[Senate Report 108-380]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 739
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-380

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

 
A BILL TO AMEND THE INDIAN GAMING REGULATORY ACT TO INCLUDE PROVISIONS 
  RELATING TO THE PAYMENT AND ADMINISTRATION OF GAMING FEES, AND FOR 
                             OTHER PURPOSES

                                _______
                                

               September 28, 2004.--Ordered to be printed

                                _______
                                

   Mr. Campbell, from the Committee on Indian Affairs; submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany S. 1529]

    The Committee on Indian Affairs, to which was referred the 
bill (S. 1529) to amend the Indian Gaming Regulatory Act to 
include provisions relating to the payment and administration 
of gaming fees, and for other purposes, having considered the 
same, reports favorably thereon with an amendment in the nature 
of a substitute and recommends that the bill (as amended) do 
pass.

                                Purpose

    The primary purpose of S. 1529, the Indian Gaming 
Regulatory Act Amendments of 2004, is to clarify and amend the 
provisions of the Indian Gaming Regulatory Act of 1988, Pub. L. 
100-497, 25 U.S.C. Sec. 2501 et seq. (``IGRA''), applicable to 
the Department of Interior (``DoI''), the National Indian 
Gaming Commission, and the Indian tribes. This legislation is 
necessary to make amendments to the IGRA so that Indian tribes 
may continue to be the primary beneficiaries of gaming 
operations conducted on Indian lands, and to reaffirm and 
further the original goals of the IGRA.

                               Background


1. Indian Gaming Pre-IGRA

    Indian gaming began in earnest in the late 1970s with 
several tribes, from New York to Florida conducting ``high-
stakes'' bingo operations. Other tribes quickly followed suit, 
and by the mid-1980s over 100 tribes were conducting bingo 
operations, which generated more than $100 million in annual 
revenues. Some states, particularly Florida and California, 
attempted to assert jurisdiction over these tribes. The tribes 
resisted strenuously, citing long-standing Federal law and 
policy which provided for Federal and tribal jurisdiction over 
Indian lands, instead of state jurisdiction.

2. Supreme Court Cabazon Decision

    These legal disputes culminated in a ruling by the Supreme 
Court in California v. Cabazon Band of Mission Indians, 480 
U.S. 202 (1987) (``Cabazon''). In that decision, the Supreme 
Court, using a balancing test between Federal, state, and 
tribal interests, found that tribes, in states that otherwise 
allow gaming, had a right to conduct gaming activities on 
Indian lands largely unhindered by state regulation. 
Specifically, the Cabazon Court held that Pub. L. 83-280 states 
that laws that regulated, but did not criminally prohibit all 
forms of gaming within their borders, could not regulate gaming 
conducted by Indian tribes on Indian lands in those states. In 
reaching this decision, the Court also emphasized the Federal 
government's policy of Indian tribal self-governance, including 
the policy of encouraging tribal self-sufficiency and economic 
development.

3. IGRA

    The Cabazon decision engendered a great deal of discussion 
regarding the need for Federal legislation to address Indian 
gaming and its regulation. Tribes, satisfied with the Cabazon 
decision, saw no need for Federal legislation. States sought 
Federal legislation overruling Cabazon and providing an 
extension of state jurisdiction over Indian lands for gaming 
regulation. Some in Congress, including current and past 
members of this Committee, saw wisdom in creating a 
comprehensive regulatory framework under Federal law, that 
would bring some order to the complex relationship between the 
Federal government, tribes and states as it related to the 
conduct and regulation of Indian gaming.
    The result of those discussions was the IGRA, enacted a 
year after the Cabazon decision, which established a 
comprehensive framework for the operation of Indian tribal 
gaming across the United States. The primary purpose of the 
IGRA, as stated by Congress was ``to provide a statutory basis 
for the operation of gaming by Indian tribes as a means of 
promoting tribal economic development, self-sufficiency, and 
strong tribal governments.'' \1\ The secondary purpose was ``to 
provide a statutory basis for the regulation of gaming by an 
Indian tribe adequate to shield it from organized crime and 
other corrupting influences, to ensure that the Indian tribe is 
the primary beneficiary of the gaming operation, and to assure 
that gaming is conducted fairly and honestly by both the 
operator and players.'' \2\
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    \1\ Pub. L. 100-497, 102 Stat. 2467, Sec. 3 (1988).
    \2\ See id.
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    In enacting the IGRA, Congress expressly rejected arguments 
by states for abrogating tribal sovereignty and imposing state 
regulation of tribal gaming. Instead, the IGRA established 
three different categories of gaming and a regulatory system 
applicable to each. The IGRA also established a Federal 
regulatory commission, the National Indian Gaming Commission 
(``NIGC''), to provide Federal oversight over certain forms of 
tribal gaming.
    The three categories of gaming established by the IGRA, and 
the regulatory system for each, are:
           Class I, which refers to traditional and 
        ceremonial games conducted by tribes, and for which the 
        IGRA provides exclusive regulatory jurisdiction by the 
        tribes;
           Class II, which refers primarily to bingo, 
        games like bingo, pulltabs, and some non-banked card 
        games, and for which the IGRA provides primary 
        regulatory jurisdiction by the tribes and secondary 
        regulatory jurisdiction by the NIGC; and
           Class III, which refers to all other types 
        of gaming, and for which the IGRA provides a unique 
        method of shared jurisdiction between tribes and states 
        through mutually agreed upon compacts, and over which 
        the NIGC exercises oversight.
    The IGRA created the NIGC, a 3-member independent Federal 
regulatory agency charged with secondary regulation of Class II 
gaming and oversight of Class III gaming. Under its mandate, 
the NIGC is charged with approving management contracts; \3\ 
conducting background investigations; \4\ approving tribal 
gaming ordinances; \5\ reviewing and conducting audits of the 
books and records of Indian gaming operations; \6\ and 
enforcing violations of the IGRA, its own regulations, and 
approved tribal gaming ordinances.\7\
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    \3\ See id., Sec. 6(a)(4).
    \4\ See id., Sec. 11(b)(2)(F).
    \5\ See id., Sec. 6(a)(3).
    \6\ See id., Sec. 7(b) (4) and Sec. 11(b)(2)(C).
    \7\ See id., Sec. 14.
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    With regard to Class III gaming, it should be noted that 
many Indian tribes, working in tandem with the states where 
they are located, have developed sophisticated regulatory 
frameworks for their operations. Pursuant to joint tribal-state 
compacts, these tribes have put in place effective standards 
for the conduct of their games, as well as financial and 
accounting standards for their operations. The need for 
intrusive oversight in these instances is lessened because 
tribal regulatory bodies and those of their respective states 
have created effective oversight for tribal gaming operations.

4. The Seminole Decision

    Unfortunately, the compacting process, originally 
envisioned as an opportunity for tribes and states to enter 
into mutually beneficial agreements addressing legitimate 
issues of concern to each, became an area of significant 
discord. Several states, including Florida, refused to enter 
into negotiations with tribes, choosing instead to assert legal 
challenges to the IGRA. These challenges culminated in a 
decision by the U.S. Supreme Court in Seminole Tribe v. 
Florida, 517 U.S. 44 (1996) (``Seminole''). In that decision, 
the Court held that provisions in the IGRA which authorized 
tribes to bring suit in Federal court for ``bad faith refusal 
to negotiate'' were unconstitutional infringements on the State 
of Florida's 11th Amendmentimmunity to suit.
    Following the Seminole decision, the Secretary of the 
Interior, using authority provided by IGRA, promulgated 
regulations pursuant to which a tribe can request 
``procedures'' for regulation of Class III gaming. Despite 
requests from several tribes, to date the Secretary has not 
issued such ``procedures'' for any tribe.

5. The Indian Gaming Industry in 2004: A Snapshot

    At the time the IGRA was enacted, Indian gaming was a 
relatively modest industry consisting mainly of what are now 
known as ``class II'' high-stakes bingo operations. At that 
time, virtually no one contemplated that gaming would become 
the $16.7 billion \8\ industry that exists today. Indian gaming 
is providing tribes with much-needed capital for development 
and employment opportunities where few previously existed.
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    \8\ See National Indian Gaming Commission, July 13, 2004.
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    Though gaming revenues have grown exponentially in the last 
sixteen years, the IGRA has been amended only one time. In 
1997, Committee on Indian Affairs Chairman Campbell introduced 
an amendment that authorized the NIGC to collect increased fees 
which would fund the Commission's regulatory efforts in Indian 
Country.\9\ Before the change in the fees structure, the NIGC 
was funded almost exclusively with Federal appropriations, and 
was barely able to keep up with the ever-growing number of 
tribal gaming operations and its statutorily mandated duties 
under the IGRA.
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    \9\ Prior to the 1997 amendment, the NIGC budget was limited to 
Federal appropriations which could match fees collected from the tribes 
based on their ``class II'' gaming revenues. The cap on those class II 
fees was set at $3,000,000.
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    Since 1997, the NIGC has made significant strides in its 
role as the Federal regulatory body charged with oversight in 
the field of Indian gaming, having opened five field offices 
and employing additional necessary staff to oversee tribal 
gaming operations across the country and fulfill the NIGC's 
monitoring responsibilities.\10\
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    \10\ See e.g. Hearing to Provide Information on the Activities of 
the National Indian Gaming Commission, Before the Senate Committee on 
Indian Affairs, S. Hrg. 106-730, 106th Cong., at p. 3 (2000) (Testimony 
of Montie Deer, Chairman, National Indian Gaming Commission). See also 
Hearing on Indian Gaming Regulatory Act: Role and Funding of the 
National Indian Gaming Commission, Before the Senate Committee on 
Indian Affairs, S. Hrg. 108-67, Pt. 1, 108th Cong., at p. 3-4 (2003) 
(Testimony of Phil Hogen, Chairman, National Indian Gaming Commission).
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                          Statement of Policy

    The regulation of gaming activities has been the subject of 
much controversy since the formation of the United States. 
Policies at the Federal and state level have swung widely 
between outright bans, to encouragement and expansion of gaming 
by individual states. Many states now participate in gaming 
through lotteries, which provide significant revenues for state 
coffers. A number of states have legalized commercial gaming, 
from full-scale ``Las Vegas''-style casinos, to slot machines 
at horse racing tracks, called ``racinos''.
    When enacting the IGRA, Congress acknowledged the ``long- 
and well-established principle of Federal-Indian law as 
expressed in the United States Constitution, reflected in 
Federal statutes, and articulated in decisions of the Supreme 
Court, that unless authorized by an act of Congress, the 
jurisdiction of State [sic] governments and the application of 
state laws do not extend to Indian lands.'' \11\ Indeed, this 
Committee expressly ``recognize[d] and affirm[ed] the principle 
that by virtue of their original tribal sovereignty, tribes 
reserved certain rights when entering into treaties with the 
United States, and that today, tribal governments retain all 
rights that were not expressly relinquished.'' \12\ For over 
half-a-century, this
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    \11\ S. Rep. 100-446, at p. 5 (1988).
    \12\ Id.
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principle has only been modified in those instances where the 
limited application of state law on Indian lands was 
conditioned upon the consent of tribal governments.
    The IGRA, is one such instance. Only through the mutual 
negotiation of a ``tribal-state compact'' for Class III gaming, 
can the tribe and state agree upon a division of regulatory 
jurisdiction between their governments. The division of 
jurisdiction authorized by the IGRA was strictly limited to the 
regulation of gaming activities, and did not open the door to a 
broad invasion of tribal jurisdiction. This Committee noted the 
unusual nature of the tripartite division of gaming regulation 
between tribes, states and the Federal government, and 
expressed its intent that the IGRA ``provide a means by which 
tribal and State governments can realize their unique and 
individual governmental objectives, while at the same time, 
work together to develop a regulatory and jurisdictional 
pattern that will foster a consistency and uniformity in the 
manner in which laws regulating the conduct of gaming 
activities are applied.'' \13\
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    \13\ Id., at p. 6.
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    Through the IGRA, it was also the express intent of 
Congress that Indian tribes be the primary beneficiaries of 
gaming activities on Indian lands.\14\ First and foremost, 
Indian gaming was intended to benefit Indian tribes by 
promoting economic development, self-sufficiency, and strong 
tribal governments.\15\
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    \14\ See supra note 1, Sec. 3.
    \15\ Id.
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    The Committee views these original purposes of the IGRA to 
continue to be the guiding principles of Federal policy dealing 
with Indian gaming. It is the intent of this Committee that 
these original purposes guide the reading and interpretation of 
the amendments to the IGRA embodied in S. 1529.

