[Senate Hearing 110-450]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-450
 
                   THE SUCCESS AND SHORTFALL OF SELF- 
                   GOVERNANCE UNDER THE INDIAN SELF- 
     DETERMINATION AND EDUCATION ASSISTANCE ACT AFTER TWENTY YEARS 

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

                                HEARING

                               before the

                      COMMITTEE ON INDIAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 13, 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 May 13, 2008.....................................     1
Statement of Senator Barrasso....................................     3
Statement of Senator Cantwell....................................    65
Statement of Senator Dorgan......................................    42
    Prepared statement...........................................    42
Statement of Senator Murkowski...................................     1
Statement of Senator Tester......................................     3

                               Witnesses

Allen, Hon. W. Ron, Chairman/CEO, Jamestown S'Klallam Tribe......     8
    Prepared statement with attachment...........................    10
Cason, James, Associate Deputy Secretary, U.S. Department of the 
  Interior.......................................................     4
    Prepared statement...........................................     5
Marshall, Hon. Clifford Lyle, Chairman, Hoopa Valley Tribe.......    43
    Prepared statement...........................................    45
Peltola, Gene, President/CEO, The Yukon-Kuskokwim Health 
  Corporation, accompanied by: Lloyd B. Miller, Esq., Partner, 
  Sonosky, Chambers, Sachse, Endreson and Perry, LLP; Dan 
  Winkelman, Esq., General Counsel, Yukon-Kuskokwim Health 
  Corporation....................................................    55
    Prepared statement...........................................    57
Steele, Jr., Hon. James, Tribal Council Chairman, Confederated 
  Salish and Kootenai Tribes.....................................    50
    Prepared statement...........................................    51

                                Appendix

Benjamin, Melanie, Chief Executive, Mille Lacs Band of Ojibwe, 
  prepared statement.............................................    85
Carroll, Marie, President, Arctic Slope Native Association; John 
  ``Chance'' Houle, Chairman, Chippewa Cree Tribe of the Rocky 
  Boy's Reservation; Gregory Pyle, Chief, Choctaw Nation of 
  Oklahoma; Harold Frank, Chairman, Forest County Potawatomi 
  Community; Andy Tueber, President, Kodiak Area Native 
  Association; Alonzo Coby, Chairman, Shoshone-Bannock Tribes of 
  the Fort Hall Reservation; Nancy Egan, Chairwoman, Shoshone-
  Paiute Tribes of the Duck Valley Reservation; and Linwood 
  Killam, CEO, Riverside-San Bernardino County Indian Health, 
  Inc., joint prepared statement.................................    83
His Horse Is Thunder, Ron, Chairman, Standing Rock Sioux Tribe; 
  A.T. Stafne, Chairman, Assiniboine and Sioux Tribes of the Fort 
  Peck Reservation; Marcus Wells, Jr., Chairman, Three Affiliated 
  Tribes of the Fort Berthold Reservation, joint prepared 
  statement with attachment......................................    75
Smith, Chad, Principal Chief, Cherokee Nation, prepared statement    79


                   THE SUCCESS AND SHORTFALL OF SELF-
                      GOVERNANCE UNDER THE INDIAN 
                   SELF-DETERMINATION AND EDUCATION 
                   ASSISTANCE ACT AFTER TWENTY YEARS

                              ----------                              


                         Tuesday, May 13, 2008


                                       U.S. Senate,
                               Committee on Indian Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m. in room 
562, Dirksen Senate Office Building, Hon. Lisa Murkowski, Vice 
Chairman of the Committee, presiding.

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

    Senator Murkowski. We are calling to order the Committee on 
Indian Affairs. We have an oversight hearing on the Success and 
Shortfalls of Title IV of the Indian Self-Determination and 
Education Assistance Act.
    Chairman Dorgan is planning on joining us here this 
afternoon. He is not able to be here for probably the first 45 
minutes or so. But he has indicated that he is looking forward 
to the opportunity to hear from all of you and an opportunity 
to ask questions. So we will await his arrival, but until then, 
I will begin with the proceedings.
    I want to acknowledge Chairman Dorgan for bringing this 
hearing on tribal self-governance. I think it is fair to say 
that the self-governance program has literally reshaped the way 
in which health care services are delivered to Native people in 
Alaska. So any hearing on this particular subject is always of 
great interest to me and so many within the State.
    I want to welcome Gene Peltola, the President and CEO of 
Yukon Kuskokwim Health Corporation. I know you took a long 
flight from Bethel and experienced a little mechanical 
difficulty to get here, so we appreciate your long journey and 
your willingness to be part of the group this afternoon.
    It has been nearly 40 years since President Nixon issued 
his famous special message to Congress on Indian affairs, which 
outlined his new and more enlightened Federal Indian policy of 
tribal self-determination. By enacting the Indian Self-
Determination Education and Education Assistance Act, Congress 
set in motion the transition from Federal domination of Indian 
programs to meaningful tribal control of these programs to make 
them more responsive for their Native communities.
    In 1988, Congress expanded upon that approach by enacting a 
tribal self-governance demonstration project and then several 
years later, made self-governance a permanent program within 
the BIA and the IHS. After 20 years, the humble beginning of 
self-governance as an experimental demonstration project, with 
only 7 tribes compacting $27 million in BIA programs, has 
expanded to over 230 tribes compacting an estimated $350 
million for the BIA and over 380 tribes and tribal 
organizations compacting over $1.2 billion within the IHS.
    The self-governance program has enabled Indian tribal 
governments to make significant improvements in the delivery 
and quality of health care, resource management and road 
systems. I have noted in previous Committee hearings that self-
governance has been particularly successful in our Alaska 
Native communities.
    By all accounts, it would appear that self-governance is a 
tribal success story, but there remain so many outstanding 
issues that need further examination. This Committee held an 
oversight hearing in the 109th Congress on self-governance 
which suggested that there may be compelling reasons to reform 
the BIA's self-governance if it is going to continue to 
flourish. I want to welcome back Mr. Ron Allen, Chairman Allen, 
who testified during the 109th, and I am interested in hearing 
whether any progress has been made or not since the time of 
that hearing and any other recommendations they may have for 
improvement.
    A significant problem in impacting the success of self-
governance is the shortfalls in the Government's payments of 
contract support costs for the BIA and the IHS programs. 
Contract support costs are essential to the tribal 
administration of these programs. Other departments of the 
Government pay their contractors general and administrative 
costs that they incur, and I believe that the Departments of 
Interior and Health and Human Services should and must do the 
same.
    Contract support costs shortfalls force compacting tribes 
to reach into funds intended for the tribes' offices intended 
to fund the administration of their programs, which in turn 
then necessarily forces a reduction in services. This is not 
what self-governance is all about.
    A tribe's decision in the first instance to join the self-
governance program, to take on basically the responsibility of 
the Federal Government's job of delivering services to Native 
people turns in large measure on the Government's agreement to 
pay these costs. Yet I understand that the BIA has an estimated 
$25 million current contract support cost shortfall, and that 
IHS programs are currently facing a $110 million shortfall. I 
do hope to hear from the Interior Department on how its 
contract support cost policy has affected the shortfall and how 
it has impacted this self-governance program.
    I do thank the witnesses for their participation and look 
forward to your testimony. With that, Senator Tester, I will 
turn to you for any comments you would choose to make.

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

    Senator Tester. Thank you, Vice Chair Murkowski. I also 
want to thank the Chairman, but I want to thank you, because I 
know that you have played a big role in getting this hearing 
up. I think it is a very important hearing to have.
    I also want to welcome the panel. Thank you all for being 
here. A special welcome to Chairman Steele from the Salish 
Kootenai. I have had the opportunity to work with Chairman 
Steele at the State level and it is good to work with you at 
this level, too.
    One of the things that I think we all hope and we all try 
to achieve is self-sufficiency in Indian Country. I think self-
government is a big first step in that. We need to hear from 
you folks as to what we can do to help improve the system. I 
know it is not perfect, but ways that we can change or adapt or 
new ideas, whatever it may be, workable solutions, let's just 
put it that way, that Congress can enact to really empower even 
more than what has been empowered in the past.
    As I said, I think this is an important hearing. I think it 
is a right first step to have. I know it hasn't been exactly a 
success story in all cases. In some cases it has worked better 
than others. That tells me that we may have to do some tweaking 
here and there. Those tweaks, from my perspective, need to come 
from you.
    So I appreciate your being here. I look forward to hearing 
from Mr. Cason, too, as this panel rolls forward, and once 
again, thank you. Thank you, Senator Murkowski, for your 
efforts.
    Senator Murkowski. Thank you, Senator Tester. With that, we 
will begin, and we will start with you, Mr. Cason. Mr. James 
Cason is the Associate Deputy Secretary of the Department of 
the Interior here in Washington. I will just introduce 
everybody and then ask you to begin, Mr. Cason.
    He will be followed by the Honorable Ron Allen, who is the 
Chairman and Executive Director of the Jamestown S'Klallam 
Tribe in Sequim, Washington; the Honorable Clifford Lyle 
Marshall, Hoopa Valley Indian Tribe in Hoopa, California. We 
also have the Honorable James Steele, Jr., Chairman of the 
Confederated Salish and Kootenai Tribes in Pablo, Montana; and 
Mr. Gene Peltola, who is the President and CEO of the Yukon-
Kuskokwim Health Corporation in Bethel, Alaska.
    Senator Barrasso, we are just about ready to go to the 
panel, but if you would care to make any opening comments, we 
would be happy to hear from you.

               STATEMENT OF HON. JOHN BARRASSO, 
                   U.S. SENATOR FROM WYOMING

    Senator Barrasso. Thank you very much, Senator Murkowski. I 
appreciate the opportunity. I want to thank you for holding 
this hearing.
    When I visit with leaders on the Wind River Reservation in 
Wyoming, I find that both of our tribes there, the Northern 
Arapaho and the Eastern Shoshone, are working to build autonomy 
within their own people, as Senator Tester and you both have 
commented on. Our concerns are that the agency charged with 
administering the contracts to allow self-governance, the BIA, 
is often weighed down by Government bureaucracy. That is what I 
heard two months ago in one of our now several different visits 
to the reservation in Wyoming. There are procedural 
requirements that slow the process of delivering needed 
services, and I think it is time to seriously take a look at 
the bureaucratic red tape that we expect the States and tribes 
and private individuals to face whenever cooperating with the 
Government. I think they are specific and significant in terms 
of working with our own tribes.
    The BIA should put tribes in a position to succeed, to 
provide a platform for the Indian people to prosper and then 
the Government really ought to just get out of the way.
    So I am looking forward to the hearings, and finding the 
best ways to help our tribes succeed. Thank you, Madam 
Chairman.
    Senator Murkowski. Thank you, Senator Barrasso.
    With that, Mr. Cason, we will proceed to you, please.

  STATEMENT OF JAMES CASON, ASSOCIATE DEPUTY SECRETARY, U.S. 
                   DEPARTMENT OF THE INTERIOR

    Mr. Cason. Thank you so much. Good afternoon, Vice Chairman 
Murkowski and members of the Committee. I am pleased to be here 
today to discuss the Department of Interior's tribal self-
governance program.
    In 1988, Congress amended the Indian Self-Determination and 
Education Assistance Act by adding Title III, which authorized 
self-governance demonstration projects. In 1994, Congress again 
amended the Act by adding Title IV, establishing a program 
within the Department of Interior to be known as tribal self-
governance. The addition of Title IV made self-governance a 
permanent option for tribes.
    These amendments authorize federally-recognized tribes to 
negotiate funding agreements with the Department of Interior 
for programs, services, functions or activities administered by 
the Bureau of Indian Affairs and within certain parameters, 
authorizes such funding agreements for other bureaus of the 
Department.
    The law allows federally-recognized tribes to assume 
programs administered by the Department's bureaus and offices 
other than BIA, subject to negotiations, and as long as the 
programs are available to Indian tribes or Indians. The law 
also authorizes the Secretary to include other programs 
administered by the Secretary which are of special geographic, 
historical or cultural significance to the participating tribe 
requesting the compact.
    In 1990, the first seven funding agreements with the 
Department were negotiated for about $27 million in total 
funding. For fiscal year 2007, there are 94 agreements that 
include 234 federally-recognized tribes and approximately $380 
million in total funding. Some of these agreements are with 
tribal consortia, which account for the difference in the 
number of tribes exceeding the number of agreements.
    The Department funding agreements allow federally-
recognized tribes to provide a wide range of programs and 
services to their members such as law enforcement, education 
and welfare assistance. Many of the funding agreements include 
trust-related programs, such as real estate services, 
appraisals, probates, natural resource programs, such as 
forestry, fisheries and agriculture. What makes these funding 
agreements unique is that Title IV allows tribal governments to 
redesign programs for their members, set their own priorities 
consistent with Federal laws and regulations, and respond to 
the unique needs of tribal members without seeking approval 
from departmental officials.
    Many tribes have been successful in implementing self-
governance programs and annual funding agreements to meet their 
tribal needs. Detailed examples are included in my written 
testimony.
    While the hearing today is an oversight hearing on tribal 
self-governance, the Department of Interior is aware that the 
House of Representatives' legislation would extend provisions 
of Title V of the Indian Self-Determination and Education 
Assistance Act to programs within the Department of Interior. 
Within the Department, except for the Bureau of Indian Affairs 
and specific instances with other bureaus, there are functions 
and responsibilities that do not lend themselves to compacting 
or funding agreements under the provisions like those in Title 
V of the Indian Self-Determination and Education Assistance 
Act.
    In addition, if Title V were extended to the entire 
Department, non-BIA bureau programs that have both Indian and 
non-Indian stakeholders would be subject to funding agreements 
at the tribes' discretion. And if extended, the non-BIA bureaus 
of Interior would have no negotiating rights with regard to 
what would be authorized under those agreements. Therefore, 
consistent with the Department's statement to the House Natural 
Resources Committee where the Department expressed opposition 
to H.R. 3994, the Department again before this Committee 
expresses its opposition to any extension of provisions of 
Title V to non-BIA bureaus of the Department.
    It is my understanding, however, that the self-governance 
group may be on the cusp of a different sort of proposal and we 
would be very encouraged to take a look at that. As I 
understand it, that alternative proposal would strike the other 
non-BIA bureaus in its approach to extend Title V.
    As the Department moves forward with the current Title IV 
provisions, we have gained valuable insight into working in 
partnership with non-BIA bureaus and tribes. We look forward to 
continuing to work with tribes on ways to expand compacting 
opportunities and improve our program.
    Madam Chairman, that concludes my statement and I will be 
happy to answer questions.
    [The prepared statement of Mr. Cason follows:]

  Prepared Statement of James Cason, Associate Deputy Secretary, U.S. 
                       Department of the Interior
    Good afternoon, Chairman Dorgan, Vice Chairman Murkowski, and 
Members of the Committee. I am pleased to be here today to discuss the 
Department of the Interior's Tribal Self Governance program.
    Self-governance Tribes have been good managers of the programs they 
have undertaken. Some Tribes add their own resources to the programs 
and are able to fashion programs to meet the particular needs of their 
beneficiaries. They are also well suited to address changing needs. 
Tribes have said that our current compacts with them reflect a true 
government-to-government relationship that indicates they are not 
viewed by the Federal government as just another federal contractor.
    While the hearing today is an oversight hearing on Tribal Self 
Government, the Department of the Interior is aware of the House of 
Representatives' legislation that would extend the provisions of Title 
V of the Indian Self-Determination and Education Assistance Act, which 
governs the programs of the Indian Health Service, to the programs of 
the Department of the Interior. Within the Department, except the 
Bureau of Indian Affairs and specific instances with other bureaus, 
there are functions and responsibilities that do not lend themselves to 
compacting or funding agreements under provisions like those in Title V 
of the Indian Self-Determination and Education Assistance Act. 
Therefore, consistent with the Department's statement to the House 
Natural Resources Committee, where the Department expressed its 
opposition to H.R. 3994, the Department again, before this Committee, 
expresses its opposition to any extension of the provisions of Title V 
of the Indian Self-Determination and Education Assistance Act to the 
non-BIA bureaus of the Department of the Interior.
    The policy of Indian self-determination is one that has endured for 
almost forty years. In a message to Congress on March 6, 1968, 
President Lyndon Johnson said:

        I propose a new goal for our Indian programs: A goal that ends 
        the old debate about ``termination'' of Indian programs and 
        stresses self-determination . . . The greatest hope for Indian 
        progress lies in the emergence of Indian leadership and 
        initiative in solving Indian problems. Indians must have a 
        voice in making the plans and decisions in programs which are 
        important to their daily life . . .

    In July 1970, President Nixon gave his famous Special message to 
Congress which stated:

        It is long past time that the Indian policies of the Federal 
        government began to recognize and build upon the capacities and 
        insights of the Indian people. . . . 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. . .. Federal termination errs in one 
        direction, Federal paternalism errs in the other. Only by 
        clearly rejecting both of these extremes can we achieve a 
        policy which truly serves the best interests of the Indian 
        people. Self-determination among the Indian people can and must 
        be encouraged without the threat of eventual termination. In my 
        view, in fact, that is the only way that self-determination can 
        effectively be fostered. . .

    And more recently, on October 30, 2006, President Bush declared:

        My Administration will continue to work on a government-to-
        government basis with tribal governments, honor the principles 
        of tribal sovereignty and the right to self-determination, and 
        help ensure America remains a land of promise for American 
        Indians, Alaska Natives, and all our citizens.

Background
    In 1988, Congress amended the Indian Self-Determination and 
Education Assistance Act (the Act) by adding Title III, which 
authorized the Self-Governance demonstration project. In 1994, Congress 
again amended the Act by adding Title IV, establishing a program within 
the Department of the Interior to be known as Tribal Self-Governance. 
The addition of Title IV made Self-Governance a permanent option for 
tribes. These amendments, in section 403(b), authorize federally 
recognized tribes to negotiate funding agreements with the Department 
of the Interior (Department) for programs, services, functions or 
activities administered by the Bureau of Indian Affairs (BIA) and, 
within certain parameters, authorized such funding agreements with 
other bureaus of the Department. In the year 2000, the Act was amended 
again to include Titles V and VI, making Self-Governance a permanent 
option for tribes to negotiate compacts with the Indian Health Service 
(IHS) within the Department of Health and Human Services and providing 
for a now-completed study to determine the feasibility of conducting a 
Self-Governance Demonstration Project in other programs of that 
Department.
    The law allows federally recognized Tribes to assume programs 
administered by the Department's bureaus and offices other than the BIA 
subject to negotiations and as long as the programs are available to 
Indian Tribes or Indians. The law also authorizes the Secretary to 
include other programs administered by the Secretary which are of 
special geographic, historical, or cultural significance to the 
participating Tribe requesting a compact.
    In 1990, the first seven funding agreements with the Department 
were negotiated for about $27 million in total funding. For FY 2007, 
there are 94 agreements that include 234 federally recognized tribes 
and approximately $380 million in total funding. Some of these 
agreements are with tribal consortia, which account for the number of 
such tribes exceeding the number of agreements. These Department 
funding agreements allow federally recognized tribes to provide a wide 
range of programs and services to their members such as law 
enforcement, education, and welfare assistance. Many of the funding 
agreements include trust related programs such as real estate services, 
appraisals, probates and natural resource programs such as forestry, 
fisheries, and agriculture. What makes these funding agreements unique 
is that Title IV allows tribal governments to re-design programs for 
their members and set their own priorities consistent with Federal laws 
and regulations. This authority allows tribal leaders the ability to 
respond to the unique needs of their tribal members without seeking 
approval by Departmental officials.
Successes
    Many Tribes have been successful implementing Self-Governance 
programs to meet their tribal needs. For example, the Chickasaw Nation 
accomplishments in 2006 included providing education services to 7,209 
students. 945 students participated in remedial education and tutoring 
and 82 percent of the students receiving tutoring gained one grade 
level or more. Scholarships were provided to 181 undergraduate students 
and 43 graduate students. The Tribe's tribal district court heard 1,118 
cases. It collected almost $50,000 in court fees and over $32,000 for 
restitution and child support. In January 2006, the Tribe's Supreme 
Court and district court were audited by a team from the BIA central 
office and received excellent ratings. The Tribe also provided career 
counseling, skills assessment, aptitude testing, and other employment 
readying services to 1,320 clients. The Tribe coordinated a job fair 
that attracted 53 vendors and over 500 job seekers. The Tribe's police 
department implemented a new computer system which has aided in 
multiple dispatching methods and improved data collection, 
investigation, and crime analysis and reporting. This example is just 
one of many where Tribes have been successful in directly administering 
federal programs.
    Section 403(b)(2) of Title IV authorizes other bureaus within the 
Department of the Interior to enter into funding agreements with Tribes 
subject to such terms as may be negotiated between the parties. The 
Council of Athabascan Tribal Governments (CATG) has successfully 
implemented Annual Funding Agreements (AFAs) since 2004 to perform 
activities in the Yukon Flats National Wildlife Refuge in Interior 
Alaska. The CATG represents the Tribal governments of Arctic Village, 
Beaver, Birch Creek, Canyon Village, Chalkyitsik, Circle, Gwichyaa Zhee 
Gwich'in Tribal Government of Fort Yukon, Rampart, Stevens Village, and 
Venetie. Members of these Tribes live near or within the Yukon Flats 
National Wildlife Refuge, the third largest of the more than 540 
conservation units in the National Wildlife Refuge System. The Refuge 
was established in 1980, and includes more than 8.5 million acres of 
wetland and boreal forest habitat along 300 miles of the Yukon River, 
north of Fairbanks, Alaska. It is internationally noted for its 
abundance of migratory birds.
    Activities subject to the AFAs include: (1) locating and marking 
public easements across private lands within the Refuge boundary; (2) 
assisting with environmental education and outreach in local villages; 
(3) monitoring wildlife harvest; (4) surveying moose populations (in 
cooperation with the Alaska Department of Fish and Game); and (5) 
maintaining Federal property in and around Fort Yukon. Public use 
(including sport and subsistence hunting, fishing, and trapping) is not 
affected by these agreements. Management authority remains with the 
Fish and Wildlife Service as required by the National Wildlife Refuge 
System Administration Act.
    The Bureau of Land Management also has an annual funding agreement 
with the CATG. Under the agreement, CATG performs preseason refresher 
training and testing services for Emergency Firefighters within 
Alaska's Upper Yukon Zone.
    In FY 2007, Redwood National and State Parks had three agreements 
under the Indian Self-Governance Act with the Yurok Tribe for watershed 
restoration in the South Fork Basin of Lost Man Creek (a boundary area 
between the Park and the Yurok reservation); the conduct of 
archeological site condition assessments; and natural resource 
maintenance. Since 2002, the Lower Elwha Klallam Tribe has been 
assisting the National Park Service as a Self- Governance tribe in the 
planning, design, and implementation of mitigation measures for the 
Elwha River Restoration Project. At Grand Portage National Monument, 
there have been AFAs for the past nine years. The agreement between the 
National Park Service and the Grand Portage Band of Minnesota Chippewa 
touches most park operations. The Band and the Park dedicated a new 
Grand Portage Heritage Center in August 2007. Over nine years, $3.3 
million has been transferred to the Band and 34 special projects have 
been completed in addition to routine maintenance.
    The Bureau of Reclamation has also been successful under the 
current law. In FY 2007, Reclamation had seven annual agreements with 
six Tribes, totaling more than $18.6 million.
Extension of Title V
    Non-BIA bureau programs, that have both Indian and non-Indian 
stakeholders, would be the subject of funding agreements at the Tribe's 
discretion if Title V were extended to the Department. If extended, the 
non-BIA bureaus of Interior would have no negotiating rights with 
regard to what would be authorized under those agreements.
    We understand some of the impetus for extending Title V to the 
Department at this time stems from the agreement between the U.S. Fish 
and Wildlife Service and the Confederated Salish and Kootenai Tribes 
(CSKT) of the Flathead Nation regarding the National Bison Range 
Complex in Montana. While there has been considerable controversy over 
the 2006 AFA between the Service and the CSKT, through this process the 
Department is gaining a better understanding of what each party needs 
to make a successful agreement with a non-BIA bureau work well. We 
believe that ultimately the process will grow stronger as a result of 
our efforts.
    We are opposed to simply providing the receiving party unilateral 
power to determine the terms and length of the agreement as well as the 
disposition of the funds, which would occur if Title V were 
unilaterally extended to non-BIA bureaus within the Department. This is 
particularly true where non-BIA bureaus have other statutory mandates 
with which they must comply. We believe the authority provided to the 
Secretary for the Self-Governance program is sufficient to protect the 
interests of Indian Tribes in non-BIA programs.
Conclusion
    As the Department moves forward with the current Title IV, we have 
gained valuable insight into working in partnership with non-BIA 
bureaus and Tribes. We look forward to continuing to work with the 
tribes on ways to expand compacting opportunities and improve our 
program.
    Mr. Chairman, this concludes my statement and I will be happy to 
answer any questions you may have.

