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Economics Special: Indian gaming is healthy and growing

Gaming, the only consistently successful means of economic development in Indian country, continues to expand. The Indian gaming industry has successfully created employment opportunities for both tribal members and non-Indians alike, funded tribal housing, medical, cultural and educational programs, and allowed for diversification of tribal assets and businesses.

According to figures from the National Indian Gaming Commission (NIGC), the industry's federal regulator, 330 Indian gaming facilities generated almost $14.5 billion in 2002, up 14 percent from the 2001 total of $12.8 billion.

"That sends the message that the public continues to have confidence they can go, do go and will go to tribal gaming facilities to spend their gaming dollars," said Philip Hogen, chairman of the NIGC, in a recent interview. "If there were a lot of trouble spots out there, [Indian casinos] probably wouldn't be growing at that rate."

While certainly a lot of money, the National Indian Gaming Association (NIGA) reports that the 2001 total represented less than 10 percent of that year's revenue for the entire gaming industry, which includes lotteries, horseracing and commercial casinos (both land-based and on riverboats).

There are currently 562 federally recognized tribes throughout the United States, 201 of which are actively engaged in either Class II or Class III gaming. According to NIGA, 249 state-tribal gaming compacts are currently in effect in 29 states.

Nationwide, some 300,000 jobs are directly attributable to Indian gaming; non-Indians hold 75 percent of these jobs. It should be noted, however, that in certain remote areas of high unemployment, a higher percentage or even a majority of gaming-related jobs are held by Indians.

Under three types of regulatory supervision, Indian gaming is one of the most highly regulated industries in the U.S. Tribal regulators are the primary overseers, while state regulators are also present at many individual casinos under compact terms. NIGC, through its Washington, D.C. headquarters and several regional offices, monitors operations at the federal level.

Obviously, it is in gaming tribes' best interest to keep even the vaguest illusion of corruption and crime at arm's length. Despite unfounded allegations to the contrary, reports by none other than the Government Accounting Office and the Justice Department have repeatedly found Indian gaming to be free of the detrimental influences of organized crime.

"By and large, tribes are bending over backwards to offer fair games, to play by the rules," Hogen told Indian Country Today. "The tribes are being good custodians of those proceeds, the tribal gaming revenues, and doing that economic development and meeting the tribal needs that the Indian Gaming Regulatory Act was designed to do."

Gaming tribes with deepening pockets have indeed joined the ranks of special interest groups, lobbying politicians and making contributions to candidates they support. In California, where 54 Indian casinos generate some $5 billion in revenue, tribal donations are expected to play a significant role in the pending recall election for the governor's office.

Although some tribes have faired quite well with their gaming operations (some even have multiple casinos), others have not enjoyed the same success. Tribes in remote regions are not always able to attract sufficient numbers of visitors to their locations to make developing a casino worthwhile.

Other tribes, citing traditional anti-gambling beliefs, have chosen not to roll the dice on gaming and instead pursue economic development through other ventures. California established a pair of state-administered funds, into which gaming tribes make payments for the benefit of their non-gaming brethren and to mitigate the impact of casinos on local communities.

Gaming has also allowed many tribes to invest their earnings into other business ventures. Besides the "traditional" Indian businesses of tobacco shops and gas stations, examples of tribally owned entities include retail outlets, banks, hotels, transportation companies, textile plants, radio stations, newspapers and even a film production company. Casinos have blossomed into full-blown resorts. Such ventures and more have created employment and income for Indians and non-Indians alike. Few of these investments would have been possible without gaming.

Indian gaming's benefits are not confined solely to tribes or reservations. Tens of thousands of jobs have been created; along with such jobs comes considerable income tax revenue for federal and state governments, along with payments into social security. All of these workers need food and other consumer products, housing, vehicles and all the other staples of modern life; the money they spend on such goods and services invigorates local economies.