                An Overview of the Provisions of S. 1529

    On May 14, 2003, and July 9, 2003, the Committee held 
oversight hearings on the IGRA, receiving testimony from the 
DoI, NIGC, and Indian tribes engaged in gaming. S. 1529 was 
introduced on July 31, 2003, by Senator Campbell, for himself 
and Senator Inouye. On March 24, 2004, the Committee held a 
legislative hearing on S. 1529.
    The hearings held in 2003 provided the Committee with 
significant information on much-needed updates and necessary 
improvements to the IGRA. S. 1529 was drafted based upon that 
information, and additional information received from other 
parties. The legislative hearing held on S. 1529, provided 
critical feedback on the bill language.
    As approved by the Committee, 5.1529 provides several 
amendments to the IGRA, including additional resources and 
accountability for the NIGC, parameters and guidance for 
revenue sharing discussions, and several technical 
clarifications.

     1. AMENDMENTS IMPACTING THE NATIONAL INDIAN GAMING COMMISSION

Funding and the Role of the NIGC

    Since Fiscal Year 1998, no Federal funds have been 
appropriated for the operation of the NIGC. Rather, the agency 
has been funded solely with fees assessed against tribal gaming 
operations. The IGRA currently caps those fees at $8 million 
annually. According to the NIGC, the growth of the Indian 
gaming industry is such that fees paid will be reduced over 
time, and will continue to be reduced if growth continues at 
the current rate.\16\
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    \16\ See National Indian Gaming Commission, Press Release, August 
17, 2004.
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    The Fiscal Year 2003 Omnibus Appropriation Act, Pub. L. 
108-7, provided no Federal funds for the NIGC, but did provide 
a 50% increase in assessable fees--from $8 million to $12 
million--and authorized the NIGC to levy $12 million in fees on 
tribal gaming operations. The fee hike is effective in Fiscal 
Year 2004. Similarly, the Fiscal Year 2004 Interior 
Appropriations Act, Pub. L. 108-108, authorizedthe NIGC to levy 
$12 million in fees effective in Fiscal Year 2005.
    S. 1529 makes permanent increases in fees assessable by the 
NIGC, and raises the statutory fee cap from the current $8 
million to $13 million over five years. The Committee takes 
this action with some trepidation, however. Since the fee 
structure was changed in 1997, the Committee has held a number 
of legislative and oversight hearings on the issue of 
regulation, fees for the NIGC, and related matters. During the 
last several years, several themes have emerged.
    Tribes have expressed increasing alarm with what they 
perceive as the explosive growth and activity of the Commission 
since the fee increase was enacted in late 1997. In hearings 
before this Committee during the 106th Congress, the National 
Indian Gaming Association (``NIGA'') testified that--

          NIGA remains supportive of a respected, independent, 
        objective and efficient NIGC, yet no communications 
        have been shared with us regarding how the NIGC plans 
        to meet those goals. Instead we face a number of new 
        regulatory initiatives that infringe upon Indian 
        nations' governmental authority and are duplicative of 
        existing regulatory structures.\17\
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    \17\ ``See Hearing on the Indian Gaming Regulatory Act, Before the 
Senate Committee on Indian Affairs, 106th Cong., S. HrG. 106-730 at p. 
49 (2000) (Testimony of Richard G. Hill, Chairman, National Indian 
Gaming Association).

    Tribes have also raised concerns regarding new regulatory 
initiatives pursued by the NIGC since the 1997 fee increase. 
The Committee notes that no new regulatory powers are granted 
to the NIGC by S. 1529. While it encourages the NIGC to fulfill 
its statutory duties and regulatory responsibilities, the 
Committee also strongly encourages the NIGC to respect the 
primary regulatory role of tribes and states through tribal-
state compacts.
    In response to these concerns, S. 1529 places a formal 
consultation responsibility on the NIGC with new IGRA Sec. 19. 
The Committee is encouraged by the NIGC's recent action to 
promulgate a formal government-to-government consultation 
policy. The Committee strongly believes that justification for 
the activities of the NIGC should be more transparent to the 
tribes to whom they are charged with providing services and 
regulation and to the public. It is the considered opinion of 
the Committee that public trust is best achieved through the 
development of strategic and performance plans by the NIGC, 
consistent with Sec. 19, reported to Congress and made 
available to the regulated industry and the public, even when 
prepared no less often than biennially.
    S. 1529 requires that the fees assessed by the NIGC be 
related to the statutory authorities and duties delegated to 
the NIGC under the IGRA.This limitation is designed to address 
tribal concerns that fees paid to the NIGC be used only for the 
purposes of the IGRA, and not for other Federal purposes.
    In establishing this fee structure, and in conjunction with 
the consultation requirements in S. 1529, adding a new Sec. 19 
to the IGRA, it is the Committee's intent that the Commission 
consult with tribes on a government-to-government basis in 
setting fees each year.

Expanding the Reporting Requirements of the NIGC

    S. 1529 makes the NIGC responsible for the submission of 
additional information not currently required by the IGRA. 
Specifically, Sec. 2(c) of the bill requires the NIGC to submit 
strategic and performance plans to Congress biennially. It is 
the Committee's belief and intent that this provision will 
provide the transparency and accountability needed between the 
regulator, the NIGC, and the regulated, the tribal gaming 
operations.
    This Committee has previously proposed that the NIGC be 
subject to the requirements of the Government Performance and 
Results Act of 1993 (``GPRA''),\18\ a position supported by
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    \18\ See Pub. L. 103-62, 107 Stat. 285 (1993).
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the General Accounting Office.\19\ Further consultation with 
the NIGC, however, has led the Committee to believe that the 
detailed annual reporting required by GPRA may be too onerous 
for the NIGC, a relative small Federal agency. The Committee 
believes strongly, however, that the planning and operations of 
the NIGC should be more accessible to the Congress and the 
regulated community.
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    \19\ See Letter from General Accounting Office to Rep. Dick Armey, 
Rep. Dan Burton, and Sen. Fred Thompson, p. 10 (July 20, 1999) (``While 
this may not be a major activity within Interior, the sensitivities of 
Indian gaming issues and the potential for criminal activities related 
to Indian gaming, would seem to indicate that Indian gaming is an 
important area in which to develop performance goals and measures to 
explain what it [NIGC] plans to accomplish with these funds.'').
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    In striking a delicate balance on this score, the language 
in S. 1529 has been changed to require the Commission to 
prepare and submit biennial reports to Congress and incorporate 
its strategic and performance plans into each report. The 
language of GPRA has been used as a model for the requirements 
of the strategic plan, which is to include a performance plan 
similar to performance plans under GPRA.
    The Committee is strongly encouraged by the support of the 
Administration for strategic planning by the NIGC, as evidenced 
by S. 2232, a bill introduced on behalf of the Administration 
by Chairman Campbell on March 25, 2004. This position is a 
welcome change from prior opposition to such reporting 
requirements by the NIGC.\20\
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    \20\ See Letter from National Indian Gaming Commission Chairman 
Montie Deer to Sen. Ben Nighthorse Campbell, p. 4 (Sept. 14, 2000) 
(``The resources of a small agency that would be directed to 
development of performance plans outweigh the benefits to be 
achieved.'').
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        2. THE USE OF TECHNOLOGICAL AIDS IN ``CLASS II'' GAMING

    A major concern, especially to tribes that do not offer 
Class III, ``casino-style'' gaming, is the continued conflict 
between the Gambling Devices Act, also known as the Johnson 
Act,\21\ and the use of technological aids in the operation of 
Class II gaming. The language of the IGRA is unambiguous in 
that technological aids may be used by a tribe to conduct Class 
II gaming and not run afoul of the Johnson Act. Similarly, 
report language accompanying the IGRA provides clear 
Congressional intent to authorize Indian tribes to maximize 
Class II operations through the use of technological advances. 
The report states in pertinent part that,

    \21\ See 15 U.S.C. Sec. Sec. 1171-1178 (2004).
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          [t]he Committee intends that tribes should be given 
        the opportunity to take advantage of modern methods of 
        conducting class II games and the language regarding 
        technology is designed to provide maximum 
        flexibility.\22\
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    \22\ See supra note 10 at p. 9.
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    Additionally, the Committee specifically stated its intent 
with regard to the application of the Johnson Act

          The phrase ``not otherwise prohibited by Federal 
        Law'' refers to gaming that utilizes mechanical devices 
        as defined in 15 U.S.C. 1175 [the Johnson Act]. That 
        section prohibits gambling devices on Indian lands but 
        does not apply to devices used in connection with bingo 
        and lotto. It is the Committee's intent that with the 
        passage of this act, no other Federal statute, such as 
        those listed below, will preclude the use of otherwise 
        legal devices used solely in aid or conjunction with 
        bingo or lotto or other such gaming on or off Indian 
        lands.\23\
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    \23\ See supra note 10 at p. 12 (emphasis added).

