.
    Mr. Van Norman. Mr. Chairman, my name is Mark Van Norman. I 
am the executive director of NIGA.
    The first chart demonstrates the different budget 
investments annually in Indian gaming. It shows that tribes are 
the primary regulators. We have $164 million each year that 
tribes invest for their own regulations. They reimburse States 
$40 million, and the NIGC has a budget of $8 million. Clearly 
we need coordination and we need to leverage the tribal 
resources so that we are not duplicating efforts at the NIGC 
level.
    I also want to show you an example of our advancing 
technology. This comes from the Viejas Tribe where Mr. DeRosier 
is the Gaming Commission. They are now employing electronic 
fingerprint technology. When folks come in, instead of putting 
ink on their fingers, they put it across the computer screen. 
It is immediately sent over to the National Indian Gaming 
Commission. The FBI can turn this around and give you a 
criminal history within 24 hours.
    The Chairman. These are for potential employees?
    Mr. Van Norman. These are for potential employees.
    The Chairman. Is that the same system that the big casinos 
in Atlantic City or Las Vegas would use?
    Mr. Van Norman. I believe it is. The situation that we are 
in is that it speeds the background checks so that they can be 
done in 24 hours. Tribes can go ahead and issue a license with 
the knowledge of the criminal history. This is new technology. 
We may be ahead of some of the casinos in Nevada and New 
Jersey.
    The Chairman. You heard the NIGC speak about background 
checks. Do you think this supplements what they are doing, or 
actually is a better system because it is faster?
    Mr. Van Norman. This system has worked in coordination with 
NIGC. They forward the fingerprints to the FBI for the criminal 
background check. We think it would be important for the NIGC 
to use part of their new budget increase to invest in this 
technology so that it is available at their regional offices.
    Mr. Stevens. Just to give you a lighthearted example of the 
intensity of gaming commissioners, in my previous capacity as a 
gaming consultant, I had to do a background check in some place 
in California. Previous to that, I served as a tribal 
councilman for the Oneida Nation in Wisconsin. I was also a 
member of the Native American Rights Fund Board and the 
National Congress of American Indians.
    We staged a very respectful and rehearsed demonstration, 
hoping to educate the Supreme Court about tribal issues. That 
demonstration, I believe, was called Civil Disobedience. We 
were incarcerated briefly for being on the Supreme Court's 
steps. It was all rehearsed. We got $50 and were bailed out of 
jail. It was a lighthearted thing except that the guys that 
asked me to do, I thought they were going with me. It was just 
Chief Blue and me from Catawba that went.
    But the tribal regulators did not want to hear anything 
about lightheartedness. They scrutinized me heavily to think 
that I was arrested at the Supreme Court steps.
    The Chairman. Was there some kind of a record of that kept? 
There was nothing put on any police record if it was rehearsed 
and planned; was there?
    Mr. Stevens. I was convicted of a misdemeanor in the 
District of Columbia.
    I am not ashamed of that. It just shows the intensity of 
our regulators out there in Indian country to bring that 
forward and scrutinizing that heavily. They are very thorough 
and they are very complete. These checks and balances 
complement one another. We are very proud of the Indian 
regulators out there.
    The Chairman. Let me ask you a few questions about gaming 
in general.
    I am sure you read the two-part Time Magazine articles?
    Mr. Stevens. Yes, sir.
    The Chairman. They were very in-depth but probably stilted 
to one side of the issue. I think it has driven some concerns 
by some of my colleagues about Indian gaming. I have mentioned 
that to you before.
    I have never heard you say on the record your view of those 
articles. Would you like to do that?
    Mr. Stevens. I am reluctant to, Senator. I sent you the 
letter asking that we could engage in this protection of Indian 
gaming. We want to sit before you today to strengthen what we 
have out there. We do not want to sit before you or anybody 
else in response to this type of publications and to try to 
give the benefit of the doubt. We responded to all those 
issues.
    The Chairman. Did you respond to Time Magazine?
    Mr. Stevens. Yes; they gave me about that much [indicating] 
to their two articles. We felt we were successful in doing so. 
We responded to many magazines. We responded through ads.
    The tribal leaders came to Washington, DC and talked about 
this. Basically what they said was that even good publications 
sometimes have bad reporting. You and I both have had to deal 
with publications and news sources that report in an 
unfortunate and sometimes an unethical manner. I just think 
that what we have been told by tribal leaders is that we 
respond. The issues centered around Time Magazine were either 
mistruths or half reporting without getting the whole story.
