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Let the Games Begin; A Revenue-Sharing Cap of 10 Percent?

Here's an idea likely to cause state budget officials to blast through
domed capital roofs around the country. During a March 24 hearing before
the Senate Indian Affairs Committee, George Skibine, director of BIA's
Office of Indian Gaming Management suggested that revenue sharing payments
under Class III tribal-state gaming compacts be capped at 10 percent.

"The payment has to be something that is in exchange for a benefit - if the
payment greatly exceeds the value of the benefit ... [it becomes] a tax and
that's prohibited," the Associated Press reported Skibine as testifying.
"We should explore having a cap on the payment of net revenues. I think it
should be single digits, maybe, or 10 percent. ... If it goes above that I
think it may be problematic for the tribes."

Although state bureaucrats and politicians will protest loudly - let the
crowing begin. Open your window - you can almost hear the clamor, which has
got to be particularly loud in California, Connecticut, Minnesota and New
York, states' currently notorious for enviously eyeing the tribal till. But
they have no reason to crow - the Indian Gaming Regulatory Act, a federal
statute, did not create tribal gaming as a revenue source for the states.

"The burdens of homeland security, the economic downturn nationwide, the
loss of jobs, and very poor financial planning are all reasons for the
state budget shortfalls," said Ernie Stevens Jr., chairman of the National
Indian Gaming Association, at the hearing. "Indian gaming, however, is not
a reason for state budget problems, and it should not be used as a way

As fiscal shortfalls continue to crimp state budgets across the country,
many states are demanding (or salivating over) ever larger shares of tribal
gaming revenues. Several states are also considering or have actually
turned to commercial gaming to create a revenue stream, irate that "their"
Indians aren't being more "cooperative" with tribal gaming monies.

As Indian gaming has expanded, more and more tribal governments have come
under pressure to share (many have agreed to do so) a portion of gaming
proceeds with neighboring state and municipal governments. Such "sharing"
is supposed to be in exchange for some tangible benefit to the tribe, like
regional or statewide gaming exclusivity or long-term compacts, but many
states have somehow come to believe that they have a "right" to tribal
gaming revenues.

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Due to such attitudes, some in Indian country may feel that such "sharing"
is more coerced than voluntary. But given the controversy often generated
by Indian casinos, it is especially important, to forge and maintain
positive relations with the neighbors. That said, Indians have already
"given up the farm" so to speak-it need not be done again with gaming

Skibine's suggestion was made at a hearing on S. 1529, a bill proposing
certain amendments to IGRA. The measure is sponsored by outgoing Sen. Ben
Nighthorse Campbell, R-Colo., and co-sponsored by Sen. Daniel K. Inouye,
D-Hawaii. Other attempts over the years to amend IGRA have failed; S. 1529,
as currently written, does not mention a cap on shared revenue.

Hindsight makes it very easy now to preach that such a cap should have been
in place from the beginning. But revenue sharing was not originally seen as
a significant issue given the fact that state taxes on Indian gaming
operations are explicitly prohibited by IGRA. When the Act was written, few
people if any correctly perceived the fiscal giant that Indian gaming, at
least in some areas, has become.

The feasibility of revenue sharing cap is now a question worth asking.
What's the right answer?

What works in one tribal-state relationship will not necessarily work
elsewhere, making an across-the-board cap untenable. As we know, the
Mashantucket Pequots and the Mohegans, who operate huge casinos in a
wealthy and populous region, pay Connecticut 25 percent of their slot take
for gaming exclusivity in that state. But tribes operating casinos in more
remote, less affluent areas could not easily handle such a burden and still
provide for their membership as IGRA mandates.

Perhaps a graduated revenue sharing cap could work - the more a tribe takes
in, the higher percentage it pays, up to whatever the cap limit would be.
States ought to also be prohibited from simply dumping shared revenue in
their general funds. Shared revenue would have to be used to mitigate
impact on local infrastructures, fund treatment for problem gamblers and
provide other specific benefit to the casino's neighbors. Allowing a state
to simply pad its bottom line with Indian gaming revenue is taxation.

So while the states may crow over Skibine's suggestion, we again remind
them to read IGRA, especially paragraph (4) under the "Tribal-State
Compacts" subsection. To eliminate the "I couldn't find it" excuse, here's
a Internet link to the Act, taken from the National Indian Gaming
Commission's Web page: