[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.


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    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


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    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?

                                  [all]
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