Minnesota Lawyer
For those who followed his promises on the campaign trail, Gov. Mark Dayton’s budget proposal held few surprises, save one. Candidate Dayton included a state-owned casino at the Mall of America or the Minneapolis-St. Paul International Airport in his campaign budget. At the time, he said such a casino could produce up to $80 million for the state in the 2012-13 biennium.
The casino proposal, however, was absent from the budget he released in February. While some political watchers guessed that the DFL Party – which has received substantial financial backing from Indian gaming over the years – had gotten to the new governor, Dayton said he changed his tune because any revenues from a new casino would not come soon enough to help balance the now-$5 billion budget deficit.
Despite Dayton’s reservations, Republicans and Democrats in the Legislature are charging ahead on gambling expansion in Minnesota, including a racino bill that would expand the gaming palette at racetracks, and other bills that would legalize electronic pulltabs and video lottery and slots in bars and restaurants. Past estimates have pointed to new revenues running into hundreds of millions of dollars, and in some cases close to $1 billion.
But Dayton’s change of heart underscores some of the real challenges in booking revenues from expanded gaming in the upcoming biennium. As Capitol denizens close to the issue note, any bill signed into law that expands gaming in the state is practically assured of facing a lawsuit from Minnesota’s 11 tribal groups – or other interested parties – challenging its constitutionality.
“The tribes are like the gorilla in the room in state politics,” Dick Day, a lobbyist with RacinoNOW and former Senate GOP leader, said. “They’ve poured so much money into fighting [expanded gaming] already, they probably won’t just roll over if something passes.”
Even if the state ultimately won such a lawsuit, fighting it would push the start of construction on a casino or a racino into the next year, and it would take time after that to get construction loans and crews working. Pricey video gambling machines are unlikely to be installed in restaurants and bars until all legal challenges are cleared, sources add.
“Tribal gambling [interests] would have every reason to oppose this in court, and they would have the money to do so,” a Capitol policy staffer said. “It could be well over a year, or even two, before the first coin is even put into a slot machine.”
Gaming challenges
A 2005 opinion from then-DFL Attorney General Mike Hatch argued that the 1988 constitutional amendment allowing a state lottery does not permit state involvement in a casino. Hatch also raised questions about the constitutionality of other expanded gaming proposals and said the issue would likely need to be brought before voters in order to further amend the state Constitution. That opinion alone, a longtime anti-expansion gaming lobbyist said, invites the tribes to file a lawsuit.
Another legal challenge could come from environmental groups, as the Constitution calls for lottery proceeds to go partly toward environmental purposes. Any proposal seeking to carry all the proceeds directly to the general fund would likely end up being litigated. “Any way you look at it, there’s going to be a lawsuit,” the lobbyist said. “And no one is going to drop major dollars like that until a lawsuit is cleared up.”
Legal challenges are not the only issue with gaming revenue. Fiscal notes attached to gaming proposals in the past have projected anywhere from $200 million to nearly $1 billion in revenues from gambling proposals that varied in scope. The broad range in revenue estimates owes to the fact that past gambling bills were not specific as to the scale of the expansion envisioned.
The staffer points to the example of GOP Senate President Michelle Fischbach’s bill to put e-pulltabs in restaurants and bars. “We don’t really know what an e-pulltab machine is,” said the staffer. “The bills leave the choices about machines to the gambling control board. And if it’s a full-blown VLT [Video Lottery Terminal, aka slot machine], then estimates of [biennial] revenue as high as $1.2 billion could be possible. If it’s a handheld device that customers ask for across the bar and then give back, sort of like an iPad, that would be much less.”
In addition, any serious 2011 revenue projections for gambling are bound to come in substantially lower than estimates produced before the economic collapse of 2008 and 2009. Publicly traded gaming stocks have tumbled in recent years, in large part because the market is saturated.
Gaming, in particular a racino proposal, is also absent from this year’s yet-to-be-introduced bill to fund a new Vikings stadium. In the past, gaming initiatives have been floated as a way to generate several hundred million dollars to help finance the project. This year, the chief author in the Senate, Republican Julie Rosen, has said she left gambling off the table because she thinks such a move would violate NFL rules.
‘Not that simple’
Iron Range DFL Sen. David Tomassoni helped kick off a “grass-roots” statewide campaign at the Capitol last summer to get electronic gambling in the state’s bars and restaurants. It’s a proposal he has unsuccessfully tried to pass since 1994. Tomassoni was joined by members of the hospitality industry group Profit Minnesota, which claimed that installing electronic bingo, pulltabs and video lottery games in bars and restaurants could bring in $630 million per biennium in new state revenue.
“We are at a crossroads as far as budgeting goes in Minnesota,” Tomassoni said at the time. “Someone has to make decisions that will ultimately close the… revenue gap that we have. This is one way to do that.”
This session, Tomassoni is a co-author on a bill with GOP Sen. Bill Ingebrigtsen to put electronic gambling in bars and restaurants. Ingebrigtsen says he has heard possible revenue figures that are fairly high, but he thinks it’s too soon to start “counting eggs.” If the bill is passed, he thinks revenues could start streaming in halfway through the 2012-13 budget cycle.
Ingebrigtsen said he had not considered the prospect that the tribes could file a lawsuit if such a proposal was passed but said part of the reason he sponsored the bill was to give Indian gaming – which has “cornered the market,” in his words – a little competition.
“If they want to throw a lawsuit at us, then maybe we should sue over whether or not they have a right to run gambling in this state,” he said.
Democratic Rep. Tom Rukavina is carrying a bill in the House to install video lottery in bars and restaurants, while GOP Rep. Bob Gunther and more than a dozen of his Republican colleagues are carrying a bill to bring other electronic gambling into those establishments. There have been no fiscal notes requested for the current gaming proposals in the bill queue.
GOP Sen. Dave Senjem has taken a different route with his proposal to create a racino in Minnesota. For Senjem’s part, he is pushing the Republican majority’s jobs mantra this session, putting the $250 million they estimate will be generated by the proposal every two years into the Department of Employment and Economic Development for things like business grants and crafting economic development partnerships.
But, he warns, “To simply throw out gaming as a way to help solve the deficit – well, to me, it’s just not that simple. I don’t think people are looking at gaming as a real way to solve the deficit problem.”
Day admits the full $250 million figure wouldn’t be realized this biennium (as a full-fledged racino would take time to construct). But he said, if need be, adding slot machines into racetracks could start earning some money for the state within four to six months.
Despite threats of a lawsuit, Day said he is ready to push that idea when the leadership gets down to the wire on budget negotiations.
“We are one of few gaming proposals that can get started quickly,” he said. “When we get down to the tail end of session, there are going to be traumatic effects in Minnesota from some of these cuts, and [the leadership] is going to start looking to anyone who has money. Gaming is one of the few places you can turn to. We want to be in the room with our hands up, saying, ‘We can help with that.'”
