[Senate Hearing 110-143]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-143
 
  DISCUSSION DRAFT LEGISLATION REGARDING THE REGULATION OF CLASS III 
                                 GAMING

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

                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 28, 2007

                               __________

         Printed for the use of the Committee on Indian Affairs




                     U.S. GOVERNMENT PRINTING OFFICE

37-531 PDF                 WASHINGTON DC:  2007
---------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office  Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
DC area (202)512-1800  Fax: (202) 512-2250 Mail Stop SSOP, 
Washington, DC 20402-0001


                      COMMITTEE ON INDIAN AFFAIRS

                BYRON L. DORGAN, North Dakota, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
KENT CONRAD, North Dakota            LISA MURKOWSKI, Alaska
DANIEL K. AKAKA, Hawaii              TOM COBURN, M.D., Oklahoma
TIM JOHNSON, South Dakota            PETE V. DOMENICI, New Mexico
MARIA CANTWELL, Washington           GORDON H. SMITH, Oregon
CLAIRE McCASKILL, Missouri           RICHARD BURR, North Carolina
JON TESTER, Montana
                Sara G. Garland, Majority Staff Director
              David A. Mullon Jr. Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 28, 2007....................................     1
Statement of Senator Dorgan......................................     1
Statement of Senator Inouye......................................    74
Statement of Senator Murkowski...................................     3

                               Witnesses

Allen, W. Ron, Chairman, Washington Indian Gaming Association and 
  Chairman, Jamestown S'Klallam Tribe............................    54
    Prepared statement with attachments..........................    56
Hogen, Philip N., Chairman, National Indian Gaming Commission....     5
    Prepared statement with attachments..........................     7
Pearson, Myra, Chairwoman, Great Plains Indian Gaming 
  Association; Chairwoman, Spirit Lake Sioux Tribe; accompanied 
  by Kurt Luger, Executive Director, Great Plains Indian Gaming 
  Association....................................................    24
    Prepared statement with attachments..........................    27
Shelton, Dean, Chairman, California Gambling Control Commission; 
  on behalf of Governor Arnold Schwarzenegger....................    22
    Prepared statement...........................................    23
Welsh-Tahbo, Valerie, Council Member, Colorado River Indian 
  Tribes Tribal Council..........................................    65
    Prepared statement...........................................    67

                                Appendix

Burris, Tracy, Gaming Commissioner of the Chickasaw Nation, 
  prepared statement.............................................    79
Crooks, Stanley R., Chairman of the Shakopee Mdewakanton Sioux 
  Community, prepared statement..................................    81


                     DISCUSSION DRAFT LEGISLATION 
              REGARDING THE REGULATION OF CLASS III GAMING

                              ----------                              


                        THURSDAY, JUNE 28, 2007

                                       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. Byron L. Dorgan, 
Chairman of the Committee, presiding.

          OPENING STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    The Chairman. I will call the hearing to order. This is a 
hearing of the Indian Affairs Committee on a draft piece of 
legislation regarding the regulation of Class III gaming.
    I want to begin on time. We will have a vote somewhere 
around 10:45 a.m. to 11 a.m., and we may have to break at that 
point, but I want to begin on time and see how long this will 
consume this morning.
    We are going to hold a hearing today to hear views on draft 
legislation to regulate Class III Indian gaming. Let me make 
clear that you have seen from the array of hearings that we 
have held in this Committee, the principal and great concerns 
that I have on Indian issues deal with Indian education, health 
care, housing, law enforcement, methamphetamine, teen suicide, 
and similar issues. That will remain our consuming ambition on 
this Committee, to address those issues as a primary 
responsibility.
    I am holding a hearing today on a draft piece of 
legislation dealing with the issue of regulation of Class III 
gaming. Let me make a few early points. Last year, a Federal 
court held that the Indian Gaming Regulatory Act did not 
provide the National Indian Gaming Commission with the 
authority to regulate day to day operations of Class III Indian 
gaming. Specifically, the court held that the commission could 
not enforce minimum internal control standards on tribes' Class 
III gaming operations. These are the standards that were 
designed to regulate the day to day operations of a gaming 
facility, including how cash is handled, surveillance, customer 
credit, and many other aspects of a gaming operation's daily 
activities.
    Indian gaming has been a great success for many tribes, 
literally bringing tribes a substantial additional stream of 
revenue with which to address many of their social problems and 
with which to provide needed investment in areas that are of 
interest and concern to tribes and tribal members. The industry 
has come a great distance from when the Regulatory Act was 
first passed by Congress, a great distance from the Cabazon 
decision by the Supreme Court.
    Last year, the gaming industry for Native Americans 
generated over $25 billion. Ninety percent of this revenue was 
generated from Class III gaming, the category of Indian gaming 
that includes slot machines, house banked card games, and so 
on. This is the category of gaming that the Federal court ruled 
that the National Indian Gaming Commission lacked authority to 
regulate on a day to day basis.
    Now, I believe that the regulation of Indian gaming, 
including adequate internal controls within a gaming facility, 
is critical to the preservation, integrity and success of 
Indian gaming. I think all stakeholders in this industry agree 
with that statement. I also believe that some entity separate 
from the gaming facility owner should have regulatory oversight 
over the facility.
    That doesn't mean that we should over-regulate the 
industry, but there should be two layers, in my judgment, of 
regulation. The first layer should be the Tribal Gaming 
Commission and the second should be the Federal Government or 
State Government providing effective oversight and regulation.
    Now, I have offered a draft piece of legislation. We have 
not introduced it. I have made it a discussion draft for a very 
specific reason. I am holding a hearing on the discussion 
draft. We have invited select witnesses to testify and we would 
invite anyone else who wishes to submit testimony on that draft 
to submit it within 2 weeks of this hearing, and we will 
consider that as well.
    The draft proposal is a proposal that would provide a 
different approach. As you know, a proposal during the last 
Congress was offered. It was much broader than the draft 
discussion proposal I have offered here. But the discussion and 
decision about where we will move to address this will depend 
on what we learn at these hearings and what we hear from the 
stakeholders.
    I do make the point that I understand the Colorado River 
Indian Tribe's intention in bringing their lawsuit to clarify 
the authority of the National Indian Gaming Commission. The 
tribe had every right to do that. The result of the case I 
think has created some gaps in the regulation of Indian gaming, 
and those gaps are of concern to me.
    The purpose of this hearing and draft legislation and the 
discussion of this is not to imply or suggest in any way that 
there is a systemic problem with respect to Indian gaming. I 
don't believe that exists. I certainly don't ever want it to 
exist, and the discussions about how we make certain there is 
effective regulation in every area here is to make certain that 
we don't have a problem in the future.
    As I indicated when I started, the priorities of this 
Committee will remain priorities dealing with healthcare, 
housing, education, teen suicide, methamphetamine, law 
enforcement and the range of issues that we have spent a great 
deal of time working on. But I did want to continue a 
discussion about the issue of the regulatory authority with 
respect to the Colorado decision and its impact on Indian 
gaming, and that is the purpose of this hearing.
    We don't know what we will do following this hearing 
because it will take some time to digest and try to understand 
and think through the comments that we will hear today.
    I am pleased that the Acting Vice Chair, Senator Murkowski, 
is with us, and I would call on her for any opening comments.

               STATEMENT OF HON. LISA MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I appreciate 
your comments in laying out the priorities here as the Chairman 
of this Committee.
    Since the days of President Nixon, it has been this 
Nation's policy to encourage Indian tribes to take control of 
their own destiny. President Nixon ushered in the Federal 
policy of self-determination over 30 years ago, and that legacy 
of self-determination is not limited to the compacting and 
contracting of government programs. It has also led many tribes 
to take control of their economic destinies, to find ways to 
stimulate economic development within Indian Country.
    Some of these economic development efforts have succeeded. 
Others have failed. And we all know that this isn't surprising 
since the odds against success of any new business venture are 
pretty high. But I am told that no single industry has 
succeeded in Indian Country as well as gaming, conducted under 
the regulatory framework of the Indian Gaming Regulatory Act. 
More than 24.5 million Americans have visited tribal gaming 
establishments and we know that that number is growing.
    The National Indian Gaming Association reports that 225 
tribes in 28 States are involved in Indian gaming activities. 
These enterprises have created 670,000 jobs, generated $8.6 
billion in Federal taxes, $2.4 billion in State payments, and 
more than $100 million in payments to local governments. The 
data strongly suggests that Indian gaming is the dominant 
driver of economic opportunity in many corners of Indian 
Country.
    The issue before the Committee today, in my view, is 
whether the current system for protecting the integrity of 
Indian gaming is adequate. Is it adequate to ensure the 
integrity of the tribal gaming enterprise? Is it adequate to 
ensure that tribal casinos do not fall vulnerable to organized 
crime and money laundering? And is it adequate to ensure that 
Indian gaming operations maintain the level of public 
confidence that brings more than 24.5 million Americans to 
their doors?
    The current regulatory system has been profoundly 
influenced by the Colorado River Indian Tribe's decision. That 
decision does not permit the National Indian Gaming Commission 
to require that Class III gaming establishments adhere to the 
commission's standards of minimum internal controls. Now, I 
understand that some who will testify today think that that is 
a good thing. They say that the existing two-tiered system of 
tribal regulation and State enforcement of tribal State 
compacts adequately protect the interests of the tribe and the 
public.
    I have heard concerns that the National Indian Gaming 
Commission, if given a mandate to regulate Class III gaming, 
will see the opportunity to impose broader, more proscriptive 
controls on the tribes over and above those in the minimum 
internal control standards, and pass those costs along to the 
regulated entity.
    But I have also heard concerns that uniformity in the 
regulation of gaming is important to maintain that public 
confidence and to allow the tribes to continue to grow their 
enterprises. We have been asked to consider the possibility 
that in some instances, reliance on State tribal compacts for 
regulatory oversight may not be adequate. Ideally, the tribes, 
the States and the NIGC would reach consensus on a regulatory 
scheme, a regulatory scheme that ensures compliance with 
applicable laws and that maintains public confidence in tribes 
and their enterprises.
    I don't know whether this is possible, but I do commend 
you, Mr. Chairman, for bringing a very diverse group of voices 
to the table to pursue that question. I am approaching the 
hearing this morning with an open mind. I look forward to the 
testimony and to the opportunity to question the witnesses.
    The Chairman. Senator Murkowski, thank you very much. I 
appreciate your service as Acting Vice Chair. As we have said 
previously, all of us continue to miss and will miss our late 
colleague, Senator Craig Thomas, the former Vice Chair, but I 
am very pleased that we have an Acting Vice Chair that has a 
background on Native American issues and she has a very special 
interest with respect to Alaska Natives. So I think this will 
be a real contribution to our Committee as well.
    Because we have a vote that will occur about 11 o'clock, 
and if we break then, it will be a rather lengthy break because 
this is a consequential vote that is going to go on for some 
while, what I am going to do is ask the witnesses to adhere to 
the 5-minute limit. What we do, as you know, for our Committee 
witnesses as a routine matter at every hearing is say that your 
entire statement will be made a part of the record, and we ask 
that you summarize.
    I am going to ask the first two witnesses, the Honorable 
Philip Hogen, Chairman of the National Indian Gaming 
Commission, and Dean Shelton, Chairman of the California 
Gambling Control Commission, who is testifying on behalf of 
Governor Arnold Schwarzenegger, I am going to ask you to 
testify first.
    Then before we ask questions, with the permission of 
Senator Murkowski, I am going to ask the three additional 
witnesses, and one of our four witnesses has canceled because 
of an airplane problem, to come forward and provide their 
testimony, following which I would like to have all five at the 
table so that we may ask questions of all of the witnesses. 
Perhaps we will complete the hearing by 11 o'clock. My hope is 
that that will be the case.
    We have trap doors under the witness chairs, and I have a 
button.
    [Laughter.]
    The Chairman. I have a button that I am able to push after 
5 minutes. Mr. Hogen if you will keep that in mind.
    [Laughter.]
    The Chairman. Let me be serious and thank you for your 
chairmanship of the National Indian Gaming Commission. We 
appreciate that you have testified here a good number of times. 
We appreciate your coming today. You may proceed.

STATEMENT OF PHILIP N. HOGEN, CHAIRMAN, NATIONAL INDIAN GAMING 
                           COMMISSION

    Mr. Hogen. Good morning and thank you, Chairman Dorgan and 
Senator Murkowski. I bring you greetings on behalf of the 
National Indian Gaming Commission. Commissioner Choney is out 
in Oklahoma today. Commissioner DesRosiers is meeting with our 
Tribal Advisory Committee working on minimum internal control 
standards out at a meeting in Dallas. So they can't be here 
today.
    For the most part, I think regulators, like children, ought 
to be seen and not heard. But nevertheless, I am here again and 
I may be sounding like a broken record because I have been here 
a number of times talking about a similar concern, but it may 
be a little more shrill today and a little more urgent.
    I think much of what I want to say will be echoed by the 
tribes. That is, while IGRA, the Indian Gaming Regulatory Act, 
was an intrusion into tribal sovereignty, that tribal 
sovereignty for the most part is still intact, and tribes ought 
to fight to protect that and ward off needless intrusions into 
sovereignty.
    IGRA intended that the tribes be the primary regulators of 
Indian gaming, and they are. They are spending significant 
dollars providing for this regulation, not just the regulation 
they do, but reimbursing States for the role they play under 
compacts and being the sole funder of the National Indian 
Gaming Commission.
    Most tribes are desperate for dollars to fund their 
programs and meet the needs of their tribal members. And so 
tribal gaming regulation that they pay for needs to be 
efficient, and we will strive to help them do that. I think 
overall the quality of tribal gaming regulation is very good. I 
think where I may differ from some of my tribal counterparts is 
whether and to what extent the overall integrity of regulation 
or tribal gaming is enhanced by having an outside, perhaps more 
objective party, participate in that regulation.
    When there is unity between the ownership and the 
regulation of a gambling operation, I think there is some cause 
for concern. When the Indian Gaming Regulatory Act was written 
back in 1988, Bingo was the primary vehicle. NIGC was given a 
role with respect to the regulation of it. But as it turned 
out, what developed in terms of the Indian gaming industry is 
most of it is now casino gaming, Class III gaming. There is a 
role pursuant to the compact process for State participation in 
that regulation.
    However, that State participation is very uneven. That is, 
there are places where States intensely participate, spend a 
lot of money, the tribes' money, participating in the 
regulation pursuant to the compacts, and other places where the 
States really didn't show up. There are a number of reasons for 
that. I think primarily the reason is when it got started, the 
States really had no experience in the regulation of casino 
gaming. There were places they did, in Nevada and New Jersey, 
but back in 1988, most States didn't have casino gaming.
    Now, that has changed over the years, but the State 
regulatory role has not caught up and in many cases those 
tribal-State compacts are carved in stone. Some of them are 
written in perpetuity and the State can't change their role.
    So it was in that environment back in the 1990s when there 
was this tremendous growth of Indian gaming, that the National 
Indian Gaming Commission saw fit to draft minimum internal 
control standards, which we have done. They gave us the 
yardstick with which to measure the performance in the 
regulation of tribal gaming in Class II and Class III, and a 
rulebook the tribes could play by. Under that structure, Indian 
gaming grew to over a $25 billion a year industry, as the 
numbers were reported last year.
    So I think there is still a need for a strong uniform set 
of Federal standards to govern or help govern this major part 
of tribal gaming regulation. The Colorado River Indian Tribes, 
the CRIT decision, took that tool away from the National Indian 
Gaming Commission, and I think we need it back. I don't think 
the system was broken. I don't disagree that the court made a 
wise decision, but the thing is, what was kind of on the 
drawing board I think changed.
    Now, we have a huge Class III casino gaming industry out 
there, and in many cases the States are not equipped or are not 
inclined to participate, and it is useful to have somebody 
else, to wit, the National Indian Gaming Commission, there to 
give validity to that good job that the tribal gaming 
commissions do.
    When we find ourselves in different models, we tailor our 
involvement. That is, in Arizona and Washington State, where 
there is great intensive State participation in the regulation, 
we are less involved in those kinds of things.
    Now, it is said that there are three levels of regulation 
and there are. This chart that we have over here, and maybe Joe 
you can put that up, shows the dollars that tribes spend on 
this. You can see that of course the vast majority of the $400 
million the tribes spend to regulate is for their own primary 
tribal regulation. And then they spend about $70 million 
reimbursing States for what they do. We are there on the top, 
$12 million in the year that that was reported. So we are 
hardly big enough to be dangerous, but we do play a significant 
role. We just validate that good job, and where there are soft 
spots, where there are weaknesses, we step in and play that 
role.
    So if a tribe is doing a great job, and the State is 
helping, that is great. But if down the street in the next 
State, some scandal occurs, it is going to affect all of the 
Indian gaming and that is where we give them some insurance. 
Now, section two of the draft legislation would in effect 
restore what we were doing from 1999 to 2006, and we are very 
supportive of section two.
    Section three would create this Committee to, in effect, 
permit States and tribes to opt out if they have an arrangement 
that would satisfactorily address that, but I think there are 
some concerns about the way it is written. We already tailor 
our role with respect to the State involvement. We have a lot 
of other Class III duties like approving ordinances, monitoring 
use of gaming revenue. We don't know how this section would 
affect that. We don't really know what that committee would 
write. Would they write their own minimum internal control 
standards or what?
    So we think we need that authority back. The industry will 
be stronger if we get it. But in terms of having that committee 
there, we would like an opportunity to discuss that. Tribal 
sovereignty is the strongest today as it has been in 100 years, 
primarily because of Indian gaming. We have been part of the 
reason that occurred because of the confidence the public has 
in the gaming, and we want to keep it that way if we can.
    Thank you.
    [The prepared statement of Mr. Hogen follows:]

Prepared Statement of Philip N. Hogen, Chairman, National Indian Gaming 
                               Commission
    Good morning Chairman Dorgan and Members of the Committee.
    My name is Philip Hogen, and I am a member of the Oglala Sioux 
Tribe from South Dakota. I have had the privilege of chairing the 
National Indian Gaming Commission (NIGC) since December of 2002.
    Thank you for inviting me to discuss the draft legislation 
regarding the regulation of Class III gaming. I would like to offer 
some preliminary thoughts about it, and as you will see, those thoughts 
are informed by the role NIGC plays in the regulation of Class III 
gaming and the impact of the Colorado River Indian Tribes decision on 
NIGC's regulation of the Indian gaming industry.
    The NIGC strongly supports Section 2 of the bill, which clarifies 
NIGC's regulatory authority over Class III gaming. In addition, NIGC 
has some concerns about Section 3 of the bill, which sets up a new 
mechanism for the regulation of Class III gaming. I must emphasize that 
those concerns are preliminary as the Commission is still reviewing and 
analyzing the draft. We stand ready to work with the Committee and the 
Committee staff to further review this concept and to best produce an 
effective structure to insure the continued integrity of the Indian 
gaming industry and its regulation.
The Draft Legislation
    The draft legislation contains three short sections. The first 
simply names the act. The second section is what we have come, 
internally, to call a ``CRIT fix.'' This refers to a recent decision by 
the United States Court of Appeals for the District of Columbia Circuit 
in Colorado River Indian Tribes v. National Indian Gaming Commission, 
466 F.3d 134 (D.C. Dir. 2006). The second section would clarify that 
NIGC generally has the same oversight authority over Class III gaming 
that it has over Class II gaming and specifically that it has authority 
to issue and enforce MICS for Class III gaming operations.
    The third and final section of the proposed legislation provides an 
alternative to NIGC regulation over some parts of Class III gaming. A 
``Regulatory Committee'' appointed by the Secretary of the Interior 
would draft ``minimum standards'' for the regulation of Class III 
gaming. If NIGC then certifies that the regulatory standards in a 
tribal-state gaming compact meet or exceed those ``minimum standards,'' 
this ``shall preempt the regulation of Class III gaming by the 
Commission'' at the operation that is the subject of the compact.
    As to Section 3, the Commission has not yet fully analyzed its 
provisions, but I have a few preliminary observations. We will send you 
a further and more complete analysis shortly.
    I am aware of the appropriate concern that tribes and states may 
have regarding how far NIGC might extend its oversight into Class III 
gaming activities if the changes proposed in Sections 1 and 2 of the 
draft legislation are enacted. I believe that the ``Class III 
Regulatory Committee'' created by Section 3 of the draft legislation is 
there, in part, to address this concern. The Committee would identify 
criteria that tribal-state compacts could meet and thus preclude NIGC's 
further participation in the oversight of that tribe's Class III 
gaming.
    First, I think that history and past practice demonstrates that 
NIGC has always been careful to tailor its oversight of compacted 
gaming to complement, not duplicate, the regulation that compacts 
provide. As noted above, there is much diversity among compacts, and no 
doubt as future compacts are written, they too will vary from those now 
in effect.
    NIGC is a relatively small organization, and the depth and breadth 
of Indian gaming already tax its resources. Thus, where adequate 
oversight arrangements are addressed and implemented by compact, the 
Commission is careful not to replicate them. This practice saves budget 
dollars for the Commission and of course saves dollars for the tribes 
whose fees ultimately fund the Commission's efforts.
    Second, history has revealed that in a number of instances, what is 
provided for in the compacts (in many cases in permissive rather than 
mandatory form) by way of a State oversight role is implemented only 
minimally, if at all. In those instances, NIGC has found it appropriate 
to be more engaged than it otherwise would. Were Section 3 of the 
proposed legislation enacted, it is possible that standards written by 
the Regulatory Committee could be met in approved compact language, but 
if those standards are not implemented, a serious regulatory oversight 
vacuum would develop, thereby impairing the integrity of the compacted 
operation.
    Third and finally, IGRA tasks NIGC with many regulatory tasks for 
Class III gaming that are wholly independent from the NIGC MICS. These 
include:

   Approve and enforce provisions of Class III gaming 
        ordinances.

   Approve and ensure compliance with Class III management 
        contracts.

   Ensure that Class III gaming is conducted in conformance 
        with a compact.

