Because of a 2020 U.S. Supreme Court ruling, new state-tribal tobacco compacts drafted by state legislators could provide a gargantuan expansion of tribal territory—an expansion of up to 109,037 percent in one instance.

That change could result in hundreds of millions in existing state tax collections shifting to the control of a small sliver of tribal officials over time, and force non-Native Oklahomans to shoulder a larger tax burden to make up the difference.

Gov. Kevin Stitt has vetoed the bill that would facilitate that expansion, saying the compacts should be renegotiated to maintain longstanding limits.

Under Oklahoma’s tobacco compacts with tribal governments, the tribes generally receive 50 percent of all state tobacco taxes collected through sales at tribal shops. That payment far exceeds anything legally obligated.

Under federal law, states cannot require tribes to collect tobacco tax on sales to tribal members at tribal shops. Compacts are typically negotiated to address that issue by allowing tribes to keep tax revenue generated by their own members on tribal land.

But less than 10 percent of Oklahomans identify as tribal members, and even in areas of concentrated American Indian population their numbers typically fall far below 50 percent.

The tobacco compacts, as originally approved in past years, were understood to apply only to sales at shops located on land held in trust for a tribe.

But in 2020, the U.S. Supreme Court ruled in McGirt v. Oklahoma that the Muscogee (Creek) Nation’s Oklahoma reservation was never formally disestablished for purposes of federal major-crimes law. That ruling has since been expanded to include other tribes whose historic reservations cover most of eastern Oklahoma.

As a result, nearly half of Oklahoma is now considered “Indian country” under the McGirt ruling, and tribes have sought to expand the ruling’s impact.

For example, five tribal governments have filed briefs in an ongoing court case that argue their tribal members are exempt from city regulations, on everything from speed limits to zoning, in communities that lie within eastern Oklahoma that were impacted by McGirt. Those tribes have similarly argued in court briefs that their members are exempt from paying state income tax if they live in eastern Oklahoma areas that are part of the McGirt reservations.

Oklahoma law provides that only the governor has the authority to negotiate compacts, stating, “The Governor is authorized to negotiate and enter into cooperative agreements on behalf of this state with federally recognized Indian tribal governments within this state to address issues of mutual interest.”

Yet this year lawmakers have attempted to sidestep that law and separately negotiate tobacco compacts without the governor’s involvement. Many state lawmakers have been the recipients, directly or indirectly, of campaign contributions from tribal governments, according to Oklahoma Ethics Commission records.

Gov. Kevin Stitt has offered to extend tobacco compacts for another year and maintain the existing 50-50 revenue split, but wants the compacts to state that they only apply to sales on trust land.

Tribal officials, who are elected by only a sliver of their tribal members, have refused to agree to that condition.

Instead, the Legislature has passed a bill that would authorize tobacco compacts for another year that include similar language to existing compacts.

However, the legislative proposal does not limit the compacts to tobacco sales on tribal trust land, leaving the door open for the compacts to apply to any sale of tobacco at any facility owned by someone of tribal descent anywhere in the eastern Oklahoma McGirt areas.

That could facilitate a massive expansion of the compacts with multi-million-dollar impact on state government finances.

For example, the Seminole Nation has 372 acres of land held in trust, which is 0.58 square miles. But the tribe’s historic reservation, impacted by the McGirt decision, includes all of Seminole County, which has 633 square miles.

As a result, the legislative tobacco compacts could increase the area covered by the tobacco compact by 109,037 percent for the Seminole Nation alone.

Similar geographic expansion is also likely under compacts with the Cherokee Nation, Chickasaw Nation, Choctaw Nation, and the Muscogee (Creek) Nation, whose historic reservations include multiple counties in which only a tiny fraction of property is currently trust land.

With that growth will come an undetermined, but substantial, increase in tobacco tax collections that will be diverted from Oklahoma government to tribal governments.

The land area of the state of Oklahoma is 68,596 square miles, and it is estimated that McGirt reservations cover nearly half the state.