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S. HRG. 113–353 

CONTRACT SUPPORT COSTS AND 

SEQUESTRATION: FISCAL CRISIS 

IN INDIAN COUNTRY 

HEARING 

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

NOVEMBER 14, 2013 

Printed for the use of the Committee on Indian Affairs 

( 

(II) 

COMMITTEE ON INDIAN AFFAIRS 

MARIA CANTWELL, Washington, Chairwoman 

JOHN BARRASSO, Wyoming, Vice Chairman 

TIM JOHNSON, South Dakota 

JON TESTER, Montana 

TOM UDALL, New Mexico 

AL FRANKEN, Minnesota 

MARK BEGICH, Alaska 

BRIAN SCHATZ, Hawaii 

HEIDI HEITKAMP, North Dakota 

JOHN MCCAIN, Arizona 

LISA MURKOWSKI, Alaska 

JOHN HOEVEN, North Dakota 

MIKE CRAPO, Idaho 

DEB FISCHER, Nebraska 

MARY J. PAVEL, Majority Staff Director and Chief Counsel 

RHONDA HARJO, Minority Deputy Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on November 14, 2013 ...................................................................... 1 

Statement of Senator Barrasso ............................................................................... 2 

Statement of Senator Begich .................................................................................. 71 

Statement of Senator Cantwell .............................................................................. 1 

Statement of Senator Franken ............................................................................... 3 

Statement of Senator Heitkamp ............................................................................. 21 

Statement of Senator Murkowski ........................................................................... 6 

Statement of Senator Schatz .................................................................................. 4 

Statement of Senator Tester ................................................................................... 5 

Statement of Senator Udall .................................................................................... 4 

WITNESSES

Anderson, Hon. Phyliss J., Tribal Chief, Mississippi Band of Chocktaw Indians ......................................................................................................................... 51

Prepared statement .......................................................................................... 53 

Cladoosby, Hon. Brian, President, National Congress of American Indians ...... 23 

Prepared statement .......................................................................................... 26 

Diver, Hon. Karen R., Chairwoman, Fond du Lac Band of Lake Superior 

Chippewa .............................................................................................................. 42 

Prepared statement .......................................................................................... 44 

Keel, Hon. Jefferson, Lieutenant Governor, Chickasaw Nation .......................... 57 

Prepared statement .......................................................................................... 59 

Lane, Hon. Alfred ‘‘Bud’’, Vice Chairman, Confederated Tribes of Siletz Indians ......................................................................................................................... 47

Prepared statement .......................................................................................... 49 

Payment, Hon. Aaron, Chairman, Sault Ste. Marie Tribe of Chippewa Indians ......................................................................................................................... 63

Prepared statement .......................................................................................... 65 

Roubideaux, M.D., M.P.H., Hon. Yvette, Acting Director, Indian Health Service, U.S. Department of Health and Human Services ...................................... 9 

Prepared statement .......................................................................................... 11 

Washburn, Hon. Kevin, Assistant Secretary—Indian Affairs, U.S. Department 

of the Interior ....................................................................................................... 6 

Prepared statement .......................................................................................... 8 

APPENDIX

Abramson, Hon. Cathy, Chairperson, National Indian Health Board, prepared 

statement .............................................................................................................. 75 

Johnson, Dr. Sherry, Director, Sisseton Wahpeton Oyate Tribal Education 

Department, prepared statement ....................................................................... 98 

Miller, Lloyd B., Partner, Sonosky, Chambers, Sachse, Miller and Munson, 

LLP, prepared statement ..................................................................................... 79 

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

prepared statement .............................................................................................. 90 

Power, Jacquelyn, Superintendent/Principal, Blackwater Community School .. 92 

Response to written questions submitted to Hon. Yvette Roubideaux by: 

Hon. John Barrasso .......................................................................................... 111 

Hon. Maria Cantwell ........................................................................................ 109 

Rigdon, Philip, President, Intertribal Timber Council, prepared statement ...... 86 

Winkelman, Dan, Vice President for Administration and General Counsel, 

Yukon-Kuskokwim Health Corporation, prepared statement .......................... 95 

Page

IV 

Additional information for the record: 

Letters to Hon. Heidi Heitkamp from the Standing Rock Sioux and Spirit 

Lake Tribes .................................................................................................. 99, 101 

National Association of Federally Impacted Schools—Report by Jocelyn 

Bissonnette .................................................................................................... 102 

Written questions submitted for the record................................................ 116, 117 

(1) 

CONTRACT SUPPORT COSTS AND 

SEQUESTRATION: FISCAL CRISIS IN INDIAN 

COUNTRY 

THURSDAY, NOVEMBER 14, 2013 

U.S. SENATE, 

COMMITTEE ON INDIAN AFFAIRS, 

Washington, DC. 

The Committee met, pursuant to notice, at 2:30 p.m. in room 

628, Dirksen Senate Office Building, Hon. Maria Cantwell, 

Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. MARIA CANTWELL, 

U.S. SENATOR FROM WASHINGTON 

The CHAIRWOMAN. Good afternoon. The Senate Indian Affairs 

Committee will come to order. 

This is an oversight hearing on testimony about contract support 

costs and the fiscal impacts of sequestration in Indian Country. 

Some of my colleagues may have noticed that we did give notice 

originally to an executive session on several bills. It turns out that 

some of those bills needed further work, and so they will hopefully 

be on the next session and markup. I just encourage all those that 

are involved with all those bills to continue to resolve any outstanding issues, so we can move forward on them. 

With that, this afternoon we are holding a hearing on the oversight issues that have serious consequences for Indian Country, sequestration and shortfalls in contract support costs. The trust relationship that exists between the United States and tribe is a relationship built through the United States Constitution, treaties, 

Federal statutes and a Supreme Court decision. Ideally, we would 

be able to fully fund tribal governments based on this relationship. 

But if that were really possible, we wouldn’t be having this hearing 

today. 

The Committee staff has held a listening session earlier on these 

issues, and the Committee heard from trial leaders that sequestration is having an incredibly negative impact on Indian programs. 

However, it is not just sequestration alone. There are other issues 

that we need to address. I know my staff has some charts, but I 

am going to forego them at this moment. What is really clear is 

that our Country’s financial troubles are not really stemming from 

our obligations to Indian Country. In fact, we are not really doing 

a good job in fulfilling the obligations that we have to Indian Country. 

2 

So today’s session is really about hearing from those individuals 

about these impacts and what we can do to strive to make sure 

that Indian Country is considered as Congress makes budgetary 

decisions going forward. 

The second issue we will address today is contract support costs. 

Today over 90 percent of tribes throughout the Country participate 

in programs which have allowed tribes to take over functions previously performed by the Federal Government. However, funding of 

the administrative costs incurred by tribes in taking over these 

functions has not kept pace with the growth of the program. So in 

effect, tribes are not being fully funded for the work they perform. 

Tribes have been litigating this issue for over a decade. The Supreme Court has in two separate decisions upheld the rights of 

tribes to receive full funding. So why are we here? Because we need 

to make more progress in resolving this issue. 

It has been 18 months since the court ruled in this case that 

tribes are owed full contract support costs. Since then, the Indian 

Health Service has only resolved 16 claims out of an estimated 

1,600. The Department of Interior has not yet resolved any of these 

claims either, but is at least treating all the claims together with 

hopes of settling them at once or within the next year. 

So my colleagues and I have heard from dozens of tribes on this 

very important topic. I look forward to hearing from the witnesses 

today on how we are going to get this issue resolved. 

I would just add a footnote to this. I think that one, to really 

wrap their minds around this issue, needs to look at how big Indian Country’s economic footprint is in various communities. So 

from the perspective of the State of Alaska, we are talking about 

a major aspect of the way of life of Alaskans. So this is not a small 

issue. This isn’t one of those things where it is just resolving a few 

things on the side procedurally. This is having a major, major impact in Indian Country. 

So with that, I am going to turn to the Vice Chairman of the 

Committee, Senator Barrasso, for his opening statement. 

STATEMENT OF HON. JOHN BARRASSO, 

U.S. SENATOR FROM WYOMING 

Senator BARRASSO. Thank you, Madam Chairwoman. I appreciate your holding this hearing this afternoon, and I appreciate 

your leadership in signaling the need for greater fiscal responsibility. 

As you know, members on both sides of the aisle agree that the 

spiraling Federal deficit and increased Government spending needed to be addressed. That is why Congress, both Democrats and Republicans, passed the bipartisan Budget Control Act, which included sequestration. In light of widely shared concerns over the 

Federal deficit, all agencies have been called upon to control spending. 

We have also recognized that the Federal Government has important responsibilities in Indian Country. So it is even more important that we examine agency decisions or priorities and efficient 

use of taxpayer funds. To that end I welcome our witnesses, and 

look forward to their testimony. 

3 

I would like to take a second, Madam Chairwoman, just to recognize Darwin St. Clair, who is here joining us. He is representing 

the Eastern Shoshone Tribe in Wyoming, and he is Chairman of 

the Shoshone Business Council. Welcome, Chairman St. Clair. 

Thank you, Madam Chairwoman. 

The CHAIRWOMAN. Thank you. Thank you, Senator Barrasso. 

Are there other opening statements? Senator Franken. 

STATEMENT OF HON. AL FRANKEN, 

U.S. SENATOR FROM MINNESOTA 

Senator FRANKEN. Madam Chair, thank you. Thank you, Chairwoman Cantwell, for holding this very important hearing. And 

thank you to the witnesses for coming here today, especially Chairwoman Karen Diver from the Fond du Lac Band of the Chippewa. 

The timing of this hearing to discuss the impact of sequestration 

on Indian Country couldn’t come at a better time, because if we are 

going to end sequestration, the opportunity is coming up in the 

next few weeks. I asked tribal leaders in Minnesota to join me at 

a roundtable three weeks ago. The stories of the consequences of 

the sequester profoundly affected me. I have been meeting with a 

number of Minnesota’s tribal leaders this week in Washington. I 

know Chairwoman Diver will share some of her tribe’s experiences. 

I would like to share one other from the roundtable. One that hit 

me particularly hard was from the Red Lake Band of the Ojibwe. 

It illustrates the real effects of this sequester very powerfully. Recent departures left two vacancies for mental health counselors at 

Red Lake Schools, left two vacancies. But because of the sequestration, the school couldn’t afford to fill those vacancies this year. 

What happened in the absence of those counselors, I am sad to say, 

is that two 14 year old students committed suicide. If sequestration 

is allowed to continue into next year, the remaining six mental 

health counselors will be let go. 

You may all recall that Red Lake was the site of a school shooting in 2005, when a mentally disturbed teen shot and killed a security guard, a teacher and five students. The representative from 

the roundtable from Red Lake, at the roundtable I held, told me 

that after that shooting, the shooting back in 2005, President Bush 

promised Red Lake that they would not be forgotten. Given the recent deaths at the school, he feels that promise has been broken, 

and it has been broken because of sequestration. 

Sequestration is a policy that was never meant to go into effect. 

It was meant to be so extreme that it would force a tough compromise. Yet it did go into effect, and some may say that it hasn’t 

been that bad and that we should just allow the cuts to stay in 

place. I challenge those voices to visit Red Lake or any of the hundreds of tribal communities that have been hit so hard by these 

cuts. We will hear testimony about that today. 

It is just as extreme as it was intended to be. It is something 

that we have to stop. 

Thank you, Chairman Cantwell, and thank you to all our witnesses today. 

The CHAIRWOMAN. Senator Udall? 

4 

STATEMENT OF HON. TOM UDALL, 

U.S. SENATOR FROM NEW MEXICO 

Senator UDALL. Thank you, Chairwoman Cantwell, and Vice 

Chairman Barrasso, for paying attention to this issue and also for 

focusing this hearing on what I think is an extremely important 

issue. 

Senator Franken, what you said, the same is true in New Mexico. We have communities that have suicides and they need help. 

And sequestration has damaged them. So people should know, 

across the Country this is having a big, big impact. 

Sequestration and contract support costs are pressing issues for 

Indian Country, two issues I have been hearing consistently from 

the tribes over the past year. I would like to echo the sentiment 

heard here today and across Indian Country that tribal programs 

should be exempted from sequestration, especially the Indian 

Health Service. It is shameful that IHS is the only direct Federal 

medical service agency not exempted in some way from sequestration. In negotiating sequestration, Congress hoped to protect the 

most vulnerable individuals in our Nation. In Indian Country, we 

fell woefully short. 

Let’s just remember, over and over it was said sequestration was 

going to protect the vulnerable. We did not do that when it came 

to the Nation’s tribes. 

This hearing is an important opportunity for tribal leaders to 

make Congress aware of the impact of sequestration on their constituents and on already chronically under-funded programs. Contract support costs are a vital part of tribal self-determination and 

self-governance. I think everyone here today can confidently acknowledge the positive outcomes that have resulted from tribes 

having the option to contract and carry out their own services. 

Unfortunately, funding for contract support costs has consistently fallen short. This injustice to tribes has been acknowledged 

on multiple occasions by the Supreme Court, most recently the 

Ramah Navajo decision, which came out of New Mexico and which 

Michael Gross and several other attorneys worked on for many 

years. It clearly is a time for Congress, the Administration and 

tribal leaders to identify a clear new path forward, one that will 

allow the success of tribal contracting to continue in a more just 

manner. 

I look forward to buckling down with my colleagues on this Committee to help resolve this longstanding issue. I strongly encourage 

the Administration to seriously engage tribal leaders on this issue 

and to work with Congress and Indian Country to identify a mutually beneficial way forward. 

Thank you, Madam Chair. I very much appreciate the opportunity here. 

The CHAIRWOMAN. Any other opening statements? Senator 

Schatz, do you have an opening statement you want to make? 

STATEMENT OF HON. BRIAN SCHATZ, 

U.S. SENATOR FROM HAWAII 

Senator SCHATZ. Thank you, Chairwoman Cantwell and Vice 

Chair Barrasso, for holding this important hearing. 

5 

We are all familiar with the health and education disparities, unemployment, substandard housing conditions and homelessness 

that our American Indian, Alaska Native and Native Hawaiian 

communities face. The United States has a duty to uphold its trust 

responsibilities to Native people in good times and in challenging 

times. Yet as today’s testimony will illustrate, there is a large gulf 

between promises made and promises kept. The failure to fully pay 

for contract support costs is creating a fiscal and human crisis in 

Indian Country. That is why I oppose capping contract support cost 

accounts, because inadequate reimbursement threatens the ability 

of tribal governments to maintain already underfunded safety net 

programs. These programs are vital to the everyday lives of tribal 

members. And the blunt sequestration cuts are already devastating 

Native communities. 

At the Tribal Nations conference yesterday, Secretary Sebelius 

said that under the sequester, 3,000 fewer Indian Health Service 

patients would be admitted to hospitals. Hospitals would have to 

turn away close to 800,000 IHS patients from important procedures 

like diabetes and cancer screenings, primary care visits and vaccinations for well-baby visits for Native Children. When people talk 

about the sequester, we need to fully understand the human price 

that this policy is exacting in Native communities. We cannot allow 

them to bear a disproportionate burden because of cuts that were 

never supposed to go into effect in the first place. We need to work 

to ensure that the trust relationship between the United States 

and all Native Americans is strong and that this relationship is 

guided by the policies of self-determination and self-governance. 

So I look forward to hearing from our witnesses, and we can 

work together on a solution to this. 

The CHAIRWOMAN. Senator Tester? 

STATEMENT OF HON. JON TESTER, 

U.S. SENATOR FROM MONTANA 

Senator TESTER. Thank you, Madam Chair. My comments will be 

brief, because I think most of them have been covered by previous 

speakers, yourself included. I do want to thank the Chair and the 

ranking Member for having this hearing. And I want to thank the 

folks who traveled such a great distance to be here today. I very 

much appreciate that. I want to thank the folks from the Administration for being here to talk about the impacts and delays and 

cuts of fulfilling contract support costs. In addition, the impacts of 

sequestration. 

The stories have been told in Minnesota, New Mexico, they are 

probably not much different anywhere else in the Country, including Montana. They have been draconian in nature. The only thing 

I would like to point out is that the Supreme Court has ruled that 

the Federal Government must fulfill its trust responsibility to our 

tribal nations. We need to take that ruling seriously as we move 

forward. Sequestration didn’t work out the way people had intended, as Senator Franken had said, these cuts were so bad that 

we were hoping the Supercommittee could come up with a better 

solution. Unfortunately the rules of the field weren’t explained before this bill was voted on. 

6 

With that, I look forward to hearing from the witnesses. Thank 

you, Madam Chair. 

The CHAIRWOMAN. Thank you. Does anybody else have an opening statement? Yes, Senator Murkowski. 

STATEMENT OF HON. LISA MURKOWSKI, 

U.S. SENATOR FROM ALASKA 

Senator MURKOWSKI. Very briefly, Madam Chairman. And I appreciate the comments that my colleagues from Montana just 

made, reminding us of not only the contractual responsibility that 

we have with contract support costs, but with the Supreme Court 

decision coming out in Ramah, it is clear, it is unequivocal, it is 

just right there. The fact that we are continuing to bring this up 

before members of the Administration I find very, very frustrating. 

I have had an opportunity to express that to both Dr. Roubideaux 

and Mr. Washburn. I think you certainly know where Alaskans are 

coming from on this. They have made it very, very clear. 

I listened very intently yesterday at the tribal summit when the 

President spoke. I went there specifically to hear what he was 

going to say on the issue of contract support costs. What I heard 

him say is, we have heard you loud and clear, but we are still 

working to find the answers. I don’t think we need to work to find 

any answers. I think that the court laid it out very, very clearly. 

It said that full reimbursement will be provided. So we have to 

make that happen within that budget. We have to make that priority. 

I too have stories for the record about the impact of sequestration 

on tribal programs in my State. The regional health provider in Juneau had to close its alcohol treatment facility. Up in the YK Delta, 

the regional health provider laid off 20 employees, permanently 

closed 40 vacant positions. They reduced services for elders. The 

impacts of sequestration means that tribes will not be able to reduce waiting times at emergency rooms, outpatient, dental clinics. 

The impact, I think we recognize, has been significant. I would 

ask, Madam Chairman, that I be able to submit for the record comments that we have received from Tribes around the State as well 

as from the Association of Village Council Presidents and stories 

from the Kawerak Region on the impacts of sequestration of tribal 

programs. I will look forward to the comments not only from Mr. 

Washburn and Dr. Roubideaux, but the panel later this afternoon. 

Thank you for the hearing. 

The CHAIRWOMAN. Thank you. Without objection, we will add 

that to the record. 

Now we will turn to our witnesses. Thank you for being here 

today. I know it has been a busy week. Assistant Secretary 

Washburn, for the U.S. Department of Interior and Acting Director 

of the Indian Health Service, Yvette Roubideaux, thank you both 

for being here and we look forward to your testimony. 

STATEMENT OF HON. KEVIN WASHBURN, ASSISTANT 

SECRETARY—INDIAN AFFAIRS, U.S. DEPARTMENT OF THE 

INTERIOR 

Mr. WASHBURN. Thank you, Madam Chair and Mr. Vice Chair, 

and the rest of the Committee, thank you for having us here. We 

7 

did have the tribal nations conference yesterday and Senator Murkowski and Senator Heitkamp were both there. It was good to see 

them. We really appreciate the support from Capitol Hill. 

Thirteen cabinet secretaries were also there hearing from tribes, 

and 300 plus tribal leaders, I believe, was the final count, something like that. We did hear loud and clear from tribes on numerous issues. Certainly contract support costs were one of the issues 

that we heard a lot about. My boss, Secretary Sally Jewell, said 

from the podium that she heard loud and clear that tribes want 

full funding of contract support costs. I think I probably don’t need 

to say too much more about that, because that is what we heard. 

We will be working further to address those issues. 

We did not consult with tribes before we came up with the approach that we put in the Green Book this year. That is not the 

way we should be doing business, so we have been scurrying 

around working to consult afterward. We have heard from tribes, 

they don’t like the approach that was used in the Green Book. So 

we are regrouping and trying to figure out how to go forward. We 

have had very productive conversations with tribal leaders, and we 

have reinstituted our contract support costs work group, and we 

have had a consultation session and have had a lot of informal conversations. We are grateful for that. We certainly got a conversation going and we need to figure out a better way through this, obviously. 

So let me turn to sequestration. Sequestration really is getting 

to be a serious problem. Tribes are now, I think when sequestration first hit, several months ago, we didn’t really know what the 

outcomes were going to be. But now we are really starting to feel 

them, as tribes have had to live with these cuts for a while now. 

It was $119 million less from our budget that was split about evenly between direct service tribes and self-governance tribes. And on 

your panel, you have five tribes that are self-governance tribes, and 

the sixth, Mississippi Band of Choctaw, actually does a lot of their 

own work, too. They do self-determination contracts and have tribally-controlled schools. So they are in essence in the same boat, 

they have a lot of contracts with the Federal Government. 

So for all these tribes that are going to be represented, they have 

all seen a cut of 5 percent in their budgets, their appropriations. 

And we face a looming cut of another 2.2 percent on January 15 

if there isn’t something done under the Budget Control Act. So that 

will be a total of $170 million cut that we have had to deal with 

over the course of a year. 

And that sounds scary. The only thing scarier is the House-proposed budget, because it would cut Indian Affairs’ budget more 

than $200 million. So that really terrifies us, because we aren’t 

doing the job we need to do with what has happened already. 

So we really hope that the Conference Committee will come up 

with a good proposal. We appreciate the Senate’s leadership, because the Senate’s budget is much better for Indian Country. We 

hope that you negotiate well on behalf of Indian tribes in the Conference Committee. And we will be in a much better place. 

Let me just tell you that the House budget, what it would do is, 

it fully funds school construction, which I know Senator Franken 

will be happy about. And it fully funds contract support costs, 

8 

which many people will be happy about. But with the overall $200 

million cut, it does all of that with a 19 percent across the board 

cut to virtually every other line in our budget. Nineteen percent. 

We just dealt with a 5 percent cut, and it was debilitating. As Senator Udall and Senator Franken and Senator Tester said, we just 

can’t live with a cut that is four times that amount. That is what 

would happen if the House budget became the law. Just to give you 

a sense, it would cut $60 million from law enforcement. 

So we are in a terrible time. We are grateful for the leadership. 

I know that each of the people on this Committee are advocates for 

Indian Country. We are grateful for that, because we really need 

it right now. 

So why don’t I stop there, and I am happy to answer questions, 

any questions you have about the budget or about contract support 

costs. Thank you. 

[The prepared statement of Mr. Washburn follows:] 

PREPARED STATEMENT OF HON. KEVIN WASHBURN, ASSISTANT SECRETARY—INDIAN

AFFAIRS, U.S. DEPARTMENT OF THE INTERIOR

Good afternoon, Chairwoman Cantwell, Vice Chairman Barrasso, and Members of 

the Committee. Thank you for the opportunity to provide a statement on behalf of 

the Department of the Interior (Department) at this oversight hearing on ‘‘Contract 

Support Costs and Sequestration: Fiscal Crisis in Indian Country.’’ 

As the Assistant Secretary for Indian Affairs, I have the responsibility to oversee 

the numerous programs within the Bureau of Indian Affairs (BIA) and the Bureau 

of Indian Education (BIE), along with other programs within the immediate Office 

of the Assistant Secretary for Indian Affairs. The Office of the Assistant Secretary 

for Indian Affairs, BIA, and BIE programs expend over 90 percent of appropriated 

funds at the local level. Of this amount, over 62 percent of the appropriations are 

provided directly to Tribes and tribal organizations through grants, contracts, and 

compacts for Tribes to operate government programs and schools. Indian Affairs’ 

programs serve the more than 1.7 million American Indians and Alaska Natives living on or near Indian reservations. 

Earlier this year I testified on the President’s FY 2014 Budget Request for Indian 

Affairs programs at the Department of the Interior. In that Budget Request, the Administration proposed that the FY 2014 budget for contract support costs (CSC) be 

funded at $231.0 million, and also proposed to fund contract support in an account 

separate from the Operation of Indian Programs account. We stated that this would 

be an increase of $9.8 million over 2012 and would strengthen the capacity of Tribes 

to manage Indian Affairs programs for which they contract. As a result of the 

Salazar v. Ramah Navajo Chapter Supreme Court decision in 2012, the Budget also 

proposed an interim measure requesting that Congress appropriate CSC funding to 

Tribes on a contract-by-contract basis, which was consistent with one of the options 

for Congress identified by the Court. To ensure as much clarity as possible regarding the level of contract support funding, the Administration provided Congress a 

contract-by-contract funding table for incorporation into the appropriations act on 

June 14, 2013. 

After releasing the President’s Budget Request for FY 2014, we have heard a 

great deal of feedback from Indian Tribes. Indian Affairs held a CSC consultation 

session at the National Congress of American Indians conference in Reno, Nevada, 

on June 25, 2013. We have also heard on several occasions from Tribes at the Tribal 

Interior Budget Council meetings, which are formal meetings for consulting with 

Tribes on proposed budgets, and at the Self-Governance Advisory Committee meetings. In addition, Indian Affairs, together with the BIA, also reconstituted the BIA’s 

CSC Workgroup. This group is composed of tribal leaders and technical experts who 

are working to improve Indian Affairs policy and practice around these issues. That 

group met in August and had productive meetings. In each of these forums, the Administration has heard from tribal leaders. The Administration also hosted the Tribal Nations Conference this week, where additional outreach efforts were made. 

Currently, the Administration is engaged in the important work of preparing the 

FY 2015 Budget Request. It is our intention to continue to work to find a responsible solution to the CSC issue. Our discussions with Tribes will continue, and the 

views we hear from Tribes will inform our path forward. 

9 

We are also dealing with the effects of sequestration on Indian Affairs programs, 

which in FY 2013 cut five percent from every program, project and activity and is 

having lasting effects on Indian programs. Our current budget for FY 2014 is funded by a continuing resolution that extends through January 15, 2014 and continues 

the 2013 post-sequester funding level. This operating level for FY 2014 is $174 million or 6.8 percent below the 2014 budget request and does not address the additional funds we requested for contract support or other important program needs. 

We await the outcome with regard to full year appropriation for Fiscal Year 2014 

and we are working with the Tribes to prudently plan. Our planning scenarios include the potential for budget reductions and sequestration. In the meantime, we 

are challenged to undertake the programs we are responsible to execute as we await 

congressional action. We urge Congress to enact a budget that more adequately 

funds Indian programs. 

The effects of sequestration are beginning to be felt more and more, as the cuts 

had immediate impacts in FY 2013 with reductions in hiring, delays and cancellation of travel and training, and cuts in contracts for maintenance and other needs. 

The impacts will continue to be felt for some time, as the reductions erode capacity 

in direct services programs and in tribally operating programs. Reduced hiring and 

training undercuts the capacity needed and results in significant skills gaps in areas 

including child welfare, early learning programs, energy development, welfare and 

others. The long term effects including erosion of our workforce and, cut backs in 

educational programs and investments in economic development and other areas are 

becoming more apparent, as other witnesses will likely explain. 

Because Indian people are often among the poorest communities in the United 

States, reductions to the budget caused by sequestration has undermined the health 

and safety of some of the most vulnerable segments of society with particular effects 

on children, the elderly, and families. 

Sequestration has undermined the efforts of the BIA and BIE and other federal 

agencies to provide services to meet our trust responsibility to Indian Tribes and 

Indian people. Our employee ranks have thinned substantially as hundreds of staff 

positions have opened through retirement and other forms of attrition and cannot 

be easily filled in the current fiscal scenario. 

This effect has been mirrored for Tribal governments in Indian Country. The sequestration reductions have reduced payments to Tribes to perform important federal services, undermining tribal self-determination and self-governance and severely handicapping the ability of Tribes to implement treaty rights and various resource management programs to maintain and restore natural resources in Indian 

Country. Imposing automatic across the board cuts to reduce spending across all 

tribal activities has had immeasurable impacts in the denial of opportunities for a 

self-reliant people. 

In conclusion, I hope the Congress will be able to successfully complete the negotiations being conducted for resolution of the budget situation so we can return to 

regular order, avoid sequestration, and have certainty in a budget that will adequately address needs in Indian Country. 

The CHAIRWOMAN. Thank you. 

Director Roubideaux, thank you for being here. 

STATEMENT OF HON. YVETTE ROUBIDEAUX, M.D., M.P.H., 

ACTING DIRECTOR, INDIAN HEALTH SERVICE, U.S. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Dr. ROUBIDEAUX. Thank you, Madam Chairwoman and Vice 

Chairman Barrasso and members of the Senate Committee on Indian Affairs. I am Dr. Yvette Roubideaux, the Acting Director of 

the Indian Health Service. I am very pleased to testify today on 

contract support costs and sequestration. 

I want to start by saying that I am deeply concerned about the 

current fiscal situation and I am very anxious to work with all of 

you on solutions. The impact of sequestration in fiscal year 2013 

was significant for the Indian Health Service. Overall, it was a 

$220 million reduction in IHS’s budget authority. It was estimated 

that that would result in, as Secretary Sebelius mentioned, and as 

10 

Senator Schatz mentioned, the reduction of 3,000 inpatient admissions and 804,000 outpatient visits for our patients 

In fiscal year 2013, IHS had to make significant reductions in administrative costs, travel, we had to delay hires, delay purchasing, 

we had to delay planned renovations that were needed in order to 

focus on trying to preserve the IHS mission. Even with all these 

challenges, I want to continue to be a strong advocate for the Indian Health Service budget, and I am anxious to work with you on 

this. I have advocated very strongly within the Administration to 

continue to keep the Indian Health Service to be a priority. 

We need to get the Indian Health Service back on track. We did 

have a series of increases over the last four years. I know that 

tribes are deeply concerned that we are going backwards. I am so 

grateful that the tribes get to tell their story today and have told 

you their story about the budget situation. 

I also want you to know that I have heard your concern about 

contract support costs, and have heard the concerns of tribes. We 

have heard loud and clear that people want solutions. We are here 

and want to work with you on solutions to these issues. Related to 

the appropriations, we have actually increased contract support 

costs 67 percent since fiscal year 2008 and our President’s budget 

includes an increase for contract support costs for fiscal year 2014. 

It also includes increases for other tribal budget priorities, including medical inflation, staff and operating costs for newly constructed facilities and contract health service for referrals. It reflects the challenge of funding all our identified needs and funding 

priorities, especially in this difficult fiscal climate that we face. 

I want you to know I have also heard the input that tribes want 

more consultation and more discussion about solutions for contract 

support costs. We are discussing it in our current area budget formulation process, and I sent a letter last month to tribes that included an update and initiated a discussion on contract support 

costs to look at the estimates of CSC in the pre-award and negotiations phase. 

I have met with the IHS tribal self-governance advisory committee. I have also met with the IHS direct service tribes advisory 

committee. They have agreed to move forward with this discussion. 

And I have agreed with them to convene the CSC work group to 

make recommendations on this topic. 

I appreciate all the input we have received from tribal leadership 

on working to continue progress on this issue. 

In terms of the past claims, we have heard your input that you 

want us to do everything we can to increase the pace of settlement. 

We have a joint management plan with the tribal lawyers. We have 

instituted a new fast-track alternative process to get offers on the 

table quicker for tribes. I have also recently committed resources 

to increase the number of staff and resources to increase the rate 

of generating initial settlement offers. 