   Ensure that Class III gaming is occurring on Indian lands.

   Ensure that net gaming revenues are used for the purposes 
        outlined in IGRA.

   Ensure that tribal revenue allocation plans are followed.

   Ensure that tribes have the sole proprietary interest in 
        their gaming activity.

   Ensure that tribes provide annual audits to the NIGC.

   Ensure that tribes issue facility licenses for their gaming 
        facilities.

   Ensure that gaming facilities are constructed and operated 
        in a manner that adequately protects the environment, public 
        health and safety.

   Ensure that background investigations are conducted on 
        primary management officials and key employees of gaming 
        operations.

    Presumably there is not an intention in the draft legislation to 
displace NIGC in those areas, but if the concept of a Regulatory 
Committee remains in the legislation, clarity should be brought to this 
area.
Draft Legislation Sec. 2, CRIT fix
    As to Section 2, the need for a CRIT solution is paramount for the 
NIGC. I have testified to the facts and figures many times before your 
Committee. Recently, I testified before the California General Assembly 
Government Organization Committee on the need for MICS in an effective 
regulatory regime.
    The battle in California over the need for MICS in their new 
compacts highlights the importance of the Federal role in a balanced 
approach to the regulation of Indian gaming.
    IGRA envisioned a three legged stool, where balance depended upon 
all three legs. With the NIGC leg now off the stool, the imbalance has 
the very real prospect of upsetting the gains gaming has made for 
Indian people.
    In my view, what is at stake is the integrity of Indian gaming. 
This is not meant to criticize either the tribes or the states. Rather, 
it is a statement of the obvious. Gaming depends on the public 
perception and belief in the integrity of operations they choose to 
patronize. A balanced regulatory approach includes: (l) tribes as the 
primary regulator with the day-to-day responsibilities and heavy 
lifting; (2) states having whatever role is provided in the tribal-
state compact, usually oversight insuring state policy and applicable 
laws are adhered to as well as assuring that any revenue sharing 
payments agreed to are properly calculated and made; and (3) NIGC 
having the role of making sure that the overall regulation is 
consistent and fair. Consistent, fair and stable regulation and 
oversight will continue to foster the growth of Indian gaming.
    The model envisioned by IGRA worked for 18 years producing $25 
billion in gaming revenue in 2006. The NIGC has the advantage of seeing 
Indian gaming all over the country enabling it to spot trends and react 
to negatives in ways that tribes and states are not usually equipped to 
do. Further, the NIGC provides a clearinghouse for vital information 
sharing between the three parties and other stakeholders, such as law 
enforcement and public safety agencies.
    It is the combination of the three that provides the balanced 
approach that has allowed Indian gaming to succeed and thrive. The 
proposed legislation in Section 2 addresses this concern by clearly 
giving the NIGC authority to promulgate and enforce MICS for Class III 
gaming.
    As background about the CRIT case, in early 2001, NIGC attempted to 
audit a Class II and III gaming operation owned by the Colorado River 
Indian Tribes (CRIT). NIGC was looking to check compliance with minimum 
internal control standards or ``MICS,'' 25. C.F.R. Part 542.
    The MICS provide, in considerable detail, minimum standards that 
tribes must follow when conducting Class II and III gaming. They are 
intended to embody accepted practices of the gaming industry. To choose 
a few of many possible examples, the MICS prescribe methods for 
removing money from gaming machines and gaming tables and counting it 
so as best to prevent theft; they prescribe methods for the storage and 
use of playing cards so as best to prevent fraud and cheating; and they 
prescribe minimum resolutions and floor area coverage for casino 
surveillance cameras. Attached as Exhibit 1 is a copy of the MICS table 
of contents, which provides a more detailed overview of their 
comprehensive scope. More than this, though, the MICS attempt to embody 
overall controls that reasonably assure gaming transactions are 
appropriately authorized, recognized and recorded. They thereby assure 
the integrity of games and safeguard tribal assets, and they do so 
without displacing internal control requirements that tribes and states 
have negotiated into their compacts. In the event of a direct conflict 
between the terms of a compact and the MICS, the MICS specifically 
state that it is the compact terms that prevail and bind the operation.
    In any event, CRIT refused to give NIGC access to its Class III 
gaming records. The NIGC Chairman responded with a notice of violation 
and civil fine. CRIT appealed to the full Commission, which upheld the 
Chairman's actions. On appeal, the District Court for the District of 
Columbia granted summary judgment in favor of CRIT, finding that IGRA 
does not confer upon NIGC the authority to issue or enforce MICS for 
Class III gaming. The District Court found that while IGRA grants NIGC 
authority over certain aspects of Class III gaming, MICS are not among 
them.
    On October 20, 2006, the U.S. Court of Appeals for the District of 
Columbia affirmed the District Court. Though some read the CRIT 
decision to say that the NIGC has no authority over Class III gaming, 
the actual holding was narrow: Congress did not give the NIGC the 
authority to promulgate minimum internal control standards for Class 
III gaming.
Background
    I would like to attempt to explain, in somewhat more detail, my 
position through the history of the development and implementation of 
the regulation of this segment of the Indian gaming industry; the tools 
NIGC has developed and used over the years in which Class III gaming 
has grown to its present size; how the aforementioned court ruling has 
had a significant impact on this regulation; and how I think 
legislation might help insure that the integrity in the operation and 
regulation of Class III gaming, which has permitted it to become so 
successful, might be best maintained. As NIGC recently reported, in 
2006, tribal gaming generated over $25 billion in gross gaming 
revenues. While precise numbers are not required in this connection, 
NIGC and those who closely watch the Indian gaming industry estimate 
that nearly 90 percent of this revenue is generated by compacted, Class 
III gaming--far and away the dominant means by which tribes generate 
gaming revenues.
History of IGRA
    It is the NIGC's belief that in IGRA, Congress intended that the 
Federal entity established to provide oversight of Indian gaming would 
have an oversight role with respect to the dominant form of gaming in 
the industry, whether bingo in 1988 or Class III gaming now. If the 
NIGC's role with respect to its minimum internal control standards and 
Class III gaming is not clarified by the courts or legislation, most 
tribes will continue to operate first-rate, well-regulated facilities, 
and their tribal gaming regulatory entities will perform effectively. 
Others likely will not.
    When the NIGC came on the scene in October 1988, it believed--and 
still believes--that its mission was to provide effective oversight of 
tribal gaming. IGRA states that it established the NIGC as an 
independent Federal regulatory authority over Indian gaming in order to 
address Congressional concerns about gaming and to advance IGRA's 
overriding purposes. These are to ensure that tribal gaming promotes 
tribal economic development, self-sufficiency and strong tribal 
governments; to shield gaming from organized crime and other corrupting 
influences; to ensure that the tribes are the primary beneficiaries of 
their gaming operations; and to ensure that gaming is conducted fairly 
and honestly by both the tribal gaming operations and its customers. 
IGRA therefore authorizes the Chairman to penalize, by fine or closure, 
violations of the Act, the NIGC's own regulations, and approved tribal 
gaming ordinances.
    Historically, casino gaming has been a target for illicit 
influences. Nevada's experience provides a classic case study of the 
evolution of strong, effective regulation. It was not until Nevada 
established a strong regulatory structure--independent from the 
ownership and operation of the casinos themselves--and developed 
techniques such as full-time surveillance of the gaming operations that 
most potentialities for criminal involvement were eliminated from the 
gaming industry there. All jurisdictions that have subsequently 
legalized gaming have looked to Nevada's experience to help guide their 
own regulation and oversight.
Regulation of Tribal Gaming
    IGRA mandates that tribes may conduct Class III gaming only in 
states where such activity is permissible under state law and where the 
tribes enter into compacts with states relating to this activity, which 
compacts require approval of the Secretary of the Interior. Compacts 
might include specific regulatory structures and give regulatory 
responsibility to the tribe, to the state, or to both in some 
combination of responsibilities. Since the passage of IGRA, 232 tribes 
have executed 249 Class III compacts with 22 states, and the allocation 
of regulatory responsibility, if addressed at all, is as diverse as the 
states and tribes that have negotiated them.
    In 1987, the Supreme Court decided the Cabazon case and clarified 
that tribes had the right to regulate gambling on their reservations, 
provided that the states wherein they were located did not criminally 
prohibit that activity. At that time, large-scale casino gaming 
operations existed only in Nevada and New Jersey. The Indian Gaming 
Regulatory Act was passed in 1988 and established the framework for the 
regulation of tribal gaming. That same year, Florida became the first 
state in the southeastern United States, and the 25th overall, to 
create a state lottery. In 1989, South Dakota legalized gambling in the 
historic gold mining town of Deadwood, and Iowa and Illinois legalized 
riverboat gambling. The following year, Colorado legalized gambling in 
some of its old mining towns, and in 1991, Missouri legalized riverboat 
gambling. By that time, 32 states operated lotteries, while tribes ran 
58 gaming operations. Thus, not just in Indian country but throughout 
the United States there was at that time a manifest social and 
political acceptance of gambling as a source of governmental revenue. 
What is also evident is that when IGRA was adopted in 1988, very few 
states had experience in the regulation of casino gaming.
    When IGRA was enacted, those tribes then engaged in gaming were 
primarily offering bingo. While there may have been an expectation in 
Congress that there would be a dramatic change in the games tribes 
would offer, I think it is reasonable to assume many expected tribal 
gaming would continue to be primarily Class II, or non-compacted, 
gaming. After 1988, when tribes began negotiating compacts for casinos 
with slot machines and banked card games, most of the states they 
negotiated with had little or no experience in regulating full-time 
casino operations. Michigan, for example, first compacted with Tribes 
in 1993 but didn't create its own Gaming Control Board or authorize 
commercial gaming until the end of 1996. Minnesota began compacting 
with tribes in 1990 and to this day has no non-Indian casinos within 
its borders.
    A review of compacts approved since 1989 shows that the more recent 
compacts often address the mechanics of the oversight and regulation of 
the gaming quite specifically but those earlier compacts, some of which 
were entered into in perpetuity, do not. Further, the dispute 
resolution provisions to resolve issues identified by a State's 
oversight authority in the compacts often employ cumbersome and time-
consuming procedures like mediation or arbitration that do not 
necessarily foster effective regulation. For example, in the 22 states 
with Class III gaming, 12 provide for some form of mediation or 
arbitration with varying degrees of specificity and enforceability. 
Attached as Exhibit 2 is a chart summarizing the internal control and 
dispute resolution provisions of the compacts in these 22 states.
    Typically, the regulatory role a particular state undertakes in its 
compact was taken from and modeled on that state's experience with the 
regulation of its own legalized gaming at the time the compact was 
negotiated. Where such states develop effective regulatory programs, 
the need for NIGC oversight is greatly reduced. For example, in states 
where the tribal-state compacts call for regular state oversight, 
institute technical standards and testing protocols for gaming machines 
and establish internal control requirements, the NIGC's oversight role 
will be limited. This is the case, for example, in Arizona. Some states 
such as Michigan and North Dakota, however, have assumed a minimal 
regulatory role. In some cases, compacts have become little more than a 
revenue sharing agreement between the state and the tribe. 
Consequently, under circumstances where the states do not have a 
significant regulatory presence, the NIGC must be in place to undertake 
a broader range of oversight and enforcement activities.
The History of MICS
    The diversity of tribal gaming operations is great. Both rural 
weekly bingo games and the largest casinos in the world are operated by 
Indian tribes under IGRA. As the industry grew from its modest 
beginnings, NIGC needed the appropriate tools to implement its 
oversight responsibilities. What the Commission lacked was a rule book 
for the conduct of professional gaming operations and a yardstick by 
which the operation and regulation of tribal gaming could be measured. 
During the early stages of the dramatic growth of the Indian gaming 
industry, some in Congress expressed concerns that uniform minimum 
internal control standards, which were common in other established 
gaming jurisdictions, were lacking in tribal gaming. The industry 
itself was sensitive and responsive to those concerns and a joint 
National Indian Gaming Association--National Congress of American 
Indians task force recommended a model set of internal control 
standards.
    Using this model as a starting point, in 1996, the NIGC assembled a 
tribal advisory committee to assist us in drafting minimum internal 
control standards applicable to Class II and Class III gaming. These 
were first proposed on August 11, 1998, and eventually became effective 
on February 4, 1999. With the adoption of the NIGC's MICS, all tribes 
were required to meet or exceed the standards therein, and the vast 
majority of the tribes acted to do so. NIGC's approach during that time 
was to assist and educate tribes in this regard, not to cite violations 
and penalize. When shortcomings were encountered by NIGC at tribal 
operations, NIGC's assistance was offered and grace periods were 
established to permit compliance.
    I served as an Associate Commissioner on the NIGC from 1995 through 
mid-1999, and I participated in the decision to adopt and implement the 
MICS. I have now served as the Chairman since December of 2002. It is 
my confirmed view that the Minimum Internal Control Standards--given 
the tribes' strong effort to meet and exceed them and the inspections 
and audits that NIGC conducts to ensure compliance--have been the 
single most effective tool that our Federal oversight body has had to 
utilize to ensure professionalism and integrity in tribal gaming. The 
NIGC MICS were embraced by state regulators, several of whom adopted or 
incorporated NIGC MICS, or compliance therewith, in their compacts.
    For 6 years, NIGC oversight of Class II and Class III gaming with 
the use of minimum internal control standards went quite smoothly. When 
necessary, NIGC revised its MICS, and it employed the assistance of 
tribal advisory committees in doing so. At the time of adoption, of 
course, many tribal gaming operations and tribal regulatory authorities 
were already far ahead of the minimums set forth in the MICS. Other 
tribes, however, had no such standards, and for the first time they had 
the necessary rule book by which to operate.
NIGC Enforcement of MICS
    NIGC employed three methods of monitoring tribal compliance with 
its MICS. First, the MICS required the tribe to engage an independent 
Certified Pubic Accountant to perform what are called ``agreed upon 
procedures'' to evaluate the gaming operation's compliance with the 
regulations. The NIGC recommended testing criteria to be used by the 
external accountant. The results were provided to the tribe and NIGC 
within 120 days of the gaming operation's fiscal year end. Next, on a 
regular basis, NIGC investigators and auditors made site visits to 
tribal gaming facilities and spot checked tribal compliance. Finally, 
NIGC auditors conducted a comprehensive MICS audit of a number of 
tribal facilities each year. Typically those audits identified 
instances wherein tribes are not in compliance with specific minimum 
internal control standards. Almost always, the non-compliance was then 
successfully resolved by the tribe. As a result, NIGC was pleased that 
tribes have a stronger regulatory structure, and tribes were pleased 
that they have plugged gaps that might have permitted a drain on tribal 
assets and revenues. Although there have been instances where the non-
compliance with the MICS was not resolved, in those instances the 
tribes were persuaded to voluntarily close their facilities until the 
shortcomings were rectified. NIGC has never issued a closure order or 
taken an enforcement action resulting in a fine for tribal non-
compliance with NIGC MICS. It is worth noting that the NIGC recognizes 
that its success in ensuring tribal gaming operations function in a 
manner sufficient to safeguard the interests of the stakeholders 
depends upon the tribes' voluntary compliance. Consequently, the 
ultimate objective of our audits was to persuade.
    Although drawing conclusions based solely on the number of MICS 
compliance exceptions detected in an audit can be misleading, a look at 
some of our numbers in this regard can be instructive. Audit reports 
have reflected as few as ten findings and others over a hundred. 
However, of the 51 comprehensive audits conducted, only a few have not 
revealed material internal control weakness. Attached as Exhibit 3 is a 
table summarizing the number and kinds of MICS violations found from 
January 2001 through February 2006. Attached as well are representative 
MICS compliance audit reports.
MICS Compliance
    The oversight responsibilities of the NIGC give it a unique view 
from which to report the variety of challenges confronting Indian 
gaming in terms of regulatory violations and enforcement actions taken. 
As said above, the primary responsibility for meeting these challenges 
is and ought to be on the shoulders of the tribes. The NIGC encourages 
strong tribal regulation and applauds the resources that Indian gaming 
currently applies to regulation and other oversight activities. As 
Indian gaming continues to grow and the sophistication of operations 
expands and as the levels of the revenues increase accordingly, 
regulation must stay ahead of this growth if the integrity of the 
industry is to be protected. I have attached as Exhibits 4 and 5 a 
timeline and growth chart depicting the growth of tribal gaming 
operations and revenues, the growth of the National Indian Gaming 
Commission's staff, and some of the benchmark developments that have 
occurred during this history. It is in this context that the following 
examples of the numbers and types of MICS violations the NIGC has 
uncovered are offered.
    The NIGC has compiled the following review of Minimum Internal 
Control Standards (``MICS'') Compliance Audits--January 2000 to May 
2007. The number of tribal gaming operations is taken from those 
reporting financial information to NIGC.

------------------------------------------------------------------------
                    Number of NIGC      Total MICS        Average MICS
Gaming Operations       Audits          Violations         Violations
------------------------------------------------------------------------
367                51               3,335              65
------------------------------------------------------------------------


    Findings common to most compliance audits:

   Lack of statistical game analysis;

   Ineffective key control procedures;

   Failure to secure gaming machine jackpot/fill system;

   Failure to effectively investigate cash variances/missing 
        supporting documentation for the cage accountability/failure to 
        reconcile cage accountability to general ledger on a monthly 
        basis;

   Inadequate segregation of duties and authorization of player 
        tracking system account adjustments;

   Ineffective internal audit department audit programs, 
        testing procedures, report writing and/or follow-up;

   Deficient surveillance coverage and recordings;

   Noncompliance with Internal Revenue Service regulation 31 
        CFR Part 103;

   Failure to exercise technical oversight or control over the 
        computerized gaming machine systems, including the maintenance 
        requirements for personnel access;

   Failure to properly document receipt and withdrawal 
        transactions involving pari-mutuel patrons' funds and a lack of 
        a comprehensive audit procedures of all pari-mutuel 
        transactions;

   Failure to adequately secure and account for sensitive 
        inventory items, including playing cards, dice, bingo paper and 
        keno/bingo balls; and

   Failure to adopt appropriate overall information technology 
        controls specific to hardware and software access to ensure 
        gambling games and related functions are adequately protected.

    Although exact data is not available regarding losses to tribal 
gaming operations resulting from the above control deficiencies, based 
on the past experience of commercial gaming, we can conclude the amount 
to be in the millions each year. These violations show that certain 
tribes are not adequately protecting their gaming assets.
    In California, for example, between 2002 and 2006, the NIGC 
conducted 8 audits that produced findings indicating that one gaming 
operation possessed an exemplary system of internal controls, four were 
reasonably effective but had multiple material control weaknesses and 
three had a system of internal controls considered to be dysfunctional.
Breakdown in Tribal Regulation
    Beyond the MICS, the NIGC oversight has uncovered serious 
breakdowns in regulation at Class II and Class III tribal gaming 
operations throughout the country. This is true even where there is 
apparent adequate tribal regulation and control in place.

    Examples of instances where tribal gaming operational and 
regulatory efforts have been found deficient include the following:

   During the course of investigations and MICS compliance 
        audits, NIGC investigators and auditors discovered that an 
        extraordinary amount of money was flowing through two Class III 
        off track betting (OTB) operations on two reservations. The 
        amount of money was so high in comparison to the amount that 
        could reasonably flow through such OTB operations that our 
        investigators immediately suspected money laundering or similar 
        activities. These two operations were the first referrals to 
        the FBI's working group in which we participate. The FBI 
        investigations found that these operations were part of a wide 
        spread network of such operations with organized crime links 
        and several Federal criminal law violations. Unfortunately, the 
        tribes' gaming management allowed them to gain access and 
        operate as part of their Class III tribal gaming operations, 
        and the tribes' gaming regulators completely failed to take any 
        action against these illegal OTB operations.

   There are also examples where tribes continued to operate, 
        without modification or correction, a gaming facility that 
        permitted gaming activities to be conducted by companies owned 
        by individuals with known criminal associations; distributed 
        large amounts of gaming revenues without requisite approved 
        revenue allocation plans or the financial controls necessary to 
        account for them; knowingly operated gaming machines that were 
        plainly illegal; and appointed gaming commissioners and 
        regulatory employees and licensed and employed gaming employees 
        whose criminal histories indicated that they were unsuitable 
        and serious risks to the tribes' gaming enterprise. An accurate 
        assessment of Indian gaming regulation must also reflect the 
        unfortunate examples of tribes that are so politically divided 
        that they are unable to adequately regulate their gaming 
        activities, as well as instances where tribal officials have 
        personally benefited from gaming revenues at the expense of the 
        tribe itself. In addition, there have been many instances where 
        apparent conflicts of interest have undermined the integrity 
        and effectiveness of tribal gaming regulation. In all of these 
        troubling situations, it was necessary for the NIGC to step in 
        to address the problems. The above examples illustrate that 
        Indian gaming has many regulatory challenges that without 
        comprehensive, well informed oversight and enforcement the 
        integrity of the industry would be in jeopardy.

    The NIGC has compiled a list of potential risks to Indian gaming if 
strong oversight is not maintained:

   Risk of not detecting employee embezzlement;

   Risk of not detecting manipulations and/or theft from gaming 
        machines;

   Risk of not detecting criminal activity or the presence of 
        organized crime influence;

   Risk of not detecting misuse of gaming revenues by tribal 
        officials;

   Inability to effectively determine whether third parties are 
        managing the gaming facility without an approved contract;

   Inability to effectively determine whether imminent jeopardy 
        exists with regard to the safety of employees and patrons of 
        the gaming establishment;

   Inability to effectively determine whether individuals other 
        than the recognized tribal government are asserting authority 
        over the gaming operation;

   Inability to effectively determine whether outside investors 
        have unduly influenced tribal decision-making or made improper 
        payments to tribal officials;

   Inability to effectively perform operational audits, which 
        track the movement of money throughout the casino;

   Risk that tribal surveillance and gaming commission funding 
        could decrease rapidly, as these are expensive and are not seen 
        as increasing the casino bottom line.

