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S. HRG. 108–475

INDIAN GAMING REGULATORY ACT AMENDMENTS

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

ON

S. 1529

TO AMEND THE INDIAN GAMING REGULATORY ACT TO INCLUDE

PROVISIONS RELATING TO THE PAYMENT AND ADMINISTRATION OF

GAMING FEES

MARCH 24, 2004

WASHINGTON, DC

(
COMMITTEE ON INDIAN AFFAIRS

BEN NIGHTHORSE CAMPBELL, Colorado, Chairman

DANIEL K. INOUYE, Hawaii, Vice Chairman

JOHN McCAIN, Arizona,

PETE V. DOMENICI, New Mexico

CRAIG THOMAS, Wyoming

ORRIN G. HATCH, Utah

JAMES M. INHOFE, Oklahoma

GORDON SMITH, Oregon

LISA MURKOWSKI, Alaska

KENT CONRAD, North Dakota

HARRY REID, Nevada

DANIEL K. AKAKA, Hawaii

BYRON L. DORGAN, North Dakota

TIM JOHNSON, South Dakota

MARIA CANTWELL, Washington

PAUL MOOREHEAD, Majority Staff Director/Chief Counsel

PATRICIA M. ZELL, Minority Staff Director/Chief Counsel

(II)
(III)

C O N T E N T S

Page

S. 1529, text of ......................................................................................................... 3

Statements:

Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, chairman,

Committee on Indian Affairs ....................................................................... 1

Hogen, Phil, commissioner, National Indian Gaming Commission .............. 26

Skibine, George T., acting deputy assistant secretary, Policy and Economic Development, Department of the Interior ....................................... 33

Stevens, Jr., Ernest, chairman, Natinal Indian Gaming Association .......... 36

Van Norman, Mark, executive director, National Indian Gaming

Commision ..................................................................................................... 36

APPENDIX

Prepared statements:

Hogen, Phil (with attachment) ........................................................................ 52

Skibine, George T. ............................................................................................ 49

Stevens, Jr., Ernest (with attachment) ........................................................... 88

(1)

INDIAN GAMING REGULATORY ACT

AMENDMENTS

WEDNESDAY, MARCH 24, 2004

U.S. SENATE, COMMITTEE ON INDIAN AFFAIRS, Washington, DC.

The committee met, pursuant to notice, at 11:00 a.m. in room

562, Dirksen Senate Building, Hon. Ben Nighthorse Campbell

(chairman of the committee) presiding.

Present: Senators Campbell, Inouye and McCain.

STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR FROM COLORADO, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

The CHAIRMAN. The committee will be in order. Good morning

and welcome to the Committee on Indian Affairs’ hearing on S.

1529, a bill that I, along with my vice chairman, Senator Inouye,

introduced in July 2003 after we held two hearings on these matters.

I have to say at the outset, Mr. Vice Chairman, I am very

pleased to see such a large turnout. I would also like to say I would

like to see this kind of participation when we talk about Indian nutrition or care of elders or education for Indian kids. Clearly, when

it has to do with money, it excites a lot of people because we have

a very full house today.

If enacted, the bill will amend the Indian Gaming Regulatory Act

of 1988 to, clarify that when a class II game is used with electronic

aids it is still a class II game for purposes of the Johnson Act; to

require the National Indian Gaming Commission to be more transparent and open to the regulated community. It clarifies the Commission’s authority with respect to class III gaming. It provides

much-needed guidance to tribes and States when they are negotiating a revenue-sharing agreement, and provides certainty and stability to tribes regarding the amount of gaming fees the Commission can charge.

We have a vote scheduled at 11:30, so we will get through as

much as we can. We will have to take a few minutes’ break and

then we will continue after that. Other members have notified us

that they will be coming and going throughout the meeting.

With that, Senator Inouye, did you have an opening statement,

sir?

Senator INOUYE. All I can say is that much has happened since

the U.S. Supreme Court’s ruling in the Cabazon case and I think
2

the crowd here today so indicates that. I look forward to hearing

the testimony.

[Text of S. 1529 follows:]
3

1

II

108TH CONGRESS

1ST SESSION 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.

IN THE SENATE OF THE UNITED STATES

JULY 31 (legislative day, JULY 21), 2003

Mr. CAMPBELL (for himself and Mr. INOUYE) introduced the following bill;

which was read twice and referred to the Committee on Indian Affairs

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Indian Gaming Regu5 latory Act Amendments of 2003’’.

6 SEC. 2. PAYMENT AND ADMINISTRATION OF GAMING FEES.

7 (a) DEFINITIONS.—Section 4(7) of the Indian Gam8 ing Regulatory Act (25 U.S.C. 2703(7)) is amended by

9 adding at the end the following:
4

2

•S 1529 IS

1 ‘‘(G) TECHNOLOGICAL AIDS.—Notwith2 standing any other provision of law, sections 1

3 through 7 of the Act of January 2, 1951 (com4 monly known as the ‘Gambling Devices Trans5 portation Act’) (15 U.S.C. 1171 through 1177)

6 shall not apply to any gaming described in sub7 paragraph (A)(i) for which an electronic aid,

8 computer, or other technological aid is used in

9 connection with the gaming.’’.

10 (b) NATIONAL INDIAN GAMING COMMISSION.—Sec11 tion 5 of the Indian Gaming Regulatory Act (25 U.S.C.

12 2704) is amended—

13 (1) by striking subsection (c) and inserting the

14 following:

15 ‘‘(c) VACANCIES.—

16 ‘‘(1) IN GENERAL.—A vacancy on the Commis17 sion shall be filled in the same manner as the origi18 nal appointment.

19 ‘‘(2) SUCCESSORS.—Unless a member of the

20 Commission is removed for cause under subsection

21 (b)(6), the member may—

22 ‘‘(A) be reappointed; and

23 ‘‘(B) serve after the expiration of the term

24 of the member until a successor is appointed.’’;

25 and
5

3

•S 1529 IS

1 (2) in subsection (e), in the last sentence, by in2 serting ‘‘or disability’’ after ‘‘in the absence’’.

3 (c) POWERS OF CHAIRMAN.—Section 6 of the Indian

4 Gaming Regulatory Act (25 U.S.C. 2705) is amended by

5 adding at the end the following:

6 ‘‘(c) DELEGATION.—The Chairman may delegate to

7 an individual Commissioner any of the authorities de8 scribed in subsection (a).

9 ‘‘(d) APPLICABLE AUTHORITY.—In carrying out any

10 function under this section, a Commissioner serving in the

11 capacity of the Chairman shall be governed by—

12 ‘‘(1) such general policies as are formally

13 adopted by the Commission; and

14 ‘‘(2) such regulatory decisions, findings, and de15 terminations as are made by the Commission.’’.

16 (d) POWERS OF COMMISSION.—Section 7 of the In17 dian Gaming Regulatory Act (25 U.S.C. 2706) is

18 amended—

19 (1) in paragraphs (1), (2), and (4) of sub20 section (b), by striking ‘‘class II gaming’’ each place

21 it appears and inserting ‘‘class II gaming and class

22 III gaming’’;

23 (2) by redesignating subsection (c) as sub24 section (d);
6

4

•S 1529 IS

1 (3) by inserting after subsection (b) the follow2 ing:

3 ‘‘(c) STRATEGIC PLAN.—

4 ‘‘(1) IN GENERAL.—The Commission shall de5 velop a strategic plan for use in carrying out activi6 ties of the Commission.

7 ‘‘(2) REQUIREMENTS.—The strategic plan shall

8 include—

9 ‘‘(A) a comprehensive mission statement

10 describing the major functions and operations

11 of the Commission;

12 ‘‘(B) a description of the goals and objec13 tives of the Commission;

14 ‘‘(C) a description of the means by which

15 those goals and objectives are to be achieved,

16 including a description of the operational proc17 esses, skills and technology, and the human,

18 capital, information, and other resources re19 quired to achieve those goals and objectives;

20 ‘‘(D) a performance plan for achievement

21 of those goals and objectives that is consistent

22 with—

23 ‘‘(i) other components of the strategic

24 plan; and
7

5

•S 1529 IS

1 ‘‘(ii) section 1115 of title 31, United

2 States Code;

3 ‘‘(E) an identification of the key factors

4 that are external to, or beyond the control of,

5 the Commission that could significantly affect

6 the achievement of those goals and objectives;

7 and

8 ‘‘(F) a description of the program evalua9 tions used in establishing or revising those

10 goals and objectives, including a schedule for

11 future program evaluations.

12 ‘‘(3) BIENNIAL PLAN.—

13 ‘‘(A) PERIOD COVERED.—The strategic

14 plan shall cover a period of not less than 5 fis15 cal years beginning with the fiscal year in which

16 the plan is submitted.

17 ‘‘(B) UPDATES AND REVISIONS.—The

18 strategic plan shall be updated and revised bi19 ennially.’’; and

20 (4) in subsection (d) (as redesignated by para21 graph (2))—

22 (A) in paragraph (3), by striking ‘‘and’’ at

23 the end;

24 (B) by redesignating paragraph (4) as

25 paragraph (5); and
8

6

•S 1529 IS

1 (C) by inserting after paragraph (3) the

2 following:

3 ‘‘(4) the strategic plan for activities of the

4 Commission described in subsection (c); and’’.

5 (e) COMMISSION STAFFING.—Section 8 of the Indian

6 Gaming Regulatory Act (25 U.S.C. 2707) is amended—

7 (1) in subsection (a), by striking ‘‘GS–18 of the

8 General Schedule under section 5332’’ and inserting

9 ‘‘level IV of the Executive Schedule under section

10 5318’’;

11 (2) in subsection (b)—

12 (A) by striking ‘‘(b) The Chairman’’ and

13 inserting the following:

14 ‘‘(b) STAFF.—

15 ‘‘(1) IN GENERAL.—The Chairman’’; and

16 (B) by striking the last sentence and in17 serting the following:

18 ‘‘(2) COMPENSATION.—

19 ‘‘(A) IN GENERAL.—Staff appointed under

20 paragraph (1) shall be paid without regard to

21 the provision of chapter 51 and subchapter III

22 of chapter 53, of title 5, United States Code,

23 relating to General Schedule pay rates.

24 ‘‘(B) MAXIMUM RATE OF PAY.—The rate

25 of pay for an individual appointed under para-
9

7

•S 1529 IS

1 graph (1) shall not exceed the rate payable for

2 level IV of the Executive Schedule under section

3 5315 of title 5, United States Code.’’; and

4 (3) by striking subsection (c) and inserting the

5 following:

6 ‘‘(c) TEMPORARY SERVICES.—

7 ‘‘(1) IN GENERAL.—The Chairman may procure

8 temporary and intermittent services under section

9 3109 of title 5, United States Code.

