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Why gambling expansion remains a long-shot bet

Briana Bierschbach//October 12, 2011

Why gambling expansion remains a long-shot bet

Briana Bierschbach//October 12, 2011

An artist’s rendering depicts a casino in downtown Minneapolis’ long-struggling Block E. A spring 2011 legislative proposal to locate a casino there fell on deaf ears at the Capitol, but some sources are now suggesting that the Block E casino plan could be revived — potentially as part of an effort to fund a Minneapolis stadium for the Vikings. (Submitted rendering: Gensler)

Despite state’s fiscal crisis, efforts run squarely into legal obstacles, political divisions in both parties, and lobbying muscle

A steady downpour didn’t keep Indian gambling workers from flocking outside the state Capitol in St. Paul last April.
At least 1,500 people gathered outside on the building’s steps, some arriving by the busload from reservations hours away. Clad in raincoats and shielded by a canopy of umbrellas, workers thrust signs into the air that read, “Rural jobs count too” and “Don’t gamble with my job!” They were pushing back at a slew of perennial bills in the legislative queue that would install slot machines at racetracks — better known as a racino — or allow electronic gambling in bars and restaurants.

(Yet another gambling proposal, predicated on building a casino at downtown Minneapolis’ chronically troubled Block E development, was also introduced in 2011 but failed to gain political traction at the Capitol. Some sources are suggesting that the proposal could yet figure prominently in a much-rumored renewal of efforts to build a Vikings stadium in Minneapolis rather than Ramsey County.)

The legislation represented an effort to break the Indian gambling monopoly in Minnesota, which stands as one of the most tribe-friendly deals cut on gambling proceeds in the nation. Minnesota’s 22 separate compacts with its 11 Indian tribes do not require Indian-owned gambling operations to provide any revenue or other benefits to the state. Other states have managed to extract a share of Indian gambling profits for their own budgets. By the middle of the last decade, Connecticut was receiving $300 million to $400 million a year from its two major Indian casinos. But Minnesota has no apparent means of sweetening its deal with tribal gambling interests — because, unlike the arrangements forged in many other states, Minnesota’s original deal with tribes contained no provision for periodically opening the compacts to renegotiation.

The public rally on the Capitol steps only mirrored the power Indian gambling interests wield inside its walls. Despite countless efforts over the years from groups to take a bite out of the industry’s proceeds — which sources estimate could bring the state anywhere from $400 million to $1 billion in biennial revenues — all such attempts have floundered. In the 2011 session, which featured a new Republican majority, a gambling-friendly governor and a multibillion-dollar budget deficit, gambling proponents saw a prime opening to break the Indian hold on the industry. But the session came and went without any concerted push to expand state-sanctioned gambling.

The gambling compacts remained intact and unchallenged, and sources say that’s not about to change.

“We’ve been dealing with that since the day the compacts were signed,” said John McCarthy, executive director of the Minnesota Indian Gaming Association (MIGA). “Part of the problem is that compacts were negotiated in total good faith by both parties, and lo and behold, the tribes made a huge success out of the business, and, gee, that kind of surprised people.” McCarthy was in the room more than 20 years ago when the original compacts were signed. Part of the deal requires that both the tribes and the state willingly come to the table to renegotiate. And, McCarthy said, “There is no appetite for that on our side.”

McCarthy, who helped the tribes negotiate the compacts with the administration of former DFL Gov. Rudy Perpich in the late 1980s, says, “The term ‘revenue-sharing’ never came up.” Now that the casinos have proven to be a successful endeavor, politicos want to get in on the action, McCarthy said, but they have never come to the tribes in a fair-minded way to do so.

“The tribes have always been interested in sitting down with the state in a civil manner to talk about ways we could work together on things that are beneficial to both groups, but we’ve always run into the gun-to-the-head approach,” he said. “There has never been [a] partnership attitude; it’s always been, ‘You’ve got money and you have to give it to us.’”

In theory the state could proceed with gambling expansion and fight the legal battle that insiders say would ensue. But the terms of the gambling compacts are only one of the many practical obstacles to going down that road. At the Legislature, the issue divides both DFL and Republican caucuses, and those divisions have been regularly exploited through the years by a large and high-powered lobbying contingent intent on turning back threats to the tribal gambling franchise.

‘Can’t wait for gaming’

Former Gov. Tim Pawlenty wasted little time in proposing to skim off Indian gambling revenues for the state’s benefit. A year after assuming office, in his 2004 State of the State address, Pawlenty noted that while he had been against expanded gambling as a member of the state House, times had changed, and the gambling compacts negotiated more than a dozen years earlier would need to be re-evaluated.

