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Should casinos welcome regulation budget increase?

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WASHINGTON - In the confusion of the President's Day blizzard, which shut down the nation's capital, the first accurate report of the budget raise for federal Indian gaming regulators came from our Northern Plains correspondent David Melmer.

Calling from South Dakota, Melmer managed to reach Philip Hogen, the new chairman of the National Indian Gaming Commission (NIGC), while the fraction of Washington that remained functioning struggled through the 3000-page Omnibus Appropriations bill. The closed-door action on the NIGC took up only one paragraph in the two-foot high document, which finally approved the on-going budget for most of the federal government just four-and-a-half months late.

In the last-minute compromise, the Congressional budget conferees raised the fee cap that funds the NIGC to $12 million for fiscal year 2004, next year's budget. It left the current year budget unchanged at $8 million and declined to appropriate any of the taxpayer's money to support the operating expenses of this body, a part of the Department of the Interior, charged with supervising Indian gaming. The White House had asked a $2 million appropriation. Congress did, however, authorize $120,000 to cover the cost of NIGC consultation with the tribes.

This action means the Commission will support its expanded activities entirely by a 50 percent increase in the fees it charges Indian gaming. It sounds like a large increase, but the actual amounts are still a drop in the gaming drop. The fees will very likely be less than the one dollar per thousand of net casino revenue for which Hogen was pleading.

It's not such a bad deal for a compromise produced in a back room during the wee hours. Hogen did get a funding increase on very short notice early in his tenure. (He'll have to struggle through this year on a tight budget, but he was already planning to.) The tribal gaming lobby retained the upper limit on fees and, more importantly, made its point about consultation. One of the main disputes between the Commission and the National Indian Gaming Association (NIGA), representing the tribal casinos, came over consultation.

NIGA is insisting that the federal regulators have to deal government-to-government with tribes in line with Bill Clinton's famous 1998 Presidential Order. The tribes have a lot to discuss. Not only do they want to know how their fees are being spent, they have serious questions about the Commission's rulings, ranging from minimum management standards for casinos to the classification of machines as Class II or Class III gaming.

After hearing back-to-back presentations by the NIGC's Hogen and NIGA Executive Director Mark C. Van Norman, the United South and Eastern Tribes passed a resolution at its recent Washington Impact Week meeting urging Congress to require Commission consultation on the way it defined Class II games. Congress evidently listened.

Now that the tribes have won this point, however, they might want to rethink their apparent reflex to oppose an expanded role for the Commission. Not all tribes agree, as Eileen Dempsey reports in a related story, but to this writer the way of wisdom is to support competent federal regulation. As Hogen warned the USET meeting, a "regulatory disaster" would hurt the interests of all the gaming tribes.

Some of the tribal reflex could be an emotional reaction to the distorted reporting of mainstream media, most recently TIME magazine. A common theme first sounded by the Boston Globe several years ago and repeated almost verbatim by the Wall Street Journal and TIME harps on the limited budget of the NIGC as proof that Indian casinos are weakly regulated. Since tribal gaming commissions bear the brunt of casino regulation, often at great expense, they are understandably annoyed. The Mohegan Tribal Nation in Connecticut, for instance, spends $12 million a year supervising just one casino. NIGA reports that tribal governments pay $164 million overall for their own regulators and contribute another $40 million to state gaming commissions, a total much larger than the combined regulatory budgets for riverboat gaming and the Nevada and New Jersey casinos.

(Since the annual revenue for those three segments of the non-Indian commercial gaming industry is more than twice that of Indian casinos, one could conclude that the tribal facilities are twice as heavily regulated as they are.)

With all this expense at the state and tribal level, why send more money to the NIGC? Hogen gave USET some specific reasons. The Commission was swamped by the explosion of gaming in California and the Midwest; it needed satellite offices in both regions. It was so understaffed that all its positions for dealing with Congress and the press were vacant. But his most persuasive argument was this: his Commission is the one body that sets national standards for Indian gaming. If it let one weak link turn into a lurid scandal, the "regulatory disaster" would damage all the well-regulated tribes. We've already seen how readily the smears fly even without any supporting evidence.

Take a lesson from the near collapse of the savings and loan industry in the 1980s. "High-flyers" (a euphemism for crooks) took over many of these formerly staid financial institutions and exploited political friendships to "get the government off their backs." As cutbacks and political interference paralyzed federal regulators, an orgy of bad loans and self-dealing sent a third of the S&Ls into bankruptcy and saddled the economy with hundreds of billions in losses. Once the regulation broke down, the rot spread through the industry with amazing speed.

Weakness of regulation at any level could expose Indian gaming to a similar infection. We have too much at stake to let that happen.

Although the NIGA's Van Norman took issue with Hogen in their USET presentations, he could thank the Commission chairman for setting up one good line. In discussing Commission staffing, which does not fall under Civil Service rules, Hogen said nothing would keep it from hiring "Mrs. or Ms. Right, if they came through the door." Van Norman seized the opening to introduce his own "Ms. Right," the most recent addition to the NIGA staff, Victoria Wright of the Aquinah Wampanoag tribe of Massachusetts.