10 ‘‘(2) MAXIMUM RATE OF PAY.—The rate of pay

11 for an individual for service described in paragraph

12 (1) shall not exceed the daily equivalent of the maxi13 mum rate payable for level IV of the Executive

14 Schedule under section 5318 of title 5, United

15 States Code.’’.

16 (f) TRIBAL GAMING ORDINANCES.—Section 11 of the

17 Indian Gaming Regulatory Act (25 U.S.C. 2710) is

18 amended—

19 (1) in subsection (b)(2)(F), by striking clause

20 (i) and inserting the following:

21 ‘‘(i) ensures that—

22 ‘‘(I) background investigations are

23 conducted on the tribal gaming commis24 sioners, key tribal gaming commission em25 ployees, and primary management officials
10

8

•S 1529 IS

1 and key employees of the gaming enter2 prise; and

3 ‘‘(II) oversight of primary manage4 ment officials and key employees is con5 ducted on an ongoing basis; and’’; and

6 (2) in subsection (d)—

7 (A) in paragraph (4)—

8 (i) by striking ‘‘(4) Except’’ and in9 serting the following:

10 ‘‘(4) REVENUE SHARING.—

11 ‘‘(A) IN GENERAL.—Except for any assess12 ments that may be agreed to under paragraph

13 (3)(C)(iii), nothing in this section confers on a

14 State or political subdivision of a State author15 ity to impose any tax, fee, charge, or other as16 sessment on any Indian tribe or any other per17 son or entity authorized by an Indian tribe to

18 engage in a class III activity. No State may

19 refuse to enter into the negotiations described

20 in paragraph (3)(A) based on the lack of au21 thority in the State or a political subdivision of

22 the State to impose such a tax, fee, charge, or

23 other assessment.

24 ‘‘(B) APPORTIONMENT OF REVENUES.—

25 The Secretary may not approve any Tribal-
11

9

•S 1529 IS

1 State compact or other agreement that includes

2 an apportionment of net revenues with a State,

3 local government, or other Indian tribes

4 unless—

5 ‘‘(i) in the case of apportionment with

6 other Indian tribes, the net revenues are

7 not distributable by the other Indian tribes

8 to members of the Indian tribes on a per

9 capita basis;

10 ‘‘(ii) in the case of apportionment

11 with local governments, the total amount

12 of net revenues exceeds the amounts nec13 essary to meet the requirements of clauses

14 (i) and (ii) of subsection (b)(2)(B), but

15 only to the extent that the excess revenues

16 reflect the actual costs incurred by affected

17 local governments as a result of the oper18 ation of gaming activities; or

19 ‘‘(iii) in the case of apportionment

20 with a State—

21 ‘‘(I) the total amount of net

22 revenues—

23 ‘‘(aa) exceeds the amounts

24 necessary to meet the require25 ments of clauses (i) and (ii) of
12

10

•S 1529 IS

1 subsection (b)(2)(B) and clause

2 (ii) of this subparagraph, if appli3 cable; and

4 ‘‘(bb) is in accordance with

5 regulations promulgated by the

6 Secretary under subparagraph

7 (C); and

8 ‘‘(II) a substantial economic ben9 efit is rendered by the State to the In10 dian tribe.

11 ‘‘(C) REGULATIONS.—Not later than 90

12 days after the date of enactment of this para13 graph, the Secretary shall promulgate regula14 tions to provide guidance to Indian tribes and

15 States on the scope of allowable assessments

16 negotiated under paragraph (3)(C)(iii) and the

17 apportionment of revenues negotiated in accord18 ance with subparagraph (B).’’;

19 (B) in paragraph (7)(B)(vii), by inserting

20 ‘‘not later than 90 days after notification is

21 made’’ after ‘‘the Secretary shall prescribe’’;

22 and

23 (C) by adding at the end the following:

24 ‘‘(10) EXTENSION OF TERM OF TRIBAL-STATE

25 COMPACT.—Any Tribal-State compact approved by
13

11

•S 1529 IS

1 the Secretary in accordance with paragraph (8) shall

2 remain in effect for up to 180 days after expiration

3 of the Tribal-State compact if—

4 ‘‘(A) the Indian tribe certifies to the Sec5 retary that the Indian tribe requested a new

6 compact not later than 90 days before expira7 tion of the compact; and

8 ‘‘(B) a new compact has not been agreed

9 on.’’.

10 (g) MANAGEMENT CONTRACTS.—Section 12 of the

11 Indian Gaming Regulatory Act (25 U.S.C. 2711) is

12 amended—

13 (1) by striking the section heading and all that

14 follows through ‘‘Subject’’ in subsection (a)(1) and

15 inserting the following:

16 ‘‘SEC. 12. MANAGEMENT CONTRACTS.

17 ‘‘(a) CLASS II GAMING AND CLASS III GAMING AC18 TIVITIES; INFORMATION ON OPERATORS.—

19 ‘‘(1) GAMING ACTIVITIES.—Subject’’; and

20 (2) in subsection (a)(1), by striking ‘‘class II

21 gaming activity that the Indian tribe may engage in

22 under section 11(b)(1) of this Act,’’ and inserting

23 ‘‘class II gaming activity in which the Indian tribe

24 may engage under section 11(b)(1), or a class III
14

12

•S 1529 IS

1 gaming activity in which the Indian tribe may en2 gage under section 11(d),’’.

3 (h) COMMISSION FUNDING.—Section 18 of the In4 dian Gaming Regulatory Act (25 U.S.C. 2717) is

5 amended—

6 (1) in subsection (a)—

7 (A) by striking paragraphs (1) through (3)

8 and inserting the following:

9 ‘‘(1) SCHEDULE OF FEES.—

10 ‘‘(A) IN GENERAL.—Except as provided in

11 this section, the Commission shall establish a

12 schedule of fees to be paid annually to the Com13 mission, on a quarterly basis, by each gaming

14 operation that conducts a class II gaming or

15 class III gaming activity that is regulated, in

16 whole or in part, by this Act.

17 ‘‘(B) RATES.—The rate of fees under the

18 schedule established under subparagraph (A)

19 that are imposed on the gross revenues from

20 each operation that conducts a class II gaming

21 or class III gaming activity described in that

22 paragraph shall be (as determined by the Com23 mission)—

24 ‘‘(i) a progressive rate structure levied

25 on the gross revenues in excess of
15

13

•S 1529 IS

1 $1,500,000 from each operation that con2 ducts a class II gaming or class III gaming

3 activity; or

4 ‘‘(ii) a flat fee levied on the gross rev5 enues from each operation that conducts a

6 class II gaming or class III gaming activ7 ity.

8 ‘‘(C) TOTAL AMOUNT.—The total amount

9 of all fees imposed during any fiscal year under

10 the schedule established under subparagraph

11 (A) shall not exceed—

12 ‘‘(i) $10,000,000 for each of fiscal

13 years 2004 and 2005;

14 ‘‘(ii) $11,000,000 for each of fiscal

15 years 2006 and 2007; and

16 ‘‘(iii) $12,000,000 for each of fiscal

17 years 2008 and 2009.’’; and

18 (B) by redesignating paragraphs (4)

19 through (6) as paragraphs (2) through (4), re20 spectively;

21 (2) by redesignating subsection (b) as sub22 section (d);

23 (3) in paragraph (2) of subsection (d) (as re24 designated by paragraph (2)), by striking ‘‘section

25 19 of this Act’’ and inserting ‘‘section 28’’; and
16

14

•S 1529 IS

1 (4) by inserting after subsection (a) the follow2 ing:

3 ‘‘(b) FEE PROCEDURES.—

4 ‘‘(1) IN GENERAL.—By a vote of not less than

5 2 members of the Commission, the Commission shall

6 adopt the schedule of fees provided for under this

7 section.

8 ‘‘(2) FEES ASSESSED.—In assessing and col9 lecting fees under this section, the Commission shall

10 take into account the duties of, and services pro11 vided by, the Commission under this Act.

12 ‘‘(3) REGULATIONS.—The Commission shall

13 promulgate such regulations as are necessary to

14 carry out this subsection.

15 ‘‘(c) FEE REDUCTION PROGRAM.—

16 ‘‘(1) IN GENERAL.—In making a determination

17 of the amount of fees to be assessed for any class

18 II gaming or class III gaming activity under the

19 schedule of fees under this section, the Commission

20 may provide for a reduction in the amount of fees

21 that otherwise would be collected on the basis of—

22 ‘‘(A) the extent and quality of regulation

23 of the gaming activity provided by a State or

24 Indian tribe, or both, in accordance with an ap25 proved State-tribal compact;
17

15

•S 1529 IS

1 ‘‘(B) the extent and quality of self-regulat2 ing activities covered by this Act that are con3 ducted by an Indian tribe; and

4 ‘‘(C) other factors determined by the Com5 mission, including—

6 ‘‘(i) the unique nature of tribal gam7 ing as compared with commercial gaming,

8 other governmental gaming, and charitable

9 gaming;

10 ‘‘(ii) the broad variations in the na11 ture, scale, and size of tribal gaming activ12 ity;

13 ‘‘(iii) the inherent sovereign rights of

14 Indian tribes with respect to regulating the

15 affairs of Indian tribes;

16 ‘‘(iv) the findings and purposes under

17 sections 2 and 3;

18 ‘‘(v) the amount of interest or invest19 ment income derived from the Indian gam20 ing regulation accounts; and

21 ‘‘(vi) any other matter that is consist22 ent with the purposes under section 3.

23 ‘‘(2) RULEMAKING.—The Commission shall

24 promulgate such regulations as are necessary to

25 carry out this subsection.’’.
18

16

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1 (i) ADDITIONAL AMENDMENTS.—The Indian Gaming

2 Regulatory Act is amended—

3 (1) by striking section 19 (25 U.S.C. 2718);

4 (2) by redesignating sections 20 through 24 (25

5 U.S.C. 2719 through 2723) as sections 23 through

6 27, respectively;

7 (3) by inserting after section 18 (25 U.S.C.

8 2717) the following:

9 ‘‘SEC. 19. INDIAN GAMING REGULATION ACCOUNTS.

10 ‘‘(a) IN GENERAL.—All fees and civil forfeitures col11 lected by the Commission in accordance with this Act

12 shall—

13 ‘‘(1) be maintained in separate, segregated ac14 counts; and

15 ‘‘(2) be expended only for purposes described in

16 this Act.

17 ‘‘(b) INVESTMENTS.—

18 ‘‘(1) IN GENERAL.—The Commission shall in19 vest such portion of the accounts maintained under

20 subsection (a) as are not, in the judgment of the

21 Commission, required to meet immediate expenses.

22 ‘‘(2) TYPES OF INVESTMENTS.—Investments

23 may be made only in interest-bearing obligations of

24 the United States guaranteed as to both principal

25 and interest by the United States.
19

17

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1 ‘‘(c) SALE OF OBLIGATIONS.—Any obligation ac2 quired with funds in an account maintained under sub3 section (a)(1) (except special obligations issued exclusively

4 to those accounts, which may be redeemed at par plus ac5 crued interest) may be sold by the Commission at the mar6 ket price.

7 ‘‘(d) CREDITS TO INDIAN GAMING REGULATORY AC8 COUNTS.—The interest on, and proceeds from, the sale or

9 redemption of any obligation held in an account main10 tained under subsection (a)(1) shall be credited to and

11 form a part of the account.

12 ‘‘SEC. 20. MINIMUM STANDARDS.

13 ‘‘(a) CLASS I GAMING.—Notwithstanding any other

14 provision of law, class I gaming on Indian land—

15 ‘‘(1) shall remain within the exclusive jurisdic16 tion of the Indian tribe having jurisdiction over the

17 Indian land; and

18 ‘‘(2) shall not be subject to this Act.

