[Senate Hearing 109-504]
[From the U.S. Government Publishing Office]



 
                                                        S. Hrg. 109-504

                          ECONOMIC DEVELOPMENT

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   ON

      OVERSIGHT HEARING ON ECONOMIC DEVELOPMENT IN INDIAN COUNTRY

                               __________

                              MAY 10, 2006
                             WASHINGTON, DC




                                 _____

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                      COMMITTEE ON INDIAN AFFAIRS

                     JOHN McCAIN, Arizona, Chairman

              BYRON L. DORGAN, North Dakota, Vice Chairman

PETE V. DOMENICI, New Mexico         DANIEL K. INOUYE, Hawaii
CRAIG THOMAS, Wyoming                KENT CONRAD, North Dakota
GORDON SMITH, Oregon                 DANIEL K. AKAKA, Hawaii
LISA MURKOWSKI, Alaska               TIM JOHNSON, South Dakota
MICHAEL D. CRAPO, Idaho              MARIA CANTWELL, Washington
RICHARD BURR, North Carolina
TOM COBURN, M.D., Oklahoma

                 Jeanne Bumpus, Majority Staff Director

                Sara G. Garland, Minority Staff Director

                                  (ii)



                            C O N T E N T S

                              ----------                              
                                                                   Page
Statements:
    Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice 
      chairman, Committee on Indian Affairs......................     4
    Garcia, Joe A., president, National Congress of American 
      Indians....................................................    11
    Hall, Tex, chairman of the board of directors, Inter-Tribal 
      Economic Alliance..........................................    13
    Johnson, Hon. Tim, U.S. Senator from South Dakota............     4
    Jorgenson, Miriam, research director, the Harvard Project on 
      American Indian Economic Development.......................    19
    McCain, Hon. John, U.S. Senator from Arizona, chairman, 
      Committee on Indian Affairs................................     1
    Meeks, Elsie, executive director, First Nations Oweesta 
      Corporation................................................    17
    Middleton, Robert, director, Office of Indian Energy and 
      Economic Development, Office of the Assistant Secretary for 
      Indian Affairs, Department of the Interior.................     1
    Morgan, Lance, chief executive officer, Ho-Chunk, Inc........    15

                                Appendix

Prepared statements:
    Dorgan, Hon. Byron L., U.S. Senator from North Dakota, vice 
      chairman, Committee on Indian Affairs......................    29
    Garcia, Joe A. (with attachment).............................    31
    Hall, Tex (with attachment)..................................    67
    Johnson, Hon. Tim, U.S. Senator from South Dakota............    74
    Jorgenson, Miriam............................................    75
    Meeks, Elsie.................................................    96
    Middleton, Robert............................................   105
    Morgan, Lance................................................   115
    National Center for American Indian Enterprise Development...   117
    Native American Contractors Association......................   123
Additional material submitted for the record:
    American Indian Population and Labor Force Report 2003, U.S. 
      Department of the Interior, Bureau of Indian Affairs, 
      Office of Tribal Affairs...................................   124



                          ECONOMIC DEVELOPMENT

                              ----------                              


                        WEDNESDAY, MAY 10, 2006


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:30 a.m. in room 
485, Senate Russell Office Building, Hon. John McCain (chairman 
of the committee) presiding.
    Present: Senators McCain, Dorgan, Johnson, and Thomas.

   STATEMENT OF HON. JOHN McCAIN, U.S. SENATOR FROM ARIZONA, 
             CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

    The Chairman. We will get started.
    As several of today's witnesses point out in their written 
testimony, Indian gaming has the reputation of having made 
Indians rich. Members of this committee know that is not the 
case.
    For many Indian people, poverty continues to be an 
intransigent problem, despite Government programs and tribal 
gaming facilities. Unemployment, for example, is a persistent 
presence on reservations and tribal economies are often 
unstable.
    We also know that poverty has many components and there is 
no single or simple solution. If there were, we might have 
found it by now. Today, however, we turn to people who are 
working to identify and implement solutions. The witnesses each 
have experience in identifying what works to create healthy and 
diversified tribal economies. I look forward to their insights.
    Senator Dorgan is on his way over and will be here shortly. 
In the meantime, Dr. Middleton, we will begin with you. Our 
first witness is Dr. Robert Middleton. He is the director of 
the Office of Indian Energy and Economic Development, Office of 
the Assistant Secretary for Indian Affairs at the Department of 
the Interior.
    Welcome, Dr. Middleton.

STATEMENT OF ROBERT MIDDLETON, DIRECTOR OFFICE OF INDIAN ENERGY 
AND ECONOMIC DEVELOPMENT, OFFICE OF THE ASSISTANT SECRETARY FOR 
           INDIAN AFFAIRS, DEPARTMENT OF THE INTERIOR

    Mr. Middleton. Good morning, Mr. Chairman and members of 
the committee. You have my written testimony, but I would like 
to open with a brief 5-minute statement and point out some of 
the highlights of my written testimony.
    My name, as you mentioned, is Bob Middleton. I am director 
of the Office of Indian Energy and Economic Development. It is 
a new office that was formed by the Secretary of the Interior 
to address some of the issues that you raised in your opening 
statement.
    We also would like to talk a little bit about our workforce 
labor report. The Department of the Interior believes that the 
Indian workforce information is a critical indicator of an 
Indian community's well being or distress. Information on 
Indian employment is also a critical social and economic factor 
in the department's program, planning and execution and can be 
used as a proxy measure of socio-economic conditions in a given 
Indian community.
    This really allows us to use it as a long-term social and 
economic services demand indicator on our programs. The 
biennial Indian labor force report is the only known 
comprehensive and certified accumulation of data on tribal 
enrollments, service population, workforce and employment, and 
it is used for a wide range of purposes by the equally wide 
range of users.
    The labor force report is also used by tribes in showing 
governing stability, efficient governing institutions, 
effective community support systems and mechanisms, and solid 
community support, which demonstrates the community is a good 
place to locate businesses, put venture capital, and/or 
capitalize on untapped labor pools.
    However, really no matter how one analyzes the data in the 
labor report, there is no dispute that reservation unemployment 
has been too high for too long. The 2000 census tells us that 
real per capita income of Indians is less than one-half the 
United States level and that Indian unemployment is more than 
twice the United States rate.
    Chronic joblessness seems endemic to many parts of Indian 
country, resisting all antidotes, and it plagues one generation 
to the next. In many cases, the sheer remoteness or isolation 
of some reservation is an enormous hurdle that tribes must 
overcome to get capital flowing into their reservations, rather 
than out of their reservations.
    Although the remoteness of many reservations from markets 
and services might provide a partial explanation, it does not 
explain why Indian joblessness lingers on despite good economic 
times in adjoining non-Indian communities. For example, 
according to census data, Buffalo County, SD is America's 
poorest county. About 2,000 people live there, yet just to the 
east of Buffalo County is Jerauld County, which is similar in 
size and population, but has a much higher income and much 
lower unemployment rate.
    A recent article by John Miller in The Wall Street Journal 
noted the disparities between these neighboring counties and 
found the main difference between the is that the Crow Creek 
Indian Reservation occupies much of Buffalo County. As Miller 
notes, ``the place is a pocket of poverty in a land of 
plenty.''
    I think like virtually all Americans, the Department of the 
Interior is saddened that any communities within the boundaries 
of the United States should not be able to share in this 
country's success and persist as pockets of poverty, and we are 
not willing to accept that they should remain so.
    While success in improving the economy of Indian 
communities has been uneven, we believe we do have a clear 
understanding of how they became pockets of poverty and why 
reservation unemployment is different than unemployment 
elsewhere. One thing we know for certain is that one size fits 
all does not work to address the unemployment and 
underemployment issues on reservations.
    That is why the department is taking a focused approach to 
work with individual tribes to identify and nurture economic 
development opportunities that fit best with the tribe's 
resources, workforce, markets and culture. For the most part, 
tribal members have a hard time creating sustaining jobs 
because of a number of roadblocks.
    In addition to the obstacle of remoteness, these include 
the ability to obtain collateral to obtain capital; access to 
financial services; technical know-how to access what capital 
is available; and the legal, corporate and judicial 
infrastructure necessary to assure participation by outside 
investors.
    Historically, it has been tougher for Native Americans to 
obtain financing than perhaps any other group in the United 
States because they own no land in fee to offer as collateral 
for loans. Lenders are also reluctant to enter financing 
agreements because tribes are sovereign and lenders see limited 
venues to resolve disputes with tribes in court.
    Because trust land cannot be used as collateral for a 
mortgage or loan, the lender has no ability to foreclose on 
them and then sell the land, which severely decreases the 
amount of capital that can flow into Indian country. Ready 
access to investment capital has enabled many generations of 
other Americans, including recent immigrants, to launch small 
businesses. As we know, small business employs one-half of all 
private sector employees.
    But this has not been the case for Native Americans. 
According to the 2003 report by the Kauffman Center for 
Entrepreneurial Leadership, Native Americans owned and started 
the fewest small businesses of all minority groups in the 
United States. Without capital, there is limited enterprise, 
and without enterprise, there are few jobs.
    Native Americans want to honor tribal traditions and 
culture, while achieving better lives for their families. They 
are willing to work hard to accomplish that goal, given the 
opportunity. The department recognizes these issues and has 
committed both budget dollars and personnel to address each of 
these roadblocks to economic progress in Indian country.
    As I mentioned, I am director of the Office of Indian 
Energy and Economic Development. It was an office that was 
initiated about 1 year ago by the Secretary of the Interior by 
a secretarial order. We have pulled together four components 
that we believe are important to the economic development in 
Indian country. Under my office, we currently have the Office 
of Workforce Development, which you know as the 477 program. We 
have pulled in the Division of Economic Development, which we 
are using to identify business opportunities in Indian country. 
I currently have under me the Indian Guaranteed Loan Program, 
which allows us to provide capital to Indian businesses. I have 
the Energy and Minerals Division, which is located out in 
Denver, which provides technical assistance to Indian 
communities in developing their energy and mineral resources.
    In summary, I would like to say the Department of the 
Interior does not consider the status quo to be acceptable. I 
am sure that the distinguished panel that will follow me will 
talk about the needs in Indian country. We stand ready to work 
with other Federal agencies and the Indian community to address 
economic development for tribes. We believe we now have a team 
in place that will work with tribes and individual Indian 
entrepreneurs to aggressively pursue solutions.
    I thank you again for the opportunity to testify today, and 
I would be happy to answer any questions the committee may 
have.
    [Prepared statement of Dr. Middleton appears in appendix.]
    The Chairman. Senator Dorgan, would you like to make an 
opening comment?

  STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM NORTH 
       DAKOTA, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

    Senator Dorgan. Mr. Chairman, I will just put my statement 
in the record, and only say that this issue of economic 
development is critical because we have Americans among us who 
are living in third-world conditions with little opportunities 
for jobs and the progress that comes from having those jobs, 
with a stable income. I really appreciate the fact that we are 
holding this hearing. I will ask that my statement be part of 
the record.
    The Chairman. Without objection.
    Senator Johnson.