    Senator Murkowski. Thank you. We appreciate that.
    And we will go to Chairman Allen, please.

    STATEMENT OF HON. W. RON ALLEN, CHAIRMAN/CEO, JAMESTOWN 
                        S'KLALLAM TRIBE

    Mr. Allen. Thank you, Madam Chair and Senators. I 
appreciate the opportunity to testify.
    As you have identified, I am the Chair of the Jamestown 
S'Klallam Tribe, located in Northwestern Washington State. Our 
Tribe has been among the original seven tribes that advanced to 
self-governance back in 1991. We were also one of the first ten 
in the demonstration project in 1988.
    So I come to the Committee with a great deal of experience 
and exposure to self-governance and the success of self-
governance as we moved forward over this last 20 years. Just a 
few weeks ago, we celebrated our 20th anniversary of the self-
governance movement and reflected on the successes of the self-
governance movement. What self-governance is, in a nutshell, it 
is empowering the tribe. It is recognizing our sovereignty as a 
government and recognizing our rightful place as a government 
within the family of the American political system.
    So what it is doing is picking up from the Nixon era, 
moving us forward and recognizing that as a government, we need 
to be empowered to take control over our own affairs and manage 
our own affairs and not to be second guessed by a Federal 
bureaucratic system.
    Conceptually, back in 1975, the Indian Self-Determination 
Act was intended to empower the tribes, and it was also 
intended to reduce the Federal bureaucracy and put the controls 
in the tribes' authority, so that tribal governments could 
manage our own affairs. We were contractors back in the 1970s 
and 1980s and into the 1990s. In the 1990s, when self-
governance emerged, now we asked the Federal Government start 
recognizing the tribes as governments, let us make our own 
decisions as governments, with regard to the limited resources 
that the Federal Government provides to our people for programs 
A through Z. It has had a remarkable success. When you think 
about where we started with the pilot project in 1988, with ten 
tribes and the seven tribes that started in 1991, with the 
Lummi Nation and the Salish and Kootenai Tribes and five others 
of us that moved forward, we now have identified well over 300 
tribes that are moving forward with respect to both DOI, BIA 
and the IHS. We have had remarkable success. And we have 
written books now and put out material that show that success.
    So we are here before this Committee, we want to continue 
to advance the authority of the tribes. As always, when 
Congress passes legislation and recognizes authorities and 
provides instruction to the Executive Branch, you always have 
the interpretation of what the Congress meant. And sometimes 
the report language isn't enough, or the language in the bill 
isn't enough. So we have found ourselves exposed to obstacles 
and impediments, bureaucratic impediments, we always refer to 
them, that impede our ability to move our agenda forward.
    Our agenda, Jim had mentioned that we are suggesting that 
at this juncture, we would delete the non-BIA agencies. We are 
not intending to delete them. What we are suggesting is to put 
them in abeyance for the moment, because of where we are 
politically in this Congressional session. If the Congress has 
the power and ability and will to be able to move it forward 
with regard to at least the BIA component of the legislation 
that we are advancing, and that we would come back in the next 
session and advance what we believe to be self-governance with 
respect to the rest of the BIA programs.
    It really is just a political reality factor that we are 
weaving into it. We have been negotiating these amendments now 
for six years. And for the last five years with the Department 
of Interior. In the last year and a half, we have had 
significant success with Jim Cason and his colleagues over at 
Interior and have had remarkable movement. Now we have bridged 
gaps, we have bridged gaps with 95, 97 percent of the issues. 
That required a compromise on both sides, both the Department 
of Interior and the BIA have both imposed compromises in order 
to propose to you the legislation that we are submitting and we 
have been discussing. We understand that the House is going to 
introduce a piece of legislation that is very similar, if not 
almost exact, to what we are suggesting for you to consider and 
that would help us move this agenda forward.
    Now, I would say that thinking of all the past hearings 
that we have had, historically, that are about empowering 
tribes, we have had generations, generations of Self-Governance 
before the Self-Determination Act. The Self-Determination Act 
advanced many more generations of leaders. I can think of 
Wendell Chino down in Mescelaro Apache, Roger Jourdain of Red 
Lake, Joe de la Cruz at Quinault Nation and others, who have 
moved this agenda forward with the support of Congress. Now we 
are at a juncture where we need to move forward again to fully 
empower us.
    The Title V amendments, you already approved and recognize 
our authority. We know that the DOI and BIA should be 
consistent. So our proposal here is focusing on what authority 
we have right now at the BIA and those programs in Interior 
that do have, that clearly are tribally-authorized in order to 
control.
    I will conclude there, Madam Chair and be open to 
questions. We really hope that you can help us move this 
forward so we can make some significant progress for this 
session.
    [The prepared statement of Mr. Allen follows:]

   Prepared Statement of Hon. W. Ron Allen, Chairman/CEO, Jamestown 
                            S'Klallam Tribe
    Good afternoon. Thank you for the opportunity to be here today. My 
name is W. Ron Allen and I am the Chairman and Chief Executive Officer 
of the Jamestown S'Klallam Tribe, located in Washington State. I am 
also the Chairman of the Department of the Interior (DOI) Self-
Governance Advisory Committee (SGAC), and I offer my testimony today in 
both capacities. My Tribe was one of the first 7 Tribes to negotiate a 
Self-Governance Compact and Funding Agreement in 1990. I am pleased to 
be able to testify on what Congress needs to do on Tribal Self-
Governance.
    I am here to urge you to introduce and promptly enact legislation 
to enhance Indian Tribes' opportunities under Self-Governance by 
amending Title IV of the Indian Self-Determination and Education 
Assistance Act (ISDEAA) (P.L. 93-638 as amended). A House version of 
this legislation, H.R. 3994, is currently under review by the House 
Natural Resources Committee. We have been told the House Committee 
expects to report its bill before the end of this month. We hope that 
members of this Committee will introduce a companion bill in the Senate 
and move this Committee and the Senate to approve this critical 
legislation this year. I attach to this testimony draft legislation 
substantively similar to H.R. 3994 which Tribes hope the Senate will 
adopt.
    These Tribally proposed Title IV amendments advance several 
important purposes. Most fundamentally, they create consistency between 
the Title IV Self-Governance initiative in the DOI and the Title V 
Self-Governance initiative in the Department of Health and Human 
Services (DHHS). Since its enactment in 2000, Title V of P.L. 93-638 
has proven to be a sound framework for carrying out government-to-
government agreements in the health care arena. The Title IV amendments 
would essentially mirror Title V, enhancing consistency, clarity, and 
workability in the relationship between the federal and Tribal 
governments.
    The Title IV amendments have long been a top legislative priority 
of Self-Governance Tribal leaders. Four years ago, Tribal leaders 
testified before this Committee in support of a predecessor bill, S. 
1715, the Department of the Interior Tribal Self-Governance Act of 
2003. That bill was favorably reported and recommended for passage by 
this Committee in Senate Report No. 108-413 (Nov. 16, 2004), but 
unfortunately died in that Congress. Two years later, I testified at 
this Committee's oversight hearing on Self-Governance in Indian 
Country, along with other Tribal leaders, in favor of comprehensive 
Self-Governance legislation. This Committee has thus heard about the 
need for this legislation on a number of occasions over the past 5 
years and Self-Governance Tribes urge the Committee and the full Senate 
to act on this legislation this session.
    Passage of the Title IV amendments would represent a major 
milestone on the path toward Tribal Self-Governance and self-reliance. 
The true import of these proposed amendments, however, cannot be 
understood without an appreciation of the unprecedented positive impact 
Self-Governance has had on Indian Tribes over the past 20 years.
Background of Title IV
    Although it is hard to imagine today, prior to 1975, the federal 
government administered almost all programs serving American Indian and 
Alaska Native Tribes. In 1975, the ISDEAA was enacted with three 
primary goals: (1) to place the federal government's Indian programs 
firmly in the hands of the local Indian people being served; (2) to 
enhance and empower local Tribal governments and their governmental 
institutions; and (3) to correspondingly reduce the federal 
bureaucracy.
    The original Title I of the ISDEAA, still in operation today, 
allows Tribes to enter into contracts with the DHHS and the DOI to 
assume the management of programs serving Indian Tribes within these 
two agencies. Frustrated by the stifling bureaucratic oversight imposed 
by BIA and the Indian Health Service (IHS), and the lack of flexibility 
and cost-effectiveness inherent in Title I contracting, a small group 
of Tribal leaders helped win passage of the Tribal Self-Governance 
Demonstration Project in 1988. That Project authorized the Jamestown 
S'Klallam and nine other Tribes to enter into compacts with DOI.
    Unlike Title I contracts--which subjected Tribes to federal 
micromanagement of assumed programs and forced Tribes to expend funds 
as prioritized by BIA and IHS officials--Self-Governance agreements 
allowed Tribes to set their own priorities and determine how program 
funds should be allocated. The Demonstration Project proved to be a 
tremendous success, and in 1994, Congress enacted Title IV of the 
ISDEAA, thereby implementing permanent Tribal Self-Governance within 
DOI.
The Success of Self-Governance
    The success of Self-Governance can be seen in the increasing number 
of Tribes that choose to participate. In Fiscal Year 1991, the first 
year Self-Governance agreements were negotiated between the BIA with 
Tribes, only seven Tribes entered into agreements. At that time, the 
total dollar amount compacted by Indian Tribes was slightly over $27 
million. By Fiscal Year 2006, 231 Tribes and Tribal consortia entered 
into 91 annual funding agreements, operating over $300 million in 
programs, services, functions and activities.
    The growth in Tribal participation in Self-Governance revealed by 
these numbers is remarkable. The number of Tribes and Tribal consortia 
participating in Self-Governance today is 33 times greater than in 
1991. While only a tiny fraction of Tribes participated in Self-
Governance the first year in 1991, today approximately 40 percent of 
all federally recognized Tribes are Self-Governance Tribes and the 
interest by other Tribes is continuing to grow.
    Under Self-Governance, Tribes have assumed the management of a 
large number of DOI programs, including roads, housing, education, law 
enforcement, court systems, and natural resources management. Why is 
this initiative such a huge success? Simply put, Self-Governance works 
because it:

   Promotes Efficiency. Devolving federal administration from 
        Washington, D.C. to Indian Tribes across the United States has 
        strengthened the efficient management and delivery of federal 
        programs impacting Indian Tribes. As this Committee well knows, 
        prior to Self-Governance, up to 90 percent of federal funds 
        earmarked for Indian Tribes were used by federal agencies for 
        administrative purposes. Under Self-Governance, program 
        responsibility and accountability has shifted from distant 
        federal personnel to Tribal leaders elected by those to be 
        served. Efficiencies have increased as politically accountable 
        Tribal leaders leverage their knowledge of actual needs, local 
        resources, conditions and trends to make cost-saving management 
        decisions. \1\
---------------------------------------------------------------------------
    \1\ As an aside, this policy of transferring management from 
federal to Tribal governmental control is currently being undermined by 
the National Business Center (NBC), the Interior agency charged with 
negotiating indirect cost agreements with Tribes and Tribal 
organizations. NBC has recently threatened to abandon its longstanding 
policy of allowing, without documentation, 50 percent of Tribal council 
expenses in Tribal indirect cost pools. Under the new policy, no such 
expenses would be allowable as indirect costs unless a Tribe could 
document, through detailed personnel activity reports, the time and 
expense council members and staff devote to running federal programs. 
Many, if not most, Tribes vest managerial responsibility for carrying 
out ISDEAA agreements in their Tribal councils, and such Tribes count 
on indirect cost reimbursements to defray the cost of these Tribal 
governmental functions. The NBC's unilateral revocation of the ``50 
percent rule'' would force Tribes to spend great amounts of time to 
produce--and the DOI to review--documentation parsing Tribal council 
minutes and activity reports to determine the precise amount of council 
members' time and expense devoted to federal programs. We ask this 
Committee to urge the Secretary to avoid this wasteful exercise by 
directing the NBC to abandon its plan to revoke the 50 percent rule.

   Strengthens Tribal Planning and Management Capacities. By 
        placing Tribes in decision-making positions, Self-Governance 
        vests Tribes with ownership of the critical ingredient 
        necessary to plan our own futures: information. At the same 
        time, Self-Governance has provided a generation of Tribal 
        members with management experience beneficial for the continued 
---------------------------------------------------------------------------
        effective stewardship of our resources.

   Allows for Flexibility. Self-Governance allows Tribes great 
        flexibility when making decisions concerning allocation of 
        funds. Whether managing programs in a manner consistent with 
        traditional values or allocating funds to meet changing 
        priorities, Self-Governance Tribes are developing in ways 
        consistent with their own needs and priorities, not those of a 
        monolithic federal bureaucracy.

   Affirms Sovereignty. By utilizing signed compacts, Self-
        Governance affirms the fundamental government-to-government 
        relationship between Indian Tribes and the U.S. Government. It 
        also advances a political agenda of both the Congress and the 
        Administration: namely, shifting federal functions to local 
        governmental control.

    In short, Self-Governance works, because it places management 
responsibility in the hands of those who care most about seeing Indian 
programs succeed: Indian Tribes and their members.
Need for Title IV Amendments
    While the overarching policy of Self-Governance has been a great 
success for my Tribe and so many others, the legal framework to carry 
out that policy within the DOI could be vastly improved. Shortly after 
Title IV was enacted, the DOI began a rulemaking process to develop and 
promulgate regulations. The process was a failure in many ways. 
Ultimately, five years after the rulemaking process began, DOI 
published regulations that, from the Tribal perspective, failed to 
fully implement Congress's intent when Title IV was enacted. The 
regulations moved Self-Governance backward, not forward.
    In 2000, after the enactment of Title V of the ISDEAA--permanent 
Self-Governance within DHHS--Tribal leaders began discussions about how 
the Title IV statute could be amended to get the initiative back on 
track. The development of Title V benefitted from the lessons learned 
as Title IV was implemented; Title V directly addressed many of the 
problem issues that emerged during the Title IV rulemaking process. 
Congress in Title V filled many of the gaps and corrected many of the 
problems in Title IV. But the improvements and greater Tribal authority 
embodied in Title V remain absent from Title IV. Consequently, many 
Self-Governance Tribes today are forced to operate under two different 
sets of administrative requirements, one for IHS and one for BIA.
    Tribal leaders have decided that Title IV needed to be amended to 
incorporate many of Title V's provisions, and that has been a top 
legislative priority for over six years. Four years ago, I testified 
before this Committee in support of S. 1715, a bill that would have 
amended Title IV in many of the same ways as H.R. 3994. Numerous 
meetings and extensive correspondence sought to narrow the differences 
between Tribal and DOI representatives. On September 20, 2006, several 
Tribal leaders presented testimony to this Committee regarding problems 
implementing Self-Governance in DOI under Title IV and made the case 
for legislative relief. These problems, ranging from inadequate funding 
levels to bureaucratic recalcitrance, have caused participation in 
Tribal Self-Governance to level off and even recede. That is 
unfortunate because Self-Governance has a proven track record of 
enhancing the ability of Tribes to improve the efficiency, 
accountability and effectiveness of programs and services.
    Over the past year, discussions between the Tribal Title IV Task 
Force and DOI representatives intensified and yielded a number of 
compromise agreements reflected in the attached draft Tribally proposed 
bill. This bill incorporates all of the agreements reached between 
Tribal and DOI representatives. While some areas of disagreements 
remain, agreement has been reached on over 97 percent of the bill's 
contents. The vast majority of the proposed amendments are not new or 
radical ideas--most have been adapted directly from Title V.
    Thus the Tribal draft reflects nearly six years of discussions, 
drafting, negotiations, and redrafting--and, as discussed below, 
significant Tribal concessions. The time has come to pass this 
legislation, which would significantly advance Congress's policy of 
promoting Tribal Self-Governance.
Overview of the Proposed Amendments
    The proposed bill would bring Title IV into line with Title V, 
creating administrative efficiencies for Tribes while also importing 
the beneficial provisions of Title V currently missing in the earlier 
Self-Governance statute. Let me quickly summarize a few of the key 
provisions in the amendments, as embodied in the Tribal draft. To 
address problems in the DOI's implementation of the Tribal Self-
Governance program, and to expand Tribes' options for pursuing their 
right to Self-Governance, the draft bill would, among other things:

   clarify and limit the reasons for which the agency may 
        decline to enter a proposed agreement, and the time frame for 
        making the decision;

   require that funds be transferred promptly after they have 
        been apportioned to the Department;

   clarify how the construction provisions would apply;

   protect Tribes from DOI attempts to impose unilaterally 
        terms in compacts or funding agreements; and,

   provide a clear avenue of appeal and burden of proof for 
        Tribes to challenge adverse agency decisions.

    Over the past four months we have had intense discussions with DOI 
representatives about various provisions in H.R. 3994 and the Tribal 
draft bill. They have made it clear that they have problems with some 
of the bill's provisions, and you may hear testimony from Department 
representatives opposing one or another provision of the bill. In 
weighing such testimony, I ask that you keep the following major facts 
in mind:

    First, the Tribally proposed draft bill that is attached to my 
testimony is different from H.R. 3994 in a number of important 
respects. While it contains the consensus language that Tribal and 
department representatives reached on close to 95 percent of the 
provisions prior to the introduction of H.R. 3994, it also contains 
Self-Governance Tribes most recent efforts to bridge the gaps on the 
remaining areas of disagreement.
    In fact, the Tribally proposed draft bill reflects significant 
compromises on the part of Tribes. For example, a major priority of 
Self-Governance Tribes for years has been to expand Self-Governance by 
making certain non-BIA programs within the DOI compactable as a matter 
of right. The DOI has repeatedly made clear that the administration 
would fight the enactment of these amendments if they contain these 
mandatory non-BIA provisions. To enhance the chances that this 
important legislation will pass during this Congress, Self-Governance 
Tribes reluctantly decided to strike the mandatory non-BIA provisions 
from the bill. We continue to think that these mandatory provisions 
make good policy sense and will pursue their enactment in the future. 
But for now, in order to get the remaining amendments passed this year, 
we are deferring our request as to non-BIA provisions.

    Second, there is ample precedent for the few provisions in the bill 
with which DOI may continue to have problems. Title V, which has worked 
very well in the context of health care services, served as the model 
for H.R. 3994 and contains most of the contested provisions, none of 
which has caused the IHS any difficulty in its implementation of 
similar provisions over the past seven years.

    Finally, to some extent Self-Governance presents an inherent, and 
perhaps intractable, tension between Tribes and the Department. A 
bureaucracy such as the DOI will inevitably resist yielding its 
authority--and its funding--to other entities, such as Tribes. For this 
reason, complete agreement between Tribal and federal viewpoints is 
likely impossible, and Congress should not wait for such agreement 
before acting. We believe that the Title IV amendments, especially 
after the most recent Tribal concessions discussed above, protect the 
interests of the federal government while advancing those of Tribal 
governments. We hope that this Committee will agree and finally take 
action to enact them.
Need to Clarify the Applicability of Title IV to the Department of 
        Transportation
    Almost none of the provisions presently included in H.R. 3994 are 
new--Self-Governance Tribal leaders have been advocating them for over 
six years and many of them come directly from Title V. I would like to 
take a moment to discuss a provision that would be new, however: the 
proposed Section 419 that would clarify that Title IV applies to 
agreements entered into by Tribes and the Department of Transportation 
(DOT) to carry out transportation programs such as the Indian 
Reservation Roads Program.
    This new provision is important and necessary. The 2005 highway 
bill, SAFETEA-LU, authorized Tribal governments to receive funding from 
and to participate in a number of Department of Transportation (DOT) 
programs as direct beneficiaries without having the BIA or state 
governments acting as intermediaries. The statute specifically says 
that DOT and Tribes can enter into agreements for these programs ``in 
accordance with the [ISDEAA].'' \2\ Some DOT officials have interpreted 
this language to mean the agreements must be consistent with the ISDEAA 
but are not really ISDEAA agreements. This erroneous interpretation has 
caused a great deal of confusion and disagreement over whether, and to 
what extent, Title IV applies to DOT. The new section 419 will make 
clear that the negotiation and implementation of Tribal funding 
agreements with DOT will be governed by Title IV.
---------------------------------------------------------------------------
    \2\ 23 U.S.C. Sec. 202(d)(5).
---------------------------------------------------------------------------
Tribal Self-Determination in Natural Resource Management
    Finally, a few words about another idea for advancing Tribal Self-
Determination and Self-Governance that has been before this Committee 
in the past. The DOI Self-Governance Advisory Committee has supported 
legislation increasing Tribal Self-Determination in natural resource 
management; Title III of S. 1439 in the 109th Congress. Under that 
bill, Tribes would have been authorized to develop an Indian Trust 
Asset Management Plan that, once approved by the Secretary of Interior, 
could be implemented by the Tribe without the need for Secretarial 
approval of every individual transaction or decision. A similar concept 
has been incorporated into the Tribal Energy Resource Agreement 
provisions of the Energy Policy Act of 2005. \3\ We suggest that the 
Committee revisit the idea of expanding Tribal self-determination in 
natural resource management, and we are prepared to present concrete 
legislative proposals to that end.
---------------------------------------------------------------------------
    \3\ Pub. L. No. 109-58 (Aug. 8, 2005).
---------------------------------------------------------------------------
Conclusion
    In conclusion, I would like to step back for a moment and reinforce 
a broader point. As a long-term Self-Governance Tribal leader and in my 
role as Chairman of the DOI Self-Governance Advisory Committee, I have 
had the opportunity to talk regularly with many other Tribal leaders 
regarding Self-Governance. Although they recognize the implementation 
problems cited above, and the need for the Title IV amendments 
described earlier, every single Tribal leader made a point of praising 
the overwhelming success of Self-Governance. That has also been our 
experience at Jamestown. Self-Governance allows us to prioritize our 
needs and plan our future in a way consistent with the Tribe's distinct 
culture, traditions, and institutions.
    My deepest hope is that this Congress will enact the Title IV 
amendments proposed by the Tribes (see attached draft bill) so that we 
can build on the successes of the past 20 years and further Tribal 
Self-Governance in partnership with the United States, to achieve our 
mission and our goals.
    Thank you.
Attachment: Tribally Proposed Draft Bill

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Senator Murkowski. Thank you, Mr. Allen. I would like to 
recognize the Chairman, and also Senator Cantwell has joined 
the Committee.