In crafting his approach, Pawlenty sought to make the most of tensions between Minnesota’s gambling-rich tribes, like the Mille Lacs Band of Ojibwe and the Shakopee Mdewakanton Sioux, and larger, poorer bands such as White Earth, Red Lake and Leech Lake. The latter three tribes entered talks with the governor about building a state-tribal shared casino in the metro area.

But members from other tribes fired back, and Pawlenty eventually gave up on his pursuits. Since then, much has changed for the tribes.

White Earth lobbyist and former GOP gubernatorial candidate Bill Haas says the tribe has “gone in other directions.” In the health and human services bill passed this spring, the White Earth tribe was given grants and exclusive rights to provide medical treatment to anyone who resides on the reservation in Mahnomen County. Looking ahead, Haas says the tribe will try to forge partnerships with the state in areas such as the development of biofuels and the construction of a tribe-run medical clinic in Minneapolis.

As for a tribal-state joint casino, the White Earth group finally grew impatient. “There was no support in the Legislature to do it,” Haas said. “[White Earth] Chairwoman [Erma] Vizenor said we can’t wait around for this; we’ve got to look for other opportunities. Vizenor’s goal is to be a partner with the state. It’s a whole different way of looking at it, but we can’t wait for gaming to come around. If we would have waited, we would have missed out.”

For Leech Lake, which considered joining White Earth and Red Lake in partnering with the state on a casino, a change in leadership and a reality check changed their minds, lobbyist Randy Asunma said. Of the three rabble-rousing leaders of those tribes in 2004, only Vizenor remains in her post.

“The financials wouldn’t work out. They were given a pie-in-the-sky kind of deal,” Asunma said. “The old leadership bought into that, and the old leadership is no longer.”

In the years since Pawlenty made his play, the richer tribes like Shakopee have worked to repair their relationships with the poorer tribes in the state. Part of that rapprochement, several sources close to the tribes say, has involved an increased amount of cross-tribal financial aid from gambling-rich bands.

Gambling a no-go at the Legislature

White Earth Tribal Council Executive Director Ron Valiant says his tribe would still be interested in partnering with the state if it ever looked at a metro area casino again, but he noted that even when Pawlenty got behind the idea, there was never enough support in the Legislature.

Historically, gambling has been a sticky wicket for both caucuses from both major parties. On the DFL side, the long history of steady donations from the tribes to the Democratic caucuses have caused some in the leadership to be reluctant to make any changes, some say. At the same time, a feistier contingent that includes DFL Iron Rangers like Rep. Tom Rukavina and Sen. David Tomassoni supports breaking the monopoly to allow gambling in the state’s bars and restaurants. “I think the rub is that many people who own small businesses and bars and legion clubs and VFWs see what have been their revenues going to the casinos after the smoking ban,” former DFL Senate Majority Leader Dean Johnson said. “There are political and public pressures that say, let’s open this up and let’s all have this opportunity at these revenues.”

The Republican conundrum is even more complex. Generally Republicans are perceived to be more open to the idea of a racino or a metro area casino, but there remains a contingent of GOP legislators (like Sen. David Hann) who are morally opposed to any expansion of gambling. “It’s an unholy alliance of persons that oppose racino,” former House Speaker Steve Sviggum said. “Some Republicans are adamant against any gaming activity at all because of moral reasons, and then you have a lot of Democrats who don’t have the moral reason but [do have] the political reason to oppose it. We are in hard times right now, and I thought the ideal time for passing some type of competitive gaming was last year.”

Former Republican House Minority Leader Marty Seifert agrees, noting that last session was the first time the “big three” – meaning House Speaker Kurt Zellers, Senate Majority Leader Amy Koch and Gov. Mark Dayton — supported some kind of expanded gambling. In the view of Seifert and others, the presence of so many new members in the Legislature complicated what was already a difficult political dynamic surrounding gambling at the Capitol.

“This session was really an example of the rank-and-file lawmakers not being able to go down that road,” Seifert said. He notes that despite a push from senior Republicans like Sen. Dave Senjem to pass racino, the bill never made it up for a floor or committee vote to test its palatability among the caucus’ newest members. While some attribute that to moral objections from new members, others point to higher-level drama surrounding the state GOP and the gambling issue.

On two occasions last session, the Republican Party of Minnesota’s platform stance against any gambling expansion in the state came to the center stage. First was Republican Party Chairman Tony Sutton’s involvement with the group Citizens Against Gambling Expansion (CAGE). Sutton’s membership on the board of the group, which is heavily funded by Indian tribes, was a point of contention as he used the platform and megaphone of his GOP chairmanship to push against bills like racino. Sutton resigned from the group this year after an internal conflict over accusations that he used a party email list to send out CAGE materials. Sutton denied those claims.

