[Senate Hearing 108-475]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-475

                INDIAN GAMING REGULATORY ACT AMENDMENTS

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                                   ON

                                S. 1529

          TO AMEND THE INDIAN GAMING REGULATORY ACT TO INCLUDE
  PROVISIONS RELATING TO THE PAYMENT AND ADMINISTRATION OF GAMING FEES

                               __________

                             MARCH 24, 2004
                             WASHINGTON, DC


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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
S. 1529, text of.................................................     3
Statements:
    Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, 
      chairman, Committee on Indian Affairs......................     1
    Hogen, Phil, commissioner, National Indian Gaming Commission.    26
    Skibine, George T., acting deputy assistant secretary, Policy 
      and Economic Development, Department of the Interior.......    33
    Stevens, Jr., Ernest, chairman, Natinal Indian Gaming 
      Association................................................    36
    Van Norman, Mark, executive director, National Indian Gaming 
      Commision..................................................    36

                                Appendix

Prepared statements:
    Hogen, Phil (with attachment)................................    52
    Skibine, George T............................................    49
    Stevens, Jr., Ernest (with attachment).......................    88

 
                INDIAN GAMING REGULATORY ACT AMENDMENTS

                              ----------                              


                       WEDNESDAY, MARCH 24, 2004


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 11:00 a.m. in 
room 562, Dirksen Senate Building, Hon. Ben Nighthorse Campbell 
(chairman of the committee) presiding.
    Present: Senators Campbell, Inouye and McCain.

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

    The Chairman. The committee will be in order. Good morning 
and welcome to the Committee on Indian Affairs' hearing on S. 
1529, a bill that I, along with my vice chairman, Senator 
Inouye, introduced in July 2003 after we held two hearings on 
these matters.
    I have to say at the outset, Mr. Vice Chairman, I am very 
pleased to see such a large turnout. I would also like to say I 
would like to see this kind of participation when we talk about 
Indian nutrition or care of elders or education for Indian 
kids. Clearly, when it has to do with money, it excites a lot 
of people because we have a very full house today.
    If enacted, the bill will amend the Indian Gaming 
Regulatory Act of 1988 to, clarify that when a class II game is 
used with electronic aids it is still a class II game for 
purposes of the Johnson Act; to require the National Indian 
Gaming Commission to be more transparent and open to the 
regulated community. It clarifies the Commission's authority 
with respect to class III gaming. It provides much-needed 
guidance to tribes and States when they are negotiating a 
revenue-sharing agreement, and provides certainty and stability 
to tribes regarding the amount of gaming fees the Commission 
can charge.
    We have a vote scheduled at 11:30, so we will get through 
as much as we can. We will have to take a few minutes' break 
and then we will continue after that. Other members have 
notified us that they will be coming and going throughout the 
meeting.
    With that, Senator Inouye, did you have an opening 
statement, sir?
    Senator Inouye. All I can say is that much has happened 
since the U.S. Supreme Court's ruling in the Cabazon case and I 
think the crowd here today so indicates that. I look forward to 
hearing the testimony.
    [Text of S. 1529 follows:]
      


    The Chairman. We will start with the first panel. I think 
we will have all three of our people testifying sit at the same 
time: Phil Hogen, the commissioner for the National Indian 
Gaming Commission from Washington; George Skibine, the acting 
deputy assistant secretary for Policy and Economic Development 
with the Department of the Interior; and Ernie Stevens, Jr., 
the chairman of the National Indian Gaming Association.
    Ernie, nice to see you. Mark Van Norman will accompany 
Ernie Stevens. That will be fine.
    Why don't we go ahead in that order. If you would like to 
start, Commissioner Hogen, we will be happy to take your 
testimony and you may abbreviate if you like.

