Analysis

Feds' Plan For Tribal COVID-19 Funding Poses Problems

By Andrew Westney
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Law360 (May 6, 2020, 11:02 PM EDT) -- The U.S. Treasury Department's move this week to send out a large portion of $8 billion in funding to combat the coronavirus pandemic is providing a long-awaited boost to tribes, but the structure of the department's plan raises concerns about what exactly the funds will cover, how much Alaska Native Corporations may be allotted, and the potential for more delays in receiving the remaining money, experts say.

After missing a deadline to distribute the $8 billion in direct tribal funding under the $2 trillion Coronavirus Aid, Relief and Economic Security Act, the Treasury Department finally announced Tuesday that it would start paying out $4.8 billion of the money, with the other $3.2 billion to be distributed later based on different criteria.

The weeks since the March 27 enactment of the relief bill have taken a harsh toll on the tribal governments expecting the funds, as the delay made purchasing equipment to fight the pandemic more difficult, according to Bay Mills Indian Community Chairman Bryan Newland.

"It's not even to not have the money itself, it's to not know what our share is," said Newland, contrasting the late delivery of the funds to tribes to the much quicker delivery of funds to states and local governments.

"This is classic federal government treatment of Indian Country, which is to say, 'Catch up with the rest of us with both your arms tied behind your back and your legs tied together,'" he said.

And while getting some of the money and more information about the department's plan was a step forward, experts say, the plan raises as many questions as it answers, particularly around the department's two-tiered approach to allocating the money.

With tribes suing to challenge the inclusion of Alaska Native Corporations in the distribution as well as to force the department to pay out the money right away, the larger legal question "is going to be the extent of Treasury's discretion to rely on data that they see as appropriate, versus what Congress really intended as a direction to rely on [tribes'] expenditures [to fight the virus]," said Monte Mills of the Alexander Blewett III School of Law at the University of Montana.

Under the plan, the initial $4.8 billion distribution from the relief bill's "tribal stabilization fund" will be based on tribal population information used for the Indian Housing Block Grant, with at least $100,000 going to each tribe, Treasury said.

The other $3.2 billion will be distributed based instead on the number of employees of each tribe and their businesses, as well as each tribe's expenditures to deal with the coronavirus outbreak.

And in the meantime, Treasury said it will withhold an unspecified part of the funding for Alaska Native Corporations "until pending litigation relating to their eligibility is resolved," after a D.C. federal judge issued an injunction April 27 preventing the government from sending any of the relief funds to the ANCs but stopped short of awarding federally recognized tribes all the money.

But neither of the department's separate formulas for the two distributions aligns neatly with the law's directive that the funds be used to pay for expenditures related to fighting the coronavirus pandemic, and could create imbalances in how tribes — and potentially ANCs — are awarded funds, experts say.

Treasury said Tuesday that the population standard for the first distribution should "correlate reasonably well" with tribal expenditures, which won't be fully known until the end of the period covered by the funding in December, and said using that familiar standard would make it easier to get funding out to tribes.

However, the impact of the pandemic "is broader than just focusing on numbers in terms of population," and more directly measuring tribes' expenditures might make for a fairer allocation of the funding, said Hogan Lovells partner Hilary Tompkins, a Navajo Nation member and former U.S. Interior Department solicitor.

And using the population data from the Indian Housing Block Grant program as a number well-known to tribes begs the question of why Treasury requested additional population information from tribes when they applied for the funding, attorneys say.

The formula may also give extra weight to the largest tribes in terms of membership, with the top five tribes in the first distribution expected to receive nearly $1.5 billion of the $4.8 billion, while many smaller tribes will receive the $100,000 minimum.

That doesn't necessarily correspond well with what each tribe is paying to fight the coronavirus or to tribes' economic impact, especially smaller-population tribes that operate successful casinos such as those in Southern California, experts say.

The Treasury Department presented the second, $3.2 billion distribution as a way to address tribal businesses' concerns, saying employment data would approximate costs businesses incur from supporting the unemployed or revenue losses from casino shutdowns or other closures.

But that additional distribution may not fully address the economic losses to tribes, which rely on their businesses to fund government services, or recognize their status as economic engines in their communities, said Jonodev Chaudhuri, chair of Quarles & Brady LLP's Indian law and policy group and former chairman of the National Indian Gaming Commission.

And the overall fund is itself far short of making up for the damage to tribal business from the pandemic, including the effect on some $34 billion in yearly gross revenues from tribal gaming alone, he added.

"$8 billion is an important start, but it still doesn't completely capture the lost economic impact that Indian Country and Indian Country's neighbors are currently suffering," said Chaudhuri, a member of the Muscogee (Creek) Nation.

While Treasury said it hasn't decided yet how much weight to give employment data along with tribes' expenditure data, Donald R. Pongrace of Akin Gump Strauss Hauer & Feld LLP, who represented three tribes and the Native American Finance Officers Association on an amicus brief in the ANC-related litigation, said the department should keep its focus on expenditures.

"I continue to believe that if they require additional data from tribes, they should ask tribes for an estimate for what they believe their increased expenditures are, including lost revenues from government budgets," Pongrace said. "That would answer their dilemma, by making tribes the ones who are responsible for self-certifying that they are coming up with the correct numbers."

ANCs appear not to be included in the first distribution of funds to tribal governments, but the Treasury Department has made clear that it intends to retain money that it believes the ANCs qualify for — which could be a significant share of the second distribution, given the large numbers of employees many ANCs have, particularly the Alaska Native Regional Corporations, experts say.

But before federally recognized tribes and ANCs alike can even grapple with that issue, Treasury has to complete that calculation, and it hasn't given a concrete timetable to do so.

With the department already having exceeded the April 26 deadline in the relief act to distribute all of the $8 billion, "they seem prepared to hold back [the second batch of] funds as long as possible," Newland said.

If the delay for the second distribution drags on, the question becomes whether the courts will light a fire under Treasury to move the process forward, attorneys say.

The Agua Caliente Band of Cahuilla Indians in California, the Ak-Chin Indian Community in Arizona and other tribes have asked the same D.C. federal judge presiding over the ANC-related suit, U.S. District Judge Amit P. Mehta, for a writ of mandamus to force Treasury Secretary Steven Mnuchin to immediately disperse the full $8 billion in coronavirus relief funding promised to tribes.

While the department recently countered that the tribes hadn't shown the delay was so egregious that mandamus was warranted, that stance could become harder to defend, experts say.

Federal agencies generally have a good deal of discretion in their decision-making, and Treasury pointed to the emergency nature of the relief bill to back its authority to decide the right way to distribute the funds, according to Holland & Knight LLP partner James T. Meggesto.

But now Judge Mehta "is going to have to balance the department's stated goal of being accurate with the need and the urgency implicit in the statute," said Meggesto, a member of the Onondaga Nation of New York.

The department "will be on very precarious grounds if they delay much further," Tompkins said. "Mandamus is a really rare form of relief, but given the scale of this pandemic and its impact on the economy and on the health and welfare of tribal citizens, I do think that those circumstances could give rise to a court saying you need to distribute these funds sooner rather than later."

--Editing by Brian Baresch and Breda Lund.

For a reprint of this article, please contact reprints@law360.com.

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