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

    The Chairman. Senator Murkowski, thank you very much. I 
regret I was delayed, but Senator Murkowski and Senator Tester 
indicated they would be here.
    Let me thank all the witnesses. I will just put my opening 
statement in the record and we will proceed with the witnesses.
    [The prepared statement of Senator Dorgan follows:]

  Prepared Statement of Hon. Byron L. Dorgan, U.S. Senator from North 
                                 Dakota
    Today the Committee will examine the Tribal Self-Governance Program 
as the program reaches its twentieth year in existence.
    As we'll hear today, the program is seen by many as an overall 
success. The basic idea of vesting tribal governments' with greater 
authority to manage and control programs administered by the United 
States to benefit their communities is the cornerstone of the Indian 
Self-Determination policy.
    The Self-Governance Program took Self-Determination one step 
further. The program offers a Tribe the flexibility to pick and choose 
programs and prioritize funding amounts that fit their individual 
community's needs.
    Dissatisfied with the services provided by the federal government, 
many Tribes today administer their own education, health care, and law 
enforcement services. In addition, Tribes are managing programs for job 
training, dam safety, forestry, utility services, and even land title 
record keeping. These Tribes have generally taken greater control of 
their destiny.
    The goals of the Self-Governance Program are to reduce the federal 
bureaucracy, improve the delivery of services to tribal residents, and 
strengthen the governing bodies of Indian Tribes.
    As we'll hear today; however, we are falling short of that goal.
    One indicator for me is the fact that no Tribe in North Dakota 
participates in the Self-Governance Program. I believe their reluctance 
lies in part on the barriers that will be discussed today.
    The Self-Governance program began as a demonstration project for 10 
Tribes in 1988. The number of participating Tribes quickly increased 
when the program was made permanent. However, that has leveled off over 
the past decade.
    Many Tribes point to the bureaucratic obstacles that exist at the 
federal level. The most prominent barriers to participation are delays 
in distributing funds to Tribes, and the inadequate provision of 
contract support costs.
    Congress, the agencies, and the Tribes must all cooperate and 
coordinate to make the Program a success. However, I believe much of 
the failure lies in a lack of planning. While it does not have an easy 
job, the Bureau of Indian Affairs has simply not planned for growth in 
the Program.
    For decades, the Bureau of Indian Affairs has been forced to wear 
several hats. It provides direct services to some Tribes, and enters 
into Self-Determination contracts and Self-Governance compacts with 
others. As a result, the agency has to employ direct service providers, 
contract and compact negotiators, and others to service the contracts 
and compacts. This is no easy task.
    For the first time in decades, the BIA sought to address these 
difficulties.
    Assistant Secretary Artman began his dialogue with Tribes on the 
modernization of the Bureau of Indian Affairs. While the term 
modernization may cause some unease, I believe that he started a 
necessary dialogue that would force the Bureau to plan for the future.
    Of course, Mr. Artman's work has been cut short. Last week, I 
expressed my disappointment regarding his departure. But the Bureau 
must move forward. It is my hope that those who remain at the Bureau 
will listen to today's discussion, and begin to plan for not only the 
future of the Bureau, but also the future of Indian country.

    Senator Murkowski. Thank you.
    Mr. Marshall.

   STATEMENT OF HON. CLIFFORD LYLE MARSHALL, CHAIRMAN, HOOPA 
                          VALLEY TRIBE

    Mr. Marshall. Good afternoon. My name is Clifford Lyle 
Marshall, Chairman of the Hoopa Valley Tribe. I first ask that 
my written testimony be entered into the record.
    Senator Murkowski. Without objection, so ordered. It will 
be entered, as will all the testimony from all the 
participants.
    Mr. Marshall. Thank you for this opportunity to present my 
views regarding the self-governance program. Please allow me to 
trump Chairman Allen by saying that the Hoopa Tribe was the 
tribe in the Nation to enter into a self-governance compact 
with the United States in 1990.
    I thank this Committee for its continuing bipartisan 
support of the tribal self-governance program. Through self-
governance, Indian Country has experienced many dynamic and 
pioneering changes in the last 20 years. Through self-
governance tribes have been able to strengthen tribal 
government, stabilize funding bases, improve and expand 
services and increase staffing and technical capabilities. 
Self-governance tribes have also become effective partners with 
the United States, working together to address and resolve 
decades of backlogged trust management issues.
    The self-governance program spurred an important transition 
from bureaucratic, one size fits all programs to flexible, 
tribally-designed and administered programs. For this reason, 
they work. This is not to say that self-governance is easy. 
Self-governance is government and performing the functions of 
government is hard work. During the first eight years of self-
governance, the Hoopa Tribe adopted over 40 ordinances, 
including a legislative procedures act and a budget ordinance 
to make our government more efficient and accountable. Today, 
tribal ordinances total over 70. We added to and improved our 
governmental capabilities. Today the Hoopa Tribe has assumed 
management authority over all Federal programs on our 
reservation.
    Currently, the Tribe manages 54 programs, including 10 
enterprises created in the last 20 years. The Tribe manages all 
lands and resources on the reservation. These programs include 
a range of services to our people, have spurred economic 
development on our reservation and ensure quality management of 
our trust resources. Our programs are audited annually and 
evaluated annually by the BIA regional office.
    Self-governance is an authorizing law, not an 
appropriations law. Yet it has given the Hoopa Tribe the 
ability to generate significant additional dollars to help 
offset the costs of carrying out trust activities. At Hoopa, we 
can show that the Tribe matches $3 from other sources for each 
$1 compacted from the BIA that is used for trust management 
programs.
    In 1997, Hoopa and six other California tribes established 
the California Trust Reform Consortium to work with the BIA 
Pacific Regional Office to address trust resource management 
issues. In 1998, the Consortium and Regional Office entered 
into an agreement that defines the management roles and 
responsibility of the regional office and the tribes in this 
regard. This working relationship has worked well for the last 
10 years.
    The specific problem to the future of self-governance is, 
frankly, the Office of Special Trustee and the Department of 
Interior's redesign of the trust relationship. The self-
governance program was designed to create flexibility. Trust 
reform reorganization is inflexible. The Hoopa Tribe's 
successes all occurred before the effort of trust reform 
reorganization, and we are now in conflict with it because they 
do not mirror the universal program as designed by the OST.
    Tribal self-governance programs do not fit into the 
inflexible trust reform boxes the Department of Interior has 
now created. We can only expect to see regression of all the 
progress made if dominating Federal control re-emerges. Please 
sunset OST this session or limit its purpose or protect the 
agreements entered into with the self-governance tribes.
    In particular, Congress needs to continue to protect the 
successful trust management programs developed by the Section 
139 tribes to ensure the advances we have made to date.
    We are deeply disappointed that the Title IV amendment 
proposals do not include the mandatory non-BIA programs. Trust 
responsibility is the obligation of the United States, not the 
BIA. All Federal agencies that perform operations that impact 
trust resources or rights of a tribe have a trust obligation to 
protect those resources and rights. We strongly feel that 
compacting should be extended to other Federal agencies and we 
ask that current Section 403(b)(2) should remain in Title IV.
    Congress passed various Federal laws that mandate 
restoration of the Trinity River, which goes through my 
reservation, to protect the Hoopa Tribe's federally-protected 
fishing rights. The Bureau of Reclamation, however, has 
determined that the restoration programs are not Indian 
programs under the Self-Governance Act, and trust 
responsibility affords them no priority in setting budgets.
    Trinity River habitat restoration, however, is so under-
funded that it threatens our federally-reserved fishing rights. 
Specific language in H.R. 3994, which would enable tribes to 
contract to perform programs that restore, maintain and 
preserve a resource in which an Indian tribe has a federally-
reserved right, would resolve problems in executing contracts 
that we currently face wit the Bureau of Reclamation over 
management of Trinity River programs.
    The Hoopa Tribe requests that the Senate Committee 
introduce Title III of Senate Bill 1439, the Indian Trust 
Reform Act of 2005, as a standalone bill. Title III would 
create the Indian Trust Asset Management Demonstration Project 
which would allow tribes to design and manage the resources as 
long as the tribes meet the requirements of Federal law. The 
Hoopa Valley Tribe already does this.
    We ask Congress, in conclusion, to continue to support 
self-governance and protect the progress self-governance tribes 
have made from the potential negative effects of the 
Department's trust reform reorganization. We ask that you 
sunset OST. We also ask Congress to address mandatory non-BIA 
compacting and finally, we ask that you introduce Title III of 
Senate Bill 1439 as a standalone bill.
    This concludes my remarks and I would be happy to address 
any questions you may have.
    [The prepared statement of Mr. Marshall follows:]

  Prepared Statement of Hon. Clifford Lyle Marshall, Chairman, Hoopa 
                              Valley Tribe
    Good Afternoon. I am Clifford Marshall, Chairman of the Hoopa 
Valley Tribe of Northern California. Thank you for this opportunity to 
present my views regarding the Self-Governance Program and, more 
importantly, the future of Self Governance. The Hoopa Tribe was one of 
the first tier of tribes under the Self-Governance Project in 1988 and 
was the first tribe in the Nation to enter a Self-Governance compact 
with the United States in 1990.
    First, and foremost, I thank this Committee for its continuing 
bipartisan support for the Tribal Self-Governance Program. The Self-
Governance provisions in the Indian Self-Determination and Education 
Assistance Act stand as one of the most progressive pieces of Indian 
legislation enacted by Congress. In 1988, Congress listened to many 
tribes who were saying loudly that they were extremely unhappy with BIA 
programs and funding. Congress answered with the Self Governance 
Project that provided tribes with funding, flexibility in designing 
their own programs, and the authority to set their own budget 
priorities.
    Through Self Governance, Indian Country has experienced many 
dynamic and pioneering changes in the last twenty years. Self-
Governance tribes have progressively moved to stabilize funding bases, 
improve and expand services at the reservation level, and increase 
staffing and technical capabilities. Tribes have been able to 
strengthen tribal government, and establish administrative capability. 
Through Self-Governance, tribes have become effective partners with the 
United States, working together to positively address and resolve 
decades of backlogged trust management issues.
    The Self-Governance Program spurred an important transition from 
bureaucratic one-size-fits-all, federally-dominated programs to 
flexible tribally-designed and administered programs. Tribes are in the 
best position to determine what is needed by, and how to provide for, 
their governments and members. Prior to Self-Governance, there had been 
a lack of tribal participation in designing programs and setting 
agendas; instead, there was a reliance on federal-project planning. 
These federally-developed programs were not only chronically under-
funded, they were not meeting the on-the-ground needs of Indian people. 
Self-Governance afforded tribes the opportunity to take over the 
planning and development of these programs. At that point they became 
based on the priorities and needs of Indian communities as determined 
by the tribes, and for this reason, they work.
    This doesn't mean to say that Self-Governance is easy. Self-
Governance is government, and performing the functions of government is 
hard work. Before Self-Governance the Tribe contracted most BIA 
programs under the Indian Self-Determination Act, Public Law 93-638. 
Frustrated with the short-comings of 93-638 contracting, the 
inflexibility of the BIA-designed programs, the draconian oversight of 
the BIA and contract compliance obligations, and the stark reality that 
needs on the ground were not being met, the Tribe embarked on Self-
Governance and has not looked back.
    For the first eight years of the program, we worked simply to 
regain control of reservation affairs and develop our governmental and 
administrative structure. The Tribal Council adopted over forty (40) 
ordinances, including the Tribe's own legislative procedures ordinance 
and a Tribal Budget Ordinance, to make our government more efficient 
and accountable. Today tribal ordinances total seventy (70). Again, 
creating a structure of government wasn't easy. During this beginning 
period, we were also able to stabilize our tribal government funding 
base, which required a lot of hard work and negotiation. We added to 
and improved our governmental capabilities, and set a course to begin 
planning for our future. Today, the Hoopa Tribe has assumed management 
authority over all Federal programs on its reservation.
Specific Hoopa Self-Governance Programs
    Self-Governance has allowed us the flexibility to design our own 
programs. Currently, the Tribe manages 54 programs, created in the last 
twenty years. These programs provide a range of services to our people, 
have spurred economic development on our reservation, and ensure 
quality management of our trust resources. We are proud of the fact 
that Hoopa was the first to compact health care with the Indian Health 
Service (IHS) in California, and now has a hospital, a dental clinic, 
and the only ambulance service and emergency room within 70 miles of 
the reservation and the next nearest hospital. Much of the other 
programs we manage would be Bureau of Indian Affairs (BIA) trust 
resources and services related programs.
    The Tribe established the first tribal court in California in 1983, 
adding a branch of government that the BIA had overlooked when it 
drafted the first tribal constitutions in the 1930's. The Tribe then 
established its own law enforcement department for resource protection 
and to enforce fish regulations. The Tribe then entered into a cross-
deputization agreement with Humboldt County, giving tribal police the 
authority to enforce state criminal laws. This relationship was the 
first in California and has been in existence for approximately 13 
years. The Tribe also enforces its own civil traffic code.
    The Tribe originally contracted forestry management from the BIA as 
part of a settlement agreement for mismanagement of tribal timber lands 
in 1983. Since 1988, we have compacted and independently managed our 
forest lands under a 10-year forest management plan that exceeds 
environmental standards required by Federal law. This plan has allowed 
our timber to be ``Smart Wood'' certified, a certification that allows 
lumber products produced from our timber to be exportable to Europe, 
which has created increased value and revenue from our annual timber 
sales. Our Forestry Department has received exemplary trust evaluations 
from then BIA's Pacific Regional Office (PRO).
    The Tribe also owns and operates its own logging company, creating 
seasonal employment and additional revenue from annual timber harvests. 
We also have our own nursery to grow trees for replanting. Forestry 
management includes forestry protection, and the Hoopa Tribe has 
created its own wildland fire protection program. All tribal 
firefighters meet the same qualification requirements of the United 
States Forest Service.
    When Hoopa assumed forestry management, we also took over the BIA 
roads department. Though the reservation contains over 100 miles of 
roads, the only Tribe receives $113,000 a year for roads maintenance 
from the BIA, not enough to maintain one mile of road. To maintain and 
upgrade our forest roads neglected for decades by the BIA, a percentage 
of our annual timber sales go toward road maintenance. Almost seven 
years ago, the Tribe invested in an aggregate plant that now helps 
subsidize the roads program by paying the salaries of roads department 
employees with revenues generated from state and federal contracts and 
from the sale of sand, gravel, road base and cement.
    The Tribe has also compacted realty from the BIA regional office. 
Through tribal ordinances, the Tribe assigns land to tribal members for 
housing, agriculture, and grazing. The Tribe created a public utilities 
district that has spent the past 15 years laying a reservation-wide 
water system. We are now in the process of developing a reservation-
wide irrigation system, using river water as the source, and are in the 
beginning stages of designing a reservation-wide sewer system that is 
projected to be needed to serve our community.
    Hoopa has its own Tribal Environmental Protection Agency, TEPA, 
which ensures that our resource management programs perform in 
compliance with Federal EPA regulations. TEPA monitors and enforces 
both air and water quality standards set by the Tribal Council. TEPA is 
also responsible for enforcement of the Tribe's solid waste ordinance. 
This past year the Tribe established the Office of Emergency Services 
to prepare and coordinate our departments and make the Tribe eligible 
for FEMA funding in the event of a disaster. The Tribe has its own 
fisheries department that monitors in-stream habitat and salmon 
populations in the Trinity River basin. This is a well-respected 
program that also contracts with the Bureau of Reclamation and the 
United States Fish and Wildlife Service for collection of fisheries 
enhancement data.
    We also have a housing authority, a human services department that 
provides alcohol and drug abuse counseling, as well as family crisis 
counseling, and an education department that encompasses preschool to a 
junior college branch campus.
    In regard to addressing poverty through economic development, we 
still have a long way to go. We have created programs addressing the 
obstacles to employment such as lack of education, training, and drug 
and alcohol abuse. With the collapse of the timber industry in our 
region in the 1970's we have been searching for a new industry that 
would establish an economic base from which we could build a local 
economy around. In 2003, the Tribe invested in, financed, and built the 
largest and most state-of-the-art modular housing plant on the West 
Coast, to provide an affordable product for Northern California 
residents. This plant produces homes using the same materials as on-
site construction for less than half the cost. Our hopes were that this 
would create the opportunity for tribal members to invest in businesses 
that provide services and/or materials to the plant. Because of the 
collapse of the housing industry, along with the housing mortgage 
industry, sales for our corporation, ``Xontah Builders'' has dropped 
significantly and employment in our plant has been reduced by 50 
percent. We are still in operation, operating with a skeleton crew of 
thirty-five (35) and anticipate increased sales once the housing market 
rebounds.
Funding Benefits and Government-to-Government Relationships
    A benefit of major importance in Self-Governance that gets little 
attention is how it has helped to generate additional funding for 
carrying out underfunded federal programs. Evidence of chronically 
underfunded Indian programs, sometimes as much as 75 percent within the 
BIA and IHS budgets, has been well-documented over the past several 
decades. Many tribes hesitate to assume federal programs under Self-
Governance because they understand there is not adequate money to 
support the tribe in carrying out the functions of the programs that 
the tribes want to administer. However, while Self-Governance is an 
authorizing law-not an appropriations law-it gives tribes the ability 
to generate significant additional dollars to help offset the cost of 
carrying out trust activities. At Hoopa, we can show that the Tribe 
matches $3.00 from other sources for each $1.00 compacted from the BIA 
that is used for trust management programs.
    Another benefit is the ability to redefine the working 
relationships between tribes and the BIA. For Self-Governance to work, 
tribes must develop and define a strong positive working relationship 
with their BIA counterpart. The Hoopa Tribe has enjoyed a solid working 
relationship with the BIA Pacific Regional Office (PRO) for more than a 
decade. In 1997, Hoopa and six other California tribes established the 
California Trust Reform Consortium. It was created to work with the PRO 
to address the trust resource management issues upon which many of the 
claims made in the Cobell litigation are based.
    In 1998, the Consortium and the PRO entered into an agreement that 
established the terms, conditions and operating procedures for the 
Consortium. The ability to develop a new working relationship with the 
Regional Office was made possible by the flexibility created by Self-
Governance. The agreement defines the management roles and 
responsibilities of the PRO and the tribes and includes provisions for 
a funding process through the PRO, a joint oversight advisory council, 
a process for developing ``measurable and quantifiable trust management 
standards,'' methods for resolving disagreements and disputes, and 
finally, a participatory process for annual trust evaluations. This 
working relationship that is unique to California has worked well for 
the last ten years.
Specific Problems that Impede the Development of Tribal Self-
        Governance: Trust Reform
    To be blunt, the specific problem to the development of Self-
Governance is the Office of Special Trustee (OST) and the Department of 
the Interior's (DOI's) redesign of the trust relationship. OST is an 
obstacle to tribal governmental, social, and economic development. The 
Self-Governance Program is designed to create flexibility. Trust Reform 
Reorganization is inflexible. I have presented to you the successes of 
my Tribe in developing government, social programs, and resource 
management programs, and in developing a unique working relationship 
with the BIA PRO. Please note that all of these occurred before the 
effort of Trust Reform Reorganization, and are now in direct conflict 
with it because they do not mirror the universal program as designed by 
the OST. Please sunset OST this session, or limit its purpose to the 
management of IIM accounts, or adopt language that will protect the 
agreements entered into with the Self-Governance Tribes.
    An example of this is the Office of Self Governance's decision not 
to honor an agreement entered into between the Hoopa Tribe and the 
tribes of the California Trust Reform Consortium and the PRO. This 
agreement was entered into in 1995 and approved by the Washington 
office by Special Authorization. This agreement allowed the Regional 
Office to distribute BIA funds for forestry and roads programs directly 
to the Tribes. This resolved a bureaucratic problem of having the PRO 
send the funds back to Washington and then resent from Washington to 
the tribes; a process which would delay receipt of the funds by several 
months. In 2008, however, the OSG reinterpreted the Self-Governance Act 
as prohibiting anyone, other than the OSG, from distributing funds to 
the Tribe. Because the language previously approved in 1995 was 
included every year in the Tribes' annual funding agreement, the Office 
of Self Governance (OSG) held up approval of the agreement for four 
months. The problem that was resolved through negotiation under Self 
Governance over thirteen years ago has now been reinstated because it 
does not comport with the DOI's model for trust reorganization.
    The OSG needs to understand that the Self-Governance Act was not 
designed to promote or protect bureaucratic activities; instead it 
exists to engage the direct participation of tribes to improve the 
provision of services to Indian people and the working relationships 
between the United States and tribes. We can only expect to see 
regression of all the progress made if dominating federal control re-
emerges, something that the Self-Governance Program sought to keep at 
bay.
    We view the reorganization plans of the DOI, starting with BITAM, 
as an attack on Self-Governance principles. There is an inherent 
conflict. Self Governance was designed to give tribes the flexibility 
to design their own programs and set their own internal funding 
priorities. Tribal Self-Governance programs, created before Trust 
reform, do not fit into the inflexible trust reform boxes DOI has now 
created. In the end, the DOI/OST trust plans will fail because tribal 
governments' local priorities and needs are not addressed in the 
reorganization plan. This is a plan for bookkeepers, not tribal 
governments.
    Congress needs to continue to protect the programs developed by the 
Section 139 tribes. These programs were designed before the DOI's Trust 
Reform Reorganization and have been described as being light-years 
ahead of other tribally-developed self-governance programs and DOI's 
trust reform programs. We need the continued protection of Congress to 
ensure the advances we have made to date are not undermined by DOI's 
Trust Reform Reorganization.
Non-BIA Mandatory Programs
    Another area of major concern for the Hoopa Tribe is compacting 
non-BIA programs. We are deeply disappointed that the Title IV 
amendment proposals no longer include the mandatory non-BIA programs. 
We understand that the Title IV Task Force agreed to remove this 
section, which was originally drafted by the Hoopa Valley Tribe, 
because of the strong opposition from Interior. It is short-sighted to 
leave out of Self-Governance those non-BIA programs that have statutory 
trust obligations to tribes and Indian people. The issue is this: Trust 
Responsibility is an obligation of the United States not the BIA. All 
federal agencies that perform operations that impact trust resources or 
rights of a tribe have a trust obligation to protect those resources 
and rights. Self-Governance affords tribes with the ability to ensure 
these resources are protected through compacting. We strongly feel that 
this ability should be extended to other federal agencies.
    On the Trinity River, which flows through the Hoopa Reservation and 
which the Tribe has federally protected fishing rights, the Bureau of 
Reclamation operates the Trinity River Division of the Central Valley 
Project. The Trinity Dam, completed in 1964, was the primary reason for 
80 percent declines in the Trinity River fishery resources, and has 
been the subject of numerous congressional and court actions associated 
with violations of the United States' trust obligations to the Tribe. 
To correct the declines in fishery resources, Congress passed various 
federal laws that mandated restoration of the Trinity River fishery 
resources as part of the Federal trust obligations to the Tribe. 
Ironically, the Bureau of Reclamation (BOR) has determined that the 
programs that are mandated by Congress to fulfill the trust obligations 
of the United States to our Tribe are not ``Indian Programs'' under the 
Self-Governance Act.
    The problem here is that funding for Trinity River habitat 
restoration is so underfunded that it jeopardizes a trust resource and 
threatens our federally-reserved fishing rights. The Hoopa Tribe is 
also recognized by law as a co-manager of the Trinity River Fishery. 
The Hoopa Valley Tribe has worked tirelessly for years to get 
Congressional action to address this inadequate funding level for the 
Trinity River Restoration Program. But what we are seeing instead is 
the movement of legislation to fund other river restoration efforts, 
without identifying additional funds, furthering the burden on the 
limited funds that the Trinity River Restoration Program currently 
relies upon. Trust Responsibility is not perceived by BOR as an 
obligation that gives tribal water and fishing rights any priority. 
Absent an acknowledgement that a trust duty is owed, protection of the 
Tribe's rights takes a back seat to other projects, even newly proposed 
projects.
    The House bill, H.R. 3994, included specific language in Section 
405(b)(2)(B) which would enable tribes to contract to perform programs, 
or portions thereof, that ``restore, maintain or preserve a resource 
(for example, fisheries, wildlife, water or minerals) in which an 
Indian tribe has a federally reserved right, as quantified by a Federal 
court.'' We refer you to our November 8, 2007, testimony before the 
House Committee on Natural Resources for details on the importance of 
this provision to the Hoopa Tribe, and how it would resolve problems we 
currently face with the BOR over the management of Trinity River 
programs. These problems include delays in executing contracts which 
result in a significant financial burden for the Tribe and 
administrative, programmatic and staffing nightmares for our programs. 
What needs to be understood, which does not seem to be by other federal 
agencies, is that the trust responsibility to tribes is the trust 
responsibility of the United States and it is owed to tribes by all 
federal agencies.
    Having said this, we ask that Congress include the federally-
reserved rights language in Title IV amendments. If this is not 
possible at this time, we ask that it be clear that current section 
403(b)(2) remains in the law. We would like to move forward with 
legislation that allows tribes to exercise their self-governance in 
other areas and in a more expansive way. With this, we ask you to take 
up and address the federally-reserved right issue with respect to non-
BIA agencies as soon as possible.
TITLE III of S. 1439, the Indian Trust Asset Management Demonstration 
        Act
    The Hoopa Tribe requests that the Senate Committee introduce Title 
III of the S. 1439, the Indian Trust Reform Act of 2005 as a stand-
alone bill. Hoopa worked with several tribes in the Northwest and the 
Committee staff on the development of this proposal. Title III of S. 
1439 would create the Indian Trust Asset Management Demonstration 
Project, which would allow tribes to continue their own tribally-
developed trust resource management programs. Title III authorizes 
tribes to design and manage their resources in a manner different than 
the Secretary as long as the tribes meet the requirements of tribal and 
federal law. Again, I point out that the Hoopa Tribe is already doing 
this with our forestry program, which is acknowledged nationally as a 
model program. Title III also would grandfather in Section 139 (131) 
tribes that currently manage their own trust resources into the 
Project. Active participation by tribal governments in the management 
of trust assets not only creates positive results, but reduces the 
chance of conflicts or breach of trust claims. We are committed to 
working with the Committee toward the enactment of Title III.
Conclusion
    We ask Congress to continue to support Self-Governance and protect 
the progress Self-Governance tribes have made from the potential 
negative effects of DOI's Trust Reform Reorganization. We ask that you 
sunset OST. We ask that Congress enact mandatory non-BIA provisions as 
soon as possible. If this is not possible at this time, we ask that 
section 403(b)(2) remain in Title IV and that Congress begin working on 
the future of Self-Governance with the participation of the tribes. 
Finally, we ask that you introduce Title III of S. 1439 as a stand-
alone bill. This concludes my remarks and I would be happy to address 
any questions you may have.