So in summary, I am very deeply concerned about the fiscal situation and sequestration. We have heard from tribes on the significant challenges that they are facing and that we are facing as a 

system as well. The President’s budget for fiscal year 2014 as a 

whole replaces sequestration and reduces discretionary spending 

11 

limits while providing funding consistent with the limits agreed to 

in the bipartisan majority’s and the Budget Control Act of 2011. 

IHS budget in particular would be increased above the sequester 

level and allow IHS to continue to make improvements in health 

care access to quality for American Indian and Alaska Native patients. 

I am anxious to work with you to find solutions to this budget 

situation and I know that I want us all to work together so we can 

honor our responsibility to provide health services for American Indians and Alaska Natives that they need and they deserve. 

Thank you, and I am happy to answer questions. 

[The prepared statement of Ms. Roubideaux follows:] 

PREPARED STATEMENT OF HON. YVETTE ROUBIDEAUX, M.D., M.P.H., ACTING

DIRECTOR, INDIAN HEALTH SERVICE, U.S. DEPARTMENT OF HEALTH AND HUMAN

SERVICES

Thank you, Madam Chairwoman, Vice Chairman Barrasso, and Members of the 

Senate Committee on Indian Affairs (Committee). I am Dr. Yvette Roubideaux, the 

Acting Director of the Indian Health Service (IHS). I am pleased to provide testimony on Contract Support Costs and Sequestration. 

The IHS is an agency within the Department of Health and Human Services 

(HHS) that provides a comprehensive health service delivery system for approximately 2 million American Indians and Alaska Natives from 566 federally-recognized Tribes in 35 states. The IHS system consists of 12 Area offices, which are further divided into 168 Service Units that provide care at the local level. Health services are provided directly by the IHS, through tribally-contracted and operated 

health programs, through services purchased from private providers, and through 

urban Indian health programs. The IHS fiscal year (FY) 2013 discretionary appropriations were $4.1 billion, with approximately $2.028 billion of the IHS appropriations transferred to Indian Tribes and Tribal Organizations (T/TO) through agreements entered under the Indian Self-Determination and Education Assistance Act 

(ISDEAA). 

The impact of sequestration in FY 2013 was significant for IHS; overall, the $220 

million reduction in IHS’ budget authority for FY 2013 was estimated to result in 

a reduction of 3,000 inpatient admissions and 804,000 outpatient visits for American 

Indians and Alaska Natives (AI/ANs). In FY 2013, IHS made significant reductions 

in administrative costs, travel, and delayed hires, purchasing and planned renovations to focus on preserving the IHS mission. 

Contract Support Costs 

As authorized in 1975, the ISDEAA provides T/TO the authority to contract with 

the Federal Government to operate programs serving eligible persons and to receive 

not less than the amount of funding that the Secretary would have otherwise provided for her direct operation of the program (also known as the ‘‘Secretarial 

amount’’). The 1988 amendments to that law added Contract Support Costs (CSC) 

as a second category of funding to ISDEAA agreements. CSC covers additional activities that T/TOs must perform in support of the programs, services, functions, and 

activities (PSFAs) administered under their ISDEAA agreements which the Government did not perform or did not otherwise fund through the Secretarial amount. 25 

U.S.C. a 450j-1(a)(2). CSC is not a simple indirect rate or percentage of funding received, though the calculation of one category of CSC—indirect CSC—can rely, in 

part, on the T/TO’s negotiated indirect cost rate agreement. The ISDEAA does not 

establish the methodology for calculating CSC; but, the statute is clear that CSC 

must be reasonable, non-duplicative, prudent and necessary to carrying out the 

PSFAs in the ISDEAA agreement. 

The IHS administers CSC funding under a policy established in 1992. The policy 

was developed through extensive consultation with and participation by Tribes and 

has been amended based on that consultation, most recently in 2007. In FY 2011 

and FY 2012, IHS made significant improvements to the IHS business practices associated with the CSC policy to ensure fair and consistent application of the CSC 

policy across all Tribes, including Tribal data verification. 

12 

Contract Support Cost Funding 

The IHS paid about $447.8 million in CSC to T/TO in FY 2013, which is a 67 

percent increase over the FY 2008 funding level. The President’s Budget request for 

FY 2014 provides about $477.2 million for CSC, including $500,000 for new and expanded ISDEAA agreements. The FY 2014 President’s Budget also requests increases for other Tribal budget priorities including medical inflation, staff and operating costs for newly constructed facilities, and Contract Health Service, and reflects 

the challenge of funding all identified needs and funding priorities, especially in the 

difficult fiscal climate we currently face. 

The FY 2014 President’s Budget request also proposed adopting a new approach 

to funding CSC in light of the Supreme Court’s decision in Salazar v. Ramah Navajo Chapter in 2012. Consistent with one of the options identified by the Supreme 

Court, the President’s request proposes new appropriations language that creates a 

line-item appropriation with a maximum amount of CSC funding available for each 

ISDEAA agreement. Three of the other options identified by the Supreme Court involve amending the ISDEAA. 

Tribes have expressed concerns about the approach proposed in the FY 2014 

President’s Budget and have emphasized that full funding of CSC is their desired 

result. The Administration considers the FY 2014 budget proposal to be an interim 

measure, and has been consulting with Tribes on a long-term solution and requesting input through several forums and communications. And, as the President stated 

at the Tribal Nation’s Conference, he hears the frustration of the Tribes and will 

work with Tribes on a solution. 

More specifically, each IHS Area Office has been requested to submit recommendations from the Tribes participating in the FY 2016 IHS Tribal Budget Formulation sessions occurring this fall. 

On September 9, 2013, I sent a letter to Tribes that included an update on CSC 

and initiated a discussion on calculation of estimates of CSC in the pre-award or 

negotiations context. As planned, I have met with the Tribal leadership in the IHS 

Tribal Self-Governance Advisory Committee and the IHS Direct Service Tribal Advisory Committee, and we had productive discussions on the topic of CSC and agreed 

to move forward with a charge to the IHS CSC Workgroup to make recommendations on this topic. We are hopeful that greater agreement on how to calculate estimates of CSC in the pre-award context will help with more efficiency in all other 

phases of the CSC process. I appreciate all the input we have received from Tribal 

leadership, and we are working to continue progress on this issue. 

Contract Disputes Act Claims for CSC in Past Years 

In terms of Contract Disputes Act (CDA) claims for unpaid CSC in past years, 

the IHS continues to make progress and to prioritize the resolution of claims presented to the agency in the most efficient manner and through settlement wherever 

possible. We have moved forward with a joint case management plan, agreed upon 

by both IHS and the T/TOs, for exploring settlement of all CSC claims on appeal 

to the Civilian Board of Contract Appeals. In response to input from Tribes, the IHS 

also announced in June 2013 two procedural options for resolving claims for unpaid 

CSC in past years: 

• Traditional procedure. Under this option, the IHS and the Tribe will have indepth discussions of the Tribe’s claims and share documentation in an effort to 

reach agreement on a final amount of unpaid CSC. The benefit of this option 

is that the mutual exchange of information and documentation ensures the 

highest level of confidence in the final agreed-upon amount. 

• Alternative procedure. Under this option, a Tribe can request that the IHS perform the same costs-incurred analysis based on the agency’s documentation and 

then make a one-time, non-negotiable offer to settle the Tribe’s claim(s). The 

Tribe may choose to settle for the offered amount and resolve the claim(s). The 

Tribe may also choose to reject the offer and instead return to the traditional 

in-depth option. The benefit of this option is it is less time-consuming for Tribes. 

Regardless of the process selected, the IHS will seek to ensure the agency consistently determines the appropriate CSC amount for each claim. IHS also recently 

committed more resources to the claims process to increase the rate of generating 

initial settlement offers. Currently, there are approximately 60 settlement offers on 

the table in both informal and formal settlement discussions, and many more in 

progress. 

Sequestration 

At this time, IHS faces uncertainty about its funding level for FY 2014 as we 

await full-year FY 2014 appropriations. The impact of sequestration in FY 2013 was 

13 

significant for IHS; overall, the $220 million reduction in IHS’ budget authority for 

FY 2013 was estimated to result in a reduction of 3,000 inpatient admissions and 

804,000 outpatient visits for American Indians and Alaska Natives (AI/ANs). In FY 

2013, IHS made significant reductions in administrative costs, travel, and delayed 

hires, purchasing and planned renovations to focus on preserving the IHS mission. 

One of the most significant challenges we face is the potential future impact of 

reductions to the discretionary spending limits and sequestration on IHS. Tribes 

have expressed their concern and disappointment that our recent progress on increases to the IHS budget is being reduced by having to absorb the cuts from sequestration. The FY 2014 President’s Budget proposal as a whole replaces sequestration and reductions to the discretionary spending limits, while providing funding 

consistent with the discretionary spending limits agreed to by bipartisan majorities 

in the Budget Control Act of 2011. The IHS budget in particular would be increased 

above the sequestered level in FY 2013, and allow the IHS to continue making improvements to health care access and quality for our AI/AN patients. 

IHS has the solemn responsibility to honor the federal trust responsibility and to 

carry out health care programs for AI/ANs, including through ISDEAA agreements, 

and remains committed to ensuring that our AI/AN patients and communities receive the quality health care that they need and deserve. 

Thank you and I am happy to answer questions. 

The CHAIRWOMAN. Thank you, and again, we appreciate both the 

witnesses being here. 

My first question is to both of you. I know that you might think 

Director Roubideaux needs to answer this, but why do we have sequestration that protects Medicaid and Medicare but not Indian 

Health Service? 

Dr. ROUBIDEAUX. I don’t know the answer to that. 

The CHAIRWOMAN. So in the Administration budget, are you talking about proposing a change to that for next year? 

Dr. ROUBIDEAUX. Well, I have heard that there are proposals to 

protect the Indian Health Service, to exempt them from sequestration. Those proposals are being discussed in Congress and the 

tribes have indicated their support for them. 

The CHAIRWOMAN. What does the Administration think? 

Dr. ROUBIDEAUX. The Administration’s approach is that we think 

sequestration is a bad idea and we want it to be eliminated. So we 

are willing to work with you on this issue. 

The CHAIRWOMAN. What I would appreciate is an answer from 

whether the Administration supports protecting Indian Health 

Services the same way they protect Medicaid and Medicare. So if 

you could get us an answer yes or no on that, that would be very 

helpful. 

Dr. ROUBIDEAUX. The Administration supports eliminating sequestration for the Indian Health Service as well as all other tribal 

programs and all of their programs. 

The CHAIRWOMAN. While we are doing sequestration, does the 

Administration believe you need to protect Indian Health Services 

just like we protect health care under Medicaid and Medicare? 

Dr. ROUBIDEAUX. I guess I have not asked that question to them. 

I will and I will bring that back to you. 

The CHAIRWOMAN. Thank you. Assistant Secretary Washburn, do 

you have any comments about that question? 

Mr. WASHBURN. I also don’t have an answer for you. Certainly 

I think that it is true that what sequestration did is, in some respects the Budget Control Act attempted to protect the most vulnerable, and it did not do that in Indian Country, that is for sure. 

14 

That would seem to be inconsistent with what was said at that 

time, as Senator Udall said. 

The CHAIRWOMAN. Okay. Back to the contract support costs. 

What do you think the estimate is that the Department of Interior 

owes tribes? 

Mr. WASHBURN. As far as past claims? 

The CHAIRWOMAN. Yes. 

Mr. WASHBURN. I don’t know what that answer is. And frankly, 

I am not sure that anyone knows what that is for sure. That really 

is the key question because liability was determined in the Ramah 

case. The liability is clear, the fact of liability. The question is how 

much. That is the golden number, that is the number we need to 

know to know how much to settle for. 

The CHAIRWOMAN. Let’s ask this. Are we talking about millions 

or billions here? 

Mr. WASHBURN. It is at least in the hundreds of millions, I would 

venture to guess. But again, it is an estimate. The way we are 

going about it, and when I say we, I mean the plaintiffs and the 

Federal Government are working together on a sampling method 

so that they don’t have to prove up every single actual cost that 

the tribes bore, but that they can come up with a method for estimating what the costs would be. As you noted in your opening 

statement, we have one large class action encompassing essentially 

every tribe that has a contract. And we are working with the plaintiffs to determine if there is a formula that we can use to estimate. 

I am confident that it is in the hundreds of millions and it may 

well exceed a billion dollars. 

The CHAIRWOMAN. I definitely think it exceeds a billion dollars 

from estimates that I have seen. So I don’t think it is in the hundreds of millions. We probably wouldn’t have everybody sitting 

here as members frustrated over the lack of progress on contract 

support if it really was in the hundreds of millions. I think we have 

a lot of people paying attention because it is a larger number. 

But I am trying to get your viewpoint on whether these claims 

can be paid out of the judgment fund that exists. 

Mr. WASHBURN. Well, let me say this. And I didn’t mean to be 

lowballing or anything, I just don’t know. And I don’t want to be 

presuming anything. I view this as the same scale as Cobell. And 

Cobell was a multi-billion dollar settlement. I think this is just as 

important as Cobell, and the principles also are very important. It 

is my understanding that for past claims, the judgment fund is 

available for these claims. And that is the assumption I have been 

bringing to everything I have been hearing about this. There is a 

question about how the judgment fund works going forward. I 

think that is why the, well, there is the interest in the Administration to come up with a solution that doesn’t create yawning liability 

indefinitely in the future. 

So there is, I guess that is the reason, one of the reasons for the 

Administration’s approach that it took in this case. 

The CHAIRWOMAN. My time is running out. I want to get to my 

colleagues. But I guess the way I look at it is, liability, as you said, 

has been determined. You and I may be quibbling about the 

amount, but my guess is that at least it is that billion dollar mark. 

You are saying it can come out of the judgment fund, which has 

15 

funds. So now it is really just the process of determining how to 

get that done. I personally believe something like a special master 

would get it done faster than what we are doing and get some serious expertise on how to settle these claims in the process. But we 

will leave that to another round of questioning and I will turn to 

my colleague, the Vice Chairman. 

Senator BARRASSO. Thank you, Madam Chairwoman. I have to 

agree with you, that was going to be my first question, just to follow your line of questioning. Written testimony from our second 

panel of witnesses today indicates that there are several thousand 

contract support cost claims pending with the agencies, close to 

9,000 for the Bureau of Indian Affairs claims, nearly 1,600 from 

the Indian Health Service, with years left to settle them. So we are 

going to get recommendations that a special master be appointed 

to handle these contract support cost claims. 

The question is, what do you think of this recommendation? 

Mr. WASHBURN. Well, let me say this. This is a matter in litigation and I don’t intend to dodge. But we didn’t have a whole lot 

of time to prepare for this hearing, because we had so much going 

on this week. So that question wasn’t posed to me and I didn’t talk 

about it with anybody else. So my answer wouldn’t be very useful 

to you, because it hasn’t been vetted with anyone else in the Administration. We are certainly open to solutions that might help. 

I have had regular briefings about the settlement discussions. 

And my sense is that the class counsel and my team have been 

making productive progress. So again, we are open to solutions, if 

they don’t believe that is true. 

Senator BARRASSO. In spite of the concerns that you didn’t have 

enough time to deal with that, I would like to leave this as a written question to you as you go back and get that answer and get 

back to me as a direct follow-up, not waiting for another hearing 

but a direct follow-up. 

Dr. Roubideaux, according to the National Congress of American 

Indians, both BIA and the Indian Health Service are essentially reevaluating these contracts and court cost claims. Since both agencies are required to report on these claims each year to Congress, 

presumably you already know what the claims are and for what 

amounts. Can you explain the need for reassessment of the claims? 

Dr. ROUBIDEAUX. Well, I think you may know that the claims 

and the amount are a topic of the litigation. So I am not at liberty 

to discuss that in detail. But we have heard the input from the 

tribe about the claim estimates and all the other numbers, and we 

are discussing those. 

Senator BARRASSO. You have testified on several occasions before 

this committee regarding the need for tribal consultation. In written testimony, Jefferson Keel, and he is here with us, indicates 

that the Indian Health Service seems inclined to raise the Federal 

Advisory Committee Act as an impediment to robust consultation. 

Can you explain how, in your opinion, the Federal Advisory Committee applies in tribal consultation? 

Dr. ROUBIDEAUX. I am sorry Mr. Keel feels that way. The Federal Advisory Committee Act has an intergovernmental exception, 

which allows for groups of governmental officials to have deliberations that are not open to the public. We do like to preserve that 

16 

ability to have frank and honest and open discussions with tribes. 

So I would not want anybody to think that we were trying to impede conversation around that. What happens is that if you don’t 

follow the rules of the intergovernmental exception, the deliberations and recommendations from the committee, as my lawyers tell 

me, could be challenged in court. We wouldn’t want those deliberations to have problems in the future. 

So it was really wanting to make sure that those recommendations would stand the test of time. 

Senator BARRASSO. So then does the Indian Health Service, are 

you inclined to raise the Federal Advisory Committee Act as an impediment to robust consultation, regardless of how he feels about 

it? Is that what the inclination would be at the Indian Health Service? 

Dr. ROUBIDEAUX. No, not at all. That is not our intention at all. 

We just want to make sure that the recommendations stand the 

test of time. That is why we want to make sure that we have all 

the documentation in place, so that these are intergovernmental 

representatives. And now that I have been able to explain that to 

tribes, the committees have told me that they understand it. 

Senator BARRASSO. Thank you. Thank you, Madam Chairwoman. 

The CHAIRWOMAN. Thank you, Senator Barrasso. Senator Tester? 

Senator TESTER. Thank you, Madam Chair. 

Just for the record, and this can be for either one of you, who 

made the determination to put caps on contract support costs? Was 

that done by the Department? Was that done by the Secretary of 

Interior? Was that done by somebody outside the Department? 

Mr. WASHBURN. Senator Tester, you put us in a very awkward 

position when you ask questions like that, which I know you don’t 

mind doing. 

[Laughter.] 

Mr. WASHBURN. I have to own that decision, and I will take responsibility for that decision, because I am the one who is testifying for the Administration. 

Senator TESTER. Could you tell me why you made that decision? 

There must be a reason for it. 

Mr. WASHBURN. Well, it is a difficult decision. It is not something 

that makes a lot of sense, in many respects, for either agency. We 

have hundreds of contracts with Indian tribes, and having to figure 

out even a cap amount for each one of them is a nearly herculean 

task. We have accountants who we would rather be using for much 

more productive work. 

But I gather that the concern is with sort of the indefinite liability going forward that the Ramah case creates. Again, it was done 

without any consultation, and that is not usually the way we do 

business, especially at Interior. So we know that we have a consultation policy when we are making important decisions like this. 

We are doing our best to go ahead and proceed with the consultation. 

Senator TESTER. That is fine. 

Mr. Assistant Secretary, probably nobody in this room knows 

trust responsibility better than you, truthfully. And don’t let me 

put words in your mouth, but I think you guys have been dealing 

with a continuing resolution at Interior for how many years? 

17 

Mr. WASHBURN. Well, the better part of 10 years, I would say. 

Senator TESTER. The better part of 10 years. And then we have 

put sequestration on top of that, correct? 

Mr. WASHBURN. That is correct. 

Senator TESTER. And that is kind of forced you into this situation, right? 

Mr. WASHBURN. I think it is fair to say that that is certainly part 

of it. There is not enough money to go around, absolutely. 

Senator TESTER. That is right. And the fact of the matter is that 

because of the dysfunction in the Senate now, with filibustering 

every little issue that comes down the pipe, we are not able to do 

our job in a way that meets the needs for Indian Country. Would 

you say that is fairly correct? I don’t want to get you into too much 

trouble with the Senate. But you can just say yes or no. 

[Laughter.] 

Mr. WASHBURN. I wouldn’t want to leave the House out. 

[Laughter.] 

Senator TESTER. We will let that stand in the record. 

I appreciate that. I will tell you that I think each one of us up 

here has our own difficulties, and you guys have your own difficulties. But we have got to be able to appropriate adequate dollars for 

you guys, or you are going to fail every time and you are going be 

in front of this Committee and we are going to be stomping our feet 

and throwing our fists on the table, saying why didn’t you get this 

job done, when in fact you start out in a hole. Truthfully. Your 

head is nodding. 

The question is, I have to ask myself, what can the Administration do differently. And has the Administration, has Secretary 

Jewell, has the President of the United States allowed you to advocate for the programs you feel are important to the extent you need 

to advocate for them? And I don’t want to get you in trouble with 

your bosses, but the truth is that we need to hear from you guys 

on dollar amounts that meet the need. We don’t want to lowball 

dollar amounts, we don’t want to highball dollar amounts. We want 

enough money so you can do things like meet the needs of contract 

support services, meet the needs of Indian Health Service, meet the 

needs of housing, meet the needs of education. The list goes on and 

on. Have you been given the reins, so to speak, to be able to advocate for what you really believe in? Because I know where your 

heart is. 

Mr. WASHBURN. Well, we don’t get the budget we dream about, 

we get the budget that we can afford. There is not enough money 

to go around to do all the things that the United States should do, 

in Indian Country or frankly anywhere else, probably. 

Senator TESTER. But they are in a little different boat with the 

trust responsibility. 

Mr. WASHBURN. They certainly are, and the responsibility, the 

duty to Indian Country is far greater. I frequently say, somewhat 

in jest, that until we are willing to give North America back, we 

have certain obligations we need to pay. I truly believe that to be 

true. As a practical matter, it often turns out to be a political question, though, what the extent of those obligations are. 

Senator TESTER. Thank you. 

18 

The CHAIRWOMAN. Senator, going back and forth, just to clarify 

how the rules in this Committee work, as a recognition, it is the 

time of the gavel, by seniority and back and forth. Senator Murkowski, then followed by Senator Franken. 

Senator MURKOWSKI. Thank you, Madam Chair. 

Just to kind of follow up on the points that you were making initially, when the Appropriations Committee had its very first hearing with what was happening with sequestration, I made the case 

at that time with OMB that tribes should be treated like the other 

Federal health programs that we have for our seniors, for our veterans. And that they be protected. 

Obviously, they did not take that into consideration. But I am 

sending a letter to the budget conferees, asking them to hold harmless from sequestration the IHS and treat with parity the Indian 

health system as they do with our veterans and Medicare and Medicaid as well. So I look to the trust responsibility we all talk to here 

on this Committee, and I just don’t see how IHS has been kind of 

shunted off into the corner, when we are talking about the responsibilities that we have from a budgetary perspective. 

I would like to direct a question to you, probably, Assistant Secretary Washburn, and maybe this is for both. I have never really 

received a satisfactory answer, talking about the Ramah decision 

that came down, then the Administration comes out with a surprise to this Committee, clearly a surprise to Indian Country, by 

including the budget language capping the amounts of the contract 

support costs, eliminating the ability of tribes to make future 

claims, rather than support the full amount of the contract costs. 

I still am just incredulous that this whole thing took place, and 

that we are still living through this. 

We have been told by the Administration that this was just an 

interim step. And yet I went to work with my counterpart on the 

House side, the former Interior Subcommittee chair Mike Simpson, 

to keep the language out of the current CR, because the Administration was insisting on putting it in. So on the one hand you are 

saying, well, we understand, we hear you, we are listening, but you 

still include it within that current CR. I do understand that you 

have had some consultation with tribes on the matter. You are 

hearing. But I guess I would ask for confirmation that you are 

working on solutions with the tribes on the issue of contract support costs. And when I say working on it, I mean to address it now. 

We have budgets that we are all dealing with here. I want to 

know whether or not you are beginning to prepare next year’s 

budget now, what the Administration’s plan is going forward, 

whether you are going to propose the same language you put forward this year in the budget, capping the contract support costs. 

I would like to understand, I know we are at the tail end of this 

calendar year. But we are beginning this next fiscal year. Where 

are we when it comes to the budget, with contract support costs as 

well as just ensuring that the priorities are there, as well as the 

consultation? 

Dr. ROUBIDEAUX. If I may answer this question. I want to reassure you that we have heard loud and clear the opposition to this 

proposal. We have heard it in many forums, the tribes don’t like 

it. We have heard your opposition as well. And I can guarantee 

19 

you, both Assistant Secretary Washburn and I have used every opportunity during the budget formulation process to make it clear 

that that is what we are hearing from you and from your colleagues and from the tribes as well. 

Senator MURKOWSKI. How is that going to translate? 

Dr. ROUBIDEAUX. The fiscal year 2015 budget is still in formulation. So I am not at liberty to discuss the President’s budget at this 

time, and I think it is still in process. So I don’t think final decisions have been made. But I can guarantee you that during the discussions we are making sure that the tribes’ positions are being 

discussed. We are making sure that your input is being heard and 

that it is very clear that people are opposed to this idea. 

Senator MURKOWSKI. I was told from our tribal health providers 

that they have gotten confirmation from OMB that IHS is going to 

be limited to a 2 percent sequestration cut in fiscal year 2014, if 

a sequestration proceeds under the BCA. Is that your understanding? 

Dr. ROUBIDEAUX. I am still awaiting the determination of what 

it will be. I think they are waiting for the final appropriations and 

what happens with Congress and the Budget Committee and so on. 

Senator MURKOWSKI. So our tribal health providers actually have 

more information than you do on this? I am just trying to figure 

out where we are going forward. 

Dr. ROUBIDEAUX. I have not received the official information 

from OMB yet on what the final determination will be. So the Administration has not given the official information yet. But I will 

go back and ask for that. 

Senator MURKOWSKI. Like I say, I am trying to work with my 

House counterparts, this is my Appropriations Subcommittee. And 

we are trying to get a firm direction from the Administration on 

this. So when I had to fight to keep the language out of the CR 

that would be detrimental to the tribes when it comes to fulfilling 

the commitment, the promise of the contract support costs, I feel 

like I am fighting the Administration. You all are supposed to be 

working to advance this, you are supposed to be consulting with 

the tribes on this. You say you are listening. I want to see it translated into advocating with us on the budget. You can’t put the monkey on our back unless you are willing to step up and be that advocate with us. 

Dr. ROUBIDEAUX. We are absolutely willing to work with you on 

that. And we do think it is likely to be the 2 percent, but officially 

I haven’t received the Administration’s final determination. But I 

will definitely work with you on that. 

Senator MURKOWSKI. Okay, thank you. Thank you, Madam 

Chair. 

The CHAIRWOMAN. Senator Franken. And I just want to say, before Senator Franken, one of the reasons why we are having this 

hearing today on the larger issue of impacts of sequestration is because of Senator Franken’s continued insistence about the importance of this issue. I just want to thank him for that. 

Senator FRANKEN. Thank you, Madam Chair. 

Assistant Secretary Washburn, testimony submitted by the Red 

Lake Band points out that over the last decade, the budget for BIA 

has been growing at a much slower rate than that of other agencies 

20 

within the Department of Interior. Now sequestration is just piling 

on and making it worse. Can you tell me why it seems that Indian 

Affairs gets the short stick from the Administration? I realize you 

are not in charge of the Department. But have you made the case 

to Secretary Jewell that this just can’t continue, you are right, I 

do want to see more school reconstruction. Because it was zeroed 

out last year. Did I hear that right, that we are going to reverse 

that and have some money there for that? But did I hear a 19 percent decrease? 

Mr. WASHBURN. Yes. The House budget would fund, I believe, $50 million for school construction, so that would take care of three 

schools that we have on our remaining list that need to be reconstructed. But yes, it would, to get that money and to otherwise 

reach the cut, it would be a $200 million cut to the Indian Affairs 

overall budget, including a 19 percent across the board cut. 

Senator FRANKEN. We are going to hear testimony from tribal 

leaders in the next panel. But those kinds of cuts are so devastating, I told you about, Dr. Roubideaux, what happened in Red 

Lake in terms of their losing a mental health counselor and having 

two suicides. I have been working on a bill for mental health in the 

schools, to get more mental health counselors, more psychologists, 

more social workers in the schools. And to hook up, make sure the 

kids have access to the community’s mental health system. 

Can you identify any other funding streams that may be out 

there to help Red Lake make their schools’ mental health department whole? 

Dr. ROUBIDEAUX. Yes. In addition to the funding that we provide 

if the tribe manages the behavioral health program, there are other 

resources within the Department of Health and Human Services. 

I would encourage them to contact the SAMHSA to see if there are 

any grants or special funds that might be available to help them 

with some of the mental health issues in that community. 

We also, in the past, as you know, had sought a deployment for 

the crisis situation that was there in the past. Sometimes those 

kinds of things are available for urgent situations. But there may 

be other funding within the Department of Health and Human 

Services. I can go back and talk with my colleagues and see if we 

can identify resources. 

Senator FRANKEN. Mr. Washburn, just in general, when we see 

cuts like this, we see cuts in things like housing. I think Chairwoman Diver is going to be speaking to housing cuts, or she did 

in her written testimony. In Indian Country, very often there are 

no shelters, people just move in to some other families’ home, 

maybe a relative’s home, and you have maybe 10 people living in 

a two-bedroom house. And there is in those two families, there is 

a very high likelihood that there is somebody who has some addiction problem. We are adding problem on top of problem on top of 

problem. How does a kid do his homework? What are we doing? 

Can you just speak to how these problems exacerbate each other 

and they pile on top of one another and it makes it impossible? If 

we have the sequester, Chairwoman Diver testifies that they are 

going to lose Head Start slots. A kid is only three years old once. 

Mr. WASHBURN. And we will deal with those issues for a lifetime 

if we lose a kid from Head Start. We are going to lose a generation. 

21 

That is what is possible. It really is that bad. And suicides are definitely an outcome of not having the proper personnel to help those 

children. We also lose the ability to investigate harm happening to 

children. All these kinds of things, which Senator Heitkamp, I 

know, is concerned about. Elderly abuse, we don’t have a staff to 

investigate elderly abuse. We pile people into one house together 

where someone has a dysfunctional problem, it definitely just exacerbates the problem even more. These all do work together and 

they create a domino effect, absolutely. Any one of these things is 

bad, but when we take money out of all these different funds, it 

just has an unbearable effect on the overall problem and creates 

many more. 

Senator FRANKEN. Thank you. Thank you, Madam Chair. 

The CHAIRWOMAN. Senator Heitkamp? 

STATEMENT OF HON. HEIDI HEITKAMP, 

U.S. SENATOR FROM NORTH DAKOTA 

Senator HEITKAMP. Thank you, Madam Chair, and thank you 

both for coming today. 

It is no secret, I am deeply, deeply concerned about the status 

of Native American children in particular, and Native American 

families. This morning I met with some of my tribal council members, heard stories about a one-bedroom, 13 to 15 people sleeping 

on the floor. They roll the mattresses out, pick them up. This is not 

uncommon. So we have, especially for direct service tribes, this is 

so critical. 

The story today should be the headline story in the national 

news. A 19 percent cut is what you are suggesting will happen if 

they reallocate money to school construction? 

Mr. WASHBURN. If the House budget passes, we would get a 19 

percent cut across the board for everything. The one upside is that 

there would be money for school construction, but it would be a cut 

to virtually everything else. So that is right, that is the House 

budget I was describing. 

