The Congress passed PRWORA in 1996, making sweeping changes to national welfare policy and placing new emphasis on the goal of work and personal responsibility. The Congress recognized the unique economic hardship facing the 40 percent of American Indians living on reservations by exempting anyone living on reservations with high unemployment from the law's 60-month time limit on receipt of TANF cash assistance.Furthermore, the act gave federally recognized American Indian tribes the option to administer their own TANF programs either individually or as part of a consortium, an option they did not have in the past. Under the Aid to Families With Dependent Children (AFDC) program, the precursor to TANF, tribal members enrolled in state welfare programs. Under PRWORA, tribes implementing their own TANF programs have greater flexibility than states in some areas. For example, for state programs, PRWORA sets numerical goals for the percentage of adults to be participating in work activities and specifically defines the approved work activities that count for the purposes of meeting these federal participation rate goals. The law set state work participation rate goals at 25 percent in fiscal year 1997, increasing to 50 percent in fiscal year 2002. In contrast, tribes can set their own participation rate goals and may define work activities more broadly, subject to approval from HHS. Finally, while states must adhere to a federal time limit on cash benefits of 60 months or less, tribal programs can set their own time limits. Tribes have the same flexibility as states to set their own eligibility requirements and to determine what policies will govern mandatory sanctions for noncompliance with program rules. Tribes and states also have the same flexibility to determine what types of work supports, such as childcare, transportation, and job training, they will provide to recipients. Some of the requirements to which tribal TANF programs are subject differ from those to which states are subject. For example, eligible tribes must submit a 3-year tribal TANF plan directly to HHS for review and approval; HHS does not approve states' plans, though it certifies that they are complete. Unlike states, whose TANF grants are based on the highest of three possible funding formulas, tribal grants must be based on the amount the state spent in fiscal year 1994 for all American Indians residing in the tribe's designated service area. In addition, tribes are not eligible for several sources of additional TANF funding that were originally provided for the states. These include performance bonuses, a population/poverty adjuster (for high-population/low-spending states), and a contingency fund for states experiencing economic downturns. Finally, whereas a state can receive a caseload reduction credit, which reduces its work participation rate goal when its caseloads falls, tribes are not eligible to receive caseload reduction credits. Tribes have used various strategies to stimulate economic development; however, unemployment and poverty rates remain high on reservations. To improve the economy on reservations, tribes own many types of enterprises. Despite these efforts, most Indians living on reservations are poor, and many tribes lack some of the key factors research has shown to be associated with economic growth on reservations. While some tribes encourage private companies owned by nonmembers to locate on their reservations, many tribes responding to our survey place more emphasis on developing tribally owned enterprises. Eighty-seven of the 133 tribes responding to our survey question reported that they place more emphasis on promoting tribally owned enterprises than on encouraging private companies owned by nonmembers to locate on reservations. Tribes have launched their own enterprises in a number of sectors, which could include gaming, tourism, manufacturing, natural resources, and agriculture or ranching (see fig. 1). Of the 110 tribes with enterprises that responded to our survey question, 22 have enterprises that are concentrated in a single sector and 88 have enterprises in more than one sector. Many tribes own and operate gaming facilities. Contrary to the common perception that tribal gaming has dramatically improved the economic circumstances for many tribes, the most lucrative account for a small percent of all tribally owned gaming facilities. According to our 1997 report, which provides the most recent comprehensive analysis of tribal gaming revenues, 40 percent of total gaming revenues were generated by only 8 of 178 tribally operated gaming facilities. For example, the Coeur d'Alene gaming facility in Idaho, near Spokane, Washington, and Lake Coeur d'Alene, a major tourist area, generates about $20 million in profit per year. In contrast, officials from the San Carlos Apache Tribe indicated that its gaming facility, located in a remote area, 90 miles from Phoenix, Arizona, barely makes enough money to cover its costs. Furthermore, gaming facilities do not always generate employment for tribal members. Nationally, only a quarter of all jobs in tribally operated gaming facilities are held by American Indians. The practice of distributing gaming royalties to tribal members is not widespread and, contrary to common perception, payments that are made are not making tribal members wealthy. About a quarter of the tribes that responded to our survey question distributed a portion of their revenues from gaming facilities and