    [Senate Hearing 113-353]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 113-353

                           CONTRACT SUPPORT COSTS AND
                            SEQUESTRATION: FISCAL CRISIS
                               IN INDIAN COUNTRY

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

                                    HEARING

                                   before the

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               NOVEMBER 14, 2013

                                   __________

             Printed for the use of the Committee on Indian Affairs

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                          COMMITTEE ON INDIAN AFFAIRS

                     MARIA CANTWELL, Washington, Chairwoman
                     JOHN BARRASSO, Wyoming, Vice Chairman
    TIM JOHNSON, South Dakota            JOHN McCAIN, Arizona
    JON TESTER, Montana                  LISA MURKOWSKI, Alaska
    TOM UDALL, New Mexico                JOHN HOEVEN, North Dakota
    AL FRANKEN, Minnesota                MIKE CRAPO, Idaho
    MARK BEGICH, Alaska                  DEB FISCHER, Nebraska
    BRIAN SCHATZ, Hawaii
    HEIDI HEITKAMP, North Dakota
            Mary J. Pavel, Majority Staff Director and Chief Counsel
                  Rhonda Harjo, Minority Deputy Chief Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on November 14, 2013................................     1
    Statement of Senator Barrasso....................................     2
    Statement of Senator Begich......................................    71
    Statement of Senator Cantwell....................................     1
    Statement of Senator Franken.....................................     3
    Statement of Senator Heitkamp....................................    21
    Statement of Senator Murkowski...................................     6
    Statement of Senator Schatz......................................     4
    Statement of Senator Tester......................................     5
    Statement of Senator Udall.......................................     4

                                   Witnesses

    Anderson, Hon. Phyliss J., Tribal Chief, Mississippi Band of
      Chocktaw Indians...............................................    51
        Prepared statement...........................................    53
    Cladoosby, Hon. Brian, President, National Congress of American
      Indians........................................................    23
        Prepared statement...........................................    26
    Diver, Hon. Karen R., Chairwoman, Fond du Lac Band of Lake
      Superior Chippewa..............................................    42
        Prepared statement...........................................    44
    Keel, Hon. Jefferson, Lieutenant Governor, Chickasaw Nation......    57
        Prepared statement...........................................    59
    Lane, Hon. Alfred ``Bud'', Vice Chairman, Confederated Tribes of
      Siletz Indians.................................................    47
        Prepared statement...........................................    49
    Payment, Hon. Aaron, Chairman, Sault Ste. Marie Tribe of Chippewa
      Indians........................................................    63
        Prepared statement...........................................    65
    Roubideaux, M.D., M.P.H., Hon. Yvette, Acting Director, Indian
      Health Service, U.S. Department of Health and Human Services...     9
        Prepared statement...........................................    11
    Washburn, Hon. Kevin, Assistant Secretary--Indian Affairs, U.S.
      Department of the Interior.....................................     6
        Prepared statement...........................................     8

                                    Appendix

    Abramson, Hon. Cathy, Chairperson, National Indian Health Board,
      prepared statement.............................................    75
    Johnson, Dr. Sherry, Director, Sisseton Wahpeton Oyate Tribal
      Education Department, prepared statement.......................    98
    Miller, Lloyd B., Partner, Sonosky, Chambers, Sachse, Miller and
      Munson, LLP, prepared statement................................    79
    Naneng, Sr., Myron P., President, Association of Village Council
      Presidents, prepared statement.................................    90
    Power, Jacquelyn, Superintendent/Principal, Blackwater Community
      School.........................................................    92
    Response to written questions submitted to Hon. Yvette Roubideaux
      by:
        Hon. John Barrasso...........................................   111
        Hon. Maria Cantwell..........................................   109
    Rigdon, Philip, President, Intertribal Timber Council, prepared
      statement......................................................    86
    Winkelman, Dan, Vice President for Administration and General
      Counsel, Yukon-Kuskokwim Health Corporation, prepared statement    95

    Additional information for the record:
        Letters to Hon. Heidi Heitkamp from the Standing Rock Sioux
          and Spirit Lake Tribes................................... 99, 101
        National Association of Federally Impacted Schools--Report by
          Jocelyn Bissonnette........................................   102
        Written questions submitted for the record.................116, 117

                          CONTRACT SUPPORT COSTS AND
                 SEQUESTRATION: FISCAL CRISIS IN INDIAN COUNTRY

                                  ----------

                          THURSDAY, NOVEMBER 14, 2013

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

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

        The Chairwoman. Good afternoon. The Senate Indian Affairs
    Committee will come to order.
        This is an oversight hearing on testimony about contract
    support costs and the fiscal impacts of sequestration in Indian
    Country.
        Some of my colleagues may have noticed that we did give
    notice originally to an executive session on several bills. It
    turns out that some of those bills needed further work, and so
    they will hopefully be on the next session and markup. I just
    encourage all those that are involved with all those bills to
    continue to resolve any outstanding issues, so we can move
    forward on them.
        With that, this afternoon we are holding a hearing on the
    oversight issues that have serious consequences for Indian
    Country, sequestration and shortfalls in contract support
    costs. The trust relationship that exists between the United
    States and tribe is a relationship built through the United
    States Constitution, treaties, Federal statutes and a Supreme
    Court decision. Ideally, we would be able to fully fund tribal
    governments based on this relationship. But if that were really
    possible, we wouldn't be having this hearing today.
        The Committee staff has held a listening session earlier on
    these issues, and the Committee heard from trial leaders that
    sequestration is having an incredibly negative impact on Indian
    programs. However, it is not just sequestration alone. There
    are other issues that we need to address. I know my staff has
    some charts, but I am going to forego them at this moment. What
    is really clear is that our Country's financial troubles are
    not really stemming from our obligations to Indian Country. In
    fact, we are not really doing a good job in fulfilling the
    obligations that we have to Indian Country.
        So today's session is really about hearing from those
    individuals about these impacts and what we can do to strive to
    make sure that Indian Country is considered as Congress makes
    budgetary decisions going forward.
        The second issue we will address today is contract support
    costs. Today over 90 percent of tribes throughout the Country
    participate in programs which have allowed tribes to take over
    functions previously performed by the Federal Government.
    However, funding of the administrative costs incurred by tribes
    in taking over these functions has not kept pace with the
    growth of the program. So in effect, tribes are not being fully
    funded for the work they perform.
        Tribes have been litigating this issue for over a decade.
    The Supreme Court has in two separate decisions upheld the
    rights of tribes to receive full funding. So why are we here?
    Because we need to make more progress in resolving this issue.
        It has been 18 months since the court ruled in this case
    that tribes are owed full contract support costs. Since then,
    the Indian Health Service has only resolved 16 claims out of an
    estimated 1,600. The Department of Interior has not yet
    resolved any of these claims either, but is at least treating
    all the claims together with hopes of settling them at once or
    within the next year.
        So my colleagues and I have heard from dozens of tribes on
    this very important topic. I look forward to hearing from the
    witnesses today on how we are going to get this issue resolved.
        I would just add a footnote to this. I think that one, to
    really wrap their minds around this issue, needs to look at how
    big Indian Country's economic footprint is in various
    communities. So from the perspective of the State of Alaska, we
    are talking about a major aspect of the way of life of
    Alaskans. So this is not a small issue. This isn't one of those
    things where it is just resolving a few things on the side
    procedurally. This is having a major, major impact in Indian
    Country.
        So with that, I am going to turn to the Vice Chairman of
    the Committee, Senator Barrasso, for his opening statement.

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

        Senator Barrasso. Thank you, Madam Chairwoman. I appreciate
    your holding this hearing this afternoon, and I appreciate your
    leadership in signaling the need for greater fiscal
    responsibility.
        As you know, members on both sides of the aisle agree that
    the spiraling Federal deficit and increased Government spending
    needed to be addressed. That is why Congress, both Democrats
    and Republicans, passed the bipartisan Budget Control Act,
    which included sequestration. In light of widely shared
    concerns over the Federal deficit, all agencies have been
    called upon to control spending.
        We have also recognized that the Federal Government has
    important responsibilities in Indian Country. So it is even
    more important that we examine agency decisions or priorities
    and efficient use of taxpayer funds. To that end I welcome our
    witnesses, and look forward to their testimony.
        I would like to take a second, Madam Chairwoman, just to
    recognize Darwin St. Clair, who is here joining us. He is
    representing the Eastern Shoshone Tribe in Wyoming, and he is
    Chairman of the Shoshone Business Council. Welcome, Chairman
    St. Clair.
        Thank you, Madam Chairwoman.
        The Chairwoman. Thank you. Thank you, Senator Barrasso.
        Are there other opening statements? Senator Franken.

                     STATEMENT OF HON. AL FRANKEN,
                      U.S. SENATOR FROM MINNESOTA

        Senator Franken. Madam Chair, thank you. Thank you,
    Chairwoman Cantwell, for holding this very important hearing.
    And thank you to the witnesses for coming here today,
    especially Chairwoman Karen Diver from the Fond du Lac Band of
    the Chippewa.
        The timing of this hearing to discuss the impact of
    sequestration on Indian Country couldn't come at a better time,
    because if we are going to end sequestration, the opportunity
    is coming up in the next few weeks. I asked tribal leaders in
    Minnesota to join me at a roundtable three weeks ago. The
    stories of the consequences of the sequester profoundly
    affected me. I have been meeting with a number of Minnesota's
    tribal leaders this week in Washington. I know Chairwoman Diver
    will share some of her tribe's experiences.
        I would like to share one other from the roundtable. One
    that hit me particularly hard was from the Red Lake Band of the
    Ojibwe. It illustrates the real effects of this sequester very
    powerfully. Recent departures left two vacancies for mental
    health counselors at Red Lake Schools, left two vacancies. But
    because of the sequestration, the school couldn't afford to
    fill those vacancies this year. What happened in the absence of
    those counselors, I am sad to say, is that two 14 year old
    students committed suicide. If sequestration is allowed to
    continue into next year, the remaining six mental health
    counselors will be let go.
        You may all recall that Red Lake was the site of a school
    shooting in 2005, when a mentally disturbed teen shot and
    killed a security guard, a teacher and five students. The
    representative from the roundtable from Red Lake, at the
    roundtable I held, told me that after that shooting, the
    shooting back in 2005, President Bush promised Red Lake that
    they would not be forgotten. Given the recent deaths at the
    school, he feels that promise has been broken, and it has been
    broken because of sequestration.
        Sequestration is a policy that was never meant to go into
    effect. It was meant to be so extreme that it would force a
    tough compromise. Yet it did go into effect, and some may say
    that it hasn't been that bad and that we should just allow the
    cuts to stay in place. I challenge those voices to visit Red
    Lake or any of the hundreds of tribal communities that have
    been hit so hard by these cuts. We will hear testimony about
    that today.
        It is just as extreme as it was intended to be. It is
    something that we have to stop.
        Thank you, Chairman Cantwell, and thank you to all our
    witnesses today.
        The Chairwoman. Senator Udall?

                     STATEMENT OF HON. TOM UDALL,
                      U.S. SENATOR FROM NEW MEXICO

        Senator Udall. Thank you, Chairwoman Cantwell, and Vice
    Chairman Barrasso, for paying attention to this issue and also
    for focusing this hearing on what I think is an extremely
    important issue.
        Senator Franken, what you said, the same is true in New
    Mexico. We have communities that have suicides and they need
    help. And sequestration has damaged them. So people should
    know, across the Country this is having a big, big impact.
        Sequestration and contract support costs are pressing
    issues for Indian Country, two issues I have been hearing
    consistently from the tribes over the past year. I would like
    to echo the sentiment heard here today and across Indian
    Country that tribal programs should be exempted from
    sequestration, especially the Indian Health Service. It is
    shameful that IHS is the only direct Federal medical service
    agency not exempted in some way from sequestration. In
    negotiating sequestration, Congress hoped to protect the most
    vulnerable individuals in our Nation. In Indian Country, we
    fell woefully short.
        Let's just remember, over and over it was said
    sequestration was going to protect the vulnerable. We did not
    do that when it came to the Nation's tribes.
        This hearing is an important opportunity for tribal leaders
    to make Congress aware of the impact of sequestration on their
    constituents and on already chronically under-funded programs.
    Contract support costs are a vital part of tribal self-
    determination and self-governance. I think everyone here today
    can confidently acknowledge the positive outcomes that have
    resulted from tribes having the option to contract and carry
    out their own services.
        Unfortunately, funding for contract support costs has
    consistently fallen short. This injustice to tribes has been
    acknowledged on multiple occasions by the Supreme Court, most
    recently the Ramah Navajo decision, which came out of New
    Mexico and which Michael Gross and several other attorneys
    worked on for many years. It clearly is a time for Congress,
    the Administration and tribal leaders to identify a clear new
    path forward, one that will allow the success of tribal
    contracting to continue in a more just manner.
        I look forward to buckling down with my colleagues on this
    Committee to help resolve this longstanding issue. I strongly
    encourage the Administration to seriously engage tribal leaders
    on this issue and to work with Congress and Indian Country to
    identify a mutually beneficial way forward.
        Thank you, Madam Chair. I very much appreciate the
    opportunity here.
        The Chairwoman. Any other opening statements? Senator
    Schatz, do you have an opening statement you want to make?

                    STATEMENT OF HON. BRIAN SCHATZ,
                        U.S. SENATOR FROM HAWAII

        Senator Schatz. Thank you, Chairwoman Cantwell and Vice
    Chair Barrasso, for holding this important hearing.
        We are all familiar with the health and education
    disparities, unemployment, substandard housing conditions and
    homelessness that our American Indian, Alaska Native and Native
    Hawaiian communities face. The United States has a duty to
    uphold its trust responsibilities to Native people in good
    times and in challenging times. Yet as today's testimony will
    illustrate, there is a large gulf between promises made and
    promises kept. The failure to fully pay for contract support
    costs is creating a fiscal and human crisis in Indian Country.
    That is why I oppose capping contract support cost accounts,
    because inadequate reimbursement threatens the ability of
    tribal governments to maintain already underfunded safety net
    programs. These programs are vital to the everyday lives of
    tribal members. And the blunt sequestration cuts are already
    devastating Native communities.
        At the Tribal Nations conference yesterday, Secretary
    Sebelius said that under the sequester, 3,000 fewer Indian
    Health Service patients would be admitted to hospitals.
    Hospitals would have to turn away close to 800,000 IHS patients
    from important procedures like diabetes and cancer screenings,
    primary care visits and vaccinations for well-baby visits for
    Native Children. When people talk about the sequester, we need
    to fully understand the human price that this policy is
    exacting in Native communities. We cannot allow them to bear a
    disproportionate burden because of cuts that were never
    supposed to go into effect in the first place. We need to work
    to ensure that the trust relationship between the United States
    and all Native Americans is strong and that this relationship
    is guided by the policies of self-determination and self-
    governance.
        So I look forward to hearing from our witnesses, and we can
    work together on a solution to this.
        The Chairwoman. Senator Tester?

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

        Senator Tester. Thank you, Madam Chair. My comments will be
    brief, because I think most of them have been covered by
    previous speakers, yourself included. I do want to thank the
    Chair and the ranking Member for having this hearing. And I
    want to thank the folks who traveled such a great distance to
    be here today. I very much appreciate that. I want to thank the
    folks from the Administration for being here to talk about the
    impacts and delays and cuts of fulfilling contract support
    costs. In addition, the impacts of sequestration.
        The stories have been told in Minnesota, New Mexico, they
    are probably not much different anywhere else in the Country,
    including Montana. They have been draconian in nature. The only
    thing I would like to point out is that the Supreme Court has
    ruled that the Federal Government must fulfill its trust
    responsibility to our tribal nations. We need to take that
    ruling seriously as we move forward. Sequestration didn't work
    out the way people had intended, as Senator Franken had said,
    these cuts were so bad that we were hoping the Supercommittee
    could come up with a better solution. Unfortunately the rules
    of the field weren't explained before this bill was voted on.
        With that, I look forward to hearing from the witnesses.
    Thank you, Madam Chair.
        The Chairwoman. Thank you. Does anybody else have an
    opening statement? Yes, Senator Murkowski.

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

        Senator Murkowski. Very briefly, Madam Chairman. And I
    appreciate the comments that my colleagues from Montana just
    made, reminding us of not only the contractual responsibility
    that we have with contract support costs, but with the Supreme
    Court decision coming out in Ramah, it is clear, it is
    unequivocal, it is just right there. The fact that we are
    continuing to bring this up before members of the
    Administration I find very, very frustrating. I have had an
    opportunity to express that to both Dr. Roubideaux and Mr.
    Washburn. I think you certainly know where Alaskans are coming
    from on this. They have made it very, very clear.
        I listened very intently yesterday at the tribal summit
    when the President spoke. I went there specifically to hear
    what he was going to say on the issue of contract support
    costs. What I heard him say is, we have heard you loud and
    clear, but we are still working to find the answers. I don't
    think we need to work to find any answers. I think that the
    court laid it out very, very clearly. It said that full
    reimbursement will be provided. So we have to make that happen
    within that budget. We have to make that priority.
        I too have stories for the record about the impact of
    sequestration on tribal programs in my State. The regional
    health provider in Juneau had to close its alcohol treatment
    facility. Up in the YK Delta, the regional health provider laid
    off 20 employees, permanently closed 40 vacant positions. They
    reduced services for elders. The impacts of sequestration means
    that tribes will not be able to reduce waiting times at
    emergency rooms, outpatient, dental clinics.
        The impact, I think we recognize, has been significant. I
    would ask, Madam Chairman, that I be able to submit for the
    record comments that we have received from Tribes around the
    State as well as from the Association of Village Council
    Presidents and stories from the Kawerak Region on the impacts
    of sequestration of tribal programs. I will look forward to the
    comments not only from Mr. Washburn and Dr. Roubideaux, but the
    panel later this afternoon. Thank you for the hearing.
        The Chairwoman. Thank you. Without objection, we will add
    that to the record.
        Now we will turn to our witnesses. Thank you for being here
    today. I know it has been a busy week. Assistant Secretary
    Washburn, for the U.S. Department of Interior and Acting
    Director of the Indian Health Service, Yvette Roubideaux, thank
    you both for being here and we look forward to your testimony.

              STATEMENT OF HON. KEVIN WASHBURN, ASSISTANT
       SECRETARY--INDIAN AFFAIRS, U.S. DEPARTMENT OF THE INTERIOR

        Mr. Washburn. Thank you, Madam Chair and Mr. Vice Chair,
    and the rest of the Committee, thank you for having us here. We
    did have the tribal nations conference yesterday and Senator
    Murkowski and Senator Heitkamp were both there. It was good to
    see them. We really appreciate the support from Capitol Hill.
        Thirteen cabinet secretaries were also there hearing from
    tribes, and 300 plus tribal leaders, I believe, was the final
    count, something like that. We did hear loud and clear from
    tribes on numerous issues. Certainly contract support costs
    were one of the issues that we heard a lot about. My boss,
    Secretary Sally Jewell, said from the podium that she heard
    loud and clear that tribes want full funding of contract
    support costs. I think I probably don't need to say too much
    more about that, because that is what we heard. We will be
    working further to address those issues.
        We did not consult with tribes before we came up with the
    approach that we put in the Green Book this year. That is not
    the way we should be doing business, so we have been scurrying
    around working to consult afterward. We have heard from tribes,
    they don't like the approach that was used in the Green Book.
    So we are regrouping and trying to figure out how to go
    forward. We have had very productive conversations with tribal
    leaders, and we have reinstituted our contract support costs
    work group, and we have had a consultation session and have had
    a lot of informal conversations. We are grateful for that. We
    certainly got a conversation going and we need to figure out a
    better way through this, obviously.
        So let me turn to sequestration. Sequestration really is
    getting to be a serious problem. Tribes are now, I think when
    sequestration first hit, several months ago, we didn't really
    know what the outcomes were going to be. But now we are really
    starting to feel them, as tribes have had to live with these
    cuts for a while now. It was $119 million less from our budget
    that was split about evenly between direct service tribes and
    self-governance tribes. And on your panel, you have five tribes
    that are self-governance tribes, and the sixth, Mississippi
    Band of Choctaw, actually does a lot of their own work, too.
    They do self-determination contracts and have tribally-
    controlled schools. So they are in essence in the same boat,
    they have a lot of contracts with the Federal Government.
        So for all these tribes that are going to be represented,
    they have all seen a cut of 5 percent in their budgets, their
    appropriations. And we face a looming cut of another 2.2
    percent on January 15 if there isn't something done under the
    Budget Control Act. So that will be a total of $170 million cut
    that we have had to deal with over the course of a year.
        And that sounds scary. The only thing scarier is the House-
    proposed budget, because it would cut Indian Affairs' budget
    more than $200 million. So that really terrifies us, because we
    aren't doing the job we need to do with what has happened
    already.
        So we really hope that the Conference Committee will come
    up with a good proposal. We appreciate the Senate's leadership,
    because the Senate's budget is much better for Indian Country.
    We hope that you negotiate well on behalf of Indian tribes in
    the Conference Committee. And we will be in a much better
    place.
        Let me just tell you that the House budget, what it would
    do is, it fully funds school construction, which I know Senator
    Franken will be happy about. And it fully funds contract
    support costs, which many people will be happy about. But with
    the overall $200 million cut, it does all of that with a 19
    percent across the board cut to virtually every other line in
    our budget. Nineteen percent. We just dealt with a 5 percent
    cut, and it was debilitating. As Senator Udall and Senator
    Franken and Senator Tester said, we just can't live with a cut
    that is four times that amount. That is what would happen if
    the House budget became the law. Just to give you a sense, it
    would cut $60 million from law enforcement.
        So we are in a terrible time. We are grateful for the
    leadership. I know that each of the people on this Committee
    are advocates for Indian Country. We are grateful for that,
    because we really need it right now.
        So why don't I stop there, and I am happy to answer
    questions, any questions you have about the budget or about
    contract support costs. Thank you.
        [The prepared statement of Mr. Washburn follows:]

    Prepared Statement of Hon. Kevin Washburn, Assistant Secretary--Indian
                    Affairs, U.S. Department of the Interior
        Good afternoon, Chairwoman Cantwell, Vice Chairman Barrasso, and
    Members of the Committee. Thank you for the opportunity to provide a
    statement on behalf of the Department of the Interior (Department) at
    this oversight hearing on ``Contract Support Costs and Sequestration:
    Fiscal Crisis in Indian Country.''
        As the Assistant Secretary for Indian Affairs, I have the
    responsibility to oversee the numerous programs within the Bureau of
    Indian Affairs (BIA) and the Bureau of Indian Education (BIE), along
    with other programs within the immediate Office of the Assistant
    Secretary for Indian Affairs. The Office of the Assistant Secretary for
    Indian Affairs, BIA, and BIE programs expend over 90 percent of
    appropriated funds at the local level. Of this amount, over 62 percent
    of the appropriations are provided directly to Tribes and tribal
    organizations through grants, contracts, and compacts for Tribes to
    operate government programs and schools. Indian Affairs' programs serve
    the more than 1.7 million American Indians and Alaska Natives living on
    or near Indian reservations.
        Earlier this year I testified on the President's FY 2014 Budget
    Request for Indian Affairs programs at the Department of the Interior.
    In that Budget Request, the Administration proposed that the FY 2014
    budget for contract support costs (CSC) be funded at $231.0 million,
    and also proposed to fund contract support in an account separate from
    the Operation of Indian Programs account. We stated that this would be
    an increase of $9.8 million over 2012 and would strengthen the capacity
    of Tribes to manage Indian Affairs programs for which they contract. As
    a result of the Salazar v. Ramah Navajo Chapter Supreme Court decision
    in 2012, the Budget also proposed an interim measure requesting that
    Congress appropriate CSC funding to Tribes on a contract-by-contract
    basis, which was consistent with one of the options for Congress
    identified by the Court. To ensure as much clarity as possible
    regarding the level of contract support funding, the Administration
    provided Congress a contract-by-contract funding table for
    incorporation into the appropriations act on June 14, 2013.
        After releasing the President's Budget Request for FY 2014, we have
    heard a great deal of feedback from Indian Tribes. Indian Affairs held
    a CSC consultation session at the National Congress of American Indians
    conference in Reno, Nevada, on June 25, 2013. We have also heard on
    several occasions from Tribes at the Tribal Interior Budget Council
    meetings, which are formal meetings for consulting with Tribes on
    proposed budgets, and at the Self-Governance Advisory Committee
    meetings. In addition, Indian Affairs, together with the BIA, also
    reconstituted the BIA's CSC Workgroup. This group is composed of tribal
    leaders and technical experts who are working to improve Indian Affairs
    policy and practice around these issues. That group met in August and
    had productive meetings. In each of these forums, the Administration
    has heard from tribal leaders. The Administration also hosted the
    Tribal Nations Conference this week, where additional outreach efforts
    were made.
        Currently, the Administration is engaged in the important work of
    preparing the FY 2015 Budget Request. It is our intention to continue
    to work to find a responsible solution to the CSC issue. Our
    discussions with Tribes will continue, and the views we hear from
    Tribes will inform our path forward.
        We are also dealing with the effects of sequestration on Indian
    Affairs programs, which in FY 2013 cut five percent from every program,
    project and activity and is having lasting effects on Indian programs.
    Our current budget for FY 2014 is funded by a continuing resolution
    that extends through January 15, 2014 and continues the 2013 post-
    sequester funding level. This operating level for FY 2014 is $174
    million or 6.8 percent below the 2014 budget request and does not
    address the additional funds we requested for contract support or other
    important program needs. We await the outcome with regard to full year
    appropriation for Fiscal Year 2014 and we are working with the Tribes
    to prudently plan. Our planning scenarios include the potential for
    budget reductions and sequestration. In the meantime, we are challenged
    to undertake the programs we are responsible to execute as we await
    congressional action. We urge Congress to enact a budget that more
    adequately funds Indian programs.
        The effects of sequestration are beginning to be felt more and
    more, as the cuts had immediate impacts in FY 2013 with reductions in
    hiring, delays and cancellation of travel and training, and cuts in
    contracts for maintenance and other needs. The impacts will continue to
    be felt for some time, as the reductions erode capacity in direct
    services programs and in tribally operating programs. Reduced hiring
    and training undercuts the capacity needed and results in significant
    skills gaps in areas including child welfare, early learning programs,
    energy development, welfare and others. The long term effects including
    erosion of our workforce and, cut backs in educational programs and
    investments in economic development and other areas are becoming more
    apparent, as other witnesses will likely explain.
        Because Indian people are often among the poorest communities in
    the United States, reductions to the budget caused by sequestration has
    undermined the health and safety of some of the most vulnerable
    segments of society with particular effects on children, the elderly,
    and families.
        Sequestration has undermined the efforts of the BIA and BIE and
    other federal agencies to provide services to meet our trust
    responsibility to Indian Tribes and Indian people. Our employee ranks
    have thinned substantially as hundreds of staff positions have opened
    through retirement and other forms of attrition and cannot be easily
    filled in the current fiscal scenario.
        This effect has been mirrored for Tribal governments in Indian
    Country. The sequestration reductions have reduced payments to Tribes
    to perform important federal services, undermining tribal self-
    determination and self-governance and severely handicapping the ability
    of Tribes to implement treaty rights and various resource management
    programs to maintain and restore natural resources in Indian Country.
    Imposing automatic across the board cuts to reduce spending across all
    tribal activities has had immeasurable impacts in the denial of
    opportunities for a self-reliant people.
        In conclusion, I hope the Congress will be able to successfully
    complete the negotiations being conducted for resolution of the budget
    situation so we can return to regular order, avoid sequestration, and
    have certainty in a budget that will adequately address needs in Indian
    Country.

        The Chairwoman. Thank you.
        Director Roubideaux, thank you for being here.

