[Senate Hearing 110-405]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-405
 
                 THE NATIONAL INDIAN GAMING COMMISSION
=======================================================================


                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 17, 2008

                               __________

         Printed for the use of the Committee on Indian Affairs





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                      COMMITTEE ON INDIAN AFFAIRS

                BYRON L. DORGAN, North Dakota, Chairman
                 LISA MURKOWSKI, Alaska, Vice Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
KENT CONRAD, North Dakota            TOM COBURN, M.D., Oklahoma
DANIEL K. AKAKA, Hawaii              JOHN BARRASSO, Wyoming
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
      Allison C. Binney, Majority Staff Director and Chief Counsel
     David A. Mullon Jr., Minority Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 17, 2008...................................     1
Statement of Senator Dorgan......................................    53
Statement of Senator Tester......................................     1

                               Witnesses

Carlyle, Delia, Chairwoman, Arizona Indian Gaming Association; 
  Chairwoman, Ak-Chin Indian Community...........................    12
    Prepared statement with attachment...........................    13
Hogen, Philip N., Chairman, National Indian Gaming Commission....     3
    Prepared statement...........................................     5
Luger, J. Kurt, Executive Director, North Dakota and Great Plains 
  Indian Gaming Association......................................    32
    Prepared statement...........................................    34
Matthews, J.R., Niga Executive Committee Member and Vice 
  Chairman, Quapaw Tribe of Oklahoma; accompanied by Mark Van 
  Norman, Executive Director, National Indian Gaming Association.    18
    Prepared statement...........................................    20
Patterson, Brian, President, United South and Eastern Tribes, 
  Inc............................................................    27
    Prepared statement...........................................    29
Rand, Kathryn R.L., J.D., Professor, University of North Dakota 
  School of Law; Co-Director, Institute for the Study of Tribal 
  Gaming Law and Policy; accompanied by Steven Andrew Light, 
  Ph.D., Professor, University of North Dakota College of 
  Business and Public Administration; Co-Director, Institute for 
  the Study of Tribal Gaming Law and Policy......................    41
    Prepared statement with attachment...........................    43

                                Appendix

Boren, Hon. Dan, U.S. Representative from Oklahoma, prepared 
  statement with attachment......................................    67
Supplementary Information Submitted by:
    Confederate Salish and Kootenai Tribes of the Flathead Nation   200
    Hogen, Philip N..............................................   203
    Miccosukee Tribe of Indians of Florida.......................    75
    Poarch Band of Creek Indians.................................   168
    Seminole Tribe of Florida, Metlakatla Indian Community, 
      Kickapoo Traditional Tribe of Texas, and the Wichita and 
      Affiliated Tribes of Oklahoma..............................   144
    Seneca Nation of Indians.....................................   192


                 THE NATIONAL INDIAN GAMING COMMISSION

                              ----------                              


                        THURSDAY, APRIL 17, 2008


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:30 a.m. in 
room 562, Dirksen Senate Office Building, Hon. Jon Tester, 
presiding.

             OPENING STATEMENT OF HON. JON TESTER, 
                   U.S. SENATOR FROM MONTANA

    Senator Tester. [Presiding.] I would like to call the 
Indian Affairs Committee meeting on the oversight of the 
National Indian Gaming Commission to order. We have a great 
panel to hear from today. The panelists can go ahead and take 
your respective seats now. I have a quick opening statement and 
then we will get to the testimony and the questions and answers 
shortly thereafter.
    I want to welcome everybody, especially the panelists, to 
the Committee meeting today. I want to thank you for being here 
to visit about the National Indian Gaming Commission's 
consultation processes. As everybody in this room knows, Indian 
gaming is a dual-edged sword. On one side, the Indian gaming 
represents the most significant economic development system 
since the treaties were made. On the other side, gaming carries 
the possibility of fraud, corruption and abuse.
    To help ensure gaming contributes more positive than 
negative to Indian Country, Congress established the NIGC. 
According to the Indian Gaming Regulatory Act, the NIGC role is 
to shield tribes from organized crime, ensure that Indians are 
the primary beneficiaries of gaming, and ensure gaming is 
conducted fairly.
    It is undisputed that NIGC is a big job to do. More than 
400 gaming enterprises on 230 reservations in 30 States 
generated about $26 billion in 2006. To complicate matters, 
each tribe is an individual nation with unique goals and needs. 
The NIGC is a relatively young entity as far as Government 
agencies go, and it is reasonable to expect a few growing pains 
along the way.
    We are here today to ensure that the NIGC and Indian gaming 
overall are accomplishing its missions to improve Indian 
Country with meaningful, safe and fair economic development. I 
have several concerns about the process today and hope this 
hearing helps clarify the issues for everybody here. I want to 
be sure that the NIGC is spending more of its time to ensure 
Indian Country is successful with gaming, rather than merely 
building bureaucracy.
    Along those lines, however, I am concerned that this very 
important job is in the hands of only three people, but right 
now it is in the hands of only two people because one of the 
positions has not been filled and both those people are 
Republicans. I want to be sure that the consultation it does is 
meaningful. The tribes have reported that although the NIGC 
announces its proposed rules and collects comments from the 
tribes, that the NIGC is merely going through more than just 
the motions. The comments have little influence on its 
decision-making process. Along these lines, I would like to get 
your thoughts about the Rahall bill that is currently before 
the House of Representatives regarding consultation, H.R. 5608.
    I am also concerned about the recent controversy 
surrounding the proposed Class II regulations. With an 
estimated $1 billion to $2 billion loss at stake in an industry 
created to provide economic benefit to Indian Country, we need 
to be very, very careful about how we proceed. I am 
particularly concerned because tribes are fairly new to the 
gaming regulations and business enterprise, and only giving 
them one month to analyze the economic impact statement and no 
time to analyze the cost-benefit analysis is contrary to NIGC's 
mission.
    That is why Senator Baucus, my comrade from Montana, and I 
wrote you a letter, Mr. Hogen. In that letter, we had asked you 
to extend that comment period until tribes had an opportunity 
to analyze the important aspects and comment appropriately. It 
is vital for you to understand the impact of this decision will 
have on Indian Country and avoid losses if at all possible.
    And finally, with all the criticisms we have heard about 
the NIGC, I also want to be sure that gaming operators 
understand that it is not fair to complain about the NIGC 
process just because they don't happen to agree with the rule 
or regulation. The NIGC has a big and very complicated job to 
do with limited resources. It is important that we all work 
together.
    So in closing, I want to thank you all for being here 
today. I look forward to this discussion. We are here today to 
ensure that as we grow, we continue to adhere to the goals 
identified by Congress. Working together, we truly can improve 
Indian Country through economic development and gaming can be a 
contributor.
    I want to welcome the panelists here today. It is great to 
have you. I will introduce you and then we will go in the order 
of introduction.
    We have the Honorable Phil Hogen, Chairman of the National 
Indian Gaming Commission right here in Washington, D.C., 
formerly out of the great State of South Dakota. We have the 
Honorable Delia Carlyle, Chairwoman of the Arizona Indian 
Gaming Association, Chairwoman of the Ak-Chin Indian Community 
Council of Phoenix, Arizona. We have the Honorable J.R. 
Mathews, Board Member and Vice Chairman of the Quapaw Tribe of 
Oklahoma, Quapaw, Oklahoma. He is accompanied by Mark Van 
Norman, Executive Director of the National Indian Gaming 
Association, Washington, D.C.
    We have Brian Patterson, the President of the United South 
and Eastern Tribes of Nashville, Tennessee; and Kurt Luger, 
Executive Director of the Great Plains Indian Gaming 
Association, Bismarck, North Dakota. And finally, last but 
certainly not least, we have Kathryn R.L. Rand, accompanied by 
Steven Light, Co-Directors, Institute for the Study of Tribal 
Gaming Law and Policy, University of North Dakota, Grand Forks, 
North Dakota.
    Welcome, all.
    We will start with you, Mr. Hogen.

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

    Mr. Hogen. Good morning, Senator. Thank you for inviting 
the National Indian Gaming Commission to testify. With me today 
here seated behind me is Norm DeRosier, who is the Vice Chair 
of the Commission, and as you observed, the other member of 
what ordinarily is a three-member commission.
    It is really important and timely that the Senate from time 
to time look at agencies like ours. Getting ready for these 
hearings is kind of like doing my income tax. I don't look 
forward to its preparation, but once I get done with it, I am 
really better off because I can put things in better 
perspective and identify some areas where I probably could have 
done things a little better.
    With respect to Indian gaming, I want to say at the outset 
and remind everybody Indian gaming is not a Federal program. 
Indians invented Indian gaming. It has been working great. Our 
job is to be part of the solution, not part of the problem.
    The growth of Indian gaming revenues continues to increase. 
I think with the economy slowing up a little bit, the growth 
rate might slow down a little, but it is getting bigger and it 
is doing great things for meeting Indian needs.
    NIGC's role, very generally, is to ensure ongoing integrity 
in this industry. We need to do that so the public will 
perceive that there is integrity and they will continue to come 
to tribal gaming facilities. We need to do that to make sure 
that the tribal assets, the tribal gaming revenues are 
protected and go to the right place.
    But most important, in looking at the regulation of Indian 
gaming, we need to bear in mind that the tribes do the heavy 
lifting. The tribes are there all day, every day, 24/7, 365 
days a year. If they fall down on the job, then the thing is 
going to have trouble. Our job is to try and assist them in 
that regard.
    We do that primarily in three ways. We help to assure the 
suitability of the people they hire to run the place. That is, 
they license the tribal gaming employees and we help them going 
to the FBI to check the fingerprint base and so forth do that. 
We also help them assure that the play at the tribal gaming 
facility, the casino or the bingo hall, is fair, fair to the 
players, fair to the tribal gaming facility.
    And thirdly, we want to make sure that the dollars that 
come in the door and are eventually supposed to end up in the 
tribal bank account get there, so that the developers and the 
contractors don't get an unfair share along the way or 
something doesn't fall through the cracks. So internal controls 
and various mechanisms permit them to do that.
    With respect to our agency, we have our headquarters office 
here in Washington, D.C. We have five regional offices out in 
the Country, so to speak, and one region is served from our 
D.C. office. We have currently 416 tribal gaming operations out 
in Indian Country operated by 230 tribes. We try to do our job 
with a staff of 104 staff members.
    We have several divisions that we are broken into. We have 
an audit division that, first of all, looks over the audits 
that are done by outside accountants for tribal operations, and 
then sent to the NIGC, and we go out and do audits with respect 
to the performance or the compliance with the tribe's internal 
control standards, and in the case of Class II gaming, the NIGC 
internal control standards.
    We have a contracts division that reviews and recommends 
approval or disapproval of proposed management contracts the 
tribes enter into with outside developers and so forth. In 
connection with that, they do background investigations of 
those folks who tribes interface with. That contracts division 
also participates in the background investigation role the NIGC 
plays to support tribal gaming commissions as they license 
their employees.
    And of course, we have an enforcement division. We have 
investigators who look to make sure that the Indian Gaming 
Regulatory Act, the NIGC regulations, the tribe's gaming 
ordinance, and the tribal-State compact are being complied 
with. To do this, we need some legal advice. We have an office 
of general counsel. I think we have 17 staff within that 
office. We often get sued for one reason or the other. They 
defend that litigation with the Department of Justice, and they 
advise the rest of the Commission. And then to do the job, of 
course, we have a division of Administration.
    One of the events that was significant in the life of the 
National Indian Gaming Commission was the ruling in what is 
called the CRIT case, Colorado River Indian Tribes case, that 
challenged NIGC's application of minimum internal control 
standards to Class III or casino gaming. That part of the 
Indian gaming, the casino gaming, represents 90 percent of that 
$26 billion that is generated, but the court decided that we 
had gone too far as we attempted to apply those regulations. So 
we have necessarily modified what we do and how we do it in 
that connection.
    We still maintain minimum internal control standards, and 
we do that of course because they still apply to Class II 
gaming. And in a number of cases, those MICS have been adopted 
by tribal-State compacts, so they need to stay current with 
technical advances and so forth.
    Recently, a number of tribes have amended their tribal 
gaming ordinances to adopt or incorporate the NIGC MICS with 
respect to Class III gaming and to recognize the NIGC's role to 
monitor that to take enforcement action if there are 
violations.
    So while we have changed after the CRIT decision, it hasn't 
been a drop in the interest in the minimum internal control 
standards. There are a number of tribes, knowing that the CRIT 
decision took that jurisdiction away from us, would like some 
help and have invited us to come in, look at their Class III 
mixed compliance, and we are doing that.
    Senator Tester. Chairman Hogen, one thing that I didn't 
state, and goes to all, we are going to try to limit you to 
five minutes. Your complete testimony will be a part of the 
record, so continue on and if you can wrap it up in the next 
two or three minutes, it would be much appreciated.
    Mr. Hogen. Okay.
    We are funded not with any taxpayers' dollars. We are 
funded with fees that we assess on tribal gaming. We recently 
set the rate for that fee, and it will be .057 percent. We 
reduced the rate from what it had been in the prior year, and 
that will collect about $15.4 million based on our projections. 
That is an increase from the previous year's budget.
    In addition to the fees, we also collect money with respect 
to the service we provide on the fingerprints and the 
management contractors pay their own way with respect to the 
background investigations they do.
    I know that the Committee is very interested in the 
consultation that NIGC conducts. We have adopted a consultation 
policy. We attempt to adhere to that, and we are watching with 
great interest that bill that is in the House that relates to 
consultation. Consultation is a good idea, but I think in terms 
of current controversy, if you will, it is not, in my view, 
that we haven't consulted. Rather, it is that we haven't agreed 
with everything that the tribe has asked or suggested of us 
with respect to the Class II standards. I would be happy to 
respond to questions that might arise in that connection.
    So we do have many other areas addressed in our written 
testimony, and I would be happy to respond to any questions 
that you or the Committee might have with respect to anything 
we do.
    Thank you, Senator.
    [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. The 
National Indian Gaming Commission (NIGC) is delighted that the 
Committee has once again chosen to look at the NIGC and the role it 
plays under the Indian Gaming Regulatory Act (IGRA). As I have 
testified before, Indian gaming is the greatest engine for economic 
development that Indian country has developed.
    Indian gaming is not a federal program, and its genesis did not 
occur with the enactment of IGRA. Rather, tribes have been gaming since 
before the inception of the Act and in many respects, the structure 
established by IGRA has fostered the growth and development of that 
industry. IGRA created the NIGC and it is the nation's only federal 
gaming regulatory entity. To put the regulation of tribal gaming in 
proper context, we need to appreciate that the vast majority of the 
regulation of tribal gaming is done by the tribes themselves, with 
their tribal gaming commissions and regulatory authorities. In many 
instances, where tribes conduct Class III or casino gaming, state 
regulators also participate in the process. NIGC has a discrete role to 
play in this process and is only one partner in a team of regulators.
    As I have often told this Committee, the growth of revenues 
generated by tribal gaming is large, and getting larger. For individual 
casinos, however, growth may slow and, in some cases, may even 
diminish. There has been and continues to be growth in the industry, 
which now generates nearly $26 billion of gross gaming revenues 
annually, and which represents the second largest component of gaming 
revenues generated by the gaming industry in the United States.
    NIGC's role in the structure established by IGRA is to ensure 
ongoing integrity in the tribal gaming industry by assisting tribes to 
determine the suitability of those whom they approve or license to 
staff and operate their gaming operations and to ensure that the play 
at the casinos and bingo halls is fair, both to the customer players 
and to the facilities themselves. In addition, NIGC ensures that the 
revenues generated by the tribal gaming operations go to the tribal 
governments and are not wrongfully siphoned away or disproportionately 
paid to those who supply and assist tribes as they conduct those 
operations.
    As the Committee knows, zero taxpayer's dollars are provided to 
NIGC to fund its role, but rather the tribes pay their way through fees 
the Commission assesses on the tribes' gross gaming revenues. The large 
and growing scope of Indian gaming of late has meant that NIGC, too, 
has grown and is growing to keep pace. The composition and staffing of 
NIGC is currently as follows:
Overview of the Commission
    The NIGC is headed by three Commissioners. The Chairman is 
appointed by the President with the advice and consent of the Senate 
and the other two Commissioners are appointed by the Secretary of the 
Interior. One Commissioner position is currently vacant.
    Our current structure is comprised of our Washington D.C. 
Headquarters Offices, six regional offices (one of which is housed in 
our D.C. offices) and five satellite offices. The typical regional 
office is composed of a regional director, several field investigators, 
one or two auditors and administrative staff.
    Collectively our field personnel consist of six regional directors, 
field and background investigators, auditors, and administrative staff 
(with one vacancy). It should be noted that the auditors in the 
regional or satellite offices actually report to the Director of Audits 
in our D.C. offices.
    Our D.C. Headquarters houses the Directors of Enforcement, 
Training, Auditing, and Contracts. The Directors and our managers for 
Information Technology (IT), Freedom of Information Act requests, 
Finance and other administrative roles all report to a Chief of Staff. 
In addition there is the Office of General Counsel. The attached chart 
further breaks down the composition of our staffing. Of our 104 
employees, 22 are Native American, 16 of whom are enrolled tribal 
members.
    A brief description of the function and achievement of the several 
divisions of the Commission follows:
Enforcement Division
    NIGC's Enforcement Division, through its field investigators, 
reviews the conduct of gaming at 416 tribal gaming operations run by 
230 tribes.
    As a result of NIGC field investigators' work and with the help of 
NIGC's Office of General Counsel, in 2007 NIGC issued seven Notices of 
Violation and entered into an additional 4 Settlement Agreements in 
lieu of notices of violation. Although informal compliance is the 
primary method for assuring compliance, approximately 160 Notices of 
Violation have been issued over the years.
Training
    Along with Congress's grant of flexibility in the amount of fees 
collected to fund our activities came a mandate to provide technical 
assistance to tribal gaming operations. NIGC has always seen training 
as an important part of its mission but has taken special care to offer 
training since enactment of Pub. L. No. 109-221 on May 12, 2006. For 
example, in calendar year 2007, NIGC's Division of Enforcement provided 
over 700 hours of formal training to tribal regulators. This figure 
excludes all the hours of informal training that took place during the 
715 site visits that were conducted during 2007 or that took place at 
national and regional gaming conferences. Training topics include: 
tribal background investigations and licensing; environment, public 
health and safety programs; tribal gaming commission duties; and slot 
machine technology.
    NIGC recently hired a Director of Training, who will oversee the 
agency's training efforts, integrating the work of our field 
investigators and field auditors in providing the training, both formal 
and informal, that is needed by tribal gaming facilities and 
regulators.
Audit Division
    Since the U.S. Court of Appeals for the D.C. Circuit affirmed the 
holding in the Colorado River Indian Tribes (CRIT) decision, the Audit 
Division has foregone the conduct of Minimum Internal Control Standards 
(MICS) audits at most gaming operations conducting Class III gaming; 
however, at the time of the decision follow-up was being performed from 
several previous audits. At the request of some tribes, that work 
continued and reports of findings were provided to the tribal gaming 
regulatory authorities for their disposition. Furthermore, in addition 
to performing four compliance audits at Class II gaming operations, the 
Division has received two requests from Class III properties to conduct 
audits; one has been completed and the other is in progress.
    The Division has also conducted audits confirming that the uses of 
gaming revenue by three tribal governments were compliant with NIGC 
regulations. Complementing the audit work has been an increased demand 
for training assistance from gaming operations and tribal regulatory 
personnel. Since the beginning of the current fiscal year, audit staff 
have participated in or conducted training on 17 occasions.
    The Audit Division has also worked to install a computerized 
accounting system to improve various aspects of the agency's financial 
management. The new system has allowed the automation of billings and 
receipts for the tribes that process fingerprints of tribal gaming 
operation key employees through the NIGC. The new system also allows us 
to better monitor the timely payment of NIGC quarterly fees and to more 
accurately track payment of fines and penalties that are deposited with 
the U.S. Treasury. The system will also help improve NIGC's monthly 
financial management through preparation of monthly financial 
statements, comparing actual expenditures to budgeting revenues and 
expenses to facilitate financial planning for the future.
Contracts Division
    The Contracts Division is responsible for reviewing all management 
contracts and amendments in order to make a recommendation to the 
Chairman, who must approve management contracts before they become 
effective.
Tribal Background Investigations and Licensing
    The NIGC assisted in processing over 72,000 fingerprint cards for 
tribal gaming operations. All the fingerprint information is sent 
electronically to the Federal Bureau of Investigation, pursuant to a 
MOU with the Bureau with most of the results returned to the tribes 
within 24 hours. This is a marked improvement since the early days of 
NIGC when results were sent through the mail and not received for two 
to four months.
Administration Division
    The NIGC Administration Division has responsibility for, among 
other things, responding to Freedom of Information Act (FOIA) requests. 
Our FOIA Office began FY 2007 with 10 pending requests, and received 
101 new requests. By December 31, 2007, the Office had processed and 
closed out 108 of those requests; the remaining three were closed out 
within the 20-day time limit.
    In addition to updating the Employee Manual with many new policies 
and procedures, the Division is also working to create an updated 
agency-wide data base.
Office of General Counsel
    The Office of General Counsel (OGC), a staff of 17, provides legal 
advice and counsel to the Commission.
    Currently, OGC attorneys, along with the Department of Justice, are 
handling 13 cases in Federal courts and monitoring 11 additional cases 
that impact the Commission. In 2006, 69 ordinances and amendments were 
submitted for review, and in 2007, an additional 49 were submitted. In 
every instance, those reviews were completed within the 90-day 
statutory deadline.
    Twenty-eight contracts in 2006 and 22 contracts in 2007 were 
submitted to OGC for a review of management and sole proprietary 
interest. The OGC issues advisory opinions on these contracts as a 
service to tribes and contractors so that they may avoid possible 
violations of the IGRA.
    The OGC also assumed responsibility for tracking whether tribal 
gaming facilities are located on Indian lands. It established an Indian 
lands data base to capture all of the information required to determine 
if the lands are eligible for gaming. That data base is undergoing a 
complete revamping to make it more user friendly. The OGC is also 
developing a system of maps to reflect where the gaming operations are 
located.
    The OGC, along with NIGC's program personnel, staffs the 
Commission's work on regulations. It also provides legal advice on the 
distinction between class II and class III games. As a consequence, 
over a period of five years, the Office helped draft and revise the 
Commission's several drafts of the regulations for classification, 
facsimile definition, technical standards, and class II minimum 
internal control standards. To do so, they staffed the meetings of two 
advisory committees, the meetings of a separate working group formed by 
the advisory committees, consultation hearings, and hundreds of 
individual consultations, and reviewed hundreds of written comments 
submitted by tribes, states and others.
    The OGC also drafted Facility License Standards which were 
published as final in the Federal Register in February of this year. 
The regulation requires tribes to notify the Commission 120 days before 
a tribe plans to license a new facility. The rule was finalized after 
nearly two years of consultation with tribal leaders and 217 written 
comments on prior drafts and proposed standards. Since the Facility 
License Standards were published, the NIGC has received seven tribal 
notifications of intent to open a new gaming facility in 120 days. We 
have requested information from another five tribes regarding their 
intent to open a facility within the 120-day timeframe.
The Commission's Evolving Mission
    Over time, of course, the methods by which the Commission fulfills 
its mission have evolved, and continue to evolve. Some of the areas of 
focus in this regard are as follows:
Consultation
    In keeping with the obligation to consult, NIGC adopted its 
consultation policy in early 2004, a copy of which is attached and 
which we published in the Federal Register. This policy was itself a 
product of the Commission's consultation with tribes as it was 
formulated. In the course of formulating this policy, NIGC also 
gathered and examined the consultation policies of other federal 
agencies, and discussed the utility of those policies with those 
agencies.
    In the course of consulting on regulations, we typically first 
draft the proposed regulations, based on the agency's experience of 
what is needed for healthy regulation, and then we present these 
proposed regulations to the tribes. The proposals are often published 
on our website and, for example, in the case of the classification 
regulations, are presented to tribal advisory committees, so that 
tribal gaming regulators with the most experience in the field can 
advise NIGC of how the regulations would affect them.
    We continue to seek consultation in the most effective ways. While 
there are 562 recognized tribes in the United States, only about 230 
are engaged in Indian gaming, and so it is that group to whom the NIGC 
has most often turned for consultation. In the two years 2006 to 2007, 
NIGC has conducted 154 government-to-government consultations.
    In addition, I met with 41 tribes here in my office in D.C. at 
their request to discuss a myriad of issues. NIGC also attended 15 
tribal advisory committee meetings, 15 national and regional 
conferences, and 8 tribal leadership meetings to which we were invited. 
In addition, on September 16, 2006, we held a public hearing on the 
class II regulations. That hearing, at which 27 speakers made public 
comments, was attended by 129 participants.
    It is not possible, of course, for the Commission to visit every 
tribe on its reservation each time an issue or policy might affect 
tribes. Gaming tribes have formed regional gaming associations, such as 
the Great Plains Indian Gaming Association (GPIGA), the Oklahoma Indian 
Gaming Association (OIGA), the Washington Indian Gaming Association 
(WIGA), the California Nations Indian Gaming Association (CNIGA), the 
Midwest Alliance of Sovereign Tribes (MAST), and the New Mexico Indian 
Gaming Association (NMIGA), among others, as well as national and 
regional organizations such as National Indian Gaming Association 
(NIGA), National Congress of American Indians (NCAI) and United South 
and Eastern Tribes (USET). Those organizations meet annually or more 
often, and NIGC has taken those opportunities to invite tribal 
leadership to attend consultation meetings on a NIGC-to-individual-
tribe basis. Consulting at gaming association meetings maximizes the 
use of the Commission's time and minimizes the travel expenses that 
tribes, who ordinarily attend those meetings anyway, must expend for 
consultation.
    Many tribes accept these invitations, many do not. Some tribes send 
their tribal chair, president or governor, and members of their tribal 
council to these consultation sessions, while others only send 
representatives of their tribal gaming commissions, or in some 
instances staff members of the tribal gaming commission or of the 
tribal gaming operations. The consultation session is always most 
effective when tribal leadership, by way of tribal chair or council, is 
present. The letters of invitation identify issues that NIGC is 
currently focusing on, and about which the agency would like tribal 
input. The letters always include an invitation to discuss any other 
topics that might be of particular interest to an individual tribe. 
Some consultations, therefore, have been limited to a single issue, 
such as NIGC's proposals to better distinguish gaming equipment 
permissible for uncompacted Class II gaming from that permitted for 
compacted Class III gaming. Others might focus on issues specific to 
the individual concerns of the tribes.
    We do not only make ourselves available for numerous consultations 
but we also listen seriously to what we hear at those consultations. 
The regulations NIGC adopts are published with thorough preambles, 
which attempt to summarize all of the issues raised in the government-
to-government consultation sessions the Commission has held with 
tribes, as well as those raised by all other commenters providing 
written comment, during the comment period on the regulation. We write 
such detailed preambles so that commenters will know that we considered 
their comments and understand why those comments were or were not 
accepted.
    We also take to heart what we hear at consultations while we 
formulate our regulations. For example, the proposed regulations on 
Minimum Internal Control Standards for Class II gaming were written 
completely in response to observations made by the Tribal Advisory 
Committee on the Class II regulations. Likewise, we have drastically 
revised our Class II classification regulations and technical standards 
based on tribal feedback. While it may not be patently clear to the 
Committee why reducing the number of daubs or ball releases in an 
electronic bingo game is important, I can assure you, it is a topic of 
hot debate among gaming tribes and the states. The fact that we have 
reduced the number of daubs from two (after the game starts) to one, 
makes a tremendous difference in the speed with which the game may be 
played.
    This is not to say that our responses to tribal feedback are met 
with applause in Indian Country. We believe that consultation should 
not necessarily mean agreement and that the parties consulting should 
not measure the good faith or effectiveness of the consultation by 
whether agreement is reached. We must also balance the desire for 
collaboration with the regulated community (Indian gaming tribes) with 
our statutory mission to provide robust and healthy regulation.
    Typically, there is little or no clamor for consultation if the 
action being considered is favorably received throughout the Indian 
gaming industry. NIGC's recent reduction in the fees it imposes on 
gross gaming revenues to fund NIGC operations provides such an example. 
On the other hand, if the issue the agency is considering is viewed as 
problematic, often there are concerns expressed that consultation has 
been inadequate.
    A further challenge the NIGC has observed is that consultation is 
most often criticized by tribes when the eventual policy that the 
agency settles on is at odds with the position expressed by tribes 
during consultations. That is, the NIGC's failure, from the tribal 
point of view, was not in the consultation per se but rather that the 
Commission did not agree with tribal points of view. It is often the 
case that the only consultation deemed adequate is that in which the 
Commission always fully comports with tribal points of view. NIGC often 
finds itself sympathetic to tribal points of view, but it is also bound 
by statutory constraints. For example, the IGRA's characterization of 
certain games as Class III requires the sanction of tribal-state 
compacts.
Government Performance and Results Act (GPRA)
    In mid-2006 IGRA was amended by Pub. L. No. 109-221 (Act of May 12, 
2006) to require the NIGC to formally comply with the Government 
Performance and Results Act (GPRA).
    The formal GPRA process was new to NIGC, and we lacked knowledge 
and experience in our agency in preparing strategic and performance 
plans in accordance with GPRA procedures and requirements. Our staff, 
after reading GPRA and reviewing one or two existing plans from other 
agencies, drafted a plan for FY 2008. In light of feedback, including 
from tribal representatives who read the discussion draft on our 
website, the plan was essentially discarded and we started anew.
    The new draft was completed around the first of April 2008. We are 
now seeking review, guidance and assistance relative to our new plan.
    We hope to have a draft strategic plan suitable for submission to 
Tribes and Congress for comments by the end of June 2008.
CRIT Decision
    In performing its oversight role, in the 1990s NIGC addressed 
concerns about the lack of internal controls in a number of tribal 
gaming facilities by adopting a comprehensive set of Minimum Internal 
Control Standards (MICS), which the NIGC applied to Class II and Class 
III gaming. While many tribes at that time already had excellent 
internal control systems, a number did not, and as a result of the 
application of those standards, the entire Indian gaming industry moved 
to a more professional level, some tribes adopting the NIGC MICS, some 
tribal-state compacts adopting those MICS, and many tribes combining 
the NIGC standards with their own, more rigorous standards. The annual 
audits IGRA requires tribes conduct and furnish to NIGC for review, 
thereafter included independent auditors' analysis of tribal compliance 
with those standards. NIGC expanded its team of auditors and conducted 
tribal audits in connection with compliance with those standards. Those 
standards were applied to Class II and Class III gaming. At the time of 
their adoption, many tribes, while complying with the new regulations, 
voiced a concern that NIGC lacked the authority to so regulate Class 
III gaming--Class III gaming constituting more than 90% of the $26 
billion of gross gaming revenues per year. Those concerns crystallized 
in a judicial challenge brought by the Colorado River Indian Tribes 
(CRIT) to the NIGC's MICS's application to Class III gaming. The United 
States District Court and the United States Court of Appeals in the 
District of Columbia agreed with the tribes reasoning and in 2006 
decreed that NIGC could no longer mandate tribal compliance in that 
area. Thus, the role and approach of NIGC in that area has since 
changed. A number of tribes have recently amended their tribal gaming 
ordinances to adopt and include the NIGC MICS, and to recognize NIGC's 
enforcement authority over Class III. In those instances NIGC has 
reverted to the role that it earlier played. Elsewhere, NIGC confines 
its review of MICS compliance to Class II gaming except when a number 
of tribes have invited the NIGC to their facilities to do Class III 
MICS audits on a voluntary basis.
Classification Standards
    Perhaps the highest profile initiative of the NIGC in recent years 
has been its effort to adopt a regulatory scheme to draw a brighter 
line to distinguish gaming equipment tribes may use for uncompacted 
Class II gaming (bingo, etc), from that which tribes employ for 
compacted Class III gaming (casino gaming). The IGRA recognized that 
the long standing Johnson Act prohibited ``gambling devices'' in Indian 
country, but made a specific exemption for the use of such equipment 
when it is utilized pursuant to the tribalstate compact. The Act also 
recited that tribes could use computers and electronic and technologic 
aids when they conducted their bingo and games similar to bingo, but 
further provided that slot machines of any kind and electronic 
facsimiles of games of chance fell into the compacted Class III 
category. After taking enforcement actions, closing tribal gaming 
facilities and imposing significant fines, in instances where the NIGC 
observed slot machines or electronic facsimiles of games of chance 
being employed in the absence of compacts, the Commission attempted to 
better address the issue by providing a number of advisory opinions 
with respect to equipment it deemed playable without a compact. That 
process proved complex and difficult, and with the rapid advances in 
technology, we discovered that no sooner were such advisory opinions 
written, than they became obsolete. Thus, a long effort, assisted by 
tribal advisory committees, was commenced to write regulations to 
clarify what equipment could be used without a compact, and how such 
equipment could be identified and certified. This effort included a 
long discussion and negotiations with the Department of Justice, which 
has responsibility for enforcement of the Johnson Act, and drafting and 
proposing rules which, after strong criticism by tribes and others 
during many consultation sessions, were withdrawn.
    As a result of a long arduous effort by the NIGC's tribal advisory 
committees, working with a working group of representatives who build, 
design and regulate such equipment at the tribal level, a new package 
of proposals was published in the Federal Register in October, 2007. 
Much consultation with respect to those proposals was held thereafter, 
and the comment period was extended several times, most recently 
concluding on March 9, 2008. In connection with this effort the 
Commission commissioned an economic impact study which will be 
considered together with the comments on the proposals under 
consideration. This long-standing effort deserves to be fairly and 
finally concluded, and the Commission is cautiously optimistic that 
with the information received from tribes, states and the public, it 
can publish final rules with respect to at least some aspects of this 
concern in the near future.
    Unless or until clarity is brought to this area, challenges will 
remain for gaming tribes, as well as those of us who attempt to 
regulate them. Tribal gaming is by no means the only sector where 
concerns of this nature exist. In many states, there is a significant 
expansion of what is purported to be charitable gaming using automated 
bingo equipment. These states find themselves struggling with questions 
about whether such equipment complies with their charitable gaming laws 
or runs afoul of their gambling laws, and, generally, with the scope of 
permissible charitable gaming within their borders. In some instances, 
this has raised issues about violating the ``exclusivity'' that tribes 
understood they had bargained for in their Class III compacts in 
exchange for revenue sharing with the states. Tribes cannot expect to 
have an unfettered breadth of Class II gaming equipment in their 
sector, yet require states to view the issue very narrowly. Clarity in 
this area will serve many purposes.
Change in the Face of Growth
    The NIGC, in the context of the federal family, is a relatively 
young and small agency. It was not long ago when NIGC's staff consisted 
of only a handful of people, operating from a single office. As the 
industry grew from at most a $200 million industry when IGRA was 
enacted to a $26 billion industry, the agency's budget grew from $1.2 
million in 1991, to $13 million in 2006, to $20.5 million in 2008. The 
days are not long past when there were only five ``field 
investigators'' operating out of their homes and the trunks of their 
cars, spread throughout Indian country.
    As this growth has occurred, it has become necessary to adopt more 
and more formal policies and procedures. The agency has always 
attempted to look at federal statutes, such as most of Title 5 U.S.C. 
governing government organization and employees, and through more 
specific procedures of the Department of the Interior under our 
interagency arrangement with the Department to provide administrative 
support. With the agency's growth, it has become necessary to develop 
and adopt more agency-specific policies, and this is a work in 
progress. Recently the agency has adopted policies relating to 
reasonable accommodations under Equal Employment Opportunity Commission 
guidance, and undoubtedly as the agency continues to grow, further 
policies of this nature will be deemed appropriate. Common sense and 
good judgment has always been the approach the agency has attempted to 
take when dealing with its management. As the NIGC has now grown to 
have a staff of more than 100, formal policies and procedures become a 
greater necessity. While an informal approach kept the agency nimble in 
its early days, experience is showing that as it has grown, more 
bureaucracy, to ensure due processes and transparency, is appropriate 
and the agency continues to examine its practices to develop measures 
that are necessary. In this connection, the agency is using its own 
audit staff to conduct audits of a number of its programs, and greater 
consistency and clarity is resulting there from.
    That is an overview of how we are evolving in carrying out our 
mission. I will be happy to answer any questions the Committee have. 
Thank you.
Staffing at the NIGC Headquarters
    1--Chief of Staff
    2--Commission assistants
    1--Director of Audits
    1--Director of Enforcement
    1--Director of Training
    1--Director, Region VI
    1--Director, Congressional and Media Relations
    1--Director of Contracts
    1--Financial Analyst
    1--NEPA Compliance Officer
    2--Tribal Background Investigation Staff
    1--Support Staff
    1--Director of Administration (vacant)
    11--Administration Personnel (1 vacant)
    1--IT Manager
    4--IT Staff (1 vacant)
    1--Acting General Counsel
    13--Attorneys (2 on detail)
    5--Legal staff

