Analysis

Federal Virus Relief Snags Bedevil Tribes' Recovery

By Andrew Westney
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Law360 (June 26, 2020, 5:37 PM EDT) -- The U.S. Department of the Treasury's vexed handling of $8 billion in COVID-19 relief has made it harder for tribal governments to cover their health expenses and try to restart their businesses, putting pressure on the department to better advise tribes trying to determine where they can spend the money before an end-of-year deadline, experts say.

The department's distribution of $8 billion in direct tribal government funding under the CARES Act coronavirus relief bill drew lawsuits from several groups of federally recognized tribes, challenging a delay that lasted long past a 30-day statutory limit to send out the money, the planned inclusion of Alaska Native corporations in the payout, and the use of federal housing data that may not closely reflect tribes' actual populations.

Pechanga Band of Luiseño Indians tribal chairman Mark Macarro said he and his tribe were "astounded" by the amount of funding specific to tribes in the law but added, "This is probably one of the least clear deliveries of federal dollars that there really ever has been."

Some of the money was distributed based on the housing data starting in early May, but not knowing when all the funds would become available made it more difficult to cope with the sudden revenue loss from the mid-March shutdown of the tribe's Pechanga Resort Casino in southern California, and played a role in the tribe's decision to reopen the casino again on a limited basis on June 1, according to Macarro.

"What did help push us along was the lack of certainty of the funding not having been received from Treasury, the delay and the big unknown," Macarro said. "And frankly, the fear that the amount received at that point by my tribe and many others in California because of our small populations was so paltry, were we even going to see anything that approached a level of helpfulness in the next round of distribution under CARES? And a lot of tribes said, 'You know what, we need to get open.'"

"It might have made a difference of a month — maybe we could've looked at July instead of June," Macarro added, noting that when the decision was made, the virus also appeared to be ebbing in the region of the casino, which is on the tribe's land in Temecula, California, north of San Diego and southeast of Los Angeles.

And even with most of the funds finally being delivered by late June, Treasury's lack of specificity about just what the funding is meant to cover could mean tribes won't get reimbursed for everything they spend it on, which they must do in the short window before the end of 2020, experts say.

The $8 billion "stabilization fund" to support tribal governments was hailed as a historic step for tribes when the relief bill was passed, as they had been left out of previous major federal relief packages like those passed after the 2008 financial crisis, according to Jennifer H. Weddle, co-chair of Greenberg Traurig LLP's American Indian law practice.

The large amount of direct funding to tribes and the ability to compete for more was "unprecedented and really once in a lifetime," Weddle said.

But the promise of quick relief under the law was muddled when Treasury missed its April 26 deadline to distribute all of the funds — drawing a suit from the Agua Caliente Band of Cahuilla Indians and others — and complicated by its controversial plan to include Alaska Native corporations that caught many tribes unawares and prompted an injunction against payments to ANCs in an ongoing suit brought by the Confederated Tribes of the Chehalis Reservation and others.

And the Prairie Band Potawatomi Nation and the Shawnee Tribe have argued in separate suits that Treasury's distribution was unbalanced by its use of Indian Housing Block Grant data to make an initial $4.8 billion distribution rather than the population data provided directly by tribes, contending they were shortchanged while other tribes received larger shares.

"That strict adherence to population never works well for Indian Country, particularly for California tribes," said Macarro, who said that "one of the ironies" of the pandemic is that his tribe's population has historically been "absolutely decimated by disease."

But the tribe's casino is now a major economic engine in southern California, generating over $1.1 billion in economic activity every year, and "when we went offline, that disappeared, and thousands of people were laid off," Macarro said.

And the combination of the funding delay and some tribes receiving less money than expected has made a tough situation tougher for tribes scrambling to handle the pandemic, experts say.

"Tribal leaders have gone from thinking about many complex governmental decisions in a day to spending 95 percent of their time on COVID-related issues," Weddle said.

Miriam Jorgensen, research director at the Native Nations Institute and the Harvard Project on American Indian Economic Development, said the immediate pressures of the pandemic are making it difficult for tribes to make plans to deal with similar future problems.

"Tribal governments are doing what many other governments are doing — looking for places where they can cut, slow down, delay and defer," Jorgensen said. "And many of those things end up being effective in the short term, but they're often one-off types of savings, and that puts a premium on figuring out the CARES Act and future legislation."

That means that tackling issues that have made many tribes especially vulnerable to the coronavirus pandemic, such as a lack of access to clean water, crowded housing, long distances from health care facilities and a lack of broadband in rural areas, may get less attention — particularly since tribes only have until the end of the year to try to spend the money they do get, Jorgensen said.

The "biggest disappointment" with the law has been the lack of economic recovery elements, which have been "virtually nonexistent," Weddle said.

Although tribal casinos successfully campaigned to access the Small Business Administration's Paycheck Protection Program after initially being denied, the PPP funding "only lasts so long," and the Main Street Lending Program has fizzled for tribes as it has proven too risky for banks, she said.

"A big challenge for tribes now is, how do they finance through recovery, or through a second wave [of the pandemic] if they have reopened and have to send their employees home again?" Weddle said.

Now that the remaining $3.2 billion in tribal CARES Act funding has mostly been distributed based on employment and expenditure information, the Treasury Department is under pressure to bring the kind of transparency to its guidance on how to spend the CARES Act money that it didn't show in its distribution, experts say.

"One of the fears I hear from tribes throughout the nation is that some tribes maybe are going to run afoul of what the guidance is intended to be," Macarro said, calling for Treasury to exercise some leniency for "pockets of Indian Country that are feeling desperation."

Macarro pointed to the Cheyenne River Sioux Tribe's coronavirus highway checkpoints that led to a standoff with the state and federal governments, as well as a lawsuit by the tribe Tuesday saying Bureau of Indian Affairs Assistant Secretary Tara Sweeney retaliated against the tribe by threatening to seize a tribal law enforcement contract.

The cost of maintaining those checkpoints is "directly related to COVID-19," but "will Treasury allow all of that to stand or not?" Macarro added.

One option for tribes could be to seek waivers of limitations Treasury may seek to put on use of the COVID funds, based on a May 19 executive order from President Donald Trump that called for the federal government to back off regulations that could hurt businesses' recovery from the pandemic, Weddle said.

"I would posit that any bureaucratic requirements that may be getting in the way of your public health recovery, which are the foundation for your economic recovery, absolutely there's authority to waive those," she said.

The Heroes Act, a $3 trillion package put forward by Democrats in mid-May, could be the vehicle to provide not only more relief for tribes — some $24 billion as originally proposed — but also to make the process more straightforward, experts say.

Jorgensen said that the new law should reduce the Treasury Department's leeway in choosing data to base its allocations on, and give tribes more time and discretion to spend the funds they receive.

And the new law could counter Treasury's lack of expertise in dealing with tribes by appointing a special master with a better grasp on the appropriate data to use, as well as providing lower-cost loans and better incentives for banks to lend to tribes, Weddle said.

Treasury could also "save a lot of heartache" by relying on data that has been self-certified by tribes — like the population data Treasury first requested and then discarded in favor of the IHBG metric, Macarro said.

"That was supposed to be the case with CARES, and then it was like they didn't believe it," he said. "If that can be done in Heroes, that will ensure the obscure, inaccurate population data Treasury used is off the table."

He said he accepts that the department performing an audit of how any COVID-19 relief funds are spent is just part of the process.

"But Treasury has already shown an inclination to move the goalposts here and there," Macarro said. "So there's a wariness."

--Editing by Philip Shea and Brian Baresch.

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

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