          STATEMENT OF HON. YVETTE ROUBIDEAUX, M.D., M.P.H.,
             ACTING DIRECTOR, INDIAN HEALTH SERVICE, U.S.
                DEPARTMENT OF HEALTH AND HUMAN SERVICES

        Dr. Roubideaux. Thank you, Madam Chairwoman and Vice
    Chairman Barrasso and members of the Senate Committee on Indian
    Affairs. I am Dr. Yvette Roubideaux, the Acting Director of the
    Indian Health Service. I am very pleased to testify today on
    contract support costs and sequestration.
        I want to start by saying that I am deeply concerned about
    the current fiscal situation and I am very anxious to work with
    all of you on solutions. The impact of sequestration in fiscal
    year 2013 was significant for the Indian Health Service.
    Overall, it was a $220 million reduction in IHS's budget
    authority. It was estimated that that would result in, as
    Secretary Sebelius mentioned, and as Senator Schatz mentioned,
    the reduction of 3,000 inpatient admissions and 804,000
    outpatient visits for our patients
        In fiscal year 2013, IHS had to make significant reductions
    in administrative costs, travel, we had to delay hires, delay
    purchasing, we had to delay planned renovations that were
    needed in order to focus on trying to preserve the IHS mission.
    Even with all these challenges, I want to continue to be a
    strong advocate for the Indian Health Service budget, and I am
    anxious to work with you on this. I have advocated very
    strongly within the Administration to continue to keep the
    Indian Health Service to be a priority.
        We need to get the Indian Health Service back on track. We
    did have a series of increases over the last four years. I know
    that tribes are deeply concerned that we are going backwards. I
    am so grateful that the tribes get to tell their story today
    and have told you their story about the budget situation.
        I also want you to know that I have heard your concern
    about contract support costs, and have heard the concerns of
    tribes. We have heard loud and clear that people want
    solutions. We are here and want to work with you on solutions
    to these issues. Related to the appropriations, we have
    actually increased contract support costs 67 percent since
    fiscal year 2008 and our President's budget includes an
    increase for contract support costs for fiscal year 2014.
        It also includes increases for other tribal budget
    priorities, including medical inflation, staff and operating
    costs for newly constructed facilities and contract health
    service for referrals. It reflects the challenge of funding all
    our identified needs and funding priorities, especially in this
    difficult fiscal climate that we face.
        I want you to know I have also heard the input that tribes
    want more consultation and more discussion about solutions for
    contract support costs. We are discussing it in our current
    area budget formulation process, and I sent a letter last month
    to tribes that included an update and initiated a discussion on
    contract support costs to look at the estimates of CSC in the
    pre-award and negotiations phase.
        I have met with the IHS tribal self-governance advisory
    committee. I have also met with the IHS direct service tribes
    advisory committee. They have agreed to move forward with this
    discussion. And I have agreed with them to convene the CSC work
    group to make recommendations on this topic.
        I appreciate all the input we have received from tribal
    leadership on working to continue progress on this issue.
        In terms of the past claims, we have heard your input that
    you want us to do everything we can to increase the pace of
    settlement. We have a joint management plan with the tribal
    lawyers. We have instituted a new fast-track alternative
    process to get offers on the table quicker for tribes. I have
    also recently committed resources to increase the number of
    staff and resources to increase the rate of generating initial
    settlement offers.
        So in summary, I am very deeply concerned about the fiscal
    situation and sequestration. We have heard from tribes on the
    significant challenges that they are facing and that we are
    facing as a system as well. The President's budget for fiscal
    year 2014 as a whole replaces sequestration and reduces
    discretionary spending limits while providing funding
    consistent with the limits agreed to in the bipartisan
    majority's and the Budget Control Act of 2011.
        IHS budget in particular would be increased above the
    sequester level and allow IHS to continue to make improvements
    in health care access to quality for American Indian and Alaska
    Native patients.
        I am anxious to work with you to find solutions to this
    budget situation and I know that I want us all to work together
    so we can honor our responsibility to provide health services
    for American Indians and Alaska Natives that they need and they
    deserve.
        Thank you, and I am happy to answer questions.
        [The prepared statement of Ms. Roubideaux follows:]

      Prepared Statement of Hon. Yvette Roubideaux, M.D., M.P.H., Acting
     Director, Indian Health Service, U.S. Department of Health and Human
                                    Services
        Thank you, Madam Chairwoman, Vice Chairman Barrasso, and Members of
    the Senate Committee on Indian Affairs (Committee). I am Dr. Yvette
    Roubideaux, the Acting Director of the Indian Health Service (IHS). I
    am pleased to provide testimony on Contract Support Costs and
    Sequestration.
        The IHS is an agency within the Department of Health and Human
    Services (HHS) that provides a comprehensive health service delivery
    system for approximately 2 million American Indians and Alaska Natives
    from 566 federally-recognized Tribes in 35 states. The IHS system
    consists of 12 Area offices, which are further divided into 168 Service
    Units that provide care at the local level. Health services are
    provided directly by the IHS, through tribally-contracted and operated
    health programs, through services purchased from private providers, and
    through urban Indian health programs. The IHS fiscal year (FY) 2013
    discretionary appropriations were $4.1 billion, with approximately
    $2.028 billion of the IHS appropriations transferred to Indian Tribes
    and Tribal Organizations (T/TO) through agreements entered under the
    Indian Self-Determination and Education Assistance Act (ISDEAA).
        The impact of sequestration in FY 2013 was significant for IHS;
    overall, the $220 million reduction in IHS' budget authority for FY
    2013 was estimated to result in a reduction of 3,000 inpatient
    admissions and 804,000 outpatient visits for American Indians and
    Alaska Natives (AI/ANs). In FY 2013, IHS made significant reductions in
    administrative costs, travel, and delayed hires, purchasing and planned
    renovations to focus on preserving the IHS mission.
    Contract Support Costs
        As authorized in 1975, the ISDEAA provides T/TO the authority to
    contract with the Federal Government to operate programs serving
    eligible persons and to receive not less than the amount of funding
    that the Secretary would have otherwise provided for her direct
    operation of the program (also known as the ``Secretarial amount'').
    The 1988 amendments to that law added Contract Support Costs (CSC) as a
    second category of funding to ISDEAA agreements. CSC covers additional
    activities that T/TOs must perform in support of the programs,
    services, functions, and activities (PSFAs) administered under their
    ISDEAA agreements which the Government did not perform or did not
    otherwise fund through the Secretarial amount. 25 U.S.C.
    450j-1(a)(2). CSC is not a simple indirect rate or percentage of
    funding received, though the calculation of one category of CSC--
    indirect CSC--can rely, in part, on the T/TO's negotiated indirect cost
    rate agreement. The ISDEAA does not establish the methodology for
    calculating CSC; but, the statute is clear that CSC must be reasonable,
    non-duplicative, prudent and necessary to carrying out the PSFAs in the
    ISDEAA agreement.
        The IHS administers CSC funding under a policy established in 1992.
    The policy was developed through extensive consultation with and
    participation by Tribes and has been amended based on that
    consultation, most recently in 2007. In FY 2011 and FY 2012, IHS made
    significant improvements to the IHS business practices associated with
    the CSC policy to ensure fair and consistent application of the CSC
    policy across all Tribes, including Tribal data verification.
    Contract Support Cost Funding
        The IHS paid about $447.8 million in CSC to T/TO in FY 2013, which
    is a 67 percent increase over the FY 2008 funding level. The
    President's Budget request for FY 2014 provides about $477.2 million
    for CSC, including $500,000 for new and expanded ISDEAA agreements. The
    FY 2014 President's Budget also requests increases for other Tribal
    budget priorities including medical inflation, staff and operating
    costs for newly constructed facilities, and Contract Health Service,
    and reflects the challenge of funding all identified needs and funding
    priorities, especially in the difficult fiscal climate we currently
    face.
        The FY 2014 President's Budget request also proposed adopting a new
    approach to funding CSC in light of the Supreme Court's decision in
    Salazar v. Ramah Navajo Chapter in 2012. Consistent with one of the
    options identified by the Supreme Court, the President's request
    proposes new appropriations language that creates a line-item
    appropriation with a maximum amount of CSC funding available for each
    ISDEAA agreement. Three of the other options identified by the Supreme
    Court involve amending the ISDEAA.
        Tribes have expressed concerns about the approach proposed in the
    FY 2014 President's Budget and have emphasized that full funding of CSC
    is their desired result. The Administration considers the FY 2014
    budget proposal to be an interim measure, and has been consulting with
    Tribes on a long-term solution and requesting input through several
    forums and communications. And, as the President stated at the Tribal
    Nation's Conference, he hears the frustration of the Tribes and will
    work with Tribes on a solution.
        More specifically, each IHS Area Office has been requested to
    submit recommendations from the Tribes participating in the FY 2016 IHS
    Tribal Budget Formulation sessions occurring this fall.
        On September 9, 2013, I sent a letter to Tribes that included an
    update on CSC and initiated a discussion on calculation of estimates of
    CSC in the pre-award or negotiations context. As planned, I have met
    with the Tribal leadership in the IHS Tribal Self-Governance Advisory
    Committee and the IHS Direct Service Tribal Advisory Committee, and we
    had productive discussions on the topic of CSC and agreed to move
    forward with a charge to the IHS CSC Workgroup to make recommendations
    on this topic. We are hopeful that greater agreement on how to
    calculate estimates of CSC in the pre-award context will help with more
    efficiency in all other phases of the CSC process. I appreciate all the
    input we have received from Tribal leadership, and we are working to
    continue progress on this issue.
    Contract Disputes Act Claims for CSC in Past Years
        In terms of Contract Disputes Act (CDA) claims for unpaid CSC in
    past years, the IHS continues to make progress and to prioritize the
    resolution of claims presented to the agency in the most efficient
    manner and through settlement wherever possible. We have moved forward
    with a joint case management plan, agreed upon by both IHS and the T/
    TOs, for exploring settlement of all CSC claims on appeal to the
    Civilian Board of Contract Appeals. In response to input from Tribes,
    the IHS also announced in June 2013 two procedural options for
    resolving claims for unpaid CSC in past years:

       Traditional procedure. Under this option, the IHS and the
            Tribe will have in-depth discussions of the Tribe's claims and
            share documentation in an effort to reach agreement on a final
            amount of unpaid CSC. The benefit of this option is that the
            mutual exchange of information and documentation ensures the
            highest level of confidence in the final agreed-upon amount.

       Alternative procedure. Under this option, a Tribe can
            request that the IHS perform the same costs-incurred analysis
            based on the agency's documentation and then make a one-time,
            non-negotiable offer to settle the Tribe's claim(s). The Tribe
            may choose to settle for the offered amount and resolve the
            claim(s). The Tribe may also choose to reject the offer and
            instead return to the traditional in-depth option. The benefit
            of this option is it is less time-consuming for Tribes.

        Regardless of the process selected, the IHS will seek to ensure the
    agency consistently determines the appropriate CSC amount for each
    claim. IHS also recently committed more resources to the claims process
    to increase the rate of generating initial settlement offers.
    Currently, there are approximately 60 settlement offers on the table in
    both informal and formal settlement discussions, and many more in
    progress.
    Sequestration
        At this time, IHS faces uncertainty about its funding level for FY
    2014 as we await full-year FY 2014 appropriations. The impact of
    sequestration in FY 2013 was significant for IHS; overall, the $220
    million reduction in IHS' budget authority for FY 2013 was estimated to
    result in a reduction of 3,000 inpatient admissions and 804,000
    outpatient visits for American Indians and Alaska Natives (AI/ANs). In
    FY 2013, IHS made significant reductions in administrative costs,
    travel, and delayed hires, purchasing and planned renovations to focus
    on preserving the IHS mission.
        One of the most significant challenges we face is the potential
    future impact of reductions to the discretionary spending limits and
    sequestration on IHS. Tribes have expressed their concern and
    disappointment that our recent progress on increases to the IHS budget
    is being reduced by having to absorb the cuts from sequestration. The
    FY 2014 President's Budget proposal as a whole replaces sequestration
    and reductions to the discretionary spending limits, while providing
    funding consistent with the discretionary spending limits agreed to by
    bipartisan majorities in the Budget Control Act of 2011. The IHS budget
    in particular would be increased above the sequestered level in FY
    2013, and allow the IHS to continue making improvements to health care
    access and quality for our AI/AN patients.
        IHS has the solemn responsibility to honor the federal trust
    responsibility and to carry out health care programs for AI/ANs,
    including through ISDEAA agreements, and remains committed to ensuring
    that our AI/AN patients and communities receive the quality health care
    that they need and deserve.
        Thank you and I am happy to answer questions.

        The Chairwoman. Thank you, and again, we appreciate both
    the witnesses being here.
        My first question is to both of you. I know that you might
    think Director Roubideaux needs to answer this, but why do we
    have sequestration that protects Medicaid and Medicare but not
    Indian Health Service?
        Dr. Roubideaux. I don't know the answer to that.
        The Chairwoman. So in the Administration budget, are you
    talking about proposing a change to that for next year?
        Dr. Roubideaux. Well, I have heard that there are proposals
    to protect the Indian Health Service, to exempt them from
    sequestration. Those proposals are being discussed in Congress
    and the tribes have indicated their support for them.
        The Chairwoman. What does the Administration think?
        Dr. Roubideaux. The Administration's approach is that we
    think sequestration is a bad idea and we want it to be
    eliminated. So we are willing to work with you on this issue.
        The Chairwoman. What I would appreciate is an answer from
    whether the Administration supports protecting Indian Health
    Services the same way they protect Medicaid and Medicare. So if
    you could get us an answer yes or no on that, that would be
    very helpful.
        Dr. Roubideaux. The Administration supports eliminating
    sequestration for the Indian Health Service as well as all
    other tribal programs and all of their programs.
        The Chairwoman. While we are doing sequestration, does the
    Administration believe you need to protect Indian Health
    Services just like we protect health care under Medicaid and
    Medicare?
        Dr. Roubideaux. I guess I have not asked that question to
    them. I will and I will bring that back to you.
        The Chairwoman. Thank you. Assistant Secretary Washburn, do
    you have any comments about that question?
        Mr. Washburn. I also don't have an answer for you.
    Certainly I think that it is true that what sequestration did
    is, in some respects the Budget Control Act attempted to
    protect the most vulnerable, and it did not do that in Indian
    Country, that is for sure. That would seem to be inconsistent
    with what was said at that time, as Senator Udall said.
        The Chairwoman. Okay. Back to the contract support costs.
    What do you think the estimate is that the Department of
    Interior owes tribes?
        Mr. Washburn. As far as past claims?
        The Chairwoman. Yes.
        Mr. Washburn. I don't know what that answer is. And
    frankly, I am not sure that anyone knows what that is for sure.
    That really is the key question because liability was
    determined in the Ramah case. The liability is clear, the fact
    of liability. The question is how much. That is the golden
    number, that is the number we need to know to know how much to
    settle for.
        The Chairwoman. Let's ask this. Are we talking about
    millions or billions here?
        Mr. Washburn. It is at least in the hundreds of millions, I
    would venture to guess. But again, it is an estimate. The way
    we are going about it, and when I say we, I mean the plaintiffs
    and the Federal Government are working together on a sampling
    method so that they don't have to prove up every single actual
    cost that the tribes bore, but that they can come up with a
    method for estimating what the costs would be. As you noted in
    your opening statement, we have one large class action
    encompassing essentially every tribe that has a contract. And
    we are working with the plaintiffs to determine if there is a
    formula that we can use to estimate.
        I am confident that it is in the hundreds of millions and
    it may well exceed a billion dollars.
        The Chairwoman. I definitely think it exceeds a billion
    dollars from estimates that I have seen. So I don't think it is
    in the hundreds of millions. We probably wouldn't have
    everybody sitting here as members frustrated over the lack of
    progress on contract support if it really was in the hundreds
    of millions. I think we have a lot of people paying attention
    because it is a larger number.
        But I am trying to get your viewpoint on whether these
    claims can be paid out of the judgment fund that exists.
        Mr. Washburn. Well, let me say this. And I didn't mean to
    be lowballing or anything, I just don't know. And I don't want
    to be presuming anything. I view this as the same scale as
    Cobell. And Cobell was a multi-billion dollar settlement. I
    think this is just as important as Cobell, and the principles
    also are very important. It is my understanding that for past
    claims, the judgment fund is available for these claims. And
    that is the assumption I have been bringing to everything I
    have been hearing about this. There is a question about how the
    judgment fund works going forward. I think that is why the,
    well, there is the interest in the Administration to come up
    with a solution that doesn't create yawning liability
    indefinitely in the future.
        So there is, I guess that is the reason, one of the reasons
    for the Administration's approach that it took in this case.
        The Chairwoman. My time is running out. I want to get to my
    colleagues. But I guess the way I look at it is, liability, as
    you said, has been determined. You and I may be quibbling about
    the amount, but my guess is that at least it is that billion
    dollar mark. You are saying it can come out of the judgment
    fund, which has funds. So now it is really just the process of
    determining how to get that done. I personally believe
    something like a special master would get it done faster than
    what we are doing and get some serious expertise on how to
    settle these claims in the process. But we will leave that to
    another round of questioning and I will turn to my colleague,
    the Vice Chairman.
        Senator Barrasso. Thank you, Madam Chairwoman. I have to
    agree with you, that was going to be my first question, just to
    follow your line of questioning. Written testimony from our
    second panel of witnesses today indicates that there are
    several thousand contract support cost claims pending with the
    agencies, close to 9,000 for the Bureau of Indian Affairs
    claims, nearly 1,600 from the Indian Health Service, with years
    left to settle them. So we are going to get recommendations
    that a special master be appointed to handle these contract
    support cost claims.
        The question is, what do you think of this recommendation?
        Mr. Washburn. Well, let me say this. This is a matter in
    litigation and I don't intend to dodge. But we didn't have a
    whole lot of time to prepare for this hearing, because we had
    so much going on this week. So that question wasn't posed to me
    and I didn't talk about it with anybody else. So my answer
    wouldn't be very useful to you, because it hasn't been vetted
    with anyone else in the Administration. We are certainly open
    to solutions that might help.
        I have had regular briefings about the settlement
    discussions. And my sense is that the class counsel and my team
    have been making productive progress. So again, we are open to
    solutions, if they don't believe that is true.
        Senator Barrasso. In spite of the concerns that you didn't
    have enough time to deal with that, I would like to leave this
    as a written question to you as you go back and get that answer
    and get back to me as a direct follow-up, not waiting for
    another hearing but a direct follow-up.
        Dr. Roubideaux, according to the National Congress of
    American Indians, both BIA and the Indian Health Service are
    essentially reevaluating these contracts and court cost claims.
    Since both agencies are required to report on these claims each
    year to Congress, presumably you already know what the claims
    are and for what amounts. Can you explain the need for
    reassessment of the claims?
        Dr. Roubideaux. Well, I think you may know that the claims
    and the amount are a topic of the litigation. So I am not at
    liberty to discuss that in detail. But we have heard the input
    from the tribe about the claim estimates and all the other
    numbers, and we are discussing those.
        Senator Barrasso. You have testified on several occasions
    before this committee regarding the need for tribal
    consultation. In written testimony, Jefferson Keel, and he is
    here with us, indicates that the Indian Health Service seems
    inclined to raise the Federal Advisory Committee Act as an
    impediment to robust consultation. Can you explain how, in your
    opinion, the Federal Advisory Committee applies in tribal
    consultation?
        Dr. Roubideaux. I am sorry Mr. Keel feels that way. The
    Federal Advisory Committee Act has an intergovernmental
    exception, which allows for groups of governmental officials to
    have deliberations that are not open to the public. We do like
    to preserve that ability to have frank and honest and open
    discussions with tribes. So I would not want anybody to think
    that we were trying to impede conversation around that. What
    happens is that if you don't follow the rules of the
    intergovernmental exception, the deliberations and
    recommendations from the committee, as my lawyers tell me,
    could be challenged in court. We wouldn't want those
    deliberations to have problems in the future.
        So it was really wanting to make sure that those
    recommendations would stand the test of time.
        Senator Barrasso. So then does the Indian Health Service,
    are you inclined to raise the Federal Advisory Committee Act as
    an impediment to robust consultation, regardless of how he
    feels about it? Is that what the inclination would be at the
    Indian Health Service?
        Dr. Roubideaux. No, not at all. That is not our intention
    at all. We just want to make sure that the recommendations
    stand the test of time. That is why we want to make sure that
    we have all the documentation in place, so that these are
    intergovernmental representatives. And now that I have been
    able to explain that to tribes, the committees have told me
    that they understand it.
        Senator Barrasso. Thank you. Thank you, Madam Chairwoman.
        The Chairwoman. Thank you, Senator Barrasso. Senator
    Tester?
        Senator Tester. Thank you, Madam Chair.
        Just for the record, and this can be for either one of you,
    who made the determination to put caps on contract support
    costs? Was that done by the Department? Was that done by the
    Secretary of Interior? Was that done by somebody outside the
    Department?
        Mr. Washburn. Senator Tester, you put us in a very awkward
    position when you ask questions like that, which I know you
    don't mind doing.
        [Laughter.]
        Mr. Washburn. I have to own that decision, and I will take
    responsibility for that decision, because I am the one who is
    testifying for the Administration.
        Senator Tester. Could you tell me why you made that
    decision? There must be a reason for it.
        Mr. Washburn. Well, it is a difficult decision. It is not
    something that makes a lot of sense, in many respects, for
    either agency. We have hundreds of contracts with Indian
    tribes, and having to figure out even a cap amount for each one
    of them is a nearly herculean task. We have accountants who we
    would rather be using for much more productive work.
        But I gather that the concern is with sort of the
    indefinite liability going forward that the Ramah case creates.
    Again, it was done without any consultation, and that is not
    usually the way we do business, especially at Interior. So we
    know that we have a consultation policy when we are making
    important decisions like this. We are doing our best to go
    ahead and proceed with the consultation.
        Senator Tester. That is fine.
        Mr. Assistant Secretary, probably nobody in this room knows
    trust responsibility better than you, truthfully. And don't let
    me put words in your mouth, but I think you guys have been
    dealing with a continuing resolution at Interior for how many
    years?
        Mr. Washburn. Well, the better part of 10 years, I would
    say.
        Senator Tester. The better part of 10 years. And then we
    have put sequestration on top of that, correct?
        Mr. Washburn. That is correct.
        Senator Tester. And that is kind of forced you into this
    situation, right?
        Mr. Washburn. I think it is fair to say that that is
    certainly part of it. There is not enough money to go around,
    absolutely.
        Senator Tester. That is right. And the fact of the matter
    is that because of the dysfunction in the Senate now, with
    filibustering every little issue that comes down the pipe, we
    are not able to do our job in a way that meets the needs for
    Indian Country. Would you say that is fairly correct? I don't
    want to get you into too much trouble with the Senate. But you
    can just say yes or no.
        [Laughter.]
        Mr. Washburn. I wouldn't want to leave the House out.
        [Laughter.]
        Senator Tester. We will let that stand in the record.
        I appreciate that. I will tell you that I think each one of
    us up here has our own difficulties, and you guys have your own
    difficulties. But we have got to be able to appropriate
    adequate dollars for you guys, or you are going to fail every
    time and you are going be in front of this Committee and we are
    going to be stomping our feet and throwing our fists on the
    table, saying why didn't you get this job done, when in fact
    you start out in a hole. Truthfully. Your head is nodding.
        The question is, I have to ask myself, what can the
    Administration do differently. And has the Administration, has
    Secretary Jewell, has the President of the United States
    allowed you to advocate for the programs you feel are important
    to the extent you need to advocate for them? And I don't want
    to get you in trouble with your bosses, but the truth is that
    we need to hear from you guys on dollar amounts that meet the
    need. We don't want to lowball dollar amounts, we don't want to
    highball dollar amounts. We want enough money so you can do
    things like meet the needs of contract support services, meet
    the needs of Indian Health Service, meet the needs of housing,
    meet the needs of education. The list goes on and on. Have you
    been given the reins, so to speak, to be able to advocate for
    what you really believe in? Because I know where your heart is.
        Mr. Washburn. Well, we don't get the budget we dream about,
    we get the budget that we can afford. There is not enough money
    to go around to do all the things that the United States should
    do, in Indian Country or frankly anywhere else, probably.
        Senator Tester. But they are in a little different boat
    with the trust responsibility.
        Mr. Washburn. They certainly are, and the responsibility,
    the duty to Indian Country is far greater. I frequently say,
    somewhat in jest, that until we are willing to give North
    America back, we have certain obligations we need to pay. I
    truly believe that to be true. As a practical matter, it often
    turns out to be a political question, though, what the extent
    of those obligations are.
        Senator Tester. Thank you.
        The Chairwoman. Senator, going back and forth, just to
    clarify how the rules in this Committee work, as a recognition,
    it is the time of the gavel, by seniority and back and forth.
    Senator Murkowski, then followed by Senator Franken.
        Senator Murkowski. Thank you, Madam Chair.
        Just to kind of follow up on the points that you were
    making initially, when the Appropriations Committee had its
    very first hearing with what was happening with sequestration,
    I made the case at that time with OMB that tribes should be
    treated like the other Federal health programs that we have for
    our seniors, for our veterans. And that they be protected.
        Obviously, they did not take that into consideration. But I
    am sending a letter to the budget conferees, asking them to
    hold harmless from sequestration the IHS and treat with parity
    the Indian health system as they do with our veterans and
    Medicare and Medicaid as well. So I look to the trust
    responsibility we all talk to here on this Committee, and I
    just don't see how IHS has been kind of shunted off into the
    corner, when we are talking about the responsibilities that we
    have from a budgetary perspective.
        I would like to direct a question to you, probably,
    Assistant Secretary Washburn, and maybe this is for both. I
    have never really received a satisfactory answer, talking about
    the Ramah decision that came down, then the Administration
    comes out with a surprise to this Committee, clearly a surprise
    to Indian Country, by including the budget language capping the
    amounts of the contract support costs, eliminating the ability
    of tribes to make future claims, rather than support the full
    amount of the contract costs. I still am just incredulous that
    this whole thing took place, and that we are still living
    through this.
        We have been told by the Administration that this was just
    an interim step. And yet I went to work with my counterpart on
    the House side, the former Interior Subcommittee chair Mike
    Simpson, to keep the language out of the current CR, because
    the Administration was insisting on putting it in. So on the
    one hand you are saying, well, we understand, we hear you, we
    are listening, but you still include it within that current CR.
    I do understand that you have had some consultation with tribes
    on the matter. You are hearing. But I guess I would ask for
    confirmation that you are working on solutions with the tribes
    on the issue of contract support costs. And when I say working
    on it, I mean to address it now.
        We have budgets that we are all dealing with here. I want
    to know whether or not you are beginning to prepare next year's
    budget now, what the Administration's plan is going forward,
    whether you are going to propose the same language you put
    forward this year in the budget, capping the contract support
    costs. I would like to understand, I know we are at the tail
    end of this calendar year. But we are beginning this next
    fiscal year. Where are we when it comes to the budget, with
    contract support costs as well as just ensuring that the
    priorities are there, as well as the consultation?
        Dr. Roubideaux. If I may answer this question. I want to
    reassure you that we have heard loud and clear the opposition
    to this proposal. We have heard it in many forums, the tribes
    don't like it. We have heard your opposition as well. And I can
    guarantee you, both Assistant Secretary Washburn and I have
    used every opportunity during the budget formulation process to
    make it clear that that is what we are hearing from you and
    from your colleagues and from the tribes as well.
        Senator Murkowski. How is that going to translate?
        Dr. Roubideaux. The fiscal year 2015 budget is still in
    formulation. So I am not at liberty to discuss the President's
    budget at this time, and I think it is still in process. So I
    don't think final decisions have been made. But I can guarantee
    you that during the discussions we are making sure that the
    tribes' positions are being discussed. We are making sure that
    your input is being heard and that it is very clear that people
    are opposed to this idea.
        Senator Murkowski. I was told from our tribal health
    providers that they have gotten confirmation from OMB that IHS
    is going to be limited to a 2 percent sequestration cut in
    fiscal year 2014, if a sequestration proceeds under the BCA. Is
    that your understanding?
        Dr. Roubideaux. I am still awaiting the determination of
    what it will be. I think they are waiting for the final
    appropriations and what happens with Congress and the Budget
    Committee and so on.
        Senator Murkowski. So our tribal health providers actually
    have more information than you do on this? I am just trying to
    figure out where we are going forward.
        Dr. Roubideaux. I have not received the official
    information from OMB yet on what the final determination will
    be. So the Administration has not given the official
    information yet. But I will go back and ask for that.
        Senator Murkowski. Like I say, I am trying to work with my
    House counterparts, this is my Appropriations Subcommittee. And
    we are trying to get a firm direction from the Administration
    on this. So when I had to fight to keep the language out of the
    CR that would be detrimental to the tribes when it comes to
    fulfilling the commitment, the promise of the contract support
    costs, I feel like I am fighting the Administration. You all
    are supposed to be working to advance this, you are supposed to
    be consulting with the tribes on this. You say you are
    listening. I want to see it translated into advocating with us
    on the budget. You can't put the monkey on our back unless you
    are willing to step up and be that advocate with us.
        Dr. Roubideaux. We are absolutely willing to work with you
    on that. And we do think it is likely to be the 2 percent, but
    officially I haven't received the Administration's final
    determination. But I will definitely work with you on that.
        Senator Murkowski. Okay, thank you. Thank you, Madam Chair.
        The Chairwoman. Senator Franken. And I just want to say,
    before Senator Franken, one of the reasons why we are having
    this hearing today on the larger issue of impacts of
    sequestration is because of Senator Franken's continued
    insistence about the importance of this issue. I just want to
    thank him for that.
        Senator Franken. Thank you, Madam Chair.
        Assistant Secretary Washburn, testimony submitted by the
    Red Lake Band points out that over the last decade, the budget
    for BIA has been growing at a much slower rate than that of
    other agencies within the Department of Interior. Now
    sequestration is just piling on and making it worse. Can you
    tell me why it seems that Indian Affairs gets the short stick
    from the Administration? I realize you are not in charge of the
    Department. But have you made the case to Secretary Jewell that
    this just can't continue, you are right, I do want to see more
    school reconstruction. Because it was zeroed out last year. Did
    I hear that right, that we are going to reverse that and have
    some money there for that? But did I hear a 19 percent
    decrease?
        Mr. Washburn. Yes. The House budget would fund, I believe,
    $50 million for school construction, so that would take care of
    three schools that we have on our remaining list that need to
    be reconstructed. But yes, it would, to get that money and to
    otherwise reach the cut, it would be a $200 million cut to the
    Indian Affairs overall budget, including a 19 percent across
    the board cut.
        Senator Franken. We are going to hear testimony from tribal
    leaders in the next panel. But those kinds of cuts are so
    devastating, I told you about, Dr. Roubideaux, what happened in
    Red Lake in terms of their losing a mental health counselor and
    having two suicides. I have been working on a bill for mental
    health in the schools, to get more mental health counselors,
    more psychologists, more social workers in the schools. And to
    hook up, make sure the kids have access to the community's
    mental health system.
        Can you identify any other funding streams that may be out
    there to help Red Lake make their schools' mental health
    department whole?
        Dr. Roubideaux. Yes. In addition to the funding that we
    provide if the tribe manages the behavioral health program,
    there are other resources within the Department of Health and
    Human Services. I would encourage them to contact the SAMHSA to
    see if there are any grants or special funds that might be
    available to help them with some of the mental health issues in
    that community.
        We also, in the past, as you know, had sought a deployment
    for the crisis situation that was there in the past. Sometimes
    those kinds of things are available for urgent situations. But
    there may be other funding within the Department of Health and
    Human Services. I can go back and talk with my colleagues and
    see if we can identify resources.
        Senator Franken. Mr. Washburn, just in general, when we see
    cuts like this, we see cuts in things like housing. I think
    Chairwoman Diver is going to be speaking to housing cuts, or
    she did in her written testimony. In Indian Country, very often
    there are no shelters, people just move in to some other
    families' home, maybe a relative's home, and you have maybe 10
    people living in a two-bedroom house. And there is in those two
    families, there is a very high likelihood that there is
    somebody who has some addiction problem. We are adding problem
    on top of problem on top of problem. How does a kid do his
    homework? What are we doing? Can you just speak to how these
    problems exacerbate each other and they pile on top of one
    another and it makes it impossible? If we have the sequester,
    Chairwoman Diver testifies that they are going to lose Head
    Start slots. A kid is only three years old once.
        Mr. Washburn. And we will deal with those issues for a
    lifetime if we lose a kid from Head Start. We are going to lose
    a generation. That is what is possible. It really is that bad.
    And suicides are definitely an outcome of not having the proper
    personnel to help those children. We also lose the ability to
    investigate harm happening to children. All these kinds of
    things, which Senator Heitkamp, I know, is concerned about.
    Elderly abuse, we don't have a staff to investigate elderly
    abuse. We pile people into one house together where someone has
    a dysfunctional problem, it definitely just exacerbates the
    problem even more. These all do work together and they create a
    domino effect, absolutely. Any one of these things is bad, but
    when we take money out of all these different funds, it just
    has an unbearable effect on the overall problem and creates
    many more.
        Senator Franken. Thank you. Thank you, Madam Chair.
        The Chairwoman. Senator Heitkamp?