    Despite clear Congressional intent, the United States 
Department of Justice (``DoJ'') has taken a different view and 
has embarked on a series of actions in the Federal 
courtsagainst tribes who use technological aids in the conduct of Class 
II gaming.\24\ These lawsuits allege that tribes operating Class II 
games which use technological aids are violating the Johnson Act. All 
of these actions have been unsuccessful at the Federal District Courts, 
Courts of Appeal, and recently at the Supreme Court.\25\
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    \24\ See e.g. United States of America v. 103 Electronic Gambling 
Devices, 223 F.3d. 1091 (9th Cir. 2000), and United States v. 162 
Megamania Gambling Devices, 231 F.3d 713 (10th Cir. 2000) (Where the 
game at issue was a bingo game played at an electronic terminal that 
connected the player with other players at other terminals, all playing 
against one another for the first ``bingo'', both circuit courts 
unequivocally found that the terminal was not a Johnson Act device or a 
Class III game.). See also Diamond Game Enterprises, Inc. v. Reno, 230 
F.3d 365 (D.C. Cir. 2000).
    \25\ See Ashcroft, et al. v. Seneca-Cayuga Tribe of Oklahoma, et 
al., 72 U.S.L.W. 3550, 72 U.S.L.W. 3551, 72 U.S.L.W. 3372, 124 S.Ct. 
1505, 158 L. Ed. 2d. 153 (U.S. Mar. 1, 2004), cert. denied 327 F.3d 
1019 (10th Cir. 2003) (In its opinion, the 10th Circuit held ``that if 
a piece of equipment is a technologic aid to an IGRA Class II game, its 
use, sale possession or transportation within Indian country is then 
necessarily not proscribed as a gambling device' under the Johnson Act 
. . . [and] a court need not assess whether, independently of IGRA, 
that piece of equipment is a `gambling device, proscribed by the 
Johnson Act.'' Id. at 1035). See also related case U.S. v. Santee Sioux 
Tribe, 324 F.3d 607 (8th Cir. 2003) (In its opinion, the 8th Circuit 
found ``that nothing in the statute proscribes the use of technological 
aids for any games, so long as the resulting exercise falls short of 
being a fascimile.'' Id at 613).
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    The Committee, a number of whose members either actively 
sponsored or were involved in the consideration of the original 
legislation that was enacted as the IGRA, intends to clarify 
what it already believes to be the law--that the Johnson Act 
does not apply to technological aids used in connection with 
Class II games.
    It is the intent of the Committee to affirm its position 
with regard to Class II games and express its agreement with 
the Federal courts' interpretation of the IGRA in the cases 
cited above. Indeed, it is the considered opinion of this 
Committee that further litigation of the applicability of the 
Johnson Act to Class II games and technologic aids is not an 
efficient use of tribal and Federal resources.
    The Committee does acknowledge, however, legitimate 
concerns raised by the NIGC and the DoJ regarding gaming 
devices that are not legally considered Class II technologic 
aids. To assist the NIGC in its enforcement efforts 2(d)(2) of 
S. 1529 adds a new subsection (d) to Sec. 7 of the IGRA which 
provides for registration and tracking of Class II technologic 
aids manufacturers and transporters similar to the regime 
provided by the Johnson Act.\26\
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    \26\ See 15 U.S.C. Sec. 1173.
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    Under this new subsection, manufacturers and dealers of 
technologic aids must annually register with the NIGC. The 
scope of persons and entities subject to this provision is 
intentionally broad, excluding only Indian tribes. It is the 
Committee's belief that every person or entity making, 
repairing, or dealing with tribes in Class II gaming aids 
should be able and required to register and keep records of 
such technologic aids. The new subsection also requires that 
every Class II technologic aid handled by a registrant will be 
required to have a serial number attached to it.
    S. 1529 places on the NIGC the responsibility to regulate 
and enforce these new requirements. It is the considered 
opinion of the Committee that the NIGC, not the DoJ, has 
developed the necessary regulatory expertise to most 
effectively implement this provision, and has informally 
acknowledged its capacity to assume these new responsibilities.
    To better implement these provisions, the Committee 
encourages the NIGC, consistent with new Sec. 19, to develop 
effective guidelines to aid tribal regulatory agencies in 
regulating the manufacture and use of Class II technologic 
aids. Ideally, such regulations will provide a consensus 
onindustry guidelines that will provide for uniform and consistent 
application by tribal regulatory agencies. In so doing, the Committee 
reaffirms its intent that tribal governments have the primary 
regulatory responsibility for Class II gaming.

              3. LICENSING OF TRIBAL GAMING COMMISSIONERS

    S. 1529 requires that tribes must address, in addition to 
key employees and primary management officials, the background 
checks of tribal gaming commissioners and tribal gaming 
commission employees.
    The specific language of Sec. 2(f) of S. 1529 requires 
tribes to address the background checks of tribal gaming 
commissioners and their employees on a regular basis. This 
language does not require a tribe to have a tribal gaming 
commission, nor does it prohibit a tribe from determining the 
makeup of those commissions. It merely requires that, where 
tribal gaming commissions have been established, that those 
commission members and commission employees meet the standards 
applicable to the employees they are responsible for licensing 
so that the appearance of impropriety is avoided.
    A number of comments have been received from tribes 
disputing the necessity of background checks for these 
individuals and the possible negative effects of this new 
requirement on tribal sovereignty.
    Indian tribal gaming has come under increasingly virulent 
attacks in recent years, and it has become a prime target for 
accusations that it is not sufficiently regulated. This section 
is designed to address a key concern regarding the operation of 
tribal gaming commissions--that the regulators themselves meet 
the criteria imposed on the individuals they regulate.
    The Committee believes that this section provides an 
appropriate balance between respect for tribal sovereignty and 
the Congress' trust responsibility to tribes. This provision 
does not mandate the use of tribal gaming commissions, nor does 
it allow the NIGC to mandate the makeup of those commissions, 
but provides a guideline for tribal gaming commissions, much 
the same as the background check language currently provides 
for primary management and key employees.
    Since IGRA has been enacted, the Committee has not received 
any testimony from tribes showing that the required background 
checks for primary management and key officials have hindered 
tribal sovereignty by dictating who a tribe may hire. The 
section simply provides guidance where a tribe has determined 
to operate Class II or Class III gaming and to operate a tribal 
gaming commission. It is the Committee's belief that a similar 
provision related to tribal gaming commissions will be 
similarly useful.
    The Committee does note that this provision of S. 1529 does 
not delegate to either the NIGC or the Secretary of the 
Interior any authority to set standards regarding tribal gaming 
commissioners. The specific amendment to the IGRA made by 
Sec. 2(f) requires that a tribe address the issue of background 
checks for tribal gaming commissioners and employees in its 
gaming ordinance. The standard a tribe adopts for the tribal 
gaming commission is within the sovereign jurisdiction of the 
tribe.

                           4. REVENUE SHARING

    Revenue sharing does not have a statutory basis in the 
IGRA. Indeed, one of the primary purposes of the IGRA is ``to 
provide a statutory basis for the operation of gaming by Indian 
tribes as a means of promoting tribal economic development, 
self-sufficiency, and strong tribal governments.'' \27\ 
Additionally, the IGRA expressly prohibits any attempts by the 
states to impose ``any tax, fee, charge, or other assessment'' 
on the revenues generated by tribal governments from their 
gaming operations.\28\
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    \27\ See supra note 10, Sec. 3(1).
    \28\ See supra note 10, Sec. 11(d)(4).
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    However, pursuant to the IGRA, in order to conduct Class 
III gaming, tribes must enter into compacts withstates within 
which their gaming operations are located.\29\ The Secretary of 
Interior is required to review the compacts for compliance with Federal 
law, including the IGRA.\30\ The Secretary has 45 days within which to 
approve or disapprove the compacts or the compacts are deemed approved, 
but only to the extent that the compact is consistent with the 
IGRA.\31\
---------------------------------------------------------------------------
    \29\ See supra note 10, Sec. 11(d)(1).
    \30\ See supra note 10, Sec. 11(d)(8)(A).
    \31\ See supra note 10, Sec. 11(d)(8)(C).
---------------------------------------------------------------------------
    Despite the lack of a statutory basis for revenue sharing, 
the DoI has repeatedly found justification for revenue sharing 
in the notion of a ``bargained-for-exchange'' between the 
respective state and tribe. Essentially, if a state had 
something of value to offer in the compact negotiations, the 
tribe could ``purchase'' that value without the exchange 
violating the IGRA's prohibition on state taxation of tribal 
gaming revenues.\32\
---------------------------------------------------------------------------
    \32\ See Letter from Ada E. Deer, Assistant Secretary, Indian 
Affairs, Dept. of Interior, to Ralph Sturges, Chief Mohegan Tribe of 
Indians of Connecticut (Dec. 5, 1994).
---------------------------------------------------------------------------
    Following the Supreme Court decision in Seminole, some 
states began refusing to negotiate tribal-state compacts, 
unless the tribe agreed to pay substantial amounts--some would 
say usurious amounts--of their gaming revenues to their state 
negotiating counterparts. Most tribes, uncertain of their legal 
remedies in light of the 11th Amendment bar imposed after 
Seminole, have reluctantly agreed to these demands.
    July 9, 2003, Hearing: On July 9, 2003, the Committee held 
an oversight hearing on the IGRA, focusing on tribal-state 
gaming compacts and ``revenue sharing''.
    The DoI testified regarding the difficulties encountered by 
tribes seeking compacts in the wake of the Seminole decision, 
which held as unconstitutional certain provisions in the IGRA 
that authorized tribes to bring lawsuits against states in 
Federal court. One of the most significant impacts in the wake 
of Seminole noted by the DoI was the sharp spike in demands by 
states for revenue sharing and the dollar amounts sought in 
their compact negotiations with tribes.\33\
---------------------------------------------------------------------------
    \33\ See Hearing on the Indian Gaming Regulatory Act, Before the 
Senate Committee on Indian Affairs, S. Hrg. 108-67, 108th Cong. at p. 3 
(2003) (Testimony of Aurene M. Martin, Acting Assistant Secretary, 
Indian Affairs, Department of the Interior).
---------------------------------------------------------------------------
    The DoI's testimony made clear that many states now view 
revenue sharing as the most important topic when negotiating 
compacts. Conversely, most tribes are loathe to share more than 
minimal amounts, as every dollar shared with the state is one 
less dollar available to dedicate to the provision of tribal 
government services.
    S. 1529 was drafted, in part, to amend Sec. 11 of the IGRA 
and address the impacts of the Seminole decision on state 
demands for revenue sharing. These amendments to the IGRA are 
consistent with and meant to further the original intent of the 
IGRA to provide strong tribal governments and improve 
reservation economies. S. 1529 accomplishes this goal by 
providing a statutory framework for revenue sharing, and 
placing limitations on unreasonable demands by states for a 
sharing of tribal revenues.
    March 24, 2004 Hearing: On March 24, 2004, the Committee 
held a legislative hearing on S. 1529. At that hearing the DoI 
testified regarding Sec. 2(f) of S. 1529, which amends Sec. 11 
of the IGRA, to deal with revenue sharing.
    In its testimony, the DoI again expressed its concern about 
the lack of statutory guidance for revenue sharing, and support 
for the proposal in S. 1529 to provide a statutory framework. 
The DoI restated its view that state demands for revenue 
sharing have significantly increased in dollar amount since the 
Seminole decision.\34\
---------------------------------------------------------------------------
    \34\ See Legislative Hearing on S. 1529, the Indian Gaming 
Regulatory Act Amendments of 2003, Before the Senate Committee on 
Indian Affairs, S. Hrg. 108-67, 108th Cong. at p. 33 (2004) (Testimony 
of George Skibine, Acting Deputy Assistant Secretary for Policy and 
Economic Development, Indian Affairs, Department of the Interior).
---------------------------------------------------------------------------
    To deal with the unfair pressure placed on tribes to agree 
to substantial revenue sharing, the DoI strongly expressed its 
agreement with the principles espoused in S. 1529:
           That gaming revenues should primarily 
        benefit Indian tribes; and
           That substantial economic benefits should be 
        conferred from states to tribes before revenue sharing 
        is allowed.
    The DoI did state its preference for a ``hard cap'' on the 
percentage of revenue that a state could negotiate in return 
for substantial economic benefits. It also expressed its 
preference for a statutory list of ``substantial economic 
benefits'' that would be acceptable. In expressing these 
preferences the DoI stated that it anticipated some 
difficulties in measuring tribal needs and determining which 
economic benefits would be acceptable.
    The DoI also restated its concerns regarding attempts by 
tribes to be approved for ``far-flung off-reservation'' gaming 
lands, meaning lands not on or near current tribal reservation 
lands. The DoI also noted increased attempts by tribes to carve 
out anti-competitive geographic zones, preventing other tribes 
from gaming in such zone. Although both of these recent 
developments raise policy concerns, and appear to be 
inconsistent with the original intent of the IGRA, the DoI 
indicated that it does not believe either of these issues are 
prohibited by the statutory language of the IGRA.
    The Substitute Amendment: Sec. 2(f)(2)(A) of S. 1529, as 
amended by the substitute, strengthens Sec. 11 of the IGRA by 
essentially requiring that gaming revenues first meet the most 
pressing needs of the tribe which has generated that revenue by 
investing in and operating a gaming facility. Over the past 
several years, testimony before this Committee by tribes has 
shown that the most pressing needs usually relate to the 
provision of tribal government programs and services, and 
funding for new economic ventures, particularly non-gaming 
ventures. If revenue sharing provisions in a compact do not 
meet the parameters provided in S. 1529, those revenue sharing 
provisions may not be approved by the Secretary.
    The Committee acknowledges that local communities are often 
the governments most significantly impacted by a tribal gaming 
operation. Therefore, S. 1529 provides that, after the need for 
tribal government programs and services are adequately 
addressed with tribal gaming revenues, a tribal-state compact 
can provide for payments to local governments to offset actual 
costs incurred by local governments impacted by tribal gaming 
activities.
    The Committee also recognizes that some tribal reservations 
are in geographic locations near large urban centers that can 
provide significant potential consumer markets. For those 
tribes, it may be appropriate to provide a state with whom its 
compacts a share of revenue in return for ``substantial 
economic benefits''. Thus, S. 81529 provides that, after any 
payments to local governments, and provided that tribal 
governments needs are met, including the provision of programs 
and services and other non-gaming economic development, a 
tribal-state compact may provide for revenue sharing in return 
for ``substantial economic benefits''.
    With regard to ``substantial economic benefits'', the 
Committee declines to define that term, but rather it is the 
Committee's intent that this requirement be the subject of 
negotiations between tribes and states, so long as the 
Secretary determines that the economic benefit is real and 
measurable. Certainly, substantial exclusivity from competition 
by non-Indian gaming, long term tribal-state compacts, and 
expanded gaming opportunities are but three examples that would 
likely meet this requirement.
    The Committee also declined to establish a maximum 
percentage cap on revenue sharing, a preference expressed by 
the DoI. The Committee's primary concern is that such a cap 
does not prevent a state from seeking revenue sharing that is 
small in terms of percentage of revenue, but may stillprevent 
the tribal government from adequately funding its programs and 
services. It is the unwavering intent of this Committee that tribal 
gaming revenues must primarily benefit Indian tribes.
    Concerns have been raised by some tribes regarding the 
limitations placed on revenue sharing, anticipating a refusal 
by states to negotiate compacts. It is the Committee's intent 
that the amendment made by Sec. 2(f)(2)(B) of S. 1529 address 
this concern. This amendment provides a reasonable timeframe 
for the Secretary to act. The Committee strongly encourages the 
Secretary to exercise the authority granted by 
Sec. 11(d)(7)(B)(vii) of the IGRA in those instances in which a 
state refuses to negotiate a compact unless it contains revenue 
sharing that exceeds the parameters prescribed in 
Sec. (2)(f)(2)(A) of S. 1529.
    It is also the Committee's belief that Sec. 2(f)(2)(C) will 
provide additional flexibility to tribes and states that are in 
the process of renegotiating compacts. The substitute amendment 
changed the original language of this provision to address 
constitutional concerns raised by the DoI.

