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Is it 'revenue sharing' or 'extortion'?

As more and more tribes seek to enter the gaming business, the topic of how or even whether to "share" Indian gaming revenues has taken on ever-greater importance. On July 9, the Senate Indian Affairs Committee held a hearing on the Indian Gaming Regulatory Act with the specific intent of examining revenue-sharing mechanisms between tribal and state governments.

At the hearing, a number of tribal, federal and industry officials testified before the committee, each offering his or her particular take on the matter. Pedro Johnson, public affairs director for the Mashantucket Pequot Tribe, summed up the general theme of those testifying.

"States should not balance their budgets on the backs of Indian governments," Johnson testified. "It's patently unfair. This goes against the entire history of Indian government sovereignty and our drive for self-sufficiency ? If states want to derive more revenue from gaming; they have their own gaming to turn to, like lotteries and pari-mutuels.

"When my tribal nation was raising hogs and tapping maple trees for syrup, nobody else cared about our revenue stream," Johnson said. But now that the Mashantucket Pequots are among the nation's most successful gaming tribes, their compact with Connecticut is often cited as an example by other states wanting a piece of the Indian gaming pie.

Aurene Martin, the Interior Department's Acting Assistant Secretary for Indian Affairs, told the committee that the concept of revenue sharing, tribal payments to state governments from casino revenues, while not specifically authorized by statute, has evolved over the years from the state-tribal negotiating process. She explained that if a tribe is willing to pay for a concession that a state is authorized to make, then Interior reviews the agreement to ensure that the deal is fair and that the tribe is able to make the payments.

Indeed, one of Indian country's more heavily scrutinized gaming compacts has been the deal between the state of Connecticut and the Mashantucket Pequot Tribe, owners of the Foxwoods Casino Resort. The critical feature of the slot agreement for our purposes is that the tribe pays 25 percent of its slot win to Hartford. Johnson explained to the committee how in 1992 tribal and state negotiators came to agree on a revenue sharing level of 25 percent.

He observed that Connecticut had been mired in a deep recession since 1989; the state wanted funds, limits on casino gaming and considerable regulatory oversight. The tribe sought an agreement that would be fair and would hold up over time, as well as exclusive gaming rights and perpetuity.

When Senator Ben Nighthorse Campbell, R-Colo., committee chair, asked if the lack of an expiration date was worth the price of 25 percent of the slot win, Johnson replied affirmatively, "We wanted [an agreement] that was lasting."

"Just because 25 percent was appropriate for our agreement in 1992, it doesn't mean it will work in other situations," Johnson cautioned. "It shouldn't have to be the norm today." He noted, however, that the Mashantuckets fully intend to honor this and other government-to-government agreements.

Johnson's point is well taken. The deal between the Mashantuckets and Connecticut seems to serve those two parties well - Foxwoods' incredible success has translated into a veritable economic and employment windfall for the state. Since January 1993, over $1.6 billion has been "shared" with Connecticut, Johnson said, adding that Indian casino funds make up three percent of Connecticut's $13 billion budget. Tribes pay all regulatory costs, amounting to nearly $5 million annually. A University of Connecticut study performed in 2000 said that directly or indirectly, the tribe is responsible for 43,000 jobs in that state; the tribe directly employs 11,000 people.

But not all of the Indian casinos have enjoyed the same level of financial success as Foxwoods and it makes little sense, as Sen. Campbell noted during the hearing, to force less profitable gaming operations to fork over money that a tribe needs more than a state.

Senator Campbell observed that funds paid to any state ought to be properly put back into the local community. If this is not happening, as many local governments in eastern Connecticut have complained, he suggested local governments hire better lobbyists in the state capitol and not go after Indian tribes, who have already been generous in agreeing to share revenues.

Jacob Viarrial, governor of the Pueblo of Pojoaque in New Mexico testified that "compact negotiations have become an excuse for extortion," while revenue sharing represents "a continuing and costly assessment on tribes." Viarrial noted that IGRA makes no mention of exclusivity or revenue sharing and suggested that "a quick cure" would be "to get the states out of IGRA."

Frank Chaves, executive director of the New Mexico Indian Gaming Association, summarized the on-going legal battles over gaming compacts between various New Mexico tribes and Santa Fe. While he noted that tribal revenue sharing funds go straight into state coffers without knowledge as to what happens to them, he is also "optimistic" about relations with the new state administration.

"It gets really old being looked at as a cash cow and that's how tribes are looked at," said Brenda Soulliere, chair of the California Nations Indian Gaming Association. She agreed with Viarrial that extortion "is what's happening. Stereotypically, we've gone from the drunk and dumb Indian to the rich Indian. I don't think there's any other segment of society that's been able to do that."

Soulliere suggested that amendments to IGRA are not the answer. Rather, the federal government should take its fiduciary trust responsibilities to Indian tribes more seriously by promulgating federal guidelines on appropriate levels of gaming revenue payments.

The committee's ranking Democrat Sen. Byron L. Dorgan of North Dakota, observed that while state governments currently face significant financial shortfalls, many states during the 1990s permanently reduced their tax bases. These shortfalls, however, are nowhere near what is being experienced on many reservations.

"We need not interrupt revenues that in most cases is the first received by Indians in many years," Sen. Dorgan said. "I wouldn't want to see states get too anxious to grab Indian gaming money to solve tax base problems of their own [the states'] making."

Others testifying before the committee included Zacharish Pahmahmie, chairman of the Prairie Band of Potawatomi Nation of Mayetta, Kan. and Herman William Jr., chairman of the Tulalip Tribes, of Tulalip, Wash. Both tribal leaders noted that despite the absence of revenue sharing agreements with the respective states, their local communities and states benefit greatly from the employment and economic activity for which tribal casinos are responsible.

Pragmatically speaking, revenue sharing is an idea that's not going to go away. Federal guidelines are needed to not only ensure fair, appropriate and consistent levels of revenue sharing are met and maintained, but to also require that monies paid to the state are used to mitigate casino effects on infrastructure, schools and the like in communities adjacent to a casino.