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

    Senator Johnson. Thank you, Mr. Chairman, for holding this 
hearing. I, too, will submit my opening statement for the 
record. I have some questions for the panel. But I would share 
Senator Dorgan's observations that I think one of the most 
critical issues we face in Indian country is the development of 
a much more robust private economic sector.
    As was pointed out to me by one of the tribal chairmen in 
South Dakota, Chairman Bordeaux at Rosebud, he indicated to me 
that about 85 percent of the money that goes in wages on the 
Rosebud, about $130 million, leaves the reservation. There 
simply is no, or very little, private sector economic activity 
going on.
    Until more people have jobs and until there is a greater 
private sector presence, I think we will be forever behind the 
curve in terms of government programs. So I appreciate your 
holding this hearing.
    I also want to welcome Elsie Meeks and J.C. Crawford from 
South Dakota.
    Thank you.
    The Chairman. Thank you very much.
    Thank you, Dr. Middleton. I read your written statement, 
and I think it is an excellent statement.
    The average unemployment rate for self-governance tribes is 
35 percent, which is still terribly high, but it is much lower 
than the average of other tribes. How do you explain this 
significant differential between self-governance tribes' 
unemployment and non-self-governance tribes?
    Mr. Middleton. We think that a self-governance program is 
really of great value to the Indian tribes. It does help them 
take advantage of the opportunity to manage their resources, to 
manage the money that flows into the reservation, to identify 
job opportunities and economic opportunities on reservation.
    We think that as more tribes start moving toward self-
governance and start identifying what the shortfalls may be for 
developing job opportunities on reservation, or in fact develop 
a workforce that can work off-reservation, the better off the 
Indian community will be. We are standing willing to help any 
tribe willing to work toward the self-governance philosophy to 
do that.
    The Chairman. It is my impression that movement toward 
self-governance has slowed down recently. Is that true?
    Mr. Middleton. That is also what I have heard, yes.
    The Chairman. You might look into that because it seems 
pretty clear, like most of us who were strong supporters of 
self-governance, that there would be a variety of improvement 
associated with self-governance, including more job creation 
and lower unemployment. It is just the nature of the kind of 
government that allows people to basically govern themselves 
and make their own decisions, rather than have them made in 
Washington.
    The report reflects that the Coushatta Tribe of Louisiana 
has an unemployment rate of 97 percent, yet this tribe has a 
casino that must create many jobs. Can you explain that?
    Mr. Middleton. I am sorry, Senator. I am not familiar with 
that particular case.
    The Chairman. Do me a favor and get us a written response, 
will you?
    Mr. Middleton. We will do that.
    The Chairman. Here is a casino tribe that obviously made a 
lot of money because they gave a lot to Mr. Abramoff. I would 
be curious why a tribe like that, with a functioning casino, a 
money-making casino, would have such high unemployment.
    How do unemployment rates for tribes with casinos generally 
compare with those for tribes without casinos?
    Mr. Middleton. In the experience that I have had, typically 
the tribes with casinos do provide additional employment to the 
tribal members. I know this is particularly true with the 
Oneida Tribe in New York. As far as a broad-based statistical 
analysis, we would be glad to provide that to you after the 
hearing.
    The Chairman. We would be interested in that, too.
    I understand from your written statement that there is a 
different way to calculate unemployment on Indian reservations 
in Indian country, as opposed to non-Indian country. But some 
tribes have reported 100 percent unemployment. How is that 
possible? Some people are employed by the tribe.
    Mr. Middleton. The information and the data that is 
reported is certified by the tribes and then verified by our 
agency superintendents, as well as the regional offices of BIA. 
This is the only labor report that actually is certified by the 
tribes as being accurate.
    Based on checks that we have been able to make, we believe 
that the numbers are accurate, but I will have to look at the 
100 percent number and see. It may be 99.8 percent and rounded 
up, but we will have to check on that.
    The Chairman. You mentioned that one of the traditional 
ways that people or groups get financing is through putting up 
land for collateral. Obviously, you are not suggesting that 
Indian tribes do that.
    Mr. Middleton. No; we are not. We are just indicating that 
it is a reason why capital investment and collateral and 
lending is not available to the tribes readily.
    The Chairman. So then they have to find other means of 
collateral. What would that be?
    Mr. Middleton. Well, that is one of the difficult 
roadblocks that we are trying to face. Absent gaming, though, 
we feel that in many cases energy and mineral development for 
tribes are probably the largest opportunity for tribes to be 
able to develop economically and economic opportunities on 
reservation. That is why we are taking and providing a focused 
effort on looking at what energy and mineral resources may be 
available to the tribes to develop, and we are helping to 
provide technical assistance to them to do that.
    We also believe that the energy bill that was recently 
passed, title V, which allows tribal energy resource agreements 
to be developed, would be a very valuable and useful tool to 
help tribes develop economically and help develop their energy 
and mineral resources.
    The Chairman. I always thought one of the most 
underutilized aspects of Indian reservations was tourism. Do 
you have any thoughts on that?
    Mr. Middleton. Yes; as a matter of fact, we are looking at 
a number of opportunities to help provide tribes some support 
to develop business plans for a tourism industry. We think that 
it could be a very valuable part of what tribes can do to in 
fact promote economic development on reservation. It obviously 
could not be a total panacea, but we think it could be a very 
valuable key portion of what tribes can do to foster business 
development.
    The Chairman. Senator Dorgan.
    Senator Dorgan. Dr. Middleton, tell me about your agency. 
You are the Director of the Office of Indian Energy and 
Economic Development. What are the resources that you have? How 
many people and how many dollars?
    Mr. Middleton. Actually, the office, we are just finalizing 
the changes in the departmental manual that will establish the 
boxes, if you will, that make up this office. We currently have 
approximately 35 people on board with an FTE limit of about 45 
folks total.
    I have 15 people, plus some contractors, working on energy 
and mineral development. I have plans to have seven or eight 
people in our Economic Development Division. We have four 
people working on our Guaranteed Loan Program, but in addition 
we have 10 regional loan officers, that although they do not 
report to me, we work closely with them in the regions. We have 
five people that are managing our 477 program, our Workforce 
Development Program.
    Our resources that we currently have total approximately 
$18 million cross all of the divisions. We have been fortunate 
that the administration is very supportive of the energy bill 
that was recently passed and the budget that came up from the 
President contained an additional $2 million to help us 
implement title V of the energy bill, with $1.4 million 
available for grants that be given to tribes to help develop 
tribal energy resource agreements, and $600,000 that will allow 
me to add three or four additional staff to help implement the 
program.
    Senator Dorgan. So there are about 40 people and $18 
million?
    Mr. Middleton. Yes; roughly.
    Senator Dorgan. Roughly. You also mentioned contractors. 
Are you spending money on contracts?
    Mr. Middleton. We do, but the contract support is mostly 
for our IT support out in our Mineral Development Office.
    Senator Dorgan. Tell me, if you would, what are the high 
points or the achievements that you could point to? You told us 
in your statement what you are aspiring to do and so on. Are 
there some things that you can describe to us that result from 
this expenditure and from this attention?
    Mr. Middleton. I believe so. We actually have had the 
opportunity of establishing a number of new and what I think 
are innovative programs, trying to focus our efforts working 
with tribes, as well as other institutions. We, of course, are 
major sponsors of the Reservation 2006 Economic Development 
Conference that was held in February of this year. We think 
that it was a valuable opportunity for tribes to not only be 
able to provide information to each other on economic 
development opportunities, but also opportunities for non-
tribal, non-Indian members to know what opportunities are 
available in Indian country.
    We have also sponsored in White Earth a loan conference 
where we are trying to educate lenders on the opportunities for 
lending capital in Indian country. That was a great success, 
attended by about 150 people. We plan on expanding that effort 
and holding it in each of the region's that are available so 
that we can marry up the capital investment community with the 
needs that are identified in Indian country.
    This week, we are holding a conference in Minnesota to talk 
about procurement, because we think there are great 
opportunities for tribes to participate in the Federal 
procurement process. We are working across government lines to 
be able to provide that access to tribal governments. We are 
partnering with SBA, as well as with DOD, to look at the 
opportunities for procurement.
    In addition, as a result of an effort by the White House to 
identify economic development opportunities in Indian country, 
we have an executive leadership group made up of 
representatives from across the Federal Government working in 
Indian programs. I chair an effort, working with the Department 
of Labor, Department of Commerce, Department of Energy, USDA, 
Small Business Administration, as well as EPA and a number of 
other agencies, to see if there are ways that we can in fact 
use the various programs we currently have working in Indian 
country, and leverage those resources and work cooperatively to 
have a better effect that we are having individually.
    Senator Dorgan. Mr. Middleton, I think that the conferences 
you suggest make a lot of sense. It seems to me you have to 
provide information. I am going to ask the next panel as well 
what impact does your organization have on their lives; what 
kinds of assistance are you providing. It is a fair amount of 
money, $18 million and 30 or 40 employees. I obviously want you 
to succeed and I appreciate your being here today, giving us a 
status report.
    The Chairman. Senator Thomas.
    Senator Thomas. Thank you, Mr. Chairman.
    Sorry I missed the first part. I am very much interested, 
however, in this issue, and particularly the energy and 
minerals aspect of it. You mentioned in your statement that the 
potential there is to produce over 5 billion barrels of oil. 
What progress has been made? What is the main obstacle to 
moving forward?
    Mr. Middleton. I think we have actually made some very 
significant progress with our energy and minerals program. Part 
of the $18 million that we have available actually goes out as 
technical assistance grants to tribes to help identify and 
evaluate the resources that they have available.
    Just this year, we made approximately $4.1 million 
available to over 40 tribes to help develop their opportunities 
in energy and mineral development. I will be honest with you, 
though. I think that we do have some hurdles to overcome. Even 
though we are looking at hydrocarbon and renewable energy 
development, sometimes the remoteness of the communities does 
make it difficult.
    We believe that it is important that we move a number of 
the tribes, or allow a number of tribes to have the opportunity 
to move from simply being landlords over their energy and 
mineral resources, to partnerships, helping to develop their 
energy and mineral resources so that there is value added, 
because that added value also brings additional income into the 
tribe itself.
    We also think, as I mentioned, that the tribal energy 
resource agreements that are authorized under title V of the 
energy bill are going to be a significant opportunity for 
tribes to move to one of being a partner or being actually a 
developer of their energy and mineral resources.
    Part of the issue really is that many tribes have come to 
us and they would like to do things like set up ethanol plants 
using biomass they have available. They would like to put in 
place refineries. They would like to have an opportunity of 
developing their wind. All of this is very highly capital-
intensive. What we are trying to do is find ways to marry 
together the capital investment market with the needs that are 
demonstrated out in Indian country.
    Senator Thomas. How about those potentials for energy 
production that someone else is willing to do? It doesn't take 
capital. It provides jobs. It provides revenue. All you have to 
do is make the leases and go.
    Mr. Middleton. Exactly. My folks, the division out in 
Denver works extensively with tribes to provide them technical 
support. Typically right now it is under the Indian Minerals 
Development Act and the Indian Minerals Development Act 
agreements. We are working with tribes, those tribes that 
choose to develop their resources, to find adequate partners so 
that we can work closely on developing those agreements.
    Senator Thomas. You say ``who choose to.'' Is that the 
problem?
    Mr. Middleton. I am sorry. I missed that.
    Senator Thomas. You said ``who choose to.''
    Mr. Middleton. Yes.
    Senator Thomas. So some of the tribes are not wanting to 
develop it? Is that it?
    Mr. Middleton. We found that many of the tribes are wanting 
to develop, but some tribes actually feel that development of 
their mineral resources may be happening a little too fast and 
they want to make sure that it fits well within their culture 
and their beliefs. We respect that.
    As Senator Dorgan pointed out, we do have some limited 
resources and we are trying to use those resources toward those 
areas where we feel we have a better idea of success. So we are 
trying to target those resources in helping the tribes that 
have come to us and asked for help.
    Senator Thomas. Thank you.
    The Chairman. Senator Johnson.
    Senator Johnson. Thank you.
    I took with interest your reference to Buffalo County, SD 
as the poorest county in America, home to the Crow Creek Indian 
Reservation in South Dakota. Several of the other most 
impoverished counties in America are also South Dakota Indian 
counties.
    I would note that the school dormitory at Crow Creek burned 
town earlier this year, last year. And the rest of their school 
is a temporary replacement as well. It is a school where they 
have been maintaining annual yearly progress. It has been a 
successful school, but at the rate we are going with school 
replacement, it is going to be literally years and years before 
these children in America's poorest county have an actual 
school building to go to school at. I know this is outside your 
bailiwick directly, but I have to note that as you bring up the 
question of Crow Creek.
    Also in my meetings with Native business leaders, and there 
are more of them, and we do now have a Chamber of Commerce and 
some other infrastructure in place, which I am grateful for, 
but one of their observations is one of the greatest hurdles, 
and there are many, but one of the greatest hurdles to Indian 
entrepreneurship in Indian country is the BIA itself and its 
leasing mechanisms, which have been a huge obstruction for 
Native leaders who would like to begin a business. It takes 
years to negotiate a lease with the BIA which is set up to deal 
with grazing leases, but is uncooperative and unhelpful in 
terms of small business development in Indian country.
    They wind up with short-term leases and once they get one, 
then they have to come up with the capital to build a building, 
and then they run into the collateralization issues that you 
raised, which cause still further problems. So I think in too 
many cases, the BIA has been part of the problem instead of 
part of the solution when it comes to the development of 
entrepreneurship and Indian owned businesses in Indian country.
    That also, of course, affects home ownership. Home 
ownership has been one of the great mechanisms for the 
development of the middle class, of all Americans, and yet 
because we have not come up with an entirely adequate 
collateralization process, we wind up with people who simply 
are mired in a low income status and are not in a position to 
generate the wealth that ordinarily could come with the 
ownership of a business or housing.
    Two questions I want to raise with you. The SBA, CDFI, and 
USDA rural development funds have all been under tremendous 
financial pressure in recent years. I wonder if you would share 
any thoughts with us about the importance of those programs as 
funds that generate not only capitalization, but business 
training skills and business planning skills. Are they 
important programs in the overall scheme of things, as far as 
you are concerned?
    Mr. Middleton. I believe they are. Actually, we have been 
working closely with all of those programs to find ways that we 
can take advantage of the resources that we are currently using 
out in Indian country. I think their success really speaks for 
itself. I think they have been valuable programs.
    Senator Johnson. Well, they are very small programs, but 
they are ones that have been under tremendous financial stress. 
So I would hope that we could work together with the White 
House in bipartisan fashion, that while we are under a lot of 
financial downward pressure these days, that we do hold onto 
programs that do truly involve investment.
    The last question for you, is on the energy side of what 
you do. You made a brief mention of this, but my tribes in 
South Dakota tend not to have a lot of natural resources, other 
than agricultural land that they have. But they do have in many 
instances the potential for significant wind energy 
development. There has been some modest progress in that area, 
but very modest.
    Can you share with us any thoughts about what your office 
could do to enhance the wind energy capabilities of some of 
these tribes? They are very remote, as you say. Their 
infrastructure is not adequate, but there is some income 
generating opportunity from the full development of those 
resources.
    Mr. Middleton. Yes; it has been an issue. We have been 
working very closely with the Intertribal Council on Utility 
Policy, which of course is a strong wind advocate. We also did 
provide funding for the single turbine that was put up in 
Rosebud. We are working diligently to try and develop our 
renewable energy resources. In this last year, we put forward 
about $1.5 million in grants, a significant number of which 
were wind development grants to try and address the feasibility 
of wind development in Indian country.
    As I am certain you are aware, many of the tribes have 
access to much wind, but they do not have access to the grid. 
It has been an issue getting the interconnect so that the 
economics of putting up an wind plant or a wind farm to kick in 
has been difficult because you really don't get the economics 
to come in and be able to get the lenders to put capital into 
this until you are able to sell off your excess and use the 
green credits and use other activities that allow you to do 
different things when you have access to put the electricity on 
the grid.
    I know that there are some provisions in the energy bill 
that are taking a look at this, but we are also looking at it, 
and we have been working with the Department of Energy to see 
if we can find some solutions to this. Having access to the 
grid is what really is going to be important for some of the 
Northern Plains tribes.
    Senator Johnson. Thank you. We do have some of the tribes 
that are located actually quite close to the existing Pick 
Sloan hydro dam system in South Dakota. It is my hope that at 
the very least that we could somehow find some interconnections 
there, because I do agree with you that transmission issues are 
difficult issues, but there are some instances where it would 
seem to me that we could make better use of existing 
transmission capabilities than we do.
    Thank you.
    Mr. Middleton. Thank you.
    The Chairman. Thank you very much, Dr. Middleton. You will 
get us some written answers to some of the question we have?
    Mr. Middleton. We will. Thank you so much.
    The Chairman. Thank you very much, Dr. Middleton.
    Our next panel is Joe Garcia. He is the president of the 
National Congress of American Indians; Tex Hall is the chairman 
of the Board of Directors of the Inter-Tribal Economic 
Alliance; Lance Morgan is chief executive officer of Ho-Chunk, 
Winnebago, NE; Elsie Meeks is executive director of First 
Nations Oweesta Corporation; and Miriam Jorgensen is research 
director of the Harvard Project on American Indian Economic 
Development of Cambridge, MA.
    Welcome. Joe Garcia, we will begin with you. Welcome back 
before the committee.