                          Legislative History

    S. 1529 was introduced on July 31, 2003, by Senator 
Campbell for himself and for Senator Inouye, and was referred 
to the Committee on Indian Affairs.
    On March 24, 2004, the Committee held a legislative hearing 
on S. 1529. Witnesses at the hearing included the Deputy 
Assistant Secretary-Indian Affairs, on behalf of the DoI, the 
Chairman of the NIGC, and the Chairman of the National Indian 
Gaming Association, on behalf of its various Indian tribes and 
tribal organizations. While each of the witnesses expressed 
either suggestions for different legislative language or 
concerns over particular provisions in the bill, all of the 
witnesses were supportive of the overall purposes and intent of 
S. 1529. Many of those suggestions and concerns were addressed 
in the substitute amendment to the bill.
    On July 14, 2004, at a business meeting duly noticed, the 
Committee adopted a substitute amendment to S. 1529 and, as 
amended, favorably reported the bill for consideration by the 
full Senate, with a recommendation that the Senate pass the 
bill.

   Section-by-Section Analysis of the Substitute Amendment to S. 1529

    Section 1. Short Title. The act may be cited as the 
``Indian Gaming Regulatory Act Amendments of 2004''.
    Section 2. Payment and Administration of Gaming Fees.
    (a) Definitions. The bill amends Sec. 4(7) of the Indian 
Gaming Regulatory Act (``IGRA'') clarifying the definition of 
``Technological Aids'' to correspond with the original intent 
of Congress in the IGRA, making the Johnson Act inapplicable to 
technological aids used to operate class II games. This 
interpretation has been universally supported by Federal court 
decisions, and the bill contains very clear language that 
guarantees this clarification cannot be used or construed to 
apply to any game that is categorized as class III.
    (b) National Indian Gaming Commission. The bill makes 
technical amendments to Sec. 5 of the IGRA to clarify how 
National Indian Gaming Commission (``NIGC'') vacancies and 
successors are filled.
    (c) Powers of Chairman. The bill makes technical amendments 
to Sec. 6 of the IGRA to clarify how the NIGC Chairman may 
delegate authorities to individual Commissioners.
    (d) Powers of Commission. The bill makes amendments to 
Sec. 7 of the IGRA to expand the reporting requirements for the 
NIGC by requiring it to provide a biennial report to Congress 
similar to the Executive Agency reporting mandated by the 
Federal Government Performance and Results Act. The bill also 
requires manufacturers and dealers of class II technologic aids 
to register with the NIGC and maintain records of the 
technologic aids.
    (e) Commission Staffing. The bill makes technical 
amendments to Sec. 8 of the IGRA and updates the statutory 
rates of pay for NIGC Commissioners, staff and temporary 
services to comport with the current Federal Executive and 
General Schedule pay rates.
    (f) Tribal Gaming Ordinances. The bill makes technical 
amendments to Sec. 11, subsection (b)(2)(F) of the IGRA to 
clarify that background investigations must be conducted for 
tribal gaming commissioners and commission employees, as well 
as key management and employees of the gaming enterprise.
    The bill amends Sec. 11, subsection (d)(4) to clarify that 
states may not tax tribal gaming operations, and to codify 
``revenue sharing'' and the limited conditions under which it 
may be appropriate. The amendment also requires the Secretary 
of Interior to promulgate regulations within 18 months 
providing guidance to tribes and states in implementing this 
provision.
    The bill further amends Sec. 11, subsection (d) (dealing 
with gaming procedures issued by the Secretary in lieu of a 
compact), by amending (d)(7)(B)(vii) to add a requirement that 
the Secretary act within 180 days. Subsection (d) is further 
amended by deleting paragraph (9) at the end of the subsection, 
and replacing it with a new paragraph. The replacement 
paragraph provides for an additional 180 day extension of 
negotiating time, if a new tribal-state compact cannot be 
negotiated prior to the official expiration date of the current 
compact, during which time tribal gaming activities may legally 
continue.
    (g) Management Contracts. The bill makes technical 
amendments to Sec.  12 of the IGRA by clarifying that the 
oversight responsibilities of the NIGC include conducting 
background information reviews on outside ``managers'' of class 
III facilities.
    (h) Commission Funding. The bill makes technical amendments 
to Sec.  18 of the IGRA by raising the cap on aggregate fees 
imposed on class II and III gaming operations from the current 
$8 million to $11.5 million in FY2005, to $12,000,000 in 
FY2006-7, and to $13 million in FY2008-9. The amendments 
further provide for the NIGC to promulgate regulations to carry 
out the new provisions.
    (i) Additional Amendments. The bill amends the IGRA by 
deleting current Sec. 19. A new ``Section 19. Tribal 
Consultation'' requires the Secretary of Interior, the 
Secretary of Treasury and the Chairman of the NIGC to consult 
with Indian tribes, to the maximum extent practicable, and in a 
manner consistent with the government to government 
relationship that exists between Indian tribes and the Federal 
government.
    Section 23 is amended by combining that section with the 
language of the current Section 24.
    Section 24 is then amended by inserting a new ``Section 24. 
Authorization of Appropriations'', which provides for 
appropriations to be authorized in an amount equal to the 
amount of funds derived from fees collected. It also provides 
for additional amounts to be appropriated as necessary to fund 
the operations of the NIGC. Currently, the NIGC is not funded 
by any federal appropriations and the enactment of this section 
is not expected to have an effect on the federal budget.

            Committee Recommendation and Tabulation of Vote

    On July 14, 2004, the Committee, in an open business 
session, considered S. 1529 and approved a substitute amendment 
to the bill, and ordered S. 1529, as amended, favorably 
reported to the full Senate with a recommendation that the bill 
do pass. Senator Reid was recorded as a nay vote. 

                   Cost and Budgetary Considerations

    The cost estimate for S. 1529 as calculated by the 
Congressional Budget Office, is set forth below:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 10, 2004.
Hon. Ben Nighthorse Campbell,
Chairman, Committee on Indian Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1529, the Indian 
Gaming Regulatory Act Amendments of 2004.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Matthew 
Pickford.
            Sincerely,
                                         Elizabeth Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

S. 1529--Indian Gaming Regulatory Act Amendments of 2004

    S. 1529 would amend the Indian Gaming Regulatory Act (IGRA) 
to change the operations of the National Indian Gaming 
Commission (NIGC) and the regulation of gambling on Indian 
reservations. The legislation would increase the fees paid to 
the commission by tribal gambling operators; require the 
commission to prepare a strategic planning report; revise the 
salary schedules, procedures, and authorities of the 
commission; expand the use of background checks for personnel 
involved in tribal gambling; and require manufacturers and 
dealers of electronic gambling aids to register with the NIGC. 
The legislation also would impose new requirements on certain 
tribal and state compacts.
    CBO estimates that implementing S. 1529 would cost $10 
million over the 2005-2009 period, assuming appropriation of 
the amounts authorized by the bill. In addition, S. 1529 would 
increase the current limitation ($8 million) on the NIGC's 
annual assessment on Indian gambling operations. Because the 
NIGC has authority to spend such assessments without further 
appropriation, however, any increase in fee collections would 
not have a significant net impact on the federal budget.
    S. 1529 contains intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA), but CBO cannot 
determine whether the total cost of these mandates would exceed 
the annual threshold established in that act ($60 million in 
2004, adjusted annually for inflation). The bill would impose 
new requirements for compacts between tribes and states, which 
must be approved by the Department of the Interior (DOI) before 
tribes can open casinos. CBO has no basis for estimating the 
impact of this mandate on state, local, and tribal governments. 
The bill also would place some additional administrative duties 
on tribes with gaming operations and would increase the fees 
they must pay to the NIGC, and CBO estimates that the cost of 
those mandates would be about $5 million per year.
    S. 1529 also contains private-sector mandates as defined in 
UMRA. The bill would impose private-sector mandates on 
individuals selling or leasing certain gambling devices to 
Indian casinos and on private-sector entities that operate 
those gambling devices under tribal management contracts. CBO 
estimates that the direct cost of mandates in the bill would 
fall well below the annual threshold established by UMRA for 
private-sector mandates ($120 million in 2004, adjusted 
annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 1529 is shown in the following table. 
The costs of this legislation fall within budget function 800 
(general government).