    The Chairman. Did anybody when they were writing those 
articles, talk to anyone in NIGA before they were written?
    Mr. Stevens. No; as a matter of fact, not only did they not 
talk with NIGA, they were very selective and almost non-
existent in talking with any tribal leaders throughout all of 
Indian country. It was very carefully rehearsed and very 
carefully written in a very negative way. They were very 
careful about finding any truth in Indian County. As a result, 
of course, they did not.
    Mr. Van Norman. Mr. Chairman, could I add something?
    The Chairman. Yes, sir.
    Mr. Van Norman. We have an appendix to Chairman Stevens' 
testimony that we would like to have included in the record.
    The Chairman. Without objection, so ordered.
    Mr. Van Norman. It includes a more recent article from the 
Atlanta Journal Constitution from April 27. We felt that was a 
little more reflective because that article was based on Census 
numbers. The Census is something that you can rely on.
    The Census showed that for tribes with gaming, average per 
capita income increased by about 50 percent. For tribes without 
gaming, average per capita income increased only by about 16 
percent.
    But even with the 50-percent increase in per capita income 
among the gaming tribes, we only went up to $13,500 average per 
capita income in 2000. That compares to $21,500 average per 
capita income nationally. We are still 60 percent below the 
average per capita income looking across Indian country.
    The Chairman. Along that line, in California the tribes 
contribute to a development fund because some tribes are doing 
well and some not doing so well. Do you believe that the 
wealthier gaming tribes have any obligation to help or 
contribute to those less fortunate tribes?
    I have visited a number of tribes that have gaming 
operations and it seems to me that the ones that are doing 
really well are the ones that are in close proximity to a 
metropolitan area, and easy to get to by people who enjoy 
gaming. But the ones that are on reservations that are way out, 
like Pine Ridge or Lame Deer, there are very few people who 
want to go that far for an evening of gaming.
    The casino is generally very small and the only people in 
them are a few of the tribal members and maybe a truck driver 
or two that happens to stop on the way by. Some of them, in 
fact, have actually gone to receivership, as you know. It is 
not the answer for all tribes. How do you feel about sharing 
the wealth, as they do in California? Maybe that is the wrong 
word for it, but having a fund to contribute to less wealthy 
tribes?
    Mr. Stevens. As you know, Senator, being a Native American 
yourself, we have a long history of looking out for one 
another. I think those examples exist in Indian country. In 
South Dakota we really have to be able to get those tribes a 
better location, some more games, and support for their 
industry out there. There is no question that we need to do 
more to support them.
    I was just at Four Bears Casino in Fort Berthold Indian 
Reservation. They are pretty far out. They are doing some real 
good business initiatives out there. They are really doing good 
to not just employ their own people, but people from the 
surrounding communities.
    I talked with a lady there from Canada. She just loves the 
place. I think once the people understand that once people 
understand this, they will be in a better place and understand 
what we have to do in Indian country. These are governments 
working to enhance government services and build for their 
future versus a few rich investors running the business for 
their own personal income.
    Another example is down in Milwaukee at the Potawatomi 
Bingo Casino. They put millions of dollars into that economy 
there. I have personally toured the quadrants of the inner city 
where there is a strong need and where the Potawatomi Casino 
pumps millions of dollars into there and into other charities. 
In addition to all that, every holiday they put in over 
$700,000 to 16 programs. It is called ``The Miracle on Canal 
Street.'' In addition to that, they send a regular lump sum 
payment to the Bad River and Red Cliff Indian communities who 
have pretty much a tourism industry in Northern Wisconsin.
    I just wanted to highlight that example. Nationwide, our 
figure is somewhere between $68 million to $70 million that 
Indian tribes give to charities, Indian and non-Indian alike. 
That is our latest figure.
    The Chairman. I would certainly encourage you to continue 
to pull together any statistics like that. I think it gives 
Indian tribes a clear defense against some of the accusations 
that I think are unfair accusations. I was not very happy with 
that Time Magazine article either. It was rather one-sided.
    Mr. Stevens. President Tex Hall, Chairman Ron Allen, 
Chairman Anthony Pico, and I personally went to the Boston 
Globe, sat with them, and tried to provide them with the best 
education we could. Business Weekly just wrote a very narrow 
article recently. The unfortunate part about that is that Time 
avoided us and avoided the truth. These people talked with us 
for 1 hour and still wrote a story about isolated incidents and 
refused our references to give them the story.