                   STATEMENT OF HON. HEIDI HEITKAMP,
                     U.S. SENATOR FROM NORTH DAKOTA

        Senator Heitkamp. Thank you, Madam Chair, and thank you
    both for coming today.
        It is no secret, I am deeply, deeply concerned about the
    status of Native American children in particular, and Native
    American families. This morning I met with some of my tribal
    council members, heard stories about a one-bedroom, 13 to 15
    people sleeping on the floor. They roll the mattresses out,
    pick them up. This is not uncommon. So we have, especially for
    direct service tribes, this is so critical.
        The story today should be the headline story in the
    national news. A 19 percent cut is what you are suggesting will
    happen if they reallocate money to school construction?
        Mr. Washburn. If the House budget passes, we would get a 19
    percent cut across the board for everything. The one upside is
    that there would be money for school construction, but it would
    be a cut to virtually everything else. So that is right, that
    is the House budget I was describing.
        Senator Heitkamp. It is not, and that is the point. The
    point is that you are robbing from Peter to pay Paul when there
    is not enough money to do everything. This isn't Cadillac, this
    is bare subsistence, this is bare existence. These are
    atrocious, appalling conditions that should not happen in this
    Country. And we need advocates, beyond this Committee, we need
    advocates in the Administration. We went, Senator Murkowski and
    I sat and listened. There was a lot of yes, we hear your
    concern, yes, we hear your concern. I have heard that for a lot
    of years, yes, we hear your concern. And nothing happens. We
    don't improve the conditions. We have to be doing better.
        A point that I want to make that is not made by these
    numbers, which is the growth in population that is being
    served. Kevin, can you tell us, what do you think? Can you give
    us a number of people who, the population that has increased as
    a result of additional births and additional people living on
    the reservations? So we are trying to take these budget cuts
    against serving more and more people. What has been the
    population growth in Indian Country in the United States?
        Mr. Washburn. I don't have the exact figures on that. But
    we are a community that has been growing dramatically. I
    believe it is under 2 million people that we serve. But that is
    in a very fast-growing community. You are right, the money
    doesn't stretch. Our budget hasn't been growing as the
    population has grown.
        Senator Heitkamp. And for Ms. Roubideaux, I am curious
    about your position on Medicaid. One of the stop-gaps that we
    might be able to utilize in terms of expanding capacity for
    enrolled members and tribal members is enrolling more members
    in Medicaid, which would actually help you, because you are a
    billable agency. Is that correct?
        Dr. Roubideaux. Yes.
        Senator Heitkamp. So you can bill if people are on
    Medicaid, plus there is another way to supplement Indian Health
    Service. So what are you doing to promote increased enrollments
    into the Medicaid system? Do you believe that is a solution?
        Dr. Roubideaux. You are absolutely right, the Medicaid
    expansion that is happening in many States, and getting more
    American Indians to enroll in Medicaid in general is critical
    for our facilities. Some of our facilities, approximately half
    of their budget is third party resources. If we can get more of
    our patients enrolled, it means more revenue.
        Senator Heitkamp. So you agree with me that this could be
    an expansion that we need to get parity for Native Americans
    who are within the Indian health system. But my question is,
    what are you doing to encourage those enrollments?
        Dr. Roubideaux. We are doing everything we can. We did
    training with our business office staff to make sure they
    understand how to help with enrollment. We are doing weekly
    question and answer telephone calls to make sure they
    understand.
        Senator Heitkamp. Have we seen an increase in the number of
    enrollments?
        Dr. Roubideaux. I don't have that information right now,
    but I will get that to you as soon as I can.
        Senator Heitkamp. That would be something that I think
    would be very helpful, because it is a way beyond our budget
    problems right now to expand capacity to provide service plus
    the ability to seek health care beyond the Indian health
    system, if you are living in, let's say, Fargo, and need to see
    a doctor, being on Medicaid will facilitate that. We won't get
    into the system of reimbursement from Indian Health, which is
    incredibly frustrating for my providers.
        So I am just really interested in both of you thinking
    beyond the box on how we can expand capacity. Because even if
    we double these numbers, we still will have people underserved.
    And so this is crisis, and we need to make that point
        The Chairwoman. Thank you. I want to thank both of our
    witnesses. I think what you hear today is bipartisan support to
    fix both of these problems. Hopefully you will take that back,
    and we will also get Administration support for fixing those
    and we can all work together. So thank you. Thank you both for
    being here.
        We are now going to turn to our second panel to continue
    discussion on both of these issues. We would like to welcome to
    the witness table the Honorable Brian Cladoosby, President of
    the National Congress of American Indians; the Honorable Karen
    Diver, Chairwoman, Fond du Lac of the Lake Superior Chippewa
    Tribe from Minnesota; the Honorable ``Bud'' Lane, Vice
    Chairman, Confederated Tribes of Siletz Indians in Oregon; the
    Honorable Phyliss Anderson, who is the Chief of the Mississippi
    Band of Choctaw Indians; the Honorable Jefferson Keel,
    Lieutenant Governor from the Chickasaw Nation; and the
    Honorable Aaron Payment, Chairman of the Sault Ste. Marie Tribe
    of Chippewa Indians in Sault Ste. Marie, Michigan.
        Thank you all for being here today. I want to say a special
    welcome to the new President of the National Congress of
    American Indians, Brian Cladoosby. We are proud you are a
    Washingtonian, congratulations on your recent election. And we
    will start with you, Brian.

    STATEMENT OF HON. BRIAN CLADOOSBY, PRESIDENT, NATIONAL CONGRESS
                          OF AMERICAN INDIANS

        Mr. Cladoosby. Thank you, Madam Chairman, members of the
    Committee. On behalf of the National Congress of American
    Indians, I would like to thank you for holding this very
    important hearing on contract support costs and sequestration.
    As you know, the underpinning of Federal spending in Indian
    Country is based on the treaties that our ancestors signed with
    the United States Government. This assistance and goodwill
    between nations derives from the trust relationship and is
    ingrained with Article I, Section 8 of the U.S. Constitution.
    Tribes have shared with NCAI their alarm and objections over
    one, the sequestration reductions to tribal programs and two,
    the underfunding of contract support costs.
        The current and future sequestration cuts amount to unpaid
    bills in Indian Country which hurt the people who need these
    services the most, the poorest of the poor throughout tribal
    communities. I ask each of you individually, you, the Senate
    Committee on Indian Affairs and members of the United States
    Senate, where is my trustee? I have been asking every single
    Federal employee and person who represents the Federal
    Government this week, are you my trustee? And you would be
    surprised by the varied responses I get to that question.
    Whether you know it or not, when you took the oath of office to
    uphold the Constitution of the United States, you took on the
    obligation of a trustee to care for the interests of tribal
    governments and individual Native Americans and Alaska natives
    in upmost good faith.
        I am disappointed and saddened to report to you that with
    regard to the two topics of today's hearing, the United States
    is not meeting its obligation as a trustee. With regard to
    contract support costs, as the Committee is well aware, the
    Indian Self-Determination Act requires the Federal Government
    to contract with tribes to operate BIA and IHS programs. The
    Self-Determination Act also requires that the contract price
    must include a negotiated amount to cover the tribe's
    anticipated fixed overhead costs. Those contract support costs
    cover everything from the cost of property or liability
    insurance to the cost of personnel management systems, legal
    costs and even the cost of the audits Federal law requires us
    to undertake every year.
        Year after year the BIA and the IHS have failed to pay
    tribal governments what they would have paid to any other
    Federal contractor. For years, tribes have filed claims against
    both agencies over their failure to honor the contracts and to
    pay all of the negotiated contract support costs that were due.
    There was a class action lawsuit filed in the 1990s on this
    issue, and in June of 2012, the Supreme Court ruled that the
    Federal Government was liable for the unpaid costs over those
    years. The Court directed that the liability be paid out of the
    permanent judgment fund.
        The payment has not happened. In fact, as far as NCAI can
    see, nothing has happened.
        The Committee recently posed several questions to the IHS.
    The IHS director responded that close to 1,600 claims are
    currently pending against the agency involving 200 tribes. I am
    told by the lawyers representing the tribes on this issue that
    the amount owed is over $2 billion for both IHS and BIA. As you
    noted, Madam Chair, over the past 16 months, IHS has settled
    only 16, 16 claims settled in 16 months. One percent of the
    1,600 claims. At this rate, it will take 1,600 months to settle
    them all, well over 130 years.
        Even if IHS does it at 10 times that rate, it will still
    take 13 years to settle all these cases. That pace is totally
    unacceptable, I believe, to everyone in this room.
        Just as the stalled settlement process is contrary to the
    Indian Self-Determination Act, so too is OMB's effort by the
    2014 budget process to cut off tribal contract rights. As this
    Committee is aware, OMB is now pressing for an anomaly in the
    continuing resolution that will fund the rest of the fiscal
    year 2014. The Administration's proposal, first announced last
    April, is to cap individual contract payments at levels that
    are lower than the negotiated contract price that is required
    to carry out these contacts.
        The purpose behind OMB's proposal is simply to save money
    by cheating the tribes. And one note, Madam Chair, on this
    topic, even the U.S. Chamber of Commerce joins us in objecting
    to a proposed cap because of the precedent it might set for
    other government contractors. I call this contract support cost
    a crisis because that is what it truly is. And I don't use that
    term lightly. Behind the phrase contract support costs are real
    services for real people in dire need, services that are being
    cut off because the agencies have not honored their contract
    obligations, services that have been reduced because the
    agencies have treated our contracts as if they were
    discretionary grants. Services that have suffered because the
    agencies preferred to protect their own internal bureaucracies,
    rather than to budget what is due under our contracts.
        NCAI appreciates that some things cannot be fixed in the
    near term, and that some issues may never get the attention
    that they truly need. But the contract support cost is a
    crisis, and it is one that needs to be fixed. The Supreme Court
    has spoken and the time for firm and swift action is now. NCAI
    respectfully calls upon Congress to do everything in its power
    to see that these challenges are met and to see that justice is
    finally done. The time for delay and injustice is over.
        With regard to the second topic for today, the impacts of
    sequestration on Indian Country, and we have had the
    opportunity this week to meet with Senator Patty Murray and to
    meet with Representative Paul Ryan, two of the most powerful
    individuals in both houses of Congress, working on the budget.
    And our ask of them both is to get rid of sequestration. Over
    close to half a billion dollars has been cut last year to our
    IHS and BIA programs. Restore those. We have asked they restore
    those numbers. If we are looking at a 2 percent cut this year,
    we ask them to take that 2 percent cut off the numbers that are
    being restored, not off the numbers that are already currently
    being cut. We asked those two individuals to eliminate that
    cap, eliminate that cap on contract support costs.
        And the big one that I ask you to help us with is to pay
    IHS a year in advance, just like you do with the veterans.
    There is not a reason, a precedent has been set and there is no
    reason why this Congress cannot also enact something like that
    to make sure that IHS is paid for a year in advance.
        So with that, I thank you. I have more to say but I see I
    had better be quiet now so the other panelists have time. If
    you have any questions, I would be more than happy to answer
    them. Thank you very much on behalf of NCAI.
        [The prepared statement of Mr. Cladoosby follows:]

        Prepared Statement of Hon. Brian Cladoosby, President, National
                          Congress of American Indians

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairwoman. Thank you.
        Chairwoman Diver, thank you for being here.

    STATEMENT OF HON. KAREN R. DIVER, CHAIRWOMAN, FOND DU LAC BAND
                       OF LAKE SUPERIOR CHIPPEWA

        Ms. Diver. Thank you for having me, Chairwoman Cantwell,
    members of the Committee.
        I submitted written testimony, and I must admit to being
    stirred a bit passionately by your vigorous questioning of Dr.
    Yvette Roubideaux and Assistant Secretary Washburn. I often
    tell a story when I am talking to people about Indian Country,
    and you all care so much, and there are so many people who
    don't know very much. I tell the story of when the elderly
    nutrition program first started on Fond du Lac, they set the
    elderly age at age 52, because the average age of death in the
    1970s was 56. And how proud we are under self-governance and
    operating our own clinic that that age is now 74.
        The Chairwoman. That is great.
        Ms. Diver. As compared to my husband's family, a fine
    European-American family from Scandinavia, whose average age at
    death is 102.
        [Laughter.]
        Ms. Diver. So I look at my parents, age 71 and 75 and know
    that every single moment I have with them is precious. And I
    tell you this because, I give you examples in my written
    testimony, but what we are having to endure right now makes a
    difference. It makes a difference on preventing death from
    chronic conditions rather than promoting wellness. You are
    asking us to be wizards in our own community, every one of
    these tribal leaders. We are to promote community development,
    we are to promote economic development, we are to promote
    health, we are to promote safety. We are to do all of these
    things without a tax base.
        If you want funds to supplement what the Feds give you or
    the grants that you can raise, then you'd better figure out a
    way to earn it yourself. And we have done that. Tribal
    communities have done that, to the extent that now Fond du Lac
    is the second largest employer in northeastern Minnesota, with
    2,200 employees.
        The economic impact we make in that community has a ripple
    effect throughout rural Minnesota. In fact, I am aware that
    collectively, Indian Country in Minnesota is the largest
    employer in rural Minnesota. You are taking away our ability to
    leverage funds, you are taking away our ability to rise up and
    help support rural communities, not just Indian communities,
    entire rural communities, with the employment and economic
    spinoff. You are reducing our chances to leverage matching
    funds.
        We are pretty good at what we do. We build veteran-
    supportive housing, putting a small amount of our NAHASDA funds
    into a facility and leveraging that four to one with other
    sources. We are trying different models of housing to deal with
    the high-risk populations that you talk about, dual diagnosis,
    chronic and long term homeless. We are being entrepreneurs and
    innovators in our service delivery.
        So we know how to do our end. But we can't do it without
    the initial support. So I appreciate your letting me have a bit
    of this passion, and like I said, I have submitted the written
    testimony. But I guess I wanted to connect a few dots that,
    that we need and are just begging for your leadership. The
    strength of your convictions needs to be there when you are
    dealing with your House counterparts. Because they are not
    connecting these dots. Not connecting the dots between the
    health and well-being of Indian communities, and that affects
    our neighbors as well as our own communities. They are not
    connecting the dots of the strides that you have expected
    tribal communities to make and tribal leaders to step up to,
    that they are inhibiting our ability to be entrepreneurial and
    talk about innovative service delivery.
        Those steps back are going to cost us more in the long run.
    And I think I am pretty good at my job, but I am not that good.
    And what I hear as I am lobbying around the Hill is that we
    need folks to stand firm in their convictions and speak up in
    the budget negotiations. That when push comes to shove, we need
    people that are saying, not in Indian Country. It is too
    important, the situation is too dire, they have come too far,
    and we are not going to be a part of pushing them back where
    they were 100 years ago.
        And that is what I ask of each one of you, is to stand up
    for Indian Country and tell us who we need to haunt in the
    House, please. What they are doing is immoral and it is wrong.
    And they should be ashamed.
        Thank you.
        [The prepared statement of Ms. Driver follows:]

    Prepared Statement of Hon. Karen R. Diver, Chairwoman, Fond du Lac Band
                           of Lake Superior Chippewa
        Chairwoman Cantwell, Vice-Chairman Barrasso, and members of this
    Committee, I would like to thank you for holding this oversight hearing
    on the crisis that sequestration is creating in Indian country.
        I am Karen R. Diver, Chairwoman of the Fond du Lac Band of Lake
    Superior Chippewa. The Fond du Lac Band occupies a small reservation in
    northeastern Minnesota. The Band has approximately 4,200 members, and
    we provide health, education, social services, public safety and other
    governmental services to more than 6,700 Indian people who live on or
    near our Reservation. These programs, and the federal funds that help
    us provide them, are essential to our ability to educate our children,
    care for our elderly and infirm, prevent crime, and protect and manage
    natural resources.
        I cannot overstate the damage that sequester has already caused to
    our ability to provide essential services to our people. In the past
    two years alone, federal funding for Fond du Lac has been cut by more
    than $2.5 million. These cuts have left us no alternative but to
    eliminate jobs, curtail services, and turn away people who most need
    our help. If sequester continues into 2014, the additional loss of jobs
    and services will be serious and severe.
        The Fond du Lac Band cannot absorb any further reductions in
    federal funding. Further cuts will not only adversely affect the long
    term health and well-being of the Fond du Lac community, but with the
    Fond du Lac Band as the largest employer in the region, those cuts will
    also adversely affect the broader region--through increased
    unemployment, and the increased demands that this will place on
    regional social service programs and related assistance.
        Across-the-board sequestration cuts and rescissions to federal
    programs for Indian tribes will not balance the federal debt. What it
    will do is set back decades of hard work by Indian tribes and the
    United States to lift Native people out of poverty and put them on a
    path to empowerment and self-sufficiency. We urge Congress to exclude
    from sequester the federal funds that are so desperately needed in
    Indian country.
    Education
        We depend on federal funds to operate the Fond du Lac Ojibwe
    School. This school serves approximately 340 students in pre-K through
    grade 12. Most of our students come from very low income households, as
    demonstrated by the fact that more than 90 percent of our students
    qualify for free or reduced rate lunches. Although the President, in
    Executive Order 13952 (Dec. 2, 2011), found ``an urgent need'' for
    federal agencies to help improve educational opportunities for American
    Indian students because there has been ``little or no progress in
    closing the achievement gap'' between our students and all other
    students, Indian schools--even without sequester--have been seriously
    under-funded for years. Sequester has only exacerbated the fiscal
    crisis in Indian education.
        As a result of sequester, in the past two years funding for the
    Ojibwe School has been cut over $500,000. This, in turn, has had the
    following adverse impacts on our education program and the children we
    are trying to serve.

       We had to eliminate 8 staff positions, including staff in
            critical areas that support science and math, school counseling
            and psychology, and paraprofessionals for special education.

       We have found it necessary to cut the hours in school
            readiness programming.

       Cuts in transportation funding have required us to use
            earlier school bus pick-ups and later drop-offs, creating
            unduly long school days for younger students.

       This year, we were further compelled to drop young
            kindergarten students with high behavior needs because we could
            not staff at the levels required to meet their needs. We are
            hoping that delaying their entry into school by a year will
            help with their developmental needs. But this has caused a
            hardship for their parents and runs a serious risk of
            stigmatizing the children.

        Any further reductions in funding will mean even fewer staff which
    will force us to further reduce or even eliminate educational programs
    that are so critically needed for the most vulnerable population--our
    children.
    Head Start
        Because of sequester, our Head Start program has been cut $100,000
    per year for two years. We have done everything possible to implement
    these cuts so that we are not required to turn away children from the
    Head Start program. We have cut administrative staff that support the
    use of technology, and converted two positions so that they are 9-month
    positions instead of year-round. We also reduced some transportation
    services that have, in the past, been provided by the Head Start
    program. But if sequester continues, next year we will have no choice
    but to start cutting available slots for children because direct
    service staff will need to be laid-off.
    Housing
        Native Americans suffer the most substandard housing--at a rate of
    six times that of the population at large. At Fond du Lac we have been
    striving to combat the endemic problems that result from the lack of a
    sufficient supply of decent, safe and affordable housing.
        Our Housing Division currently has a waiting list of approximately
    175 applicants seeking low income and homeownership housing. We have
    many other Tribal members who are also in need of housing, but who have
    moderate incomes and therefore are not even shown on our waiting list.
        Our current housing stock is very limited and far below the need.
    Many of our housing units are over fifteen years old, with the oldest
    units built more than 40 years ago, in 1970. Because of the age of our
    housing stock, the units are constantly in need of maintenance and
    repairs. Approximately 30 percent of our housing units require major
    renovation, such as the replacement of roofs and siding, as well as
    upgrades in plumbing and other utility systems, and the replacement of
    windows and doors. Other units require routine repairs and maintenance,
    the average cost of which is at least $5,000 per year.
        Because of the severity of our housing shortage, approximately 270
    of the Indian households that we serve--close to 20 percent of our
    service population--currently live in overcrowded homes. It is not
    uncommon on our Reservation and among our people to find 10 or more
    individuals living together in a two-bedroom home. Overcrowding, in
    turn, accelerates the wear and tear on those homes, creating a vicious
    cycle of need.
        Overcrowded and dilapidated housing creates other risks. It
    increases the risk of fire and accidents, and creates unsanitary
    conditions, with increased spreading of communicable but normally
    preventable illnesses. Overcrowded housing ``often results in stress,
    which can magnify family dysfunction and eventually lead to alcohol and
    child abuse.'' \1\ Such conditions are especially harmful to children,
    as over-crowding, and the related risk of homelessness ``threaten their
    educational success, health and mental health, and personal
    development.'' \2\ We see these problems at Fond du Lac.
        Our members who are compelled to live in overcrowded homes are also
    often only a step away from being homeless. As set out in a series of
    recent studies of homeless and near-homeless persons on Minnesota
    Indian reservations, including the Fond du Lac Reservation, doubling up
    with family or friends is often the last housing arrangement a person
    has before becoming literally homeless, and it is common for people to
    go back and forth between doubling up and homelessness. \3\ A
    disproportionately high number of Native Americans in Minnesota are
    homeless. Although Native American adults are only 1 percent of the
    State population, they are 10 percent of the adults identified as
    homeless. And while Native American youth (under age 21) are only 2
    percent of the youth population in Minnesota, they are 22 percent of
    the homeless youth that are unaccompanied by an adult. \4\
        Federal funds are critical to meeting those needs. With the aid of
    federal funds, the Fond du Lac Band has been able to partner with state
    and private entities in an effort to begin to more comprehensively
    address housing needs. In July 2010, we began construction of a
    supportive housing development to provide permanent supportive housing
    to 24 tribal members and their families and which, in conjunction with
    our Human Services Division, would address the tenant's barriers to
    maintaining housing and create a support system to prevent
    homelessness. This year, those same partnerships helped us to operate
    the first Veteran's supportive housing facility in Indian country.
        But sequestration puts our progress at great risk. Even without
    sequester, funding for Indian housing had not materially increased over
    the years, while, at the same time, the costs of the supplies,
    materials and labor necessary to remodel and modernize our aging
    housing stock have increased every year with inflation.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Since 2011, our Indian Housing Block grant, provided through the
    Department of Housing and Urban Development, has been cut $339,000.
    Prior to those cuts, we could fund the construction of 5 or 6 new homes
    a year. But the cuts caused by sequester mean that we must now either
    reduce work on rehabilitation of older housing stock, or reduce the
    number of new homes built, or possibly both.
        Housing represents the single largest expenditure for most Indian
    families. The development of housing has a major impact on the national
    economy and the economic growth and health of regions and communities.
    Housing is inextricably linked to access to jobs and healthy
    communities and the social behavior of the families, especially
    children, who occupy it. The failure to achieve adequate housing leads
    to significant societal costs.
        Decent, affordable, and accessible housing fosters self-
    sufficiency, brings stability to families and new vitality to
    distressed communities, and supports overall economic growth. Very
    particularly, it improves life outcomes for children. In the process,
    it reduces a host of costly social and economic problems that place
    enormous strains on the Tribal and State education, public health,
    social service, law enforcement, criminal justice, and welfare systems.
    Overall Adverse Impacts of Sequester
        These are just some examples of the serious adverse impacts of
    sequestration on Indian tribes and Indian people. In addition to the
    cuts described above, we are also dealing with the impact of sequester
    on the reduced federal funding for: Indian health care provided by the
    Indian Health Service; social service programs provided through the
    Bureau of Indian Affairs; law enforcement provided through the
    Department of Justice and BIA; as well as the safety nets on which the
    poorest of our people depend to meet the most basic subsistence needs--
    including the USDA's Food Nutrition Program on Indian Reservations, the
    Low Income Home Energy Assistance program, and Child Care Assistance
    provided through HHS. Because of these cuts, the Fond du Lac Band has
    been compelled to lay-off staff, and reduce some services, and
    eliminate others altogether. We will do our best to fill the unmet
    need, and look for partnerships with local governments and others to do
    this. But the unmet need at Fond du Lac, and in Indian country
    generally, is massive.
        I urge Congress to honor the Federal Government's trust
    responsibility to Indian tribes and to the Indian people by excluding,
    from any sequester and mandatory rescissions, the federal funding for
    the programs that serve Indian country consistent with the Nation's
    sacred obligations. Miigwech. Thank you.

        The Chairwoman. Thank you for your testimony. And thank you
    for being here today.
        We will now turn to the Honorable Bud Lane, Vice Chairman
    of the Siletz Tribe from Oregon. Welcome.

         STATEMENT OF HON. ALFRED ``BUD'' LANE, VICE CHAIRMAN,
                 CONFEDERATED TRIBES OF SILETZ INDIANS

        Mr. Lane. Thank you, Chairman Cantwell, Committee members.
    My name is Bud Lane, and as tribal Vice Chairman for the
    Confederated Tribes of Siletz Indians, I want to thank you for
    creating this opportunity to hear directly from the tribes on
    the impacts of sequestration.
        The Siletz Reservation is located on the central Oregon
    coast. Our original reservation was 1.1 million acres and was
    intended to confederate all the bands and tribes of western
    Oregon. The Siletz Reservation was significantly reduced by
    Congress in the late 1800s. Our current reservation is about
    0.4 percent of our original reservation.
        As a result of termination and subsequent restoration of
    our tribes, the majority of our 5,000 members are spread
    throughout 11 counties in western Oregon. Our ability to
    provide services in such a large area is challenging as it is.
        The recent funding cuts through sequestration further
    threaten our ability to meet the needs of our tribal members.
    The real effect on Siletz is the elimination of 10 percent of
    our workforce and the effect on contract health is even
    greater.
        For the first time ever, we began this year having to
    severely ration our health care services from the very
    beginning. This type of rationing usually doesn't occur until
    mid-year.
        As some of you may know, there are no inpatient IHS
    hospitals in the Pacific Northwest. All of us in the Northwest
    depend on contract health care for the services that we can't
    provide directly through our clinics. So for those that we
    cannot fund directly we have what we call a deferred list of
    Siletz. It also has a more notorious name known as the walking
    wounded, because these are actually folks who cannot get
    referred out because of the limited amount of funds to
    hospitalization or an operation that they may need.
        In a good year, the backlog is always big. And all we are
    is one catastrophic case away from being not being able to fund
    hardly anybody to go to the hospital.
        On the law enforcement side of things, the situation is
    even worse for tribal law enforcement. We have contracted local
    police patrols from the nearest town, and it is seven miles
    away, to cover the city of Siletz. The funding for that law
    enforcement came from BIA, from some tribal revenues and from
    HUD. But along with the already low funding amounts from BIA,
    cuts from sequestration make that policing contract infeasible.
    In other words, the city of Siletz and the Siletz reservation
    could be virtually without police protection as of January 1st,
    2014.
        The county's Public Law 280 responsibilities have become
    virtually non-existent. Even if a sheriff is dispatched out to
    Siletz, it is twice the distance, up to 15 miles, to get there.
        Turning to contract support, we believe that Congress'
    intent is for tribes to receive the full amount due them when
    they compact or contract programs. Adding insult to injury of
    sequestration, agencies such as HUD are attempting to
    retroactively change the rules of allowable contract support
    costs, previously negotiated in good faith and approved. We,
    the Siletz Tribe, have been threatened with costs going back to
    1998 that had been previously negotiated in good faith and
    approved by the cognizant agency.
        We understand the situation of Federal agencies and their
    budgetary constraints. But they shouldn't balance their budgets
    on the backs of the tribes.
        I hope I have adequately conveyed to you the very real and
    negative effects of sequestration on the tribes. We have been
    as creative as we can in meeting this challenge. But we are
    quickly running out of options. The tribes have long been among
    the poorest, most vulnerable populations in the United States
    and historically have been underfunded by the Federal
    Government. I implore you to honor treaty obligations and to
    exempt all tribes and programs serving tribes from the current
    and any future sequestration.
        Several years ago, our tribal leadership met with the
    former chairman of this very Committee, Senator Daniel Inouye,
    in Portland, Oregon. He told us that in his view, all tribes
    have a prepaid health plan, and that it was paid for by our
    ancestors who ceded their lands to the United States. I hope
    that the Congress will reflect on this unique legal historic
    and moral situation of the tribes as it does other programs
    exempted from sequestration.
        I thank you for the ability to be here today and I would
    like to answer any questions that you may have.
        [The prepared statement of Mr. Lane follows:]

        Prepared Statement of Hon. Alfred ``Bud'' Lane, Vice Chairman,
                     Confederated Tribes of Siletz Indians
        My name is Bud Lane. As Tribal Vice Chairman for the Confederated
    Tribes of Siletz Indians I want to thank you for creating this
    opportunity to hear directly from tribes on the impacts of
    sequestration. The Siletz Reservation is located on the central Oregon
    Coast. Our original Reservation was 1.1 million acres and was intended
    to confederate all the bands and tribes of western Oregon. The Siletz
    Reservation was significantly reduced by Congress in the late 1800s.
    Our current reservation is 0.4 percent of the original Siletz
    Reservation. As a result of termination and restoration, the majority
    of our 5000 members are spread throughout 11 counties in western
    Oregon. Our ability to provide services in such a large area is
    challenging as it is. Recent funding cuts through sequestration further
    threaten our ability to meet the needs of our tribal members.
    2008 Economic Collapse
        Like the rest of the nation, the Siletz Tribe has been trying to
    recover from the 2008 crash of the economy. We have worked diligently
    to keep services and jobs intact for our tribal members and focused
    funding cuts in the areas of travel, training and staffing. To that end
    we have left vacated positions unfilled and shifted duties to other
    staff, froze salaries and step increases from 2010 through 2012, and
    provided no COLA in 2010, a 1 percent COLA in 2011 and no COLA in 2012.
    Compare that to federal agencies who, while freezing salaries, still
    received step increases and bonuses, including a 3.6 percent COLA for
    2012.
        The Siletz Tribe's recovery has been limited--tribal revenue is
    slowly coming back but as of 2012 we are still down 35 percent from
    where we were in 2008. Our federal funding has steadily declined in
    this same time period.
    2013 Sequestration
        The Tribe has continued cost cutting in response to the first round
    of sequestration cuts. Staff travel is restricted to mandatory grantee
    meetings and to trainings required to maintain professional licensing
    and certifications. For 2013 we continued not filling most vacated
    positions and in some instances reduced full-time positions to part-
    time to achieve savings in salary and fringe benefits. At this point we
    have had to eliminate 26 positions (10 percent of our staff).
        For the first time ever the Tribe's Contract Health Services
    program began the year on priority levels which restricted services:
    (1) authorized care is limited to health services needed for urgent or
    emergent care or to prevent disease and disability and (2) surgeries
    such as carpal tunnel release, rotator cuff repair, knee surgeries,
    gastric bypass, inpatient psychological treatment, herniated disc
    repair and hysterectomies are deferred indefinitely.
        Our Tribal Court, exercising limited jurisdiction, averages 500
    civil cases a year and is staffed by a full-time Court Administrator, a
    part-time Deputy Court Administrator, a part-time Chief Judge and four
    on-call judges. The 2013 Court budget is $197,000 most of which comes
    from tribal revenue. Only $36,271--less than 19%--comes from BIA funds.
    A 2010 BIA assessment of Tribal Courts noted that this federal
    contribution was the lowest of 50 tribal courts reviewed and
    recommended there be a significant increase funding to the tribe, but
    that has not occurred. Inadequate funding unnecessarily restricts the
    tribe from fully exercising jurisdiction and sequestration is worsening
    this situation.
        The Health Department eliminated four positions--a Pharmacy
    Technician, a Dental Assistant, a Community Health Advocate, and the
    Clinical Applications Coordinator. We will maintain Contract Health
    Services at the priority 1 & 2 levels and cancel two specialty provider
    contracts. The clinic personnel reductions will result in 200 fewer
    medical transports, 50 fewer home visits, elimination of child safety
    seat and bicycle safety helmet distribution programs, 240 fewer dental
    visits, lengthening the time to fill prescriptions, and 12,000 fewer
    patient visits.
        We are eliminating one of two Elders Program Coordinators, the
    After-School Program Coordinator and Assistant positions, and our
    Environmental Planner. This will significantly reduce services to our
    elders, while increasing the workload for the remaining staff person.
    Elimination of the After-School Program staff requires that we close
    the program--impacting 20 children and their families who relied on
    these services. We are shifting the Environmental Planner duties to our
    natural resources staff--significantly more work than ``other duties as
    assigned.'' The functions of this position are essential for ensuring
    environmental compliance for purchasing, managing and developing land.
    As this committee knows, the land-into-trust process is cumbersome and
    time-consuming on the federal side, for Siletz it will now take even
    longer due to sequestration impacts on staffing.
        Additionally, three Administrative positions being eliminated are:
    Public Relations Clerk, Records Management Clerk, and the Public Works
    Supervisor. Again, we are shifting responsibilities of these jobs onto
    other staff. Our Public Information Specialist will now be a one-person
    department, making it harder to keep up on projects and more difficult
    to maintain quality. The Records Management Clerk duties have been
    added to another staff person's duties. The Public Works Crew are
    reorganized as a team to self-direct their work and report periodically
    to a manager.
        Our Information Systems Department has been making critical
    upgrades to our operating systems on five servers, as well as the call
    manager for our phone system. The 2014 cuts will prevent completion of
    these projects which means we will no longer have vendor tech support
    for these old systems. This is critical to ensure our clinic's
    capability to meet HIPPA standards for electronic health records and
    accreditation standards.
        The situation is even worse for tribal law enforcement services
    which cover tribal lands and the City of Siletz where many tribal
    members and non-tribal citizens live. These services started out at 120
    patrol hours a week under a contract with a neighboring city police
    department in order to save on costs. At $95,391 the BIA funding
    covered just under a third of the costs. The Tribe's Housing Department
    funded another third and the remainder was subsidized by tribal
    revenue. However, steady revenue decline from 2008 to 2012 required
    reducing law enforcement coverage from 120 to 80 hours a week. In 2013,
    BIA funding dropped to $90,809 under sequestration and will be down to
    $86,298 with the second sequester. In addition, new HUD guidance has
    reduced the amount Tribal Housing can contribute. And, it is not
    feasible for the contracted police department to provide services. We
    are working with the City of Siletz to poll the community's support to
    help fund these essential services; however, it is anticipated by the
    Tribe that these services will not be available in our community very
    soon.
        What this means is that the City of Siletz could be virtually
    without police protection by January 1, 2014. Traditionally the County
    has policed the outlying areas under P.L. 280, but these services have
    become non-existent in the last decade. If the County sheriff is called
    to respond to a crime, the distance has now doubled from 7 to 15 miles
    up to Siletz.
        Insufficient contract support costs is not the only factor
    affecting the ability of tribes to manage our contract s and grants.
    During a periodic monitoring of the tribes housing programs, HUD staff
    disputed costs under our approved indirect rate. The law--Native
    American Housing and Self-Determination Act--clearly and unambiguously
    states that indirect costs rates will be determined by a tribe's
    cognizant agency (not by HUD or any other outside agency). For Siletz
    and most tribes that agency is the BIA through their National Business
    Center (NBC).
        HUD conducted two monitoring reviews of the Tribes housing program
    in which they determined the tribes Indirect Cost Rate was not applied
    correctly to HUD programs. Unable to convince HUD that the indirect
    cost rate had to be applied consistently to all tribal programs, the
    Tribe contacted the National Business Center (NBC), only to find that
    HUD had already been in communication with them and consequently the
    NBC was unwilling to defend their longstanding approval of our indirect
    cost proposal. Unfortunately, the tribe felt it had nowhere to go as
    HUD was threatening to make their finding retroactive (back to 1998),
    so we agreed to settlement limiting the finding to one year which was a
    significant amount--$518,405.
        Agreeing to settle had immediate fiscal impacts--it shifted two
    program manager positions from the indirect cost pool to direct costs
    thereby increasing the Tribe's costs to manage contracts and grants by
    an estimated $200,000 a year. We need these two positions but it is
    likely we can only afford one of them.
        And, how is it that a single federal agency, in conflict with
    literally the letter of the law, could do this in the first place? Will
    tribes have to vet their indirect cost proposals to all federal
    agencies that they contract and compact with? Where was our trustee in
    defending the tribe from this intrusive action and the resulting long-
    lasting harm?
        It is important to recognize that sequestration has exacerbated the
    longstanding issue of insufficient funding for contract support costs.
    Often the only recourse to address this shortfall is to reduce services
    to tribal members. For Siletz, we have seen tribal child welfare
    positions go unfilled, while remaining staff carry caseloads two times
    higher than their state counterparts. In some cases the Tribe has to
    seek additional grants to fund salaries and services--our Natural
    Resources Clerk has three funding sources. And this situation is not
    limited to BIA and IHS funding. We support staffing costs for our
    Elders Program through four sources of revenue--BIA, Title VI-A & C,
    and tribal gaming revenue.
        At some point, service reductions are not an option. For years, the
    Siletz tribe has contributed funds to cover an increasing CSC shortfall
    for the Head Start Program. In 2009, this cost reached a high of
    $90,000 it is now down to just under $60,000. This might appear to be
    good news but it is not--the cost has gone down due to declining
    appropriations. Two years of sequestration has taken $100,000 from our
    program budget, directly affecting the education of our youngest
    members and their families. We have eliminated positions, reduced
    others to part time for salary and benefit savings, added duties onto
    other job descriptions, and most offensive, have had to eliminate
    classroom days. While the collective sentiment may be that the children
    are our future, it is not reflected in federal appropriations.
        Tribes are legitimate government contractors, whose indirect rates
    are objectively calculated by the National Business Center (despite
    HUD's opinion). Payment of these costs to tribes is required by federal
    law (ISDEAA) and has been upheld by the U. S. Supreme Court Cherokee
    Nation v. Leavitt. There are solutions to this long and ongoing problem
    and the Siletz Tribes urges you to consider the following actions: (1)
    appropriating more funds for CSCs to close the funding gap; (2) lifting
    the cap on CSC appropriations; (3) tapping into un-obligated BIA and
    IHS appropriations from prior years; (4) prohibiting the National
    Business Center from altering past rules for negotiating indirect cost
    rates; (5) extending the statute of limitations for Tribes to pursue
    CSC claims; and as an alternative to costly litigation, creating a CSC
    Claims Board to fairly compensate affected Tribes.
        I hope I have adequately conveyed to you the very real and negative
    effects of sequestration on tribes. We have been as creative as we can
    in meeting this challenge but we are running out of options. Tribes
    have long been among the poorest, most vulnerable populations in the
    United States, and historically been under-funded by the Federal
    Government. I implore you to honor treaty obligations and to exempt all
    tribes and programs serving tribes from the current and any future
    sequestration.
        Several years ago our tribal leadership met with the former
    chairman of this Committee, Senator Daniel Inouye, in Portland, Oregon.
    He told us that in his view tribes have a ``pre-paid'' health plan. It
    was paid by our ancestors who ceded our land to the United States. I
    hope that the Congress will reflect on the unique legal, historic and
    moral situation of tribes as it does other programs exempted from
    sequestration.
        Thank you for allowing me to share our comments with you today and
    I would be happy to answer any questions.