 STATEMENT OF PHIL HOGEN, COMMISSIONER, NATIONAL INDIAN GAMING 
                           COMMISSION

    Mr. Hogen. Thank you. Good morning, Mr. Chairman, Senator 
Inouye. We thank you very much for the opportunity to appear 
before you with respect to this very significant measure that 
you are considering.
    With me here today are the other members of the National 
Indian Gaming Commission. I am Phil Hogen, Oglala Sioux from 
South Dakota. Chuck Choney is also present. Mr. Choney is 
Comanche from Oklahoma. He is a veteran of the FBI, for 26 
years he served as a special agent with the Federal Bureau of 
Investigation [FBI]. One of his pet projects in terms of what 
we are doing is trying to enhance the sensitivity that Federal 
investigators, Federal prosecutors give to crime that occurs 
against Indian gaming facilities or at gaming facilities. In 
this connection, we have orchestrated with the help of the FBI, 
the Internal Revenue Service [IRS], the Department of the 
Interior's Inspector General, a Federal law enforcement working 
group.
    One of the recent efforts in that regard was last month, we 
held, at the Mohegan Sun facility in Connecticut, a 1-week-long 
training, attended by more than 100 FBI agents, IRS agents, and 
assistant U.S attorneys, to educate them with respect to Indian 
gaming. Hopefully, now when an offense is perpetrated against a 
facility, the Federal law enforcement family will be more 
attentive and we will get those cases prosecuted, and there 
will be better cooperation and communication.
    Commissioner and Vice Chairman Nelson Westrin is also 
present with me. Commissioner Westrin was formerly with the 
Michigan Gaming Control Board. We, the three of us, I think 
make a good team. One of the strengths that Nelson brings to 
our Commission is his organizational ability. We have, and we 
have distributed to the committee our annual report for 2003 
that is before you. Nelson was one of the guiding forces in 
getting this put together. It really does a good job of 
reflecting where we have been, what we have done, how we have 
used the resources that we have to play our important role in 
the oversight of Indian gaming.
    Also, our new chief of staff, Gary Pechota, and our new 
director of Congressional Affairs, Affie Ellis, played a 
significant role in putting that together. This report 
discusses our mission, our structure, our revenues, our budget, 
and our staff.
    Of course, what we are primarily here to tell you about 
today is what we think of the legislation that has been 
proposed, as well as some companion legislation or proposed 
legislation that the Administration has submitted. I will not 
tell you all of the things you already know about the context 
of Indian gaming, but it is important to keep that in mind. 
Both we, as we do our job, and Congress as it enacts 
legislation, must keep in mind that Indian gaming is not a 
Federal program. This is not something that the Great White 
Father did for the Indians. Rather, Indians invented Indian 
gaming. They have made it work and it has indeed been a very 
significant and useful economic development tool in Indian 
country.
    IGRA, of course, when passed in 1988 set up the framework 
that is now utilized to oversee, to operate Indian gaming. It 
was put in place for a number of reasons. Congress wanted a 
place in Federal law that tribes could point to to say, yes, we 
can continue with this important economic development tool. 
Like all gaming that is sanctioned, it provided that those who 
are involved in Indian gaming be examined for their 
suitability; that the fairness of play at the casinos, at the 
bingo halls be fair, both by the operation and by the 
customers, and that the money goes where it is supposed to. It 
has to be the tribes that benefits primarily from those 
operations.
    Finally, a Federal regulatory mechanism was set up, a 
Federal agency was created. That is us, the National Indian 
Gaming Commission, to among other things establish Federal 
standards for the regulation of Indian gaming.
    Now, of course, we are looking at an opportunity to revisit 
that act, to make some adjustments.
    I would like to comment on the funding aspect with respect 
to NIGC, some of the housekeeping measures contained in the 
proposed legislation regarding NIGC's authority, the tools that 
we have to deal with those who attempt to deal unfairly with 
gaming tribes, how we attempt to distinguish between class II 
and class III gaming, the minimum internal control standards we 
have established that set the rules by which Indian gaming must 
be conducted, the use made of the proceeds from civil fines 
that we assess and collect, and how we consult with Indian 
tribes in the course of all of this.
    In 2003, Congress provided that the National Indian Gaming 
Commission can collect from Indian tribes on the Indian gaming 
revenues from class II and class III gaming up to $12 million. 
Those fees that we assess, those fees that we collect are the 
only revenues we have. We do not get any appropriated money to 
do our job. So this represented an increase of some $4 million 
in the cap, from $8 million up to $12 million. This fiscal year 
2004 is the first year that we are now operating under this $12 
million cap.
    We have established the fee rate, the rate that we assess 
our fee on Indian gaming at .69 percent [.069]. In other words, 
for every $1,000 of gross gaming revenues, each tribe has to 
send NIGC 69 cents. This is a moderate increase from what it 
was before when we had the $8 million cap. The reason it is not 
a large increase to make a big step in revenue is the industry 
itself continues to grow. So we have a bigger base that we are 
assessing fees on.
    We do not think that we need or could appropriately spend 
$12 million this year, or probably even next year. This year, 
we anticipate we will collect and spend about $10.7 million, so 
we are staying well under that cap. The additional funding that 
we now have over that $8 million has permitted us to fill a 
number of vacancies, particularly in our audit positions, the 
auditors that we have in the field, and our inspectors that are 
our in our five field offices. This has permitted the staff to 
make more frequent, more thorough visitations at the tribal 
gaming operations sites, and to provide training to tribal 
regulators and gaming commissioners.
    We have a lot of information at the National Indian Gaming 
Commission. We get audits from tribes. We review their 
background investigation reports. That information could be 
very useful to all of those that have a role to play, but right 
now the way we handle that information probably is inefficient. 
Without increased funding we are going to upgrade our 
information management system, the computers that we use to 
deal with this, and of course we are not unaware of the 
scrutiny that the Department of the Interior's trust fund 
information has been given. We want to make sure our computers 
are indeed secure and that, first of all, the information is 
protected as it should be, and secondly, someone does not come 
along and in effect kick us off the Internet and hamper our 
ability to do our job.
    Another computer-related tool that we are using is Live 
Scan to communicate fingerprint information the tribes collect 
at the tribal level when someone applies for a tribal gaming 
license. In the old days, they would do it on a cardboard 
fingerprint card and send it to us. We would sent it to the FBI 
and the FBI would send the results to us. We would send it back 
to the tribe and that could take months. Now, electronically in 
a heartbeat, that information can be beamed from the tribal 
office to the NIGC, then to the FBI, and the results can be 
returned. This is much more efficient in that you can tell 
right there in minutes if your applicant has a criminal record 
and maybe should not be further considered. You do not have to 
give him or her a temporary gaming license. It will be 
extremely efficient, both at the tribal and at the NIGC level 
in terms of the background investigation process.
    We do not have all tribes on line yet, but we are now set 
up so that we can make this opportunity available to all the 
tribes. That follows a pilot project that was successful that 
involved a number of tribes.
    In terms of setting a fee schedule, any fee schedule that 
Congress sets for NIGC needs to keep us somewhat proportionate 
to the size of the industry. If the industry grows faster than 
we do, we cannot do the job that we are assigned under the 
Indian Gaming Regulatory Act [IGRA].
    What we have suggested in the Administration's proposal is 
that the fee cap be set as a percentage of gross gaming 
revenues. We have suggested not to exceed .8 percent [.08], or 
80 cents per $1,000. That way, we would not have to revisit 
from time to time what that level would be, with congressional 
action.
    However it is done, it is important that we look down the 
road. We know what our future is going to hold. So the proposal 
S. 1529 that would set up funding through fiscal year 2008 is 
certainly a step in the right direction.
    S. 1529 proposes a fee reduction proposal, in effect to 
reward tribes that do an excellent job of regulation at the 
tribal level by assessing a reduced fee. Certainly, there is 
some merit to that. The problem that we have is that we spend a 
disproportionate amount of time working with tribes that are 
not well equipped to pay a fee because they have problems. We 
would like to be like the Maytag repairman and have our phone 
not ring because everything is going smoothly. It does ring 
occasionally, and I think what we are more like is the fire 
department. That is, while we hope we do not have to go do 
enforcement and things like that at tribal gaming facilities, 
when we do go, we want to know what is going on; we want to be 
well prepared. Nobody likes having to pay for the fire 
department, but they want them there when they need them. We 
think that is sort of a parallel that can be drawn with respect 
to fees the tribes pay.
    The whole Indian gaming industry is well served if there is 
a sound, adequately funded regulatory oversight body at the 
national level. With the fee proposal that we have suggested 
and perhaps with the one contained in S. 1529, we can stay at 
that level.
    In terms of the housekeeping measures with respect to 
NIGC's authority, we think it is appropriate that NIGC develop, 
provide to the tribes, and provide the Congress a strategic 
plan.
    There are some corrections or clarifications that need to 
be made with respect to how vacancies on the Commission are 
filled and how the Chairman at the National Indian Gaming 
Commission delegates his authority, and then the pay level 
specified in the IGRA are obsolete. That needs to be made 
consistent with the current Federal employment pay structure.
    We strongly support the language that will clarify our 
authority to play a role in the regulation of class III gaming. 
If all of those things are enacted, we think we will be a 
better, stronger Commission.
    In terms of the tools that we have to deal with those who 
might deal unfairly with gaming tribes, we have a role to play 
with respect to management contractors. In the old days when 
unscrupulous traders swindled Indians, Congress quickly enacted 
Section 81 of Title 25 that says the Federal government has to 
approve a contract with the tribe if it affects Indian lands. 
When IGRA was enacted in 1988, recognizing that gaming is kind 
of specialized, they farmed that out, that role, the approval 
of management contracts to NIGC. So we do that. We review and 
approve the backgrounds, the management contracts the tribes 
