Skooter McCoy, general manager of the nonprofit Cherokee Boys Club, knows all too well the impact per-capita payments from the Eastern Band of Cherokee’s Harrah’s casino in North Carolina has had on tribal children, including his son, Spencer.
“If you’ve lived in a small, rural community and never saw anybody leave, never saw anyone with a white-collar job or leading any organization, you always kind of keep your mindset right here,” McCoy told Wired magazine.
“Our kids today—the kids at the high school—they believe the sky’s the limit. It’s really changed the entire mindset of the community these past 20 years.”
Tribal government gaming exploded into a $32.4 billion industry with passage of the Indian Gaming Regulatory Act (IGRA) of 1988, enabling American Indian tribes to grow and strengthen their governments and diversify their economies.
But a somewhat controversial aspect of IGRA remains the direct disbursement of casino revenue to tribal citizens, referred to as per-capita payments. Some Cherokee children call it “big money.”
Payment Processing
Of the approximately 370 tribes in the lower 48 states, 242 tribes operate government casinos, according to the National Indian Gaming Commission (NIGC), generating revenue largely used to provide community infrastructure, health care, housing, education and other services.
About 130 of those gambling tribes also issue per-capita payments to their citizens, according to the Department of the Interior’s Bureau of Indian Affairs.
Per-capita is a non-issue for large tribes on primarily rural reservations in the Midwest and Great Plains and the massive Navajo Nation, which spans parts of Arizona, New Mexico and Utah. Those tribal casinos are primarily marginal operations intended to generate jobs rather than revenue. Tribal enrollments are too large to justify per-capita payments.
But annual per-capita payments can easily run into five, six and even seven figures for the more lucrative, small-enrollment tribes in urban areas such as the Mashantucket Pequots in Connecticut, the Shakopee Mdewakanton Sioux of Minnesota and the Pechanga, Santa Ynez and San Manuel Indian bands in Southern California.
Modest per-capita payments of $1,000 to $2,000 a year have provided marginal and low-income families with subsidies to make rent, mortgage and car payments and obtain other household necessities. Larger payments from the more lucrative casinos have enabled tribal citizens to launch businesses, create investment portfolios and engage in entrepreneurialism.
“It’s not only helped us with economic stipends each month, but it has given us cause to hope and dream and plan,” a tribal elder for the Dry Creek Rancheria Band of Pomo Indians told a Harvard University research team.
Negative Reaction
But critics regard per-capita as a form of welfare, sapping the initiative of indigenous citizens to complete their education and seek out jobs and economic opportunity. Some blame per-capita payments for drug and alcoholic abuse.
Many tribal leaders criticize the payments for depleting gambling revenue that would otherwise be used for government programs and tribal business enterprises.
And per-capita payments have been blamed for negatively impacting community politics and creating an epidemic of tribal disenrollment.
A number of respected tribal leaders have been ousted for decisions impacting per-capita payments to tribal citizens. As many as 81 tribes have purged membership rolls, presumably to increase casino payments, although some contend determining citizenship is a function of a maturing tribal government.
“Per-capita is the most formidable political force in Indian Country right now,” says tribal attorney Gabriel Galanda, a citizen of the Round Valley Tribe of California. “There are examples of tribes unable to get a quorum of the membership to vote in an election without offering a per-cap payment at the door.
“It is a massive influence in Indian Country,” Galanda says, “and not in a good way.”
“Tribal economies and lifestyles built on per-capita payments have almost no chance of long-term sustainability,” Lance Morgan, CEO of Ho-Chunk Inc., a subsidiary of the Winnebago Tribe of Nebraska, told Harvard researchers. “This new form of welfare is just the latest in a cycle of dependency that Indian Country has been trying to break out of for over 100 years.”
By any measure, per-capita payments are a highly complex issue. Assumptions cannot be easily made.
It will be a topic of discussion at the annual conference of the Native American Finance Officers Association (NAFOA) meeting April 14-16 in Portland, Oregon.
“Do per-capita payments provide needed support and help build a local economy or do they undermine culture and tradition by servicing individuals over the community and providing cash payments in lieu of jobs?” the conference agenda states. “With the benefit a few decades of experience and hindsight, our panelists will explore the often-contentious issue of distributing revenue to members/citizens.”
NAFOA Executive Director Dante Desiderio, a Sappony citizen, said the per-capita discussion “should be brought out in the open for leadership to discuss and work together toward a balanced stewardship of a healthy and sustained government while meeting citizen interests.”
But the session will be closed to the press.