    Senator Murkowski. Thank you, Mr. Marshall. We appreciate 
your specific suggestions.
    With that, we will move to Chairman Steele.

 STATEMENT OF HON. JAMES STEELE, JR., TRIBAL COUNCIL CHAIRMAN, 
            CONFEDERATED SALISH AND KOOTENAI TRIBES

    Mr. Steele. Chairman Dorgan, Vice Chairwoman Murkowski, 
Committee members and particularly Senator Tester from Montana, 
my name is James Steele, Jr., and I serve as the Chairman of 
the Tribal Council of the Confederated Salish and Kootenai 
Tribes. On behalf of my tribes, I thank you for the opportunity 
to provide our views to your Committee.
    I have submitted a more detailed statement for the record 
that I will now summarize.
    The Indian Self-Determination Act of 1975 and the Tribal 
Self-Governance Act of 1994 have been two of the most 
successful and important pieces of Federal Indian legislation 
in the history of this Country. The last 20 or 30 years have 
seen great changes in Indian Country. Progress has been made, 
and it is no coincidence that this progress has been realized 
at the same time as the Indian Self-Determination Act has been 
implemented and improved by the passage of the Self-Governance 
Act.
    We were one of the first to enter into a contract with the 
BIA to operate and manage BIA programs in the 1970s. We were 
also one of the original 10 tribes to implement the Self-
Governance Act when it was just a demonstration project. Today, 
I believe we operate more Federal programs than any tribe in 
the Country. We have done so with excellent evaluations and 
clean audits. A recent report funded by the State of Montana 
showed that the Confederated Salish and Kootenai Tribes 
contributed $317 million a year to the Montana economy.
    My submitted statement discusses our success in operating 
our large electrical utility, known as Mission Valley Power, 
for the past 20 years that serves tribal and non-tribal members 
on the reservation; the Bureau of Indian Affairs' land title 
recording office for the Flathead Reservation since 1996; the 
BIA Safety of Dams program; the BIA's forestry program, fire 
programs, including one with the U.S. Fish and Wildlife Service 
for protection of the National Bison Range; the Individual 
Indian Monies Program and Title Plant functions for the 
Flathead Reservation.
    In addition to the programs I have just discussed, we 
compact for all other available BIA programs, including law 
enforcement, tribal courts, education, et cetera. There are 
areas where improvements are needed, and for these reasons, the 
enactment of the pending legislation is important.
    Work still needs to be done to ensure that the Federal 
Government will fully fund its obligation of paying full 
contract support costs, so that it can meet this legal 
requirement to contracting tribes. The Indian Self-
Determination and Education Assistance Act was not intended to 
be a money-losing proposition for the tribes. Nor was it 
intended as a mechanism for tribal governments to subsidize 
Federal programs and Federal statutory obligations.
    Just as tribally-contracted programs should be funded at 
the same level as federally-administered programs, so should 
they have equal liability coverage under the Federal Tort 
Claims Act. Unfortunately, the Interior Department has not 
established a successful overall record with respect to self-
governance contracting of non-BIA programs. We have been at the 
forefront in the effort to contract non-BIA programs primarily 
through our 14-year effort to contract activities at the 
National Bison Range.
    The Bison Range consists of three national wildlife 
refuges, located in the middle of the Flathead Indian 
Reservation, two of which are owned by the tribes. We are 
currently in the final stages of negotiations with the United 
States Fish and Wildlife Service for another annual funding 
agreement to contract activities and positions at the National 
Bison Range complex. We are hopeful that we can reach agreement 
on a new AFA that would return CSKT to the bison range and 
establish a productive tribal-Federal partnership.
    To fully realize Congressional objectives behind the Tribal 
Self-Governance Act, there needs to be an accompanying 
Congressional commitment to fully fund the Federal programs 
being contracted by the tribes. Shrinking or stagnant Federal 
funding requirements requiring supplementation of tribal 
dollars is a real problem for many tribes and a huge 
disincentive.
    We are supportive of the proposed legislation and in 
particular, agree with the definition for the term ``inherent 
Federal function.'' The proposed definition would provide 
consistency with Title V of the Act, thus promoting a more 
cohesive Federal self-governing policy overall.
    We support the inclusion of activities in the Office of 
Special Trustee as mandatory for inclusion in an AFA at a 
tribe's option. We support language which retains the existing 
authority for tribal self-governance, contracting of non-BIA 
programs which are of special geographical, historical or 
cultural significance to an Indian tribe. We support the 
language that we retain the existing statutory language 
mandating funding to tribes for contract support costs and the 
language regarding Federal Tort Claims Act coverage.
    I encourage this Committee to continue working with the 
tribes to improve the Tribal Self-Governance act and ensure 
that it fulfills tribal and Congressional objectives. We need 
to eliminate disincentives and remove barriers to self-
governance participation. The proposed legislation is a good 
start toward accomplishing those ends.
    On behalf of the Confederated Salish Kootenai Tribes, thank 
you for the opportunity to provide testimony and also thank you 
for the opportunity to submit more lengthy written testimony. 
Thank you.
    [The prepared statement of Mr. Steele follows:]

Prepared Statement of Hon. James Steele, Jr., Tribal Council Chairman, 
                Confederated Salish and Kootenai Tribes
    Greetings Chairman Dorgan, Vice-Chairwoman Murkowski and Committee 
members. My name is James Steele, Jr. and I serve as the Chairman of 
the Tribal Council of the Confederated Salish and Kootenai Tribes 
(``CSKT'' or ``Tribes''). On behalf of the Confederated Salish and 
Kootenai Tribes, I thank you for the opportunity to provide our views 
to your Committee.
    I am pleased to testify before this Committee on the draft 
legislation which would amend the Tribal Self-Governance Act's Interior 
Department provisions found in Title IV of the Indian Self-
Determination and Education Assistance Act. I note that, almost four 
years ago today, my predecessor, Tribal Chairman Fred Matt, provided 
testimony to your Committee on similar Self-Governance amendments.
    The Indian Self-Determination and Education Assistance Act (ISDEAA) 
of 1975 and the 1994 amendments to that act, known as the Tribal Self-
Governance Act (Title IV of ISDEAA) have been two of the most 
successful and important pieces of federal Indian legislation in the 
history of this country. They rank with the Indian Reorganization Act 
of 1934 as setting the stage for Tribal governments to determine our 
own affairs, protect our own communities, and provide for our own 
people in concert with our respective cultures and traditions. It has 
been a crucial step in realizing the federal policy of Indian Self-
Determination which was ushered in over thirty years ago. I say 
``step'' because I believe the federal government is still in the 
process of realizing that goal.
    The last twenty or thirty years have seen great changes in Indian 
country. Many Tribes have developed vibrant economies, established 
stronger governments, rebuilt communities, and achieved other hallmarks 
of progress and success. It is no coincidence that this progress has 
been realized at the same time as the Indian Self-Determination and 
Education Assistance Act has been implemented and improved, including 
by passage of the Tribal Self-Governance Act. The record shows that 
empowering Tribal governments and communities clearly results in 
benefits not only for Tribal members, but for surrounding communities 
and the larger public as well. After President Nixon signed the Indian 
Self-Determination Act into law the Salish and Kootenai Tribes we were 
one of the first to enter into a contract with the Bureau of Indian to 
operate and manage BIA programs. We were also one of the original 10 
tribes to implement the Self-Governance Act when it was just a 
demonstration project initiated by the late Congressman Sid Yates 
during his tenure as Chairman of the House Appropriations Subcommittee 
on the Interior. We have expanded the number of programs we operate 
ever since and today I believe we operate more federal programs than 
any Tribe in the country and we have done so with excellent evaluations 
and clean audits.
    At present, the CSKT Tribal government administers $25 million in 
self-governance funds, $150 million in contracts and grants, and $44 
million in Tribal revenue. Our government alone has 1,000 full-time 
employees. We are the largest employer on the Flathead Reservation, one 
of the largest employers in western Montana and we contribute over $30 
million in payroll and over $50 million in purchasing in the local 
economy. A recent report funded by the State of Montana showed that the 
Confederated Salish and Kootenai Tribes contribute $317 million to the 
Montana economy annually.
Tribal Self-Governance Act Successes
    Congress should be pleased to see that there is no shortage of 
success stories from Indian Tribes participating in the Interior 
Department's Tribal Self-Governance program. I am proud to testify that 
the Confederated Salish and Kootenai Tribes have many of our own. 
Following are just a few of these success stories:

   In the mid-1980s we took over total control and management 
        of the electrical utility on our reservation, known as the 
        Electrical Division of the Flathead Indian Irrigation Project 
        and then renamed as Mission Valley Power (MVP). This utility 
        serves every home and business on the reservation, to Indians 
        and non-Indians. It is considered one of the best run utilities 
        in the state of Montana. Since the Tribes took over, MVP has 
        replaced and updated much of the utility's infrastructure yet 
        managed to retain some of the lowest rates in the region. We 
        have even been approached by off-reservation residents asking 
        if the utility could be extended to serve them.

   CSKT has contracted the operation of the Bureau of Indian 
        Affairs' (BIA) Land Title Recording Office for the Flathead 
        Reservation since 1996. We are one of only Tribes I know of who 
        contract this program. Control of this program's activities 
        helped create the Tribal government capacity and infrastructure 
        that allowed us to partner with the BIA to address the problem 
        of land fractionation on the Flathead Indian Reservation 
        through a program for Tribal acquisition of fractionated 
        interests.

   In 1989, CSKT contracted the BIA's Safety of Dams (SOD) 
        program. One of the main objectives of this program is to 
        eliminate or ameliorate structural and/or safety concerns at 17 
        locations on the Flathead Reservation as identified by the 
        Department of Interior National Dams--Technical Priority Rating 
        listing. CSKT's SOD Program provides investigations, designs 
        and SOD modifications to resolve the concerns of the dams on 
        the list.

        The Tribes' SOD Program has been extremely successful and, 
        under our administration, Reservation dams have been modified 
        at a cost significantly lower than originally estimated by the 
        Bureau of Reclamation. For example, the Black Lake Dam was 
        completed in November 1992 at a savings of approximately $1.3 
        million below BOR estimates. The Pablo Dam Modification Project 
        was completed in February 1994 at a savings of nearly $140,000. 
        The first phase of the McDonald Dam SOD program has been a 
        ``model'' program which has been used by other tribes.

   Our Forestry Program is another example of a success made 
        possible by the Tribal Self-Governance contracting framework. 
        In Fiscal Year 1996, following a year-long Tribal study of the 
        assumption of BIA's Forestry programs, CSKT compacted all of 
        those Forestry activities. We also administer fire pre-
        suppression and suppression activities through other 
        agreements, including one with the U.S. Fish and Wildlife 
        Service for fire protection at the National Bison Range, which 
        is located on our Reservation.

   In Fiscal Years 1997 and 1998 respectively, CSKT began 
        compacting for administration of both the Individual Indian 
        Monies (IIM) program and the Northwest Regional Office title 
        plant functions for the Flathead Reservation. Few tribes 
        operate these programs. The fact that CSKT does so is a 
        testament to our strong commitment to exercise our full 
        authority under the Tribal Self-Governance Act.

    In addition to the above-listed areas, CSKT compacts for all other 
available BIA programs, including: law enforcement; Tribal courts; 
education programs, etc. Our Tribal government infrastructure and staff 
is well-equipped to administer these programs and we are very 
experienced in federal contracting requirements. Our Natural Resources 
Department alone has well over 100 employees, including biologists, 
botanists, hydrologists, wildlife technicians, etc.
    While it is outside the scope of the Indian Self Determination Act 
or the Tribal Self Governance Act it may also be noteworthy that we 
have signed an innovative agreement with the State of Montana governing 
hunting and fishing on all lands on the reservations that applies to be 
both tribal members and non-Indians. I point this out because that 
agreement is an important exercise in tribal governmental authority, 
which is one of the underpinnings of tribal Self Determination and Self 
Governance.
    One of the great benefits of the Tribal Self-Governance contracting 
scheme is that it results in capacity building at the Tribal level (as 
illustrated by our above-referenced Land Title Records Office example). 
This capacity building results in benefits for Tribal governments, 
Tribal enterprises, and communities as a whole--both Indian and non-
Indian. It helps provide quality jobs for Tribal members who want to 
remain in the Tribal community. It also helps to provide a stronger 
civic structure that supports greater economic development, 
environmental protection, safety, and other public benefits.
Areas Where Improvements Are Needed
    Contract Support Costs. Work still needs to be done to ensure that 
the federal government will fully fund its obligation of paying full 
contract support costs so that it can meet this requirement to 
contracting Tribes. As we have stated to this Committee before, the 
Indian Self-Determination and Education Assistance Act was not intended 
to be a money-losing proposition for tribes, nor was it intended as a 
mechanism for Tribal governments to subsidize federal programs and 
federal statutory obligations. Unfortunately, the reality of Tribes 
having to absorb indirect costs associated with contracting federal 
programs currently serves as a real disincentive for Tribes to contract 
such programs as intended by Congress. We assume that all other federal 
contractors fully recover their indirect costs when doing business with 
the federal government and have never understood why tribes get 
disparate and negative treatment in this regard, especially since our 
indirect cost rates are negotiated pursuant to the same OMB criteria as 
are used by other contractors.
    Federal Tort Claims Act (FTCA) coverage. Just as Tribally-
contracted programs should be funded at the same level as federally-
administered programs, so should they have equal liability coverage. 
CSKT is concerned about the apparent trend within the U.S. Department 
of Justice to opine that FTCA coverage does not extend to contracting 
Tribes, their employees or volunteers under various circumstances. 
This, like insufficient contract support cost funding, creates a 
fundamental, and powerful, disincentive for Tribal contracting and 
thereby undermines the Congressional objectives behind the Act.
    Contracting of Non-BIA Programs. Unfortunately, the Interior 
Department has not established a successful overall record with respect 
to Self-Governance contracting of non-BIA programs. The Confederated 
Salish and Kootenai Tribes have been at the front of the effort to 
contract non-BIA programs, primarily through our nearly 14-year effort 
to contract activities at the National Bison Range Complex (NBRC). The 
NBRC consists of three National Wildlife Refuges located in the middle 
of the Flathead Indian Reservation. It is also noteworthy that the 
bison at the NBRC descend from a herd once owned by tribal members. All 
three refuges are administered by the U.S. Fish and Wildlife Service 
(FWS) as part of the National Wildlife Refuge System. Two of the NBRC 
refuges, the Ninepipe and Pablo Refuges, are actually located on 
Tribally-owned land; FWS operates them as refuges through easements 
granted by CSKT.
    In 14 years, the FWS has entered into only one other AFA and that 
is in Alaska for some work to be done at Yukon Flats with the Council 
of Athabascan Tribal Governments. That AFA does not contain any 
personnel transfers.
    CSKT is hopeful that the Department's record in this area will 
change. Certainly there have been supporters at the policy making level 
of the Interior Department (such as Secretary Kempthorne, Deputy 
Secretary Scarlett, Associate Deputy Secretary Cason and Assistant 
Secretary Laverty) and there have been some excellent people for us to 
work with in the field (such as Dean Rundle from the Denver office and 
others) but there have also been a number of opponents, primarily 
entrenched federal employees or retirees who do like to see things 
change. Were it not for our perseverance and the support from 
headquarters, we would likely still be mired down. We are currently in 
the final stages of negotiations with the U.S. Fish and Wildlife 
Service for another Annual Funding Agreement to contract activities and 
position at the NBRC. We are hopeful that we can reach agreement on a 
new AFA that would return CSKT to the National Bison Range and 
establish a productive Federal-Tribal partnership.
    Tribal Subsidizing of Federal Programs. To fully realize 
congressional objectives behind the Tribal Self-Governance Act, there 
needs to be an accompanying congressional commitment to fully funding 
the federal programs being contracted by Self-Governance Tribes. 
Shrinking or stagnant federal funding necessitating supplementation of 
Tribal dollars is a real problem for many Tribes. I realize that, as an 
appropriations matter, this is somewhat of a separate issue from the 
Self-Governance legislation itself. It is, however, integrally related 
to achieving the goals of the Act and merits attention.
Draft Title IV Amendments Legislation
    As has been our position before this Committee with past proposals 
for Self-Governance amendments, CSKT is generally supportive of the 
proposed legislation.
    With respect to Sec. 401(8) of the proposed legislation, CSKT 
believes that inclusion of a definition for the term ``inherent federal 
function'' is very important, and we are glad to see it addressed in 
the current legislation before the House and the draft legislation 
presented to this Committee. During some of our past negotiations, the 
discussion of what constitutes an ``inherent federal function'' within 
the meaning of the Tribal Self-Governance Act has at times been 
frustrating. Providing, for the first time, a definition for the term 
in Title IV is a good start for addressing this issue. The proposed 
definition would provide consistency with Title V of the Act, thus 
promoting a more cohesive federal Self-Governance policy overall.
    We support the explicit identification, in Sec. 405(b)(1)(A), of 
Office of Special Trustee (OST) activities as mandatory for inclusion 
in an AFA (at a Tribe's option). This reflects organizational changes 
within the Interior Department since the Act was originally passed, and 
makes clear that the programs are still available for Tribal compacting 
despite any reorganization. CSKT has been entering into AFA's with the 
OST for performing appraisal activities.
    CSKT also supports Sec. 405(b)(2) of the proposed legislation, 
which retains the existing authority for Tribal Self-Governance 
contracting of non-BIA programs which are of special geographical, 
historical or cultural significance to an Indian Tribe. As indicated 
above, CSKT has utilized this authority to enter into a past AFA with 
the U.S. Fish and Wildlife Service covering activities at the National 
Bison Range Complex and we are currently in negotiations with the 
Service for a new AFA there.
    CSKT is pleased to see that the current Title IV amendments 
legislation on the House side (H.R. 3994), as well as the proposed 
Senate legislation, no longer contain the prohibition of ``compacting'' 
the Flathead Agency Power Division or Flathead Agency Irrigation 
Division which is currently found in 25 U.S.C. Sec. 458cc(b)(4)(C). 
CSKT has contracted the Power Division under a P.L. 638 contract since 
1987 and, as indicated above, has built a solid record of success in 
administration of the utility, now known as Mission Valley Power.
    It is important that Sec. 409(c) of the proposed legislation would 
retain the existing statutory language mandating funding to tribes for 
contract support costs. As noted above, this is a fundamental issue for 
realizing the full potential of the Tribal Self-Governance objectives. 
Stronger efforts to secure adequate appropriations for this area are 
badly needed.
    The provision in Sec. 412(a) of the proposed legislation which 
further clarifies application of the Federal Tort Claims Act (FTCA) 
will hopefully assist in clarifying the federal responsibilities for 
liability coverage when Tribes contract for administration of federal 
programs and activities. We continue to support the optional 
incorporation of Title I provisions into an AFA, as stated in 
Sec. 412(b) of the proposed legislation. Such incorporation can help 
strengthen an AFA and supply additional tools for contracting Tribes. 
It also promotes consistency between ISDEAA's Titles.
Closing Comments
    I believe the Confederated Salish and Kootenai Tribes are a good 
example of how Tribes can thrive under the Tribal Self-Governance 
framework. As illustrated by this testimony, surrounding communities--
both Indian and non-Indian--also benefit from this type of Tribal 
success. I encourage this Committee to continue working with Tribes to 
improve the Tribal Self-Governance Act and ensure that it fulfills 
Tribal and Congressional objectives. Together, we need to make sure 
that there are incentives to participate in the Tribal Self-Governance 
framework. Similarly, we need to eliminate disincentives and remove 
barriers to Self-Governance participation. The proposed legislation is 
a good start towards accomplishing those ends.
    On behalf of the Confederated Salish and Kootenai Tribes, thank you 
for the opportunity to provide testimony. I would be happy to answer 
any questions.

    Senator Murkowski. Thank you, Chairman Steele.
    Finally, we will go to Mr. Peltola.

