The Rise of Tribal Self-Determination and Economic Development

Vol. 33 No. 2

By

Jeff R. Keohane specializes in federal Indian and tribal law and land use and environmental law in the San Francisco office of Holland & Knight LLP. He previously practiced federal Indian law in the Office of General Counsel of the U.S. Environmental Protection Agency.

The past three decades have seen American Indians and Alaskan Natives—collectively referred to as Native Americans here—make the first widespread economic gains since their territories were incorporated with­in the United States. This unprecedented growth correlates strongly with increased tribal autonomy and is not pri­­­marily due to the growth of tribal casinos.

The federal government historically dominated nearly every aspect of tribal life, from the exercise of religion and cultural practices to land tenure and the structure of tribal government. More­­over, with the exception of a brief, protribal interregnum under President Franklin D. Roosevelt, U.S. policy has generally aimed to eliminate tribal governments.

Native American activism rose quietly in parallel to other civil rights movements in the 1960s, reaching a crescendo in the early 1970s with the occupation of Alcatraz (1969), the Trail of Broken Treaties and takeover of the Bureau of Indian Affairs offices (1972), and the siege at Wounded Knee (1973). These and other protests, for the first time, focused the nation’s attention on the political oppression and poverty in tribal areas.

President Richard Nixon reacted to this Native American activism in 1970 by repudiating past antitribal policies. He also formally identified tribal government as the appropriate form of government in Indian country, adopting a policy of “tribal self-determination.” Congress followed suit, increasing funding for Native American services and enacting the Indian Self-Determination and Education Assistance Act of 1975 (Self-Determination Act) and other legislation. The Self-Determination Act entitles tribes and intertribal consortia to take over administration of federal programs for the benefit of their members through “self-determination contracts” with the Departments of the Interior and of Health and Human Services.

Tribes experienced the beneficial economic effects of increased appropriations and the Self-Determination Act almost immediately. Per capita income on reservations rose from $4,300 in 1970 to $6,500 in 1980 (in year-2000 dollars), and poverty fell from 57 percent of families to 43 percent. Congress cut funding by one-third in the 1980s, however, and reservation family poverty increased to 51 percent while incomes increased a scant $500 by 1990. By contrast, per capita income for all Americans rose steadily from $13,000 in 1970 to $19,400 in 1990, and family poverty remained fairly constant between 13.7 percent in 1969 and 13.1 percent in 1989.

Two decades later, Congress extended the tribal self-determination concept to many other federal programs serving tribes and offered tribes the option of administering federal pro­grams independently under the Tribal Self-Governance Act of 1994.

Gaming, Economic Development, and Sovereignty

One area of significant economic growth for tribes in the 1980s was high-stakes bingo. When the U.S. Su­preme Court in 1987 struck down California’s attempts to regulate gambling on Indian reservations, it caused an immediate legislative backlash. The next year, Congress enacted the Indian Gaming Regulatory Act of 1988, which essentially allowed limited state regulation of tribal economic development for the first time. However, that act also brought certainty to the field by demarcating the scope of state and tribal jurisdiction over tribal casinos, helping to instigate the first-ever rush to invest private capital in Indian country.

The growth of tribally owned casinos over the past two decades has been breathtaking. Gross revenues soared to $5.5 billion in 1995 and almost doubled to $11 billion by 2000. By 2004, 367 tribally owned casinos in twenty-eight states took in $19.4 billion in revenues. For the sake of comparison, the 455 commercial, nontribal casinos spread across eleven states received $30.2 billion in 2004.

The distribution of revenues, however, has been uneven. The fifty-five richest tribal casinos, with median gross revenues of over $100 million, took in 70 percent of total tribal casino revenues, while the least lucrative 60 percent of tribal casinos, with median gross incomes of less than $25 million, took in just 8 percent of total tribal casino revenues. Moreover, many tribes either cannot, or have chosen not to, develop casinos. In any event, most tribal casinos by themselves are unable to fund the economic development of their tribes, although they have positive effects on tribal employment.

Economic Development Beyond Gaming

Tribal gaming falls far short of explaining tribal economic development in the 1990s. Between 1990 and 2000, the median household income on gaming reservations rose 35 percent, from $17,500 to $23,700, but on nongaming reservations the median household income rose at a slightly faster 36 percent, from $15,300 to $20,700. At the same time, the median household income for all Americans rose 4 percent, from $40,400 to $42,000.

Census Bureau statistics suggest that most of this economic growth in tribal areas comes from small business growth. From 1982 to 1997, the number of privately and tribally owned Native American businesses grew more than tenfold. In 1997, 197,300 Native American businesses had 298,700 employees and gross revenues of $40.3 billion—more than four times the tribal casino receipts of $8.8 billion that year (in 2004 dollars). The Census Bureau excluded tribally owned businesses from its 2002 survey, yet a preliminary figure for privately owned Native American business receipts was $27.8 billion.

If they continued their 1992 to1997 trajectory through 2002, privately and tribally owned Native American business revenues would have reached $100 billion (in 2004 dollars). Even assuming the more modest growth rate of non–Native American businesses, gross revenues would have reached $50 billion in 2002, dwarfing the $15.5 billion brought in by tribal government casinos. Because federal investments did not increase in real terms over the same period, the increased revenues point to significant and sustained private and tribal investment in the nongaming sector.

Although Native American incomes recently have grown very quickly, indicators of their economic development still lag far behind the general population. Native Americans remained the poorest identifiable group in the 2000 Census. While gains are being made, at current rates, tribal median household income would not reach parity with the rest of the population for another fifty years. The question is, there­fore, not only how to sustain the recent rates of economic growth, but how to accelerate them.

Overcoming Barriers to Tribal Development

The federal government’s negative treatment of tribal govern­ments and members continues to hinder tribal economic development in many ways, including undermining tribal jurisdiction, which creates economic uncertainty, and underinvesting in tribal areas.

Historical federal policy created a checkerboard of land ownership and jurisdictions within Indian reservations. Between 1887 and 1934, the federal government “allotted” many reservations, generally distributing 40- to 160-acre parcels to individual Indians or families. The allotment policy failed to fulfill its express purpose of accelerating the assimilation of Indians but succeeded in weakening tribal governments and wresting away two-thirds of their lands, often in the very heart of the reservation. Today, due to intestate succession, the remaining tribal member allotments often have several to several thousand owners with fractional interests, making them exceedingly difficult to develop.

Further complicating the development of allotted lands, decisions of the Supreme Court since 1978 have eliminated or seriously weakened tribal authority to (1) zone, (2) adjudicate private disputes, (3) impose criminal pen­alties, or (4) institute taxes, when those actions involve non-Indian individuals or lands. Therefore, the checkerboard nature of reservation ownership renders the scope of tribal and nontribal government jurisdiction uncertain, deterring investment.

Underinvestment in social and health services and disparate levels of federal spending vis-à-vis states also undermine tribal economic development. Since 1975, federal funding for Native American programs has fallen by 40 percent, while funding for the rest of the population has increased by 60 percent. Per capita federal spending for Native Americans is now a little more than half that of other Americans.

Lack of federal investment in basic services disadvantages tribes in economic and other immediate ways. For example, despite rates of preventable diseases many times higher than the general population, the federal government spends half as much per Indian Health Service beneficiary as it does per Medicaid beneficiary or federal prisoner and a third as much as aggregate per capita health care expenditures.

Further, although the fatality rates on reservation roads are four times higher than on nonreservation roads due in large part to their deteriorated conditions and lack of safety features, Congress appropriates less than half of the amount for construction per mile than it does for state roads and one-fifth of what states spend per mile on maintenance.

Such underinvestment shifts the bur­den for basic services to tribal governments. Yet, unlike states, tribes are limited in the taxes they can raise because of legal restrictions and still-low levels of economic activity. Low levels of service in tribal areas in turn impede tribal development, creating a vicious circle.

Tribal Sovereignty Drives Economic Development

In the mid-1980s, the Harvard Project on American Indian Economic De­velopment and others found that the tribes with the most economic growth tended to share certain common attributes: (1) they had reasserted tribal sovereignty over their members and resources, (2) their governments reflect­ed their bodies politic, and (3) they kept politics out of tribal and private enterprises. For example, the Harvard Project studied seventy-five reservations with timber operations, some of which were managed by tribal governments while the rest were managed by the Bureau of Indian Affairs for the benefit of the tribe. The Harvard Project found that tribe-led operations had 40-percent higher productivity and 6-percent higher per unit prices than the bureau-led operations.

Although most of the Harvard Project’s studies only examine a handful of tribes, its findings fit with the anecdotal experience of tribal professionals. Further, the Government Accountability Office, in a 2004 study of 1990 and 2000 census figures, found that tribes that engaged in self-governance or a high degree of self-determination tended to enjoy more improvements in employment, per capita income, and poverty reduction than other tribes.

Many tribes have exercised their sovereignty by adopting commercial codes and independent judiciaries, and experienced an increase in economic activity. For example, the Confederated Salish & Kootenai Tribes have attracted private enterprise growth in their jurisdiction by delivering more efficient administrative and judicial services to private enterprises than the state of Montana.Other tribes, such as the White Mountain Apache and the Mississippi Choctaw, generated great business dividends before gaming by establishing tribally owned but politic­ally independent businesses.

Moreover, to address the problem of interwoven jurisdictions, many tribes have entered into cooperative agreements with state and local governments to allocate or harmonize regulatory and taxing authorities. Agree­ments, such as that between the Swinomish Tribe and Skagit County, Washington, may promote business development by creating certainty and streamlining the process of obtaining local land use decisions. Scores of taxation agreements between tribes and states have reduced the uncertainty of which government will collect taxes, increasing economic development and the tax base in tribal as well as nontribal areas.

Future Growth and Self-Determination

The legacy of economic and political oppression, and the still disparately low funding for tribes and their members, present real obstacles to economic development in tribal areas. Tribes are investing in themselves, however, and their economies are growing as a result. Unlike other investments required for development, tribal government reform does not require capital. It does require political decisions based on the answers to some fundamental questions about the nature of the tribal government in order to succeed. All tribes have already amply demonstrated the strength of their resolve by managing to survive to the present, promising economic growth and self-determination into the future.

As published in Human Rights, Spring 2006, Vol. 33, No. 2, pp.9-12.

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