Senator HEITKAMP. It is not, and that is the point. The point is 

that you are robbing from Peter to pay Paul when there is not 

enough money to do everything. This isn’t Cadillac, this is bare 

subsistence, this is bare existence. These are atrocious, appalling 

conditions that should not happen in this Country. And we need 

advocates, beyond this Committee, we need advocates in the Administration. We went, Senator Murkowski and I sat and listened. 

There was a lot of yes, we hear your concern, yes, we hear your 

concern. I have heard that for a lot of years, yes, we hear your concern. And nothing happens. We don’t improve the conditions. We 

have to be doing better. 

A point that I want to make that is not made by these numbers, 

which is the growth in population that is being served. Kevin, can 

you tell us, what do you think? Can you give us a number of people 

who, the population that has increased as a result of additional 

births and additional people living on the reservations? So we are 

trying to take these budget cuts against serving more and more 

people. What has been the population growth in Indian Country in 

the United States? 

22 

Mr. WASHBURN. I don’t have the exact figures on that. But we 

are a community that has been growing dramatically. I believe it 

is under 2 million people that we serve. But that is in a very fastgrowing community. You are right, the money doesn’t stretch. Our 

budget hasn’t been growing as the population has grown. 

Senator HEITKAMP. And for Ms. Roubideaux, I am curious about 

your position on Medicaid. One of the stop-gaps that we might be 

able to utilize in terms of expanding capacity for enrolled members 

and tribal members is enrolling more members in Medicaid, which 

would actually help you, because you are a billable agency. Is that 

correct? 

Dr. ROUBIDEAUX. Yes. 

Senator HEITKAMP. So you can bill if people are on Medicaid, 

plus there is another way to supplement Indian Health Service. So 

what are you doing to promote increased enrollments into the Medicaid system? Do you believe that is a solution? 

Dr. ROUBIDEAUX. You are absolutely right, the Medicaid expansion that is happening in many States, and getting more American 

Indians to enroll in Medicaid in general is critical for our facilities. 

Some of our facilities, approximately half of their budget is third 

party resources. If we can get more of our patients enrolled, it 

means more revenue. 

Senator HEITKAMP. So you agree with me that this could be an 

expansion that we need to get parity for Native Americans who are 

within the Indian health system. But my question is, what are you 

doing to encourage those enrollments? 

Dr. ROUBIDEAUX. We are doing everything we can. We did training with our business office staff to make sure they understand 

how to help with enrollment. We are doing weekly question and answer telephone calls to make sure they understand. 

Senator HEITKAMP. Have we seen an increase in the number of 

enrollments? 

Dr. ROUBIDEAUX. I don’t have that information right now, but I 

will get that to you as soon as I can. 

Senator HEITKAMP. That would be something that I think would 

be very helpful, because it is a way beyond our budget problems 

right now to expand capacity to provide service plus the ability to 

seek health care beyond the Indian health system, if you are living 

in, let’s say, Fargo, and need to see a doctor, being on Medicaid will 

facilitate that. We won’t get into the system of reimbursement from 

Indian Health, which is incredibly frustrating for my providers. 

So I am just really interested in both of you thinking beyond the 

box on how we can expand capacity. Because even if we double 

these numbers, we still will have people underserved. And so this 

is crisis, and we need to make that point 

The CHAIRWOMAN. Thank you. I want to thank both of our witnesses. I think what you hear today is bipartisan support to fix 

both of these problems. Hopefully you will take that back, and we 

will also get Administration support for fixing those and we can all 

work together. So thank you. Thank you both for being here. 

We are now going to turn to our second panel to continue discussion on both of these issues. We would like to welcome to the witness table the Honorable Brian Cladoosby, President of the National Congress of American Indians; the Honorable Karen Diver, 

23 

Chairwoman, Fond du Lac of the Lake Superior Chippewa Tribe 

from Minnesota; the Honorable ‘‘Bud’’ Lane, Vice Chairman, Confederated Tribes of Siletz Indians in Oregon; the Honorable Phyliss 

Anderson, who is the Chief of the Mississippi Band of Choctaw Indians; the Honorable Jefferson Keel, Lieutenant Governor from the 

Chickasaw Nation; and the Honorable Aaron Payment, Chairman 

of the Sault Ste. Marie Tribe of Chippewa Indians in Sault Ste. 

Marie, Michigan. 

Thank you all for being here today. I want to say a special welcome to the new President of the National Congress of American 

Indians, Brian Cladoosby. We are proud you are a Washingtonian, 

congratulations on your recent election. And we will start with you, 

Brian. 

STATEMENT OF HON. BRIAN CLADOOSBY, PRESIDENT, 

NATIONAL CONGRESS OF AMERICAN INDIANS 

Mr. CLADOOSBY. Thank you, Madam Chairman, members of the 

Committee. On behalf of the National Congress of American Indians, I would like to thank you for holding this very important hearing on contract support costs and sequestration. As you know, the 

underpinning of Federal spending in Indian Country is based on 

the treaties that our ancestors signed with the United States Government. This assistance and goodwill between nations derives 

from the trust relationship and is ingrained with Article I, Section 

8 of the U.S. Constitution. Tribes have shared with NCAI their 

alarm and objections over one, the sequestration reductions to tribal programs and two, the underfunding of contract support costs. 

The current and future sequestration cuts amount to unpaid bills 

in Indian Country which hurt the people who need these services 

the most, the poorest of the poor throughout tribal communities. I 

ask each of you individually, you, the Senate Committee on Indian 

Affairs and members of the United States Senate, where is my 

trustee? I have been asking every single Federal employee and person who represents the Federal Government this week, are you my 

trustee? And you would be surprised by the varied responses I get 

to that question. Whether you know it or not, when you took the 

oath of office to uphold the Constitution of the United States, you 

took on the obligation of a trustee to care for the interests of tribal 

governments and individual Native Americans and Alaska natives 

in upmost good faith. 

I am disappointed and saddened to report to you that with regard to the two topics of today’s hearing, the United States is not 

meeting its obligation as a trustee. With regard to contract support 

costs, as the Committee is well aware, the Indian Self-Determination Act requires the Federal Government to contract with tribes 

to operate BIA and IHS programs. The Self-Determination Act also 

requires that the contract price must include a negotiated amount 

to cover the tribe’s anticipated fixed overhead costs. Those contract 

support costs cover everything from the cost of property or liability 

insurance to the cost of personnel management systems, legal costs 

and even the cost of the audits Federal law requires us to undertake every year. 

Year after year the BIA and the IHS have failed to pay tribal 

governments what they would have paid to any other Federal conVerDate Mar 15 2010 09:57 Aug 11, 2014 Jkt 089367 PO 00000 Frm 00027 Fmt 6633 Sfmt 6601 S:\DOCS\89367.TXT JACK
24 

tractor. For years, tribes have filed claims against both agencies 

over their failure to honor the contracts and to pay all of the negotiated contract support costs that were due. There was a class action lawsuit filed in the 1990s on this issue, and in June of 2012, 

the Supreme Court ruled that the Federal Government was liable 

for the unpaid costs over those years. The Court directed that the 

liability be paid out of the permanent judgment fund. 

The payment has not happened. In fact, as far as NCAI can see, 

nothing has happened. 

The Committee recently posed several questions to the IHS. The 

IHS director responded that close to 1,600 claims are currently 

pending against the agency involving 200 tribes. I am told by the 

lawyers representing the tribes on this issue that the amount owed 

is over $2 billion for both IHS and BIA. As you noted, Madam 

Chair, over the past 16 months, IHS has settled only 16, 16 claims 

settled in 16 months. One percent of the 1,600 claims. At this rate, 

it will take 1,600 months to settle them all, well over 130 years. 

Even if IHS does it at 10 times that rate, it will still take 13 

years to settle all these cases. That pace is totally unacceptable, I 

believe, to everyone in this room. 

Just as the stalled settlement process is contrary to the Indian 

Self-Determination Act, so too is OMB’s effort by the 2014 budget 

process to cut off tribal contract rights. As this Committee is 

aware, OMB is now pressing for an anomaly in the continuing resolution that will fund the rest of the fiscal year 2014. The Administration’s proposal, first announced last April, is to cap individual 

contract payments at levels that are lower than the negotiated contract price that is required to carry out these contacts. 

The purpose behind OMB’s proposal is simply to save money by 

cheating the tribes. And one note, Madam Chair, on this topic, 

even the U.S. Chamber of Commerce joins us in objecting to a proposed cap because of the precedent it might set for other government contractors. I call this contract support cost a crisis because 

that is what it truly is. And I don’t use that term lightly. Behind 

the phrase contract support costs are real services for real people 

in dire need, services that are being cut off because the agencies 

have not honored their contract obligations, services that have been 

reduced because the agencies have treated our contracts as if they 

were discretionary grants. Services that have suffered because the 

agencies preferred to protect their own internal bureaucracies, 

rather than to budget what is due under our contracts. 

NCAI appreciates that some things cannot be fixed in the near 

term, and that some issues may never get the attention that they 

truly need. But the contract support cost is a crisis, and it is one 

that needs to be fixed. The Supreme Court has spoken and the 

time for firm and swift action is now. NCAI respectfully calls upon 

Congress to do everything in its power to see that these challenges 

are met and to see that justice is finally done. The time for delay 

and injustice is over. 

With regard to the second topic for today, the impacts of sequestration on Indian Country, and we have had the opportunity this 

week to meet with Senator Patty Murray and to meet with Representative Paul Ryan, two of the most powerful individuals in 

both houses of Congress, working on the budget. And our ask of 

25 

them both is to get rid of sequestration. Over close to half a billion 

dollars has been cut last year to our IHS and BIA programs. Restore those. We have asked they restore those numbers. If we are 

looking at a 2 percent cut this year, we ask them to take that 2 

percent cut off the numbers that are being restored, not off the 

numbers that are already currently being cut. We asked those two 

individuals to eliminate that cap, eliminate that cap on contract 

support costs. 

And the big one that I ask you to help us with is to pay IHS a 

year in advance, just like you do with the veterans. There is not 

a reason, a precedent has been set and there is no reason why this 

Congress cannot also enact something like that to make sure that 

IHS is paid for a year in advance. 

So with that, I thank you. I have more to say but I see I had 

better be quiet now so the other panelists have time. If you have 

any questions, I would be more than happy to answer them. Thank 

you very much on behalf of NCAI. 

[The prepared statement of Mr. Cladoosby follows:] 

26 

PREPARED STATEMENT OF HON. BRIAN CLADOOSBY, PRESIDENT, NATIONAL CONGRESS

OF AMERICAN INDIANS


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The CHAIRWOMAN. Thank you. 

Chairwoman Diver, thank you for being here. 

STATEMENT OF HON. KAREN R. DIVER, CHAIRWOMAN, FOND 

DU LAC BAND OF LAKE SUPERIOR CHIPPEWA 

Ms. DIVER. Thank you for having me, Chairwoman Cantwell, 

members of the Committee. 

I submitted written testimony, and I must admit to being stirred 

a bit passionately by your vigorous questioning of Dr. Yvette 

Roubideaux and Assistant Secretary Washburn. I often tell a story 

when I am talking to people about Indian Country, and you all care 

so much, and there are so many people who don’t know very much. 

I tell the story of when the elderly nutrition program first started 

on Fond du Lac, they set the elderly age at age 52, because the average age of death in the 1970s was 56. And how proud we are 

under self-governance and operating our own clinic that that age 

is now 74. 

The CHAIRWOMAN. That is great. 

Ms. DIVER. As compared to my husband’s family, a fine European-American family from Scandinavia, whose average age at 

death is 102. 


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[Laughter.] 

Ms. DIVER. So I look at my parents, age 71 and 75 and know that 

every single moment I have with them is precious. And I tell you 

this because, I give you examples in my written testimony, but 

what we are having to endure right now makes a difference. It 

makes a difference on preventing death from chronic conditions 

rather than promoting wellness. You are asking us to be wizards 

in our own community, every one of these tribal leaders. We are 

to promote community development, we are to promote economic 

development, we are to promote health, we are to promote safety. 

We are to do all of these things without a tax base. 

If you want funds to supplement what the Feds give you or the 

grants that you can raise, then you’d better figure out a way to 

earn it yourself. And we have done that. Tribal communities have 

done that, to the extent that now Fond du Lac is the second largest 

employer in northeastern Minnesota, with 2,200 employees. 

The economic impact we make in that community has a ripple 

effect throughout rural Minnesota. In fact, I am aware that collectively, Indian Country in Minnesota is the largest employer in 

rural Minnesota. You are taking away our ability to leverage funds, 

you are taking away our ability to rise up and help support rural 

communities, not just Indian communities, entire rural communities, with the employment and economic spinoff. You are reducing our chances to leverage matching funds. 

We are pretty good at what we do. We build veteran-supportive 

housing, putting a small amount of our NAHASDA funds into a facility and leveraging that four to one with other sources. We are 

trying different models of housing to deal with the high-risk populations that you talk about, dual diagnosis, chronic and long term 

homeless. We are being entrepreneurs and innovators in our service delivery. 

So we know how to do our end. But we can’t do it without the 

initial support. So I appreciate your letting me have a bit of this 

passion, and like I said, I have submitted the written testimony. 

But I guess I wanted to connect a few dots that, that we need and 

are just begging for your leadership. The strength of your convictions needs to be there when you are dealing with your House 

counterparts. Because they are not connecting these dots. Not connecting the dots between the health and well-being of Indian communities, and that affects our neighbors as well as our own communities. They are not connecting the dots of the strides that you 

have expected tribal communities to make and tribal leaders to 

step up to, that they are inhibiting our ability to be entrepreneurial 

and talk about innovative service delivery. 

Those steps back are going to cost us more in the long run. And 

I think I am pretty good at my job, but I am not that good. And 

what I hear as I am lobbying around the Hill is that we need folks 

to stand firm in their convictions and speak up in the budget negotiations. That when push comes to shove, we need people that are 

saying, not in Indian Country. It is too important, the situation is 

too dire, they have come too far, and we are not going to be a part 

of pushing them back where they were 100 years ago. 

And that is what I ask of each one of you, is to stand up for Indian Country and tell us who we need to haunt in the House, 

44 

please. What they are doing is immoral and it is wrong. And they 

should be ashamed. 

Thank you. 

[The prepared statement of Ms. Driver follows:] 

PREPARED STATEMENT OF HON. KAREN R. DIVER, CHAIRWOMAN, FOND DU LAC BAND

OF LAKE SUPERIOR CHIPPEWA

Chairwoman Cantwell, Vice-Chairman Barrasso, and members of this Committee, 

I would like to thank you for holding this oversight hearing on the crisis that sequestration is creating in Indian country. 

I am Karen R. Diver, Chairwoman of the Fond du Lac Band of Lake Superior 

Chippewa. The Fond du Lac Band occupies a small reservation in northeastern Minnesota. The Band has approximately 4,200 members, and we provide health, education, social services, public safety and other governmental services to more than 

6,700 Indian people who live on or near our Reservation. These programs, and the 

federal funds that help us provide them, are essential to our ability to educate our 

children, care for our elderly and infirm, prevent crime, and protect and manage 

natural resources. 

I cannot overstate the damage that sequester has already caused to our ability 

to provide essential services to our people. In the past two years alone, federal funding for Fond du Lac has been cut by more than $2.5 million. These cuts have left 

us no alternative but to eliminate jobs, curtail services, and turn away people who 

most need our help. If sequester continues into 2014, the additional loss of jobs and 

services will be serious and severe. 

The Fond du Lac Band cannot absorb any further reductions in federal funding. 

Further cuts will not only adversely affect the long term health and well-being of 

the Fond du Lac community, but with the Fond du Lac Band as the largest employer in the region, those cuts will also adversely affect the broader region— 

through increased unemployment, and the increased demands that this will place 

on regional social service programs and related assistance. 

Across-the-board sequestration cuts and rescissions to federal programs for Indian 

tribes will not balance the federal debt. What it will do is set back decades of hard 

work by Indian tribes and the United States to lift Native people out of poverty and 

put them on a path to empowerment and self-sufficiency. We urge Congress to exclude from sequester the federal funds that are so desperately needed in Indian 

country. 

Education 

We depend on federal funds to operate the Fond du Lac Ojibwe School. This 

school serves approximately 340 students in pre-K through grade 12. Most of our 

students come from very low income households, as demonstrated by the fact that 

more than 90 percent of our students qualify for free or reduced rate lunches. Although the President, in Executive Order 13952 (Dec. 2, 2011), found ‘‘an urgent 

need’’ for federal agencies to help improve educational opportunities for American 

Indian students because there has been ‘‘little or no progress in closing the achievement gap’’ between our students and all other students, Indian schools—even without sequester—have been seriously under-funded for years. Sequester has only exacerbated the fiscal crisis in Indian education. 

As a result of sequester, in the past two years funding for the Ojibwe School has 

been cut over $500,000. This, in turn, has had the following adverse impacts on our 

education program and the children we are trying to serve. 

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

for special education. 

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

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

• This year, we were further compelled to drop young kindergarten students with 

high behavior needs because we could not staff at the levels required to meet 

their needs. We are hoping that delaying their entry into school by a year will 

help with their developmental needs. But this has caused a hardship for their 

parents and runs a serious risk of stigmatizing the children. 

45 

Any further reductions in funding will mean even fewer staff which will force us 

to further reduce or even eliminate educational programs that are so critically needed for the most vulnerable population—our children. 

Head Start 

Because of sequester, our Head Start program has been cut $100,000 per year for 

two years. We have done everything possible to implement these cuts so that we 

are not required to turn away children from the Head Start program. We have cut 

administrative staff that support the use of technology, and converted two positions 

so that they are 9-month positions instead of year-round. We also reduced some 

transportation services that have, in the past, been provided by the Head Start program. But if sequester continues, next year we will have no choice but to start cutting available slots for children because direct service staff will need to be laid-off. 

Housing 

Native Americans suffer the most substandard housing—at a rate of six times 

that of the population at large. At Fond du Lac we have been striving to combat 

the endemic problems that result from the lack of a sufficient supply of decent, safe 

and affordable housing. 

Our Housing Division currently has a waiting list of approximately 175 applicants 

seeking low income and homeownership housing. We have many other Tribal members who are also in need of housing, but who have moderate incomes and therefore 

are not even shown on our waiting list. 

Our current housing stock is very limited and far below the need. Many of our 

housing units are over fifteen years old, with the oldest units built more than 40 

years ago, in 1970. Because of the age of our housing stock, the units are constantly 

in need of maintenance and repairs. Approximately 30 percent of our housing units 

require major renovation, such as the replacement of roofs and siding, as well as 

upgrades in plumbing and other utility systems, and the replacement of windows 

and doors. Other units require routine repairs and maintenance, the average cost 

of which is at least $5,000 per year. 

Because of the severity of our housing shortage, approximately 270 of the Indian 

households that we serve—close to 20 percent of our service population—currently 

live in overcrowded homes. It is not uncommon on our Reservation and among our 

people to find 10 or more individuals living together in a two-bedroom home. Overcrowding, in turn, accelerates the wear and tear on those homes, creating a vicious 

cycle of need. 

46 

Overcrowded and dilapidated housing creates other risks. It increases the risk of 

fire and accidents, and creates unsanitary conditions, with increased spreading of 

communicable but normally preventable illnesses. Overcrowded housing ‘‘often results in stress, which can magnify family dysfunction and eventually lead to alcohol 

and child abuse.’’ 1 Such conditions are especially harmful to children, as overcrowding, and the related risk of homelessness ‘‘threaten their educational success, 

health and mental health, and personal development.’’ 2 We see these problems at 

Fond du Lac. 

Our members who are compelled to live in overcrowded homes are also often only 

a step away from being homeless. As set out in a series of recent studies of homeless 

and near-homeless persons on Minnesota Indian reservations, including the Fond du 

Lac Reservation, doubling up with family or friends is often the last housing arrangement a person has before becoming literally homeless, and it is common for 

people to go back and forth between doubling up and homelessness. 3 A disproportionately high number of Native Americans in Minnesota are homeless. Although 

Native American adults are only 1 percent of the State population, they are 10 percent of the adults identified as homeless. And while Native American youth (under 

age 21) are only 2 percent of the youth population in Minnesota, they are 22 percent 

of the homeless youth that are unaccompanied by an adult. 4

Federal funds are critical to meeting those needs. With the aid of federal funds, 

the Fond du Lac Band has been able to partner with state and private entities in 

an effort to begin to more comprehensively address housing needs. In July 2010, we 

began construction of a supportive housing development to provide permanent supportive housing to 24 tribal members and their families and which, in conjunction 

with our Human Services Division, would address the tenant’s barriers to maintaining housing and create a support system to prevent homelessness. This year, those 

same partnerships helped us to operate the first Veteran’s supportive housing facility in Indian country. 

But sequestration puts our progress at great risk. Even without sequester, funding for Indian housing had not materially increased over the years, while, at the 

same time, the costs of the supplies, materials and labor necessary to remodel and 

modernize our aging housing stock have increased every year with inflation. 


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47 

Since 2011, our Indian Housing Block grant, provided through the Department of 

Housing and Urban Development, has been cut $339,000. Prior to those cuts, we 

could fund the construction of 5 or 6 new homes a year. But the cuts caused by sequester mean that we must now either reduce work on rehabilitation of older housing stock, or reduce the number of new homes built, or possibly both. 

Housing represents the single largest expenditure for most Indian families. The 

development of housing has a major impact on the national economy and the economic growth and health of regions and communities. Housing is inextricably linked 

to access to jobs and healthy communities and the social behavior of the families, 

especially children, who occupy it. The failure to achieve adequate housing leads to 

significant societal costs. 

Decent, affordable, and accessible housing fosters self-sufficiency, brings stability 

to families and new vitality to distressed communities, and supports overall economic growth. Very particularly, it improves life outcomes for children. In the process, it reduces a host of costly social and economic problems that place enormous 

strains on the Tribal and State education, public health, social service, law enforcement, criminal justice, and welfare systems. 

Overall Adverse Impacts of Sequester 

These are just some examples of the serious adverse impacts of sequestration on 

Indian tribes and Indian people. In addition to the cuts described above, we are also 

dealing with the impact of sequester on the reduced federal funding for: Indian 

health care provided by the Indian Health Service; social service programs provided 

through the Bureau of Indian Affairs; law enforcement provided through the Department of Justice and BIA; as well as the safety nets on which the poorest of our 

people depend to meet the most basic subsistence needs—including the USDA’s 

Food Nutrition Program on Indian Reservations, the Low Income Home Energy Assistance program, and Child Care Assistance provided through HHS. Because of 

these cuts, the Fond du Lac Band has been compelled to lay-off staff, and reduce 

some services, and eliminate others altogether. We will do our best to fill the unmet 

need, and look for partnerships with local governments and others to do this. But 

the unmet need at Fond du Lac, and in Indian country generally, is massive. 

I urge Congress to honor the Federal Government’s trust responsibility to Indian 

tribes and to the Indian people by excluding, from any sequester and mandatory rescissions, the federal funding for the programs that serve Indian country consistent 

with the Nation’s sacred obligations. Miigwech. Thank you. 

The CHAIRWOMAN. Thank you for your testimony. And thank you 

for being here today. 

We will now turn to the Honorable Bud Lane, Vice Chairman of 

the Siletz Tribe from Oregon. Welcome. 

STATEMENT OF HON. ALFRED ‘‘BUD’’ LANE, VICE CHAIRMAN, 

CONFEDERATED TRIBES OF SILETZ INDIANS 

Mr. LANE. Thank you, Chairman Cantwell, Committee members. 

My name is Bud Lane, and as tribal Vice Chairman for the Confederated Tribes of Siletz Indians, I want to thank you for creating 

this opportunity to hear directly from the tribes on the impacts of 

sequestration. 

The Siletz Reservation is located on the central Oregon coast. 

Our original reservation was 1.1 million acres and was intended to 

confederate all the bands and tribes of western Oregon. The Siletz 

Reservation was significantly reduced by Congress in the late 

1800s. Our current reservation is about 0.4 percent of our original 

reservation. 

As a result of termination and subsequent restoration of our 

tribes, the majority of our 5,000 members are spread throughout 11 

counties in western Oregon. Our ability to provide services in such 

a large area is challenging as it is. 

The recent funding cuts through sequestration further threaten 

our ability to meet the needs of our tribal members. The real effect 

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on Siletz is the elimination of 10 percent of our workforce and the 

effect on contract health is even greater. 

For the first time ever, we began this year having to severely ration our health care services from the very beginning. This type of 

rationing usually doesn’t occur until mid-year. 

As some of you may know, there are no inpatient IHS hospitals 

in the Pacific Northwest. All of us in the Northwest depend on contract health care for the services that we can’t provide directly 

through our clinics. So for those that we cannot fund directly we 

have what we call a deferred list of Siletz. It also has a more notorious name known as the walking wounded, because these are actually folks who cannot get referred out because of the limited 

amount of funds to hospitalization or an operation that they may 

need. 

In a good year, the backlog is always big. And all we are is one 

catastrophic case away from being not being able to fund hardly 

anybody to go to the hospital. 

On the law enforcement side of things, the situation is even 

worse for tribal law enforcement. We have contracted local police 

patrols from the nearest town, and it is seven miles away, to cover 

the city of Siletz. The funding for that law enforcement came from 

BIA, from some tribal revenues and from HUD. But along with the 

already low funding amounts from BIA, cuts from sequestration 

make that policing contract infeasible. In other words, the city of 

Siletz and the Siletz reservation could be virtually without police 

protection as of January 1st, 2014. 

The county’s Public Law 280 responsibilities have become virtually non-existent. Even if a sheriff is dispatched out to Siletz, it 

is twice the distance, up to 15 miles, to get there. 

Turning to contract support, we believe that Congress’ intent is 

for tribes to receive the full amount due them when they compact 

or contract programs. Adding insult to injury of sequestration, 

agencies such as HUD are attempting to retroactively change the 

rules of allowable contract support costs, previously negotiated in 

good faith and approved. We, the Siletz Tribe, have been threatened with costs going back to 1998 that had been previously negotiated in good faith and approved by the cognizant agency. 

We understand the situation of Federal agencies and their budgetary constraints. But they shouldn’t balance their budgets on the 

backs of the tribes. 

I hope I have adequately conveyed to you the very real and negative effects of sequestration on the tribes. We have been as creative 

as we can in meeting this challenge. But we are quickly running 

out of options. The tribes have long been among the poorest, most 

vulnerable populations in the United States and historically have 

been underfunded by the Federal Government. I implore you to 

honor treaty obligations and to exempt all tribes and programs 

serving tribes from the current and any future sequestration. 

Several years ago, our tribal leadership met with the former 

chairman of this very Committee, Senator Daniel Inouye, in Portland, Oregon. He told us that in his view, all tribes have a prepaid 

health plan, and that it was paid for by our ancestors who ceded 

their lands to the United States. I hope that the Congress will reVerDate Mar 15 2010 09:57 Aug 11, 2014 Jkt 089367 PO 00000 Frm 00052 Fmt 6633 Sfmt 6601 S:\DOCS\89367.TXT JACK
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flect on this unique legal historic and moral situation of the tribes 

as it does other programs exempted from sequestration. 

I thank you for the ability to be here today and I would like to 

answer any questions that you may have. 

[The prepared statement of Mr. Lane follows:] 

PREPARED STATEMENT OF HON. ALFRED ‘‘BUD’’ LANE, VICE CHAIRMAN, CONFEDERATED TRIBES OF SILETZ INDIANS

My name is Bud Lane. As Tribal Vice Chairman for the Confederated Tribes of 

Siletz Indians I want to thank you for creating this opportunity to hear directly 

from tribes on the impacts of sequestration. The Siletz Reservation is located on the 

central Oregon Coast. Our original Reservation was 1.1 million acres and was intended to confederate all the bands and tribes of western Oregon. The Siletz Reservation was significantly reduced by Congress in the late 1800s. Our current reservation is 0.4 percent of the original Siletz Reservation. As a result of termination 

and restoration, the majority of our 5000 members are spread throughout 11 counties in western Oregon. Our ability to provide services in such a large area is challenging as it is. Recent funding cuts through sequestration further threaten our 

ability to meet the needs of our tribal members. 

2008 Economic Collapse 

Like the rest of the nation, the Siletz Tribe has been trying to recover from the 

2008 crash of the economy. We have worked diligently to keep services and jobs intact for our tribal members and focused funding cuts in the areas of travel, training 

and staffing. To that end we have left vacated positions unfilled and shifted duties 

to other staff, froze salaries and step increases from 2010 through 2012, and provided no COLA in 2010, a 1 percent COLA in 2011 and no COLA in 2012. Compare 

that to federal agencies who, while freezing salaries, still received step increases 

and bonuses, including a 3.6 percent COLA for 2012. 

The Siletz Tribe’s recovery has been limited—tribal revenue is slowly coming back 

but as of 2012 we are still down 35 percent from where we were in 2008. Our federal funding has steadily declined in this same time period. 

2013 Sequestration 

The Tribe has continued cost cutting in response to the first round of sequestration cuts. Staff travel is restricted to mandatory grantee meetings and to trainings 

required to maintain professional licensing and certifications. For 2013 we continued not filling most vacated positions and in some instances reduced full-time positions to part-time to achieve savings in salary and fringe benefits. At this point we 

have had to eliminate 26 positions (10 percent of our staff). 

For the first time ever the Tribe’s Contract Health Services program began the 

year on priority levels which restricted services: (1) authorized care is limited to 

health services needed for urgent or emergent care or to prevent disease and disability and (2) surgeries such as carpal tunnel release, rotator cuff repair, knee surgeries, gastric bypass, inpatient psychological treatment, herniated disc repair and 

hysterectomies are deferred indefinitely. 

Our Tribal Court, exercising limited jurisdiction, averages 500 civil cases a year 

and is staffed by a full-time Court Administrator, a part-time Deputy Court Administrator, a part-time Chief Judge and four on-call judges. The 2013 Court budget is 

$197,000 most of which comes from tribal revenue. Only $36,271—less than 19%— 

comes from BIA funds. A 2010 BIA assessment of Tribal Courts noted that this federal contribution was the lowest of 50 tribal courts reviewed and recommended 

there be a significant increase funding to the tribe, but that has not occurred. Inadequate funding unnecessarily restricts the tribe from fully exercising jurisdiction 

and sequestration is worsening this situation. 

The Health Department eliminated four positions—a Pharmacy Technician, a 

Dental Assistant, a Community Health Advocate, and the Clinical Applications Coordinator. We will maintain Contract Health Services at the priority 1 & 2 levels 

and cancel two specialty provider contracts. The clinic personnel reductions will result in 200 fewer medical transports, 50 fewer home visits, elimination of child safety seat and bicycle safety helmet distribution programs, 240 fewer dental visits, 

lengthening the time to fill prescriptions, and 12,000 fewer patient visits. 

We are eliminating one of two Elders Program Coordinators, the After-School Program Coordinator and Assistant positions, and our Environmental Planner. This 

will significantly reduce services to our elders, while increasing the workload for the 

remaining staff person. Elimination of the After-School Program staff requires that 

50 

we close the program—impacting 20 children and their families who relied on these 

services. We are shifting the Environmental Planner duties to our natural resources 

staff—significantly more work than ‘‘other duties as assigned.’’ The functions of this 

position are essential for ensuring environmental compliance for purchasing, managing and developing land. As this committee knows, the land-into-trust process is 

cumbersome and time-consuming on the federal side, for Siletz it will now take even 

longer due to sequestration impacts on staffing. 