  STATEMENT OF JOE A. GARCIA, PRESIDENT, NATIONAL CONGRESS OF 
                        AMERICAN INDIANS

    Mr. Garcia. Good morning, everyone. Good morning, Chairman 
McCain, Vice Chairman Dorgan, and Senators, members of the 
committee. My name is Joe Garcia. I am Governor of Ohkay 
Owingeh and president of the National Congress of American 
Indians.
    I am happy to be here today to discuss how the Federal 
Government and the tribes can best support our efforts to 
achieve self-reliance and support of our communities through 
economic development.
    It bears repeating that real per capita income of Indians 
living on reservations is still less than one-half of the 
national average. The poorest counties in the United States are 
on tribal lands. Frequently identified barriers to economic 
development include a lack of access to capital; insufficient 
infrastructure; remote locations; complicated legal and 
regulatory status; and insufficient access to training and 
technical assistance, among others.
    Compounding the problem, tribal governments have a severely 
restricted tax base that makes it difficult to build 
infrastructure and fund basic governmental services. In 
addition, tribes are hamstrung in their ability to access other 
traditional governmental revenue streams such as tax-exempt 
bond financing. As a result, we rely upon Federal funding and 
what we can develop from tribal businesses to run our 
governments and to provide necessary services.
    Meaningful economic development is sorely needed. Recent 
studies indicate that the tribes are making progress, and that 
tribal self-determination is working. Tribal enterprises across 
a variety of industries are growing and thriving. Tribes, 
despite the barriers, are becoming more sophisticated in 
assessing the assets available to them for economic development 
and making the most of those assets.
    Tribes have also made strides in attracting outside 
investors into tribal communities and encouraging business 
development among tribal members. Native entrepreneurship is on 
the rise and, as respected researchers at Harvard University 
have found, this progress is due to increased respect for self-
determination.
    I would like to spend a few more minutes this morning 
focusing on a few opportunities for action that are currently 
before this Congress. First is streamlined sales tax. I 
mentioned earlier that tribes have a limited tax base. However, 
some tribes have begun to turn to sales taxes as a key source 
of revenue to build infrastructure, and infrastructure, simply 
defined, is not just the physical infrastructure or fiscal, but 
the human resources is consider as infrastructure.
    For example, the Navajo Nation imposes a reservation-wide 
sales tax and collects over $14 million annually to provide 
government services. Other tribes like the Reno-Sparks Indian 
Colony are able to use their sales tax revenue to back tax 
exempt bonds. Reno-Sparks recently built a hospital with tax 
exempt bonds backed by its sales tax revenue.
    Senator Dorgan, you are one of the primary sponsors of the 
streamline sales tax legislation, which will give Federal 
authority to the States to collect taxes on remote sales. We 
would very much like you to consider including tribal 
governments in the legislation. Just like North Dakota or 
Puerto Rico, a tribal government collects sales tax and they 
need the ability to participate so that they can collect taxes 
on remove sites and be a part of the new sales tax collection 
system.
    With a more stable tax base, we can provide the 
infrastructure that will make economic development happen and 
more successful in Indian country.
    Tax exempt bond financing. Another obstacle preventing 
tribes from accessing capital is the limitations on tribal tax 
exempt bond financing. Under current law, tribes may issue tax 
exempt government bonds only for facilities used in the 
exercise of a ``essential governmental function,'' a 
restriction that does not apply to State or local governments.
    The Audit Division fo the IRS has adopted an extremely 
restrictive view of an essential government function. In their 
view, if it earns revenue, it can't be an essential government 
function. But of course, it is hard to repay a bond if there is 
no revenue. The IRS Audit Division has put a chill on most 
tribal participation in the tax exempt bond market and 
prevented the use of what could be a valuable economic tool for 
tribes.
    This past fall, your colleagues in the House urged the IRS 
to move forward with a regulation to clarify this issue. 
Moreover, the IRS's own Advisory Committee on Tax Exempt and 
Government Entities acknowledged problems with enforcement in 
tribal tax exempt bonds. The tribes cannot even challenge the 
IRS in court because as the bond issuers, we are not the 
taxpayer.
    Legislation is needed that would allow tribes to issue tax 
exempt bonds or other financing obligations in a manner similar 
to States and municipalities. At the very least, we would like 
Congress to give us the standing to challenge the IRS mistakes. 
We urge you to join with the Senate Finance Committee in 
reviewing this matter.
    8(a) Contracting. Several recent studies have identified 
the 8(a) minority contracting program as one of the most 
valuable programs for tribal economic development. The tribes 
participating in the program confirm this. The Federal 
Government buys over $200 billion in goods and services 
annually and the 8(a) and HUBZone programs provide incentives 
for Federal agencies to contract with tribally-owned businesses 
for the procurement of these goods and services.
    The positive impact of this program, particularly for 
tribes who have been unable to jump-start their economies 
through gaming, cannot be overstated. Revenue generated by 
tribally owned 8(a) companies allow the tribe to provide 
benefits and services to the community as a whole.
    Committees on both the House and Senate sides have 
indicated that they will be holding hearings to examine Native 
participation in the 8(a) program in the upcoming months. I 
think there is a great deal of confusion about the differences 
between tribal participation in the program and participation 
of other individual minority business owners.
    The Chairman. Mr. Garcia, I am going to have to ask you to 
summarize, since we are over time.
    Mr. Garcia. Okay. The other thing that I would simply like 
to reflect on a little bit, and it is provided in my testimony, 
is that there are opportunities for government-to-government 
relations in such items as telecom. It is a major effort. On 
trust reform, we need to be sure that that gets done because as 
we are tied up in trying to provide some solution to that, 
efforts in the economic development, education and other areas, 
that the Federal Government is to help with Indian country, is 
stalemated. So I would appreciate it if we could move forward 
those kinds of agenda.
    I appreciate the opportunity. Thank you.
    [Prepared statement of Mr. Garcia appears in appendix.]
    The Chairman. Thank you very much, President Garcia. Yours 
and all the witnesses' complete statements will be made part of 
the record.
    Tex Hall, welcome back.