Potential Impact of CRIT Decision
    Finally, I would like once again to return the significance of the 
CRIT decision and the importance that NIGC places upon a CRIT fix. 
IGRA, in effect, anticipated the wide range of regulatory structures in 
the various tribal-state compacts through the establishment of the NIGC 
as an independent Federal regulatory authority for gaming on Indian 
lands. With respect to NIGC's regulatory oversight responsibilities, 
IGRA authorized the Commission to penalize violations of the Act, 
violations of the Commission's own regulations, and violations of the 
Commission-approved tribal gaming ordinances by the way of imposition 
of civil fines and orders for closure of tribal gaming facilities.
    A luxury that tribal gaming regulators have, when contrasted to the 
NIGC and state regulators, is that ordinarily their regulatory 
responsibility is confined to one, or in some cases several, tribal 
gaming facilities. The laser-focus this permits undoubtedly has 
advantages. However, states, and NIGC, have an advantage not permitted 
in such an arrangement, and that is ability to look at a broad range of 
gaming operations, permitting them to contrast and compare 
methodologies and trends, and perhaps thereby identifying issues that 
would not be apparent to a regulator with primary exposure to only one 
operation. (Such operation being owned by the entity which controls the 
purse strings for the tribal regulatory body itself.) Thus, the 
combined approach--tribes having the heavy lifting--the all day, every 
day responsibility and the NIGC and the states having a less immediate 
but independent oversight perspective, seeing multiple operations, 
affords an important perspective which would otherwise not be 
available. In an arrangement where states do not bring this perspective 
to the arrangement--or where NIGC cannot bring it, this synergy 
envisioned by the authors of IGRA is lost.
    More specifically, since the Colorado River Indian Tribes decision, 
the NIGC has discontinued the practice of Class III gaming reviews 
conducted by our auditors. There will be temptations, generated by 
demands for per capita payments or other tribal needs, to pare down 
tribal regulatory efforts and bring more dollars to the bottom line. 
There will be no Federal standard that will stand in tribes' way should 
this occur. For the most part, the NIGC will become an advisory 
commission rather than a regulatory commission for the vast majority of 
tribal gaming. The very integrity of the now-smoothly-operating 
regulatory system, shared by tribal, state and Federal regulators, will 
be disrupted. If there is one imperative change that needs to be made 
in the Indian Gaming Regulatory Act, in the view of this NIGC Chairman 
and consistent with the legislative proposal that the NIGC sent to this 
Congress in May of 2007, it is the clarification that NIGC has a role 
in the regulation of Class III gaming.
    Not everyone agrees, of course. Some tribes argue that the CRIT 
decision should be read broadly to eliminate any NIGC authority over 
Class III gaming. This interpretation may impact on the ability ofthe 
NIGC to enforce its regulations as follows:

------------------------------------------------------------------------
            Activity                              Impact
------------------------------------------------------------------------
Bingo                             Unchanged
Pull-Tabs                         Unchanged
Card Games                        Unchanged
Keno                              No enforcement authority
Pari-Mutuel Wagering              No enforcement authority
Table Games                       No enforcement authority
Gaming Machines                   No enforcement authority
Cage                              Scope limited--Bingo/Pull--Tab/Card
                                   Game Inventory Items
Credit                            Scope limited--Bingo/Pull--Tab/Card
                                   Game Inventory Items
Information Technology            Scope limited--Bingo/Pull--Tab/Card
                                   Game Related Software and Hardware
Complimentary Services and Items  Scope limited--Bingo/Pull--Tab/Card
                                   Game Transactions
Drop and Count                    Scope limited--Bingo/Pull--Tab/Card
                                   Game Cash, Cash Equivalents and
                                   Documents
Surveillance                      Scope limited--Bingo/Pull--Tab/Card
                                   Game Areas
Internal Audit                    Scope limited--Bingo/Pull--Tab/Card
                                   Game Transactions
------------------------------------------------------------------------

    One of the daunting challenges facing the NIGC is answering the 
question: ``Where does the Class II end and the Class III begin? '' In 
most Indian gaming establishments there is no segregation of internal 
controls between Class II and Class III. We can audit Class II games 
without auditing Class III, for instance bingo versus blackjack. 
However, when it comes to comps and surveillance and other more general 
areas it gets tricky. In most instances, the proceeds are combined or 
commingled and auditors then can't look at one revenue stream without 
observing the other. This gray area has the potential to hinder our 
mission.
    The above examples illustrate that the regulation of Indian gaming 
is a complicated matter. At the tribal level it can often be impacted 
by political discord that may lead to uneven enforcement or at times 
little effect regulation regardless of overall intention. It is 
nevertheless clear that tribes have a very strong interest in assuring 
that their operations are adequately regulated.
Challenges to the Independence of Tribal Regulation
    That said, some gaming commissions are not sufficiently independent 
of the tribal governments or the managers that operate the gaming 
operation. In this connection, the history of Nevada's regulatory 
structure may be instructive. Effective gaming regulatory authority in 
Nevada was a process that evolved over a forty year period and is 
continuing to improve and respond to change today. Only after creation 
of a separate gaming regulatory authority did oversight of the industry 
have an effective champion. Beginning in the late 70s, significant 
progress was made into the identification and removal of individuals 
and entities intent upon exploitation and corruption. Although many 
factors contributed to corruptive influences in Nevada, one aspect 
stood out. At the time gaming was legalized in Nevada, the state and 
local governments were in a rather deprived financial position 
therefore the governmental agencies charged with regulatory oversight 
were also dependent, albeit desperate, for the potential revenues this 
growing industry could provide. The Nevada experience demonstrates a 
critical policy question when gaming regulations are considered: that 
as the government charged with regulation becomes increasingly 
dependent upon the profitability of the industry being regulated, the 
effectiveness of the regulatory effort may diminish.
    Generally, in tribal gaming, the tribal council is the ultimate 
governmental authority responsible for ensuring the gaming operation 
generates the greatest return on investment and that, in doing so, is 
effectively regulated. Such an organizational structure has challenges 
because the motivations lack congruity. Inevitably, from time to time, 
one objective may be foregone in pursuit of the other and, many times 
it is the oversight function. Although some tribes have recognized the 
organizational weakness and have installed procedures to counteract its 
effect, others have not and, as a result, the effectiveness of their 
regulatory processes is significantly diminished.
    In sum, the result of the CRIT decision is that Class III gaming is 
left with tribal-state compacts as the remaining vehicle for oversight 
and enforcement. The information I have attempted to present here 
shows, I believe, many of the structural weaknesses of that situation. 
While NIGC has no role, compacts are lacking in the area of 
enforcement. Compacts might include specific regulatory structures and 
give regulatory responsibility to the tribe, to the state, or to both 
in some combination of responsibilities. In two states, Arizona and 
Washington, the tribal-state compacts call for regular state oversight, 
institute technical standards and testing protocols for gaming 
machines, and establish internal control requirements. Most states, 
however, have assumed a minimal regulatory role. In many cases, 
compacts have become little more than a revenue sharing agreement 
between the state and the Tribe. The absence of the NIGC in the 
regulation of Class III gaming removes an essential component of 
oversight and enforcement.















    The Chairman. Chairman Hogen, thank you very much for 
summarizing. We appreciate your testimony.
    Next, we will hear from the Chairman of the California 
Gambling Control Commission, Mr. Dean Shelton, who is 
appearing, as I understand it, on behalf of Governor Arnold 
Schwarzenegger.

   STATEMENT OF DEAN SHELTON, CHAIRMAN, CALIFORNIA GAMBLING 
               CONTROL COMMISSION; ON BEHALF OF 
                 GOVERNOR ARNOLD SCHWARZENEGGER

    Mr. Shelton. Yes. I will read a short statement. I am sure 
we will follow it up with a lengthier written statement in the 
2-week period.
    Good morning, Mr. Chairman and Vice Chairperson, my name is 
Dean Shelton. I am the Chairman of the California Gambling 
Control Commission. Governor Arnold Schwarzenegger has 
requested I appear on his behalf in support of language in the 
draft bill that clarifies the National Indian Gaming 
Commission's authority over Class III minimum control 
standards.
    California is unique in that it has 107 federally 
recognized Indian tribes. At present, 66 of those tribes have 
tribal-State gaming compacts. There are 57 tribal casinos in 
operation in California and several more casinos are in the 
planning and development stage.
    The Gambling Control Commission has responsibility of 
oversight of tribal casinos to the extent authorized under the 
tribal-State gaming compacts and performs fiduciary and audit 
responsibilities associated with tribal gaming. Given the 
number of gaming tribes and the scale of the tribal gaming 
industry in California, this draft bill has a potential to 
significantly impact our State.
    Governor Schwarzenegger believes that NIGC should be 
authorized to formally inspect and enforce the MICS, as they 
have done in the past. His position is based on the belief that 
strong State, Federal and tribal regulation and oversight of 
Class III gaming best serves the public interest and serves the 
goals of the Indian Gaming Regulatory Act. This three- prong 
approach has worked well in our State, creating a good balance 
among the three sovereign responsibilities for regulation and 
oversight of tribal gaming. We would encourage and support 
enhanced coordination and open lines of communication among all 
of these regulators.
    I personally have enjoyed a professional relationship with 
Chairman Hogen. He has been most cooperative. His agency has 
assisted us. We coordinate our activities and we don't trample 
on one another. While we support language in the draft bill 
that clarifies NIGC's authority with respect to Class III 
gaming, we believe that section three of the proposed bill is 
unnecessary. As we understand it, the proposed language would 
authorize the commission to determine whether it should be 
preempted from regulatory Class III gaming in the State based 
on its review of regulatory activity under a tribal-State 
compact.
    This review would be based on the standards to be 
established by a newly created Class III Regulatory Committee. 
The Committee also would develop minimum standards for 
regulations of Class III gaming. We see no need to develop this 
additional layer of bureaucracy. We believe the NIGC has the 
expertise to carry out its responsibilities and creation of the 
committee is unnecessary at this time.
    Additionally, given the number of gaming tribes in the 
State of California, we believe there is more than enough room 
for both Federal and State oversight of Class III gaming and 
that preemption also is unnecessary. Our approach in California 
has been to complement NIGC's activities, rather than duplicate 
them.
    We will continue that approach, and according to this 
position, only section one and two of the draft bills should be 
created at this time.
    This is a short statement, and I will be available for 
questions later as you have asked.
    [The prepared statement of Mr. Shelton follows:]

   Prepared Statement of Dean Shelton, Chairman, California Gambling 
    Control Commission; on behalf of Governor Arnold Schwarzenegger
    Good morning Mr. Chairman and Members of the Committee. My name is 
Dean Shelton and I am the Chairman of the California Gambling Control 
Commission.
    Governor Arnold Schwarzenegger has requested that I appear on his 
behalf in support of language in the draft bill that clarifies the 
National Indian Gaming Commission's authority over the Class III 
Minimum Internal Control Standards or MICS.
    California is unique in that it has 107 federally-recognized Indian 
tribes. At present, 66 of those tribes have tribal-state gaming 
compacts. There are 57 tribal casinos in operation in California and 
several more casinos are in the planning and development stage. The 
Gambling Control Commission has the responsibility of oversight of 
tribal casinos to the extent authorized under the tribal-state gaming 
compacts, and performs fiduciary and audit responsibilities associated 
with tribal gaming.
    Given the number of gaming tribes and the scale of the tribal 
gaming industry in California, this draft bill has the potential to 
significantly impact our state. Governor Schwarzenegger believes that 
NICG should be authorized to formally inspect and enforce the MICS as 
they have done in the past. His position is based on his belief that 
strong state, Federal, and tribal regulation and oversight of class III 
gaming best serves the public interest and furthers the goals of the 
Indian Gaming Regulatory Act. This three-pronged approach has worked 
well in our state, creating a good balance among the three sovereigns 
responsible for regulation and oversight of tribal gaming. We would 
encourage and support enhanced coordination and open lines of 
communication among all of these regulators.
    I personally have enjoyed a professional relationship with NIGC and 
find Chairman Phil Hogan and his staff to be open and cooperative with 
our commission. We believe that the past work of NIGC has helped 
promote, and increase public confidence in, the integrity of gambling 
on Indian land.
    While we support language in the draft bill that clarifies NIGC's 
authority with respect to Class III gaming, we believe that section 3 
of the proposed bill is unnecessary. As we understand it, the proposed 
language would authorize the Commission to determine whether it should 
be preempted from regulating Class III gaming in a state based on its 
review of the regulatory activity required under tribal-state compacts. 
This review would be based on standards to be established by a newly 
created Class III Regulatory Committee. The Committee also would 
develop minimum standards for the regulation of Class III gaming.
    We see no need to develop this additional layer of bureaucracy. We 
believe NIGC has the expertise to carry out its responsibilities and 
that creation of the committee is unnecessary. Additionally, given the 
number of gaming tribes in the State of California, we believe there is 
more than enough room for both Federal and state oversight of Class III 
gaming and that preemption also is unnecessary. Our approach in 
California has been to complement NIGC's activities, rather than 
duplicate them, and we will continue to follow that approach. 
Accordingly, it is our position that only sections 1 and 2 of the draft 
bill should be enacted.
    Thank you for the opportunity to speak today on this important 
matter. I would be pleased to answer any questions you may have.

    The Chairman. Mr. Shelton, thank you very much for coming 
from California to give us your views.
    Mr. Shelton. Our pleasure.
    The Chairman. What I would like to do now is to call the 
additional witnesses to the table. Chairman Hogen and Chairman 
Shelton, if you would remain available, then I would have you 
come back and we will have questions for all of the witnesses.
    The next panel will be the Honorable Myra Pearson, the 
Chairman of the Great Plains Indian Gaming Association, the 
Chair of the Spirit Lake Tribe in Fort Totten, North Dakota, 
accompanied by Kurt Luger, Executive Director of the Great 
Plains Indian Gaming Association, Bismarck, North Dakota; the 
Honorable W. Ron Allen, Chairman, Washington Indian Gaming 
Association, and Chairman of the Jamestown S'Klallam Tribe in 
the State of Washington; the Honorable Valerie Welsh-Tahbo, 
Council Member of the Colorado River Indian Tribal Council at 
Parker, Arizona.
    I appreciate very much all of you being here. I did mention 
that Tracy Burris, who is the Commissioner of the Chickasaw 
Nation Gaming Commission in Norman, Oklahoma had an airplane 
problem this morning and is not able to be here for this 
testimony.
    We have been joined by our colleague from Hawaii, the 
former Chairman of this Committee for many, many years, Senator 
Inouye. Senator Inouye, would you like to make any comments?
    Senator Inouye. No, thank you, Mr. Chairman.
    The Chairman. I think everyone understands the contribution 
Senator Inouye has made over so many decades on this Committee, 
and we appreciate very much your being here, Senator.
    Why don't we begin with you, Myra Pearson, who is the 
Chairman of the Great Plains Indian Gaming Association. Welcome 
and why don't you proceed? We would ask what we have asked of 
the previous panel, if you would be willing to summarize in 
about 5 minutes. We have all had the opportunity to read the 
entire statement and all of the entire statement will be part 
of the permanent record.

  STATEMENT OF MYRA PEARSON, CHAIRWOMAN, GREAT PLAINS INDIAN 
                GAMING ASSOCIATION; CHAIRWOMAN, 
 SPIRIT LAKE SIOUX TRIBE; ACCOMPANIED BY KURT LUGER, EXECUTIVE 
             DIRECTOR, GREAT PLAINS INDIAN GAMING 
                          ASSOCIATION

    Ms. Pearson. Thank you and good morning, Chairman Dorgan, 
Vice Chairwoman Murkowski, and Members of the Committee.
    My name is Myra Pearson and I am Chairwoman for the Spirit 
Lake Sioux Tribe in North Dakota, and I am also the Chairperson 
for the Great Plains Indian Gaming Association, which includes 
28 Indian nations from North and South Dakota, Nebraska, Iowa 
and Kansas. Accompanying me this morning is Kurt Luger, 
Executive Director of the Great Plains Indian Gaming 
Association, and a member of the Cheyenne River Sioux Tribe, 
who has a family home on the Standing Rock Indian Reservation 
in North Dakota.
    Before I begin my comments, I would like to take a few 
seconds to recognize the troops and their families in the war, 
who are currently fighting for our freedom. I want to express 
my gratitude, and that comes from Indian Country, Senator. 
Thank you for that.
    The Chairman. Thank you very much.
    Ms. Pearson. This morning, I am here to comment on the 
discussion draft of a bill to amend IGRA. Before I comment on 
the draft, I would first like to talk about Indian gaming and 
what it is doing for the citizens of North Dakota. There is no 
question that Indian gaming has had a significant and positive 
impact on all the citizens of North Dakota. Tribal governments 
have created 2,400 direct jobs through Indian gaming. These 
jobs help families on reservations that face greater than 80 
percent unemployment rates. While the majority of these jobs go 
to tribal citizens, many help employ non-Indians living near 
the reservations.
    Tribal government payrolls contribute $121 million annually 
to the North Dakota economy. Tribal government gaming 
operations purchased over $40 million in goods and services in 
North Dakota. Without these sales, the State of North Dakota 
would lose $70 million of economic activity each year. The 
total economic impact of the Indian gaming in the State since 
1997 exceeds $1.2 billion.
    These are only some of the reasons why the tribes of North 
Dakota and throughout the Great Plains are opposed to amending 
the Indian Gaming Regulatory Act. Now, I understand that the 
primary purpose of this hearing is to address concerns with the 
regulation of Indian gaming in light of the recent Colorado 
River Indian Tribes decision.
    Mr. Chairman, I want you to know that Indian tribes in 
North Dakota and throughout the Nation are fully committed to 
strong regulation. Our tribal leaders understand that we need 
solid regulation to protect the government revenue that Indian 
gaming provides. As you know, we run relatively modest 
operations. However, in 2006 alone, tribal governments spent 
$7.4 million on tribal and State regulation and employed more 
than 325 tribal regulators and staff.
    Our tribal regulators work hand in hand with State Attorney 
Generals' offices to address Class III gaming regulatory 
issues. Our compacts provide for a strong partnership between 
the tribes and the States. Our tribe expressly adopted minimum 
internal control standards through our tribal-State compacts, 
which incorporate the NIGC MICS by reference.
    The tribes in North Dakota have worked very hard to 
preserve the relationship with the State and the State, for its 
part, has worked in good faith with the tribes. As you will see 
in our submitted testimony, Attorney General Stenjhem has 
complimented the tribal governments on our record of strong 
regulation and has cooperated with the tribal regulatory 
agencies to apprehend and prosecute those who attempt to cheat 
our casinos.
    From our point of view, we don't see a need to amend IGRA. 
Nothing changed after the CRIT decision with regard to 
regulating Indian gaming in North Dakota. Regulation of Indian 
gaming remains as strong as ever, not only in North Dakota, but 
throughout the Great Plains region.
    We believe that the Act is working as intended. However, 
when we heard that the Committee was considering amending IGRA 
to address the CRIT decision, we put it to a vote of our 28 
member tribes. The Great Plains Indian Gaming Association met 
in May of this year. The association passed a resolution 
opposing any amendments to IGRA. We think that any NIGC issues 
can be addressed through model tribal ordinance provisions 
under existing law.
    If this Committee moves forward, we will oppose any 
legislation unless several conditions are met. Congress should 
respect the existing framework of IGRA, tribal-State compacts, 
and tribal ordinances established in regulatory rules for Class 
III gaming, not Federal regulation. NIGC oversees tribal 
enforcement of tribal ordinances, so any substantive standards 
should be included in tribal ordinances.
    Congress must guarantee protection of the integrity of 
IGRA, and commit to moving legislation through regular order. 
IGRA amendments must include provisions to address the Seminole 
decision. We also request a provision to affirm Class II 
technological aids and Congress should require NIGC to work 
with tribes on a basis of government-to-government relations 
and use negotiated rulemaking.
    Finally, any amendments should grandfather existing tribal-
State compacts.
    While we appreciate that the Committee has offered the bill 
as a draft, in our view the bill does not promote strong tribal 
government as IGRA does, because it relies on Federal 
rulemaking and ignores tribal lawmaking. The existing tribal 
ordinance process should be respected. NIGC approves our tribal 
ordinances process as consistent with minimum Federal statutory 
standards and retains authority to enforce against any 
violations of IGRA, proper NIGC regulations, and tribal 
ordinances.
    Furthermore, the provision to address the Seminole case 
falls far short of what is needed to restore the balance to the 
compacting process. The discussion draft bill overturns the 
existing tribal-State compact process by giving NIGC blanket 
unchecked authority over all aspects of Class III gaming. This 
unchecked authority will endanger the future of Indian gaming 
under NIGC leadership. That doesn't honor the existing tribal-
State compact process and tribal ordinance process.
    My second point in opposition to the draft is that it will 
feed the Federal bureaucracy at the expense of local tribe and 
State decisionmaking. The bill would create a new compact 
committee within the Department of Interior and grant the NIGC 
authority to approve regulatory provisions in tribal-State 
compacts. This will further complicate the already burdensome 
compacting process and it permits the NIGC to judge the reach 
of its own jurisdiction. Under the provisions of the bill, NIGC 
would never cede authority to State regulators and tribal 
gaming commissions. It would keep its new Federal authority 
across the board.
    No other form of gaming in North Dakota is subject to 
Federal agency regulation. Indian gaming is fully regulated. 
Chairman Hogen testified before the California Assembly that 
even in light of the CRIT decision, the NIGC has the authority 
to regulate Class III gaming.
    We ask that the Committee help us to look for opportunities 
short of legislation to address NIGC concerns, and we are 
willing to work cooperatively on model tribal ordinance 
provisions that respects the existing statutory framework of 
IGRA and honors the serious commitment that both States and 
tribal governments have vested in the tribal-State compact 
process.
    In other words, please look to address any concerns within 
the existing framework of IGRA. Congress could simply call upon 
our tribal governments to maintain MICS in our tribal 
ordinances. Indeed, we can do this on a voluntary government-
to-government basis. This would preserve tribal law-making 
authority, create an objective statutory standard, and ensure 
that tribal governments are not subjected to the whims of a 
bureaucracy.
    The Chairman. Are you nearly done? I have to ask that you 
summarize.
    Ms. Pearson. OK. I am going to jump right down to the 
bottom.
    In conclusion, I want to say that Indian gaming is doing 
well. It is working and Indian gaming in North Dakota and 
throughout the Great Plains is beginning to rebuild their 
economies. It is doing something great for the Indian people 
and we hope that we can see that continue.
    Thank you very much for this opportunity, Senator Dorgan.
    [The prepared statement of Ms. Pearson follows:]