Additionally, three Administrative positions being eliminated are: Public Relations Clerk, Records Management Clerk, and the Public Works Supervisor. Again, 

we are shifting responsibilities of these jobs onto other staff. Our Public Information 

Specialist will now be a one-person department, making it harder to keep up on 

projects and more difficult to maintain quality. The Records Management Clerk duties have been added to another staff person’s duties. The Public Works Crew are 

reorganized as a team to self-direct their work and report periodically to a manager. 

Our Information Systems Department has been making critical upgrades to our 

operating systems on five servers, as well as the call manager for our phone system. 

The 2014 cuts will prevent completion of these projects which means we will no 

longer have vendor tech support for these old systems. This is critical to ensure our 

clinic’s capability to meet HIPPA standards for electronic health records and accreditation standards. 

The situation is even worse for tribal law enforcement services which cover tribal 

lands and the City of Siletz where many tribal members and non-tribal citizens live. 

These services started out at 120 patrol hours a week under a contract with a neighboring city police department in order to save on costs. At $95,391 the BIA funding 

covered just under a third of the costs. The Tribe’s Housing Department funded another third and the remainder was subsidized by tribal revenue. However, steady 

revenue decline from 2008 to 2012 required reducing law enforcement coverage from 

120 to 80 hours a week. In 2013, BIA funding dropped to $90,809 under sequestration and will be down to $86,298 with the second sequester. In addition, new HUD 

guidance has reduced the amount Tribal Housing can contribute. And, it is not feasible for the contracted police department to provide services. We are working with 

the City of Siletz to poll the community’s support to help fund these essential services; however, it is anticipated by the Tribe that these services will not be available 

in our community very soon. 

What this means is that the City of Siletz could be virtually without police protection by January 1, 2014. Traditionally the County has policed the outlying areas 

under P.L. 280, but these services have become non-existent in the last decade. If 

the County sheriff is called to respond to a crime, the distance has now doubled 

from 7 to 15 miles up to Siletz. 

Insufficient contract support costs is not the only factor affecting the ability of 

tribes to manage our contract s and grants. During a periodic monitoring of the 

tribes housing programs, HUD staff disputed costs under our approved indirect rate. 

The law—Native American Housing and Self-Determination Act—clearly and unambiguously states that indirect costs rates will be determined by a tribe’s cognizant 

agency (not by HUD or any other outside agency). For Siletz and most tribes that 

agency is the BIA through their National Business Center (NBC). 

HUD conducted two monitoring reviews of the Tribes housing program in which 

they determined the tribes Indirect Cost Rate was not applied correctly to HUD programs. Unable to convince HUD that the indirect cost rate had to be applied consistently to all tribal programs, the Tribe contacted the National Business Center 

(NBC), only to find that HUD had already been in communication with them and 

consequently the NBC was unwilling to defend their longstanding approval of our 

indirect cost proposal. Unfortunately, the tribe felt it had nowhere to go as HUD 

was threatening to make their finding retroactive (back to 1998), so we agreed to 

settlement limiting the finding to one year which was a significant amount— 

$518,405. 

Agreeing to settle had immediate fiscal impacts—it shifted two program manager 

positions from the indirect cost pool to direct costs thereby increasing the Tribe’s 

costs to manage contracts and grants by an estimated $200,000 a year. We need 

these two positions but it is likely we can only afford one of them. 

And, how is it that a single federal agency, in conflict with literally the letter of 

the law, could do this in the first place? Will tribes have to vet their indirect cost 

proposals to all federal agencies that they contract and compact with? Where was 

our trustee in defending the tribe from this intrusive action and the resulting longlasting harm? 

It is important to recognize that sequestration has exacerbated the longstanding 

issue of insufficient funding for contract support costs. Often the only recourse to 

address this shortfall is to reduce services to tribal members. For Siletz, we have 

51 

seen tribal child welfare positions go unfilled, while remaining staff carry caseloads 

two times higher than their state counterparts. In some cases the Tribe has to seek 

additional grants to fund salaries and services—our Natural Resources Clerk has 

three funding sources. And this situation is not limited to BIA and IHS funding. 

We support staffing costs for our Elders Program through four sources of revenue— 

BIA, Title VI–A & C, and tribal gaming revenue. 

At some point, service reductions are not an option. For years, the Siletz tribe has 

contributed funds to cover an increasing CSC shortfall for the Head Start Program. 

In 2009, this cost reached a high of $90,000 it is now down to just under $60,000. 

This might appear to be good news but it is not—the cost has gone down due to 

declining appropriations. Two years of sequestration has taken $100,000 from our 

program budget, directly affecting the education of our youngest members and their 

families. We have eliminated positions, reduced others to part time for salary and 

benefit savings, added duties onto other job descriptions, and most offensive, have 

had to eliminate classroom days. While the collective sentiment may be that the 

children are our future, it is not reflected in federal appropriations. 

Tribes are legitimate government contractors, whose indirect rates are objectively 

calculated by the National Business Center (despite HUD’s opinion). Payment of 

these costs to tribes is required by federal law (ISDEAA) and has been upheld by 

the U. S. Supreme Court Cherokee Nation v. Leavitt. There are solutions to this long 

and ongoing problem and the Siletz Tribes urges you to consider the following actions: (1) appropriating more funds for CSCs to close the funding gap; (2) lifting the 

cap on CSC appropriations; (3) tapping into un-obligated BIA and IHS appropriations from prior years; (4) prohibiting the National Business Center from altering 

past rules for negotiating indirect cost rates; (5) extending the statute of limitations 

for Tribes to pursue CSC claims; and as an alternative to costly litigation, creating 

a CSC Claims Board to fairly compensate affected Tribes. 

I hope I have adequately conveyed to you the very real and negative effects of 

sequestration on tribes. We have been as creative as we can in meeting this challenge but we are running out of options. Tribes have long been among the poorest, 

most vulnerable populations in the United States, and historically been under-funded by the Federal Government. I implore you to honor treaty obligations and to exempt all tribes and programs serving tribes from the current and any future sequestration. 

Several years ago our tribal leadership met with the former chairman of this 

Committee, Senator Daniel Inouye, in Portland, Oregon. He told us that in his view 

tribes have a ‘‘pre-paid’’ health plan. It was paid by our ancestors who ceded our 

land to the United States. I hope that the Congress will reflect on the unique legal, 

historic and moral situation of tribes as it does other programs exempted from sequestration. 

Thank you for allowing me to share our comments with you today and I would 

be happy to answer any questions. 

The CHAIRWOMAN. Thank you so much. We will now turn to the 

Honorable Phyliss Anderson, who is the Chief of the Mississippi 

Band of Choctaw Indians. Welcome. 

STATEMENT OF HON. PHYLISS J. ANDERSON, TRIBAL CHIEF, 

MISSISSIPPI BAND OF CHOCKTAW INDIANS 

Ms. ANDERSON. Chairwoman Cantwell, and members of the Senate Committee on Indian Affairs, my name is Phyliss J. Anderson, 

and I am the Tribal Chief of the Mississippi Band of Choctaw Indians. I am so thankful that you have invited us to come here and 

speak on behalf of Native American Indians. 

In my written testimony, I discussed contract support costs and 

sequestration, both of which represent a breach in the Federal Government’s trust responsibility to Indian tribes. For my remarks, I 

would like to focus on sequestration and how it is failing Indian 

Country, including the loss of more than $4 million for Mississippi 

Choctaw. 

I realize that when I talk about $4 million, compared to a trillion 

dollar budget, that may seem small. But it isn’t small for the 

10,600-plus membership in our Tribe, especially when the State we 

52 

live in is the poorest State. The largest impact for the fiscal year 

2013 funding has been with the Chocktaw Health Department, 

which receives most of its funding from the Indian Health Service 

program. I will refrain from listing all the cuts to the health care. 

But I can tell you that payments were slow, even down to the last 

few days of the fiscal year, especially during the government shutdown. 

Such uncertainty for a small reservation hospital in rural Mississippi limits our ability to provide vital health care to more than 

10,000 eligible users. Much of this uncertainty was a result of 

being told for months that the cuts to IHS would be capped at 2 

percent. However, OMB ruled that the 2 percent cap only applied 

to mandatory funds, such as diabetic programs, Medicare and Medicaid. Congress and OMB must change this interpretation to ensure that all IHS funding be exempt from the sequestration. 

We also support advanced appropriations for IHS. I would like 

to thank those Senators who support that legislation. Forward 

funding by itself will not prevent the harm of sequestration. Nor 

is it sufficient, it is not a sufficient substitute to fully fund programs that have been significantly underfunded for far too long. 

However, advanced appropriations would create a greater level of 

the budget, certainly to allow us to plan and provide better services 

to our citizens. Most of our education programs are forward funded. 

So we were better able to plan for those cuts. But if sequestration 

continues, stop-gap measures will not be sustainable. And essential 

services will be needed if reduction is made. 

Head Start, after school and summer instructional programs are 

critical to the Chocktaw youth, many of whom will be at risk for 

neglect or abuse if the programs continue to be cut. Sequestration 

has also made overcrowding to our largest school even worst. Our 

Pearl River Elementary School was originally built for a capacity 

of 350 students. It now has the enrollment of 657 students, 200 of 

whom are housed in portable classrooms, some which are 40 years 

old. 

This isn’t just an education issue. This is a serious health and 

safety issue that demands an increase, not a cut, in our school facilities funds. Unfortunately, the safety of our children has taken 

a back seat to the politics and realities of sequestration. 

Cuts to child care protection services, emergency assistance and 

programs to combat domestic violence put tribes at risk, tribal 

members in danger. Earlier this year, I stood side by side with 

many tribal leaders to ensure that Congress reauthorized the Violence Against Women Act with the tribal provisions intact. We 

fought for months to secure this language. I would like to thank 

every member of Congress, including the Mississippi Senators, 

Cochran and Wicker, who helped make this happen. 

However, no matter how many programs like VAWA that we authorize, they will not be as effective as they need to be without adequate funding. According to Webster’s dictionary, sequester mean 

to set apart, to keep a person or group apart from other people. 

Our ancestors, who relinquished millions of acres of their homelands and were forced into reservations, were all too familiar with 

this concept of setting some Americans apart from others. 

53 

Today, sequester mean to set money apart by arbitrarily cutting 

funds across the board. In my opinion, though, however, the word 

sequester to me means something else. It means failure. Specifically, the failure of Congress and the President to work together 

and do their jobs on behalf of the American people. 

So in conclusion, my final recommendation to this Committee, 

the President and every member of Congress, please do your job. 

The health and well-being of Chocktaw families and all Native 

Americans throughout this Country depends upon you not failing 

again. 

Thank you for inviting me to testify, and I welcome any questions that you might have. 

[The prepared statement of Ms. Anderson follows:] 

PREPARED STATEMENT OF HON. PHYLISS J. ANDERSON, TRIBAL CHIEF, MISSISSIPPI

BAND OF CHOCKTAW INDIANS


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The CHAIRWOMAN. Thank you, Madam Chair. Thank you for 

being here. 

We will now turn to the Honorable Jefferson Keel, who is the 

Lieutenant Governor of the Chickasaw Nation. Thank you for being 

here, and thank you for your service at NCAI. 

STATEMENT OF HON. JEFFERSON KEEL, LIEUTENANT 

GOVERNOR, CHICKASAW NATION 

Mr. KEEL. Thank you, Madam Chair, and members of the Committee. Thank you for inviting me to come and appear before this 

honorable committee. It is an honor, and I appreciate not only the 

opportunity to appear but for you holding this important hearing. 

The contract support cost issue truly is a crisis in Indian Country, especially for the Chickasaw Nation. The failure of the Indian 

Health Service and the Bureau of Indian Affairs to meet its financial obligation to tribes is not only disgraceful, I believe it borders 

on criminal behavior. We know to the penny what IHS owes every 

year, because IHS is required by law to report to Congress every 

year, certified both by the Administration, by HHS, down to the 

penny exactly how much it has failed to pay us. So figuring out 

what IHS has failed to pay is not rocket science. It is very easy. 


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58 

It is laid out in the IHS manual in Section 106 of the Self-Determination Act. For us, that figure is $36,188,534. 

Because the nation was not paid contract support services or 

costs in full, we were forced to reduce services to our patients, 

which causes a reduction in third party collections opportunity. 

When you factor in lost third party collections, the Chickasaw Nation has accumulated well over $50 million of non-payment over 

the past 16 years. Our latest claim for 2013 alone was over $14 

million. 

Our contract support cost requirements have been calculated 

every year by IHS to provisions now contained in the manual. But 

even though IHS has detailed records and submits detailed reports 

to Congress about how much it owes us each year, they will not 

settle our claims. 

There are several things that need to happen immediately. First, 

the Supreme Court has said that IHS should have paid us in full. 

IHS should announce it will pay us these reported shortfall 

amounts and this Committee should instruct IHS to do so. 

Second, Congress should direct the appointment of a special master, someone like Ken Feinberg who settled the BP oil claims and 

the September 11th claims. Third, Congress should direct that all 

claims be settled before the two-year anniversary of the Ramah decision. Congress should amend the Indian Self-Determination Act 

to make perfectly clear that the issue is not what the tribes spent, 

but what did IHS fail to pay. 

Congress should reject the new contract by contract caps that 

OMB had asked Congress to include in the appropriations for this 

year. The job is to honor these contracts in full, just like any other 

government contract. 

Finally, Congress should direct both agencies to work openly 

with tribal leaders and tribal contracting experts when exploring 

any contracting reforms. 

Regarding the Ramah case, I have been told that a year and a 

half after the decision came down, the government is about to start 

a statistical sampling of about 9,000 contracts. We already know 

what the BIA failed to pay and the Supreme Court understood 

that. This case, the Ramah case has been decided by the Supreme 

Court. It is time to bring it to an end. 

The Chickasaw Nation has been able to meet the shortfalls created by the failure of the IHS and the BIA to honor their contract 

obligations to the nation. But most other tribes are not as fortunate. The shortfalls cause real heartache and suffering for tribal 

people every day. 

Regarding sequestration, as you know and as you have heard, 

some of the poorest areas in America are located in Indian Country. It is just unfathomable that the Federal Government would try 

to balance the budget on the backs of the poorest of the poor in this 

great Country of ours. Tribal leaders have been dealing with underfunded or drastic cuts in program funding for decades. Loss of 

funding means loss of services, which causes loss of jobs, devastates families and damages local communities. 

Diversified economies allow us to provide high quality services to 

our people while reducing the reliance on the Federal Government. 

There are a number of tribes, as you have heard, that are making 

59 

significant progress and are reinvesting in their communities. This 

raises the quality of life for our citizens and at the same time provides tremendous benefits to our local, non-Indian communities. 

Again, we ask Congress to clarify once and for all the responsibility 

of the Federal agencies to meet its financial obligations regarding 

contract support costs and we ask that you not allow sequestration 

to occur one more day in Indian Country. Hold the Indian tribes 

harmless in the next budget rounds. 

Thank you. 

[The prepared statement of Mr. Keel follows:] 

PREPARED STATEMENT OF HON. JEFFERSON KEEL, LIEUTENANT GOVERNOR, 

CHICKASAW NATION

Madam Chair and members of the Committee, thank you for holding this important hearing and for the opportunity and honor to appear before you today. 

Our job as leaders is to help our people in any way we can. We want them to 

be successful for themselves, their tribes and their communities. It is our responsibility as leaders to make sure our citizens have access to a quality education, housing, health care and safety. It is our duty to provide support for them while they 

pursue their dreams. 

The contract support cost issue truly is a ‘‘crisis’’ for the Chickasaw Nation, both 

when it comes to the status of our claims that have been pending with IHS for over 

8 eight years, and when it comes to the continuing annual shortfalls we suffer and 

which we must therefore subsidize year in and year out. 

The failure of at least two federal agencies, the Indian Health Service and the 

Bureau of Indian Affairs, to defy judges’ orders to meet their financial obligations 

to the tribes is disgraceful. We know to the penny what IHS owes every year, because IHS is required by law to report to Congress on what it owes the Chickasaw 

Nation. It is also required by law to report to Congress every year how much IHS 

failed to pay us. So figuring out what IHS failed to pay us isn’t rocket science: it’s 

already been calculated, certified by IHS, certified by HHS, and reported to Congress. All this is laid out in the IHS Manual and in section 106 of the Self-Determination Act, and for us that totals $36,188,534. 

In reality, when you factor in lost third-party collections, the Chickasaw Nation 

has accumulated well over $50 million dollars of non-payment over the past 16 

years. Because the Nation was not paid contract support costs in full, we were 

forced to reduce services to our patients which caused a reduction in third-party collections opportunity. Our latest claim for 2013 alone was over $14 million. On average, for every $3,500 lost, we could have served another patient as an inpatient, or 

outpatient, including provision of X-ray, laboratory services and pharmaceuticals. 

With a claim of well over $50 million (cumulative from 1996–2013) we could have 

handled between 14,000 and 20,000 more patient visits. 

The Chickasaw Nation operates a 72-bed state-of-the-art hospital, the Chickasaw 

Nation Medical Center (CNMC), in Ada, Oklahoma. This is an IHS hospital. In addition, the Nation operates IHS-funded health center clinics in Ardmore, 

Tishomingo, Purcell, and Durant, as well as wellness centers in Ada, Ardmore, and 

Tishomingo, and additional nutritional centers in Ardmore and Purcell. These 

healthcare facilities employ approximately 1,100 people, including physicians, registered nurses, dentists, physicians’ assistants, nurse practitioners, midwifes and a 

very considerable support staff from receptionists to billing clerks to janitors. In the 

12 month period ending May 31, 2011, our medical center performed 2,664 surgeries, and experienced 588 births, 8,422 inpatient days and 2,392 admissions. During the same period, the Nation had 445,478 in-patient visits. 

This is one of the largest tribally-operated health care systems in the United 

States, and much of it, including our clinics and Ada Medical Center, are IHS-funded facilities. The Chickasaw Nation compacts with IHS to operate them for the government under the self-governance provisions of Title V of the Indian Self-Determination Act. We do this because, as history has shown, we run them better than 

IHS ever did or ever could. We cut the red-tape, we are more efficient, and we redesign the IHS programs to match what our people actually need. We are, of course, 

fully accountable to IHS, and after the close of every year we provide IHS with a 

comprehensive audit of how we spent our compact funds. But unlike IHS, we are 

also accountable to our own tribal citizens, and that is the driving reason why our 

services in every respect far outshine what IHS was ever able to do. 

60 

For as long as we can remember, IHS has underpaid the Chickasaw Nation’s negotiated requirements for contract support costs. The Indian Self-Determination Act 

says that IHS is required by law to negotiate those requirements with us and to 

then add those costs in full to our compact every year. That is the negotiated contract price. Most of these negotiated contract support cost requirements are to cover 

our personnel management, accounting, procurement, and other overhead costs of 

the Nation without which we could not operate. They cover our annual audit costs. 

They cover our insurance costs. In the general government contract setting they are 

called G&A costs—general and administrative costs. So this is not a system that is 

unique to tribal contracting or to the Chickasaw Nation. 

Our contract support cost requirements have been calculated every year by IHS 

through provisions now contained in the IHS Manual. (The Bureau of Indian Affairs 

has a very similar set of instructions for calculating these costs for our compact with 

the BIA.) 

For years, IHS told us that it had no responsibility to pay us our full contract 

support cost requirement. It would pay some of our costs, but then not the rest. 

Some years we were actually told we had to wait on a waiting list—even though 

we were running a government contract and operating services for IHS. But as the 

Committee is aware, in 2005 the Supreme Court ruled that IHS was wrong to have 

told us that. The Supreme Court in the Cherokee Nation case said our contract was 

no less binding on the federal government than any other government contract. So 

later in 2005 we filed claims reaching back to 1995, and since then we have regularly filed additional claims up through 2012. 

But, even though IHS had detailed records, and had submitted detailed reports 

to Congress, about how much it owed us each year, IHS would not settle our claims. 

By 2012—7 years after filing our first claims—IHS finally paid us $7 million to settle just the first 15 months of our claims. But we had a total of 18 years of claims 

pending with IHS, not just 15 months. 

In 2012, the Supreme Court spoke again, and it again said the government was 

liable for failing to pay our full contract support cost requirements. The Federal Circuit Court of Appeals also rejected all kinds of other defenses IHS had thrown up. 

So you would think that in 2012, finally, all of our remaining 16 years of claims 

would finally be resolved. After all, in its reports IHS told Congress we had not been 

paid $36,188,534 through 2012. At a minimum you would think the Nation would 

have swiftly gotten a check for that $36,188,534. 

Instead, IHS announced that it was not going to focus on what it had failed to 

pay us, but focus on what the Chickasaw Nation spent in IHS funds. Naturally, 

since the Nation could not spend what IHS did not pay, the net result is the government would owe us virtually nothing. And that is exactly what IHS told us earlier 

this year: that IHS would pay us virtually nothing. 

In April we sat down for two days of negotiations with IHS in Anaheim California. By the end of those discussions we thought we were making progress. IHS 

first promised to get us a fresh offer in May, then in June after we provided additional documentation, then in July, and on and on. Seven months later we have still 

not heard back from IHS, and we have no idea if we will ever hear back from IHS. 

It’s basically radio silence, and every time IHS says it will get us a number, nothing 

happens. Most recently, the Judge said we should propose a trial date for next year 

because nothing is happening. 

This is the story of just one of the so-called 54 active settlement negotiations the 

IHS Director has said is underway at this time. I know from other tribal leaders 

that in most other instances, nothing has happened at all. IHS may have a list 

somewhere of dozens of cases it would like to settle out of the 200 cases involving 

1600 claims; but in one of the first cases to go into the settlement process after the 

Supreme Court Ramah decision came down—our Chickasaw Nation case—nothing 

is happening, and nothing has been happening for months. 

There are several things that need to happen immediately. 

First, the Supreme Court has said IHS should have paid us in full, and IHS has 

already told Congress what it would have paid us if it had paid us in full. At least 

for the basic claim amount, settlement should have been instantaneous after the 

June 2012 Ramah decision. IHS should announce it will pay us these reported 

shortfall amounts, and this Committee should instruct IHS to do so. 

Second, Congress should direct the appointment of a Special Master, someone like 

Ken Feinberg who settled the BP oil spill claims and the September 11 claims. 

Third, Congress should direct that all claims will be settled before June 2014, the 

2 year anniversary date of the Ramah decision. 

Fourth, Congress should amend the ISDA to make perfectly, absolutely, beyondany-shadow-of-a-doubt clear, that the issue here is what did the IHS fail to pay, not 

what did the Tribes spend. The agencies’ so-called ‘‘incurred cost’’ approach is unVerDate Mar 15 2010 09:57 Aug 11, 2014 Jkt 089367 PO 00000 Frm 00064 Fmt 6633 Sfmt 6621 S:\DOCS\89367.TXT JACK
61 

supported by anything in the law and is just a gimmick they invented to chop down 

the amount the government owes us. We had a deal. The government failed to honor 

the deal. The Supreme Court said that was wrong. The government now just needs 

to honor the deal. 

Fifth, Congress should reject the Administration’s recent counter-attack on the 

Tribes and reject these new contract-by-contract caps that OMB has asked Congress 

to include in the appropriations for this year. Apparently no good deed goes 

unpunished. The Tribes actually win a case in the Supreme Court—actually they 

win that case twice—and OMB’s response is to try and reverse that victory by legislative fiat hidden in an Appropriations Act. That is wrong, it is immoral, and it is 

illegal. Instead, the job now is to honor these contracts in full on a going-forward 

basis, just like any other government contract. To my surprise, even the U.S. Chamber of Commerce has condemned OMB for daring to permanently underpay these 

government contracts. 

Finally, Congress should direct both agencies to work openly with tribal leaders 

and tribal contracting experts when exploring any contracting reforms. Just as the 

contracting process should be transparent and accountable, so, too, the process for 

regulating the contracting process needs to be open and transparent. 

No changes to the contract support cost system should be made without full consultation, and an open and transparent process visible to all interested Tribes and 

tribal contracting experts. If, as IHS seems inclined to often say, the so-called Federal Advisory Committee Act is unintentionally creating an impediment to full and 

open participation by all tribal representatives and experts, then that Act needs to 

be amended. The time has to end when the Secretary or the Director of IHS are 

permitted to tell tribal representatives in a room that they are forbidden to speak. 

Before closing, I just want to say one word about the Ramah case. That is the 

pending class action that is addressing 19 years of contract support cost claims 

against the BIA. I have been told that a year and a half after the decision came 

down, the government is about to start a statistical sampling of about 9,000 contracts. I am also told that when each tribe’s contract is selected, the issue the government will look at is not what the BIA failed to pay, but what the Tribe spent. 

Again, you cannot spend what you are not paid. We are about to see years of sampling and tribal studies to come up with some global number that has nothing to 

do with what the government actually owes. 

In the Supreme Court case, in one place the Court says that over the course of 

certain years the BIA failed to pay ‘‘between 77 percent and 92 percent of tribes’ 

aggregate contract support costs.’’ As that statement shows, we already know what 

the BIA failed to pay, and the Supreme Court understood that. This new sampling 

idea is but another example of lawyers and agencies gone wild. The Ramah case has been decided, finally, by the Supreme Court. It is time to bring it to an end. 

It should have been ended last year. Again, a Special Master appointed by the 

President or by Congress should be directed to cut through all the delay tactics and 

get this case settled at once. 

Thanks to many blessings, the Chickasaw Nation has been able to weather the 

challenges it has confronted by the failure of the IHS and the BIA to honor their 

contract obligations to the Nation, and through the Nation the government’s obligations to our citizens. We have been able to cover the government’s shortfalls with 

our own money. We have been funding an unfunded mandate that the Supreme 

Court says the government should have paid. 

But most other Tribes have not been as fortunate, and the shortfalls have caused 

real heartache and suffering for tribal people. 

I ask the Committee to do everything in its power to see these contract support 

cost issues promptly resolved and put to rest. We have far more important work to 

do than to litigate with the government for another 10 or 20 years over past contract liabilities. We ask Congress to pass legislation so that tribes can receive proper 

payment in exchange for the services the Tribes provided in good faith on behalf 

of and in reliance upon the Federal Government. 

Regarding sequestration, for tribal nations there are no positive effects of sequestration to speak of. Tribal leaders have been dealing with underfunded or drastic 

cuts in program funding for many years. Cuts in budgets cause rippling effects, cuts 

in services, which causes loss of jobs, which devastates families, and damages the 

local economies. However, sequestration does require the Federal Government to 

make some decisions regarding the size and functions of the various departments 

within the federal government itself. Again, tribes have been doing this for years. 

The inherent sovereign rights of Indian tribes was recognized by this country’s 

founding fathers, and affirmed in the United States Constitution. At its most basic 

level, the economic success of the United States is built upon the land and natural 

resources that originally belonged to the tribal nations. As you well know, the unVerDate Mar 15 2010 09:57 Aug 11, 2014 Jkt 089367 PO 00000 Frm 00065 Fmt 6633 Sfmt 6621 S:\DOCS\89367.TXT JACK
62 

derpinning of federal spending in Indian Country is based on sacred treaties between Indian tribes and the United States of America. This sacred trust between 

tribes and the federal government commits our federal partners to the protection 

of Indian lands; the protection of tribal self-governance; and the provision of social, 

medical, and educational services for tribal citizens. The authority to fund programs 

that fulfill this responsibility is founded in the U.S. Constitution. More fundamentally, full funding for the Indian Country budget was pre-paid with the loss of our 

land, and with our ancestors blood. We are not a ‘‘line-item’’ to be negotiated away, 

we are a commitment to be honored. 

Tribal leaders know the pressures of scarce resources better than most, and each 

of us has had to make hard decisions to build the economic strength of our peoples. 

In order to reduce their reliance on the federal government for the provision of services to our peoples, many tribes have entered the business world. Tribes are diversifying our economies and are now providing high quality services to our people. 

In some areas across the country, Indian gaming has become the lifeblood of tribal 

communities. There are a number of tribes that are making unprecedented progress. 

Gaming revenues provide those fortunate tribes with the access to funding that is 

necessary to diversify their economies. Tribes are now reaping those benefits and 

are reinvesting in their own communities. These successes allow us to raise the 

quality of life for our citizens, and at the same time provide tremendous benefits 

to our local non-Indian communities. 

In Oklahoma, you see the result of tribal leaders who have stepped up to the plate 

and made the tough decisions. We’ve gone from managing poverty to advancing 

prosperity. Tribal Nations in our State contribute almost $11 billion to the State’s 

economy, and five percent of the jobs in the State are provided by Tribal Nations. 

The tribal business community has an important role to play in the ever evolving 

global economy. For tens of thousands of years, our people have been stewards of 

the environment. But, we are also successful stewards of our economies and societies. As tribal businesses continue to grow, it is more and more clear that we bring 

value to the table. 

The Chickasaw Nation understands that we are part of the emerging economy, 

one that is built on the complexities of people, communities, and an inter-connected 

world community. We, along with other tribes, are proactively participating in defining and shaping the new global marketplace. The Chickasaw Nation has a diversified economic portfolio that includes a bank (Bank2), a tribal corporation, Chickasaw Nation Industries (CNI), a metal fabrication facility, a chocolate factory (Bedre), 

and healthcare and energy development ventures that provide a high rate of return. 

The Menominee Nation has a large and successful timber operation in Wisconsin 

with a sawmill and a furniture manufacturing facility. The Menominee forestry program is one of the most well-managed timber operations in the world. The Three 

Affiliated Tribes in North Dakota is building an oil refinery on its lands which will 

benefit the entire country, and there are other tribes with much to offer. 

Tribal Nations in Washington sell Northwest Pacific oysters to Japan. The Cherokee Nation has a growing international tourism business relationship with Germany. Tribal Nations are also expanding their manufacturing capacity as contractors. For example, the Penobscot Nation in Maine manages a portfolio that includes 

a wood recycling business and another business that builds guidance systems for 

military applications. Another high profile example of tribal business success is 

found in one of the most bold entertainment chain transactions I am aware of in 

Indian country, in which the Seminole Tribe of Florida purchased the globally-recognized Hard Rock Cafe ́ business for $965 million dollars. The Tribe now owns Hard 

Rock Cafes in 53 countries and has only seen an annual increase in locations since 

the deal was finalized in 2006. 

Across Indian country tribal leaders are working together to find ways to capitalize on these opportunities. One of the ways that we can improve our communities and strengthen our tribal economies is through Inter-Tribal Trade. There are 

many tribes that have developed resources and diversified their economies, and they 

are now poised to assist other tribes. It is up to us to find ways that we can assist 

in these efforts. Indian country can and should, develop an Inter-Tribal Trade agreement that tribes can use to work with each other. 

Trade has always been at the core of our way to interact with one another, and 

with others. Like CEO’s, tribal leaders are required to consider political, economic, 

and business risk when making decisions about when to expand, when to borrow 

money, and when to diversify. In addition, we must ensure our enterprises remain 

competitive by developing new market shares; by providing appropriate incentives 

for our employees and, by leveraging innovation. But the role of tribal and Indigenous leaders goes well beyond that of a CEO. 