  STATEMENT OF TEX HALL, CHAIRMAN OF THE BOARD OF DIRECTORS, 
                 INTER-TRIBAL ECONOMIC ALLIANCE

    Mr. Hall. Thank you, Mr. Chairman, and members of the 
committee, Senator Dorgan, Senator Johnson.
    I have a different hat on today. It is the hat of the 
Inter-Tribal Economic Alliance. I am very excited to report 
about this wonderful organization which we established in 2001, 
whose sole mission is to develop economic development on 
reservations.
    So entrepreneurship, creating businesses and job on or near 
reservations, Alaska Native land, and Native Hawaiian 
communities, is critical to us. I was really appreciative of 
Bob Middleton's report on the BIA labor force, the current 
labor force in my neck of the woods and the Great Plains still 
with 70 percent unemployment. So I want to talk a little bit 
about how we are going about doing and putting a dent in some 
of that.
    I first want to talk about one of the initiatives that ITEA 
has done. It is focused on the SBA 8(a) program, so that is 
very critical to us. We formed a multi-tribal IT consortium so 
its gets the contract as an IT consortium and it subcontracts. 
We now have 12 Native businesses that include the Turtle 
Mountain Reservation, Cheyenne River Reservation, Three 
Affiliated Tribes. I see the chairman for the Shoshone Tribe, 
Ivan Posey is here from Wyoming, Wind River. They are in there. 
The Tlingit-Haida from Alaska, and Hawaii and so on and so 
forth. So those are 12, and we really appreciate the initial 
efforts of Senator Inouye and Senator Stevens. This is on 
digitization of defense contracts.
    So in working with the defense and the Defense Committee, 
we are initially get $34 million to digitize. One of the key 
things is we have a teaming relationship with these tribes with 
DCL, Data Conversion Laboratories out of New York City. So with 
that expertise that they have, combined with the 8(a) program 
that ITEA has done with its IT consortium, we were able to 
solicit that initial $34 million and now $80 million in 
contracts that are critical to creating 350 jobs on our 
reservations.
    So that is key in how that actually works, and how to use 
that 8(a) program, and use a teaming agreement with experts 
like DCL to create the expertise and job opportunities on our 
reservation.
    So that is very critical to us. We want to continue in 
other businesses because we showed success in the IT. We want 
to go to energy, the Multi-Tribal Energy Consortium, that ITEA 
is going to build another for-profit leg that will sit next to 
the ITEA and we want to focus on oil and gas, wind, solar. And 
so we want to move to natural beef, buffalo, natural food 
products.
    And we want to also move into a construction consortium, 
and finally a MTEF, a multi-tribal enterprise fund, where we 
would like to work with the gaming tribes, those that have 
success in the gaming tribes that are near large markets, to 
contribute to this venture capital fund that we can fund these 
many projects that we currently have problems in 
collateralization, as Mr. Chairman you mentioned, and members 
of the committee had mentioned earlier. We want to be able to 
create this fund with gaming tribes' help, and those tribes 
that don't have successful gaming.
    So we really want to show that it works. I think, Chairman 
McCain, you were actually at one of our companies up in Barrow, 
UIC, and visited one of our ITEA companies, so you have 
probably seen Native people up in Barrow actually working and 
doing this digitization for the Department of Defense.
    And so our whole initiative at ITEA is to create 200,000 
jobs. We have a ways to go, but we created 350. As we look to 
develop these economies, if you drop back to energy, for 
example, there are some obstacles. In my tribe, we are trying 
to build a refinery, and again I was appreciate. Bob Middleton 
has been very supportive of our refinery project, but we had 
some additional work in our EIS that EPA was willing to give 
moneys, but they don't have 93-638 contracting capabilities.
    They can't provide money directly, so it has to get 
transferred to BIA. But BIA said, well, we can't do that 
because the work has already been done in terms of the contract 
with our water quality studies, so the moneys we want to get, 
$112,000, was to be put back to the EPA. So there are obviously 
some problems in 93-638 that EPA doesn't have and they are 
trying to give money, but it is going to get put back because 
the work has been already done. So there are some problems 
within the 93-638 in terms of other agencies being able to use 
this.
    So in closing, what we are really trying to say as ITEA is 
we would like to ask the committee to be our partner. We need 
the Senate Committee on Indian Affairs to be a partner with 
this national effort that we at the Inter-Tribal Economic 
Alliance are trying to do with creation of our for-profit 
businesses.
    We have developed or are developing a multi-tribal air 
ambulance company. This will be the first of its kind. We 
rolled it out in Sioux Falls 2 weeks ago. Rosebud and Pine 
Ridge were the first two tribes to sign on. Again the success 
of ours is a teaming agreement, and so we have a company out of 
Minneapolis that has eight airplanes to provide air rescue 
within that golden hour, but they would have to renovate our 
airports on the reservations in order to have the air ambulance 
come in and go to a trauma, at least a level II trauma center, 
which in my case would be Bismarck, ND, and would be 39 minutes 
by air. By car, it would be just under 3 hours. We would lose 
that golden hour.
    So that is another for-profit company we are working on. 
And of course the third party billing to pay for that would be 
Medicaid and Medicare.
    So we are very appreciative of this time to testify. But 
again, we are looking to have the Senate Committee on Indian 
Affairs partner as we look to create this 200,000 jobs 
initiative.
    Thank you, Mr. Chairman.
    [Prepared statement of Mr. Hall appears in appendix.]
    The Chairman. Thank you very much, and welcome back.
    Mr. Morgan, welcome.

 STATEMENT OF LANCE MORGAN, CHIEF EXECUTIVE OFFICER, HO-CHUNK, 
                              INC.

    Mr. Morgan. Thank you. I appreciate the opportunity to 
testify.
    I am the CEO of a company called Ho-Chunk, Inc., which is 
owned by the Winnebago Tribe of Nebraska. In 1994, the tribe 
had a modest casino operation, and they decided that they would 
want to diversify their economy, and that is the company that I 
have run for the last 11 years. I was the first employee. We 
now have 525 employees. The first year we started, we had 
revenues of $400,000. This year, we will have revenues close to 
$150 million, all completely non-gaming.
    We are a tribe with basically 4,000 members and primarily 
centered on a town with 1,500 people. So we have been able to 
have a broad impact. We now have more jobs than working age 
tribal members in our community, so it is something that we are 
very proud of.
    When I think about this, though, we really are an exception 
in a lot of ways because of the difficult environment that we 
have to function in. I am not going to belabor it because 
several panelists have talked about the trust land system, but 
it doesn't allow us to have property taxes, so no taxes and 
bonds, no home ownership, no inter-generational wealth 
transfer, no collateralizing on loans, those kinds of things.
    So it pretty much is the most difficult environment 
possible to do development in the United States. The Federal 
Government has been pretty aggressive in developing programs 
that are designed to implement or designed to emulate the 
American economic system off the reservation, but they are 
usually limited in scope and don't have enough impact.
    So tribes are told to go into business. If you don't have a 
tax base, you can't develop your own economy. The Federal 
Government encourages us to go into business and use those 
profits in lieu of the taxes to develop the economy. The tribes 
with no collateral, no experience, no wealth, no capital, and 
going into business usually don't mix.
    What we have done over the years is exploit tribal 
jurisdiction. If you think about it, there is a bit of a 
stereotype of the types of business tribes function in: Gas, 
tobacco, and now gaming. Those are not tribal businesses per 
se. Those are businesses that we can get into that allow us to 
exploit our jurisdiction and create an advantage. The problem 
with those types of businesses is that they are controversial. 
They tend to interfere with State rights or they tend to upset 
the playing field for non-Indian economic interests that are 
already entrenched.
    So we do not believe that those are the future. Now, Ho-
Chunk, Inc., is a company that has been in those businesses, 
since we have exploited them, and we have made the decision 
that we want to focus on other things. In the last 5 years, we 
have purchased a home manufacturing company. We started a 
construction company. We started an office supply company, a 
marketing company. But all of those are nice companies, but the 
thing that had the most potential for us to grow beyond 
attracting gamblers and smokers to our reservation, was 
Government contracting.
    We started a government contracting company, and for 4 
years we lost money on it trying to figure out how to do it. I 
think there are some shortcuts probably we could have thought 
of, but we like to do it the hard way. We have built up a 
company that now has operations in three different countries 
doing vital things for the Federal Government, things that we 
can take pride in.
    What is interesting about this is that we have just figured 
out how to do this. It is a key way for us to develop our 
economy and diversify it away from these kinds of controversial 
businesses. Now, we are suffering some kind of attacks on it. I 
think it is completely unreasonable that that is happening.
    The Federal Government set up this system. They told us to 
go into business. They set up some incentive programs. We 
invested hundreds of thousands of dollars to get into it. And 
now we are just starting to be successful in those areas, and 
it is really elevating our level of sophistication across the 
board. And now we have to look over our shoulder, and I think 
it is completely unfair.
    I would ask you as our leaders to figure out a way to help 
us in this regard. This system, this trust land economic system 
is not a system that we created or designed. We are desperately 
trying to figure out ways to function within it. And things 
like the 8(a) program are very important.
    I thank you for your time.
    [Prepared statement of Mr. Morgan appears in appendix.]
    The Chairman. Thank you very much.
    Ms. Meeks, welcome.