19 ‘‘(b) CLASS II GAMING.—

20 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

21 an Indian tribe shall retain primary jurisdiction over

22 regulation of class II gaming activities conducted by

23 the Indian tribe.
20

18

•S 1529 IS

1 ‘‘(2) CONDUCT OF CLASS II GAMING.—Any class

2 II gaming activity shall be conducted in accordance

3 with—

4 ‘‘(A) section 11; and

5 ‘‘(B) regulations promulgated under sub6 section (d).

7 ‘‘(c) CLASS III GAMING.—

8 ‘‘(1) IN GENERAL.—Subject to paragraph (2),

9 an Indian tribe shall retain primary jurisdiction over

10 regulation of class III gaming activities conducted

11 by the Indian tribe.

12 ‘‘(2) CONDUCT OF CLASS III GAMING.—Any

13 class III gaming operated by an Indian tribe under

14 this Act shall be conducted in accordance with—

15 ‘‘(A) section 11; and

16 ‘‘(B) regulations promulgated under sub17 section (d).

18 ‘‘(d) RULEMAKING.—

19 ‘‘(1) IN GENERAL.—

20 ‘‘(A) PROMULGATION.—Not later than 180

21 days after the date of enactment of the Indian

22 Gaming Regulatory Act Amendments of 2003,

23 the Commission shall develop procedures under

24 subchapter III of chapter 5 of title 5, United
21

19

•S 1529 IS

1 States Code, to negotiate and promulgate regu2 lations relating to—

3 ‘‘(i) the monitoring and regulation of

4 tribal gaming;

5 ‘‘(ii) the establishment and regulation

6 of internal control systems; and

7 ‘‘(iii) the conduct of background in8 vestigation.

9 ‘‘(B) PUBLICATION OF PROPOSED REGULA10 TIONS.—Not later than 1 year after the date of

11 enactment of the Indian Gaming Regulatory

12 Act Amendments of 2003, the Commission shall

13 publish in the Federal Register proposed regu14 lations developed by a negotiated rulemaking

15 committee in accordance with this section.

16 ‘‘(2) COMMITTEE.—A negotiated rulemaking

17 committee established in accordance with section

18 565 of title 5, United States Code, to carry out this

19 subsection shall be composed only of Federal and In20 dian tribal government representatives, a majority of

21 whom shall be nominated by and be representative

22 of Indian tribes that conduct gaming in accordance

23 with this Act.

24 ‘‘(e) ELIMINATION OF EXISTING REGULATIONS.—
22

20

•S 1529 IS

1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), as of the date that is 1 year after the

3 date of enactment of the Indian Gaming Regulatory

4 Act Amendments of 2003, regulations establishing

5 minimum internal control standards promulgated by

6 the Commission that are in effect as of the date of

7 enactment of the Indian Gaming Regulatory Act

8 Amendments of 2003 shall have no force or effect.

9 ‘‘(2) EXCEPTION FOR AFFIRMATION OF EXIST10 ING REGULATIONS.—Notwithstanding paragraph

11 (1), if, before the date of enactment of the Indian

12 Gaming Regulatory Act Amendments of 2003, the

13 Commission certifies to the Secretary of the Interior

14 that the Commission has promulgated regulations

15 that establish minimum internal control standards

16 that meet the requirements of subsection (d)(1)(A)

17 and were developed in consultation with affected In18 dian tribes, the regulations shall—

19 ‘‘(A) be considered to satisfy the require20 ments of paragraph (1); and

21 ‘‘(B) remain in full force and effect.

22 ‘‘SEC. 21. USE OF NATIONAL INDIAN GAMING COMMISSION

23 CIVIL FINES.

24 ‘‘(a) ACCOUNT.—Amounts collected by the Commis25 sion under section 14 shall—
23

21

•S 1529 IS

1 ‘‘(1) be deposited in a separate Indian gaming

2 regulation account established under section

3 19(d)(1)(A); and

4 ‘‘(2) be available to the Commission, as pro5 vided for in advance in Acts of appropriation, for

6 use in carrying out this Act.

7 ‘‘(b) USE OF FUNDS.—

8 ‘‘(1) IN GENERAL.—The Commission may pro9 vide grants and technical assistance to Indian tribes

10 using funds secured by the Commission under sec11 tion 14.

12 ‘‘(2) USES.—A grant or financial assistance

13 provided under paragraph (1) may be used only—

14 ‘‘(A) to provide technical training and

15 other assistance to an Indian tribe to strength16 en the regulatory integrity of Indian gaming;

17 ‘‘(B) to provide assistance to an Indian

18 tribe to assess the feasibility of conducting non19 gaming economic development activities on In20 dian land;

21 ‘‘(C) to provide assistance to an Indian

22 tribe to devise and implement programs and

23 treatment services for individuals diagnosed as

24 problem gamblers; or
24

22

•S 1529 IS

1 ‘‘(D) to provide to an Indian tribe 1 or

2 more other forms of assistance that are not in3 consistent with this Act.

4 ‘‘(c) SOURCE OF FUNDS.—Amounts used to carry out

5 subsection (b) may be derived only from funds—

6 ‘‘(1) collected by the Commission under section

7 14; and

8 ‘‘(2) authorized for use in advance by an Act of

9 appropriation.

10 ‘‘(d) REGULATIONS.—The Commission may promul11 gate such regulations as are necessary to carry out this

12 section.

13 ‘‘SEC. 22. TRIBAL CONSULTATION.

14 ‘‘In carrying out this Act, the Secretary of the Inte15 rior, Secretary of the Treasury, and Chairman of the Com16 mission shall involve and consult with Indian tribes to the

17 maximum extent practicable, as appropriate, in a manner

18 that is consistent with the Federal trust and the govern19 ment-to-government relationship that exists between In20 dian tribes and the Federal Government.’’; and

21 (4) by inserting after section 27 (as redesig22 nated by paragraph (2)) the following:

23 ‘‘SEC. 28. AUTHORIZATION OF APPROPRIATIONS.

24 ‘‘(a) IN GENERAL.—Subject to section 18, there is

25 authorized to be appropriated to carry out this Act, for
25

23

•S 1529 IS

1 fiscal year 1998 and each fiscal year thereafter, an

2 amount equal to the amount of funds derived from the

3 assessments authorized by section 18(a).

4 ‘‘(b) ADDITIONAL AMOUNTS.—Notwithstanding sec5 tion 18, in addition to amounts authorized to be appro6 priated by subsection (a), there are authorized to be ap7 propriated $2,000,000 to fund the operation of the Com8 mission for fiscal year 1998 and each fiscal year there9 after.’’.

Æ
26

The CHAIRMAN. We will start with the first panel. I think we will

have all three of our people testifying sit at the same time: Phil

Hogen, the commissioner for the National Indian Gaming Commission from Washington; George Skibine, the acting deputy assistant

secretary for Policy and Economic Development with the Department of the Interior; and Ernie Stevens, Jr., the chairman of the

National Indian Gaming Association.

Ernie, nice to see you. Mark Van Norman will accompany Ernie

Stevens. That will be fine.

Why don’t we go ahead in that order. If you would like to start,

Commissioner Hogen, we will be happy to take your testimony and

you may abbreviate if you like.

STATEMENT OF PHIL HOGEN, COMMISSIONER, NATIONAL

INDIAN GAMING COMMISSION

Mr. HOGEN. Thank you. Good morning, Mr. Chairman, Senator

Inouye. We thank you very much for the opportunity to appear before you with respect to this very significant measure that you are

considering.

With me here today are the other members of the National Indian Gaming Commission. I am Phil Hogen, Oglala Sioux from

South Dakota. Chuck Choney is also present. Mr. Choney is Comanche from Oklahoma. He is a veteran of the FBI, for 26 years

he served as a special agent with the Federal Bureau of Investigation [FBI]. One of his pet projects in terms of what we are doing

is trying to enhance the sensitivity that Federal investigators, Federal prosecutors give to crime that occurs against Indian gaming

facilities or at gaming facilities. In this connection, we have orchestrated with the help of the FBI, the Internal Revenue Service

[IRS], the Department of the Interior’s Inspector General, a Federal law enforcement working group.

One of the recent efforts in that regard was last month, we held,

at the Mohegan Sun facility in Connecticut, a 1-week-long training,

attended by more than 100 FBI agents, IRS agents, and assistant

U.S attorneys, to educate them with respect to Indian gaming.

Hopefully, now when an offense is perpetrated against a facility,

the Federal law enforcement family will be more attentive and we

will get those cases prosecuted, and there will be better cooperation

and communication.

Commissioner and Vice Chairman Nelson Westrin is also present

with me. Commissioner Westrin was formerly with the Michigan

Gaming Control Board. We, the three of us, I think make a good

team. One of the strengths that Nelson brings to our Commission

is his organizational ability. We have, and we have distributed to

the committee our annual report for 2003 that is before you. Nelson

was one of the guiding forces in getting this put together. It really

does a good job of reflecting where we have been, what we have

done, how we have used the resources that we have to play our important role in the oversight of Indian gaming.

Also, our new chief of staff, Gary Pechota, and our new director

of Congressional Affairs, Affie Ellis, played a significant role in

putting that together. This report discusses our mission, our structure, our revenues, our budget, and our staff.
27

Of course, what we are primarily here to tell you about today is

what we think of the legislation that has been proposed, as well as

some companion legislation or proposed legislation that the Administration has submitted. I will not tell you all of the things you already know about the context of Indian gaming, but it is important

to keep that in mind. Both we, as we do our job, and Congress as

it enacts legislation, must keep in mind that Indian gaming is not

a Federal program. This is not something that the Great White Father did for the Indians. Rather, Indians invented Indian gaming.

They have made it work and it has indeed been a very significant

and useful economic development tool in Indian country.

IGRA, of course, when passed in 1988 set up the framework that

is now utilized to oversee, to operate Indian gaming. It was put in

place for a number of reasons. Congress wanted a place in Federal

law that tribes could point to to say, yes, we can continue with this

important economic development tool. Like all gaming that is sanctioned, it provided that those who are involved in Indian gaming

be examined for their suitability; that the fairness of play at the

casinos, at the bingo halls be fair, both by the operation and by the

customers, and that the money goes where it is supposed to. It has

to be the tribes that benefits primarily from those operations.

Finally, a Federal regulatory mechanism was set up, a Federal

agency was created. That is us, the National Indian Gaming Commission, to among other things establish Federal standards for the

regulation of Indian gaming.

Now, of course, we are looking at an opportunity to revisit that

act, to make some adjustments.

I would like to comment on the funding aspect with respect to

NIGC, some of the housekeeping measures contained in the proposed legislation regarding NIGC’s authority, the tools that we

have to deal with those who attempt to deal unfairly with gaming

tribes, how we attempt to distinguish between class II and class III

gaming, the minimum internal control standards we have established that set the rules by which Indian gaming must be conducted, the use made of the proceeds from civil fines that we assess

and collect, and how we consult with Indian tribes in the course

of all of this.

In 2003, Congress provided that the National Indian Gaming

Commission can collect from Indian tribes on the Indian gaming

revenues from class II and class III gaming up to $12 million.

Those fees that we assess, those fees that we collect are the only

revenues we have. We do not get any appropriated money to do our

job. So this represented an increase of some $4 million in the cap,

from $8 million up to $12 million. This fiscal year 2004 is the first

year that we are now operating under this $12 million cap.

We have established the fee rate, the rate that we assess our fee

on Indian gaming at .69 percent [.069]. In other words, for every

$1,000 of gross gaming revenues, each tribe has to send NIGC 69

cents. This is a moderate increase from what it was before when

we had the $8 million cap. The reason it is not a large increase to

make a big step in revenue is the industry itself continues to grow.