    --------------------------------------
    D.C. Total 50
    Field Total 54
    --------------------------------------
    Agency Total 104

    April, 2008

    Senator Tester. Thank you, Chairman Hogen. I appreciate 
that.
    Along the lines of testimony, Congressman Boren has 
requested a statement for the record and it will be also 
included. *
---------------------------------------------------------------------------
    * The information referred to is printed in the Appendix.
---------------------------------------------------------------------------
    Senator Tester. Delia, I look forward to your testimony. As 
with the previous one, if you can keep it to about five minutes 
and we will put your full testimony in the record. So go ahead. 
Thank you for being here.

        STATEMENT OF DELIA CARLYLE, CHAIRWOMAN, ARIZONA 
        INDIAN GAMING ASSOCIATION; CHAIRWOMAN, AK-CHIN 
                        INDIAN COMMUNITY

    Ms. Carlyle. Thank you. Good morning, Chairman Dorgan, Vice 
Chairman Murkowski, Senator Tester and other distinguished 
members of this Committee and staff. My name is Delia Carlyle. 
I am currently the Chairman of the Ak-Chin Indian Community, 
which is just south of Phoenix, not in Phoenix, but south of 
Phoenix. I am also the Chair of the Arizona Indian Gaming 
Association, which represents 19 tribes with gaming compacts in 
Arizona.
    My comments today are on behalf of both my tribe and AIGA, 
and are based on my written comments which I respectfully 
request be entered into the record.
    First, let me discuss what I think many of you may have 
heard about Indian gaming in Arizona. First and foremost, 
tribal gaming activity in Arizona is rigorously regulated by 
both the tribes and the State in Arizona. In Arizona, the 
tribes and the State have developed a collaborative partnership 
for effective regulation of Indian gaming.
    Now, that is not to say we agree on everything. Like many 
good relationships, we often agree to disagree, but remain 
reasonable, respectful and attentive. To reiterate what the 
Arizona Department of Gaming Director Paul Bullis had 
previously stated to this Committee, and I quote, ``Although 
the compact is the cornerstone of our partnership, what makes 
the partnership work is communication, discussion, engagement, 
and a process for resolving issues.'' In fact, in May of 2007, 
Casino Enterprise Management Magazine wrote that Arizona's 
regulatory program exemplifies the very best in regulation.
    I want to touch upon a few issues with the NIGC's current 
practices and regulations. In general, the NIGC is overreaching 
with its recent regulations and appears to be engaging in 
empire-building as there is no significant reason for them to 
be involving themselves in areas already regulated by other 
Federal, tribal and State agencies.
    The publishing of the NIGC's facility licensing standards 
is a prime example of how NIGC has disregarded meaningful 
tribal consultation and collaboration, and adopts its own 
rules. Based upon our experience in Arizona, tribal 
consultation and collaboration means actually listening to and 
considering tribal perspectives, not just sitting across from 
tribal representatives in a one-hour meeting and responding 
with a thank you for your comments.
    Here is an example of what we think the NIGC considers 
consultation. At our January, 2008 annual Southwest Indian 
Gaming Trade Show, the Arizona tribal leaders extended an 
invitation to the NIGC to meet with them and talk about a 
number of issues, one of which was how tribes and the NIGC 
could better communicate. The first item brought up by tribal 
leaders was the NIGC's facility licensing regulations.
    To our surprise, the answer from NIGC was that the 
regulations were already at the Federal Register waiting to be 
published and additional comments were not necessary. When 
asked if there were changes from the last draft, the answer was 
yes. When asked if NIGC could let the tribal leaders know what 
those changes were, the answer from NIGC was no.
    If you look further into this issue, you will see that the 
December 12th, 2007 NIGC consultation letter to Arizona tribal 
leaders included the status of proposed facility licensing 
regulations as a bullet point discussion item. Doesn't it seem 
odd that NIGC listed for discussion with tribal leaders the 
proposed facility licensing standards, when the NIGC already 
had its version of the standards at the Federal Register 
waiting to be published?
    With the new regulations, the NIGC is trying to expand from 
a gaming activity regulator to a sanitation, emergency 
preparedness, electrical, plumbing, food and water, 
construction and maintenance, hazardous materials, and 
environmental regulator.
    Mr. Chairman and other distinguished members of this 
Committee, tribes already have EPA, OSHA, IHS and other 
Federal, State and tribal regulators who review environmental 
health and safety conditions. There are more than enough 
Federal layers piled on our industry.
    Moreover, we are highly dubious of gaming regulators turned 
all of the above regulators at the swoop of a Federal Register 
publication. We do not need yet another Federal agency 
expanding beyond its statutory mission as directed by Congress 
to become another unwieldy, ever-growing bureaucracy.
    Finally, on October 1st, 2007, the NIGC submitted its draft 
Government Performance Results Act report, GPRA. Subsequently, 
as I have been informed, the NIGC has decided on its own to 
revise its own GPRA report. The NIGC should not be allowed to 
stall this long. We question the logic of implementing 
significant changes to the current regulations when tribes do 
not know how we fit within NIGC's strategic five-year plan.
    In addition, tribes are also waiting for the plan on 
technical training, which is another part of the GPRA report.
    Again, on behalf of the Ak-Chin Indian Community and the 
Arizona Indian Gaming Association, I would like to thank the 
Chairman, Vice Chair and other members of this Committee for 
holding this important meeting.
    Thank you.
    [The prepared statement of Ms. Carlyle follows:]

Prepared Statement of Delia Carlyle, Chairwoman, Arizona Indian Gaming 
           Association; Chairwoman, Ak-Chin Indian Community
Introduction
    Good Morning, Chairman Dorgan, Vice-Chair Murkowski, other 
distinguished members of this Committee and Staff.
    My name is Delia Carlyle and I am the Chairman of the Ak-Chin 
Indian Community. I am also Chair of the Arizona Indian Gaming 
Association (AIGA) which represents 19 tribes in Arizona. My comments 
today are on behalf of both my Tribe and AIGA.
    The Ak-Chin Indian Community Reservation was established in May 
1912 and comprised over 47,000 acres. A few months later, more than 
half of the Reservation was taken by the federal government and reduced 
to its present day size of almost 22,000 acres. The Community is 
located approximately 35 miles south of Phoenix, Arizona, near the Gila 
River Indian Reservation. We are a small tribe with about 800 enrolled 
members.
    Ak-Chin is an O'odham word which means ``people of the wash.'' The 
term refers to a type of desert farming that depends on the area's 
washes where our ancestral people planted beans, corn and squash, which 
were irrigated from the wash runoff from storms. While we are still 
farmers today, we also engage in another form of economic development 
known as Tribal Governmental Gaming which helps support the needs and 
dreams of our tribe and tribal members.
    On behalf of the Ak-Chin Indian Community I would like to thank the 
Chairman, Vice-Chair, and the other members of this Committee for 
holding this hearing on oversight of the National Indian Gaming 
Commission (NIGC).
Collaborative Regulation: Arizona Indian Tribes and the Arizona 
        Department of Gaming
    First, let me discuss what I think many of you may have heard about 
Arizona Indian gaming. In Arizona, the tribes and State have developed 
a collaborative partnership for effective regulation of Indian gaming. 
After years, if not decades, of the State not accepting that tribes are 
in fact sovereign governments, Arizona, under the leadership of 
Governor Napolitano, now understands that tribes are indeed sovereign 
governments that predate Arizona. Moreover, under the leadership of 
Executive Director Paul Bullis at the Arizona Department of Gaming, the 
relationship between tribes and the State has become a successful 
partnership. That is not to say we agree on everything. Like many good 
relationships, we often agree to disagree but remain reasonable, 
respectful and attentive.
    In Arizona, the Tribal-State Gaming Compacts delineate the roles 
and responsibilities of the tribes and State. To reiterate what 
Director Bullis has previously stated to this Committee, ``[a]lthough 
the Compact is the cornerstone of our partnership, what makes the 
partnership work is communication, discussion, engagement, and a 
process for resolving issues.'' \1\
---------------------------------------------------------------------------
    \1\ SCIA March 8, 2006 Testimony of Mr. Paul Bullis.
---------------------------------------------------------------------------
    Pursuant to our Compacts, tribal gaming in Arizona funds the vast 
majority of the Arizona Department of Gaming's budget and regulatory 
activities. The Department's Fiscal Year 2008 budget is approximately 
$15.6 million, and for FY 2009 about $16.3 million. To highlight some 
examples, the tribally-funded Arizona Department of Gaming: \2\
---------------------------------------------------------------------------
    \2\ Arizona Department of Gaming.

   Has 111 employees (comprised of numerous peace officers, 
---------------------------------------------------------------------------
        auditors, CPAs and CFEs);

   Performed approximately 12,000 slot machine inspection and 
        certifications;

   Conducted over 300 vendor background reviews and 
        certifications with 100 being new vendor certifications and 200 
        renewals; and

   Conducted approximately 10,000 employee background reviews 
        and certifications with almost 2,500 new applications and over 
        7,500 renewals.

    Please keep in mind that tribal regulatory agencies also inspect 
and certify slot machines; review and certify employee and vendor 
backgrounds; and have multi-million dollar budgets and staff to ensure 
fair and safe gaming on our tribal lands. In May 2007, ``Casino 
Enterprise Management'' magazine wrote that Arizona's regulatory 
program exemplifies ``the very best in regulation,'' The magazine staff 
spent several days with the Arizona Department of Gaming and observed 
their gaming compliance technicians inspecting slot machines at our 
casinos. The article said: ``The state regulators and the tribal 
regulators work together for the best interest of gaming and to assure 
compliant and effective enforcement. The Department's management and 
staff have worked hard to build a comprehensive and efficient system of 
checks and balances that not only work well for them, but . . . are 
also welcomed by the tribes.'' Consequently, tribal gaming activity in 
Arizona is rigorously regulated by both the tribes and the State.
Problems with NIGC Regulation--Facility Licensing Standards
    I want to touch upon several issues we have with NIGC current 
regulatory regime. In general, the NIGC is overreaching with its recent 
regulations, and appears to be engaged in empire building as there is 
no significant reason for them to be involving themselves in areas 
already regulated by other tribal, federal, and state agencies.
    The promulgation and publishing of the Facility Licensing Standards 
are prime examples of how the NIGC has disregarded meaningful tribal 
consultation and collaboration, and unilaterally adopts its own rules. 
The NIGC's own March 31, 2004 Tribal Consultation Policy requires that:

        To the extent practicable and permitted by law, the NIGC will 
        engage in regular, timely, and meaningful government-to-
        government consultation and collaboration with Federally-
        recognized Indian tribes, when formulating and implementing 
        NIGC administrative regulations . . . which may substantially 
        affect or impact the operation or regulation of gaming on 
        Indian lands by tribes under the provisions of IGRA.

    Accordingly, collaboration means more than the NIGC incorporating 
grammatical comments into their regulations. Based upon our experience 
with tribal and State regulation in Arizona, consultation and 
collaboration means actually listening to and considering tribal 
perspectives not just sitting across from tribal representatives in a 
one hour meeting and responding with only a curt ``thanks for your 
comments.'' This regulation by fiat must be replaced by meaningful 
consultation and collaboration with tribes, instead of the all too 
familiar ``we [NIGC] considered that comment but . . . .''
    Here is an example of what NIGC considers consultation. As stated 
in Chairman Hogan's testimony on H.R. 5608, ``Gaming tribes have formed 
regional gaming associations, such as . . . . Those organizations meet 
annually or more often, and NIGC has taken those opportunities to 
invite tribal leaders to attend consultation meetings on a NIGC-to-
individual-tribe basis. Consulting at gaming association meetings 
maximizes the use of the Commission's time and minimizes the travel 
expenses that tribes, who ordinarily attend those meeting anyway, must 
expend for consultation.'' While this looks great on the surface, the 
experience we had at our Annual Southwest Trade Show was very 
different. Although Arizona tribes received letters to meet with NIGC 
(see attached example letter), tribal leaders also extended an 
invitation to the NIGC to meet with them at a breakfast since some of 
the tribal leaders could not meet with the NIGC at their scheduled time 
(where the NIGC met with tribal staff). The first comment to the 
Commissioners was that they would like to talk about the ``Facility 
Licensing Draft Regulations.'' To our surprise, the answer from the 
NIGC was that the regulations were already at the Federal Register 
waiting to be published and additional comments were unnecessary. When 
asked if there were changes from the last draft--the answer was yes. 
When asked if they could let the leaders know what changes were made--
the answer was no.
    If you look further into this issue you will see that the NIGC 
consultation letters to tribal leaders inviting them to a consultation 
meeting were dated December 12, 2007. One of the bullet point 
discussion items was the ``[s]tatus of proposed facility licensing 
regulations.'' Our tribal leaders' breakfast meeting was on January 15, 
2008. The new regulations were published on February 1, 2008. It seems 
disingenuous that the NIGC listed for discussion with tribal leaders 
the proposed gaming facility licensing standards, when the NIGC already 
had its version of the standards at the Federal Register waiting to be 
published two weeks later.
    A significant problem at the NIGC is that they have stopped 
listening to tribes. As I have previously stated, in Arizona, both the 
tribes and the Arizona Department of Gaming work together to fulfill 
the goals of the Compact by listening to each other to develop a mutual 
understanding, even if we don't always agree. The problem with the NIGC 
is that they are hearing tribes--but not listening! While this NIGC 
administration has done a good job of meeting with tribes as compared 
to their predecessors, they are putting quantity of meetings over 
quality of listening to tribes. For example, most tribes in Arizona met 
with the NIGC in March 2007 and January 2008 regarding the Facility 
Licensing Standards. Again, the quality of consultation is far more 
important than the quantity of tribal consultations.
    In December of 2007, the AIGA submitted written comments to the 
NIGC which detailed AIGA's objections to their Facility Licensing 
Standards. In summary, the 19 Indian tribes of AIGA find it offensive 
that the NIGC's Standards conflict with the intent of IGRA, which 
recognizes tribal authority to regulate the construction, maintenance, 
and operation of a tribal gaming facility within tribal jurisdiction. 
In addition, the regulations provide a very broad grant of authority 
and discretion to only the Chairman, as opposed to the Commission, for 
approving gaming facility licenses. IGRA itself provides that a tribe 
must issue a facility license for Class II or III gaming. Finally, the 
tribe must provide in its tribal gaming ordinance that it will comply 
with appropriate construction, maintenance, and operation of these 
facilities.
    Furthermore, our State-Tribal Compacts already require tribes to 
comply with minimum operational standards to protect environment, 
health and safety. Once again, the NIGC's rules conflict with our 
Compact and, thus, are a waste of resources when tribal operations in 
Arizona already comply with such standards.
    The overbreadth of regulation is especially true for the new Gaming 
Facility Licensing Standards. The Indian Gaming Regulatory Act (IGRA) 
is supposed to provide a balanced framework for tribal, state, and 
federal regulators. Unfortunately, the NIGC has upset that delicate 
balance with its new Gaming Facility Licensing Standards. With the new 
regulations, the NIGC is trying to expand from a gaming activity 
regulator to a sanitation, emergency preparedness, electrical, 
plumbing, food and water, construction and maintenance, hazardous 
materials, and environmental regulator. Mr. Chairman and other 
distinguished members of the Committee, we already have the EPA, OSHA, 
IHS, and other federal, state and tribal regulators who review 
environmental, and health and safety conditions. There are more than 
enough federal layers piled on our industry. Moreover, we are highly 
dubious of gaming regulators turned all-of-the-above regulators at the 
swoop of a federal register publication. We do not need yet another 
federal agency expanding beyond its statutory mission as directed by 
Congress to become another unwieldy, burgeoning bureaucracy.
    Finally, another major concern of many tribal regulators is whether 
the NIGC is prepared to understand and apply new technology as it rolls 
out today and in the future. We are concerned that the NIGC's process 
for Class II gaming could once again delay available technology and 
future gaming activities for tribal gaming.
Revised GPRA
    On October 1, 2007, the NIGC submitted its Draft Government 
Performance Results Act Report (GPRA). The GPRA Report was due pursuant 
to the Congressional mandate as part of S. 1295, the National Indian 
Gaming Commission Accountability Act of 2005. Subsequently, as I have 
been informed, the NIGC has decided on its own to revise its own draft, 
a draft that was approved by the Chairman of NIGC and submitted for 
comment to the Office of Budget and Management. The NIGC's decision to 
revise its GPRA Report stalls its mandated requirement to submit to 
Congress: (1) a strategic five-year plan, annual performance plans, and 
performance reports, and (2) as part of its compliance with GPRA, a 
plan that addresses technical assistance to tribal gaming operations. 
If in fact the NIGC is not going to comply with the mandate, then it 
should be held responsible. The NIGC should not be allowed to stall 
this long, and Congress should not enable the delay. Without the GPRA 
Report, tribes have no idea how the current regulations fit into the 
NIGC's five-year plan and when, or if, the technical assistance that 
many tribes need are adequate or even being developed. Furthermore, we 
question the logic of embarking on such large regulatory changes 
without first knowing how they fit into a strategic plan and without 
that plan going out for consultation with the very people who have to 
implement it.
Conclusion
    Again, on behalf of the Ak-Chin Indian Community I would like to 
thank the Chairman, Vice-Chair, and the other members of this Committee 
for holding this very important hearing. Thank you.
Attachment





    Senator Tester. Thank you, Ms. Carlyle.
    Mr. Mathews?

