Indian Self-Determination Contracting

During his visit to the Oglala Sioux Tribe in South Dakota in July 1999, the President stressed the need for economic empowerment among Native Americans. The historic visit was another step--the first was the passage of the Indian Self-Determination and Education Assistance Act of 1975--toward recognizing the potential for tribes' self-determination through economic development. The act gives tribes the opportunity to manage federal Indian programs and provides funds to cover their costs of contract management and administration. This testimony discusses (1) the extent of, and the reasons for, increases in contract support costs in recent years and (2) four alternatives for funding these costs.

GAO noted that: (1) tribes' allowable contract support costs tripled from 1989 through 1998--increasing from about $125 million to about $375 million; (2) this increase occurred for two principal reasons; (3) the total costs of tribally contracted programs--upon which contract support costs are based--have increased; (4) the total cost to tribes of administering their self-determination contracts has increased; (5) although the amounts appropriated for contract support costs have increased over the past decade, they have not increased at as great a rate as the support costs, resulting in funding shortfalls; (6) for fiscal year (FY) 1998, for example, the shortfall between appropriations (almost $280 million) and allowable contract support costs (about $375 million) was about $95 million; (7) projections of future contract support costs are difficult to calculate because the number of programs for which tribes will choose to contract in the future is uncertain, as is the amount of funding they will receive; (8) however, the tribes' allowable contract support costs could double in the future if tribes were to contract for all the available programs from the Bureau of Indian Affairs and the Indian Health Service; (9) the impasse over whether to provide full funding for contract support costs or limit these costs continues in Congress; (10) the fallout has included litigation relevant to the issue, as well as a 1-year moratorium for FY 1999 on new contracting; (11) because of a lack of progress in resolving this issue during 1999, the Senate Committee on Appropriations has proposed extending the moratorium for another year; (12) to assist Congress in its deliberations over how to resolve the impasse over contract support costs, GAO presents four alternative funding approaches, each of which can be considered individually or combined with the others; (13) these alternatives range from providing appropriations sufficient to fund the tribes' allowable contract support costs each year to amending the act to remove the provision for funding contract support costs separately from and in addition to a program's direct costs and instead provide a single, consolidated contract amount; (14) each of the alternatives has advantages and disadvantages; (15) three of the four alternatives have the advantage of controlling future increases in contract support costs; and (16) a disadvantage of these same three alternatives is that they would require legislative changes to the funding provisions of the act.