have with those who run their facilities.
    However, a large number of individuals and firms that deal 
with tribes are not management contractors per se. Rather, they 
style themselves as consultants, as lenders, as lessors of 
machines, and they do not get that same scrutiny. We think in 
the Administration proposal whereby we set up a category of 
``regulated individuals,'' that whereby NIGC when necessary, 
would have the authority to reach out and require that those 
non-management contractors make corrections, perhaps make 
refunds to tribes, would be appropriate and would actually 
comply with the spirit of what Congress had in mind in the 
IGRA.
    Distinguishing between what is class II, bingo, and what is 
class III, casino-type gaming that you have to have a compact 
with the State to do, continues to be a real challenge for the 
National Indian Gaming Commission. We spend a disproportionate 
amount of our time trying to sort out, whether a particular 
machine is one that can be played without a compact, or is it 
indeed a class II bingo or pull-tab-type machine that the tribe 
does not have to have a compact for.
    We are trying to meet this challenge. We recently appointed 
or selected the nomination of tribes, membership to a tribal 
advisory committee that will help us establish class II 
standards so that if a game meets those standards, then it can 
be used without a class III compact. The process we are now 
using of offering informal advisory opinions with respect to 
each machine, often results in extended, costly litigation, and 
we do not really give the tribes or the vendors a clear path. 
Once we have these standards in place, we think that will be 
workable and will be a service to tribes, as well as those who 
provide these devices to the tribes.
    S. 1529 takes a look at the minimum internal control 
process. Minimum internal control standards are basically 
universal for all commercial legalized gaming. The State of 
Nevada, the State of New Jersey, all the jurisdictions that 
have gaming have some standards that facilities must meet so 
that they track the dollars as they go through the machine to 
the cage, to the count room and eventually in some cases to 
State coffers if there are taxes, or to the casino proprietor, 
or in the case of Indian gaming, to the tribe.
    We promulgated minimum internal control standards. They are 
in effect. They have been revisited once in 2002. A tribal 
advisory committee was assembled. We revised them. We are 
currently in the process of doing that again. Not only have we 
appointed a tribal advisory committee to help us do that, but 
it is a standing tribal advisory committee. You cannot just get 
it done once and solve the problem. Given the changes in 
technology and so forth, you have to keep up with this. With 
the assistance of this tribally nominated tribal advisory 
committee, we will be again revising the minimum internal 
control standards.
    S. 1529, as we read it, would in effect send us back to the 
drawing board. The good news is it would clearly in Federal law 
say we have the authority to do this. The problem as I see it 
is we would have to in effect throw out the progress we have 
made, the minimum internal control standards we now have in 
place, and in effect start over, do negotiated rulemaking to 
come up with a new set of minimum internal control standards. I 
think the adage, ``if it ain't broke, don't fix it,'' ought to 
apply here. I think our present standards are workable. I think 
we continue to get tribal input with respect to those 
standards. We hope that is a tack that the committee will take 
as it pursues this.
    We are not without challenges in this area. At the Colorado 
River Indian Tribe in Arizona, we went out to do a MICS audit, 
minimum internal control standard audit. That was going pretty 
well until our Regional Director said, okay, let's go take a 
look at the slot machines. The tribe said, no, you do not have 
authority to look at class III. We said, well, yes we do. As a 
result, the audit came to a stop. Eventually the Commission 
issued a violation notice, assessed a fine because the audit 
process had been disrupted. Eventually we got that sorted out. 
We have been to Colorado River Indian Tribe. We have done an 
audit. Things look pretty good out there. But they reserved the 
right to challenge whether we have that authority, the 
proposition being tribes and NIGC will regulate class II; class 
III will be regulated pursuant to Tribal-State compacts.
    Well, that case is now working its way through the court. 
If in fact the court disagrees with us and says, no, even 
though IGRA says we have the right to promulgate standards, 
even though the chairman of the National Indian Gaming 
Commission has the right to assess fines for violations of the 
IGRA, of NIGC's regulations, of the tribal gaming ordinance, 
you have to stay out of class III, that is where most of the 
ballgame is. Class III is where all of the money, or not all of 
the money, but most of the money in Indian gaming is. All day 
every day, that is what we are currently doing now. This act 
would clarify that we have that authority. However, if we have 
to go back and rewrite the MICS, we think it is a step forward 
and maybe also a step backward.
    There is a provision in S. 1529 that addresses the use of 
the fines that NIGC collects for violations of IGRA and the 
regulations and so forth. It would in effect say, NIGC, you set 
up a separate fund; put those proceeds in that fund; and there 
are some special uses you can make of those funds. We do not 
think that is good business. That is, we do not think that the 
body that assesses the fines should be the one that gets to 
decide or decides in part where to spend it. Right now, those 
fines that we collect, and in this last year we collected about 
$4 million in fines, go into the general fund of the U.S. 
Treasury.
    There is probably a way to do both of these things. That 
is, get the benefits of what money like that would provide for, 
such as additional training for tribal gaming regulators, 
things of that nature, but money for those purposes could be 
appropriated. Maybe they could look as they do that, to see how 
much the fines were that came in. But to say to us, you go out 
there and collect fines and then use that money, I think raises 
a red flag with respect to the credibility of the NIGC when we 
assess those fines.
    The consultation provision of S. 1529 is something we 
certainly agree with. We have promulgated for the first time at 
NIGC a consultation policy. It will be published in the Federal 
Register the first week in April. It specifically sets forth 
how NIGC should and will consult with tribes when we consider 
changing policy that relates to Indians and Indian gaming. We 
have held five regional consultations this past year, and 
almost on a weekly basis we are engaged in consultation of one 
sort or another, meeting with tribal leaders and addressing the 
issues that arise as we play our regulatory role.
    Finally, let me say we want to continue to play an 
important role in the regulation of Indian gaming that makes it 
a strong economic development tool. We want to continue to help 
tribes scrutinize the individuals that participate in Indian 
gaming. We want to monitor with them the fairness of the play. 
We want to make sure that the money goes where it is supposed 
to.
    We fully understand that tribes do the heavy lifting. They 
are out there all day every day. We merely come along and look 
over their shoulder. But by looking over their shoulder, we 
give credibility to what they are doing, to the gaming public, 
to know that there is somebody here that is talking to you, 
talking to Congress, talking to the tribes with respect to how 
it works. I think it also fortifies the trust that tribal 
members themselves have that their assets are being adequately 
protected; that their economic development in the way of gaming 
is being run the way it should.
    There certainly will be new challenges that will come 
along. We are seeing more and more questions about our tribes 
making proper utilization of their gaming revenues. NIGC will 
continue to try and address those issues that come our way. We 
need to have the tools to do that, enough resources in the way 
of dollars and staff. We need to have a viable, modern, 
current, organic Act, the [IGRA]. When we have that, we think 
we can play the role that is expected of us.
    That basically concludes what I have to say, Mr. Chairman. 
But before concluding, we may not have the opportunity during 
your tenure to come before you again, Senator Campbell. I want 
to thank you so much for the attention you have given to us. It 
has been a privilege to appear before you. From one Indian to 
another, you make us proud that the Indians know how things 
ought to work.
    Thank you, sir.
    [Prepared statement of Mr. Hogen appears in appendix]
    The Chairman. The three of us here in attendance today, we 
were all active in 1988 in helping write IGRA. I do not think 
any of us, or anybody in Congress, had any idea of the growth 
that was going to happen after we passed that bill. In my view, 
I think Indian gaming has done a world of good for communities 
around reservations, and particularly for tribes that have 
invested in gaming, but it has had some complications, and that 
is what this bill is about.
    Before we go to Mr. Skibine, I would like to ask Senator 
McCain if had an opening statement or any comments to make.
    Senator McCain. No, Mr. Chairman; except to thank you for 
holding this hearing. I think it is important after 15 years 
that we review IGRA. As you mentioned, and I think Senator 
Inouye would agree, we had no idea that it would be this large 
a situation.
    I was reading the opening statement of Mr. Stevens, who 
said that IGRA is a result of lobbying efforts by State 
governments and the commercial gaming industry in response to 
the Supreme Court's holding California v. Cabazon Band of 
Mission Indians. I do not know where you were at that time, Mr. 
Stevens. It had nothing to do whatsoever with anybody's 
lobbying. It had a lot to do with our abiding commitment to try 
to see that a Supreme Court decision, which we all supported, 
certainly Senator Inouye and myself and Senator Campbell, was 
translated into some kind of reasonable process so that we 
would be in compliance with a U.S. Supreme Court decision, and 
allow as much as possible Indian tribes to engage in gaming.
    To allege that somehow that this was a result of lobbying 
efforts is a bit insulting to those of us who worked so hard on 
behalf of Native Americans and have continued to work on behalf 
of Native Americans' right to engage in gaming.
    Thank you, Mr. Chairman.
    Mr. Stevens. Senator, if I could?
    The Chairman. Yes; go ahead, if you would like to respond 
to that.
    Mr. Stevens. I apologize if I offended you in any way, 
shape or form.
    Senator McCain. You did not offend me. I was just 
correcting the record.
    Mr. Stevens. It is not my intent, and certainly we feel 
that there was a lot of lobbying efforts that took place. We 
certainly take the position that tribes did not write this and 
we were not the champions of this until it was installed.
    Senator McCain. This law was passed in complete 
consultation with Indian tribes. It was extensive for a long 
period of time. I will engage in that later on, Mr. Chairman, 
but I thank you, Mr. Chairman.
    Mr. Stevens. I would welcome the opportunity to try to 
clarify my record on that, Senator.
    Senator McCain. Thank you.
    The Chairman. Mr. Skibine, if you would continue.