    The Chairman. Do you have any kind of a public relations 
plan, for lack of a better word, or a contract with anyone to 
try to get the truth out or put a better face on Indian gaming?
    Mr. Stevens. Absolutely. I was actually trying not to talk 
about Time Magazine today. I was just trying mostly to talk 
about that initiative. It is a national public relations 
initiative. It is cochaired by Mark Brown from Mohegan and 
Darren Marques from San Manuel. We have been in operation for 5 
months. We currently have a plan that gets out there and tells 
the real story, a proactive story. We also do have a public 
relations director. When that Time article first hit, we 
papered the Hill with about everything we could get to tell 
people the true story.
    In our legislative summit this winter, legislators like 
yourself and others came and were a recipient of that 
clarification. Again, the tribal leaders refused to operate 
that way. They told us that this is a public relations 
initiative that we are going through right now. We raised 
somewhere between $400,000 to $500,000 to do ads and different 
types of things like that, to tell the proactive true story 
about Indian gaming.
    They have stepped up to the plate, but they do not want to 
step up in response to Time. They want to step up to enhance 
and talk about the good things that are happening throughout 
Indian country.
    The Chairman. Let me shift the questions to your 
relationship with NIGC. You mentioned that some of the 
consultation comes after the fact rather than before.
    Mr. Stevens. It was strictly regarding the budget request.
    The Chairman. Did I understand you to say that you think 
that the budget request should be disseminated to tribes 
before?
    Mr. Stevens. Absolutely. That is the strong point we are 
trying to make. We want those budget increases to come to the 
tribe.
    The Chairman. The budget requests are already a matter of 
record when they request them through this committee or through 
the Appropriations Committee.
    Mr. Stevens. The main thing is that they have to pay for 
it. That is the reason that I stand on that strong point that 
it has to come through the tribes.
    Mr. Van Norman. There was an unusual process last year. If 
you recall, the President came out with his appropriation 
request in January as normal. We relied on the Administration's 
request and talked to our member tribes about it. They 
supported the $2 million appropriation requested.
    Then there was a delay in the passage of that bill from its 
normal passage in September up until January. In a 1-month 
period between the end of December and January, frankly, the 
Appropriations staff changed gears. There was no real public 
acknowledgment of that until the bill became available, which 
was only a couple of days prior to passage.
    The Chairman. I have to tell you that last year was a 
really unusual year, as you probably know. It was the first 
time in 28 years that we did not finish our appropriations 
process. We had to do it the following year with some new 
members that were not even here when we framed up things the 
year before. You probably know that. We ended up passing a 
omnibus package of, I think, 10 of the 13 bills that we did get 
passed when we should have the year before.
    Everything was a little unusual. Very frankly, when you put 
that much paperwork together, no one--no single staff or no 
Senator--knows everything that is in there. Some things go 
through that should not. It is as simple as that. We dropped 
the ball in getting the job done in the Senate, and in the 
House, too. Hopefully that will not happen again.
    Mr. Van Norman. We want to thank you because we thought we 
had a clear statement from the authorizing committee over to 
the appropriators. We hope that this year the authorizing 
committee dialog will be heated by the appropriators.
    Mr. Stevens. We are not asking for a rollback on this 
thing. We want to move forward and help get our jobs done. We 
respect NIGC's role in this. We are not asking for a rollback. 
We are just asking for future increases and consultations with 
the tribes.
    The Chairman. Senator Inouye and I are on both committees, 
as you probably know. I know he will do his best, and I will 
certainly will, too.
    Let me ask about the consultation. Do you have some kind of 
a draft policy that you would like to give to us, or to the 
NIGC to start the discussion about consultation before the 
fact?
    Mr. Stevens. I think that we could provide it. I do not 
know that Phil would be excited about that.
    The Chairman. Well, you provide it to us and we will try to 
excite Phil. [Laughter.]
    Mr. Stevens. I think that we would love to do that. Again, 
with respect to Chairman Hogen, we would continue to assert 
that. If it would be more helpful in black and white, we would 
love to do that.
    The Chairman. If you would at least provide it to us, I 
would appreciate that.
    Mr. Stevens. We will make sure we do that.
    The Chairman. I think I have no further questions. If we 
do, I will send them to you in writing, if you would get back 
to us in writing. Other Senators may do the same.
    The Chairman. Thank you for appearing today.
