February 24, 1999

I. INTRODUCTION

Good morning Mr. Chairman. My name is W. Ron Allen and I am the President of the National Congress of American Indians (NCAI) and the Chairman of the Jamestown S'Klallam Tribe of Washington State. NCAI is the largest and oldest membership organization of Indian tribes in the United States, and advocates on behalf of all the Nation's 558 federally recognized Tribes. I am honored by the Committee's invitation to appear and testify on the Indian Self-Determination Act and the role that contract support costs has played under that Act.
 

II. INDIAN SELF-DETERMINATION ACT OF 1975

The Indian Self-Determination Act of 1975 has proven to be the cornerstone of the Nation's modern policy toward empowering tribal governments. The Act rejected all of the Nation's past failed policies toward our tribes, including paternalism, forced dependency, assimilation and outright termination of our unique status as governments. In their place, it established the basic framework for tribal self-determination, tribal economic recovery, transfer of federal resources and services to tribal operations and true government-to-government relations between tribes and the United States.

The Act has directly led to every major American Indian and Alaska Native initiative to come before this Congress in the last quarter century, and the self-determination goal has become a reality for hundreds of tribal communities seeking greater autonomy, responsibility, accountability and control over their daily affairs and their destiny. Thanks in major part to this Committee's continuing and unbroken vigilance to protect against any erosion of the Act, either administratively or through legislation, the Self-Determination Act has proven a resounding success in lifting up our tribal communities, elevating the health status of Native American peoples by improving the quality and expanding the delivery of our health care services, promoting local innovation, relieving unemployment, improving educational opportunities, improving tribal justice systems and law enforcement, and removing the distant federal government bureaucrats from our daily affairs.

Even with these improvements, however, the continuation of serious problems still exist. As a 1987 Senate report stated, in the course of strengthening the Act, "perhaps the single most serious problem with implementation of the Indian self-determination policy has been the failure of the Bureau of Indian Affairs and the Indian Health Service to provide funding for the indirect costs associated with self-determination contracts."
 

III. CONTRACT SUPPORT COST UNDERFUNDING

The Senate Indian Affairs Committee, and this Committee, noted that the failure to fully fund indirect costs had resulted in severe difficulties for tribes who incur enormous costs not borne by IHS and the BIA, and who must also carry out functions similar to those carried out by a variety of other federal agencies that support the BIA and IHS, but which are beyond the reach of the Act. For many tribes, the IHS and BIA practice of underfunding contract support costs meant either compromising on these essential functions, reducing already underfunded program services to help cover these requirements, or both.

In 1988 and in1994, this Committee helped enact legislative amendments, among other purposes, intended to "prohibit" the underfunding practice, thus overcoming the funding problems and disturbing consequences. In some respects, the amendments worked and some of the contract support problems improved. But while tribes went on administering hundreds of federal Indian programs, the agencies continued to defy the statutory and contractual mandates to fully fund contract support costs.

With respect to both the BIA and the IHS, the administration refused to use all available funds to meet their obligations and failed to ask for sufficient additional funding from Congress to get around their self-imposed limitations. Unfortunately, the Administration eventually supported statutory funding "caps" designed to protect the agencies from ever fully paying the tribes the amounts determined to be necessary by the agencies.

On the BIA side, an additional BIA policy (known as the pro rata policy) has long meant that today tribes never know until a fiscal year is almost over, and their programs are almost fully carried out, how much they will receive in contract support costs that year. From year to year, the payment jumps up and down anywhere from the mid 70% to the low 90% range. Unfortunately, over the last 6 years, the payment schedule has averaged in the low 80% range. This continuing practice seriously undermines the ability of tribes to achieve real financial stability and predictability even in one year, no less over the longer term. 

To make matters worse, the BIA system fails to provide tribes with the same personnel benefits that the BIA's own employees receive when they carry out the same programs, making it that much harder to maintain service levels in tribal communities. From IHS's experience, we estimate that this failure actually pushes the BIA payments down in real terms another 20% below real need.

On the IHS side, IHS policies have until very recently led to a situation where years go by during which some (and occasionally all) of a tribe's health care programs receive no contract support costs at all. Although the IHS policy does offer tribes better predictability from year to year, most are nonetheless forced to operate with substantial contract support deficits.
 

IV. NCAI NATIONAL POLICY WORK GROUP ON CONTRACT SUPPORT COSTS

Faced with a growing crisis, last year (1998) NCAI established a National Policy Work Group on Contract Support Costs. Among the many goals of this initiative were: (1) to work aggressively with the agencies to improve the contract support situation; (2) to begin a serious educational campaign here in Congress on the need for contract support costs and on the impact of the current crisis on tribal service delivery; (3) to work more closely with the two Departments and the Office of Management and Budget to increase awareness of this critical issue; and, (4) to thoroughly explore all aspects of the contract support system and develop options and recommendations where improvements can be made for the benefit of all concerned.
 

Our intense work on this initiative has already contributed to achieving real progress on many fronts:

First, and thanks in major part to the bipartisan leadership and sensitivity of Appropriations Subcommittee Chairman Regula, Chairman Young and Congressman Miller, Co-Chairs Hayworth and Kildee of the House Native American Caucus, the House Leadership, as well as the support of Senator Ted Stevens, this year's appropriation included a 21% increase in contract support cost funding. Although IHS reports that funding will still be some $90 million short in FY 2000, this year's increase has permitted very real corrections--and changes--to be made to a system in crisis.

Second, both the BIA and the IHS are now working closely with NCAI and others to reexamine their contract support cost policies. As a direct result of these efforts, in 1999, IHS expects to move all tribes closer to the 100% necessary funding level that some tribes--but far too few--already enjoy, and in doing so to correct the most severe funding inequities that have plagued the IHS system. For IHS, this represents a major change from past contract support policies.