    STATEMENT OF GEORGE T. SKIBINE, ACTING DEPUTY ASSISTANT 
 SECRETARY FOR POLICY AND ECONOMIC DEVELOPMENT, DEPARTMENT OF 
                          THE INTERIOR

    Mr. Skibine. Thank you, Mr. Chairman.
    Good morning, Mr. Chairman, Mr. Vice Chairman, Senator 
McCain. I am pleased to be here to present the Department of 
the Interior's view on S. 1529, the Indian Gaming Regulatory 
Act Amendments of 2003. My comments this morning will focus on 
section 2(f)(2) of the bill, which is the only section that 
directly affects the Secretary's statutory duties under the 
IGRA.
    As you know, in July of last year the principal deputy 
assistant secretary, for Indian Affairs testified before this 
committee on the concerns we had with revenue-sharing 
provisions in class III gaming compacts. We talked about the 
growth of revenue-sharing provisions in the compacts; about how 
the 1996 Seminole decision affected this by giving States the 
upper hand in compact negotiations; how there has been a rise 
in revenue-sharing provisions in general in compacts and, also, 
how there has been a rise in the percentage of revenue that the 
states receive under these compacts.
    Back in 1994, we approved the Mohegan compact. It was the 
beginning of the era for revenue-sharing provisions in 
compacts. We also you, a book with a compendium of our 
decisions regarding revenue-sharing payment. Our position has 
been that as long as these payments are not a tax, then they 
are okay, as long as they are viewed as the purchase of a 
valuable economic benefit in exchange for the payment.
    We require that the economic benefit be quantifiable and we 
have also insisted that it be for a benefit that the state is 
not required to negotiate in good faith. Our thinking there is 
that we do not believe it was the intent of IGRA to have all 
the provisions up for sale. We wanted to make sure that it is 
like substantial exclusive rights to certain forms of class III 
gaming, something that the State is not required to offer in 
good faith.
    As a result, we support the thrust of section 2(f)(2)(a) 
because it provides a statutory basis for the inclusion of 
revenue-sharing provisions in class III gaming compacts. We 
think that this is welcome because the Department has been 
challenged over its approval of such provisions in court, and 
we have not lost litigation there, but we feel that it is an 
ongoing concern and that if that can be clarified by an 
amendment to IGRA I think it will resolve all these doubts 
about whether you can or cannot make those revenue-sharing 
payments.
    We believe that the conditions for revenue-sharing payments 
in the bill should be, modified and that the bill should 
contain very clear language that specifies exactly what 
economic benefits may be conferred in exchange for the payment, 
and perhaps even to provide a cap on the percentage of net 
revenues that can be made so that there will not be a tendency 
to have the percentage that the States require be increased 
over time. This is something we have seen, and with direction 
from Congress as to the cap, that we would essentially help 
promote the notion that the gaming activities are mainly for 
the tribes' economic development and tribal programs, that it 
will not see more and more of these revenues going to States 
under these compacts.
    We think that this clear statutory guidance, in this 
respect, will provide a transparent process for reviewing these 
provisions at Interior and will help states and tribes know 
exactly what is on the table for them to negotiate. It will 
also eliminate the uncertainty surrounding the approval or 
disapproval of these provisions at Interior. Usually, I can 
tell you that when we have to make a determination on a compact 
that contains revenue-sharing provisions, we do a lot of hand-
wringing and a lot of analysis, and we are usually not done 
with our analysis until the 44th day when we actually issue the 
decision because it is a very difficult process to try to 
figure out exactly what is the value that the tribe is 
receiving in exchange for the payment.
    With respect to the promulgation of regulations included in 
section 2(f)(2), we believe that if the statute itself clearly 
articulates the criteria for revenue-sharing payments, then 
regulations may actually not be necessary. Actually, if the 
committee believes these regulations are necessary, we think in 
our testimony we said that the timeframe seems unrealistic and 
we suggest 18 months, rather than the 90 days that are in the 
bill.
    Also, we think that the inclusion of a 90-day timeframe for 
issuing class III procedures in section 2(f)(2)(b) is 
insufficient. We would recommend the doubling of that deadline 
of the timeframe at the very least. In our experience, we have 
had very few instances of reviewing class III procedures under 
the scheme outlined in IGRA. We are in the process of doing 
that now. I can tell you that the timeframe, presents very 
difficult questions, especially in the scope of gaming, that 
would require us to study this very diligently.
    Now, I note that last July our principal deputy assistant 
secretary for Indian Affairs was asked whether the committee 
should consider any other modifications of IGRA. She responded 
that the 45-day deadline for approval of compacts was too 
short. I cannot find that provision extending that timeframe in 
the bill. We continue to believe that the 45-day timeframe is 
short. What happens a lot of times is we have a compact that is 
submitted and when we examine it, we notice that there are some 
glitches. We ask within the timeframe for the tribe and the 
State to modify that section, to provide us with something that 
would comply with IGRA. The back-and-forth negotiation that we 
are doing takes time. As a result, we always bump up against 
that 45 days, in most cases.
    We notice that in section 2(f)(2)(b) there is a requirement 
that the net revenues from gaming activities of the tribe that 
may be in the compact be allocated to another tribe or a 
portion to another tribe and not be used on a per capita basis. 
I think I should make the committee aware that at Interior, we 
do not believe that these funds are subject to the revenue 
allocation plan requirements currently under IGRA. We do not 
consider those to be the net revenue of that tribe, and as a 
result in states that authorize that, they are using those 
funds for tribal governance purposes or whatever purpose they 
need without having to come to Interior to submit a revenue 
allocation plan. So we have not considered these particular 
funds to be subject to IGRA.
    Let me also, mention that the 6-month extension of compacts 
contained in section 2(f)(2)(c) is a concept that we do like, 
but we were made aware by the Justice Department that there may 
be 10th Amendment problems with this provision. We think this 
issue should be examined in more detail.
    Finally, the Department requests the committee examine two 
additional issues which are of concern to us. The first is the 
inclusion of anti-competitive provisions in compacts that are 
directed at other Indian tribes. Secretary Norton is very 
concerned about that and we have seen that in the last 2 years 
in a compact where the compact would provide exclusive rights 
to game on a geographical basis, or substantial exclusivity to 
tribes against non-Indian gaming. It also gives a tribe the 
right to game in a geographical area to the exclusion of other 
Indian tribes. We have noticed a rise in these provisions that 
set tribes against tribes, and we are very concerned about it.
    Our lawyers have told us that they do not feel that such a 
requirement violates any requirement of IGRA, but yet, we feel 
as a policy matter that it is something that gives us pause. In 
fact, we have been sued in Wisconsin by two tribes over the 
decision not to disapprove the Ho-Chunk Nation compact that 
contains such a provision, so there is ongoing litigation on 
that.
    The second issue that we raise involves section 20(b)(1)(a) 
of IGRA and the submission of applications to take land into 
trust for gaming on what we call ``far flung'' lands. We 
discussed this in our appearance last summer with the 
committee. We have come to the conclusion that section 20 of 
IGRA does not prohibit gaming on off-reservation land under 
section 20(b)(1)(a) of IGRA and there is nothing in IGRA that 
prohibits it. In fact, it is contemplated that it does occur.
    Yet, when we are seeing the rise of applications from 
tribes for land that is hundreds of miles from the reservation, 
or from lands that are in another State, we are often contacted 
by congressmen that are essentially outraged that this can 
happen under IGRA and that in fact they feel that it was never 
the intent of Congress to permit it. We believe the committee 
may want to consider clarifying this area since it is raising a 
lot of concerns, not only with congressmen, but also with the 
communities that are affected by these applications that we 
continue to process.
    This concludes my remarks. I will be happy to respond to 
any questions you may have.
    Thank you very much.
    [Prepared statement of Mr. Skibine appears in appendix.]
    The Chairman. We will look forward to working with the 
Department in trying to improve this bill as we go along. I do 
not think any of us had any idea in 1988 about some of the 
complicated things that are coming up now as the industry 
grows. In my view, having been one of the people that worked on 
it in 1988, I was not concerned about the states at all. They 
are doing great compared to the tribes. When you compare 
unemployment as an example, State unemployment and tribal 
unemployment, it is just as different as night and day, as well 
as many things like the suicide rate among youngsters or high 
school dropout rate or so on.
    My original intent was to try to help tribes, and certainly 
the peripheral benefits have gone to States or communities. 
That is fine, but right from the beginning I was concerned more 
about tribes than I was States. Who would have known that when 
we thought we would put something in place in 1988 that would 
allow people of good faith to reach an agreement between the 
states and the tribes, and then after the Seminole decision we 
found out that one of the participants did not have to 
participate if they wanted to hold out and basically put 
tribes, in my view, in a real subjective position.
    Now, we find that when many States have deficits, they are 
looking to tribes to bail them out, when they were not there in 
the beginning to help them pass IGRA to help tribes. In those 
days, if anything, they dragged their feet, if you remember.
    We will go ahead to Mr. Stevens' testimony.

  STATEMENT OF ERNIE STEVENS, Jr., CHAIRMAN, NATIONAL INDIAN 
 GAMING ASSOCIATION, ACCOMPANIED BY MARK VAN NORMAN, EXECUTIVE 
                            DIRECTOR