        The Chairwoman. Thank you so much. We will now turn to the
    Honorable Phyliss Anderson, who is the Chief of the Mississippi
    Band of Choctaw Indians. Welcome.

         STATEMENT OF HON. PHYLISS J. ANDERSON, TRIBAL CHIEF,
                  MISSISSIPPI BAND OF CHOCKTAW INDIANS

        Ms. Anderson. Chairwoman Cantwell, and members of the
    Senate Committee on Indian Affairs, my name is Phyliss J.
    Anderson, and I am the Tribal Chief of the Mississippi Band of
    Choctaw Indians. I am so thankful that you have invited us to
    come here and speak on behalf of Native American Indians.
        In my written testimony, I discussed contract support costs
    and sequestration, both of which represent a breach in the
    Federal Government's trust responsibility to Indian tribes. For
    my remarks, I would like to focus on sequestration and how it
    is failing Indian Country, including the loss of more than $4
    million for Mississippi Choctaw.
        I realize that when I talk about $4 million, compared to a
    trillion dollar budget, that may seem small. But it isn't small
    for the 10,600-plus membership in our Tribe, especially when
    the State we live in is the poorest State. The largest impact
    for the fiscal year 2013 funding has been with the Chocktaw
    Health Department, which receives most of its funding from the
    Indian Health Service program. I will refrain from listing all
    the cuts to the health care. But I can tell you that payments
    were slow, even down to the last few days of the fiscal year,
    especially during the government shutdown.
        Such uncertainty for a small reservation hospital in rural
    Mississippi limits our ability to provide vital health care to
    more than 10,000 eligible users. Much of this uncertainty was a
    result of being told for months that the cuts to IHS would be
    capped at 2 percent. However, OMB ruled that the 2 percent cap
    only applied to mandatory funds, such as diabetic programs,
    Medicare and Medicaid. Congress and OMB must change this
    interpretation to ensure that all IHS funding be exempt from
    the sequestration.
        We also support advanced appropriations for IHS. I would
    like to thank those Senators who support that legislation.
    Forward funding by itself will not prevent the harm of
    sequestration. Nor is it sufficient, it is not a sufficient
    substitute to fully fund programs that have been significantly
    underfunded for far too long.
        However, advanced appropriations would create a greater
    level of the budget, certainly to allow us to plan and provide
    better services to our citizens. Most of our education programs
    are forward funded. So we were better able to plan for those
    cuts. But if sequestration continues, stop-gap measures will
    not be sustainable. And essential services will be needed if
    reduction is made.
        Head Start, after school and summer instructional programs
    are critical to the Chocktaw youth, many of whom will be at
    risk for neglect or abuse if the programs continue to be cut.
    Sequestration has also made overcrowding to our largest school
    even worst. Our Pearl River Elementary School was originally
    built for a capacity of 350 students. It now has the enrollment
    of 657 students, 200 of whom are housed in portable classrooms,
    some which are 40 years old.
        This isn't just an education issue. This is a serious
    health and safety issue that demands an increase, not a cut, in
    our school facilities funds. Unfortunately, the safety of our
    children has taken a back seat to the politics and realities of
    sequestration.
        Cuts to child care protection services, emergency
    assistance and programs to combat domestic violence put tribes
    at risk, tribal members in danger. Earlier this year, I stood
    side by side with many tribal leaders to ensure that Congress
    reauthorized the Violence Against Women Act with the tribal
    provisions intact. We fought for months to secure this
    language. I would like to thank every member of Congress,
    including the Mississippi Senators, Cochran and Wicker, who
    helped make this happen.
        However, no matter how many programs like VAWA that we
    authorize, they will not be as effective as they need to be
    without adequate funding. According to Webster's dictionary,
    sequester mean to set apart, to keep a person or group apart
    from other people. Our ancestors, who relinquished millions of
    acres of their homelands and were forced into reservations,
    were all too familiar with this concept of setting some
    Americans apart from others.
        Today, sequester mean to set money apart by arbitrarily
    cutting funds across the board. In my opinion, though, however,
    the word sequester to me means something else. It means
    failure. Specifically, the failure of Congress and the
    President to work together and do their jobs on behalf of the
    American people.
        So in conclusion, my final recommendation to this
    Committee, the President and every member of Congress, please
    do your job. The health and well-being of Chocktaw families and
    all Native Americans throughout this Country depends upon you
    not failing again.
        Thank you for inviting me to testify, and I welcome any
    questions that you might have.
        [The prepared statement of Ms. Anderson follows:]

         Prepared Statement of Hon. Phyliss J. Anderson, Tribal Chief,
                      Mississippi Band of Chocktaw Indians

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairwoman. Thank you, Madam Chair. Thank you for being
    here.
        We will now turn to the Honorable Jefferson Keel, who is
    the Lieutenant Governor of the Chickasaw Nation. Thank you for
    being here, and thank you for your service at NCAI.

        STATEMENT OF HON. JEFFERSON KEEL, LIEUTENANT GOVERNOR,
                            CHICKASAW NATION

        Mr. Keel. Thank you, Madam Chair, and members of the
    Committee. Thank you for inviting me to come and appear before
    this honorable committee. It is an honor, and I appreciate not
    only the opportunity to appear but for you holding this
    important hearing.
        The contract support cost issue truly is a crisis in Indian
    Country, especially for the Chickasaw Nation. The failure of
    the Indian Health Service and the Bureau of Indian Affairs to
    meet its financial obligation to tribes is not only
    disgraceful, I believe it borders on criminal behavior. We know
    to the penny what IHS owes every year, because IHS is required
    by law to report to Congress every year, certified both by the
    Administration, by HHS, down to the penny exactly how much it
    has failed to pay us. So figuring out what IHS has failed to
    pay is not rocket science. It is very easy. It is laid out in
    the IHS manual in Section 106 of the Self-Determination Act.
    For us, that figure is $36,188,534.
        Because the nation was not paid contract support services
    or costs in full, we were forced to reduce services to our
    patients, which causes a reduction in third party collections
    opportunity. When you factor in lost third party collections,
    the Chickasaw Nation has accumulated well over $50 million of
    non-payment over the past 16 years. Our latest claim for 2013
    alone was over $14 million.
        Our contract support cost requirements have been calculated
    every year by IHS to provisions now contained in the manual.
    But even though IHS has detailed records and submits detailed
    reports to Congress about how much it owes us each year, they
    will not settle our claims.
        There are several things that need to happen immediately.
    First, the Supreme Court has said that IHS should have paid us
    in full. IHS should announce it will pay us these reported
    shortfall amounts and this Committee should instruct IHS to do
    so.
        Second, Congress should direct the appointment of a special
    master, someone like Ken Feinberg who settled the BP oil claims
    and the September 11th claims. Third, Congress should direct
    that all claims be settled before the two-year anniversary of
    the Ramah decision. Congress should amend the Indian Self-
    Determination Act to make perfectly clear that the issue is not
    what the tribes spent, but what did IHS fail to pay.
        Congress should reject the new contract by contract caps
    that OMB had asked Congress to include in the appropriations
    for this year. The job is to honor these contracts in full,
    just like any other government contract.
        Finally, Congress should direct both agencies to work
    openly with tribal leaders and tribal contracting experts when
    exploring any contracting reforms.
        Regarding the Ramah case, I have been told that a year and
    a half after the decision came down, the government is about to
    start a statistical sampling of about 9,000 contracts. We
    already know what the BIA failed to pay and the Supreme Court
    understood that. This case, the Ramah case has been decided by
    the Supreme Court. It is time to bring it to an end.
        The Chickasaw Nation has been able to meet the shortfalls
    created by the failure of the IHS and the BIA to honor their
    contract obligations to the nation. But most other tribes are
    not as fortunate. The shortfalls cause real heartache and
    suffering for tribal people every day.
        Regarding sequestration, as you know and as you have heard,
    some of the poorest areas in America are located in Indian
    Country. It is just unfathomable that the Federal Government
    would try to balance the budget on the backs of the poorest of
    the poor in this great Country of ours. Tribal leaders have
    been dealing with underfunded or drastic cuts in program
    funding for decades. Loss of funding means loss of services,
    which causes loss of jobs, devastates families and damages
    local communities.
        Diversified economies allow us to provide high quality
    services to our people while reducing the reliance on the
    Federal Government. There are a number of tribes, as you have
    heard, that are making significant progress and are reinvesting
    in their communities. This raises the quality of life for our
    citizens and at the same time provides tremendous benefits to
    our local, non-Indian communities. Again, we ask Congress to
    clarify once and for all the responsibility of the Federal
    agencies to meet its financial obligations regarding contract
    support costs and we ask that you not allow sequestration to
    occur one more day in Indian Country. Hold the Indian tribes
    harmless in the next budget rounds.
        Thank you.
        [The prepared statement of Mr. Keel follows:]

        Prepared Statement of Hon. Jefferson Keel, Lieutenant Governor,
                                Chickasaw Nation
        Madam Chair and members of the Committee, thank you for holding
    this important hearing and for the opportunity and honor to appear
    before you today.
        Our job as leaders is to help our people in any way we can. We want
    them to be successful for themselves, their tribes and their
    communities. It is our responsibility as leaders to make sure our
    citizens have access to a quality education, housing, health care and
    safety. It is our duty to provide support for them while they pursue
    their dreams.
        The contract support cost issue truly is a ``crisis'' for the
    Chickasaw Nation, both when it comes to the status of our claims that
    have been pending with IHS for over 8 eight years, and when it comes to
    the continuing annual shortfalls we suffer and which we must therefore
    subsidize year in and year out.
        The failure of at least two federal agencies, the Indian Health
    Service and the Bureau of Indian Affairs, to defy judges' orders to
    meet their financial obligations to the tribes is disgraceful. We know
    to the penny what IHS owes every year, because IHS is required by law
    to report to Congress on what it owes the Chickasaw Nation. It is also
    required by law to report to Congress every year how much IHS failed to
    pay us. So figuring out what IHS failed to pay us isn't rocket science:
    it's already been calculated, certified by IHS, certified by HHS, and
    reported to Congress. All this is laid out in the IHS Manual and in
    section 106 of the Self-Determination Act, and for us that totals
    $36,188,534.
        In reality, when you factor in lost third-party collections, the
    Chickasaw Nation has accumulated well over $50 million dollars of non-
    payment over the past 16 years. Because the Nation was not paid
    contract support costs in full, we were forced to reduce services to
    our patients which caused a reduction in third-party collections
    opportunity. Our latest claim for 2013 alone was over $14 million. On
    average, for every $3,500 lost, we could have served another patient as
    an inpatient, or outpatient, including provision of X-ray, laboratory
    services and pharmaceuticals. With a claim of well over $50 million
    (cumulative from 1996-2013) we could have handled between 14,000 and
    20,000 more patient visits.
        The Chickasaw Nation operates a 72-bed state-of-the-art hospital,
    the Chickasaw Nation Medical Center (CNMC), in Ada, Oklahoma. This is
    an IHS hospital. In addition, the Nation operates IHS-funded health
    center clinics in Ardmore, Tishomingo, Purcell, and Durant, as well as
    wellness centers in Ada, Ardmore, and Tishomingo, and additional
    nutritional centers in Ardmore and Purcell. These healthcare facilities
    employ approximately 1,100 people, including physicians, registered
    nurses, dentists, physicians' assistants, nurse practitioners, midwifes
    and a very considerable support staff from receptionists to billing
    clerks to janitors. In the 12 month period ending May 31, 2011, our
    medical center performed 2,664 surgeries, and experienced 588 births,
    8,422 inpatient days and 2,392 admissions. During the same period, the
    Nation had 445,478 in-patient visits.
        This is one of the largest tribally-operated health care systems in
    the United States, and much of it, including our clinics and Ada
    Medical Center, are IHS-funded facilities. The Chickasaw Nation
    compacts with IHS to operate them for the government under the self-
    governance provisions of Title V of the Indian Self-Determination Act.
    We do this because, as history has shown, we run them better than IHS
    ever did or ever could. We cut the red-tape, we are more efficient, and
    we redesign the IHS programs to match what our people actually need. We
    are, of course, fully accountable to IHS, and after the close of every
    year we provide IHS with a comprehensive audit of how we spent our
    compact funds. But unlike IHS, we are also accountable to our own
    tribal citizens, and that is the driving reason why our services in
    every respect far outshine what IHS was ever able to do.
        For as long as we can remember, IHS has underpaid the Chickasaw
    Nation's negotiated requirements for contract support costs. The Indian
    Self-Determination Act says that IHS is required by law to negotiate
    those requirements with us and to then add those costs in full to our
    compact every year. That is the negotiated contract price. Most of
    these negotiated contract support cost requirements are to cover our
    personnel management, accounting, procurement, and other overhead costs
    of the Nation without which we could not operate. They cover our annual
    audit costs. They cover our insurance costs. In the general government
    contract setting they are called G&A costs--general and administrative
    costs. So this is not a system that is unique to tribal contracting or
    to the Chickasaw Nation.
        Our contract support cost requirements have been calculated every
    year by IHS through provisions now contained in the IHS Manual. (The
    Bureau of Indian Affairs has a very similar set of instructions for
    calculating these costs for our compact with the BIA.)
        For years, IHS told us that it had no responsibility to pay us our
    full contract support cost requirement. It would pay some of our costs,
    but then not the rest. Some years we were actually told we had to wait
    on a waiting list--even though we were running a government contract
    and operating services for IHS. But as the Committee is aware, in 2005
    the Supreme Court ruled that IHS was wrong to have told us that. The
    Supreme Court in the Cherokee Nation case said our contract was no less
    binding on the federal government than any other government contract.
    So later in 2005 we filed claims reaching back to 1995, and since then
    we have regularly filed additional claims up through 2012.
        But, even though IHS had detailed records, and had submitted
    detailed reports to Congress, about how much it owed us each year, IHS
    would not settle our claims. By 2012--7 years after filing our first
    claims--IHS finally paid us $7 million to settle just the first 15
    months of our claims. But we had a total of 18 years of claims pending
    with IHS, not just 15 months.
        In 2012, the Supreme Court spoke again, and it again said the
    government was liable for failing to pay our full contract support cost
    requirements. The Federal Circuit Court of Appeals also rejected all
    kinds of other defenses IHS had thrown up. So you would think that in
    2012, finally, all of our remaining 16 years of claims would finally be
    resolved. After all, in its reports IHS told Congress we had not been
    paid $36,188,534 through 2012. At a minimum you would think the Nation
    would have swiftly gotten a check for that $36,188,534.
        Instead, IHS announced that it was not going to focus on what it
    had failed to pay us, but focus on what the Chickasaw Nation spent in
    IHS funds. Naturally, since the Nation could not spend what IHS did not
    pay, the net result is the government would owe us virtually nothing.
    And that is exactly what IHS told us earlier this year: that IHS would
    pay us virtually nothing.
        In April we sat down for two days of negotiations with IHS in
    Anaheim California. By the end of those discussions we thought we were
    making progress. IHS first promised to get us a fresh offer in May,
    then in June after we provided additional documentation, then in July,
    and on and on. Seven months later we have still not heard back from
    IHS, and we have no idea if we will ever hear back from IHS. It's
    basically radio silence, and every time IHS says it will get us a
    number, nothing happens. Most recently, the Judge said we should
    propose a trial date for next year because nothing is happening.
        This is the story of just one of the so-called 54 active settlement
    negotiations the IHS Director has said is underway at this time. I know
    from other tribal leaders that in most other instances, nothing has
    happened at all. IHS may have a list somewhere of dozens of cases it
    would like to settle out of the 200 cases involving 1600 claims; but in
    one of the first cases to go into the settlement process after the
    Supreme Court Ramah decision came down--our Chickasaw Nation case--
    nothing is happening, and nothing has been happening for months.
        There are several things that need to happen immediately.
        First, the Supreme Court has said IHS should have paid us in full,
    and IHS has already told Congress what it would have paid us if it had
    paid us in full. At least for the basic claim amount, settlement should
    have been instantaneous after the June 2012 Ramah decision. IHS should
    announce it will pay us these reported shortfall amounts, and this
    Committee should instruct IHS to do so.
        Second, Congress should direct the appointment of a Special Master,
    someone like Ken Feinberg who settled the BP oil spill claims and the
    September 11 claims.
        Third, Congress should direct that all claims will be settled
    before June 2014, the 2 year anniversary date of the Ramah decision.
        Fourth, Congress should amend the ISDA to make perfectly,
    absolutely, beyond-any-shadow-of-a-doubt clear, that the issue here is
    what did the IHS fail to pay, not what did the Tribes spend. The
    agencies' so-called ``incurred cost'' approach is unsupported by
    anything in the law and is just a gimmick they invented to chop down
    the amount the government owes us. We had a deal. The government failed
    to honor the deal. The Supreme Court said that was wrong. The
    government now just needs to honor the deal.
        Fifth, Congress should reject the Administration's recent counter-
    attack on the Tribes and reject these new contract-by-contract caps
    that OMB has asked Congress to include in the appropriations for this
    year. Apparently no good deed goes unpunished. The Tribes actually win
    a case in the Supreme Court--actually they win that case twice--and
    OMB's response is to try and reverse that victory by legislative fiat
    hidden in an Appropriations Act. That is wrong, it is immoral, and it
    is illegal. Instead, the job now is to honor these contracts in full on
    a going-forward basis, just like any other government contract. To my
    surprise, even the U.S. Chamber of Commerce has condemned OMB for
    daring to permanently underpay these government contracts.
        Finally, Congress should direct both agencies to work openly with
    tribal leaders and tribal contracting experts when exploring any
    contracting reforms. Just as the contracting process should be
    transparent and accountable, so, too, the process for regulating the
    contracting process needs to be open and transparent.
        No changes to the contract support cost system should be made
    without full consultation, and an open and transparent process visible
    to all interested Tribes and tribal contracting experts. If, as IHS
    seems inclined to often say, the so-called Federal Advisory Committee
    Act is unintentionally creating an impediment to full and open
    participation by all tribal representatives and experts, then that Act
    needs to be amended. The time has to end when the Secretary or the
    Director of IHS are permitted to tell tribal representatives in a room
    that they are forbidden to speak.
        Before closing, I just want to say one word about the Ramah case.
    That is the pending class action that is addressing 19 years of
    contract support cost claims against the BIA. I have been told that a
    year and a half after the decision came down, the government is about
    to start a statistical sampling of about 9,000 contracts. I am also
    told that when each tribe's contract is selected, the issue the
    government will look at is not what the BIA failed to pay, but what the
    Tribe spent. Again, you cannot spend what you are not paid. We are
    about to see years of sampling and tribal studies to come up with some
    global number that has nothing to do with what the government actually
    owes.
        In the Supreme Court case, in one place the Court says that over
    the course of certain years the BIA failed to pay ``between 77 percent
    and 92 percent of tribes' aggregate contract support costs.'' As that
    statement shows, we already know what the BIA failed to pay, and the
    Supreme Court understood that. This new sampling idea is but another
    example of lawyers and agencies gone wild. The Ramah case has been
    decided, finally, by the Supreme Court. It is time to bring it to an
    end. It should have been ended last year. Again, a Special Master
    appointed by the President or by Congress should be directed to cut
    through all the delay tactics and get this case settled at once.
        Thanks to many blessings, the Chickasaw Nation has been able to
    weather the challenges it has confronted by the failure of the IHS and
    the BIA to honor their contract obligations to the Nation, and through
    the Nation the government's obligations to our citizens. We have been
    able to cover the government's shortfalls with our own money. We have
    been funding an unfunded mandate that the Supreme Court says the
    government should have paid.
        But most other Tribes have not been as fortunate, and the
    shortfalls have caused real heartache and suffering for tribal people.
        I ask the Committee to do everything in its power to see these
    contract support cost issues promptly resolved and put to rest. We have
    far more important work to do than to litigate with the government for
    another 10 or 20 years over past contract liabilities. We ask Congress
    to pass legislation so that tribes can receive proper payment in
    exchange for the services the Tribes provided in good faith on behalf
    of and in reliance upon the Federal Government.
        Regarding sequestration, for tribal nations there are no positive
    effects of sequestration to speak of. Tribal leaders have been dealing
    with underfunded or drastic cuts in program funding for many years.
    Cuts in budgets cause rippling effects, cuts in services, which causes
    loss of jobs, which devastates families, and damages the local
    economies. However, sequestration does require the Federal Government
    to make some decisions regarding the size and functions of the various
    departments within the federal government itself. Again, tribes have
    been doing this for years.
        The inherent sovereign rights of Indian tribes was recognized by
    this country's founding fathers, and affirmed in the United States
    Constitution. At its most basic level, the economic success of the
    United States is built upon the land and natural resources that
    originally belonged to the tribal nations. As you well know, the
    underpinning of federal spending in Indian Country is based on sacred
    treaties between Indian tribes and the United States of America. This
    sacred trust between tribes and the federal government commits our
    federal partners to the protection of Indian lands; the protection of
    tribal self-governance; and the provision of social, medical, and
    educational services for tribal citizens. The authority to fund
    programs that fulfill this responsibility is founded in the U.S.
    Constitution. More fundamentally, full funding for the Indian Country
    budget was pre-paid with the loss of our land, and with our ancestors
    blood. We are not a ``line-item'' to be negotiated away, we are a
    commitment to be honored.
        Tribal leaders know the pressures of scarce resources better than
    most, and each of us has had to make hard decisions to build the
    economic strength of our peoples. In order to reduce their reliance on
    the federal government for the provision of services to our peoples,
    many tribes have entered the business world. Tribes are diversifying
    our economies and are now providing high quality services to our
    people.
        In some areas across the country, Indian gaming has become the
    lifeblood of tribal communities. There are a number of tribes that are
    making unprecedented progress. Gaming revenues provide those fortunate
    tribes with the access to funding that is necessary to diversify their
    economies. Tribes are now reaping those benefits and are reinvesting in
    their own communities. These successes allow us to raise the quality of
    life for our citizens, and at the same time provide tremendous benefits
    to our local non-Indian communities.
        In Oklahoma, you see the result of tribal leaders who have stepped
    up to the plate and made the tough decisions. We've gone from managing
    poverty to advancing prosperity. Tribal Nations in our State contribute
    almost $11 billion to the State's economy, and five percent of the jobs
    in the State are provided by Tribal Nations.
        The tribal business community has an important role to play in the
    ever evolving global economy. For tens of thousands of years, our
    people have been stewards of the environment. But, we are also
    successful stewards of our economies and societies. As tribal
    businesses continue to grow, it is more and more clear that we bring
    value to the table.
        The Chickasaw Nation understands that we are part of the emerging
    economy, one that is built on the complexities of people, communities,
    and an inter-connected world community. We, along with other tribes,
    are proactively participating in defining and shaping the new global
    marketplace. The Chickasaw Nation has a diversified economic portfolio
    that includes a bank (Bank2), a tribal corporation, Chickasaw Nation
    Industries (CNI), a metal fabrication facility, a chocolate factory
    (Bedre), and healthcare and energy development ventures that provide a
    high rate of return.
        The Menominee Nation has a large and successful timber operation in
    Wisconsin with a sawmill and a furniture manufacturing facility. The
    Menominee forestry program is one of the most well-managed timber
    operations in the world. The Three Affiliated Tribes in North Dakota is
    building an oil refinery on its lands which will benefit the entire
    country, and there are other tribes with much to offer.
        Tribal Nations in Washington sell Northwest Pacific oysters to
    Japan. The Cherokee Nation has a growing international tourism business
    relationship with Germany. Tribal Nations are also expanding their
    manufacturing capacity as contractors. For example, the Penobscot
    Nation in Maine manages a portfolio that includes a wood recycling
    business and another business that builds guidance systems for military
    applications. Another high profile example of tribal business success
    is found in one of the most bold entertainment chain transactions I am
    aware of in Indian country, in which the Seminole Tribe of Florida
    purchased the globally-recognized Hard Rock Cafe business for $965
    million dollars. The Tribe now owns Hard Rock Cafes in 53 countries and
    has only seen an annual increase in locations since the deal was
    finalized in 2006.
        Across Indian country tribal leaders are working together to find
    ways to capitalize on these opportunities. One of the ways that we can
    improve our communities and strengthen our tribal economies is through
    Inter-Tribal Trade. There are many tribes that have developed resources
    and diversified their economies, and they are now poised to assist
    other tribes. It is up to us to find ways that we can assist in these
    efforts. Indian country can and should, develop an Inter-Tribal Trade
    agreement that tribes can use to work with each other.
        Trade has always been at the core of our way to interact with one
    another, and with others. Like CEO's, tribal leaders are required to
    consider political, economic, and business risk when making decisions
    about when to expand, when to borrow money, and when to diversify. In
    addition, we must ensure our enterprises remain competitive by
    developing new market shares; by providing appropriate incentives for
    our employees and, by leveraging innovation. But the role of tribal and
    Indigenous leaders goes well beyond that of a CEO.
        We also have unique political, business, and cultural risks that
    need to be carefully measured. For example, when we consider a new
    business venture, strategy, or market, we need to make certain it fits
    with the values of our communities. We need to make sure any
    development will provide real opportunity for productive and meaningful
    employment for our citizens. We need to consider how and when we best
    utilize our limited natural and geographic resources.
        Most importantly, we consider to whom we are answerable. Tribal
    leaders must decide whether to reinvest our dividends in our business
    for possible future growth or help those in need at home. We consider
    the sacrifices made by our ancestors to hold on to our land when we
    choose to develop our land or utilize our resources. And, we strive to
    make decisions that will improve the quality of life for our community
    today and in the long term. These are often hard choices and heavy
    responsibilities. But if we take the necessary steps to position
    ourselves to take advantage of current opportunities and trends, tribal
    leaders are poised to make significant advances for their people,
    enterprises, communities, and nations in the decades to come.
        We can reach out to one another, create government and enterprise
    partnerships and establish nation-to-nation trade. In the past, trade
    among our Nations has produced peace, cultural exchange, and wealth for
    our people. We need to form more partnerships based on government-to-
    government trade.
        The promise of economic strength that will come from working
    together will enable us to address one of the most pressing issues
    today: fighting poverty in our communities.
        Tribes are working together more closely than ever before, to
    protect our sovereign rights and to make advances on many key
    legislative issues. Some of these include helping Congress to pass a
    clean Carcieri legislative fix so that Tribes can continue economic
    development activities and continue reducing their reliance on the
    federal budget. As I noted, we also need to secure full payment for
    contract support costs, so that our contract with the government, just
    like our other business contracts, are honored. We also need to secure
    advanced appropriations for the Indian Health Service to further
    stabilize this most essential governmental program.
        From land restoration, to education, to tax reform, to energy, to
    health--Indian country has a stake in every federal policy decision.
    Indian issues are not partisan issues. The last few months have made it
    clear that Indian country is common ground for all members of Congress.
        Tribal Nations and Congress must all continue to work together to
    open new windows of opportunity to secure our communities, and most
    importantly secure our futures as sovereign nations. Whether it be the
    farm bill or language preservation, Indian Country must remain focused
    on all windows of opportunity and engage on issues of significance.
        It's also time for Congress to make some tough decisions, too. It's
    time to once and for all deal with the devastating effects of the
    sequester. Our Tribal Nations cannot sustain the ongoing effects of
    Congress' refusal to keep its pre-paid commitments to the Tribal
    Nations.
        Over the past four years we have made significant progress with
    Congress and the Administration. We need the President and Congress to
    work with us to address outstanding issues regarding contract support
    costs and to sustain this work that will take our nation-to-nation
    relationship to the next level.
        We must continue to create action plans for energy security and
    natural resources, and to protect our cultures and languages. Most
    importantly we must protect the very basis of our communities--our
    people--and more critically the future of our communities: our
    children. This means doing everything we can, on every issue, to take
    proactive steps. We ask Congress to honor its obligations and to hold
    the Tribal Nation's harmless in future budget actions.

