INDIAN GAMING REGULATORY ACT

WEDNESDAY, JULY 9, 2003

U.S. SENATE,

COMMITTEE ON INDIAN AFFAIRS,

Washington, DC.

The committee met, pursuant to notice, at 10:05 a.m. in room 106, Senate Dirksen Building, Hon. Ben Nighthorse Campbell (chairman of the committee) presiding.

Present: Senators Campbell, Thomas, and Dorgan.

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

The CHAIRMAN. Good morning, and welcome to the committee's second oversight hearing in the 108th Congress on the Indian Gaming Regulatory Act of 1988, known by its acronym of IGRA. By the way, Senator Inouye will not be able to be with us this morning. He's in a markup on appropriations and unfortunately will not be here. But any statement he sends in we'll include in the record.

Congress enacted the IGRA in 1988 after the U.S. Supreme Court handed down the Cabazon case which confirmed that Indian tribes have inherent authority to conduct Indian gaming on their lands. I think it's fair to say that 15 years ago, no one could have seen that by 2002 Indian gaming revenues would grow to $14.5 billion, the most recent revenue data collected by the National Indian Gaming Commission.

The growth of Indian casinos continues at a very fast pace and has caused some concerns in some areas in dealing with zoning, local land use planning, and things of that nature. But I'm still convinced that many of those disagreements are often worked out and can be worked out with a dialogue between people on both sides of the issue if they have good intentions and good will.

What many didn't foresee back then was that States would try and exact their share of gaming revenues from the tribes. Anyone who reads the papers today realizes that with many States struggling to balance their own budgets, almost every one of them having a deficit, that day has come. In some cases, those same States that opposed IGRA in 1988 are now the most ardent supporters of Indian gaming, as long as they get their share.

The IGRA does make it clear that Congress views gaming as an economic activity that Indian tribes can develop and that they should be the primary beneficiary of the efforts. The drive by States to get shares of tribal gaming revenues has only increased

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since the 1996 Seminole decision. Tribal leaders are informing this committee that many States will not even begin to negotiate without first getting an agreement on revenue sharing. We have asked the Department of the Interior to explain to the committee the authority and criteria it uses in approving compacts that contain revenue sharing components. We have also asked Indian tribes and tribal associations that conduct gaming to provide their experiences with the compacting process and demands for revenue sharing. They will also share with us the many good things that they have done with their gaming revenues.

And with that, Senator Thomas, did you have an opening statement?

Senator THOMAS. Thank you, Mr. Chairman. Not really. I just am very interested in what's happening here. It's a big dollar issue. It's important to the tribes, of course. The role of the State is an interesting issue. Wyoming is involved, as a matter of fact, right now with the Secretary. Also the type of land on which gambling is initiated is interesting. So I'm more here to listen than anything. Thank you.

The CHAIRMAN. Thank you. Then we'll start with Aurene Martin, deputy assistant secretary of Indian Affairs. Welcome, Ms. Martin. And by the way, thank you for attending the ceremony in Montana last week on commemorating the memorial for the American Indians who died at the Battle of the Little Big Horn. It was very well attended with, I understand, over 5,000 people. I had to leave somewhat early, but I was delighted to see such great, overwhelming support for it. Thank you for being here. Go ahead.

STATEMENT OF AURENE M. MARTIN, ACTING ASSISTANT SECRETARY, INDIAN AFFAIRS, DEPARTMENT OF THE INTERIOR, WASHINGTON, DC, ACCOMPANIED BY GEORGE SKIBINE, DIRECTOR, BUREAU OF INDIAN AFFAIR'S OFFICE OF INDIAN GAMING MANAGEMENT

Ms. MARTIN. Thank you. I enjoyed the event as well. It was very moving.

First of all, I'd like to thank you for the opportunity to appear here today to testify on this issue. My name is Aurene Martin. I'm the acting assistant secretary for Indian Affairs at the Department of the Interior.

You've asked us to appear today to talk about the Department's role in reviewing revenue sharing provisions included in class III tribal-State gaming compacts. I'm here today to talk about that, and I'm accompanied by George Skibine, who is the director of our Office of Indian Gaming.