    Mr. Stevens. Mr. Chairman, members of the committee, I just 
want to clarify. I reviewed the statement regarding Senator 
McCain's concern and clarify that in my record.
    The Chairman. Okay, that will be fine.
    Mr. Stevens. I get a lot of my information from my elders 
and they have made it clear to me that in working with that 
process, it was not completely Indian country's baby, but we 
have championed that from day one and done a great job of doing 
that. I apologize if my statement was a little bit aggressive 
in that regard.
    Senator McCain. That is not an important item, believe me. 
Thank you.
    Mr. Stevens. Thank you, Senator.
    Good morning Chairman Campbell and Vice Chairman Inouye and 
Senator McCain, members of the committee, on behalf of NIGA's 
member tribes, I want to thank you for providing me the 
opportunity to testify before you this morning.
    My name is Ernie Stevens, Jr. and I am a member of the 
Oneida Nation of Wisconsin and chairman of the National Indian 
Gaming Association. With me this morning is Mark Van Norman, a 
member of the Cheyenne River Sioux Tribe and NIGA's executive 
director.
    I first want to commend your efforts in crafting S. 1529. 
NIGA fully supports a number of provisions that would make 
positive technical corrections to the IGRA. However, as you 
know, Indian country has a number of concerns with this bill 
and we appreciate the continuing dialog with you and your staff 
over the past year. Most importantly, we welcome the 
opportunity to formally provide our views.
    Mr. Chairman, before I speak from the text, I want to speak 
from my heart. Tribal government gaming is working. Before 
Indian gaming, my people had few jobs. Indian gaming has 
created 500,000 jobs. Before tribal gaming, Indian people when 
they were sick they could not find a doctor. Now, we are 
building health clinics. Before tribal gaming, Indian children 
had little chance for an education, and now we are building 
schools. Before tribal gaming, Indian people had few 
opportunities. Now we have a bright future for our children.
    Gentlemen, tribal government gaming is the Native American 
success story.
    I will turn to the specifics of my presentation. I would 
ask that I am able to provide my full statement for the record.
    The Chairman. It will be included in the record.
    Mr. Stevens. Thank you, sir.
    It has been 15 years since Congress enacted IGRA. Indian 
gaming is a tool that tribal governments have used for more 
than 30 years now. IGRA was the brainchild of many different 
efforts, but as I said previously before Senator McCain left, 
it was not ours, but we are very proud of what we have done to 
champion that law and we are very proud of what we have done to 
contribute to this industry.
    Indian tribes use gaming just as state governments use 
lotteries, to build infrastructure and provide essential 
services for their citizens. In just 30 years, Indian gaming 
has helped tribes begin to rebuild communities that were all 
but forgotten.
    Indian country still has a long way to go. Too many people 
continue to live with disease and poverty. Indian gaming has 
proven to be the best available tool for tribal economic 
development.
    I appreciate your efforts through S. 1529, which would 
bring clarity to several areas of the law. These are some of 
the provisions we support. First, the Johnson Act 
clarification. The Supreme Court brought stability to this area 
of law by rejecting the Department of Justice review to two 
appellate court decisions that found the Johnson Act did not 
apply to IGRA class II technological aids. This bill's 
provisions would help prevent any future confusion.
    Second is NIGC's accountability. This bill would require 
NIGC to adopt a 5-year strategic plan, and in addition would 
propose section 20 which will require the Commission to involve 
and consult with Indian tribes. We kind of look at the record 
regarding this, and we are not so excited about that. We are 
appreciative of the efforts more recently on consultation and 
we are encouraged by the way this process is growing in Indian 
country by NIGC. NIGA asks the committee to consider requiring 
the NIGC to develop its plans in accordance with the limited 
powers pursuant to IGRA.
    Despite our strong support for these important 
clarifications, Chairman Campbell, NIGA has three concerns. It 
authorizes the NIGC to regulate class III gaming. It authorizes 
NIGC to do background checks on tribal gaming commissioners. 
And it does not provide a Seminole fix.
    The authorization will burden the tribal-State compacting 
process pertaining to class III authorization. It will create 
conflict and only serve to create confusion and a duplication 
of effort. Congress considered NIGC authority over class III 
gaming, but decided against it. Our elders have fought against 
it as well. Our elders have told me on more than one occasion 
that is a sovereign right and we need to stand by that.
    As Congress and the Department of Justice expected, tribal-
State compacts are working to provide a strong regulatory 
regime backed up by Federal agencies like the FBI, FinCEN, IRS 
and others. In total, Indian tribes invest over $262 million 
annually for the regulation of Indian gaming. Against a 
backdrop of comprehensive regulation, the FBI and the U.S. 
Department of Justice have testified repeatedly that this 
regulatory scheme is working well to prevent the infiltration 
of crime and protect the integrity of games played at all 
tribal operations.
    Next if I could just talk real briefly about NIGC licensing 
authority. NIGA objects to the provision requiring Federal 
background checks for tribal gaming commissioners. Unlike 
management and other key gaming personnel, tribal gaming 
commissioners are tribal government officials and the selection 
of tribal government officials must be left to the sovereign 
authority of tribal governments. NIGC should not be permitted 
to infringe on tribal government authority in this manner and 
we ask that you consider deleting that provision from the bill.
    One thing we are very concerned about is the lack of a 
Seminole fix. I think everybody is aware of that. For the past 
8 years, NIGA, NCAI and tribal governments throughout the 
Nation have all stated that any IGRA amendment must contain a 
Seminole provision. When I spoke before this committee in 1997, 
then as First Vice President of the National Congress of 
American Indians, that was our stance, and those resolutions 
stand firm today.
    Today, I must again ask that the committee consider adding 
a provision to address this longstanding wrong. States are 
using Seminole to impose unreasonable demands on tribal 
governments through the compacting process.
    Last, before I close, I would like to address the revenue-
sharing provision. NIGA fully supports this concept. The 
burdens of homeland security, the economic downturn nationwide, 
the loss of jobs and very poor financial planning are all 
reasons for State budget shortfalls. Indian gaming, however, is 
not a reason for State budget problems and should not be used 
as a way out. Shifting the burden to tribal governments is 
neither reasonable or fair. Why? Because these proposals burden 
only the industry that is producing jobs and generating 
economic development. They also ignore a significant benefit 
that Indian gaming currently provides to State and local 
communities.
    Finally, these proposals violate Federal law and ignore the 
status of Indian tribes as governments. As I mentioned earlier, 
tribal government gaming has created 500,000 American jobs and 
three-fourths of those jobs are held by non-Indians.
    Indian gaming also creates a substantial revenue stream for 
the State and local units of government. In 2003 alone, Indian 
gaming provided for about $7.6 billion in added revenue to 
Federal, State and local governments. These provisions do not 
make good financial sense and most of them violate Federal law.
    Indian tribes conduct gaming for the same purpose that 
State governments operate lotteries: To generate revenue, to 
fund infrastructure and essential government programs. Congress 
enacted the IGRA to promote tribal economies and strengthen 
tribal governments. As a result, IGRA requires that Indian 
gaming revenues be used first and foremost to address the 
governmental, economic and social problems of Indian country.
    Until these needs are fully addressed, Federal law 
prohibits the use of gaming revenues for any other purpose. I 
understand that an amended version of S. 1529 includes a 
savings clause to protect the effect of existing tribal-State 
compacts that are working well for the tribes and States 
involved. Again, NIGA fully supports this provision.
    In closing, Mr. Chairman and Senator, I again thank you for 
your dedication and interest in tribal government gaming and 
Native Americans. We want you to know that we appreciate the 
hard work that the committee and its staff have done in regards 
to this legislation.
    Senator Campbell, this may be the last time that I have the 
privilege of testifying before you as one chairman to another. 
I was saddened to hear you will be leaving the committee. You 
have been an inspiration to all Native Americans. We are deeply 
and eternally grateful.
    Mr. Chairman and members of the committee, this concludes 
my remarks this morning, and once again I thank you for 
providing me with this opportunity. I am available for any 
questions.
    [Prepared statement of Mr. Stevens appears in appendix.]
    The Chairman. Thank you, Ernie.
    I am going to run and vote. Senator Inouye will chair. 
Don't be a little bit embarrassed about your confusion with 
which one of us is Inouye and which one is Campbell. We have 
worked together for so many years and been friends for so many 
years that we are like an old married couple sometimes. We 
begin to look alike. [Laughter.]
    Mr. Stevens. I am very clear, Chairman Campbell. Again, we 
are excited to come before you on this important matter. You 
two are great gentlemen and friends I have inherited from my 
father. I am very clear the difference. I am a little bit 
nervous trying to clarify for Senator McCain this morning, but 
I hope my position here this morning stands clear.
    Senator Inouye. Thank you very much. I am sorry I was not 
here for the past 10 minutes. Since this issue has been brought 
up, when the U.S. Supreme Court issued its ruling in the 
Cabazon case the committee was faced with a problem. We 
approached the Administration to suggest that they should 
carryout its responsibility on a government-to-government 
relationship with sovereign nations, but as some of you recall, 
our Government, our Attorney General adamantly refused to 
participate and said, no, we do not want to have any part of 
this.
    As a result, the Congress had to enact laws and delegate 
this government-to-government role to the States. We know that 
the Constitution did not contemplate such a rule for the States 
but what choice did we have? It was either that or chaos, and 
we could not countenance that. So that is why we have this law 
today. I am glad that the Federal Government is involved now to 
some extent.
    If I may, I would like to ask a few questions. I believe 