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal year, in millions of dollars--
                                                                    --------------------------------------------
                                                                       2005     2006     2007     2008     2009
----------------------------------------------------------------------------------------------------------------
                                CHANGES IN SPENDING SUBJECT TO APPROPRIATION \1\

Authorization Level................................................        2        2        2        2        2
Estimated Outlays..................................................        2        2        2        2        2
----------------------------------------------------------------------------------------------------------------
\1\ Enacting this bill also would increase revenues and direct spending, however, CBO expects the net budgetary
  impact of these increases would be negligible in each year.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted near the start of fiscal year 2005, that 
the authorized amounts will be provided for each year, and that 
spending will follow historical patterns for the NIGC and its 
programs.
    The bill would authorize the appropriation of $2 million 
annually for the operations of the NIGC. There was no 
appropriation for the NIGC in fiscal year 2004. Appropriation 
of the authorized amounts would cost a total of $10 million 
over the 2005-2009 period.
    Estimated impact on state, local, and tribal governments: 
S. 1529 contains several intergovernmental mandates as defined 
in UMRA. Because of uncertainty about the cost of one mandate 
affecting state and tribal gaming compacts, CBO cannot 
determine whether the total cost of these mandates exceeds the 
annual threshold established in that act ($60 million in 2004, 
adjusted annually for inflation). We estimate that the total 
cost of other mandates in the bill would be about $5 million 
per year.

                         STATE-TRIBAL COMPACTS

    S. 1529 would add new requirements for compacts between 
states and tribes that govern gaming activities on tribal land. 
Such compacts must be approved by DOI before tribes can operate 
casinos. The new requirements would limit the extent to which 
tribal gaming revenues could be shared with affected state and 
local governments. This change would not affect existing 
compacts. Under current law, tribes and states are under a 
mandate to negotiate these compacts before tribes may operate 
casinos, and a change in the standards governing those compacts 
could alter the cost of that mandate. However, because of great 
uncertainty about how those changes would be interpreted and 
implemented by DOI and because of the complex nature of 
negotiations between states and tribes, CBO cannot estimate how 
the new requirements would affect either total revenues from 
tribal gaming or the distribution of those revenues between 
tribes and other governments.

                               NIGC FEES

    IGRA currently imposes a mandate on tribes with gaming 
operations to pay fees to the NIGC. This bill would require 
NIGC to establish a new rate structure and would increase the 
annual cap on total fees. By increasing the cap, the bill would 
increase the cost of the mandate by about $5 million a year 
over the next five years. The new fee schedule would result in 
a reallocation of the burden of this mandate among gaming 
tribes.

                     OTHER ADMINISTRATIVE MANDATES

    S. 1529 would require tribes to conduct background 
investigations of tribal gaming commissioners and employees of 
tribal gaming commissions and to register with the NIGC if they 
use certain types of electronic gambling machines--both are 
mandates as defined by UMRA. Under current law, tribes must 
conduct background investigations of a large number of gaming 
officials and employees. Based on information provided from the 
NIGC, CBOestimates that the additional number of investigations 
required as a result of this bill would be small. The cost of each 
investigation would be no more than $50, so the cost of complying with 
the first mandate would not be significant. The registration 
requirement would primarily apply to electronic bingo machines. Based 
on information from the NIGC and the National Indian Gaming 
Association, CBO estimates that this mandate also would impose no 
significant costs on the tribes.
    Estimated impact on the private sector: S. 1529 contains 
private-sector mandates as defined in UMRA. The bill would 
require sellers, dealers, buyers, and lessors to register class 
II gambling devices with the National Indian Gaming Commission. 
Class II gambling devices include devices used to play games 
such as electronic bingo. The bill would impose mandates on 
individuals selling or leasing class II gambling devices to 
Indian casinos and on private-sector entities that enter into 
contracts with tribes to manage those casinos. CBO estimates 
that the direct cost of mandates in the bill would fall well 
below the annual threshold established by UMRA for private-
sector mandates ($120 million in 2004, adjusted annually for 
inflation).
    S. 1529 would require sellers, dealers, buyers, and lessors 
of class II gambling devices to number and label the devices 
and maintain monthly records for the devices. The monthly 
records must include the number of the device, the 
manufacturer's legal and trade name, the date of manufacture, 
and, in the case of transfer, the name of the person to whom 
the device is transferred and the date of transfer. According 
to the NIGC, the gaming companies that currently provide class 
II gambling devices to Indian casinos already have the 
infrastructure necessary for this. Under current law, those 
companies are subject to similar registration requirements for 
class III gambling devices, and thus, the costs for registering 
the class II gambling devices are estimated to be minimal. Some 
gaming companies already may be registering class II devices.
    Private-sector entities managing Indian casinos that 
operate class II devices also would be subject to the 
registration requirements of S. 1529. The cost for registration 
and recordkeeping for class II gambling devices is expected to 
be minimal for tribes that operate casinos. Since a smaller 
number of Indian casinos are run by private contractors, CBO 
expects that the cost of this mandate would be minimal for 
those entities, as well.
    Estimate prepared by: Federal Costs: Matthew Pickford; 
Impact on State, Local, and Tribal Governments: Marjorie 
Miller; and Impact on the Private Sector: Selena Caledera.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

               Regulatory and Paperwork Impact Statement

    Paragraph 11(b) of rule XXVI of the Standing Rules of the 
Senate requires that each report accompanying a bill to 
evaluate the regulatory and paperwork impact that would be 
incurred in carrying out the bill. The Committee has concluded 
that S. 1529 will reduce regulatory or paperwork requirements 
and impacts.

                        Executive Communications

    The Committee has received no communications from the 
Executive Branch regarding S. 1529.

                        Committee Correspondence

                             Department of Justice,
                             Office of Legislative Affairs,
                                     Washington, DC, June 15, 2004.
Hon. Ben Nighthorse Campbell,
Chairman, Committee on Indian Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: This presents the views of the 
Department of Justice on S. 1529, the ``Indian Gaming 
Regulatory Act Amendments of 2003.'' We generally defer to 
other, more directly concerned parties regarding the need for, 
or desirability of, enactment of this legislation. We do, 
however, oppose enactment of section 2(a) of S. 1529.
    Section 2(a) of S. 1529 would amend section 4(7) of the 
Indian Gambling Regulatory Act (IGRA) (25 U.S.C. Sec. 2703(7)) 
to provide that no provision of the Gambling Devices Act, 15 
U.S.C. Sec. Sec. 1171-1177, shall apply to ``any gambling 
described in subparagraph (A)(i) [Class gaming] for which an 
electronic aid, computer, or other technological aid is used in 
connection with gaming.'' The Department of Justice enforces 
the Gambling Devices Act.
    The issue of the application of the Gambling Devices Act to 
Class II gaming under IGRA was the subject of two recent 
appellate court decisions, United States v. Santee Sioux Tribe 
of Nebraska and Ashcroft v. Seneca-Cayuga Tribe of Oklahoma, 
that reached differing conclusions. In both of these cases, the 
United States argued that under existing law the Gambling 
Devices Act does apply to Class II gaming with technological 
aids. The Supreme Court recently denied certiorari in these 
cases. The denial of certiorari, however, does not clarify the 
issue, and a conflict still exists between the Circuit Courts 
of Appeal. The Department of Justice believes that 
clarification of this issue is needed, but would favor an 
amendment clarifying that the Gambling Devices Act does apply 
to Class II gambling, rather than the approach taken in S. 
1529.
    The approach to clarifying this issue taken by S. 1529 
provides that the Gambling Devices Act does not apply to Class 
II gambling. Section 2(a) of S. 1529 thus authorizes the use of 
gambling devices, as that term is defined in 15 U.S.C. 
Sec. 1171 of the Gambling Devices Act, for Class II gaming. The 
Department believes that this amendment may well result in more 
lucrative Class II gaming with the use of high speed machines 
that are virtually indistinguishable to a player from machines 
used in Class III gaming. When IGRA was first enacted, Class 
III gaming was viewed as including more lucrative forms of 
gambling, including high-speed machine gaming. In order to 
avoid criminal influences and corruption, Congress required 
increased regulation over Class III gaming. Included in the 
enhanced regulatory scheme was the necessity of a tribal-state 
compact that balanced the interests of the affected tribe and 
state and required the approval of the Secretary of the 
Interior. Since IGRA's enactment, the technology has changed 
substantially, so that machines used in Class II gaming can be 
as fast and as lucrative as Class III machines and, from a 
player's perspective, may be virtually indistinguishable. 
Because the machines used in Class II and Class III gaming are 
becoming increasingly indistinguishable in their play, they 
should be subject to the same or similar levels of regulation 
and approval.
    The Department of Justice cannot support this amendment to 
IGRA, as it removes the current restrictions on the use of 
gambling devices in Class II gambling without substituting an 
increased level of regulation and approval that at least 
approximates that surrounding the use of similar machines in 
the Class III context. As noted above, in examining the 
alternative ways in which the issue of the application of the 
Gambling Devices Act to Class II gaming can be clarified, the 
Department of Justice favors amending IGRA to clarify that the 
Gambling Devices Act does apply, and that, therefore, gambling 
devices could only be used in conjunction with gaming 
authorized pursuant to a valid tribal-state compact. That being 
said, the Department of Justice might support an amendment that 
removes the Gambling Devices Act's prohibition on the use of 
gambling devices in Class II gaming, if that prohibition were 
replaced with adequate approval and regulation that recognizes 
the concerns raised by the high speed and lucrative nature of 
the gambling. The Department of Justice would be happy to work 
with the Committee in order to devise appropriate regulation.
    In addition, S. 1529 would create a blanket repeal of the 
Gambling Devices Act's prohibitions pertaining to Class II 
gaming. We oppose the blanket repeal of all of the provisions 
of the Gambling Devices Act for ``technological aids'' for 
Class II gaming. As drafted, Section 2(a) would go further in 
its repeal of the Gambling Devices Act than what IGRA currently 
provides for Class III gaming. IGRA currently provides repeal 
of Section 1172's transportation prohibition and Section 1175's 
prohibition on possession and use of gambling devices for Class 
III gaming. The other provisions of the Gambling Devices Act, 
such as Section 1173's requirement to register annually with 
the Attorney General and Section 1174's shipping requirements, 
remain in effect for Class III gaming under IGRA. S. 1529 
should not provide a broader repeal of the Gambling Devices Act 
for Class II gaming with technological aids than what IGRA 
currently provides for Class III gaming.
    Finally, S. 1529 creates additional confusion as to which 
machines should be considered Class II gaming and which should 
not be. Section 2703(7) of IGRA states that Class II gaming 
does not include ``a slot machine of any kind'' while another 
provision will state that the prohibition against the use of 
gambling devices, including slot machines, does not apply to 
Class II gaming ``for which an electronic aid, computer, or 
other technological aid is used with the gaming.'' Class II 
gaming with technological aids, in some cases, falls within the 
term ``a slot machine of any kind.'' Enacting S. 1529 with this 
provision will not help clarify what Congress intends to 
constitute Class II gaming. Instead, it will add to the 
confusion by creating conflicting provisions within the same 
statute.
    Thank you for the opportunity to comment on this 
legislation. Please do not hesitate to call on us to answer any 
questions you might have regarding the suggestions discussed in 
this letter, or if you would like the Department of Justice to 
provide any additional assistance. We look forward to 
discussing this matter with you further. The Office of 
Management and Budget has advised us that there is no objection 
from the standpoint of the Administration's program to the 
presentation of this report.
            Sincerely,
                                      William E. Moschella,
                                        Assistant Attorney General.