As you're aware, such compacts are submitted to the Department for approval pursuant to the requirements of the Indian Gaming Regulatory Act, otherwise known as IGRA. IGRA provides that class III gaming activities are lawful on Indian lands only if they are, among other things, conducted in conformance with tribalState compacts entered into by an Indian tribe in a State and approved by the Secretary.

In reviewing a compact, the Secretary must ensure that three requirements are met. She must ensure that the compact does not violate any provision of IGRA. She must also ensure that the com

pact does not violate any other provision of Federal law that is not related to jurisdiction over gaming on Indian lands. Finally, she must ensure that the compact does not violate the trust obligations of the United States to Indian tribes.

The secretary must approve or disapprove a compact within 44 days of its submission or the compact is considered to have been approved, but only to the extent the compact is consistent with the provisions of IGRA. A compact takes effect when the secretary publishes notice of its approval in the Federal Register.

Since IGRA was passed in 1988, the Department of the Interior has approved approximately 250 class III gaming compacts between States and Indian tribes which are located in 24 States throughout the country. Of those compacts, the Department has approved or deemed approved revenue sharing provisions between Indian tribes and the following States: Connecticut, New Mexico, Wisconsin, California, New York, and Arizona. In addition, several Michigan tribes are making revenue sharing payments to the State of Michigan under compacts that became effective by operation of law, and other Michigan tribes have made revenue sharing payments to the State under court approved consent decrees.

Section 11(d)(4) of IGRA specifically provides that the compacting provisions of IGRA shall not be interpreted as conferring upon a State or any of its political subdivisions the authority to impose a tax, fee, charge or other assessment upon an Indian tribe, and that no State may refuse to enter into compact negotiations based upon the lack of authority in such State. However, since the Supreme Court's 1996 decision in Seminole v. Florida, more States have sought to include revenue sharing provisions in class III gaming compacts, resulting in a discernible increase in such provisions over the past 7 years.

In general, the Department has attempted to apply the law to limit circumstances under which Indian tribes can make direct payments to a State for purposes other than deferring costs of regulating class III gaming activities. To date, the Department has only approved revenue sharing payments that call for tribal payments when the State has agreed to provide valuable economic benefit of what the Department has termed substantial exclusivity for Indian gaming in exchange for the payment. As a consequence, if the Department affirmatively approves a proposed compact, it has an obligation to ensure that the benefit received by the State is equal or appropriate in light of the benefit conferred on the tribe. Accordingly, if a payment exceeds the benefit received by the tribe, it would violate IGRA because it would amount to an unlawful tax, fee, charge or other assessment. Though there has been substantial disagreement over what constitutes a tax, fee, charge or other assessment within this context, we believe that if the payments are made in exchange for the grant of a valuable economic benefit that the Governor has the discretion to provide, these payments do not fall within the category of a prohibited tax, fee, charge or assessment.

Revenue sharing has undoubtedly been approved by the Department. It has emerged as a result of the Department's review of each individual compact over the past several years, and it is contained in the letters that we have sent to both the States and

tribes with regard to the results of our reviews. I have brought a copy of those letters and would like to submit them to the committee for inclusion in the record.

The CHAIRMAN. They will be in the record.

Ms. MARTIN. Thank you.

As I stated earlier, Štates and tribes have increasingly agreed to revenue sharing provisions. As part of this overall trend, the Department has observed a number of other issues that have arisen in the context of revenue sharing and which may have serious consequences for Indian gaming in the future. These issues include an increase in the number of provisions authorizing off-reservation establishments for gaming, sometimes out of State. And these are often accompanied by high percentage revenue sharing provisions. There have also been some attempts by tribes to define zones of tribal exclusivity, most often around off-reservation sites. And again, these are often accompanied by high revenue sharing provisions as well.