While some communities in the vicinity of casinos have complained about traffic congestion and overcrowded schools, the griping gets louder when tribally acquired property reverts to trust status, rendering it free from local property taxes. Many tribes have attempted to fairly compensate municipal and county governments with monetary gifts that approximate their properties' assessed values. Sometimes these funds are accepted and sometimes not.

"We encourage tribes to try to make some arrangements with their surrounding communities before they get going so they're well received," Hogen said. "In many cases that means having a memorandum of understanding about dealing with traffic, environment and infrastructure and so forth - when those steps are taken, it usually is lot smoother than otherwise."

For the federal regulator, NIGC, keeping the games from external influence remains paramount going forward.

"We want to do the job that IGRA assigned to us - to look over the shoulders of tribal gaming regulators who are the first-line regulators of Indian gaming," said Hogen. "We want to make sure that they conform to the requirements of IGRA, NIGC's regulations and of course the tribe's own gaming ordinances. [We will] hopefully be able to continue to report to Congress and the world that Indian gaming is indeed squeaky clean, that the regulation is strong and we're going to continue to go onward and upward."

Will Indian gaming continue to grow by double-digit percentages? While a number of tribes hope to open gaming facilities in the coming years, sustaining similar growth rates is unlikely.

"I don't think the growth will be as great as it has been during these maturing years of the industry - it will probably level out somewhat," said Hogen, noting that many of the "easy" spots for gaming facilities have been taken. "The last few years have pretty much followed that trend - I think the year before [last] it was a 17 percent growth rate. We're down to 14 percent this past year but we're talking about bigger numbers. So it's still very healthy."

Going forward, three important Indian gaming-related issues sit at the forefront. These issues will remain prominent over the next 12 to 24 months.

Revenue sharing

As many states face budgetary shortfalls, attempts to squeeze more money from Indian casinos have angered many tribes. The states seem to forget that IGRA's purpose is to foster tribal economic development, not serve as a revenue source for state coffers.

The development of national guidelines will help determine what constitutes fair and equitable revenue sharing of gaming proceeds with the various state and local governments. Of course, what may work between a Connecticut tribe and that state, for example, may not be appropriate for a compact between a tribe in Oklahoma and that state. Nevertheless, guidance is necessary to ensure fairness for both tribes and states.

"One of the thresholds that we think needs to be in place is that a substantial benefit to the tribe in return for a revenue sharing agreement," said John Harte, NIGA's general counsel, suggesting that perhaps long-term compacts or gaming exclusivity may be exchanged for flat-rate or percentage payments.

Opposition groups

Dealing with the continued and growing backlash of anti-gaming and anti-Indian sovereignty groups will continue to be important for tribes. As tribes gain and assert a measure of financial independence, Indian bashing groups have become more willing to flex their muscles.

The best and really only effective way to combat such opposition is through public relations and education on the nature of Indian sovereignty and the financial benefits of gaming. Toward that end, NIGA offered a media training program at its recent mid-year conference. The program sought to give tribal officials skill and confidence in dealing with questions from a potentially hostile media.

Coming home

Several tribes are attempting to establish gaming operations in states other than where they are federally recognized. In many cases, such tribes are seeking to re-establish a presence in ancestral homelands. IGRA does have mechanisms by which this can happen, primarily for tribes restored or recognized since 1988, but leaves the decision to the Secretary of the Interior, with concurrence from the governor of the state involved. Some governors, including New York's George Pataki, have steadfastly refused to negotiate with "out-of-state" tribes, preferring instead to deal with tribes that have retained a formal presence in their state.

"We recognize that this has the potential to be a very divisive issue amongst tribal governments," Harte said. "We're concerned with claims where a tribe doesn't really have any aboriginal ties to the land and is just moving in for purposes of gaming only. There has to some kind of aboriginal tie to the land in order for that claim to be legitimate, otherwise it will undercut all the legitimate land claims tribes have across the nation."

All in all, gaming remains the most positive force in the economic development of Indian country, with benefits that seep across reservation borders into the surrounding communities. Indeed, as conferees at the recent NIGA mid-year meeting concluded, "Indian gaming is working for America - it is the Native American success story."