                     MINORITY VIEWS OF SENATOR REID

    As one of the original authors of the Indian Gaming 
Regulatory Act of 1988 (IGRA), Pub. L. 100-497, 25 U.S.C. 
Sec. 2501 et seq., I was proud of the balance we achieved among 
the different interests in Indian gaming. Tribes, local, State 
and the federal governments all have legitimate interest in 
this subject, and the concerns of each were accounted for in 
that original legislation. The Indian Gaming Regulatory Act 
Amendments of 2004 (S. 1529), however, fundamentally upsets 
that balance and fails to account for the significant State and 
local concerns that have arisen as Indian gaming has grown 
dramatically in the years since IGRA's passage. For the reasons 
explained below, I oppose S. 1529. I hope to work with my 
colleagues to address the concerns I raise in this report 
before further action.
    It should be noted at the outset that while the Committee 
report characterizes the changes to IGRA's Class II and Class 
III regulatory structure as ``technical'' and portrays federal 
court cases on the subject as settled, that is not the case. In 
fact, there is a split in federal circuit court cases on the 
Class II/Class III issue addressed by S. 1529, and no Supreme 
Court disposition has been rendered on that subject. In 
addition, while the report notes that no Executive Branch 
communications were received on S. 1529, I have included a 
letter from the U.S. Department of Justice to the Chairman 
expressing the Department's opposition to this legislation. 
Finally, the Committee's characterization of Congressional 
intent regarding the Johnson Act is not accurate. A plain 
reading of IGRA confirms that Congress did not waive the 
Johnson Act for Class II games.

                         CONCERNS WITH S. 1529

    There are three main problems with S. 1529 and each are 
explained in turn below. First, S. 1529 makes it easier to 
conduct Class II gaming that is effectively the same as Class 
III. This enables the evasion of Class III compacting and 
thereby the prime vehicle for the consideration and 
satisfaction of State and local concerns. Second, S. 1529 would 
make it difficult, if not impossible, for State and local 
governments to recover costs associated with Class III gaming 
as provided for under current law. Third, S. 1529 does nothing 
to deal with the increasing propensity of some Tribes to seek 
far-flung, non-reservation lands on which to conduct gaming 
free of regulation to the detriment of State and local 
governments and established Tribes in those areas.
I. Class II and Class III Gaming
    As the Committee report notes, IGRA created a fundamental 
legal distinction between Class II and Class III games. Under 
the law, Tribes were permitted to engage in Class II gaming, 
defined as bingo and like games, with modest oversight. Class 
III gaming, defined as fast-paced games like slots and other 
casino games, would be more heavily regulated by permitting 
their use only when the subject of a Tribal-State compact. This 
process was intended to provide the State with the opportunity 
to regulate Tribal enterprises that were functionally 
equivalent to casinos. It was also intended to provide an even 
playing field, prevent organized crime, ensure consumer 
protection, and guarantee the consideration of State and local 
impacts of full-fledged gaming operations.
    The greater rigor of Class III regulation, however, 
provided a strong incentive to design and characterize bingo 
and similar machines which fundamentally played like slot 
machines as Class II machines so as to avoid such regulation. 
The financial incentive to do so is great. Slot machines and 
games made to play like them represent roughly 70% of an 
average casino's profit.
    One disincentive to blurring the lines between Class II and 
Class III is the Johnson Act. Enacted in the 1950s, the Johnson 
Act prohibits the use of ``gambling devices'' on Tribal 
lands.\1\ While IGRA lifted this Johnson Act limitation for 
Class III games, it did not do so for Class II games. The 
statute itself, the Senate Report accompanying IGRA, and my 
colloquy with Senator Inouye at the time IGRA was debated all 
confirm that IGRA only repealed the Johnson Act prohibition for 
Class III games. For example, the Senate Report confirms that 
IGRA only permitted the use of Class II games on reservations 
if those games were ``not otherwise prohibited by federal law'' 
and specifically cited ``15 U.S.C. 1175'' (the Johnson Act) as 
such a restriction. S. Rept. No. 100-446.
---------------------------------------------------------------------------
    \1\ A ``gambling device'' under Johnson Act is ``any so-called 
`slot machine' or any other machine or mechanical device an essential 
part of which is a drum or reel with an insignia thereon and . . . 
which when operated may deliver, as the result of the application of an 
element of chance, any money or property, or . . . by the operation of 
which a person may become entitled to receive, as the result of the 
application of an element of chance, any money or property. . . .''
---------------------------------------------------------------------------
    In the colloquy on the topic, Senator Inouye responds to my 
question asking the Senator to confirm the understanding that 
the Johnson Act would still apply to limit Class II gaming by 
saying: ``The bill as reported by the Committee would not alter 
the effect of the Johnson Act except to provide for a waiver of 
its application in the case of gambling devices operated 
pursuant to a compact with the state in which the tribe is 
located [i.e., class III]. The bill is not intended to amend or 
otherwise alter the Johnson Act in any way.'' Cong. Rec. 24024 
(September 15, 1988).
    Accordingly, the Committee's assertion that Congress 
intended to waive the Johnson Act for Class II games is both 
inconsistent with the statute and its legislative history.
    As interpreted by the Department of Justice, the Johnson 
Act interacts and may be harmonized with IGRA's authorization 
of Class II games by prohibiting the use of electronic slot-
machine equivalents, but enabling Tribes to use technological 
aids like telecommunicationstechnology to enable bingo players 
to play bingo against one and other at different locations. The 
Committee Report on IGRA lends credence to this view.\2\
---------------------------------------------------------------------------
    \2\ ``The Committee recognizes that tribes may wish to join with 
other tribes to coordinate their class II operations and thereby 
enhance the potential of increasing revenues. For example, linking 
participant players at various reservations whether in the same or 
different States, by means of telephone, cable, televison or satellite 
may be a reasonable approach for tribes to take. Simultaneous games 
participation between and among reservations can be made practical by 
use of computers and telecommunications technology as long as the use 
of such technology does not change the fundamental characteristics of 
the bingo or lotto games. . . . S. Rept. No. 100-446 at 9.
---------------------------------------------------------------------------
    Despite this clarity, the Committee is correct that federal 
courts have found that Congress must have meant to waive the 
Johnson Act for Class II games. What the report fails to note 
is that another federal circuit court has decided the issue the 
other way, finding that the Johnson Act does indeed apply.\3\ 
The Supreme Court has not stepped in to resolve the conflict 
between circuits.
---------------------------------------------------------------------------
    \3\ The U.S. Federal Court of Appeals for the Eighth Circuit--after 
a review of the express text of IGRA and the legislative history--
determined that the Johnson Act prohibition on gambling devices and 
IGRA's sanctioning of Class II devices could be read together. In this 
court's view, IGRA did not impliedly repeal the Johnson Act. The court 
determined that you could have a bingo-type class II device that did 
not fall within the gambling device definition (and prohibition) of the 
Johnson Act. U.S. v. Santee Sioux Tribe of Nebraska, 324 F. 3d 607 (8th 
Cir. 2003). See also Cabazon Band of Mission Indians, 14 F.3d 633, 635, 
n. 3 (D.C. Cir. 1994) (IGRA did not repeal the Johnson Act for class II 
games). For example, the use of telecommunications equipment to connect 
electronic bingo players could be both a permissible Class II game and 
not fall within the Johnson Act.
---------------------------------------------------------------------------
    S. 1529's repeal of the Johnson Act's limitation on Class 
II games is the source of the Department of Justice's 
opposition to the bill. In the Department's June 15, 2004 
letter to the Chairman, they put it this way: ``[Justice] 
cannot support this amendment to IGRA, as it removes the 
current restrictions on the use of gambling devices in class II 
gambling without substituting an increased level of regulation 
an approval that at least approximates that surrounding the use 
of similar machines in the class III context.''
    That is, the bill removes regulation of Class II machines 
and doesn't replace it with anything. It breaks down the 
fundamental policy trade off in IGRA between Class II and Class 
III to the detriment of State and local governments.

II. State and local impacts in Class III Compacting

    After liberalizing the definition of Class II gaming, S. 
1529 weakens the requirements for Class III compacting. IGRA 
provides that compacts may provide for revenue sharing 
agreements between the Tribe and the compacting State. Such 
agreements allow for the consideration and resolution of State 
and local cost and other impacts. As Tribal gaming has 
dramatically increased over the last twenty years, the need for 
these agreements is greater, not smaller.
    Accordingly, S. 1529 goes in the wrong direction by placing 
new restrictions on revenue sharing agreements, making it more 
difficult for State and local governments to form these 
agreements. More specifically, S. 1529 provides that the 
Secretary ``shall not'' approve a compact providing for such 
assessments unless a number of Tribal fiscal considerations are 
met first, including a catchall that the ``general welfare'' of 
the tribe is first satisfied.

III. Reservation Shopping

    While S. 1529's repeal of the Johnson Act and weakening of 
Class III compacting would greatly ease the requirements on 
Indian gaming to the detriment of State and local governments, 
the bill is silent on one of their most significant concerns: 
reservation shopping. Over the last decade, the propensity for 
reservation shopping has grown in tandem with the profitability 
of certain Indian gaming enterprises.
    Tribes seeking lands with speculative connection in areas 
where a casino might be profitably run have increased 
dramatically. One of the most notable current disputes involves 
and Oklahoma Tribe seeking land in Denver for the operation of 
a casino. That effort is strongly opposed by State and local 
officials. In addition, many Tribes oppose these efforts, as 
reservation shopping threatens to bring gaming enterprises near 
well-established Tribes and their reservations.
    Any amendment to IGRA must deal with this new phenomena to 
address significant Tribal, State, Federal and local concerns.

IV. Conclusion

    Since the passage of IGRA almost twenty years ago, the 
explosion of Indian gaming has benefitted Tribes throughout the 
nation, providing a critical avenue for economic development 
which should be supported. With this great growth, however, 
have come concerns with how and where such gaming is conducted. 
I look forward to working with the Committee to ensure that S. 
1529 is amended to follow in the example of its predecessor by 
carefully balancing the important Tribal, local, State and 
federal concerns at issue here.

                                                        Harry Reid.