So we have a bigger base that we are assessing fees on.

We do not think that we need or could appropriately spend $12

million this year, or probably even next year. This year, we antici-
28

pate we will collect and spend about $10.7 million, so we are staying well under that cap. The additional funding that we now have

over that $8 million has permitted us to fill a number of vacancies,

particularly in our audit positions, the auditors that we have in the

field, and our inspectors that are our in our five field offices. This

has permitted the staff to make more frequent, more thorough visitations at the tribal gaming operations sites, and to provide training to tribal regulators and gaming commissioners.

We have a lot of information at the National Indian Gaming

Commission. We get audits from tribes. We review their background investigation reports. That information could be very useful

to all of those that have a role to play, but right now the way we

handle that information probably is inefficient. Without increased

funding we are going to upgrade our information management system, the computers that we use to deal with this, and of course we

are not unaware of the scrutiny that the Department of the Interior’s trust fund information has been given. We want to make sure

our computers are indeed secure and that, first of all, the information is protected as it should be, and secondly, someone does not

come along and in effect kick us off the Internet and hamper our

ability to do our job.

Another computer-related tool that we are using is Live Scan to

communicate fingerprint information the tribes collect at the tribal

level when someone applies for a tribal gaming license. In the old

days, they would do it on a cardboard fingerprint card and send it

to us. We would sent it to the FBI and the FBI would send the results to us. We would send it back to the tribe and that could take

months. Now, electronically in a heartbeat, that information can be

beamed from the tribal office to the NIGC, then to the FBI, and

the results can be returned. This is much more efficient in that you

can tell right there in minutes if your applicant has a criminal

record and maybe should not be further considered. You do not

have to give him or her a temporary gaming license. It will be extremely efficient, both at the tribal and at the NIGC level in terms

of the background investigation process.

We do not have all tribes on line yet, but we are now set up so

that we can make this opportunity available to all the tribes. That

follows a pilot project that was successful that involved a number

of tribes.

In terms of setting a fee schedule, any fee schedule that Congress

sets for NIGC needs to keep us somewhat proportionate to the size

of the industry. If the industry grows faster than we do, we cannot

do the job that we are assigned under the Indian Gaming Regulatory Act [IGRA].

What we have suggested in the Administration’s proposal is that

the fee cap be set as a percentage of gross gaming revenues. We

have suggested not to exceed .8 percent [.08], or 80 cents per

$1,000. That way, we would not have to revisit from time to time

what that level would be, with congressional action.

However it is done, it is important that we look down the road.

We know what our future is going to hold. So the proposal S. 1529

that would set up funding through fiscal year 2008 is certainly a

step in the right direction.
29

S. 1529 proposes a fee reduction proposal, in effect to reward

tribes that do an excellent job of regulation at the tribal level by

assessing a reduced fee. Certainly, there is some merit to that. The

problem that we have is that we spend a disproportionate amount

of time working with tribes that are not well equipped to pay a fee

because they have problems. We would like to be like the Maytag

repairman and have our phone not ring because everything is going

smoothly. It does ring occasionally, and I think what we are more

like is the fire department. That is, while we hope we do not have

to go do enforcement and things like that at tribal gaming facilities, when we do go, we want to know what is going on; we want

to be well prepared. Nobody likes having to pay for the fire department, but they want them there when they need them. We think

that is sort of a parallel that can be drawn with respect to fees the

tribes pay.

The whole Indian gaming industry is well served if there is a

sound, adequately funded regulatory oversight body at the national

level. With the fee proposal that we have suggested and perhaps

with the one contained in S. 1529, we can stay at that level.

In terms of the housekeeping measures with respect to NIGC’s

authority, we think it is appropriate that NIGC develop, provide to

the tribes, and provide the Congress a strategic plan.

There are some corrections or clarifications that need to be made

with respect to how vacancies on the Commission are filled and

how the Chairman at the National Indian Gaming Commission delegates his authority, and then the pay level specified in the IGRA

are obsolete. That needs to be made consistent with the current

Federal employment pay structure.

We strongly support the language that will clarify our authority

to play a role in the regulation of class III gaming. If all of those

things are enacted, we think we will be a better, stronger Commission.

In terms of the tools that we have to deal with those who might

deal unfairly with gaming tribes, we have a role to play with respect to management contractors. In the old days when unscrupulous traders swindled Indians, Congress quickly enacted Section 81

of Title 25 that says the Federal government has to approve a contract with the tribe if it affects Indian lands. When IGRA was enacted in 1988, recognizing that gaming is kind of specialized, they

farmed that out, that role, the approval of management contracts

to NIGC. So we do that. We review and approve the backgrounds,

the management contracts the tribes have with those who run

their facilities.

However, a large number of individuals and firms that deal with

tribes are not management contractors per se. Rather, they style

themselves as consultants, as lenders, as lessors of machines, and

they do not get that same scrutiny. We think in the Administration

proposal whereby we set up a category of ‘‘regulated individuals,’’

that whereby NIGC when necessary, would have the authority to

reach out and require that those non-management contractors

make corrections, perhaps make refunds to tribes, would be appropriate and would actually comply with the spirit of what Congress

had in mind in the IGRA.
30

Distinguishing between what is class II, bingo, and what is class

III, casino-type gaming that you have to have a compact with the

State to do, continues to be a real challenge for the National Indian

Gaming Commission. We spend a disproportionate amount of our

time trying to sort out, whether a particular machine is one that

can be played without a compact, or is it indeed a class II bingo

or pull-tab-type machine that the tribe does not have to have a

compact for.

We are trying to meet this challenge. We recently appointed or

selected the nomination of tribes, membership to a tribal advisory

committee that will help us establish class II standards so that if

a game meets those standards, then it can be used without a class

III compact. The process we are now using of offering informal advisory opinions with respect to each machine, often results in extended, costly litigation, and we do not really give the tribes or the

vendors a clear path. Once we have these standards in place, we

think that will be workable and will be a service to tribes, as well

as those who provide these devices to the tribes.

S. 1529 takes a look at the minimum internal control process.

Minimum internal control standards are basically universal for all

commercial legalized gaming. The State of Nevada, the State of

New Jersey, all the jurisdictions that have gaming have some

standards that facilities must meet so that they track the dollars

as they go through the machine to the cage, to the count room and

eventually in some cases to State coffers if there are taxes, or to

the casino proprietor, or in the case of Indian gaming, to the tribe.

We promulgated minimum internal control standards. They are

in effect. They have been revisited once in 2002. A tribal advisory

committee was assembled. We revised them. We are currently in

the process of doing that again. Not only have we appointed a tribal advisory committee to help us do that, but it is a standing tribal

advisory committee. You cannot just get it done once and solve the

problem. Given the changes in technology and so forth, you have

to keep up with this. With the assistance of this tribally nominated

tribal advisory committee, we will be again revising the minimum

internal control standards.

S. 1529, as we read it, would in effect send us back to the drawing board. The good news is it would clearly in Federal law say we

have the authority to do this. The problem as I see it is we would

have to in effect throw out the progress we have made, the minimum internal control standards we now have in place, and in effect

start over, do negotiated rulemaking to come up with a new set of

minimum internal control standards. I think the adage, ‘‘if it ain’t

broke, don’t fix it,’’ ought to apply here. I think our present standards are workable. I think we continue to get tribal input with respect to those standards. We hope that is a tack that the committee

will take as it pursues this.

We are not without challenges in this area. At the Colorado

River Indian Tribe in Arizona, we went out to do a MICS audit,

minimum internal control standard audit. That was going pretty

well until our Regional Director said, okay, let’s go take a look at

the slot machines. The tribe said, no, you do not have authority to

look at class III. We said, well, yes we do. As a result, the audit

came to a stop. Eventually the Commission issued a violation no-
31

tice, assessed a fine because the audit process had been disrupted.

Eventually we got that sorted out. We have been to Colorado River

Indian Tribe. We have done an audit. Things look pretty good out

there. But they reserved the right to challenge whether we have

that authority, the proposition being tribes and NIGC will regulate

class II; class III will be regulated pursuant to Tribal-State compacts.

Well, that case is now working its way through the court. If in

fact the court disagrees with us and says, no, even though IGRA

says we have the right to promulgate standards, even though the

chairman of the National Indian Gaming Commission has the right

to assess fines for violations of the IGRA, of NIGC’s regulations, of

the tribal gaming ordinance, you have to stay out of class III, that

is where most of the ballgame is. Class III is where all of the

money, or not all of the money, but most of the money in Indian

gaming is. All day every day, that is what we are currently doing

now. This act would clarify that we have that authority. However,

if we have to go back and rewrite the MICS, we think it is a step

forward and maybe also a step backward.

There is a provision in S. 1529 that addresses the use of the fines

that NIGC collects for violations of IGRA and the regulations and

so forth. It would in effect say, NIGC, you set up a separate fund;

put those proceeds in that fund; and there are some special uses

you can make of those funds. We do not think that is good business. That is, we do not think that the body that assesses the fines

should be the one that gets to decide or decides in part where to

spend it. Right now, those fines that we collect, and in this last

year we collected about $4 million in fines, go into the general fund

of the U.S. Treasury.

There is probably a way to do both of these things. That is, get

the benefits of what money like that would provide for, such as additional training for tribal gaming regulators, things of that nature,

but money for those purposes could be appropriated. Maybe they

could look as they do that, to see how much the fines were that

came in. But to say to us, you go out there and collect fines and

then use that money, I think raises a red flag with respect to the

credibility of the NIGC when we assess those fines.

The consultation provision of S. 1529 is something we certainly

agree with. We have promulgated for the first time at NIGC a consultation policy. It will be published in the Federal Register the

first week in April. It specifically sets forth how NIGC should and

will consult with tribes when we consider changing policy that relates to Indians and Indian gaming. We have held five regional

consultations this past year, and almost on a weekly basis we are

engaged in consultation of one sort or another, meeting with tribal

leaders and addressing the issues that arise as we play our regulatory role.

Finally, let me say we want to continue to play an important role

in the regulation of Indian gaming that makes it a strong economic

development tool. We want to continue to help tribes scrutinize the

individuals that participate in Indian gaming. We want to monitor

with them the fairness of the play. We want to make sure that the

money goes where it is supposed to.
32

We fully understand that tribes do the heavy lifting. They are

out there all day every day. We merely come along and look over

their shoulder. But by looking over their shoulder, we give credibility to what they are doing, to the gaming public, to know that there

is somebody here that is talking to you, talking to Congress, talking to the tribes with respect to how it works. I think it also fortifies the trust that tribal members themselves have that their assets are being adequately protected; that their economic development in the way of gaming is being run the way it should.

There certainly will be new challenges that will come along. We

are seeing more and more questions about our tribes making proper utilization of their gaming revenues. NIGC will continue to try

and address those issues that come our way. We need to have the

tools to do that, enough resources in the way of dollars and staff.

We need to have a viable, modern, current, organic Act, the

[IGRA]. When we have that, we think we can play the role that is

expected of us.

That basically concludes what I have to say, Mr. Chairman. But

before concluding, we may not have the opportunity during your

tenure to come before you again, Senator Campbell. I want to

thank you so much for the attention you have given to us. It has

been a privilege to appear before you. From one Indian to another,

you make us proud that the Indians know how things ought to

work.