          STATEMENT OF J.R. MATTHEWS, NIGA EXECUTIVE 
 COMMITTEE MEMBER AND VICE CHAIRMAN, QUAPAW TRIBE OF OKLAHOMA; 
                ACCOMPANIED BY MARK VAN NORMAN, 
          EXECUTIVE DIRECTOR, NATIONAL INDIAN GAMING 
                          ASSOCIATION

    Mr. Mathews. Thank you, Mr. Chairman.
    Senator Tester and other members of the Committee, my name 
is J.R. Mathews. I am the Vice Chairman of the Quapaw Tribe of 
Oklahoma. As a Board Member, I am speaking on behalf of the 
National Indian Gaming Association. Thank you for this 
opportunity.
    The Indian Gaming Regulatory Act is a remarkable success. 
Nationwide, there are over 230 tribes in 28 States which are 
engaged in gaming, and these tribes are using revenues to build 
or rebuild their communities.
    Last year, Indian gaming, as you know, generated more than 
$26 billion in gross revenues for those tribal governments. 
That means that we created more than 700,000 jobs nationwide 
and generated almost $12 billion in Federal, State and local 
revenues.
    Tribal governments are dedicated to building and 
maintaining strong regulatory systems because of our sovereign 
authority, governmental operations and resources are at stake. 
Under IGRA, tribal governments are the primary day-to-day 
regulators of Indian gaming. We have dedicated tremendous 
resources to the regulation of Indian gaming. Tribes spent over 
$345 million last year on tribal, State and local regulations. 
We have more than 3,300 expert regulators and staff.
    Among our concerns today is the government-to-government 
consultation and a need for a statutory directive to the NIGC 
to consult with Indian tribes. Executive Order 13175 
establishes the framework for Federal agencies to work with 
Indian tribes and elected tribal leaders.
    When Federal action will substantially and directly affect 
tribal governments, the essential principles and the guiding 
agency actions should be an all-out respect for tribal 
sovereignty and self-government, the maximum administrative 
discretion for tribal governments, and preserving the 
prerogatives of tribal lawmaking whenever possible.
    This is a firm belief among tribal leaders that while the 
NIGC is willing to meet with tribal leaders, the NIGC does not 
accommodate tribal government concerns. Instead, the NIGC has a 
pre-determined decision that has already been made, and they 
tell us they are open to change, but they don't listen to us.
    Tribal leaders believe that Federal agencies should try to 
reasonably accommodate a tribal government concern, not just to 
sit across the table from us and then go on about business as 
usual. The tribal Federal government-to-government relationship 
needs to be better than this, especially when the agency has 
``Indian'' in its name. The NIGC should do the utmost to 
accommodate our views through consultation. We should not get a 
flippant response to the quote that was stated, consultation 
does not mean agreement.
    The United States should operate on a basis of mutual 
consent with Indian tribes, just as it does with U.S. 
territories. A statutory directive to the NIGC on government-
to-government consultation is both appropriate and necessary. 
We encourage this Committee to introduce legislation along the 
lines of House Resolution 5608 which seeks to codify the 
Executive Order 13175. Also Executive Order 12866 requires that 
agencies examine whether or not these alternatives to direct 
regulations consider the cost and benefits of the regulations, 
consult with State, local and tribal governments, and minimize 
the burdens on them.
    In addition, regulations should be drafted in a manner that 
is simple and easy to understand. The NIGC has failed to comply 
with these standards.
    NIGC's own economic impact analysis found that the Class II 
proposals would cost Indian tribes between $1.2 billion and 
$2.8 billion annually. The NIGC does not conduct cost/benefit 
analysis of its regulatory proposals. That violated Executive 
Order 12866. Clearly, the NIGC is failing to comply with the 
general rules for Federal regulatory proposals.
    The NIGC should adopt and comply with the Regulatory 
Flexibility Act. Because the NIGC failed to conduct its 
economic impact analysis until the close of the comment period, 
and it did not consider lower-cost alternatives as required by 
the Regulatory Flexibility Act, once again the NIGC should open 
its regulation and consider the cost and benefits of 
alternatives.
    The NIGC should comply with the Federal Advisory Committee 
Act. The NIGC has been regularly constituting and disbanding 
tribal advisory committees. This gives the impression that when 
an existing TAC objected to the arbitrary NIGC policies, the 
NIGC abolished them and sought a new TAC that would be amenable 
to the NIGC views.
    The NIGC should comply with Congress's directive to provide 
training. Despite a clear directive to the NIGC in the NIGC 
Accountability Act, they have not provided meaningful training 
and technical assistance. Congress should act to ensure that 
the National Indian Gaming Commission is working with tribal 
governments to build up tribal government institutions, rather 
than a Washington-centered approach and relying primarily on 
rulemaking to resolve perceived problems.
    Thank you for this opportunity to speak.
    [The prepared statement of Mr. Mathews follows:]

 Prepared Statement of J.R. Mathews, NIGA Executive Committee Member; 
                Vice-Chairman, Quapaw Tribe of Oklahoma
    Good Morning, Mr. Chairman and Members of the Committee. Thank you 
for inviting me to testify today.
    My name is J.R. Mathews. I am the Vice Chairman of the Quapaw Tribe 
of Oklahoma and I serve on the Executive Committee of the National 
Indian Gaming Association.
    I am speaking today on behalf of the National Indian Gaming 
Association and its 184 Member Tribes. NIGA is a tribal government 
association dedicated to supporting Indian gaming and defending Indian 
sovereignty. I am accompanied by Mark Van Norman, NIGA's Executive 
Director. Mark is a member of the Cheyenne River Sioux Tribe of South 
Dakota.
Indian Gaming: The Native American Success Story
    The Indian Gaming Regulatory Act is a remarkable success. 
Nationwide there are 231 tribes in 28 states which are engaged in 
gaming. Tribes are using revenues to build or rebuild their 
communities, while putting tribal members to work and providing basic 
and essential tribal government services. Tribes are also generating 
significant taxes to Federal, state and local governments through 
Indian gaming and making significant charitable contributions to their 
communities and other Indian tribes. Last year, Indian gaming generated 
$26.5 billion in gross revenues (before capital costs, salaries, 
expenses and depreciation, etc.) for tribal governments. That means 
tribal governments created more than 700,000 jobs through Indian gaming 
nationwide and generated almost $12 billion in Federal, state and local 
revenue.
    Here are some examples of the tribal community infrastructure and 
the essential government services that Indian gaming revenues provide:

   The Mescalero Apache Tribe of New Mexico built a new high 
        school;

   The Choctaw Nation of Oklahoma built a new hospital;

   Gila River established a new police and emergency medical 
        unit;

   The Pechanga Band established a new fire department;

   The Mohegan Tribe is building a water system for the Tribe 
        and seven of its surrounding communities;

   The Rosebud Sioux Tribe established child care and provides 
        new school clothes for impoverished students;

   The Fort Berthold Tribes established a new Headstart center;

   The Tohono O'odham Nation is funding the Tohono O'odham 
        Community College and used $30 million to fund a student 
        scholarship program; and

   Several tribal governments provided major funding for the 
        new Smithsonian Museum of the American Indian.

    These positive developments are happening across Indian country.

    The development of Indian lands is a benefit to surrounding 
communities. For example, Gila River EMTs serve as first responders to 
accidents in their stretch of I-10. The Pechanga Band's Fire Department 
responded to the California wildfires, working hard to save homes and 
lives in neighboring communities.
    Indian gaming benefits neighboring Indian tribes as well. The 
Shakopee Mdewakanton Sioux Tribe, for example, has generously assisted 
many Indian tribes in Minnesota, the Dakotas, and Nebraska, including 
refinancing the Oglala Sioux Tribe's debt, providing a grant to help 
build a new nursing home for the Cheyenne River Sioux Tribe and an 
economic development grant for the Santee Sioux Tribe.
    The public recognizes that Indian gaming is a success. A national 
poll of 1,000 voters conducted on March 14, 2008 for NIGA by the 
independent polling firm Fairbank, Maslin, Maullin & Associates found 
that American voters generally agree that Indian gaming has been a 
success:

   81 percent agree that Indian tribes benefit from having 
        casinos;

   82 percent agree that Indian gaming provides revenues that 
        tribes can use to provide essential services to their members;

   79 percent agree that Indian gaming provides jobs for 
        Indians;

   65 percent agree that Indian gaming benefits state and local 
        communities; and

   68 percent agree that Indian gaming allows Indian tribes to 
        break the cycle of poverty and welfare and become self-reliant.

    Approximately, twenty-four million visitors annually travel to 
Indian country to visit Indian gaming facilities and on average, make 7 
visits per year. Thus, many voters have now experienced Indian gaming 
personally and their first hand experience is reflected in the polling 
data.\1\
---------------------------------------------------------------------------
    \1\ At the outset of the poll, 59 percent of American voters 
support Indian gaming. After learning about the uses of Indian gaming 
revenue for essential tribal government purposes and economic 
development, 69 percent of voters support Indian gaming.
---------------------------------------------------------------------------
The Existing Regulatory Framework for Indian Gaming
    Tribal governments are dedicated to building and maintaining strong 
regulatory systems because tribal sovereign authority, government 
operations and resources are at stake. Under IGRA, tribal governments 
are the primary day-to-day regulators of Indian gaming and regulate 
Indian gaming through tribal gaming commissions. Tribal gaming 
regulators work with the NIGC to regulate Class II gaming, and through 
the Tribal-State Compact process, tribal gaming regulators work with 
state regulators to safeguard Class III gaming.
    Tribal governments have dedicated tremendous resources to the 
regulation of Indian gaming: Tribes spent over $345 million last year 
nationwide on tribal, state, and Federal regulation:

   $260 million to fund tribal government gaming regulatory 
        agencies;

   $71 million to reimburse states for state regulatory work 
        under the Tribal-State Compact process; and

   $14.5 million for the NIGC's budget.

    At the tribal, state, and Federal level, more than 3,350 expert 
regulators and staff protect Indian gaming:

   Tribal governments employ former FBI agents, BIA, tribal and 
        state police, New Jersey, Nevada, and other state regulators, 
        military officers, accountants, auditors, attorneys and bank 
        surveillance officers;

   Tribal governments employ more than 2,800 gaming regulators 
        and staff;

   State regulatory agencies assist tribal governments with 
        regulation, including California and North Dakota Attorney 
        Generals, the Arizona Department of Gaming and the New York 
        Racing and Wagering Commission;

   State governments employ more than 500 state gaming 
        regulators, staff and law enforcement officers to help tribes 
        regulate Indian gaming;

   The National Indian Gaming Commission is led by Philip 
        Hogen, former U.S. Attorney and past Associate Solicitor for 
        Indian Affairs; and Commissioner Norm DesRosier is a former 
        tribal gaming regulator and state law enforcement officer.

   At the Federal level, the NIGC employs more than 100 
        regulators and staff.

    Tribal governments also employ state-of-the-art surveillance and 
security equipment. For example, the Mashantucket Pequot Tribal Nation 
uses the most technologically advanced facial recognition, high 
resolution digital cameras and picture enhancing technology. The 
Pequot's digital storage for the system has more capacity than the IRS 
or the Library of Congress computer storage system. In fact, the Nation 
helped Rhode Island state police after the tragic nightclub fire by 
enhancing a videotape of the occurrence, so state police could study 
the events in great detail.
    At the state level, more than 200 tribal governments have entered 
into 250 Tribal-State Compacts with 23 States. Typically, Tribal-State 
Compacts include rules on internal controls and regulation. For 
example, California 1999 Compacts require tribal governments to 
maintain accounting, machine and technical standards that meet or 
exceed industry standards. In California, tribal governments have 
incorporated MICS into their tribal gaming regulatory ordinances.\2\ 
The Fairbanks Maslin poll found that 76 percent of American voters 
support the Tribal-State Compact system.
---------------------------------------------------------------------------
    \2\ Alturas Rancheria, for example, provides in its tribal gaming 
ordinance: ``Tribal Gaming Commission regulations necessary to carry 
out the orderly performance of its duties and powers shall include . . 
. the following: The Minimum Internal Control Standards (MICS) as 
issued by the NIGC.'' This type of incorporation by reference is 
unaffected by the Federal Court decision in Colorado River Indian 
Tribes. In California, tribal governments spent approximately $104 
million to fund regulation of Indian gaming in 2006. Of the $100 
million, Tribal governments spent $80 million to fund tribal regulation 
of Indian gaming, $20 million for state regulation, and $4 million for 
Federal regulation. The State of California dedicates more than 100 
regulators and staff to Indian gaming regulation while tribal 
governments maintain 800 tribal regulators and staff.
---------------------------------------------------------------------------
    Indian gaming is also protected by the oversight of the FBI and the 
U.S. Attorneys. The FBI and the U.S. Justice Department have authority 
to prosecute anyone who would cheat, embezzle, or defraud an Indian 
gaming facility-this applies to management, employees, and patrons. 18 
U.S.C. 1163. Tribal governments work with the Department of Treasury 
Financial Crimes Enforcement Network to prevent money laundering, the 
IRS to ensure Federal tax compliance, and the Secret Service to prevent 
counterfeiting. Tribal governments have stringent regulatory systems in 
place that compare favorably with Federal and state regulatory systems. 
Seventy-four percent of American voters agree that IGRA provides enough 
or more than enough regulation, according to the Fairbank, Maslin poll. 
Only 15 percent of American voters believe that there should be more 
regulation.
Government-to-Government Consultation: Need for a Statutory Directive
    Since 1960, when then Senator John F. Kennedy pledged to 
``[e]mphasize genuinely cooperative relations between Federal officials 
and Indians,'' each succeeding Administration has pledged to promote 
tribal self-government. President Kennedy followed through on his 
pledge by ending the Termination Policy and establishing Federal 
programs to revitalize Indian country. President Johnson helped tribal 
governments build capacity to provide essential services to tribal 
citizens.
    Building on the work of the Kennedy-Johnson Administrations, 
President Nixon promoted the Indian Self-Determination Act to empower 
tribal governments to provide the government services that the Bureau 
of Indian Affairs and the Indian Health Service previously provided. 
Nixon heralded the new Indian Self-Determination Policy in a special 
message to Congress, which explained:

        It is long past time that the Indian polices of the Federal 
        government began to recognize and build upon the capacities and 
        insights of the Indian people. Both as a matter of justice and 
        as a matter of enlightened social policy, we must begin to act 
        on the basis of what the Indians themselves have long been 
        telling us. The time has come to break decisively with the past 
        and to create the conditions for a new era in which the Indian 
        future is determined by Indian acts and Indian decisions.

        President Nixon, Special Message on Indian Affairs, July 8, 
        1970.

    Presidents Ford, Carter, Reagan and Bush used the Indian Self-
Determination Policy as the baseline for American Indian policy. In 
their Administrations, Congress built upon Self-Determination Policy 
through the Indian Health Care Improvement Act, the American Indian 
Religious Freedom Act, the Tribal College Act, the Indian Self-
Governance Act, and the Indian Gaming Regulatory Act, among others.
    On January 24, 1983, President Reagan issued a Statement on 
American Indian Policy, explaining:

        When European colonial powers began to explore and colonize 
        this land, they entered into treaties with the sovereign Indian 
        nations. Our new nation continued to make treaties and to deal 
        with Indian tribes on a government-to-government basis. 
        Throughout our history, despite periods of conflict and 
        shifting national priorities, the government-to-government 
        relationship between the United States and Indian tribes has 
        endured. The Constitution, treaties, laws and court decisions 
        have consistently recognized a unique political relationship 
        between Indian tribes and the United States which this 
        administration pledges to uphold . . . .

        The administration intends to . . . remove[e] the obstacles to 
        self-government and . . . creat[e] a more favorable environment 
        for the development of healthy reservation economies . . . . 
        Development will be charted by the tribes, not the Federal 
        Government . . . . Our policy is to reaffirm dealing with 
        Indian tribes on a government-to-government basis and to pursue 
        the policy of self-government for Indian tribes without 
        threatening termination . . . .

    President Clinton's Executive Memorandum and Executive Orders on 
Consultation and Coordination with Tribal Governments took President 
Reagan's announcement the next steps forward.
    Executive Order 13175 on Consultation and Coordination with Tribal 
Governments, EO 13175, establishes the framework for Federal agencies 
to work with Indian tribes and elected tribal leaders. President 
Clinton issued it in 2000 and President Bush affirmed it in 2004. When 
Federal action will substantially and directly affect tribal self-
government or tribal rights, the essential principles that guide agency 
action are:

   Respect for tribal sovereignty and self-government, treaty 
        rights, lands and natural resources, and the Federal trust 
        responsibility;

   Maximum administrative discretion for tribal governments; 
        and

   Preserve the prerogatives of tribal law-making whenever 
        possible.

    The Executive Order recommends that consensual decision-making, 
such as negotiated rulemaking be used when possible.

    Five years ago, the National Indian Gaming Association and our 
Member Tribes asked the Senate Committee on Indian Affairs to enact a 
statutory directive to the NIGC to consult with tribal governments on a 
government-to-government basis. The NIGC, for its part, said, ``No, 
there is no need for a statutory directive because we will develop our 
own policy.''
    There is a firm belief among tribal leaders that, while the NIGC is 
willing to meet with tribal leaders, the NIGC does not accommodate 
tribal government concerns. Instead NIGC has a pre-determined decision 
made, they tell us that they are open to change, but they do not 
accommodate tribal leader concerns. Chairman Hogen says, ``Consultation 
does not mean agreement.'' Well, we believe that is the wrong attitude. 
Tribal leaders believe that, to the maximum extent possible, Federal 
agencies should try to reasonably accommodate tribal government 
concerns--not just sit across the table for a little while and then go 
about with business as usual. One tribal representative explained to us 
that:

        As long as they feel they that tribal governments do not need 
        to be consulted in the rulemaking process until after the final 
        rules are crafted by NIGC and published, then they are 
        perpetuating a failed process. Tribes not only have the same 
        responsibilities and goals to protect the integrity of Indian 
        gaming, they have the primary responsibility, and they have 
        created the governmental institutions in the tribal gaming 
        commissions and have hired and trained staff in the areas of 
        compliance, surveillance, security, co-jurisdictional law 
        enforcement, etc.

    Some tribal government leaders are reluctant to meet with the NIGC 
because they believe that informational meetings are wrongly being 
reported as Federal-tribal government-to-government consultation. A 
Northwest tribal representative has informed us that:

        In my dealings with the NW tribes thru ATNI and WIGA, even as 
        recently as yesterday, what I hear is that tribes are reluctant 
        to sign up for the consultations offered at the trade show next 
        week, or ANY consultation opportunity for that matter.

        Many of the NW tribes' consultation meetings with NIGC over the 
        past 2-3 years were mischaracterized by the NIGC in their 
        October 2007 letters to Congressman Rahall and Senator Dorgan 
        regarding the proposed Class II package, stating that the 
        listed tribes were consulted regarding the proposed 
        regulations. Most, if not all, tribes discussed (when the NIGC 
        wasn't monopolizing the conversation) their own individual 
        tribe's issues at those meetings. One tribe . . . gave a tour 
        of their surveillance department to the NIGC only to have their 
        tribe show up on the list of tribes having been consulted with 
        on the proposed regulations. What?!?

         . . . Also, the laundry list provided in the notice of 
        consultation is huge. There are 7 bullets in the notice but if 
        you read each one, it's really 13 topics plus your own tribe's 
        issues. All done in 45 minutes should you have the full amount 
        of time once NIGC is done with their spiel.

        In sum, the tribes up here feel that they are damned if they do 
        and damned if they don't. If they sign up, chances of 
        misrepresentation of their meeting to benefit the NIGC's 
        position is likely to occur. If they don't, then their absence 
        will be misrepresented as not haven taken the opportunity to 
        consult when offered (as done with my tribe.) And finally, most 
        believe that even if they could manage to have their meetings 
        represented accurately, whatever they say about the proposed 
        regulations will not be considered. That is, what difference 
        will it make? They aren't listening anyway. Why bother? This is 
        a good indicator that something is wrong with the NIGC's 
        consultation process.

    The Federal-tribal government-to-government relationship needs to 
work better than this, especially when the agency has ``Indian'' in its 
name!

    The United States' government-to-government relationship with 
Indian tribes is as venerable as the American Republic. In 1796, 
President George Washington told the Cherokee Nation that:

        The wise men of the United States meet together once a year to 
        consider what will be for the good of all of their people . . . 
        . I have thought that a meeting of your wise men once or twice 
        a year would be alike useful to you . . . . The beloved agent 
        of the United States would meet with them . . . . If it should 
        be agreeable to you that your wise men should hold such 
        meetings, you will speak your mind to my beloved man . . . . to 
        be communicated to the President of the United States . . . .

        President George Washington Letter to the Cherokee Nation, 
        August 29, 1796.

    President Thomas Jefferson said, ``The sacredness of [Native 
American] rights is felt by all thinking persons in America as well as 
Europe.'' \3\ Jefferson's view is embodied in the Louisiana Purchase 
Treaty, where the United States agreed to honor prior European 
treaties, until such time as it entered its own treaties with the 
Indian nations, based upon mutual consent:
---------------------------------------------------------------------------
    \3\ A. Josephy, The Patriot Chiefs (1961) at 178.

        The United States promise to execute such treaties and articles 
        as may have been agreed between Spain and the tribes and 
        nations of Indians until by mutual consent of the United States 
        and the said tribes or nations other Suitable articles shall 
        have been agreed upon. \4\
---------------------------------------------------------------------------
    \4\ Louisiana Purchase Treaty (Treaty between U.S.A. and the French 
Republic), Article VI (1803). (Spain is referenced because France 
acquired Louisiana territory from Spain).

    In total, the United States entered into more than 370 Indian 
treaties, and these treaties guaranteed tribal lands and tribal self-
government. Those guarantees continue to protect tribal self-government 
and tribal lands today.
    Given this background, the NIGC should do its utmost to accommodate 
tribal government views through consultation. We should not get a 
flippant response that consultation does not mean agreement. The United 
States should operate on a basis of mutual consent with Indian tribes, 
whenever possible--just as it does with United States territories. A 
statutory directive to NIGC on government-to-government consultation is 
both appropriate and necessary. We encourage the Committee to introduce 
legislation along the lines of H.R. 5608, which seeks to codify 
Executive Order 13175.
NIGC Should Follow Basic Rules for Drafting Regulations: Executive 
        Order 12866
    Executive Order 12866, as modified by the Bush Administration to 
exempt the Vice President, provides the framework for Federal agency 
rule-making. The Executive Order provides:

        The American people deserve a regulatory system that works for 
        them, not against them . . . . [R]egulatory approaches that 
        respect the role of State, local, and tribal governments; and 
        regulations that are effective, consistent, sensible, and 
        understandable . . . .

    This Executive Order requires that agencies identify the problem 
the regulation is intended to address, examine whether there are 
alternatives to direct regulation, determine the costs and benefits of 
the regulation, consult with state, local and tribal governments and 
seek to minimize the burdens on those governments. In addition, 
regulations should be drafted in a manner that is simple and easy to 
understand.