        The Chairwoman. Thank you, Mr. Keel.
        Now our last witness, thank you for being here, is the
    Honorable Aaron Payment from the Sault Ste. Marie Tribe of
    Chippewas from Michigan. Thank you so much for being here.

      STATEMENT OF HON. AARON PAYMENT, CHAIRMAN, SAULT STE. MARIE
                       TRIBE OF CHIPPEWA INDIANS

        Mr. Payment. Thank you. Thank you for inviting me and to
    the Committee members.
        My tribe is one of the largest tribes east of the
    Mississippi. Our treaty is the 1836 treaty of Washington. In
    our treaty, as most treaties, it provides for the health,
    education and social welfare as long as the grass grows, the
    winds blow and the rivers flow. Pretty common language in most
    of our treaties. Our service area includes the seven eastern-
    most counties in the Upper Peninsula of Michigan. Only about
    13,000 of our members live in the service area, so they are not
    covered by our contract health service delivery funding or a
    BIA catchment areas.
        So I want to deviate from my testimony for a second and
    remind the Senate Committee, which you are already aware of,
    but that our funding is not welfare. It is not reparations and
    it is certainly the forced assimilation, smallpox, historical
    trauma, all of that would justify reparations, but it is not
    reparations. It is not even entitlements. Unfortunately, in
    this tenor and government today, entitlements is a negative
    word where it should be a good thing.
        We prepaid through our treaty obligations. We prepaid with
    the blood, sweat and tears and millions of acres of our
    ancestors. And when we say ancestors, we are not talking about
    hundreds and hundreds of years ago. We are only talking about
    our great-grandparents generation. They made the sacrifice and
    we prepaid for the services that we are supposed to be getting.
        So we held up our end of the deal or our contract, if you
    will. And contracts are not supposed to be unilateral. So we
    ask that you honor the treaties and don't continue the legacy
    of broken treaties. Honor your contracts. We have done so.
        Historically we have been burdened by shortfalls and
    contract support costs. Just like the sequester, these cuts
    have been devastating. In the Bemidji area, our shortfall in
    contract support is almost $46 million. In Michigan, it is
    almost $14 million. My tribe filed their claim after the Ramah
    case last summer, and not really much has happened since then.
    We are in an environment of litigation where we should actually
    be working together to try to figure out how to honor the
    outcome of the Supreme Court case.
        In Indian Country we had a victory with the Supreme Court
    case, but it doesn't really feel like that right now. As a
    tribal leader it seems to me like our trustee should be finding
    ways to resolve this issue on our behalf and advocating on our
    behalf, rather than trying to find ways to, as someone else
    said earlier, cheat us out of the money that is actually due.
        So the agencies instead are looking for ways to evaluate
    how we spent our programs. I have to assume that is going to
    mean to diminish the liability that is actually due to us.
    However, I need to clarify that we can't spend something that
    we didn't get. When you get an under-amount, you find ways to
    work underneath that. So I am fearful that the conclusion is
    going to be that we really didn't need it or it wasn't due. And
    I have to say that that approach is tautological and circular
    reasoning and really, it is nonsense, it is absolute nonsense.
    So the government doesn't win when it pays less than it owes.
    The government wins when justice is done, and we are asking for
    justice. The Supreme Court has made perfectly clear that
    justice here means paying the portion of the contract support
    that is due to us.
        On sequester, I brought my little document that spreads out
    the actual impact to my tribe last year. It was $1.7 million,
    health alone was $1 million. The projected sequestration could
    go up to $5 million in cuts. We have laid off, we furloughed
    our Head Start staff. We have tried to do everything we could
    to withstand this. But it has been devastating. During the
    shutdown, our special diabetes program, we didn't have our
    award letter, we had to lay off our special diabetes staff.
    Only for a week, but we ended up losing our director, because
    she wants stable employment. She is a medical professional that
    has other opportunities.
        Going into the implementation of the Affordable Care Act, I
    am fearful that another program that we cut was our COLA for
    our medical staff. We don't have COLA for our medical staff. We
    haven't had COLA for all of our other team members for years.
    But it is going to be difficult to try to retain our physicians
    under the Affordable Care Act, when there are 100,000 new jobs
    opened up for them.
        The final thing, and I will leave this, but the final thing
    I also wanted to call attention to is, I participated in the
    Faces of Austerity. This shows the impact of sequestration all
    across the Country, not just Indians. I want to put a pitch in
    for stopping sequestration. Obviously for us, but if it is
    possible to protect community action, I am on our community
    action board, Head Start, Meals on Wheels, the Upward Bound
    program, all the Great Society programs. I was born in 1965 and
    benefited from many of those programs. This year I was selected
    as Sargent Shriver award winner for my continued contributions
    to the Great Society programs. I would be remiss if I didn't
    stand up for and speak for them as well.
        All of these programs work together. Last year the Federal
    agencies minimized the impact. Next year the impact is going to
    be drastic, because the full brunt of sequester is going to be
    felt next year. Maybe then citizens will understand what the
    impact is and they will start contacting their Congressmen and
    their Senators to insist that they represent us, rather than
    follow some ideology that is being pushed by one party or
    another.
        Thank you.
        [The prepared statement of Mr. Payment follows:]

     Prepared Statement of Hon. Aaron Payment, Chairman, Sault Ste. Marie
                           Tribe of Chippewa Indians
        Good afternoon and thank you Chairwoman Cantwell and Vice-Chairman
    Barrasso for inviting me to testify today.
        My name is Aaron Payment and I am the Chairman of the Sault Ste.
    Marie Tribe of Chippewa Indians. My Tribe is one of the largest tribes
    east of the Mississippi River with 41,000 members. We were re-
    recognized in 1972 after a 20-year struggle. The 1836 Treaty of
    Washington recognized my Tribe's aboriginal territory, and this is
    where we have resided since time immemorial and where we continue to
    reside today.
        Our service area includes the seven eastern counties in the Upper
    Peninsula of Michigan. About 13,000 of our members reside in our
    service area. Since being re-recognized in 1972, my Tribe has engaged
    in the arduous task of re-acquiring land in our original territory to
    meet the needs of our members. The present-day trust land of my Tribe
    is just over 1,000 acres. That is not a large amount of land, yet with
    the resources that we have we operate our tribal government and provide
    essential governmental services for our tribal citizens, including
    housing programs, youth and education programs, employment programs,
    health care programs, social services programs and law enforcement
    services. Our health care programs, alone, employ 260 employees and
    operate four primary care centers and two satellite clinics. In
    carrying out many of these functions, we contract with the Indian
    Health Service and the Bureau of Indian Affairs under the Indian Self-
    Determination Act to administer the programs that these two agencies
    would otherwise operate for our people.
        We do this because depending on the government to run these
    programs not only breeds more dependence; it also leaves in place
    cookie-cutter programs that are developed in Washington, D.C. by
    bureaucrats who have no knowledge of our culture and our local needs.
    By running these programs and services ourselves, we are also able to
    rebudget funds and redesign these contracted programs to best meet the
    needs of our people, just as Congress intended when it enacted the
    Indian Self-Determination Act.
        But, historically, we have been burdened by shortfalls in contract
    support cost payments. And just like the current sequester, these cuts
    have had a very real and negative impact upon our community.
        Contract support costs cover the fixed overhead costs we must incur
    to carry liability, property and workers compensation insurance; to
    meet federal legal and regulatory requirements; to conduct federally
    mandated annual audits; to supervise and manage our program and
    employees; to purchase supplies; to provide health insurance to our
    employees; and, to do all of the necessary things that a government
    does when it employs people to run government programs, but which the
    federal government does from resources that we will never be able to
    access, including the alphabet soup of agencies that help the BIA and
    IHS day in and day out, like the GSA, DOJ, OMB, OPM, OGC and countless
    other agencies.
        These contract support costs are our fixed overhead costs. And
    while we try to keep these costs as low as reasonably possible, they
    cannot be eliminated entirely. At the same time, these costs are
    audited every year. So when the Federal Government, through the
    Interior Business Center, sets these costs for a new year, the
    government is setting these costs based upon real audits. None of this
    involves guesswork. In short, these are hard costs--real costs--and
    they simply have to be paid.
        But the agencies do not pay them. That's right: the government does
    not pay these contract costs, at least not in full. The government
    fully pays the overhead costs of other government contractors, but it
    does not pay the overhead costs of our Tribe and it does not pay the
    overhead costs of most other tribal contractors. In fact, the agencies
    don't even ask Congress for enough money to pay these contract
    obligations in full. This year is a good example: the President's
    budget only asks for $477 million for IHS contract support cost
    payments even though IHS says the actual costs are over $75 million
    more. The same is true of the BIA: the $230 million the President's
    budget requests is roughly $10 million short of what is required to pay
    all tribal contractors in full for the work we do for the government
    under these contracts.
        This is not just a problem for my Tribe. For instance, if you look
    at the contract support cost shortfall reports that the Indian Health
    Service sends every year to Congress, you will see that virtually every
    Tribe is underpaid at some point in time, and most are underpaid all of
    the time. In the IHS Bemidji Area where my Tribe is located, the total
    amount of the underpayments IHS reported to Congress for fiscal years
    2007 through 2011 was $45,521,239. For just the Tribes in the State of
    Michigan, IHS reported to Congress that its underpayments totaled
    $13,850,650. When you think about it, that is an enormous amount of
    health care for Indian people that has been lost.
        For years--really for decades--IHS and the BIA told us that this
    was just the way it is, that tribal contracts were ``different'' and
    ``unique'' and that we were not entitled to be treated as well as other
    government contractors. Frankly, we believed what we were told. But
    then in the 1990s some Tribes started to protest these underpayments in
    the courts, and in 2005 the Supreme Court said in the ``Cherokee
    Nation'' case that the government was wrong all along, and that we had
    been entitled to be paid, and that it had been wrong to force us to cut
    or subsidize services in the federal programs we were operating in
    order to cover the fixed costs of running those programs. And so it
    turned out that our right to be paid was at least as strong as the
    rights held by other government contractors.
        But right after the 2005 Supreme Court decision, the agencies told
    us that times had changed in the meantime. The BIA and IHS said that
    the Supreme Court decision involved a period of time when the agencies
    could have lawfully paid us in full, but that in the meantime the
    agencies had worked out a new system with Congress that actually
    prohibited the agencies from paying our contracts in full. Once again,
    we trusted the agencies and figured they must be right. But once again
    it turns out the agencies were wrong, and last year the Supreme Court
    decided in the Ramah Navajo case that we should have been paid in full
    all along. The Supreme Court said that any claims we had would be
    covered by the Contract Disputes Act and paid out of Treasury's
    Judgment Fund.
        After that, we confirmed that our claims over the BIA contract
    shortfalls were being covered by the Ramah Navajo class action lawsuit,
    so we focused on filing claims over our IHS contract shortfalls. We did
    that in the summer of 2012, but since then, nothing has happened. It's
    been over 16 months since the Supreme Court decision, and well over a
    year since we filed our claims, yet nothing has happened. And nothing
    has happened in the Ramah Navajo case either.
        These are difficult times for all Indian Tribes. Not only are
    federal budgets not keeping up with inflation, not only are they not
    being increased to meet our needs; they are actually being cut. At our
    Tribe, shingles vaccinations have been cut, and reduced foot care will
    eventually mean increased amputations. At a time like this, settlement
    payments from these cases would be of critical help in keeping services
    running.
        But as far as we can see, nothing is happening. For a tribal
    leader, this is difficult to understand. I say this because we watched
    very large and longstanding disputes with the Tribes and with Indian
    people settled swiftly and on fair terms once President Obama took
    office. He brought a can-do attitude to long-festering problems, and
    his people got the message. The Cobell case was finally settled. The
    tribal trust fund cases were finally settled. The Indian farmers' cases
    were finally settled. The President saw to it that all of these
    settlements were achieved on fair and reasonable terms, even though the
    courts had not resolved whether the government was even to blame, much
    less how much. Why? Because it was important to resolve these long-
    simmering disputes once and for all, and to turn the page on these
    historic wrongs.
        Compare those situations to the issue at hand. When it comes to
    contract support cost claims, Indian country has something that no one
    had in those other cases: a complete tribal victory by the highest
    court in the land, the Supreme Court, and not once, but twice. As a
    tribal leader, it seems to me that the relevant agencies would redouble
    their efforts to resolve all of this that much faster, in keeping with
    the President's commitments to Indian people.
        But that is not what the agencies are doing. They seem to be
    stalling and looking for ways for the government to pay less, and maybe
    nothing at all. I am told the agencies no longer think it is relevant
    to look at how much the agencies should have paid. Instead, the
    agencies want to look at how we ran out programs and how much did we
    spend. The IHS Director said this in a public letter she issued earlier
    this year, and I am told this is the BIA's view, too. But we have
    already been audited over how we ran out programs: we are audited every
    year and the government gets those audits every year. Our audits are
    clean audits, just like most audits across Indian country.
        As for how much we spent on our programs, all I know is that we
    cannot spend what we are not paid. If the agencies will only reimburse
    us for what we spent, they will probably calculate that we are owed
    nothing. But how can that be? If you read the Supreme Court decision in
    the Ramah case you will see that the Court ruled that the government
    was responsible for its underpayments. That is what the whole case was
    about, just like the Cherokee case. This has nothing to do with how we
    spent the portion of the money the government paid under our contracts.
        I believe the President is committed to seeing these issues
    resolved fairly and quickly. But I also believe that there are some in
    the agencies who do not see it that way, and that is unfortunate. The
    government doesn't ``win'' when it pays less than it owes; the
    government ``wins'' when justice is done--Justice. And the Supreme
    Court has made it perfectly clear that Justice here means paying the
    portion of the contracts that the agencies failed to pay at the time.
        That is not a hard number to calculate. I say this because the
    agencies kept records every year of how much they paid and how much
    they didn't pay. They told us the amounts and they told Congress these
    amounts. Might there me some errors? Undoubtedly yes, and maybe the
    true number is a little higher or a little lower; nothing is perfect.
    But for purposes of settling these claims once and for all, it seems to
    me, as a tribal leader, that many years and millions of dollars could
    be saved by just using the data the government already has to settle up
    all of these claims. Going forward, certainly the goal should be
    improved accuracy. But to settle up the past claims when the numbers
    are essentially known is just good business and good government.
        The NCAI has called for swift resolution of all outstanding claims,
    and we agree with NCAI. We also agree that the best course of action is
    for Congress or the White House to appoint a special master who can
    wind up all these claims, and who is instructed to do so swiftly. We
    agree that if clarifications are needed to the law about what Tribes
    are due, those clarifications should be made at once by this Committee.
    But most of all, we agree that these claims need to be wound up in the
    next few months and then promptly paid out of Treasury's Judgment Fund.
    Our people, Indian people all over the country, are suffering from
    grossly underfunded care, and now from the sequester cuts that came on
    top of those already poorly-funded programs. We are doing our best
    under difficult times. The last thing we need is another decade of
    battles with the government, especially when the courts have spoken so
    clearly and directly to the point.
        We cannot take more, not my Tribe, not the Tribes in the State of
    Michigan, and not the Tribes in the rest of the country. It is time to
    stop this longstanding 20 year battle and to turn the page of history.
    I am confident that this is what the President wants, that this is what
    Congress wants, and that this is what Tribal Leadership wants. Now we
    need to work together, and creatively, to actually make it happen.
        Before closing, I wish to convey our Tribe's gratitude for the work
    of this Committee, and especially for the September 30 letter that
    several Committee members sent to the OMB Director, urging that OMB
    withdraw its proposal to essentially convert our contracts into
    discretionary grants (by permanently underfunding them at whatever
    levels are fixed by the agencies). Although much of Indian country has
    been angered by this proposal, I prefer to see it as a hasty over-
    reaction to the Supreme Court's Ramah decision, driven strictly by
    fiscal concerns and developed without due regard for the nature of
    these contractual agreements. I am certain that the President believes
    in tribal self-governance and self-determination, in the sanctity of
    our contracts with the government, and in the importance of the Nation
    honoring its fiscal obligations both abroad and at home. OMB's proposal
    cannot be reconciled with those core values.
        Congress has already once rejected OMB's proposal when it enacted
    the current Continuing Resolution, and the House appropriations
    subcommittee also rejected OMB's proposal earlier this summer. While
    OMB proposals are never actually withdrawn, hopefully your input and
    the input of Tribal Leadership this week will persuade OMB to allow its
    proposal to simply fade away. If not, we hope and trust that this
    Committee will see to it that the appropriations process is not mis-
    used to effect fundamental changes in the Indian Self-Determination
    Act.
        Thank you, Madam Chair and Vice-Chairman Barrasso, for the honor of
    testifying today, and I look forward to working with all Members of the
    Committee in developing swift and just solutions to the current
    contract support cost crisis.

        The Chairwoman. Thank you. I want to thank all the
    witnesses for their testimony.
        I want to make sure that I have this correct on this
    contract support issue. Chairwoman Diver kind of expressed it,
    and that is, when you turn over these services, you can get
    more efficient results. So the notion of self-governance, if
    you will, in driving more efficiency in the services that are
    delivered.
        So Chairman Payment, I understand every year you enter into
    negotiations with the U.S., pursuant to that Self-Determination
    Act and what services you are going to provide and how much the
    United States will pay, including what the law calls the
    contract support costs. Is that not right, every year, you
    enter into an agreement?
        Mr. Payment. We do. As last year showed us, with the impact
    of sequestration, it is obviously not an agreement, because it
    is contingent on whether or not the funding exists. So we do
    support advanced funding, as the others do.
        The Chairwoman. So how many years have you contracted with
    the U.S.?
        Mr. Payment. We have been doing self-governance funding for
    IHS since, we were one of the pilots for the Country, so the
    early 1990s.
        The Chairwoman. So in all those years when you were
    contracting with the United States, did they ever inform you
    that the negotiated amount that you contracted with them was
    not the amount that they were going to pay you?
        Mr. Payment. No.
        The Chairwoman. So for years and years and years, you
    negotiated and said, okay, we will deliver these services for
    this amount of money?
        Mr. Payment. For 21 years. We have never been notified that
    we are doing was not correct. We negotiate the agreement that
    we operate from. So there is obviously a presumption that what
    you are doing is correct, because the Federal Government has
    agreed to it.
        The Chairwoman. So President Keel, why do tribes continue
    to take over Federal programs if the contract support costs are
    constantly underfunded?
        Mr. Keel. Tribes have proven, Madam Chair, thank you for
    that question, the tribes have proven over the years that they
    can operate these programs more efficiently, with less money,
    because they are closer to the community. In fact, these
    programs are absolutely critical to taking care of our people.
    If we didn't agree to contract and take over these programs,
    many of our people would not get services. So we agreed to do
    this.
        Now, the Chickasaw Nation has been fortunate, as I said, we
    have a diversified economy. We have some economic development
    activities that allow us a revenue stream to, as I said, meet
    the shortfall of some of these requirements. So we basically
    subsidize these programs out of our own funds.
        The Chairwoman. President Cladoosby, Jefferson Keel and
    others have suggested this special master, similar to what we
    did with the Deepwater Horizon, because there was a lot of
    complexity here, a lot of complexity in the 9/11 victims
    compensation fund. So are you advocating for something like
    that as well?
        Mr. Cladoosby. Yes. Yes, Madam Chair, that is a great
    question. The Administration appears to be in need of some
    direction from this Congress in that matter. We will be more
    than willing to work with you, NCAI will, to find a
    constructive path forward. Because it is not the first time, we
    are not creating the wheel here. This is something that has
    been done with the September 11th victims and the BP Horizon
    oil spill, as President Keel has indicated.
        So at the rate that they are going, it is unacceptable.
    Sixteen resolved out of 1,600, that is unacceptable. If they
    think that they can continue that record going down the road,
    we are not going to get there. We need this special master to
    help move this process along a lot faster than it is right now.
    So we need your help in encouraging this Administration to do
    that.
        The Chairwoman. Thank you. Senator Franken?
        Senator Franken. Thank you again, Chairwoman Cantwell, for
    holding this hearing. Thank you, Chairwoman Diver, for your
    eloquent oral testimony and your also eloquent and helpful
    written testimony. I think that you said it was about $2.5
    million that you have been cut in the last two years alone,
    that the Fond du Lac has been. How is that $2.5 million cut
    compared to your entire budget for the Band?
        Ms. Diver. Thank you very much for that question, Senator
    Franken. Out of our total program funding, that is about 6
    percent, 6 percent the first year and another 5.2 percent, so
    just a little over 11 in total.
        Senator Franken. If the sequester continues into next year,
    what choices will you have to make in your budget and what will
    that mean for your tribe?
        Ms. Diver. I will have to start to cut actual Head Start
    slots, instead of the ancillary programs around that support
    the teachers, I will have to start to cut teachers. Before we
    start cutting teaching staff in our school, we would probably
    reduce transportation, at which point quite a number of our
    students would choose to leave our school and go to other
    school districts that don't have the cultural competency or the
    tribal focus, language activities, those types of things. They
    will leave our school district for those that can provide those
    levels of support service.
        Our housing block grant, we are already having to make a
    hard choice between adding to our housing stock or reducing
    maintenance, deferring maintenance on the old 1937 Act housing.
    That is not a great long-term solution. I would much rather
    keep homes rehabbed than have to tear them down and replace
    them.
        Senator Franken. You have already had to drop kindergarten
    students with behavior difficulties. And you have just had to
    stop letting them go to school, right?
        Ms. Diver. It was actually one of the most heart-wrenching
    decisions that we have had. We had to take several kindergarten
    students that came in with pretty high level behavior needs.
    And because we could not give them the paraprofessionals that
    would ease their way into kindergarten, we actually denied them
    enrolment, asked them to leave and come back in a year. We are
    hoping their cognitive development in the next year will put
    them in a different place.
        The struggles for the parents are that now they are having
    to arrange child care, having copays for those types of
    activities. We are worried about stigma to the children. And
    once again, many of the parents faced with some of those
    decisions may choose to go to a non-tribal school so that they
    can get the services they need for their children.
        Those entities that they are choosing to go to that have
    the services have the ability to do something tribes do not,
    and it is called levy. So as an alternative to sequestration,
    maybe we should consider letting tribes levy in our ceded
    territories. We are being asked to provide services and rely on
    all of you good folks to help us make that happen, or raise the
    money ourselves. There is no other entity of government that
    has to do that. That was just wishful thinking, I understand.
        [Laughter.]
        Senator Franken. Chairwoman Diver, you cite research that
    overcrowded housing is especially harmful to children and can
    harm their education success and their health and mental
    health. We talked about that a little bit in the first panel.
    Could you talk to the Committee about sort of the accumulated
    risks to the health, education of children because of housing
    cuts? And just what all of this looks like in human terms.
        Ms. Diver. Sure. After 25 years in the housing, operating
    and developing business, and bringing those skills back into my
    own community, we have been a leader in Indian Country with
    developing other menus of services besides low income rentals
    and homeowners. Because those models alone don't work. Our
    supportive housing units for chronic and long-term homeless,
    those are the families you spoke about earlier, Senator, the
    ones that get doubled and tripled up, because that is what
    homelessness looks like in Indian Country, verified by the
    Wilder Research Center in Minnesota.
        We see spikes in police activity that we track, behavioral
    health incidents, commitments, delinquency, truancy. When we
    opened up our 24 units of supportive housing, we are now in our
    third year with four of the families where their children for
    the first time in their lives have not had to change schools in
    the middle of the year.
        In terms of impact, maybe mom and dad aren't better, but
    what we see is the incidence of alcohol use declining
    significantly and their severity and number. We see joint case
    management among school counselors, behavioral health workers,
    social workers, so that we can get the packages of services
    those kids need. The average saving in cost for stable housing
    for families is estimated to be for every dollar spent on
    stable housing and services there is a saving of $9 to crisis
    care and other systems later.
        Senator Franken. Thank you, Chairwoman Diver. You are a
    great leader in Minnesota for your tribe, for Fond du Lac. You
    are a true friend. Thank you.
        Ms. Diver. And thank you to all of you for saving my clinic
    on some behavioral health of my own.
        The Chairwoman. Thank you. Senator Begich.

                    STATEMENT OF HON. MARK BEGICH,
                        U.S. SENATOR FROM ALASKA

        Senator Begich. Thank you very much Madam Chair. I
    apologize that I wasn't here for the first panel. I was busy on
    an Alaska issue, an issue that I know you are familiar with and
    others, Pebble Mine. I was working through two groups at the
    same time. It has an impact on Indian Country and our State.
        Let me first say thank you all very much. My poor staff,
    they write good questions for me, and I get frustrated always
    when I come here, only because I wish I was here for the last
    panel, and listening once again on contract support services
    and the inability for this Administration to deal with this
    issue once and for all.
        I am looking at the testimony that Dr. Roubideaux sent, the
    written testimony. And she had two alternatives to deal with
    this, which I am trying to reserve my words of what I describe
    these, they are useless. She settled 16 of these issues out of
    1,600. And they need, I say they, the tribes across this
    Country, including Alaska, need to have a separate opportunity,
    and if it is a special master that is appointed or some
    situation outside the hands of Indian Health Services.
        Because here is what I think is going to happen. We will be
    here next year. We will have the same conversation, we will say
    the same thing and it will be 30, maybe, settled out of 1,600.
    This is ridiculous. It is outrageous. When they know that they
    can settle this, I think Mr. Keel said it best, and I have
    heard the data, they have the numbers. They have to verify to
    this Committee and this Congress on what is back-owed. Now,
    somehow that number has changed, then obviously they certified
    something incorrectly, which means they weren't telling the
    truth when they sent the paperwork to us. I doubt that, I think
    it was probably truthful, I think we all agree that whatever
    those numbers were, that is what they were behind in payment.
        I know they may make the legal argument that that was a BIA
    case and that is different. Despite the fact that BIA is going
    to do a class settlement and get it all done by 2014. It is
    amazing that magically one agency can get it done but one other
    agency is incompetent and unable to get it done. I know, they
    have heard from me and I am trying to be polite with my words.
    I just cannot believe they cannot resolve this, it is a simple
    request that the Indian Health Services do and this
    Administration do, and that is set an organization up, an
    individual to do, if it is called a master or whatever it might
    be, but someone to go through these claims and settle them and
    be done.
        The money is in Treasury, it is a setaside legal fund, to
    do this. It doesn't touch Indian Health Services money. It is
    appalling to me that they cannot get this done.
        The second part of this is, they need to set a plan, and I
    know, and I will ask the new chairman in regards to contract
    support cost working group. I know a couple of days ago you all
    met. Dr. Roubideaux said they are going to reinstate this. I
    have just a couple of basic questions. Is OMB going to be in
    those meetings? Because if the Office of Management and Budget
    is not in those meetings, it is a useless meeting. No
    disrespect to my friends at OMB, they are the great sanitizers.
    You send a budget up, they clean it off. I know this as a
    former mayor, my OMB did it to every department I had, because
    my department heads would come to me and say, did you know we
    actually proposed this and OMB cleaned it off. Is OMB going to
    be involved in that working group?
        Mr. Cladoosby. That is a great question. We are hoping that
    they are involved. Once again, one of those agencies that we
    would really love to have an Indian desk in OMB, to have a
    presence there. We have been pushing this request. Yes, we
    agree that they need to be there and they need to be at the
    table.
        Senator Begich. Maybe we can as a committee or individually
    make the request of the Administration. Because a working group
    without the people who manage the money, it is going to be a
    lot of great conversation you will have. Good philosophical
    debate, you will feel good when you leave, everyone leaves.
    Then a year later or six months later or two months later when
    the working group comes together--did she give you a timetable
    when the working group will start meeting?
        Mr. Cladoosby. Does anybody at the table know if there is a
    timetable set for this? Aaron?
        Mr. Payment. We actually, we are here, and both of us are
    on stack. This is one of the issue we were asking for in the
    new position in OMB. It is going to be immediate. My first
    question was, because I want to be on that committee, and I
    represent the Midwest.
        Senator Begich. I would like to be on that committee.
        [Laughter.]
        Mr. Payment. So one of the things that I have impressed to
    the Secretary of Health and Human Services is that, tribes
    recognize that President Obama has been one of the best
    presidents as it relates to Indian issues.
        Senator Begich. Absolutely.
        Mr. Payment. This is a disconnect. This is absolutely not
    congruent with his promise to uphold the treaty obligations,
    the creation of the White House Council, all of those things
    suggest a different approach. So what I am trying to figure
    out, I am a political scientist by academic training, where
    this is coming from and trying to understand it. I think that
    new position in OMB might help. I have asked several people to
    get a word to the President that this is not reflecting very
    well on his commitment to Indian Country. We need to uphold our
    treaty obligations.
        I want to say one other thing quickly, if I have the
    chance. I am newly the vice president for the Midwest for NCAI.
    And I want to speak for our Alaska tribes as well. My tribe has
    a casino. One hundred percent of our revenue is used to
    supplement the services that the Federal Government is not
    providing us, so I loved your term supplement. But some tribe
    don't have that. And so the devastation of the shutdown and the
    devastation of the sequestration for the Alaska tribes or for
    the Nevada tribes or for the tribes that don't have gaming has
    been devastating. It is devastating for us. But for them, they
    have nowhere to turn and no one to look to.
        Senator Begich. That is right.
        Mr. Payment. So your leadership by the way, is really
    respected by the leaders in your State. So thank you.
        Senator Begich. Thank you. I know my time is up, but I will
    just end on this, and that is, Madam Chair, I want to do
    whatever we can. I sent a letter to the President last week
    outlining five specific issues. This was one of them, the
    master, resolving this. And I do agree, in the last five years,
    this President has done a lot for Indian Country, more than
    most have done in years, as we look at the history.
        But it just seems like there is something not, and your
    phrase was a good one, connecting here. There is something
    missing in this linkage and it seems like it is not a
    complicated problem. It is almost like every time we go to the
    gate, we go to a different door. And they say, no, no, go to
    the next door. And we never find the right door. And so I want
    to again, the letter I sent last week to the President was very
    direct with specific recommendations. I was not hesitant to be
    blunt about it. But I want to be able to help you. But I can
    tell you, this testimony and the written testimony is
    unacceptable to me, of the solutions to solve this problem from
    Dr. Roubideaux. She has heard enough from me, I am sure. But I
    will do whatever I can.
        I thank you all for the work you do. The work you have to
    do under sequestration, and as you know, some of you may know,
    I have proposed an advance funding bill. Just as what we did in
    the first year I got here, I sent it to the VA. We did it for
    the medical VA, we should do it for our Indian Health Services.
    These are not discretionary, they are mandatory. They are
    treaties. They are contracts. And we should fulfill the
    obligation that we set out. We are dealing with VA, and we did
    that a year and a half ago. I also have another bill with the
    VA to finish off their benefits to make them also advance
    funding in Indian Health Services. So we will look forward to
    working with you on that.
        Thank you, Madam Chair. I know I extended more than I
    should have. But this just frustrates me. I will try my best
    next time to come with a very positive attitude on something. I
    don't know what it will be, but it will be something.
        The Chairwoman. I appreciate it, Senator Begich. If you
    needed a few more minutes, please take them. I said at the
    beginning of the hearing that you could see from our colleagues
    the level of frustration, only because we hear from our
    constituents and only because Indian Country and the State of
    Alaska or in Minnesota or some of these various places are
    large parts of constituencies and economic tools. When they
    don't have the resources then obviously everything is strained.
        So I want to thank this panel and the witnesses here for
    their testimony. You have shown some light on the challenge and
    some ideas about solutions. I am glad that the Administration
    and the Assistant Secretary and Director Roubideaux were here,
    because hopefully we can now move forward in resolving both of
    these issues, getting some parity as it relates to health
    services in sequestration and in dealing with the contract
    support issue and moving forward in a more timely fashion.
        So again, I thank my colleagues also for showing up and for
    their commitment to making sure these issues are heard. With
    that, we are adjourned.
        [Whereupon, at 4:34 p.m., the Committee was adjourned.]
                                A P P E N D I X