  STATEMENT OF ELSIE MEEKS, EXECUTIVE DIRECTOR, FIRST NATIONS 
                      OWEESTA CORPORATION

    Ms. Meeks. Thank you, Chairman McCain and Vice Chairman 
Dorgan. Although I can't see Senator Johnson, I know he is 
there. [Laughter.]
    Thank you for the opportunity to appear here on behalf of 
First Nations Oweesta Corporation and the Native Financial 
Education Coalition. My name is Elsie Meeks. In addition to my 
role as the executive director of Oweesta and chair of the 
Native Financial Education Coalition, I am appearing before you 
as someone who has, although I didn't know I was going to 
dedicate my life to, I have, to the importance of private 
enterprise development on reservation communities.
    I have come to believe that unless tribal members are given 
the tools and opportunities to build assets we will never 
become self-sufficient and independent. Home ownership and 
small business development can stand on their own as important 
initiatives, but at the end of the day unless we start to build 
assets individually, we are never going to become independent.
    So my journey began more than 20 years ago, as I said, when 
we launched the Lakota Fund on the Pine Ridge Indian 
Reservation, with the mission of creating a private sector 
economy through financing and capacity building for 
entrepreneur development. Now, a couple of years after we 
started lending, we did a little study that showed that 85 
percent of our borrowers have never had a checking or a savings 
account and 75 percent have never had a loan, or it was the 
other way around, and only 5 percent of them had ever been in 
business before.
    So we were tackling a really big job. My testimony is also 
informed by my role as the chair of the Native Financial 
Education Coalition that Oweesta has worked to spearhead. This 
coalition is a testament to our conviction that financial 
education is at the very foundation of effective economic 
development in all communities, and especially Native 
communities.
    And also, you know, it is a truism of economic development 
theory that credible institutions are essential to successful 
development, yet most Native communities lack nonprofit 
institutions that are taken for granted in most other 
communities, and many lack a developed private sector economy. 
Dr. Middleton also referred to the Treasury study that showed 
the lack of financial institutions on Indian reservations.
    So to address this need, Oweesta's main goal is to help 
Native communities create Native community development 
financial institutions. These are community based organizations 
that really work on the ground and they bring the need for 
accessible and affordable loans and other financial products, 
and they are always tied to intensive training and technical 
assistance for its borrowers.
    CDFI has been around for years, but when Congress created 
the CDFI Fund under the Department of Treasury, there were very 
few established Native CDFIs. Today as a direct result of the 
CDFI Fund, there are over 80 Native financial institutions in 
various stages of development and certification, including 36 
of them, Native CDFIs, are now certified under the CDFI Fund.
    In my written testimony, what we see as integrated asset 
building strategies, which start with, there is a graphic in 
your written, starts with the need for building these 
institutions, Native community development financial 
institutions, organizations like Ho-Chunk, Inc. and other non-
governmental organizations, that then provide tools such as 
financial education, entrepreneurial development, homebuyer 
education, and then the outcomes of that are home ownership, 
entrepreneur development and human capital, which in the end 
then results in healthy economies and strong communities.
    And so it is really this holistic approach. Just to give 
you some really fast, and I am probably running out of time, 
but in South Dakota we have done a pretty good job of the 
tribes there developing CDFIs. This is all foundational work, 
so it is going to take some time to get to where we need to be. 
Even at Pine Ridge, which is probably one of the most difficult 
places to work, we have already seen an increase in per capita 
income, a decrease in unemployment. This has all come about 
from these small businesses.
    The mention of this high unemployment rate, you know, it 
has been historical at Pine Ridge. We have had high 
unemployment for many, many years, so people a lot of times 
don't even, you know, the workforce isn't developed. And 
bringing in these big companies that employ a lot of people, 
sometimes it has been very difficult. But through each small 
business, they have hired 5, then 10, then 15 and 20 employees, 
and have really started to build this workforce in a very slow, 
but I think quality way.
    Arizona has 11 Native financial institutions. The Navajo 
Partnership for Housing, for one, has just initiated a Navajo 
nationwide financial literacy campaign, and offered homebuyer 
education to over 2,000 community members. There is a lot of 
activity with the tribes in Arizona. In North Dakota, Three 
Affiliated Tribes is just now developing one. Turtle Mountain 
has been in the process.
    In Wyoming, the Wind River Reservation has developed the 
Wind River Development Fund which has been a very strong CDFI, 
and I think has really helped the tribe in helping to create a 
UCC code. So they are all very foundational and they are about 
system building.
    One of the quick recommendations I would like to see is I 
would like to see CDFIs, a lot of them are already lending, of 
course, and as they develop and become a more important 
institution in their communities, be able to utilize the BIA 
guaranteed loans. That is not possible at this point, and also 
the SBA guaranteed loans.
    I would also like to echo Senator Johnson's remarks about 
improving the title status reports and the ability to use land 
as collateral. It is an incredible mess at this point. I don't 
understand why it is something we can't fix.
    So I will conclude my remarks, but again, thank you so much 
and I have longer written testimony. So thank you.
    [Prepared statement of Ms. Meeks appears in appendix.]
    The Chairman. Thank you very much.
    Ms. Jorgenson.