    NIGC has failed to comply with these standards. First of all, 
tribal governments have asked: What is the need for these regulations? 
NIGC has responded that it seeks clarity in terms of the definition of 
Class II technologic aids, yet its proposed definition is inherently 
ambiguous and does little or nothing to promote clarity. Indeed, Indian 
tribes have pointed out that its proposed definition of ``electro-
mechanical facsimile'' may very well be contrary to IGRA's statutory 
language and contrary to five Federal Court of Appeals cases on this 
subject. See U.S. v. 162 Megamania Gambling Devices, 231 F. 3d 713 
(10th Cir. 2000); U.S. v. 103 Electronic Gambling Devices, 223 F. 3d 
1091, 1093 (9th Cir. 2000); Seneca-Cayuga Tribe of Oklahoma v. National 
Indian Gaming Commission, 327 F.3d 1019 (10th Cir. 2003); United States 
v. Santee Sioux Tribe, 324 F.3d 607, 615-617 (8th Cir. 2003); Diamond 
Games v. Reno, 230 F.3d 713 (D.C. Cir. 2000). Thus, the primary NIGC 
rationale for the regulation is baseless and leaves the regulation 
without foundation or merit.
    The Oklahoma Indian Gaming Association makes the point a different 
way-where there is clear statutory guidance, why is the agency adding 
new legal requirements of its own making? OIGA states:

        Assuming for arguments sake, that classification regulations 
        were needed, another question that has been asked and not 
        answered is why hasn't the NIGC used the statute and the 
        Federal court cases, both those won and lost, as guidelines for 
        drafting regulations? Instead, the NIGC has chosen to draft 
        extremely cumbersome language, which arbitrarily adds more than 
        one legal element beyond the elements that IGRA uses to define 
        the game of ``bingo.'' Given the strict construction given to 
        IGRA in other cases like the Colorado River Indian Tribes 
        decision, and with three Federal Appeals Courts ruling that the 
        statutory language of IGRA establishes the legal elements for 
        bingo, the NIGC has no valid reason to go down a legally 
        perilous path.

    As Gerry Danforth, Chairman of the Oneida Tribe of Wisconsin 
testified before the House Natural Resources Committee last week, if 
NIGC took the time to really consult with tribal governments on a 
government-to-government basis, it would find workable, acceptable and 
durable solutions to regulatory issues that do not lead to litigation. 
So, the time invested in consultation and coordination with Indian 
tribes is well worth it.
    NIGC's own economic impact analysis (conducted by an independent 
economist) found that its Class II regulatory proposal would cost 
Indian tribes between $1.2 billion and $2.8 billion annually. While the 
four proposed Class II regulations were published on October 24, 2007, 
the economic impact study was not published until February 1, 2008 and 
the comment period on the regulations closed on March 9, 2008. NIGC did 
not conduct a cost-benefit analysis of its regulatory proposals. That 
violated Executive Order 12866. A cost-benefit analysis should have 
considered the cost of alternative regulatory approaches, such as using 
existing statutory definitions or existing regulatory definitions. The 
existing regulatory Class II technologic aid definition would carry no 
additional cost because it has been in force since June, 2002, the 
industry has already accommodated the regulation, and the Federal 
Courts have approved the regulation. \5\
---------------------------------------------------------------------------
    \5\ Seneca-Cayuga Tribe of Oklahoma v. National Indian Gaming 
Commission, 327 F.3d 1019 (10th Cir. 2003) (10th Circuit relied on NIGC 
2002 Class II regulations); United States v. Santee Sioux Tribe, 324 
F.3d 607, 615-617 (8th Cir. 2003) (Relying on the NIGC 2002 Class II 
regulations, the Court found that ``NIGC's conclusion that Lucky Tab II 
is a permissible class II gaming device seems to be a reasonable 
interpretation of the IGRA'').
---------------------------------------------------------------------------
    Clearly, the NIGC is failing to comply with the general rules for 
Federal regulatory proposals. Indeed, on the Class II regulations, the 
NIGC failed the very basic task of drafting the regulations in a simple 
manner: After months of work by the Class II gaming manufacturers group 
convened by NIGC, NIGC took a fairly reasonable rewrite of its Class II 
minimum internal control standards regulation and re-inserted its old 
Class II MICS rule by reference. That is not plain English--the 
incorporation by reference makes it almost impossible to understand the 
new regulatory proposal, or to point out potential conflicts between 
the old and new rule. This proposal needs to go back to the ``drawing 
board'' for a ``plain English'' lesson.
NIGC Should Comply with the Regulatory Flexibility Act
    The Regulatory Flexibility Act requires Federal agencies to 
consider the economic impact of Federal regulations on small 
governments, communities, and entities. The RFA requires agencies to 
consider lower cost alternatives to expensive regulations. Experts 
explain the RFA as follows:

        The Regulatory Flexibility Act created several new sections in 
        the APA. The legislative history states that the intention of 
        the Act is ``to encourage individuals, small businesses, small 
        organizations, and small government bodies that would otherwise 
        be unnecessarily adversely affected by Federal regulations . . 
        . . It is primarily aimed at forcing agencies to consider the 
        problems of small businesses and local governments and to 
        investigate least cost alternatives in regulation.

        C.A. Wright & C.H. Koch, ``Judicial Review of Administrative 
        Action,'' 32 Fed. Prac. & Proc. Judicial Review, Section 8187 
        (2008).

    Yet, because the NIGC failed to conduct its economic impact 
analysis until the close of the comment period and it did not consider 
lower cost alternatives as required by the Regulatory Flexibility Act. 
Thus, with the comment period closed tribal governments are left to 
contemplate an economic impact of $1.2 billion to $2.8 billion in lost 
income, a loss of perhaps 35,000 jobs, and an additional compliance 
burden of $347 million. Once again, the NIGC should re-open its 
regulation and consider lower cost alternatives to its proposed 
regulations.
NIGC Should Comply With Congress's Directive to Provide Training
    In 2006, Congress gave the NIGC new authority to work with tribal 
governments to provide technical assistance and training to tribal 
regulators. Public Law No. 109-221 (2006). Specifically, the NIGC 
Accountability Act is intended to do three things:

   Provide increased funding for NIGC by empowering NIGC to 
        assess a fee up to the level of $0.80 per $1,000 of gross 
        Indian gaming revenue;

   Require NIGC to follow the Government Performance and 
        Results Act; and

   Require NIGC to include a training and technical assistance 
        plan in its GPRA compliance plan.

    NIGC is currently undertaking a paperwork shuffle of its GPRA 
compliance plan, but Indian tribes were not consulted in its 
development, there have been no national or regional meetings scheduled 
to consult with tribes on the GPRA plan, and no training or technical 
assistance programs have been undertaken pursuant to the plan. NIGC has 
increased its fees and is spending more money under the fee provisions.

NIGC Should Comply with the Federal Advisory Committee Act
    Congress established a general rule to limit the use of Federal 
Advisory Committees by regulatory agencies because they are not 
democratic. Yet, it provided an exception for Federal agency 
consultation with state, local and tribal governments. That exception 
only applies to tribal governments when Federal agencies meet with 
authorized tribal government representatives. Under FACA, GSA provides 
oversight of Federal Advisory Committees.
    The NIGC, however, has been regularly constituting and disbanding 
Tribal Advisory Committees for work regarding the development of the 
NIGC's regulatory proposals. It has several problems with this 
approach:

   No Tribal Advisory Committee (TAC) plan or proposal was 
        presented to GSA to ensure that NIGC is actually complying with 
        FACA;

   TAC Members were not initially requested to be authorized 
        representatives of their tribal governments and some were not, 
        putting them outside the FACA exception for consultation with 
        tribal governments;

   While the NIGC established the TAC to assist in the 
        development of its Class II regulations, this committee was 
        limited to seven members expected to represent all of Indian 
        country; and

   Although the TAC unanimously objected to unreasonable 
        restrictions on Class II games, none of its significant 
        objections were accepted by the NIGC.

    Just last month, the NIGC disbanded its existing TAC and Minimum 
Internal Control Standards Tribal Advisory Committee (MICS TAC) and 
then asked for the formation of a new Tribal Advisory Committee, to be 
limited to tribal regulators with five or more years experience. This 
gives the impression that when the existing TACS objected to arbitrary 
NIGC policies, the NIGC abolished them and sought a new TAC that would 
be amenable to NIGC views. As a tribal representative explained to us:

        NIGC's latest initiative to dissolve existing tribal advisory 
        committees and to appoint new committees whose member's 
        qualifications have been predetermined by NIGC is done without 
        tribal consultation. The NIGC should be consult with the tribes 
        concerning the purposes and functions of the committees, and 
        the qualifications of committee members.

        Tribes do have staff with the legal, technical and operational 
        experience and skills to develop an effective regulatory 
        environment, and they are willing and able to consult with NIGC 
        to contribute their expertise to the process. It is clear from 
        Chairman Hogen's letter of February 29, 2008, that NIGC intends 
        to exclude many experienced and competent candidates, who have 
        legal or operational experience, rather than ``auditing'' or 
        ``accounting'' experience.

    Indeed, the NIGC's new tribal regulatory experience requirement 
excludes elected tribal leaders while FACA expressly authorizes Federal 
consultation with elected tribal leaders as the primary exception to 
the general prohibition on ``expert'' advisory committees!
Miscellaneous Concerns
    We have additional concerns with the NIGC. For example, NIGC does 
not have an audited financial statement available for review. The NIGC 
is just now implementing an accounting package that will give it the 
ability to produce financial statements. For the past 5 years, the NIGC 
has collected more fees than needed for its operating budget over the 
past 5 years. At the end of last year, the amount was greater than $10 
million. While IGRA requires ``excess'' fees to be returned to the 
Tribes, these funds have been retained by NIGC from year to year.
Conclusion
    Congress should act to ensure that the National Indian Gaming 
Commission is working with tribal governments to build up tribal 
government institutions rather than using a Washington-centered 
approach and relying primarily on rulemaking to solve perceived 
problems. We encourage the Senate Committee to consider legislation 
like H.R. 5608 to mandate an accountable government-to-government 
consultation process for the NIGC. In addition, the NIGC should begin 
to provide training and technical assistance to tribal governments and 
tribal gaming regulators as Congress mandated in 2006. NIGC has been 
collecting increased fees, but has yet to engage tribes under its new 
requirement to provide training and technical assistance. Perhaps if it 
did, NIGC would find a useful role, besides continually revising 
existing NIGC regulations.

    Senator Tester. Thank you, Mr. Mathews.
    Mr. Patterson?

   STATEMENT OF BRIAN PATTERSON, PRESIDENT, UNITED SOUTH AND 
                         EASTERN TRIBES

    Mr. Patterson. Good morning, Senator Tester and 
distinguished members of the Committee on Indian Affairs. My 
name is Brian Patterson. I am the President of the United South 
and Eastern Tribes. I am also a member of the Oneida Indian 
Nation where I serve as Bear Clan Representative to the 
nation's council. Thank you for the opportunity to testify 
before the Committee on our experiences with the National 
Indian Gaming Commission.
    USET represents 25 federally recognized tribes from Maine 
to Texas to Florida. While for the most part the relationship 
of our member tribes with the NIGC works well and is positive, 
there is one very important area in which USET feels that NIGC 
has failed to meet its responsibility to Indian Country, and 
our tribes are affected by this failure far more than other 
areas of the Country. The NIGC and USET share the same common 
goal of ensuring that Indian gaming operates in a manner which 
benefits and protects tribal interests. I will highlight 
several areas in which we have been able to establish positive 
relationships.
    One, our member tribes have been able to work 
collaboratively with the NIGC to identify areas in which the 
tribes could improve the regulation before they become 
problematic. Two, despite a Federal decision limiting the 
NIGC's jurisdiction on Class III gaming operations, several of 
our member tribes have continued to work with the NIGC to 
ensure that their operations meet minimal internal control 
standards.
    Three, a number of our member tribes are located in States 
which allow Class III gaming as a matter of State law, but the 
States refuse to negotiate with tribes for Class III gaming 
compacts. The NIGC has been helpful in providing these tribes 
with technical assistance in the operation of Class II gaming 
and offering support and assistance with developing the 
regulatory framework necessary for secretarial procedures to 
move forward.
    Four, the NIGC has also provided on-site training to a 
number of our member tribes which provides them with invaluable 
technical assistance they need to develop and improve their 
regulatory systems.
    As I have mentioned above, there is one very important 
situation in which we believe the NIGC has failed to meet and 
fulfill its responsibilities to those tribes who are only able 
to operate Class II gaming. For the member USET tribes who find 
themselves in this situation, the State's regulatory scheme 
would in fact allow them to operate Class III gaming. However, 
for these tribes, their respective State has refused to 
negotiate a Class III compact with the tribe.
    These tribes are therefore left to operate Class II games, 
and apply to the Department of Interior for Class III gaming 
procedures, a process which has taken years to navigate. Thus, 
the regulation of Class II gaming is vital to USET member 
tribes, especially those located in Florida, Alabama, 
Louisiana, and Texas. Consequently, USET member tribes follow 
the NIGC's regulatory efforts in the area of Class II gaming 
with great interest.
    Unfortunately, the NIGC's new set of proposed regulations 
addressing Class II definitions would have a devastating impact 
on many gaming operations. The NIGC's own economic impact study 
estimates that the draft Class II regulations will cost the 
tribal gaming industry over $1.2 billion a year.
    Much to our dismay, these regulations are dramatically 
different than previous drafts that have been worked on between 
NIGC and tribes. The USET tribes generally believe that NIGC 
has not listened to our comments, nor have they acknowledged 
the current state of the law. USET tribes are most concerned 
that the NIGC has set on a specific outcome with regard to 
adoption of these proposed regulations pertaining to Class II 
gaming, and that this has skewed the rulemaking process. I have 
attached copies of our member tribes' comments regarding the 
proposed gaming classification regulations.
    One additional area on which we would like to comment is 
that of governmental planning and performance. The application 
of the Government Performance Results Act to the NIGC is a 
positive step. We look forward to an ongoing consultation and 
dialogue with the Commission as the draft GPRA report is 
finalized.
    In conclusion, our member tribes feel the overall 
relationship between the tribes and NIGC is positive. We 
acknowledge Chairman Hogen's support of Indian tribes over the 
many years and in his many different roles. But we also believe 
that NIGC has failed in one very significant respect with its 
unyielding move toward reworking Class II gaming regulation.
    A lot of hard work has already been done to develop 
consensus positions on many of the Class II issues. This 
provides a good place for us to re-engage with the Federal 
Government in establishing a meaningful dialogue to reach out 
to an acceptable outcome for Indian nations.
    Thank you, Senator Tester, for the opportunity to testify 
before you today.
    [The prepared statement of Mr. Patterson follows:]

  Prepared Statement of Brian Patterson, President, United South and 
                          Eastern Tribes, Inc.
    Good morning Mr. Chairman and distinguished members of the 
Committee on Indian Affairs, my name is Brian Patterson, and I am the 
President of the United South and Eastern tribes, Inc. (USET). I am 
also an enrolled member of the Oneida Indian Nation, where I serve on 
the Nation's Council as a Bear Clan Representative. Thank you for the 
opportunity to testify before the Committee on our experiences with the 
National Indian Gaming Commission (``Commission'' or ``NIGC'').
    United South and Eastern Tribes, Inc. is a non-profit, inter-tribal 
organization that collectively represents its member tribes at the 
regional and national levels. USET represents twenty-five federally 
recognized tribes. \1\
---------------------------------------------------------------------------
    \1\ Members of the United South and Eastern Tribes, Inc., include: 
Eastern Band of Cherokee, Mississippi Band of Choctaw, Miccosukee 
Tribe, Seminole Tribe of Florida, the Chitimacha Tribe of Louisiana, 
the Seneca Nation of Indians, the Coushatta Tribe of Louisiana, the St. 
Regis Band of Mohawk Indians, Penobscot Indian Nation, the 
Passamaquoddy Tribe Indian Township, the Passamaquoddy Pleasant Point, 
the Houlton Band of Maliseet Indians, the Tunica-Biloxi Indians of 
Louisiana, the Poarch Band of Creek Indians, the Narragansett Indian 
Tribe, the Mashantucket Pequot Tribe, the Wampanoag Tribe of Gay Head 
(Aquinnah), the Alabama-Coushatta Tribe of Texas, the Oneida Indian 
Nation, the Aroostook Band of Micmac Indians, the Catawba Indian 
Nation, the Jena Band of Choctaw Indians, the Mohegan Tribe of 
Connecticut, the Cayuga Nation, and the Mashpee Wampanoag Tribe.
---------------------------------------------------------------------------
    Included among the members of USET are some of the largest gaming 
tribes in the United States. We also represent tribes with more modest 
gaming facilities, as well as tribes that currently do not engage in 
gaming.
    Congress enacted IGRA ``to promote tribal economic development, 
tribal self-sufficiency, and strong tribal government.'' \2\ The Act, 
for the most part, has accomplished those goals. Indian gaming has been 
described as ``the only federal Indian economic initiative that ever 
worked.'' That is absolutely correct. Indian gaming has served as a 
critical economic tool to enable Indian nations to once again provide 
essential governmental services to their members, re-assert their 
sovereignty, and promote the goals of self-determination and self-
sufficiency.
---------------------------------------------------------------------------
    \2\ 25 U.S.C. Sec. 2701(4)
---------------------------------------------------------------------------
    Prior to the advent of Indian gaming, many Indian nations, while 
legally recognized as sovereign governments, were not able to provide 
basic, governmental services to their people. They had all of the legal 
attributes of sovereign nations, but many did not have the practical 
ability to be an effective government for their members. Consequently, 
despite a strong and proud tradition, Indian nations languished in a 
two hundred year cycle of poverty.
    Today, the resources of Indian gaming operations are used to 
provide essential governmental services to tribal members. Indian 
nations across the country are using gaming revenues to invest in 
dozens of tribal member programs, including home ownership initiatives, 
tuition assistance for everything from elementary schools to post-
doctorate work, health insurance for all tribal members, and access to 
top-notch health clinics.
    We cannot calculate the intangible benefits of the impact such 
economic development has created, including the impact on the most 
important matter for an Indian nation--its human resources. Suffice it 
to say that in many situations, Indian governments have seen their 
members move from unemployment rolls to being gainfully employed.
    Reclaiming a past heritage also has been a priority for all USET 
members, and gaming proceeds have enabled Indian nations to make 
tremendous gains in this area. In many respects, these individual 
efforts culminated collectively in the dedication of the National 
Museum of the American Indian in September 2004. I am proud to note 
that the three largest contributions to the building of this tremendous 
institution came from Indian nations that are Members of USET. \3\ I 
want to thank the Committee for its leadership in making this museum a 
reality, and in particular, Senator Inouye for his vision and 
dedication to ensuring that the museum would meet the expectations of 
Indian people.
---------------------------------------------------------------------------
    \3\ Jim Adams, Leaders guide museum with humble yet historic 
partnership, Indian Country Today (Lakota Times), Sept. 22, 2004, at 1.
---------------------------------------------------------------------------
    While for the most part, the relationship of our member tribes with 
the NIGC works well and is positive, there is one very important area 
in which USET member Tribes feel the NIGC has failed to meet its 
responsibilities to Indian Country, and our tribes are 
disproportionately affected by this failure far more than other areas 
of the Country. I am here today to discuss both the negative and 
positive aspects of our members' relationship with the NIGC.
Working Toward a Common Goal
    The National Indian Gaming Commission and the United Southern and 
Eastern Tribes, Inc., share the common goal of ensuring that Indian 
gaming operated by the USET Tribes is operated fairly and in a manner 
which benefits and protects the Tribes' interests. We believe that the 
Tribes and the NIGC have been able to establish a relationship that 
assists both parties in meeting their goals.
    There are several areas in which we have been able to establish 
positive relationships.
1. Working together to identify problem areas.
    Our member tribes have been able to work collaboratively with the 
NIGC to identify areas in which the Tribes could improve their 
regulation before they become problematic. It can be helpful to engage 
the assistance of the NIGC, even though Tribes are quite effective at 
resolving the vast majority of these issues without such assistance.
2. Voluntarily working with NIGC to conduct on-site reviews of their 
        Class III gaming operations.
    Despite the holding in the Colorado River Indian Tribe (CRIT) v. 
National Indian Gaming Commission, several of our member tribes have 
continued to work with the NIGC to ensure that their operations meet 
minimum internal control standards. Many tribes, since the CRIT 
decision was issued, have voluntarily continued to follow the Minimum 
Internal Control Standards set in place by the NIGC prior to the 
decision.
    The NIGC has assisted more than one of our member Tribes with on-
site visits to assess voluntary compliance with those MICS standards.
3. Working with tribes who have applied for Secretarial Procedures.
    A number of our member Tribes are located in states which allow 
Class III gaming as a matter of State law, but the States refuse to 
negotiate with the tribes for Class III gaming compacts. These tribes 
are left to operate Class II gaming and seek Secretarial Procedures.
    The NIGC has been helpful in providing these tribes with technical 
assistance in the operation of Class II gaming, and offering support 
and assistance with developing the regulatory framework necessary for 
Secretarial Procedures to move forward. In at least one instance, the 
NIGC has offered to provide Class III regulatory services to the Tribe 
seeking procedures.
4. Providing on-site training and review.
    The NIGC has also provided on-site training to a number of our 
member Tribes, which provides them with invaluable technical assistance 
they need to develop and improve their new or existing regulatory 
systems. They are also available and have provided on-site reviews to 
assess the adequacy of existing systems in place, and provide advice on 
how to improve those systems, preventing problems before they can 
happen.
When Relationships Break Down
    As I mentioned above, there is one very important situation in 
which we believe the NIGC has failed to meet its responsibilities to 
those Tribes who are only able to operate Class II gaming.
    For the member Tribes of USET who find themselves in this 
situation, their state's regulatory scheme would in fact allow them to 
operate Class III gaming. However, for these Tribes, their respective 
state has refused to negotiate a Class III compact with the Tribe. 
These Tribes are therefore left to operate Class II games, and apply to 
the Department of Interior for Class III gaming procedures, a process 
which takes years to navigate. In the case of one of our member Tribes, 
this process of receiving Class III gaming took sixteen years (16) to 
resolve and is still not complete.
    Thus, the regulation of Class II gaming is vital to many of our 
member Tribes, especially those located in Florida, Alabama, Louisiana 
and Texas. Consequently, USET member tribes follow the NIGC's 
regulatory efforts in the area of Class II gaming with great interest. 
\4\
---------------------------------------------------------------------------
    \4\ In addition, the regulation of Class II gaming is important 
even to those tribes who operate pursuant to Class III compacts because 
in many instances the terms of the compact expire. There is no 
guarantee that a state with a new governor and legislature will 
negotiate in good faith over a new compact.
---------------------------------------------------------------------------
    In the past several years, the NIGC has attempted to modify the 
regulatory structure surrounding Class II gaming in a number of ways, 
beginning in 2003 with the formation of a Tribal Advisory Committee 
charged with creating a ``bright line'' between Class II and Class III 
gaming. These efforts led to the NIGC's publication of Game 
Classification Standards and amendments to its definition of 
electromechanical facsimile on May 26, 2006, as well as proposed Class 
II Technical Standards on August 11, 2006. Tribes overwhelmingly 
opposed these draft regulations, a position that was driven home during 
a hearing held on September 19, 2006. Most Tribes stated that the new 
standards would impose an unwieldy and unworkable system of rules on 
Class II operators, and would cause severe economic harm to Indian 
tribes who operate Class II games. And tribes were not alone in their 
opposition of these regulations: gaming manufacturers also opposed the 
NIGC's regulations.
    In the wake of this hearing, the NIGC held a follow-up meeting in 
December of 2006 with what is now termed the ``Tribal Gaming Working 
Group.'' This Working Group consists of Tribal Leaders, technical and 
legal experts, and members of the NIGC's Tribal Advisory Committee 
(TAC) on Class II gaming, which itself is made up of Tribal 
representatives and Class II technical experts. During this follow-up 
meeting, the draft regulations were discussed, and it was agreed that 
the Working Group would develop a more suitable set of Class II 
Technical Standards. Less than two months later, on January 25, 2007, 
this group provided a revised draft of the Class II Technical Standards 
to the NIGC for review and consideration. Now understanding that they 
were looking at Class II gaming incorrectly, and that they needed to 
look at Class II gaming more systematically, the NIGC withdrew all 
pending Class II regulations on February 15, 2007.
    The NIGC, in conjunction with the Tribal Gaming Working Group, then 
embarked on an extensive effort to revise the NIGC's Minimum Internal 
Control Standards (MICS) so that they conformed to the Technical 
Standards, as revised. The Working Group also made additional 
conforming changes to the already revised Technical Standards to ensure 
that when taken as a whole, the overall package was consistent.
    The work product from this extensive effort was submitted to the 
NIGC on September 12, 2007. On October 24, 2007, the NIGC published 
four new sets of proposed regulations addressing the Facsimile 
Definition, Game Classification Standards, the MICS and the Class II 
Technical Standards. Much to our dismay, however, our member tribes who 
participated in this process were completely shocked to find that 
significant and material changes had been made by the NIGC to the 
collaborative September 2007 drafts.
    Overall, USET Tribes generally believe that the NIGC has not 
listened to their comments, nor have they acknowledged the current 
state of the law. Our member Tribes also are concerned with the 
appearance that the NIGC simply went through the motions of 
``consultation'' by holding meetings with tribal leaders and 
representatives when in fact, they had no intention of attempting to 
reach a consensus or even making meaningful concessions regarding the 
substance of the draft regulations.
    Perhaps most disturbing, our members Tribes are concerned that the 
NIGC has not heeded Tribal concerns regarding the devastating impacts 
that these proposals will have on the Tribal gaming industry. The 
NIGC's own economic impact study estimates that the draft Class II 
regulations will cost the tribal gaming industry over $1.2 billion a 
year.
    At the end of the day, USET Tribes are concerned that the NIGC has 
been set on a specific outcome with regard to the adoption of the 
proposed regulations pertaining to Class II gaming, and that this 
orientation to a specific outcome has skewed the rulemaking process. 
They also feel that, despite their best efforts to deal with the NIGC 
fairly on these issues, they have not received the same treatment in 
return.
    I have attached copies of our member Tribes comments regarding the 
proposed gaming classification regulation for your information, because 
I feel the information contained in them is important and too detailed 
to be properly addressed by my brief testimony.
Governmental Performance and Results Act
    One additional area in which we would like to comment is that of 
governmental planning and performance. Until very recently, the 
National Indian Gaming Commission was not required to take part in the 
standard strategic planning and performance assessment in which other 
agencies are required to participate.
    This changed very recently, with the adoption of Public Law 109-
221, which subjected the NIGC to the requirements of the Government 
Performance and Results Act (GPRA) of 1993 (Public Law 103-62) and 
additionally required the NIGC to provide a plan for technical 
assistance to tribal gaming operations in accordance with GPRA.
    We believe that the application of GPRA to the NIGC is a positive 
step toward making the Commission more transparent and accountable to 
the public and particularly to Indian Country. We are also encouraged 
by the development of the draft GPRA plan proposed by the NIGC is a 
move in the right direction, and we look forward to an ongoing 
consultation and dialogue with the NIGC on their future plans before 
the report is finalized.
Conclusion
    As you can see, the relationship between the diverse tribes who 
make up the United South and Eastern Tribes and the Commission is 
complicated. Overall, our member tribes feel that the relationship 
between tribes and the NIGC is positive. We acknowledge Chairman 
Hogen's support of Indian tribes over many years and in many different 
roles. But we also believe that NIGC has failed in one very significant 
respect, with its unyielding move toward reworking Class II gaming 
regulation.
    The failure of the NIGC to properly consult with tribes regarding 
its Class II rulemaking efforts has left our member Tribes frustrated. 
However, if afforded the opportunity, we are committed to continuing to 
work with Congress and the NIGC on the Class II gaming issues. A lot of 
hard work already has been done to develop consensus positions on many 
of the Class II issues. This provides a good place for us to re-engage 
with the Federal Government in establishing meaningful dialogue to 
reach to an acceptable outcome for Indian nations.
    Thank you, Mr. Chairman, for the opportunity to testify today.

