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Conn. risks $400m annual loss from Indian gaming revenues

HARTFORD, Conn. – A legislative hearing on the state’s proposal to add electronic Keno to its stable of games of chance in an effort to close part of the state budget’s $1.3 billion revenue gap had a moment of high irony when the head of the gaming agency testified in favor of the plan.

“At the Connecticut Lottery (Corporation),” said Anne M. Noble, its president and CEO, “we adhere to an advertising code of conduct and present the lottery products as a game – never as a way out of financial difficulties. We want people using their discretionary income for gambling, not money meant for other things. That’s why we will never advertise gambling as a way out of financial trouble.”

Two Democratic state representatives took issue with Noble’s statements.

“Well, thank you for that, but it sounds a little hypocritical when you say we don’t want you, as a resident, to feel as if gambling is the only way out of financial problems, but we as a state, are looking to it as a means to get out of our financial problem,” said Charles Clemons, D-Bridgeport.

“On the one hand, we say we’re against gambling but, of course, we want that $400 million (from Indian gaming). I think that’s sort of hypocrisy,” said Ernest Hewett, D-New London.

The informal forum March 2 was called by the legislature’s public safety committee to hear views on Gov. Jodi Rell’s proposal to introduce 600 to 1,000 electronic Keno games around the state as a way of raising an estimated $60 million annually in revenues. The plan is to help fill the $1.3 billion budget shortfall by “securitizing” – or borrowing against – future Keno revenues.

The Mashantucket Pequot Tribal Nation and the Mohegan Tribe, who operate Foxwoods Resort Casino and the Mohegan Sun, told legislators that allowing the state to run a Keno game could invalidate the tribal-state gaming compact.

The compact requires the nations to pay 25 percent of their gross slot machine revenues to the state – an amount that reached more than $430 million in recent economically robust years, and around $377 million last year. By contrast, the state lottery yielded around $283 million to the general fund last year.

Both tribes offer Keno at their gaming facilities.

Although Keno isn’t the major money at the casinos, the nations oppose the state plan based on both competition and contractual obligations.

“It’s a matter of principle,” Mohegan Chief of Staff Chuck Bunnell said. “I can tell you that I think the council would be deeply concerned about 600 to 1,000 gaming parlors opening up around the state of Connecticut as a violation of an agreement that was entered into in good faith.”

Attorneys representing the tribal nations said they believe Keno is a casino game and the compact gives the nations the exclusive right to operate casino games in the state.

Rell’s spokesmen at the hearing, budget director Robert Genuario and Paul Young, Division of Special Revenue executive director, said Keno is a lottery game and the state could implement it without approval from the legislature.

“It is a casino game,” said John Meskel, director of operations for the Mohegan Tribal Gaming Commission. “It’s very close to what we play at the casino. The reason we play it at the casino is because it’s a complement to the casino games.”

“Even if Keno is a lottery,” said Jackson King, general counsel for the Mashantucket Pequot Tribal Nation, “we have to determine whether it is a video facsimile.” The nations have an exclusive right to operating video facsimiles in the state.

Attorney General Richard Blumenthal last year voiced doubts about the governor’s proposal, stating that it could violate the state’s gaming compact. But Deputy Attorney General Carolyn K. Querijero, who attended the hearing for Blumenthal, could not provide a definitive answer on Keno’s status.

“There’s no way we can say with any degree of certainty how the court would rule on that, if the game was introduced and the tribes challenged it as violating the Memo of Understanding. There have been some cases dealing with whether Keno is a lottery game or a casino game, and they’ve gone both ways.”

If the state introduces Keno, the nations won’t have to file a lawsuit: they could stop making payments to the state based on a violation of the compact, King said.

“If Keno is a commercial casino game, then the payments no longer have to be made.”

The state would then be faced with the option of filing a federal court lawsuit against the nations on a claim that they had violated the compact, and leave it up to the court to determine whether Keno is a casino game or a lottery game.

The nations might have the best hand in that game – the National Indian Gaming Commission has ruled that Keno is a casino game.

A number of legislators expressed opposition to the Keno plan, and the hearing likely gave them additional reasons to consider it carefully. No decisions were made at the hearing and if strong opposition continues it’s unlikely the plan will be implemented.

“While the administration believes that no new legislation is necessary. ... that is not a statement that the administration or the Connecticut Lottery Corporation would implement Keno in the absence of legislative approval,” Genuario told the committee.