The other kerfuffle came about after Pat Anderson announced she would take a paycheck to lobby in favor of a racino. The move came not long after she was elected as Republican national committeewoman, and state GOP Deputy Party Chairman Michael Brodkorb immediately criticized Anderson, saying her new role with the RNC and her support for racino were in conflict and she would have to stand down from one of the positions.

While Republican freshman Rep. John Kriesel was notably vocal in deriding the party’s actions, some lobbyists say other freshmen were scared off by the political infighting surrounding the issue. “Here they are in their first term, trying to be careful, facing tough votes on gay marriage and the budget,” one lobbyist said. “I don’t think they were going to go out of their way to get involved in this mess, especially if they didn’t know how it would sit with their constituents.”

Others point to the strong lobbying contingent supporting Indian gambling interests at the Capitol. Among the 11 tribes and MIGA, there are nearly 50 lobbyists — with some overlap — working at the Capitol to protect the Indian gambling monopoly. The richer tribes, like Mille Lacs and the Shakopee, have nearly 20 lobbyists combined, including DFL lobbying heavyweight Ted Grindal, Rich Ginsberg and former Republican Party Chairman-turned-lobbyist Chris Georgacas. The Prairie Island band boasts the services of longtime power lobbyists John Knapp and Christine Zimmer.

“They are really strong. They’ve really held us in check for numerous years,” said Dick Day, who until recently lobbied for Racino NOW. “We were getting close last year, and this year might be the telling year because we are going to try to tie it to school funding, but I think they feel quite comfortable that they’ve been able to hold everyone off for numerous years.”

Dayton and the tribes

Unlike Pawlenty, Gov. Mark Dayton entered office having already made noise about a challenge to the state’s tribal gambling franchise.

As he campaigned around the state, Dayton said frequently that he was interested in pursuing a state-run metro area casino to help bridge Minnesota’s budget gap. During primary season, tribes with gambling interests had given large donations to the gubernatorial campaign of then-House Speaker Margaret Anderson Kelliher, who had long protected interests of the tribes in the Legislature. The tribes even threw money at long-shot DFLer Matt Entenza’s campaign. In that time, Dayton got a single $1,000 donation from the tribes.

Even after Dayton triumphed in the primary, the tribes were hesitant to dump money into his candidacy. Instead they focused most of their resources on legislative campaigns and DFL fundraising powerhouse WIN Minnesota, which funneled its money to the Alliance for a Better Minnesota.

In the early days of the 2011 session, Dayton seemed to be free from the donor strings that tied Democrats in the past to the Indian gambling monopoly. He still talked about a casino as a way to help the deficit and even build a new Vikings stadium, but that line of talk slowly died as the session wore on.

While many, including the governor’s office, attributed the change in emphasis to the problems in booking any near-term revenue from such ventures — something the Minnesota Management and Budget office was loath to do given the near-certainty of litigation from the tribes — others believe that Dayton’s push was tempered by the tribes’ funding ties to WIN Minnesota and the Alliance for a Better Minnesota. Dayton used to be married to WIN Minnesota uber-donor Alida Messinger.

“When you think about who is calling the shots,” one DFLer said, “you can’t forget that the Alliance and WIN Minnesota received a ton of money from the tribes, and those groups spent that money against [GOP gubernatorial candidate Tom] Emmer and for Dayton. It’s unfair to assume that no tribal interests have his ear.”

Legal questions loom

The litigation threat that apparently helped to derail Dayton’s interest in a casino has also effectively scared off others over the years.

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 gambling proposals and concluded that the issue would likely need to be brought before voters again as an additional amendment to the state’s Constitution. Sources say the attorney general’s opinion amounts to a standing invitation to tribes to file a lawsuit in the event the state ratifies any gambling expansion.

Another legal challenge could come from environmental groups. The Constitution calls for lottery proceeds to go partly toward environmental purposes, and any proposal seeking to carry all the proceeds directly to the general fund would likely end up in court.

“There are very serious constitutional issues with regard to an expansion of gambling in Minnesota,” said DFL super-attorney David Lillehaug, who has worked with the tribes and studied closely the constitutional questions surrounding gambling. “Advocates of that have to take into account the risk of loss in litigation and the time it would take to resolve.”
There’s also a tricky provision in the federal Indian Gaming Regulatory Act that requires any casino proposal to be assessed in terms of its impact on the Indian community. While a state-tribal casino partnership would help the state in any case against the federal government, it would not forestall litigation. Tribes not included in the partnership could still argue that the casino would hurt their communities.

“They have to show that the tribes are getting some kind of real benefit from it,” one gambling lobbyist said. “And it’s my understanding that generally [the federal government] looks askance when the tribes have to pay out money.”

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