The U.S. Supreme Court on Monday agreed to hear a dispute over a federal funding policy that tribes say is costing them hundreds of millions of dollars.

Lawsuits over contract support costs have been brought by a handful of tribes but the issue affects all of Indian Country. This year alone, tribes who manage federal programs will run up against a $142 million shortfall, according to estimates from the National Congress of American Indians.

"If the U.S. has a contractual relationship with anybody out there in the U.S., it honors those contracts," Ron Allen, the treasurer of NCAI and chairman of the Jamestown S'Klallam Tribe of Washington, said last month. "Today, the U.S. is not honoring the full contracts that it has with existing tribes."

Over the last 30 years, tribes have taken over programs previously managed by the Bureau of Indian Affairs and the Indian Health Service. But tribes have long questioned whether they are receiving enough support funds to effectively carry out the programs.

In a case brought by the Cherokee Nation of Oklahoma, the Federal Circuit Court of Appeals ruled that the tribe is owed full support costs for administering IHS programs. The unanimous decision, issued by a three-judge panel in July 2003, held the Department of Health and Human Services liable for failing to pay.

The ruling conflicted with an earlier one from the 10th Circuit Court of Appeals. A three-judge panel in November 2002 said the Cherokee Nation and the Duck Valley Shoshone-Paiute Tribe of Nevada will have to live with the funding shortages.

In agreeing to resolve the dispute, the Supreme Court consolidated both cases. The Bush administration at first opposed review of the 10th Circuit case but changed its mind after losing in the Federal Circuit.

The dispute is rooted in the landmark Indian Self-Determination and Education Assistance Act. The law, passed in 1975, authorizes tribes to enter into contracts to manage BIA and IHS programs.

The law dictates that tribes receive no less than the amount the government would have spent on the programs. It also requires the government to provide tribes with additional funds needed to carry out the contracts.

In briefs to the high court, the Department of Justice says the federal agencies are at the mercy of Congress when doling out the contract support costs. Government lawyers cite two limits: the amount Congress appropriates for the contracts; and a restriction on "reprogramming," or shifting other funds, to cover any shortfalls.

"Those limits reflect the fact that self-determination agreements are not government procurement contracts -- they are not purchases for the federal government," one brief stated. "Instead, they are governmental funding arrangements under which the tribes are substituted for a federal agency both in furnishing governmental services and in receiving federal funding for that purpose."

The Federal Circuit ruled that this line of thought wasn't an adequate defense for the Secretary of Health and Human Services, who oversees the IHS. "We cannot agree that the Secretary had discretion to refuse to reprogram to meet his contractual obligations," wrote Judge Timothy B. Dyk.

The 10th Circuit, on the other hand, deferred to agency discretion, which is based on the Congressional limits. "This court finds the contracts at issue are conditioned on the IHS having sufficient funding," wrote Judge Stephen H. Anderson.

Tribes have not had luck in pressing their views before the Supreme Court. Since 2001, Indian interests have lost the overwhelming majority of cases that reach the justices.

An avenue out of a potential negative decision is already being pursued by tribal leaders. NCAI is urging members of Congress to amend existing law in order to fund contracts fully.

"It is time to change the system for funding these government contracts," NCAI president Tex Hall wrote in a November 7 letter to the Senate Indian Affairs Committee and the House Resources Committee. "Indian tribes should no longer be treated as 'second class' contractors."

Lower Court Decisions:
Fed Circuit: Thompson v. Cherokee Nation (July 3, 2003) | 10th Circuit: Cherokee Nation v. Thompson (November 26, 2002) |

Relevant Documents:
Docket Sheet No. 03-853: Thompson v. Cherokee Nation | Docket Sheet No. 02-1472: Cherokee Nation v. Thompson | Department of Justice Petition No. 03-853 | Department of Justice Supplemental Brief No. 02-1472

Related Decisions:
9th Circuit: Shoshone-Bannock v. Thompson (October 16, 2001) | 9th Circuit: Navajo Nation v. HHS, No. 99-16129 (April 8, 2003)

Relevant Links:
Contract Support Costs, NCAI - http://www.ncai.org/main/pages/issues/
governance/contract_support.asp