 STATEMENT OF GENE PELTOLA, PRESIDENT/CEO, THE YUKON-KUSKOKWIM 
  HEALTH CORPORATION, ACCOMPANIED BY: LLOYD B. MILLER, ESQ., 
 PARTNER, SONOSKY, CHAMBERS, SACHSE, ENDRESON AND PERRY, LLP; 
 DAN WINKELMAN, ESQ., GENERAL COUNSEL, YUKON-KUSKOKWIM HEALTH 
                          CORPORATION

    Mr. Peltola. Good afternoon, Chairman Dorgan, Vice Chair 
Murkowski, Members of the Senate Committee on Indian Affairs. I 
am Gene Peltola, President and CEO of the Yukon-Kuskokwim 
Health Corporation.
    YKHC provides health care to the federally-recognized 
tribes in Alaska. My testimony today simply focuses on the 
disparities within Title IV. The Yukon-Kuskokwim Health 
Corporation has been contracting with the Indian Health Service 
since before the enactment of the Indian Self-Determination 
Act. Today we provide comprehensive health care to 28,000 
largely Yupik Eskimo people across a roadless area the size of 
Oregon, where the average per capita income is $15,000. Gas in 
our main hub city of Bethel is almost $5 per gallon, and in our 
villages it is approaching $7 per gallon, the same price we pay 
for milk.
    When considering the high energy, food and personnel costs 
against an IHS appropriation that does not allow for mandatory 
inflation costs, providing health care in our region is a daily 
and extraordinary challenge.
    This is especially true when considering the enormous 
health disparities our region faces. For example, Alaska 
Natives' leading cause of death is cancer. The Alaska Native 
cancer mortality rate is 26 percent higher than the U.S. 
Caucasian rates. While cancer mortality for the rest of 
Americans is decreasing, it is increasing for us.
    Also terribly disturbing are our region's high suicide 
rates. Our age-adjusted suicide rate for 15 to 19 year olds is 
17 times the national average, something that is entirely 
preventable.
    Over 20 years ago, former Committee Chairman Inouye wrote 
that the single greatest impediment to the success of tribal 
self-determination was the failure of the IHS and BIA to pay 
contract support costs. I can testify that what Chairman Inouye 
said in 1987 is just as true today.
    In Fiscal Year 2007, YKHC's annual true shortfall exceeded 
$10 million for the very first time. It has gone up 
approximately $1 million each year as we seek to take on the 
ever-growing IHS programs in a climate of ever-rising costs. 
This is truly a crisis.
    In 1992 and 1993, when we began operating the local IHS 
hospital, we suffered a shortfall of over $2.2 million in 
contract support costs. The impact to YKHC was immediate. Over 
40 positions were laid off within months. Subsequent rounds of 
reductions in force and layoffs occurred in 1997, 2006 and 
2007. These events have had a very severe impact on the quality 
of care that YKHC can provide our people.
    However, the impact is not just measured by $10 million in 
shortfall. As a result of that underpayment, YKHC cannot employ 
as many primary care providers and we therefore lose an 
additional $6 million in revenue from third parties like 
Medicaid.
    Across Indian Country, we call this the compacting penalty. 
Any tribe taking on a Federal trust program has to be ready 
either to subsidize the trust responsibly, which we cannot do, 
or else essentially relieve the Government of part of that 
trust responsibility by cutting the trust programs. Whether 
that means cutting a police officer or a realty specialist for 
a tribe compacting with the BIA, or cutting a doctor or nurse 
for a tribal organization like ours, compacting with the Indian 
Health Service, the cut is the same. Nowhere else does the 
Government deal with its contractors in this way, whether it is 
a Halliburton or Acme, Congress always makes appropriations 
necessary to meet the Government's obligation.
    But even after the Supreme Court announced in the Cherokee 
case that our contracts are as good as gold, we continue to 
suffer enormous underpayments. This has to change.
    I have six recommendations today. First, the Committee 
should consider directing the GAO to study the actual impact of 
these continuing severe shortfalls. Second, the Committee needs 
to look closely at what is going on with the BIA in this area. 
Tribes are experiencing a near 100 percent shortfall in the 
payment of their personal costs associated with carrying out 
BIA contracts.
    Third, the Committee needs to put a halt to the National 
Business Center's unilateral change in its indirect cost 
practices. The Committee should impose a moratorium on all 
changes until there has been thorough tribal consultation.
    Fourth, the Committee should pressure the BIA to develop 
expertise in the details of contract support cost 
administration. If the BIA's data is not reliable, it 
jeopardizes all tribal self-determination.
    Fifth, I would ask the Committee to look into the status of 
the pending contract support litigation. Litigation is grinding 
on in various courts and boards, and one judge has recently 
ruled that tribes have stood by and waited to file their claims 
while a class action was pending, actually have lost all their 
rights to pursue those claims. This was a shock, considering 
that in parallel litigation against the BIA, the very same 
tribe did rely on a class action to protect their rights, and 
in fact, they recovered their share of over $100 million in 
damages awarded against the BIA.
    The fairest approach would be for Congress to extend the 
statute of limitations for all tribal contractors to pursue 
their claims over historic IHS underpayments from prior years. 
A more comprehensive approach would be a legislative change to 
create a new claim payment mechanism that would permit all 
tribes to receive appropriate compensation through the judgment 
fund without draining litigation that takes years to resolve.
    Finally, the current contract support shortfall of over 
$100 million from the Indian Health Service, which has received 
absolutely no increase in six years, and the $40 million 
shortfall from the BIA, must finally be eliminated. This can be 
done through a combination of appropriation increases by 
removing the current caps and by tapping into agency 
collections and unobligated balances from prior years. Surely, 
using leftover agency balances to meet the Government's legal 
obligations to Indian tribes is a higher priority than to 
supplement internal agency operations, as currently occurs.
    Ultimately, receiving full contract support costs is not 
just about money. For tribal organizations like YKHC, it means 
being able to systematically address cancer, suicide and other 
health disparities.
    I thank you for the opportunity and honor to address you 
and your Committee today. I believe that full contract support 
appropriations is one small step, but it would be a giant leap 
in addressing the health disparities of Native Americans 
nationwide. Thank you.
    [The prepared statement of Mr. Peltola follows:]

Prepared Statement of Gene Peltola, President/CEO, The Yukon-Kuskokwim 
                           Health Corporation
    Good afternoon. Mr. Chairman and members of the Committee:
    The Yukon-Kuskokwim Health Corporation has been contracting with 
the Indian Health Service since before the enactment of the Indian 
Self-Determination Act. Today we provide comprehensive healthcare to 
28,000 largely Yupik Eskimo people across a roadless area the size of 
Oregon, where the average per capita income is $15,000. Gas in our main 
hub city of Bethel is almost $5 per gallon, and in our villages it is 
approaching $7 per gallon, the same price we pay for milk. When 
considering the high energy, food and personnel costs against an Indian 
Health Service appropriation that does not allow for mandatory medical 
inflation costs, providing healthcare for our 58 tribes is a daily and 
extraordinary challenge.
    This is especially true when considering the enormous health 
disparities our region faces. For example, Alaska Natives' leading 
cause of death is cancer. The Alaska Native cancer mortality rate is 
approximately 26 percent higher than for U.S. Caucasians. While cancer 
mortality for the rest of Americans is decreasing, it is increasing 
dramatically for Alaska Natives. Particularly disturbing are our 
region's high suicide rates. Our age-adjusted suicide rate for 15-19 
year olds is 17 times the national average.
    Over 20 years ago, former Chairman Inouye of this Committee wrote 
that the single greatest impediment to the success of tribal self-
determination was the failure of the Indian Health Service to pay 
contract support costs. I can testify that what Chairman Inouye said in 
1987 is just as true today.
    In the just concluded Fiscal Year 2007, YKHC's annual true 
shortfall exceeded $10 million for the very first time, and it has gone 
up approximately $1 million each year as we seek to take on ever 
growing IHS programs in a climate of ever rising costs. This is truly a 
crisis.
    Most people hear about ``contract support costs'' and their eyes 
glaze over. But these are very real costs, either the fixed costs of 
our overhead that are set by the government, based upon independent 
annual audits, or else the cost of providing workers compensation 
insurance, and health and retirement benefits to our staff. That's what 
contract support costs are. They are fixed and they are real.
    In 1992 and 1993, when we began operating the local IHS hospital, 
we suffered a shortfall of over $2.2 million in contract support costs. 
The impact to YKHC was immediate: over 40 positions were laid off 
within months after hospital operations began. Subsequent rounds of 
reductions in force and layoffs occurred in 1997, 2006 and 2007.
    These events have had a very severe impact on the quality of care 
that YKHC can provide. However, the impact is not just measured by the 
$10 million shortfall. As a result of that underpayment, YKHC cannot 
employ as many primary care provider teams. The care that those teams 
provide to our patients is typically billed to Medicare, Medicaid, or 
private insurance when available. The result is that $10 million in 
reduced direct care services translates into an additional $6 million 
in lost revenues from these sources. So, the real loss is at least $16 
million to our programs, and even more when you consider that we direct 
those lost third-party revenues back into staffing additional teams 
throughout our villages.
    Across Indian Country, we call this the compacting penalty, 
although it is equally applicable to self-determination contracting 
tribes. Any tribe taking on the administration of a federal trust 
program--whether from IHS or the BIA--has to be ready either to 
subsidize the trust responsibility (which we cannot do) or else 
essentially relieve the government of part of that trust responsibility 
by cutting the trust programs. Whether that means a police officer or a 
realty specialist for a tribe compacting with the BIA, or a doctor or a 
nurse for a tribal organization like ours compacting with the IHS, the 
cut is the same.
    Nowhere else does the government deal with its contractors in this 
way. Whether it is Haliburton or Acme, Congress always makes the 
appropriations necessary to meet the government's contract obligations. 
But even after the Supreme Court announced in the Cherokee case that 
our contracts are as good as gold, we continue to suffer enormous 
underpayments. This has got to change.
    I have six recommendations.
    First, the Committee should consider directing the General 
Accountability Office to study the actual impact of the continuing 
shortfalls tribes are suffering in their contract payments. I am sure 
YKHC's experience is not unique, and hopefully a GAO report will help 
energize Congress to do its part in remedying the situation. As part of 
the GAO study, some examination should be made into IHS's new policy, 
announced two years ago, not to provide any contract support costs 
whatsoever for any new contract or compact operation, regardless of 
circumstance, and notwithstanding Congress making available up to $5 
million for this purpose every year. The current situation is bringing 
to a stop all forward progress on tribal self-determination and self-
governance.
    I also recommend that the Committee request that IHS provide its 
own comprehensive report on its contract support cost shortfalls. IHS 
provided such a report to Congress in 1997 and a new report is long 
overdue. IHS should be instructed to work in close consultation with 
self-governance Tribes in the development of its report.
    Second, the Committee needs to look closely at what is going on 
with the BIA in this area. I know from our sister organization in 
Southwest Alaska, the Association of Village Council Presidents, that 
Tribes are experiencing a near 100 percent shortfall in the payment of 
their personnel costs associated with carrying out BIA contracts. 
Again, this means Tribes are either subsidizing or, in Alaska cutting, 
these vital trust services.
    Third, the Committee needs to put a halt to the National Business 
Center's unilateral change in its indirect cost practices. As a non-
profit 100 percent of our Board costs are covered in our indirect cost 
pool. But the same is not true of tribal governments, and historically 
NBC has only permitted 50 percent of Tribal Council costs to be treated 
this way. But very recently, NBC eliminated even the 50 percent rule, 
now demanding timekeeping records from all Tribal Council members. The 
Committee should impose a moratorium on this change until there has 
been thorough Tribal consultation.
    Fourth, the Committee should pressure the BIA to develop expertise 
in the details of contract support cost administration, now that the 
BIA has begun implementing its first-ever contract support cost policy 
in over 30 years. Congress depends heavily on the integrity of the data 
both agencies provide. If BIA's data is not reliable, it jeopardizes 
all tribal self-determination.
    Fifth, I would ask the Committee to look into the status of the 
pending contract support litigation. After 12 years of litigation, YKHC 
recently settled its old claims for approximately $42 million. But this 
was the exception. For other Tribes, litigation is grinding on in 
various courts and Boards. One judge just ruled that tribes who stood 
by and waited to file their claims while the Zuni class action 
litigation was pending actually lost all their rights to pursue those 
claims. This was a shock, considering that in parallel litigation 
against the BIA, the very same tribes were years ago told that they 
could rely on a class action to protect their rights, and in fact they 
recovered their share of over $100 million in damages awarded against 
the BIA.
    The fairest approach would be for Congress to extend the statute of 
limitations for all tribal contractors to pursue their claims over 
historic IHS underpayments from prior years.
    A more comprehensive approach would be a legislative change to 
create a new claim payment mechanism that would permit all tribes to 
receive appropriate compensation through the Judgment Fund, without 
draining litigation that takes years to resolve.
    In the absence of reform in this area along these or some other 
lines, I am deeply concerned that YKHC's experience will prove to be 
the exception, and that even the 15 percent of tribal contractors that 
have dared to litigate will never see their rights vindicated.
    Finally, the current contract support shortfall of over $100 
million from IHS--which has received absolutely no increase in 6 
years--and the $40 million shortfall from the BIA, must finally be 
eliminated. In addition to the reforms proposed years ago in S. 2172 
and H.R. 4148, this can be done through a combination of appropriation 
increases and by using agency collections and unobligated balances from 
prior years. In this respect, surely using leftover agency balances to 
meet the government's legal obligations to Indian tribes is a higher 
priority than to supplement internal agency operation as currently 
occurs.
    Ultimately, receiving full contract support costs is not just about 
money. For tribal organizations like YKHC it means being able to 
systematically address cancer, suicide and other health disparities.
    Full contract support costs represent the ability to hire a 
provider to perform portable mammograms in our villages to detect 
breast cancers early in stage 1 when the 5 year survival rate is over 
90 percent versus a later stage; it represents the ability to hire a 
counselor to deploy a community-wide behavioral health initiative in 
order to save a teenager from taking his own life.
    The funding of full contract support costs and--more importantly--
its relationship to directly improving American Indians' and Alaska 
Natives' health status, is a matter entirely within Congress's power to 
address!
    Thank you for the opportunity and honor to address your Committee 
today.

    Senator Murkowski. Thank you, Mr. Peltola.
    Chairman Dorgan.
    The Chairman. Mr. Cason, I have read your testimony. Let me 
ask a question about something Mr. Peltola just referred to, 
and that is the ten-day turnaround time with respect to 
reimbursements. The Indian Health Service has, it seems to me, 
done better in that regard than the Bureau of Indian Affairs. 
Can you tell me what is happening at the BIA?
    Mr. Cason. It is my understanding, Mr. Chairman, that it 
ends up being a combination of a lack of formulaic approach for 
distributing money, a staffing issue within our Office of Self-
Governance and mechanisms for getting money out to tribes. So 
it is not just one root cause why it takes BIA longer than IHS 
to distribute money to the tribes.
    It is an issue that is on the plate of the Office of Self-
Governance, to try to improve the timeliness of making 
payments. That is a thing that we would like to try to 
accomplish, but there are some impediments.
    The Chairman. Well, can they make those improvements? Will 
they make those improvements? Will they commit to the tribes 
they will make those improvements?
    Mr. Cason. At this point, Mr. Chairman, I am not sure that 
the Office of Self-Governance has the answer on how to fix it 
to get to a point where they can make 10-day payments. But 
their objective is to speed the process as much as they can.
    The Chairman. Well, but it seems to me that there has to be 
some accountability. I understand the concern of the tribes, if 
they don't have the funding in hand, and they have incurred the 
cost, how do they deal with that? So we are wanting to be 
encouraging to the tribes with respect to self-governance and 
self-determination. And then what we hear is what we so often 
hear, I don't like to be overly critical of the BIA, but I am 
obviously upset at the moment that we don't have an Assistant 
Secretary as the head of the BIA. That was vacant for two 
years, filled for one year and now vacant again. There is 
something dreadfully wrong with this picture.
    And then we have hearings, not just on this issue, but we 
have hearings on virtually every issue and try to find out why 
is this not moving forward, why is this happening, why is there 
the backlog, why is there not approval? I was in a State a 
while back and saw a building that had sat, brand-new, 
beautiful building, sat empty for a year while they were 
waiting for somebody in the BIA to sign some papers. Nobody 
would sign the papers.
    So when I hear Mr. Peltola and others talk about 
reimbursements, I notice that the Indian Health Service has 
made whatever adjustments that it is necessary for them to make 
in order for them to have a much better record than the BIA at 
this point. I guess my question is, will you make a commitment 
to improving things there and if so, when?
    Mr. Cason. As I said, Mr. Chairman, it is an initiative on 
the part of the Office of Self-Governance to do a better job. 
They do have some limitations in their processes and their 
staffing too.
    The Chairman. What does that mean? I don't understand what 
that means. I don't understand what formulaic means. Your 
answer is not something I understand. What does formulaic mean?
    Mr. Cason. Okay. Well, as I understand the distribution of 
the IHS funding, it is basically a funding paradigm that, I 
have a set number of dollars that I am distributing in a year. 
When I get to the next year, I am able to distribute those 
number of dollars right up front as soon as I get an 
appropriation.
    Then if there are any additional dollars to be distributed 
as a result of an appropriation, then separate actions are 
taken on the incremental dollars. We don't have the same 
approach within Indian Affairs, that we end up negotiating on a 
year-by-year basis the contracted amounts that we would give 
based upon the appropriation we have. So we have more of a 
process to get to a distributed amount than the IHS approach.
    That is compounded by the fact that the Office of Self-
Governance operates with a staffing difficulty or shortfall, so 
the amount of work that they have to do with the staffing that 
they have leaves them in a position that they are not as timely 
as they need to be.
    The Chairman. Well, the staffing shortfall, have you 
requested funding to meet that in order to respond to it?
    Mr. Cason. Mr. Chairman, I am not sure about what Assistant 
Secretary Artman has done in terms of requesting funding for 
that particular problem.
    The Chairman. Well, who would be sure?
    Mr. Cason. I think that would be the Office of Self-
Governance and their budget shop that would be able to tell you 
that.
    The Chairman. But you come to a hearing and say we don't 
have the staffing, do you think that your agency requested the 
staffing?
    Mr. Cason. As I said, Mr. Chairman, I am not specifically 
sure about whether they requested additional staffing for that 
specific office.
    The Chairman. I don't understand that answer at all. 
Somebody--well, you have come, I don't mean to badger you, but 
look, you have come to testify on this subject, you have told 
us the funds aren't getting out on time because of staffing 
issues, among other issues. And I ask you, well, did you 
request adequate staffing and you say, I don't know.
    Mr. Cason. I would be happy to answer the question for the 
record, go back and research it and find out exactly what the 
answer is and provide that to the Committee.
    The Chairman. All right. I would appreciate it if you would 
do that.
    [The information referred to follows:]

    The Fiscal Year 2009 President's Budget does not request increased 
funding or FTEs for the Self-Governance program in Indian Affairs. 
However, Indian Affairs plans to add two additional staff to the 
program in 2008 through the use of existing resources within the Indian 
Affairs budget.

    The Chairman. I am going to submit some additional 
questions particularly dealing with contract health. I 
appreciate all the witnesses being here today.
    Senator Murkowski. Thank you, Mr. Chairman.
    We know that it is not always exclusively about the money. 
But when it comes to the contract support costs, and Mr. 
Peltola, I think you said this, you have taken on the 
obligation to provide for, at least out in YKHC, a level of 
health care and those obligations. You have undertaken, you 
have incurred the costs and yet, you are not reimbursed the 
actual costs out there, you are not reimbursed even close 
sometimes to what those costs are.
    And nowhere else, nowhere else can you think of a situation 
where the agreement is, well, you take on this obligation and 
assume the cost, and we will see how much we actually end up 
reimbursing you, and then you throw in issues of timeliness, 
the level of frustration is understandably high. Certainly we 
hear this time and time again in the State of Alaska. In my 
opening comments, I said, there are real good things we can say 
about self-governance. But I think we also need to appreciate 
that we do need to keep the commitment that we have made there.
    You mentioned, Mr. Peltola, the initial number of layoffs 
that you were forced to move forward with this $2.2 million 
shortfall that you saw, I think it was in 1990. Do you have any 
idea, over the course of the years, then, how many folks you 
have actually had to lay off? Do you keep data in terms of the 
lost jobs, the lost revenues, the other impacts that you have 
to YKHC as a result of contract support cost shortfalls?
    Mr. Peltola. In 1990, 1997, 2006, 2007, we had to lay off 
approximately 150 people.
    Senator Murkowski. A hundred and fifty throughout that? And 
then as you have indicated, when you have to make those 
staffing decisions, what happens is a level of service is also 
cut off to the Natives in the region. So that is 150 direct 
jobs, but you also have a ripple effect within the community, I 
would imagine.
    Mr. Peltola. Yes, there is, Senator Murkowski. On top of 
that, as you are well aware, in 1980, Congress appropriated a 
staffing package for a new hospital in Bethel, funding 56 new 
positions. That money never did reach the Bethel Hospital, none 
of it.
    Senator Murkowski. For any of those positions?
    Mr. Peltola. Fifty-six positions were funded by Congress 
and none of that money reached Bethel Regional Hospital.
    Senator Murkowski. You were successful in filing suit 
against the Government for contract support costs. It is my 
understanding that the vast majority of self-governance tribes 
is about 85 percent of them who have claims do not actually 
file their contract support cost claims. Why is that? Why do 
you figure that is?
    Mr. Peltola. I really don't have an accurate answer on 
that. I think a lot of them are waiting to see what is 
happening. YKHC was fortunate enough on the 23rd of May of 1996 
to file a claim for a contract support shortfall. We have 
updated that every year. Just recently, the first week of 
December, well, last fall, after 11 years, our claim finally 
got to the U.S. Contract Court of Appeals.
    Senator Murkowski. Eleven years to get there?
    Mr. Peltola. It took 11 years to get there, and we were 
ordered into mediation. After five and a half days of 
mediation, we settled the claim with a $25 million settlement 
on the claim with interest back to May 23rd, 1996. It totaled 
almost $43 million. That money came from the U.S. Treasury in 
mid-February.
    Senator Murkowski. I might suggest that one of the reasons 
why you don't have more filing the claims is just the length of 
time that you were waiting and fighting, the legal costs that 
you incur, and you are trying to provide health care out in an 
area that desperately needs it. Your first job is not to fight 
the Federal Government for the promises they have made to you. 
So we appreciate what you do out there.
    We don't have a clock here running, but I think my five 
minutes are up. I will turn to Senator Tester, and we will have 
an opportunity for second rounds.
    Senator Tester. Thank you, Madam Vice Chair.
    Just real quickly, Chairman Steele, would you agree in your 
situation that the IHS reimbursement works better than the BIA 
reimbursement?
    Mr. Steele. I don't know if I would go that far. I would 
just say, in kind of indirectly answering, we had contracted 
the contract health services from the Indian Health Service. 
Because the contract support costs weren't adequate and we were 
seeing that we were having to potentially subsidize with tribal 
dollars those costs, we retroceded that back to the Indian 
Health Service. Because it was weighing heavy on our tribal 
side of the budget, our tribal dollars. And we weren't getting 
the adequate funding for the contract support costs. So we 
retroceded back.
    So I am not really in a position to answer adequately your 
question, Senator. But I don't know that I would go that far.
    Senator Tester. Sitting in this position for the last 16, 
17 months, we have had a lot of folks come in, we have had a 
lot of hearings. Last week, for example, it was inadequate 
funding on oil well leases, particularly in North Dakota, on 
that reservation. This week it happens to be inadequate 
staffing for this law enforcement, health care.
    And if you have been here in the Committee meetings, I know 
a lot of the people that are watching have, the Chairman has 
asked the same questions almost every hearing: do you have 
adequate money, do you have adequate staff, did you request it 
in your budget. And I can't recall if he ever got an answer on 
any of those questions, not once.
    I think it is important to know if there is inadequacy in 
getting the dollars out, we have to recognize either that you 
made the request and somebody turned it down above you, or it 
is not a priority. And that is really the way the two fall 
down. My goal here, my goal as a policy-maker at the Federal 
level, is to give tribes the tools so they can be self-
sufficient, so they can say, we don't need you any more. They 
can do it on their own. That is my goal.
    But the fact is, if we are putting up roadblocks, whether 
it is procedural or through regulations or through different 
administrative requirements, that doesn't work very well. So 
that was more of a lecture than a question, thank you guys for 
being here. I appreciate it. We have some work to do.
    Senator Murkowski. Senator Barrasso.
    Senator Barrasso. Thank you very much. I want to follow up 
on what all of you have said, I am running into the same 
experiences. And there is a situation in Wyoming that is 
ongoing.
    Mr. Cason, if I could ask you, when projects are new, 
people don't have experience, and there have been difficulties, 
are there things that your agency does to facilitate the 
tribes' taking on new contracts, helping them better figure out 
what they need to do to get the funding, to fill out the forms 
and to receive the funding? It just seems that until they 
really get geared up to learn how to do that, the delays seem 
to be extraordinary.
    Mr. Cason. Senator, I believe there is. As Senator Tester 
mentioned, our basic view of the self-governance is similar to 
what he said. The successful outcome of a self-governance 
program in the end is every tribe runs its own affairs. What we 
try to do is facilitate that. Is it perfect? No. But we do have 
a fund where we help new tribes who want to take on self-
governance and actually prepare for it. Then once they have 
gone through that preparation period, then the funding 
allocated, the programs they take over become available to 
them. They get the same number of dollars to run a program that 
basically we do, along with contract support costs.
    There has been a fair mention about contract support costs, 
adequacy or inadequacy. That is an issue. In my relationship 
with the tribes, we basically worked on that issue to include 
both indirect and direct support costs as part of the budget 
process. We did move to get more money into that program over 
time. It is still not all the way there to full funding.
    But it is an important component of running these programs. 
We have been supportive of trying to improve on that area of 
the budget.
    Senator Barrasso. We are certainly looking for ways to 
help, through advice, through flexibility. I know when Senator 
Thomas was here, he was able to secure an appropriation for the 
Wind River Reservation to upgrade its irrigation system. The 
BIA still holds $7 million for the project, yet only about 
$200,000 has been spent in the past two years, due to red tape 
and the tribe's contract difficulties. I don't know if you know 
the specifics of that case.
    Does that sound unusual to you or something that you would 
find disturbing?
    Mr. Cason. The experience I have had with our Indian 
Affairs programs is, I would say across the board, that in some 
cases we have project funding that does take a while to 
utilize, because we run into some impediment of one sort or 
another. And all the way to the other end of the spectrum, 
where the process runs very smoothly and very expeditiously and 
we can get projects started and done in a timely way.
    So unusual that we would have an issue? No. I have seen a 
number of those things. I don't know the specifics about the 
Wind River situation, but I would be happy to look into it if 
you would like.
    Senator Barrasso. I would very much appreciate it if you 
would.
    [The information referred to follows:]

    While you didn't mention a specific fiscal year, upon our research, 
we identified a $7.5 million appropriation in the FY 2006 Conference 
Report for Irrigation Projects in the Department of the Interior 
spending bill. In the FY 2006 Conference Report, the language states . 
. .

