The Legal Foundation
The Trust Responsibility
The federal government’s obligation to provide healthcare to tribal citizens is not discretionary. It is a trust responsibility — a legal duty established through treaties, the Commerce Clause, the Snyder Act (1921), and the Indian Health Care Improvement Act (1976, permanently reauthorized 2010).
IHS exists to fulfill this obligation. The funding IHS receives from Congress is not a grant to tribes — it is an appropriation to carry out a federal responsibility. When a tribe assumes operation of a health program under 638, it is taking over a federal function, not accepting a charitable award.
This distinction matters because it determines the compliance relationship. A 638 contractor or compactor is a governmental partner, not a grantee. The relationship is government-to-government, not grantor-to-grantee.
ISDEAA: The Self-Determination Act
P.L. 93-638, enacted in 1975, established that tribal nations can contract with federal agencies to operate programs that would otherwise be run by those agencies. The act has been amended multiple times, most significantly to add Title V self-governance compacts.
Key principles:
- •Tribal right to contract. A tribe’s decision to assume operation of a federal program is a right, not a privilege. The federal agency must approve a 638 proposal unless it can demonstrate specific grounds for declination (and the burden of proof is on the agency).
- •No diminishment of services. When a tribe takes over a federal program, the funding must be sufficient to maintain at least the level of services that the federal agency was providing.
- •Contract Support Costs. The federal government must pay the administrative overhead costs of tribally operated programs — costs that the federal agency would have covered through its own bureaucracy.
- •Self-governance flexibility. Under Title V compacts, tribes can redesign programs, reallocate funds across program lines, and retain savings for reinvestment.
Title I Contracts vs. Title V Compacts
Title I: Self-Determination Contracts
A Title I contract is the original mechanism under ISDEAA. The tribe contracts with IHS (or BIA) to operate a specific program or set of programs.
| Feature | Title I Contract |
|---|---|
| Scope | Individual programs (e.g., contract to operate a specific clinic or program) |
| Flexibility | Limited — must operate the program substantially as described in the contract |
| Funding | Program-specific allocation based on what IHS would have spent (the “Secretarial amount”) |
| Reallocation | Cannot move funds between contracted programs without approval |
| Reporting | More prescriptive — program-specific reporting per contract terms |
| Savings | Retained savings must be used for program purposes |
| Oversight | IHS retains more direct oversight of contracted programs |
| Governance | Tribal council must authorize the contract |
Title I contracts are suitable for tribes that want to operate specific programs while maintaining a closer relationship with IHS for technical support. They are less flexible but simpler to administer for programs with straightforward service delivery.
Title V: Self-Governance Compacts
Title V compacts represent the full expression of tribal self-determination in health program operation. A compact is a government-to-government agreement that transfers entire program operations to the tribe with maximum flexibility.
| Feature | Title V Compact |
|---|---|
| Scope | Comprehensive — all or most IHS programs for the tribe can be rolled into a single compact |
| Flexibility | Maximum — tribe can redesign programs, reallocate funds, and innovate |
| Funding | Tribal share + new/expanded programs + Contract Support Costs |
| Reallocation | Can move funds between program lines within the compact |
| Reporting | Negotiated reporting terms — tribe and IHS agree on what gets reported and how |
| Savings | Fully retained by the tribe for health-related purposes |
| Oversight | Reduced federal oversight — tribe is responsible for program outcomes |
| Governance | Tribal council authorizes the compact; Annual Funding Agreement (AFA) details specific terms |
Washington context: Virtually all Washington tribes operate under Title V compacts. Washington tribes — particularly the Jamestown S’Klallam Tribe under the leadership of W. Ron Allen — were national pioneers in the self-governance movement. The Tribal Self-Governance Demonstration Project (1988) and subsequent Tribal Self-Governance Act (1994) were championed by Pacific Northwest tribes.
Choosing Between Title I and Title V
For Washington tribes, this choice was made decades ago — nearly all have compacted. But for tribes in other states or for programs considering the transition:
| Factor | Title I Favors | Title V Favors |
|---|---|---|
| Administrative capacity | Smaller programs with limited admin staff | Programs with established finance and management infrastructure |
| Desire for flexibility | Programs that operate well within existing IHS parameters | Programs that need to redesign services for community fit |
| Reporting relationship | Programs that benefit from close IHS technical support | Programs that want to define their own metrics and reporting |
| Multi-program management | Single-program operations | Tribes managing multiple health programs that benefit from consolidated funding |
| Innovation | Standard service delivery | Programs incorporating traditional healing, non-traditional service models, or community-driven design |
Contract Support Costs
What CSC Are
When IHS operates a health program directly, it uses its own administrative infrastructure — payroll systems, procurement offices, financial management, HR, facilities management, IT. When a tribe takes over that program under 638, the tribe must provide all of those administrative functions. Contract Support Costs are the federal government’s obligation to fund those administrative costs.
CSC have two components:
Direct CSC: Administrative costs directly attributable to operating the 638 program — things like the program director’s salary, dedicated accounting staff, program-specific insurance, travel for program management.
Indirect CSC: The tribe’s negotiated indirect cost rate applied to the 638 program — covering the share of centralized tribal government administration (tribal council operations, central accounting, HR, IT, legal, facilities) attributable to the health program.
Why CSC Matter
CSC are not overhead padding. They are the cost of operating a program that the federal government would otherwise operate with its own bureaucratic infrastructure. Without full CSC, tribes must either:
- •Divert program funds from direct services to cover admin costs (reducing healthcare delivery)
- •Subsidize the federal program with tribal general fund revenue (the tribe pays for a federal obligation)
- •Decline to compact or contract (forgoing self-determination because of unfunded mandates)
For decades, all three of these outcomes occurred because Congress did not fully fund CSC.