    Senator Tester. Thank you, Mr. Patterson.
    Mr. Luger?

 STATEMENT OF J. KURT LUGER, EXECUTIVE DIRECTOR, NORTH DAKOTA 
                AND GREAT PLAINS INDIAN GAMING 
                          ASSOCIATION

    Mr. Luger. Thank you, Senator. My name is Kurt Luger. I am 
a member of the Cheyenne River Sioux Tribe in South Dakota. My 
office is in Bismarck, North Dakota and I represent 28 nations 
from Kansas, Nebraska, Iowa, North Dakota, South Dakota, and 
the great State of Montana.
    I am here today, and I will great right to the heart of our 
concerns with the NIGC. It is that they have adopted a top-down 
inside-the-beltway approach to the regulation of Indian gaming. 
Rather than coming out to the field to assist tribal 
governments in ensuring that tribal regulatory systems are 
running appropriately. The NIGC constantly wants to write new 
Federal rules. We acknowledge that the NIGC is willing to sit 
down with tribal leaders and willing to attend tribal meetings. 
Unfortunately, tribal leaders often come away with the feeling 
that NIGC had a predetermined decision and that despite tribal 
concerns, the NIGC will not move off its own bureaucratic 
agenda to find its way to respect tribal sovereignty and self-
government.
    We are told that consultation does not mean agreement, but 
consultation is supposed to be meaningful and it should require 
consideration of tribal points of view and accommodation of 
those perspectives to the greatest extent possible. For 
example, when the NIGC was developing its Class II regulatory 
proposals, it was very reluctant to consider tribal 
governmental points of view. Yet when the gaming manufacturers 
made a point, the NIGC would listen to them readily.
    The other thing that happens is when something appears to 
make travel concerns, the Chairman and Commissioners go back 
and talk to the NIGC lawyers and any sign of accommodation is 
later dropped. There is simply too much inside-the-beltway 
counseling and not enough field experience.
    I brought with me five recommendations that we believe 
would help the NIGC in fulfilling its mission to assist Indian 
tribes with gaming regulation. One, our first recommendation is 
to make Federal and tribal consultation meaningful, that NIGC 
should be directed by statute to follow Executive Order 13175, 
and we call upon the Senate Committee to consider a bill 
similar to H.R. 5608.
    Our next recommendations concern training and technical 
assistance. In 2006, the NIGC Accountability Act was signed 
into law. In that Act, Congress intended three things: to 
provide increased funding to the NIGC; require the NIGC to 
comply with the Government Performance and Results Act; and to 
require the NIGC to include training and technical assistance 
plans to the GPRA.
    NIGC is currently undertaking a paperwork shuffle of its 
GPRA compliance plan, but Indian tribes were not consulted in 
its development. There have been no national or regional 
meetings scheduled to consider with the tribes on the GPRA 
plan, and no training or technical assistance programs have 
been undertaken. NIGC, however, has increased its fees and is 
spending the money under the fee provisions.
    Two, we recommend that NIGC hire a training and technical 
assistance director with Indian gaming experience. We urge the 
Senate Committee to ensure that NIGC hires a training and 
technical assistance director to begin providing training and 
technical assistance programs to tribal governments and tribal 
gaming regulators.
    Three, we also recommend that NIGC provide training and 
technical assistance that meets or exceeds industry standards. 
This is critical. We need practical training and useful 
technical assistance that can really help tribal regulators to 
establish and maintain top-notch systems that meet or exceed 
industry standards.
    Mr. Chairman, our experience of you today called up what I 
myself and my association has put on more than 150 training 
sessions. I went back through my record. Their people have been 
at less than 10 of them. They tell me one of two things: they 
are not available or they don't have the expertise in that 
particular field to do it. So, I get them from Indian Country, 
from within ourselves. If lawyers who do not know the industry 
standards are assigned to the task of training and technical 
assistance, it is a waste of time.
    The NIGC should apply Indian preference in hiring. The 
District Court of the District of Columbia recently ruled that 
Indian preference in hiring applies to ``positions in the 
Department of Interior whether within or without the Bureau of 
Indian Affairs that directly and primarily provides services to 
Indians.'' NIGC is directly and primarily providing regulatory 
services to Indians within the meaning of Indian preference, 
yet NIGC has a poor track record of hiring Indians. Only three 
out of 17 supervisory personnel at the NIGC Washington 
headquarters are Indian. This must change.
    Lastly, we are also very concerned with NIGC's use of 
Federal advisory committees. The NIGC claims exemption from 
FACA and constitutes and disbands tribal advisory committees at 
will. It is a recommendation that NIGC submit its claimed FACA 
exception to GSA for its review, and upon a favorable review by 
GSA, that the tribal advisory committees be formed only after 
consultation about their use and purpose with tribal 
governments.
    In conclusion, the NIGC must respect tribal governments as 
day-to-day regulators of Indian gaming and become more of a 
user-friendly agency. NIGC must stop its top-down inside-the-
beltway approach. We have seen it before. It was called the BIA 
and the IHS, and we don't need anymore of that.
    Thank you very, very much for your time and for being 
invited today.
    [The prepared statement of Mr. Luger follows:]

 Prepared Statement of J. Kurt Luger, Executive Director, North Dakota 
               and Great Plains Indian Gaming Association
    Good Morning, Chairman Dorgan and Members of the Committee. Thank 
you for inviting me to testify this morning.
    My name is Kurt Luger and I am a member of the Cheyenne River Sioux 
Tribe. I grew up on the Standing Rock Sioux reservation in North Dakota 
on my family ranch and my family operates a grocery store and small 
business in Fort Yates, North Dakota.
    I serve as the Executive Director of the North Dakota Indian Gaming 
Association, which includes the Spirit Lake Sioux Tribe, Standing Rock 
Sioux Tribe, Sisseton-Wahpeton Sioux Tribe, the Three Affiliated Tribes 
of Fort Berthold, and the Turtle Mountain Chippewa Tribe.
    I also serve as the Executive Director of the Great Plains Indian 
Gaming Association, which covers North Dakota, South Dakota, Nebraska, 
Iowa, Kansas, Wyoming, and Montana. GPIGA was founded in 1997, and we 
have 28 Tribes as Members. This year we will hold our 16th Annual 
Gaming Conference & Trade Show together with the Minnesota Indian 
Gaming Association on May 18-21, 2008 at the Mystic Lake Casino & 
Hotel. Senator Dorgan, I respectfully extend to you an invitation to be 
our keynote speaker on Monday, May 19, 2008, so our tribal leaders can 
hear from you directly about the Committee's policies and priorities.
    At GPIGA, our mission is to bring together the federally recognized 
Indian Nations in the Great Plains Region who are operating gaming 
enterprises in a spirit of cooperation to develop common strategies and 
positions concerning issues affecting all gaming tribes; to promote 
tribal economic development and its positive impacts within the Great 
Plains; to provide pertinent and contemporary information for the 
benefit of the GPIGA member nations; to draw upon the unique status of 
those Great Plains Indian Nations which have treaties between 
themselves and the United States; and to provide our Member Tribes with 
information about national legislation and issues affecting tribal 
economic development.
    Naturally, we are concerned about the manner in which the NIGC 
approaches its mission to assist tribes in regulating Indian gaming. 
Rather than a cooperative environment where the NIGC and Indian tribes 
work together to ensure the highest standards of regulation, Tribes are 
left with the impression that the NIGC has chosen to write regulations 
without tribal input or concern for the affect those regulations will 
have on tribal sovereignty and the Indian gaming industry. Similarly, 
we are concerned by the lack of training and technical assistance on 
those regulations to Indian tribes and tribal regulators despite a 
mandate to do so in the NIGC Accountability Act of 2006.
Background: Federal-Tribal Government-to-Government Relations
    Before the United States, Indian tribes were independent sovereigns 
with sustainable economies, strong agricultural traditions, vast 
natural resources and extensive trade networks. Early United States' 
treaties sought to foster ``a firm and lasting peace'' with the North 
Dakota tribes, to build a trade network between the United States and 
North Dakota tribes, and to extend Federal protection to the tribes. 
See Treaty with the Mandan (1825); Treaty with the Arikara (1825); 
Treaty with the Hunkpapa Sioux (1825). Later, the United States sought 
cessions of land from North Dakota tribes through war, treaty, or 
statutory agreement, and these cessions left the tribes destitute.
    Through these treaties the United States acknowledged the status of 
Indian tribes as sovereigns and established the principle of 
government-to-government relations between the United States and Indian 
tribes. In fact, these principles are part of the very fabric of the 
Constitution, as set forth in the Indian Commerce and Treaty Clauses. 
The United States never withdrew its treaty pledges of peace, 
friendship, and protection for North Dakota's Indian tribes, and 
accordingly, we seek to hold the United States to its Federal trust 
responsibility. Part of the Federal trust responsibility is a duty to 
protect tribal self-government, which means that to the greatest extent 
possible, the United States, its officers and agencies should work with 
Indian tribes on a basis of mutual respect and mutual consent.
Indian Gaming in North Dakota
    The Indian Gaming Regulatory Act's purpose is to build strong 
tribal governments, promote tribal economic development and foster 
tribal self-sufficiency. Indian gaming has been an important economic 
development activity for Indian tribes in North Dakota and the Great 
Plains region. 25 U.S.C. section 2701(4).
    After almost 20 years of experience under the Indian Gaming 
Regulatory Act, we can say definitively 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 $55 million, 
and approximately $39 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 $156 million annually to 
the total economy of the state. Tribal government gaming operations 
purchased over $45 million in goods and services within North Dakota. 
Purchases were made in 93 communities throughout the State. Without 
these sales, the state would lose $100 million of economic activity in 
cities throughout the State. We have estimated our total economic 
impact in the State since 1997 to have exceeded $1.3 billion.
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.
    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. 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. 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 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 
were 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.
    Due to the flooding, 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 6  12 mile 
Turtle Mountain reservation. Belcourt, North Dakota, the tribal 
headquarters, 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 
United States officers--that is, the BIA police acting in concert with 
the U.S. Cavalry and under the direction of the Indian Agent.
    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.
The Tribal-State Compact Process in North Dakota
    Since the beginning of tribal gaming in North Dakota, its 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).
    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 two 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, and 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.
The Role of the NIGC--Background Oversight/Training and Technical 
        Assistance
    The National Indian Gaming Commission was established to assist 
Indian tribes with the regulation of Indian gaming. Under IGRA, tribal 
gaming regulators are the primary day-to-day regulators of Indian 
gaming and they regulate Indian gaming under tribal gaming ordinances, 
which are approved by the NIGC provided that they conform to minimum 
federal statutory standards.
    For Class II gaming, tribal regulators are supported by continuous 
monitoring of the NIGC. For Class III gaming, tribal regulators are 
supported by State regulators in accordance with Tribal-State compacts 
and the NIGC has a specialized role. Specifically, the NIGC:

   NIGC reviews and approves tribal gaming regulatory laws;

   NIGC reviews tribal background checks and gaming licenses;

   NIGC receives independent annual audits of tribal gaming 
        facilities;

   As part of the annual audits, NIGC receives audits of gaming 
        contractors over $25,000; and

   NIGC approves management contracts.

    In addition to the Tribal-State Compact system, IGRA specifically 
provides that NIGC authority to work with tribal governments to ensure 
the enforcement of NIGC approved tribal ordinances under 25 U.S.C. sec. 
2713:

        Subject to such regulations as may be prescribed by the 
        Commission, the 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 game or a 
        management contractor engaged in gaming for any violation of 
        any provision of this chapter, any regulation prescribed by the 
        Commission pursuant to this chapter, or tribal regulations, 
        ordinances, or resolutions approved under section 2710 or 2712 
        of this title.

    Thus, the NIGC has authority to assist the tribes in ensuring 
proper enforcement of those tribal minimum internal control standards. 
This role continues and was not interrupted by the Federal Court 
decision in Colorado River Indian Tribes v. NIGC. \1\
---------------------------------------------------------------------------
    \1\ In essence, the Federal Court ruling 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.
---------------------------------------------------------------------------
Top Down/Inside the Beltway Approach to Regulation
    Our concern with the NIGC is that they have adopted a top-down, 
inside the beltway approach to the regulation of Indian gaming. Rather, 
than coming out to the field to assist tribal governments in ensuring 
that tribal regulatory systems are running appropriately, the NIGC 
constantly wants to write new Federal rules.
    To strengthen the United States' government-to-government 
relationships with Indian tribes, President Clinton issued Executive 
Order No. 13175 (2000), which directs Federal agencies to consult and 
coordinate with Indian tribes on Federal rulemaking and agency actions 
that have substantial direct impacts on tribal self-government, tribal 
lands and treaty rights. In considering Federal rulemaking that so 
impact tribal interests, the Executive Order provides that agencies 
shall adhere to the following criteria:

   Respect for tribal self-government and sovereignty, treaty 
        and other rights that arise from the Federal trust 
        relationship;

   Provide tribes with the maximum administrative discretion 
        possible; and

   Encourage tribes to develop their own policies to achieve 
        objectives, defer to tribal standards where possible, and 
        otherwise preserve the prerogatives and authority of Indian 
        tribes.

    The Executive Order also directs Federal agencies to consider the 
need for the regulation in light of tribal interests, take tribal 
concerns into account, and use consensual mechanisms for decision-
making, including negotiated rulemaking, where appropriate. On 
September 23, 2004, President Bush issued an Executive Memorandum 
directing Federal agencies to adhere to Executive Order 13175.
    We acknowledge that the NIGC is willing to sit down with tribal 
leaders and is willing to attend tribal meetings. Unfortunately, tribal 
leaders often come away with the feeling that NIGC had a pre-determined 
decision and that despite tribal concerns, NIGC will not move off its 
own bureaucratic agenda to find a way to respect tribal sovereignty and 
self-government. We are sometimes told that consultation does not mean 
agreement but consultation is supposed to be meaningful and it should 
require consideration of tribal points of view and accommodation of 
those perspectives to the greatest extent possible.
    For example, when the NIGC was developing its Class II regulatory 
proposals it was very reluctant to consider tribal government points of 
view, yet when the gaming manufacturers made a point, the NIGC would 
listen to them. The other thing that happens is when we sometimes 
appear to make some headway in promoting tribal government concerns, 
the Chairman and Commissioners go back and talk to NIGC lawyers and any 
sign of accommodation is later dropped. There is simply too much inside 
the beltway counseling and not enough field experience.
    Recommendation: Make the Federal-Tribal Government-to-Government 
Relationship Meaningful! The NIGC should be directed by statute to 
follow Executive Order No. 13175 and we call upon the Senate Committee 
to consider a bill similar to H.R. 5608. If possible, we would ask the 
Committee to pass that bill with an expanded scope to cover other 
Federal agencies.
Training and Technical Assistance
    In 2006, Congress gave the NIGC new authority to work with tribal 
governments to provide technical assistance and training to tribal 
regulators. Public Law No. 109-221 (2006). Specifically, the NIGC 
Accountability Act is intended to do three things:

   Provide increased funding for NIGC by empowering NIGC to 
        assess a fee up to the level of $0.80 per $1,000 of gross 
        Indian gaming revenue;

   Require NIGC to follow the Government Performance and 
        Results Act; and

   Require NIGC to include a training and technical assistance 
        plan in its GPRA compliance plan.

    NIGC is currently undertaking a paperwork shuffle of its GPRA 
compliance plan, but Indian tribes were not consulted in its 
development, there have been no national or regional meetings scheduled 
to consult with tribes on the GPRA plan, and no training or technical 
assistance programs have been undertaken pursuant to the plan. NIGC has 
increased its fees and is spending more money under the fee provisions.
    Recommendation: NIGC Must Hire a Training/Technical Assistance 
Director with Indian Gaming Experience! We urge the Senate Committee to 
ensure that the NIGC hires a training and technical assistance director 
to begin providing training and technical assistance programs to tribal 
governments and tribal gaming regulators. We strongly believe that the 
NIGC training and technical assistance director should be someone who 
has actual Indian gaming field experience (meaning that they have 
worked for an Indian tribe).
    Recommendation: NIGC Must Provide Training/Technical Assistance 
that Meets or Exceeds Industry Standards! If Washington lawyers who 
have never worked in the field sit around a conference table at the 
agency headquarters and dream up training subjects, the NIGC is headed 
for failure in this area. We need practical training and useful 
technical assistance that can really help tribal regulators to 
establish and maintain top-notch systems that meet or exceed industry 
standards. If lawyers who do not know the industry standards are 
assigned to the task of training and technical assistance, it is a 
waste of time.
The NIGC Should Apply Indian Preference in Hiring
    Recommendation: NIGC Must Use Indian Preference in Hiring! Under 
existing law, NIGC should provide for Indian preference in hiring. On 
March 31, 2008, the U.S. District Court for the District of Columbia 
ruled that Indian preference in hiring applies to all ``positions in 
the Department of the Interior, whether within or without the Bureau of 
Indian Affairs, that directly and primarily relate to providing 
services to Indians . . . .'' Indian Educators Federation v. Dirk 
Kempthorne,__F.3d__(Civ. No. 04-01215) (March 31, 2008). IGRA expressly 
places the NIGC within the Department of the Interior and it is without 
question that NIGC is engaged in providing regulatory services for 
Indian gaming, which is a tribal government activity. Hence, NIGC is 
directly and primarily providing regulatory services to Indians within 
the meaning of Indian preference. Yet, NIGC has a poor track record of 
hiring Indians: only 3 out of 17 supervisory personnel at the NIGC 
Washington headquarters are Indian. This must change.
Federal Advisory Committees
    In general, the Federal Advisory Committee Act (FACA) frowns on the 
use of Federal Advisory Committees because they are composed of 
unelected experts who may have an unknown impact on Federal policy 
while the public is excluded. There is an exception for consultation 
with state, local and tribal government representatives because such 
consultation is appropriate to promote federalism, comity, and respect 
for tribal self-government. Normally, when a Federal Advisory Committee 
is formed a plan must be filed with GSA.
    NIGC simply claims exemption from FACA and constitutes and disbands 
Tribal Advisory Committees at will. Recommendation: Tribal Advisory 
Committees Should be Formed Only After Consultation with Tribal 
Governments about their uses and purposes. They should be staffed with 
tribal government representatives freely nominated by sovereign tribal 
governments. Instead, NIGC calls for experts and puts qualifications on 
its Tribal Advisory Committees that fly in the face of FACA. For 
example, NIGC just disbanded a MICS Tribal Advisory Committee and 
Technical Standards Tribal Advisory Committee and shortly thereafter, 
announced the formation of a new Tribal Advisory Committee that would 
limit its membership to tribal regulators with 5 or more years of 
experience. That means that no elected tribal government leaders will 
be on the committee and no gaming operators will be on the committee. 
That seems to subvert the FACA exception that NIGC is relying upon by 
cherry-picking committee members who are amenable to the NIGC 
viewpoint.
    Recommendation: NIGC Should Submit Its Claimed FACA Exception to 
GSA for Review. NIGC should submit its Tribal Advisory Committee plans 
to GSA for approval as an exception to FACA to ensure that it is not 
end-running the statute.
Conclusion: NIGC Must Respect Tribal Governments as Day-to-Day 
        Regulators
    NIGC should embrace Congress' direction to provide training and 
technical assistance to tribal governments and tribal gaming 
regulators. Moreover, NIGC should meaningfully consult with tribal 
governments concerning the need for new regulations. For example, where 
NIGC just issued regulations in 2002 on Class II Technologic Aids, NIGC 
should truly consider the importance of simply maintaining those 
regulations as an alternative to new regulations. Especially, where 
those 2002 regulations were approved by the Federal Court of Appeals!
    In short, NIGC needs to become a more user friendly agency, and 
stop the top/down inside the beltway regulatory directive approach to 
its mission. Tribal governments invest hundreds of millions of dollars 
for regulation and NIGC is not happy unless it is duplicating tribal 
government regulation.

    Senator Tester. Thank you, Mr. Luger.
    Ms. Rand?