63 

We also have unique political, business, and cultural risks that need to be carefully measured. For example, when we consider a new business venture, strategy, 

or market, we need to make certain it fits with the values of our communities. We 

need to make sure any development will provide real opportunity for productive and 

meaningful employment for our citizens. We need to consider how and when we best 

utilize our limited natural and geographic resources. 

Most importantly, we consider to whom we are answerable. Tribal leaders must 

decide whether to reinvest our dividends in our business for possible future growth 

or help those in need at home. We consider the sacrifices made by our ancestors 

to hold on to our land when we choose to develop our land or utilize our resources. 

And, we strive to make decisions that will improve the quality of life for our community today and in the long term. These are often hard choices and heavy responsibilities. But if we take the necessary steps to position ourselves to take advantage of 

current opportunities and trends, tribal leaders are poised to make significant advances for their people, enterprises, communities, and nations in the decades to 

come. 

We can reach out to one another, create government and enterprise partnerships 

and establish nation-to-nation trade. In the past, trade among our Nations has produced peace, cultural exchange, and wealth for our people. We need to form more 

partnerships based on government-to-government trade. 

The promise of economic strength that will come from working together will enable us to address one of the most pressing issues today: fighting poverty in our 

communities. 

Tribes are working together more closely than ever before, to protect our sovereign rights and to make advances on many key legislative issues. Some of these 

include helping Congress to pass a clean Carcieri legislative fix so that Tribes can 

continue economic development activities and continue reducing their reliance on 

the federal budget. As I noted, we also need to secure full payment for contract support costs, so that our contract with the government, just like our other business 

contracts, are honored. We also need to secure advanced appropriations for the Indian Health Service to further stabilize this most essential governmental program. 

From land restoration, to education, to tax reform, to energy, to health—Indian 

country has a stake in every federal policy decision. Indian issues are not partisan 

issues. The last few months have made it clear that Indian country is common 

ground for all members of Congress. 

Tribal Nations and Congress must all continue to work together to open new windows of opportunity to secure our communities, and most importantly secure our futures as sovereign nations. Whether it be the farm bill or language preservation, 

Indian Country must remain focused on all windows of opportunity and engage on 

issues of significance. 

It’s also time for Congress to make some tough decisions, too. It’s time to once 

and for all deal with the devastating effects of the sequester. Our Tribal Nations 

cannot sustain the ongoing effects of Congress’ refusal to keep its pre-paid commitments to the Tribal Nations. 

Over the past four years we have made significant progress with Congress and 

the Administration. We need the President and Congress to work with us to address 

outstanding issues regarding contract support costs and to sustain this work that 

will take our nation-to-nation relationship to the next level. 

We must continue to create action plans for energy security and natural resources, and to protect our cultures and languages. Most importantly we must protect the very basis of our communities—our people—and more critically the future 

of our communities: our children. This means doing everything we can, on every 

issue, to take proactive steps. We ask Congress to honor its obligations and to hold 

the Tribal Nation’s harmless in future budget actions. 

The CHAIRWOMAN. Thank you, Mr. Keel. 

Now our last witness, thank you for being here, is the Honorable 

Aaron Payment from the Sault Ste. Marie Tribe of Chippewas from 

Michigan. Thank you so much for being here. 

STATEMENT OF HON. AARON PAYMENT, CHAIRMAN, SAULT 

STE. MARIE TRIBE OF CHIPPEWA INDIANS 

Mr. PAYMENT. Thank you. Thank you for inviting me and to the 

Committee members. 

64 

My tribe is one of the largest tribes east of the Mississippi. Our 

treaty is the 1836 treaty of Washington. In our treaty, as most 

treaties, it provides for the health, education and social welfare as 

long as the grass grows, the winds blow and the rivers flow. Pretty 

common language in most of our treaties. Our service area includes 

the seven eastern-most counties in the Upper Peninsula of Michigan. Only about 13,000 of our members live in the service area, so 

they are not covered by our contract health service delivery funding 

or a BIA catchment areas. 

So I want to deviate from my testimony for a second and remind 

the Senate Committee, which you are already aware of, but that 

our funding is not welfare. It is not reparations and it is certainly 

the forced assimilation, smallpox, historical trauma, all of that 

would justify reparations, but it is not reparations. It is not even 

entitlements. Unfortunately, in this tenor and government today, 

entitlements is a negative word where it should be a good thing. 

We prepaid through our treaty obligations. We prepaid with the 

blood, sweat and tears and millions of acres of our ancestors. And 

when we say ancestors, we are not talking about hundreds and 

hundreds of years ago. We are only talking about our great-grandparents generation. They made the sacrifice and we prepaid for the 

services that we are supposed to be getting. 

So we held up our end of the deal or our contract, if you will. 

And contracts are not supposed to be unilateral. So we ask that 

you honor the treaties and don’t continue the legacy of broken treaties. Honor your contracts. We have done so. 

Historically we have been burdened by shortfalls and contract 

support costs. Just like the sequester, these cuts have been devastating. In the Bemidji area, our shortfall in contract support is 

almost $46 million. In Michigan, it is almost $14 million. My tribe 

filed their claim after the Ramah case last summer, and not really 

much has happened since then. We are in an environment of litigation where we should actually be working together to try to figure 

out how to honor the outcome of the Supreme Court case. 

In Indian Country we had a victory with the Supreme Court 

case, but it doesn’t really feel like that right now. As a tribal leader 

it seems to me like our trustee should be finding ways to resolve 

this issue on our behalf and advocating on our behalf, rather than 

trying to find ways to, as someone else said earlier, cheat us out 

of the money that is actually due. 

So the agencies instead are looking for ways to evaluate how we 

spent our programs. I have to assume that is going to mean to diminish the liability that is actually due to us. However, I need to 

clarify that we can’t spend something that we didn’t get. When you 

get an under-amount, you find ways to work underneath that. So 

I am fearful that the conclusion is going to be that we really didn’t 

need it or it wasn’t due. And I have to say that that approach is 

tautological and circular reasoning and really, it is nonsense, it is 

absolute nonsense. So the government doesn’t win when it pays 

less than it owes. The government wins when justice is done, and 

we are asking for justice. The Supreme Court has made perfectly 

clear that justice here means paying the portion of the contract 

support that is due to us. 

65 

On sequester, I brought my little document that spreads out the 

actual impact to my tribe last year. It was $1.7 million, health 

alone was $1 million. The projected sequestration could go up to $5 

million in cuts. We have laid off, we furloughed our Head Start 

staff. We have tried to do everything we could to withstand this. 

But it has been devastating. During the shutdown, our special diabetes program, we didn’t have our award letter, we had to lay off 

our special diabetes staff. Only for a week, but we ended up losing 

our director, because she wants stable employment. She is a medical professional that has other opportunities. 

Going into the implementation of the Affordable Care Act, I am 

fearful that another program that we cut was our COLA for our 

medical staff. We don’t have COLA for our medical staff. We 

haven’t had COLA for all of our other team members for years. But 

it is going to be difficult to try to retain our physicians under the 

Affordable Care Act, when there are 100,000 new jobs opened up 

for them. 

The final thing, and I will leave this, but the final thing I also 

wanted to call attention to is, I participated in the Faces of Austerity. This shows the impact of sequestration all across the Country, not just Indians. I want to put a pitch in for stopping sequestration. Obviously for us, but if it is possible to protect community 

action, I am on our community action board, Head Start, Meals on 

Wheels, the Upward Bound program, all the Great Society programs. I was born in 1965 and benefited from many of those programs. This year I was selected as Sargent Shriver award winner 

for my continued contributions to the Great Society programs. I 

would be remiss if I didn’t stand up for and speak for them as well. 

All of these programs work together. Last year the Federal agencies minimized the impact. Next year the impact is going to be 

drastic, because the full brunt of sequester is going to be felt next 

year. Maybe then citizens will understand what the impact is and 

they will start contacting their Congressmen and their Senators to 

insist that they represent us, rather than follow some ideology that 

is being pushed by one party or another. 

Thank you. 

[The prepared statement of Mr. Payment follows:] 

PREPARED STATEMENT OF HON. AARON PAYMENT, CHAIRMAN, SAULT STE. MARIE

TRIBE OF CHIPPEWA INDIANS

Good afternoon and thank you Chairwoman Cantwell and Vice-Chairman 

Barrasso for inviting me to testify today. 

My name is Aaron Payment and I am the Chairman of the Sault Ste. Marie Tribe 

of Chippewa Indians. My Tribe is one of the largest tribes east of the Mississippi 

River with 41,000 members. We were re-recognized in 1972 after a 20-year struggle. 

The 1836 Treaty of Washington recognized my Tribe’s aboriginal territory, and this 

is where we have resided since time immemorial and where we continue to reside 

today. 

Our service area includes the seven eastern counties in the Upper Peninsula of 

Michigan. About 13,000 of our members reside in our service area. Since being rerecognized in 1972, my Tribe has engaged in the arduous task of re-acquiring land 

in our original territory to meet the needs of our members. The present-day trust 

land of my Tribe is just over 1,000 acres. That is not a large amount of land, yet 

with the resources that we have we operate our tribal government and provide essential governmental services for our tribal citizens, including housing programs, 

youth and education programs, employment programs, health care programs, social 

services programs and law enforcement services. Our health care programs, alone, 

66 

employ 260 employees and operate four primary care centers and two satellite clinics. In carrying out many of these functions, we contract with the Indian Health 

Service and the Bureau of Indian Affairs under the Indian Self-Determination Act 

to administer the programs that these two agencies would otherwise operate for our 

people. 

We do this because depending on the government to run these programs not only 

breeds more dependence; it also leaves in place cookie-cutter programs that are developed in Washington, D.C. by bureaucrats who have no knowledge of our culture 

and our local needs. By running these programs and services ourselves, we are also 

able to rebudget funds and redesign these contracted programs to best meet the 

needs of our people, just as Congress intended when it enacted the Indian Self-Determination Act. 

But, historically, we have been burdened by shortfalls in contract support cost 

payments. And just like the current sequester, these cuts have had a very real and 

negative impact upon our community. 

Contract support costs cover the fixed overhead costs we must incur to carry liability, property and workers compensation insurance; to meet federal legal and regulatory requirements; to conduct federally mandated annual audits; to supervise 

and manage our program and employees; to purchase supplies; to provide health insurance to our employees; and, to do all of the necessary things that a government 

does when it employs people to run government programs, but which the federal 

government does from resources that we will never be able to access, including the 

alphabet soup of agencies that help the BIA and IHS day in and day out, like the 

GSA, DOJ, OMB, OPM, OGC and countless other agencies. 

These contract support costs are our fixed overhead costs. And while we try to 

keep these costs as low as reasonably possible, they cannot be eliminated entirely. 

At the same time, these costs are audited every year. So when the Federal Government, through the Interior Business Center, sets these costs for a new year, the government is setting these costs based upon real audits. None of this involves guesswork. In short, these are hard costs—real costs—and they simply have to be paid. 

But the agencies do not pay them. That’s right: the government does not pay 

these contract costs, at least not in full. The government fully pays the overhead 

costs of other government contractors, but it does not pay the overhead costs of our 

Tribe and it does not pay the overhead costs of most other tribal contractors. In fact, 

the agencies don’t even ask Congress for enough money to pay these contract obligations in full. This year is a good example: the President’s budget only asks for $477 

million for IHS contract support cost payments even though IHS says the actual 

costs are over $75 million more. The same is true of the BIA: the $230 million the 

President’s budget requests is roughly $10 million short of what is required to pay 

all tribal contractors in full for the work we do for the government under these contracts. 

This is not just a problem for my Tribe. For instance, if you look at the contract 

support cost shortfall reports that the Indian Health Service sends every year to 

Congress, you will see that virtually every Tribe is underpaid at some point in time, 

and most are underpaid all of the time. In the IHS Bemidji Area where my Tribe 

is located, the total amount of the underpayments IHS reported to Congress for fiscal years 2007 through 2011 was $45,521,239. For just the Tribes in the State of 

Michigan, IHS reported to Congress that its underpayments totaled $13,850,650. 

When you think about it, that is an enormous amount of health care for Indian people that has been lost. 

For years—really for decades—IHS and the BIA told us that this was just the way 

it is, that tribal contracts were ‘‘different’’ and ‘‘unique’’ and that we were not entitled to be treated as well as other government contractors. Frankly, we believed 

what we were told. But then in the 1990s some Tribes started to protest these underpayments in the courts, and in 2005 the Supreme Court said in the ‘‘Cherokee 

Nation’’ case that the government was wrong all along, and that we had been entitled to be paid, and that it had been wrong to force us to cut or subsidize services 

in the federal programs we were operating in order to cover the fixed costs of running those programs. And so it turned out that our right to be paid was at least 

as strong as the rights held by other government contractors. 

But right after the 2005 Supreme Court decision, the agencies told us that times 

had changed in the meantime. The BIA and IHS said that the Supreme Court decision involved a period of time when the agencies could have lawfully paid us in full, 

but that in the meantime the agencies had worked out a new system with Congress 

that actually prohibited the agencies from paying our contracts in full. Once again, 

we trusted the agencies and figured they must be right. But once again it turns out 

the agencies were wrong, and last year the Supreme Court decided in the Ramah 

Navajo case that we should have been paid in full all along. The Supreme Court 

67 

said that any claims we had would be covered by the Contract Disputes Act and 

paid out of Treasury’s Judgment Fund. 

After that, we confirmed that our claims over the BIA contract shortfalls were 

being covered by the Ramah Navajo class action lawsuit, so we focused on filing 

claims over our IHS contract shortfalls. We did that in the summer of 2012, but 

since then, nothing has happened. It’s been over 16 months since the Supreme 

Court decision, and well over a year since we filed our claims, yet nothing has happened. And nothing has happened in the Ramah Navajo case either. 

These are difficult times for all Indian Tribes. Not only are federal budgets not 

keeping up with inflation, not only are they not being increased to meet our needs; 

they are actually being cut. At our Tribe, shingles vaccinations have been cut, and 

reduced foot care will eventually mean increased amputations. At a time like this, 

settlement payments from these cases would be of critical help in keeping services 

running. 

But as far as we can see, nothing is happening. For a tribal leader, this is difficult 

to understand. I say this because we watched very large and longstanding disputes 

with the Tribes and with Indian people settled swiftly and on fair terms once President Obama took office. He brought a can-do attitude to long-festering problems, 

and his people got the message. The Cobell case was finally settled. The tribal trust 

fund cases were finally settled. The Indian farmers’ cases were finally settled. The 

President saw to it that all of these settlements were achieved on fair and reasonable terms, even though the courts had not resolved whether the government was 

even to blame, much less how much. Why? Because it was important to resolve 

these long-simmering disputes once and for all, and to turn the page on these historic wrongs. 

Compare those situations to the issue at hand. When it comes to contract support 

cost claims, Indian country has something that no one had in those other cases: a 

complete tribal victory by the highest court in the land, the Supreme Court, and 

not once, but twice. As a tribal leader, it seems to me that the relevant agencies 

would redouble their efforts to resolve all of this that much faster, in keeping with 

the President’s commitments to Indian people. 

But that is not what the agencies are doing. They seem to be stalling and looking 

for ways for the government to pay less, and maybe nothing at all. I am told the 

agencies no longer think it is relevant to look at how much the agencies should have 

paid. Instead, the agencies want to look at how we ran out programs and how much 

did we spend. The IHS Director said this in a public letter she issued earlier this 

year, and I am told this is the BIA’s view, too. But we have already been audited 

over how we ran out programs: we are audited every year and the government gets 

those audits every year. Our audits are clean audits, just like most audits across 

Indian country. 

As for how much we spent on our programs, all I know is that we cannot spend 

what we are not paid. If the agencies will only reimburse us for what we spent, they 

will probably calculate that we are owed nothing. But how can that be? If you read 

the Supreme Court decision in the Ramah case you will see that the Court ruled 

that the government was responsible for its underpayments. That is what the whole 

case was about, just like the Cherokee case. This has nothing to do with how we 

spent the portion of the money the government paid under our contracts. 

I believe the President is committed to seeing these issues resolved fairly and 

quickly. But I also believe that there are some in the agencies who do not see it 

that way, and that is unfortunate. The government doesn’t ‘‘win’’ when it pays less 

than it owes; the government ‘‘wins’’ when justice is done—Justice. And the Supreme Court has made it perfectly clear that Justice here means paying the portion 

of the contracts that the agencies failed to pay at the time. 

That is not a hard number to calculate. I say this because the agencies kept 

records every year of how much they paid and how much they didn’t pay. They told 

us the amounts and they told Congress these amounts. Might there me some errors? 

Undoubtedly yes, and maybe the true number is a little higher or a little lower; 

nothing is perfect. But for purposes of settling these claims once and for all, it seems 

to me, as a tribal leader, that many years and millions of dollars could be saved 

by just using the data the government already has to settle up all of these claims. 

Going forward, certainly the goal should be improved accuracy. But to settle up the 

past claims when the numbers are essentially known is just good business and good 

government. 

The NCAI has called for swift resolution of all outstanding claims, and we agree 

with NCAI. We also agree that the best course of action is for Congress or the White 

House to appoint a special master who can wind up all these claims, and who is 

instructed to do so swiftly. We agree that if clarifications are needed to the law 

about what Tribes are due, those clarifications should be made at once by this ComVerDate Mar 15 2010 09:57 Aug 11, 2014 Jkt 089367 PO 00000 Frm 00071 Fmt 6633 Sfmt 6621 S:\DOCS\89367.TXT JACK
68 

mittee. But most of all, we agree that these claims need to be wound up in the next 

few months and then promptly paid out of Treasury’s Judgment Fund. Our people, 

Indian people all over the country, are suffering from grossly underfunded care, and 

now from the sequester cuts that came on top of those already poorly-funded programs. We are doing our best under difficult times. The last thing we need is another decade of battles with the government, especially when the courts have spoken 

so clearly and directly to the point. 

We cannot take more, not my Tribe, not the Tribes in the State of Michigan, and 

not the Tribes in the rest of the country. It is time to stop this longstanding 20 year 

battle and to turn the page of history. I am confident that this is what the President 

wants, that this is what Congress wants, and that this is what Tribal Leadership 

wants. Now we need to work together, and creatively, to actually make it happen. 

Before closing, I wish to convey our Tribe’s gratitude for the work of this Committee, and especially for the September 30 letter that several Committee members 

sent to the OMB Director, urging that OMB withdraw its proposal to essentially 

convert our contracts into discretionary grants (by permanently underfunding them 

at whatever levels are fixed by the agencies). Although much of Indian country has 

been angered by this proposal, I prefer to see it as a hasty over-reaction to the Supreme Court’s Ramah decision, driven strictly by fiscal concerns and developed 

without due regard for the nature of these contractual agreements. I am certain 

that the President believes in tribal self-governance and self-determination, in the 

sanctity of our contracts with the government, and in the importance of the Nation 

honoring its fiscal obligations both abroad and at home. OMB’s proposal cannot be 

reconciled with those core values. 

Congress has already once rejected OMB’s proposal when it enacted the current 

Continuing Resolution, and the House appropriations subcommittee also rejected 

OMB’s proposal earlier this summer. While OMB proposals are never actually withdrawn, hopefully your input and the input of Tribal Leadership this week will persuade OMB to allow its proposal to simply fade away. If not, we hope and trust that 

this Committee will see to it that the appropriations process is not mis-used to effect 

fundamental changes in the Indian Self-Determination Act. 

Thank you, Madam Chair and Vice-Chairman Barrasso, for the honor of testifying 

today, and I look forward to working with all Members of the Committee in developing swift and just solutions to the current contract support cost crisis. 

The CHAIRWOMAN. Thank you. I want to thank all the witnesses 

for their testimony. 

I want to make sure that I have this correct on this contract support issue. Chairwoman Diver kind of expressed it, and that is, 

when you turn over these services, you can get more efficient results. So the notion of self-governance, if you will, in driving more 

efficiency in the services that are delivered. 

So Chairman Payment, I understand every year you enter into 

negotiations with the U.S., pursuant to that Self-Determination Act 

and what services you are going to provide and how much the 

United States will pay, including what the law calls the contract 

support costs. Is that not right, every year, you enter into an agreement? 

Mr. PAYMENT. We do. As last year showed us, with the impact 

of sequestration, it is obviously not an agreement, because it is contingent on whether or not the funding exists. So we do support advanced funding, as the others do. 

The CHAIRWOMAN. So how many years have you contracted with 

the U.S.? 

Mr. PAYMENT. We have been doing self-governance funding for 

IHS since, we were one of the pilots for the Country, so the early 

1990s. 

The CHAIRWOMAN. So in all those years when you were contracting with the United States, did they ever inform you that the 

negotiated amount that you contracted with them was not the 

amount that they were going to pay you? 

69 

Mr. PAYMENT. No. 

The CHAIRWOMAN. So for years and years and years, you negotiated and said, okay, we will deliver these services for this amount 

of money? 

Mr. PAYMENT. For 21 years. We have never been notified that we 

are doing was not correct. We negotiate the agreement that we operate from. So there is obviously a presumption that what you are 

doing is correct, because the Federal Government has agreed to it. 

The CHAIRWOMAN. So President Keel, why do tribes continue to 

take over Federal programs if the contract support costs are constantly underfunded? 

Mr. KEEL. Tribes have proven, Madam Chair, thank you for that 

question, the tribes have proven over the years that they can operate these programs more efficiently, with less money, because they 

are closer to the community. In fact, these programs are absolutely 

critical to taking care of our people. If we didn’t agree to contract 

and take over these programs, many of our people would not get 

services. So we agreed to do this. 

Now, the Chickasaw Nation has been fortunate, as I said, we 

have a diversified economy. We have some economic development 

activities that allow us a revenue stream to, as I said, meet the 

shortfall of some of these requirements. So we basically subsidize 

these programs out of our own funds. 

The CHAIRWOMAN. President Cladoosby, Jefferson Keel and others have suggested this special master, similar to what we did with 

the Deepwater Horizon, because there was a lot of complexity here, 

a lot of complexity in the 9/11 victims compensation fund. So are 

you advocating for something like that as well? 

Mr. CLADOOSBY. Yes. Yes, Madam Chair, that is a great question. The Administration appears to be in need of some direction 

from this Congress in that matter. We will be more than willing 

to work with you, NCAI will, to find a constructive path forward. 

Because it is not the first time, we are not creating the wheel here. 

This is something that has been done with the September 11th victims and the BP Horizon oil spill, as President Keel has indicated. 

So at the rate that they are going, it is unacceptable. Sixteen resolved out of 1,600, that is unacceptable. If they think that they 

can continue that record going down the road, we are not going to 

get there. We need this special master to help move this process 

along a lot faster than it is right now. So we need your help in encouraging this Administration to do that. 

The CHAIRWOMAN. Thank you. Senator Franken? 

Senator FRANKEN. Thank you again, Chairwoman Cantwell, for 

holding this hearing. Thank you, Chairwoman Diver, for your eloquent oral testimony and your also eloquent and helpful written 

testimony. I think that you said it was about $2.5 million that you 

have been cut in the last two years alone, that the Fond du Lac 

has been. How is that $2.5 million cut compared to your entire 

budget for the Band? 

Ms. DIVER. Thank you very much for that question, Senator 

Franken. Out of our total program funding, that is about 6 percent, 

6 percent the first year and another 5.2 percent, so just a little over 

11 in total. 

70 

Senator FRANKEN. If the sequester continues into next year, 

what choices will you have to make in your budget and what will 

that mean for your tribe? 

Ms. DIVER. I will have to start to cut actual Head Start slots, instead of the ancillary programs around that support the teachers, 

I will have to start to cut teachers. Before we start cutting teaching 

staff in our school, we would probably reduce transportation, at 

which point quite a number of our students would choose to leave 

our school and go to other school districts that don’t have the cultural competency or the tribal focus, language activities, those 

types of things. They will leave our school district for those that 

can provide those levels of support service. 

Our housing block grant, we are already having to make a hard 

choice between adding to our housing stock or reducing maintenance, deferring maintenance on the old 1937 Act housing. That is 

not a great long-term solution. I would much rather keep homes 

rehabbed than have to tear them down and replace them. 

Senator FRANKEN. You have already had to drop kindergarten 

students with behavior difficulties. And you have just had to stop 

letting them go to school, right? 

Ms. DIVER. It was actually one of the most heart-wrenching decisions that we have had. We had to take several kindergarten students that came in with pretty high level behavior needs. And because we could not give them the paraprofessionals that would ease 

their way into kindergarten, we actually denied them enrolment, 

asked them to leave and come back in a year. We are hoping their 

cognitive development in the next year will put them in a different 

place. 

The struggles for the parents are that now they are having to arrange child care, having copays for those types of activities. We are 

worried about stigma to the children. And once again, many of the 

parents faced with some of those decisions may choose to go to a 

non-tribal school so that they can get the services they need for 

their children. 

Those entities that they are choosing to go to that have the services have the ability to do something tribes do not, and it is called 

levy. So as an alternative to sequestration, maybe we should consider letting tribes levy in our ceded territories. We are being asked 

to provide services and rely on all of you good folks to help us make 

that happen, or raise the money ourselves. There is no other entity 

of government that has to do that. That was just wishful thinking, 

I understand. 

[Laughter.] 

Senator FRANKEN. Chairwoman Diver, you cite research that 

overcrowded housing is especially harmful to children and can 

harm their education success and their health and mental health. 

We talked about that a little bit in the first panel. Could you talk 

to the Committee about sort of the accumulated risks to the health, 

education of children because of housing cuts? And just what all of 

this looks like in human terms. 

Ms. DIVER. Sure. After 25 years in the housing, operating and 

developing business, and bringing those skills back into my own 

community, we have been a leader in Indian Country with developing other menus of services besides low income rentals and 

71 

homeowners. Because those models alone don’t work. Our supportive housing units for chronic and long-term homeless, those are 

the families you spoke about earlier, Senator, the ones that get 

doubled and tripled up, because that is what homelessness looks 

like in Indian Country, verified by the Wilder Research Center in 

Minnesota. 

We see spikes in police activity that we track, behavioral health 

incidents, commitments, delinquency, truancy. When we opened up 

our 24 units of supportive housing, we are now in our third year 

with four of the families where their children for the first time in 

their lives have not had to change schools in the middle of the 

year. 

In terms of impact, maybe mom and dad aren’t better, but what 

we see is the incidence of alcohol use declining significantly and 

their severity and number. We see joint case management among 

school counselors, behavioral health workers, social workers, so 

that we can get the packages of services those kids need. The average saving in cost for stable housing for families is estimated to be 

for every dollar spent on stable housing and services there is a saving of $9 to crisis care and other systems later. 

Senator FRANKEN. Thank you, Chairwoman Diver. You are a 

great leader in Minnesota for your tribe, for Fond du Lac. You are 

a true friend. Thank you. 

Ms. DIVER. And thank you to all of you for saving my clinic on 

some behavioral health of my own. 

The CHAIRWOMAN. Thank you. Senator Begich. 

STATEMENT OF HON. MARK BEGICH, 

U.S. SENATOR FROM ALASKA 

Senator BEGICH. Thank you very much Madam Chair. I apologize 

that I wasn’t here for the first panel. I was busy on an Alaska 

issue, an issue that I know you are familiar with and others, Pebble Mine. I was working through two groups at the same time. It 

has an impact on Indian Country and our State. 

Let me first say thank you all very much. My poor staff, they 

write good questions for me, and I get frustrated always when I 

come here, only because I wish I was here for the last panel, and 

listening once again on contract support services and the inability 

for this Administration to deal with this issue once and for all. 

I am looking at the testimony that Dr. Roubideaux sent, the 

written testimony. And she had two alternatives to deal with this, 

which I am trying to reserve my words of what I describe these, 

they are useless. She settled 16 of these issues out of 1,600. And 

they need, I say they, the tribes across this Country, including 

Alaska, need to have a separate opportunity, and if it is a special 

master that is appointed or some situation outside the hands of Indian Health Services. 

Because here is what I think is going to happen. We will be here 

next year. We will have the same conversation, we will say the 

same thing and it will be 30, maybe, settled out of 1,600. This is 

ridiculous. It is outrageous. When they know that they can settle 

this, I think Mr. Keel said it best, and I have heard the data, they 

have the numbers. They have to verify to this Committee and this 

Congress on what is back-owed. Now, somehow that number has 

72 

changed, then obviously they certified something incorrectly, which 

means they weren’t telling the truth when they sent the paperwork 

to us. I doubt that, I think it was probably truthful, I think we all 

agree that whatever those numbers were, that is what they were 

behind in payment. 

I know they may make the legal argument that that was a BIA 

case and that is different. Despite the fact that BIA is going to do 

a class settlement and get it all done by 2014. It is amazing that 

magically one agency can get it done but one other agency is incompetent and unable to get it done. I know, they have heard from 

me and I am trying to be polite with my words. I just cannot believe they cannot resolve this, it is a simple request that the Indian 

Health Services do and this Administration do, and that is set an 

organization up, an individual to do, if it is called a master or 

whatever it might be, but someone to go through these claims and 

settle them and be done. 

The money is in Treasury, it is a setaside legal fund, to do this. 

It doesn’t touch Indian Health Services money. It is appalling to 

me that they cannot get this done. 

The second part of this is, they need to set a plan, and I know, 

and I will ask the new chairman in regards to contract support cost 

working group. I know a couple of days ago you all met. Dr. 

Roubideaux said they are going to reinstate this. I have just a couple of basic questions. Is OMB going to be in those meetings? Because if the Office of Management and Budget is not in those meetings, it is a useless meeting. No disrespect to my friends at OMB, 

they are the great sanitizers. You send a budget up, they clean it 

off. I know this as a former mayor, my OMB did it to every department I had, because my department heads would come to me and 

say, did you know we actually proposed this and OMB cleaned it 

off. Is OMB going to be involved in that working group? 

Mr. CLADOOSBY. That is a great question. We are hoping that 

they are involved. Once again, one of those agencies that we would 

really love to have an Indian desk in OMB, to have a presence 

there. We have been pushing this request. Yes, we agree that they 

need to be there and they need to be at the table. 

Senator BEGICH. Maybe we can as a committee or individually 

make the request of the Administration. Because a working group 

without the people who manage the money, it is going to be a lot 

of great conversation you will have. Good philosophical debate, you 

will feel good when you leave, everyone leaves. Then a year later 

or six months later or two months later when the working group 

comes together—did she give you a timetable when the working 

group will start meeting? 

Mr. CLADOOSBY. Does anybody at the table know if there is a 

timetable set for this? Aaron? 

Mr. PAYMENT. We actually, we are here, and both of us are on 

stack. This is one of the issue we were asking for in the new position in OMB. It is going to be immediate. My first question was, 

because I want to be on that committee, and I represent the Midwest. 

Senator BEGICH. I would like to be on that committee. 

[Laughter.] 

73 

Mr. PAYMENT. So one of the things that I have impressed to the 

Secretary of Health and Human Services is that, tribes recognize 

that President Obama has been one of the best presidents as it relates to Indian issues. 

Senator BEGICH. Absolutely. 

Mr. PAYMENT. This is a disconnect. This is absolutely not congruent with his promise to uphold the treaty obligations, the creation of the White House Council, all of those things suggest a different approach. So what I am trying to figure out, I am a political 

scientist by academic training, where this is coming from and trying to understand it. I think that new position in OMB might help. 