  Prepared Statement of Myra Pearson, Chairwoman, Great Plains Indian 
Gaming Association; Chairwoman, Spirit Lake Sioux Tribe; accompanied by 
 Kurt Luger, Executive Director, Great Plains Indian Gaming Association
Introduction
    Good Morning. Chairman Dorgan and Members of the Committee thank 
you for inviting me to testify today concerning the regulation of 
Indian gaming and the authority of NIGC to regulate Class III gaming.
    My name is Myra Pearson and I am Chairwoman of the Spirit Lake 
Sioux Tribe in North Dakota. I also serve as Chair of the Great Plains 
Indian Gaming Association, which includes 28 Indian nations from North 
and South Dakota, Nebraska, Iowa, and Kansas. We work closely with both 
the National Indian Gaming Association and other regional Indian gaming 
associations, including the Minnesota Indian Gaming Association.
    I am accompanied by Kurt Luger, Executive Director of the Great 
Plains Indian Gaming Association. Kurt is a member of the Cheyenne 
River Sioux Tribe but he and his family maintain their home and ranch 
on the Standing Rock Sioux Reservation in North Dakota. At Great Plains 
Indian Gaming Association, his job is to work with our Member Tribes to 
address challenges that we face in Indian gaming and to provide 
training and technical assistance to our tribal government officials, 
tribal gaming commissioners, gaming management and staff.
    At the outset, let me say that Indian gaming is working in rural 
areas of America. Indian tribes that faced 50, 60, and even 70 percent 
unemployment are now generating jobs not only for their own tribal 
members, but for neighboring non-Indians as well. I live and work in 
North Dakota so I will use the North Dakota Tribes as a representative 
example.
    In North Dakota, Indian gaming has a significant economic impact. 
Our tribal government gaming operations provide employment, essential 
tribal government revenue that funds essential services and community 
infrastructure, and generates much needed revenue for communities 
statewide through the economic multiplier effect. Our Tribes have 
created 2,400 direct, full-time jobs with pension and health care 
benefits. The payroll from the gaming operations exceeds $39 million, 
and approximately $30 million of that payroll goes to tribal members 
who live in rural North Dakota. More than 70 percent of our gaming 
employees are Native Americans and 40 percent of our employees were 
formerly unemployed and survived on welfare.
    Our tribal government payroll contributes $121 million annually to 
the total economy of the state. Tribal government gaming operations 
purchased over $40 million in goods and services within North Dakota. 
Purchases were made in 93 communities throughout the state. Without 
these sales, the state would lose $70 million of economic activity in 
cities throughout the state. We have estimated our total economic 
impact in the state since 1997 to have exceeded $1.2 billion.
    In short, we believe that it is not necessary to give the NIGC a 
new role under IGRA. They merely want to expand their agency authority, 
when our tribal governments have already adopted either the MICS 
standards through tribal ordinance, negotiated Tribal-State Compacts to 
address these issues, or both. We believe the NIGC should sit down with 
us and work out issues they have through model tribal ordinance 
provisions because that is what the existing framework of IGRA calls 
for. It is wrong to ask us to both negotiate a regulatory framework 
with the state, which equals or exceeds state law requirements for 
gaming, and then to add on a new layer of Federal bureaucracy on top of 
that. We take our Tribal-State Compact requirements seriously and they 
are working.
Indian Tribes in North Dakota
    In North Dakota, 5 tribal governments operate Indian gaming 
facilities: the Three Affiliated Tribes of Fort Berthold--Mandan, 
Hidatsa, and Arikara; the Spirit Lake Sioux Tribe, the Turtle Mountain 
Chippewa Tribe, the Standing Rock Sioux Tribe and the Sisseton-Wahpeton 
Sioux Tribe. Both the Standing Rock Sioux Tribe's reservation and the 
Sisseton-Wahpeton Sioux Tribe's reservation straddle the border with 
South Dakota.
    Three Affiliated Tribes. The Three Affiliated Tribes, Mandan, 
Hidatsa, and Arikara, operate as a unified tribal government. These 
Tribes have occupied the Missouri valley for hundreds and thousands of 
years, planted corn, squash, and beans on the fertile flood plains, and 
hunted buffalo and wild game. Living in stockaded villages, the Three 
Affiliated Tribes were devastated by smallpox epidemics in 1792, 1836, 
and 1837.
    Early on, the Three Affiliated Tribes established friendly 
relationships with the United States. They welcomed the Lewis and Clark 
expedition into their villages and assisted them on their journey. In 
1825, the Mandan, Hidatsa, and Arikara Tribes entered into Treaties of 
Friendship and Trade with the United States, which states:

        Henceforth, there shall be a firm and lasting peace between the 
        United States and the [Mandan, Hidatsa, and Arikara Tribes] . . 
        .. The United States . . . receive the [Tribes] into their 
        friendship and under their protection.

    The United States' treaty pledges of protection forms the basis for 
the Federal Indian trust responsibility. The traditional lands of the 
Mandan, Hidatsa, and Arikara encompassed an area of 12 million acres 
from eastern North Dakota to Montana and as far south as Nebraska and 
Wyoming. The Fort Laramie Treaty of 1851, congressional acts and 
executive orders reduced the Tribes' lands to 1,000,000 acres in 
western North Dakota.
    In the early 1950s, the Three Affiliated Tribes were asked to 
undertake a tremendous sacrifice by allowing the United States to dam 
the Missouri River and flood their reservation. The original tribal 
headquarters was flooded and families were moved away from the fertile 
Missouri River flood plain up on to the high prairie. When Lake 
Sakakawea was formed by the dam, the new lake divided the reservation 
into three parts. The Tribes suffered an enormous loss of natural 
resources, including the most fertile land on the reservation, their 
community was divided and the small village life that many had known 
along the Missouri River was gone. The tribal headquarters were 
relocated four miles away in New Town, North Dakota. Today, the tribal 
population is about 10,000 with about 5,000 living on the reservation.
    Spirit Lake Sioux Tribe. The Spirit Lake Sioux Tribe is composed of 
the Sisseton-Wahpeton and Yankton bands of the Dakota or Sioux Nation. 
Originally residing in Minnesota and eastern North Dakota, the Spirit 
Lake Sioux Reservation was established by the Treaty of 1867 with the 
United States. The Treaty of 1867 provides that: ``The . . . Sioux 
Indians, represented in council, will continue . . . friendly relations 
with the Government and people of the United States . . ..'' The Treaty 
recognizes the Spirit Lake Sioux Reservation as the ``permanent'' 
reservation of the Tribe.
    The Tribe has worked to develop jobs through manufacturing, 
providing Kevlar helmets and military vests to the Pentagon through 
Sioux Manufacturing Corporation, yet with a reservation population of 
over 6,000 people, the Tribe has struggled with 59 percent unemployment 
as the Defense Department budget was cut in the 1990s. The Spirit Lake 
Reservation encompasses 405 square miles north of the Sheyenne River in 
northeastern North Dakota.
    Turtle Mountain Chippewa Tribe. The Chippewa or Ojibwe people 
originally inhabited the Great Lakes Region and began to hunt and trade 
in North Dakota in the late 18th and early 19th Centuries. 
Historically, the Chippewa and the Dakota fought wars with each other, 
but they settled their differences through the Treaty of Sweet Corn in 
1858.
    In 1882, Congress set aside a 32 mile tract in Northeastern North 
Dakota for the Turtle Mountain Band of Chippewa 11 miles from the 
Canadian border. With the passing of the great buffalo herds, the 
Chippewa turned to agriculture and ranching, and faced many 
difficulties due to encroachment by settlers. Today, almost 20,000 
tribal members live on the 612 mile Turtle Mountain 
reservation, and Belcourt, North Dakota has become the 5th largest city 
in the state.
    Standing Rock Sioux Tribe. The Standing Rock Sioux Tribe is 
composed of Sitting Bull's Band, the Hunkpapa, and the Yanktonai, with 
some Black Foot Sioux on the South Dakota side. In the Fort Laramie 
Treaty of 1868, the United States pledged that: ``The Government of the 
United States desires peace and its honor is hereby pledged to keep 
it.'' The Treaty also provides that the Great Sioux Reservation was to 
serve as the ``permanent home'' of the Sioux Nation.
    Yet, in 1876, General Custer and the 7th Cavalry came out to Sioux 
country to force the Sioux tribes on to diminished reservations. In 
1889, the Federal Government once again called on the Sioux Nation to 
cede millions more acres of reservation lands, and the Standing Rock 
Sioux Reservation was established by the Act of March 2, 1889. Sitting 
Bull had opposed the land cession and in 1890, he was murdered by BIA 
police acting in concert with the U.S. Cavalry.
    The Standing Rock Sioux Reservation is composed of 2.3 million 
acres of land lying across the North and South Dakota border in the 
central area of the state. Like the Three Affiliated Tribes, the 
Standing Rock Sioux Tribe was asked to make a substantial sacrifice for 
flood control and ceded almost 56,000 acres of the best reservation 
land for Lake Sakakawea. Tribal members were removed from their 
traditional homes along the Missouri River flood plain and relocated 
well up above the river. Today, the population of resident tribal 
members is almost 10,000.
    Sisseton-Wahpeton Sioux Tribe. Located in Southeastern North Dakota 
and Northeastern South Dakota, the Sisseton-Wahpeton Sioux Tribe has a 
total enrollment of over 10,000 tribal members and a resident 
population of about 5,000 tribal members. The Tribe was originally 
located in Minnesota, but pressure from white settlers pushed the Tribe 
westward. The Treaty of 1858 with the United States established the 
Sisseton-Wahpeton Sioux Reservation, which today has approximately 
250,000 acres in North and South Dakota.
Indian Gaming in North Dakota
    Since the beginning of tribal gaming in North Dakota, the primary 
function has been to provide employment and economic development 
opportunities. Indian gaming has also provided vital funding for tribal 
government infrastructure, essential services including police and fire 
protection, education, and water and sewer services, and tribal 
programs, such as health care, elderly nutrition, and child care.
    There are five Indian gaming facilities in the state--Four Bears 
Casino & Lodge (Three Affiliated Tribes), Sky Dancer Casino & Lodge 
(Turtle Mountain), Spirit Lake Casino (Spirit Lake Sioux), Dakota Magic 
Casino (Sisseton-Wahpeton), and Prairie Knights Casino & Lodge 
(Standing Rock).
The Tribal-State Compact Process in North Dakota
    In North Dakota, tribal governments have worked hard to maintain 
our sovereign authority and territorial integrity, so that we can 
provide a life for our people on our own homelands. The Indian Gaming 
Regulatory Act acknowledges the governmental status of Indian tribes 
and seeks to promote ``tribal economic development, self-sufficiency, 
and strong tribal governments.''
    Historically, state law does not apply to Indian tribes or Indians 
on Indian lands in the absence of an express congressional delegation 
of authority. That means that under general principles of Indian 
sovereignty, Indian tribes are able to conduct gaming under tribal law, 
not state law. Yet, through the Indian Gaming Regulatory Act, Congress 
made a compromise between tribal interests and state interests and 
established the Tribal-State Compact process for the regulation of 
Class III gaming. The Senate Committee Report explains:

        It is a long and well-established principle of Federal Indian 
        law as expressed in the United States Constitution . . . that 
        unless authorized by act of Congress, the jurisdiction of State 
        governments and the application of state laws do not extend to 
        Indian lands . . .. [U]nless a tribe affirmatively elects to 
        have State laws and State jurisdiction extend to tribal lands, 
        the Congress will not unilaterally impose or allow State 
        jurisdiction on Indian lands for the regulation of Indian 
        gaming activities. The mechanism for facilitating the unusual 
        relationship in which a tribe might affirmatively seek the . . 
        . application of state laws . . . is a Tribal-State Compact.

The Administration Expressly Rejected a Primary Federal Regulatory Role
    Recognizing that the extension of State jurisdiction on Indian 
lands has traditionally been inimical to Indian interests, some have 
suggested the creation of a Federal Regulatory Agency to regulate Class 
II and Class III gaming activities on Indian lands. Justice Department 
officials were opposed to this approach, arguing that the expertise to 
regulate gaming activities and to enforce laws related to gaming could 
be found in state agencies, and thus there was no need to duplicate 
those mechanisms on a Federal level.
Senate Report No. 100-497 at 5-7 (1988)
    Accordingly, when tribal governments conduct Class III gaming, IGRA 
first requires three things: (1) a tribal gaming regulatory ordinance 
that meets minimum statutory standards, approved by the NIGC; (2) the 
Tribe is located in a state where Class III gaming is allowed for any 
purpose by any person, entity or organization; and (3) a Tribal-State 
Compact. The Tribal-State Compact provides the rules for Class III 
gaming:

        (i) the application of the criminal and civil laws of the 
        Indian tribe or the State that are directly related to, and 
        necessary for, the licensing and regulation of such activity;

        (ii) the allocation of criminal and civil jurisdiction between 
        the State and the Indian tribe necessary for the enforcement of 
        such laws and regulations;

        (iii) the assessment by the State of such activities in such 
        amounts as are necessary to defray the costs of regulating such 
        activity;

        (iv) taxation by the Indian tribe of such activity in such 
        amounts comparable to amounts assessed by the State for 
        comparable activities;

        (v) remedies for breach of contract;

        (vi) standards for the operation of such activity and 
        maintenance of the gaming facility, including licensing; and

    (vii) other subjects that are directly related to the operation of 
gaming activities.

25 U.S.C. sec. 2710(d)(3)
    Tribal gaming regulatory ordinances support the Tribal-State 
Compact provisions. Tribal gaming ordinances must include: (1) the 
tribe has sole ownership of the gaming facility; (2) net revenues are 
used first and foremost for essential government purposes and tribal 
infrastructure; (3) annual audits are provided to NIGC (including 
independent review of contracts in excess of $25,000); (4) standards 
for construction and maintenance of the facility; and (5) a background 
check and licensing system for management and key employees. The tribal 
ordinance process is intended to provide a measure of respect for 
tribal law-making authority, so the NIGC can only disapprove of a 
tribal ordinance if it does not meet the statutory criteria.
North Dakota Tribal-State Relations
    In North Dakota, both our Tribes and the States have taken the 
Tribal-State Compact very seriously. Our first Tribal-State Compacts 
were approved in 1992 and they were renewed in 1999. We follow a broad, 
inclusive process of negotiation where all 5 Tribes work together and 
we negotiate with the Executive Branch, including the Governor's office 
and the Attorney General. The State Senate Majority and Minority 
Leaders and the State House Majority and Minority Leaders are invited 
to sit in on our compact negotiation meetings. The Tribes participate 
in six public hearings throughout the state to gather public input. 
Then our Tribal-State Compacts are approved through the normal 
legislative process, including committee hearings and approval by a 
vote of the State Legislature.
    All of the North Dakota tribes have worked to maintain positive 
government-to-government relationships with the State of North Dakota. 
We meet every 2 years with the same group of state officials that 
negotiate Tribal-State Compacts to review tribal progress and any 
regulatory or implementation issues that may arise.
    Our Tribes expressly adopted Minimum Internal Control Standards 
through our Tribal-State Compacts--which incorporate the NIGC MICS by 
reference:
Minimum Internal Control Standards
        ``Tribes shall abide with such Minimum Internal Control 
        Standards as are adopted, published, and finalized by the 
        National Indian Gaming Commission and as may be in current 
        effect.''

    The State Attorney General is vested with authority to regulate 
gaming under state law, so Attorney General has expertise in this area:

        The State Attorney General regulates the State Lottery, horse-
        racing and charitable gaming, alcoholic beverages, tobacco 
        retailers, enforces consumer protection laws, and operates the 
        Bureau of Criminal Investigations. The Attorney General's 
        Gaming Division regulates, enforces and administers charitable 
        gaming in North Dakota. The division provides training, 
        performs audits and investigations of gaming organizations; 
        reviews gaming tax returns; issues administrative complaints; 
        conducts criminal history record checks of gaming employees and 
        Indian casino employees; and ensures compliance with tribal-
        state casino gaming compacts.

    The Attorney General's office works with our tribal gaming 
commissions to address any significant issues that arise in Class III 
gaming conducted pursuant to our compacts. Our compacts provide: (1) 
GAAP and IGRA standards for accounting; (2) regulation, testing and 
reporting for electronic machines to the state; (3) regulation for 
table games; (4) background checks conducted by the State Attorney 
General's office and licensing standards for our tribal gaming 
commissions; and (5) random inspections by the State Attorney General's 
office and tribal gaming commissions. The Tribes in North Dakota have 
worked very hard to preserve a strong relationship with the State, and 
the State for, its part, has worked in good faith with the Tribes.
    In North Dakota, tribal governments employ more than 325 tribal 
regulators and staff. In 2006, tribal governments spent $7.4 million on 
tribal and state regulation of Indian gaming in North Dakota. That's 
$1.48 million per tribal government and we run relatively modest 
operations. We just had our biennial meeting with state officials and 
no regulatory issues or deficiencies were identified by any party. The 
Attorney General has said that his office is comfortable that we have 
achieved our original intention to create a safe, secure and effective 
tribal-state regulatory system.
    Attorney General Stenjhem has complimented the tribal governments 
on our record of strong regulation and has cooperated with the tribal 
regulatory agencies to apprehend and prosecute those who attempt to 
cheat our casinos. The Attorney General has recognized that Indian 
gaming has created important jobs and generated vital revenue for 
tribal self-government. He made it clear that he is proud that the 
State has not asked for revenue sharing. State officials in North 
Dakota know that tribal governments have many unmet needs and it helps 
the whole state, when tribal governments have a way to create jobs and 
generate essential governmental revenue.
Summary of the Discussion Draft
    Senator Dorgan's bill would amend IGRA to grant the NIGC the 
following authority over Class III gaming:

        1. To monitor Class III gaming conducted on Indian lands on a 
        continuing basis;

        2. To inspect and examine all premises located on Indian lands 
        on which Class III gaming is conducted; and

        3. To demand access to and inspect, examine, photocopy, and 
        audit all papers, books, and records respecting gross revenues 
        of Class III gaming conducted on Indian lands and any other 
        matters necessary to carry out the duties of the Commission 
        under this chapter.

    By granting the NIGC this new authority, Senator Dorgan's bill 
would overturn the Federal Court's decision in Colorado River Indian 
Tribes, which reflects the correct understanding of existing law. As a 
result, NIGC would then argue that its rulemaking authority for Class 
III gaming has increased.
    The bill also calls for the establishment of a new Class III 
Regulatory Committee made up of regulators with either 1 year 
experience in regulating Class III gaming or at least 3 years 
experience at a tribal gaming operation. This Committee will be tasked 
with developing ``minimum standards for the regulation of Class III 
gaming,'' which could cover anything including scope of games, bet and 
wager limits, hours of operation, etc. In other words, this new Federal 
regulatory authority--although couched as ``minimum standards''--would 
actually completely duplicate the issues already covered under our 
Tribal-State Compacts required by existing law.
    The bill requires the NIGC to then establish a process for 
certifying that tribes meet the minimum standards developed by this new 
committee. The draft bill also provides tribes with the ability to 
``opt-out'' of the scheme if NIGC ``certifies that the regulatory 
activity required under the Tribal-State compact meets the standards 
established by the Class III Regulatory Committee.'' Actual experience 
shows that the NIGC would not cede jurisdiction willingly. For almost 
20 years, the NIGC has not done so for Class II gaming under the self-
regulation provisions.
    Finally, the Senator's proposed bill appears to provide for a 
``Seminole fix.'' However, the proposal does not address the States' 
11th Amendment immunity to suit and is far short of the remedy needed 
to truly address the imbalance in Tribal-State compact negotiations.
Problems With the Discussion Draft
    First, we are concerned that the NIGC itself has failed to comply 
with the NIGC Accountability Act of 2006, enacted by Congress last year 
as part of Public Law No. 109-221 (2006). That Act increases NIGC 
authority to impose regulatory fees on tribal governments of .080 
percent of gross Indian gaming revenues and requires NIGC to establish 
a 5 year plan, including a technical assistance and training program, 
in consultation with tribal governments. The NIGC is using its 
increased fee authority to raise fees to increase its personnel levels, 
yet the NIGC has not begun the consultations mandated by the statute. 
Before new legislation is introduced, we believe that Congress should 
ensure that NIGC has fulfilled the mandate of Public Law No. 109-221. 
Proper implementation of Federal technical assistance could minimize or 
eliminate the need for legislation.
    Second and most importantly, IGRA Amendments are not necessary at 
this time. As our example from North Dakota shows, Tribes already have 
strong regulatory rules in place through Tribal-State Compacts and 
tribal ordinances. We have worked hard to develop a working 
relationship with the state and our compacts include reference to state 
law and practice as well as the NIGC MICS. In North Dakota, the Tribal-
State Compact negotiation process works well, without the intervention 
of new Federal rules or agencies.
    The NIGC does not need new authority to work with us in North 
Dakota. We already have tribal gaming regulatory ordinances that meet 
IGRA's minimum statutory standards and have the approval of the NIGC. 
(Our Tribal-State Compacts also require that our tribal gaming 
ordinance be at least as stringent as the compacts.) Under IGRA, 25 
U.S.C. sec. 2713, the NIGC has authority to come to our facilities and 
meet with the tribal gaming commission to ensure that our tribal 
ordinances are enforced. Section 2713 provides:

        [T]he Chairman shall have authority to levy and collect 
        appropriate civil fines, not to exceed $25,000 per violation, 
        against the tribal operator of an Indian gaming or a management 
        contractor engaged in gaming for any violation of this chapter, 
        any regulation prescribed by the Commission . . . or tribal 
        regulations, ordinances, or resolutions approved under section 
        2710 or 2712 of this title.