        ``The addition of $7,500,000 in non-reimbursable construction 
        funds for Indian irrigation rehabilitation is separate from the 
        Navajo Indian Irrigation Project, which retains its own 
        construction budget of $12,773,000. Within the funds provided 
        for Indian irrigation rehabilitation, a number of Bureau and 
        tribal projects are in desperate need of immediate attention to 
        continue delivering water to users. The Bureau is expected to 
        consult with the House and Senate Committees on Appropriations, 
        in the form of a detailed proposal, prior to obligating funds. 
        The Bureau is expected to administer these funds from the 
        central office program level to address projects with the 
        greatest need of rehabilitation. Construction of new projects 
        or expansion of existing projects is secondary to the 
        rehabilitation, reconstruction, and necessary upgrade of 
        current irrigation projects and systems. Specific projects to 
        be addressed under these guidelines and to be addressed in the 
        Bureau's proposal for the obligation of these funds are: the 
        Fort Yates Unit of the Standing Rock Sioux Project, the 
        Blackfeet Irrigation Project, the Crow Irrigation Project, the 
        Fort Belknap Irrigation Project, the Fort Peck Irrigation 
        Project, and the Wind River Irrigation Project.''

    Senator Barrasso. Chairman Steele, I don't know if you 
heard the question, but just looking at the situation at Wind 
River Indian Reservation, where we had $7 million for a project 
for an upgrade to the irrigation system, it has been two years 
and only $200,000 has gotten there, due to red tape, tribe's 
contract difficulties. Does that seem unusual to you in your 
experience or disturbing to you?
    Mr. Steele. You are speaking in general, across the board?
    Senator Barrasso. Yes.
    Mr. Steele. I would say in general, it is an accurate 
statement.
    Senator Barrasso. It is accurate, that kind of time delay 
due to red tape and difficulties dealing with the systems?
    Mr. Steele. Yes, I would say in general it is an accurate 
statement.
    Senator Barrasso. Then I would find that disturbing and I 
imagine other members of the Committee would.
    No further questions, Madam Chairman, thank you.
    Senator Murkowski. Thank you, Senator Barrasso. Senator 
Cantwell.

               STATEMENT OF HON. MARIA CANTWELL, 
                  U.S. SENATOR FROM WASHINGTON

    Senator Cantwell. Thank you, Madam Chair. I thank the 
witnesses for being here today, particularly Chairman Allen. 
Thank you for being here from the Northwest, and thank you for 
your leadership in the proposal you are putting forth today to 
outline how self-governance can happen in a more efficient way. 
I know there have been 15 different Washington tribes that have 
used various elements of this. From time to time, we do hear 
concerns about flexibility, so I am sure you are trying to 
address that.
    What are the specific parts of Title V that you think we 
really need to incorporate into these amendments? I understand 
your concern in the fact that when the rulemaking came out on 
the Title IV amendments that the process kind of got bogged 
down and that Title V really is a more reflective end result 
that we want to look for. So what specifically works about that 
that we should adopt?
    Mr. Allen. Thank you, Senator. I guess I would point, there 
are a number of them in there, probably some of the more 
important ones to move self-governance forward within the 
Department of Interior and BIA is, the language that would 
clarify the reasons why the agency may decline a tribe's 
proposal to enter into a compact, what they can do is drag it 
on into time immemorial and the tribe just basically loses 
interest.
    So this amendment provides time-specific process where they 
have to respond to a final proposal by the tribe and then they 
have to give the reasons.
    Senator Cantwell. And that works that way in Title V?
    Mr. Allen. Yes, it does. It has very specific time frames 
in which they have to respond to you, here is our request, you 
need to give us in writing what your argument is. That also 
rolls over into a clear avenue where we can appeal.
    Right now, we don't have that process. We can't even get to 
that juncture in the negotiation. So many tribes are impeded 
from entering into negotiations for that very reason. They 
won't provide the information that we need in order to 
negotiate. So there is that issue.
    Title V, as you had discussed, requires the Department to 
transfer the funds promptly. That is an issue of staffing. 
Senators are correct, that is a problem. On the DOI side, they 
have authorized I think like eight FTEs. To put it in 
perspective, eight FTEs over $300 million, relative to the 
11,000 FTEs that are in the BIA, you would think there could be 
some adjustment in FTEs in order to accommodate that kind of 
process to get those monies out to the tribes.
    But the language in this amendment would provide promptly, 
you have an obligation to do it, so you are going to figure out 
a way to do it. Construction provisions, clarify that we will 
have clear and consistent authority to move forward with our 
construction projects. And it would prevent the BIA from 
imposing unilateral adjustments. Many times what they will do, 
we will negotiate from program A through Z, then they will 
unilaterally reduce the funding numbers because they have 
changed their allocation.
    Mr. Cason referenced some of the problems at BIA. They have 
a moving target in many of their programs, general assistance 
programs. It is like they throw them back into a pot and 
readjust the allocation. So the tribes never know from year to 
year what your allocation is. On the IHS side, you always know 
from year to year, subject to any adjustment that the Congress 
makes.
    So those are some of the primary objectives. There are a 
couple of others that are important. But what it does is 
provide more certainty and requires the BIA to move the 
proposals forward, if you are taking on more programs or if a 
new tribe is coming in and wanting to negotiate their initial 
compact and funding agreement.
    Senator Cantwell. Is health care just naturally easier than 
some of these other areas?
    Mr. Allen. BIA tried to say it is naturally easy for IHS, 
because they just deal with health care, or the BIA deals with 
social programs, natural resource programs, governmental 
programs, enforcement, et cetera. So there is a different level 
of different kinds of activities that they administer as 
opposed to IHS. IHS has a lot of very sophisticated programs, 
from their clinical programs to hospitals.
    Senator Cantwell. I was going to say, look at what we have 
to deal with here, it is a very complex set of challenges. I 
would think some other things would be a lot more 
straightforward, particularly the construction, juxtaposed to 
say----
    Mr. Allen. We feel that construction is consistent with the 
other programs and should be treated consistently. So there is 
a difference, there is no question about it. But there is no 
reason why there can't be consistency as the Federal 
Government, whether it is the BIA, Department of Interior or 
IHS, when they are dealing with tribal governments.
    Senator Cantwell. So why do you think this got bogged down?
    Mr. Allen. In my opinion, the success of self-governance 
has moved forward effectively. I just think that the system is 
continuing to dig back in. The notion that it doesn't want to 
let go, that we really don't know what we are doing in general, 
broad terms, and there needs to be better oversight or more 
oversight over our affairs. That is recalcitrance, it wouldn't 
matter whether it was basic programs or trust programs like the 
Hoopa Nation has raised or other programs, like Salish and 
Kootenai with DOI Fish and Wildlife Service and so forth.
    The notion that they don't trust the Indians, and I am 
saying this very bluntly, is out there still. We are still 
fighting that image, that notion. Even though we have 20 plus 
years of success of effectively and responsibly administering 
Federal monies that you procure for the benefit of Indian 
people.
    Senator Cantwell. Thank you, Madam Chair.
    Senator Murkowski. Thank you, Senator.
    Mr. Cason, I want to ask a question, this goes to the 
liability issue. I understand that there still is a difference 
between the tribes and the Department of the Interior regarding 
the Secretary's liability for tribal operations of programs 
that can't be reassumed by the Secretary. Would the Secretary 
avoid liability or be able to avoid liability by simply 
refusing to reassume the programs?
    Mr. Cason. I don't believe so, Madam Chairman. The concern 
that we have had over time, the issue of Title V applied to 
Title IV has been an issue regarding liability. Our lawyers 
have advised us that tribes taking over programs does not 
relieve the Secretary of the liability associated with the 
performance of the program. Being currently engaged, at least 
within the confines of this Administration, with extensive 
litigation about what the Federal Government's liability is for 
performance of our program over time has been of concern.
    We have spent a considerable amount of time dealing with 
our liability. There are at least claims of our liability in 
the hundreds of millions to billions of dollars that we have 
been trying to work out during the course of this 
Administration. Understandably, the Administration is very 
concerned about our outlying liability exposure.
    On this particular issue, there have been concerns about 
the standards at which we have to perform and the intersection 
of those standards. What I mean by that, Madam Chairman, is 
that in some of the past proposed ways of approaching this 
problem, and I haven't seen the new proposal from the self-
governance group yet, but in past iterations that we have 
talked about, it basically calls for a standard of essentially 
irreparable harm before the Secretary could intrude into a 
program that has been compacted.
    But at the same time, the Federal Government, Department of 
Interior, BIA, is being held to exacting high fiduciary 
standards of managing its trust responsibilities. So there is a 
big gap between those two. And our ability to reassume programs 
to ensure that we can meet our fiduciary duties is not the same 
as the standard in which the Secretary could exercise a 
reassumption of a program.
    So we think that there is some potential legal liability 
for the Department there. One of the things we would seek to do 
in any change to the law is try to marry up authority to run a 
program with the responsibility for it.
    Senator Murkowski. Let me ask you this, then, Mr. Allen, 
from your perspective, how big of a risk are we talking about 
in terms of liability for the Government? Can you think of any 
situation or any instance where a self-governance tribe has 
sued the U.S. Government for failure to protect the tribe from 
its own self-governance decision? Mr. Cason has indicated that 
from the Government's perspective, they feel there is lots of 
money on the line here in terms of liability. What has your 
experience been?
    Mr. Allen. This is an interesting question. When we raise 
the question of the liability with regard to trust resources 
versus the other trust, the other trust activities that we 
engage in, I don't know of any suit of tribe with the Federal 
Government with respect to the programs that we are 
administering and administering to the benefit of our people 
that we took over from the BIA.
    Senator Murkowski. It seems that he would be suggesting 
that your own management was inappropriate. I am trying to 
reconcile the two.
    Mr. Allen. I can assure you that the BIA could never take 
over any of our programs and do the same job that we are doing. 
They just can't do the same level of quality of service, 
categorically, whether you are dealing with trust activities or 
any other programs that we administer. I will footnote that the 
tribes do, as mentioned by my colleagues here, contribute a 
great deal of our money, our own money, to make the services 
better. But the quality of the service that we are able to 
provide to our people is unquestionably better. If they were to 
try to reassume those programs, there would be a major 
degradation of the services to our people with respect to every 
program that we have taken over.
    I know that there are liabilities that the Department is 
concerned about. But I don't agree that that notion, and that 
maybe it is coming out of the Cobell case, is a reason to 
undermine the tribes' ability to take over these programs. In 
the past, there have been notions that in taking over these 
programs that we want the government to relinquish all Federal 
obligation. It is much more surgical than that. Tribes are much 
more intelligent and knowledgeable about what legal obligations 
you still retain versus what obligations we take over and will 
absorb and take full responsibility for it.
    Senator Murkowski. Mr. Marshall, you look like you are just 
itching to jump in there.
    Mr. Marshall. I think you hit the nail on the head, and I 
have said this before, the issue of liability, I know of no 
self-governance tribe that sued the United States for its own 
mismanagement in the last 20 years of self-governance. It 
hasn't happened. Tribes who have assumed the responsibility of 
managing their own resources do it for a reason, because it is 
probably because it has been mismanaged in the past and they 
want to do a better job.
    My tribe has taken over forestry management, fisheries 
management. The tribes that step up and do those things do that 
with a commitment. It always comes back to the liability issue 
that we can't let you do that because you might sue us for what 
you do. It hasn't happened and I don't think it ever will.
    So there is a process, if the Bureau determines that a 
program is being mismanaged by a tribe, it declares the program 
to be in imminent jeopardy. Then the Bureau would reassume 
management of the program.
    But the tribes that I am familiar with, especially the 
tribes to my left and right who have been in the trenches with 
us since the beginning, we have taken on the responsibility and 
we have found other money. It is not tribal funds, it is not 
always tribal funds. We match programs with them, I could show 
you my budget, I have a column for tribal money, a column for 
indirect cost money, a column for compact money, a column for 
grants tribes still contract, a column for enterprise funds. So 
you are dealing with five, six columns of funding sources, and 
you work out a budget so that you cover the cost of all of your 
programs and you set your own priorities.
    In terms of resource management, when tribe assume 
management of trust resources, it also generates revenue. From 
that revenue generation you also set priorities and you cover 
costs. We learn as we go. So 20 years of developing a 
government which is the foundation of our nation, then figuring 
out ways to afford it are positive. But this idea that, well, 
now I am glad we were here in the beginning before, like I 
said, trust reform reorganization comes in and says, wait a 
minute, we have to make sure we are covered.
    A question that was asked by the Senator, can you help 
tribes get started, well, we have been at it for 20 years. If 
you truly want tribes to move toward self-governance, they are 
going to take baby steps. That is what I testified to, about 
establishing government and administrative capability, you 
can't, in the first instance say, well, if you are a baby and 
you fall down, we are not liable if you bump your head. You 
have to give the tribes the ability to learn how to do this. 
And when they get there, they are going to do a great job. We 
are an example of that, and I give you my guarantee. If people 
need to know how to do it, ask us, because we are doing it.
    Thank you for the question.
    Senator Murkowski. I appreciate your comments there. Just 
one last question for those of you that represent tribes. This 
is as it relates to this 50 percent rule that the National 
business Center has changed, allowing 50 percent of the tribal 
council costs to be counted as indirect contract support costs 
without documentation, thus requiring tribal councils to 
document all of their costs under this new rule.
    We are all about accountability here in the Government and 
making sure that the monies that are provided are spent wisely. 
Do you believe that under this new rule it provides more 
assurances that the Federal Government, I guess the Federal 
monies, rather, are being spent in appropriate manners as it 
relates to the indirect costs? Does this help you at all in 
your opinion? If not, I am assuming not, tell me exactly why. 
Mr. Allen?
    Mr. Allen. Where to begin this conversation? We fought this 
little battle with the Inspector General 15, 20 years ago, 
somewhere in that nature. When the Federal Government deals 
with the tribal governments, they are dealing on a government 
to government basis. We are contracting, we are taking over the 
Federal contracts and all the activities that the Federal 
Government incurs, all the costs. We have been identifying them 
as indirect costs, then we identified direct, indirect costs or 
direct contract costs that are associated with those kinds of 
costs.
    Those are the costs that provide the oversight of these 
Federal programs and activities. It is a different animal now 
as we move forward. Back then, the way the A-87 rule reads is 
that council costs are not allowed except, and then except 
means when you can show that the council costs are providing 
the oversight of these programs.
    All of us do that. I am not even going to say some of us or 
most of us. All of us do that. All of our councils, no matter 
what the size and how the configuration is, we all provide 
oversight over every one of our programs. It varies, just like 
you as the Congress provide a variance of oversight over all 
the programs of the Federal Government.
    So back then, they wanted us to identify by time sheet or 
by stipend variation of when they actually provide oversight 
over BIA or IHS or HUD or DOL programs, et cetera, and we said, 
you are crazy to do this. Because what we will do is we will 
incorporate into our indirect costs additional staff to track 
down every one of our council members and do that, because that 
is not their job. You don't do it as a Senator or Congress 
people don't do that. Nobody does that.
    So we said, look, keep it simple here. They do provide 
oversight and yes, they do provide oversight over other tribal 
functions. We would argue those tribal functions are Federal 
functions, we are actually carrying out what the Federal 
Government should be doing for us. But we decided not to argue 
that case, just leave it at 50 percent, and no matter how the 
tribe does it, if they have salaries or if they have stipends, 
it doesn't make any difference. Just cut it down the middle, 
say it is 50 percent, and if we win some, we lose some, it is 
okay, we will live with that.
    Now they want to revisit it and say, it is illegal. Now the 
DNC and the legal counsel from the Department of Interior are 
saying that is against the law, that for the last 25 years, 
you, the Federal Government have been violating the law. We are 
going with this new policy, where did that come from?
    So now they are revisiting this thing. Our argument is that 
we probably need some sort of very clear remedy that that is a 
part of the Federal oversight by the tribal government for 
these Federal activities and really don't get into the nitty-
gritty of breaking it down, category by category, program by 
program. It just doesn't make sense.
    Senator Murkowski. What about any of the rest of you? Mr. 
Steele?
    Mr. Steele. Madam Chair, if I can philosophically talk for 
a second, I think my opinion, since 1491 and prior, we were 
self-governing. We were sovereign nations and we believe we are 
sovereign nations now. It is ironic to me that we have to go 
through, we signed the Treaty of Hellgate in 1855 with the 
United States Government, not with the State of Montana.
    To be very frank, it always bothers me to have to come to 
D.C. and work out exactly what my colleague, Chairman Allen, is 
talking about. It is frustrating, because my ancestors 
negotiated a treaty that reserved a reservation for our people, 
gave up a big chunk of Washington territory which is now 
Montana. And we have to go through all of these little hoops 
that we are talking about. I appreciate your question, I know I 
am not answering it.
    But it gets frustrating to me. I think the essence of self-
governance is for us that are at this table and other tribes to 
not have to come to D.C. and to ask for this or ask for that. 
Keep the Federal responsibility, it needs to be maintained, 
that is a treaty right, it is a treaty responsibility. But give 
us the tools to be self-governing. Give us the tools to do what 
we need to do as a government.
    Our constitution of our tribe prohibits our council from 
levying taxes. What a novel idea. So we have to get creative. 
We have to be business-like, business-minded. We have to raise 
funds without dealing with taxes. We can't raise taxes on our 
own members without their express consent.
    I guess in answering your question, Madam Chair, we just 
need the tools and the ability to continue our self-governance 
that we have practiced for hundreds of years, not just in the 
last 20. And I appreciate the last 20, but for hundreds and 
thousands of years we have been self-governing. So I know I 
didn't answer directly.
    Mr. Marshall. You did, and it was in the same vein as 
Senator Barrasso suggested, that the Federal Government gives 
you the tools and then we get out of the way and let you do the 
work.
    Mr. Marshall?
    Mr. Marshall. Indirect cost is something that we have 
negotiated every year. It is an annual tooth-pulling procedure. 
We could settle on an indirect cost rate, not have to go 
through that process, understand what the rules are that would 
give us stability in budgeting for administration and fiscal 
management. So ours has fluctuated, and we did go through a 
process that Chairman Allen was saying, is government direct or 
indirect. So you couldn't use indirect cost monies to pay for 
the executive secretary, because that was government. But I 
could pay for the salary of my administrative assistant, 
because that was administration.
    So we have these terms, when their offices are about 50 
feet apart and they work together doing practically the same 
thing. That makes for instability. What governments really need 
to do is stabilize their governmental capability, define it, 
and if they know that they are going to get adequate funding on 
an annual basis from the programs that they compact or 
contract. And of course, we talked about trust reform 
reorganization. We are held to very high standards now for 
fiscal accountability, fiscal management. We have to comply 
with the Single Audit Act, and we pay a great deal of money to 
have professionals come in, because we are managing, as Mr. 
Steele said, he is managing a program that contributes $300 
million to his State. My annual budget is over $70 million, 
gross.
    So I have to have a strong fiscal department. We also have 
records management obligations that require that we house, 
maintain records on site. We do ours electronically because 
that is an obligation that has now come through trust reform 
reorganization. Those are added costs and expectations from us. 
I remember one of the self-governance tribes was hammered 
severely because it didn't have fireproof filing cabinets to 
protect their records. Well, who comes up with the money for 
that, to comply? It wasn't about records management, it was how 
to protect them. Those are additional costs that the tribes 
assume.
    So if we can have stability in funding, specifically 
whether you call it contract support or indirect cost, then it 
makes it easier for us to establish the capability that the 
Department is expecting from us.
    Senator Murkowski. Mr. Peltola, since you have traveled 
farthest, I will give you the last word.
    Mr. Peltola. Madam Chair, I would just like to make one 
final parting comment. That is, I want to reiterate what Ron 
Allen had to say. At least in health care, in my region, the 
membership of my 58 tribes, it would be a total disservice to 
those tribal members for the Government to provide health care 
service. They could not even come close to providing the 
spectrum of services that we provide today and the level of 
health care that we provide to our people. I don't know what I 
would do, I would stick my head in the sand, I guess, if that 
ever happened, because it would be impossible for them to do 
it.
    I would like to close by saying, I believe it was 1992 when 
the Senate Select Committee held hearings in Alaska. The only 
Senators there were Senator Stevens from Alaska and Senator 
McCain from Arizona. But I testified before the Select 
Committee, and I closed out stating that, Senators, if our area 
office of the Indian Health Service were to close, become 
extinct tonight at 5 o'clock, and if the headquarters in 
Rockville, Maryland became extinct at 5 o'clock and we still 
had the ability to receive the funds, it would be a step 
forward for health care for Native Americans residing in 
Alaska.
    Thank you.
    Senator Murkowski. Thank you, gentlemen.
    Mr. Cason, I will circle back to you and give you an 
opportunity to respond.
    Mr. Cason. I am sorry, Madam Chairman, I wasn't really 
after the last word, but I did want to make a comment. There is 
a lot of frustration on the part of Indian Country overall 
about dealing with the process of funding from BIA, 
particularly on the indirect and direct contract support costs.
    But I would like to have everybody know, it is frustrating 
on the part of the BIA employee, too, to have to do it. We end 
up in a situation where we have scarce dollars that we are 
trying to allocate in a broad spectrum of ways across Indian 
Country. There is desire to have more dollars, so that puts 
pressure on the institution to make sure where we are 
allocating dollars is a fair distribution.
    Then when we take a look at things like indirect support 
costs that may range from 30 percent to 130 percent of contract 
costs, we feel like we are in a position where we have to be 
mindful of what kind of costs we are paying. Because every 
dollar I give to one tribe is a dollar I cannot give to another 
tribe.
    So we look at the costs that we are putting out there, 
because we are in a situation right now of pro-rating the 
dollars that we have available. Because there are scarce 
dollars, we want to make sure everybody gets the fairest mix 
that we can. It is a frustrating situation on both sides of the 
fence. We are happy to work with Indian Country to find better 
ways of skinning this cat. We end up in a situation that maybe 
in the end, some sort of a grant process may be a better way to 
do things than we do them. But we haven't gotten there yet.
    We would like to simplify the process as well. But we are 
tasked to provide accountability for where did every dollar go, 
how did it get spent, how is it justified. That adds to the 
frustration that everybody has in the process. Thank you.
    Senator Murkowski. I appreciate your comments there. I do 
recognize, though, again, that we are asking through this 
contract support cost and the whole operation here, we are 
asking for the tribes to administer a job that we here in the 
Federal Government would have otherwise been doing. So it 
really does come down, I said earlier in this hearing that it 
really isn't always about cost, or excuse me, the dollars that 
are available.
    But when we do have to ration, divide things on a pro-rata 
basis and yet the efforts are still underway to provide for 
that level of service, we have to figure out clearer equity 
here. To have tribes kind of take the Federal Government on, 
using precious resources in that way or just fighting for what 
it is that they believe they had fairly contracted for, we do 
need to find a better path forward. I appreciate your efforts 
and your willingness on behalf of the Administration to work to 
find that better path forward.
    I appreciate the efforts of all of you in this area, 
Chairman Allen, your leadership clearly, and those of you from 
around the Country, as we try to resolve some of these very 
difficult issues that face us in Indian Country and how we make 
it happen better here in Washington, D.C.
    With that, we will stand adjourned.
    [Whereupon, at 4:02 p.m., the Committee was adjourned.]
                            A P P E N D I X