    With that, this hearing is adjourned.
    [Whereupon, at 11:14 a.m., the committee was adjourned, to 
reconvene at the call of the Chair.]
=======================================================================


                            A P P E N D I X

                              ----------                              


              Additional Material Submitted for the Record

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


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

    Mr. Chairman and Vice Chairman, thank you for scheduling today's 
hearing to evaluate the role and funding of the National Indian Gaming 
Commission [NIGC], the Federal agency responsible for oversight of 
Indian gaming. It is critically important to check-in and continue 
congressional oversight on issues associated with the regulation of 
Indian gaming.
    Senator Inouye and I, as the original authors of the Indian gaming 
law envisioned that Indian gaming would grow exponentially, given the 
right political climate and economic opportunities. We instituted the 
National Indian Gaming Commission to be the official oversight agency, 
responsible for implementing and monitoring different regulatory 
aspects of the industry as well as enforcing against criminal 
activities.
    More than 14 years later, Indian gaming is a $13-billion industry 
and growing fast. The largest casino in the world is a tribal casino 
and many others are fast becoming world class casinos. By no means am I 
critical of that success. Indian gaming has afforded economic 
opportunity and success where the Federal Government has failed to meet 
its responsibilities to aid tribal communities for such fundamental 
services such as education and health care.
    Considering the steady growth, we also need to continually evaluate 
the Commission's ability to respond to that growth. It's been 
acknowledged in prior hearings before this committee that the NIGC has 
been limited in fully meeting its responsibilities by the lack of 
adequate resources to match the growth of the industry. The limitations 
on the agency have also been highlighted by several investigative 
reports, including those in recent Time Magazine profiles, which have 
characterized the National Indian Gaming Commission as ``the impotent 
enforcer'' with bare-bones resources and staff to fulfill its statutory 
responsibilities.
    Those of us most familiar with Indian gaming and the Indian gaming 
law recognize the bias of those reports. However, there is an 
underlying message in such reports that should compel our response and 
encourage all of us to provide a more informed status of the Indian 
gaming industry.
    The ability of the NIGC to fulfill its statutory role is very 
important, since the industry itself has changed dramatically since 
1988. The NIGC is currently responsible for monitoring 300 gaming 
facilities with a current budget of $8 million and employing 77 staff. 
By way of comparison, the New Jersey Casino Control Commission spends 
$59 million and hires a staff of 720 to monitor 12 casinos in Atlantic 
City. This is an important point considering that Indian gaming is now 
believed to generate more revenue than Las Vegas and Atlantic City 
combined.
    If we are to defend the integrity of Indian gaming then we must 
defend it by ensuring the strongest possible regulation and highest 
standards, equal to the regulation of non-Indian gaming. An immediate 
point of concern from the NIGC's testimony today is the fact that the 
NIGC has only four auditors on hand to deal with what the NIGC 
describes as ``the only mechanism'' to determine ``with any certainty 
the extent to which specific operations are at risk of theft or loss or 
may be engaging in practices that jeopardize the integrity of the games 
conducted.'' The NIGC will also report today on its limitations in 
preventing any major criminal elements or individuals from unduly 
profiting from Indian gaming.
    Another point of discussion today is the funding for the Commission 
itself, which is 100 percent from fees assessed on gaming facilities. 
While the original Indian gaming law did set a limit of fees assessed 
on certain tribal facilities to support the operations of the NIGC, the 
Act has since been amended twice in recognition of the limitations 
facing the NIGC to carryout its responsibilities to match the growth of 
the industry. The latest change raises the agency's fee assessment 
ceiling to $12 million for fiscal year 2004, which according to the 
NIGC will provide significant help, but the agency anticipates that 
further resources will still be necessary for future years.
    My friends in Indian country know that I am a strong supporter of 
Indian gaming, and of tribal self-governance to increase self-
sufficiency for tribal communities. I don't think anyone here would 
question the benefit of gaming revenues to support tribal economies and 
services. The issue at hand is whether we are sufficiently supporting 
the agency or hampering it by imposing restrictive limitations.
    The NIGC will testify today about the need to ``modernize IGRA'' to 
conform with the industry boom. I think there is merit to this 
discussion. I emphasize to the National Indian Gaming Association that 
the purpose of such discussion is not to compromise tribal regulation 
or sovereignty, but to strengthen it.
    I look forward to additional hearings by this committee to consider 
other regulatory issues association with Indian gaming.
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