The Supreme Court Rulings
Two landmark Supreme Court decisions established that CSC are a binding federal obligation:
Cherokee Nation v. Leavitt, 543 U.S. 631 (2005): The Court held that when the federal government enters into a 638 contract, the promise to pay CSC is a binding contractual obligation. The government cannot appropriate insufficient funds and then claim it is excused from paying.
Salazar v. Ramah Navajo Chapter, 567 U.S. 182 (2012): The Court held that CSC must be paid to each individual tribe in full — the government cannot cap CSC payments and distribute a pro-rata share when appropriations fall short. Each tribe’s contract creates an individual obligation.
Current CSC Funding Status
Following these rulings and sustained tribal advocacy:
- •IHS CSC has been funded through an indefinite appropriation since FY2016, meaning Congress appropriates “such sums as may be necessary” rather than a capped amount.
- •BIA CSC received similar treatment.
- •Settlement payments for historical CSC shortfalls were made to tribes — totaling billions of dollars collectively.
Despite the indefinite appropriation, disputes continue over CSC calculation methodologies, particularly for new and expanded programs. Tribes and IHS may disagree on the appropriate CSC amount for new programs added to a compact.
Tribal Shares and Secretarial Amounts
Tribal Share
The tribal share is the amount of IHS funding that would have been spent to operate the program if IHS had run it directly. This is the base funding in a 638 contract or compact.
Calculating the tribal share is an annual negotiation embedded in the compact’s Annual Funding Agreement (AFA). It includes:
- •The historical funding for the specific programs being assumed
- •Adjustments for inflation (though these have historically been inadequate)
- •Population growth adjustments
- •Any increases in the IHS base appropriation allocated to the Portland Area
New and Expanded Programs
Under Title V, tribes can propose new or expanded programs beyond what IHS was providing. This is one of the most powerful features of self-governance — it allows tribes to innovate beyond the scope of traditional IHS services.
New/expanded programs are funded from:
- •Tribal compact funding (reallocated from lower-priority programs)
- •New federal appropriations directed to specific program areas
- •Tribal general fund supplementation
The flexibility to reallocate and innovate is a key advantage of Title V over Title I. A tribe that identifies an unmet behavioral health need can redirect funds from a lower-priority program without seeking IHS approval for each budget change.
How 638 Differs from Competitive Federal Grants
This distinction is critical because most tribal health departments manage both 638 compact funds and competitive grants simultaneously. The compliance frameworks are different.
| Dimension | 638 Compact | Competitive Federal Grant |
|---|---|---|
| Legal authority | ISDEAA (P.L. 93-638) | Agency-specific authorizing statute + 2 CFR 200 |
| Relationship | Government-to-government agreement | Grantor-to-grantee |
| Compliance framework | Negotiated compact terms | 2 CFR 200 (Uniform Guidance) |
| Application process | Compact negotiation / AFA amendment | Competitive application (Grants.gov/NOFO) |
| Funding basis | Trust responsibility — not discretionary | Discretionary or formula — competitive |
| Reporting | Negotiated between tribe and IHS | Prescribed by awarding agency per NOFO |
| Audit | Single Audit applies (if >$750K federal expenditures) | Single Audit applies (same threshold) |
| Procurement | Tribal procurement code (must meet basic standards) | 2 CFR 200 procurement standards (more prescriptive) |
| Budget flexibility | Can reallocate across program lines | Must follow approved budget; changes require prior approval |
| CSC | Federal obligation to pay administrative overhead | No CSC — indirect costs covered by indirect cost rate within grant budget |
| Indirect costs | Covered by CSC (separate from program budget) | Charged to grant as indirect costs (reduces direct service dollars) |
| Period | Ongoing (annual AFA renewal) | Fixed period (typically 3–5 years), must compete for renewal |
| Ownership | The tribe is operating a federal program it has assumed | The tribe is a recipient of a discretionary award |
The practical impact: A tribal health director managing both compact and competitive grant programs must maintain two compliance mindsets. The 638 compact allows flexibility and is governed by negotiated terms. The SAMHSA grant requires prior approval for budget changes, prescriptive reporting, and adherence to 2 CFR 200. Policies and procedures that work for the compact may not meet the competitive grant requirements, and vice versa.
This dual compliance reality is the core operational challenge for tribal health programs expanding beyond 638 into competitive funding.
Implications for Grant Readiness
Understanding the 638 framework changes how readiness should be assessed for tribal health programs:
1. 638 compliance history is a qualification. A tribe that has successfully managed a compact for a decade has demonstrated financial management, program oversight, and organizational capacity. This should be recognized — not ignored — when evaluating readiness for competitive grants.
2. The compliance gap is documentation format, not capability. A tribal program operating under compact authority may lack a written procurement policy that cites 2 CFR 200.320 — not because it lacks procurement controls, but because compact terms don’t require that specific format. Readiness work for competitive grants is often a translation exercise, not a capacity building exercise.
3. Indirect cost rate is a structural factor. The tribe’s DOI-negotiated rate reflects real costs. In competitive scoring, this rate may be higher than a nonprofit competitor’s rate — not because of inefficiency, but because of geography, remoteness, and the cost of operating a governmental health system. Readiness tools should present this context, not flag it as a concern.
4. CSC and indirect costs are different mechanisms. Under compact, overhead is paid through CSC (separate from program dollars). Under competitive grants, overhead is charged as indirect costs within the grant budget (reducing direct service dollars). This distinction affects budget development and cost competitiveness.