Thank you, sir.

[Prepared statement of Mr. Hogen appears in appendix]

The CHAIRMAN. The three of us here in attendance today, we

were all active in 1988 in helping write IGRA. I do not think any

of us, or anybody in Congress, had any idea of the growth that was

going to happen after we passed that bill. In my view, I think Indian gaming has done a world of good for communities around reservations, and particularly for tribes that have invested in gaming,

but it has had some complications, and that is what this bill is

about.

Before we go to Mr. Skibine, I would like to ask Senator McCain

if had an opening statement or any comments to make.

Senator MCCAIN. No, Mr. Chairman; except to thank you for

holding this hearing. I think it is important after 15 years that we

review IGRA. As you mentioned, and I think Senator Inouye would

agree, we had no idea that it would be this large a situation.

I was reading the opening statement of Mr. Stevens, who said

that IGRA is a result of lobbying efforts by State governments and

the commercial gaming industry in response to the Supreme

Court’s holding California v. Cabazon Band of Mission Indians. I

do not know where you were at that time, Mr. Stevens. It had

nothing to do whatsoever with anybody’s lobbying. It had a lot to

do with our abiding commitment to try to see that a Supreme

Court decision, which we all supported, certainly Senator Inouye

and myself and Senator Campbell, was translated into some kind

of reasonable process so that we would be in compliance with a

U.S. Supreme Court decision, and allow as much as possible Indian

tribes to engage in gaming.

To allege that somehow that this was a result of lobbying efforts

is a bit insulting to those of us who worked so hard on behalf of
33

Native Americans and have continued to work on behalf of Native

Americans’ right to engage in gaming.

Thank you, Mr. Chairman.

Mr. STEVENS. Senator, if I could?

The CHAIRMAN. Yes; go ahead, if you would like to respond to

that.

Mr. STEVENS. I apologize if I offended you in any way, shape or

form.

Senator MCCAIN. You did not offend me. I was just correcting the

record.

Mr. STEVENS. It is not my intent, and certainly we feel that there

was a lot of lobbying efforts that took place. We certainly take the

position that tribes did not write this and we were not the champions of this until it was installed.

Senator MCCAIN. This law was passed in complete consultation

with Indian tribes. It was extensive for a long period of time. I will

engage in that later on, Mr. Chairman, but I thank you, Mr. Chairman.

Mr. STEVENS. I would welcome the opportunity to try to clarify

my record on that, Senator.

Senator MCCAIN. Thank you.

The CHAIRMAN. Mr. Skibine, if you would continue.

STATEMENT OF GEORGE T. SKIBINE, ACTING DEPUTY ASSISTANT SECRETARY FOR POLICY AND ECONOMIC DEVELOPMENT, DEPARTMENT OF THE INTERIOR

Mr. SKIBINE. Thank you, Mr. Chairman.

Good morning, Mr. Chairman, Mr. Vice Chairman, Senator

McCain. I am pleased to be here to present the Department of the

Interior’s view on S. 1529, the Indian Gaming Regulatory Act

Amendments of 2003. My comments this morning will focus on section 2(f)(2) of the bill, which is the only section that directly affects

the Secretary’s statutory duties under the IGRA.

As you know, in July of last year the principal deputy assistant

secretary, for Indian Affairs testified before this committee on the

concerns we had with revenue-sharing provisions in class III gaming compacts. We talked about the growth of revenue-sharing provisions in the compacts; about how the 1996 Seminole decision affected this by giving States the upper hand in compact negotiations; how there has been a rise in revenue-sharing provisions in

general in compacts and, also, how there has been a rise in the percentage of revenue that the states receive under these compacts.

Back in 1994, we approved the Mohegan compact. It was the beginning of the era for revenue-sharing provisions in compacts. We

also you, a book with a compendium of our decisions regarding revenue-sharing payment. Our position has been that as long as these

payments are not a tax, then they are okay, as long as they are

viewed as the purchase of a valuable economic benefit in exchange

for the payment.

We require that the economic benefit be quantifiable and we

have also insisted that it be for a benefit that the state is not required to negotiate in good faith. Our thinking there is that we do

not believe it was the intent of IGRA to have all the provisions up

for sale. We wanted to make sure that it is like substantial exclu-
34

sive rights to certain forms of class III gaming, something that the

State is not required to offer in good faith.

As a result, we support the thrust of section 2(f)(2)(a) because it

provides a statutory basis for the inclusion of revenue-sharing provisions in class III gaming compacts. We think that this is welcome

because the Department has been challenged over its approval of

such provisions in court, and we have not lost litigation there, but

we feel that it is an ongoing concern and that if that can be clarified by an amendment to IGRA I think it will resolve all these

doubts about whether you can or cannot make those revenue-sharing payments.

We believe that the conditions for revenue-sharing payments in

the bill should be, modified and that the bill should contain very

clear language that specifies exactly what economic benefits may

be conferred in exchange for the payment, and perhaps even to provide a cap on the percentage of net revenues that can be made so

that there will not be a tendency to have the percentage that the

States require be increased over time. This is something we have

seen, and with direction from Congress as to the cap, that we

would essentially help promote the notion that the gaming activities are mainly for the tribes’ economic development and tribal programs, that it will not see more and more of these revenues going

to States under these compacts.

We think that this clear statutory guidance, in this respect, will

provide a transparent process for reviewing these provisions at Interior and will help states and tribes know exactly what is on the

table for them to negotiate. It will also eliminate the uncertainty

surrounding the approval or disapproval of these provisions at Interior. Usually, I can tell you that when we have to make a determination on a compact that contains revenue-sharing provisions,

we do a lot of hand-wringing and a lot of analysis, and we are usually not done with our analysis until the 44th day when we actually issue the decision because it is a very difficult process to try

to figure out exactly what is the value that the tribe is receiving

in exchange for the payment.

With respect to the promulgation of regulations included in section 2(f)(2), we believe that if the statute itself clearly articulates

the criteria for revenue-sharing payments, then regulations may

actually not be necessary. Actually, if the committee believes these

regulations are necessary, we think in our testimony we said that

the timeframe seems unrealistic and we suggest 18 months, rather

than the 90 days that are in the bill.

Also, we think that the inclusion of a 90-day timeframe for

issuing class III procedures in section 2(f)(2)(b) is insufficient. We

would recommend the doubling of that deadline of the timeframe

at the very least. In our experience, we have had very few instances of reviewing class III procedures under the scheme outlined

in IGRA. We are in the process of doing that now. I can tell you

that the timeframe, presents very difficult questions, especially in

the scope of gaming, that would require us to study this very diligently.

Now, I note that last July our principal deputy assistant secretary for Indian Affairs was asked whether the committee should

consider any other modifications of IGRA. She responded that the
35

45-day deadline for approval of compacts was too short. I cannot

find that provision extending that timeframe in the bill. We continue to believe that the 45-day timeframe is short. What happens

a lot of times is we have a compact that is submitted and when

we examine it, we notice that there are some glitches. We ask within the timeframe for the tribe and the State to modify that section,

to provide us with something that would comply with IGRA. The

back-and-forth negotiation that we are doing takes time. As a result, we always bump up against that 45 days, in most cases.

We notice that in section 2(f)(2)(b) there is a requirement that

the net revenues from gaming activities of the tribe that may be

in the compact be allocated to another tribe or a portion to another

tribe and not be used on a per capita basis. I think I should make

the committee aware that at Interior, we do not believe that these

funds are subject to the revenue allocation plan requirements currently under IGRA. We do not consider those to be the net revenue

of that tribe, and as a result in states that authorize that, they are

using those funds for tribal governance purposes or whatever purpose they need without having to come to Interior to submit a revenue allocation plan. So we have not considered these particular

funds to be subject to IGRA.

Let me also, mention that the 6-month extension of compacts

contained in section 2(f)(2)(c) is a concept that we do like, but we

were made aware by the Justice Department that there may be

10th Amendment problems with this provision. We think this issue

should be examined in more detail.

Finally, the Department requests the committee examine two additional issues which are of concern to us. The first is the inclusion

of anti-competitive provisions in compacts that are directed at

other Indian tribes. Secretary Norton is very concerned about that

and we have seen that in the last 2 years in a compact where the

compact would provide exclusive rights to game on a geographical

basis, or substantial exclusivity to tribes against non-Indian gaming. It also gives a tribe the right to game in a geographical area

to the exclusion of other Indian tribes. We have noticed a rise in

these provisions that set tribes against tribes, and we are very concerned about it.

Our lawyers have told us that they do not feel that such a requirement violates any requirement of IGRA, but yet, we feel as a

policy matter that it is something that gives us pause. In fact, we

have been sued in Wisconsin by two tribes over the decision not to

disapprove the Ho-Chunk Nation compact that contains such a provision, so there is ongoing litigation on that.

The second issue that we raise involves section 20(b)(1)(a) of

IGRA and the submission of applications to take land into trust for

gaming on what we call ‘‘far flung’’ lands. We discussed this in our

appearance last summer with the committee. We have come to the

conclusion that section 20 of IGRA does not prohibit gaming on offreservation land under section 20(b)(1)(a) of IGRA and there is

nothing in IGRA that prohibits it. In fact, it is contemplated that

it does occur.

Yet, when we are seeing the rise of applications from tribes for

land that is hundreds of miles from the reservation, or from lands

that are in another State, we are often contacted by congressmen
36

that are essentially outraged that this can happen under IGRA and

that in fact they feel that it was never the intent of Congress to

permit it. We believe the committee may want to consider clarifying this area since it is raising a lot of concerns, not only with congressmen, but also with the communities that are affected by these

applications that we continue to process.

This concludes my remarks. I will be happy to respond to any

questions you may have.

Thank you very much.

[Prepared statement of Mr. Skibine appears in appendix.]

The CHAIRMAN. We will look forward to working with the Department in trying to improve this bill as we go along. I do not think

any of us had any idea in 1988 about some of the complicated

things that are coming up now as the industry grows. In my view,

having been one of the people that worked on it in 1988, I was not

concerned about the states at all. They are doing great compared

to the tribes. When you compare unemployment as an example,

State unemployment and tribal unemployment, it is just as different as night and day, as well as many things like the suicide

rate among youngsters or high school dropout rate or so on.

My original intent was to try to help tribes, and certainly the peripheral benefits have gone to States or communities. That is fine,

but right from the beginning I was concerned more about tribes

than I was States. Who would have known that when we thought

we would put something in place in 1988 that would allow people

of good faith to reach an agreement between the states and the

tribes, and then after the Seminole decision we found out that one

of the participants did not have to participate if they wanted to

hold out and basically put tribes, in my view, in a real subjective

position.

Now, we find that when many States have deficits, they are looking to tribes to bail them out, when they were not there in the beginning to help them pass IGRA to help tribes. In those days, if

anything, they dragged their feet, if you remember.

We will go ahead to Mr. Stevens’ testimony.

STATEMENT OF ERNIE STEVENS, JR., CHAIRMAN, NATIONAL

INDIAN GAMING ASSOCIATION, ACCOMPANIED BY MARK

VAN NORMAN, EXECUTIVE DIRECTOR

Mr. STEVENS. Mr. Chairman, members of the committee, I just

want to clarify. I reviewed the statement regarding Senator

McCain’s concern and clarify that in my record.