       STATEMENT OF KATHRYN R.L. RAND, J.D., PROFESSOR, 
         UNIVERSITY OF NORTH DAKOTA SCHOOL OF LAW; CO-
  DIRECTOR, INSTITUTE FOR THE STUDY OF TRIBAL GAMING LAW AND 
 POLICY; ACCOMPANIED BY STEVEN ANDREW LIGHT, Ph.D., PROFESSOR, 
   UNIVERSITY OF NORTH DAKOTA COLLEGE OF BUSINESS AND PUBLIC 
ADMINISTRATION; CO-DIRECTOR, INSTITUTE FOR THE STUDY OF TRIBAL 
                     GAMING LAW AND POLICY

    Ms. Rand. Thank you, Senator Dorgan and the Committee for 
inviting us to testify this morning. My name is Kathryn Rand. I 
am a professor at the University of North Dakota School of Law, 
and with me is Dr. Steven Light, a professor at the University 
of North Dakota College of Business and Public Administration.
    We are the Co-Directors of the Institute for the Study of 
Tribal Gaming Law and Policy at the University of North Dakota.
    We are not here to criticize the NIGC. Our testimony will 
focus on three issues raised in our written statement: 
consultation with tribes; accountability; and agency capture. 
These issues, including our recommendations for each, are 
addressed in detail in our written statement.
    As the Committee knows, the NIGC has a government-to-
government tribal consultation policy, and as you have heard, 
tribal leaders have criticized the NIGC's consultation as pro 
forma and without substantive impact on decisions. These 
criticisms are illustrated by the protracted process of 
promulgating Class II bright-line regulations.
    The NIGC's accountability is complicated by its varied 
stakeholders and the fact that it addresses highly 
controversial and technically complex issues. Several questions 
related to the Commission's accountability are raised in the 
context of the Class II-proposed regulations.
    For example, are the proposed regulations necessary, given 
the Commission's 2002 amendments and the Federal court's 
application of the same? And is the content of the proposed 
regulations consistent with congressional intent, especially 
given the potential economic impact on tribes?
    With agency capture, the question is how to balance 
appropriate government-to-government consultation and 
stakeholder accountability with the risk of capture. For 
example, both tribes and game manufacturers have a vested 
interest in a strong Class II market and have sought to 
influence the NIGC's regulation of the same.
    We have a few preliminary recommendations in each of these 
areas. With regard to consultation, we recommend comparing 
other agency practices. For example, the IHS has a relatively 
detailed and specific consultation policy which requires the 
definition of consultation and specific triggers for the 
process of consultation.
    We also recommend clarifying the nature of government-to-
government consultation, which should be uniquely geared toward 
tribes' governmental status and their relationship with the 
Federal Government.
    And also with regard to consultation, we recommend 
considering consent-based policy-making in the form of 
negotiated rulemaking. True government-to-government 
consultation may afford tribes a role in decision-making. There 
is a need for clear criteria and mechanisms to trigger 
negotiated rulemaking. For example, the IHS policy ties 
negotiated rulemaking to specific issues.
    With regard to accountability, we recommend preserving the 
NIGC's role in tribal institution-building. The NIGC has a dual 
role of facilitating and overseeing tribal regulation of 
gaming. Any accountability measures should take into account 
the NIGC's facilitation of effective tribal regulation.
    Also with regard to accountability, we recommend accounting 
for the NIGC's effective gambling regulation. The NIGC is also 
responsible for some direct regulation of gaming, and this 
regulation should be tailored to IGRA's goals and to the 
specific needs of the tribal gaming industry, including 
fostering tribal economic development.
    Finally, with regard to accountability, we recommend 
increasing transparency as much as possible.
    On the issue of capture, we recommend ensuring sufficient 
funding and personnel for the NIGC and, perhaps more 
importantly, weighing the capture risk against IGRA's goals and 
the NIGC's role in facilitating tribal institution-building. 
There is a need for the NIGC to be informed by tribal and 
industry expertise. We recommend guidelines for the formation 
of work groups and advisory committees, as well as their input.
    Thank you. Both Dr. Light and I stand ready to answer the 
Committee's questions.
    [The prepared statement of Ms. Rand follows:]

Prepared Statement of Kathryn R.L. Rand, J.D., Professor, University of 
  North Dakota School of Law; Co-Director, Institute for the Study of 
   Tribal Gaming Law and Policy; accompanied by Steven Andrew Light, 
 Ph.D., Professor, University of North Dakota College of Business and 
 Public Administration; Co-Director, Institute for the Study of Tribal 
                         Gaming Law and Policy
    Good morning. We thank Senator Dorgan and the Committee for this 
opportunity to appear before you today to discuss the role of the 
National Indian Gaming Commission (NIGC) in effective and appropriate 
regulation of Indian gaming.
    We co-direct the Institute for the Study of Tribal Gaming Law and 
Policy at the University of North Dakota, which provides legal and 
policy assistance related to tribal gaming enterprises to all 
interested governments and organizations, assists tribes with gaming 
enterprises in pursuing reservation economic development and building 
strong tribal governments, and contributes to the scholarly and 
practical research and literature in the area of tribal gaming. Our 
testimony today is informed by our research and scholarship in the area 
of Indian gaming over the past twelve years.
    In the last two decades, the tribal gaming industry has seen rapid 
expansion under the regulatory framework of the Indian Gaming 
Regulatory Act of 1988 (IGRA). Some 400 tribal gaming establishments in 
as many as 30 states are operated by 230 tribes that have decided to 
pursue gaming to create jobs, facilitate economic development, and 
provide public services to their members. The Indian gaming industry 
generated $25 billion in 2006. As a peculiar intersection of federal 
Indian law and gambling law, Indian gaming is a particularly 
complicated and highly specialized topic, giving rise to numerous legal 
questions fraught with political and policy implications. A regulatory 
official must respond to a phenomenal array of such questions, from 
concepts related to abstract theoretical principles or 
preconstitutional history to those with highly technical answers 
grounded in the interpretation of current federal law and regulations. 
Given the growth of the industry and the myriad and recurring legal and 
political issues concerning Indian gaming, it perhaps should come as no 
surprise that many, including members of Congress, see Indian gaming as 
meriting vigorous federal oversight.
    The congressional goals reflected in IGRA and its legislative 
history contemplated both federal Indian law and policy and Congress's 
expectations for the tribal gaming industry. Although federal Indian 
policy may not have significantly changed since 1988, the Indian gaming 
industry certainly has. The predominant view, at least of non-tribal 
policymakers and the general public, is that the rapid growth of the 
industry has created significant problems that should be solved through 
more stringent regulation. Congress's goal in providing sufficient 
regulation of tribal gaming to ensure legality and protect the 
financial interests of gaming tribes remains critically important. At 
the same time, we believe the success of the industry has created 
opportunities to achieve two additional goals of at least equal 
importance in the long term. Together, the three goals of sound 
regulation, tribal institution building, and improving tribal-state 
relations, each of which is based on Congress's original intent in 
enacting IGRA, should serve as lodestars for Congress's policymaking 
for Indian gaming. See Kathryn R.L. Rand & Steven Andrew Light, How 
Congress Can and Should ``Fix'' the Indian Gaming Regulatory Act: 
Recommendations for Law and Policy Reform, 13 VA. J. SOC. POL'Y & L. 
396 (2006).
    Today we have been asked to provide our opinions related to 
Congress's legislative oversight of the NIGC, the independent federal 
regulatory agency charged with regulating Indian gaming. Indian gaming 
presents complexities unlike most other industries subject to federal 
regulation. We believe that the NIGC has been largely successful in its 
efforts to work with tribes in regulating a complex and changing 
industry. The members of this Committee undoubtedly are familiar with 
the NIGC's authority and many of the issues swirling around its 
implementation and enforcement of IGRA and federal Indian law and 
policy. As the NIGC itself has acknowledged, there is a strong 
perception among tribes that the NIGC does not adequately consult with 
tribal leaders regarding proposed regulations, a criticism raised 
repeatedly during the NIGC's protracted process of issuing proposed 
regulations related to Class II gaming. Recently, the NIGC requested 
assistance from the National Indian Gaming Association (NIGA) in 
developing and implementing procedures and practices for government-to-
government consultation with tribes.
    We welcome this opportunity to contribute our views on how best to 
ensure appropriate congressional oversight and efficient and 
accountable governance through the NIGC's meaningful consultation and 
cooperation with tribal governments. In this statement, we focus on 
three issues related to the NIGC's role that we believe may be helpful 
to the Committee: communication and consultation policies and 
practices, accountability, and agency capture.
I. Scope of NIGC Powers
    In IGRA, Congress specified several goals related to the 
overarching tenets of federal Indian policy. Congress intended IGRA to 
codify tribes' right to conduct gaming on Indian lands as a means of 
promoting tribal economic development, self-sufficiency, and strong 
tribal governments, while providing sufficient regulation to ensure 
legality and to protect the financial interest of gaming tribes. 
Congress also enacted IGRA to establish an independent federal 
regulatory authority in the form of the NIGC.
    IGRA situates the NIGC within the U.S. Department of the Interior. 
At least two of the NIGC's three members must be enrolled members of a 
tribe. IGRA also requires the Commission to submit a report, with 
minority views, to Congress every two years. The NIGC's mission is ``to 
regulate gaming activities on Indian lands for the purpose of shielding 
Indian tribes from organized crime and other corrupting influences; to 
ensure that Indian tribes are the primary beneficiaries of gaming 
revenue; and to assure that gaming is conducted fairly and honestly by 
both operators and players.'' IGRA assigns some powers to the NIGC 
Chair, and others to the full Commission. The powers of the Chair 
include authority to issue temporary closure orders, to levy and 
collect civil fines, to approve tribal ordinances and resolutions, and 
to approve management contracts. The Chair's decisions in these areas 
may be appealed to the full Commission. The Commission also may 
delegate additional authority to the Chair. The Commission's powers 
include authority to order permanent closure, to monitor and inspect 
Class II gaming, to conduct background investigations, to issue self-
regulation certificates, and to issue subpoenas, order testimony, take 
depositions, and hold hearings. The NIGC also exercises broad authority 
to ``promulgate such regulations and guidelines as it deems appropriate 
to implement [IGRA's] provisions.'' 25 U.S.C. Sec. 2706(b)(10). In 
addition to promulgating formal regulations, the NIGC also issues 
opinion letters and other informal interpretations of IGRA.
    In 2000, President Clinton issued Executive Order 13175, titled 
``Consultation and Coordination with Indian Tribal Governments.'' The 
Executive Order sets forth three ``fundamental principles'' to guide 
regulations, legislative proposals or recommendations, and other policy 
statements or actions that have ``substantial direct effects on one or 
more Indian tribes'':

   The unique nature of the tribal-federal relationship

   Federal law's recognition of tribal sovereignty

   Federal Indian policy recognizing tribal self-government and 
        supporting tribal sovereignty and self-determination

    The Executive Order further specifies ``policymaking criteria,'' 
directing federal agencies to:

   Respect tribal self-government and sovereignty

   Grant tribal governments the maximum administrative 
        discretion possible

   Encourage tribes to develop their own policies to achieve 
        federal program objectives, defer to tribes to establish 
        standards, and consult with tribes as to the need for federal 
        standards

    In a 2004 memorandum, President Bush directed federal agencies to 
adhere to the principles reflected in the Executive Order and to ``work 
with tribal governments in a manner that cultivates mutual respect and 
fosters greater understanding.'' Accordingly, the NIGC adopted a 
Government-to-Government Tribal Consultation Policy. In addition to 
incorporating the fundamental principles set out in the Executive 
Order, the NIGC policy references IGRA's recognition of tribal 
sovereignty, its policy goals, and its regulatory framework, including 
the primary authority and responsibility of tribes over Indian gaming. 
The policy provides that:

        to the extent practicable and permitted by law, the NIGC will 
        engage in regular, timely, and meaningful government-to-
        government consultation and collaboration with Federally 
        recognized Indian tribes, when formulating and implementing 
        NIGC administrative regulations, bulletins, or guidelines, or 
        preparing legislative proposals or comments for Congress, which 
        may substantially affect or impact the operation or regulation 
        of gaming on Indian lands by tribes under the provisions of 
        IGRA.

    The NIGC policy also sets forth ``policymaking principles and 
guidelines,'' including:

   Reasonable consideration of variations among tribes, gaming 
        operations, and tribal-state compacts

   Qualified deference to tribal regulations and standards for 
        Indian gaming

   Provision of technical assistance to tribes in complying 
        with federal law and in implementing their own policies and 
        standards

   Restraint from enacting policies that will impose 
        substantial direct compliance or enforcement costs on tribes, 
        if the policies are not required by IGRA or necessary to 
        further IGRA's goals

   Granting tribes the maximum administrative and regulatory 
        discretion possible in operating and regulating Indian gaming, 
        and elimination of unnecessary and redundant federal regulation 
        ``in order to conserve limited tribal resources, preserve the 
        prerogatives and sovereign authority of tribes over their own 
        internal affairs, and promote strong tribal government and 
        self-determination''

    The policy's procedures and guidelines have as the primary focus 
consultation and collaboration with individual tribes. The consultation 
procedures promise ``early notification'' to tribes of proposed 
policies, ``adequate opportunity'' for discussion, and ``meaningful 
input regarding the legality, need, nature, form, content, scope and 
application of such proposed regulations, including opportunity to 
recommend other alternative solutions or approaches.'' As part of the 
consultation process and before issuing a final decision, the NIGC will 
``answer tribal questions and carefully consider all tribal positions 
and recommendations.'' The NIGC also will ``consult with affected 
tribes to select and establish fairly representative intertribal work 
groups, task forces, or advisory committees'' in developing 
administrative regulations or legislative proposals. Finally, the 
policy provides that ``[t]he NIGC will, to the extent it deems 
practicable, appropriate, and permitted by law, explore and consider 
the use of consensual policy making mechanisms, including negotiated 
rulemaking.''
    One of the more pressing issues with which the NIGC has grappled is 
game classification. If a particular game falls within Class II, then 
it may be operated by a tribe without a tribal-state compact; if the 
game falls within Class III, however, legal operation requires a 
compact. IGRA's definitions do not offer much in the way of technical 
guidance. Class II gaming is defined as ``bingo (whether or not 
electronic, computer or other technologic aids are used in connection 
therewith),'' as well as some card games. Class II gaming specifically 
excludes house-banked card games and ``electronic or electromechanical 
facsimiles of any game of chance or slot machines of any kind.'' Games 
excluded from Class II fall within Class III, a residual category that 
includes all other forms of gaming (excepting, of course, Class I's 
traditional games). In addition to the statutory definitions, the NIGC 
promulgated regulations meant to clarify the distinctions between Class 
II and Class III gaming. The current regulations in large part mimic 
the statutory language, but also provide ``plain English'' definitions 
and additional guidance. The NIGC also issues advisory opinions on 
whether a specific game is Class II or Class III.
    Whether a game falls within the catch-all of Class III or qualifies 
as a Class II game has significant impact. The legality of Class II 
games depends only on whether ``such gaming'' is permitted in the state 
and the tribe retains exclusive regulatory jurisdiction (with limited 
federal oversight) over the games. Class III games, on the other hand, 
are allowed only under the terms of a valid tribal-state compact.
    As reflected in IGRA's legislative history, Congress included the 
Class II ``technologic aid'' provision to ensure that tribes ``have 
maximum flexibility to utilize games such as bingo and lotto for tribal 
economic development.'' Tribes' Class II games should not be limited to 
``existing game sizes, levels of participation, or current 
technology,'' but should ``take advantage of modern methods'' of 
conducting games. See S. Rep. 100-446, 100th Cong. 2d Sess., 1988 
U.S.C.C.A.N. 3071. Although Congress's intent in authorizing Class II 
technologic aids may have been clear, the line between a Class II 
technologic aid and a Class III electronic facsimile was not. IGRA did 
not define either term, and until it amended its regulations in 2002, 
the NIGC offered little additional guidance. The 2002 amendments 
provided more detailed definitions, as well as illustrative examples of 
Class II technologic aids. The 2002 amendments were applied by the 
federal courts in United States v. Santee Sioux Tribe, 324 F.3d 607 
(8th Cir. 2003), and Seneca-Cayuga Tribe of Oklahoma v. NIGC, 327 F.3d 
1019 (10th Cir. 2003), to conclude that the machines at issue in each 
case fell within Class II.
    In both Santee Sioux Tribe and Seneca-Cayuga Tribe, the U.S. 
Department of Justice took a position contrary to that of the NIGC, 
contending that both games at issue were Class III electronic 
facsimiles or, alternatively, even if Class II technologic aids, the 
games violated the Johnson Act's criminal prohibition against gambling 
devices in Indian country. Because the Johnson Act is a federal 
criminal statute separate from IGRA and enforced by the Justice 
Department, the NIGC's interpretation of the Johnson Act is not 
entitled to the same deference as its interpretation of IGRA. Though 
agency officials were not uniform in their reading of the statutes, 
generally speaking the NIGC and the Justice Department disagreed over 
the Johnson Act's applicability to Class II aids. In 2005, the Justice 
Department sought legislation that would include Class II gambling 
devices within the scope of the Johnson Act. The Justice Department's 
proposal was met with tribal opposition, and failed to find a sponsor 
in Congress.
    In the meantime, though, the NIGC was in the protracted process of 
issuing new, highly technical regulations governing Class II electronic 
aids, sometimes called the ``bright line'' rules. In 2004, the NIGC 
formed a Class II Game Classifications Standards Advisory Committee, 
charged with assisting the NIGC in developing definitive classification 
and technical standards for distinguishing Class II aids from Class III 
facsimiles. In May 2006, the NIGC published its first set of proposed 
regulations. During the public comment period, it collected comments 
from over 80 tribes, as well as state and local governments, game 
manufacturers, citizen groups, and others, and conducted multiple 
hearings. See http://www.nigc.gov/LawsRegulations/
ProposedAmendmentsandRegulations/
ClassIIGameClassificationStandardsWithdrawn/tabid/705/Default.aspx.
    The 2006 proposed ``bright line'' regulations were criticized by 
tribes on two grounds. First, in requiring slower play, the rules would 
undermine the Class II market. An economic impact study concerning the 
2006 proposed regulations commissioned by the NIGC found the rules 
would have ``a significant negative impact'' on Class II gaming 
revenue, and therefore on the tribes that operate such games. The study 
concluded that the proposed changes would reduce gaming revenue by 
$142.7 million, with an accompanying loss of $9.6 million in non-gaming 
revenue and a $17.4 million reduction in tribal government revenue. 
Second, the regulations would trigger IGRA's tribal-state compacting 
requirement. In drawing a bright line between Class II and Class III 
games, the proposed regulations would shift some Class II games into 
the Class III category. Tribes in states that allow Class III gaming 
would need to convince the state to negotiate a new compact, opening up 
the process to the whims and vagaries of state politics and the 
possibility of state-mandated revenue sharing.
    Interagency contestation with the Department of Justice and 
continued criticism from tribes and game manufacturers considerably 
slowed the NIGC's promulgation of the new Class II regulations. 
Following the initial announcement of the 2006 proposed standards, a 
group of prominent manufacturers formed the Technical Standards Work 
Group (TSWG) to draft an alternative regulatory scheme to submit to the 
NIGC. Together with the Technical Standards Tribal Advisory Committee, 
a group of tribal operators and experts that had been advising the 
NIGC, the TSWG submitted alternative Technical Standards to the 
Commission in early 2007. In February 2007, the NIGC formally withdrew 
the 2006 proposed regulations. The NIGC published its new set of 
proposed regulations in October 2007, eventually extending the public 
comment period until March 9, 2008. On February 1, 2008, the NIGC 
released a second economic impact study, which estimated that under the 
2007 proposed regulations tribes could lose up to $2.8 billion in 
revenues and face expenses of almost $350 million in redeveloping Class 
II machines. Both tribal and industry leaders have complimented 
Chairman Hogen's efforts and acknowledged some improvements over the 
2006 proposed regulations, but also have expressed frustration and 
disappointment in both the process and the substance of the 2007 
proposed regulations.
II. Concerns Expressed About the NIGC: The Goldilocks Gamut
    Indian gaming is a product of the confluence of law and public 
policy that sanction and regulate the industry at the tribal, state, 
and federal levels. With so much at stake for so many stakeholders, it 
is no surprise that the resultant regulatory politics of tribal gaming 
is complex and controversial. The NIGC is charged with the complex task 
of monitoring and enforcing IGRA in relation to a host of ever-changing 
issues. The Commission interfaces with 230 sovereign tribal 
governments, as many as 30 sovereign state governments, and a powerful 
industry lobby that increasingly resembles that of the commercial 
gaming industry--in part because it includes identical players with a 
global reach, from game manufacturers to the commercial conglomerates 
that operate the majority of the casinos in Reno, Atlantic City, and on 
the Las Vegas Strip, and in part because of the growing clout of tribal 
advocacy associations like NIGA and its state and regional partners, 
such as the California Nations Indian Gaming Association (CNIGA).
    Despite its broad authority under IGRA and its generally successful 
efforts to regulate a complex industry, the NIGC variously has been 
accused of being underfunded, understaffed, and underempowered to 
regulate tribal gaming, overly solicitous of tribal, state, or industry 
interests, and overzealous and overreaching in exercising its statutory 
grant of authority.
    In the last 20 years, the NIGC has faced a number of ``hot-button'' 
issues across the U.S. with which the agency is involved through direct 
regulation or advisory opinions or in conjunction with decision making 
by other federal agencies. These highly controversial, sometimes 
rapidly developing, and often technically complex issues include:

   Promulgation of rules defining Class II technologic aids and 
        Class III electronic facsimiles, as detailed above

   Gaming on newly acquired lands, including land-into-trust 
        and ``Indian land'' determinations

   Enforcement actions and closure of gaming operations

   Tribal-state compacting and a ``Seminole Tribe'' fix to 
        address perceived political imbalances between tribal and state 
        governments

   Management contracts and consulting agreements with non-
        tribal parties

   Tribal use of gaming revenue, including transparency and 
        accountability

   Employment issues, including unionization of tribal casino 
        employees

   Tribal acknowledgment determinations

   Differences of opinion across and within federal agencies

   Calls to amend IGRA and other federal statutes to address 
        the above issues and more