    If a Civil fine is not sufficient, the Chairman may issue a 
temporary closure order. If the problem is not resolved, the Chairman 
may then issue a permanent closure order. There has never been a 
permanent closure order issued in the Great Plains because Tribes have 
always worked with the NIGC on the rare occasion when a temporary 
closure order was issued.
    Our tribal gaming ordinances are incorporated by reference into our 
compacts, so the State Attorney General also has enforcement authority 
for violations of our tribal regulatory ordinance. We work 
cooperatively with the Attorney General, so generally our tribal gaming 
commissions have an opportunity to resolve the issue after notifying 
the Attorney General. Then we notify the Attorney General of the 
resolution.
    It would complicate our Tribal-State Compact negotiations if the 
NIGC were given new authority to issue Federal regulations for Class 
III Indian gaming. That would happen if the NIGC were given authority 
to ``monitor'' Class III gaming on a ``continuing basis,'' as the draft 
bill recommends, because it would overturn the Colorado River Indian 
Tribes decision and trigger the NIGC's existing rulemaking power. 
Adding in a new Department of Interior Committee to develop MICS 
regulations would just be a duplication of existing efforts and 
promotes wasteful bureaucracy. Furthermore, the bill would leave the 
NIGC to judge the reach of its own jurisdiction, and it is not likely 
to give deference to our Tribal-State system since the Interior 
Committee will be developing new standards.
    If the Senate Committee wants to give the NIGC authority to 
regulate Class III Indian gaming, then it should do away with the 
Tribal-State Compact process and take the State out of the picture. Our 
guess is that the Committee does not want to do that because our State 
Governor, Attorney General, and State Legislature have invested a lot 
of time and effort under the current Tribal-State Compact system.
    Another question arises. NIGC seems to be seeking expanded 
authority for Class III gaming--is the Senate going to treat all gaming 
fairly and adopt a policy of Federal oversight for other gaming. 
Working with the North Dakota Attorney General we have at least as good 
a system as any state licensed gaming, so why should we be required to 
have more Federal regulation than state licensees?
Alternative Legislative Provisions
    If the Committee decides to go forward despite our objections, then 
we strongly believe that it should avoid new Federal rulemaking that 
would interfere with Tribal-State Compacts. Instead, Congress should 
simply call upon our tribal governments to maintain MICS in our tribal 
ordinances. This would preserve tribal law-making authority, create an 
objective statutory standard and ensure that tribal governments are not 
subjected to the whims of a, sometimes, arbitrary bureaucracy. At 
times, it seems as though the NIGC writes new rules just to keep busy.
    If the Committee goes forward with legislation requiring Tribes to 
call upon tribal governments to maintain MICS in our tribal ordinances, 
then it should also address the following issues that Tribes are 
concerned about:

   Seminole Fix--Provide access to secretarial procedures in 
        lieu of compact when a state raises and 11th Amendment defense 
        to good faith negotiation. While the proposed bill appears to 
        provide for a ``Seminole fix,'' the proposal does not address 
        the States' 11th Amendment immunity to suit. This is far short 
        of the remedy needed to restore the imbalance in Tribal-State 
        compact negotiations;

   Class II Technologic Aids--Affirm the IGRA and Federal Court 
        of Appeals decisions that allow the use of technologic aids for 
        Class II gaming;

   Grandfather existing Tribal-State Compacts and Grandfather 
        Tribal Ordinances that already address the MICS; and

   Require NIGC to work with Tribes on a government-to-
        government basis, including negotiated rulemaking with tribal 
        governments.

Conclusion
    Instead of looking to Congress to legislatively overturn this 
decision, the NIGC should rely on its ability to provide technical 
assistance to Tribal regulators to fulfill any perceived gaps in its 
authority. Increased technical assistance and consultation by the NIGC 
will avoid the need for any amendments to the Indian Gaming Regulatory 
Act.
    Naturally, if legislation goes forward, we ask that the Senate 
Committee on Indian Affairs defend its jurisdiction to prevent 
``legislative riders'' on Appropriations bills. We are firmly opposed 
to such riders because historically they have done much mischief in 
Indian country. Indeed, it was an Appropriations ``rider'' that ended 
treaty-making with Indian tribes in 1871. Thereafter, we were relegated 
to congressional agreements. This is not asking too much, since 
Congress has pledged to do so under its procedural reform efforts. We 
also ask that the Committee proceed in a deliberative manner, with 
hearings after any bill is introduced, and such a bill should move as a 
technical bill through regular order on the unanimous consent calendar. 
IGRA should not be subject to amendments in an ``ad hoc'' manner on the 
floor of the Senate.
    Moreover, any legislation to amend IGRA must respect the existing 
Tribal-State Class III regulatory framework and tribal law-making 
authority. We have worked too hard to fulfill IGRA's mandates to see 
the existing framework of the Act overturned. The Federal Court ruling 
in CRIT simply held that the NIGC may not draw up new Federal standards 
for the operation of Class III Indian gaming over and above Tribal-
State Compacts. The Federal Court left in place the original 
understanding of IGRA and that understanding should be maintained. Any 
amendments can rest on tribal ordinances, which respect tribal law-
making. We reject Federal regulatory mandates to be imposed on 
sovereigns who have worked in ``good faith'' to fulfill congressional 
purposes.
    Thank you for considering our views. We look forward to working 
with you to preserve the existing framework of the Indian Gaming 
Regulatory Act. Pidamaya.
Attachments
           State of North Dakota Office of Attorney General
                                   Bismarck, ND, September 18, 2006
Hon. Byron L. Dorgan,
Chairman,
Senate Committee on Indian Affairs,
Washington, DC.

Dear Senator Dorgan:

    Provisions of S. 2078 fail to recognize that some tribal/state 
gaming compacts and some tribal/state relationships adequately address 
problems the bill seeks to solve. In particular, the bill significantly 
expands the National Indian Gaming Commission's (NIGC) authority to 
regulate Class III gaming.
    I cannot comment on the effectiveness of gaming oversight in other 
states, and whether there is a need for added regulation, but I do know 
about the efforts my office undertakes in working with tribal casinos 
here in North Dakota. North Dakota gaming compacts provide for 
considerable regulation of Class III gaming. Another regulatory layer 
is questionable, at least in North Dakota.
    The Senate Report 109-261 that accompanies S. 2078 states that 
``many Indian tribes and states developed sophisticated regulatory 
frameworks to oversee tribal gaming operations,'' and describes such 
frameworks as ``effective.'' North Dakota has developed an effective 
regulatory regime overseeing Class III gaming. Furthermore, and of 
equal importance, when regulatory issues arise, North Dakota tribes 
cooperate with state officials. In my experience, issues are routinely 
resolved promptly and effectively.
    If the Senate finds a need to expand NIGC's regulatory authority, I 
suggest an exception should be considered for those tribes being 
adequately regulated under their gaming compacts. If not, the bill will 
burden an agency with unnecessary work, subject well-run casinos to 
unnecessary oversight, and compromise tribal self-government and the 
compact process.
    I also question provisions in the S. 2078 giving NIGC authority to 
review ``gaming related contracts'' that tribes may wish to enter. The 
paternalism of these provisions expresses a policy long ago abandoned 
by the Federal Government. In my discussions and negotiations with 
tribal officials on a variety of matters, they bring sophisticated, 
talented resources to the table. They are able to negotiate contracts 
without Federal oversight.
    I appreciate an opportunity to offer some thoughts on efforts in 
Congress to strengthen oversights of Indian gaming.
        Sincerely,
                                           Wayne Stenehjem,
                                                  Attorney General.
                                 ______
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 

    The Chairman. Thank you very much. We appreciate your 
testimony.
    Next, we will hear from the Honorable Ron Allen, Chairman 
of the Washington Indian Gaming Association. Chairman Allen, 
you may proceed.

        STATEMENT OF W. RON ALLEN, CHAIRMAN, WASHINGTON 
            INDIAN GAMING ASSOCIATION AND CHAIRMAN, 
                   JAMESTOWN S'KLALLAM TRIBE

    Mr. Allen. Thank you, Mr. Chairman. It is always an honor 
to come before this Committee to testify on a variety of 
legislative issues that affect our tribes across the United 
States.
    I am the Chair of the Jamestown S'Klallam Tribe up in 
Western Washington. I have been Chair for 30 years, and I have 
been very active in Indian Country on many levels. I do want to 
thank you and Senator Murkowski and Senator Inouye and the 
others who have been very strong champions for us over the 
years.
    The question of the day here is, and you have our testimony 
that identifies some of the issues that concern us and that are 
in the testimony that we have identified with our colleagues in 
Washington State. But the question of the day is should IGRA be 
amended. Quite frankly, in my opinion, all legislation needs to 
be amended. There isn't any perfect legislation out there. 
There never was and never will be.
    We come to you regularly talking about legislation that 
needs to be improved. The Health Care Improvement Act, you know 
of all the different provisions that we have talked about in 
that Act alone. The SDA, the Self-Determination Act, we 
improved with the self-governance legislation. And these pieces 
of legislation all are about empowering the tribes to exercise 
our sovereignty, our governmental authority, our jurisdiction 
as tribal governments so that we can control our destiny, as 
you and the Senator have advocated.
    So with regard to gaming, the jury is already in with 
regard to its success. It is successful and you know it. You 
know it is true all across Indian Country. Are there blemishes 
and are there issues out there? Yes, there are issues out 
there, and you can say that everywhere. You can say that with 
regard to the gaming industry in Nevada. You can say it in New 
Jersey or Louisiana. You can say it everywhere.
    So gaming has its challenges like any other industry. Is it 
being well regulated? The answer to that is yes. I think that 
it is a credit to our tribal governments. It is a credit to you 
in Congress who have empowered the tribes and have elevated our 
governmental capacity to be able to administer our 
responsibilities and regulate these affairs. We all care about 
the integrity of the gaming industry on our reservations, and 
we all care about it because no one is more beat on by the 
public or the general perception than Indian Country. Nobody is 
beat up by the general public and media more than we are.
    And so we have a great interest in this legislation, in the 
integrity of our gaming, and our right to be able to advance 
its agenda. Nothing Congress or the State or anyone has ever 
done has made a difference in our community like gaming. So we 
want to protect our rights.
    But we also want to be treated fairly, and we want to be 
treated fairly with respect to our ability to engage in 
regulatory oversight over the game. We are the primary 
regulators and we have done an absolutely fabulous job. 
Chairman Hogen has pointed out the hundreds of millions of 
dollars we spend on regulation at all levels.
    So we are doing our job. The compacts that we are 
negotiating, not all compacts address this thing, but the 
majority of the compacts are addressing exactly what IGRA 
envisions. IGRA intended that the States would have a role. It 
was recognizing the sovereignty of the State and their 
responsibility with regard to their relationship with the 
tribes as it applies to this industry. So it envisioned this 
relationship and it envisioned that it would be addressing 
those internal controls. My testimony talks about how it is 
successful out in Washington State, and I know it is successful 
elsewhere as well.
    So the bottom line is as we approach legislation, the issue 
is what should be corrected. How much power should NIGC have? 
We do not want to empower them with the provision that 
basically says that the tribes and the States have to come to 
this agency and say ``mother may I.'' We do not want that kind 
of legislation, because they could go awry. We have examples 
where, quite frankly, we believe that they have misused their 
authority.
    So the issue is what is their role. We have to be very 
careful when we design legislation that amends a regulatory 
oversight's authority and what that role should be so that it 
is not unnecessarily burden our industry. That is just 
reasonable. I think that with regard to this matter, are we 
doing the same thing to Nevada? Are we doing the same thing to 
New Jersey? No, we are not. I can tell you that we would need a 
bigger room if they were at the table with the same matter.
    But the issue here, Senator, is what are we going to do 
about it. I think that your draft legislation poses some 
questions. I would remind you that Senator Inouye had proposed 
a couple of amendments in the last session with the same issue 
that was being raised with regard to the Seminole case, which 
has to be fixed so the States don't have the right to not in 
good faith negotiate with the tribes, so that they can exercise 
their rights. So that issue is out there to be corrected.
    What are the conditions? You have a number of conditions 
that you have identified in some sections in your proposed bill 
that need to be thoroughly discussed in terms of how would it 
really act, how would it really function in the field at the 
tribes and/or the States interface with this agency with 
respect to the quality and the integrity of these internal 
controls.
    So the bottom line here is are we supportive of amendments 
to the Act? Yes, but we have to be very careful. I will close 
with, it is not just being careful about the empowerment of 
NIGC; it is also being careful about all those other 
mischievous pieces of legislation that want to be attached to 
these proposed legislative amendments to put more tentacles 
around Indian Country, to continue to badger us with a 
historical paternalism that we have been experiencing.
    We can't go down that road.
    Thank you, Senator.
    [The prepared statement of Mr. Allen follows:]

Prepared Statement of W. Ron Allen, Chairman, Washington Indian Gaming 
          Association and Chairman, Jamestown S'Klallam Tribe
    Senator Dorgan, Members of the Committee, my name is Ron Allen and 
I am Chairman of the Jamestown S'Klallam Tribe of Sequim, Washington 
and Chairman of the Washington Indian Gaming Association, an 
organization of 25 federally recognized tribes who have entered into 
gaming compacts with the State of Washington and one tribe currently in 
negotiations. I also serve on the Board of the National Congress of 
American Indians. I am here today, on very short notice, to discuss a 
discussion draft of amendments to the Indian Gaming Regulatory Act.
    When the original IGRA legislation was being considered by 
Congress, Indian tribes fought very hard to preserve, to the greatest 
extent possible, our sovereign right of self-government and our right 
to regulate our own affairs. State governments fought very hard to 
include a regulatory role for themselves over gaming in Indian Country 
within their borders. The resulting Act was a compromise which 
established a regulatory framework between Tribal, State, and Federal 
governments.
    IGRA clearly delineated Class II gaming regulation as a matter for 
Tribal gaming agencies and the National Indian Gaming Commission and 
reserved Class III gaming regulation as a matter for Tribal-State 
gaming compacts.
    Nonetheless, we are here today because the D.C. Court of Appeals 
addressed something that states attorneys general and tribes thought 
they already knew--whether or not the Indian Gaming Regulatory Act gave 
the National Indian Gaming Commission authority to promulgate 
regulations establishing mandatory operating procedures for Class III 
gaming in tribal casinos. The court said it did not. We agree.
    We do not disagree with NIGC over the importance of gaming control 
standards or regulations. We simply agree with the court--that Congress 
intended that the state-tribal compact process would govern the 
operation of Class III gaming and that is how the Indian Gaming 
Regulatory Act (IGRA) was constructed. Every gaming compact for a 
tribal casino in Washington requires minimum internal control standards 
which are negotiated between each Tribal gaming agency and the 
Washington State Gambling Commission. I have attached two exhibits to 
my testimony from the compacts which list the subject areas for 
operational standards for table games and the tribal lottery system 
(electronic games).\1\,\2\ These cover all of the areas that 
NIGC is concerned about--accounting, audits, cash handling, security, 
surveillance, game standards, and player relations. These are just the 
Table of Contents--the actual documents are huge, and written 
specifically for each gaming facility.
    In addition, each tribal gaming operation is subject to an annual 
audit by an independent certified public accountant, in accordance with 
the auditing and accounting standards for audits of casinos of the 
American Institute of Certified Public Accountants.
    The bill under consideration today, ``Indian Gaming Regulatory Act 
Amendments of 2007,'' would create a confusing, unnecessary, and 
ultimately conflicting construction of regulations between three 
government jurisdictions--Tribal, State, and Federal.
    And it is completely unnecessary. NIGC has substantial existing 
authority: IGRA authorizes the NIGC to review and approve tribal gaming 
regulatory laws, review tribal background checks and gaming licenses, 
receive independent annual audits of tribal gaming facilities, approve 
management contracts, and work with tribal gaming regulatory agencies 
to promote tribal implementation of tribal gaming regulatory 
ordinances.
    In Colorado River Indian Tribes v. NIGC, which has inspired this 
bill, the court held that IGRA does not authorize the NIGC to 
promulgate or enforce Minimum Internal Control Standards (MICS) over 
Class III Indian gaming. NIGC apparently believes that a national 
standard is necessary for every aspect of Indian gaming. Senator 
Dorgan, let me give you an example of NIGC's MICS cited by the court:

        ``The regulations take up more than eighty pages in the Code of 
        Federal Regulations. No operational detail is overlooked. The 
        rules establish standards for individual games, see, e.g., 25 
        C.F.R. Sec. 542.7, .8, .10, customer credit, id. Sec. 542.15, 
        information technology, id. Sec. 542.16, complimentary 
        services, id. Sec. 542.17, and many other aspects of gaming. To 
        illustrate, tribes must establish ``a reasonable time period'' 
        not to exceed 7 days for removing playing cards from play, but 
        ``if a gaming operation uses plastic cards (not plastic-coated 
        cards), the cards may be used for up to three (3) months if the 
        plastic cards are routinely inspected, and washed or cleaned in 
        a manner and timeframe approved by the Tribal gaming regulatory 
        authority.'' Id. Sec. 542.9(d), (e).

    We know that cleaning or replacing playing cards in order to 
prevent players from ``marking'' cards and thereby cheating is an 
important operating procedure, but is a national standard really 
necessary to address this? Why has NIGC established 7 days to replace 
cards? What if the tribal gaming agency and the state gaming agency 
said 10 days? We would be out of compliance. Why aren't we considering 
standards for all the commercial casinos as well? Wouldn't the Nevada 
Gaming Commission benefit from similar Federal oversight that this bill 
would place on the Washington State Gambling Commission and every 
tribal gaming commission in the state? Or would it be more reasonable 
to implement internal controls in a Tribal-State co-regulatory process 
that IGRA created? We think it would.
    All of the operational areas that NIGC is concerned about are 
addressed in the internal control standards developed jointly between 
the Washington Tribal gaming agencies and the Washington State Gambling 
Commission. They are specific to the games and the gaming facilities. 
They are updated for changes in technology or new game play features, 
in a process that is continuous and ongoing. In fact, new internal 
controls are being written by our regulators as we discuss this, to 
accommodate new game features of the compact amendments for 27 tribes 
which were approved by the Department of Interior on May 30, 2007.
    I would like to include for the record copies of letters written by 
the Chairman of Washington State Gambling Commission, Curtis Ludwig, 
and Washington Governor Christine Gregoire addressing this same issue 
(MICS), but in the context of S. 2078 introduced by Senator McCain last 
year\3\,\4\,\5\ (attached).
    Governor Gregoire (who is also a former three-term state attorney 
general) states in her March 28, 2006 letter to Sen. McCain,

        ``[a]n additional level of enforcement will negatively impact 
        our state's long-standing relationship with the tribes 
        regarding Class III gaming, without providing any substantial 
        benefit, and will interfere in our state's authority to 
        regulate gambling activity.''

    Washington Gambling Commission Chairman Curtis Ludwig writes on 
January 13, 2006:

        ``Pursuant to the compacts with Washington Tribes, Commission 
        staff has been involved with Class III gaming regulation for 
        more than 13 years. Our Tribal Gaming Unit has 19 agents, whose 
        work is solely devoted to tribal gaming, and an Electronic 
        Gambling Lab that tests and approves all Class III electronic 
        games offered in tribal casinos.

        The Commission believes that an additional layer of regulation 
        is unnecessary for Washington's Tribal casinos. Although the 
        MICS provide a starting point for internal controls and should 
        be available as a resource for states and Tribes, they are not 
        specific to Washington gaming. Moreover, they do not provide 
        regulations for some critical gaming activities, such as our 
        State's electronic Tribal Lottery System, which we regulate 
        according to a detailed, 46-page appendix to each compact.''

    Senator Dorgan, the Washington State Gambling Commission says that 
the national standards in NIGC's MICS are not specific to Washington 
gaming and do not cover some critical gaming activities. However, the 
internal controls established by the Tribal gaming Agencies and the 
State gaming agency are specific and address all gaming activities.
    And yes, Senator, I do understand that the draft language of this 
bill includes an ``opt-out'' clause giving NIGC the option of excusing 
from NIGC regulation, a tribe with a tribal-state compact which 
includes minimum standards that meets the standards established by 
NIGC. So, if you follow that circular reasoning, NIGC still sets the 
standards, regardless of the standards that the tribal and state 
regulators establish in the compacts. The only language that tribes 
would support is if the option to ``opt-out'' would be a decision of 
the tribe, not NIGC. As I said before, we believe that internal 
controls should be specific to games, technology, and facilities, and 
that can best be done by tribal and state regulators working together.
    Finally, we have not seen any record established that shows that 
Indian tribes are incapable of regulating their own affairs. We have 
seen no record established that there is a crisis or scandal in Indian 
gaming operations. The amendments in this discussion draft are 
unnecessary. Thank you.
Attachments
        1. Standards of Operation and Management for Class III 
        Activities.