The CHAIRMAN. Okay, that will be fine.

Mr. STEVENS. I get a lot of my information from my elders and

they have made it clear to me that in working with that process,

it was not completely Indian country’s baby, but we have championed that from day one and done a great job of doing that. I

apologize if my statement was a little bit aggressive in that regard.

Senator MCCAIN. That is not an important item, believe me.

Thank you.

Mr. STEVENS. Thank you, Senator.

Good morning Chairman Campbell and Vice Chairman Inouye

and Senator McCain, members of the committee, on behalf of
37

NIGA’s member tribes, I want to thank you for providing me the

opportunity to testify before you this morning.

My name is Ernie Stevens, Jr. and I am a member of the Oneida

Nation of Wisconsin and chairman of the National Indian Gaming

Association. With me this morning is Mark Van Norman, a member of the Cheyenne River Sioux Tribe and NIGA’s executive director.

I first want to commend your efforts in crafting S. 1529. NIGA

fully supports a number of provisions that would make positive

technical corrections to the IGRA. However, as you know, Indian

country has a number of concerns with this bill and we appreciate

the continuing dialog with you and your staff over the past year.

Most importantly, we welcome the opportunity to formally provide

our views.

Mr. Chairman, before I speak from the text, I want to speak from

my heart. Tribal government gaming is working. Before Indian

gaming, my people had few jobs. Indian gaming has created

500,000 jobs. Before tribal gaming, Indian people when they were

sick they could not find a doctor. Now, we are building health clinics. Before tribal gaming, Indian children had little chance for an

education, and now we are building schools. Before tribal gaming,

Indian people had few opportunities. Now we have a bright future

for our children.

Gentlemen, tribal government gaming is the Native American

success story.

I will turn to the specifics of my presentation. I would ask that

I am able to provide my full statement for the record.

The CHAIRMAN. It will be included in the record.

Mr. STEVENS. Thank you, sir.

It has been 15 years since Congress enacted IGRA. Indian gaming is a tool that tribal governments have used for more than 30

years now. IGRA was the brainchild of many different efforts, but

as I said previously before Senator McCain left, it was not ours,

but we are very proud of what we have done to champion that law

and we are very proud of what we have done to contribute to this

industry.

Indian tribes use gaming just as state governments use lotteries,

to build infrastructure and provide essential services for their citizens. In just 30 years, Indian gaming has helped tribes begin to rebuild communities that were all but forgotten.

Indian country still has a long way to go. Too many people continue to live with disease and poverty. Indian gaming has proven

to be the best available tool for tribal economic development.

I appreciate your efforts through S. 1529, which would bring

clarity to several areas of the law. These are some of the provisions

we support. First, the Johnson Act clarification. The Supreme

Court brought stability to this area of law by rejecting the Department of Justice review to two appellate court decisions that found

the Johnson Act did not apply to IGRA class II technological aids.

This bill’s provisions would help prevent any future confusion.

Second is NIGC’s accountability. This bill would require NIGC to

adopt a 5-year strategic plan, and in addition would propose section

20 which will require the Commission to involve and consult with

Indian tribes. We kind of look at the record regarding this, and we
38

are not so excited about that. We are appreciative of the efforts

more recently on consultation and we are encouraged by the way

this process is growing in Indian country by NIGC. NIGA asks the

committee to consider requiring the NIGC to develop its plans in

accordance with the limited powers pursuant to IGRA.

Despite our strong support for these important clarifications,

Chairman Campbell, NIGA has three concerns. It authorizes the

NIGC to regulate class III gaming. It authorizes NIGC to do background checks on tribal gaming commissioners. And it does not

provide a Seminole fix.

The authorization will burden the tribal-State compacting process pertaining to class III authorization. It will create conflict and

only serve to create confusion and a duplication of effort. Congress

considered NIGC authority over class III gaming, but decided

against it. Our elders have fought against it as well. Our elders

have told me on more than one occasion that is a sovereign right

and we need to stand by that.

As Congress and the Department of Justice expected, tribal-State

compacts are working to provide a strong regulatory regime backed

up by Federal agencies like the FBI, FinCEN, IRS and others. In

total, Indian tribes invest over $262 million annually for the regulation of Indian gaming. Against a backdrop of comprehensive regulation, the FBI and the U.S. Department of Justice have testified

repeatedly that this regulatory scheme is working well to prevent

the infiltration of crime and protect the integrity of games played

at all tribal operations.

Next if I could just talk real briefly about NIGC licensing authority. NIGA objects to the provision requiring Federal background

checks for tribal gaming commissioners. Unlike management and

other key gaming personnel, tribal gaming commissioners are tribal government officials and the selection of tribal government officials must be left to the sovereign authority of tribal governments.

NIGC should not be permitted to infringe on tribal government authority in this manner and we ask that you consider deleting that

provision from the bill.

One thing we are very concerned about is the lack of a Seminole

fix. I think everybody is aware of that. For the past 8 years, NIGA,

NCAI and tribal governments throughout the Nation have all stated that any IGRA amendment must contain a Seminole provision.

When I spoke before this committee in 1997, then as First Vice

President of the National Congress of American Indians, that was

our stance, and those resolutions stand firm today.

Today, I must again ask that the committee consider adding a

provision to address this longstanding wrong. States are using

Seminole to impose unreasonable demands on tribal governments

through the compacting process.

Last, before I close, I would like to address the revenue-sharing

provision. NIGA fully supports this concept. The burdens of homeland security, the economic downturn nationwide, the loss of jobs

and very poor financial planning are all reasons for State budget

shortfalls. Indian gaming, however, is not a reason for State budget

problems and should not be used as a way out. Shifting the burden

to tribal governments is neither reasonable or fair. Why? Because

these proposals burden only the industry that is producing jobs and
39

generating economic development. They also ignore a significant

benefit that Indian gaming currently provides to State and local

communities.

Finally, these proposals violate Federal law and ignore the status

of Indian tribes as governments. As I mentioned earlier, tribal government gaming has created 500,000 American jobs and threefourths of those jobs are held by non-Indians.

Indian gaming also creates a substantial revenue stream for the

State and local units of government. In 2003 alone, Indian gaming

provided for about $7.6 billion in added revenue to Federal, State

and local governments. These provisions do not make good financial sense and most of them violate Federal law.

Indian tribes conduct gaming for the same purpose that State

governments operate lotteries: To generate revenue, to fund infrastructure and essential government programs. Congress enacted

the IGRA to promote tribal economies and strengthen tribal governments. As a result, IGRA requires that Indian gaming revenues

be used first and foremost to address the governmental, economic

and social problems of Indian country.

Until these needs are fully addressed, Federal law prohibits the

use of gaming revenues for any other purpose. I understand that

an amended version of S. 1529 includes a savings clause to protect

the effect of existing tribal-State compacts that are working well

for the tribes and States involved. Again, NIGA fully supports this

provision.

In closing, Mr. Chairman and Senator, I again thank you for

your dedication and interest in tribal government gaming and Native Americans. We want you to know that we appreciate the hard

work that the committee and its staff have done in regards to this

legislation.

Senator Campbell, this may be the last time that I have the

privilege of testifying before you as one chairman to another. I was

saddened to hear you will be leaving the committee. You have been

an inspiration to all Native Americans. We are deeply and eternally grateful.

Mr. Chairman and members of the committee, this concludes my

remarks this morning, and once again I thank you for providing me

with this opportunity. I am available for any questions.

[Prepared statement of Mr. Stevens appears in appendix.]

The CHAIRMAN. Thank you, Ernie.

I am going to run and vote. Senator Inouye will chair. Don’t be

a little bit embarrassed about your confusion with which one of us

is Inouye and which one is Campbell. We have worked together for

so many years and been friends for so many years that we are like

an old married couple sometimes. We begin to look alike. [Laughter.]

Mr. STEVENS. I am very clear, Chairman Campbell. Again, we

are excited to come before you on this important matter. You two

are great gentlemen and friends I have inherited from my father.

I am very clear the difference. I am a little bit nervous trying to

clarify for Senator McCain this morning, but I hope my position

here this morning stands clear.

Senator INOUYE. Thank you very much. I am sorry I was not

here for the past 10 minutes. Since this issue has been brought up,
40

when the U.S. Supreme Court issued its ruling in the Cabazon case

the committee was faced with a problem. We approached the Administration to suggest that they should carryout its responsibility

on a government-to-government relationship with sovereign nations, but as some of you recall, our Government, our Attorney

General adamantly refused to participate and said, no, we do not

want to have any part of this.

As a result, the Congress had to enact laws and delegate this

government-to-government role to the States. We know that the

Constitution did not contemplate such a rule for the States but

what choice did we have? It was either that or chaos, and we could

not countenance that. So that is why we have this law today. I am

glad that the Federal Government is involved now to some extent.

If I may, I would like to ask a few questions. I believe the Deputy

Assistant Secretary brought up the matter of caps.

Mr. SKIBINE. Yes.

Senator INOUYE. At the present time, there are no caps. When

the first compact was put into effect, I believe that was the

Mashantucket Pequots.

Mr. SKIBINE. The Mashantucket Pequots were actually procedures under IGRA. The first compact with a revenue-sharing payment that we approved was the Mohegan compact.

Senator INOUYE. For that revenue-sharing agreement, the Connecticut tribes got some monopolies. Isn’t that correct?

Mr. SKIBINE. That is correct.

Senator INOUYE. Do the other tribes that are being forced to accept high percentages of revenue-sharing, they get monopolies as

well?

Mr. SKIBINE. In some cases they do. What they get is a substantial exclusivity to certain forms of tax-free gaming. So it is not as

broad as the exclusivity that the Mohegan Tribe got in Connecticut,

which is a total monopoly on slot machines, but it is still a substantial exclusivity. We believe that the form of class III gaming has

to be authorized somehow within the State so it is not a total exclusivity anymore, but it is a substantial exclusivity.

We have in fact, for a while, insisted on a statewide exclusivity.

With the Seneca compact in New York, we agreed to a substantial

exclusivity that is geographic, so that the Seneca Tribe has essentially substantial exclusivity on forms of machines in Western New

York, but not over the whole state. The tribe persuaded us that it

was significant enough to provide payments to the State.

Senator INOUYE. Do you believe it is your responsibility to, quote,

‘‘protect’’ Indians from being shortchanged or conned by some of

these dealers?

Mr. SKIBINE. What we believe is that in order for the compact

not to violate IGRA, and especially not to violate the taxation provision of IGRA, the payment has to be something that is a payment

in exchange for a benefit. If the payment greatly exceeds the value

of the benefit, our view is that the difference between what the

benefit is worth and the payment that the tribe would agree to

make, that is a tax and that is prohibited by IGRA. So to that extent, that is what we look at.

Senator INOUYE. Who determines what is a tax or is a benefit?
41

Mr. SKIBINE. We ask the tribe and the State to provide us with

an economic analysis that outlines what is the benefit that is conferred and essentially what is the value of the benefit, as compared

to the payment that is provided. Based on this analysis, we make

a decision as to whether it is not a tax and in fact is a payment

that is authorized as the purchase of a valuable economic benefit.

It is a difficult analysis and that is why we welcome the provision that would clarify that it is authorized, and under what circumstances.

Senator INOUYE. I have been advised that New Mexico Indian

tribes originally were forced to accept 16 percent revenue-sharing

with the State.