    Prepared Statement of Hon. Cathy Abramson, Chairperson, National Indian
                                  Health Board
        Chairwoman Cantwell, Vice Chairman Barrasso, and Members of the
    Committee, thank you for holding this important hearing on contract
    support costs and sequestration. Both of these issues are of paramount
    importance to Indian Country and we sincerely appreciate the attention
    that this committee has given to the discussion of these key concerns.
    On behalf of the National Indian Health Board (NIHB) and the 566
    federally recognized Tribes we serve, I submit this testimony for the
    record.
        First, I would like to emphasize the importance of the Federal
    Trust responsibility, when it comes to the health of American Indian/
    Alaska Native (AI/AN) people. Based on treaties between Tribes and the
    United States for the exchange of peace and Tribal lands as well as
    United States Supreme Court cases and statutory acts, the Federal Trust
    responsibility is an absolute legal obligation under which the United
    States has the highest responsibility and trust to Indian Tribes. The
    Snyder Act of 1921 (25 USC 13) legislatively affirmed this trust
    responsibility. To facilitate upholding its responsibility, the Federal
    Government created the Indian Health Service (IHS) and tasked the
    agency with providing health services to AI/ANs. Since its creation in
    1955, IHS has worked toward fulfilling the federal promise to provide
    health care to Native people. In passing the Affordable Care Act,
    Congress also reauthorized and made permanent the Indian Health Care
    Improvement Act (IHCIA). In renewing the IHCIA, Congress reaffirmed the
    duty of the Federal Government to American Indians and Alaska Natives,
    declaring that ``it is the policy of this Nation, in fulfillment of its
    special trust responsibilities and legal obligations to Indians--to
    ensure the highest possible health status for Indians and urban Indians
    and to provide all resources necessary to effect that policy.'' (P.L.
    111-148, Indian Health Care Improvement Act,  103(2009).
        To fully understand the implications of these two issues, it is
    crucial to understand the state of health for AI/ANs. The AI/AN life
    expectancy is 4.1 years less than the rate for the U.S. all races
    population. AI/ANs suffer disproportionally from a variety of diseases.
    According to IHS data from 2005-2007, AI/AN people die at higher rates
    than other Americans from alcoholism (552 percent higher), diabetes
    (182 percent higher), unintentional injuries (138 percent higher),
    homicide (83 percent higher) and suicide (74 percent higher).
    Additionally, AI/ANs suffer from higher mortality rates from cervical
    cancer (1.2 times higher); pneumonia/influenza (1.4 times higher); and
    maternal deaths (1.4 times higher).
        AI/ANs have paid in advance for their health care. Sequestration
    and refusal to fully pay contract support costs are but two examples of
    the failure of the U.S. government to uphold its trust responsibilities
    while irresponsibly seeking to balance the federal budget on the backs
    of those who depend on the fulfillment of these agreements.
        In 2003, the U.S. Commission on Civil Rights released a report
    titled: ``A Quiet Crisis: Federal Funding and Unmet Needs in Indian
    Country.'' This report detailed the lower health status and poverty for
    AI/ANs. Sadly, despite increases in federal spending, little has
    changed in Indian Country over the last decade when it comes to health.
    In 2003, IHS was 0.5 percent of the Department of Health and Human
    Services' (HHS) budget. Today, IHS spending is only 0.4 percent of the
    HHS budget. The crisis is still here, funding is not, and Tribes are
    continuing to suffer. To make matters worse, the inability of the
    Federal Government to protect the IHS from sequestration and a failure
    to pay Tribes' contract support costs has only exacerbated the problems
    of health delivery in Indian Country. As Chairwoman Cantwell noted in
    the November 14 hearing, ``Our country's financial troubles are not
    really stemming from our obligations to Indian Country, and frankly,
    we're not doing a good job in fulfilling those obligations.''
    Sequestration Cuts and Indian Health
        IHS spends roughly $2,896 on each patient per year. This is far
    less than the national average of $7,535 for health care spending per
    capita per year and even less than the $12,042 average for Medicare and
    $6,980 for the Veteran's Administration. Despite the legal promise to
    provide health care in perpetuity for AI/ANs, the Federal Government is
    falling woefully short.
        In FY 2013, the IHS lost $228 million dollars due to the across-
    the-board spending cuts of sequestration and to rescissions. This was a
    critical blow for an agency that is funded at only 56 percent of total
    need. Late last year, a technical interpretation by the Office of
    Management and Budget (OMB) confirmed that IHS would be subject to the
    full sequestration amount of 5.1 percent. This was a surprise to many
    Tribes and, in fact, to IHS, because the Budget Control Act of 2011
    (BCA) (P.L. 112-25), which governs sequestration, includes language
    that exempts IHS from all but 2 percent of sequestration. All other
    federal programs that provide health care services the nation's
    populations with the highest need, such as Social Security, Medicare,
    Medicaid, the Children's Health Insurance Program and the Veteran's
    Administration, have been exempted from these funding reductions. But,
    not the Indian Health Service!
        This determination left many Tribes' scrambling to find a way to
    continue health services in FY 2013. Over the last several months, NIHB
    has heard from countless Tribes about the negative impacts of
    sequestration on their ability to deliver or access of health care. For
    many, this means shutting down facilities, furloughing employees and
    denying access. Others have shifted funds from other Tribal services;
    meaning, that they are forced to subsidize the federal trust
    responsibility. For example, the NATIVE Project in Spokane, Washington
    (a Native American Urban Clinic) will implement three furlough days a
    month. This will mean the elimination of roughly 150 doctor visits. On
    the Pine Ridge Reservation, the health education department will cut a
    full time physical fitness aid to part time--dramatically affecting
    efforts to prevent heart disease and diabetes. Also on Pine Ridge,
    testing and screening services for elders and babies have been reduced.
        These cuts are literally a matter of life and death. The Rosebud
    Sioux Tribe has lost over $119,000 due to sequestration. Since March
    2013, the death rate on the reservation has at least doubled because
    patients coming into facilities with critical problems just cannot get
    the care they need. The Mississippi Band of Choctaw Indians has said
    that referrals for medical services except those that are necessary to
    prevent the immediate death or serious impairment of the health of the
    individual have been delayed or denied. These delays and denials often
    cause the patients' health to get worse, leading to higher treatment
    costs down the road and sometimes death. The South East Alaska Regional
    Health Consortium announced it will close the Bill Brady Healing Center
    that provides alcohol and drug treatment to Native Alaskans.
        On the Lower Brule Sioux Tribe's reservation located in South
    Dakota, there are not many opportunities for economic development.
    While some Tribes are forced to supplement the federal trust
    responsibility for health programming with funds from other programs or
    Tribal businesses, this is not a possibility on the Lower Brule
    Reservation. They have experienced budget cuts totaling over $77,000.
    This means they have had to drastically reduce a patient transportation
    program which takes individuals from this remote location to other
    cities to receive care. Dedicated Tribal health staff members still
    take the patients in many cases, but they are using their own funds.
    The alcoholism program on Lower Brule has lost $33,000, and now the
    treatment facilities do not have enough staff, supplies or meetings to
    help Tribal members. Mental health programs were cut by $6,000. This is
    a devastating reduction considering that in the Northern Plains region,
    American Indian young people are five to seven times more likely to
    take their own lives than other American youth. In a place where funds
    for health are already far below the need, sequestration cuts have left
    Tribal health directors desperately trying to make it work.
        While some Tribes have been able to make some tough cuts to
    services and staff to remain open, next year Indian Country will be in
    a much worse state. For FY 2014, the situation for Indian health will
    be even further diminished if IHS is held to any sequester reduction.
    The Sault Ste. Marie Tribe of Chippewa Indians estimates that next year
    they will eliminate several health positions including several nurses
    and a registered dietitian and cancel other programs, such as their HIV
    program which provides over 1,000 visits annually. Tribal programs
    should be entirely exempt from sequestration in FY 2014, as they are a
    fulfillment of the trust responsibility to Tribes by the U.S.
    government.
        However, if this is not possible, NIHB requests the Senate
    Committee on Indian Affairs to weigh in with the OMB, and explain that
    IHS should have a special sequestration exemption for FY 2014 and
    beyond, pursuant to current law. In FY 2013, the Budget Control Act
    (BCA) spelled out how sequestration would work and left open that even
    exempt accounts could be sequestered. However, for FYs 2014-2021, the
    Act specifies that the sequestration order should reduce spending for
    all accounts except those exempted (i.e., held at 2 percent
    sequestration) in Section 256, which includes IHS. In addition, the BCA
    required line-by-line sequestration in FY 2013 only. This means,
    unequivocally, that all of IHS, discretionary, and mandatory alike,
    would be held at 2 percent under any future sequestration reductions
    under the BCA. Regardless, let us be clear: there should be NO
    REDUCTIONS in IHS funding for the IHS, Tribal, and Urban (I/T/U)
    system. Two percent is too much!
    Support for Advance Appropriations
        NIHB has previously weighed in with this Committee regarding
    support for Advance Appropriations for the Indian Health Service. On
    October 10, 2013, Senator Lisa Murkowski introduced legislation, S.
    1570, to provide advance appropriations for the IHS. While this measure
    will not solve the complex budget issues for IHS, it will be an
    important first-step in ensuring that AI/ANs at least continue to
    receive the health care we have come to know. Advance appropriations,
    which proved to be very effective for the Veteran's Administration
    health system, would allow Indian health programs to effectively and
    efficiently manage budgets, coordinate care, and improve health quality
    outcomes for AI/ANs. This change in the appropriations schedule will
    help the Federal Government meet its trust obligation to Tribal
    governments and bring parity to the federal health care system.
    Adopting advance appropriations for IHS would result in the ability for
    health administrators to continue treating patients without wondering
    if -or when- they would have the necessary funding.
        Additionally, IHS administrators would not waste valuable
    resources, time and energy re-allocating their budgets and engaging in
    arduous outreach and education to the Tribes each time Congress passed
    a continuing resolution. Indian health providers would know in advance
    how many physicians and nurses they could hire without wondering if
    funding would be available when Congressional decisions funnel down to
    the local level. Health care services in particular require consistent
    funding to be effective. We urge this Committee to quickly consider S.
    1570 and report the bill favorably to ensure that Tribes can move
    forward to a more stable funding mechanism.
    Contract Support Costs
        The Indian Self-Determination, Education and Assistance Act (P.L.
    93-638), which has allowed Tribes to operate health programs directly
    on behalf of the Federal Government and is arguably the single greatest
    policy change when it comes to improving health delivery in Native
    communities. By empowering Tribes to run their own health programs,
    services are provided more efficiently and effectively because Tribes
    have better knowledge of their population and possess the important
    cultural understanding that can lead to better health outcomes for AI/
    AN people.
        However, when contracting to provide health care services, Tribal
    governments have not received their full administrative payments, or
    contract support costs (CSC), from the Federal Government. According to
    the IHS ``CSC are defined as reasonable costs for activities that [the
    Tribe] must carry out but that the Secretary either did not carry out
    in her direct operation of the program or provided from resources other
    than those under contract.'' These are fixed costs that are negotiated
    before the Tribe and the Federal Government finalize a contract.
        This decade-long problem has forced many Tribes to shift funds from
    other programs to make up the difference; again, exacerbating some of
    the challenges that AI/ANs face when it comes to health. Again,
    subsidizing the federal Government's responsibility. This affects all
    of Indian Country, as each Tribe has at least one contract with the
    Federal Government. In June 2012, the Supreme Court issued a ruling in
    Salazar vs. Ramah Navajo Chapter that held that the U.S. Government
    must pay each Tribe's contract support costs even if the full amount to
    fund this has not been appropriated by Congress. Despite this, little
    progress has been made on resolving the past claims. In 16 months, IHS
    has settled only 1 percent of the 1600 pending claims. At the current
    rate, it would take over 100 years to settle these claims. Clearly,
    more must be done at IHS to ensure that there is adequate resolution on
    this issue and more must be done by the Federal Government to bring
    this matter to a quick and equitable resolution.
        It is important to emphasize that these costs are negotiated in
    advance with the government, so prompt settlement amounts do not
    require much guesswork. The Supreme Court found in the Ramah case that
    72-92 percent of CSC were paid between the years of 1994-2001, and
    these cases can be paid from the judgment fund. Yet, the Administration
    has done little to move forward since the decision. This same
    Administration has shown unprecedented leadership in settling several
    historic Indian-related cases when there were no court rulings holding
    the government liable. These include settlement of individual Indian
    claims (Cobell), Tribal trust claims (Nez Perce), and Indian farmer
    claims (Keepseagle). There is no excuse for failing to promptly settle
    all outstanding claims where the Supreme Court has spoken and where
    certified agency reports to Congress show all amounts due. NIHB echoes
    others in Indian Country who have advocated for a Special Master to
    promptly settle all outstanding CSC claims. Congress should also set a
    quick deadline for the full resolution of these claims.
    Future Funding for Contract Support Costs
        To make matters worse, on the heels of the Ramah decision, the
    Administration used their FY 2014 Budget request to support a major
    reform of the CSC payment system--and did so without engaging in Tribal
    consultation. The FY 2014 Budget recommends that the government enter
    into individual contracts with each Tribe for CSC funds that each Tribe
    will receive. This proposal was made without consultation from Tribes,
    and is therefore a violation of established Tribal consultation
    policies as well as Executive Order 13175, which states the purpose
    ``to establish regular and meaningful consultation and collaboration
    with tribal officials in the development of Federal policies that have
    tribal implications, to strengthen the United States government-to-
    government relationships with Indian tribes, and to reduce the
    imposition of unfunded mandates upon Indian tribes.'' IHS Director Dr.
    Yvette Roubideaux stated, at her nomination hearing before the Senate
    Committee on Indian Affairs on June 12, 2013: ``We have heard loud and
    clear the Tribes do not like our proposal . . . we anticipated that the
    Tribes would not like the proposal.'' Tribal consultation could have
    mitigated the damaging impact of this ill-conceived and onerous policy.
        The Budget language, if enacted, would mean that Tribes and Tribal
    Organizations are the only government contractors in the United States
    not receiving full compensation when entering into contracts with the
    United States Government. Furthermore, it would serve to further
    violate the federal trust responsibility to provide health for American
    Indian and Alaska Native people. If the Administration negotiated a CSC
    cap with a particular Tribe and then experienced an administrative
    shortfall over the course of the contract, the Tribe would be required
    to subsidize the federal trust responsibility by covering those
    additional costs: Again. This was clearly not the intent of the Indian
    Self-Determination Education and Assistance Act.
        Assistant Secretary of the Bureau of Indian Affairs Kevin Washburn
    said at this Committee's hearing on November 14, the Administration's
    proposal to put individual caps on contract support costs is ``not
    something that makes a lot of sense in many respects . . . '' Even the
    U.S. Chamber of Commerce has recently weighed in on behalf of Tribes
    against this proposal. Yet, the Administration still pushes forward
    with this misinformed policy, and reiterated support for it in the
    Office of Management and Budget's anomalies report issued at the end of
    FY 2013. NIHB agrees with the statement Senator Murkowski provided at
    the hearing that, ``The fact that we are continuing to bring this up
    before members of the Administration, I find very, very frustrating.''
        NIHB is encouraged by the recent decision of the IHS Acting
    Director to reinstate the Contract Support Cost Workgroup in order to
    move forward to find a long-term solution to fund CSC. This group was
    abruptly abandoned in 2012 by IHS, which cited it could not meet due to
    restrictions within the Federal Advisory Committee Act. The IHS Acting
    Director has stated that this group will meet in early December 2013
    and will quickly make recommendations. NIHB calls on this Committee to
    hold the IHS accountable to this plan. There is much work to be done,
    and it is critical that the group meet as soon as possible.
        NIHB, again, appreciates the attention that members of this
    Committee have given to this critical issue, and the tough tone it has
    taken with the Administration on the misguided proposal around CSC.
    However, we have a long way to go before this issue is fully resolved.
    NIHB urges the committee to maintain its support for the speedy
    resolution of past CSC claims, and also urges the Committee to continue
    to hold hearings so that we may pave a path forward.
    Conclusion
        On behalf of the National Indian Health Board and the 566 federally
    recognized Tribes we serve, we thank the Committee for holding this
    important hearing. Both sequestration and CSC are critical issues that
    have a direct impact on the health and well-being of AI/ANs. To
    summarize, we recommend the following:

             1) Restoration of the $228 million in IHS funds lost due to
            sequestration and rescissions in FY 2013

             2) Full exemption from sequestration for IHS and other Tribal
            programs in FY 2014 and beyond

             3) The Committee should promptly consider and pass S. 1570,
            which provides advance appropriations for IHS.

             4) Congress should direct a special master to settle past CSC
            claims and impose a deadline for resolution of these claims.

             5) Reject the Administration's proposal to place individual
            caps on CSC.

             6) Hold the IHS accountable to their commitment to reconvene
            the CSC Workgroup.

        State and local governments have the power to tax in order to fund
    government services. Tribes do not have that option. In many remote
    Tribal communities, economic development is also unfeasible. Tribal
    governments depend more heavily on Federal Government sources, thereby
    making the impacts of sequestration and contract support shortfalls
    even graver to Indian Country. Funding of IHS and other Tribal programs
    are a fulfillment of the federal trust responsibility that has been
    long established through the Constitution, treaties and law. These
    obligations to Indian Country are not discretionary. It is time that
    the first Americans stop being the last Americans when it comes to
    health care delivery, access and opportunity.
        Thank you for the opportunity to offer this testimony.
                                     ______

      Prepared Statement of Lloyd B. Miller, Partner, Sonosky, Chambers,
                         Sachse, Miller and Munson, LLP
        My name is Lloyd Miller and I am a partner in the law firm of
    Sonosky, Chambers, Sachse, Miller and Munson, LLP.
        I offer this testimony in two capacities. First, I am counsel to
    the National Tribal Contract Support Cost Coalition. This Coalition is
    comprised of 20 Tribes and tribal organizations situated in 11 States.
    Collectively, these Tribes and tribal organizations contract to
    administer $400 million in IHS and BIA services on behalf of over 250
    Native American Tribes. \1\
    ---------------------------------------------------------------------------
        \1\ The NTCSCC is comprised of the: Alaska Native Tribal Health
    Consortium (AK), Arctic Slope Native Association (AK), Central Council
    of the Tlingit & Haida Indian Tribes (AK), Cherokee Nation (OK),
    Chippewa Cree Tribe of the Rocky Boy's Reservation (MT), Choctaw Nation
    (OK), Confederated Salish and Kootenai Tribes (MT), Copper River Native
    Association (AK), Forest County Potawatomi Community (WI), Kodiak Area
    Native Association (AK), Little River Band of Ottawa Indians (MI),
    Pueblo of Zuni (NM), Riverside-San Bernardino County Indian Health
    (CA), Shoshone Bannock Tribes (ID), Shoshone-Paiute Tribes (ID, NV),
    SouthEast Alaska Regional Health Consortium (AK), Spirit Lake Tribe
    (ND), Tanana Chiefs Conference (AK), Yukon-Kuskokwim Health Corporation
    (AK), and the Northwest Portland Area Indian Health Board (43 Tribes in
    ID, WA, OR).
    ---------------------------------------------------------------------------
        Second, I am counsel to 50 Tribes and tribal organizations pursuing
    claims against the Indian Health Service over contract support cost
    underpayments which occurred as far back as 1995. More generally, I
    have worked for over 25 years in matters involving contract support
    costs, including work on several legislative matters, on numerous
    regulatory matters, and (among other cases) as counsel for the
    prevailing Tribes in Cherokee Nation & Shoshone-Paiute Tribes v
    Leavitt, 543 U.S. 631 (2005) and co-class counsel for the prevailing
    Tribes in Salazar v. Ramah Navajo Chapter, 132 U.S. 2181 (2012).
        In 1988, former Chairman Inouye and this Committee noted that no
    single enactment has had a more profound effect on more tribal
    communities than the Indian Self-Determination Act, and no issue has
    been more critical to the success of that Act than the payment of
    contract support costs. These statements were part of this Committee's
    exhaustive report which accompanied the historic 1988 Amendments to the
    Indian Self-Determination Act, 25 U.S.C.   450-458aaa-18. See S. Rep.
    No. 100-274 (1987).
        Today we celebrate the fact that, over the course of nearly four
    decades, Tribes and inter-tribal organizations have taken over control
    of vast portions of the Bureau of Indian Affairs and the Indian Health
    Service, including critical federal functions in the areas of health
    care, education, law enforcement and land and natural resource
    protection. Today, not a single Tribe in the United States is without
    at least one self-determination contract with the IHS and BIA.
    Collectively, the Tribes annually administer some $2.8 billion in
    essential federal government functions, employing an estimated 35,000
    people. Contract support cost issues thus touch every Tribe in the
    United States.
        The 1988 Amendments (Pub. L. No. 100-472) eliminated any possible
    doubt that self-determination contracts are fully enforceable under the
    Contract Disputes Act, just like other government contracts. Congress
    did so by adding Section 110 to the Indian Self-Determination Act. 25
    U.S.C.  450m-1. This is key to understanding how we got to where we
    are today.
        Before the 1988 Amendments, court decisions like Busby School of
    the Northern Cheyenne Tribe v. United States, 8 Cl. Ct. 596 (1985), had
    treated these contracts as if they were mere discretionary grants and,
    on that basis, had denied Tribes the right to recover damages when the
    agencies failed to pay their full contract support cost obligations
    under the contracts. S. Rep. No. 100-274, at 34-35 (discussing Busby).
    In one 1987 hearing on this issue, then-Chairman Inouye pointedly noted
    that, in his capacity as a member of the Defense Appropriations
    Subcommittee, DOD frequently came before the Committee to request
    supplemental appropriations to cover shortfalls in amounts due under
    government contracts. Yet, he noted, when the shortfalls are in
    contracts with Indian Tribes, the relevant agencies never come to the
    appropriations committee for supplemental funding. Chairman Inouye then
    vowed to change this prevailing view by amending the Indian Self-
    Determination Act.
        The late Chairman Inouye's remarks are worth repeating here for the
    record:

             A final word about contracts: I am a member of the
            Appropriations Committee, and there we deal with contracts all
            the time. Whenever the Department of Defense gets into a
            contract with General Electric or Boeing or any of the other
            great organizations, that contract is carried out, even if it
            means supplemental appropriations. But strangely in this trust
            relationship with Indians they come to you maybe halfway or
            three quarters through the fiscal year and say, ``Sorry boys,
            we don't have the cash, so we're going to stop right here''
            after you've put up all the money. At the same time, you don't
            have the resources to sue the Government. Obviously, the equity
            is not on your side. We're going to change that also.
            [Applause]

             HEARING BEFORE THE SELECT COMMITTEE ON INDIAN AFFAIRS ON S.
            1703, TO AMEND THE INDIAN SELF-DETERMINATION AND EDUCATION
            ASSISTANCE ACT, 100th Cong., 1st sess., at 55 (Sept. 21, 1987).

