Rapid-growth industries always make the headlines, and Indian gaming –
which reaped more than $18 billion in 2004 – is no exception. On June 28,
the Senate Committee on Indian Affairs was slated to hold an oversight
hearing on regulation of the Indian gaming industry. While a periodic
examination of regulatory practices over this or any other business sector
is not necessarily a bad thing, submitting to irrational hysteria always
is.
Committee Chairman John McCain, R-Ariz., for some reason seems to think
that the tribal casinos are a scandal waiting to happen. The senator has
introduced legislation to raise the fees that tribal governments must pay
to the National Indian Gaming Commission (NIGC), the federal regulatory
agency. The June 27 Arizona Republic quoted him asking rhetorically: “Do we
protect the patrons of Indian gaming to the fullest extent?”
Questioning the integrity of Indian gaming, now that the industry has grown
to such unexpected levels so quickly, is en vogue. Pundits and politicians
of all stripes are spouting off, in ever louder tones, about how tribal
gaming is spinning out of control. Such allegations are unfounded, yet
widely believed.
In recent years both the Department of Justice and the General Accounting
Office have found tribal gaming to be scandal-free, untainted by
corruption. Unfortunately, people quickly forget such positive news, while
irresponsible and unfounded statements like Arnold Schwarzenegger’s “the
Indians are ripping us off” remark seem to resonate in the public
consciousness for years.
Tribal gaming is overseen by three separate groups of regulators – federal,
state and tribal – making it one of the most heavily regulated industries
in the United States. In addition to shouldering the cost of maintaining
their own regulatory agencies, tribes in most states foot the bill for
state regulation along with their mandatory contributions to NIGC.
Perhaps strengthening NIGC with more funding isn’t such a bad idea, but the
money should not come out of tribal pockets. If McCain wants to put more
money into NIGC, he’ll hopefully find it elsewhere.
But the bottom line is this: The industry does not need more regulatory
oversight and IGRA needs no amendments. The Indian gaming industry does,
however, need guidance on two other important issues. One is limitations on
tribal “revenue sharing” with state governments. IGRA created tribal gaming
to fund tribal governments (not state governments) and to benefit tribal
members (not state taxpayers).
The first revenue sharing agreements involved a quid pro quo – for example,
a slice of slot revenue in return for regional or state-wide exclusivity.
Over the years, however, the idea of paying states for the right to conduct
gaming has gradually become the de facto price for gaining a Class III
compact. In fact, many state politicians around the country seem to think
they have some sort of inherent right to tribal gaming dollars. Not only is
this not true, it is contrary to the spirit of IGRA.
What kind of guidance is needed? It might take the form of strict
regulations delineating acceptable parameters for figuring appropriate
“sharing” percentages, and/or a cap on the total amount of gaming revenue
that can be paid by a tribe to a state. The circumstances under which
tribes may or may not be “required” to “share” gaming funds ought to be
addressed as well – in other words, what is the state “sharing” with the
tribe?
The second issue needing attention is whether tribes may legally cross
state lines for gaming purposes, as such attempts are underway in several
states. In New York, for example, negotiations between two in-state tribes
over land claim and taxation issues have been compromised by non-New York
tribes who, prior to the Supreme Court’s City of Sherrill v. Oneida Indian
Nation of N.Y. decision, capitulated to Albany’s state sales tax collection
demands (which the New York tribes have staunchly opposed) and agreed to
land claim terms less favorable than those sought by their New York-based
cousins. Comprehensive land/tax/casino agreements reached between Albany
and tribal governments in Wisconsin and Oklahoma collapsed after the
surprising anti-sovereignty ruling in Sherrill.
Desperate to settle land and tax disputes and establish a revenue stream
from one or more Indian casinos in the Catskills to Albany, New York Gov.
George Pataki appeared to turn his back on the Oneida and Cayuga nations in
entertaining the out-of-state proposals. I speculated at the time that this
was a negotiating ploy to get the New York tribes back to the bargaining
table. But the fact that it took Sherrill to negate the out-of-state deals
belies such speculation. Pataki was indeed serious about awarding New York
casinos to several non-New York tribes.
Allowing tribes to cross state lines to establish gaming operations, like
de facto revenue sharing, may be likewise contrary to the spirit of IGRA.
Although tribal gaming is most certainly a business venture, it first and
foremost acts as a tribal government’s tax base. A tribe that tries to move
into another state to conduct gaming severely hampers the fiscal prospects
of the tribes in that state by undermining their negotiating positions and
undercut their potential “tax base.”
IGRA was intended to benefit as many tribes as possible – it was not meant
to be Used to allow states like New York to pit tribes against each other
in order for the state to get a better deal. Nor was it meant to enable
tribes that had been relocated in years past to build multi-state business
empires at the expense of tribes that remained in or near their ancestral
homelands. The wealth from tribal gaming should be spread, not concentrated
in fewer hands.
These are the issues that the Senate Committee on Indian Affairs ought to
be addressing, rather than contemplating adding to a bureaucracy that will
only take more money out of tribal coffers.