other enterprises through per capita payments to members. Of the 87 tribes that reported operating a gaming facility, 28 reported providing per capita payments to members. Of those, 16 provided payments of less than $5,000 (see table 1). Despite tribes' efforts to stimulate the economy on reservations, American Indian families on reservations still have high unemployment and poverty rates. BIA has reported that in 1999--the most recent year for which data are available--more than 40 percent of American Indians living on or near reservations between the ages of 16 and 64 were unemployed, and of those who were employed, a third were below the federal poverty guideline. Unemployment was even higher on some reservations. For example, on the Blackfeet reservation, 74 percent of adults were not employed and 22 percent of employed adults were poor. Our survey results indicate that poverty and unemployment rates remain high on many reservations. Fifty of the 127 tribes with reservations that responded to our survey question reported that at least half of all families living on their reservations had incomes below the federal poverty level. In addition, 51 tribes reported that 50 percent or more of adults living on the tribes' reservations were unemployed. Tribal officials we visited indicated that the isolated geographic location and distance from markets of many reservations as well as a lack of education and job skills among workers living on the reservation impact economic growth. For example, a modular home manufacturing plant on the Blackfeet Reservation in Montana has had trouble finding and keeping enough workers with construction skills to expand its business. To overcome this obstacle, the enterprise has worked with the local community college to offer construction training to tribal members on the reservation. The gaming facility owned by the White Mountain Apache tribe was forced to hire non-tribal members. Officials explained that because members lack the basic work and life skills needed to hold such jobs, nonmembers hold most of the better-paid jobs. A number of tribes also lack some key factors research has shown to be important for economic growth on reservations. These include fully exercised sovereignty, effective governing institutions, and a strategic orientation. For example, 45 of the 142 tribes that responded to our survey question stated that they are not participating in a self-governance initiative. In addition, although research indicates the separation of tribal governance and economic development contributes to effective governing institutions, 78 of the 145 tribes that responded to our survey question stated that they do not have an economic development committee or organization that is separate from their tribal government. Finally, 56 of the 140 tribes that responded to our survey question reported they did not have a written plan for improving economic conditions on the reservation, although research indicates that having such a formal approach is an indicator of strategic orientation. The number of American Indian families receiving cash assistance in state TANF programs in the 34 states with federally recognized Indian tribes decreased between 1994 and 2001, from almost 68,000 to about 26,000.Part of this decline occurred because many American Indian TANF recipients were served by tribal TANF programs in 2001 and are not included in the data. While data on tribal TANF program caseloads are not available for 2001, tribes have estimated that they could serve as many as 22,000 families. Even if those participating in tribal TANF programs were taken into account, the decline in American Indian families receiving TANF is significant. In comparison, the number of all families receiving TANF fell from about 3.4 million families in 1994 to about 1.5 million in 2001. In some states, the share of the caseload made up of American Indians has risen. According to HHS data, the share of the TANF caseload made up of American Indians increased in 6 of the 34 states with federally recognized tribes. As shown in figure 2, the increase has been greatest in South Dakota, Montana, and North Dakota. In South Dakota, the proportion of cash assistance families that were American Indian increased from under 60 percent in 1994 to about 80 percent in 2001. According to the 2000 census, about 8 percent of South Dakota's population were American Indians. Although data are not available to confirm this, it is possible that the decline in the number of American Indians receiving TANF has predominantly occurred among those not living on reservations, who represent a majority of all American Indians. Based on responses to our survey, the size of the TANF caseload on some reservations has in fact stayed about the same or even increased. Forty-nine of 97 tribes responding to our survey question reported that the number of tribal members receiving TANF was about the same size or larger than it had been in 1997. Several factors may contribute to the lack of welfare caseload decline among American Indians in certain places. These include the scarcity of jobs on reservations; the difficulty reservation residents have accessing work supports, such as job training and child care; and cultural or religious ties to tribal lands and strong ties to families and communities that make it difficult for many American Indians to relocate. In addition, like many other TANF recipients, many American Indian TANF recipients have characteristics