Casinos enter budget plan

Gov. Tim Pawlenty has introduced gaming as a way to generate revenue.

Brady Averill

Gov. Tim Pawlenty has proposed a gaming partnership between the state and local American Indian tribes to help erase Minnesota’s $700 million deficit.

According to Pawlenty’s recommended two-year budget, tribes would pay a one-time licensing fee of $200 million and build, pay for and own the casino. The Minnesota State Lottery would operate gaming machines, and the state would share some of the revenue.

Now, as the state is facing a deficit, Pawlenty has proposed gaming as a way to generate revenue, instead of raising new taxes.

Tribes currently don’t have to share revenue from legal gambling with the state. Pawlenty is proposing a revenue-sharing partnership. But, as the governor and some legislators support the plan, some tribes have reacted much differently.

Dan McElroy, Pawlenty’s chief of staff, said the $200 million licensing fee would help lessen the deficit for the 2006-07 fiscal year. Starting in 2008, he said, the governor anticipates annual revenue of $114 million.

George Goggleye Jr., tribal chairman of the Leech Lake Band of Ojibwe, said the partnership is something both the state and his tribe can benefit from.

For the last two to three years, he said, he has sought a partnership.

Included in the proposed partnership are three tribes from northern Minnesota: the Leech Lake Band of Ojibwe, White Earth Band of Ojibwe and Red Lake Band of Chippewa. A casino would potentially be built in the metro area.

Currently, Goggleye said, his tribe isn’t supporting any gaming proposals. Instead, he said, he’s more interested in what’s best for tribal members.

“We just have to be careful, and we’re going to continue to be careful,” he said.

He said he doesn’t care what the state does with the money, should an agreement be reached.

“What the state chooses to do with their portion of the revenue that would be shared is totally up to them,” he said.

The Leech Lake Band of Ojibwe operates three casinos, which generate an annual revenue of $10 million to $12 million, he said.

“We have gaming operations, but we just haven’t seen some of the profits other tribes have seen,” Goggleye said.

He said his goal is to land a metro casino.

As a tribal leader, he said, he has to address certain needs, such as those of hundreds of tribal members who are on a waiting list for homes.

“There are so many things that we would be using that resource for, if it were ever to become a reality,” he said.

But the $200 million licensing fee is a big number.

“If we could afford the cost of a $200 million licensing fee, we wouldn’t be pushing what they are now,” he said.

Conflicts between tribes

There are 11 American Indian tribes in Minnesota, and gaming affects them all, said Doreen Hagen, president of the Prairie Island Indian Community.

A metro casino would hurt tribes and nearby casinos, she said.

Hagen said she feels Pawlenty is spreading the misconception that tribes don’t contribute to the state.

Prairie Island’s casino’s 1,600 employees pay $81 million annually in payroll taxes, she said.

Tribal members who don’t live on the reservation also pay property taxes, she said.

Mystic Lake and Treasure Island casinos’ owners have launched a TV campaign to get their message out, she said.

Hagen recalled growing up on Prairie Island without electricity or water. The state, she said, did not come to the rescue then.

The federal Indian Gaming Regulatory Act, passed in 1988, helped tribes with economic development and allowed them to conduct legal gambling without being subject to state regulatory laws.

Now, the state is asking for help, she said.

“We didn’t create the deficit,” she said. “It’s (Pawlenty’s) problem, not ours.”

Professor David Wilkins, interim chairman of the University’s American Indian studies department, said he believes a state-tribal gaming partnership would put a wedge between tribes.

He said the governor is seeking out tribes that aren’t as financially well off as other tribes. Wilkins called the technique “divide and conquer.”

He said he’s worried this could hurt tribal relations.

Minnesota is not the first state to call for a state-tribal gaming partnership, Wilkins said.

Some neighboring states, including Wisconsin, have revenue from casino gaming through revenue-sharing or a gaming tax on licensed casinos.

“(Governors) have sort of looked at tribes to bail them out of their own economic problems,” Wilkins said.

Proposal terms

The tribes haven’t agreed to Pawlenty’s terms, in which they would have to pay a licensing fee and build their casino.

“There’s a good possibility that some type of a hybrid act could come out of this,” Goggleye said.

Kevin Washburn, a University law professor and expert in American Indian gaming, said terms of an agreement are key.

He said it appears the state is asking for money without giving any services.

“That sounds like a tax,” he said.

Washburn said building and operating a casino requires a lot of money, and it would take a long time for a new casino to be profitable.

Current legislation

State Sen. Sandy Pappas, DFL-St. Paul, said she first introduced a bill in 2003 that would establish a gaming partnership between the state and the American Indian tribes. She said she plans to reintroduce the bill in the next few weeks.

Pappas said the purpose of the partnership is not to generate revenue so the state can lessen its deficit.

“I don’t think gambling money should be used to solve the deficit or any ongoing financial situation,” she said.

Instead, she said, she wants the partnership to establish fair gaming. She said tribes in northwest Minnesota do not benefit from casinos as much as tribal casinos surrounding the metro area.

The remote locations of the northwestern casinos draw in fewer people, she said.

“I think the expansion of gambling is inevitable in Minnesota. It’s already happening as the current casinos are getting larger,” Pappas said.