    A critical feature unifying the issues the NIGC faces is that they 
vary by tribe, by state, and even by gaming establishment, creating a 
tension between the need for uniform industry regulatory standards to 
effectuate IGRA's overarching policy goals, and the highly localized 
and particularized nature of issues that might compel highly tailored 
and even tribe-specific regulation. Elsewhere we have written in detail 
about the very different issues faced by tribes across the U.S., and 
the governmental challenges they create. See, e.g., STEVEN ANDREW LIGHT 
& KATHRYN R.L. RAND, INDIAN GAMING AND TRIBAL SOVEREIGNTY: THE CASINO 
COMPROMISE (2005); Rand & Light, How Congress Can and Should ``Fix'' 
the Indian Gaming Regulatory Act.
    Depending on the issue and the interests involved, concerns 
expressed about the NIGC's authority, resources (including funding and 
personnel), and decisions have run a Goldilocks gamut, ranging from 
``far too much'' to ``nowhere near enough.'' Rarely is the agency seen 
as having or exercising ``just the right amount'' of regulatory 
authority--although admittedly few agencies are.
    We turn to three prominent critiques of NIGC authority that the 
above issues illustrate, and which may be of the greatest concern to 
this Committee as we sit before you in today's oversight hearing: the 
NIGC's communication and consultation policies and practices, its 
accountability to various stakeholders, including Congress and tribal 
governments, and the possibility of agency capture.
A. Communication and consultation policies and practices
    Under the NIGC's own government-to-government consultation policy, 
the NIGC routinely communicates with tribes through ``Dear Tribal 
Leader'' letters, attends tribal gaming association and other trade 
conferences and meetings, and conducts consultation sessions with 
individual tribal leaders. It also has convened working groups and 
advisory committees to assist in policy formulation.
    Nevertheless, some tribal leaders and others have criticized the 
NIGC's consultation process as being pro forma; that is, the letters 
are sent and the meetings and sessions for the most part occur, but the 
consultation efforts are too little, too late (for instance, key 
information is released just before relevant deadlines, or consultation 
comes only after regulations are fully drafted and formally proposed), 
or tribal input does not have a significant or substantive impact on 
the NIGC's decision making. For example, the NIGC's protracted efforts 
to promulgate Class II ``bright line'' regulations have been subject to 
extensive criticism regarding both the process and substance of the 
NIGC's consultation with affected tribes. Recently, NIGA and a number 
of tribal leaders have criticized the fact that the NIGC closed the 
formal notice-and-comment period on the proposed regulations just over 
a month after releasing an economic impact study it commissioned that 
estimated the proposed regulations would cost tribes as much as $2.8 
billion in lost revenues.
    Succinctly put, the question is whether the NIGC in fact conducts 
timely and meaningful communication and consultation with the parties 
it regulates, which include sovereign tribal governments. The answer, 
though, depends upon the nature of government-to-government 
consultation--an area where tribes and the federal government may not 
agree.
B. Accountability
    Like all administrative agencies, the NIGC is subject to concerns 
about accountability, whether to its enabling legislation (and 
therefore to congressional intent), its own internal policies, or 
appropriate stakeholders. Previous congressional hearings, including a 
Senate Indian Affairs Committee oversight hearing at which we testified 
in April 2005, have aired concerns about the NIGC's resources and 
capacity to adequately carry out its regulatory authority under IGRA. 
Despite its formal tribal consultation policy, the NIGC is one of three 
federal agencies singled out in a recent House bill (H.R. 5608, 110th 
Congress, 2d Session) meant to ensure an ``accountable consultation 
process'' between the agencies and tribal governments, including 
``meaningful and timely input by tribal officials in the formulating, 
amending, implementing, or rescinding [of] policies that have tribal 
implications.'' The broad and varied range of stakeholders to which the 
NIGC must at some level answer, including Congress, tribes, states, 
industry, and the public, further complicates the issue of agency 
accountability.
    The attempt to promulgate Class II regulations illustrates several 
additional issues related to accountability. Some have suggested that, 
given the NIGC's 2002 amendments and subsequent application of the same 
in the federal courts, the proposed regulations were the result of 
pressure from the Justice Department and some members of Congress 
rather than any real need for new standards. From that perspective, the 
NIGC's accountability to Congress and other federal agencies trumped 
accountability to tribes. The distinction between a Class II 
technologic aid and a Class III electronic facsimile is, in many ways, 
a technical one. Game manufacturers and tribal regulators complained 
that the proposed standards lacked cognizance of game technology and 
were too rigid to accommodate innovation, therefore hamstringing the 
manufacture of games that would allow tribes to maintain and further 
develop the Class II market through the use of ``modern methods'' of 
conducting games. Some tribes have been critical of what they saw as 
continual NIGC lip service to tribal sovereignty and self-government, 
while perhaps embodying the stereotype of a federal agency that 
purports to be ``here to help'' but in reality simply assumes control. 
Others pointed out that with an estimated impact of $1 billion to $2.8 
billion in lost revenues, the proposed regulations would undermine 
IGRA's goals of tribal economic development, tribal self-sufficiency, 
and strong tribal governments.
    The NIGC frequently must deal with and resolve highly controversial 
and technically complicated issues in which the varied nature of 
stakeholders and their interests make it difficult to assess the 
outcomes. The question here is how best to assess whether the NIGC is 
``doing its job'' while appropriately balancing relevant imperatives.
C. Agency capture
    A frequently expressed concern in regulatory administration is the 
evolution of a capture effect. Agency capture occurs as regulator and 
industry develop an iterated relationship in which industry views come 
to govern how regulation occurs. Without sufficient and appropriate 
legislative oversight, the agency becomes a tool of those it seeks to 
regulate. The conditions under which this model prevails are found in 
the relationship between the public and private sectors. The profit 
motive is best served by a favorable regulatory environment, and agency 
independence is sacrificed at the altar of private gain. Ultimately, 
the agency fails to promote the public interest. One need only look at 
recent headlines concerning American Airlines and the FAA to find 
evidence of agency capture--and calls for more and better legislative 
oversight in the future.
    In the context of the regulation of Indian gaming by the NIGC, the 
capture criticism stems from two oft-made assertions: the NIGC is a 
``toothless tiger,'' and tribal government gaming commissions are akin 
to ``the fox guarding the henhouse.'' See, e.g., Donald L. Barlett & 
James B. Steele, Wheel of Misfortune, TIME (Dec. 16, 2002), 48, 59. The 
charge is that the NIGC is unwilling or lacks the resources to guard 
against capture by the numerous gaming tribes it regulates or that 
tribal and industry interests may align in such a way as to exacerbate 
the risk. For instance, in the context of the development of the 
proposed Class II ``bright line'' regulations, both tribes and game 
manufacturers have vested interests in a competitive and lucrative 
Class II market. Both groups possess valuable and relevant knowledge 
and technical expertise that the NIGC has taken into account through 
what has ended up being a protracted and iterated process of 
consultation with working groups comprised of tribal officials and game 
manufacturers.
    As we explained to this Committee in our 2005 testimony, our views 
on agency capture are based on our sense of at least three key 
differences between the Indian gaming and commercial gambling 
industries: regulatory structures, policy impetus, and who benefits. At 
the structural level, capture theory focuses on the capture of an 
entire agency by the industry. However, in contrast to commercial 
gaming, we note that tribal gaming operations are subject to extensive 
tribal, state, and federal regulations. Simply put, there are too many 
regulatory authorities involved to allow one (or the capture of one) to 
dominate. The policy impetus behind Indian gaming revolves around the 
goals stated in IGRA: tribal economic development, self-sufficiency, 
and self-governance. Tribal gaming commissions have a clear stake in 
promoting these goals, which are quite different than the profit 
motivation in the private sector. The vast majority of gaming tribes 
see Indian gaming as the first viable means of economic development in 
generations, and tribal regulatory authorities are less likely to lose 
sight of effective regulation and compliance with policy goals than if 
they were regulating private industry. These policy motivations relate 
to the third key difference between the private and public sectors: who 
benefits. Agency capture subverts a public interest. But Indian gaming 
directly supports tribal governments and underwrites their ability to 
provide essential government services--a clear public interest.
    Here, then, the question is how to balance appropriate government-
to-government tribal consultation and accountability to stakeholders 
with the risk of agency capture.
III. Recommendations
    In exercising oversight of the NIGC and its role in regulating the 
Indian gaming industry, Congress should be guided by the best available 
data and analysis. The same definitely is true for the NIGC in 
exercising its authority as an independent regulatory agency. In our 
prior work, we have identified three lodestar policy goals for Indian 
gaming law and policy. The three goals--sound regulation, tribal 
institution building, and improving tribal-state relations, each of 
which is based on Congress's original intent in enacting IGRA--should 
serve to guide this Committee in its consideration of the issues raised 
in today's hearing. See Rand & Light, How Congress Can and Should 
``Fix'' the Indian Regulatory Act.
    We wish to offer a few preliminary concrete recommendations that 
may be useful to the Committee in exercising its oversight function.
A. Communication and consultation policies and practices
    1. Compare other agency consultation and communication practices. 
We recommend gathering information about how other federal agencies 
interact with sovereign tribal governments, including assessment of the 
success of these practices, as measured in large part through the 
degree to which they align with and serve the articulated goals of 
federal Indian policy with regard to tribal self-government and self-
determination.
    2. Clarify the nature of government-to-government communication and 
consultation. As both Executive Order 13175 and the NIGC's tribal 
consultation policy acknowledge, tribal sovereignty and the federal 
government's trust obligation shape tribes' unique status in the 
American political system. Accordingly, the NIGC's consultation policy 
should be uniquely geared to tribes' governmental status and 
relationship with the federal government, both in theory and in 
practice. The challenge, of course, is ensuring that the promises of 
both the Executive Order and the NIGC policy are kept in their 
implementation. Along with willpower and oversight, truly meaningful 
consultation requires resources, concretely realized in NIGC funding 
and personnel.
    3. Consider requiring consent-based policymaking in the form of 
negotiated or hybrid rulemaking. Further, government-to-government 
consultation with tribes may require more than notice-and-comment 
periods and consultation sessions in which tribes may be listened to, 
but which do not provide tribes a direct role in setting priorities or 
shaping policy outcomes. Government-to-government consultation perhaps 
should include a defined role for affected tribes in the decision-
making process. This may be appropriate, given not only tribes' unique 
status, but also the fact that unlike state governments, tribes have 
not delegated authority to the federal government. On a practical 
level, our point here is that the NIGC's consultation policy promises 
to ``explore and consider the use of consensual policy making 
mechanisms, including negotiated rulemaking,'' but the criteria for the 
NIGC's decision on whether and when to use that process appear to be at 
the sole discretion of the agency. Clear criteria, along with a 
mechanism to trigger negotiated or hybrid rulemaking, should be 
established.
    4. Define and implement meaningful consultation and communication 
policies and practices. Perhaps taking a cue from the impetus behind 
H.B. 5608, Congress's intent and expectations regarding government-to-
government consultation in the NIGC's exercise of its statutory 
authority should be made clear. In addition to the points made above, 
this should include timeliness of notice and appropriate opportunity 
for input, guidelines for expanding or adjusting the usual formal 
notice-and-comment requirements, and guidelines and outcome measures 
for adherence to the goals of both IGRA and federal Indian policy.
B. Accountability
    1. Further IGRA's goal of tribal economic development. The NIGC's 
regulatory role is distinct from that of other federal agencies, such 
as the BIA or the IHS, that implement or provide programmatic services 
to tribes and American Indian people. Indian gaming is neither a public 
entitlement program nor a federal obligation, but an aspect of tribal 
governmental authority, as Congress recognized in IGRA. One of IGRA's 
goals is to foster tribal economic development, a point to keep in mind 
in balancing the NIGC's relevant imperatives created by its varied 
stakeholders. Elsewhere we have discussed the social and economic 
impacts of tribal gaming, and we note that these considerations are 
relevant to both Congress's and the NIGC's decisions. As the economic 
impact studies connected to the Class II ``bright line'' rules clearly 
illustrate, the NIGC's decisions have a very real impact on tribes and 
tribal members, and the future of tribal communities.
    2. Preserve the NIGC's role in tribal institution building. The 
NIGC is in the difficult position of both facilitating and overseeing 
tribal regulation of an industry that, in the private sector, 
traditionally has merited stringent governmental control. The NIGC has 
a dual role with regard to tribal regulation, as it provides technical 
assistance to tribes and encourages tribal institution building 
necessary for effective tribal regulation of gaming enterprises. As the 
NIGC's consultation policy promises, tribes should be given the maximum 
administrative and regulatory discretion possible. The NIGC should 
resort to federal policy or regulation only where required by IGRA or 
necessary to meet IGRA's policy goals. Thus, accountability measures 
must take into account the NIGC's effective facilitation of tribal 
regulation, and not merely its direct regulatory role.
    3. Account for effective gaming regulation. Another challenge faced 
by the NIGC is the effective regulation of gambling itself. In enacting 
IGRA, Congress was well aware of the challenges of gaming regulation, 
particularly for casino-style gaming. IGRA's regulatory framework, 
which involves tribal, state, and federal regulation, balances federal 
standards with the need for regulation tailored to local concerns and 
needs. In assigning Class II regulation primarily to tribes, and Class 
III regulation primarily to tribal-state compacts, Congress recognized 
the need to tailor regulation to specific jurisdictional circumstances. 
Accountability, then, must not be measured solely by uniformity imposed 
by the NIGC through federal standards and regulations. Here, too, we 
emphasize the need for information gathering to build federal expertise 
in gaming regulation and to tailor general gaming policy to the 
specific goals and challenges of the Indian gaming industry.
    4. Increase transparency. The NIGC should be applauded for its 
efforts to maintain an accessible and informative Web site. As with 
nearly any government agency, however, more could be done to make 
information readily available to stakeholders, including Congress, 
tribes, states, industry, and the public. We note that increased 
transparency also serves the constituents of the governments charged 
with tribal gaming regulation at the tribal, state, and federal levels.
C. Agency capture
    1. Ensure sufficient funding and personnel. Both the NIGC and 
tribes need sufficient resources to fulfill their obligations under 
IGRA. The NIGC's current levels of funding and personnel may constrain 
its ability to engage in meaningful government-to-government 
consultation with tribes, and also subject the NIGC to criticisms 
concerning its investigative and enforcement responsibilities as well 
as to charges of secrecy and behind-the-scenes decision making.
    2. Balance accountable consultation and agency capture. Perceptions 
of the risk of agency capture must take into account the goals of IGRA 
and federal Indian policy, as well as the NIGC's role in facilitating 
effective tribal regulation. A perceived threat of agency capture must 
not be allowed to undermine the primacy of tribal regulation under IGRA 
or the NIGC's responsibility to consult with tribes on a government-to-
government basis. Additionally, as the Class II ``bright line'' 
regulations illustrate, there is a need for industry and technical 
expertise to inform the NIGC's decisions. The work groups and advisory 
committees convened as part of the NIGC's process in promulgating the 
proposed Class II regulations should serve as a model for instituting a 
more formal and less ad hoc process. Guidelines and mechanisms 
concerning the formation of and input by such groups should be 
developed.
    At the Committee's request, we would be glad to elaborate further 
on the points made in this written statement or other issues related to 
the NIGC that the Committee deems pertinent.
Attachment
    Institute for the Study of Tribal Gaming Law and Policy at the 
                       University of North Dakota
About the Institute
    Co-Directors Kathryn R.L. Rand (Law) and Steven Andrew Light 
(Political Science) founded the Institute for the Study of Tribal 
Gaming Law and Policy at the University of North Dakota in 2002 as the 
first university-affiliated institute in the U.S. dedicated to the 
study of Indian gaming. The Institute provides legal and policy 
assistance and analysis to all interested individuals, governments, and 
organizations, and conducting scholarly and practical research in the 
area of tribal gaming.
    The Institute adopts a unique ``team-based'' interdisciplinary 
approach to legal and policy analysis of the complicated and technical 
issues related to Indian gaming, including regulation and agency 
authority, policy and socioeconomic impact analysis, tribal-state 
compacting, Class II vs. Class III gaming, tribal law and sovereignty, 
federal Indian law, labor relations, state referenda and voter 
initiatives, the federal acknowledgment process, land-into-trust 
applications, and ``off-reservation'' gaming.
About the Co-Directors
    Kathryn R.L. Rand (J.D., University of Michigan School of Law; 
B.A., University of North Dakota) is Floyd B. Sperry Professor of Law 
and Associate Dean for Academic Affairs and Research at the University 
of North Dakota School of Law. Steven Andrew Light (Ph.D., Northwestern 
University; B.A., Yale University) is Associate Professor of Political 
Science and Public Administration at the University of North Dakota 
College of Business and Public Administration.
    Rand and Light are internationally recognized experts on Indian 
gaming, with over 30 publications and three books: Indian Gaming Law: 
Cases and Materials (Carolina Academic Press, 2008), Indian Gaming Law 
and Policy (Carolina Academic Press, 2006), and Indian Gaming and 
Tribal Sovereignty: The Casino Compromise (University Press of Kansas, 
2005). They have testified on Indian gaming regulation before the U.S. 
Senate Committee on Indian Affairs in Washington, D.C., and were 
featured on C-SPAN's Book TV. They frequently present their research 
and perspectives on Indian gaming before diverse audiences, including 
professional and trade groups, tribal and non-tribal civic 
associations, academic conferences, and university endowed lectures. 
Rand and Light have been quoted extensively by media throughout the 
world, including the New York Times, Boston Globe, Miami Herald, Sydney 
(Australia) Morning Herald, International Herald Tribune, San Diego 
Union-Tribune, and Bloomberg Media. Both are members of the 
International Masters of Gaming Law, and Rand is on the Editorial Board 
of the Gaming Law Review. Rand and Light write a column, ``Indian 
Gaming Today,'' that appears regularly in Casino Lawyer magazine, and 
have written for Casino Enterprise Management and Indian Gaming 
magazines. They blog on Indian gaming and the legal, political, and 
public policy issues raised by the tribal gaming industry at their 
website, Indian Gaming Today, at indiangamingtoday.com.
Selected Publications Related to Indian Gaming
Books
    Kathryn R.L. Rand & Steven Andrew Light. 2008. INDIAN GAMING LAW: 
CASES AND MATERIALS (Durham, NC: Carolina Academic Press)

    Kathryn R.L. Rand & Steven Andrew Light. 2006. INDIAN GAMING LAW 
AND POLICY (Durham, NC: Carolina Academic Press)

    Steven Andrew Light & Kathryn R.L. Rand. 2005. INDIAN GAMING AND 
TRIBAL SOVEREIGNTY: THE CASINO COMPROMISE (Lawrence, KS: University 
Press of Kansas)

Book Chapters
    Kathryn R.L. Rand & Steven Andrew Light. Forthcoming 2009. Morality 
Policymaking and Indian Gaming: Negotiating a Different Terrain. In 
Alan Wolfe & Erik Owens, eds., GAMBLING AND THE AMERICAN MORAL 
LANDSCAPE

    Kathryn R.L. Rand & Steven Andrew Light. Forthcoming 2009. Within 
Boundaries: Indian Gaming in North Dakota and Beyond. In Pauliina 
Raento & David Schwartz, eds., GAMBLING, SPACE, AND TIME (Reno: 
University of Nevada Press)

    Steven Andrew Light. Forthcoming 2008. Indian Gaming and State-
Level Constraints on Tribal Interest-Group Behavior. In Tracy A. Skopek 
& Kenneth N. Hansen, eds., ENFRANCHISING INDIAN COUNTRY: THE POLITICS 
AND ORGANIZATION OF NATIVE AMERICAN GAMING INTERESTS (Reno: University 
of Nevada Press)

    Kathryn R.L. Rand. Forthcoming 2008. State Law, State Politics, and 
State Courts: Indian Gaming and Intergovernmental Relations. In Tracy 
A. Skopek & Kenneth N. Hansen, eds., ENFRANCHISING INDIAN COUNTRY: THE 
POLITICS AND ORGANIZATION OF NATIVE AMERICAN GAMING INTERESTS (Reno: 
University of Nevada Press)

    Kathryn R.L. Rand & Steven Andrew Light. 2007. North Dakota. In 
William Thompson & Anthony Cabot, eds., INTERNATIONAL CASINO LAW (Reno: 
Institute for the Study of Gambling and Commercial Gaming)

Journal and Law Review Articles
    Kathryn R.L. Rand, Steven Andrew Light, & Alan P. Meister. 
Forthcoming 2008. Questionable Federal ``Guidance'' on Off-Reservation 
Indian Gaming: Legal and Economic Issues. GAMING LAW REVIEW 12

    Steven Andrew Light. Forthcoming 2008. Indian Gaming and 
Intergovernmental Relations: State-Level Constraints On Tribal 
Political Influence Over Policy Outcomes. AMERICAN REVIEW OF PUBLIC 
ADMINISTRATION 38

    Kathryn R.L. Rand. 2007. Caught in the Middle: How State Politics, 
State Law, and State Courts Constrain Tribal Influence Over Indian 
Gaming. MARQUETTE LAW REVIEW 90(4): 971-1008

    Kathryn R.L. Rand & Steven Andrew Light. 2006. How Congress Can and 
Should ``Fix'' the Indian Gaming Regulatory Act: Recommendations for 
Law and Policy Reform. VIRGINIA JOURNAL OF SOCIAL POLICY & THE LAW 
13(3): 396-473

    Steven Andrew Light & Kathryn R.L. Rand. 2006. The ``Tribal 
Loophole'': Federal Campaign Finance Law and Tribal Political 
Participation After Jack Abramoff. GAMING LAW REVIEW 10: 230-39

    Steven Andrew Light, Kathryn R.L. Rand, & Alan P. Meister. 2004. 
Spreading the Wealth: Indian Gaming and Tribal-State Revenue-Sharing 
Agreements. NORTH DAKOTA LAW REVIEW 80(4): 657-79

    Steven Andrew Light & Kathryn R.L. Rand. 2004. Reconciling the 
Paradox of Tribal Sovereignty: Three Frameworks for Developing Indian 
Gaming Law and Policy. NEVADA LAW JOURNAL 4(2): 262-84

    Steven Andrew Light. 2004. The Third Sovereign: Indian Gaming as a 
Teaching Case in Intergovernmental Relations and Public Administration. 
JOURNAL OF PUBLIC AFFAIRS EDUCATION 10(4): 311-27

    Steven A. Light & Kathryn R.L. Rand. 2001. Are All Bets Off? Off-
Reservation Indian Gaming in Wisconsin. GAMING LAW REVIEW 5: 351-63

    Kathryn R.L. Rand & Steven A. Light. 2001. Raising the Stakes: 
Tribal Sovereignty and Indian Gaming in North Dakota. GAMING LAW REVIEW 
5: 329-40

    Kathryn R.L. Rand & Steven A. Light. 1998. Do ``Fish and Chips'' 
Mix? The Politics of Indian Gaming in Wisconsin. GAMING LAW REVIEW 2: 
129-42

    Kathryn R.L. Rand and Steven A. Light. 1997. Virtue or Vice? How 
IGRA Shapes the Politics of Native American Gaming, Sovereignty, and 
Identity. VIRGINIA JOURNAL OF SOCIAL POLICY & THE LAW 4: 381-437

Prior Congressional Testimony
    Kathryn R.L. Rand and Steven Andrew Light. Prepared Statement and 
Oral Testimony, Oversight Hearing on the Regulation of Indian Gaming, 
United States Senate, Committee on Indian Affairs (John McCain, Chair), 
109th Congress, 1st Session (April 27, 2005).

    Senator Tester. Thank you, Ms. Rand.
    Chairman Dorgan, do you have comments?