 STATEMENT OF MIRIAM JORGENSEN, RESEARCH DIRECTOR, THE HARVARD 
        PROJECT ON AMERICAN INDIAN ECONOMIC DEVELOPMENT

    Ms. Jorgensen. Chairman McCain, Vice Chairman Dorgan and 
distinguished members of the committee, which I guess at this 
point is Senator Johnson. I also want to give a special 
greeting to you, because while you would not know it from my 
institutional affiliations, I was also born and raised in 
Vermillion, SD, which affects a lot of the perspectives and 
viewpoints that you will hear today.
    My name is Miriam Jorgensen. I am research director of the 
Harvard Project on American Indian Economic Development. I also 
hold a parallel position at the University of Arizona at the 
Native Nations Institute for Leadership, Management and Policy, 
which is part of the Udall Center for Studies in Public Policy. 
It is really a joint research enterprise that we undertake.
    For nearly 20 years, the Harvard Project and the Native 
Nations Institute have been focused on a central research 
question: How, amidst the widespread poverty and social 
distress that characterize Indian country, are an increasing 
number of Native nations breaking old patterns and building 
societies that work? What explains the stark differences that 
we see in Indian country?
    I really do mean ``stark differences.'' For a long time, 
before we had very good data about what was going on in Indian 
country with regard to gaming, we used to present information 
of the pre-gaming era, and say, look, there are a number of 
Native nations that are really pulling away from the pack and 
demonstrating economic and social success.
    Now, when we have a lot of data about the 1990's and the 
rise of gaming in Indian country, we still see remarkable 
diversity. There are gaming and non-gaming tribes at the top of 
the distribution, where per capita incomes for Native 
reservation residents in 2000 were double their inflation 
adjusted per capita levels in 1990, and we have gaming and non-
gaming tribes at the bottom of the revenue distribution or 
growth distribution, where per capita incomes in 2000 for 
Native reservation residents were barely holding pace with 
inflation adjusted 1990 levels.
    I think these data reinforce the fundamental question that 
our research has been addressing: Where it is occurring, how 
and why did economic development occur?
    In answer, our research points to the important roles of 
institutions, culture and sovereignty. Now, I think many of you 
are familiar with a lot of that research, and I don't want to 
rehash it. It is presented in my written comments. Today, I 
want to focus just on one element of that. And indeed, I think 
you have heard a lot of policy recommendations that underscore 
this idea, and it came up in your opening remarks as well, 
Senator McCain.
    I want to talk about this notion of sovereignty and self-
determination as a broad policy and make a pitch for its 
creative and expanded implementation, because I think it has 
made a lot of difference in Indian country.
    What I want to explore right now in my oral remarks are 
what I see as four important linkages between practical 
sovereignty and self-determination and economic and community 
development in Indian country. I want to explore those links, 
reinforce them, and hopefully provide you with some ideas for 
policy action.
    The first link is one of institutional design. Governing 
institutions provide the foundation on which economies are 
built. They provide a rule of law, help resolve disputes, and 
smooth the processes of business interactions. But to be 
effective in these roles, institutions must also be legitimate. 
They must reflect the society's beliefs about how power and 
authority ought to be distributed and exercised.
    This is a consonance that in our research we call 
``cultural match.'' It is the leading reason why self-rule, 
practical sovereignty and self-determination matter. 
Sovereignty and self-determination make it possible for a 
Native nation to design its institutions with traction in a 
society. People will follow those rules, and the institutions 
are able to work in support of economic development and 
community change.
    The second idea that ties sovereignty and self-
determination to positive economic outcomes is ownership. Self- 
determination and self-governance place resources squarely in 
the hands of Native nation officials and citizens. This leads 
to an increased sense of ownership over those resources, which 
in turn backs up the effectiveness of community development 
strategies. Ownership is about people coming to say, ``these 
are my resources; don't mess with them.''
    The third link, accountability, is really the mirror image 
of ownership. In the direct service model, where Federal 
administrators manage programs, program managers are 
accountable to Washington and not to tribal citizens. But under 
a contract or a compact and other manifestations of self-
determination and sovereignty, tribal government program 
managers become accountable to tribal citizens for how 
resources, both Federal resources and a tribal governments' own 
resources, are used.
    I want to point out here that the hard statistical evidence 
on this shift in accountability is unequivocal. From programs 
such as forestry management to health care, changed 
accountability through tribal takeover of program management 
improves program outcomes.
    And now there is also an additional, largely unsung, payoff 
to self-determination, and that is leadership development. 
Indigenous control attracts and provides a fertile training 
ground for talented leadership. These leadership skills result 
in more effective bureaucracy, creative programming, new 
economic opportunities, and even the expanded use of self-
governance, so you get a virtuous cycle of economic growth and 
community change going in these communities.
    I just want to end my remarks with this pitch, that self-
determination, and here I mean self-determination broadly 
conceived, not just the idea of Public Law 93-638 and its 
amendments, is the only Federal policy that has worked to 
alleviate poverty and social distress in Indian country. 
Without self-determination, the Federal Government invites 
increased and prolonged dependence on the Federal budget, and 
that is a lose-lose policy for everyone.
    [Prepared statement of Ms. Jorgensen appears in appendix.]
    The Chairman. Ms. Jorgenson, when you say self-
determination, do you believe an integral part of that is self-
governance?
    Ms. Jorgensen. I do. I want to be clear here that in a lot 
of ways, and I am subject to this myself, the terms ``self-
determination'' and ``self-governance'' are captive to the 
policies that the Federal Government has put in place, while I 
want to talk about the ideas very broadly.
    The Chairman. Yes; but I was referring to the specific 
self-governance law that tribes are free to implement or not 
implement.
    Ms. Jorgensen. Yes; and in fact I make a point in my 
written testimony that says I really like self-determination 
policy in Public Law 93-638, but I like self-governance better, 
because I think there is a tendency under self-determination 
for tribes to simply self-administer programs. Their operations 
become an extension of the Federal Government, and that is not 
really taking advantage of the four points I have made here 
about how you really get creative programming and true self-
rule, which is through good institutional design. That is only 
possible under self-governance where there is more freedom to 
design programs that work. So I really do like that policy 
better. I like them both, but if I were to rank them, the self-
governance policy gets higher marks in my book.
    The Chairman. President Garcia, why do you think there has 
been such a slowdown in tribes choosing to exercise self-
governance?
    Mr. Garcia. Sir, it might just be the policies that are set 
forth and may demonstration that policies are implemented or 
laws are made and Indian country proceeds with some of those, 
being active in those environments, and they become successful, 
and then new laws are made to sort of curtail their 
effectiveness and their success.
    The Chairman. What laws have been passed which would 
curtail their ability to exercise self-governance?
    Mr. Garcia. Well, the self-governance is different, though. 
I think we need to make a separation between self-governance. 
``Governance'' means governmental services that are provided 
for Indian country and the tribal membership, whereas self-
sufficiency and self-determination is about how do you succeed 
using not government, but the business side of it, and how you 
interface the two is an important piece.
    The Chairman. President Garcia, we passed a law concerning 
self-governance in, somebody knows what year it was. It was 
former Senator Dan Evans that was prime. It was in the 1980's. 
There were a large number of tribes that decided to exercise 
self-governance, according to that law. My specific question 
is, why is it that a number of tribes have not? At first, we 
had a large number of tribes who chose it, and by all reports 
it was a great success, but now there has been a slowdown. 
Maybe Tex Hall can give me his view of that, given your 
previous position.
    Mr. Hall. Mr. Chairman, I would say the number one issue is 
budget, funding, or lack of funding. You are correct. It is 
very successful, but tribes are hesitant because if they manage 
the contracts and the funding doesn't follow, then it goes 
cycle from year to year, then it falls flat on its face. So 
there was a great success. Really, a lot of tribes were 
involved with the self-governance, and those that are doing it, 
I think Bob Middleton talked about the statistics are very 
good, and probably Ms. Jorgensen, but it has slowed down 
because of funding. There is uncertainty among tribes of what 
is going to be in the Federal budget.
    The Chairman. What I don't quite get is the choice is not 
what the money is going to be in the Federal budget. The choice 
is whether it is administered by the BIA or by the tribe 
themselves. So I don't quite understand. I think there is a 
legitimate concern about funding of programs, but my 
understanding of self-governance is the decisions are made by 
the tribe or they are made by the Federal Government.
    Mr. Hall. Mr. Chairman, could I just comment?
    The Chairman. Yes; could I just say at the time of passage, 
we were worried, and we made it voluntarily for a number of 
reasons, but one of them was that some tribes did not have the 
infrastructure to administer their own programs. It seems to me 
that they have had a number of years now to set up that 
infrastructure so that they could then make the decisions at 
the tribal level that are otherwise made at the Federal level 
here in Washington.
    I think testimony that we have received over the years, 
including today, where unemployment is lower on self-governing 
tribes rather than not, I can understand the real concern about 
funding levels. But I am not sure how that would affect 
decisions as to whether to take whatever funding there is and 
make the decision on how to spend it at the tribal government 
level, as opposed to Washington bureaucracy level.
    Please respond. Both of you. Go ahead.
    Mr. Hall. Mr. Chairman, I just wanted to mention on Indian 
Health Service, the reason that tribes are reluctant to self-
govern that program is because, let's use contract health. 
There is a report that says don't get sick after June because 
those funds run out around June 30, so they don't have enough 
money to go to the end of the fiscal year.
    The Chairman. Don't they run out no matter whether you are 
a self-governance tribe or not? That is my point.
    Mr. Hall. So it is a liability issue.
    Mr. Garcia. Let me respond, Senator. If you use the word 
``success'' or ``non-success,'' I guess it would reflect that. 
If the appropriations don't follow the mandates and the 
services are to be provided by tribal government, then if the 
funds run out, that says that you have been unsuccessful in 
implementing programs that are for the benefit of the people. 
And so if the funds dry out and you don't provide as effective 
services, that sends the wrong message. I think there is a fear 
for those tribes that want to do that. They still hold the 
Federal government responsible for its fiduciary trust 
responsibility. So getting away from that would say, well, we 
de-obligate the United States for its trust responsibility, and 
that would hinder the progress.
    The Chairman. I think we are talking past each other. We 
appropriate a certain amount of money for Indian health care. 
It doesn't say ``this amount for self-governing tribes and that 
amount for non-self-governing tribes.'' We appropriate certain 
amounts of money for certain purposes.
    Now, I will freely agree, and all of us, or at least 
certainly a majority of us on this committee feel strongly 
opposed to any cuts in funding, particularly for Indian health 
care. I have never seen in any legislation saying ``this is for 
tribes that are self-governing tribes, and those are not.''
    So we are talking past each other. I guess there is no 
point in continuing this conversation because I believe that 
the most efficient use of these Federal dollars, as they become 
scarcer, is the decisions made by the tribal governments 
themselves. Whether they are unsure of funding or not unsure of 
funding, they are still either going to receive or not receive 
the money. I think that every tribal government that I have 
talked to that exercises self-governance is more satisfied with 
being able to make the decisions themselves.
    Senator Dorgan.
    Senator Dorgan. Mr. Chairman, if I might just follow on 
that point. I think with respect to something Chairman Hall 
said, this issue of contract health running out of money in May 
or June, for example, and someone being very, very ill, in 
chronic pain, and it is not judged life or limb, in those cases 
the health care is not going to be available to them. My guess 
is that under self-governance, all of a sudden the tribe says, 
no, the reason it is not available is we are in charge and the 
money is not there. I think that gets to the liability question 
and who is responsible for the money not being there.
    I understand the point you are making as well.
    The Chairman. I understand that. And it is disgraceful that 
we should be in this situation. I think we are certainly in 
agreement on that.
    Senator Dorgan. Running out of money for contract health is 
in fact a disgrace. It is doing two things. Number one, it is 
preventing people who have serious health problems from getting 
the kind of health care they need. And number two, in certain 
circumstances, those who got the health care they needed and 
who fall into this gray area, and it is not being paid for, it 
ruins their credit because the hospital goes back after them 
because contract health doesn't pay for it.
    But let me ask a question. I guess first for Mr. Middleton. 
I have the 2003 report of Indian population and labor force 
report. Is there a new report? This is the last report issued?
    Mr. Middleton. It is the last report issued, but we are 
preparing the information right now and it will be out at the 
end of this year.
    Senator Dorgan. I think you are required to do that every 
two years, so I would expect that it would be out soon. I was 
looking at this because of the testimony today. I am trying to 
understand whether we are taking baby steps or making big 
strides in dealing with this issue of unemployment and trying 
to address some of the economic issues. Ms. Jorgensen's report 
suggests that we are making some progress. You have all 
suggested we are making progress.
    I am looking at this report. This is 2003. Let me just 
mention a couple of statistics: Fort Berthold, 71 percent 
unemployment in Fort Berthold. I want to ask about your 
anecdotal notions about are we making progress to whittle that 
down: the Pine Ridge Agency, Ms. Meeks, 87 percent 
unemployment; the Sisseton-Wahpeton Tribe, which is partially 
in North Dakota, 82 percent unemployment; the Standing Rock 
Sioux Tribe, 56 percent on the North Dakota side, 91 percent 
unemployment on the South Dakota side; Turtle Mountain Tribe in 
North Dakota, 71 percent unemployment.
    So we are talking about very high rates of unemployment in 
2003. All of us understand the consequences of that. The 
consequences are devastating. The inability to get a job that 
pays well with benefits to allow you to take care of your 
family and do the things that give you an opportunity for a 
good life, those are gone if you don't have that opportunity.
    So let me ask whether you see now these numbers that we 
have. They are the latest numbers that exist. When the new 
report comes out, and I don't have any idea what these numbers 
will show, but the question I have is: Are we making strides? 
Ms. Jorgensen says we are. Are they baby steps or are they big 
strides? Ms. Meeks?
    Ms. Meeks. Well, I can speak for several reservations in 
South Dakota, primarily Pine Ridge. I think we are taking baby 
steps, but I think we are headed in the right direction. To 
tell you the truth, I don't think there is any way to do it but 
to take baby steps. That is why I am such a proponent of small 
business development because as I said, I have a grocery store. 
I have a business at Pine Ridge and we hire about 20 people. 
Let me tell you, we had to work very hard to get those 20 
people, kind of get a core group, because people haven't worked 
for years.
    And so I know, and other business, Crazy Horse 
Construction, one I mention in my testimony, is hiring 20 or 30 
people. And this has all come about in the last 10 years. So I 
am surprised that that report in 2003 says 87 percent because 
the South Dakota Business Review actually showed a decrease, 
and actually the fastest growing employment in any county in 
South Dakota, which is still not good.
    Senator Dorgan. Baby steps toward a goal can take decades, 
given how far the population is below the rest of the American 
population. So I am not diminishing what you said.
    The Chairman. When you said fastest growing employment, 
from what to what?
    Ms. Meeks. I actually can't even remember the percentages 
now, but compared to any other county in South Dakota, Shannon 
County, which is Pine Ridge Reservation, it had the fastest 
growing employment than any other county in South Dakota. So it 
is headed in the right direction. I mean, we are still at the 
bottom virtually.
    Senator Dorgan. It says, for example, just to use Pine 
Ridge, the latest report that we have as a panel says 87 
percent unemployment. There were 3,400 jobs essentially and 
2,800 of them were public sector jobs; only 576 private sector 
jobs. My guess is that all of us would agree that what we need 
to do in order to provide opportunity is to build the private 
sector. I know that is what Chairman Hall is talking about on 
the Fort Berthold Reservation.
    So as much as we can, we really need to get new numbers to 
find out what has happened; where are we moving and how quickly 
are we moving in that direction.
    Chairman Hall, this suggests that on the Fort Berthold 
Reservation we have 71 percent unemployment. In your notion, is 
that improving at this point?
    Mr. Hall. I think it definitely is improving. I think if we 
looked at the data today, 2006, it would be much less because 
we just had, it was 300 plus on the new Four Bears Bridge 
construction of tribal members and other tribes working, but 
now that the bridge is complete, that is our challenge. How do 
we provide, and I think that report shows available workforce 
in one of the categories, Senator Dorgan.
    That is the best thing that I got in that report is that 
unemployment is one thing, but available workforce is another. 
So it shows there is an available workforce if we can just 
create the opportunities. I think we are taking small steps. I 
would like to take larger steps, and I know Elsie, my good 
friend, is more on the entrepreneurship. I am more on creating 
large business contracts that are probably leaving our State 
and going somewhere else. We would like to keep those jobs 
within Indian country and our States.
    So we are losing opportunities. In natural beef, we don't 
have the capital to put feedlots of processing plants, but by 
doing a teaming agreement with somebody else, we could do it 
right now. So those are the kind of opportunities, like the IT 
that we are looking at. How do we create teaming agreements 
with corporate America, with people who have the expertise, to 
get those contracts and get those jobs created right now.
    Senator Dorgan. I might just point out, I just received 
information. The Indian Self-Determination Act was passed in 
1975. The Indian Self-Governance Act, which expands self-
determination, was passed in 1989. I share the belief of the 
chairman that this is a really important direction. I think the 
Harvard studies show this.
    I think the people best able to make decisions about what 
is promising, what works, what doesn't work, are the people who 
are running the tribes, the tribal government. So I agree with 
the chairman.
    One other point, I note, Chairman Hall, you and I have had 
lengthy discussions about this. President Garcia, you mentioned 
it, and Mr. Morgan, you did as well, the trust land issue, 
which is a real problem. When you talk about how do you develop 
new enterprises, create new business, startups and so on, you 
have to talk financing. When you talk financing, you talk now 
in present day circumstances about a huge disadvantage for 
tribal governments because they don't have the land base 
because of the trust land situation that most others would have 
to go to lenders and to go to others to say, here is the asset 
base we have, upon which you can lend.
    So we also need to begin thinking about how we address some 
of that. You have made some recommendations today which I think 
are helpful as well. But all of us, I think we are of one mind. 
All of us desperately want to find the key that unlocks 
opportunity here. It is not right in this country that we have 
pockets of poverty that exist similar to third world 
conditions.
    You can look at this and say 80 percent are out of work. It 
is not because they don't want to work. These are people that 
would, in my judgment, they would trade their circumstance in a 
nano-second for a good job that pays well with decent benefits, 
that would give them a chance to take care of their families.
    So, we want what you want, and I think it is very helpful 
to have you describe to us what you are observing and what your 
circumstances are, and the kinds of things you think could be 
helpful. Ms. Jorgensen, thank you for the work that you are 
doing, both in Arizona and at Harvard, trying to provide some 
focus and some spotlight on these issues.
    Mr. Garcia. Mr. Chairman, if I may make one small 
recommendation? I think it will impact a lot of Indian country, 
and that is that something we have demonstrated in Ohkay 
Owingeh, New Mexico is that because we have a tribal business, 
the Thay Corporation, when we planned out our business 
diversification, we basically kind of overcame the hindrances 
of leasing agreements with the Bureau and the requirements 
thereof by setting aside a commercial development sector, if 
you will, and defined that property. It is a major commercial 
development area, and we obtained a master lease signing the 
agreement one time with the Bureau, and agreed to that.
    So we then turned that over to the corporation, the 
tribally owned corporation, to do with it as it wished in terms 
of commercial development. So you by-passed a requirement that 
has been a hindrance in a lot of Indian country, and that 
seemed to help us move forward a lot faster. So something like 
that could be incorporated in a number of other tribes, and 
that would be a big help. Thank you.
    Senator Dorgan. President Garcia, thank you.
    I have to run, but as we conclude, I didn't ask you a 
question, Mr. Morgan, but I did want to say that your story and 
your success is very inspiring. Congratulations to you.
    Mr. Morgan. Thank you.
    The Chairman. Yours and the Choctaws are great, inspiring 
stories.
    Senator Dorgan, I know you have to run. We are about to 
wrap up here. I think maybe there has been some lack of 
attention to the self-determination, particularly self-
governance issues. Maybe this committee could do a little 
research, helped by Ms. Jorgensen and others, and point out the 
success of the self-governance program and send a letter to the 
Indian tribes on behalf of this committee saying that we hope 
you will take another look at self-governance, since it seems 
to have lost some of its momentum, and yet it seems to have 
been rather successful for Native American tribes. We certainly 
would not want to mandate it, but at least we could point out 
to many of the tribes that at least for the overwhelming 
majority of tribes that have adopted self-governance, it has 
been very successful. Would you agree with that assessment, Ms. 
Jorgensen?
    Ms. Jorgensen. I would. I also think there is more that the 
committee can do than send a letter.
    The Chairman. All right. What would you like for us to do?
    Ms. Jorgensen. Congress can actually increase the 
incentives to take up self-governance. I think one of the 
things you have heard from the Honorable Mr. Hall and the 
Honorable Mr. Garcia is that tribes right now don't feel the 
incentive. Despite the fact that the research evidence shows 
that there are advantages, that is not translating to an 
incentive at the Native nation level.
    I think there are a variety of things, for instance 
investments in the administrative capacity, which you noted was 
discussed back in 1988 and 1989 when the legislation was 
passed. To be specific, maybe competitive funding streams made 
to develop administrative capacity could increase the uptake.
    I think there's also an oblique way of getting at it that 
is quite important. It relates to administrative capacity. It 
is echoed in some of the comments of Dr. Middleton about the 
labor force report. Tribes don't have the management 
information system capacity to generate a lot of their own 
data, to understand the success of programs, even know very 
precisely what their unemployment and employment situation is. 
Investments in that kind of capacity I think could make those 
points to tribes.
    The Chairman. Then I would like to have from the witnesses 
their recommendations. Maybe Senator Dorgan and I would 
reintroduce tribal self-governance II, mission impossible II or 
III. [Laughter.]
    Mr. Hall. The ratings aren't too good. [Laughter.]
    The Chairman. Well, Senator Dorgan will play Tom Cruise. 
[Laughter.]
    The Chairman. But maybe we could shape some kind of 
legislation to increase incentives for self-governance. It 
works, and it obviously is not being adopted by a significant 
number of tribes at this time. Maybe this is something valuable 
we could have learned from this hearing.
    By the way, President Garcia, Senator Smith is holding a 
hearing on May 23 in his subcommittee of the Finance Committee 
to address tax-exempt bonding in Indian country. Pay close 
attention to that, and we will work with Senator Smith because 
that area does fall under the Finance Committee, as you know.
    I want to thank the witnesses and I appreciate the 
testimony. You have re-motivated us.
    Thank you.
    [Whereupon, at 11 a.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 Hon. Byron L. Dorgan U.S. Senator from North 
           Dakota, Vice Chairman, Committee on Indian Affairs

