Tribal entities remain resilient as COVID-19 batters their finances

Tribal governments and tribal enterprises continue to show distress due to the COVID-19 pandemic, according to findings from a new survey by the Center for Indian Country Development (CICD) at the Federal Reserve Bank of Minneapolis. September survey findings show continued cost increases and revenue declines for tribal governments, while tribal enterprises also report revenue declines. Conditions are not uniform, however. As one tribal government respondent noted, some communities are just now experiencing the spread of the virus, and its financial consequences remain uncertain. This was CICD's third survey of tribal entities to deepen its understanding of the pandemic’s economic impact in Indian Country. CICD surveys early in the pandemic, in March and April of 2020, found severe financial stress among tribal entities as they dealt with pandemic-related shutdowns and social distancing requirements. 

Tribal governments affected on multiple fronts

Compared to the prior surveys in March and April, tribal governments reported less lost revenue and fewer layoffs and furloughs in the September survey, which may reflect a partial improvement in economic conditions since the start of the pandemic. In April, 10 percent of tribal governments reported a 100 percent decline in revenue to date, while in this recent survey, less than 5 percent of tribal government respondents reported a 100 percent decline in revenue. However, the impact on services tribal governments provide to their communities remains large, and it has led to difficult decisions by tribal councils across the country. Survey respondents also said tribal governments need more financial resources for government operations and for ongoing support for tribal citizens.

A rise in costs

Most tribal government respondents reported an increase in costs due to COVID-19, with half reporting that they have already seen a 20–40 percent increase. (See Figure 1.) About one in five reported an increase of less than 20 percent. Remaining respondents were roughly split among those seeing no increase in cost and those seeing cost increases of 40–60 percent and cost increases of 100 percent or more.

Substantial revenue losses expected

Over half of the tribal government respondents reported a decrease in revenue since March 2020. (See Figure 2.) Nearly a quarter of respondents specifically reported that they have had a 20–40 percent decline in revenue and anticipate similar revenue shortfalls in the coming months, indicating that the pandemic is having a continued impact on tribal government revenue. Compared to previous CICD surveys, more tribal government respondents reported no change in revenue since March 2020. However, it is important to note that nearly 50 percent of tribal government respondents in this recent survey anticipate continued revenue shortfalls of 20 percent or greater in the coming six months. Furthermore, tribal governments reported between $15,000 and $100 million in unmet capital need. On average, tribal governments reported needing $10 million, with a median unmet capital need of $1.75 million.

Tribal governments are not alone in experiencing substantial fiscal distress during the pandemic recession. State and local governments are at risk of needing to reduce the services they provide if additional federal assistance is not eventually provided. State and local governments often rely on a wide range of taxation tools to help make up for potential shortfalls in their budgets, especially during the pandemic. However, these tools are not as easily accessible by tribal governments. In lieu of a traditional tax base, tribal governments depend on their tribal enterprises as a source of revenue for important governmental functions.

Tribal enterprises experience lingering operational impacts

Over 50 percent of tribal enterprise respondents reported revenue declines of more than 20 percent to date. Additionally, over 60 percent of tribal enterprises saw at least a 20 percent reduction in their employment since March 2020. These employment reductions appear more limited for non-gaming tribal enterprises, though the sample size is too small to draw larger conclusions definitively.

Some tribal enterprises in the September CICD survey reported substantial distress. Gaming enterprises may have been hit especially hard, as tribal enterprise respondents generally indicated. As one respondent noted, the effects on casino gaming are consistent with the disproportionate impact of COVID-19 on service-oriented industries.

Painful choices

Negative effects on tribal enterprise revenue have made it difficult for tribal governments to provide services for their citizens. Tribal governments have had to prioritize certain services above others during the pandemic, and some important services—such as economic development investments, non-emergency charitable grantmaking, recreation, and cultural activities—have been reduced. (See Figure 3.) Reductions in economic development spending may hamper tribes’ long-term ability to boost economic growth and recover from the pandemic.

More resources needed

CICD also solicited open-ended comments from respondents about the economic impact of COVID-19 on tribal communities, existing COVID-19-related governmental relief, and the experiences of tribal citizens through the pandemic. (See Figure 4.) Comments indicate that further support may be necessary for tribal governments and tribal enterprises. Roughly one-third of tribal government respondents reported that they needed more assistance for governmental operations. One in four tribal government respondents also emphasized that they have experienced declining revenue from multiple sources. Additionally, one-fifth of tribal government respondents reported that more ongoing assistance was needed for their citizens, and one-fifth reported that accessing funding from various COVID-19 relief programs—such as those contained in the Coronavirus Aid, Relief, and Economic Security (CARES) Act—has proved slow or cumbersome.

One notable frustration for respondents was the long wait times between applying for CARES Act funding, being approved, and eventually receiving the funding. In a recent webinar hosted by the Harvard Project on American Indian Economic Development, tribal leaders echoed this frustration over accessing and utilizing CARES Act resources.

Tribal governments and enterprises are displaying resilience as they navigate the pandemic, but a need for support remains. The dual effects of rising costs and declines in revenue are clearly impacting tribal governments’ ability to carry out their functions. As tribes head into the final months of 2020, they may need further assistance to close or prevent gaps in important government services.