such as low education levels and few job skills, which can make it difficult for them to get and keep jobs. PRWORA gives tribal TANF programs flexibility in many areas to tailor their programs to their communities, for example, by defining their own work activities and work participation rate goals, time limits, and eligibility requirements. The 36 tribal TANF programs are given the flexibility to define the activities they count toward meeting the work participation requirement more broadly than state TANF programs, subject to approval by HHS. According to data provided by tribal TANF programs to HHS, about a fifth of all adults engaged in work activities participate in activities that would not count toward meeting work participation rate goals under state plans (see fig. 3), but do count toward meeting work participation goals under tribal programs. For example, the Port Gamble S'Klallam tribe, whose reservation is located on Washington's Puget Sound, allows recipients to count time spent engaged in traditional subsistence gathering and fishing towards meeting the TANF work requirement. In general, rather than adopting an approach similar to most states that emphasizes job search and work, tribal TANF programs tend to encourage recipients to engage in education or training activities. While all of the tribal TANF program officials that responded to our survey question reported using TANF funds for job search, screening and assessment, and other employment services, most also used TANF funds for a variety of education services. Fourteen of the 18 tribal TANF programs responding to our survey question reported that a greater share of their recipients were enrolled in educational activities such as high school equivalency programs, community college, or other job training, than were engaged in employment. In contrast, a majority of TANF recipients engaged in work activities in state programs are in unsubsidized jobs. Officials from several of the tribes we visited reported that their tribal TANF programs emphasize education and training activities because their recipients have low rates of high school completion and high rates of illiteracy. Tribal TANF programs have flexibility to set their own time limits, subject to HHS approval. To date, HHS has not approved any tribal TANF plans with a time limit of greater than 60 months, although at least one tribe has submitted a plan proposing a longer time limit. Thirty-four of the 36 tribal TANF programs have time limits of 60 months; 2 programs have 24-month time limits. While a state may exempt no more than 20 percent of its caseload from time limits due to hardship, tribal programs have the flexibility to determine the share of the caseload they are allowed to exempt from time limits due to hardship. A majority of tribes have the same exemption limit as states, but HHS has approved 10 plans with higher exemption rates. If tribes want to extend benefits beyond the level approved in their plans, they must pay for the benefits with their own funds. Many tribal TANF programs are not subject to time limits because the unemployment rate on the reservations is greater than 50 percent. PRWORA exempts any month from counting toward an individual's time limit if that individual is living on a reservation with a population of at least 1,000 and an unemployment rate of 50 percent or greater, whether they are enrolled in a tribal program or a state program. Of the 29 tribal TANF programs that serve a single tribe, 16 are located on reservations that have unemployment rates of 50 percent or greater, according to the most recent BIA data. Tribes also have the flexibility to determine many of their own eligibility requirements. This includes the flexibility to determine the area that will be covered by their programs (the service area). Some tribes define their service area as their reservation or land base, while others serve families residing in nearby communities or within the counties that overlap with their reservations (see fig. 4). Tribes also have the flexibility to determine whom they will serve (the service population). Some tribes base eligibility on race or tribal membership; others serve all families in their service areas. Figure 5 shows the decisions all 36 tribal TANF programs have made about their service populations. Tribes have faced a number of challenges in implementing tribal TANF programs. Many tribes have found that data on the number of American Indians are inaccurate, complicating the determination of tribal TANF grant amounts and making it difficult to design and plan programs. Because tribes do not have the infrastructure they need to start their programs, tribes have had to solicit contributions from a variety of different sources to cover their significant start-up costs and ongoing operating expenses. In addition, because tribes do not have experience operating welfare programs, they lack the expertise needed to administer key program features, including determining eligibility. Some tribes have requested and received technical assistance from states and the federal government to help them develop this expertise. The challenges tribes have to overcome in order to plan, develop, and implement tribal TANF programs include, among others: Obtaining the population data necessary to conduct reliable feasibility studies and to plan and design tribal TANF programs. HHS and tribal officials told us that state data on American Indians is inaccurate, complicating