I have asked several people to get a word to the President that this 

is not reflecting very well on his commitment to Indian Country. 

We need to uphold our treaty obligations. 

I want to say one other thing quickly, if I have the chance. I am 

newly the vice president for the Midwest for NCAI. And I want to 

speak for our Alaska tribes as well. My tribe has a casino. One 

hundred percent of our revenue is used to supplement the services 

that the Federal Government is not providing us, so I loved your 

term supplement. But some tribe don’t have that. And so the devastation of the shutdown and the devastation of the sequestration 

for the Alaska tribes or for the Nevada tribes or for the tribes that 

don’t have gaming has been devastating. It is devastating for us. 

But for them, they have nowhere to turn and no one to look to. 

Senator BEGICH. That is right. 

Mr. PAYMENT. So your leadership by the way, is really respected 

by the leaders in your State. So thank you. 

Senator BEGICH. Thank you. I know my time is up, but I will just 

end on this, and that is, Madam Chair, I want to do whatever we 

can. I sent a letter to the President last week outlining five specific 

issues. This was one of them, the master, resolving this. And I do 

agree, in the last five years, this President has done a lot for Indian Country, more than most have done in years, as we look at 

the history. 

But it just seems like there is something not, and your phrase 

was a good one, connecting here. There is something missing in 

this linkage and it seems like it is not a complicated problem. It 

is almost like every time we go to the gate, we go to a different 

door. And they say, no, no, go to the next door. And we never find 

the right door. And so I want to again, the letter I sent last week 

to the President was very direct with specific recommendations. I 

was not hesitant to be blunt about it. But I want to be able to help 

you. But I can tell you, this testimony and the written testimony 

is unacceptable to me, of the solutions to solve this problem from 

Dr. Roubideaux. She has heard enough from me, I am sure. But 

I will do whatever I can. 

I thank you all for the work you do. The work you have to do 

under sequestration, and as you know, some of you may know, I 

have proposed an advance funding bill. Just as what we did in the 

first year I got here, I sent it to the VA. We did it for the medical 

VA, we should do it for our Indian Health Services. These are not 

discretionary, they are mandatory. They are treaties. They are contracts. And we should fulfill the obligation that we set out. We are 

dealing with VA, and we did that a year and a half ago. I also have 

74 

another bill with the VA to finish off their benefits to make them 

also advance funding in Indian Health Services. So we will look forward to working with you on that. 

Thank you, Madam Chair. I know I extended more than I should 

have. But this just frustrates me. I will try my best next time to 

come with a very positive attitude on something. I don’t know what 

it will be, but it will be something. 

The CHAIRWOMAN. I appreciate it, Senator Begich. If you needed 

a few more minutes, please take them. I said at the beginning of 

the hearing that you could see from our colleagues the level of frustration, only because we hear from our constituents and only because Indian Country and the State of Alaska or in Minnesota or 

some of these various places are large parts of constituencies and 

economic tools. When they don’t have the resources then obviously 

everything is strained. 

So I want to thank this panel and the witnesses here for their 

testimony. You have shown some light on the challenge and some 

ideas about solutions. I am glad that the Administration and the 

Assistant Secretary and Director Roubideaux were here, because 

hopefully we can now move forward in resolving both of these 

issues, getting some parity as it relates to health services in sequestration and in dealing with the contract support issue and 

moving forward in a more timely fashion. 

So again, I thank my colleagues also for showing up and for their 

commitment to making sure these issues are heard. With that, we 

are adjourned. 

[Whereupon, at 4:34 p.m., the Committee was adjourned.] 

(75) 

A P P E N D I X 

PREPARED STATEMENT OF HON. CATHY ABRAMSON, CHAIRPERSON, NATIONAL INDIAN

HEALTH BOARD

Chairwoman Cantwell, Vice Chairman Barrasso, and Members of the Committee, 

thank you for holding this important hearing on contract support costs and sequestration. Both of these issues are of paramount importance to Indian Country and 

we sincerely appreciate the attention that this committee has given to the discussion of these key concerns. On behalf of the National Indian Health Board (NIHB) 

and the 566 federally recognized Tribes we serve, I submit this testimony for the 

record. 

First, I would like to emphasize the importance of the Federal Trust responsibility, when it comes to the health of American Indian/Alaska Native (AI/AN) people. Based on treaties between Tribes and the United States for the exchange of 

peace and Tribal lands as well as United States Supreme Court cases and statutory 

acts, the Federal Trust responsibility is an absolute legal obligation under which the 

United States has the highest responsibility and trust to Indian Tribes. The Snyder 

Act of 1921 (25 USC 13) legislatively affirmed this trust responsibility. To facilitate 

upholding its responsibility, the Federal Government created the Indian Health 

Service (IHS) and tasked the agency with providing health services to AI/ANs. Since 

its creation in 1955, IHS has worked toward fulfilling the federal promise to provide 

health care to Native people. In passing the Affordable Care Act, Congress also reauthorized and made permanent the Indian Health Care Improvement Act (IHCIA). 

In renewing the IHCIA, Congress reaffirmed the duty of the Federal Government 

to American Indians and Alaska Natives, declaring that ‘‘it is the policy of this Nation, in fulfillment of its special trust responsibilities and legal obligations to Indians—to ensure the highest possible health status for Indians and urban Indians and 

to provide all resources necessary to effect that policy.’’ (P.L. 111–148, Indian Health 

Care Improvement Act, § 103(2009). 

To fully understand the implications of these two issues, it is crucial to understand the state of health for AI/ANs. The AI/AN life expectancy is 4.1 years less 

than the rate for the U.S. all races population. AI/ANs suffer disproportionally from 

a variety of diseases. According to IHS data from 2005–2007, AI/AN people die at 

higher rates than other Americans from alcoholism (552 percent higher), diabetes 

(182 percent higher), unintentional injuries (138 percent higher), homicide (83 percent higher) and suicide (74 percent higher). Additionally, AI/ANs suffer from higher 

mortality rates from cervical cancer (1.2 times higher); pneumonia/influenza (1.4 

times higher); and maternal deaths (1.4 times higher). 

AI/ANs have paid in advance for their health care. Sequestration and refusal to 

fully pay contract support costs are but two examples of the failure of the U.S. government to uphold its trust responsibilities while irresponsibly seeking to balance 

the federal budget on the backs of those who depend on the fulfillment of these 

agreements. 

In 2003, the U.S. Commission on Civil Rights released a report titled: ‘‘A Quiet 

Crisis: Federal Funding and Unmet Needs in Indian Country.’’ This report detailed 

the lower health status and poverty for AI/ANs. Sadly, despite increases in federal 

spending, little has changed in Indian Country over the last decade when it comes 

to health. In 2003, IHS was 0.5 percent of the Department of Health and Human 

Services’ (HHS) budget. Today, IHS spending is only 0.4 percent of the HHS budget. 

The crisis is still here, funding is not, and Tribes are continuing to suffer. To make 

matters worse, the inability of the Federal Government to protect the IHS from sequestration and a failure to pay Tribes’ contract support costs has only exacerbated 

the problems of health delivery in Indian Country. As Chairwoman Cantwell noted 

in the November 14 hearing, ‘‘Our country’s financial troubles are not really stemming from our obligations to Indian Country, and frankly, we’re not doing a good 

job in fulfilling those obligations.’’ 

76 

Sequestration Cuts and Indian Health 

IHS spends roughly $2,896 on each patient per year. This is far less than the na- tional average of $7,535 for health care spending per capita per year and even less 

than the $12,042 average for Medicare and $6,980 for the Veteran’s Administration. 

Despite the legal promise to provide health care in perpetuity for AI/ANs, the Federal Government is falling woefully short. In FY 2013, the IHS lost $228 million dollars due to the across-the-board spending cuts of sequestration and to rescissions. This was a critical blow for an agency 

that is funded at only 56 percent of total need. Late last year, a technical interpretation by the Office of Management and Budget (OMB) confirmed that IHS would be 

subject to the full sequestration amount of 5.1 percent. This was a surprise to many 

Tribes and, in fact, to IHS, because the Budget Control Act of 2011 (BCA) (P.L. 112– 

25), which governs sequestration, includes language that exempts IHS from all but 

2 percent of sequestration. All other federal programs that provide health care services the nation’s populations with the highest need, such as Social Security, Medicare, Medicaid, the Children’s Health Insurance Program and the Veteran’s Administration, have been exempted from these funding reductions. But, not the Indian 

Health Service! 

This determination left many Tribes’ scrambling to find a way to continue health 

services in FY 2013. Over the last several months, NIHB has heard from countless 

Tribes about the negative impacts of sequestration on their ability to deliver or access of health care. For many, this means shutting down facilities, furloughing employees and denying access. Others have shifted funds from other Tribal services; 

meaning, that they are forced to subsidize the federal trust responsibility. For example, the NATIVE Project in Spokane, Washington (a Native American Urban Clinic) 

will implement three furlough days a month. This will mean the elimination of 

roughly 150 doctor visits. On the Pine Ridge Reservation, the health education department will cut a full time physical fitness aid to part time—dramatically affecting efforts to prevent heart disease and diabetes. Also on Pine Ridge, testing and 

screening services for elders and babies have been reduced. 

These cuts are literally a matter of life and death. The Rosebud Sioux Tribe has lost over $119,000 due to sequestration. Since March 2013, the death rate on the 

reservation has at least doubled because patients coming into facilities with critical 

problems just cannot get the care they need. The Mississippi Band of Choctaw Indians has said that referrals for medical services except those that are necessary to 

prevent the immediate death or serious impairment of the health of the individual 

have been delayed or denied. These delays and denials often cause the patients’ 

health to get worse, leading to higher treatment costs down the road and sometimes 

death. The South East Alaska Regional Health Consortium announced it will close 

the Bill Brady Healing Center that provides alcohol and drug treatment to Native 

Alaskans. 

On the Lower Brule Sioux Tribe’s reservation located in South Dakota, there are 

not many opportunities for economic development. While some Tribes are forced to 

supplement the federal trust responsibility for health programming with funds from 

other programs or Tribal businesses, this is not a possibility on the Lower Brule 

Reservation. They have experienced budget cuts totaling over $77,000. This means 

they have had to drastically reduce a patient transportation program which takes 

individuals from this remote location to other cities to receive care. Dedicated Tribal 

health staff members still take the patients in many cases, but they are using their 

own funds. The alcoholism program on Lower Brule has lost $33,000, and now the 

treatment facilities do not have enough staff, supplies or meetings to help Tribal 

members. Mental health programs were cut by $6,000. This is a devastating reduction considering that in the Northern Plains region, American Indian young people 

are five to seven times more likely to take their own lives than other American 

youth. In a place where funds for health are already far below the need, sequestration cuts have left Tribal health directors desperately trying to make it work. 

While some Tribes have been able to make some tough cuts to services and staff 

to remain open, next year Indian Country will be in a much worse state. For FY 

2014, the situation for Indian health will be even further diminished if IHS is held 

to any sequester reduction. The Sault Ste. Marie Tribe of Chippewa Indians estimates that next year they will eliminate several health positions including several 

nurses and a registered dietitian and cancel other programs, such as their HIV program which provides over 1,000 visits annually. Tribal programs should be entirely 

exempt from sequestration in FY 2014, as they are a fulfillment of the trust responsibility to Tribes by the U.S. government. 

However, if this is not possible, NIHB requests the Senate Committee on Indian 

Affairs to weigh in with the OMB, and explain that IHS should have a special sequestration exemption for FY 2014 and beyond, pursuant to current law. In FY 

77 

2013, the Budget Control Act (BCA) spelled out how sequestration would work and 

left open that even exempt accounts could be sequestered. However, for FYs 2014– 

2021, the Act specifies that the sequestration order should reduce spending for all 

accounts except those exempted (i.e., held at 2 percent sequestration) in Section 256, 

which includes IHS. In addition, the BCA required line-by-line sequestration in FY 

2013 only. This means, unequivocally, that all of IHS, discretionary, and mandatory 

alike, would be held at 2 percent under any future sequestration reductions under 

the BCA. Regardless, let us be clear: there should be NO REDUCTIONS in IHS 

funding for the IHS, Tribal, and Urban (I/T/U) system. Two percent is too much! 

Support for Advance Appropriations 

NIHB has previously weighed in with this Committee regarding support for Advance Appropriations for the Indian Health Service. On October 10, 2013, Senator 

Lisa Murkowski introduced legislation, S. 1570, to provide advance appropriations 

for the IHS. While this measure will not solve the complex budget issues for IHS, 

it will be an important first-step in ensuring that AI/ANs at least continue to receive the health care we have come to know. Advance appropriations, which proved 

to be very effective for the Veteran’s Administration health system, would allow Indian health programs to effectively and efficiently manage budgets, coordinate care, 

and improve health quality outcomes for AI/ANs. This change in the appropriations 

schedule will help the Federal Government meet its trust obligation to Tribal governments and bring parity to the federal health care system. Adopting advance appropriations for IHS would result in the ability for health administrators to continue 

treating patients without wondering if -or when- they would have the necessary 

funding. 

Additionally, IHS administrators would not waste valuable resources, time and 

energy re-allocating their budgets and engaging in arduous outreach and education 

to the Tribes each time Congress passed a continuing resolution. Indian health providers would know in advance how many physicians and nurses they could hire 

without wondering if funding would be available when Congressional decisions funnel down to the local level. Health care services in particular require consistent 

funding to be effective. We urge this Committee to quickly consider S. 1570 and report the bill favorably to ensure that Tribes can move forward to a more stable 

funding mechanism. 

Contract Support Costs 

The Indian Self-Determination, Education and Assistance Act (P.L. 93–638), 

which has allowed Tribes to operate health programs directly on behalf of the Federal Government and is arguably the single greatest policy change when it comes 

to improving health delivery in Native communities. By empowering Tribes to run 

their own health programs, services are provided more efficiently and effectively because Tribes have better knowledge of their population and possess the important 

cultural understanding that can lead to better health outcomes for AI/AN people. 

However, when contracting to provide health care services, Tribal governments 

have not received their full administrative payments, or contract support costs 

(CSC), from the Federal Government. According to the IHS ‘‘CSC are defined as reasonable costs for activities that [the Tribe] must carry out but that the Secretary 

either did not carry out in her direct operation of the program or provided from resources other than those under contract.’’ These are fixed costs that are negotiated 

before the Tribe and the Federal Government finalize a contract. 

This decade-long problem has forced many Tribes to shift funds from other programs to make up the difference; again, exacerbating some of the challenges that 

AI/ANs face when it comes to health. Again, subsidizing the federal Government’s 

responsibility. This affects all of Indian Country, as each Tribe has at least one contract with the Federal Government. In June 2012, the Supreme Court issued a ruling in Salazar vs. Ramah Navajo Chapter that held that the U.S. Government must 

pay each Tribe’s contract support costs even if the full amount to fund this has not 

been appropriated by Congress. Despite this, little progress has been made on resolving the past claims. In 16 months, IHS has settled only 1 percent of the 1600 

pending claims. At the current rate, it would take over 100 years to settle these 

claims. Clearly, more must be done at IHS to ensure that there is adequate resolution on this issue and more must be done by the Federal Government to bring this 

matter to a quick and equitable resolution. 

It is important to emphasize that these costs are negotiated in advance with the 

government, so prompt settlement amounts do not require much guesswork. The Supreme Court found in the Ramah case that 72–92 percent of CSC were paid between 

the years of 1994–2001, and these cases can be paid from the judgment fund. Yet, 

the Administration has done little to move forward since the decision. This same 

78 

Administration has shown unprecedented leadership in settling several historic Indian-related cases when there were no court rulings holding the government liable. 

These include settlement of individual Indian claims (Cobell), Tribal trust claims 

(Nez Perce), and Indian farmer claims (Keepseagle). There is no excuse for failing 

to promptly settle all outstanding claims where the Supreme Court has spoken and 

where certified agency reports to Congress show all amounts due. NIHB echoes others in Indian Country who have advocated for a Special Master to promptly settle 

all outstanding CSC claims. Congress should also set a quick deadline for the full 

resolution of these claims. 

Future Funding for Contract Support Costs 

To make matters worse, on the heels of the Ramah decision, the Administration 

used their FY 2014 Budget request to support a major reform of the CSC payment 

system—and did so without engaging in Tribal consultation. The FY 2014 Budget 

recommends that the government enter into individual contracts with each Tribe for 

CSC funds that each Tribe will receive. This proposal was made without consultation from Tribes, and is therefore a violation of established Tribal consultation policies as well as Executive Order 13175, which states the purpose ‘‘to establish regular 

and meaningful consultation and collaboration with tribal officials in the development of Federal policies that have tribal implications, to strengthen the United States 

government-to-government relationships with Indian tribes, and to reduce the imposition of unfunded mandates upon Indian tribes.’’ IHS Director Dr. Yvette Roubideaux 

stated, at her nomination hearing before the Senate Committee on Indian Affairs 

on June 12, 2013: ‘‘We have heard loud and clear the Tribes do not like our 

proposal . . . we anticipated that the Tribes would not like the proposal.’’ Tribal 

consultation could have mitigated the damaging impact of this ill-conceived and onerous policy. 

The Budget language, if enacted, would mean that Tribes and Tribal Organizations are the only government contractors in the United States not receiving full 

compensation when entering into contracts with the United States Government. 

Furthermore, it would serve to further violate the federal trust responsibility to provide health for American Indian and Alaska Native people. If the Administration 

negotiated a CSC cap with a particular Tribe and then experienced an administrative shortfall over the course of the contract, the Tribe would be required to subsidize the federal trust responsibility by covering those additional costs: Again. This 

was clearly not the intent of the Indian Self-Determination Education and Assistance Act. 

Assistant Secretary of the Bureau of Indian Affairs Kevin Washburn said at this 

Committee’s hearing on November 14, the Administration’s proposal to put individual caps on contract support costs is ‘‘not something that makes a lot of sense 

in many respects . . . ’’ Even the U.S. Chamber of Commerce has recently weighed 

in on behalf of Tribes against this proposal. Yet, the Administration still pushes forward with this misinformed policy, and reiterated support for it in the Office of 

Management and Budget’s anomalies report issued at the end of FY 2013. NIHB 

agrees with the statement Senator Murkowski provided at the hearing that, ‘‘The 

fact that we are continuing to bring this up before members of the Administration, 

I find very, very frustrating.’’ 

NIHB is encouraged by the recent decision of the IHS Acting Director to reinstate 

the Contract Support Cost Workgroup in order to move forward to find a long-term 

solution to fund CSC. This group was abruptly abandoned in 2012 by IHS, which 

cited it could not meet due to restrictions within the Federal Advisory Committee 

Act. The IHS Acting Director has stated that this group will meet in early December 

2013 and will quickly make recommendations. NIHB calls on this Committee to hold 

the IHS accountable to this plan. There is much work to be done, and it is critical 

that the group meet as soon as possible. 

NIHB, again, appreciates the attention that members of this Committee have 

given to this critical issue, and the tough tone it has taken with the Administration 

on the misguided proposal around CSC. However, we have a long way to go before 

this issue is fully resolved. NIHB urges the committee to maintain its support for 

the speedy resolution of past CSC claims, and also urges the Committee to continue 

to hold hearings so that we may pave a path forward. 

Conclusion 

On behalf of the National Indian Health Board and the 566 federally recognized 

Tribes we serve, we thank the Committee for holding this important hearing. Both 

sequestration and CSC are critical issues that have a direct impact on the health 

and well-being of AI/ANs. To summarize, we recommend the following: 

79 

1The NTCSCC is comprised of the: Alaska Native Tribal Health Consortium (AK), Arctic 

Slope Native Association (AK), Central Council of the Tlingit & Haida Indian Tribes (AK), Cherokee Nation (OK), Chippewa Cree Tribe of the Rocky Boy’s Reservation (MT), Choctaw Nation 

(OK), Confederated Salish and Kootenai Tribes (MT), Copper River Native Association (AK), 

Forest County Potawatomi Community (WI), Kodiak Area Native Association (AK), Little River 

Band of Ottawa Indians (MI), Pueblo of Zuni (NM), Riverside-San Bernardino County Indian 

Health (CA), Shoshone Bannock Tribes (ID), Shoshone-Paiute Tribes (ID, NV), SouthEast Alaska Regional Health Consortium (AK), Spirit Lake Tribe (ND), Tanana Chiefs Conference (AK), 

Yukon-Kuskokwim Health Corporation (AK), and the Northwest Portland Area Indian Health 

Board (43 Tribes in ID, WA, OR). 

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

rescissions in FY 2013 

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

2014 and beyond 

3) The Committee should promptly consider and pass S. 1570, which provides 

advance appropriations for IHS. 

4) Congress should direct a special master to settle past CSC claims and impose 

a deadline for resolution of these claims. 

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

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

Workgroup. 

State and local governments have the power to tax in order to fund government 

services. Tribes do not have that option. In many remote Tribal communities, economic development is also unfeasible. Tribal governments depend more heavily on 

Federal Government sources, thereby making the impacts of sequestration and contract support shortfalls even graver to Indian Country. Funding of IHS and other 

Tribal programs are a fulfillment of the federal trust responsibility that has been 

long established through the Constitution, treaties and law. These obligations to Indian Country are not discretionary. It is time that the first Americans stop being 

the last Americans when it comes to health care delivery, access and opportunity. 

Thank you for the opportunity to offer this testimony. 

PREPARED STATEMENT OF LLOYD B. MILLER, PARTNER, SONOSKY, CHAMBERS, 

SACHSE, MILLER AND MUNSON, LLP 

My name is Lloyd Miller and I am a partner in the law firm of Sonosky, Chambers, Sachse, Miller and Munson, LLP. 

I offer this testimony in two capacities. First, I am counsel to the National Tribal 

Contract Support Cost Coalition. This Coalition is comprised of 20 Tribes and tribal 

organizations situated in 11 States. Collectively, these Tribes and tribal organizations contract to administer $400 million in IHS and BIA services on behalf of over 

250 Native American Tribes. 1

Second, I am counsel to 50 Tribes and tribal organizations pursuing claims 

against the Indian Health Service over contract support cost underpayments which 

occurred as far back as 1995. More generally, I have worked for over 25 years in 

matters involving contract support costs, including work on several legislative matters, on numerous regulatory matters, and (among other cases) as counsel for the 

prevailing Tribes in Cherokee Nation & Shoshone-Paiute Tribes v Leavitt, 543 U.S. 

631 (2005) and co-class counsel for the prevailing Tribes in Salazar v. Ramah Navajo Chapter, 132 U.S. 2181 (2012). 

In 1988, former Chairman Inouye and this Committee noted that no single enactment has had a more profound effect on more tribal communities than the Indian 

Self-Determination Act, and no issue has been more critical to the success of that 

Act than the payment of contract support costs. These statements were part of this 

Committee’s exhaustive report which accompanied the historic 1988 Amendments to 

the Indian Self-Determination Act, 25 U.S.C. § § 450–458aaa-18. See S. Rep. No. 

100–274 (1987). 

Today we celebrate the fact that, over the course of nearly four decades, Tribes 

and inter-tribal organizations have taken over control of vast portions of the Bureau 

of Indian Affairs and the Indian Health Service, including critical federal functions 

in the areas of health care, education, law enforcement and land and natural resource protection. Today, not a single Tribe in the United States is without at least 

one self-determination contract with the IHS and BIA. Collectively, the Tribes annually administer some $2.8 billion in essential federal government functions, employVerDate Mar 15 2010 09:57 Aug 11, 2014 Jkt 089367 PO 00000 Frm 00083 Fmt 6601 Sfmt 6621 S:\DOCS\89367.TXT JACK
80 

2Shoshone-Bannock Tribes of the Fort Hall Reservation v. Shalala, 988 F.Supp. 1306, 1311– 

12 (D.Or. 1997). Although this opinion was later reversed by the Ninth Circuit, Shoshone-Bannock Tribes of the Fort Hall Reservation v. Thompson, 269 F.3d 948 (9th Cir. 2001), opinion 

amended and replaced by 279 F.3d 660 (9th Cir. 2002), three years later the district court reopened the judgment in the wake of the Cherokee decision (Shoshone-Bannock Tribes of the Fort 

Hall Reservation v. Shalala, 408 F.Supp.2d 1073 (D. Or. 2005)), and thereafter entered an amended judgment of $1.2 million against the government. 

ing an estimated 35,000 people. Contract support cost issues thus touch every Tribe 

in the United States. 

The 1988 Amendments (Pub. L. No. 100–472) eliminated any possible doubt that 

self-determination contracts are fully enforceable under the Contract Disputes Act, 

just like other government contracts. Congress did so by adding Section 110 to the 

Indian Self-Determination Act. 25 U.S.C. § 450m-1. This is key to understanding 

how we got to where we are today. 

Before the 1988 Amendments, court decisions like Busby School of the Northern 

Cheyenne Tribe v. United States, 8 Cl. Ct. 596 (1985), had treated these contracts 

as if they were mere discretionary grants and, on that basis, had denied Tribes the 

right to recover damages when the agencies failed to pay their full contract support 

cost obligations under the contracts. S. Rep. No. 100–274, at 34–35 (discussing 

Busby). In one 1987 hearing on this issue, then-Chairman Inouye pointedly noted 

that, in his capacity as a member of the Defense Appropriations Subcommittee, 

DOD frequently came before the Committee to request supplemental appropriations 

to cover shortfalls in amounts due under government contracts. Yet, he noted, when 

the shortfalls are in contracts with Indian Tribes, the relevant agencies never come 

to the appropriations committee for supplemental funding. Chairman Inouye then 

vowed to change this prevailing view by amending the Indian Self-Determination 

Act. 

The late Chairman Inouye’s remarks are worth repeating here for the record: 

A final word about contracts: I am a member of the Appropriations Committee, 

and there we deal with contracts all the time. Whenever the Department of Defense gets into a contract with General Electric or Boeing or any of the other 

great organizations, that contract is carried out, even if it means supplemental 

appropriations. But strangely in this trust relationship with Indians they come 

to you maybe halfway or three quarters through the fiscal year and say, ‘‘Sorry 

boys, we don’t have the cash, so we’re going to stop right here’’ after you’ve put 

up all the money. At the same time, you don’t have the resources to sue the 

Government. Obviously, the equity is not on your side. We’re going to change 

that also. [Applause] 

HEARING BEFORE THE SELECT COMMITTEE ON INDIAN AFFAIRS ON 

S. 1703, TO AMEND THE INDIAN SELF–DETERMINATION AND EDUCATION ASSISTANCE ACT, 100th Cong., 1st sess., at 55 (Sept. 21, 1987). 

In 1988, this Committee’s deep concern that the underpayment of contract support costs resulted in reduced patient care and other services, combined with this 

Committee’s commitment to providing solid contract remedies if the agencies continued to underpay the contracts, led to the enactment of powerful contract support 

cost funding provisions (§ § 450j-1(a)(2), (g)), mandatory congressional reporting requirements (§ 450j-1(c)), and reliable contract enforcement mechanisms. § 450m-1(a). 

Despite these heroic measures, and despite a second round of amendments in 

1994 (Pub. L. No. 103–413), the agencies continued to fall short on their contract 

obligations. By the late 1990s, IHS was underfunding tribal contracts by nearly 

$100 million a year. The BIA, too, was failing to meet its contract obligations (although at considerably lower sums). All along, the agencies insisted that Tribes had 

no enforceable right to be paid in full, and the agencies therefore shirked their responsibilities to report these shortfalls to Congress and even to request the funds 

necessary to pay the contracts in full. In this environment, it was inevitable that 

litigation would follow. 

It is not necessary to catalogue all of the ensuing litigation, because we already 

know the rest of the story. After more than a decade of litigation by a few courageous Tribes in various courts and boards, in 2005 the Supreme Court issued a 

unanimous decision against IHS (and, by extension, the BIA too). The Court upheld 

this Committee’s legislation against attacks that its words were empty rhetoric, and 

the Court agreed that contracts with Tribes are as fully enforceable against the government as any other government contracts. That was the Cherokee case. 

But even before the Cherokee case finished its journey in the courts, IHS put into 

place a scheme to undermine the Tribe’s rights for the future. After suffering an 

early defeat in a Portland district court, 2 IHS in 1988 persuaded the Appropriations 

81 

Committees to erect limiting earmarks-caps-on the total amount the agency could 

spend on contract support cost payments. 

IHS was unabashed in its intentions: it wanted to foreclose any future claims by 

tribal contractors. IHS might eventually lose the Cherokee case (which involved 

years before 1998), but IHS had a new plan to escape any further liability, while 

still permitting IHS to keep the benefit of all of the services the Tribes were providing. In developing this new attack on tribal rights, IHS followed a path the BIA 

had started in 1994, though for entirely different reasons. In 1994, the BIA merely 

wanted to separate its direct service appropriation from its contract appropriation; 

its initial goal wasn’t to cheat the Tribes on their contracts. In due course, however, 

both agencies came to see these earmarking appropriations caps as a way for the 

agencies to underpay the contracts with impunity. 

But contract law doesn’t work that way. If a contractor performs work for the government, the contractor is entitled to be paid. And if the agency asks for insufficient 

funds from Congress to cover all of its contracts—yet still accepts the contractor’s 

services, be it operating an IHS hospital or running a BIA police department—then 

the agency remains responsible: it either pays the contracts or the government answers in court. 

It took 14 years for various cases to wind their way through the courts on this 

new issue. But in June 2012 the Supreme Court rejected the agencies’ new scheme 

to avoid liability to the Tribes. The Court’s decision echoed Chairman Inouye’s remarks from a quarter century earlier: ‘‘Consistent with longstanding principles of 

Government contracting law, we hold that the Government must pay each tribe’s 

contract support costs in full.’’ Salazar v. Ramah Navajo Chapter, 132 S. Ct. 2181, 

2186 (2012). The Court made plain that ‘‘the Government’s obligation to pay contract support costs should be treated as an ordinary contract promise.’’ Id. at 2188. 

Although the Ramah case involved the BIA, the Supreme Court also vacated a 

decision from the U.S. Court of Appeals for the Federal Circuit in the government’s 

favor involving IHS and sent that case back to the lower court. Two months later 

the Court of Appeals concluded that ‘‘[t]he Secretary [was] obligated to pay all of 

ASNA’s contract support costs for fiscal years 1999 and 2000.’’ Arctic Slope Native 

Ass’n, Ltd. v. Sebelius, No. 2010–1013, Order at 6, 2012 WL 3599217 (Fed. Cir. Aug. 

22, 2012). 

One would think this would be the end of the matter. But not so. The tenacity 

of the agencies in their efforts to underpay tribal contractors is nothing short of remarkable. 

First, the agencies secretly concocted yet another scheme to cheat the Tribes. 

They proposed language never before seen in government contracting law, seeking 

to establish several hundred mini-caps on the amounts the agencies will pay each 

individual contractor this year-and at levels far below what the contractors are actually owed. Even the U.S. Chamber of Commerce has come out four-square against 

this unprecedented move. The reaction from this Committee was swift, and I will 

not repeat here the testimony this Committee heard on this issue last April. The 

House appropriations subcommittee rejected the proposal outright, and over a dozen 

Senators have asked OMB to withdraw the proposal. Yet at last word, OMB is continuing to press Congress to insert this provision into the final funding measure 

Congress adopts for fiscal year 2014. 