Third, IHS in particular has made enormous strides in improving the accuracy of its data, thanks to truly tremendous and concentrated efforts by the agency, and thanks also to a solid commitment to consult and work more closely with tribes.

Fourth, NCAI has issued two interim reports summarizing our work and much needed data on all aspects of the contract support cost system. The first report was distributed to all members of Congress, all relevant agencies, and all Indian tribes; and, the second report is just now under distribution. Copies of both reports have been attached to my written testimony today, and I think Members will find the information invaluable to a thorough understanding of the system. We anticipate having our final report out this spring.

Fifth and last, the Administration has now requested an additional 17% increase in contract support appropriations to IHS for FY 2000. This is the first time any Administration's budget request has ever acknowledged to such a degree the serious need in this area, and we hope the House and Senate will substantially build upon that request in the coming months. Although the President's budget reflects an increase to remedy the near-equally serious BIA shortfall, here too we hope to work closely with Congress and OMB to better address the need for FY 2000. Unfortunately, the BIA is projecting increased levels which will only fund 86% of need in FY 2000.

Our reports have also revealed important little known facts regarding the contract support system. For instance,
 

• Our research has clearly dispelled the notion that CSC costs are "out of control". Individual tribal requirements for contract support costs have remained level over several years. In fact, they have not increased and are consistent with other federal agencies contract support cost-type reimbursements-- even though the average rate of these inter-agency rates are almost double that of the average tribal indirect cost rates.

• The increased demand for contract support costs over the mid-1990s was directly caused by more tribes taking advantage of the Self-Determination Act's opportunity to operate the IHS and BIA programs.
   

• On average, contract support costs account for about one-quarter of a tribe's total IHS funding (when fully funded), and a smaller proportion of a tribe's total BIA funding. The difference partly reflects the fact that a number of BIA programs involve pass-through payments (such as general assistance and scholarships), and partly reflects the fact that the BIA still fails to recognize tribal direct contract support cost requirements.
  
• In every year since 1980 both the federal agencies and Congress have known the extent to which contract support costs requirements have gone unfunded. And yet, and until this year, the amounts made available by Congress, the agencies or both have not come close to meeting the need, driving the IHS backlog higher and higher, and leaving the BIA system essentially stagnant. 

• Over one-half of the IHS programs are operated by tribes, and a larger portion of the BIA programs operated by tribes, involve programs smaller than $500,000, while only 7% exceed $5 million.

• Tribal contract support cost requirements have varied due to diverse local circumstances. No "one size fits all" approach can be sensitive to this highly variable situation. 

• The rate of growth in tribal contracting and compacting activities with IHS and BIA has slowed markedly, with each agency now projecting new contract support demands per year at approximately $12.5 million and $5 million, respectively.
   

• In a recent three-year period, IHS staffing reduced by 6%, with substantial additional IHS staff currently detailed to tribal programs. In the last 17 years, BIA staffing has reduced by over one-third. (Relative to IHS, there are very few BIA staff currently detailed to tribal programs.)
   

Mr. Chairman, a large proportion of the Nation's tribes has taken advantage of the Self-Determination Act's opportunity to administer IHS and BIA programs. The result has been highly accredited and acclaimed health care programs, increased governmental and program service delivery through reductions in red-tape and bureaucracy, innovative partnerships with state agencies, multi-fold increases in third-party revenues from Medicare, Medicaid and private insurance, a broader array of program choice for tribal members, more relevant and locally-prioritized health and social service programs, and significant and measurable improvements in the communities' quality of life.

We have much to applaud in what tribes have done for themselves in the past 25 years, even with legislative and policy restrictions including inadequate funding to fully implement tribal self-determination and self-governance goals. The Congress and the Administration have been advancing the "devolution" process to empower state and local governments. This movement is based on a simple theory that the communities in our country will be better served when the federal government provides greater control and flexibility over federal resources to address these community needs. This goal should be applied equally and consistently with the 558 tribal governments throughout the United States.

One important consideration that must be recognized by the federal government is that the tribes do not have the same revenue-generating base as state and local governmental tax authority system. In conjunction with this fact, the Congress must remember it has a historical, legal and moral obligation to the tribal governments in lieu of the vast lands and resources relinquished to the United States by the tribes.

We therefore respectfully caution the Committee to reject recommendations that would revamp the Self-Determination Act in significant ways, such as by deferring new contract starts, deferring tribal entitlements to receive contract support, or otherwise weakening the Act's contract support cost provisions. These options would severely undermine the tribes' governmental capacity to provide effective and responsible programs and services to their communities.

We do believe, however, that improvements can certainly be made in how the Act has been carried out. For instance, IHS and BIA can report to Congress on a more timely basis the contract support cost needs anticipated both for the current year and the upcoming new year. Further, we believe the agencies can do a better job of refining and standardizing the process for determining contract support cost needs.

The contract support crisis is solvable--with refinement in the agencies' policies, the renewed commitment from Congress and the Administration shown this year, and the willingness of tribes to join in the search for innovations that will help further close the gap. Through the collaborative work of the NCAI Workgroup on Contract Support Costs, we are developing recommendations which support similar CSC approaches and policies within the BIA and IHS. While the Workgroup is exploring options regarding consistent standards and criteria in the calculation of all aspects of contract support costs (including start-up costs, direct contract support cost and indirect costs), these options recognize areas of commonality among tribes but are also sensitive to the unique differences among us.

NCAI stands ready to assist the Congress and Indian country to reach this goal, and we are hard at work as I speak doing our part to make it happen. Mr. Chairman, thank you once again for the opportunity to share these thoughts with the Committee.