    Mr. Chairman, most of us in this room today are aware of the Third 
World conditions that continue to be commonplace in most Indian 
communities. While the United States maintains an unemployment rate 
around 5 percent, unemployment within Indian country continues to be 
near 50 percent, with some reservations in the Great Plains having an 
unemployment rate over 75 percent.
    Tribal communities continue to face extreme poverty, severe health 
conditions, overcrowded and substandard housing, substance abuse 
problems, and a weak education system. This is unacceptable.
    Similar to Third World Countries, many of these social issues faced 
by tribes are a result of under-developed and unstable economies and 
governments.
    But tribes are somewhat unique in that Congress and the Federal 
Government are partly to blame for the condition of tribal economies 
and governments:

   \\\\\\Many tribes were removed from their traditional 
        homelands.
   \\\\\\In some instances the United States took the best 
        lands on Indian reservations for our public projects.
   \\\\\\Our Federal courts continue to limit tribal 
        jurisdiction over their lands, and the tribes' ability to tax 
        persons and activities that occur on their lands. The basic 
        services that any local government can provide its citizens are 
        dependent upon that government's ability to raise revenue, 
        which is primarily done through taxation. Yet, Indian tribes 
        lack a clear tax base.
    Now, I'm NOT suggesting that the Federal Government supply an 
endless amount of money or initiatives to build tribal economies, but 
we do need to recognize that many of the obstacles faced by tribes are 
a creation of the Federal Government. Nor do I believe that it is the 
Federal Government's responsibility to ensure that each tribe has a 
thriving economy. But it is our responsibility to look for ways to 
remove the hurdles to tribal economic development that we helped to 
create.
    The Federal Government continues to support the policy of self-
determination and self-sufficiency for Indian tribes. However, neither 
of these objectives can be reached if tribes are not able to develop 
strong and sustainable economies.
    Each Indian tribe is unique, and thus, the development of each 
tribal economy will have unique attributes.
    There is no ``one-system-fits-all'' solution here. But I think that 
there are some basic elements that ANY successful economy requires:

   \\\\\\Stable governmental institutions;
   \\\\\\Governmental jurisdiction over its citizens and lands;
   \\\\\\The ability of a government to tax persons and 
        activities on their lands;
   \\\\\\Physical infrastructure;
   \\\\\\A healthy, educated workforce;
   \\\\\\Jobs that provide a livable wage;
   \\\\\\Assess to financial capital and markets; and
   \\\\\\Incentives for entrepreneurial innovation.

    We need to find ways to assist Indian tribes and individuals obtain 
these characteristics. We need to

   \\\\\\create incentives; and
   \\\\\\provide technical and financial, and other assistance 
        to tribes; and
   \\\\\\promote economic activities in Indian country for 
        tribal members and public and private investment companies.

    I know that there are some examples of successful tribal economies 
out there, and I think we are going to hear about some examples of 
success today. These successes have been in spite of the economic 
liabilities faced by tribes and their members, and I applaud the good 
work that our witnesses are doing.
    And let me finish by saying that as we look at this issue, we 
should NOT limit our trust responsibility to tribes. Rather, we need to 
look at this issue as an opportunity to fulfill our trust 
responsibility, and helping tribes reach the goals of self-
determination and self-sufficiency that Congress and the tribes share.
    Mr. Chairman, this is an important issue, an overwhelming issue, 
which makes it difficult to determine how best to tackle it. But it is 
one that our Committee should be addressing, and I thank you for 
convening this hearing.
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 Prepared Statement of Hon. Tim Johnson, U.S. Senator from South Dakota

    Thank you Chairman McCain and Vice Chairman Dorgan for holding a 
hearing on this important issue. I would also like to extend a special 
welcome to Elsie Meeks of the Oglala Sioux Tribe in South Dakota, we're 
glad you are here and I look forward to your testimony.
    The development of reservation economies is of the utmost 
importance to both the Indian and non-Indian constitutes in my State. I 
recently proposed a comprehensive economic development initiative 
called ``The Hometown Prosperity Plan,'' which focuses on the specific 
needs of both tribal and rural communities.
    In conjunction with this initiative I recently conduced a tribal 
listening session on tribal economic development and had an opportunity 
to hear from several tribal chairmen, presidents, and business leaders. 
The general consensus among those in attendance was that the greatest 
impediments to development in Indian country were the lack of access to 
capital and inadequate infrastructure development.
    As our witness will probably agree, the Community Development 
Financial Institutions, Community Development Block Grants, and USDA 
Rural Development programs have been useful to address these concerns 
but need continued support from Congress.
    Also, a bill I have introduced, the Native American Small Business 
Development Act, would create three grant programs to promote new 
Native American-owned businesses and establish a permanent Office of 
Native American Affairs within the U.S. Small Business Administration. 
I appreciate the bipartisan support this bill has received and will 
continue in my efforts to pass the legislation.
    Several of the tribal leaders who spoke at the listening session 
also brought up the fact that many impediments to economic development 
can only be properly addressed by tribes themselves. The tribal leaders 
I spoke with emphasized their responsibilities to build stable 
governments, educate their youth, and maintain responsible government 
relationships as sovereign entities.
    Economic development is not just a tribal responsibility or Federal 
responsibility, but a partnership. The entire country benefits when 
reservation economies grow and become self sufficient. In my State, as 
is common across the country, reservation communities are often 
considerably worse off financially than non reservation communities of 
similar sizes. The history of Federal Indian policy is largely to blame 
for these discrepancies.
    The obvious difference between comparable reservation and non 
reservation communities in the Great Plains is that reservation 
communities lack the private sector development that exists off the 
reservation. The money that comes into the community rarely turns over 
before it leaves the reservation. At my listening session President 
Bordeaux of the Rosebud Sioux tribe, estimated that 85 percent of the 
$130 million in wages paid annually leaves the reservation without ever 
turning over because there are simply not enough places to spend money 
on the reservation.
    I know many of the witnesses here today have worked hard to address 
these problems and as Congress proceeds I think consultation, such as 
at this hearing, is essential. III conceived Federal Policies of the 
past, some of which still exist, are significantly responsible for the 
lack of opportunity in Indian country. I feel the best way to avoid the 
mistakes of the past is through meaningful consultation, and as today's 
witnesses demonstrate there is a strong determination to put these 
ideas into action.
    These are challenging issues to address and they rarely have easy 
answers so again I would like to thank Chairman McCain and Vice 
Chairman Dorgan for calling this hearing and I look forward to the 
testimony. Thank you,
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       Prepared Statement of Lance Morgan, CEO of Ho-Chunk, Inc.