        In 1988, this Committee's deep concern that the underpayment of
    contract support costs resulted in reduced patient care and other
    services, combined with this Committee's commitment to providing solid
    contract remedies if the agencies continued to underpay the contracts,
    led to the enactment of powerful contract support cost funding
    provisions (  450j-1(a)(2), (g)), mandatory congressional reporting
    requirements ( 450j-1(c)), and reliable contract enforcement
    mechanisms.  450m-1(a).
        Despite these heroic measures, and despite a second round of
    amendments in 1994 (Pub. L. No. 103-413), the agencies continued to
    fall short on their contract obligations. By the late 1990s, IHS was
    underfunding tribal contracts by nearly $100 million a year. The BIA,
    too, was failing to meet its contract obligations (although at
    considerably lower sums). All along, the agencies insisted that Tribes
    had no enforceable right to be paid in full, and the agencies therefore
    shirked their responsibilities to report these shortfalls to Congress
    and even to request the funds necessary to pay the contracts in full.
    In this environment, it was inevitable that litigation would follow.
        It is not necessary to catalogue all of the ensuing litigation,
    because we already know the rest of the story. After more than a decade
    of litigation by a few courageous Tribes in various courts and boards,
    in 2005 the Supreme Court issued a unanimous decision against IHS (and,
    by extension, the BIA too). The Court upheld this Committee's
    legislation against attacks that its words were empty rhetoric, and the
    Court agreed that contracts with Tribes are as fully enforceable
    against the government as any other government contracts. That was the
    Cherokee case.
        But even before the Cherokee case finished its journey in the
    courts, IHS put into place a scheme to undermine the Tribe's rights for
    the future. After suffering an early defeat in a Portland district
    court, \2\ IHS in 1988 persuaded the Appropriations Committees to erect
    limiting earmarks-caps-on the total amount the agency could spend on
    contract support cost payments.
    ---------------------------------------------------------------------------
        \2\ Shoshone-Bannock Tribes of the Fort Hall Reservation v.
    Shalala, 988 F.Supp. 1306, 1311-12 (D.Or. 1997). Although this opinion
    was later reversed by the Ninth Circuit, Shoshone-Bannock Tribes of the
    Fort Hall Reservation v. Thompson, 269 F.3d 948 (9th Cir. 2001),
    opinion amended and replaced by 279 F.3d 660 (9th Cir. 2002), three
    years later the district court reopened the judgment in the wake of the
    Cherokee decision (Shoshone-Bannock Tribes of the Fort Hall Reservation
    v. Shalala, 408 F.Supp.2d 1073 (D. Or. 2005)), and thereafter entered
    an amended judgment of $1.2 million against the government.
    ---------------------------------------------------------------------------
        IHS was unabashed in its intentions: it wanted to foreclose any
    future claims by tribal contractors. IHS might eventually lose the
    Cherokee case (which involved years before 1998), but IHS had a new
    plan to escape any further liability, while still permitting IHS to
    keep the benefit of all of the services the Tribes were providing. In
    developing this new attack on tribal rights, IHS followed a path the
    BIA had started in 1994, though for entirely different reasons. In
    1994, the BIA merely wanted to separate its direct service
    appropriation from its contract appropriation; its initial goal wasn't
    to cheat the Tribes on their contracts. In due course, however, both
    agencies came to see these earmarking appropriations caps as a way for
    the agencies to underpay the contracts with impunity.
        But contract law doesn't work that way. If a contractor performs
    work for the government, the contractor is entitled to be paid. And if
    the agency asks for insufficient funds from Congress to cover all of
    its contracts--yet still accepts the contractor's services, be it
    operating an IHS hospital or running a BIA police department--then the
    agency remains responsible: it either pays the contracts or the
    government answers in court.
        It took 14 years for various cases to wind their way through the
    courts on this new issue. But in June 2012 the Supreme Court rejected
    the agencies' new scheme to avoid liability to the Tribes. The Court's
    decision echoed Chairman Inouye's remarks from a quarter century
    earlier: ``Consistent with longstanding principles of Government
    contracting law, we hold that the Government must pay each tribe's
    contract support costs in full.'' Salazar v. Ramah Navajo Chapter, 132
    S. Ct. 2181, 2186 (2012). The Court made plain that ``the Government's
    obligation to pay contract support costs should be treated as an
    ordinary contract promise.'' Id. at 2188.
        Although the Ramah case involved the BIA, the Supreme Court also
    vacated a decision from the U.S. Court of Appeals for the Federal
    Circuit in the government's favor involving IHS and sent that case back
    to the lower court. Two months later the Court of Appeals concluded
    that ``[t]he Secretary [was] obligated to pay all of ASNA's contract
    support costs for fiscal years 1999 and 2000.'' Arctic Slope Native
    Ass'n, Ltd. v. Sebelius, No. 2010-1013, Order at 6, 2012 WL 3599217
    (Fed. Cir. Aug. 22, 2012).
        One would think this would be the end of the matter. But not so.
    The tenacity of the agencies in their efforts to underpay tribal
    contractors is nothing short of remarkable.
        First, the agencies secretly concocted yet another scheme to cheat
    the Tribes. They proposed language never before seen in government
    contracting law, seeking to establish several hundred mini-caps on the
    amounts the agencies will pay each individual contractor this year-and
    at levels far below what the contractors are actually owed. Even the
    U.S. Chamber of Commerce has come out four-square against this
    unprecedented move. The reaction from this Committee was swift, and I
    will not repeat here the testimony this Committee heard on this issue
    last April. The House appropriations subcommittee rejected the proposal
    outright, and over a dozen Senators have asked OMB to withdraw the
    proposal. Yet at last word, OMB is continuing to press Congress to
    insert this provision into the final funding measure Congress adopts
    for fiscal year 2014.
        Second, the agencies have failed to promptly settle the damages
    portions of all outstanding claims. The result: as of today--over 17
    months since the Supreme Court's Ramah decision--the BIA has yet to
    settle any portion of the Ramah litigation (although admittedly that
    case has unique complexities, since it is a class action covering 20
    years of underpayments suffered by some 500 tribal contractors under at
    least 9,000 contracts). For its part, the IHS Director testified to
    this Committee in writing last Summer that the agency is facing close
    to 1,600 claims from 200 Tribes totaling about $2 billion dollars. Yet
    the agency has only managed to settle 19 of 1,600 claims since the
    Ramah case was announced (including 3 claims settled on November 18th).
    That is a rate of 1 percent of the claims resolved every 17 months. At
    that rate, it will take more than a century for IHS to complete it
    work. If IHS triples the rate of its work, it will still take 32 years
    to resolve the claims.
        Why is this happening? To fully answer that question, and to
    understand what should be happening instead, requires a detour back
    through the Indian Self-Determination Act.
        The Indian Self-Determination Act. Every self-determination
    contract has a price attached to it for the work the Tribe is to do,
    and the ISDA sets forth the elements of that contract price. First,
    450j-1(a)(1) addresses the direct program costs, which are also called
    the ``Secretarial amount.'' These are ``the amount[s] the Secretary
    would have expended had the government itself [continued to] run the
    program.'' Arctic Slope Native Ass'n, v. Sebelius, 629 F.3d 1296, 1298-
    99 (Fed. Cir. 2010), vacated on other grounds 133 S. Ct. 22 (2012).
        But tribal contractors incur administrative and overhead costs to
    carry out functions that the agencies cannot transfer to the Tribes.
    The agencies cannot transfer much of their financial management and
    personnel management functions to the Tribes. They cannot transfer many
    payroll functions. There are even costs Tribes must incur but that the
    agencies never incur in the first place (such as paying for insurance,
    workers compensation premiums, legal advice and representation, annual
    auditing and reporting requirements).
        For all of these reasons, the ISDA in  450j-1(a)(2) specifies that
    ``[t]here shall be added to the amount required by paragraph (1) [i.e.,
    to the Secretarial amount], contract support costs which shall consist
    of an amount for the reasonable costs for activities which must be
    carried on by a tribal organization as a contractor to ensure
    compliance with the terms of the contract and prudent management . . .
    .'' By and large, these are simply ``administrative expenses,''
    Cherokee, 543 U.S. at 634, but they can be substantial. And since they
    are fixed costs, when the agencies fail to pay them, Tribes still incur
    the costs and they must divert program funds to pay them. Accordingly,
    services are necessarily reduced.
        The IHS Manual contains an entire chapter devoted to explaining how
    the agency determines each Tribe's ``contract support cost
    requirement.'' The Manual is clear that the ``contract support cost
    requirement'' means: ``[t]he full amount of [contract support cost]
    need for new and expanded programs (plus ongoing contracted or
    compacted programs) as determined under this chapter pursuant to
    Section 106 of P.L. 93-638 as amended [25 U.S.C.  450j-1].'' IHM  6-
    3.1.E.5. This ``contract support cost requirement'' is comprised of two
    parts: ``indirect'' costs and ``direct'' costs. The total of these two
    costs constitutes the Tribe's total annual ``contract support cost
    requirement.''
        Indirect contract support costs. Indirect contract support costs
    constitute the majority of contract support costs. These costs are
    generally determined by applying a tribal contractor's ``indirect cost
    rate,'' 25 U.S.C.  450b(g), ``to the amount of funds otherwise payable
    to the Tribe'' (that is, to the Secretarial amount). Cherokee, 543 U.S.
    at 635. For most Tribes, the relevant ``indirect cost rate'' is issued
    by the Interior Department's Interior Business Center. This ``rate'' is
    drawn from audits of prior year activities which show how much a Tribe
    spent on administrative overhead expenses, versus how much the Tribe
    spent on the actual delivery of services.
        The IHS Manual requires IHS to determine the contractor's indirect
    contract support cost requirement ``by applying the negotiated
    [indirect cost] rate(s) to the appropriate [IHS] direct cost base.''
    IHM  6-3.2.E.1. The ``appropriate direct cost base'' includes both the
    Secretarial amount paid under the contract, and all additional direct
    contract support costs negotiated to carry out the IHS contract (such
    as workers compensation insurance costs associated with nurses or other
    health department employees carrying out the IHS contracted programs).
    See IHM  3.4.E.1; IHM  6-3.3.A.3. The product of multiplying the
    ``indirect cost rate'' times the ``appropriate direct cost base'' is
    the contractor's indirect contract support cost requirement. \3\
    ---------------------------------------------------------------------------
        \3\ The Manual sets forth other fine-tuning adjustments, but for
    purposes of this general description they are omitted here. See, e.g.,
    IHM  6-3.2.F.2 (discussing ``tribal shares'' adjustment).
    ---------------------------------------------------------------------------
        Direct contract support costs. As noted earlier, direct contract
    support costs include a Tribe's payments for workers compensation
    insurance and other personnel health and related insurance or other
    benefits not transferred by IHS to the contractor as part of the
    Secretarial amount, yet which are necessary to prudently manage the
    contract. The IHS Manual instructs that these costs are to be
    negotiated according to detailed guidelines set forth in the Manual and
    an Appendix. IHM  6-3.2D; IHM Exhibit 6-3-H. Once negotiated, direct
    contract support costs are paid on a ``recurring basis'' (IHM   6-
    3.2D, 6-3.2D(2)) and ``do not require annual rejustification to the
    Secretary . . . .'' IHM  6-3.1E(12). Each year the Tribe has the
    ``option to negotiate with the Secretary'' over these costs. 25 U.S.C.
     450j-1(a)(3)(B). But until they are re-negotiated, they remain fixed.
        Duplicative costs. Once the indirect costs are calculated, and once
    the direct contract support costs are negotiated (or carried forward
    from a prior year with just an inflation adjustment), the IHS Manual
    requires a final review ensure that, if any of the contract support
    costs were actually covered by the Secretarial amount (which sometimes
    happens), the agency will receive a credit adjustment against what
    would otherwise be due. IHM  6-3.2.B.
        After all of these steps, ``[t]his adjusted CSC requirement is the
    Section 106(a)(2) amount that the [contractor] is eligible to
    receive.'' Id.
        Once the contract amount is determined, for most Tribes it is due
    in full at the beginning of the year. 25 U.S.C.  450j-1(g) (``Upon the
    approval of a self-determination contract, the Secretary shall add to
    the contract the full amount of funds to which the contractor is
    entitled.'') That said, payment delays are chronic. Nonetheless, once
    all of the contract funds are paid to the Tribe, the Tribe can
    reallocate the funds and redesign the contracted programs to best meet
    local needs and priorities (so long as services to eligible
    beneficiaries are not cut off). Further, funds not spent in the
    contract year can be carried over and spent in a later year (a not
    uncommon occurrence, given that many agency contract payments are not
    made until the last days of the fiscal year).
        All these provisions are indicative of a fixed price contract--
    payment of a lump-sum amount up front, the ability to re-budget the
    funds once paid, and the specific command that the funds need not be
    spent in the year in which they are awarded.
        The Annual Contract Support Cost Shortfall Report. Once the
    negotiated contract price is set, there is an agency reporting
    requirement. Congress established this mandate in the Act to monitor
    whether the contract amounts were being fully paid. That is, the ISDA
    requires IHS to report to Congress each year on the agency's
    calculation of the contract support costs that are due, and what was
    actually paid against what was due. 25 U.S.C.  450j-1(c); see also IHM
     6-3.5B (requirement to prepare annual reports). Because IHS has
    chronically underpaid the amounts due the Tribes, Congress mandated
    that the annual report include ``an accounting of any deficiency in
    funds needed to provide required contract support costs to all
    contractors for the fiscal year for which the report is being submitted
    . . . .'' 25 U.S.C.  450j-1(c)(2). These reports are known as the
    ``IHS Contract Support Cost Shortfall Reports.''
        The IHS Manual dictates the process for creating the annual
    Shortfall Report. First, the Manual requires that each ``Area Director
    . . . shall maintain a historical record of funds negotiated and
    awarded'' in eleven different categories, including direct program
    funds, direct contract support funds, indirect cost rates, direct CSC
    requirements and indirect CSC requirements. IHM  6-3.5(A).
        Next, the Manual provides deadlines by which the shortfall data
    must be collected, provided to each Tribe for review, and submitted to
    numerous IHS Offices for review, including the IHS Headquarters
    Director, the Director of the Office of Tribal Programs, and the
    Director of the Office of Tribal Self-Governance. Id. It is certified
    for accuracy by each Area finance office and each Area Director. It is
    certified for accuracy by the Headquarters finance office. Then, the
    report is transmitted to the IHS Director for her approval ``no later
    than February 1.'' Id. at  6-3.5(A)(3). Finally, the Report is
    submitted to the Secretary of the HHS, who also approves the Report.
    (Unfortunately, the Secretary's certification has typically taken
    months, and often has taken years. The IHS data report for FY 2012 has
    still not been submitted to Congress, although it was due to Congress
    last Spring.)
        At the end of this rigorous review process, the Secretary is
    required to submit the Shortfall Report to Congress. 25 U.S.C.  450j-
    (1)(c). As noted, the report provides ``an accounting of any deficiency
    in funds needed to provide required contract support costs to all
    contractors for the fiscal year for which the report is being submitted
    . . . .'' 25 U.S.C.  450j-1(c)(2).
        The last report submitted to Congress is illustrative. The IHS
    Director noted in the narrative portion of the FY 2012 Report that the
    Report was ``prepared as required by [25 U.S.C.  450j-1(c)]'' and
    contains ``an accounting of any deficiency in funds needed to provide
    required contract support costs to all contractors for the fiscal year
    for which the report is being submitted.'' Report at 3. That is, both
    the statute requires, and the Director acknowledges, that the Report
    contains an accounting of the underpayment of contract support costs
    each year, Tribe by Tribe.
        Contract Damages. All of the foregoing leads to the question of
    damages: what does the government now owe a contractor if the agency
    did not fully pay the contract amount? Here, the law seems clear.
        First, general contract law principles control the government's
    liability, because ``[w]hen the United States enters into contract
    relations, its rights and duties therein are governed generally by the
    law applicable to contracts between private individuals.'' Winstar v.
    United States, 518 U.S. 839, 895 (1996) (quoting Lynch v. United
    States, 292 U.S. 571, 579 (1934)). See also Mobil Oil Exploration &
    Producing Se., Inc. v. United States, 530 U.S. 604, 607-08 (2000)
    (quoting Winstar and relying on the RESTATEMENT (SECOND) OF CONTRACTS
    (1981) (``RESTATEMENT'')); Franconia Assocs. v. United States, 536 U.S.
    129, 141 (2002) (quoting Mobil Oil and applying principles of general
    contract law).
        Second, under general contract law a contractor is entitled to be
    paid damages which will put [the contractor] in as good a position as
    he would have been in had the contract been performed . . . .''
    RESTATEMENT  344(a) (emphasis added).
        These bedrock principles are easy to apply in the case of ISDA
    contracts. The IHS Shortfall Reports compute the negotiated price of
    each Tribe's contract for each year. The Reports also recite how much
    of that price was not paid. What is due now is the remainder of that
    contract price. It may be that today a Tribe wishes it had negotiated a
    different (and higher) amount, or that the agency wishes it had
    negotiated a different (and lower) amount, but general contract law
    does not permit the parties to go back on the original negotiated deal
    they struck.
        IHS's flawed approach. Which brings us to IHS's alternative, and
    deeply flawed, approach. IHS takes the position that damages are to be
    assessed by first calculating how much money the Tribe actually spent
    in a given year to run the IHS program. Second, IHS would calculate how
    much of what the Tribe spent IHS already paid the Tribe. If there is a
    difference, that amount is the amount of damages the government now
    owes. This is the so-called ``incurred cost'' approach.
        The problem with this approach is it doesn't make sense.
        If a Tribe was owed $10 but it was only paid $8, then the most the
    Tribe could have spent of IHS money is the $8 it received. It cannot
    spend money it never received. Under the Tribe's approach to
    calculating damages, the Tribe is owed the $2 that IHS promised to pay
    but never did pay (in other words, the amount IHS certified in the
    Shortfall Report). But under the IHS approach, the government can never
    owe more than the $8 because that is the amount of the costs the Tribe
    ``incurred''--and if, by chance, the Tribe spent only $7 that year and
    carried the other dollar over to the next year, the government's
    position is that the Tribe owes IHS that $1. This makes no sense.
        But this kind of gamesmanship is not new. It was identified as a
    problem in 1987. At that time, Congress expanded upon the BIA's
    identical ``incurred . . . cost'' approach to damages, and this
    Committee called that approach ``unacceptable'':

             [T]he Bureau has argued that even if the self-determination
            contractor was entitled to receive the amount of indirect costs
            generated by its indirect costs rate . . . the contractor could
            not recover the difference between the amount it was entitled
            to receive under the contract, and the amount the Bureau paid .
            . . The rationale offered by the BIA for this argument was that
            since the contractor had not received the funds it was entitled
            to receive, it had also not spent them and, therefore, had not
            incurred any costs which could be recovered as an indirect cost
            under the contract. Clearly, this is an unacceptable argument.

            S. Rep. 100-274 at 37 (1987) (emphasis added).

        The ``incurred cost'' approach to damages under the Act has not
    been pressed in ISD cases since 1988, nor in cases resolved before or
    after the 2005 Cherokee case. It has only been resurrected since the
    Ramah case. Why is that? Because IHS insists that the Supreme Court
    mandated this approach in the Ramah case. But that is quite a stretch.
    IHS reaches for this by observing that the Court used the word
    ``incurred'' in the opening paragraph of the Court's opinion. But the
    Ramah case was not about calculating damages, much less about how
    damages are computed; the case addressed whether the government had any
    liability at all.
        Moreover, when it comes to the issue of contract underpayments, the
    Court actually suggested just the opposite of what IHS now argues. The
    Supreme Court explained that, during the relevant timeframe at issue in
    the case, ``appropriations covered only between 77 percent and 92
    percent of tribes' aggregate contract support costs. The extent of the
    shortfall was not revealed until each fiscal year was well underway, at
    which point a tribe's performance of its contractual obligations was
    largely complete.'' Ramah, 132 S.Ct at 2187. If any implication can be
    drawn from this passage, it would be that the damages due now are the
    portions of the contract amounts that the agency failed to pay--the
    shortfall amounts.
        IHS also relies on the statute, which itself uses the word
    ``incurred.'' But that argument is simply wrong. While the ISDA does
    state that contract support costs must ``include'' certain incurred
    costs, see  450j-1(a)(3), contract support costs are generally not
    limited to those costs (except in the case of specialized ``start-up''
    and ``preaward'' costs, see  450j-1(a)(5)-(6)). I do not need to
    recite to this Committee the elementary rule of statutory construction
    that the word ``includes'' means ``includes but is not limited to.''
    See OFFICE OF THE LEGIS. COUNSEL, U.S. HOUSE OF REPS., GUIDE TO LEGIS.
    DRAFTING,  VII(A), available at http://www.house.gov/legcoun/HOLC/
    Drafting_Legislation/Drafting_Guide.html (emphasis added). In short,
    there is no basis in the statutory text for limiting contract damages
    to so-called ``incurred'' costs.
        The ``incurred cost'' argument IHS has resurrected this past year
    is not even colorable under the statute. But if there actually were
    actually some ambiguity on the issue, the answer would be just the same
    and just as clear. This is because the ISDA contains special, strict
    statutory rules of construction that this Committee purposely added in
    order to force any ambiguity to be resolved in the Tribe's favor-
    something the Supreme Court remarked upon twice in its opinion. See,
    e.g., Ramah, 132 S. Ct. at 2187, 2191 (citing  450l(c), (model
    agreement  1(a)(2)); . Thus, according to the Supreme Court, IHS can
    only prevail on its view of the statute if it can ``demonstrate that
    its reading is clearly required by the statutory language.'' Ramah, 132
    S. Ct. at 2191 (emphasis added). Plainly, that is not possible here.
        Despite the clarity of the controlling law and 25 years of
    consistent agency practice, in a matter of months IHS has managed to
    completely derail the settlement process. Cases which should have been
    resolved in a matter of months on the basis of the Shortfall Reports
    are now being settled for a fraction of the amounts in a litigation
    process that will continue to take years. Unless changed, it will take
    decades to resolve these cases, and the result will not be just. Worse
    yet, resolution of the damages issues will consume enormous time and
    resources for both the Tribes and the agency, all at a time when all
    should be focused singularly on delivering health care to the least
    healthy and most underserved populations in the Nation.
        The current situation cries out for a radical change in direction.
    The current approach to settlement of these cases is simply not
    working. \4\
    ---------------------------------------------------------------------------
        \4\ Everything noted here is equally true of the BIA, whose process
    for calculating contract support cost requirements is virtually
    identical to the IHS process. See National Policy Memorandum NPM-SELFD-
    1 (Dep't of Interior May 5, 2006).
    ---------------------------------------------------------------------------
        Nor is there any meaningful promise in the IHS Director's
    discussion of an ``alternative procedure'' where IHS makes a speedy
    assessment based on more limited investigation and then conveys to a
    Tribe a take-it-or-leave-it offer. I have worked with two Tribes for
    whom such a process actually worked, but their claims were small and
    limited, and their settlements were under $200,000. That process will
    not and cannot provide speedy justice to the vast majority of Tribes.
        Although IHS promises that this alternative ``is less time-
    consuming'' (Dr. Roubideaux Testimony at 5), there is nothing speedy
    about it. One small tribal clinic we work with in California requested
    a speedy ``alternative procedure'' offer on June 17, by email to the
    Acting IHS Director. The Tribe did not receive a response from the
    Acting Director until five months later, (the day of this Committee's
    hearing). Worse yet, the Tribe was told that the actual speedy offer
    itself would not be coming for another six months. Eleven months--
    almost a full year--is not a typical definition of the word ``speedy''
    and hardly bodes well for Tribes with more substantial claims.
        The IHS Director also testified that there were scores of
    settlement negotiations now underway. It is difficult to credit this
    statement. My firm and I are currently involved in active settlement
    negotiations with only five out of the 50 tribal contractors we
    represent. It is true that another dozen or so tribal contractors have
    been put on a theoretical list as ``ready'' for settlement
    negotiations, but in actuality, no settlement negotiations are
    underway. If our firm is any reflection, it would appear that, at best,
    IHS is only actively engaged in settlement negotiations with 10 percent
    of the 200 Tribes that have pending claims against the agency.
        The way forward is clear, as suggested in testimony by several
    other Tribal leaders, including NCAI President Brian Cladoosby, Sault
    Ste. Marie Chippewa Chairman Aaron Payment, and Chickasaw Lt. Governor
    Jefferson Keel.
        1. The White House should take charge of the entire settlement
    process and promptly appoint a Special Master. The only exception
    should be for the 20 or so cases already in mediation, and others that
    enter alternative mediation processes. If the White House will not act,
    Congress should.
        2. The Special Master should be instructed to settle the
    outstanding claims by beginning with the IHS Shortfall Reports, while
    also hearing any additional claims Tribes wish to have heard.
        3. All claims should be resolved on or before June 18, 2014, the
    two year anniversary of the Ramah decision.
        4. Congress should immediately enact an amendment to the Act to
    establish clear rules for computing damages in these cases. (This would
    not be the first time Congress amended the ISDA to force a recalcitrant
    agency to obey Congress's clear instructions.)
        5. Finally (and as I mentioned in my testimony to this Committee
    last April), Congress should reject OMB's proposal to start capping
    individual contract amounts at less than the amounts that everyone--
    Tribes and the agencies alike--all agree are due this year for services
    duly rendered to the United States. The United States must honor its
    contractual obligations to tribal governments on no less an equal
    footing than it honors it obligations to other contractors and to other
    Nations. America does not default abroad, and it should not default at
    home.
        By any measure, the Indian Self-Determination Act has been a
    stunning success, most importantly for the Indian citizens served, but
    also in the strengthening and maturing of modern tribal government
    institutions. This Committee has had everything to do with bringing
    about the conditions necessary for that success.
        Now is the time for Congress to keep that commitment to the Tribes
    and to finish the job the Supreme Court began. The Court has spoken,
    and it is time for the Tribes to be paid so that this unfortunate
    chapter can be closed.
        Thank you for the opportunity to offer testimony on the contract
    support cost crisis facing Indian Country.
                                     ______

      Prepared Statement of Philip Rigdon, President, Intertribal Timber
                                    Council
        Madam Chair and Members of the Senate Committee on Indian Affairs,
    I am Phil Rigdon, President of the Intertribal Timber Council (ITC) and
    Deputy Director of Natural Resources for the Yakama Nation. On the
    behalf of the ITC, I hereby submit this testimony on the Consequences
    of Sequestration on Native American Natural Resources for the record of
    the Committee's November 14, 2013 Oversight Hearing on ``Contract
    Support Costs and Sequestration: Fiscal Crisis in Indian Country.''
        The ITC is a 38 year old organization of some 60 forest owning
    Indian tribes and Alaska Native organizations that collectively manage
    more than 90 percent of the 18 million acres of BIA trust timberland
    and woodland acres--one third of the trust land base--as well as
    millions of timberland and woodland acres owned by Alaska Native
    organizations. These lands are a source of thousands of jobs and many
    millions of dollars in economic activity in and around Indian Country.
    Beyond their economic importance, forests also store and filter the
    water and purify the air to sustain life itself. They sustain habitats
    for fish and wildlife, produce foods, medicines, fuel, and materials
    for shelter, transportation, and artistic expression. In short, our
    forests are vital to our economies, cultures and spiritual well being.
        Automatic spending cuts (sequesters) under the Budget Control Act
    of 2011 (BCA) are applied across-the-board to great swaths of the
    federal discretionary budget, absent Congressional and Presidential
    agreement otherwise. The inability to reach agreement triggered
    sequester for FY 2013 and appears to be impending for FY 2014.
        Budgets for the Bureau of Indian Affairs (BIA), the Indian Health
    Service (IHS) and a variety of other federal tribal programs have been
    affected by the BCA's indiscriminate sequester process, despite the
    federal government's unique and often binding treaty and other
    obligations to tribes, placing tribal communities and natural resources
    at increased risk. As reported by the 2003 U.S. Civil Rights Commission
    report ``A Quiet Crisis: Federal Funding and Unmet Needs in Indian
    Country'', Tribal programs and natural resources have long suffered
    from inadequate and inequitable funding. A particularly key federal
    obligation, rooted in treaties and fiduciary trust responsibility, is
    the protection and management of Tribal land and its resources--Tribal
    natural resources--that play a central and critical role with Tribes
    and their members. This testimony examines the consequences the
    sequester is having now, and could have in even larger measure in the
    future, on Tribal natural resources.
    Land and Natural Resources Have Always Been Central to Tribal Cultures
            and Economies
        Tribal lands and natural resources, often secured by treaty and to
    be held in perpetuity, serve as homelands for many Tribes. These
    resources and federally reserved rights to fish, hunt, and gather
    provide a wide array of elements basic to tribal life:

       Fish, wildlife, and plants: foods and medicines for
            subsistence and health,

       Shelter, fuel and materials for household use and commerce,

       Income, livelihoods and entrepreneurial opportunities,

       Protection of water, air and soils,

       Sacred sites and cultural resources, and

       Recreation.

    U.S. Obligations for Tribal Natural Resources
        The United States has historic, binding and judicially and
    statutorily affirmed trust and treaty obligations to Tribes and their
    natural resources. These obligations include:

       Fiduciary trust responsibilities to protect the productivity
            of the trust corpus and ensure fair value and full accounting
            of proceeds from utilization;

       Trust and legal responsibilities to protect the rights of
            Indians in their trust property and those rights affecting
            trust property that are afforded by tribal sovereignty (water
            rights, land titles, boundary disputes, trespass, hunting and
            fishing, zoning and land use);

       Provision of all services necessary to enable Indians to
            utilize all rights based on treaty, statute, proclamation,
            sovereignty, trust responsibility, or otherwise;

       Supporting the capacity of Tribal governments to fulfill
            their responsibilities and authorities for managing natural
            resource on and off reservations; and

       Providing full contract support costs for programs
            administered by Tribes under self-determination contracts and
            self-governance compacts.

    Funding For Tribal Natural Resource Management Has Long Been
            Inadequate
        Over many years, the insufficiency and inequity of federal funding
    of Tribal natural resources have been repeatedly documented by
    governmental and non-governmental commissions and studies, as well as
    being determined by federal courts. Information on sequester's impacts
    on Indian forestry are summarized below.
        Forestry--The third statutorily-required decadal report of the
    independent, blue-ribbon Indian Forest Management Assessment Team
    (IFMAT-III), completed in June 2013, finds that per-acre federal
    funding of tribal trust forest management is just one third that of the
    U.S. Forest Service. That inequity is essentially unchanged from BIA
    Forestry funding insufficiencies documented in the 1993 and 2003 IFMAT
    reports. IFMAT-III also found that, even without sequestration:

       An additional $100 million needs to be added to the BIA
            Forestry budget annually to provide the minimum base level
            funding needed to fulfill trust responsibilities for Indian
            forestry,

       800 additional BIA and tribal contract/compact Forestry
            staff positions are needed; current and arising vacancies can't
            be filled,

       An additional $12.7 million is needed for staff recruitment
            and development to maintain workforce capabilities, and

       Indian trust forests are deteriorating due to increasing
            threats from wildfire, insects, and disease.

    The Costly Consequences of Failing to Properly Manage Tribal Natural
            Resources
        Inadequate federal trust management of Tribal natural resources can
    have costly consequences for Tribes and their members, for surrounding
    communities, and for the Federal Government, including:

       Litigation. The federal trust responsibility for the
            protection and management of Tribal forests is a binding,
            compensable fiduciary obligation similar to a private trust,
            and the United States can be--and has been--found liable for
            inadequate or inappropriate management. Over the past several
            years, the U.S. has paid more than $1 billion on 70 Cobell-like
            trust settlements with tribes, at least partially due to the
            failure to fulfill fiduciary trust obligations for natural
            resources. This is but one of a host of settlements resulting
            from litigation over mismanagement of trust resources. Unless
            affirmative actions are taken to proactively address long-
            standing and emergent problems, claims for future damages
            arising from the failure to fulfill fiduciary obligations can
            be expected.

       Job and economic losses affecting individual workers in
            tribal and surrounding communities and reducing revenues for
            tribal governments to meet community needs.

       Diminishment of natural resource health and productivity,
            either as a direct result of insufficient or inappropriate
            management or due to overall management failure to maintain
            forest health, increasing the associated risk of catastrophic
            loss of the forest resource through fire, infestation or
            disease.

       Reduced availability of natural resource-based traditional
            foods and medicines, increasing social welfare costs and
            adversely affecting human health in tribal communities.

       Degraded water, air, soil, and fish, wildlife and plant
            resources and habitats, increasing conservation concerns and
            reducing management flexibility and development opportunities.

       Reduced ability to protect irreplaceable cultural and sacred
            sites from damage or loss.

       Shift of funding away from proactive forest health and
            management to cover increasing wildland fire suppression costs.
            In a self-fulfilling downward spiral, an increasing proportion
            of available federal forest funding is being spent for wildfire
            suppression (50 percent of the USFS budget is dedicated to
            suppression), reducing forest health and management funds that
            proactively reduce wildfire risk and severity. This approach
            promises to lead to progressively increasing costs as the
            failure to invest funds to treat the land to reduce potentials
            for catastrophic loss is diminished. This strategy abdicates
            federal trust responsibilities for maintaining the health and
            productivity of tribal forests and places the safety and
            welfare of tribal communities at great risk.
    Sequester Will Make Matters Worse
        Current funding and staffing shortfalls will widen.
        Insidious impacts of sequestration:
    Workforce Impacts

       Expertise is being lost due to programs that encourage early
            retirements to reduce funding needs.

       Reductions in force and positions, hiring freezes,
            furloughs, pay cuts, and inability to provide pay cost
            increases or provide compensation for required overtime lead to
            poorer service and staff exhaustion from added physical,
            financial, and emotional stress due to increased workloads.

       Travel restrictions will hinder the ability of agency staff
            to get out into reservation forests to make first-hand
            evaluations and determinations, degrading management decisions
            and transferring costs to tribes in order to meet with federal
            officials.

       Uncertainty of stable funding increases the difficulty of
            recruitment and retention of qualified staff, damaging program
            continuity and development and causing the quality of decisions
            to deteriorate and the need for more staff training and
            education to increase.

       Inability to fund co-operative student intern programs will
            hinder development of future managers.

    Impacts on Planning, Management and Productivity

       Short-Term Horizons. Financial uncertainty reduces the
            ability of Tribal forest managers to plan for and undertake
            long-term programs and make investments to protect and develop
            natural resources.

       Increased Reliance on ``Soft Money.'' Tribes are being
            forced to try to support natural resource programs by cobbling
            funding sources and projects together, greatly increasing costs
            of administration and adversely affecting program effectiveness
            and continuity.

       Lost Opportunities. Inability to prepare advance plans and
            secure administrative and environmental clearances reduces the
            ability of tribes to take advantage of market opportunities,
            reducing the value of the trust corpus. Sequestration of
            support will also reduce tribal abilities to develop resource-
            based enterprises (e.g., projects that would contribute to U.S.
            objectives of energy independence and security).

       Deteriorating Infrastructure. Loss of commodity production
            from federal forestlands is contributing to the loss of
            harvesting, transportation, and manufacturing infrastructure,
            reducing the ability to defray costs of management, increasing
            reliance on direct federal funding for forest health and
            management activities, and restricting the capability of
            materials harvested to generate income and provide governmental
            services, employment and business opportunities.

    Increased Pressure on Tribal Communities and Resources

       Community Cohesion. Competition for limited funding for
            programs and jobs will heighten stress within already fragile
            Tribal communities.

       Increased reliance on natural resource extraction.
            Reductions in jobs, income, and community assistance programs
            increase pressure to liquidate natural resources over the short
            term to meet daily needs.

       Colonialism by Budget. Desperation for jobs and income to
            provide governmental services can coerce Tribes into making
            imprudent decisions regarding their natural resources.

    Collateral Impacts
        The across-the-board nature of sequesters also has indirect but
    significant effects on Tribes by reducing the capacities of neighboring
    forest entities, including other federal forest agencies and states
    participating in federal programs.

       Increased Tribal Risks and Burdens Due to Reduced Capacity
            of Co-Managers. The reduced capacity of governmental forestland
            neighbors, particularly federal public forest managers, to
            actively manage and maintain their adjacent land and resources
            will subject Tribal forests to increased risk of catastrophic
            loss through fire, infestation and disease. Additionally, the
            reduced capacity of federal public land agencies to enforce
            laws and regulations to protect environmental functions in
            Tribal traditional use areas increases risks to Tribal trust
            and other co-managed resources such as fish, wildlife, plants,
            soil, air, and water. These reduced capacities of neighboring
            governmental agencies shifts management and protection burdens
            onto Tribes, resulting in diminishment of treaty and reserved
            rights, reduces flexibility for management of Tribal resources,
            and deprives Tribal access and use under federally reserved
            rights.

       Reduced Ability of Forest Neighbors to Cooperate and
            Collaborate. Despite recognition that landscape-scale forest
            management is needed, sequestration will force reduced federal
            and other program participant staff to spend more time on their
            individual agency ``boiler-plate'' administrative functions,
            diminishing capacity to work cooperatively and collaboratively
            on landscape activities. This will result in increasing
            isolation and fragmentation that will diminish integrity of
            ecological functions and foster proliferation of inefficient,
            compartmentalized and incompatible management of the forest
            landscape.

        Madam Chair, Members of the Committee, the ITC hopes this testimony
    helps illuminate the broad and devastating consequences that BCA
    sequesters have on Native American natural resources. The health and
    productivity of our natural resources and our communities are closely
    intertwined. The consequences of sequestration can be direct, indirect,
    short-term and long-term, immediately evident and subtle. Sequestration
    threatens to undo the progress we have been able to make over the last
    four decades. It will trample on tribal rights and interests, jobs and
    economies, and our efforts to lift our communities toward self-
    sufficiency. It compounds and exacerbates historical federal funding
    inequities, insufficiencies and indifferences against which the Tribes
    have struggled for generations. We join with all the other voices
    throughout Indian Country to urge that Native American programs be
    removed from the ruinous BCA sequester and that support for federal
    obligations to Tribes be treated as non-discretionary expenditures.
                                     ______

     Prepared Statement of Myron P. Naneng, Sr., President, Association of
                           Village Council Presidents

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                     ______

       Prepared Statement of Jacquelyn Power, Superintendent/Principal,
                          Blackwater Community School

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                     ______

    Prepared Statement of Dan Winkelman, Vice President for Administration
            and General Counsel, Yukon-Kuskokwim Health Corporation

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                     ______

     Prepared Statement of Dr. Sherry Johnson, Director, Sisseton Wahpeton
                       Oyate Tribal Education Department

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                     ______

       Response to Written Questions Submitted by Hon. Maria Cantwell to
                             Hon. Yvette Roubideaux
        As we all know, the Supreme Court ruled last year in Salazar v.
    Ramah that the Federal Government must pay each tribe's contact support
    costs in full. The Department of Health and Human Services \1\ has not
    yet resolved these claims.
    ---------------------------------------------------------------------------
        \1\ The Questions for the Record refer throughout to the Department
    of Interior. The Indian Health Service (IHS) cannot answer with regard
    to the Department of Interior and instead responds regarding claims
    against IHS. Although the questions themselves are typically not
    revised by an agency when responding, IHS has also corrected the
    questions to address this issue.
    ---------------------------------------------------------------------------
        Question 1. It has been 17 months since the Supreme Court's
    decision. What is your plan for expeditiously settling these claims?
        Answer. IHS is devoting additional resources and hiring new staff
    to resolve claims for unpaid contract support costs (CSC) with a
    primary focus on speedy resolution through settlement whenever
    possible. Because IHS is not part of a class action, it must analyze
    each claim individually and comply with the multi-step process required
    by the Contract Disputes Act (CDA). IHS is working to resolve the
    claims expeditiously and also believes that the Agency and Tribes
    working together to resolve the claims will have the most benefit for
    our ongoing relationship. IHS is also improving internal business
    practices related to the CSC claims settlement process. IHS is also
    consistently reviewing methods to enhance collaboration and streamline
    the process and has offered an alternative claim resolution process
    that is less burdensome for Tribes, though IHS follows the same type of
    analysis used under the traditional approach to be fair and consistent
    with all Tribes.