Mr. SKIBINE. No; they pay 8 percent.

Mr. VAN NORMAN. Could I just add. There are two that remain

under the former regime, Mescalero and Pojoaque Pueblo.

Mr. SKIBINE. Yes; right.

Senator INOUYE. Do they receive any exclusivity?

Mr. SKIBINE. Under the previous——

Senator INOUYE. Under the 16 percent.

Mr. SKIBINE. Under the 16 percent, they receive some exclusivity,

however the Department never affirmatively approved the compact

for these two tribes, or for the other tribe. We did not approve it

because we felt that it was not arms length negotiations with the

State and therefore, the payment was more likely to be a tax than

a payment in exchange for a bargain a benefit. At the time, from

what I recall, we felt that the tribes were between a rock and a

hard place.

If they did not have a compact, I think the U.S. Attorney at the

time had filed to close them down, and yet they were faced with

a legislative compact that they did not negotiate. The tribe sent us

a resolution urging us to neither approve nor disapprove this compact because in fact they felt that they wanted to be able to test

their legality in court. So we ended up following that request.

Senator INOUYE. Would you recommend that this bill contain a

cap?

Mr. SKIBINE. Yes; I think that we should explore having a cap

on the payment of net revenues.

Senator INOUYE. From your experience, what would be a reasonable cap?

Mr. SKIBINE. I think it should be single-digit, maybe, or 10 percent. I think that has yet to be looked at. I think that if it goes

above that I think it is maybe problematic for the tribes.

Senator INOUYE. We will consider that.

Mr. Stevens, Mr. Chairman, you have indicated that you are not

happy with the bill requiring personnel to be investigated because

of your sovereign nature. Is that correct?

Mr. STEVENS. Tribal gaming commissioners that are appointed

by the tribes, we think that is a tribal council right, only for tribal

gaming commissioners.

Senator INOUYE. And you do not want the Government of the

United States investigating them?

Mr. STEVENS. I am saying that it is our position that that is first

and foremost the right of the tribal government. That is my only

statement.
42

Senator INOUYE. How can you assure your tribal members and

the Government that your commissioners are free of a criminal

background?

Mr. STEVENS. I think that we have a demonstrated experience

with our background investigation through our tribal governments.

As I reflected in our numbers, our numbers are for regulation nationwide is $272 million. That is reflective of our tribes’ background

investigations. So I would say that our tribal governments would

be able to do adequate background investigations on those commissioners.

Senator INOUYE. Mr. Hogen, do you believe that you and your

Commission should have the right to investigate?

Mr. HOGEN. Senator Inouye, as I read the proposed legislation,

it would not give us the primary task of investigating tribal gaming

commissioners. Rather, they, the tribal gaming commissioners,

would have to be backgrounded just as all of the licensed employees are. We play a role in that in that the tribes first do that, then

they send their investigative report to us. We review that, and only

if we object to what they have done do we take any action. That

action would be, for example, to ask them to reexamine or to object

to that. They have the ultimate decision as to whether they are

going to license those individuals.

I think it is good business to have those who do the licensing at

the tribal level subject to the same scrutiny as those that they are

going to license. I do not think it would be good to have a tribal

gaming commissioner with a felony record sitting there looking

over applicants from blackjack dealers and be in a position to veto

their qualification because they may have a conviction.

So we do not want to be intrusive, and I agree that the record

of tribal gaming commissions is good, but I think putting everybody

on that same level has merit.

Senator INOUYE. If you object, do the commissioners get thrown

out? What is the outcome?

Mr. HOGEN. I believe, and I would have to look at the statute to

be absolutely clear, that the tribes are obligated to re-examine,

they look at it, and I think they may have to suspend that license

that is in place for a period of time, but they make that ultimate

decision.

Senator INOUYE. Notwithstanding your objection?

Mr. HOGEN. Right.

Senator INOUYE. Do you believe that this is what you want?

Mr. HOGEN. It has worked pretty well so far. We have been troubled occasionally, but it has been very isolated.

Mr. STEVENS. Vice Chairman Inouye?

Senator INOUYE. Yes?

Mr. STEVENS. I just want to make sure I clarify for the record

that in no way, shape or form do we advocate that we should not

do a background or a review. We just want to make sure that we

clarify that it is a sovereign right of our tribal governments to do

so for their regulators.

Senator INOUYE. I fully support your sovereignty, as you know,

but I want to also make certain that gaming is conducted in a manner that would be approved by the public at large because we are

constantly pressured by members of the Congress, members of the
43

Senate to close tribal gaming. They pick on everything that they

can find. A little thing can be a big thing for you.

So with that, I thank you very much.

Mr. Chairman.

The CHAIRMAN. Thank you, Senator Inouye.

We are all double- or triple-booked today, so I apologize for that,

but those of you who have been here before, you know it comes

with the deal here in the Senate. I do not know what Senator

Inouye already asked you, so hopefully I will not duplicate that.

Let me start with you, Phil. You indicate that this roller-coaster

appropriations cycle is not the best way to go, and that is certainly

what we have had. I understand that. In your testimony you express concern about having to consider factors such as level and

quality of State and tribal regulation in determining fees imposed

on individual tribes. It just would seem to me those are reasonable

things to consider. Do you disagree with that?

Mr. HOGEN. No; I think as a general proposition, to decide how

much we have to do and what we need to do that, we need to kind

of be very cognizant of the environment that we are looking at. If

tribes are doing a super job and we find out that they are doing

that by going to their facility twice a year, that is great. If we find

out that it is not working very well, we need to be there more

often. So we need to be aware of what they are doing, how they

are doing it, and are there any holes that we need to try and plug

in the role that we play.

The CHAIRMAN. I see. Okay. I think we are probably close to the

same track.

In your testimony, you mention that tribes can reduce their fees

by obtaining a certificate of self-regulation. Are there any tribes

that do that now or have applied for that?

Mr. HOGEN. The only two tribes that do that, I believe are the

Menominee Tribe in Wisconsin and the Grand Ronde Tribe in Oregon. However, under the current IGRA, that only applies to the

class II gaming. As I mentioned before, that is a small chunk of

the action, so there is really not much reward to a tribe for doing

that.

The CHAIRMAN. Should we apply that to class III gaming?

Mr. HOGEN. If everybody is self-regulated, then NIGC is probably

going to be left with very little resources, and must still spring into

action when they need to. I have concerns about that, not only dollars and cents, but as Senator Inouye mentioned 1 minute ago, we

are under a great deal of scrutiny. If we say to those who are complaining about the extent of the regulation of tribal gaming, well,

now they are self-regulated, I expect we might hear some increased

concerns expressed.

The CHAIRMAN. I understand.

I am interested to see that the legislative proposal that you have

mentioned includes long-term planning similar to the Government

Performance Results Act that applies to most other agencies. Can

you tell me if that change is also a position of the National Indian

Gaming Commission?

Mr. HOGEN. We have always done some planning, and it has

probably been less formal than is required of other, and particularly larger agencies. This GPRA that I do not know all the details
44

about, but I do know that it is fairly bureaucratic and complex, we

think that there are aspects of that that we can comply with that

will tell this committee, tell Congress what they need to know

about where we are going, tell tribes where we are going, and fully

be transparent. Maybe we do not need to jump through all the

hoops that GPRA itself would require, but still accomplish that.

The CHAIRMAN. I am not an expert on the technology that is

changing so fast with any kind of gaming, but clearly there is some

difference of opinion about what should be class II and class III.

I guess with some of the new machines that are coming out, it is

difficult to determine. In your opinion, is the NIGC the best agency

situated to determine whether a particular game is class II or III?

Mr. HOGEN. I think we are the best agency to set the rules or

the standards as to what the machine has to comply with. Once

those are clear, then tribal gaming commissions themselves can examine those devices and decide whether to permit them on their

floor. I think the buck, in terms of what those standards are, needs

to stop someplace. I think having some national consistency to that

has merit. So for that reason, I think that is a role that the NIGC

ought to be playing.

The CHAIRMAN. Do you think that would also be tested in court,

if you did have that legislative authority?

Mr. HOGEN. I would not be surprised. We very seldom go someplace without having somebody file a lawsuit. But I think if there

is a strong statutory basis, we would prevail.

The CHAIRMAN. Let me move on to Mr. Skibine.

You state that the Seminole decision created, in your written testimony, uncertainties in compacting between tribes and States. I

believe that, too. But several attorneys general believe there is no

problem because, and I am quoting from a letter from the Conference of Western Attorneys General, ‘‘tribes do not have to sign

these compacts if they don’t want to.’’ What has been the impact

of the Seminole decision on revenue sharing?

Mr. SKIBINE. As I said in my comments, I think the impact of

the Seminole decision on revenue sharing has been to increase the

number of revenue-sharing provisions in compacts, and we have

seen an increase in the percentage that the tribes are required to

pay.

If the tribes do not sign these compacts, then there is very little

remedy available.

The CHAIRMAN. I do not know if it is connected, but it seems like

since the Seminole decision that more and more States have made

higher demands and held out. Is that my imagination or is that

true?

Mr. SKIBINE. No; that is true.

The CHAIRMAN. What recourse do the tribes have now if they do

not want to share revenue with the State?

Mr. SKIBINE. If they do not want to share revenue with the State

and the State refuses to negotiate, what can happen is they can

sue the State for a bad-faith negotiation. If the State raises its 11th

Amendment defense, then the suit will be dismissed. Then the

tribe may come to the Department and apply for class III procedures under our regulation in 25 CFR part 291. We are entertaining a proposal right now from a few tribes, but our authority to
45

promulgate these regulations has been challenged so that we have

actually not issued regulations, procedures for these tribes. So it is

up in the air.

The CHAIRMAN. Do you know the number of States, in lieu of a

compact, are there regulations now that states have dealing with

them?

Mr. SKIBINE. No; not under our regulations.

The CHAIRMAN. I had my notes all mixed up here, but one of you

mentioned the example of $4 million of fines that have been assessed to tribes.

Mr. HOGEN. I brought that up.

The CHAIRMAN. What were most of those fines for?

Mr. HOGEN. Most of those fines were assessed against tribes that

were operating class III devices when they did not have a compact.

We attempted, and most of those fines were assessed by the Commission that preceded ours, but they tried to equate the amount of

the fine to the ill-gotten gain, so to speak, the amount that the

tribe made by playing illegal machine.

The CHAIRMAN. I see. Let me go back to Mr. Skibine.

Do you think, Mr. Skibine, that State consent to off-reservation

gaming would be another relevant substantial economic benefit to

tribes?

Mr. SKIBINE. It would definitely be an economic benefit to tribes.

The CHAIRMAN. This bill that we are talking about would require

tribal-State compacts to address tribal government needs, which is

something we probably should have done in the first bill in 1988,

but did not. That deals with the general welfare of tribes, and its

members too, before the State can share in the revenue. I would

guess just off-hand that that is not a provision that the States

would be very supportive of. In the view of the Department, or do

you have a view on that, in fact?

Mr. SKIBINE. In the provision of the bill?

The CHAIRMAN. Yes.

Mr. SKIBINE. We would prefer to see a clear direction in the bill

on what is allowable in terms of revenue-sharing payment and

what the criteria are. In terms of that provision in this bill, we

think that would be difficult for us to look at because when we receive those compacts, usually the revenue-sharing provision is expressed in terms of a percentage of net revenues.