 Joint Prepared Statement of Hon. Ron His-Horse-Is-Thunder, Chairman, 
Standing Rock Sioux Tribe; Hon. A.T. Stafne, Chairman, Assiniboine and 
  Sioux Tribes of the Fort Peck Reservation; Hon. Marcus Wells, Jr., 
   Chairman, Three Affiliated Tribes of the Fort Berthold Reservation
    We write jointly to highlight a shortfall which significantly 
affects Indian tribes and tribal organizations carrying out 
construction projects under either Title I or Title IV of the Indian 
Self-Determination and Education Assistance Act (ISDA), 25 U.S.C. 
Sec. Sec. 450-450n, as well as to urge the Committee to pass a proposed 
``technical'' amendment to the ISDA which would resolve the issue.
    Major construction cost increases over the last several years, 
combined with statutory cost-indexing and the inability to prepare 
cost-effective bid packages due to low appropriations levels, are 
unnecessarily increasing overall project costs to the taxpayer for 
tribal construction projects and pushing the date of completion of 
these projects further and further into the future. The current 
circumstances are as follows:

   According to various federal and industry indices, 
        construction costs are increasing by at least 10 percent or 
        more per year;

   Congress and the Department of Interior generally provide 
        small amounts of construction funding each year to any single 
        construction project, which often does not even keep up with 
        statutorily mandated cost indexing, let alone regional and 
        nation-wide inflation;

   Total project costs increase if bid packages are smaller, 
        and decrease with larger bid packages;

   Current interest rates for borrowing money remain 
        historically low.

    Under these circumstances, financing construction projects makes 
good economic sense and is sound public policy. Tribes can build their 
respective projects using cost-effective bid packages, and in current 
dollars, before construction costs increase even further. Because of 
the statutory cost indexing for many authorized projects, tax-exempt 
bond financing (or other modes of financing) would save the federal 
government and the U.S. taxpayer substantial costs over the life of the 
project. It would also allow tribes to build their projects faster, 
thus bringing the benefit of these projects to tribal and rural 
communities much sooner than if traditional ``pay-as-you-go'' financing 
is used. Moreover, because interest rates for borrowing money remain 
historically low for all types of financing, contracting and compacting 
tribes should be able to obtain financing at favorable rate of 
interests.
    Therefore, we have proposed the attached ``technical'' amendment to 
the ISDA at 25 U.S.C. 450j-1(k). That subsection of the ISDA provides a 
non-exhaustive list of costs that are allowable without approval of the 
Secretary of the Interior. Our proposed amendment would add the 
following provision to the list:

        (11) Interest payments, retirement of principal, costs of 
        issuance, and costs of insurance or similar credit support for 
        a debt financing instrument, the proceeds of which are used to 
        support a contracted construction project.

    This provision would benefit tribes contracting for specific 
construction projects under Title I of the ISDA, as well as tribes 
carrying out construction projects under Title IV Self-Governance 
agreements, because they could opt to include this Title I provision in 
their compacts.
    This so-called ``flexible financing'' model has already proven 
effective in the Indian Reservation Roads (IRR) construction arena. The 
provisions of the SAFETEA-LU legislation and its regulations 
specifically authorize States and tribes to use bonds or other debt 
financing instruments to pay for project construction costs, and then 
use federal appropriations to pay back the financing costs over time.
    The Standing Rock Sioux Tribe was at the forefront of flexible 
financing in the road construction arena. The Tribe was able to 
successfully complete a $26.5 million roads project in three years, 
utilizing annual IRR Program funding to partially pay for a private 
bank loan. The Tribe's experience serves as a model for demonstrating 
that flexible financing can be a win-win situation for both tribes and 
the Federal government. Assuming a conservative 5 percent construction 
cost inflation over time, the Tribe has calculated that, by utilizing 
flexible financing, the Tribe saved $27 million in overall project 
costs. In recent years, construction cost inflation has been more in 
the range of 8 percent to 15 percent, depending on the type of 
materials and certain geographical considerations, so the actual 
savings were probably substantially greater. It is also important to 
note that this savings calculation does not take into account the 
additional transaction costs and bid-price increases necessitated by 
pay-as-you-go financing, which forces a tribe to bid out smaller 
components of the project each year, rather than achieving economies of 
scale with large bid packages. Standing Rock Sioux Tribal officials 
estimate that each additional bid package incurs between $100,000 and 
$125,000 in additional transaction costs for the project. Eliminating 
these unnecessary costs results in still more total project savings 
over time. Furthermore, in the Standing Rock Sioux Tribe roads 
scenario, the Tribe took out loans in the amount of 6.125 percent 
interest. For water project construction, discussed further below, 
tribes have taken out U.S. Department of Agriculture (USDA) loans 
(often attached to USDA grants) at rates between 4.0 percent and 4.5 
percent. With a lower interest rate, one would expect the total project 
savings to be even greater over time with flexible financing.
    We are particularly interested in flexible financing as it relates 
to our municipal, rural, and industrial water projects--and our Tribes 
have been battling with the Department of Interior to recognize that 
financing costs are allowable costs for these vital water projects. 
Each of our respective Tribes has contracted with the Department of 
Interior under the ISDA to construct the important drinking water 
systems that will provide safe, clean drinking water to our residents 
and communities. The construction of drinking water systems is 
essential to revitalize economic growth on our respective Reservations, 
and the United States government has made repeated promises to our 
Tribes to provide a safe and plentiful domestic water supply. However, 
our drinking water systems are far from complete, and federal funding 
has historically been inadequate to keep up with inflation and cost-
indexing. Many families on our Reservations must still clean dishes and 
bathe themselves and their small children in brown well water that 
reeks of heavy minerals such as manganese, coal, iron and lime. These 
unhealthy minerals also exacerbate the dangerously high level of 
diabetes in our communities. As a result, many families in our rural 
communities still haul in or truck in potable water to their homes, 
making life on the Reservation expensive and inconvenient. To speed 
these important drinking water projects along, we have taken it upon 
ourselves to find alternative sources of supplemental funding, such as 
grants and loans from the USDA.
    A Department of Interior administrative ruling has already held 
that debt financing is an allowable use of federal funds under a 
tribe's Indian self-determination agreement when the debt instrument is 
used to pay for valid water construction costs. The Three Affiliated 
Tribes of the Fort Berthold Reservation had to bring a lawsuit against 
the Bureau of Reclamation in 2005 to gain recognition that the Tribe's 
successful financing of a small portion of the water system 
construction project through low-interest USDA loans could be repaid 
with ISDA contract funds. Ultimately, the Administrative Law Judge 
ruled for the Three Affiliated Tribes, holding that these were 
allowable costs under current law. See Three Affiliated Tribes of the 
Fort Berthold Reservation v. Great Plains Regional Dir., Bureau of 
Reclamation, IBIA 05-7-A, at 25-31 (Dec. 22, 2005). However, the 
Department of Interior has refused to recognize this principle for 
other tribes or other types of financing instruments. For example, the 
Assiniboine and Sioux Tribes of the Fort Peck Reservation have so far 
been unable to negotiate language into their Fiscal Year 2008 Annual 
Funding Agreement (AFA) with the Bureau of Reclamation which would 
allow for reimbursement of financing costs. The Assiniboine and Sioux 
Tribes may be forced to bring yet another lawsuit against the Bureau to 
gain federal recognition of a legal right that should now be well-
recognized. Our respective Tribes' discussions with the Interior 
Solicitor's office on this issue have also been unfruitful.
    This impasse between our Tribes and the Department of Interior 
prompted Senator Conrad, joined by co-sponsors Senator Johnson and 
Senator Tester, to introduce S. 2200--the Tribal Water Resources 
Innovative Financing Act--in October last year. That bill would affirm 
the ability of Indian tribes to use flexible financing techniques to 
advance the construction of critical water projects. We respectfully 
request that you join Senator Conrad in sponsoring and supporting this 
important legislation, so that tribes can finance drinking water 
construction projects in today's dollars, bringing these important 
projects to completion much sooner and more cost effectively than could 
occur with traditional pay-as-you-go funding methods.
    However, this issue is not limited to roads projects or drinking 
water projects. The reasons why the financing of these projects makes 
sense apply with equal force to any construction projects under the 
ISDA--including schools, health care facilities, waste and wastewater 
treatment facilities, government offices, and any other vital 
infrastructure.
    We believe that the ISDA already provides that financing costs are 
allowable costs for construction projects, in accordance with the 
ruling of the Administrative Law Judge in the Three Affiliated Tribes 
case. However, due to the reticence of the Department of Interior, we 
respectfully urge you to pass the attached legislation to affirm this 
principle for all contracting tribes-including tribes carrying out 
construction projects under both Title I Self-Determination contracts 
and Title IV Self-Governance arrangements.
    We thank the Committee for providing oversight on these important 
issues and for the opportunity to present this testimony. 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 ______
                                 
   Prepared Statement of Chad Smith, Principal Chief, Cherokee Nation
    On behalf of the Cherokee Nation, please accept the following 
remarks regarding the successes and shortfalls under the Indian Self-
Determination and Education Assistance Act (ISDEA) after twenty years 
of existence. I want to thank you for convening this hearing to discuss 
important issues affecting Indian Country specifically contract support 
costs and Title IV Amendments.
Introduction
    The Cherokee Nation (Nation) is a government, cultural entity, 
social service agency, and regional development organization deeply 
committed to advancing the health and social well-being of its citizens 
through the improvement of its communities, creation of a strong 
economy, and preservation of the Cherokee language. The Nation was one 
of the first tribes in the United States to execute a self-
determination contract under the original ISDEA and in 1990 executed a 
self-governance agreement under ISDEA, Title III. Since 1994, all of 
the Nation's self-determination programs have been administered under 
Self-Governance compacts with the Department of the Interior and the 
Department of Health and Human Services.
Title IV Amendments
    The United States Constitution recognizes Indian nations as 
governments. Hundreds of treaties, federal laws and court cases have 
reaffirmed that Indian nations retain the inherent powers to govern 
themselves. Since the passage of the Indian Self-Determination and 
Education Assistance Act in 1975, tribes have been enabled to 
administer programs and services formerly administered by the Bureau of 
Indian Affairs and the Indian Health Service on behalf of their people. 
The law was amended in 1988 and in 1994 to broaden the scope of Self-
Governance and tribes began to negotiate Self-Governance agreements 
with the Federal Government. In 2000, Congress enacted further 
amendments authorizing Self-Governance as a permanent option for Indian 
Health Service.
    The Cherokee Nation was among the first ten Self-Governance tribes 
and has experienced great success designing and delivering services 
based upon the needs and priorities of our citizens rather than based 
upon federal priorities. The successes of Self-Governance tribes are 
due in part to local control of service delivery, flexibility of 
resources, partnership development and collaboration with other local 
governments and an overall ability of a people to govern themselves and 
thereby control their destiny.
    However, there still remain obstacles to overcome in order for 
Self-Governance to reach full potential. The proposed tribal amendments 
to Title IV of the Indian Self-Determination and Education Assistance 
Act have been drafted to fulfill important purposes such as to ensure 
consistency between Title IV and Title V (the permanent Self-Governance 
authority within the Department of Health and Human Services enacted in 
2000) and to clarify statutory requirements governing construction-
related matters.
    The Cherokee Nation has been actively involved in the Title IV 
Amendments Workgroup and proposed language to address tribal concerns 
regarding section 405(e) existing and subsequent funding agreements. It 
has been the experience of Cherokee Nation that an inequity in 
negotiation power has existed between the parties, due in large part, 
to the Department of Interior's ability to withhold payment if the 
tribe does not agree to the terms of the Department. In recent years, 
the reality of negotiations has been ``agree to the terms, or don't get 
paid.'' Conversely, under negotiations with the Indian Health Service, 
funds due to the tribe continue to be paid under Title V Section 505 
(e) Subsequent Funding Agreements. This allows for the parties to 
concentrate on reaching compromise on the issues and for true 
negotiations to occur.
    Recommendation: It is imperative to the furtherance of Self-
Governance that the same provisions and interpretations afforded under 
Title V with Indian Health Service be extended to the Bureau of Indian 
Affairs under the Title IV Amendments.
Contract Support Costs
    While enactment of the ISDEA has provided a solid foundation for 
the Cherokee Nation and other Tribes throughout the United States to 
chart a course for self-determination, it is greatly hampered by the 
lack of the Federal Government's commitment to providing funding for 
contract support costs that has made it difficult, if not impossible, 
for Tribes to enter and maintain ISDEA compacts and contracts.
    Pursuant to the Nation's compact with the Department of the 
Interior, the Nation administers a wide array of Federal Government 
programs serving Indian people, including credit and finance programs; 
agricultural, forestry and real estate services; tribal courts; social 
services, Indian child welfare and housing improvement programs; a 
general assistance program; Johnson O'Malley education programs; law 
enforcement services; the Indian Reservation Roads construction, 
planning and maintenance programs; Individual Indian Money services; 
higher education and adult education services; and child abuse and 
early childhood wellness programs.
    Under the Nation's Self-Governance compact with the Department of 
Health and Human Services, the Nation operates six rural outpatient 
clinics providing Indians with primary medical care, dental services, 
optometry, radiology, mammography, behavioral health services, medical 
laboratory services, pharmacy services, community nutrition programs, 
and a public health nursing program. The Nation also operates inpatient 
and outpatient contract health services programs for management of 
specialty care.
    The Cherokee Nation has been able to make tremendous improvements 
to these formerly Federal programs and services. The ISDEA has enabled 
the Nation to resume responsibility for its own affairs and carry out 
these programs and services in a more responsive and accountable manner 
for the benefit of Indian people. Unfortunately, the Nation's progress 
has been severely impeded by the Federal Government's failure to fund 
required contract support costs as mandated by ISDEA, despite the 
efforts of Congress to prevent such systematic underfunding of contract 
support costs by making several strengthening amendments to the act in 
1988 and 1994.
    Since the time of the Nation's first Self-Governance compact with 
the Department of the Interior in 1990, the Nation has never been fully 
funded with contract support costs as mandated by ISDEA. The Bureau of 
Indian Affairs (BIA) neglects to provide to the Nation in excess of a 
$900,000 in contract support costs annually.
    On May 8, 2006 the BIA signed a Contract Support Cost Policy that 
became effective in Fiscal Year 2007. This policy now allows the 
payment of Direct Contract Support Costs (DCSC) in addition to the 
payment of Indirect Contract Support Costs (IDC). A workgroup comprised 
of federal and tribal representatives has been organized to assist in 
the implementation of this policy including the development of the 
annual BIA CSC Shortfall Report to Congress. Historically since 1998, 
the Department of Interior has not filed these reports consistent with 
Section 106(c) of the ISDEA.
    The Indian Self-Determination Fund (ISDF), also known as Contract 
Support Costs (CSC) Pool 1, is no-year (available until spent) 
appropriations. At this time, the only funds available to pay start-up 
and CSC for new contracts are funds from prior year's appropriations. 
No recurring appropriations have been made to the ISDF, therefore once 
the prior appropriations are gone there are no CSC funds available for 
new assumptions. Currently, a tribe may utilize the ISD Fund to assume 
BIA programs for the first year but will have to incur the full CSC for 
that new program from direct program dollars thereafter.
    Recommendation: In addition to fully funding Contract Support 
Costs, the Nation requests recurring appropriations be made to the BIA 
Indian Self-Determination Fund (ISDF), also known as CSC Pool 1.
    As for the Indian Health Service (IHS), in 1992 and 1994, 
respectively, the Nation assumed operation of the Redbird Smith Health 
Center in Sallisaw, Oklahoma, and the Wilma P. Mankiller Health Center 
in Stilwell, Oklahoma. In 1995, the Nation began administering the W.W. 
Hastings Indian Hospital contract health program outpatient program, 
and in Fiscal Year 1997, the Nation assumed control of the facility's 
contract health program inpatient program. Until September 1999, the 
Nation did not receive ANY contract support funding for the operation 
of these four multi-million dollar programs. In FY 2007, the Nation was 
funded at only 63 percent of its requirement for contract support for 
IHS programs, a shortage of $3.9 million per year. Despite the lack of 
adequate contract support funds, the Nation realizes the benefits and 
opportunities of exercising self-determination through ISDEA and 
remains committed to undertaking additional programs and services 
previously administered by the Federal Government. However, the lack of 
contract support funds have served as a disincentive for tribes to 
further compact and contract with the Federal Government under ISDEA.
    The Nation recently opened a 105,000 square-foot clinic in 
Muskogee, Oklahoma through the IHS Joint Venture program. The Nation is 
extremely supportive of the Joint Venture Program as it demonstrates 
the shared commitment of the Nation and the Federal Government in 
providing additional health facilities for the Indian population. The 
Muskogee Clinic will have an operating budget of approximately $24 
million annually to serve an estimated 7,576 users in its first year of 
operation (10,396 projected in FY 2015). The new services will include 
primary care, maternal and child care, dental care, eye care, 
audiology, pharmacy, physical therapy, and many other vital services. 
The Nation provided nearly $23 million of Tribal funds to bring a much 
needed facility to serve the Indian population in the Muskogee area.
    When a Joint Venture is entered into between a tribe and the IHS, 
the IHS agrees to fund the operational and equipment costs for the 
facility, and the tribe agrees to fund the design and construction 
costs. Although it is mandatory that Contract Support Costs (CSC) are 
added to direct operational costs, it is neither included as part of 
the Joint Venture Agreement nor submitted by the IHS and therefore, not 
appropriated by Congress as part of the cost of Joint Venture project. 
CSC is a legitimate component of costs to operate a new facility; 
however, it is not planned for in the operational start-up costs in 
either the Facilities Appropriation or the Joint Venture account. This 
presents a critical policy issue, where the IHS has committed by way of 
a Joint Venture agreement to fund the operational costs for the 
facility, but has not acquired sufficient appropriations to fulfill its 
end of the bargain when a Tribe chooses to operate the facility.
    Estimates indicate the Nation's current rate for indirect costs 
(which comprise the majority of contract support costs) would require 
an additional $6.7 million annually for the Muskogee Clinic. In order 
for the continued success of the Joint Venture program, the Nation 
strongly believes that contract support funds are included as a 
component of the program. Without such funding, resources must be 
diverted from patient care to necessary administrative services 
resulting in diminished health care services.
    Recommendation: When IHS has contracted to fund the operational and 
equipment costs for a facility, the IHS should submit to Congress the 
total cost of that commitment. The Contract Support Costs should be 
included as part of the total project cost within the Joint Venture 
Agreement.
    In January 2008, the Cherokee Nation initiated the process to 
undertake operations of all applicable programs, services, functions 
and activities (PSFAs) at the W.W. Hastings Indian Hospital in 
Tahlequah, Oklahoma. The decision is based on years of careful 
consideration and will enable the Nation to provide a comprehensive 
health care system for the use and benefit of all eligible 
beneficiaries consisting of a hospital, clinics, and various programs 
within the area for the use and benefit of all eligible beneficiaries.
    Negotiations are currently underway and the Nation intends to 
assume operations of the facility on October 1, 2008. Preliminary 
estimates indicate that the Nation's current rate for indirect costs 
(which comprise the majority of contract support costs) would require 
an additional $4 million annually for the W.W. Hastings Hospital. The 
contract support needs due to the additional programs and services 
assumed at the Muskogee clinic, as well as the impending programs and 
services at W.W. Hastings Hospital, indicate additional financial 
burden for the Nation, as well as the entire Indian health system, 
absent congressional intervention.
    The contract support cost problem has caused severe financial 
strains on the Nation's programs and facilities, as it has for many 
other tribes in the country. Since contract support costs are fixed 
costs that a contractor must incur, Tribes typically either (1) reduce 
funds budgeted for critical healthcare, education and other services 
under the contract in order to cover the shortfall; (2) they divert 
Tribal funds to subsidize the federal contract (when such Tribal funds 
are available); or (3) they use a combination of these two approaches. 
The Nation remains committed to the furtherance of a comprehensive 
health care system because the imperative of self-governance is that 
important. Despite the lack of adequate funds to carry out services and 
activities through ISDEA compacts, including program funding cuts and 
underfunded contract support, the Nation can provide more efficient, 
and cost effective services as well as provide continuity of services 
to our citizens.
    Given the conduct of the agencies and recent court decisions, it is 
clear that reforms are needed. Congress intended that tribes would be 
fully paid contract support costs if they agree to take over the 
administration of these Federal programs. But that is not what has 
happened, and the courts have been slow to respond, if at all.
    Recommendations: Some of the reforms to the contract support costs 
system should include:
    Specifically mandate that Indian Health Service utilize any 
unobligated balances from prior appropriations Acts to make payments to 
tribes or tribal organizations for contract support costs. The IHS 
already has this authority but has made a policy decision to not make 
these funds available to meet the contract support cost obligations 
associated with contracts, self-governance compacts, or annual funding 
agreements. This resolution would have no impact to the total 
appropriations to Indian Health Service.
    Resolving the accounting quagmire created when the government-wide 
indirect cost rate is not followed by all government agencies. This 
accounting mess has led not only to an under-calculation in indirect 
cost rates, but it has also severely strained the ability of tribes to 
operate all their Federal programs across all agencies within OMB's 
guidelines. For nearly 20 years tribes have called for reform in this 
area. It is also critical that Congress uphold existing statutory 
flexibility in the expenditure of self-governance funds, to best meet 
special or unique local needs, when self-determination funds are pooled 
with other funds in each tribe's ``indirect cost pool.''
    Strengthening the mandate to fully fund contract support costs by 
removing ``availability'' clauses. Courts have at times interpreted the 
``availability'' clauses to negate the mandate to fund contract support 
costs, an interpretation that effectively downgrades the Nation's 
government contracts, negotiated in good faith, to something more akin 
to a discretionary grant.
    When discussing contract support costs, Tribes often state that the 
greatest threat to the success of ISDEA is the failure to fully fund 
contract support costs. The Nation fully agrees with that statement as 
it has indeed been one of the greatest problems impeding the Nation's 
progress. The Nation believes that there is so much more that can be 
done, and so much more that must be done, to meet the critical health, 
education, economic and social needs of Cherokee citizens and all other 
Indians eligible for our services. The Nation is confident in its 
abilities to carryout the Federal Government's trust programs, however, 
the Nation's ability to administer these programs successfully and to 
maximize delivery of high quality services to Indian people, depends on 
having adequate contract support cost funding.
    The United States Supreme Court recognizes that contract support 
costs are a contract obligation that must be paid and the current 
system simply should not go on any longer. Neither the BIA nor IHS pays 
full contract support costs even though all other Government 
contractors receive their full administrative overhead when they deal 
with the Federal Government. Although Tribes enter into these 
agreements and take over significant responsibilities from the Federal 
Government, the Nation is consistently treated as a second-class 
contractor, which is unacceptable. Neither agency even requests full 
contract support funding from Congress, at times because they haven't 
the will, and at other times because the Department or the Office of 
Management and Budget stands in the way. And, of course, there are 
other, competing demands on the appropriations committees.
    Recommendation: After pursuing legal remedy which lasted ten long 
years, the United States Supreme Court, by unanimous decision, applied 
traditional government contract law to conclude that the government is 
liable whenever it fails to pay fully on a contract and where 
appropriations are legally available to pay the contract. The Nation 
strongly urges Congress to fully fund Contract Support Costs.
Closing
    In closing, the Cherokee Nation commends the Senate Committee on 
Indian Affairs for its continued efforts to address the insufficiencies 
regarding contract support costs and the Nation looks forward to 
working with Congress to address this long standing issue that greatly 
impedes the ability of Tribes to function as thriving, responsible 
governments.
    Thank you for holding this oversight hearing on ``The Success and 
Shortfall of Self Governance under the Indian Self-Determination and 
Education Assistance Act after Twenty Years'' and for your work on 
behalf of the Cherokee people and your continued support in Indian 
Country. Should you require additional information, I encourage you to 
contact Cherokee Nation's Senior Legislative Officer, Paula Ragsdale.
                                 ______
                                 