the Deputy Assistant Secretary brought up the matter of caps.
    Mr. Skibine. Yes.
    Senator Inouye. At the present time, there are no caps. 
When the first compact was put into effect, I believe that was 
the Mashantucket Pequots.
    Mr. Skibine. The Mashantucket Pequots were actually 
procedures under IGRA. The first compact with a revenue-sharing 
payment that we approved was the Mohegan compact.
    Senator Inouye. For that revenue-sharing agreement, the 
Connecticut tribes got some monopolies. Isn't that correct?
    Mr. Skibine. That is correct.
    Senator Inouye. Do the other tribes that are being forced 
to accept high percentages of revenue-sharing, they get 
monopolies as well?
    Mr. Skibine. In some cases they do. What they get is a 
substantial exclusivity to certain forms of tax-free gaming. So 
it is not as broad as the exclusivity that the Mohegan Tribe 
got in Connecticut, which is a total monopoly on slot machines, 
but it is still a substantial exclusivity. We believe that the 
form of class III gaming has to be authorized somehow within 
the State so it is not a total exclusivity anymore, but it is a 
substantial exclusivity.
    We have in fact, for a while, insisted on a statewide 
exclusivity. With the Seneca compact in New York, we agreed to 
a substantial exclusivity that is geographic, so that the 
Seneca Tribe has essentially substantial exclusivity on forms 
of machines in Western New York, but not over the whole state. 
The tribe persuaded us that it was significant enough to 
provide payments to the State.
    Senator Inouye. Do you believe it is your responsibility 
to, quote, ``protect'' Indians from being shortchanged or 
conned by some of these dealers?
    Mr. Skibine. What we believe is that in order for the 
compact not to violate IGRA, and especially not to violate the 
taxation provision of IGRA, the payment has to be something 
that is a payment in exchange for a benefit. If the payment 
greatly exceeds the value of the benefit, our view is that the 
difference between what the benefit is worth and the payment 
that the tribe would agree to make, that is a tax and that is 
prohibited by IGRA. So to that extent, that is what we look at.
    Senator Inouye. Who determines what is a tax or is a 
benefit?
    Mr. Skibine. We ask the tribe and the State to provide us 
with an economic analysis that outlines what is the benefit 
that is conferred and essentially what is the value of the 
benefit, as compared to the payment that is provided. Based on 
this analysis, we make a decision as to whether it is not a tax 
and in fact is a payment that is authorized as the purchase of 
a valuable economic benefit.
    It is a difficult analysis and that is why we welcome the 
provision that would clarify that it is authorized, and under 
what circumstances.
    Senator Inouye. I have been advised that New Mexico Indian 
tribes originally were forced to accept 16 percent revenue-
sharing with the State.
    Mr. Skibine. No; they pay 8 percent.
    Mr. Van Norman. Could I just add. There are two that remain 
under the former regime, Mescalero and Pojoaque Pueblo.
    Mr. Skibine. Yes; right.
    Senator Inouye. Do they receive any exclusivity?
    Mr. Skibine. Under the previous----
    Senator Inouye. Under the 16 percent.
    Mr. Skibine. Under the 16 percent, they receive some 
exclusivity, however the Department never affirmatively 
approved the compact for these two tribes, or for the other 
tribe. We did not approve it because we felt that it was not 
arms length negotiations with the State and therefore, the 
payment was more likely to be a tax than a payment in exchange 
for a bargain a benefit. At the time, from what I recall, we 
felt that the tribes were between a rock and a hard place.
    If they did not have a compact, I think the U.S. Attorney 
at the time had filed to close them down, and yet they were 
faced with a legislative compact that they did not negotiate. 
The tribe sent us a resolution urging us to neither approve nor 
disapprove this compact because in fact they felt that they 
wanted to be able to test their legality in court. So we ended 
up following that request.
    Senator Inouye. Would you recommend that this bill contain 
a cap?
    Mr. Skibine. Yes; I think that we should explore having a 
cap on the payment of net revenues.
    Senator Inouye. From your experience, what would be a 
reasonable cap?
    Mr. Skibine. I think it should be single-digit, maybe, or 
10 percent. I think that has yet to be looked at. I think that 
if it goes above that I think it is maybe problematic for the 
tribes.
    Senator Inouye. We will consider that.
    Mr. Stevens, Mr. Chairman, you have indicated that you are 
not happy with the bill requiring personnel to be investigated 
because of your sovereign nature. Is that correct?
    Mr. Stevens. Tribal gaming commissioners that are appointed 
by the tribes, we think that is a tribal council right, only 
for tribal gaming commissioners.
    Senator Inouye. And you do not want the Government of the 
United States investigating them?
    Mr. Stevens. I am saying that it is our position that that 
is first and foremost the right of the tribal government. That 
is my only statement.
    Senator Inouye. How can you assure your tribal members and 
the Government that your commissioners are free of a criminal 
background?
    Mr. Stevens. I think that we have a demonstrated experience 
with our background investigation through our tribal 
governments. As I reflected in our numbers, our numbers are for 
regulation nationwide is $272 million. That is reflective of 
our tribes' background investigations. So I would say that our 
tribal governments would be able to do adequate background 
investigations on those commissioners.
    Senator Inouye. Mr. Hogen, do you believe that you and your 
Commission should have the right to investigate?
    Mr. Hogen. Senator Inouye, as I read the proposed 
legislation, it would not give us the primary task of 
investigating tribal gaming commissioners. Rather, they, the 
tribal gaming commissioners, would have to be backgrounded just 
as all of the licensed employees are. We play a role in that in 
that the tribes first do that, then they send their 
investigative report to us. We review that, and only if we 
object to what they have done do we take any action. That 
action would be, for example, to ask them to reexamine or to 
object to that. They have the ultimate decision as to whether 
they are going to license those individuals.
    I think it is good business to have those who do the 
licensing at the tribal level subject to the same scrutiny as 
those that they are going to license. I do not think it would 
be good to have a tribal gaming commissioner with a felony 
record sitting there looking over applicants from blackjack 
dealers and be in a position to veto their qualification 
because they may have a conviction.
    So we do not want to be intrusive, and I agree that the 
record of tribal gaming commissions is good, but I think 
putting everybody on that same level has merit.
    Senator Inouye. If you object, do the commissioners get 
thrown out? What is the outcome?
    Mr. Hogen. I believe, and I would have to look at the 
statute to be absolutely clear, that the tribes are obligated 
to re-examine, they look at it, and I think they may have to 
suspend that license that is in place for a period of time, but 
they make that ultimate decision.
    Senator Inouye. Notwithstanding your objection?
    Mr. Hogen. Right.
    Senator Inouye. Do you believe that this is what you want?
    Mr. Hogen. It has worked pretty well so far. We have been 
troubled occasionally, but it has been very isolated.
    Mr. Stevens. Vice Chairman Inouye?
    Senator Inouye. Yes?
    Mr. Stevens. I just want to make sure I clarify for the 
record that in no way, shape or form do we advocate that we 
should not do a background or a review. We just want to make 
sure that we clarify that it is a sovereign right of our tribal 
governments to do so for their regulators.
    Senator Inouye. I fully support your sovereignty, as you 
know, but I want to also make certain that gaming is conducted 
in a manner that would be approved by the public at large 
because we are constantly pressured by members of the Congress, 
members of the Senate to close tribal gaming. They pick on 
everything that they can find. A little thing can be a big 
thing for you.
    So with that, I thank you very much.
    Mr. Chairman.
    The Chairman. Thank you, Senator Inouye.
    We are all double- or triple-booked today, so I apologize 
for that, but those of you who have been here before, you know 
it comes with the deal here in the Senate. I do not know what 
Senator Inouye already asked you, so hopefully I will not 
duplicate that.
    Let me start with you, Phil. You indicate that this roller-
coaster appropriations cycle is not the best way to go, and 
that is certainly what we have had. I understand that. In your 
testimony you express concern about having to consider factors 
such as level and quality of State and tribal regulation in 
determining fees imposed on individual tribes. It just would 
seem to me those are reasonable things to consider. Do you 
disagree with that?
    Mr. Hogen. No; I think as a general proposition, to decide 
how much we have to do and what we need to do that, we need to 
kind of be very cognizant of the environment that we are 
looking at. If tribes are doing a super job and we find out 
that they are doing that by going to their facility twice a 
year, that is great. If we find out that it is not working very 
well, we need to be there more often. So we need to be aware of 
what they are doing, how they are doing it, and are there any 
holes that we need to try and plug in the role that we play.
    The Chairman. I see. Okay. I think we are probably close to 
the same track.
    In your testimony, you mention that tribes can reduce their 
fees by obtaining a certificate of self-regulation. Are there 
any tribes that do that now or have applied for that?
    Mr. Hogen. The only two tribes that do that, I believe are 
the Menominee Tribe in Wisconsin and the Grand Ronde Tribe in 
Oregon. However, under the current IGRA, that only applies to 
the class II gaming. As I mentioned before, that is a small 
chunk of the action, so there is really not much reward to a 
tribe for doing that.
    The Chairman. Should we apply that to class III gaming?
    Mr. Hogen. If everybody is self-regulated, then NIGC is 
probably going to be left with very little resources, and must 
still spring into action when they need to. I have concerns 
about that, not only dollars and cents, but as Senator Inouye 
mentioned 1 minute ago, we are under a great deal of scrutiny. 
If we say to those who are complaining about the extent of the 
regulation of tribal gaming, well, now they are self-regulated, 
I expect we might hear some increased concerns expressed.
    The Chairman. I understand.
    I am interested to see that the legislative proposal that 
you have mentioned includes long-term planning similar to the 
Government Performance Results Act that applies to most other 
agencies. Can you tell me if that change is also a position of 
the National Indian Gaming Commission?