the determination of TANF grant amounts and making it difficult to design and plan programs. The law specifies that federal tribal TANF grants must be based on the funds expended on American Indians who were residing in the program's designated service area and receiving AFDC from the state in fiscal year 1994. In practice, however, few states collected reliable data on the race of AFDC recipients in 1994, so some tribes negotiate the number on which their grant will be based, according to tribal officials. Having accurate data on American Indian caseloads is also critical for tribes as they design their programs and make decisions about how to allocate their resources. The degree to which any tribal TANF program's federal grant corresponds to its current caseload varies substantially. Some officials attribute this to underestimates of the number of American Indian families who were receiving AFDC in 1994. Others believe that eligible families are more likely to seek benefits from a tribal program, in part because of increased outreach. Changes in the economy and population growth over the past decade have also led to fluctuations in public assistance caseloads on some reservations. The majority of tribes with TANF programs responding to our survey question, 19 of 21, reported that the number of families they were currently serving was the same as, or smaller than, the number of families on which their grant was based. However, 2 of the 21 tribes reported that their TANF caseload was larger than the caseload on which their grant was based. Securing or leveraging the resources needed to establish the infrastructure needed to administer tribal TANF. Because most tribes starting tribal TANF programs do not have the infrastructure they need in place, they have secured and leveraged funding from a variety of sources to meet the basic "start-up" costs involved in setting up a new program. These start-up costs include those for basic infrastructure such as information technology systems. In addition, tribal TANF programs are not eligible to receive any of the performance incentives currently available to states. One infrastructure need that tribes have found particularly difficult to meet is the development of new information systems. Like states, tribal TANF programs are permitted to spend as much of their federal TANF grant on management information systems as they choose, and some tribes have developed systems for their new TANF programs. Unlike states, tribes did not receive additional federal funds expressly for the purpose of developing and operating automated information systems under AFDC, the precursor to the TANF program. Although most of the tribal TANF programs reported using an automated system to report TANF data, many--8 of 27--do not. For example, the Fort Belknap tribal TANF program in Montana has a caseload of 175 families, yet it does not have an automated information system for the collection, processing, and reporting of TANF data. Eleven tribes reported having an automated system devoted to their TANF program. Others use the state's computer system or contract with the state to collect, store, or process data for federal reporting purposes. Because most tribal TANF funds are used to provide benefits and services to TANF recipients, some tribes have leveraged funds from other federal programs or relied on other sources, including state TANF funds and tribal government contributions. States recognize that it is in their best interest if tribal TANF programs succeed, and therefore most provide at least some of their state maintenance of effort (MOE) funds to tribal programs in their state. HHS reports that 29 of 36 tribal TANF programs receive MOE funds from the states. Some states provide tribes with a share of MOE proportionate to the population they are serving; others provide some start-up costs; and others have not provided any funds. There is little incentive for states to contribute MOE to tribes. The law does not require states to contribute MOE to tribal programs, and in fact, if a tribe opts to administer a tribal TANF program, the state's MOE requirement drops by an amount that is proportional to the population served by the tribal program. However, any contributions made by states to tribal TANF programs do count toward a state's MOE requirement. Most tribal TANF programs that responded to our survey question, 24 of 27, reported that their tribal government made contributions to their TANF program. Eighteen of these respondents reported their tribes contributed office space or buildings. In addition, 15 programs received contributions from the tribal governments to cover other start-up costs. In addition to securing resources from federal, state, and tribal governments, some tribes have leveraged other funds to enable them to administer tribal TANF with limited resources. One way tribes have been able to do this is by combining TANF and other tribally administered federal employment and training programs into a single program with a single budget through a "477" plan. Tribes with 477 plans are able to save on administrative costs and reduce duplication of services by streamlining the administration of related programs. For example, a tribe with a 477 plan could provide job search and job preparation services to all tribal members through a single program, rather than having a separate program for TANF recipients. To date, 13 tribal TANF programs responding to our survey question