        2. Rules Governing Tribal Lottery Systems.

        3. Letter from Governor Gregoire to Sen. John McCain, March 28, 
        2006.

        4. Letter to Governor Gregoire from Gambling Commission 
        Chairman Curtis Ludwig, January 13, 2006.

        5. Chart of Gaming Jurisdiction Subject areas by Washington 
        State Gambling Commission, April 2006.


  Appendix A--Confederated Tribes of The Chehalis Reservation (State of
 Washington)--Standards of Operation and Management for Class III Gaming
 
       Section                Subject Matter                 Page
 
1                     Definitions                    A-1
2                     Accounting Records             A-3
3                     System of Internal Control     A-3
4                     Forms, Records, Documents and  A-4
                       Retention
5                     Annual Audit and Other         A-5
                       Reports
6                     Cosed Circuit Television       A-6
                       System
7                     Organization of the Tribal     A-7
                       Operation
8                     Personnel Assigned to the      A-10
                       Operation and Conduct of
                       Class III Gaming Activities
9                     Cashier's Cage                 A-11
10                    Accounting Control Within the  A-12
                       Cashier's Cage
11                    Drop Boxes                     A-13
12                    Drop Boxes, Transportation To  A-14
                       and From Gaming Stations and
                       Storage in the Count Room
13                    Procedure For Exchange of      A-14
                       Checks Submitted by Gaming
                       Patrons
14                    Procedure For Depositing       A-16
                       Checks Received From Gaming
                       Patrons
15                    Procedure For Collecting and   A-16
                       Recording Checks Returned to
                       the Gaming Operation After
                       Deposit
16                    Procedure For Accepting Cash   A-17
                       at Gaming Stations
17                    Acceptance of Gratuities From  A-17
                       Patrons
18                    Adoption of Rules For Class    A-18
                       III Activities
19                    Station Inventories and        A-20
                       Procedure For Opening
                       Stations For Gaming
20                    Procedure For Distributing     A-21
                       Gaming Chips and Coins to
                       Gaming Stations
21                    Procedure For Removing Gaming  A-24
                       Chips and Coins From Gaming
                       Stations
22                    A. Procedure For Shift         A-26
                       Changes at Gaming Stations
                      B. Procedure For Closing       A-27
                       Gaming Stations
23                    Count Room: Characteristics    A-29
24                    Procedure For Counting and     A-30
                       Recording Contents of Drop
                       Boxes
25                    Signatures                     A-33
 

                                 ______
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 
                                 ______
                                 
                 State of Washington Office of the Governor
                                        Olympia, WA, March 28, 2006
Hon. John McCain,
Chairman,
Senate Committee on Indian Affairs,
Washington, DC.

Dear Senator McCain:

    I am writing to share my concerns and those of the Washington State 
Gambling Commission (WSGC) about action the Senate Indian Affairs 
Committee will soon take on S. 2078 regarding the Indian Gaming 
Regulatory Act (IGRA).
    A critical component of IGRA is the local control that it provides 
for negotiating state-tribal gaming compacts, particularly in relation 
to Class III gaming. Washington has entered into gaming compacts with 
27 of our state's 29 federally recognized tribes. Each compact has been 
negotiated in a government-to-government manner, taking into account 
the unique circumstances present in Washington and in the local 
communities where tribal casinos will be located.
    The WSGC has successfully regulated Class III gaming, in 
cooperation with the local tribes, for more than 13 years. The WSGC has 
a specific Tribal Gaming Unit composed of 19 agents, whose work is 
solely devoted to tribal gaming regulation. This unit has developed an 
expertise in the regulation of Class III gaming within Washington and 
works closely with each tribal gaming authority. In addition, the WSGC 
operates a state-of-the-art Electronic Gambling Lab, which tests and 
approves every Class III electronic game offered in a Washington tribal 
casino.
    Increasing the National Indian Gaming Commission (NIGC) authority 
to regulate Class III gaming infringes upon local control and is 
unnecessary, considering Washington's strong regulatory controls. The 
NIGC internal controls are not specific to Washington gaming and do not 
provide regulations for some critical gaming activities in our state. 
For example, our electronic Tribal Lottery System, which we regulate 
according to a detailed, 46-page appendix to each compact, would not be 
regulated under NIGC controls. An additional level of enforcement will 
negatively impact our state's long-standing relationship with the 
tribes regarding Class III gaming, without providing any substantial 
benefit, and will interfere in our state's authority to regulate 
gambling activity.
    I hope you will reconsider expanding the authority of the NIGC over 
Class III gaming in Washington. Our state is proud of its tribal gaming 
regulatory program and believes local control over Class III gaming is 
in its best interest, having proven successful for the past l3 years.
    Again, thank you for your consideration of this matter.
        Sincerely,
                                     Christine O. Gregoire,
                                                          Governor.

        cc: Senator Patty Murray, Washington State; Senator Maria 
        Cantwell, Washington State; and Senator Byron Dorgan, Vice 
        Chair, Committee on Indian Affairs.
                                 ______
                                 
                    State of Washington Gambling Commission
                                                   January 13, 2006
Hon. Christine Gregoire,
Washington State Governor,
Olympia, WA.

Dear Governor Gregoire:

    We are writing to seek your assistance in expressing our concerns 
regarding two current legislative efforts in Congress which would 
subject Washington Tribes to an increase in fees paid to the National 
Indian Gaming Commission (NIGC), and would authorize an unnecessary 
expansion in the regulatory authority of the NIGC. We respectfully 
request your assistance in contacting Washington's Congressional 
delegation and lobbyist regarding these problems.
    First, Senate Bill 1295, which was passed by the U.S. Senate on 
December 12, 2005, contains a provision that would authorize the NIGC 
to impose a fee on each compacted gaming Tribe not to exceed 0.080 
percent of the gross gaming revenues for all tribal gaming operations. 
Washington Tribes could pay close to $1 million in additional Federal 
regulatory fees each year under this proposal.
    Under its compacts with Washington's Tribes, regulatory enforcement 
in Tribal casinos is accomplished through a partnership between the 
Tribes and the Washington State Gambling Commission (``Commission''). 
Each Tribe is required to have its own Tribal Gaming Agency (TGA), 
independent from the Tribe, which provides on-site regulation for 
casino operations. Under the compacts, the Tribes reimburse the 
Commission for the costs that the Commission incurs in its regulatory 
work with the Tribes. The Commission incurred over $1.4 million for 
state costs to regulate Class III gaming for the l2-month period 
between October 2004 and September 2005. These costs were billed to the 
Washington Tribes. These fees do not include amounts paid by the Tribes 
for their own on-site regulatory programs.
    Second, the Commission is even more concerned about the NIGC's 
request to ``clarify its authority'' over Class III gaming activity. 
During a hearing before the Senate Committee on Indian Affairs, the 
NIGC Chairman testified that his Commission had submitted a draft bill 
to Congress to ``clarify the NIGC's authority to regulate Class III 
gaming generally, and to promulgate and enforce its MICS (Minimum 
Internal Control Standards) regulations for Class III gaming 
specifically.''
    This request was in response to the decision by the U.S. District 
Court in Washington D.C., where the court held that the NIGC's MICS for 
Class III gaming exceeded the agency's statutory authority. Colorado 
River Indian Tribes v. National Indian Gaming Commission, (2005 WL 
2035946). The court recognized that, under the Indian Gaming Regulatory 
Act, Class III gambling is subject to regulation by Tribes and states 
pursuant to the provisions of compacts between the Tribes and states. 
The NIGC has extensive regulatory authority over Class II gaming, but 
none over Class III gaming.
    Pursuant to the compacts with Washington Tribes, Commission staff 
has been involved with Class III gaming regulation for more than 
thirteen years. Our Tribal Gaming Unit has 19 agents, whose work is 
solely devoted to tribal gaming, and an Electronic Gambling Lab that 
tests and approves all Class III electronic games offered in tribal 
casinos.
    The Commission believes that an additional layer of regulation is 
unnecessary for Washington's Tribal casinos. Although the MICS provide 
a starting point for internal controls and should be available as a 
resource for states and Tribes, they are not specific to Washington 
gaming. Moreover, they do not provide regulations for some critical 
gaming activities, such as our State's electronic Tribal Lottery 
System, which we regulate according to a detailed, 46-page appendix to 
each compact.
    Because of the strong regulatory structure in our gaming compacts, 
the Commission believes that fee increases and an additional level of 
internal control enforcement will negatively impact the Tribal-State 
relationship without providing any substantial benefit. If these 
proposals are passed in either pending or future legislation, the 
Commission would strongly urge that states like Washington that have 
effective Tribal-State regulatory programs be exempted from such 
requirements. We respectfully request your assistance in contacting 
Washington's Congressional delegation and lobbyist regarding these 
concerns.
        Sincerely,
                                             Curtis Ludwig,
                                                  Commission Chair.

        cc: Senator John McCain, United States Congress--Arizona; 
        Senator Maria Cantwell, United States Congress--Washington 
        State; Senator Patty Murray, United States Congress--Washington 
        State; Representative Jay Inslee, United States Congress--1st 
        Congressional District; Representative Rick Larsen, United 
        States Congress--2nd Congressional District; Representative 
        Brian Baird, United States Congress--3rd Congressional 
        District; Representative Doc Hastings, United States Congress--
        4th Congressional District; Representative Cathy McMorris, 
        United States Congress--5th Congressional District; 
        Representative Norm Dicks, United States Congress--6th 
        Congressional District; Representative Jim McDermott, United 
        States Congress--7th Congressional District; Representative 
        Dave Reichert, United States Congress--8th Congressional 
        District; Philip Hogen, Chairman--National Indian Gaming 
        Commission; Randy Sitton, Regional Director--Region 1--National 
        Indian Gaming Commission; and John Lane, Governor's Executive 
        Policy Office--Washington State Gambling Commission.
                                 ______
                                 
                                 
                                 

    The Chairman. Mr. Allen, thank you very much for being with 
us, and your testimony today.
    Next, we will call on the Honorable Valerie Welsh-Tahbo, I 
hope I have pronounced that correctly, who is a Council Member 
of the Colorado River Indian Tribes Tribal Council in Parker, 
Arizona. You may proceed.

  STATEMENT OF VALERIE WELSH-TAHBO, COUNCIL MEMBER, COLORADO 
               RIVER INDIAN TRIBES TRIBAL COUNCIL

    Ms. Welsh-Tahbo. Thank you, Senator. Good morning, Mr. 
Chairman and Members of the Committee. Thank you for providing 
the Colorado River Indian Tribes with the opportunity to 
testify this morning. My name is Valerie Welsh-Tahbo. I am of 
the Chiricahua-Apache Tribes, as well as the Mojave Tribe, 
which is the indigenous nation of the Colorado River Indian 
Reservation. I am currently the tribal Secretary.
    At the outset, I wish to express our gratitude for your 
willingness to work with the tribes in exploring a possible 
amendment of IGRA. We understand that the Federal court's 
decision in our litigation against the National Indian Gaming 
Commission have rightly or wrongly fed the perception that 
there is a need for increased Federal regulation of Class III 
gaming.
    Before directly addressing that question, I would like to 
very briefly describe that litigation before I do that. From 
time to time, deficiencies are identified. CRIT wants to 
address comments previously made by Chairman Hogen regarding 
the length of time taken to address these deficiencies. We want 
to assure the Committee that each of these deficiencies were 
addressed as expeditiously and thoroughly as possible.
    The background of CRIT v. NIGC, as we have repeatedly 
stressed, CRIT did not seek out its challenge to the NIGC's 
regulatory authority. Like every other tribe in the Country, we 
questioned the commission's statutory authority to mandate 
Class III minimum internal control standards. When the NIGC 
began an audit of our compliance with its MICS in January of 
2001, we attempted to discuss with the audit team the statutory 
basis for its audit. Tempers flared. The audit team left with 
its audit unfinished and the NIGC issued a notice of violation 
and assessed a $10,000 fine against the tribes.
    At that point, we had no choice but to defend ourselves. 
Our defense was a simple legal position that we shared with 
most other tribes: The commission did not have the authority 
under the Indian Gaming Regulatory Act to mandate Class III 
MICS. The Federal District Court agreed with our position and 
the Court of Appeals of the District of Columbia circuit 
affirmed that decision last fall.
    As a result of those court decisions, some members of this 
Committee and others have expressed concern that their now 
exists a regulatory void, requiring the grant of increased 
powers of NIGC to regulate Class III gaming. Certainly in our 
case there is no regulatory void. CRIT's gaming activity is 
vigorously regulated by both the tribe under tribal law and by 
the State of Arizona through the mechanisms of the tribal-state 
compact required by IGRA.
    The draft bill, in considering legislation to address the 
CRIT decision, it is important to bring the discussion back to 
the limited subject of what our litigation involved and what 
the courts actually held. We did not claim that the courts did 
not hold that the NIGC has no regulatory authority over Class 
III gaming. They held only that the NIGC lacked the authority 
to impose mandatory minimal internal control standards on Class 
III gaming. Those standards regulate the details of how Class 
III games are conducted for the sole purpose of ensuring that 
gaming revenues are properly tracked and accounted for.
    The fix for the CRIT ruling, if needed at all, is quite 
narrow. Expressly authorize the commission to adopt and require 
such standards, subject to an opt-out provision for tribes 
whose tribal law and compacts are sufficiently rigorous. The 
draft bill we address today goes far beyond that limited need. 
Indeed, it would authorize the regulatory committee and the 
NIGC to develop minimum standards for the regulation of Class 
III gaming. This scope of regulation goes far beyond minimum 
internal control standards and would confer Class III 
regulatory authority that not even the NIGC has previously 
claimed or sought.
    The draft bill's grant of authority for the regulation of 
Class III gaming encompasses every aspect of the tribe's Class 
III gaming operation. It would give the NIGC the broad 
authority to adopt whatever regulation it wished, subject only 
to a requirement that it be rationally related to the purpose 
of IGRA. The elephant gun of total regulation is 
disproportionate to the perceived flea of control standards. It 
would also eliminate, for all practical purposes the regulatory 
role of the tribes and the compacting role of the States.
    It is unnecessary, overbreadth, and the draft bill also 
incorporates one of the most troubling aspects of Senate 2078 
considered by this Committee during last session. The mere 
addition of the words of ``Class III gaming'' to subsections 
2706(b)(1)(2) and (4) effectively guts the tripartite scheme of 
the statute as originally conceived by giving NIGC equal or 
preemptively superior regulatory authority over the tribes and 
the States. This seemingly straightforward amendment would set 
up the likelihood of inconsistent regulations and render much 
of the compacting process meaningless.
    We would propose instead an amendment limited to the issues 
of minimum internal controls incorporated through the existing 
ordinance approval process. We submitted proposed language to 
the Committee last year and would be happy to provide it again. 
We did also submit as part of our testimony recommendations to 
the draft bill.
    We would like to close on a positive note. We are pleased 
that the draft bill recognizes that many compacts impose 
rigorous tribal regulations and State oversight that does not 
need an additionally expensive layer of Federal activity. If 
the opt-out process contemplated by the draft bill is 
ultimately adopted, we hope to participate actively in 
formulating a procedure that fully respects the experience and 
wisdom developed by the tribes and the States and avoids 
needless intergovernmental conflict.
    I thank you again for giving CRIT the opportunity to offer 
its views on the important issue. We look forward to working 
closely with the Committee to develop a bill that 
satisfactorily addresses the issue on internal controls, 
without destroying the delicate intergovernmental balance that 
has largely worked extraordinarily well for nearly 20 years.
    Thank you, Senator.
    [The prepared statement of Ms. Welsh-Tahbo follows:]

  Prepared Statement of Valerie Welsh-Tahbo, Council Member, Colorado 
                   River Indian Tribes Tribal Council
    Good Morning Mr. Chairman and Members of the Committee. Thank you 
for providing the Colorado River Indian Tribes with the opportunity to 
testify this morning. My name is Valerie Welsh-Tahbo, and I am a member 
of the Tribal Council of the Colorado River Indian Tribes (CRIT).
    At the outset, I wish to express our gratitude for your willingness 
to work with the tribes in exploring the possible amendment of IGRA. We 
understand that the Federal courts' decisions in our litigation against 
the National Indian Gaming Commission have, rightly or wrongly, fed the 
perception that there is a need for increased Federal regulation of 
Class III gaming. Before directly addressing that question, I'd like 
very briefly to describe that litigation for those members new to this 
Committee.
Background of the CRIT v. NIGC Litigation
    As we have repeatedly stressed, CRIT did not seek out its challenge 
to the NIGC's regulatory authority. Like every other tribe in the 
country, we questioned the Commission's statutory authority to mandate 
Class III Minimum Internal Control Standards (MICS). When the NlGC 
began an audit of our compliance with its MICS in January of 2001, we 
attempted to discuss with the audit team the statutory basis for its 
audit. Tempers flared, the audit team left with its audit unfinished, 
and the NIGC issued a notice of violation and assessed a $lO,OOO fine 
against the tribe. At that point, we had no choice but to defend 
ourselves. Our defense was the simple legal position that we shared 
with most other tribes: the Commission did not have the authority under 
the Indian Gaming Regulatory Act to mandate Class III MICS. The Federal 
district court agreed with our position, and the Court of Appeals for 
the District of Columbia Circuit affirmed that decision last fall.
    As a result of those court decisions, some Members of this 
Committee and others have expressed concern that there now exists a 
regulatory void, requiring the grant of increased powers the NIGC to 
regulate Class III gaming. Certainly in our case, there is no 
regulatory void. CRIT's gaming activity is vigorously regulated by both 
the Tribe under tribal law and by the State of Arizona through the 
mechanism of the tribal-state compact required by IGRA.
The Draft Bill
    In considering legislation to address the CRIT decision, it is 
important to bring the discussion back to the limited subject of what 
our litigation involved and what the courts actually held. We did not 
claim, and the courts did not hold, that the NIGC has no regulatory 
authority over Class III gaming; they held only that the NIGC lacked 
the authority to impose mandatory minimal internal control standards on 
Class III gaming. Those standards regulate the details of how Class III 
games are conducted for the sole purpose of ensuring that gaming 
revenues are properly tracked and accounted for.
    The ``fix'' for the CRlT ruling, if needed at all, is quite narrow: 
expressly authorize the Commission to adopt and require such standards, 
subject to an opt-out provision for the tribes whose tribal law and 
compacts are sufficiently rigorous.
    The Draft Bill we address today goes far beyond that limited need. 
Indeed, it would authorize the Regulatory Committee--and the NIGC--to 
develop ``minimum standards for the regulation of Class III gaming.'' 
This scope of regulation goes far beyond minimum internal control 
standards, and would confer Class III regulatory authority that not 
even the NIGC has previously claimed or sought. The Draft Bill's grant 
of authority ``for the regulation of Class III gaming'' encompasses 
every aspect of a tribe's Class III gaming operation. It would give the 
NIGC the broad authority to adopt whatever regulation it wished, 
subject only to a requirement that it be rationally related to the 
purposes of IGRA. The elephant gun of total regulation is 
disproportionate to the perceived flea--minimum internal control 
standards. It would also eliminate for all practical purposes the 
primary regulatory role of the tribes and the compacting role of the 
states.
    In its unnecessary overbreadth, the Draft Bill also incorporates 
one of the most troubling aspects of S. 2078, considered by this 
Committee during the last session. The ``mere'' addition of the words 
``and Class III gaming'' to subsections 2706(b)(1), (2) and (4) 
effectively guts the tripartite scheme of the statute as originally 
conceived. By giving the NIGC equal (or preemptively superior) 
regulatory authority with the tribes and the states, a seemingly 
straightforward amendment would set up the likelihood of inconsistent 
regulations and render much of the compacting process meaningless.
    We would propose instead an amendment limited to the issue of 
minimum internal controls, incorporated through the existing ordinance 
approval process. We submitted proposed language to the Committee last 
year and would be happy to provide it again.
Other Comments
    Bearing in mind that the Draft Bill is the opening point of the 
discussion, we have a number of additional comments.
    First: We believe that a minimum of 1 year's experience in the 
regulation of Class III gaming is insufficient for service on the 
proposed Class III Regulatory Committee. We recommend that the minimum 
be at least 3 years.
    Second: We strongly recommend that the Bill require that at least 
two members of the Committee be Native Americans.
    Third: If constitutionally permissible, we propose that the 
Committee be comprised of five individuals, one individual being 
appointed by each of the Secretary, the Senate Majority Leader, the 
Senate Minority Leader, the Speaker of the House, and the House 
Minority Leader.
    Fourth: We recommend that the prohibition on Committee members 
being Commission employees be expanded, to prohibit Committee 
membership for anyone employed by the Commission within the immediately 
preceeding 12 months.
    Finally: We close on a positive note. We are pleased that the Draft 
Bill recognizes that many Compacts impose rigorous tribal regulation 
and state oversight that does not need an additional--and additionally 
expensive--layer of Federal activity. If the opt-out process 
contemplated by the Draft Bill is ultimately adopted, we hope to 
participate actively in formulating a procedure that fully respects the 
experience and wisdom developed by the tribes and states, and avoids 
needless intergovernmental conflicts.
    I thank you again for giving CRIT the opportunity to offer its 
views on this important issue. We look forward to working closely with 
the Committee to develop a Bill that satisfactorily addresses the issue 
of internal control standards without destroying the delicate 
intergovernmental balance that has largely worked extraordinarily well 
for nearly twenty years.
    I would be happy to answer any questions the Committee may have.