We do not know whether the needs of the tribes are met. In fact,

it is likely that the needs of many of these tribes are not met.

There are unmet needs with tribal governments, as you know, for

many, many tribes. If that is the case, then there will never be revenue sharing if we have to address the unmet needs of the tribes.

The CHAIRMAN. You also mention in your testimony the Department’s concern with anti-competitive provisions in compacts that

may prevent some tribes from operating gaming in specific geographic locations. First of all, will you tell the committee, are there

many of those compacts with those provisions?

Mr. SKIBINE. In the last 2 years or 11⁄2, we have seen more and

more of these provisions.

The CHAIRMAN. Have they been suggested between tribes, that

one tribe is concerned that another one may leap-frog over them
46

closer to a metropolitan area, and therefore cut off the benefits of

the first tribe?

Mr. SKIBINE. That is correct.

The CHAIRMAN. How do you address that in lieu of what some

might say that that is a violation of a trust responsibility to those

tribes that you put some restrictions on?

Mr. SKIBINE. The Secretary is very concerned about these provisions from a policy standpoint. But our legal position is that these

provisions do not violate IGRA or our trust obligation to Indians,

principally because we do not think that tribes have a statutory

right to off-reservation gaming, so we have not disapproved these

compacts.

The CHAIRMAN. I see. Let me ask another question or two. I just

got a note. The Energy Committee is waiting to establish a quorum

and I have to leave, so I am going to submit most of my further

questions of all three of you in writing, if you would, so that I can

get to the next committee.

Over the past couple of years, Ernie, the NIGC has been able to

obtain increased fee authority through the appropriation process.

As I remember, some tribes were concerned that that would translate into more punitive action by the NIGC. Did the NIGA oppose

those efforts when we were dealing with increased fee authority?

Mr. STEVENS. I want to hand this to Mark real quick, but I just

want to make sure, the main thing that we want to do through

that process is that they consult with tribes while they are going

through that process.

I will let Mark handle the technical side of that.

Mr. VAN NORMAN. Mr. Chairman, yes, we did oppose the increase from $8 million to $12 million because that was a 50-percent

increase. We thought a much more measured increase would have

been appropriate and that we should have had a direction that the

NIGC work with us on a government-to-government basis to accompany that, and that it should go through the authorizing committees.

The CHAIRMAN. Okay. Your testimony, Ernie, states an objection

to a provision in our bill requiring background checks on tribal

gaming commissioners as an intrusion on tribal government decisionmaking. As I read the language that we framed up, the decisions on background checks on gaming commissioners is still left

up to the tribe, as they do with people who run for tribal council

and that that happens to be in their constitution. The only requirement, as I read our language, is that some provision should be for

background checks instituted by the tribe.

Mr. STEVENS. The only clarification, and I clarified that for Senator Inouye, is that we are not saying that our commissioners

should not do a background investigation, but we are saying that

that right should be left to the tribal government; only to that extent.

The CHAIRMAN. I see. Perhaps the last question, NIGA has long

objected to amending IGRA if a fix for the Seminole decision is not

included. You probably know, with states’ rights folks around here,

that might be a very difficult thing to include and still get the

thing passed. That was one of the problems we had in 1988.
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The way it works in the Senate, of course, is you get things done

by consensus, and when you have 100 flaming egos, it is difficult

to get them all to agree on anything. I happen to agree with you

personally, but I think that that might be a very difficult thing to

get into this bill to actually get it passed. It is something that we

will certainly look at.

Mr. STEVENS. Let me just say, Chairman Campbell, I appreciate

it. I think that tribal sovereignty and tribal governments have

evolved around consensus from the beginning of time, and I appreciate that encouragement. I think to that extent, what we would

do is, and we have pledged to other tribal leaders that have

brought this up, that we will bring this before our executive committee meeting coming up next month. We would like to discuss it.

I appreciate your asking the question, because it is the only way

I could really clarify, but what we have told to this extent is that

is our position. However, we will bring this before the tribal leadership.

The CHAIRMAN. I would appreciate your getting back to the committee when they do address that, and perhaps tell the committee

if we cannot get that provision, if we cannot keep that provision in,

would you still support the bill? I would like to know that.

Mr. STEVENS. I will have the information for you in April.

The CHAIRMAN. Okay, that will be fine.

With that, I will include the rest of my questions to all three of

you in writing. If you would get back to the committee, I would appreciate it. We will keep the record open for 2 weeks, if you can

get back to us within 2 weeks.

This committee is adjourned.

[Whereupon, at 12:20 p.m. the committee was adjourned, to reconvene at the call of the Chair.]

(49)

APPENDIX

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF GEORGE SKIBINE, ACTING DEPUTY ASSISTANT SECRETARY

FOR POLICY AND ECONOMIC DEVELOPMENT, OFFICE OF THE ASSISTANT SECRETARY,

DEPARTMENT OF THE INTERIOR

Good morning, Mr. Chairman, Mr. Vice Chairman and members of the committee.

My name is George Skibine, and I am the acting deputy assistant secretary for Policy and Economic Development in the Office of the Assistant Secretary—Indian Affairs at the Department of the Interior [Department]. I am pleased to be here today

to offer the Department’s views on S. 1529, the ‘‘Indian Gaming Regulatory Act

Amendments of 2003,’’ as well as express our support for the Administration’s proposal, the ‘‘Indian Gaming Regulatory Act Amendments of 2004.’’

The Department believes legislation in this area could provide a unique opportunity to address some of the uncertainties created by the U.S. Supreme Court’s decision in the Seminole v. Florida case and existing revenue-sharing schemes adopted

by tribes and States and approved by the Department. It allows us to take a step

back from the present situation and create a process that is transparent to all parties

involved in the process, provide clear guidelines regarding allowable benefits that

may be negotiated by the parties and limits the percentage of net revenues that may

be allocated to revenue-sharing schemes., This clarity is good, would benefit all parties, and can take. much of the guesswork out of the already time-consuming and

highly sensitive process of tribal-State negotiations.

There are five provisions of this bill which directly affect the duties of the Secretary as originally laid out in the Indian Gaming Regulatory Act [IGRA]. These include the provisions relating to revenue-sharing between tribes and State and local

governments; promulgation of regulations regarding revenue-sharing provisions;

timeframes for the Secretarial issuance of class III gaming procedures to a tribe

after a mediator’s notification of his or her determination; and the extension of expiration dates of compacts between tribes and states who are negotiating compact renewals.

Section 2(f)(2)(A) of the bill amends section 11(d)(4) of IGRA, 25 U.S.C. 2710(d)(4),

by adding a new subparagraph (B) that provides a statutory basis for apportioning

net revenues to a State, local government or other Indian tribes in a class III gaming compact, but imposes several conditions on apportionment and requires the promulgation of regulations to provide guidance on the allowable assessments within

90 days of the enactment of this bill.

This provision provides express authorization for revenue-sharing by tribes. These

provisions provide clarity to an area which has become increasingly complex. In the

past, the Department has provided approval to revenue-sharing agreements between

tribes and States where the tribe has received the substantial economic benefit of

exclusive authorization to operate class III games within a State. The Department

has also approved agreements which authorize payments to local governments to

offset the costs it may incur as a result of the operation of class II gaming in a municipality. Generally, we support-this new provision because it provides a statutory
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basis for revenue sharing provisions in class III gaming compacts. However, we believe that the conditions for apportionment should be modified.

We believe that the proposed amendments to IGRA should provide a clearer definition of the substantial benefits that Congress determines are appropriate in exchange for revenue-sharing. Until now, the Department has considered the exclusivity of class III gaming the only substantial economic benefit that merits revenue

sharing between a tribe and a State. The exclusivity may be limited to specific types

of class III games or to specific geographic areas within a State. If the committee

contemplates that other benefits may be negotiated, the Department requests that

Congress define in more detail the items it believes are appropriate.

Additionally, the Department believes that the legislation should provide guidance

regarding the amount of revenue-sharing that may be authorized. Tribes and states

are making agreements for increasing percentages of net revenues. More and more,

we are seeing agreements that call for 15 percent to 20 percent of a tribe’s net win

to be paid to State and local governments. We expect to see agreements soon which

are in excess of that, possibly as much as 25 percent or more of a tribe’s net win.

One of the stated purposes of IGRA is to provide ‘‘a means of promoting tribal

economic development, self-sufficiency, and strong tribal governments.’’ The Department recommends that Congress consider whether these percentages are allowable

and specifically authorize a limit on the percentage if it deems necessary.

Section 2(f)(2)(A) would also amend Section 11(d)(4)(C) by requiring regulations

regarding revenue sharing payments be promulgated within 90 days of enactment

of the bill. The process of rulemaking is lengthy, and 90 days is not enough time

to finalize regulations. We recommend that a more realistic timeframe be identified

for the promulgation of the regulations, and that 18 months is a reasonable amount

of time.

Section 2(f)(2)(B) of the bill would modify section 11 (d)(7)(B)(vii) of IGRA by requiring the Secretary to prescribe class III procedures within 90 days after notification is made by the mediator. Again, we believe this timeframe is too short, and

recommend the words ‘‘180 days’’ be substituted instead of ‘‘90 days’’ to give the Secretary enough time to carefully examine difficult questions of State and Federal law

that are usually involved in this process.

Section 2(f)(2)(C) of the bill would create a new subparagraph 11(d)(10) providing

that an approved compact will stay in effect for up to 180 days after its expiration

if the tribe certifies to the Secretary it has requested a new compact no later than

90 days before the compacts’ expiration, and a new compact has not been agreed

on. We support a concept that allows tribes and states a window in which they may

negotiate compact renewals. The Department of Justice has advised us that there

may be constitutional limitations on the Federal Government’s authority to extend

compacts that require State regulation of tribal gaming. Further, we note that the

bill states that it adds a new paragraph (10) at the end of section 11 that should

read that it adds a new paragraph (10) at the end of section 11(d) of IGRA.

Finally, the Department requests that the committee examine two issues we believe would improve its ability to review and analyze compacts and gaming related

fee to trust transactions.

First, the Department is increasingly encountering tribes who are interested in

developing gaming sites which are far away from their homelands, in some cases

in States other than where they are located, and in other cases on lands which are

hundreds of miles from the tribe’s homelands. We have researched the issue internally, and can find no limitation in IGRA or its legislative history that would lead

us to believe that it is prohibited. At the same time, we receive numerous communications from Congressmen from around the country who express this as their

greatest concern. The Department believes Congress should consider clarifying the

ability of tribes to locate gaming operations far from their homelands, particularly

in cases where the lands at issue are located in another State.
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Second, the Department has received several compacts over the past 2 years

which contain ‘‘anticompetitive’’ provisions. These provisions generally provide a

tribe with a protected territory, outside of its reservation, in which they may game

and create a disincentive for states that may otherwise be willing to negotiate for

off-reservation sites with other tribes. Especially in cases of off-reservation casinos,

it provides guaranteed exclusivity, possibly at the expense of other tribes who might

otherwise desire to locate a facility in an off-reservation location. This limitation as

applied to other tribes appears to violate the spirit of IGRA, but there is not express

prohibition contained in the act. The Department believes Congress should consider

clarifying this matter.

Although we prefer the Administration’s proposal, we would be happy to work

with the committee and to participate in further discussions with regard to our comments.

Thank you for the opportunity to testify on S. 1529. I will be happy to answer

any questions you may have.
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