“That’s how sensitive this is,” says a tribal official who requested anonymity. “Tribal leaders know they need to talk about it. They’re happy NAFOA is taking it up. It’s an issue we need to address. But it needs to be discussed in private.”
“It’s a very complicated issue,” says Rosebud Sioux Joe Valandra, managing director of VAdvisors and former NIGC chief of staff. “And it becomes very emotional.”
Per-capita Politics and Policy
The emergence of tribal gambling has provided Indian communities with discretionary income, many for the first time in their history. It also has created the need to make major government and public policy decisions.
For example, should casino revenue be used for the welfare of the entire community, building governmental infrastructure, launching business enterprises and providing health care, housing and social services?
Or should the funds go to individual families who are most in need? About 40 percent of indigenous Americans live on economically depressed reservations where poverty is rampant and unemployment can range from 40 percent to 60 percent or higher.
“Per-capita payments help citizens meet urgent needs. Many reservation populations are poor, and individuals and families are chronically short of cash,” wrote the Native Nations Institute and the Harvard Project on American Indian Economic Development in a 2007 policy paper.
But “channeling all tribal revenues into tribal government encourages the idea that it is the government’s job to provide for all the needs of its citizens—a form of dependency,” the report goes on to say. “Tribal citizens are shareholders in the tribal estate. This is their money. It should be given to them.”
Others argue that jobs, housing, education and health care are items most aptly provided by well-funded and administered tribal government programs.
“Per-capita payments draw away resources that should be invested in such services, making it harder to provide them to citizens,” Harvard researchers say.
The per-capita inequality is glaring. Although most tribes keep their financial information a closely guarded secret, the Shakopee Mdewakanton Sioux per-capita is believed to be approaching $1 million a year.
Meanwhile, the Blackfeet Nation in Montana sets aside a $75 per-capita payment at Christmas for its 17,000 members to buy presents without going into debt.
The roughly 16,000 members of the Eastern Band of Cherokee receive about $12,000 a year. The Mississippi Band of Choctaw Indians, with about 11,000 members, limit per-capita in their tribal-state compact to $1,000 per year.
Disbursements To Minors
Per-capita payments to minors are generally held in trust until the child reaches the age of 18. Depending on the tribe and amount of per-capita, the person could at that age collect a sizable sum.
Fears young adults receiving large disbursements would lapse into idleness and drug abuse apparently have not materialized to a great degree. Studies show dropout rates for students with the Eastern Band of Cherokee improved when their families began receiving income subsidies.
But there is anecdotal evidence of increasing high school dropout rates tied to large per-capita payments.
“After we started per-capita payments (of $2,000 per month) it seemed everybody lost motivation,” a Southern California tribal leader told Harvard researchers. “We had a high dropout rate, around 85 percent.”
According to studies—most notably a 2010 report by Duke University Medical School for the National Institute of Health—young Native American adult recipients of income subsidies encounter few psychiatric disorders. But there have been incidents of violence linked to drugs and gangs on a handful of California reservations with lucrative casinos.
Modest per-capita payments normally are used to pay off debts and nominal household expenses. Research suggests that mental health issues and socially damaging behavior for school-age children increase with the excessive accumulation of wealth.
The First Nations Development Institute encourages crafting per-capita distribution programs to promote education, savings and investment programs. Some tribes require the recipient to undergo financial training. Others require incremental payments over a period of time.
“Considering the potential for negative consequences of children coming into one-time moderate-to-large amounts of capital as young adults, ages 18 to 25 years, it is a profound responsibility to assist youth to better understand the economic choices they have gained through accounts established by tribes for their futures,” Karen Edwards and Sarah Dewees write in “Developing Innovations,” a study for the Native Assets Research Center.
“Many children in tribes today do not remember historical ‘hard times’ and do not have a point of reference as to what life was like when their parents, grandparents and ancestors had to sacrifice just so their children would survive shortages of food, shelter and other basic necessities,” Edwards and Dewees write.
An Alternative To RAPs
IGRA requires that tribes seeking to make per-capita payments submit a revenue allocation plan (RAP) to the Department of the Interior for approval. The RAP must ensure the tribe has adequate funding for its tribal government, tribal economic development and donations to charitable organizations and local governments.
In addition, the RAP must include information and criteria for accounting of disbursements as well as dispute resolution and utilization or creation of a tribal court system.
The primary criticism of per-capita is its divisive impact on politics and the fact it diverts revenue from government, social services and economic development programs.
Per-capita payments to individuals are subject to taxation. But the Tribal Welfare Exclusion Act of 2014 states that tribal government payments to citizens for certain benefits—such as health coverage, housing, elder care, education and cultural programs—are exempt from taxation.