    The Chairman. Ms. Tahbo, thank you very much for your 
testimony.
    I would like to ask if we could have Chairman Hogen come 
back to the witness table, and Mr. Shelton as well. Take a 
couple of chairs. I apologize that we are a little bit cramped 
there, but I appreciate very much all of you being willing to 
stay and be available for questions.
    Let me begin by stating that, this issue of regulation or 
the regulatory mechanism for gaming is a very important issue. 
We have a lot of experience, for example, with the development 
of a gaming industry in Las Vegas, Nevada, which kind of became 
the first and the largest. We have a lot of experience with 
this issue of what kind of regulation is needed with respect to 
Las Vegas, for example, when someone builds a major new 
facility with gaming. I assume they provide for their own 
regulatory capability inside the facility.
    And then in addition to that, there is a very stringent 
regulatory system by the State of Nevada, by a control board of 
some sort. So you have two different levels. If Mr. Wynn, for 
example, who is a very big builder there, he opens up a new 
facility with gaming, he I am sure, with his professional 
people, are creating their level of regulatory schematics 
inside the company, and then the State has a very certain 
regulatory capability.
    In my opening statement, I talked about the need to have 
regulatory oversight outside of the entity that owns the 
facility itself. The entity that owns the facility in almost 
all cases will have the best opportunity to create standards, 
but there needs to be another level.
    Now, Mr. Allen, first of all, do you agree with that, and 
second, if that is the case, the second level in most cases 
with respect to the compact would be State governments. Am I 
correct about that?
    Mr. Allen. Yes. The way you characterized it isn't quite 
right. The owner, Mr. Wynn, or the tribe, will have their own 
internal controls and accountability and security measures, so 
the system will be structured to account for the management of 
our assets and the operation of the business. Then you are 
going to the regulatory oversight to assure you are compliant 
with all regulations and any agreements that the tribes have 
made with the State and then subsequently compliant with IGRA.
    So then our regulatory agency is insulated and it is 
independent. It is commissioned by the tribe as a government 
regulatory agency to do that. The States do the same thing. 
Nevada does the same thing. So that is how they are authorized 
in order to provide that regulatory oversight. Then the State, 
for us, oversees how well we have done that, and how well we 
have committed to the agreement that we have had with regard to 
the regulatory oversight of the operation.
    The Chairman. I want to understand that. Mr. Wynn doesn't 
create his own oversight system.
    Mr. Allen. No, he doesn't.
    The Chairman. It is the State of Nevada that then provides 
that oversight.
    Mr. Allen. That is correct.
    The Chairman. My question is this. With respect to the 
tribes that own the casinos themselves, they provide their own 
internal systems and then the States, according to the compact, 
would provide its oversight system. Is that correct?
    Mr. Allen. Well, it is two-fold. Imagine the business 
itself as one level. The regulatory oversight, as a government, 
because we are the government just like the State of Nevada, so 
we have our own regulatory agency that we established.
    The Chairman. But you are a government that owns the 
facility.
    Mr. Allen. Yes, that is true. But then so States who run 
lotteries provide the same oversight for their lotteries. It is 
the same. They are establishing independent regulatory 
oversight of their own gaming operation. They own the lottery, 
so it is the same with them. And no one questions their 
integrity, so that is our point. We think that we are doing a 
good job.
    Now, are they meeting the standards? The question of the 
day is are we meeting the standards to provide credibility and 
integrity with regard to the public interest. That is the 
question. We think that IGRA is requiring that.
    Now, I know Phil has raised issues about there are some 
areas where the compacts don't address that, and the issue is 
what is the appropriate course of action to try to improve 
those areas where the compacts don't address those internal 
controls.
    The Chairman. Mr. Shelton, in the State of California, 
describe to me the system in the State of California that now 
exists.
    Mr. Shelton. At this time, the first compacts were issued 
in 1999 to address and recognize IGRA and the role of NIGC as 
approving regulations that the tribes submit. California 
believes in the compacts. We have the authority to do the 
oversight, but at this time what we have done is financial 
audits for the special distribution fund that comes to the 
State and is distributed to different entities.
    Doing that, we do look at internal control standards around 
financial issues, but we have not gone further. The Division of 
Gambling Control, which comes under another constitutional 
officer, which is the Attorney General, has sworn personnel 
that do go out and do spot checks on minimum control standards, 
but not to the extent neither of us have done due to resources 
that NIGC has done.
    So we felt and believe strongly that they complement what 
we do. We don't question the integrity of the tribes. As a 
matter of fact, the audits that we have performed have shown 
great operations, great integrity. But the Governor believes 
transparency is very necessary for the gaming public to have, 
and we need the oversight to do that and do the inspections to 
verify what is actually occurring.
    The Chairman. Mr. Hogen, respond to Mr. Allen's point. Mr. 
Allen's point is that you have lotteries out there that are run 
by the States. No one is overseeing that, or no one is coming 
back at a second level. Why should it exist with respect to 
tribal casinos?
    Mr. Hogen. I think there are certainly some parallels that 
can be drawn, but I think there are more differences than there 
are similarities. That is, for the most part in tribal gaming, 
tribal gaming is if not the only, the principal source of 
funding. So the tribe in many cases is almost totally dependent 
on that revenue stream. So the significance of the dollars is 
different.
    I think it is also economies of scale, trying to compare 
the St. Augustine Rancheria and its membership and ability to 
regulate and manage and separate those, with the State of Texas 
and their State lottery, I think it is quite a stark contrast. 
The State lotteries are a little different in terms of the 
gaming that they operate. They don't deal blackjack. They don't 
run slot machines. They don't do slot machines drops and so 
forth.
    So I think the principle is the same, but there are 
significant differences, enough differences that I think that 
it is very important and appropriate to have that independent 
oversight.
    The Chairman. Mr. Hogen, other testimony has indicated this 
morning that they feel you do retain some authority over Class 
III gaming. In your judgment, is that accurate? Tell me how you 
view that testimony.
    Mr. Hogen. Yes, we absolutely have and continue to have 
after the CRIT decision authority to do a number of things. 
Most of those, however, deal with the actual operation of the 
gambling activity. We look at the use of gaming revenues; the 
adoption of the tribal gaming ordinance. We continue to get 
audits reflecting the report on an annual basis.
    But in terms of that tool that we had, the minimum internal 
control standards, that dealt with where the surveillance 
cameras are, what the resolution has to be, how you protect the 
playing cards and things like that, we have been kind of 
ejected from that arena. And that is really important with 
respect to the integrity of the gaming. I think Nevada learned 
first the hard way that you have really got to have those rules 
and that control.
    The Chairman. Myra Pearson, in your testimony you described 
the opposition of the Great Plains organization. How many 
tribes exist in that organization?
    Ms. Pearson. Twenty-eight.
    The Chairman. I think you made the point, and I would echo 
the point that all of you have made, this hearing isn't held 
for the purpose of describing some significant national problem 
that exists in Indian gaming. That is not the case and people 
should understand that.
    The question is, with respect to the CRIT decision, has 
that decision impacted the oversight or the regulatory 
capability with respect to Indian gaming in a manner that 
should suggest this Committee adopt some modifications or some 
legislative changes. That is the purpose of this inquiry. I 
appreciate the comments, and I will have a couple of additional 
questions, but let me call on the Vice Chair, Senator 
Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    Mr. Hogen, I want to go back to you. We have heard here 
this morning, and certainly previously, that this CRIT fix is 
not necessary because the compacts include within their 
provisions, provisions or standards that are similar to these 
minimum controls or these MICS standards. In your judgment, are 
the States in any way hindered from enforcing the internal 
control standards of their compacts?
    Mr. Hogen. I don't believe that there is a legal hindrance 
there. I think there is, for a multitude of reasons, a lack of 
inclination in many cases to be very involved or very 
effective. In some cases, the language of the compact just 
doesn't provide for that. In other cases, while the language 
may address it, it is permissive. And second, the States have 
not really devoted much resources to do that.
    Senator Murkowski. So it would vary from State to State, 
depending on the priority or the compact. Is that your 
suggestion?
    Mr. Hogen. Absolutely. There is a huge variety there. We 
have compacts in 22 States and none of them are identical. Some 
have some similarities. Some in fact adopt the NIGC minimum 
internal control standards, but one size certainly does not fit 
all.
    Senator Murkowski. Let me ask a question, and I perhaps 
suggested this in my opening remarks. With the language that we 
have before us in this bill, there is some concern that perhaps 
the NIGC could gain additional authority to regulate the Class 
III establishments over and above the compliance with the MICS. 
Is that your understanding? Is that what the NIGC is seeking, 
that broader or more expansive authority?
    Mr. Hogen. When I last testified about this subject, I 
think the language I used was ``let me be crystal clear.'' We 
are not trying to expand our authority at all. We just want to 
keep doing what we at that time were doing, drafting, requiring 
compliance with minimum internal control standards and having 
the ability to go out there and audit to see if there was 
compliance, and when there wasn't compliance, to try and help 
tribes fix it, or if necessary to take enforcement action.
    Senator Murkowski. As you have done that in these audits, 
have you surveyed the States that have entered into Class III 
compacts to determine whether or not they would welcome a 
mandate that would allow these Class III establishments to 
comply with or to follow the MIC standards? Has that type of a 
survey of the States been done?
    Mr. Hogen. I don't know that we have had a specific 
discussion with each and every of those 22 States, but for 
example, Mr. Shelton's agency, we often discuss this sort of 
thing and we have in many places. I just returned from the 
North American Gaming Regulators Association that had their 
annual meeting in Kansas City. There, we meet with the State 
regulatory agencies. We have a good open relationship with 
those agencies, and I think for the most part they are 
supportive.
    Certainly, nobody wants to give up their turf, so to speak, 
but when we go out and do our audits, we literally never run 
into or stumble across or duplicate what States are doing. 
Where States address those kinds of issues, we do it less 
often. One of the requirements in our minimum internal control 
standards is when the tribes do their annual audit, they have 
to follow the auditors, the independent outside auditors, 
follow agreed upon procedures. They have to look, is the tribe 
in compliance with NIGC's minimum internal control standards. 
They give that report to the tribe. They give it to us. That is 
how we focus on those places that we go to do the audits, and 
literally, we have never been there while the State was doing 
the same thing, and I don't know any States that do exactly 
what we do when we do the minimum internal control standards 
audits.
    We have never closed a facility for their failure to comply 
with the MICS. When we found shortcomings, we have said, let us 
help you fix it, and for the most part, that has worked.
    Senator Murkowski. Well, let me ask you, Mr. Shelton, it is 
not very often that we get somebody coming from the State 
actually asking or urging us to step in and regulate in areas 
that the court has determined that the Federal Government 
should perhaps stay out of. So it is kind of unusual to have 
you coming in and I appreciate the perspective that you have 
shared with California. But can you tell me what the difference 
is here, and perhaps answer my question? To the best that you 
know, are there other States that are in the same situation as 
California, where you are suggesting that the Federal 
Government should have an increased role there?
    Mr. Shelton. I wouldn't be presumptuous to speak for the 
other States, but I came to Kansas City with Mr. Hogen at the 
same time, and several States and Canada were represented. NIGC 
received a wonderful welcome there in their reaction.
    California has grown so immensely in gaming, from $1 
billion and some in 2001, to 2006 over $7 billion. We had not 
geared up to do what we should be doing. The tribes have been 
very open. They are great to work with and we have great 
communications, but the Governor sees NIGC filling a void at 
this time, and it is very necessary. They have been just 
recently in our State and did an audit. I don't know of any 
ramifications from that audit that would be negative.
    Most of the tribes I talk to, and I believe to the major 
tribes in California, I have a good rapport with, and they told 
me that we don't know which one we want in. We enjoy NIGC 
coming in. We haven't experienced in the State of California a 
full MICS inspection at this time. What we fear is both of you 
coming in at the same time.
    We understand that. Chairman Hogen and I have discussed 
that. As long as we at the point California is at, we would 
coordinate our activities. That is not what any of us want to 
do. The Governor would not want that. He would not allow that. 
He doesn't want the heavy-handedness. His respect for 
sovereignty is too great. So I believe it is a good marriage 
that works out.
    Senator Murkowski. Let me ask you, probably Mr. Allen, you 
had mentioned in your comments the need for just the openness 
and the integrity, or an acknowledgment that in your opinion 
these are attributes that we are staying with, in the content 
of the gaming that is going on. We have not heard anything to 
dispute that. In fact, I understand that there are some polls 
out there that have been conducted for the National Indian 
Gaming Association that say Indian gaming has an approval 
rating between 61 percent and 75 percent, depending on the 
question asked.
    We would only dream of those kinds of approval ratings here 
in the Congress.
    [Laughter.]
    Senator Murkowski. We recognize that whether you are the 
Congress or whether a business enterprise, everybody stands 
before that court of public opinion. And where we recognize 
that sometimes that public opinion is a fragile base, how 
important is it that the Indian gaming industry adhere to a 
uniform national and kind of best practices set of standards 
for the internal control, to maintain this integrity that you 
currently have?
    Mr. Allen. Well, it is important that there is a set of 
standards that the general public and the policymakers know 
that the tribes are adhering to, without a doubt. Many of us 
believe that NIGC has sufficient authority right now in terms 
of its oversight. They have to approve our tribal regulations 
with our gaming agencies. So they review them, so they know 
exactly what that is.
    This whole process is a dynamic process in terms of our 
regulatory independent agencies with regard to that regulatory 
oversight. The issue before us is should NIGC approve the 
standard internal controls that would be adhered to with the 
tribes and/or the States with respect to that matter. The 
question is, how that would be imposed.
    The dialogue and debate is about is it an additional layer. 
That is our concern, that the way it is being structured right 
now, and what we are advocating with the Chair, is be careful 
here because you could be adding a layer, even though it 
appears like it is not a layer.
    So the question is, if NIGC is given this authority and it 
says that it has to have these internal control standards for 
Class III activities, then now the issue is are they going to 
now being engaged in our negotiations with our compacts, so 
that those requirements are now in our compacts? So now it is 
no longer a State-tribal relationship as authorized by IGRA. 
Now, there is an NIGC role in that forum. You have this 
triangular negotiation about what is acceptable and not 
acceptable. It can be a little bit presumptuous.
    Now, we are growing. Here is the fact. We are 20 years old 
now in this industry. We have been growing together at the same 
time. It is not about one entity or one agency has greater 
superiority than the other. We have been growing. The only one 
who has greater superiority or experience is Nevada and New 
Jersey, et cetera. But the rest of us have grown and have the 
same kind of expertise as anyone else.
    So the question is, if the Act is amended, how is it 
structured so that it is not paternalistic toward the tribe, 
and is respectful of the tribal governments, as we impose these 
conditions? And make sure you know exactly what is going on out 
there, because the integrity of oversight, as we have all 
testified, is at a very high level. There are no problems, as 
the Chairman has pointed out. There aren't very many problems 
out there. There is this concern that Phil and his staff can 
point to.
    I have some examples. You have to have some examples. But 
what is the kind of corrective action you should take, and do 
you already have the authority to do that, to fix those things? 
How should you be encouraging higher levels of internal 
controls and standards?
    Senator Murkowski. Thank you.
    Thank you, Mr. Chairman. I may have some additional 
questions to submit for the record.
    The Chairman. Senator Inouye?
    Senator Inouye. Thank you very much.
    May I make a statement in lieu of asking questions?
    The Chairman. Absolutely.

              STATEMENT OF HON. DANIEL K. INOUYE, 
                    U.S. SENATOR FROM HAWAII

    Senator Inouye. Mr. Chairman, I have had the pleasure of 
serving on this Committee for many years, as either Chairman or 
Ranking Member, since 1986. The first challenge that this 
Committee faced was the Cabazon case. The Cabazon case was 
decided by the Supreme Court in 1985, and it once again 
reestablished and affirmed the sovereignty of Indian nations. 
It was not considered an important case because you hardly saw 
this matter being reported in the press.
    When this Committee realized that we had a problem before 
us, we immediately conferred with the Government of the United 
States because it was our belief that the sovereignty of Indian 
nations required a government-to-government relationship not 
with the States, but with the Federal Government. At that time, 
the Attorney General, the White House, all said no, we don't 
want any part of this, and so we conferred with the States.
    Mr. Chairman, I had the privilege of meeting every Governor 
to discuss this matter because it was obvious to me that this 
matter will someday become big. In the beginning, this 
Committee, and for that matter the Congress of the United 
States, with the Administration, had very little concern or 
interest in Indian gaming. As one told me, well, these simple 
folks won't know what to do. They just want to run bingo games 
and such.
    And the Indian tribes because they were not receiving any 
help from the financial institutions of the United States, 
because their lands could not be alienated, they could not put 
it up for mortgage. They couldn't borrow any money. They had to 
go elsewhere to borrow money, at times from unscrupulous 
people, many times, across the ocean to foreign lands, paying 
high interest rates, unheard of, outrageous regulations. But 
they did this.
    Mr. Chairman, I supported the Indians because I believe in 
their sovereignty. And second, we have not kept up our side of 
the bargain. There have been many treaties in which we promised 
Indian Country that we would do this and that. Keep in mind 
that this Country was once owned by the Indians, and they gave 
up jurisdiction over these lands on the promise that they would 
be cared for. And the way we have cared for Indians is just a 
blight upon the democracy of this land. We should be ashamed.
    So when this came about, I said, here is an opportunity 
where the Indians may be able to help themselves. Well, they 
began doing well. They regulated their industries they went 
into, and said, OK, we will live with these outrageous 
compacts, but we will go ahead and do it. They paid 
extraordinarily large interest rates, but they still made 
money. And they set up hospitals and schools and housing, 
something that we should have been doing.
    Now, Mr. Chairman, I don't wish to be part of any move that 
would in any way erode the sovereignty that they have. And so 
you will find me on the other side. I think the Indian nations 
have done extremely well. We haven't had any major scandal. 
Compare that with the so-called well-run activities of New 
Jersey and Las Vegas, and see how the Indians have done. The 
one big scandal that involved Indian gaming came about because 
non-Indians tried to scam and con Indians. It wasn't initiated 
by the Indians.
    So Mr. Chairman, I think this is a good hearing. I should 
tell you that I will do everything possible to see that this 
bill disappears. Incidentally, there are two States in the 
union that prohibit any form of gambling, Utah and Hawaii. I am 
against gambling. I don't think that is the way to make money. 
But I respect the sovereignty of Indian nations.
    Thank you.
    The Chairman. Senator Inouye, thank you very much.
    [Applause.]
    The Chairman. That is a wonderful description of the 
history going back to the Cabazon case that has changed the 
landscape with respect to the issue of Indian gaming, the 
opportunity to develop a stream of income to be helpful to 
Indian tribes around the Country. And your description of the 
compacts and so on is an apt description.
    One of the things that we have tried to make certain in 
this Committee is about consultation and the Committee is about 
understanding and recognizing sovereignty. That is very 
important. Those are two things that I believe when people take 
a look through the rearview mirror of history about this 
Committee, they will understand, starting long, long ago, with 
the stewardship of Senator Inouye, and I hope up to and 
including now with Senator Murkowski and myself and many other 
Members of the Committee, that people understand this Committee 
was about consultation and respecting and recognizing the 
sovereignty that exists.
    Let me just ask one additional question. Mr. Luger, you are 
the Executive Director of the Great Plains organization. You 
accompanied Chairwoman Pearson today. Let me finally just ask a 
question. I am going to submit questions to a number of you.
    One of the reasons for a continuing discussion about this 
is the need, or the feeling that there is a need for more than 
one level of regulation. My understanding is that in some cases 
in the Country, that there is common membership in the tribal 
council and also the gaming authority, the regulatory authority 
for that tribe's gaming facility. I don't know that that is the 
case in many circumstances, but I understand it is in some. If 
that is the case, then you don't have an arm's length 
regulatory oversight of the gaming facility.
    Is it your feeling and Chairman Pearson's feeling that 
there needs to be at least two levels? I think in previous 
discussions, you have indicated that there is with the State 
compact a State level of regulatory authority, and the tribe. 
Is there a feeling that there needs to be at least two levels 
of regulatory authority?
    Mr. Luger. Yes. The short answer is yes. We, as you know 
better than I, the hard work of all of these. And the 
frustrating part is that because of the Seminole decision, we 
have put all of our time and energy in beefing up our own 
tribal gaming commissions and our relationship with the States.
    Quite frankly, and I will be very brief, as long as Phil is 
here, it is something that just never comes up and it is a 
constant consternation to Indian Country, and that is with 
technical assistance, a lot of this would have been minimized 
or eliminated. They have done poorly in that area. It is 
hurtful, especially for your tribes at home, Senator Dorgan. I 
can't call up NIGC. I have 14 training and regulatory seminars 
last year. I have called the Minneapolis area every time, John 
Peterson, and every time I get the same response: I don't have 
an expert in that field, or I don't have the travel time, or 
what have you.
    I have to go back out into Indian Country to find those 
experts in that regulatory area. I don't think there is a tribe 
in here that wouldn't disagree with me that the technical 
assistance aspect of NIGC has been less than star quality.
    The Chairman. Mr. Hogen, you are welcome to respond to that 
in writing if you wish.
    Let me make a final point today. Senator Inouye, you 
offered an amendment dealing with the Seminole case, which I 
supported. That failed on a tie vote in this Committee. I don't 
disagree that we need to resolve and deal with the Seminole 
case. That is a related issue that we should be considering.
    Our future discussions will ensue from the information we 
have now received from our witnesses. I think the witness table 
is probably a pretty accurate reflection of the division that 
exists in the country on this subject. I am talking now about 
Indian Country. As I indicated, we will digest and evaluate 
what we have heard today, and what we feel we should do to 
respond.
    Having had this hearing, and now being able to study over 
some period of time in the future the information we have 
received, I want you all to understand again that the principal 
priority of this Committee is going to remain health care, 
housing, education, teen suicide, methamphetamine, and law 
enforcement. Those are the items that will consume a 
substantial amount of the passion and energy of this Committee 
because we have a full-blown crisis in Indian Country on those 
issues.
    I did think it was important to have this hearing in order 
to consider how to move forward with respect to this issue of 
regulatory authority for Indian gaming. Indian gaming is very 
important. It produces a very substantial $25 billion revenue 
stream for Indian tribes, and it has been desperately needed in 
much of this country. So I think no one in this room who comes 
to this subject wishes in any way to injure or to cast doubt 
upon these issues. We believe that this issue is a very 
important issue and a very important source of much-needed 
revenue for American Indians.
    One final point, I would agree with my colleague, Senator 
Inouye, that the Congress of the United States over many, many 
decades has I think shamefully ignored its responsibility to 
address the very issues I have described with tribes in many 
ways. I think Presidents and Congresses have failed with people 
living in Third World conditions in this Country on Indian 
reservations, and it is shameful that that continues to exist.
    This Committee and many others have a responsibility to 
address it and address it aggressively, and that will remain 
the major agenda for this Committee.
    Let me thank the witnesses for coming. Let me thank my 
colleagues for being here as well.
    This hearing is adjourned.
    [Whereupon, at 10:50 a.m. the Committee was adjourned.]
                            A P P E N D I X

