Volume 8, Fall 2001

California Makes Distribution of Revenue Sharing Trust Fund

On August 29, 2001, the State Controller's office began sending checks to California Tribes eligible for distributions from the Revenue Sharing Trust Fund (RSTF), to which California gaming Tribes have contributed over $39 million. 85 of the 109 federally recognized Tribes in California – those that have either small or no gaming operations – will receive checks that will provide these Tribes with funds to help meet the critical needs of their communities. Tribes will manage the RSTF distributions in a variety of ways, including providing per capita distributions of direct cash benefits.

CILS is working with a number of Tribes to make sure that per capita distribution of RSTF monies results in real benefits to tribal communities and their members. With planning tailored to the unique circumstances of each Tribe, RSTF distributions can provide much needed additional resources to tribal communities, rather than simply replace various forms of state or federal assistance that individual members may be receiving. The following information on various aspects of RSTF may be helpful to all Tribes and their members in assessing the creation of per capita distribution plans.

Per Capita Distributions May Jeopardize Members' Access to Public Benefits

Many California Indians receive public benefits from various tribal, state, and federal sources, agencies, and programs. When making decisions about the management of RSTF, Tribes must be aware that per capita distributions may affect their members' access to these vital public benefits programs.

For example, per capita distributions, even if small, may jeopardize tribal members' eligibility for the state- and county-run welfare program for families (CalWORKs), the Bureau of Indian Affairs' General Assistance program, California-based tribal TANF programs, Supplemental Security Income, Veterans Benefits, and Medi-Cal. Each of these public benefits programs has limits on the amounts of income and assets a recipient may have and remain eligible for the program.

How a per capita distribution would affect tribal members' eligibility for various programs depends on the specific laws and regulations governing each program. In general, however, per capita distributions paid from RSTF monies would be counted dollar-for-dollar against the money provided by public benefits cash grants.

Individual members and households within a Tribe are likely to receive varying amounts of cash assistance from public benefits programs, thus the consequences of per capita distribution of RSTF monies will vary among those individual tribal members and households.

Per capita distribution of RSTF monies may result in an individual tribal member's income remaining exactly the same as it would have been without the RSTF distribution, while another member of the same Tribe receiving the same per capita distribution may suffer an overall loss of income due to the loss of services that previously accompanied their cash benefits from the county or state.

Table 1 (above) provides several examples of the various effects a per capita distribution by one Tribe may have on its tribal members depending upon the tribal members' benefits before a per capita distribution. Detailed explanations of the first two examples follow.

In the first example, a tribal member was receiving $300 per month in cash benefits and $150 per month in related program services such as child care subsideies, health care, or transportation assistance. The tribal member then receives a $200 per capita distribution from the member's Tribe. That member's CalWORKs grant would be reduced dollar-for-dollar for the $200 tribal per capita distribution and the tribal member would be eligible to receive only $100 in cash benefits from CalWORKS for that month. The member would continue to receive a total of $300 in cash benefits for the month, but instead of CalWORKS providing all $300, $100 would be provided by CalWORKS, with the remaining $200 being provided by the Tribe. The member would also continue to receive the $150 per month in services.
There is neither a gain nor a loss of income for this individual tribal member. On the other hand, the tribe has replaced the money provided to the tribal member by CalWORKS with money from the Tribe's RSTF distribution, resulting in a net gain for the county welfare office, but none for the individual tribal member or the tribe.

Another example of a potential effect of per capita distribution of RSTF monies involves a tribal member whose CalWORKs cash grant was $200 per month and who received $150 per month in services and will now receive a $200 per capita distribution from the member's Tribe. The member's cash assistance from CalWORKS would be reduced dollar-for-dollar for the $200 tribal per capita distribution, eliminating the cash assistance from CalWORKS and causing the member to become ineligible for the program.

In addition to the loss of cash assistance, the member would become ineligible for the $150 per month of the program's related benefits or support services. The tribal member would then have to pay $150 per month to continue any services he or she had been receiving in conjunction with the member's CalWORKS grant.

In this case, the combined value of the cash assistance and related services the member had been receiving would far exceed the value of the per capita distribution, and the tribal member would actually have been better off without the distribution.

Per Capita Distributions May Have to be Reported to Public Benefits Programs

Typically, each public benefits program – such as CalWORKS, Medi-Cal, Veterans Benefits, etc. – requires recipients to report their income on a monthly or quarterly basis. The programs require recipients to fill out certain forms to report their income to the program. A per capita distribution would have to be reported as income during the month the tribal member received it.

If a tribal member does not report a per capita distribution from the RSTF money, the member may become liable for the overpayment of the benefits program, and various penalties may be incurred or termination of eligibility may result.

If a tribal member is receiving cash assistance and is the recipient of an RSTF distribution larger than the amount of one month's cash assistance, the member may lose their eligibility for cash assistance for several months.

Per Capita Distributions Are Not Considered Exempt Income Under Federal Law

There are certain federal exemptions that apply to unique kinds of income received by Indian people. For example, federal law provides that income received from an individualized interest in trust land, up to $2000 a year, may not be considered as income or resources for federally-assisted programs (25 U.S.C. § 1408). Unfortunately, this exemption does not apply to per capita distributions.

Likewise, up to $2,000 of per capita payments distributed by the federal government from Indian judgment claims may not be considered as income for federally-assisted programs (25 U.S.C. § 1407). This exemption does not apply to general per capita distributions from tribal assets, only to those payments made by the federal government in specific circumstances. Existing law indicates that per capita distributions from the RSTF must be considered income.

There is a new proposal pending in Congress that would, for certain designated programs, the first $5,000 per year of per capita distributions received by tribal members over the age of 50. Tribes may wish to monitor the course of this legislation and, if it looks like it might pass, delay issuing per capita distributions until such time as the new law controls.

Per Capita Distributions Are Subject to Federal Income Tax

Like most income per capita distributions of RSTF is subject to federal income tax. Withholding arrangements should be made before per capita distributions of RSTF are made, or tribal members may be subject to penalities for late payment of their taxes. Various reporting requirements may apply to both the Tribe and the individuals receiving distributions.

Responsibility for state income tax must also be considered. Whether an RSTF per capita distribution is subject to state income tax depends on the particular situation of the recipient.

Within Certain Limits, Tribal Governments Can Tailor Tribal Programs to Preserve Their Members' Eligibility for Public Benefits Programs

It is possible, within certain limits, for Tribes to tailor their tribal programs to reduce the impact of per capita distribution of RSTF money on tribal members' eligibility for public benefits programs, as well as minimizing the tax consequences of such distributions.

CILS is currently working with several tribal clients to assist them in implementing appropriate systems. Each Tribe's unique circumstances require individualized assistance.