“Tribes are currently weighing a recent alternative,” Desiderio says of the Welfare Exclusion Act. The legislation, Desiderio says, “offers a way to provide programs and services that are exempt from income taxes, making them attractive alternatives to individual distributions for both the government and the individual.”
The demand RAPs place on the funding of tribal government programs can also impact bank underwriting of tribal debt.
“The decision to continue or increase per-capita payments is not without consequences,” Desiderio says. “Banks and rating agencies may weigh the per-capita obligations when underwriting loans or assigning credit scores. So the decisions may impact future growth.
“With the benefit of a few decades of experience and hindsight, our panelists will relate their experiences, lessons learned, and what issues may be in store for the future,” Desiderio says. “For example, with slowing revenue from a mature gaming industry and an exploding youth population, how do tribes meet future expectations? We will also look to the academic community to weigh community impacts.”
A Critical Review
The architects of IGRA regret the negative impact per-capita payments have had on tribal politics and enrollment. Individual disbursements were not a controversy when the act was passed because tribal government gambling was not expected to become a billion-dollar industry.
“There was no argument for or against it (per-capita payments),” says Alex Skibine, an Oklahoma Osage and University of Utah law professor who served as deputy counsel for the House Committee on Interior and Insular Affairs when IGRA was drafted. “There was no real debate. We wanted to include some kind of limits to control the tribes’ spending. We wanted to make sure the needs of the tribe were met.”
“I put the provision in there,” says Frank Ducheneaux, an Oglala Lakota and legal counsel to Interior and Insular Affairs. “The concern at the time was the taxability of the payments.
“I never imagined a tribe would disenroll people solely on the grounds they didn’t want them to have per-capita distributions. Disenrollment wasn’t a big issue back then.
“I’m opposed to disenrollment, particularly when it’s related to per-capita. I don’t like it. Tribal membership can be a valuable right,” Ducheneaux says. “But I don’t think the federal government can tell a tribe it can’t make per-capita payments out of its gaming revenue.”
“Frankly, we did not forecast how successful some of those casinos would become and how fast it would occur,” Skibine says. “We didn’t know the economics of gaming, the way it was going to develop.
“If you look at some of the big tribes in the Midwest and Great Plains, they may never meet the needs of their tribal members,” Skibine says, a Department of Interior requirement before a tribe can issue per-capita payments. “We didn’t realize a lot of the more successful tribes would be the very, very small enrollment tribes in urban areas. We didn’t think in those terms.
“Those are the ones who became the most successful the quickest. They are able to meet the needs of the tribal members very quickly,” largely because government and social services are provided by non-Indian communities.
“We didn’t think issuing a per-capita was going to be that easy,” Skibine says.
Looking to the Future
“I am not a fan of per-capita payments. But I would also defend the right of tribal governments and tribes and their communities to make those decisions for themselves,” says Bryan Newland, chairman of the Bay Mills Indian Community of Michigan and a former counsel with the Department of the Interior.
“I would never want the federal government as a matter of federal policy to say, ‘Hey, you can’t spend your gaming revenues that way.’
“But I think it leads to a lot of complex political problems in a lot of tribal communities. It can create all kinds of problems for tribal governments and tribal communities.
“But if you have all of your nation-building done along with your operating infrastructure and government, and you’re meeting the needs of your community, what else are you going to do with the revenue?
“If you are a seasonable employee or you’re disabled or retired or you’re a minimum-wage worker, even $1,000 a year makes a big difference. When you ask me about how I feel about per-caps, I say they are a double-edged sword.”
Many tribal leaders pursuing economic and governmental expansion and diversification may rue the day they approved a per-capita payment plan. Amending a RAP can be a politically volatile endeavor.
“The political issue for most tribal leaders is once you start a RAP you can never stop,” Valandra says. “Yet, what if economic circumstances change and as a tribe you don’t have the revenue you once had? What do you do?
“When you get into guaranteed income, people depend on it. If something happens and the tribe can no longer maintain the payments, not only is it a political death knell for the current administration, but it has a lot of ramification for the tribal economy.”
“The thing about a per-capita is once you put them out there, they can only increase, politically,” Skibine says. “Anybody wants to freeze them, they’ll get voted out of office.”
“A lot of tribes throughout the country have built successful businesses, particularly those that haven’t chosen to allocate most of their gaming revenue to per-capita distributions, but have instead chosen to build tribal assets,” says Kristi Jackson, chairman of TFA Capital Partners, an investment banking firm servicing tribal and commercial gambling and leisure industry clients.
“Those tribes that do say that if you can, politically, don’t initiate a per-cap. It’s interesting to hear that perspective.”