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

    The Chairman. [Presiding.] Senator Tester, first of all 
thank you for filling in this morning as Chair. I was called 
over to Senator Reid's office for a leadership meeting and it 
just lasted longer than we had expected. So my apologies to the 
witnesses. I have had a chance to review the testimony, 
however, and I thank you again, Senator Tester, for being such 
a significant part of our Committee.
    Why don't you proceed with your questions, Senator Tester?
    Senator Tester. Thank you. I will just say that any time 
that you need to be away from the Committee for leadership 
reasons, it is time well spent. So thanks.
    I do have a bunch of questions. I guess I will just start 
out with a pretty basic one to Mr. Hogen. You have heard the 
testimony here today, as have I. Do you think that there is a 
problem in communication between the NIGC and the tribes?
    Mr. Hogen. Yes, there is a problem. We continually work on 
it, as how can we better come up with a system that permits us 
to get the views of 230 tribal governments across the Nation 
when we confront an issue that we might act on that is going to 
impact upon them.
    We are currently engaged in consultation. We are going out 
to the National Indian Gaming Association's meeting next week. 
We have scheduled consultations with tribes that will be 
attending there. We had more people ask for a slot than we had 
time for, given the other demands of the National Indian Gaming 
Association. So we have set up the overflow to go both to the 
Great Plains Association's meeting in Minneapolis and out to 
Reno for the National Congress of American Indians. So having 
the time to do it all is one of the challenges.
    Ms. Carlyle referenced a consultation we held out in the 
Southwest and talked about our adoption of this facility 
license regulation and how we put on our letter inviting to 
talk about things that we wanted to talk about the status of 
that. When we got there, we said it has already been adopted, 
and that is true. That was the status of it. It was in the 
transition period of going to the Federal Register.
    Why did we do it when we did it? Well, we had a long 
consultation period. We significantly modified the proposal 
based on the consultation that we had received. But as you just 
observed, Senator Tester, we are short a commissioner. 
Commissioner Choney, the non-Republican, we wanted to get his 
view. He was there with us through the formulation of that. He 
was leaving on the 31st of December. You know, sometimes there 
comes a time when you just have to get it done.
    So we adopted that policy and we don't micro-manage the 
environment for health and public safety. We merely ask tribes, 
please tell us what your roles are and certify as you license 
your gaming facility that you are in compliance.
    Senator Tester. A couple of questions, and maybe I should 
ask you if this is correct. Delia, Mr. Hogen cited the facility 
regulations and your testimony said there was no time for 
comment, there was no consultation. And I just wanted to make 
sure that was correct. That's what you did say, right?
    Ms. Carlyle. Yes.
    Senator Tester. Mr. Hogen, I kind of feel like I am up here 
as judge and jury, but the fact is that if there is one thing 
that can get me fired up about Government quicker than anything 
is lack of public opportunity for input. Sometimes the public 
takes advantage of it; sometimes the public doesn't take 
advantage of it. But if you presented those regs, I am sure 
that you heard that there was unhappiness in the hinterlands 
because the truth is as I heard it from everyone of these folks 
that were testifying here today.
    At what time do you step back and say, maybe we need to re-
think this and actively pursue more participation, knowing full 
well that the input you might get may not be input you agree 
with or the input you want to deal with, but that is the nature 
of this beast. It is the nature of where I sit and it is the 
nature of where you sit. It is probably the nature of where 
every one of these guys sit, too, from their constituents.
    So at what point in time do you step back and say, hold it, 
be honest with ourselves, we didn't give enough time for public 
input. Let's go back to the drawing board and let's do it 
again.
    I appreciate the fact that there is a point in time where 
you have to get it done, but I never heard, with the exception 
of one of them, that said the relationship overall is positive, 
Mr. Patterson, that the relationship overall is positive with 
the NIGC. I never heard a lot of glowing comments out of the 
testimony here today.
    Mr. Hogen. With respect to this example, and I think it 
probably serves to exemplify how we often do this, we started 
the process by writing a letter to tribal leaders saying the 
Indian Gaming Regulatory Act says that you have to license your 
gaming facilities, and it says if you are going to build and 
operate a tribal gaming facility, you have to take steps to 
protect the environment, health and public safety, but it 
doesn't have a lot more detail than that, and we are thinking 
about writing a regulation to kind of tie those together, 
licensing and complying with those concerns.
    And then we send our a draft of what we were thinking 
about. We got a lot of criticism, particularly with respect to 
the information we want to gather about the Indian lands where 
the gaming facilities were located. I have forgotten exactly 
the sequence, but then we published the regulation and we 
received comments, and every time we went on one of these 
consultation stops, that was on the agenda. At a point, we said 
we have it wrong here.
    Senator Tester. How many days from the time you announced 
it until the time you adopted it?
    Mr. Hogen. I would guess more than six months, but I don't 
know for sure.
    Senator Tester. Could you get that for me?
    Mr. Hogen. I absolutely can, Senator.
    Senator Tester. That is the first thing.
    The second thing is, do you have enough people to do the 
job adequately?
    Mr. Hogen. I think yes, I think we do.
    Senator Tester. Okay. How many people do you have working 
for you?
    Mr. Hogen. One hundred and four.
    Senator Tester. You have 400 gaming enterprises, 230 
reservations in 30 States, 104 people. I just want to make sure 
that is fine.
    When you receive the tribal comments, how do you utilize 
them in your decision-making process? It shouldn't just be 
tribal comments, any comments. How do you utilize those in your 
decision-making process?
    Mr. Hogen. We read them. We discuss them. And if we think a 
step forward is going to be the adoption of the regulation, we 
know that in the preamble that we publish in the Federal 
Register with the final regulation, we have to say what they 
are and why we agreed or disagreed with them.
    Senator Tester. So do you get back to the people who put 
forth their recommendations or the comments and say, you know, 
we don't agree on this and here is why? Or is that not 
something that you do?
    Mr. Hogen. I don't know that we send a letter to each and 
every author of the comments. During this ongoing consultation 
process, we attempt to share our thinking, yes.
    Senator Tester. Okay. Have you looked at other agencies? I 
know that one of the individuals brought up IHS. I am not sure 
that that is a good example. But have you looked at other 
agencies to see how they do it? Is your consultation process on 
rulemaking similar to what other agencies do?
    Mr. Hogen. I believe it is. When we drafted the 
consultation policy, we looked at every other Federal agency's 
policy that we could get our hands on, including the Indian 
Health Service. And we tried to put the best of all of those in 
our policy.
    Now, having it in the policy and doing it are two different 
things.
    Senator Tester. That is kind of your job, though.
    Mr. Hogen. Absolutely, absolutely. So I think it is 
important to bear in mind as you look at what IHS does, 
providing health care to a greater or lesser extent for Indian 
people, and what we do are qualitatively different. We are a 
regulatory agency. We are the traffic cop. That is not a fun 
job to have. We don't provide services in the same way the 
Indian Health Service does. So what we agree on may have some 
limits.
    Senator Tester. Okay. I preface the letter that Senator 
Baucus and I sent to you a while back. I am just curious. I 
mean, why were tribes given one month to comment on the 
economic impact and really no time to comment on the cost/
benefit analysis? I think just why, that is all. I think that 
that kind of action really doesn't do much for me as a policy-
maker, period.
    Mr. Hogen. One reason is we agreed absolutely with their 
view of the cost/benefit study. First of all, it wasn't the 
initial cost/benefit study. It was a modification of the cost/
benefit study based on our modification of the proposal which 
we made because they made the comments. But if we adopt the 
regulations, they will have a draconian effect on the dollars 
generated by Class II gaming, but that doesn't necessarily make 
them wrong. It is just that is a fact of life.
    Senator Tester. I am not saying that. I am not saying 
whether their comments are right or wrong. I am saying 30 days, 
I don't know how many Class II operations are out there, but 
you have a pretty big area you are taking on. And you obviously 
felt 30 days was adequate, whether you agree with them or not, 
just the comment period, the time, 30 days from your 
perspective you felt was adequate?
    Mr. Hogen. It was part of the package. We had four discrete 
regulatory proposals. Part of the process was we decided we 
better to the cost/benefit or the economic impact study.
    Senator Tester. Consultation and listening to folks is a 
big deal. The question is, as it is coming out of this meeting, 
do you think it is going to take an act of Congress to make it 
happen? Or do you think the way things are, and I am sorry I 
haven't focused any questions to the rest of you guys, and I am 
sorry that I have focused them all on you, Mr. Hogen, too, but 
is it going to take an act of Congress to get this done? Or 
will an act of Congress do any good?
    Mr. Hogen. I think the proposed act of Congress that is the 
House bill would do a disservice to us, the regulators who have 
a job to do. Then we would need more people. We would need a 
lot more lawyers because everything we would try to do would be 
resulting in a lawsuit brought by one of the 230 tribes that 
the regulations might affect.
    But cut to the chase, Senator. The hue and cry for the 
consultation concern has to do with what we have proposed in 
our Class II regulations. You have heard from the tribes, they 
are not listening. They haven't modified their proposal based 
on what we have said. Nobody has asked us what is our point of 
view, what changes have we made. But more importantly, why do 
we take the position that we do? We take the position that we 
do because that is exactly how we read the Indian Gaming 
Regulatory Act.
    I would be delighted if Congress would amend that and say 
tribes can do whatever they want with bingo machines. But they 
haven't. They said if they use electronic and electric 
facsimiles of games of chance, then they are Class III. They 
have to have a compact. I would be happy to explain that 
further.
    Senator Tester. I have taken too much time. I am going to 
turn this over to Senator Dorgan. But I do want to make one 
last comment in relation to that comment. It is your job to 
communicate. It is my job to communicate. I have to tell people 
what I am doing and you have to tell people what their doing. 
And the truth is to say that do away with the rules so that we 
don't have to regulate anymore I don't think was the intent of 
NIGC.
    So I think that what I heard at this Committee, and I came 
in here with, well, with a little bit because of our letter we 
sent off and we were denied on that extension, and I thought 
that was kind of interesting and actually raised some red flags 
there. But when I come into these meetings and I hear people 
that are working on the ground saying nobody is listening to 
us, I understand. I make decisions all the time that people 
don't agree with, but I try to make sure that those statements 
don't happen because it is your job and it is my job and it is 
policy-makers and part of the bureaucracy that if we don't 
listen to the people we are working for, we aren't going to be 
there very long.
    Senator Dorgan?
    The Chairman. Senator Tester, thank you very much.
    This is not only an interesting, but also a very important 
issue. The gross revenues for Indian gaming have now reached I 
believe $25 billion. They have grown very rapidly. I think all 
of us understand the urgency and the need for effective 
regulatory capability. I know there are very different views 
about what form that should take from time to time. Mr. Luger 
and I have had long discussions over time.
    Maybe, Kurt, you would take the position we don't need a 
National Indian Gaming Commission because the States have a 
regulatory authority and the tribes have a regulatory 
authority. So in most cases, you have two regulatory 
authorities. Others would take the position that you must have 
a national regulatory commission because some States say they 
regulate, but in fact do not effectively regulate, and all you 
have is the tribe, at which one level is not sufficient.
    So this is very important. The one thing all of us would 
share, I believe, is we want to make certain that Indian gaming 
is able to continue free of scandal, free of difficulty, free 
of any criminal element. We understand. We have watched areas 
of gaming long before Indians had gaming in this Country. In 
every area where there is billions of dollars of gaming, it is 
a magnet for criminal elements, a magnet for fraud, a magnet 
for stealing and so on.
    So that is why we have a long history in this Country, and 
just using Nevada as an example, of very aggressive, very, very 
certain kinds of regulatory authority with respect to gaming. 
It is different than many other enterprises.
    Having said all that, I want to ask a couple of questions 
with respect to the commission itself.
    Mr. Hogen, I am trying to understand. We are told by some, 
and I don't know this as a fact, that you have as much as $12 
million in reserves. We have tried to get information from the 
commission about that, excess fees. Do you have a reserve? If 
so, how big is it?
    Mr. Hogen. About $10 million, Senator.
    The Chairman. And what do you do with the reserve?
    Mr. Hogen. Well, we are, as I mentioned earlier, not funded 
by taxpayers' dollars. Rather, we are funded by the fees we 
collect. If we were a Department of the Interior, on the first 
of October every fiscal year, we would get the dollars and we 
would have them to spend. But we collect those dollars on a 
quarterly basis. They come in over the year. So if we didn't 
have some money in the bank, so to speak, we wouldn't be able 
to pay the rent. So we need a little money there to tide us 
over.
    The Chairman. I understand that. But do you have a detailed 
accounting of fees versus and operating budget?
    Let me say to Senator Tester, I appreciate your chairing 
this morning and appreciate your work on the Committee. I know 
you have to run. I am going to continue to ask questions of the 
panel, so thank you, Senator Tester.
    Do you have an operating budget and an accounting of fees 
that you can provide to the Committee? We have not seen that 
and that would be helpful to us.
    Mr. Hogen. We certainly do. I have it with me if you would 
like it now, Senator.
    The Chairman. And you say you have a reserve because I 
think you make the point you need a reserve, given the 
financial mechanism with which we finance the commission. What 
size a reserve do you think is necessary?
    Mr. Hogen. We are trying to draw down on the carryover 
amount. It is probably excessive the way it is.
    The Chairman. What size is the reserve you think you need?
    Mr. Hogen. Probably $5 million would be closer to ensure 
that there is no risk in terms of a smooth operation.
    The Chairman. But the other way of looking at this, and the 
reason I ask the question is these come from fees sent in by 
tribes. So we need to work with you on an accounting here so we 
understand what is your operating budget, what kind of a 
reserve do you need. Because if you have $5 million in excess 
fees, it probably ought to go back to the tribes if you don't 
need them for operating purposes.
    You have an Acting General Counsel, I understand, since 
2002. Why has that position been only acting for now nearly six 
years?
    Mr. Hogen. The Chairman hires the General Counsel, and I 
have been the Chairman since December of 2002. It is not my 
first stint on the commission. I served as an Associate 
Commissioner and for a little while as Vice Chairman for a 
four-year period from 1995 to 1999. During that time, Penny 
Coleman, who is our Acting General Counsel, was in the Office 
of General Counsel. She came to NIGC from the Solicitor's 
Office over at the Department of Interior when IGRA was 
enacted. So she is kind of the institutional memory with 
respect to a lot of these things.
    Penny is a career employee, not a political appointee, 
which she would be if she were the General Counsel of the NIGC. 
I found that her style, her knowledge, her experience served 
the commission very well. Rather than have her risk her career 
status and have her come on board and be political and then 
maybe have no place to go, it worked fine, in my experience, to 
have her serve as our Acting General Counsel. I am glad that we 
have done it that way.
    The Chairman. Well, that is a curious thing, though, isn't 
it? Think of how many places in our government we would have if 
people said, well, I don't want to assume the risk of actually 
assuming the office. So we would have a whole government full 
of acting people. Would they have the responsibility and the 
authority? You do what you need to do on that, but I don't 
think that is necessarily a good way to handle that 
responsibility. You have a specific post for a General Counsel, 
and to have an Acting General Counsel for six years makes 
little sense to me.
    I am going to ask you a couple of other questions, and then 
I am going to have some questions of the rest of the panel.
    I think that you need to publish some kinds of financial 
statements so that the Congress and also the tribes who are 
funding the commission understand what is happening. You don't 
now do that. Is there a reason you don't do that? And will you 
be doing that?
    Mr. Hogen. Well, we do it, Senator, in part in the 
appropriations process. We get, like every other Federal 
agency, what is referred to as the green book, where we break 
down the dollars. One of the reasons that is not particularly 
informative with respect to us is we are so small that the 
million-dollar increments that they use there makes it harder 
to get a good picture.
    When I go to tribal gaming association meetings, I will 
display on a PowerPoint this is what we spend for compensation; 
this is what we are spending for rent and travel; these are our 
plans for the coming year, and so forth. But your advice is 
well taken. We will not only provide you, but the Indian tribal 
constituency that we serve with more of that information.
    The Chairman. Let me suggest you do a yearly report so that 
it is not just when you go out and make a presentation. I am 
not suggesting you are hiding anything, far from it. But I 
think those that are financing you through fees should 
understand what your financial report is and shows. We would 
like to see that as well, so that would be something I would 
recommend.
    Let me now talk just a bit about the issue of consultation. 
I understand this is kind of a unique situation. First of all, 
consultation, as I have said as Chairman of this Committee, is 
critically important. That is the hallmark, in my judgment. Our 
government needs to consult with tribes. I think the Indian 
Gaming Commission needs to consult with tribes. Consultation is 
critically important.
    Obviously, you know from the testimony at this hearing and 
you know from other circumstances that there are discordant 
voices out there who feel you have not engaged in the 
consultation they would like. You say, well maybe that is 
because they don't like the result of some of our rulings. 
Maybe so, but whatever your rulings, it seems to me the issue 
of consultation is a continuum that I think is required of you 
and should be expected of you by us and by the tribes.
    Let me ask Ms. Rand. You are at the law school, correct?
    Ms. Rand. That is correct.
    The Chairman. Tell me about how you see the consultation as 
you know it exists here or doesn't exist here, either one, with 
respect to consultation in other circumstances with other 
Federal entities and jurisdictions.
    Ms. Rand. Senator, I think that we would suggest that 
government-to-government consultation with tribes should be 
distinct from the ordinary public notice and comment period 
required by Federal law; that it should be uniquely tailored to 
tribes' status as governments and their relationship with the 
Federal Government.
    We brought up the IHS policy for two purposes. First, that 
there may be a more concrete way to address some of the issues 
either in the NIGC's own policy or through a directive to the 
NIGC. But also as Senator Tester implied, that what is promised 
on paper may not be implemented in practice. We think that that 
might be a very important issue for the commission or the 
Committee to grapple with.
    The Chairman. I am not sure the IHS is necessarily a good 
model, as we have noticed before. If you want to take a look at 
an institution that pays very little attention to consultation, 
look at the Indian Health Service. I have a couple of 
investigations I have requested of them precisely because 
instead of consulting with anybody, they do whatever they damn 
well please. They are shifting incompetents around to various 
places in the Country instead of getting rid of the 
incompetents.
    But the issue of consultation with respect to a regulatory 
authority and those that would be regulated I understand is 
different and interesting to discuss, but nonetheless still 
required. What are the conditions under which it is required 
and how should it be conducted? That is what I think we are 
trying to understand.
    Mr. Luger, you discussed this in your testimony. I probably 
spoke for you when I said you would probably prefer that we not 
have a National Indian Gaming Commission. Was I accurate about 
that?
    Mr. Luger. Fairly accurate. I think it has its role. I just 
think that the role as it is currently taking place is 
bureaucratic. Phil is in a tough position. Phil and I are 
friends so it is not a personal thing, but they are just moving 
boxes around, Senator. We have regulatory problems out there.
    Any time, for example--and I will be very brief--the 
Standing Rock Sioux Tribe calls up NIGC and thinks that they 
may have something wrong in their system. You are having a 
punitive conversation automatically. You can't have a 
confidential conversation saying I think maybe this might be 
it, but I am not sure, but you have the expertise and I want 
you to come in and look at it.
    Standing Rock just subjected themselves to punitive action. 
I cannot stress this enough. Again, it is not a personal attack 
on NIGC. I would say this with any agency that any entity has 
to deal with. Bring in some experts. You have too many P.E. 
majors working for him and trying to help us in the gaming 
industry. I am generalizing.
    The Chairman. We are not talking about Class III today. We 
are talking about Class II, because we are just talking about 
consultations here.
    But with respect to Class II gaming, if the NIGC received a 
complaint and they said the Standing Rock Reservation is 
absolutely defying regulations, they are going to call you. 
They are going to send people in. They have a right, it seems 
to me, in that circumstance to say, here are the regulations 
and you at this point are not in compliance. So they are purely 
regulatory and everyone who is aggrieved by that would feel it 
is all punitive, but that is the role of a regulator, number 
one.
    Number two, in the circumstance you just described, when 
you call the commission, you ought not when you call the 
commission get some notion there is some punitive voice on the 
other end of the line. That is a culture issue with the NIGC. I 
don't know whether that is true or not, but you say it is true.
    Mr. Hogen, what about that?
    Mr. Hogen. I think the record will reflect almost without 
exception whenever we learn, whether it is by the tribe telling 
us or some other, that there is a problem, the first thing we 
do is say let's fix this. Let us help you fix this. And only at 
the last resort do we end up with a notice of violation that 
might result in a fine, or in a worst-case scenario result in 
closure.
    But Kurt is right that there are some tensions there in the 
relationship. If you hire your lawyer and you go in and say I 
want to ask you whether this is wrong or not, you hope he 
doesn't have to turn around and tell the FBI. We are supposed 
to provide this technical assistance, which I think we do a 
pretty good job of, but we also wear the traffic cop hat. We 
have to do that.
    But the practice as borne out is very seldom do we--we have 
never issued a notice of violation for failure to adhere to the 
minimum internal control standards. We have always gotten it 
fixed, sometimes by way of an agreement, a kind of settlement 
agreement.
    The Chairman. Let me ask Ms. Carlyle, you are from Arizona?
    Ms. Carlyle. Yes.
    The Chairman. Arizona is reputed to have a fine statewide 
Indian gaming regulatory strata. Is that correct?
    Ms. Carlyle. I would be a little biased, but say yes.
    The Chairman. You have a pretty substantial statewide 
effort with respect to Indian gaming regulatory practices.
    Ms. Carlyle. Yes, we do, Senator. I am very proud of that 
process.
    The Chairman. If you pick up the phone and call the Nevada 
folks and say, look, we think we have a wrinkle here, is it 
different than calling the NIGC in terms of consultation from 
you to them?
    Ms. Carlyle. Nevada?
    The Chairman. Yes.
    Arizona, I am sorry.
    Ms. Carlyle. That is why I looked, Nevada.
    [Laughter.]
    The Chairman. Don't call Nevada. Call Arizona.
    [Laughter.]
    Let's assume that you pick up the phone and you call the 
regulatory authorities in the State, as opposed to calling the 
Indian Gaming Commission. Do you detect a cultural difference 
there?
    Ms. Carlyle. No.
    The Chairman. Okay.
    Ms. Carlyle. I think based on the process that we have 
started that has been in Arizona, that relationship is 
understood, I want to say, so there is not a problem in picking 
up the phone and saying there could be a problem.
    The Chairman. I see.
    Mr. Patterson, you are from Tennessee?
    Mr. Patterson. Oneida Indian Nation, Upstate and Central 
New York.
    The Chairman. I see. The organization is in Nashville.
    Mr. Patterson. Yes, Senator.
    The Chairman. How many people does the State of New York 
employ to be involved in the State regulatory process of Indian 
gaming? Do you know?
    Mr. Patterson. Mr. Chairman, I do not have that answer, but 
I would be glad to research that.
    The Chairman. Would you submit that?
    Mr. Patterson. Yes, sir.
    The Chairman. And Mr. Mathews, you are here accompanied by 
Mark Van Norman. He is an acquaintance of this Committee. He 
has testified here a good number of times. You heard Mr. Luger 
talk about the issue of a tribe seeking information from the 
NIGC, or at least going to the NIGC, suggesting they have an 
issue. Do you have experience with that at all?
    Mr. Mathews. Yes, we do.
    The Chairman. Tell me your experience.
    Mr. Mathews. I would just like to say this, that for our 
own tribe, the Quapaw Tribe of Oklahoma, we did have an issue 
several years ago, that the NIGC brought to us, with a 
management contract and a person that was working with us. I 
have to say that through the efforts of the NIGC, along with 
our tribe, we ended up getting rid of this guy. It was a very 
bad situation. We learned a lot. We have become a much stronger 
tribe with our regulatory issues. We have a very, very strong 
regulatory body, and it is due to the assistance that we got 
through the NIGC. We are very proud of that fact.
    On the other hand, what they are doing now, we do have a 
problem with, in the publication of these four regulations, 
with the consultation that we don't feel is thorough, that we 
feel is a rush to judgment. It is a pre-determined 
consultation. As Phil has even said, consultation does not mean 
agreement, but when you have so many tribes in Indian Country 
that are against what they are doing and the way they are doing 
it, there has to be some red flag thrown up there.
    We think they should consider cost/benefit alternatives to 
their current approach. They should reopen these regs for 
comments, along with the cost/benefit analysis. It is funny 
that the regulators expect us to comply with some of their 
rules when they don't even comply with their own. So we have 
issues there.
    But it is very obvious that Indian Country wants 
regulation. We have 3,300 regulators across the Country. They 
spend an enormous amount of money on regulations. It is very 
important to keep out those bad elements, to make sure that we 
are providing a safe environment for our patrons and our 
employees. By doing that, we feel that we have to have strong 
regulations.
    The Chairman. Mr. Hogen, the commission regulations on 
Class II, you have heard today concern and you have heard that 
concern before about lack of consultation. My understanding is 
that the National Indian Gaming Commission authorized a study 
to examine the potential impact of the proposed regulations. 
According to at least one of the comments we received, the 
commission determined that 57 percent of the Class II games in 
play would be considered unlawful if the proposed 
classification standards were adopted in the current form. Is 
that correct?
    Mr. Hogen. Yes. I consider them unlawful right now.
    The Chairman. You did an economic impact. When did you 
launch that economic impact study? Was it through a consultant?
    Mr. Hogen. Yes. We hired a consultant who punches a lot of 
Indian gaming numbers. When we first published, I think that 
was in May of 2006, we published some regulations. We hired the 
expert to do the study. Then after we got those results and we 
heard comments, we withdrew that proposal. We then supplemented 
it with a pared-down version and had a renewal or an extension 
of that impact study done to reflect the changes.
    The Chairman. Which of the practices will be shut down 
under the Class II regulations?
    Mr. Hogen. One-touch bingo machines primarily. However, as 
a result of the comments we received, the concern tribes 
expressed about the economic impact and so forth, we put in--
and understand these are just drafts. We haven't done a thing 
yet. They are just a draft. But we put in a five-year 
grandfather clause. We said we know it is going to be a tough 
economic impact, so to soften that blow, the useful life of 
this equipment is probably about five years, use them until 
they are used up, and then comply.
    The Chairman. This Committee is not in the business of 
trying to do your work or look over your shoulder and determine 
whether you are making judgments that are appropriate. Those 
are judgments you make. But the Committee is concerned, as 
Senator Tester has indicated, that in the conduct of the work 
of the National Indian Gaming Commission, that consultation 
exists as between the tribes and the commission so that there 
is some mutual understanding of what is happening and what are 
the consequences.
    You have in your own commission adoption going back to 2004 
government-to-government tribal consultation policies. So those 
exist. Do you feel like you have followed those policies 
sufficiently with respect to the Class II proposed rules, 
number one? And number two, given the concern by tribal 
authorities, do you feel that even if you did follow them, do 
you feel those policies are sufficient so that tribes feel like 
you have consulted adequately?
    Mr. Hogen. Obviously, they do not feel we have consulted 
adequately. I think we have made a really good-faith effort, 
Senator, to do that. We had four different versions of these 
proposals on our website to talk about with tribes before we 
actually put them in the Federal Register. When we were about 
ready to do that the first time, the Justice Department came 
along and said to us, these aren't tough enough; you can't do 
that.
    Thereafter, we published another set. We met with I think 
about 70 tribes on the record government-to-government 
consultation. If you look on our website you will find the 
transcript of each one of those 67 or 70 meetings. We asked 
tribes to send us their best and their brightest in terms of a 
tribal advisory committee, tribal regulators and so forth, to 
help us with this.
    Did we agree with everything they told us? No, we disagreed 
with some of it, but we sure learned a lot and we did make lots 
of changes. If you have the time, I could enumerate some of 
those changes. But we have extended the comment period numerous 
times, sometimes to accommodate comment on the economic impact 
study and so forth.
    But Senator, I am going home some time soon. I am going 
back to the Black Hills, and when you hear that hurrah out in 
Indian Country, you will know that has happened. But the thing 
is, I have to get this done. I have been at it now for more 
than five years. It is time to draw this bright line so the 
industry, the manufacturers, the tribes, the States, can know 
what is going on.
    Right now, there is confusion. That is not good for the 
industry, and if and when it appears that there is a loss of 
the integrity in the system, then the goose that laid the 
golden egg will be at risk. I don't want to be responsible for 
that. I want to leave it with some clarity.
    The Chairman. I believe there should be a bright line, and 
I think that bright line is something that would be embraced by 
tribes. There needs to be definition. If you don't have 
definition, there is chaos. This is, as I said, a $25 billion 
growing industry. It is very important that the reputation of 
this industry be in tact, that there be effective levels of 
regulation that give all of us the assurance that this gaming 
and the stream of income from the gaming that can improve and 
invest in people's lives will be able to continue.
    But that will only happen if we are free of scandal and 
free of the kind of criminal element that always tries to 
attach to any center of gaming anyplace in this world. We have 
plenty of experience with that.
    Mr. Luger?
    Mr. Luger. Mr. Chairman, just indulge me for 30 seconds.
    One, I just want to leave a note that I don't have quite 
the gloom-and-doom feeling that Phil does. I don't know if our 
dateline should be predicated upon his retirement back to the 
Black Hills. But on a separate note, and this is a pledge that 
I give to my folks at home, I cannot tell you now grateful and 
appreciative I am of you and our North Dakota and South Dakota 
delegation for what you did for Woodrow Wilson Keeble.
    Everybody in this room knows about it. I love and honor you 
for that. That was something that needed to be done. It was a 
sore spot in Indian Country. I personally invite you at that 
third week in May we will have Woodrow Wilson Keeble Day, and 
we would be honored if you would be a part and master of 
ceremonies at that. Senator Daschle will be there. I have so 
much respect for the work that you did with that that I had to 
make that comment today.
    From the Standing Rock Sioux Tribe, Sisseton-Wahpeton, 
Ayata, the Lakotas and the Dakotas, I want to thank you very, 
very much.
    The Chairman. Mr. Luger, thank you very much. I was honored 
to be a small part of trying to rectify a mistake that was made 
many, many years ago of not giving the Medal of Honor to 
someone who had earned it, deserved it, and should have 
received it except for lost paperwork. It was an emotional 
moment to be in the East Room of the White House and have the 
President present to the relatives of Woodrow Wilson Keeble the 
Medal of Honor that he so richly deserved.
    This was a very courageous, very brave American who risked 
his life many times and received a number of Purple Hearts, 
Silver Star, Bronze Star, the highest honors this Country could 
bestow on a very brave soldier. Many years after his death, he 
finally received the Medal of Honor.
    I regret that his wife, Blossom Keeble, was very hopeful 
that this would be done before she passed, but it did not 
happen. She passed away last summer. But I know that there is 
great pride in Indian Country for this Medal of Honor.
    Let me thank all of you for being here.
    Yes, Ms. Carlyle?
    Ms. Carlyle. Senator, if I could real fast, and I don't 
want to touch on Class II because we have a limited number of 
that in Arizona, but my biggest concern again, well really, I 
wouldn't want to be in NIGC's shoes. So I have to give them 
kudos for stepping up to the plate and taking on that 
responsibility.
    But I truly feel that meaningful consultation, not just 
sitting across the table, can occur. If it can happen in 
Arizona and other areas, it can happen with the NIGC. My 
tribe's biggest concern was the rush on the facility 
regulations that was placed on tribes. When we talk about 
meaningful consultation, this is a bit of information that the 
Arizona Department of Gaming employs 111 people, and they have 
a $15.6 million budget. I will say that Arizona and the State, 
the collaboration is great.
    I always like to end it with saying that we have our 
respective meetings. It may be a slow process, but we do come 
to a compromise which I was told that when both sides are 
equally unhappy, then we have met a true compromise. I think 
that is how in Arizona we try to work on that basis somewhat. I 
would like to see that with NIGC because the time-frames given 
to tribes is not enough. It is not adequate. My counsel only 
meets twice a month, but we have to call specials if we have 
deadlines. Then we have to include our regulators, too, to make 
sure that our comments are appropriate or at least heard and 
considered.
    Thank you.
    The Chairman. Well said.
    Mr. Patterson?
    Mr. Patterson. Mr. Chairman, I would just like to leave 
with the thought to say that my mother always said how naive I 
was, but I have a glass in front of me and I say that it is 
half full, not half empty.
    [Laughter.]
    Mr. Patterson. I believe that NIGC and USET share the same 
common goal to ensure that Indian gaming operates in a manner 
which benefits and protects tribal interests in that respect. I 
also believe that a lot of hard work has already been done to 
develop consensus positions. I think that is a great place to 
re-engage and build consensus.
    As far as consultations, sir, my people have had a long 
history of consultation, beginning in the 1600s and the Two-Row 
Wampum Treaty that my people negotiated with the Europeans when 
they first arrived. We have been in consultation for 400 years, 
and I support meaningful dialogue.
    Thank you, sir.
    The Chairman. That is an interesting way of describing the 
fact that you know what consultation is when you see it.
    Mr. Hogen, let me thank you for chairing the commission. We 
have sometimes tensions about various regulations and things, 
but our Committee has enjoyed working with you and will 
continue until you depart.
    I do hope, and I say this to the Indian Health Service and 
BIA and every organization, I hope that everyone understands 
the need for effective communications. The issue of 
consultation--consultation is more than a word. It is an 
attitude and it is a culture. It is very important to remind 
every agency and every organization that works with tribes 
about the meaning of consultation.
    So take that from this hearing, and understand that we want 
you to succeed. It is in our interest that the NIGC succeed. I 
think it is in the tribes' interest for you to succeed in a way 
that makes them a significant part of the future of regulation 
effective--and I underline the word effective--effective 
regulation of Indian gaming. All of us have a big stake in the 
effective regulation of Indian gaming.
    This Committee will certainly be considering these issues 
going forward.
    Ms. Rand, let me also say to you something that I think is 
important to be said. We have tried to build at the University 
of North Dakota a very effective Indian Studies Program in a 
wide range of areas, Indian doctors, Indian psychologists, 
Indian lawyers--a wide range of areas. And I think we have done 
that over a long period of time very successfully. I am 
enormously proud of those programs and proud that you are able 
to come from those programs and be a part of the hearing here 
in Washington, D.C. So I welcome you.
    Ms. Rand. Thank you.
    The Chairman. Mr. Luger?
    Mr. Luger. Senator Dorgan, I know there is a rumor out 
there that I have few friends, but Kathryn is one of them.
    [Laughter.]
    The Chairman. Let me thank all of you for being here today. 
This Committee will, as I said, consider all of the issues we 
have received today.
    The hearing is now adjourned.
    [Whereupon, at 11:55 a.m., the Committee was adjourned.]
                            A P P E N D I X



















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