Second, the agencies have failed to promptly settle the damages portions of all 

outstanding claims. The result: as of today—over 17 months since the Supreme 

Court’s Ramah decision—the BIA has yet to settle any portion of the Ramah litigation (although admittedly that case has unique complexities, since it is a class action covering 20 years of underpayments suffered by some 500 tribal contractors 

under at least 9,000 contracts). For its part, the IHS Director testified to this Committee in writing last Summer that the agency is facing close to 1,600 claims from 

200 Tribes totaling about $2 billion dollars. Yet the agency has only managed to settle 19 of 1,600 claims since the Ramah case was announced (including 3 claims settled on November 18th). That is a rate of 1 percent of the claims resolved every 17 

months. At that rate, it will take more than a century for IHS to complete it work. 

If IHS triples the rate of its work, it will still take 32 years to resolve the claims. 

Why is this happening? To fully answer that question, and to understand what 

should be happening instead, requires a detour back through the Indian Self-Determination Act. 

The Indian Self-Determination Act. Every self-determination contract has a price 

attached to it for the work the Tribe is to do, and the ISDA sets forth the elements 

of that contract price. First, § 450j-1(a)(1) addresses the direct program costs, which 

are also called the ‘‘Secretarial amount.’’ These are ‘‘the amount[s] the Secretary 

would have expended had the government itself [continued to] run the program.’’ 

82 

3The Manual sets forth other fine-tuning adjustments, but for purposes of this general description they are omitted here. See, e.g., IHM a 6-3.2.F.2 (discussing ‘‘tribal shares’’ adjustment). 

Arctic Slope Native Ass’n, v. Sebelius, 629 F.3d 1296, 1298–99 (Fed. Cir. 2010), vacated on other grounds 133 S. Ct. 22 (2012). 

But tribal contractors incur administrative and overhead costs to carry out functions that the agencies cannot transfer to the Tribes. The agencies cannot transfer 

much of their financial management and personnel management functions to the 

Tribes. They cannot transfer many payroll functions. There are even costs Tribes 

must incur but that the agencies never incur in the first place (such as paying for 

insurance, workers compensation premiums, legal advice and representation, annual 

auditing and reporting requirements). 

For all of these reasons, the ISDA in § 450j-1(a)(2) specifies that ‘‘[t]here shall be 

added to the amount required by paragraph (1) [i.e., to the Secretarial amount], contract support costs which shall consist of an amount for the reasonable costs for activities which must be carried on by a tribal organization as a contractor to ensure 

compliance with the terms of the contract and prudent management . . . .’’ By and 

large, these are simply ‘‘administrative expenses,’’ Cherokee, 543 U.S. at 634, but 

they can be substantial. And since they are fixed costs, when the agencies fail to 

pay them, Tribes still incur the costs and they must divert program funds to pay 

them. Accordingly, services are necessarily reduced. 

The IHS Manual contains an entire chapter devoted to explaining how the agency 

determines each Tribe’s ‘‘contract support cost requirement.’’ The Manual is clear 

that the ‘‘contract support cost requirement’’ means: ‘‘[t]he full amount of [contract 

support cost] need for new and expanded programs (plus ongoing contracted or compacted programs) as determined under this chapter pursuant to Section 106 of P.L. 

93–638 as amended [25 U.S.C. § 450j-1].’’ IHM § 6–3.1.E.5. This ‘‘contract support 

cost requirement’’ is comprised of two parts: ‘‘indirect’’ costs and ‘‘direct’’ costs. The 

total of these two costs constitutes the Tribe’s total annual ‘‘contract support cost 

requirement.’’ 

Indirect contract support costs. Indirect contract support costs constitute the majority of contract support costs. These costs are generally determined by applying 

a tribal contractor’s ‘‘indirect cost rate,’’ 25 U.S.C. § 450b(g), ‘‘to the amount of funds 

otherwise payable to the Tribe’’ (that is, to the Secretarial amount). Cherokee, 543 

U.S. at 635. For most Tribes, the relevant ‘‘indirect cost rate’’ is issued by the Interior Department’s Interior Business Center. This ‘‘rate’’ is drawn from audits of 

prior year activities which show how much a Tribe spent on administrative overhead expenses, versus how much the Tribe spent on the actual delivery of services. 

The IHS Manual requires IHS to determine the contractor’s indirect contract support cost requirement ‘‘by applying the negotiated [indirect cost] rate(s) to the appropriate [IHS] direct cost base.’’ IHM § 6–3.2.E.1. The ‘‘appropriate direct cost base’’ 

includes both the Secretarial amount paid under the contract, and all additional direct contract support costs negotiated to carry out the IHS contract (such as workers 

compensation insurance costs associated with nurses or other health department 

employees carrying out the IHS contracted programs). See IHM § 3.4.E.1; IHM § 6– 

3.3.A.3. The product of multiplying the ‘‘indirect cost rate’’ times the ‘‘appropriate 

direct cost base’’ is the contractor’s indirect contract support cost requirement. 3

Direct contract support costs. As noted earlier, direct contract support costs include a Tribe’s payments for workers compensation insurance and other personnel 

health and related insurance or other benefits not transferred by IHS to the contractor as part of the Secretarial amount, yet which are necessary to prudently manage the contract. The IHS Manual instructs that these costs are to be negotiated 

according to detailed guidelines set forth in the Manual and an Appendix. IHM § 6– 

3.2D; IHM Exhibit 6–3-H. Once negotiated, direct contract support costs are paid 

on a ‘‘recurring basis’’ (IHM § § 6–3.2D, 6–3.2D(2)) and ‘‘do not require annual rejustification to the Secretary . . . .’’ IHM § 6–3.1E(12). Each year the Tribe has the 

‘‘option to negotiate with the Secretary’’ over these costs. 25 U.S.C. § 450j-1(a)(3)(B). 

But until they are re-negotiated, they remain fixed. 

Duplicative costs. Once the indirect costs are calculated, and once the direct contract support costs are negotiated (or carried forward from a prior year with just 

an inflation adjustment), the IHS Manual requires a final review ensure that, if any 

of the contract support costs were actually covered by the Secretarial amount (which 

sometimes happens), the agency will receive a credit adjustment against what would 

otherwise be due. IHM § 6–3.2.B. 

After all of these steps, ‘‘[t]his adjusted CSC requirement is the Section 106(a)(2) 

amount that the [contractor] is eligible to receive.’’ Id. 

83 

Once the contract amount is determined, for most Tribes it is due in full at the 

beginning of the year. 25 U.S.C. § 450j-1(g) (‘‘Upon the approval of a self-determination contract, the Secretary shall add to the contract the full amount of funds to 

which the contractor is entitled.’’) That said, payment delays are chronic. Nonetheless, once all of the contract funds are paid to the Tribe, the Tribe can reallocate 

the funds and redesign the contracted programs to best meet local needs and priorities (so long as services to eligible beneficiaries are not cut off). Further, funds not 

spent in the contract year can be carried over and spent in a later year (a not uncommon occurrence, given that many agency contract payments are not made until 

the last days of the fiscal year). 

All these provisions are indicative of a fixed price contract—payment of a lumpsum amount up front, the ability to re-budget the funds once paid, and the specific 

command that the funds need not be spent in the year in which they are awarded. 

The Annual Contract Support Cost Shortfall Report. Once the negotiated contract 

price is set, there is an agency reporting requirement. Congress established this 

mandate in the Act to monitor whether the contract amounts were being fully paid. 

That is, the ISDA requires IHS to report to Congress each year on the agency’s calculation of the contract support costs that are due, and what was actually paid 

against what was due. 25 U.S.C. § 450j-1(c); see also IHM § 6–3.5B (requirement to 

prepare annual reports). Because IHS has chronically underpaid the amounts due 

the Tribes, Congress mandated that the annual report include ‘‘an accounting of any 

deficiency in funds needed to provide required contract support costs to all contractors for the fiscal year for which the report is being submitted . . . .’’ 25 U.S.C. 

§ 450j-1(c)(2). These reports are known as the ‘‘IHS Contract Support Cost Shortfall 

Reports.’’ 

The IHS Manual dictates the process for creating the annual Shortfall Report. 

First, the Manual requires that each ‘‘Area Director... shall maintain a historical 

record of funds negotiated and awarded’’ in eleven different categories, including direct program funds, direct contract support funds, indirect cost rates, direct CSC requirements and indirect CSC requirements. IHM § 6–3.5(A). 

Next, the Manual provides deadlines by which the shortfall data must be collected, provided to each Tribe for review, and submitted to numerous IHS Offices 

for review, including the IHS Headquarters Director, the Director of the Office of 

Tribal Programs, and the Director of the Office of Tribal Self-Governance. Id. It is 

certified for accuracy by each Area finance office and each Area Director. It is certified for accuracy by the Headquarters finance office. Then, the report is transmitted to the IHS Director for her approval ‘‘no later than February 1.’’ Id. at § 6– 

3.5(A)(3). Finally, the Report is submitted to the Secretary of the HHS, who also 

approves the Report. (Unfortunately, the Secretary’s certification has typically taken 

months, and often has taken years. The IHS data report for FY 2012 has still not 

been submitted to Congress, although it was due to Congress last Spring.) 

At the end of this rigorous review process, the Secretary is required to submit the 

Shortfall Report to Congress. 25 U.S.C. § 450j-(1)(c). As noted, the report provides 

‘‘an accounting of any deficiency in funds needed to provide required contract support costs to all contractors for the fiscal year for which the report is being 

submitted . . . .’’ 25 U.S.C. § 450j-1(c)(2). 

The last report submitted to Congress is illustrative. The IHS Director noted in 

the narrative portion of the FY 2012 Report that the Report was ‘‘prepared as required by [25 U.S.C. § 450j-1(c)]’’ and contains ‘‘an accounting of any deficiency in 

funds needed to provide required contract support costs to all contractors for the fiscal year for which the report is being submitted.’’ Report at 3. That is, both the statute requires, and the Director acknowledges, that the Report contains an accounting 

of the underpayment of contract support costs each year, Tribe by Tribe. 

Contract Damages. All of the foregoing leads to the question of damages: what 

does the government now owe a contractor if the agency did not fully pay the contract amount? Here, the law seems clear. 

First, general contract law principles control the government’s liability, because 

‘‘[w]hen the United States enters into contract relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals.’’ Winstar v. United States, 518 U.S. 839, 895 (1996) (quoting Lynch v. United 

States, 292 U.S. 571, 579 (1934)). See also Mobil Oil Exploration & Producing Se., 

Inc. v. United States, 530 U.S. 604, 607–08 (2000) (quoting Winstar and relying on 

the RESTATEMENT (SECOND) OF CONTRACTS (1981) (‘‘RESTATEMENT’’)); 

Franconia Assocs. v. United States, 536 U.S. 129, 141 (2002) (quoting Mobil Oil and 

applying principles of general contract law). 

Second, under general contract law a contractor is entitled to be paid damages 

which will put [the contractor] in as good a position as he would have been in had 

the contract been performed . . . .’’ RESTATEMENT § 344(a) (emphasis added). 

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These bedrock principles are easy to apply in the case of ISDA contracts. The IHS 

Shortfall Reports compute the negotiated price of each Tribe’s contract for each 

year. The Reports also recite how much of that price was not paid. What is due now 

is the remainder of that contract price. It may be that today a Tribe wishes it had 

negotiated a different (and higher) amount, or that the agency wishes it had negotiated a different (and lower) amount, but general contract law does not permit the 

parties to go back on the original negotiated deal they struck. 

IHS’s flawed approach. Which brings us to IHS’s alternative, and deeply flawed, 

approach. IHS takes the position that damages are to be assessed by first calculating how much money the Tribe actually spent in a given year to run the IHS 

program. Second, IHS would calculate how much of what the Tribe spent IHS already paid the Tribe. If there is a difference, that amount is the amount of damages 

the government now owes. This is the so-called ‘‘incurred cost’’ approach. 

The problem with this approach is it doesn’t make sense. 

If a Tribe was owed $10 but it was only paid $8, then the most the Tribe could have spent of IHS money is the $8 it received. It cannot spend money it never received. Under the Tribe’s approach to calculating damages, the Tribe is owed the 

$2 that IHS promised to pay but never did pay (in other words, the amount IHS 

certified in the Shortfall Report). But under the IHS approach, the government can 

never owe more than the $8 because that is the amount of the costs the Tribe ‘‘incurred’’—and if, by chance, the Tribe spent only $7 that year and carried the other 

dollar over to the next year, the government’s position is that the Tribe owes IHS 

that $1. This makes no sense. 

But this kind of gamesmanship is not new. It was identified as a problem in 1987. 

At that time, Congress expanded upon the BIA’s identical ‘‘incurred... cost’’ approach to damages, and this Committee called that approach ‘‘unacceptable’’: 

[T]he Bureau has argued that even if the self-determination contractor was entitled to receive the amount of indirect costs generated by its indirect costs 

rate . . . the contractor could not recover the difference between the amount 

it was entitled to receive under the contract, and the amount the Bureau 

paid . . . The rationale offered by the BIA for this argument was that since 

the contractor had not received the funds it was entitled to receive, it had also 

not spent them and, therefore, had not incurred any costs which could be recovered as an indirect cost under the contract. Clearly, this is an unacceptable argument. 

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

The ‘‘incurred cost’’ approach to damages under the Act has not been pressed in 

ISD cases since 1988, nor in cases resolved before or after the 2005 Cherokee case. It has only been resurrected since the Ramah case. Why is that? Because IHS insists that the Supreme Court mandated this approach in the Ramah case. But that 

is quite a stretch. IHS reaches for this by observing that the Court used the word 

‘‘incurred’’ in the opening paragraph of the Court’s opinion. But the Ramah case was not about calculating damages, much less about how damages are computed; the 

case addressed whether the government had any liability at all. 

Moreover, when it comes to the issue of contract underpayments, the Court actually suggested just the opposite of what IHS now argues. The Supreme Court explained that, during the relevant timeframe at issue in the case, ‘‘appropriations 

covered only between 77 percent and 92 percent of tribes’ aggregate contract support 

costs. The extent of the shortfall was not revealed until each fiscal year was well 

underway, at which point a tribe’s performance of its contractual obligations was 

largely complete.’’ Ramah, 132 S.Ct at 2187. If any implication can be drawn from 

this passage, it would be that the damages due now are the portions of the contract 

amounts that the agency failed to pay—the shortfall amounts. 

IHS also relies on the statute, which itself uses the word ‘‘incurred.’’ But that argument is simply wrong. While the ISDA does state that contract support costs 

must ‘‘include’’ certain incurred costs, see § 450j-1(a)(3), contract support costs are 

generally not limited to those costs (except in the case of specialized ‘‘start-up’’ and 

‘‘preaward’’ costs, see § 450j-1(a)(5)-(6)). I do not need to recite to this Committee the 

elementary rule of statutory construction that the word ‘‘includes’’ means ‘‘includes 

but is not limited to.’’ See OFFICE OF THE LEGIS. COUNSEL, U.S. HOUSE OF 

REPS., GUIDE TO LEGIS. DRAFTING, § VII(A), available at http:// 

www.house.gov/legcoun/HOLC/DraftinglLegislation/DraftinglGuide.html (emphasis added). In short, there is no basis in the statutory text for limiting contract 

damages to so-called ‘‘incurred’’ costs. 

The ‘‘incurred cost’’ argument IHS has resurrected this past year is not even 

colorable under the statute. But if there actually were actually some ambiguity on 

the issue, the answer would be just the same and just as clear. This is because the 

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4 Everything noted here is equally true of the BIA, whose process for calculating contract support cost requirements is virtually identical to the IHS process. See National Policy Memorandum NPM–SELFD–1 (Dep’t of Interior May 5, 2006). 

ISDA contains special, strict statutory rules of construction that this Committee 

purposely added in order to force any ambiguity to be resolved in the Tribe’s favorsomething the Supreme Court remarked upon twice in its opinion. See, e.g., Ramah, 

132 S. Ct. at 2187, 2191 (citing § 450l(c), (model agreement § 1(a)(2)); . Thus, according to the Supreme Court, IHS can only prevail on its view of the statute if it can 

‘‘demonstrate that its reading is clearly required by the statutory language.’’ Ramah, 

132 S. Ct. at 2191 (emphasis added). Plainly, that is not possible here. 

Despite the clarity of the controlling law and 25 years of consistent agency practice, in a matter of months IHS has managed to completely derail the settlement 

process. Cases which should have been resolved in a matter of months on the basis 

of the Shortfall Reports are now being settled for a fraction of the amounts in a litigation process that will continue to take years. Unless changed, it will take decades 

to resolve these cases, and the result will not be just. Worse yet, resolution of the 

damages issues will consume enormous time and resources for both the Tribes and 

the agency, all at a time when all should be focused singularly on delivering health 

care to the least healthy and most underserved populations in the Nation. 

The current situation cries out for a radical change in direction. The current approach to settlement of these cases is simply not working. 4

Nor is there any meaningful promise in the IHS Director’s discussion of an ‘‘alternative procedure’’ where IHS makes a speedy assessment based on more limited investigation and then conveys to a Tribe a take-it-or-leave-it offer. I have worked 

with two Tribes for whom such a process actually worked, but their claims were 

small and limited, and their settlements were under $200,000. That process will not 

and cannot provide speedy justice to the vast majority of Tribes. 

Although IHS promises that this alternative ‘‘is less time-consuming’’ (Dr. 

Roubideaux Testimony at 5), there is nothing speedy about it. One small tribal clinic 

we work with in California requested a speedy ‘‘alternative procedure’’ offer on June 

17, by email to the Acting IHS Director. The Tribe did not receive a response from 

the Acting Director until five months later, (the day of this Committee’s hearing). 

Worse yet, the Tribe was told that the actual speedy offer itself would not be coming 

for another six months. Eleven months—almost a full year—is not a typical definition of the word ‘‘speedy’’ and hardly bodes well for Tribes with more substantial 

claims. 

The IHS Director also testified that there were scores of settlement negotiations 

now underway. It is difficult to credit this statement. My firm and I are currently 

involved in active settlement negotiations with only five out of the 50 tribal contractors we represent. It is true that another dozen or so tribal contractors have been 

put on a theoretical list as ‘‘ready’’ for settlement negotiations, but in actuality, no 

settlement negotiations are underway. If our firm is any reflection, it would appear 

that, at best, IHS is only actively engaged in settlement negotiations with 10 percent of the 200 Tribes that have pending claims against the agency. 

The way forward is clear, as suggested in testimony by several other Tribal leaders, including NCAI President Brian Cladoosby, Sault Ste. Marie Chippewa Chairman Aaron Payment, and Chickasaw Lt. Governor Jefferson Keel. 

1. The White House should take charge of the entire settlement process and 

promptly appoint a Special Master. The only exception should be for the 20 or so 

cases already in mediation, and others that enter alternative mediation processes. 

If the White House will not act, Congress should. 

2. The Special Master should be instructed to settle the outstanding claims by beginning with the IHS Shortfall Reports, while also hearing any additional claims 

Tribes wish to have heard. 

3. All claims should be resolved on or before June 18, 2014, the two year anniversary of the Ramah decision. 

4. Congress should immediately enact an amendment to the Act to establish clear 

rules for computing damages in these cases. (This would not be the first time Congress amended the ISDA to force a recalcitrant agency to obey Congress’s clear instructions.) 

5. Finally (and as I mentioned in my testimony to this Committee last April), Congress should reject OMB’s proposal to start capping individual contract amounts at 

less than the amounts that everyone—Tribes and the agencies alike—all agree are 

due this year for services duly rendered to the United States. The United States 

must honor its contractual obligations to tribal governments on no less an equal 

footing than it honors it obligations to other contractors and to other Nations. America does not default abroad, and it should not default at home. 

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By any measure, the Indian Self-Determination Act has been a stunning success, 

most importantly for the Indian citizens served, but also in the strengthening and 

maturing of modern tribal government institutions. This Committee has had everything to do with bringing about the conditions necessary for that success. 

Now is the time for Congress to keep that commitment to the Tribes and to finish 

the job the Supreme Court began. The Court has spoken, and it is time for the 

Tribes to be paid so that this unfortunate chapter can be closed. 

Thank you for the opportunity to offer testimony on the contract support cost crisis facing Indian Country. 

PREPARED STATEMENT OF PHILIP RIGDON, PRESIDENT, INTERTRIBAL TIMBER COUNCIL

Madam Chair and Members of the Senate Committee on Indian Affairs, I am Phil 

Rigdon, President of the Intertribal Timber Council (ITC) and Deputy Director of 

Natural Resources for the Yakama Nation. On the behalf of the ITC, I hereby submit this testimony on the Consequences of Sequestration on Native American Natural Resources for the record of the Committee’s November 14, 2013 Oversight 

Hearing on ‘‘Contract Support Costs and Sequestration: Fiscal Crisis in Indian 

Country.’’ 

The ITC is a 38 year old organization of some 60 forest owning Indian tribes and 

Alaska Native organizations that collectively manage more than 90 percent of the 

18 million acres of BIA trust timberland and woodland acres—one third of the trust 

land base—as well as millions of timberland and woodland acres owned by Alaska 

Native organizations. These lands are a source of thousands of jobs and many millions of dollars in economic activity in and around Indian Country. Beyond their economic importance, forests also store and filter the water and purify the air to sustain life itself. They sustain habitats for fish and wildlife, produce foods, medicines, 

fuel, and materials for shelter, transportation, and artistic expression. In short, our 

forests are vital to our economies, cultures and spiritual well being. 

Automatic spending cuts (sequesters) under the Budget Control Act of 2011 (BCA) 

are applied across-the-board to great swaths of the federal discretionary budget, absent Congressional and Presidential agreement otherwise. The inability to reach 

agreement triggered sequester for FY 2013 and appears to be impending for FY 

2014. 

Budgets for the Bureau of Indian Affairs (BIA), the Indian Health Service (IHS) 

and a variety of other federal tribal programs have been affected by the BCA’s indiscriminate sequester process, despite the federal government’s unique and often binding treaty and other obligations to tribes, placing tribal communities and natural 

resources at increased risk. As reported by the 2003 U.S. Civil Rights Commission 

report ‘‘A Quiet Crisis: Federal Funding and Unmet Needs in Indian Country’’, Tribal programs and natural resources have long suffered from inadequate and inequitable funding. A particularly key federal obligation, rooted in treaties and fiduciary 

trust responsibility, is the protection and management of Tribal land and its resources—Tribal natural resources—that play a central and critical role with Tribes 

and their members. This testimony examines the consequences the sequester is having now, and could have in even larger measure in the future, on Tribal natural 

resources. 

Land and Natural Resources Have Always Been Central to Tribal Cultures 

and Economies 

Tribal lands and natural resources, often secured by treaty and to be held in perpetuity, serve as homelands for many Tribes. These resources and federally reserved 

rights to fish, hunt, and gather provide a wide array of elements basic to tribal life: 

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

• Shelter, fuel and materials for household use and commerce, 

• Income, livelihoods and entrepreneurial opportunities, 

• Protection of water, air and soils, 

• Sacred sites and cultural resources, and 

• Recreation. 

U.S. Obligations for Tribal Natural Resources 

The United States has historic, binding and judicially and statutorily affirmed 

trust and treaty obligations to Tribes and their natural resources. These obligations 

include: 

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• Fiduciary trust responsibilities to protect the productivity of the trust corpus 

and ensure fair value and full accounting of proceeds from utilization; 

• Trust and legal responsibilities to protect the rights of Indians in their trust 

property and those rights affecting trust property that are afforded by tribal 

sovereignty (water rights, land titles, boundary disputes, trespass, hunting and 

fishing, zoning and land use); 

• Provision of all services necessary to enable Indians to utilize all rights based 

on treaty, statute, proclamation, sovereignty, trust responsibility, or otherwise; 

• Supporting the capacity of Tribal governments to fulfill their responsibilities 

and authorities for managing natural resource on and off reservations; and 

• Providing full contract support costs for programs administered by Tribes under 

self-determination contracts and self-governance compacts. 

Funding For Tribal Natural Resource Management Has Long Been 

Inadequate 

Over many years, the insufficiency and inequity of federal funding of Tribal natural resources have been repeatedly documented by governmental and non-governmental commissions and studies, as well as being determined by federal courts. Information on sequester’s impacts on Indian forestry are summarized below. 

Forestry—The third statutorily-required decadal report of the independent, blueribbon Indian Forest Management Assessment Team (IFMAT–III), completed in 

June 2013, finds that per-acre federal funding of tribal trust forest management is 

just one third that of the U.S. Forest Service. That inequity is essentially unchanged 

from BIA Forestry funding insufficiencies documented in the 1993 and 2003 IFMAT 

reports. IFMAT–III also found that, even without sequestration: 

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

• 800 additional BIA and tribal contract/compact Forestry staff positions are 

needed; current and arising vacancies can’t be filled, 

• An additional $12.7 million is needed for staff recruitment and development to 

maintain workforce capabilities, and 

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

The Costly Consequences of Failing to Properly Manage Tribal Natural 

Resources 

Inadequate federal trust management of Tribal natural resources can have costly 

consequences for Tribes and their members, for surrounding communities, and for 

the Federal Government, including: 

• Litigation. The federal trust responsibility for the protection and management 

of Tribal forests is a binding, compensable fiduciary obligation similar to a private trust, and the United States can be—and has been—found liable for inadequate or inappropriate management. Over the past several years, the U.S. has 

paid more than $1 billion on 70 Cobell-like trust settlements with tribes, at 

least partially due to the failure to fulfill fiduciary trust obligations for natural 

resources. This is but one of a host of settlements resulting from litigation over 

mismanagement of trust resources. Unless affirmative actions are taken to 

proactively address long-standing and emergent problems, claims for future 

damages arising from the failure to fulfill fiduciary obligations can be expected. 

• Job and economic losses affecting individual workers in tribal and surrounding 

communities and reducing revenues for tribal governments to meet community 

needs. 

• Diminishment of natural resource health and productivity, either as a direct result of insufficient or inappropriate management or due to overall management 

failure to maintain forest health, increasing the associated risk of catastrophic 

loss of the forest resource through fire, infestation or disease. 

• Reduced availability of natural resource-based traditional foods and medicines, 

increasing social welfare costs and adversely affecting human health in tribal 

communities. 

• Degraded water, air, soil, and fish, wildlife and plant resources and habitats, 

increasing conservation concerns and reducing management flexibility and development opportunities. 

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• Reduced ability to protect irreplaceable cultural and sacred sites from damage 

or loss. 

• Shift of funding away from proactive forest health and management to cover increasing wildland fire suppression costs. In a self-fulfilling downward spiral, an 

increasing proportion of available federal forest funding is being spent for wildfire suppression (50 percent of the USFS budget is dedicated to suppression), 

reducing forest health and management funds that proactively reduce wildfire 

risk and severity. This approach promises to lead to progressively increasing 

costs as the failure to invest funds to treat the land to reduce potentials for catastrophic loss is diminished. This strategy abdicates federal trust responsibilities for maintaining the health and productivity of tribal forests and places the 

safety and welfare of tribal communities at great risk. 

Sequester Will Make Matters Worse 

Current funding and staffing shortfalls will widen. 

Insidious impacts of sequestration: 

Workforce Impacts 

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

• Reductions in force and positions, hiring freezes, furloughs, pay cuts, and inability to provide pay cost increases or provide compensation for required overtime 

lead to poorer service and staff exhaustion from added physical, financial, and 

emotional stress due to increased workloads. 

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

officials. 

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

and education to increase. 

• Inability to fund co-operative student intern programs will hinder development 

of future managers. 

Impacts on Planning, Management and Productivity 

• Short-Term Horizons. Financial uncertainty reduces the ability of Tribal forest 

managers to plan for and undertake long-term programs and make investments 

to protect and develop natural resources. 

• Increased Reliance on ‘‘Soft Money.’’ Tribes are being forced to try to support 

natural resource programs by cobbling funding sources and projects together, 

greatly increasing costs of administration and adversely affecting program effectiveness and continuity. 

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

• Deteriorating Infrastructure. Loss of commodity production from federal 

forestlands is contributing to the loss of harvesting, transportation, and manufacturing infrastructure, reducing the ability to defray costs of management, increasing reliance on direct federal funding for forest health and management 

activities, and restricting the capability of materials harvested to generate income and provide governmental services, employment and business opportunities. 

Increased Pressure on Tribal Communities and Resources 

• Community Cohesion. Competition for limited funding for programs and jobs 

will heighten stress within already fragile Tribal communities. 

• Increased reliance on natural resource extraction. Reductions in jobs, income, 

and community assistance programs increase pressure to liquidate natural resources over the short term to meet daily needs. 

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

their natural resources. 

Collateral Impacts 

The across-the-board nature of sequesters also has indirect but significant effects 

on Tribes by reducing the capacities of neighboring forest entities, including other 

federal forest agencies and states participating in federal programs. 

• Increased Tribal Risks and Burdens Due to Reduced Capacity of Co-Managers. 

The reduced capacity of governmental forestland neighbors, particularly federal 

public forest managers, to actively manage and maintain their adjacent land 

and resources will subject Tribal forests to increased risk of catastrophic loss 

through fire, infestation and disease. Additionally, the reduced capacity of federal public land agencies to enforce laws and regulations to protect environmental functions in Tribal traditional use areas increases risks to Tribal trust 

and other co-managed resources such as fish, wildlife, plants, soil, air, and 

water. These reduced capacities of neighboring governmental agencies shifts 

management and protection burdens onto Tribes, resulting in diminishment of 

treaty and reserved rights, reduces flexibility for management of Tribal resources, and deprives Tribal access and use under federally reserved rights. 

• Reduced Ability of Forest Neighbors to Cooperate and Collaborate. Despite recognition that landscape-scale forest management is needed, sequestration will 

force reduced federal and other program participant staff to spend more time 

on their individual agency ‘‘boiler-plate’’ administrative functions, diminishing 

capacity to work cooperatively and collaboratively on landscape activities. This 

will result in increasing isolation and fragmentation that will diminish integrity 

of ecological functions and foster proliferation of inefficient, compartmentalized 

and incompatible management of the forest landscape. 

Madam Chair, Members of the Committee, the ITC hopes this testimony helps illuminate the broad and devastating consequences that BCA sequesters have on Native American natural resources. The health and productivity of our natural resources and our communities are closely intertwined. The consequences of sequestration can be direct, indirect, short-term and long-term, immediately evident and 

subtle. Sequestration threatens to undo the progress we have been able to make 

over the last four decades. It will trample on tribal rights and interests, jobs and 

economies, and our efforts to lift our communities toward self-sufficiency. It compounds and exacerbates historical federal funding inequities, insufficiencies and 

indifferences against which the Tribes have struggled for generations. We join with 

all the other voices throughout Indian Country to urge that Native American programs be removed from the ruinous BCA sequester and that support for federal obligations to Tribes be treated as non-discretionary expenditures. 