    Mr. Hogen. We have always done some planning, and it has 
probably been less formal than is required of other, and 
particularly larger agencies. This GPRA that I do not know all 
the details about, but I do know that it is fairly bureaucratic 
and complex, we think that there are aspects of that that we 
can comply with that will tell this committee, tell Congress 
what they need to know about where we are going, tell tribes 
where we are going, and fully be transparent. Maybe we do not 
need to jump through all the hoops that GPRA itself would 
require, but still accomplish that.
    The Chairman. I am not an expert on the technology that is 
changing so fast with any kind of gaming, but clearly there is 
some difference of opinion about what should be class II and 
class III. I guess with some of the new machines that are 
coming out, it is difficult to determine. In your opinion, is 
the NIGC the best agency situated to determine whether a 
particular game is class II or III?
    Mr. Hogen. I think we are the best agency to set the rules 
or the standards as to what the machine has to comply with. 
Once those are clear, then tribal gaming commissions themselves 
can examine those devices and decide whether to permit them on 
their floor. I think the buck, in terms of what those standards 
are, needs to stop someplace. I think having some national 
consistency to that has merit. So for that reason, I think that 
is a role that the NIGC ought to be playing.
    The Chairman. Do you think that would also be tested in 
court, if you did have that legislative authority?
    Mr. Hogen. I would not be surprised. We very seldom go 
someplace without having somebody file a lawsuit. But I think 
if there is a strong statutory basis, we would prevail.
    The Chairman. Let me move on to Mr. Skibine.
    You state that the Seminole decision created, in your 
written testimony, uncertainties in compacting between tribes 
and States. I believe that, too. But several attorneys general 
believe there is no problem because, and I am quoting from a 
letter from the Conference of Western Attorneys General, 
``tribes do not have to sign these compacts if they don't want 
to.'' What has been the impact of the Seminole decision on 
revenue sharing?
    Mr. Skibine. As I said in my comments, I think the impact 
of the Seminole decision on revenue sharing has been to 
increase the number of revenue-sharing provisions in compacts, 
and we have seen an increase in the percentage that the tribes 
are required to pay.
    If the tribes do not sign these compacts, then there is 
very little remedy available.
    The Chairman. I do not know if it is connected, but it 
seems like since the Seminole decision that more and more 
States have made higher demands and held out. Is that my 
imagination or is that true?
    Mr. Skibine. No; that is true.
    The Chairman. What recourse do the tribes have now if they 
do not want to share revenue with the State?
    Mr. Skibine. If they do not want to share revenue with the 
State and the State refuses to negotiate, what can happen is 
they can sue the State for a bad-faith negotiation. If the 
State raises its 11th Amendment defense, then the suit will be 
dismissed. Then the tribe may come to the Department and apply 
for class III procedures under our regulation in 25 CFR part 
291. We are entertaining a proposal right now from a few 
tribes, but our authority to promulgate these regulations has 
been challenged so that we have actually not issued 
regulations, procedures for these tribes. So it is up in the 
air.
    The Chairman. Do you know the number of States, in lieu of 
a compact, are there regulations now that states have dealing 
with them?
    Mr. Skibine. No; not under our regulations.
    The Chairman. I had my notes all mixed up here, but one of 
you mentioned the example of $4 million of fines that have been 
assessed to tribes.
    Mr. Hogen. I brought that up.
    The Chairman. What were most of those fines for?
    Mr. Hogen. Most of those fines were assessed against tribes 
that were operating class III devices when they did not have a 
compact. We attempted, and most of those fines were assessed by 
the Commission that preceded ours, but they tried to equate the 
amount of the fine to the ill-gotten gain, so to speak, the 
amount that the tribe made by playing illegal machine.
    The Chairman. I see. Let me go back to Mr. Skibine.
    Do you think, Mr. Skibine, that State consent to off-
reservation gaming would be another relevant substantial 
economic benefit to tribes?
    Mr. Skibine. It would definitely be an economic benefit to 
tribes.
    The Chairman. This bill that we are talking about would 
require tribal-State compacts to address tribal government 
needs, which is something we probably should have done in the 
first bill in 1988, but did not. That deals with the general 
welfare of tribes, and its members too, before the State can 
share in the revenue. I would guess just off-hand that that is 
not a provision that the States would be very supportive of. In 
the view of the Department, or do you have a view on that, in 
fact?
    Mr. Skibine. In the provision of the bill?
    The Chairman. Yes.
    Mr. Skibine. We would prefer to see a clear direction in 
the bill on what is allowable in terms of revenue-sharing 
payment and what the criteria are. In terms of that provision 
in this bill, we think that would be difficult for us to look 
at because when we receive those compacts, usually the revenue-
sharing provision is expressed in terms of a percentage of net 
revenues.
    We do not know whether the needs of the tribes are met. In 
fact, it is likely that the needs of many of these tribes are 
not met. There are unmet needs with tribal governments, as you 
know, for many, many tribes. If that is the case, then there 
will never be revenue sharing if we have to address the unmet 
needs of the tribes.
    The Chairman. You also mention in your testimony the 
Department's concern with anti-competitive provisions in 
compacts that may prevent some tribes from operating gaming in 
specific geographic locations. First of all, will you tell the 
committee, are there many of those compacts with those 
provisions?
    Mr. Skibine. In the last 2 years or 1\1/2\, we have seen 
more and more of these provisions.
    The Chairman. Have they been suggested between tribes, that 
one tribe is concerned that another one may leap-frog over them 
closer to a metropolitan area, and therefore cut off the 
benefits of the first tribe?
    Mr. Skibine. That is correct.
    The Chairman. How do you address that in lieu of what some 
might say that that is a violation of a trust responsibility to 
those tribes that you put some restrictions on?
    Mr. Skibine. The Secretary is very concerned about these 
provisions from a policy standpoint. But our legal position is 
that these provisions do not violate IGRA or our trust 
obligation to Indians, principally because we do not think that 
tribes have a statutory right to off-reservation gaming, so we 
have not disapproved these compacts.
    The Chairman. I see. Let me ask another question or two. I 
just got a note. The Energy Committee is waiting to establish a 
quorum and I have to leave, so I am going to submit most of my 
further questions of all three of you in writing, if you would, 
so that I can get to the next committee.
    Over the past couple of years, Ernie, the NIGC has been 
able to obtain increased fee authority through the 
appropriation process. As I remember, some tribes were 
concerned that that would translate into more punitive action 
by the NIGC. Did the NIGA oppose those efforts when we were 
dealing with increased fee authority?
    Mr. Stevens. I want to hand this to Mark real quick, but I 
just want to make sure, the main thing that we want to do 
through that process is that they consult with tribes while 
they are going through that process.
    I will let Mark handle the technical side of that.
    Mr. Van Norman. Mr. Chairman, yes, we did oppose the 
increase from $8 million to $12 million because that was a 50-
percent increase. We thought a much more measured increase 
would have been appropriate and that we should have had a 
direction that the NIGC work with us on a government-to-
government basis to accompany that, and that it should go 
through the authorizing committees.
    The Chairman. Okay. Your testimony, Ernie, states an 
objection to a provision in our bill requiring background 
checks on tribal gaming commissioners as an intrusion on tribal 
government decisionmaking. As I read the language that we 
framed up, the decisions on background checks on gaming 
commissioners is still left up to the tribe, as they do with 
people who run for tribal council and that that happens to be 
in their constitution. The only requirement, as I read our 
language, is that some provision should be for background 
checks instituted by the tribe.
    Mr. Stevens. The only clarification, and I clarified that 
for Senator Inouye, is that we are not saying that our 
commissioners should not do a background investigation, but we 
are saying that that right should be left to the tribal 
government; only to that extent.
    The Chairman. I see. Perhaps the last question, NIGA has 
long objected to amending IGRA if a fix for the Seminole 
decision is not included. You probably know, with states' 
rights folks around here, that might be a very difficult thing 
to include and still get the thing passed. That was one of the 
problems we had in 1988.
    The way it works in the Senate, of course, is you get 
things done by consensus, and when you have 100 flaming egos, 
it is difficult to get them all to agree on anything. I happen 
to agree with you personally, but I think that that might be a 
very difficult thing to get into this bill to actually get it 
passed. It is something that we will certainly look at.
    Mr. Stevens. Let me just say, Chairman Campbell, I 
appreciate it. I think that tribal sovereignty and tribal 
governments have evolved around consensus from the beginning of 
time, and I appreciate that encouragement. I think to that 
extent, what we would do is, and we have pledged to other 
tribal leaders that have brought this up, that we will bring 
this before our executive committee meeting coming up next 
month. We would like to discuss it.
    I appreciate your asking the question, because it is the 
only way I could really clarify, but what we have told to this 
extent is that is our position. However, we will bring this 
before the tribal leadership.
    The Chairman. I would appreciate your getting back to the 
committee when they do address that, and perhaps tell the 
committee if we cannot get that provision, if we cannot keep 
that provision in, would you still support the bill? I would 
like to know that.
    Mr. Stevens. I will have the information for you in April.
    The Chairman. Okay, that will be fine.
    With that, I will include the rest of my questions to all 
three of you in writing. If you would get back to the 
committee, I would appreciate it. We will keep the record open 
for 2 weeks, if you can get back to us within 2 weeks.
    This committee is adjourned.
    [Whereupon, at 12:20 p.m. the committee was adjourned, to 
reconvene at the call of the Chair.]