    Over the last 200 years the United States has developed arguably 
the world's best financial, legal and economic development system. But 
those battle tested economic and financial systems don't work on the 
reservation. It isn't that tribes and Native Americans aren't capable 
of economic success. Tribes had a complex economic and trading system 
based on mutual self-interest for thousands of years. Like all people 
we want to make sure that our families have the best available 
opportunities. But participating in the American economic system 
remains a far-fetched dream for tribal governments and tribal members 
because our hands have been tied behind our collective backs.

The Trust Land Economic System

    I want to discuss briefly the economic system we are forced to 
function in. The consistent and long-term poverty of tribes has its 
roots in Federal policy. If I had to pick one reason we are poor, I 
would chose Federal trust land. When the Government created trust land 
it basically guaranteed our dependence on it for basic services and put 
a stranglehold on tribal entrepreneurial and economic development.
    Trust Land can't be taxed by anyone including tribal governments 
themselves. This prevents tribes from using local property tax dollars 
and tax-exempt bonds to implement basic Government services. Other 
attempts at developing an alternative tax base are consistently 
attacked by overaggressive State governments and encouraged by the U.S. 
Supreme Court rulings. This lack of a tribal tax base results in tribes 
being dependent upon the Federal Government for education, health, 
roads, and police protection.
    Trust land is also inalienable and therefore, can't be used as 
collateral for a loan. This effectively killed modern farming on my 
reservation. Tribal members simply couldn't go to the bank in the 
spring and get a loan to plant our crop. This forced our members to 
lease their land to non-Indian farmers and condemned our landholders to 
the bottom of the value added chain. In most years, the farmers receive 
more in Federal subsidies than we do in lease income.
    Trust land also killed home ownership in Indian country. Owning a 
home has always been a path to create wealth in the United States. But 
you cannot get a normal mortgage on trust land. We have become life 
long renters. As a result, we never developed any equity in our homes. 
This lack of home ownership means inheriting meaningful wealth doesn't 
even enter our minds. No capital, no collateral, no intergenerational 
wealth transfer and no experience means owning your own business 
remains only a dream to most Native Americans.
    The Federal Government has created this ``Trust Land Economic 
System'', which is an astounding failure. To make up for it the Federal 
Government creates small-scale band-aid lending and homeownership 
programs, which in essence are designed to try and recreate the 
American economic system on reservations. These programs are well 
intentioned but have almost no chance of addressing the underlying 
issue, which is that we don't control our own fate because our largest 
asset, our land and resources, is controlled by someone else--the 
Federal Government.

Stereotype Economic Development

    Because meaningful Trust Land reform remains a controversial issue, 
we have to function in the Trust Land Economic System for now. Without 
a tax base and almost no hope of being allowed to develop one, we are 
told by the Federal Government to develop businesses, and to use the 
profits in lieu of taxes to provide for ourselves.
    So what do tribes do? We exploit what we can. We historically have 
gone into low capital businesses that take advantage of all we have--
tribal jurisdiction. Tribes have stereotype businesses that include 
things like gas, tobacco and now gaming. These aren't genetically hard 
wired into tribal DNA. These are businesses that allow us to create 
some type of advantage using our tribal jurisdiction.
    The problem is that these businesses are controversial. Their 
existence is not viewed as part of a governmental development strategy, 
but as an unfair advantage given to a racial group. A cross border tax 
variance in price on gas or tobacco between States is acceptable and 
common, but if a tribe tries to create an advantage for itself it is 
called an unequal playing field. This type of attack is bitterly ironic 
when you consider that the entire economic system on reservations has 
clearly been slanted against tribes.
    Now we have gaming, which has been the most successful use of 
tribal jurisdiction yet for economic development. But it too is under 
attack now. The tribes have never in our history of dealings with the 
United States been able to maintain anything of significant value. 
There is always a logical rationale, but in the end it is the same 
result and tribes are left wondering what happened? Because of the 
obvious threats to non-Indian interests, nobody believes that these 
jurisdiction-based businesses are the final answer. They are simply the 
first step. Tribes have to move up the economic ladder to the second 
stage of development. By taking the income from these controversial 
businesses and investing it into other types of businesses we will have 
a chance to create a permanent and self-sustaining economy.

SBA 8(a) Program and Diversification

    One of the primary ways that tribes diversity their economy is the 
SBA 8(a) program, which allows tribes to break out of a cycle of 
economic dependence and move up the ladder of economic activity.
    The company I run is fairly sophisticated, but it took us 4 years 
of hard work to figure out how to best utilize the SBA 8(a) program. We 
are currently doing projects for the Federal Government all over the 
United States and in three countries. In just a few years, we have been 
able to transform ourselves from a company dependent upon cheap 
cigarette and gasoline sales to one that is performing vital tasks for 
the Federal Government.
    Without the SBA 8(a) program we would be stuck in the Trust Land 
Economic System and figuring out ways to get more gamblers and smokers 
to come to our reservation. This program has been hyped by the Federal 
Government for as long as I have been an Indian professional. It is 
astounding to me and beyond common sense that its success is being 
attacked. The SBA 8(a) program should be trumpeted as a clear sign that 
tribes are evolving their governmental, legal and corporate systems to 
participate at a higher level in the economic system.
    In closing, our economic problems are not our own creation. We are 
doing what we can in an incredibly difficult development environment 
and are desperately trying to improve the lives of our members. You, as 
our leaders and controllers of our assets, have the ability to help or 
hurt us. I respectfully request you help us by allowing us to take 
control of our destiny and leaving in place meaningful incentive 
programs that help us help ourselves. Thank-You.
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   Prepared Statement of the Native American Contractors Association

    The Native American Contractors Association [NACA] appreciates the 
opportunity to submit testimony for the record on the U.S. Senate 
Committee on Indian Affairs Oversight Hearing on Tribal Economic 
Development. The Native American Contractors Association was formed to 
increase the awareness of the benefits of using Indian tribes, Alaska 
Native Corporations and Native Hawaiian Organizations [NHO] to provide 
goods and services to the Federal Government. The mission of NACA is to 
enhance self-determination through preservation of government 
contracting participation based on the government-to-government 
relationship between Native Americans and the Federal Government.
    The Native American Contractors Association [NACA] is working to 
enhance the economic self-sufficiency of America's indigenous people. 
We are working to create a brighter future for Indian tribes and Alaska 
Natives and Native Hawaiian organizations whose members are among the 
poorest and most under-employed in America. NACA strives to create 
opportunities for Native Americans to become economically self-
sufficient by enabling them to compete more effectively in the 
marketplace for government contracts. Unlike other American small 
businesses, for whom profits generally go to one individual or one 
family, the profits from Native American corporations owned by tribes 
and Alaska Native Corporations [ANC] are shared by hundreds--and 
sometimes even thousands--of tribal members. The profits earned by 
Native Americans and Alaska Native Corporations provide dividends, job 
training programs, scholarships, healthcare clinics, social service 
programs, and cultural programs for their communities. Contracting 
profits are an essential source of revenue to support vibrant, healthy 
Native communities in some of the poorest regions where unemployment 
and poverty rates are disproportionately high--often staggering.
    To help overcome barriers and impediments to Native American 
economic development, Congress forged one of its most successful 
Federal initiatives for Indian tribes, Alaska Native Corporations and 
Native Hawaiian Organizations [Native Americans] in making them 
eligible to participate in the Small Business Act's Section 8(a) 
program. This business development program is intended to help small 
businesses be successful for the future. The Native American 
contracting provisions that Congress enacted recognize the unique 
status of Indian tribes, Alaska Native Corporations and Native Hawaiian 
Organizations and promote government to government commerce. The 
Federal Government has a fiduciary duty to promote Native American 
economic development and self-sufficiency.
    It took almost 20 years, for Native American contractors to show 
progress in participating in the Federal marketplace and they are just 
now starting to achieve a level of success in the 8(a) program. With 
the Federal Government buying over $300 billion in goods and services 
annually, and Congress imposing a statutory goal of awarding 23 percent 
of all Federal contract dollars to small businesses, Native-owned 
businesses are working harder than ever to match their business 
capabilities with Federal contracting opportunities.
    The recent GAO report, Contract Management: Increased Use of Alaska 
Native Corporations' Special 8(a) Provisions Calls for Tailored 
Oversight (GAO-06-399) shows the success of the Federal policy of 
promoting Native American government-to-government participation in the 
Federal marketplace. The 8(a) program has helped tribal communities 
diversify their economies and provide jobs, education, and services to 
a group of Americans historically far less able to access the American 
dream. The 8(a) program has been particularly helpful to those tribes 
and Alaska Native Corporations that are located far away from major 
markets or industrial centers because it provides access to Federal 
markets nationwide. The ability to participate in Government 
contracting helps tribes and Alaska Native Corporations develop strong 
Native economies by generating profits and diversifying native revenue 
bases rather than focusing on employment.
    Fostering the development of successful small business contractors 
advances the Government's interests by broadening and diversifying its 
industrial base of service providers and suppliers. More competition 
can result by combating the consolidation of the Government contracting 
industry into a few dominant large businesses. By providing different 
contracting provisions to qualified Native Entities, Congress increased 
the likelihood of sustaining business opportunities, ownership, and 
revenues for Native Americans. These provisions are fulfilling the 
Federal Government's special legal obligations. to Native Americans. As 
discussions regarding the reauthorization of the Small Business Act and 
implementation of the recommendations in the above-mentioned GAO report 
begin, we ask for your support to maintain and preserve these Native 
8(a) provisions.
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