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- By Chez Oxendine
- Economic Development
Native American economic well being can “spill over” into a tribe’s neighbors. That means that strong Native economies can provide nearby communities with more business and wider access to federal contracts.
That’s per research by the Center for Indian Country Development at the Federal Reserve Bank of Minneapolis. The Center hosted a webinar July 17 to discuss what the organization called “spillover” from surging revenues in tribal communities.
This spillover effect — while dependent on the type of Native business driving the revenues — could lead to improved economic well being not just for Natives, but non-Natives living nearby the affected communities, the CICD found.
Highlighting the interconnectedness, CICD Director Casey Lozar (Confederated Salish-Kootenai Tribes) pointed to his own tribe’s electronic manufacturing business, S&K Electronics Inc., as an example. The business, which is certified under the Small Business Administration's 8(a) program, participates in the federal contracting sector. S&K has created hundreds of jobs for both tribal community members and off-reservation residents, and has also created subcontracting opportunities for non-Native firms in the region, Lozar said during the webinar.
“There is a theme of connection and success through geographic place-based economic development,” Lozar said. “As a former board member and community member, I have witnessed firsthand the symbiotic relationship between tribally owned enterprises and local and regional economies.”
The webinar focused on two particular pieces of CICD research released in July: a paper on the spillover effects of the tribal gaming sector, and an article on spillover from federal contracting businesses. Indian gaming revenues topped $41 billion this year, while federal contracting has become the second largest tribal revenue driver, per Tribal Business News reporting.
The paper on gaming focused on renewed economic activity around casinos post-pandemic. The study found that hospitality and leisure businesses within a mile and a half of a reopened casino saw increased visitorship once the casino reopened. More generally, any businesses near a reservation saw an increase in visitors after casinos reopened.
“Our findings show that large-scale tribal Investments such as Indian casinos on reservations could be a catalyst for regional development,” CICD Senior Research Assistant Elliot Charette, one of the study’s authors and a member of the Lac Du Flambeau and Red Cliff Bands of Lake Superior Chippewa, said during the event. “This interconnectedness provides additional rationale and incentives for closer economic cooperation between tribal and state governments.”
By comparison, the CICD research on federal contracting found that a significant portion of money that flows through tribal federal contracting companies ends up with small businesses as subcontractors. In some cases, tribes will subcontract parts of a larger federal project to other small businesses due to their specialization or location.
In 2022, the CICD reported that the federal government awarded $16.6 billion in prime contracts to Native-owned businesses. Roughly 7.1%, or $1.2 billion, of that money went to other, subcontracted small businesses.
This practice can help small businesses continue to compete amid contract consolidation, the combination of smaller contracts into a larger one. Those consolidations can prove difficult bids for Native companies unless they use subcontractors to help in a wider range of competencies.
The process creates a cycle that allows Native companies to accept a wider variety of contracts and small businesses to acquire needed experience for their portfolios.
“Larger contracts are being awarded to bigger companies, and it’s harder for some businesses to compete,” said CICD Policy Assistant and article co-author Jacqui Baldwin-LeClair. “That’s why we wanted to look at that subcontracting connection — with subcontracting by Native-owned enterprises, we see those small businesses getting an opportunity to get experience, which is necessary to later acquire those larger contracts.”
Wider economic impact
The idea that tribal economic activities create positive impact is not new, of course. Many tribes have conducted economic studies to demonstrate the revenues they bring in for nearby counties, municipalities, or the states around them. A 2022 report found that Oklahoma tribes, in 2019, created $15.6 billion in economic activity across the state, according to a prior Tribal Business News story.
Cherokee Nation Businesses’ chief economist Tralynna Scott (Cherokee) told the webinar’s viewers that the spillover reports were proof of a positive relationship between tribal and local economic prosperity.
“The spillover is not strictly to Native-owned businesses or Native citizens, it's really a spillover effect to a variety of business owners and people,” Scott said. “This study shows that when tribes do well, everyone does well.”
Scott also noted that the surge in federal contracting activity for the Cherokee Nation was actually a spillover effect itself from a wildly successful gaming business. Scott said the cash flow from the tribe’s gaming operations helped kickstart federal contracting operations to diversify revenues.
“There’s a lot of tribes who have the opportunity to get into federal contracting this way, and I think that would be a good diversification plan,” Scott said.
Scott was joined during her segment by Randall Akee (Native Hawaiian), chair of the American Indian Studies Interdepartmental Program and associate professor of public policy at University of California Los Angeles. Akee said the research at the webinar’s core was an “evolution” of prior research on subjects like unemployment rates around tribal casinos.
With data like this under their belt, tribal communities can start having seats at the economic development table that weren’t available before, Akee said. In turn, this could impact policy discussions both on tribal and intergovernmental levels.
As an example, Akee pointed to a discussion about double taxation in the CICD’s paper on gaming operation spillover.In their paper, the research group noted that some businesses find themselves taxed twice - once by a state or county government, and once by a tribal government. These situations can dampen economic growth by impeding business development.
Showing the spillover that tribal prosperity can create in wider economic impact may lead those governments to solve the issue of double taxation, Akee said.
“We can see ourselves and our communities and our economies in the national picture, and start to assert ourselves in these discussions,” Akee said. “[Double taxation] is the kind of thing that can be spurred to change. I can really see this kind of mounting evidence for the repeat or rescinding of that type of policy that we know hinders economic growth.”
