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Experts debate legality of revenue-sharing compacts
Monday, April 18, 2005

Don't expect the battle over revenue-sharing in gaming compacts to end anytime soon, two former Bureau of Indian Affairs officials said on Friday.

Kevin Gover, the former assistant secretary during the last three years of the Clinton administration, said more and more tribes are being asked to give a greater portion of their gaming revenues. "The state's opening position is 25 percent," said Gover, now a University of Arizona professor and tribal consultant.

Michael Anderson, who served as Gover's deputy assistant secretary, said it is too late to debate whether a trend that is growing nationwide is allowed under the Indian Gaming Regulatory Act. "The whole herd has left the barn," he observed.

But William Hardacker, the legal counsel for the Shakopee Mdewakanton Sioux Community of Minnesota, said revenue-sharing is illegal. He noted that Gov. Tim Pawlenty (R) demanded $350 million from the state's tribes and, when that failed, he proposed an urban, off-reservation casino that has divided the Indian community.

"It's absolutely heartbreaking to see tribal leaders get up and publicly criticize other tribes in the state," said Hardacker, whose tribe opposes the urban casino and any sort of revenue-sharing with the state.

The comments came during a panel discussion at the Federal Bar Association's Indian law conference in Albuquerque, New Mexico. Indian law practitioners and students packed into a crowded room to consider whether revenue-sharing is an "illegal tax" or a "valuable benefit."

It's a little bit of both, according to Gover, who approved dozens of compacts that have come under fire by Gov. California Arnold Schwarzenegger (R) because they don't require tribes to share casino profits. "There is no bottom line here," he said. "The statute doesn't not prohibit revenue-sharing."

Anderson, who now works for an Indian law firm in Washington, D.C., that represents tribes with and without casinos, argued that revenue-sharing is acceptable in some cases. He said tribes have signed compacts that guarantee a certain measure of exclusivity to lucrative Class III games such as slot machines.

Existing law doesn't prohibit tribes and states "from jointly agreeing to a revenue-sharing agreement in the context where there is a balance of economic development," he said.

Hardacker on the other hand said tribes shouldn't ground to state governments for legal reasons. "What's happening in Minnesota ... harkens back to a very basic issue," he said. "To what extent do state governments have authority over tribal governments?"

In testimony to Congress, Bush administration officials have noted that they are seeing more and more compacts with high levels of revenue-sharing. The BIA's only criteria for judging these agreements is whether they guarantee tribes exclusive rights.

Since 2001, the Bush administration has allowed revenue-sharing as high as 25 percent in New York, California, Arizona and Oklahoma. The BIA has only rejected one compact for a Louisiana tribes on the grounds that the revenue provision was unfair.

Efforts to provide more guidance on the issue have generated support among tribes but opposition from state officials. Retired Sen. Ben Nighthorse Campbell (R-Colorado) sponsored a bill to limit revenue-sharing but it failed to get a vote on the Senate floor.

The debate has eroded state-tribal relations, according to tribal leaders. "Each year, the Prairie Island Community contributes more than $100 million to Minnesota's economy. We have accomplished this without government subsidies," Doreen Hagen, the tribe's chairwoman, said recently. "Yet we are constantly criticized for not contributing enough."

Tribal casinos brought in $18 billion in revenues last year, according to the National Indian Gaming Association. Tribes contributed $1.8 billion to states through taxes and other payments, NIGA said in a recent report. Tribes also contribute $100 million a year to local governments.

Despite the rise in revenue sharing and the contributions made by tribes, state governments haven't been willing to credit tribes for this influx of cash. In December, National Governors' Association released a report that failed to account for many of the payments states receive from tribal governments.

NIGA Report:
An Analysis of the Economic Impact of Indian Gaming in 2004 (February 2005)

Relevant Links:
National Indian Gaming Association - http://www.indiangaming.org