        Question 2. When does the Department expect all claims to be
    finally resolved?
        Answer. Our goal is to resolve the majority of currently pending
    claims with Tribes that are amenable to settlement as soon as possible.

        Question 3. What is the estimated amount that the Department of
    Health and Human Services owes to tribes?
        Answer. The IHS is not able provide a total estimated amount of CSC
    owed to Tribes at this time. Consistent with the CDA claims process,
    the Agency must analyze and respond to claims on an individual basis by
    Tribe by contract term, and to date, the analysis of all claims
    currently pending has not been completed. In addition, the amounts that
    may be owed under a particular contract are the subject of ongoing
    litigation and, in many cases, the Tribes and the IHS disagree on how
    to determine the amount owed. While Tribes rely on estimates in the
    annual shortfall reports to support their claims, the IHS is analyzing
    each claim on a case-by-case basis to determine the amount of unpaid,
    documented CSC incurred under the contract that was not funded already
    by IHS.

        Question 4. How is the Department of Health and Human Services
    estimating this amount? Is it utilizing the Department's annual
    contract support costs shortfall reports that it submits to Congress?
        Answer. As required by the CDA, the IHS performs an analysis of
    each individual claim in order to determine the amount of CSC owed to a
    Tribe for each contract term. The annual shortfall reports provide
    information on the estimated overall CSC need at a particular point in
    time as a part of the appropriations process and are based on the
    amount of IHS funding paid to a Tribe and based on information
    available to IHS at the time; the reports do not reflect the amount
    owed under any particular contract. However, at the time of preparation
    IHS often does not have, for example, the final indirect cost rate
    negotiated by the Tribe with its cognizant agency or the pass-throughs
    and exclusions required by that indirect cost rate. As a result, the
    estimates in the reports cannot be used to determine the exact amount
    owed to a Tribe. Rather, the annual shortfall reports are used to
    estimate the aggregate amount of CSC need during the appropriations
    process. Later, when claims are filed by Tribes under the CDA, IHS
    analyzes each claim and determines the amount of CSC owed to the Tribes
    with updated information.
        Generally, the process that IHS has been following to settle a CSC
    claim involves two major steps: financial analysis of the claim and
    negotiation of the settlement amount. With regard to the financial
    analysis, all claims undergo the same analysis of a Tribe's costs and
    funding, and IHS relies on its own staff, as well as contract services
    for this purpose. The analysis is aimed at identifying each Tribe's
    actual costs to determine the full amount of unpaid, documented CSC
    incurred under the contract. In the second step, IHS and the Tribe work
    collaboratively to settle on the final amount to be paid for the claim.
    Therefore, the estimates in the annual shortfall report may end up
    being different from the updated amounts determined by analyses of
    claims filed in future years, and then the final amounts paid are
    determined mainly through settlement discussions with the Tribes.

        The Indian Self-Determination Act has been hailed as one of the
    most successful pieces of legislation in the history of federal Indian
    policy. Providing contract support costs is essential to the proper
    administration of these contracts.

        Question 5. After providing contract support costs to tribes for
    over 20 years, can you explain why there is still so much ambiguity
    regarding these costs?
        Answer. Based on the law and IHS policy developed in consultation
    with Tribes, the estimation and calculation of CSC is complex. CSC can
    seem obscure because of both the common misperception that CSC is
    equivalent to indirect costs and the inherent timing issues that impact
    the calculation of the costs.
        Under its policy, IHS has agreed to rely, in part, on indirect cost
    rates to calculate indirect CSC. Indirect cost rates, which IHS does
    not negotiate and instead are negotiated by a Tribe with its cognizant
    agency, are used to calculate indirect costs for many entities that
    receive federal funding. The cognizant agency for Indian Tribes
    generally is the Department of Interior, while the cognizant agency for
    non-profit Tribal organizations generally is determined by calculating
    which Federal agency provides the most funding.
        When indirect costs rates are applied to contracts under the Indian
    Self-Determination and Education Assistance Act (ISDEAA) to determine
    indirect CSC, IHS and the Tribes must also account for indirect costs
    already funded under the ISDEAA agreement. The ISDEAA provides for two
    types of funding: the ``Secretarial amount'' (what IHS would have spent
    to operate the program) and CSC, which consist of both direct and
    indirect costs. The ISDEAA specifically requires the Agency to ensure
    that there is no duplication between the CSC paid to the Tribe and the
    ``Secretarial amount'' it receives. When a Tribe receives the
    Secretarial amount from the IHS, several types of overhead costs that
    the Agency incurred are also often included in that amount. For
    example, IHS incurred utilities costs in operating a facility and would
    have transferred the funding for utilities to the Tribe operating that
    facility. So, for Tribes that choose to use an indirect cost rate as
    one part of indirect CSC negotiations, the Agency cannot simply apply
    the indirect cost rate to derive the indirect CSC amount for the Tribe,
    but must also determine which costs were funded through the Secretarial
    amount and exclude them from the calculation to avoid duplication. The
    exact costs involved vary among Tribes, which requires a unique
    calculation for each Tribe's contract.
        In addition, the calculation of indirect CSC often yields a
    different result depending on the timing of the calculation because of
    the different information available throughout the ISDEAA process.
    ISDEAA funding agreements often are negotiated before the fiscal year
    (and contract performance) begins. The calculation performed prior to
    contract performance is based primarily on the past year's budget
    information (since final, audited numbers are not yet available) and
    the upcoming fiscal year's budget amounts. These also vary based on
    which services the Tribe is contracting to perform. The submission of
    the shortfall report occurs after the fiscal year (and contract
    performance, in most cases) ends, but before final data for the fiscal
    year is available to IHS. A calculation performed at this point in time
    often results in a different number than the amount projected prior to
    the start of the fiscal year because more up-to-date information is
    available. Finally, if a Tribe believes it was underfunded for CSC for
    the fiscal year and subsequently submits a CDA claim, additional
    information is likely available that allows the parties to rely on
    final, audited costs information. Although the information available at
    each of these stages may differ, therefore resulting in different
    amounts, IHS follows the same process or methodology for calculating
    the amounts at each stage. While estimates vary over time, at each
    stage IHS uses a consistent process that was developed in consultation
    with Tribes.

        The House Interior Appropriations bill does not contain the
    contract support cost cap language proposed by the Administration.
    Tribes have generally stated that the House approach towards contract
    support costs is the better one, and that the Senate should drop the
    Administration's proposal.

        Question 6. What does the Administration's proposal actually
    accomplish, other than extinguishing the government's liability to pay
    tribes what they're contractually owed?
        Answer. To balance funding for CSC and other IHS activities, and in
    accordance with the Supreme Court's recommendations in Salazar v. Ramah
    Navajo Chapter in June 2012, the President's FY 2014 Budget proposed
    new appropriations language for both IHS and the Bureau of Indian
    Affairs (BIA) to provide a specific amount of CSC funding for each
    ISDEAA contract. The proposal would have protected other budget
    priorities within the IHS and BIA budgets from being repurposed for CSC
    funding. Indeed, the Supreme Court recognized in Ramah that the cap
    served that very purpose. \2\
    ---------------------------------------------------------------------------
        \2\ The Administration's FY 2014 Budget proposal was not
    implemented by Congress and CSC was fully funded in the Consolidated
    Appropriations Act of 2014. The President's FY 2015 Budget also fully
    funds estimated CSC. This information is provided as a footnote because
    QFRs are answered with information available at the time of the
    hearing. As of November 2013 Congress had not passed the FY 2014
    Omnibus Bill and the President's FY 2015 Budget had not been released.

        Question 7. Is it good federal Indian policy to prevent tribes from
    going to Court when the federal government shortchanges tribes from
    receiving what they're contractually owed?
        Answer. The President's FY 2014 Budget was based on one of the
    options specifically outlined in the Ramah decision to address what the
    Supreme Court recognized as a ``dilemma'' when CSC appropriations are
    insufficient.
                                     ______

       Response to Written Questions Submitted by Hon. John Barrasso to
                             Hon. Yvette Roubideaux
        You testified before the Committee on November 14, 2013, at the
    oversight hearing on ``Contract Support Costs and Sequestration: Fiscal
    Crisis in Indian Country,'' that the Indian Health Service (IHS) has
    made approximately 60 settlement offers for past Contract Support Costs
    (CSC) claims.

        Question 1. How many CSC claims are pending in Federal court?
        Answer. Past claims for unpaid CSC are made directly to the IHS,
    which is required to deny the claims due to lack of appropriations to
    pay the claims and for any other legal grounds that may exist. (Such
    denial is necessary, as the Judgment Fund is available only after
    Tribes appeal their claims; the Supreme Court recognized that the
    agencies do not have appropriations to pay the prior year claims
    although the Judgment Fund is available to pay those claims.) Tribes
    then have the option under the CDA and the ISDEAA to appeal their
    claims to Federal court or the Civilian Board of Contract Appeals
    (CBCA).
        Overall, as of November 2013, there are approximately 1300 claims
    from about 200 Tribes pending before the Agency. The number of claims
    can fluctuate on a daily basis, increasing as more claims are filed and
    decreasing as claims are settled.
        With regard to the claims pending in Federal court, 38 Tribes have
    appealed over 160 claims to Federal court.

        Question 2. How many CSC claims are pending in the administrative
    process?
        Answer. As mentioned above, overall, as of November 2013, there are
    approximately 1300 claims from about 200 Tribes pending before the
    Agency. There have been 22 Tribes that have appealed nearly 250 claims
    to the CBCA.

        Question 3. Are these offers all ``active'' or have any been
    subsequently rejected by tribes?
        Answer. The number of claims indicated above is not equivalent to
    the number of settlement offers since most claims are in various stages
    of the required process. Approximately 15 offers made by the IHS have
    been rejected by Tribes since Ramah. The number of settlement offers is
    provided in the response to the next question.

        Question 4. Please provide a list of tribes and settlement years
    for which these offers correspond.
        Answer. Detailed information pertaining to settlement negotiations
    is confidential under the Federal Rules of Evidence; however, since
    Ramah, and as of November 2013, 3 claims have been formally settled
    with 2 Tribes for a total of $1.5 million and IHS has made settlement
    offers to 60 of the 82 claims which have a completed financial
    analysis.

        Question 5. What is your timeline for settling all outstanding
    claims for past CSC?
        Answer. Our goal is to resolve the majority of currently pending
    claims with Tribes that are amenable to settlement as soon as possible.

        In his written testimony submitted for the Committee hearing on
    November 14, 2013, on ``Contract Support Costs and Sequestration:
    Fiscal Crisis in Indian Country'', the President of the National
    Congress of American Indians, Brian Cladoosby, indicated that there are
    nearly 1,600 CSC claims pending against the IHS, many of which are
    still in the administrative process. Mr. Cladoosby, as well as other
    witnesses, further recommended that a Special Master be appointed to
    handle these CSC claims more expeditiously.
        Question 6. What are your views on this recommendation?
        Answer. A court appoints a Special Master to carry out some action
    on the court's behalf, including investigations and compiling evidence
    or documents to inform some future action by the court. The appointment
    of a Special Master would have limited benefit for the CSC claims
    against IHS, for several reasons. For example, the CSC claims against
    IHS are at different stages of the CDA process; most claims are not
    before a Federal court, and the appointment of a Special Master would
    have limited benefit on claims not before the court that made the
    appointment. Second, IHS is devoting additional resources to do the
    necessary investigative work and document gathering to resolve claims
    for unpaid CSC. The Agency is prioritizing collaboration with Tribes
    and speedy resolution through settlement whenever possible. IHS is
    confident that it can resolve the claims expeditiously, thereby making
    a Special Master unnecessary, and also believes that the Agency and
    Tribes working together to resolve the claims will have the most
    benefit for our ongoing relationship.

        Question 7. Are there any possible barriers or impediments (legal
    or otherwise) to using a Special Master for settlement of claims that
    are still in the administrative process and not yet in Federal court?
    Please be specific.
        Answer. The option for a Special Master arises in Federal court,
    when the court determines it is appropriate for certain trial
    proceedings or when both parties agree to the process of appointing
    such a master to perform certain duties. Because each contract claim is
    unique and is at a different stage of the multi-step process, use of a
    Special Master would have limited benefit. For example, appointment of
    a Special Master by a Federal court would likely impact only claims on
    appeal to that court and not claims pending in other jurisdictions.
    Further, it is not clear how a Special Master would expedite the
    settlement process for CSC claims since the CDA process, including the
    requirement of analyzing each contract individually, must be followed
    for settling claims and obtaining payment from the Judgment Fund.

        Several witnesses testified at the Committee hearing on November
    14, 2013, on ``Contract Support Costs and Sequestration: Fiscal Crisis
    in Indian Country'', that, with respect to settling past CSC claims,
    the IHS has announced that it will not focus on unpaid amounts due for
    CSC. Instead, the IHS will instead focus on what each tribe spent in
    determining a settlement amount. However, in Salazar v. Ramah, the
    Supreme Court held that, consistent with longstanding principles of
    government contracting law, the Federal government is liable for 100
    percent of CSC on each tribal contract entered into pursuant to the
    Indian Self-Determination and Education Assistance Act.
        Question 8. Under this approach of examining tribal expenditures,
    would the IHS consider both Federal funds used by tribes to cover these
    costs, as well as any tribal funds expended for these costs?
        Answer. IHS and Tribes agree that the ISDEAA requires payment of
    CSC only on Federal funds, awarded as the Secretarial amount, to the
    Tribes to operate programs, functions, services, and activities (PFSA)
    under the ISDEAA; if Tribes supplement the Secretarial amount provided
    by IHS to carry out those PFSA, IHS and Tribes agree that IHS does not
    pay CSC on those supplemental funds.
        When reviewing a CDA claim for additional CSC, the Agency is
    required to review and analyze the claim submitted by the contractor to
    determine whether the claim is valid and if any additional CSC is owed
    to the contractor for the PFSA awarded under the ISDEAA agreement.
    Because the ISDEAA provides that the Agency pay a Tribe for the CSC it
    incurred while performing the PFSA awarded under its ISDEAA contract,
    the IHS analysis of a CSC CDA claim involves determining the total CSC
    incurred by a Tribe, and the amount of those costs that were not paid
    by IHS, either through the Secretarial amount or with CSC funding.
    Tribal funds expended for PFSA, above the Secretarial amount, are not
    included in the calculation because IHS and Tribes agree that CSC is
    not payable on those costs. If, however, Tribes supplemented the CSC
    funding to cover costs that qualify as CSC, IHS's approach of looking
    at the Tribes' actual costs means that those CSC covered by Tribal
    funds will be factored into IHS's analysis of the claims.
        Therefore, IHS analyzes all costs that were expended by a Tribe
    that meet the definition of CSC and, consistent with the Supreme
    Court's decision, is willing to pay all costs that were not funded by
    IHS so long as the costs meet the definition of CSC.

        Question 9. What is the justification for focusing on the amounts
    that tribes have spent as opposed to the amounts initially negotiated,
    but not paid to them?
        Answer. The ISDEAA provides that CSC are the reasonable costs for
    activities that a Tribe must carry out under the contract, i.e., CSC
    are actual costs of activities actually performed. In addition, the
    Supreme Court's decision in Ramah describes CSC as limited to those
    costs incurred by the Tribe. However, as required by the ISDEAA and in
    order to ensure that Tribes receive funds timely to support their
    contracts, the IHS negotiates the amount it will pay in advance of
    contract performance, based on estimates from budgeted amounts from
    prior years.
        Each ISDEAA contract includes funding IHS would have spent for
    direct and indirect costs if it operated the programs (the
    ``Secretarial amount''), plus CSC. Tribes do not contest that IHS paid
    the CSC amounts included in their contracts. Following Ramah, however,
    Tribes claim additional amounts are owed. IHS is analyzing these claims
    to ensure that any additional costs meet the statutory definition of
    CSC.

        Question 10. Does this approach retroactively change the manner in
    which amounts owed for CSC are determined? Please explain how it does
    or does not.
        Answer. The approach used to project CSC in advance of contract
    performance does not differ from the approach used to determine the
    amount owed under a CDA claim, though the amounts resulting from the
    calculations performed at those different points in time may differ.
    The amount negotiated in advance of contract performance is based on
    estimates of budgeted amounts. That same calculation often reaches a
    different result after contract performance, however, and the resulting
    amount is the CSC owed based on the Tribe's actual costs of performing
    under the ISDEAA contract.
        This approach is consistent with the ISDEAA, as well as with
    longstanding IHS CSC Policy. The ISDEAA makes it clear that CSC is
    meant to cover additional, reasonable costs for activities that a Tribe
    must carry on to ensure contract compliance and prudent management, but
    that were not transferred as part of the Secretarial amount--either
    because the Secretary did not carry on the funded activities, or the
    Secretary funded the activities from resources other than those under
    contract. IHS's analysis determines the costs that meet that definition
    but that were not already funded by the Government. The IHS CSC Policy
    adopts the statutory definition of CSC and sets out a general
    methodology for calculating CSC. IHS uses this same methodology in the
    claims process to determine the amounts that are owed for CSC.

        Question 11. How does this approach reconcile with the Supreme
    Court's ruling in Salazar v. Ramah?
        Answer. The Supreme Court's ruling in Salazar v. Ramah Navajo
    Chapter did not directly address how CSC is calculated or how damages
    for unpaid CSC should be calculated. Instead, the Court resolved an
    appropriations question. Although the Supreme Court did not
    specifically make a finding as to how CSC should be calculated, it did
    confirm that the United States is liable to ``pay the full amount of
    [CSC] incurred by tribes in performing their contracts.''

        Your written testimony submitted to the Committee for the hearing
    on November 14, 2013, on ``Contract Support Costs and Sequestration:
    Fiscal Crisis in Indian Country'', states that you have initiated
    discussions with tribes regarding the accurate method for calculating
    CSC at the time of contract negotiation or the pre-award phase. You
    further state that ``greater agreement on how to calculate estimates of
    CSC in the pre-award context will help with more efficiency in all
    other phases of the CSC process.'' However, according to Jefferson
    Keel's testimony, a method for calculating CSC already exists and these
    amounts are calculated by IHS according to provisions contained in the
    IHS Manual.

        Question 12. Please describe the current method for calculating CSC
    at the time of contract negotiation?
        Answer. The IHS negotiates the amount it will pay in advance of
    contract performance, based on estimates from budgeted amounts from
    prior years, the statutory definition of CSC, and IHS CSC policy. The
    ISDEAA makes it clear that CSC is meant to cover additional, reasonable
    costs for activities that a Tribe must carry on to ensure contract
    compliance and prudent management, but that were not transferred as
    part of the Secretarial amount--either because the Secretary did not
    carry out the funded activities, or the Secretary funded the activities
    from resources other than those under contract. The IHS CSC Policy
    adopts the statutory definition of CSC and sets out a general
    methodology for calculating CSC. IHS uses this same methodology in the
    claims process to determine the amounts that are owed for CSC.

        Question 12a. Please clarify why a new method is needed.
        Answer. The IHS and Tribes have been successful in negotiating CSC
    estimates in many funding agreements, but some Tribes have raised
    questions about how to define what types of costs qualify as CSC for
    inclusion in those estimates.
        Although it does not provide a formula for calculating the costs,
    the ISDEAA defines the costs that qualify for CSC. 25 U.S.C.  450j-
    1(a)(2). IHS's current CSC policy provides practical negotiation
    guidance based on the statutory definition, but more detailed guidance
    could be beneficial to negotiating the estimates in a consistent manner
    with all Tribes. For example, additional agreed-upon principles would
    be helpful for applying the statutory principles of reasonableness,
    necessity of the activity/costs to ensure contract compliance and
    prudent management, and eliminating duplication of costs already paid
    to the Tribe in the Secretarial (106(a)(1)) amount. Differences of
    opinion on the application of these principles have led to differing
    estimates and, in the end, prolonged discussions during some
    negotiations. For example, how to determine indirect costs funded in
    the Secretarial amount that cannot also be funded as indirect CSC under
    the ISDEAA's prohibition against duplicative funding.
        There also is a need to clarify the difference between indirect
    cost rates negotiated with a Tribe's cognizant agency, which covers all
    indirect costs and relies upon a methodology applied to non-ISDEAA
    contractors as well, versus the negotiation with IHS of indirect CSC
    for Programs, Functions, Services, or Activities (PFSA) included in
    ISDEAA contracts. The indirect cost rate that a Tribe negotiates for
    grants and contracts is related to but not the same as CSC, since some
    indirect costs are also funded through the Secretarial amount and,
    under the ISDEAA, those same costs must not also be funded as indirect
    CSC. For example, while Tribes' indirect cost pools often include rent
    and utilities, IHS incurs costs for rent and utilities for facilities
    it operates as well and transfers the funding for those costs as part
    of the Secretarial amount when a Tribe assumes operation of the
    facility; it would be duplicative to include the costs again in the CSC
    calculation. Some Tribes confuse this form of duplication, which is
    unique to the nature of ISDEAA funding, with the potential for
    duplication between indirect and direct costs, which the cognizant
    agency may raise as part of the negotiation of their indirect cost
    rate. Discussions to clarify or improve everyone's understanding of the
    estimate of CSC in ISDEAA negotiations would help to resolve some of
    this confusion. Understanding these differences up front would help the
    entire contracting process, as well as development of the annual
    shortfall report.
        These principles may also be helpful to reducing litigation in the
    future. Our experience with the CSC litigation to date shows that we
    can eventually agree on the amount of CSC that is owed, even though the
    initial damages calculations by the Tribes and the IHS are often very
    far apart. We can reduce the need for litigation, as well as the work
    required to reconcile these calculations in those instances where
    litigation arises, if everyone can agree on a more accurate method for
    calculating CSC at the beginning of the process, i.e., at the time of
    negotiating the contract, because we have reached agreement on how to
    calculate CSC from the very beginning. Moreover, such agreement will
    also lead to a more efficient and accurate process with respect to CSC
    funding and estimation of need. Reaching agreement on the relevant
    principles at the beginning of the process will help make every other
    part of the process go more smoothly.

        Question 13. Is the current method unsatisfactory to tribes? If so,
    how?
        Answer. In discussions with the IHS CSC Workgroup, Tribes indicated
    support for these discussions because they also want to ensure that the
    CSC estimates in the pre-award or negotiation phase are as accurate as
    possible, and they want to be reassured that IHS is negotiating in a
    consistent manner with all Tribes. Agreement on principles for
    calculation of these estimates will help with both of these goals.

        Question 13a. Is the current method unsatisfactory to the IHS? If
    so, how?
        Answer. IHS agrees with Tribes that more agreement on calculation
    of CSC estimates in the pre-award/negotiation phase would be
    beneficial.

        The Indian Self-Determination and Education Assistance Act requires
    that annual reports be submitted to Congress on CSC ``shortfalls'' or
    need. Presumably, the IHS has, each year, provided these reports to
    Congress, with shortfall amounts broken down by tribe.

        Question 14. Do the amounts provided in these shortfall reports
    represent the CSC amounts unpaid and due to each tribe for each fiscal
    year? If not, please clarify and explain what these amounts actually
    represent.
        Answer. The amounts provided in the shortfall reports do not
    represent the CSC amounts due to each Tribe for each fiscal year,
    because the timing of the report results in a snapshot or estimate of
    CSC need at the aggregate level for budget formulation purposes at that
    particular point in time. It is not used for determining amounts owed
    to Tribes in litigation, and the report clearly states that it is not
    intended for that purpose. In fact, although the shortfall data is
    collected after the end of the fiscal year, final data for at least two
    of the elements included in the report are not available at the time of
    the report. One element is the indirect cost rate. Many indirect cost
    rates reported in the shortfall report are provisional at the time of
    the report. Fixed carry forward rates may be outdated, or may be
    labeled for that fiscal year, but reflect actual costs of two years
    prior to the report and derived from a budgeted indirect cost pool. The
    other element is the amount of pass-throughs and exclusions reported.
    The IHS is dependent on Tribes to provide these amounts, and it is
    frequently a challenge to collect the data needed and/or to validate
    information provided. Therefore the IHS must attempt to obtain the
    Tribally-submitted data from the cognizant agency with which the Tribe
    negotiates its indirect cost rate. Therefore, the shortfall report
    represents a snapshot or estimate of CSC at the time in order to
    demonstrate need to inform the appropriations process. The actual
    amount owed to any particular Tribe that submits a CDA claim is
    determined based on updated information that is available when the
    claims are analyzed.
        Attachment
    IHS CSC Claims Settlement Update--March 2014
        As indicated in the IHS Acting Director's testimony during the
    Senate Committee on Indian Affairs Hearing on the FY 2015 Budget on
    March 26, 2014, IHS has made significant progress in accelerating the
    pace of settlement analysis and settlement offers on Contract Support
    Costs claims. However, the Questions for the Record for the November
    14, 2013 Oversight Hearing on Contract Support Costs and Sequestration
    must include the status as of that date. IHS would like to provide an
    update to the Committee on the answers to the Questions for the Record
    with the most current data available on the agency's progress on CSC
    past claims settlement.
        IHS is devoting additional resources and hiring new staff to
    resolve claims for unpaid contract support costs (CSC) with a primary
    focus on speedy resolution through settlement whenever possible.
    Because IHS is not part of a class action, it must analyze each claim
    individually and comply with the multi-step process required by the
    Contract Disputes Act (CDA). IHS is working to resolve the claims
    expeditiously and also believes that the Agency and Tribes working
    together to resolve the claims will have the most benefit for our
    ongoing relationship. IHS is also improving internal business practices
    related to the CSC claims settlement process. IHS is also consistently
    reviewing methods to enhance collaboration and streamline the process
    and has offered an alternative claim resolution process that is less
    burdensome for Tribes, though IHS follows the same type of analysis
    used under the traditional approach to be fair and consistent with all
    Tribes.
        As a result of these efforts, since November IHS the number of
    claims analyzed has increased from 82 to 385, and the number of claims
    for which IHS has extended a settlement offer has increased from 60 to
    211.
        Overall, there are currently 1,251 claims pending before the
    Agency. The number of claims can fluctuate on a daily basis, increasing
    as more claims are filed and decreasing as claims are settled.
        With regard to the claims pending in Federal court, 38 Tribes have
    appealed over 160 claims to Federal court.
        There have been 22 Tribes that have appealed nearly 250 claims to
    the CBCA.
        Detailed information pertaining to settlement negotiations is
    confidential under the Federal Rules of Evidence; however, since Ramah,
    IHS has made settlement offers to 31 Tribes to settle over 200 claims.
    Since Ramah, approximately 34 claims have been formally settled with
    five Tribes, and an additional 68 offers have been accepted by eight
    Tribes and are in the process of 1settlement. This is a considerable
    increase from the three settled claim years reported as ofNovember
    2013. The total settlement amount for claims, formally settled or in
    the process ofsettlement, totals over $133 million.
        IHS is committed to continuing progress on claims that are amenable
    to settlement and to extendsettlement offers to Tribes as soon as
    possible.
                                     ______

    *Response to the following written questions was not received before
            the hearing's print deadline*

             Written Questions Submitted by Hon. Maria Cantwell to
                              Hon. Kevin Washburn
        As we all know, the Supreme Court ruled last year in Salazar v.
    Ramah that the Federal Government must pay each tribe's contact support
    costs in full. The Department of the Interior has not yet resolved
    these claims.
        Question. It has been seventeen months since the Supreme Court's
    decision. What is your plan for expeditiously settling these claims?

        Question. When does the Department expect all claims to be finally
    resolved?

        Question. What is the estimated amount that the Department of the
    Interior owes to tribes?

        Question. How is the Department of the Interior estimating this
    amount? Is it utilizing the Department's annual contract support costs
    shortfall reports that it submits to Congress?

        The Indian Self-Determination Act has been hailed as one of the
    most successful pieces of legislation in the history of federal Indian
    policy. Providing contract support costs is essential to the proper
    administration of these contracts, but we have heard from several
    tribes that the Bureau of Indian Affairs is beginning to more narrowly
    define how those costs are calculated, sometimes contrary to its own
    guidance.

        Question. After providing contract support costs to tribes for over
    20 years, can you explain why there is still so much ambiguity
    regarding these costs?

        The House Interior Appropriations bill does not contain the
    contract support cost cap language proposed by the Administration.
    Tribes have generally stated that the House approach towards contract
    support costs is the better one, and that the Senate should drop the
    Administration's proposal.

        Question. What does the Administration's proposal actually
    accomplish, other than extinguishing the government's liability to pay
    tribes what they're contractually owed?

        The Administration's budget proposal recommends that Congress cap
    the contract support costs owed to each specific tribe. If Congress
    were to accept this request, Tribes would no longer be able to recover
    unpaid contract support costs through the courts.

        Question. Is it good federal Indian policy to prevent tribes from
    going to Court when the Federal Government shortchanges tribes from
    receiving what they're contractually owed?
                                     ______

               Written Questions Submitted by Hon. Tom Udall to
                              Hon. Kevin Washburn
        As you know, the Buy-Indian regulations prohibit a Buy-Indian
    contractor from subcontracting more than 50 percent of the work to a
    non-Indian firm. In a letter to you earlier this year, I inquired
    whether a non-Indian company was doing 100 percent of the work on an
    air ambulance contract awarded to an Indian firm under the Buy-Indian
    Act. Your response only addressed whether the Indian firm was Indian
    owned.
        Question. What is the percentage of work being performed by the
    prime contractor and the amount being performed by non-Indian
    subcontractors on the Air ambulance contract awarded by the Phoenix
    Area office?

        Question. How does IHS monitor contracts to insure compliance with
    Buy-Indian regulations?
                                     ______

             Written Questions Submitted by Hon. John Barrasso to
                              Hon. Kevin Washburn
        Testimony received by the Committee from several witnesses at the
    hearing on November 13, 2013, on ``Contract Support Costs and
    Sequestration: Fiscal Crisis in Indian Country,'' indicates there are
    approximately 9,000 Contract Support Costs (CSC) claims pending with
    the Bureau of Indian Affairs (BIA). These witnesses recommend that a
    Special Master be appointed to handle these claims.
        Question. What are your views on this recommendation?

        Question. In your opinion, would a Special Master be better
    equipped than the BIA to settle these claims expeditiously?

        Question. Are there any possible barriers or impediments (legal or
    otherwise) to using a Special Master for settlement of claims that are
    still in the administrative process and not yet in Federal court?
    Please be specific.

        Question. How many CSC claims are pending in Federal court?

        Question. How many CSC claims are pending in the administrative
    process?

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