Staggered payments for Cherokee Minors’ Fund

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Staggered payments for Cherokee Minors’ Fund

fr minorsfund When teen members of the Eastern Band of Cherokee Indians come of age, they find themselves in sudden possession of a six-figure bank account. But the overnight windfall comes with risk, many tribal leaders believe, and Tribal Council took a monumental vote to change the way money is paid out to their young people — in installments rather than as a one-time payment.

The result will be a roughly $109,000 increase in the net payout over time.

“What the Junaluska Leadership Council is proposing here is really about tax savings and being able to utilize that for the young people rather than giving it to the federal government,” said Principal Chief Patrick Lambert, who introduced the legislation on behalf of JLC.

Since Harrah’s Cherokee Casino Resort opened nearly 20 years ago, half of the net casino profits have been set aside for semi-annual distribution back to tribal members, called per capita payments. Minors get a share in the per capita distribution as well, but the money is set aside in an investment account — called the Minors’ Trust Fund — until they turn 18 and graduate from high school, at which point they get a massive check. This year, the amount sits around $130,000 in net payout.

There have been a couple drawbacks to this system, Cherokee’s elected leaders said. First of all, getting a big payout bumps kids up to a much higher tax bracket, so they pay an arm and a leg in federal taxes — this year minors coming of age will fork over $40,000.

Then, there’s the issue of handing a kid who’s just figuring out how adulthood works an enormous sum of money.

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“What would be more responsible is to equip our young people to be able to be in the process of making on-time payments, simply because the evidence over time has been that most young people buy a 40 or 50 thousand dollar car, they don’t put insurance on it, the car gets trashed, wrecked, and then they have nothing,” Vice Chief Richie Sneed told council.

A group of Cherokee teens was the driving force behind the discussion. The Junaluska Leadership Council, made up on EBCI members who are in high school, had spent years researching the issue, developing and executing a survey on the topic, and speaking with Tribal Council members in work sessions and, finally, in budget session May 31.

“They initially brought a resolution to council on that — goodness — a couple years ago,” said EBCI Finance Director Erik Sneed. “It had been brewing for some time.”

Reaching a compromise

The JLC asked Tribal Council to spread the payments out to four installments, dispersed at ages 18, 21, 25 and 30. Each payment would represent one-quarter of the total amount, reaching a total payout of $344,000 — $214,000 more than under the current lump sum plan.

Council ultimately wound up amending the legislation, however, to stipulate three payments rather than four, with the last one dispersed at age 25.

“The goal was to try and find some balance however age-wise, and holding the final until 30 seemed too long for most,” Erik Sneed explained.

Much of the conversation focused on concern about young people who weren’t on the prescribed college-career-family track.

“It’s not that I’m opposed to what the Leadership Council is proposing,” said Councilmember Teresa McCoy, of Big Cove. “I for one agree with you, but I also side with those who have to go right into life.”

What about teen parents, for instance, who might need that money right away to keep their lives stable?

“You’ve got young people who are going to graduate with a family who need their money now for whatever reason,” McCoy said.

That’s why she pushed throughout the conversation for council to consider other options. Why not let the individual choose whether to receive their money in a lump sum or have it spread out?

Lambert agreed that would be the best way to go but said federal law makes the idea impossible to execute. In that scenario, he said, “you actually received it when you were 18 in the eyes of the law,” so those who chose the dispersed payments wouldn’t get the tax benefits they will under the newly enacted plan. It’s only been since 2011 that IRS procedures have allowed staggered payments at all.

“It’s going to save those enrolled members off the boundary even more because they’re getting hit with state taxes that enrolled members on the boundary do not,” said Councilmember Richard French, of Big Cove.

Best for the majority

Councilmembers expressed a desire to find solutions for people in special situations that might necessitate financial assistance sooner, but they decided that the staggered payments would be the best decision for the majority.

“When my first daughter received hers, she was hit with the enormous, enormous tax,” said Councilmember Anita Lossiah, of Yellowhill. “One of the things that was told to me immediately was that if it had just been divided up into three or four distributions, they would be dropped to a lower tax bracket and save thousands and thousands. That’s what this would be doing. I believe it would be a very wise decision.”

“It’s impossible to craft something that’s going to fit every situation, so we have to look at what will be better for the whole,” Richie Sneed said.

Other policies could be considered separately to work out those solutions for those in special situations.

“To me there’s a lot more questions than just to the whole majority because each little pod has their own problems dealing with the distribution cycle we’re proposing,” said Councilmember Adam Wachacha, of Snowbird, adding that he agreed with Richie Sneed’s overall point. “I’m leaning toward staggering. It’s just trying to fine-tune everything.”

McCoy said she wasn’t convinced that the fine-tuning was complete enough for a vote to take place. She remained adamant that, while staggered distribution had many benefits, teens should have the option to access their money all at once if they so desired.

“I would like to have an IRS tax attorney come in here and stand before council and invite the Junaluska Leadership Council to come in here and participate,” she said.

Chairman Bill Taylor, of Wolfetown, countered that the discussions had been long and thorough and the time had come for a vote.

“These young people have gone out and done the work and our finance department has been working on this for several years,” Taylor said. “I think all the questions have been answered. To me as a parent and as a councilmember we’re supposed to be out looking for the best interest of our children.”

Saving those children upwards of a hundred grand sounds like the right thing to do, Taylor said.

Going forward

With the vote complete, all that remains is for the finance department to get to work amending trust documents and internal processes to enact the legislation. That will take some time — the target date for the new dispersal schedule is June 1, 2017.

“We’re working hard right now to actually get it in place sooner than later,” Erik Sneed said.

Councilmember Alan “B” Ensley prefaced his vote with an observation — that when the Minors Trust Fund was first set up, it was a struggle to even get tribal members to trust that the money would still be there when their children came of age, that their government could handle the responsibility.

“I think we came a long way,” Ensley said, “and this is a pretty good compromise.”

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