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PREPARED STATEMENT OF MYRON P. NANENG, SR., PRESIDENT, ASSOCIATION OF

VILLAGE COUNCIL PRESIDENTS


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PREPARED STATEMENT OF JACQUELYN POWER, SUPERINTENDENT/PRINCIPAL, 

BLACKWATER COMMUNITY SCHOOL


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PREPARED STATEMENT OF DAN WINKELMAN, VICE PRESIDENT FOR ADMINISTRATION

AND GENERAL COUNSEL, YUKON-KUSKOKWIM HEALTH CORPORATION


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PREPARED STATEMENT OF DR. SHERRY JOHNSON, DIRECTOR, SISSETON WAHPETON

OYATE TRIBAL EDUCATION DEPARTMENT


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1The Questions for the Record refer throughout to the Department of Interior. The Indian 

Health Service (IHS) cannot answer with regard to the Department of Interior and instead responds regarding claims against IHS. Although the questions themselves are typically not revised by an agency when responding, IHS has also corrected the questions to address this issue. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. MARIA CANTWELL TO

HON. YVETTE ROUBIDEAUX

As we all know, the Supreme Court ruled last year in Salazar v. Ramah that the 

Federal Government must pay each tribe’s contact support costs in full. The Department of Health and Human Services 1 has not yet resolved these claims. 

Question 1. It has been 17 months since the Supreme Court’s decision. What is 

your plan for expeditiously settling these claims? 

Answer. IHS is devoting additional resources and hiring new staff to resolve 

claims for unpaid contract support costs (CSC) with a primary focus on speedy resolution through settlement whenever possible. Because IHS is not part of a class action, it must analyze each claim individually and comply with the multi-step process 

required by the Contract Disputes Act (CDA). IHS is working to resolve the claims 

expeditiously and also believes that the Agency and Tribes working together to resolve the claims will have the most benefit for our ongoing relationship. IHS is also 

improving internal business practices related to the CSC claims settlement process. 

IHS is also consistently reviewing methods to enhance collaboration and streamline 

the process and has offered an alternative claim resolution process that is less burdensome for Tribes, though IHS follows the same type of analysis used under the 

traditional approach to be fair and consistent with all Tribes. 

Question 2. When does the Department expect all claims to be finally resolved? 

Answer. Our goal is to resolve the majority of currently pending claims with 

Tribes that are amenable to settlement as soon as possible. 

Question 3. What is the estimated amount that the Department of Health and 

Human Services owes to tribes? 

Answer. The IHS is not able provide a total estimated amount of CSC owed to 

Tribes at this time. Consistent with the CDA claims process, the Agency must analyze and respond to claims on an individual basis by Tribe by contract term, and 

to date, the analysis of all claims currently pending has not been completed. In addition, the amounts that may be owed under a particular contract are the subject 

of ongoing litigation and, in many cases, the Tribes and the IHS disagree on how 

to determine the amount owed. While Tribes rely on estimates in the annual shortfall reports to support their claims, the IHS is analyzing each claim on a case-bycase basis to determine the amount of unpaid, documented CSC incurred under the 

contract that was not funded already by IHS. 


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Question 4. How is the Department of Health and Human Services estimating this 

amount? Is it utilizing the Department’s annual contract support costs shortfall reports that it submits to Congress? 

Answer. As required by the CDA, the IHS performs an analysis of each individual 

claim in order to determine the amount of CSC owed to a Tribe for each contract 

term. The annual shortfall reports provide information on the estimated overall CSC 

need at a particular point in time as a part of the appropriations process and are 

based on the amount of IHS funding paid to a Tribe and based on information available to IHS at the time; the reports do not reflect the amount owed under any particular contract. However, at the time of preparation IHS often does not have, for 

example, the final indirect cost rate negotiated by the Tribe with its cognizant agency or the pass-throughs and exclusions required by that indirect cost rate. As a result, the estimates in the reports cannot be used to determine the exact amount 

owed to a Tribe. Rather, the annual shortfall reports are used to estimate the aggregate amount of CSC need during the appropriations process. Later, when claims are 

filed by Tribes under the CDA, IHS analyzes each claim and determines the amount 

of CSC owed to the Tribes with updated information. 

Generally, the process that IHS has been following to settle a CSC claim involves 

two major steps: financial analysis of the claim and negotiation of the settlement 

amount. With regard to the financial analysis, all claims undergo the same analysis 

of a Tribe’s costs and funding, and IHS relies on its own staff, as well as contract 

services for this purpose. The analysis is aimed at identifying each Tribe’s actual 

costs to determine the full amount of unpaid, documented CSC incurred under the 

contract. In the second step, IHS and the Tribe work collaboratively to settle on the 

final amount to be paid for the claim. Therefore, the estimates in the annual shortfall report may end up being different from the updated amounts determined by 

analyses of claims filed in future years, and then the final amounts paid are determined mainly through settlement discussions with the Tribes. 

The Indian Self-Determination Act has been hailed as one of the most successful 

pieces of legislation in the history of federal Indian policy. Providing contract support costs is essential to the proper administration of these contracts. 

Question 5. After providing contract support costs to tribes for over 20 years, can 

you explain why there is still so much ambiguity regarding these costs? 

Answer. Based on the law and IHS policy developed in consultation with Tribes, 

the estimation and calculation of CSC is complex. CSC can seem obscure because 

of both the common misperception that CSC is equivalent to indirect costs and the 

inherent timing issues that impact the calculation of the costs. 

Under its policy, IHS has agreed to rely, in part, on indirect cost rates to calculate 

indirect CSC. Indirect cost rates, which IHS does not negotiate and instead are negotiated by a Tribe with its cognizant agency, are used to calculate indirect costs 

for many entities that receive federal funding. The cognizant agency for Indian 

Tribes generally is the Department of Interior, while the cognizant agency for nonprofit Tribal organizations generally is determined by calculating which Federal 

agency provides the most funding. 

When indirect costs rates are applied to contracts under the Indian Self-Determination and Education Assistance Act (ISDEAA) to determine indirect CSC, IHS 

and the Tribes must also account for indirect costs already funded under the 

ISDEAA agreement. The ISDEAA provides for two types of funding: the ‘‘Secretarial 

amount’’ (what IHS would have spent to operate the program) and CSC, which consist of both direct and indirect costs. The ISDEAA specifically requires the Agency 

to ensure that there is no duplication between the CSC paid to the Tribe and the 

‘‘Secretarial amount’’ it receives. When a Tribe receives the Secretarial amount from 

the IHS, several types of overhead costs that the Agency incurred are also often included in that amount. For example, IHS incurred utilities costs in operating a facility and would have transferred the funding for utilities to the Tribe operating that 

facility. So, for Tribes that choose to use an indirect cost rate as one part of indirect 

CSC negotiations, the Agency cannot simply apply the indirect cost rate to derive 

the indirect CSC amount for the Tribe, but must also determine which costs were 

funded through the Secretarial amount and exclude them from the calculation to 

avoid duplication. The exact costs involved vary among Tribes, which requires a 

unique calculation for each Tribe’s contract. 

In addition, the calculation of indirect CSC often yields a different result depending on the timing of the calculation because of the different information available 

throughout the ISDEAA process. ISDEAA funding agreements often are negotiated 

before the fiscal year (and contract performance) begins. The calculation performed 

prior to contract performance is based primarily on the past year’s budget information (since final, audited numbers are not yet available) and the upcoming fiscal 

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2The Administration’s FY 2014 Budget proposal was not implemented by Congress and CSC 

was fully funded in the Consolidated Appropriations Act of 2014. The President’s FY 2015 Budget also fully funds estimated CSC. This information is provided as a footnote because QFRs are 

answered with information available at the time of the hearing. As of November 2013 Congress 

had not passed the FY 2014 Omnibus Bill and the President’s FY 2015 Budget had not been 

released. 

year’s budget amounts. These also vary based on which services the Tribe is contracting to perform. The submission of the shortfall report occurs after the fiscal 

year (and contract performance, in most cases) ends, but before final data for the 

fiscal year is available to IHS. A calculation performed at this point in time often 

results in a different number than the amount projected prior to the start of the 

fiscal year because more up-to-date information is available. Finally, if a Tribe believes it was underfunded for CSC for the fiscal year and subsequently submits a 

CDA claim, additional information is likely available that allows the parties to rely 

on final, audited costs information. Although the information available at each of 

these stages may differ, therefore resulting in different amounts, IHS follows the 

same process or methodology for calculating the amounts at each stage. While estimates vary over time, at each stage IHS uses a consistent process that was developed in consultation with Tribes. 

The House Interior Appropriations bill does not contain the contract support cost 

cap language proposed by the Administration. Tribes have generally stated that the 

House approach towards contract support costs is the better one, and that the Senate should drop the Administration’s proposal. 

Question 6. What does the Administration’s proposal actually accomplish, other 

than extinguishing the government’s liability to pay tribes what they’re contractually owed? 

Answer. To balance funding for CSC and other IHS activities, and in accordance 

with the Supreme Court’s recommendations in Salazar v. Ramah Navajo Chapter 

in June 2012, the President’s FY 2014 Budget proposed new appropriations language for both IHS and the Bureau of Indian Affairs (BIA) to provide a specific 

amount of CSC funding for each ISDEAA contract. The proposal would have protected other budget priorities within the IHS and BIA budgets from being 

repurposed for CSC funding. Indeed, the Supreme Court recognized in Ramah that 

the cap served that very purpose. 2

Question 7. Is it good federal Indian policy to prevent tribes from going to Court 

when the federal government shortchanges tribes from receiving what they’re contractually owed? 

Answer. The President’s FY 2014 Budget was based on one of the options specifically outlined in the Ramah decision to address what the Supreme Court recognized 

as a ‘‘dilemma’’ when CSC appropriations are insufficient. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. JOHN BARRASSO TO

HON. YVETTE ROUBIDEAUX

You testified before the Committee on November 14, 2013, at the oversight hearing on ‘‘Contract Support Costs and Sequestration: Fiscal Crisis in Indian Country,’’ 

that the Indian Health Service (IHS) has made approximately 60 settlement offers 

for past Contract Support Costs (CSC) claims. 

Question 1. How many CSC claims are pending in Federal court? 

Answer. Past claims for unpaid CSC are made directly to the IHS, which is required to deny the claims due to lack of appropriations to pay the claims and for 

any other legal grounds that may exist. (Such denial is necessary, as the Judgment 

Fund is available only after Tribes appeal their claims; the Supreme Court recognized that the agencies do not have appropriations to pay the prior year claims although the Judgment Fund is available to pay those claims.) Tribes then have the 

option under the CDA and the ISDEAA to appeal their claims to Federal court or 

the Civilian Board of Contract Appeals (CBCA). 

Overall, as of November 2013, there are approximately 1300 claims from about 

200 Tribes pending before the Agency. The number of claims can fluctuate on a 

daily basis, increasing as more claims are filed and decreasing as claims are settled. 

With regard to the claims pending in Federal court, 38 Tribes have appealed over 

160 claims to Federal court. 

Question 2. How many CSC claims are pending in the administrative process? 

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Answer. As mentioned above, overall, as of November 2013, there are approximately 1300 claims from about 200 Tribes pending before the Agency. There have 

been 22 Tribes that have appealed nearly 250 claims to the CBCA. 

Question 3. Are these offers all ‘‘active’’ or have any been subsequently rejected 

by tribes? 

Answer. The number of claims indicated above is not equivalent to the number 

of settlement offers since most claims are in various stages of the required process. 

Approximately 15 offers made by the IHS have been rejected by Tribes since 

Ramah. The number of settlement offers is provided in the response to the next 

question. 

Question 4. Please provide a list of tribes and settlement years for which these 

offers correspond. 

Answer. Detailed information pertaining to settlement negotiations is confidential 

under the Federal Rules of Evidence; however, since Ramah, and as of November 

2013, 3 claims have been formally settled with 2 Tribes for a total of $1.5 million 

and IHS has made settlement offers to 60 of the 82 claims which have a completed 

financial analysis. 

Question 5. What is your timeline for settling all outstanding claims for past CSC? 

Answer. Our goal is to resolve the majority of currently pending claims with 

Tribes that are amenable to settlement as soon as possible. 

In his written testimony submitted for the Committee hearing on November 14, 

2013, on ‘‘Contract Support Costs and Sequestration: Fiscal Crisis in Indian Country’’, the President of the National Congress of American Indians, Brian Cladoosby, 

indicated that there are nearly 1,600 CSC claims pending against the IHS, many 

of which are still in the administrative process. Mr. Cladoosby, as well as other witnesses, further recommended that a Special Master be appointed to handle these 

CSC claims more expeditiously. 

Question 6. What are your views on this recommendation? 

Answer. A court appoints a Special Master to carry out some action on the court’s 

behalf, including investigations and compiling evidence or documents to inform some 

future action by the court. The appointment of a Special Master would have limited 

benefit for the CSC claims against IHS, for several reasons. For example, the CSC 

claims against IHS are at different stages of the CDA process; most claims are not 

before a Federal court, and the appointment of a Special Master would have limited 

benefit on claims not before the court that made the appointment. Second, IHS is 

devoting additional resources to do the necessary investigative work and document 

gathering to resolve claims for unpaid CSC. The Agency is prioritizing collaboration 

with Tribes and speedy resolution through settlement whenever possible. IHS is 

confident that it can resolve the claims expeditiously, thereby making a Special 

Master unnecessary, and also believes that the Agency and Tribes working together 

to resolve the claims will have the most benefit for our ongoing relationship. 

Question 7. Are there any possible barriers or impediments (legal or otherwise) 

to using a Special Master for settlement of claims that are still in the administrative process and not yet in Federal court? Please be specific. 

Answer. The option for a Special Master arises in Federal court, when the court 

determines it is appropriate for certain trial proceedings or when both parties agree 

to the process of appointing such a master to perform certain duties. Because each 

contract claim is unique and is at a different stage of the multi-step process, use 

of a Special Master would have limited benefit. For example, appointment of a Special Master by a Federal court would likely impact only claims on appeal to that 

court and not claims pending in other jurisdictions. Further, it is not clear how a 

Special Master would expedite the settlement process for CSC claims since the CDA 

process, including the requirement of analyzing each contract individually, must be 

followed for settling claims and obtaining payment from the Judgment Fund. 

Several witnesses testified at the Committee hearing on November 14, 2013, on 

‘‘Contract Support Costs and Sequestration: Fiscal Crisis in Indian Country’’, that, 

with respect to settling past CSC claims, the IHS has announced that it will not 

focus on unpaid amounts due for CSC. Instead, the IHS will instead focus on what 

each tribe spent in determining a settlement amount. However, in Salazar v. 

Ramah, the Supreme Court held that, consistent with longstanding principles of 

government contracting law, the Federal government is liable for 100 percent of 

CSC on each tribal contract entered into pursuant to the Indian Self-Determination 

and Education Assistance Act. 

Question 8. Under this approach of examining tribal expenditures, would the IHS 

consider both Federal funds used by tribes to cover these costs, as well as any tribal 

funds expended for these costs? 

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Answer. IHS and Tribes agree that the ISDEAA requires payment of CSC only 

on Federal funds, awarded as the Secretarial amount, to the Tribes to operate programs, functions, services, and activities (PFSA) under the ISDEAA; if Tribes supplement the Secretarial amount provided by IHS to carry out those PFSA, IHS and 

Tribes agree that IHS does not pay CSC on those supplemental funds. 

When reviewing a CDA claim for additional CSC, the Agency is required to review 

and analyze the claim submitted by the contractor to determine whether the claim 

is valid and if any additional CSC is owed to the contractor for the PFSA awarded 

under the ISDEAA agreement. Because the ISDEAA provides that the Agency pay 

a Tribe for the CSC it incurred while performing the PFSA awarded under its 

ISDEAA contract, the IHS analysis of a CSC CDA claim involves determining the 

total CSC incurred by a Tribe, and the amount of those costs that were not paid 

by IHS, either through the Secretarial amount or with CSC funding. Tribal funds 

expended for PFSA, above the Secretarial amount, are not included in the calculation because IHS and Tribes agree that CSC is not payable on those costs. If, however, Tribes supplemented the CSC funding to cover costs that qualify as CSC, 

IHS’s approach of looking at the Tribes’ actual costs means that those CSC covered 

by Tribal funds will be factored into IHS’s analysis of the claims. 

Therefore, IHS analyzes all costs that were expended by a Tribe that meet the 

definition of CSC and, consistent with the Supreme Court’s decision, is willing to 

pay all costs that were not funded by IHS so long as the costs meet the definition 

of CSC. 

Question 9. What is the justification for focusing on the amounts that tribes have 

spent as opposed to the amounts initially negotiated, but not paid to them? 

Answer. The ISDEAA provides that CSC are the reasonable costs for activities 

that a Tribe must carry out under the contract, i.e., CSC are actual costs of activities actually performed. In addition, the Supreme Court’s decision in Ramah describes CSC as limited to those costs incurred by the Tribe. However, as required 

by the ISDEAA and in order to ensure that Tribes receive funds timely to support 

their contracts, the IHS negotiates the amount it will pay in advance of contract 

performance, based on estimates from budgeted amounts from prior years. 

Each ISDEAA contract includes funding IHS would have spent for direct and indirect costs if it operated the programs (the ‘‘Secretarial amount’’), plus CSC. Tribes 

do not contest that IHS paid the CSC amounts included in their contracts. Following Ramah, however, Tribes claim additional amounts are owed. IHS is analyzing these claims to ensure that any additional costs meet the statutory definition 

of CSC. 

Question 10. Does this approach retroactively change the manner in which 

amounts owed for CSC are determined? Please explain how it does or does not. 

Answer. The approach used to project CSC in advance of contract performance 

does not differ from the approach used to determine the amount owed under a CDA 

claim, though the amounts resulting from the calculations performed at those different points in time may differ. The amount negotiated in advance of contract performance is based on estimates of budgeted amounts. That same calculation often 

reaches a different result after contract performance, however, and the resulting 

amount is the CSC owed based on the Tribe’s actual costs of performing under the 

ISDEAA contract. 

This approach is consistent with the ISDEAA, as well as with longstanding IHS 

CSC Policy. The ISDEAA makes it clear that CSC is meant to cover additional, reasonable costs for activities that a Tribe must carry on to ensure contract compliance 

and prudent management, but that were not transferred as part of the Secretarial 

amount—either because the Secretary did not carry on the funded activities, or the 

Secretary funded the activities from resources other than those under contract. 

IHS’s analysis determines the costs that meet that definition but that were not already funded by the Government. The IHS CSC Policy adopts the statutory definition of CSC and sets out a general methodology for calculating CSC. IHS uses this 

same methodology in the claims process to determine the amounts that are owed 

for CSC. 

Question 11. How does this approach reconcile with the Supreme Court’s ruling 

in Salazar v. Ramah? 

Answer. The Supreme Court’s ruling in Salazar v. Ramah Navajo Chapter did not 

directly address how CSC is calculated or how damages for unpaid CSC should be 

calculated. Instead, the Court resolved an appropriations question. Although the Supreme Court did not specifically make a finding as to how CSC should be calculated, 

it did confirm that the United States is liable to ‘‘pay the full amount of [CSC] incurred by tribes in performing their contracts.’’ 

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Your written testimony submitted to the Committee for the hearing on November 

14, 2013, on ‘‘Contract Support Costs and Sequestration: Fiscal Crisis in Indian 

Country’’, states that you have initiated discussions with tribes regarding the accurate method for calculating CSC at the time of contract negotiation or the pre-award 

phase. You further state that ‘‘greater agreement on how to calculate estimates of 

CSC in the pre-award context will help with more efficiency in all other phases of 

the CSC process.’’ However, according to Jefferson Keel’s testimony, a method for 

calculating CSC already exists and these amounts are calculated by IHS according 

to provisions contained in the IHS Manual. 

Question 12. Please describe the current method for calculating CSC at the time 

of contract negotiation? 

Answer. The IHS negotiates the amount it will pay in advance of contract performance, based on estimates from budgeted amounts from prior years, the statutory definition of CSC, and IHS CSC policy. The ISDEAA makes it clear that CSC 

is meant to cover additional, reasonable costs for activities that a Tribe must carry 

on to ensure contract compliance and prudent management, but that were not 

transferred as part of the Secretarial amount—either because the Secretary did not 

carry out the funded activities, or the Secretary funded the activities from resources 

other than those under contract. The IHS CSC Policy adopts the statutory definition 

of CSC and sets out a general methodology for calculating CSC. IHS uses this same 

methodology in the claims process to determine the amounts that are owed for CSC. 

Question 12a. Please clarify why a new method is needed. 

Answer. The IHS and Tribes have been successful in negotiating CSC estimates 

in many funding agreements, but some Tribes have raised questions about how to 

define what types of costs qualify as CSC for inclusion in those estimates. 

Although it does not provide a formula for calculating the costs, the ISDEAA defines the costs that qualify for CSC. 25 U.S.C. § 450j-1(a)(2). IHS’s current CSC policy provides practical negotiation guidance based on the statutory definition, but 

more detailed guidance could be beneficial to negotiating the estimates in a consistent manner with all Tribes. For example, additional agreed-upon principles 

would be helpful for applying the statutory principles of reasonableness, necessity 

of the activity/costs to ensure contract compliance and prudent management, and 

eliminating duplication of costs already paid to the Tribe in the Secretarial 

(106(a)(1)) amount. Differences of opinion on the application of these principles have 

led to differing estimates and, in the end, prolonged discussions during some negotiations. For example, how to determine indirect costs funded in the Secretarial 

amount that cannot also be funded as indirect CSC under the ISDEAA’s prohibition 

against duplicative funding. 

There also is a need to clarify the difference between indirect cost rates negotiated 

with a Tribe’s cognizant agency, which covers all indirect costs and relies upon a 

methodology applied to non-ISDEAA contractors as well, versus the negotiation with 

IHS of indirect CSC for Programs, Functions, Services, or Activities (PFSA) included 

in ISDEAA contracts. The indirect cost rate that a Tribe negotiates for grants and 

contracts is related to but not the same as CSC, since some indirect costs are also 

funded through the Secretarial amount and, under the ISDEAA, those same costs 

must not also be funded as indirect CSC. For example, while Tribes’ indirect cost 

pools often include rent and utilities, IHS incurs costs for rent and utilities for facilities it operates as well and transfers the funding for those costs as part of the Secretarial amount when a Tribe assumes operation of the facility; it would be duplicative to include the costs again in the CSC calculation. Some Tribes confuse this form 

of duplication, which is unique to the nature of ISDEAA funding, with the potential 

for duplication between indirect and direct costs, which the cognizant agency may 

raise as part of the negotiation of their indirect cost rate. Discussions to clarify or 

improve everyone’s understanding of the estimate of CSC in ISDEAA negotiations 

would help to resolve some of this confusion. Understanding these differences up 

front would help the entire contracting process, as well as development of the annual shortfall report. 

These principles may also be helpful to reducing litigation in the future. Our experience with the CSC litigation to date shows that we can eventually agree on the 

amount of CSC that is owed, even though the initial damages calculations by the 

Tribes and the IHS are often very far apart. We can reduce the need for litigation, 

as well as the work required to reconcile these calculations in those instances where 

litigation arises, if everyone can agree on a more accurate method for calculating 

CSC at the beginning of the process, i.e., at the time of negotiating the contract, 

because we have reached agreement on how to calculate CSC from the very beginning. Moreover, such agreement will also lead to a more efficient and accurate process with respect to CSC funding and estimation of need. Reaching agreement on the 

115 

relevant principles at the beginning of the process will help make every other part 

of the process go more smoothly. 

Question 13. Is the current method unsatisfactory to tribes? If so, how? 

Answer. In discussions with the IHS CSC Workgroup, Tribes indicated support 

for these discussions because they also want to ensure that the CSC estimates in 

the pre-award or negotiation phase are as accurate as possible, and they want to 

be reassured that IHS is negotiating in a consistent manner with all Tribes. Agreement on principles for calculation of these estimates will help with both of these 

goals. 

Question 13a. Is the current method unsatisfactory to the IHS? If so, how? 

Answer. IHS agrees with Tribes that more agreement on calculation of CSC estimates in the pre-award/negotiation phase would be beneficial. 

The Indian Self-Determination and Education Assistance Act requires that annual 

reports be submitted to Congress on CSC ‘‘shortfalls’’ or need. Presumably, the IHS 

has, each year, provided these reports to Congress, with shortfall amounts broken 

down by tribe. 

Question 14. Do the amounts provided in these shortfall reports represent the 

CSC amounts unpaid and due to each tribe for each fiscal year? If not, please clarify 

and explain what these amounts actually represent. 

Answer. The amounts provided in the shortfall reports do not represent the CSC 

amounts due to each Tribe for each fiscal year, because the timing of the report results in a snapshot or estimate of CSC need at the aggregate level for budget formulation purposes at that particular point in time. It is not used for determining 

amounts owed to Tribes in litigation, and the report clearly states that it is not intended for that purpose. In fact, although the shortfall data is collected after the 

end of the fiscal year, final data for at least two of the elements included in the 

report are not available at the time of the report. One element is the indirect cost 

rate. Many indirect cost rates reported in the shortfall report are provisional at the 

time of the report. Fixed carry forward rates may be outdated, or may be labeled 

for that fiscal year, but reflect actual costs of two years prior to the report and derived from a budgeted indirect cost pool. The other element is the amount of passthroughs and exclusions reported. The IHS is dependent on Tribes to provide these 

amounts, and it is frequently a challenge to collect the data needed and/or to validate information provided. Therefore the IHS must attempt to obtain the Triballysubmitted data from the cognizant agency with which the Tribe negotiates its indirect cost rate. Therefore, the shortfall report represents a snapshot or estimate of 

CSC at the time in order to demonstrate need to inform the appropriations process. 

The actual amount owed to any particular Tribe that submits a CDA claim is determined based on updated information that is available when the claims are analyzed. 

Attachment 

IHS CSC Claims Settlement Update—March 2014 

As indicated in the IHS Acting Director’s testimony during the Senate Committee 

on Indian Affairs Hearing on the FY 2015 Budget on March 26, 2014, IHS has made 

significant progress in accelerating the pace of settlement analysis and settlement 

offers on Contract Support Costs claims. However, the Questions for the Record for 

the November 14, 2013 Oversight Hearing on Contract Support Costs and Sequestration must include the status as of that date. IHS would like to provide an update 

to the Committee on the answers to the Questions for the Record with the most current data available on the agency’s progress on CSC past claims settlement. 

IHS is devoting additional resources and hiring new staff to resolve claims for unpaid contract support costs (CSC) with a primary focus on speedy resolution through 

settlement whenever possible. Because IHS is not part of a class action, it must analyze each claim individually and comply with the multi-step process required by the 

Contract Disputes Act (CDA). IHS is working to resolve the claims expeditiously and 

also believes that the Agency and Tribes working together to resolve the claims will 

have the most benefit for our ongoing relationship. IHS is also improving internal 

business practices related to the CSC claims settlement process. IHS is also consistently reviewing methods to enhance collaboration and streamline the process and 

has offered an alternative claim resolution process that is less burdensome for 

Tribes, though IHS follows the same type of analysis used under the traditional approach to be fair and consistent with all Tribes. 

As a result of these efforts, since November IHS the number of claims analyzed 

has increased from 82 to 385, and the number of claims for which IHS has extended 

a settlement offer has increased from 60 to 211. 

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Overall, there are currently 1,251 claims pending before the Agency. The number 

of claims can fluctuate on a daily basis, increasing as more claims are filed and decreasing as claims are settled. 

With regard to the claims pending in Federal court, 38 Tribes have appealed over 

160 claims to Federal court. 

There have been 22 Tribes that have appealed nearly 250 claims to the CBCA. 

Detailed information pertaining to settlement negotiations is confidential under 

the Federal Rules of Evidence; however, since Ramah, IHS has made settlement offers to 31 Tribes to settle over 200 claims. Since Ramah, approximately 34 claims 

have been formally settled with five Tribes, and an additional 68 offers have been 

accepted by eight Tribes and are in the process of 1settlement. This is a considerable increase from the three settled claim years reported as ofNovember 2013. The 

total settlement amount for claims, formally settled or in the process ofsettlement, 

totals over $133 million. 

IHS is committed to continuing progress on claims that are amenable to settlement and to extendsettlement offers to Tribes as soon as possible. 

*Response to the following written questions was not received before the 

hearing’s print deadline* 

WRITTEN QUESTIONS SUBMITTED BY HON. MARIA CANTWELL TO

HON. KEVIN WASHBURN

As we all know, the Supreme Court ruled last year in Salazar v. Ramah that the 

Federal Government must pay each tribe’s contact support costs in full. The Department of the Interior has not yet resolved these claims. 

Question. It has been seventeen months since the Supreme Court’s decision. What 

is your plan for expeditiously settling these claims? 

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

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

to tribes? 

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

The Indian Self-Determination Act has been hailed as one of the most successful 

pieces of legislation in the history of federal Indian policy. Providing contract support costs is essential to the proper administration of these contracts, but we have 

heard from several tribes that the Bureau of Indian Affairs is beginning to more 

narrowly define how those costs are calculated, sometimes contrary to its own guidance. 

Question. After providing contract support costs to tribes for over 20 years, can 

you explain why there is still so much ambiguity regarding these costs? 

The House Interior Appropriations bill does not contain the contract support cost 

cap language proposed by the Administration. Tribes have generally stated that the 

House approach towards contract support costs is the better one, and that the Senate should drop the Administration’s proposal. 

Question. What does the Administration’s proposal actually accomplish, other 

than extinguishing the government’s liability to pay tribes what they’re contractually owed? 

The Administration’s budget proposal recommends that Congress cap the contract 

support costs owed to each specific tribe. If Congress were to accept this request, 

Tribes would no longer be able to recover unpaid contract support costs through the 

courts. 

Question. Is it good federal Indian policy to prevent tribes from going to Court 

when the Federal Government shortchanges tribes from receiving what they’re contractually owed? 

WRITTEN QUESTIONS SUBMITTED BY HON. TOM UDALL TO

HON. KEVIN WASHBURN

As you know, the Buy-Indian regulations prohibit a Buy-Indian contractor from 

subcontracting more than 50 percent of the work to a non-Indian firm. In a letter 

to you earlier this year, I inquired whether a non-Indian company was doing 100 

percent of the work on an air ambulance contract awarded to an Indian firm under 

117 

the Buy-Indian Act. Your response only addressed whether the Indian firm was Indian owned. 

Question. What is the percentage of work being performed by the prime contractor 

and the amount being performed by non-Indian subcontractors on the Air ambulance contract awarded by the Phoenix Area office? 

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

regulations? 

WRITTEN QUESTIONS SUBMITTED BY HON. JOHN BARRASSO TO

HON. KEVIN WASHBURN

Testimony received by the Committee from several witnesses at the hearing on 

November 13, 2013, on ‘‘Contract Support Costs and Sequestration: Fiscal Crisis in 

Indian Country,’’ indicates there are approximately 9,000 Contract Support Costs 

(CSC) claims pending with the Bureau of Indian Affairs (BIA). These witnesses recommend that a Special Master be appointed to handle these claims. 

Question. What are your views on this recommendation? 

Question. In your opinion, would a Special Master be better equipped than the 

BIA to settle these claims expeditiously? 

Question. Are there any possible barriers or impediments (legal or otherwise) to 

using a Special Master for settlement of claims that are still in the administrative 

process and not yet in Federal court? Please be specific. 

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

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

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