have included TANF in their 477 plans. Two of the tribes we visited, the Confederated Salish and Kootenai tribe and the Sisseton- Wahpeton tribe, included their tribal TANF programs in 477 plans, and both tribes indicated that the ability to combine funding sources and streamline service delivery was instrumental in allowing them to administer tribal TANF within their budget constraints. Developing the expertise to better implement tribal TANF programs. Because they do not have experience in administering welfare programs, tribal TANF program administrators have had to quickly develop the expertise to plan and operate tribal TANF programs. Tribal TANF administrators have had to train staff on eligibility determination, data reporting requirements, and administration. They have also had to set up information systems, conduct feasibility studies, and leverage resources to help cover their costs. Most of the tribes that responded to our survey reported that states provided them with at least some technical assistance in these areas, but the amount of assistance provided by states varied. PRWORA does not require states to provide technical assistance to tribes, but 19 tribes reported that the state helped them to a great or very great extent in developing their initial concept paper describing their TANF program. In addition, 26 tribal TANF programs reported that they had received technical assistance and support from the state in developing or operating automated systems to collect and report TANF program data. A number of programs reported that they received assistance from the state on other aspects of administering a TANF program. Tribes also reported that HHS has provided them with technical assistance when asked. Tribal officials indicated that certain types of technical assistance were not readily available to them from states or the federal government. For example, tribes interested in administering tribal TANF often conduct studies to help them determine whether it is feasible to administer their own programs, but neither states nor the federal government had provided tribes with technical assistance on how best to conduct a feasibility study that would provide them with all of the information they needed to make an informed decision. Similarly, some of the tribes we visited indicated that they have little access to information about the "best practices" of other tribal TANF programs, which could help them meet TANF goals. PRWORA gives tribes a new opportunity to exercise their sovereignty by administering their own TANF programs. At this early stage of tribal TANF implementation, we see tribes making progress in exercising their flexibility by tailoring the design of their programs and engaging their members in a broad array of work activities. However, tribes face challenges in developing the data, systems, and expertise they need to operate their programs. While tribes have moved forward in establishing their own programs, it is not yet known whether these programs will help recipients find employment before reaching time limits. In addition, it is not yet clear whether the flexibility afforded to tribal TANF programs will allow them to continue to provide benefits and services to those who reach the time limit without obtaining a job. Whether tribal TANF programs will be successful in moving more American Indians from welfare into the workforce will ultimately depend on not only the ability of the programs to meet their recipients' need for income support, education, and training, but also the success of economic development efforts in providing employment opportunities for American Indians. Mr. Chairman, this concludes my prepared statement. I look forward to sharing the results of our final study with you in August. I will be happy to respond to any questions you or other Members of the Committee may have. For future contacts regarding this testimony, please call Cynthia M. Fagnoni at (202) 512-7215 or Clarita Mrena at (202)512-3022. Individuals making key contributions to this testimony included Kathryn Larin, Carolyn Blocker, Mark McArdle, Bob Sampson, Catherine Hurley, and Corinna Nicolaou.

Summary:
Under welfare reform, American Indian tribes have the option to run Temporary Assistance for Needy Families (TANF) programs either alone or as part of a consortium of other tribes rather than receiving benefits and services from state TANF programs. Because of the difficult economic circumstances on many reservations, the law also gives tribal TANF programs more flexibility to design their programs than it gives to states. Tribes have used various strategies to stimulate economic development; however, unemployment and poverty rates remain high on reservations, and prospects for economic growth are limited. Nationally, the number of American Indian families receiving TANF assistance has declined significantly in recent years. On some reservations, however, caseloads have remained the same or increased. American Indians represent an increasing proportion of the total TANF caseload in some states. To date, 172 tribes, either alone or as part of a consortium, have used the act's flexibility to design and administer their own TANF programs. Tribes face challenges in implementing tribal TANF programs, including a lack of (1) reliable data on the number of American Indian TANF recipients; (2) infrastructure support, such as information systems; and (3) experience and expertise in administering welfare programs.