    Prepared Statement of Tracy Burris, Gaming Commissioner of the 
                            Chickasaw Nation
    Good morning Chairman Dorgan and distinguished Members of the 
Committee.
    On behalf of the Chickasaw Nation, allow me to extend our deep 
appreciation for this opportunity to comment on this important 
legislative proposal. My name is Tracy Burris and I serve as the 
Commissioner of Gaming for the Chickasaw Nation, a post I have held for 
approximately 12 years. The Chickasaw Nation strives always to provide 
constructive comments, and I am honored to deliver the Chickasaw 
Nation's view in relation to the proposed amendment on the issue of the 
NIGC's authority over Class III gaming. We hope the Committee finds our 
testimony today useful in its deliberations on this important issue.
    Let me open with the observation that there is no debate in Indian 
Country about the need for sound internal control standards. Effective 
internal control standards represent a critical tool in safeguarding 
critical tribal gaming revenues and ensuring operational integrity. 
Neither is there a question as to the importance of regulatory 
oversight and the enforcement of regulations designed to serve these 
purposes. As a front line gaming regulator, the utility and necessity 
of internal control standards is clear and we work hard to ensure 
operational compliance at the Chickasaw Nation's gaming facilities.
    In our view, the issue before us today is NOT whether regulatory 
oversight is important or whether internal control standards are 
necessary, but rather how best to allocate regulatory responsibilities 
essential to the fulfillment of the purposes for which IGRA was 
enacted. First and foremost, IGRA was enacted to establish a 
comprehensive regulatory framework for tribal government gaming. The 
act reflects a balance between the competing governmental interests by 
assigning regulatory roles to tribal, state and Federal agencies based 
on a classification system dividing gaming activities into three 
classes with regulatory roles distributed among tribal, state and 
federal governments in accordance with the class of the gaming 
activity.
    Class I gaming consists of traditional tribal social games. In 
light of the superior tribal governmental interest in matters of 
culture and tradition, tribal governments were accorded exclusive 
regulatory authority over Class I games. Class II games include bingo, 
lotto, pull-tabs, games similar to bingo and certain other enumerated 
games as well as certain non-banking card games. Though similar, 
Congress accorded greater weight to the tribal interest in Class II 
games, according tribal government primary regulatory authority, though 
establishing a Federal regulatory agency charged with regulatory 
oversight responsibilities.
    With regard to Class III gaming, which includes slot machines, 
facsimiles, house banked card and table games and other wagering 
activities, Congress did something novel. It created a consensual 
mechanism, and then left tribal and state governments to work out their 
differences. If negotiations succeeded in producing a tribal-state 
gaming compact, and the compact met with the approval of the Secretary 
of the Interior, tribal governments could lawfully engage in Class III 
gaming activities.
    In the beginning, there was considerable discontent on both sides. 
Over the years, however, tribal and state governments for the most part 
have succeeded in working through the compacting process. As a result, 
the Class III gaming industry comprises most of the tribal gaming 
industry. This fact underscores how effective IGRA has been in altering 
the course of the tribal-state relationship in a more positive 
direction. Given the tensions that once characterized the tribal-state 
relationship over gaming, it's almost surprising that the issue that 
brings us here today is the Federal interest in Class III gaming.
    The crux of the matter is a decision by the Federal Circuit Court 
of Appeals for the District of Columbia affirming the lower court's 
ruling that IGRA does not authorize the NIGC to regulate Class III 
gaming nor to promulgate and enforce its minimum internal control 
standards in relation to Class III gaming activities. The committee is 
now considering whether to amend IGRA to broaden its authority to 
encompass Class III gaming. Bill language to do so has been drafted and 
we thank Chairman Dorgan for the courtesy of circulating a discussion 
draft.
    We note that the bill would also establish an alternative 
rulemaking process for the development of Class III minimum internal 
control standards. To some extent, the fact that language is drafted 
and a hearing convened would indicate that there is to some degree a 
sense that the amendment is warranted. The purpose of this hearing is 
to aid the committee in deciding if this is so and whether the proposed 
language is acceptable to tribal and federal governments.
    We see the proposal as an effort to again strike a balance between 
competing governmental interests, yet it is important to recognize that 
the amendment will alter the regulatory framework and the balance 
reflected in it. We would prefer to avoid amending IGRA in this manner 
because IGRA represents a compromise that has finally been accepted 
after a very long and difficult period of time. Statutory amendments 
introduce complexities and create uncertainties, which is not conducive 
to a stable business environment. Moreover, it is not possible to 
foresee every ramification, particularly where the amendment effects 
such fundamental change. We know that where multiple jurisdictions have 
overlapping functions and responsibilities, inefficiencies inevitably 
result and costs increase. Redundancy is also conducive to conflict, 
which creates instability.
    By all indications, the tribal gaming industry is healthy. It has 
enjoyed double digit growth in productivity each year for more than a 
decade. On the whole the industry enjoys a wholesome public image and 
maintains considerable public support. Tribal regulatory capacity and 
expertise have strengthened over the years and tribal regulatory 
agencies continue to achieve ever increasing levels of sophistication. 
In every respect IGRA represents one of the most successful and 
important pieces of Indian legislation ever enacted by the Congress. It 
has provided tribal governments a substitute for the tax base they 
lack, and in so doing, it has strengthened tribal governments 
economically and institutionally.
    In light of the success and importance of gaming to tribal 
governments, it is only natural that tribal officials will have 
misgivings about amending IGRA. Tribal officials are equally 
apprehensive in relation to proposed rules, particularly regulations 
such as the MICS which are legislative in nature and highly detailed 
technically. In the first place, the responsibility for implementing, 
monitoring and enforcing such regulations falls most heavily on tribal 
gaming regulatory agencies. Yet, the NIGC's policies with regard to 
tribal participation in the drafting process have been erratic. There 
have been periods when the NIGC has welcomed participation and others 
where it has been unreceptive. We believe that the quality and 
workability of regulations suffers when those most directly affected by 
the regulations, particularly those responsible for on-the-ground 
implementation are not given a seat at the drafting table. The 
development of internal control standards requires an intimate working 
knowledge about the gaming environment as well as expertise in all 
aspects of gaming operations.
    The MICS have been the subject of longstanding complaints from both 
the regulatory and the operational sides of the industry. In reviewing 
the draft bill, we appreciated that a provision was included to address 
these tribal concerns and felt that we might offer some insight that 
may aid the committee's deliberations on the subject.
    The dissatisfaction with the MICS arose soon after they were first 
adopted. In implementing the MICS it soon became evident that the 
standards were flawed in several respects. First, they were largely 
borrowed from the Nevada Gaming Control Board's regulations at a time 
when the industry was undergoing a period of significant technological 
advancement. As a result, the MICS were already stale in several areas 
at the time of adoption. They were also poorly suited to the Class II 
gaming environment, though the NIGC resisted this premise based on its 
belief that electronically aided Class II games are indistinguishable 
from Class III gambling machines.
    Another flaw was that the MICS initially reflected a one-size-fits-
all approach. The same standards applied to all tribal gaming 
activities regardless of the size of the operation, which in Indian 
Country ranges from some of the world's largest gaming operations to 
some of its tiniest. The rigidity of the MICS was frustrating to 
regulators and operators. Moreover, compliance with the MICS presented 
so many practical difficulties that tribal governments were alarmed by 
the implications. Federal enforcement action, as a result of these 
difficult to implement provisions of the MICS was the concern that 
prompted tribes to begin questioning the NIGC's authority to promulgate 
and enforce the standards.
    In 2000, tribal leaders and regulators approached the NIGC about 
the problems. The commission agreed to review the MICS and consider 
revisions to address the practical problems tribal governments were 
experiencing. A tribal advisory committee was assembled and a 
significant revision resulted, but the issue of the NIGC's authority 
was not resolved until the decision in the Colorado River case.
    We are aware of the NIGC's strong concerns about the court's 
decision and its desire for a legislative solution. We can also 
understand the committee's interest in discerning whether the court's 
decision creates a regulatory gap. At the same time we know that tribal 
governments are not so irresponsible as to abandon their internal 
control standards. To do so would deprive them of their most valuable 
regulatory tool and render operations vulnerable to panoply of harms. 
Tribal governments are competent to promulgate and enforce tribal 
standards without a statutory or regulatory mandate or the threat of 
enforcement. Tribal governments desire strong effective internal 
control standards because they are in the best interest of the tribe.
    On the question of whether the rule making function should remain 
with the NIGC or be delegate to a specially created entity, we view 
this decision as less important from our perspective than ensuring that 
tribal officials have a seat at the drafting table. Unless the 
provision guarantees that a specially created entity would be more 
receptive to collaborative processes than the NIGC has been we cannot 
see its value. The draft does not mandate that tribal officials will be 
accorded meaningful participation or ensure that the committee members 
will have expertise and experience that will allow them to participate 
in meaningful discussion. We encourage the committee to consider a 
slightly different approach. As drafted, the proposed bill establishes 
a drafting committee, but offers very little procedural guidance. The 
Negotiated Rulemaking Act and the Federal Advisory Committee Act, on 
the other hand, each contains procedures that if applied would go far 
in alleviating our concerns.
    We strongly believe that all rule making under IGRA should be 
subject to collaborative processes. Besides the expertise tribal gaming 
regulators can provide, they have important insights to offer as to the 
practical strengths and weaknesses of the regulations. They will also 
be better equipped to identify areas in need of attention. Moreover, it 
is illogical to exclude tribal gaming regulators from the drafting 
process, given that tribal regulatory agencies will have primary 
responsibility for implementing, monitoring and enforcing the 
regulation plus approving the necessary operating procedures. Providing 
oral or written feedback on draft regulations is of limited use. Once a 
draft is prepared, there is typically limited interest in exploring 
alternative approaches or effecting significant revision. Too much time 
and effort has been invested and important choices have already been 
made.
    I will close where I began. Tribal officials well understand the 
importance of internal control standard and effective regulations. 
Tribal governments rely on gaming revenues to fund essential 
governmental functions, services and programs. These revenues fuel the 
economic engine driving tribal economic growth and development. Gaming 
provides permanent jobs, fair wages and benefits. Thanks to gaming, 
there are business opportunities within the community. These jobs and 
opportunities stay right where they are and this knowledge increases 
confidence and stability in the economy which fosters continued growth.
    These successes were not easily accomplished. Years of hard work 
have been invested, and years more will be needed to achieve the 
standard of living and quality of life our leaders envision for 
ourselves and our posterity. As Governor Bill Anoatubby has observed 
many times, we do not see the accumulation of wealth from gaming as an 
end in itself, but as a means of achieving the goals to which we aspire 
on behalf of the Chickasaw Nation.
    Thank you.
                                 ______
                                 
   Prepared Statement of Stanley R. Crooks, Chairman of the Shakopee 
                      Mdewakanton Sioux Community
    Good morning Chairman Dorgan, Vice Chairman Murkowski, and Members 
of the Committee. My name is Stanley R. Crooks, and I am the Chairman 
of the Shakopee Mdewakanton Sioux Community (``Community''), a 
federally recognized Indian tribe located in the State of Minnesota. On 
behalf of the Community, I appreciate the opportunity to provide this 
written testimony on the draft legislation (``Draft Bill'') that would 
amend the Indian Gaming Regulatory Act of 1988 (``IGRA'').
    As explained in more detail below, because the Draft Bill would 
give the National Indian Gaming Commission (``NIGC'') general 
regulatory authority over Class III gaming, the Community does not 
believe that the amendments to IGRA set forth in the Draft Bill are 
warranted or necessary. Although the Community disagrees with the Draft 
Bill, we would also like to provide the Committee with specific 
comments on why we believe the Draft Bill in its current form is 
overbroad, vague, and would prove unworkable in practice.
    Notwithstanding the Community's objections, we look forward to 
working with the Committee in a cooperative manner to ensure that any 
concerns with the regulation of Indian gaming are addressed in a manner 
consistent with the congressional intent of IGRA and are in the best 
interests of all applicable regulatory authorities.
General Federal Regulatory Authority Over Class III Gaming is 
        Unwarranted
    Among other things, the Draft Bill deviates from IGRA's careful 
regulatory balance by insinuating the NIGC into matters that are now 
within the exclusive domain of the states and the tribes. The Draft 
Bill would do this by granting to the NIGC new, general regulatory 
authority to regulate Class III gaming. As the Committee is aware, IGRA 
in its current form does not provide the NIGC with such general 
authority. As the U.S. District Court for the District of Columbia 
noted in a case brought by the Colorado River Indian Tribes:

        Upon a careful review of the text, the structure, and the 
        legislative history of the IGRA, and the entire record in this 
        case, the Court is compelled to agree with Colorado River that 
        the [IGRA] statute does not confer upon the NIGC the authority 
        to issue or enforce [minimum internal control standards] for 
        Class III gaming.. . .  [T]he NIGC has overstepped its bounds.

    Colorado River Indian Tribes v. National Indian Gaming Commission, 
383 F. Supp. 2d 123 (D. D.C. 2005), aff'd, 466 F.3d 134 (D.C. Cir. 
2006)(hereinafter, ``CRIT''). In affirming the CRIT decision, the D.C. 
Circuit Court of Appeals concluded its analysis by posing a question 
and then answering it: ``[W]hat is the statutory basis empowering the 
[NIGC] to regulate class III gaming operations? Finding none, we 
affirm.'' 446 F.3d at 140.
    When Congress enacted IGRA in 1988, it was careful to ensure that 
IGRA's statutory framework clearly enumerated the authority of the NIGC 
with respect to Class II and Class III gaming. Because Indian tribes 
that conduct Class III gaming must have in place valid, executed 
Tribal-State compacts, Congress did not believe that a third layer of 
Federal regulation for Class III gaming was necessary. Furthermore, the 
Federal Government--through the Department of Justice--argued against 
such Federal regulatory authority over Class III when Congress was 
considering IGRA. The legislative history to IGRA states:

        Recognizing that the extension of State jurisdiction on Indian 
        lands has traditionally been inimical to Indian interests, some 
        have suggested the creation of a Federal regulatory agency to 
        regulate Class II and Class III gaming activities on Indian 
        lands. Justice Department officials were opposed to this 
        approach, arguing that the expertise to regulate gaming 
        activities and to enforce laws related to gaming could be found 
        in state agencies, and thus that there was no need to duplicate 
        those mechanisms on a Federal level.
S. Rep. No. 100-446, at 5 (1988)(emphasis added).
    Careful enumeration by Congress in 1988 of the NIGC's authority 
over the various classes of gaming authorized by IGRA has proven to be 
an effective and efficient regulatory scheme, and one that has 
transformed Indian gaming into the most heavily regulated form of 
gaming in the United States. The Tribal-State compact mechanism, 
although not perfect, has allowed Indian tribes and state governments 
to negotiate and allocate regulatory duties in a single document. These 
compacts, some of which--such as the Community's compacts with the 
State of Minnesota--are long term or are perpetual in duration--were 
entered into on the basis of the assumption that Class III gaming would 
be regulated exclusively by tribes and the states.
    Just as the hearing record fails to support the creation of yet 
another layer of regulation for Class III gaming, there is no 
justification for the added regulatory costs the NIGC would undoubtedly 
seek to impose on tribes. Indian tribes currently pay all costs of 
tribal gaming commissions, the costs of state regulation under the 
Tribal-State compacts, and the entire budget for the NIGC through the 
NIGC's annual assessment of fees. To now provide the NIGC with blanket 
Class III regulatory authority, as the Draft Bill would do, would upset 
the delicate balance Congress struck in 1988 and that tribes and states 
have relied on ever since.
    If the NIGC is concerned that the CRIT decision may limit its 
ability to audit Class III gaming facilities or ensure that Indian 
tribes have adopted minimum internal control standards (``MICS''), the 
Community believes that these issues can be addressed in a more 
narrowly tailored manner and through direct consultation with tribal 
leaders.
The Community's Comments on the Draft Bill
    Section 1 of the Draft Bill sets forth the purpose of the 
legislation, and Section 2 would generally provide the NIGC with 
authority to regulate Class III gaming. Section 3 of the Draft Bill 
would establish a mechanism whereby the NIGC's regulatory authority 
over Class III might be preempted if the NIGC itself certifies that the 
regulatory activity required under the Tribal-State compact meets the 
standards established by the Class III Regulatory Committee (``Class 
III Committee''). Section 3 further grants the Secretary of the 
Interior authority to establish the Class III Committee, which would 
consist of five to eight members appointed by the Secretary. No member 
of the Class III Committee could be an employee of the NIGC, and the 
NIGC would pay the Class III Committee's operating expenses.
    The Community believes that even if the apparent assumption upon 
which the Draft Bill was written--that a need exists to provide the 
NIGC with regulatory authority over Class III gaming--was valid, which 
it is not, the Draft Bill in its current form is flawed and unworkable. 
Some examples include the following:
    (1) The Class III Committee Would Have Unfettered Discretion to 
Adopt Regulatory Standards. The Draft Bill provides the Class III 
Committee with nearly unrestricted authority to promulgate substantive 
regulatory standards. Indeed, the Draft Bill states that the Class III 
Committee shall ``develop minimum standards for the regulation of Class 
III gaming.'' In addition to providing the Class III Committee with 
authority to establish standards for the operation of Class III games, 
the Draft Bill's open-ended charge might also be construed by some as 
granting the NIGC authority to venture--among other areas--into scope 
of games issues and gaming classification standards.
    The NIGC's unilateral efforts to establish gaming classification 
regulations have been universally opposed by tribes as conflicting with 
IGRA's stated purpose to promote ``tribal economic development, self-
sufficiency, and strong tribal governments.'' 25 U.S.C. Sec. 2702(1). 
The broad scope of the Class III Committee authority, however, might 
provide an avenue for that Committee to establish substantive standards 
in areas where the NIGC has thus far been unsuccessful.
    Also, the Class III Committee might use its broad mandate to create 
substantive environmental, health and safety standards, a regulatory 
area that IGRA reserves to Indian tribes. As a condition precedent to 
the lawful operation of gaming activities on Indian lands, an Indian 
tribe must adopt a gaming ordinance which must be approved by the NIGC. 
25 U.S.C. Sec. 2710. Among other requirements, tribal gaming ordinances 
must contain provisions ensuring that ``the construction and 
maintenance of the gaming operation, and the operation of that gaming 
is conducted in a manner that adequately protects the environment and 
the public health and safety.'' 25 U.S.C. Sec. 2710 (b)(2)(E).
    Although IGRA grants the NIGC the authority to approve gaming 
ordinances that satisfy these broad criteria, it does not grant the 
NIGC authority to prescribe the substance of these environmental, 
health or safety regulations. These decisions rest with the individual 
tribes. In 2002, the NIGC attempted to impose on tribal gaming 
operations substantive environmental, health and safety criteria, but 
abandoned the effort in the face of widespread tribal opposition. The 
broad discretion granted to the Class III Committee in the Draft Bill 
would establish a mechanism for the NIGC to use the Class III Committee 
as a proxy to regulate in these and other areas in which the text and 
structure of IGRA do not allow.
    (2) No Grace Period for NIGC to Review Existing Tribal-State 
Compacts and No Deadlines for Implementation of Class III Committee. 
Section 2 of the Draft Bill grants the NIGC new authority to regulate 
Class III gaming, while Section 3 establishes the Class III Committee 
that will later develop standards that may provide a basis for a tribe 
or a state to be exempt from the new authority provided in Section 2. 
The Draft Bill, however, does not contain any time frames for when the 
new NIGC authority in Section 2 will become effective. Presumably, 
Section 2 will be effective immediately upon enactment of the 
legislation into law.
    Operating under this presumption, all Indian tribes will be 
subjected to the NIGC's general Class III regulatory power until the 
Class III Committee is established, the Class III Committee promulgates 
standards, and the NIGC acts to certify Tribal-State compacts. Without 
any deadlines for the establishment of the Class III Committee, the 
promulgation of that Committee's standards, or for the NIGC to act to 
certify a given Tribal-State compact, it will likely take years before 
an Indian tribe--through no fault of its own--can be exempted from the 
NIGC's Class III regulatory authority. The absence of a grace period or 
associated deadlines for implementation renders the purported exemption 
in Section 3 of the Draft Bill nothing more than an illusion.
    (3) No Process for Appealing the NIGC's Refusal to Certify a 
Tribal-State Compact. The Draft Bill provides no mechanism for a tribe 
to appeal a determination by the NIGC that a Tribal-State compact does 
not satisfy the standards established by the Class III Committee.
    (4) Status of Nonconforming Tribal-State Compacts Unclear: The 
Draft Bill does not address the status of those Tribal-State compacts 
that the NIGC determines do not comply with the Class III Committee's 
standards. This might lead some to demand that these ``nonconforming'' 
compacts be reopened for negotiation. This, in turn, could create an 
opening for states that are parties to such compacts to demand new or 
increased ``revenue sharing'' in exchange for the tribes' continued 
ability to conduct gaming. At the very least, this omission would 
create a cloud over the legality of these compacts. The Draft Bill 
should explicitly state that compacts that the NIGC determines do not 
conform to the Class III Committee's standards are not subject to 
amendment or to renegotiation without the written consent of all 
parties to the compacts.
    If Congress opts to have the NIGC assume all regulatory control 
over Class III tribal gaming, as the Draft Bill would do, then there is 
no need for the Tribal-State compacting process that is now an integral 
part of the IGRA. The Community does not believe that this is the 
result the Committee intends.
    Rather, the Community believes that to the extent the Committee 
believes that a legislative response to the CRIT decision is necessary, 
the Committee should consider including MICS as a component of tribal 
gaming ordinances rather than handing the NIGC broad regulatory 
authority. The Community, however, has grave concerns about the wisdom 
of any attempt to amend IGRA in the current political climate.
    I appreciate the opportunity to provide the Community's views on 
the Draft Bill. The Community stands ready to work with the Committee 
and its members on this and other issues affecting Indian gaming.

                                  