  Joint Prepared Statement of Marie Carroll, President, Arctic Slope 
  Native Association; John ``Chance'' Houle, Chairman, Chippewa Cree 
  Tribe of the Rocky Boy's Reservation; Gregory Pyle, Chief, Choctaw 
 Nation of Oklahoma; Harold Frank, Chairman, Forest County Potawatomi 
  Community; Andy Tueber, President, Kodiak Area Native Association; 
    Alonzo Coby, Chairman, Shoshone-Bannock Tribes of the Fort Hall 
Reservation; Nancy Egan, Chairwoman, Shoshone-Paiute Tribes of the Duck 
 Valley Reservation; and Linwood Killam, CEO, Riverside-San Bernardino 
                       County Indian Health, Inc.
    We write as leaders of several Tribes and Tribal Organizations to 
convey our very strong support for reform in the Nation's treatment of 
Tribes administering essential Indian Health Service and Bureau of 
Indian Affairs governmental programs under Title I, Title IV and Title 
V of the Indian Self-Determination Act of 1975. It is absolutely 
critical that Congress at long last see to it that our self-
determination contracts and compacts are fully paid, including our full 
contract support cost requirements due under those contracts and 
compacts.
    The Indian Self-Determination Act has long been a beacon of hope as 
our Tribal communities recover from decades of abuse and neglect. By 
contracting and compacting for the management of IHS and BIA programs 
benefitting our communities, we have traveled far down the road of 
reestablishing and strengthening Tribal Self-Determination, precisely 
as Congress envisioned in 1975. We have also provided an invaluable 
service to the United States, by simultaneously helping reduce the size 
of the Federal bureaucracy and increasing and enhancing the quality of 
Federal programs serving Native American people.
    But the Federal Government has not always honored its commitment 
under these agreements, and historically we have suffered increasingly 
large shortfalls in the Government's payment of our contract support 
cost requirements.
    In its 1988 reforms to the Indian Self-Determination Act, Congress 
recognized that the payment of contract support costs, much like 
general and administrative costs incurred by any government contractor, 
was critical to the success of Tribal Self-Determination. These 
contract support costs represent our fixed costs of carrying out our 
agreements with the Federal Government. Contract support costs are the 
costs of our Federally mandated audits. They are the costs of our 
worker's compensation insurance for our police officers, our doctors 
and our nurses. They are the costs of our accounting systems. They are 
fixed costs that must be incurred year in and year out, and these costs 
are annually audited by independent certified public accountants, all 
as required by Federal law.
    Most of our Tribes and Tribal organizations lack any collateral 
source of funds to cover these fixed costs. As a consequence, when the 
Indian Health Service or the Bureau of Indian Affairs fails to pay 
these costs, the only option we have is to cut services. Ultimately, 
then, our very own Indian people are penalized by the Federal 
Government's failure to honor the self-determination agreements that 
Congress in 1975 urged our Tribes to take on.
    The growing crisis caused by continuing shortfalls in contract 
payments owed to Tribes and Tribal organizations is reflected in 
substantially reduced contracting and compacting initiatives, layoffs, 
and reductions in force among program personnel administering these 
agreements, as well as in the increasing possibility of wholesale 
retrocessions of contracted programs back to the Federal Government. We 
respectfully call upon Congress to focus its attention immediately on 
this crisis, before it is too late.
    We respectfully urge Congress to consider the following multi-
faceted approaches to addressing the current crisis.
    First, if members of Congress have any lingering doubt as to the 
critical nature of contract support cost payments, and the terrible 
impact continuing shortfalls in those payments have on Tribes and 
Tribal organizations, then Congress should direct the General 
Accountability Office, IHS, and BIA to report to Congress in detail. 
The GAO and the National Congress of American Indians each provided 
reports to Congress in 1999, providing a strong record for renewed 
action today. But if further investigation is necessary, then GAO 
should be tasked with primary responsibility for swiftly updating its 
1999 report.
    Second, the Bureau of Indian Affairs--which only adopted a 
comprehensive policy on contract support costs in 2006, 31 years after 
Congress passed the Indian Self-Determination Act--must be directed to 
commit substantial resources and personnel to strengthening its ability 
to accurately administer the BIA's responsibilities under the law. 
Recent experience shows that the BIA is still ill-equipped to properly 
carry out its responsibilities for accurately determining contract 
support cost requirements, and accurately allocating its appropriation 
to pay those requirements.
    Third, the National Business Center should be prohibited from 
unilaterally altering its methodology for determining Tribal indirect 
cost rates. NBC sets the rates for most Tribes and Tribal organizations 
that contract or compact with the BIA, and for 80 percent of the Tribes 
and Tribal organizations that contract with IHS. As such, it is 
imperative that NBC's methodologies not be changed without extensive 
advance Tribal consultation, followed by formal notice and comment.
    Fourth, Congress should consider legislation to facilitate the 
resolution of historic breach of contract claims against the Indian 
Health Service. In recent years the courts have permitted class actions 
to address the Governments's liability for underpaying contract support 
costs due under the BIA's contracts and compacts. However, and quite 
inconsistently, the courts have not permitted liabilities over IHS's 
failure to pay full contract support cost requirements to be resolved 
in an identical manner. As a result, although the Supreme Court in the 
Cherokee Nation case found IHS's conduct in the period 1994-1997 to be 
unlawful, only 6 out of over 330 Tribes have ever been able to recover 
compensation.
    In the short term, we urge Congress to clarify Tribal rights in 
this area by extending the statute of limitations for pursuing claims 
to at least December 31, 2010. In the long term, we urge Congress to 
consider establishing an alternate mechanism--one that would not 
require litigation--for arriving at fair compensation for the contract 
underpayments that occurred during the Cherokee period.
    Any reform legislation in this area must recognize that the 
Government continues to face litigation over its contract support cost 
payments in more recent years, including claims filed by most of our 
Tribes and Tribal organizations. The Government's liability for IHS and 
BIA underpayments in more recent years is presently being litigated. 
Since the courts have not finally spoken to the Government's liability 
in these more recent years, it is sensible for Congress to limit reform 
legislation in this area to the resolution of claims arising during the 
Cherokee years only.
    Fifth, we respectfully urge Congress to draw upon two sources to 
finally close the gap in future contract support cost payments. First, 
new appropriations are vitally needed in sums that will substantially 
reduce the gaps in contract obligations--which currently hover near $50 
million for the BIA and well over $100 million for IHS. In addition, 
Congress should commit a fixed amount of each agency's prior year 
unobligated balances toward this effort. Tapping into each agency's 
prior year unobligated balances to cover current contract support 
shortfalls is certainly a higher priority than tapping into those funds 
to support internal agency administration (as currently occurs with the 
BIA in the area of trust reform).
    Finally, Congress should give active consideration once again to 
the proposals (as contained in years past in S. 2127 and H.R. 4148), to 
create an automatic payment mechanism that would operate independently 
of the ordinary appropriations cycle, for contracts that have been 
lawfully awarded under the Indian Self-Determination Act. 
Alternatively, we recommend that Congress eliminate the current 
earmarking ``not to exceed'' caps that inhibit the agencies' ability to 
pay full contract support costs. Under these earmarks, the agencies 
insist they have no options when they underpay our contracts. While we 
do not agree with the agencies on this point, it is clear that, so long 
as these earmarks are in place, the agencies cannot exercise any 
discretion to reach into the remainder of their appropriations. Prior 
to 1998 (for the Indian Health Service) and 1994 (for the Bureau of 
Indian Affairs) no earmarks limited the agencies' discretion in this 
respect. If Congress would eliminate these earmarks, the agencies would 
once again have the authority to reach into other portions of the 
agencies' appropriations to pay these contracts. It is apparent from 
the Cherokee litigation that the agencies at the time did not 
understand they had such authority. With new guidance from the Supreme 
Court on this issue, removing the caps would permit contracting Tribes 
and the agencies to work together to manage Congress's overall 
appropriations consistent with the Government's contractual 
obligations.
    Before closing, we also respectfully urge Congress to making a 
number of improvements to the Indian Self Determination Act. Among 
these:

   Congress should prohibit IHS or the BIA from declining to 
        award a contract, whether in its entirety or in part, due to an 
        agency concern that appropriations may not be available to 
        fully pay the contract. Whether appropriations will be 
        available to fully pay a contract is a matter exclusively 
        within the province of Congress to decide, not the agencies.

   Similarly, Congress should prohibit IHS and the BIA from 
        refusing to award and fund a subsequent funding agreement, 
        either based upon agency concerns over available appropriations 
        or (as has frequently happened in recent years) over an 
        agency's unilateral imposition of new contract language on a 
        Tribe. Although such language is included in proposed 
        amendments to rewrite Title IV of the Indian Self-Determination 
        Act, we make special note of the critical and immediate 
        importance of this particular reform.

   Congress should direct the BIA to develop a comprehensive 
        tribal shares identification and distribution process, much as 
        the Indian Health Service did in the mid 1990s. Such a process 
        will permit Tribes to bring resources currently retained in the 
        BIA regional offices down to the agency and reservation levels. 
        For similar reasons, Congress should eliminate the current 
        appropriations rider which protects the BIA central office from 
        the tribal shares process--again, a process which IHS 
        Headquarters has carried out since the mid-1990s.

   Congress should develop amendments to the Indian Self-
        Determination Act that would make Tribal employees carrying out 
        self-determination programs eligible for participation in the 
        Federal retirement and health insurance systems. Such a 
        provision would substantially reduce the need for ``direct'' 
        contract support costs currently furnished to pay such 
        benefits, while helping maintain parity between direct service 
        programs and contracted and compacted programs.

   Congress should clarify that Congress's approval of program 
        expenditures set forth in section 106(k) of the Act includes 
        expenditures made from Tribal indirect cost pools.

   Congress should accelerate to February 1 the deadline for 
        IHS and BIA to furnish their section 106(c) annual shortfall 
        reports to Congress, so that Congress can consider such reports 
        when entertaining supplemental appropriations bills.

    Thank you for the opportunity to offer testimony in connection with 
the Committee's May 13 hearing, and for holding the record open to 
receive these remarks.
                                 ______
                                 
  Prepared Statement of Melanie Benjamin, Chief Executive, Mille Lacs 
                             Band of Ojibwe
    Good afternoon, Chairman Dorgan, Vice Chair Murkowski, and members 
of the Committee. My name is Melanie Benjamin. I am the elected Chief 
Executive of the Mille Lacs Band of Ojibwe.
    The key message in my testimony is this--I urge you to introduce 
and work to secure Senate and House passage this year of the compromise 
tribal legislative provisions to reform Title IV, the self-governance 
portion of Public Law 93-638 that governs relations between the 
Interior Department and tribes like the Mille Lacs Band. Enactment of 
these provisions will remove many obstacles to greater tribal self-
governance.
    I have a second message which is in response to a critical on-going 
issue on our Reservation. In 2007, University of Minnesota Law 
Professor Kevin Washburn testified before your committee about law 
enforcement matters and detailed a law enforcement crisis our Band is 
facing due to a hostile relationship with Mille Lacs County, which 
asserts that our Reservation no longer exists. In response to critical 
public safety issues on our Reservation, Professor Washburn asked the 
Committee to consider legislation that would create an escape valve 
from Public Law 83-280 when state retrocession of criminal jurisdiction 
to the Federal Government is not an option. We believe that Self-
Governance would be an appropriate vehicle for developing such 
authority under which the Secretary and Tribe could enter into a direct 
agreement under Title IV when the state is being non-responsive to 
public safety concerns.
    I made the same request of Chairman Rahall when I testified before 
the House Natural Resources Committee on Self-Governance matters. We 
would like to work with the Committee to develop such authority and 
make it part of Title IV.
Background
    The Mille Lacs Band has long been a leader among other Tribes in 
seeking greater tribal self-governance authority and in putting it into 
practice. The Band was among the first ten Indian Tribes to participate 
in self-governance with the Bureau of Indian Affairs (BIA) in the late 
1980s and the first Tribe to negotiate an agreement with the Indian 
Health Service (IHS) in the early 1990s.
    It has been 20 years since the beginning of tribal self-governance. 
Two tribal leaders--Wendell Chino and Roger Jourdain--brought this 
concept to the forefront in 1987 as the country was planning the 
bicentennial celebration of the United States Constitution. Chino and 
Jourdain called for a meeting of tribal leaders in Kansas City to 
discuss the 200th anniversary and the need for changes in federal 
Indian policy.
    Tribes' participation in the bicentennial of the Constitution's 
signing was significant. They provided research on what the 
Constitution's framers envisioned as the basis of governance and 
presented information on the Constitution at the Philadelphia 
symposium. They also raised awareness about the U.S. Constitution being 
modeled on the Iroquois Confederacy and the Constitution's outlining of 
the special relationship between tribes and the Federal Government.
    In addition, ten tribes met with Congress to discuss problems in 
Indian Country; three main problems were identified: the plenary power 
of Congress; the relationship between Indian tribes and the United 
States; and the working relationship with the Bureau of Indian Affairs 
(BIA). Congress addressed one of these issues by giving each tribe 
$100,000 to find a better way to work with the BIA under the Self-
Governance Demonstration Project which became Title III of P.L. 93-638. 
The tribes agreed to this action, and each tribe drafted its proposal. 
The tribes also agreed that they needed to be treated as governments 
like they were during the treaty-making era, when tribes met with the 
President on a government-to-government basis. The transition from the 
former federal Indian policy of Self-Determination to Self-Governance 
was a logical step.
    On the 20th anniversary of Self-Governance policy, the question is: 
Has Self-Governance resulted in improvements in Indian Country? For the 
Mille Lacs Band of Ojibwe, self-governance has led to a number of 
successes: First, all six other Chippewa Bands in Minnesota have 
negotiated and signed Self-Governance compacts with the Federal 
Government, which has increased cooperation among member bands with the 
Mille Lacs Band of Ojibwe. Second, the Mille Lacs Band has improved its 
government by developing laws and a separation-of-powers system of 
government. Third, the Band's main source of financial success has been 
its two casinos, which are operated by a separate corporate system. 
Without Self-Governance, the Band could not have developed these 
businesses to the level they are today. The Band's departments were 
allowed to work directly with federal agencies to ensure compliance 
with federal requirements, which saved time in developing these 
businesses.
    Other opportunities that would not have been made available under 
past policies include: resolving issues with state government, setting 
up partnerships with businesses, improving government structure, 
working with other tribal governments, and better financial management. 
Finally, the Band's tribal government is better able to establish 
government-to-government relationships with the Federal, state, county 
and municipal governments.
    In the years since Self-Governance was first established as federal 
law, we have worked closely with this Committee and other Tribes to 
reform the law so as to permit greater tribal self-governance authority 
that curbs the federal bureaucracy's insatiable appetite to dominate 
tribal operations. Unless the Bureau of Indian Affairs and the Office 
of Special Trustee are controlled by the law, they tend to restrict 
tribal authority, priorities, administration, and programs.
    We are, today, at a point where we must ask the Congress to step in 
once again and change the law to remove more obstacles to tribal self-
governance.
    As you know, four years ago, this Committee favorably reported out 
a predecessor bill, S. 1715, the Department of the Interior Tribal 
Self-Governance Act of 2003 (Senate Report No. 108-413, Nov. 16, 2004), 
but the full Senate never voted on it.
Enact the Draft Tribal Bill
    The efforts of the past seven years to reach agreement with 
Interior on specific changes to the Title IV statute have borne great 
fruit. The Tribal and Interior representatives have listened to each 
other and found ways to accommodate the other's concerns.
    The attached tribal draft bill reflects these compromises. But more 
importantly, it represents a huge concession on the part of the 
Tribes--it completely drops all provisions which would have made 
mandatorily applied self-governance to non-BIA and non-OST offices of 
the Department like the National Park Service and Fish and Wildlife 
agencies.
    While the Mille Lacs Band very much regrets having to make this 
compromise, we agree with our fellow Tribes that it must be made in 
order to clear the way for enactment this year of much-needed self-
governance reforms that focus on BIA and OST and with which the 
Department has shown substantial agreement.
    Like other Self-Governance Tribes, we reluctantly give up, 
temporarily, our request for the application of tribal self-governance 
authority to every corner of the Department of the Interior. We do so 
only in order to remove the remaining Departmental objections to 
enactment of the rest of the tribal draft bill in 2008.
    A House version of this legislation, H.R. 3994, is currently under 
review by the House Natural Resources Committee. The House Committee 
has told us it expects to mark up the bill in the next month. We hope 
that you will introduce a companion bill in the Senate and that this 
critical legislation can be enacted during this session of Congress. 
The draft legislation I have attached to my testimony is substantively 
identical to H.R. 3994.
Why the Tribal Reform Bill is Needed
A. The Bill Will Remove Dual and Overlapping Requirements
    Mille Lacs and many other Tribes have self-governance agreements 
with both IHS and BIA. But because Congress enacted Title IV governing 
BIA in 1994 and Title V governing IHS in 2000, Title IV and Title V now 
contain provisions that differ from each other and thus require self-
governance tribes to operate separate administrative structures and 
systems for programs funded by BIA and IHS.
    Congress expanded tribal authority and flexibility when it enacted 
Title V governing IHS-funded programs. But the same Tribes still labor 
under the more restrictive authority of Title IV governing BIA-funded 
programs. These dual requirements are an administrative and cost burden 
to Tribes like Mille Lacs Band. And they deter Tribes from assuming 
more federal program administration under self-governance authority.
B. The Bill Will Expedite Negotiations and Reduce Conflict
    The bill would make significant improvements to the negotiation and 
implementation of self-governance agreements. Negotiation disputes 
would be resolved quickly with uniform standards. It would clarify and 
limit how the BIA may decline to enter into a proposed agreement, and 
the time frame for making its decision. It would require that funds be 
transferred promptly after they have been apportioned to the 
Department. It would streamline how construction provisions would be 
implemented. And it would protect tribes from BIA attempts to impose 
unilaterally terms in compacts or funding agreements. Finally, it would 
provide a clear avenue of appeal and burden of proof for Tribes to 
challenge adverse agency decisions.
C. The Bill is Modeled After the 8-Year-Old IHS Law
    As you know, Congress in 2000 enacted Title V to govern tribal-
self-governance agreements with the IHS. Title V, which has worked very 
well in the context of health care services, served as the model for 
the tribal draft bill on Title IV. None of the several provisions of 
the draft tribal Title IV bill that BIA refuses to support has caused 
the IHS any heartburn over the past eight years. Self-Governance, by 
definition, will always reflect an inherent tension between Tribes and 
the BIA. Any federal bureaucracy will try to avoid yielding its 
authority--and its funding--to tribes. This Committee, and the Senate 
and Congress, should keep this in mind when weighing the persuasiveness 
of any continuing objections raised by BIA.
    We believe that the Title IV amendments, especially after the most 
recent tribal concessions discussed above, protect the interests of the 
Federal Government while advancing those of tribal governments. We hope 
that this Committee will agree.
Conclusion
    For eight years we have tried to negotiate with Interior to gain 
its agreement to add to Title IV the reforms made by Congress to Title 
V (IHS). The broader Title V self-governance authority has worked well 
at IHS where there is widespread participation by tribes in self-
governance. We believe tribal participation would expand if Title IV 
were amended to look more like Title V (as reflected in the attached 
tribal draft bill).
    Given the Department's objections to extending self-governance 
authority to the non-BIA, non-OST agencies within the Department, the 
Tribes have reluctantly agreed to sever those sections and request this 
year only amendments dealing with BIA and OST. We have done this only 
to facilitate passage this year. We ask that you honor this significant 
tribal concession with prompt enactment of these remaining provisions 
which are largely without controversy.
    The compromise tribal amendments will provide for more efficient 
and responsive tribal program administration. Broad-based and sustained 
economic development and growth will surely follow an expansion of 
tribal self-governance authority. And so we ask the Committee to 
marshal its energies and persuade the Senate and the House to enact 
these tribal amendments in the closing days of this Congress.
    Thank you for this opportunity to express the views of the Mille 
Lacs Band of Ojibwe, and for your work, Mr. Chairman, and the work of 
this Committee over the years in supporting tribal self-governance at 
the request of tribal governments and in the face of resistance from 
the federal agencies.
    Miigwetch.
Attachment: Tribal BIA/OST Amendments to Title IV *
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    * The information referred to is printed on pages 15-42 of this 
hearing.
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