Finally, there are increasing concessions by States on issues related to gaming, but upon which the State may not be obligated to bargain. These are also accompanied by high revenue sharing provisions. An example of this is an expanded scope of gaming in a State where there might be a limited class III authorization within the State for gaming, but the tribe is bargaining for an expanded scope of gaming.

IGRA doesn't give guidance on the legality of these issues in all cases, and the Department must determine how to address them as they are presented, which is most often within the context of a compact submitted by an individual tribe. Where these provisions appear to us to violate the purposes of IGRA or appear for other reasons contrary to basic issues of fairness, the Department feels limited in its ability to disapprove such compacts, given the charge of the Department to review compacts to determine only whether they violate Federal law; that is, whether they violate IGRA, other Federal law or they violate the trust obligation to Indian tribes. This concludes my remarks. I'd be happy to answer any questions.

[Prepared statement of Ms. Martin appears in appendix.]

The CHAIRMAN. I'm interested in hearing your views on a couple of things. I visit a lot of reservations and a lot of casinos in the process. Some are very, very successful. And if they have reached some kind of a revenue sharing agreement with States, and it was done without duress, done of their own volition, that's fine. But I've also visited some that are just barely making it. And there are some casinos that are a way, a long way from any metropolitan area, and frankly, there's nobody in them except a few of the Indian people that live on the reservation and maybe a few non-Indians who happen to work there. But there is clearly very, very little money from those casinos.

Does the Department have a view on revenue sharing or the State's taking money from the casinos through revenue sharing when they're that desperate and destitute?

Ms. MARTIN. We do have such a concern. Whenever we receive an individual compact, we look at the provisions of the compact and if it has a revenue sharing provision, we review it to find out

if that particular tribe is able to make those payments. Oftentimes what we'll do is require or ask for financial statements from the tribe to find out if their projections and their operations support a revenue sharing payment and if in fact what they're getting in exchange for that payment is of substantial economic benefit to them. The CHAIRMAN. Have you found that, what would you term a "substantial economic benefit"? I can't imagine any for a couple of casinos that I visited, what benefits they're getting from the State. I don't see any at all, in fact.

Ms. MARTIN. Up to now, the Department has only accepted one type of benefit as being sufficient to merit a revenue sharing payment, and that is substantial exclusivity. That is in a State where Class III gaming may be authorized but is not authorized for nonIndian persons to operate commercial enterprises, but the tribe is authorized to operate those enterprises. Then we would look at whether a revenue sharing payment is warranted and to what degree, given a particular tribe's circumstances.

In many of the cases you're talking about these facilities are employment vehicles but they don't raise a lot of money for the tribe. The CHAIRMAN. And you said you've approved 250 compacts, and of that, 6 have been with revenue sharing compacts?

Ms. MARTIN. Within six States and all of the tribes located within those States.

The CHAIRMAN. What is the Department's role, in California now there's sort of an explosion of casinos, as you know. Are you dealing with them, tribe by tribe with the State? Because I know they're having some pretty fierce discussions with the State in California now about revenue sharing.

Ms. MARTIN. California, and I guess you could say this about every State, has its own unique circumstances. They have a constitutional amendment which deals with Indian gaming. They have an existing compact that most of the tribes have with the State. Unless and until we start to receive those compacts for review, we don't really have a role in their ongoing discussions.

The CHAIRMAN. How many compacts are being reviewed in California?

Ms. MARTIN. I'm not aware of a specific number. The information we get is anecdotal, really.

The CHAIRMAN. We've had some discussion, as you probably know, dealing with revenue sharing, that those tribes that are making a lot of money with tribal casinos should share with those tribes that are rather poor. In fact, in some cases they do this, they do it of their own volition. Would the Department favor some kind of tribal revenue sharing?

Ms. MARTIN. I think that we have supported that type of revenue sharing in the case of California. We haven't had a larger discussion of whether tribes who were not willing to participate in such a revenue sharing program should be coerced into such a program. Obviously, it could be of tremendous benefit to some of the poorer tribes.

The CHAIRMAN. Have you found that tribes that would see a benefit, for instance, if it went to the local communities or costs of police or fire or improving the roads to the casinos or something of