Divide and Conquer
With the state budget hamstrung by his no-new-tax pledge, Gov. Tim Pawlenty has increasingly cast a covetous eye toward tribal gambling revenue as a solution to the perpetual deficits his policies have created. Last year, he demanded that tribes running casinos in Minnesota fork over $350 million in annual payments or face the prospect of competition from expansion of the state's own gaming operations. When the tribes ignored his threat, Pawlenty unveiled a "Gaming Fairness" plan as part of his official state budget proposal on January 25.
The governor's plan purports to be a partnership between the state and the three northern Minnesota tribes whose geographical isolation has precluded them from reaping the gambling profits enjoyed by their American Indian brethren. But within days of Pawlenty's announcement, it was revealed that the governor had been negotiating with his "partners"--the White Earth, Leech Lake, and Red Lake bands--in bad faith: a $200 million fee to be paid up-front by the tribes was never mentioned in key talks. Meanwhile, the Senate minority leader from Pawlenty's own party countered with his own "racino" proposal and declared the governor's plan to be "dead on arrival" at the state Legislature.
"Gaming Fairness" is an ironic name for Pawlenty's proposal, which would provide an enormous, essentially risk-free windfall for the state while placing a huge financial burden on tribes that are already having difficulty making ends meet. Among the provisions is the fee, apparently for the privilege of "partnering" with the state. The tribes would also incur the cost of acquiring the land and constructing and furnishing the casino, which would ostensibly be located in a more geographically advantageous, but expensive, area in or around the Twin Cities.
The tribes would also be responsible for managing the casino operation, which could initially involve them enlisting an outside management company whose fees run upward of 30 percent of the profits. Finally, the plan calls for 10 percent of the gross revenues--not the net profits--to be paid to the Minnesota State Lottery for "operating the gaming machines and other lottery games."
Let's begin with the $200 million fee, a small detail that Pawlenty somehow neglected to mention in negotiations with tribal leaders. "The governor's [budget] speech was the first time we heard there was going to be a $200 million fee," said Gary Padrta, the public relations coordinator for the White Earth Band of Ojibwe Tribal Council. As Leech Lake Band of Ojibwe Tribal Chairman George Goggleye told Player Magazine recently, "If we had access to that kind of money, we certainly wouldn't be pitching a casino in the metro area."
"We played no part in the drafting and configuration of the concepts in this plan," says Floyd Jourdain Jr., the tribal chairman of the Red Lake Band of Chippewa. Jourdain adds that when he met with Pawlenty's chief of staff Dan McElroy four days before the budget address, he was told there would be a fee proposed, but heard precious few details about what the governor had in mind.
"We asked McElroy if they had any specific projections," Jourdain claims. "We were told they couldn't divulge anything until the governor made a speech at his budget address. Imagine that, sitting across the table negotiating with somebody and they say they can't tell us anything."
Further, Jourdain adds that the tribes didn't know the governor had met with officials from the Mall of America and Bloomington for a proposed site. "And then the governor gives this speech that seemed very well thought out, with expert legal advice and consultation," Jourdain continues, "like it had been in the works for some time."
McElroy is calling the size of the fee "an estimate" that is "subject to being discussed." The tribal chairs from White Earth and Leech Lake met with him last week to that effect, with all sides refusing to divulge any progress in those talks.
But Red Lake is taking a harder line. "We are not in negotiating mode right now," Jourdain says. "It is being spun that the tribes and the state are all on the same page and working together, and that is not accurate. In fact, there has been some inside squabbling about how the tribes would split their share, because of the size of the enrollments."
Indeed, the total enrollment among the three tribes is approximately 40,000, with White Earth at 22,000 members, Red Lake just under 10,000, and Leech Lake at 8,000. Details of the payment percentages remain sketchy, but Pawlenty has estimated that the state will receive slightly more than $100 million per year from the casino operation, some 35 percent, according to Jourdain. That leaves approximately $200 million annually for the tribes to divvy up. But given that the impoverished tribes would be on the hook for the state's fee and hundreds of millions of dollars more in land acquisition, construction, and management costs, it would be years before they would pay off their debt. And even then, $200 million divided by 40,000 works out to just $5,000 per year for each tribal member.
Jourdain is skeptical that Pawlenty's proposal was ever meant to benefit the tribes. He notes that for the past three years, all three tribes have pushed a proposal for a Twin Cities casino that would have netted them $130 million a year, with the state getting $90 million annually, without any up-front fee. Pawlenty's plan effectively sidetracks any momentum for that proposal. "After three years of hard work, we're slapped with the reality that we're back at the bottom rung," he says, and then states what is likely to be the practical fallout from Pawlenty's maneuvers: "The bottom line is it looks like there is going to be a big push this year for a racino."
In fact, the "Gaming Fairness" proposal specifically states that "the governor's proposal doesn't foreclose the idea of a racino," adding that a race track could compete to be the site of a new partnership casino or the Legislature could approve both a partnership casino and a racino.
That's a far cry from Pawlenty's statement, after five months in office, that gambling operations are "not a proper function of government." As recently as December, he stated that the state might do a casino deal with the tribes, but that "we wouldn't operate it and run it directly." Less than two months later, he wants the Minnesota State Lottery to take 10 percent of the gross explicitly for "operating the gaming machines."
Two years ago, Pawlenty executed a budget deal with the DFL that short-circuited a racino bill being promoted by Senate Minority Leader Dick Day and Speaker of the House Steve Sviggum. Intentionally or not, the way he has conducted "negotiations" with the northern tribes and the wording of his "Gaming Fairness" plan pave the way for passage of racino legislation much more smoothly than they foster hopes for a partnership casino.
"I have a totally different philosophy from the governor. He wants to negotiate with the Native Americans and I say, go ahead and let them have their casinos," says Day. "I am saying with a racino, we can start generating dollars for the state within six months." Day cites the length of time negotiating for and building such a casino would take, and further asserts that a gambling proposal that's just between the tribes and the state "will go down in my caucus."
"It will be up to the Democrats in the Senate to carry it through, and they'll be lobbied hard by the [Minnesota Indian Gaming Association] people," Day concludes. "So if anything is going to be done in gambling, I think the racino is at the top of the list."
"All the tribes know what is going on, that this could be a divide-and-conquer thing," says Jourdain. "This tribe has always been aware about being in a sticky situation and has always reserved the right to walk away if it is not in our best interest. Right now we are wanting to ride the train without signing our name in blood. But we'll jump off if we have to."
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