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                            A P P E N D I X

                              ----------                              


              Additional Material Submitted for the Record

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


Prepared Statement of George Skibine, Acting Deputy Assistant Secretary 
for Policy and Economic Development, Office of the Assistant Secretary, 
                       Department of the Interior

    Good morning, Mr. Chairman, Mr. Vice Chairman and members of the 
committee. My name is George Skibine, and I am the acting deputy 
assistant secretary for Policy and Economic Development in the Office 
of the Assistant Secretary--Indian Affairs at the Department of the 
Interior [Department]. I am pleased to be here today to offer the 
Department's views on S. 1529, the ``Indian Gaming Regulatory Act 
Amendments of 2003,'' as well as express our support for the 
Administration's proposal, the ``Indian Gaming Regulatory Act 
Amendments of 2004.''
    The Department believes legislation in this area could provide a 
unique opportunity to address some of the uncertainties created by the 
U.S. Supreme Court's decision in the Seminole v. Florida case and 
existing revenue-sharing schemes adopted by tribes and States and 
approved by the Department. It allows us to take a step back from the 
present situation and create a process that is transparent to all 
parties involved in the process, provide clear guidelines regarding 
allowable benefits that may be negotiated by the parties and limits the 
percentage of net revenues that may be allocated to revenue-sharing 
schemes., This clarity is good, would benefit all parties, and can 
take. much of the guesswork out of the already time-consuming and 
highly sensitive process of tribal-State negotiations.
    There are five provisions of this bill which directly affect the 
duties of the Secretary as originally laid out in the Indian Gaming 
Regulatory Act [IGRA]. These include the provisions relating to 
revenue-sharing between tribes and State and local governments; 
promulgation of regulations regarding revenue-sharing provisions; 
timeframes for the Secretarial issuance of class III gaming procedures 
to a tribe after a mediator's notification of his or her determination; 
and the extension of expiration dates of compacts between tribes and 
states who are negotiating compact renewals.
    Section 2(f)(2)(A) of the bill amends section 11(d)(4) of IGRA, 25 
U.S.C. 2710(d)(4), by adding a new subparagraph (B) that provides a 
statutory basis for apportioning net revenues to a State, local 
government or other Indian tribes in a class III gaming compact, but 
imposes several conditions on apportionment and requires the 
promulgation of regulations to provide guidance on the allowable 
assessments within 90 days of the enactment of this bill.
    This provision provides express authorization for revenue-sharing 
by tribes. These provisions provide clarity to an area which has become 
increasingly complex. In the past, the Department has provided approval 
to revenue-sharing agreements between tribes and States where the tribe 
has received the substantial economic benefit of exclusive 
authorization to operate class III games within a State. The Department 
has also approved agreements which authorize payments to local 
governments to offset the costs it may incur as a result of the 
operation of class II gaming in a municipality. Generally, we support-
this new provision because it provides a statutory basis for revenue 
sharing provisions in class III gaming compacts. However, we believe 
that the conditions for apportionment should be modified.
    We believe that the proposed amendments to IGRA should provide a 
clearer definition of the substantial benefits that Congress determines 
are appropriate in exchange for revenue-sharing. Until now, the 
Department has considered the exclusivity of class III gaming the only 
substantial economic benefit that merits revenue sharing between a 
tribe and a State. The exclusivity may be limited to specific types of 
class III games or to specific geographic areas within a State. If the 
committee contemplates that other benefits may be negotiated, the 
Department requests that Congress define in more detail the items it 
believes are appropriate.
    Additionally, the Department believes that the legislation should 
provide guidance regarding the amount of revenue-sharing that may be 
authorized. Tribes and states are making agreements for increasing 
percentages of net revenues. More and more, we are seeing agreements 
that call for 15 percent to 20 percent of a tribe's net win to be paid 
to State and local governments. We expect to see agreements soon which 
are in excess of that, possibly as much as 25 percent or more of a 
tribe's net win.
    One of the stated purposes of IGRA is to provide ``a means of 
promoting tribal economic development, self-sufficiency, and strong 
tribal governments.'' The Department recommends that Congress consider 
whether these percentages are allowable and specifically authorize a 
limit on the percentage if it deems necessary.
    Section 2(f)(2)(A) would also amend Section 11(d)(4)(C) by 
requiring regulations regarding revenue sharing payments be promulgated 
within 90 days of enactment of the bill. The process of rulemaking is 
lengthy, and 90 days is not enough time to finalize regulations. We 
recommend that a more realistic timeframe be identified for the 
promulgation of the regulations, and that 18 months is a reasonable 
amount of time.
    Section 2(f)(2)(B) of the bill would modify section 11 
(d)(7)(B)(vii) of IGRA by requiring the Secretary to prescribe class 
III procedures within 90 days after notification is made by the 
mediator. Again, we believe this timeframe is too short, and recommend 
the words ``180 days'' be substituted instead of ``90 days'' to give 
the Secretary enough time to carefully examine difficult questions of 
State and Federal law that are usually involved in this process.
    Section 2(f)(2)(C) of the bill would create a new subparagraph 
11(d)(10) providing that an approved compact will stay in effect for up 
to 180 days after its expiration if the tribe certifies to the 
Secretary it has requested a new compact no later than 90 days before 
the compacts' expiration, and a new compact has not been agreed on. We 
support a concept that allows tribes and states a window in which they 
may negotiate compact renewals. The Department of Justice has advised 
us that there may be constitutional limitations on the Federal 
Government's authority to extend compacts that require State regulation 
of tribal gaming. Further, we note that the bill states that it adds a 
new paragraph (10) at the end of section 11 that should read that it 
adds a new paragraph (10) at the end of section 11(d) of IGRA.
    Finally, the Department requests that the committee examine two 
issues we believe would improve its ability to review and analyze 
compacts and gaming related fee to trust transactions.
    First, the Department is increasingly encountering tribes who are 
interested in developing gaming sites which are far away from their 
homelands, in some cases in States other than where they are located, 
and in other cases on lands which are hundreds of miles from the 
tribe's homelands. We have researched the issue internally, and can 
find no limitation in IGRA or its legislative history that would lead 
us to believe that it is prohibited. At the same time, we receive 
numerous communications from Congressmen from around the country who 
express this as their greatest concern. The Department believes 
Congress should consider clarifying the ability of tribes to locate 
gaming operations far from their homelands, particularly in cases where 
the lands at issue are located in another State.
    Second, the Department has received several compacts over the past 
2 years which contain ``anticompetitive'' provisions. These provisions 
generally provide a tribe with a protected territory, outside of its 
reservation, in which they may game and create a disincentive for 
states that may otherwise be willing to negotiate for off-reservation 
sites with other tribes. Especially in cases of off-reservation 
casinos, it provides guaranteed exclusivity, possibly at the expense of 
other tribes who might otherwise desire to locate a facility in an off-
reservation location. This limitation as applied to other tribes 
appears to violate the spirit of IGRA, but there is not express 
prohibition contained in the act. The Department believes Congress 
should consider clarifying this matter.
    Although we prefer the Administration's proposal, we would be happy 
to work with the committee and to participate in further discussions 
with regard to our comments.
    Thank you for the opportunity to testify on S. 1529. I will be 
happy to answer any questions you may have.

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