                        Changes in Existing Law

    In compliance with subsection 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill S. 1529, as ordered reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, existing law in 
which no change is proposed is shown in roman):

                           Public Law 100-497


               AN ACT To regulate gaming on Indian lands

    Be it enacted by the Senate and House of Representatives of 
the United States of America in Congress assembled,

           *       *       *       *       *       *       *


                              DEFINITIONS

    Sec. 4. For purposes of this Act--* * *
          (7) * * *
                  (E) Notwithstanding any other provision of 
                this paragraph, the term ``class II gaming'' 
                includes, during the 1-year period beginning on 
                the date of enactment of this subparagraph 
                [enacted Dec. 17, 1991], any gaming described 
                in subparagraph (B)(ii) that was legally 
                operated on Indian lands in the State of 
                Wisconsin on or before May 1, 1988, if the 
                Indian tribe having jurisdiction over the lands 
                on which such gaming was operated requested the 
                State, by no later than November 16, 1988, to 
                negotiate a Tribal-State compact under section 
                11(d)(3) [of the Indian Gaming Regulatory Act 
                (25 U.S.C. 2710(d)(3))].
                  (F) If, during the 1-year period described in 
                subparagraph (E), there is a final judicial 
                determination that the gaming described in 
                subparagraph (E) is not legal as a matter of 
                State law, then such gaming on such Indian land 
                shall cease to operate on the date next 
                following the date of such judicial decision.
                  (G) Technological aids.--Notwithstanding any 
                other provision of law, sections 1 through 7 of 
                the Act of January 2, 1951 (commonly known as 
                the ``Gambling Devices Transportation Act'') 
                (15 U.S.C. 1171 et seq.), shall not apply to 
                any gaming described in subparagraph (A)(i) for 
                which an electronic aid, computer, or other 
                technological aid is used in connection with 
                the gaming.

           *       *       *       *       *       *       *


                   NATIONAL INDIAN GAMING COMMISSION

    Sec. 5. * * *
    [(c) Vacancies occurring on the Commission shall be filled 
in the same manner as the original appointment. A member may 
serve after the expiration of his term of office until his 
successor has been appointed, unless the member has been 
removed for cause under subsection (b)(6).]
    (C) Vacancies.--
          (1) In general.--A vacancy on the Commission shall be 
        filled in the same manner as the original appointment.
          (2) Successors.--Unless a member of the Commission is 
        removed for cause under subsection (b)(6), the member 
        may--
                  (A) be reappointed; and
                  (B) serve after the expiration of the term of 
                the member until a successor is appointed. * * 
                *
    (e) The Commission shall select, by majority vote, one of 
the members of the Commission to serve as Vice Chairman. The 
Vice Chairman shall serve as Chairman during meetings of the 
Commission in the absence or disability of the Chairman.

           *       *       *       *       *       *       *


                         POWERS OF THE CHAIRMAN

    Sec. 6. * * *
    (c) Delegation.--The Chairman may delegate to an individual 
Commissioner any of the authorities described in subsection 
(a).
    (d) Applicable Authority.--In carrying out any function 
under this section, a Commissioner serving in the capacity of 
theChairman shall be governed by--
          (1) such general policies as are formally adopted by 
        the Commission; and
          (2) such regulatory decisions, findings, and 
        determinations as are made by the Commission.

                        POWERS OF THE COMMISSION

    Sec. 7. * * *
    (c) Strategic Plan.--
          (1) In general.--The Commission shall develop a 
        strategic plan for use in carrying out activities of 
        the Commission.
          (2) Requirements.--The strategic plan shall include--
                  (A) a comprehensive mission statement 
                describing the major functions and operations 
                of the Commission;
                  (B) a description of the goals and objectives 
                of the Commission;
                  (C) a description of the general means by 
                which those goals and objectives are to be 
                achieved, including a description of the 
                operational processes, skills, and technology, 
                and the human resources, capital, information, 
                and other resources required to achieve those 
                goals and objectives;
                  (D) a performance plan for achievement of 
                those goals and objectives that is consistent 
                with--
                          (i) other components of the strategic 
                        plan; and
                          (ii) section 1115 of title 31, United 
                        States Code;
                  (E) an identification of the key factors that 
                are external to, or beyond the control of, the 
                Commission that could significantly affect the 
                achievement of those goals and objectives; and
                  (F) a description of the program evaluations 
                used in establishing or revising those goals 
                and objectives, including a schedule for future 
                program evaluations.
          (3) Biennial plan.--
                  (A) Period covered.--The strategic plan shall 
                cover a period of not less than 5 fiscal years 
                beginning with the fiscal year in which the 
                plan is submitted.
                  (B) Updates and revisions.--The strategic 
                plan shall be updated and revised biennially.
    (d) Registration of Technological Aids.--
          (1) In general.--The Commission shall require the 
        registration of--
                  (A) any electronic aid, computer, or other 
                technological aid described in section 4(7)(G) 
                that is intended for use on Indian land, and
                  (B) any manufacturer, seller, dealer, buyer, 
                lessor, or any other person that is engaged in 
                the business of repairing, reconditioning, or 
                reprogramming such technological aids.
          (2) Registration of manufacturers and dealers.--A 
        manufacturer, seller, dealer, buyer, lessor, or any 
        other person that intends to be engaged in the business 
        of repairing, reconditioning, or reprogramming any 
        electronic aid, computer, or other technological aid 
        described in section 4(7)(G) that is intended for use 
        on Indian land in a calendar year shall register with 
        the Commission not later than November 30 of the 
        preceding calendar year.
          (3) Numbering and records for technological aids.--
                  (A) Manufacturers.--A manufacturer of an 
                electronic, computer, or other technological 
                aid described in section 4(7)(G) shall--
                          (i) sequentially number each 
                        technological aid; and
                          (ii) permanently affix to the 
                        technological aid, so as to be clearly 
                        visible, the serial number, legal and 
                        trade name of the manufacturer, and 
                        date of manufacture of the 
                        technological aid.
                  (B) Persons required to register.--
                          (i) Numbering.--A person required to 
                        register under paragraph (2) shall--
                                  (I) sequentially number each 
                                electronic aid, computer, or 
                                other technological aid within 
                                the physical possession of the 
                                person, if a manufacturer's 
                                serial number has not been 
                                previously affixed pursuant to 
                                paragraph (A); and
                                  (II) permanently affix to the 
                                technological aid, so as to be 
                                clearly visible, the serial 
                                number, legal name and trade 
                                name of the registrant, and the 
                                date on which the serial number 
                                is affixed.
                          (ii) Records.--A person required to 
                        registerunder paragraph (2) for any 
calendar year shall, on and after the date of registration or the first 
day of that year (whichever occurs later), maintain a record by 
calendar month, for all periods thereafter in the year, of each 
electronic aid, computer, or other technological aid within the 
possession of the registrant that discloses--
                                  (I) the information required 
                                by subparagraph (A) and clause 
                                (i); and
                                  (II) on transfer of 
                                possession of the technological 
                                aid, the legal and trade name 
                                of the person to which 
                                possession is transferred and 
                                the date of the transfer.
          (4) Civil penalties.--A person that fails to comply 
        with this subsection shall be subject to the penalties 
        prescribed in section 14 as if the person were a 
        management contractor engaged in gaming.
    [(c)] (e) The Commission shall submit a report with 
minority views, if any, to the Congress on December 31, 1989, 
and every two years thereafter. The report shall include 
information on--
          (1) whether the associate commissioners should 
        continue as full or part-time officials;
          (2) funding, including income and expenses, of the 
        Commission;
          (3) recommendations for amendments to [the Act; and] 
        this Act;
          (4) the strategic plan for activities of the 
        Commission described in subsection (c); and
          [(4)] (5) any other matter considered appropriate by 
        the Commission.

                          COMMISSION STAFFING

    Sec. 8.(a) The Chairman shall appoint a General Counsel to 
the Commission who shall be paid at the annual rate of basic 
pay payable for [GS-18 of the General Schedule under section 
5332] level IV of the Executive Schedule under section 5318 of 
title 5, United States Code.
    [(b) The Chairman] (b) Staff.--
          (1) In general.--The Chairman shall appoint and 
        supervise other staff of the Commission without regard 
        to the provisions of title 5, United States Code, 
        governing appointments in the competitive service. 
        [Such staff shall be paid without regard to the 
        provisions of chapter 51 and subchapter III of chapter 
        53 of such title relating to classification and General 
        Schedule pay rates, except that no individual so 
        appointed may receive pay in excess of the annual rate 
        of basic pay payable for GS-17 of the General Schedule 
        under section 5332 of that title.]
          (2) Compensation.--
                  (A) In general.--Staff appointed under 
                paragraph (1) shall be paid without regard to 
                the provisions of chapter 51 and subchapter III 
                of chapter 53, of title 5, United States Code, 
                relating to General Schedule pay rates.
                  (B) Maximum rate of pay.--The rate of pay for 
                an individual appointed under the paragraph (1) 
                shall not exceed the rate payable for level IV 
                of the Executive Schedule under section 5315 of 
                title 5, United States Code.
    [(c) The Chairman may procure temporary and intermittent 
services under section 3109(b) of title 5, United States Code, 
but at rates for individuals not to exceed the daily equivalent 
of the maximum annual rate of basic pay payable for GS-18 of 
the General Schedule.]
    (c) Temporary Services.--
          (1) In general.--The Chairman may procure temporary 
        and intermittent services under section 3109 of title 
        5, United States Code.
          (2) Maximum rate of pay.--The rate of pay for an 
        individual for service described in paragraph (1) shall 
        not exceed the daily equivalent of the maximum rate 
        payable for level IV of the Executive Schedule under 
        section 5318 of title 5, United States Code.

