Law & Principles

Stitt offers tribes status-quo deal on tobacco compacts

June 29, 2023

Ray Carter

Gov. Kevin Stitt has offered tribal governments a one-year extension of state-tribal compacts that maintains the status quo as it has existed for nearly a decade, including payment of millions of dollars to tribes that the state does not legally have to provide.

The governor’s offer comes as members of the Oklahoma Legislature are separately seeking to approve new one-year compacts that do not maintain the existing system since they contain language that may allow a dramatic expansion of territory covered by the compacts.

In a letter sent to all tribes whose tobacco compacts are set to expire this year, Stitt reiterated his previous call to extend the compacts previously negotiated by Oklahoma’s previous governor and tribal counterparts.

“It is my sincere hope that this letter paves the way toward an agreement that will benefit all 4 million Oklahomans...,” Stitt wrote. “I extend this offer in good faith and remain steadfast in my belief that we must find common ground to move our state forward.”

The governor’s letter offers tribes a one-year extension of state-tribal compacts through Dec. 31, 2024.

The agreements would split state tobacco taxes collected from sales at tribal outlets 50-50 between the state and tribal governments. That represents a multi-million-dollar benefit for tribes because it far exceeds what is legally required under federal law.

Under federal law, Oklahoma cannot require tribal shops to collect state tobacco taxes on sales to tribal members (who represent between 10 percent and 15 percent of the total state population) but can require tax payments to be collected on sales to the remainder of a tribal smoke shop’s customers.

The state is required to rebate tribes only the portion of tax collections derived from tribal sales to Indian customers. Based on figures discussed by state Senate leadership, tribes have been receiving $57 million annually when only $17.1 million may actually be owed as a result of the exemption for sales to tribal citizens. Stitt’s proposal maintains the generous $57 million payout to tribes.

Stitt’s proposal also includes clearly defined compact jurisdiction language to ensure the same boundaries are maintained that were contemplated when the current state-tribal compacts were approved by limiting the compacts to tobacco sales on lands owned by the tribe and/or its members that are held in trust by the United States, or which are owned by members of the tribes and are subject to restricted title.

Stitt’s proposal would also eliminate a unilateral-termination provision for purposes of the one-year extension.

The governor’s proposal is in marked contrast to one developed by the Oklahoma Legislature when it comes to the land area potentially covered by the compact.

SB 26X would authorize one-year state-tribal tobacco compacts that says the compacts apply to sales in “Indian country.”

While “Indian country” once referred only to Oklahoma land held in trust for a tribe, a 2020 ruling by the U.S. Supreme Court has opened the door for tribes to argue it incorporates land across nearly half the state.

In McGirt v. Oklahoma, the U.S. Supreme Court declared 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.

The governor’s office has said 42 percent of Oklahoma lies within the historic reservation areas impacted by McGirt, a figure that translates into more than 28,000 square miles that tribal officials may now claim is “Indian country” covered by the legislative version of the compacts authorized in SB 26X.

Stitt vetoed SB 26X because of the dramatic changes it could generate, which could divert potentially hundreds of millions in tobacco-tax collections away from state programs to tribal governments.

The Senate recently attempted to override Stitt’s veto, but lawmakers voted to sustain it by a one-vote margin. Senate leadership has indicated lawmakers will try again to override the veto in July.

Ethics Commission records show many state lawmakers have received campaign contributions from tribal governments and tribal officials that would financially benefit from the expansion potentially authorized through SB 26X’s compacts.