           *       *       *       *       *       *       *


                        TRIBAL GAMING ORDINANCES

    Sec. 11. * * *
    (b) * * *
          (2) The Chairman shall approve any tribal ordinance 
        or resolution concerning the conduct, or regulation of 
        class II gaming on the Indian lands within the tribe's 
        jurisdiction if such ordinance or resolution provides 
        that-- * * *
                  (F) there is an adequate system which--
                          [(i) ensures that background 
                        investigations are conducted on the 
                        primary management officials and key 
                        employees of the gaming enterprise and 
                        that oversight of such officials and 
                        their management is conducted on an 
                        ongoing basis; and]
                          (i) ensures that--
                                  (I) background investigations 
                                are conducted on the tribal 
                                gaming commissioners, key 
                                tribal gaming commission 
                                employees, and primary 
                                management officials and key 
                                employees of the gaming 
                                enterprise; and
                                  (II) oversight of primary 
                                management officials and key 
                                employees is conducted on an 
                                ongoing basis; and * * *
    (d) * * *
          [(4) Except for any assessments that may be agreed to 
        under paragraph (3)(C)(iii) of this subsection, nothing 
        in this section shall be interpreted as conferring upon 
        a State or any of its political subdivisions authority 
        to impose any tax, fee, charge, or other assessment 
        upon an Indian tribe or upon any other person or entity 
        authorized by an Indian tribe to engage in a class III 
        activity. No State may refuse to enter into the 
        negotiations described in paragraph (3)(A) based upon 
        the lack of authority in such State, or its political 
        subdivisions, to impose such a tax, fee, charge, or 
        other assessment.]
          (4) Revenue apportionment.--
                  (A) In general.--Except for any assessments 
                that may be agreed to under paragraph 
                (3)(C)(iii) , nothing in this section confers 
                on a State or any political subdivision of a 
                State authority to impose any tax, fee, charge, 
                or other assessment on an Indian tribe or on 
                any other person or entity authorized by an 
                Indian tribe to engage in a class III activity.
                  (B) Negotiations.--No State may refuse to 
                enter into the negotiations described in 
                paragraph (3)(A) based on the lack of authority 
                in a State, or political subdivision of a 
                State, to impose such a tax, fee, charge, or 
                other assessment.
                  (C) Apportionment of revenues.--The Secretary 
                may not approve any Tribal-State compact or 
                other agreement that includes an apportionment 
                of revenues with a State or local government 
                unless--
                          (i) in the case of apportionment with 
                        local governments, the total amount of 
                        net revenues exceeds the amounts 
                        necessary to meet the requirements of 
                        subsection (b)(2)(B)(i), but only to 
                        the extent that the excess revenues 
                        reflect the actual costs incurred by 
                        affected local governments as a result 
                        of the operation of gaming activities; 
                        or
                          (ii) in the case of apportionment 
                        with a State--
                                  (I) the total amount of net 
                                revenues--
                                          (aa) exceeds the 
                                        amounts necessary to 
                                        meet the requirements 
                                        of clauses (i) and 
                                        (iii) of subsection 
                                        (b)(2)(B) and clause 
                                        (i) of this 
                                        subparagraph, if 
                                        applicable; and
                                          (bb) is in accordance 
                                        with regulations 
                                        promulgated by the 
                                        Secretary under 
                                        subparagraph (D); and
                                  (II) a substantial economic 
                                benefit is rendered by the 
                                State to the Indian tribe.
                  (D) Regulations.--Not later than 18 months 
                after the date of enactment of this 
                subparagraph, the Secretary shall promulgate 
                regulations to provide guidance to Indian 
                tribes and States on the scope of allowable 
                assessments negotiated under paragraph 
                (3)(C)(iii) and the apportionment of revenues 
                negotiated in accordance with subparagraph (C).
                  (E) No effect on existing agreements.--
                Nothing in this paragraph affects any existing 
                Tribal-State compact or other agreement 
                providing for an apportionment of revenues with 
                a State, local government, or other Indian 
                tribe. * * *
          (7) * * *
                  (B) * * *
                          (vii) If the State does not consent 
                        during the 60-day period described in 
                        clause (vi) to a proposed compact 
                        submitted by a mediator underclause 
(v), the mediator shall notify the Secretary and the Secretary shall 
prescribe not later than 180 days after notification is made, in 
consultation with the Indian tribe, procedures--
                                  (I) which are consistent with 
                                the proposed compact selected 
                                by the mediator under clause 
                                (iv), the provisions of this 
                                Act, and the relevant 
                                provisions of the laws of the 
                                State, and
                                  (II) under which class III 
                                gaming may be conducted on the 
                                Indian lands over which the 
                                Indian tribe has jurisdiction. 
                                * * *
          [(9) An Indian tribe may enter into a management 
        contract for the operation of a class III gaming 
        activity if such contract has been submitted to, and 
        approved by, the Chairman. The Chairman's review and 
        approval of such contract shall be governed by the 
        provisions of subsections (b), (c), (d), (f), (g), and 
        (h) of section 12.]
          (9) Extension of negotiating timeframe.--Class III 
        gaming activities conducted by an Indian tribe on 
        Indian land shall be lawful under this Act for up to 
        180 days after expiration of a Tribal-State compact if 
        the Indian tribe signatory to the compact certifies to 
        the Secretary that--
                  (A) the Indian tribe requested a new compact 
                not later than 90 days before expiration of the 
                compact; and
                  (B) a new compact has not been agreed on.

                         [MANAGEMENT CONTRACTS

    [Sec. 12. (a)(1) Subject]

SEC. 12. MANAGEMENT CONTRACTS.

    (a) Class II Gaming and Class III Gaming Activities; 
Information on Operators.--
          (1) Gaming activities.--Subject to the approval of 
        the Chairman, an Indian tribe may enter into a 
        management contract for the operation and management of 
        a [class II gaming activity that the Indian tribe may 
        engage in under section 11(b)(1)] class II gaming 
        activity in which the Indian tribe may engage under 
        section 11(b)(1), or a class III gaming activity in 
        which the Indian tribe may engage under section 11(d), 
        but, before approving such contract, the Chairman shall 
        require and obtain the following information--
                  (A) the name, address, and other additional 
                pertinent background information on each person 
                or entity (including individuals comprising 
                such entity) having a direct financial interest 
                in, or management responsibility for, such 
                contract, and, in the case of a corporation, 
                those individuals who serve on the board of 
                directors of such corporation and each of its 
                stockholders who hold (directly or indirectly) 
                10 percent or more of its issued and 
                outstanding stock;
                  (B) a description of any previous experience 
                that each person listed pursuant to 
                subparagraph (A) has had with other gaming 
                contracts with Indian tribes or with the gaming 
                industry generally, including specifically the 
                name and address of any licensing or regulatory 
                agency with which such person has had a 
                contract relating to gaming; and
                  (C) a complete financial statement of each 
                person listed pursuant to subparagraph (A).
          [(2) Any person] (2) Requirement to respond.--Any 
        person listed pursuant to paragraph (1)(A) shall be 
        required to respond to such written or oral questions 
        that the Chairman may propound in accordance with his 
        responsibilities under this section.
          [(3) For purposes] (3) References to management 
        contracts.--For purposes of this Act, any reference to 
        the management contract described in paragraph (1) 
        shall be considered to include all collateral 
        agreements to such contract that relate to the gaming 
        activity.

           *       *       *       *       *       *       *


                          [COMMISSION FUNDING

    [Sec. 18. (a)(1) The Commission shall establish a schedule 
of fees to be paid to the Commission annually by each gaming 
operation that conducts a class II or class III gaming activity 
that is regulated by this Act.
    [(2)(A) The rate of the fees imposed under the schedule 
established under paragraph (1) shall be--
          [(i) no more than 2.5 percent of the first 
        $1,500,000, and
          [(ii) no more than 5 percent of amounts inexcess of 
the first $1,500,000, of the gross revenues from each activity 
regulated by this Act.
    [(B) The total amount of all fees imposed during any fiscal 
year under the schedule established under paragraph (1) shall 
not exceed $8,000,000.
    [(3) The Commission, by a vote of not less than two of its 
members, shall annually adopt the rate of the fees authorized 
by this section which shall be payable to the Commission on a 
quarterly basis.]

SEC. 18. COMMISSION FUNDING.

    (a) Fees.--
          (1) Fee schedule.--
                  (A) In general.--Except as provided in this 
                section, the Commission shall establish a 
                schedule of fees to be paid annually to the 
                Commission, on a quarterly basis, by each 
                gaming operation that conducts a class II 
                gaming or class III gaming activity that is 
                regulated, in whole or in part, by this Act.
                  (B) Rates.--The rate of fees under the 
                schedule established under subparagraph (A) 
                that are imposed on the gross revenues from 
                each operation that conducts a class II gaming 
                or class III gaming activity described in that 
                paragraph shall be (as determined by the 
                Commission)--
                          (i) a progressive rate structure 
                        levied on the gross revenues in excess 
                        of $1,500,000 from each operation that 
                        conducts a class II gaming or class III 
                        gaming activity; or
                          (ii) a flat fee levied on the gross 
                        revenues from each operation that 
                        conducts a class II gaming or class III 
                        gaming activity.
                (C) Total amount.--Notwithstanding any other 
                provision of law, the total amount of all fees 
                imposed during any fiscal year under the 
                schedule established under subparagraph (A) 
                shall not exceed--
                          (i) $11,500,000 for fiscal year 2005;
                          (ii) $12,000,000 for each of fiscal 
                        years 2006 and 2007; and
                          (iii) $13,000,000 for each of fiscal 
                        years 2008 and 2009.
          [(4)] (2) Failure to pay the fees imposed under the 
        schedule established under paragraph (1) shall, subject 
        to the regulations of the Commission, be grounds for 
        revocation of the approval of the Chairman of any 
        license, ordinance, or resolution required under this 
        Act for the operation of gaming.
          [(5)] (3) To the extent that revenue derived from 
        fees imposed under the schedule established under 
        paragraph (1) are not expended or committed at the 
        close of any fiscal year, such surplus funds shall be 
        credited to each gaming activity on a pro rata basis 
        against such fees imposed for the succeeding year.
          [(6)] (4) For purposes of this section, gross 
        revenues shall constitute the annual total amount of 
        money wagered, less any amounts paid out as prizes or 
        paid for prizes awarded and less allowance for 
        amortization of capital expenditures for structures.
    (b) Fee Procedures.--
          (1) In general.--By a vote of not less than 2 members 
        of the Commission, the Commission shall adopt the 
        schedule of fees provided for under this section.
          (2) Fees assessed.--In assessing and collecting fees 
        under this section, the Commission shall take into 
        account the duties of, and services provided by, the 
        Commission under this Act.
          (3) Regulations.--The Commission shall promulgate 
        such regulations as are necessary to carry out this 
        subsection.
    [(b)] (c)(1) The Commission, in coordination with the 
Secretary and in conjunction with the fiscal year of the United 
States, shall adopt an annual budget for the expenses and 
operation of the Commission.
    (2) The budget of the Commission may include a request for 
appropriations, as authorized by [section 19] section 24, in an 
amount equal the amount of funds derived from assessments 
authorized by subsection (a) for the fiscal year preceding the 
fiscal year for which the appropriation request is made.
    (3) The request for appropriations pursuant to paragraph 
(2) shall be subject to the approval of the Secretary and shall 
be included as a part of the budget request of the Department 
of the Interior.

                    [AUTHORIZATION OF APPROPRIATIONS

    [Sec. 19(a) Subject to section 18, there are authorized to 
be appropriated, for fiscal year 1998, and for each fiscal year 
thereafter, an amount equal to the amount of funds derived from 
the assessments authorized by section 18(a).
    [(b) Notwithstanding section 18, there are authorized to be 
appropriated to fund the operation of the Commission, 
$2,000,000 for fiscal year 1998, and $2,000,000 for each fiscal 
year thereafter. The amounts authorized to be appropriated in 
the preceding sentence shall be in addition to the amounts 
authorized to be appropriated under subsection (a).]

SEC. 19. TRIBAL CONSULTATION.

    In carrying out this Act (including the use of negotiated 
rulemaking with tribal governments and the use of tribal 
advisory committees in developing regulatory policies, 
standards, and definitions), the Secretary, Secretary of the 
Treasury, and Chairman of the Commission shall involve and 
consult with Indian tribes to the maximum extent practicable, 
as appropriate, in a manner that is consistent with the Federal 
trust and the government-to-government relationship that exists 
between Indian tribes and the Federal Government.

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                          [CRIMINAL PENALTIES

    [Sec. 23. Chapter 53]

SEC. 23. CRIMINAL PENALTIES.

    (a) In General.--Chapter 53 of title 18, United States 
Code, is amended by adding at the end thereof the following new 
sections:

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                         [CONFORMING AMENDMENT

    [Sec. 24. The table]
    (b) Conforming Amendment.--The table of contents for 
chapter 53 of title 18, United States Code, is amended by 
adding at the end thereof the following:

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SEC. 24. AUTHORIZATION OF APPROPRIATIONS.

    (a) In General.--Subject to section 18, there is authorized 
to be appropriated to carry out this Act, for fiscal year 1998 
and each fiscal year thereafter, an amount equal to the amount 
of funds derived from the assessments authorized by section 
18(a).
    (b) Additional Amounts.--Notwithstanding section 18, in 
addition to amounts authorized to be appropriated by subsection 
(a), there are authorized to be appropriated $2,000,000 to fund 
the operation of the Commission for fiscal year 1998 and each 
fiscal year thereafter.

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