Article by Erik Smith. Published on Friday, April 02, 2011 EST.
Would Expand State’s ‘Pseudo-Slots’ to Off-Reservation Cardrooms – Could Raise $380 Million for Beleaguered Budget
By Erik Smith
Staff writer/ Washington State Wire
OLYMPIA, April 1.—A plan that would for the first time allow electronic gambling machines to be installed in non-Indian establishments is finally in play in this year’s legislative session.
You can call it a new tax on the foolhardy, or a challenge to a tribal tax loophole, as some Republicans like to call it, but the plan certainly would generate new money for the state at a time when it could use the cash. Backed by the state’s cardroom operators, House Bill 2044 could generate as much as $380 million in tax revenue for the state every two years. The relatively modest expansion of gambling butts up against the increasingly politically powerful tribes, whose lucrative casinos are now the only venues where machine gambling is allowed, and you can count on a fight.
And not just with the tribes, either. The fact that only nine members have signed onto the bill – despite expressions of wide support for the idea within the Legislature – may be taken as a sign that there’s another proposal just around the corner. The Washington Restaurant Association is pushing a plan of its own that would allow the “pseudo-slot” machines to be installed in every establishment with a liquor license. That one holds the promise of even more revenue for the state, while permitting a wider spread of gambling.
The bill is introduced today with Democratic and Republican signatures. It is sponsored by Rep. David Taylor, R-Moxee. Backing him up are Republicans Charles Ross of Naches, Larry Haler of Richland, Norm Johnson of Yakima and Joel Kretz of Wauconda. Democrats on board are Steve Kirby of Tacoma, Dave Upthegrove of Des Moines, Kathy Haigh of Shelton and Chris Reykdal of Olympia.
It may be about money, but to hear backers describe it, the real issue is discrimination and fair competition.
“Tribal casinos were first built in rural areas, but now they are expanding to urban areas, providing unfair competition to private businesses,” Taylor said. “We have to ask ourselves – do we want more mega-casinos or do we want established and reputable house-banked card rooms to compete for the same market share?”
State Would Get a Cut
Under the Recreational Gaming Association proposal, the state’s 63 card rooms – or mini-casinos, as many prefer to style themselves – would be allowed to install as many as 200 video lottery terminals in each location. These machines are slot machines in everything but name. They don’t have spinning wheels or pull-action levers, but the more important distinction, in gambling terms, is that the outcome each time a button is pressed is “predetermined” by the machine. That makes them a sort of “electronic scratch ticket” device, not a slot – and that technical and legal distinction is what allowed the tribes to begin installing them in their casinos in 1999.
Under federal law, the tribes are allowed to offer any game that is offered statewide. The state lottery’s paper scratch tickets provided enough of an opening for the courts to rule in the tribes’ favor.
But the non-Indian cardroom operators never got the same opportunity. And what has happened over the years is that Indian casino gambling has exploded, to $1.7 billion a year, most of it fueled by the ersatz slots, while cardroom operators have seen their business drop. About a quarter have closed.
What appeals to lawmakers, perhaps as much, or more than any sense of social justice, is that the cardroom operators are proposing that the state get a cut. Their proposal would give the state 30 percent of the net, and would allow local governments to impose taxes to collect another 5 percent.
That’s more than the state gets from the tribes. The state doesn’t get a cut of their revenue because Washington didn’t demand a split of the slot-machine proceeds in return for exclusivity, as has been done in other states. Critics have been railing about it for years, saying the tribes got a sweetheart deal. But because the state never played all its cards, that presents an opportunity in this tight-budget year.
Call it a Matter of Fairness
“The monopoly that tribes have on this market isn’t fair or equitable,” Ross said. “Allowing existing non-tribal cardrooms to upgrade their gaming facilities will allow them to adequately compete with tribal gaming activities. This would only apply to card rooms that have proven they can abide by regulations and provide a fair game.”
The proposal would allow all current card rooms to install the terminals. New entrants into the market would have to be in operation for at least five years to qualify.
The Recreational Gaming Association commissioned an independent study that indicated the cardrooms could generate $190 million in annual tax revenue for the state when fully deployed. They would capture a nine percent share of the market, now owned completely by the tribes, though the advantages of big-casino gaming, entertainment and dining would likely allow them to bounce back quickly.
Dolores Chiechi, executive director of the cardroom association, said that by limiting the gaming to cardrooms the proposal addresses one of the big arguments against the statewide-slot initiative of 2004. That one would have allowed electronic gambling devices in bars, taverns and other locations where minors are excluded, and Indian tribes mounted a $5 million campaign to raise fears of gambling’s spread.
“Our members are squarely behind this bill,” Chiechi said. “It is based on the findings of the economic study that we released earlier, and it addresses public concerns about limiting the footprint of electronic gaming to existing venues.”The bill faces a major hurdle: The state constitution says any expansion of gambling requires a two-thirds vote of both houses of the Legislature.
Other Bills Target Tribes
While the gaming proposal might be seen as a body-blow to the tribal monopoly on electronic gambling, a couple of other bills introduced by House Republicans Friday aim between the eyes. House Bill 2045 eliminates the exemption from taxation of off-reservation tribal property, would force renegotiation of compacts that give them 75 percent of gas-tax proceeds from tribal stations, and would tighten regulation of Indian cigarette sales.
That measure notes that recent tax agreements and preferences negotiated with Indian tribes “reduce or eliminate the amount of tax dollars the state is entitled to collect and create an inequitable situation. This is money that can be used for education, public safety, human services and transportation.”
The measure also is sponsored by Taylor and signed by Ross, Matt Shea of Spokane, Haler, Brad Klippert of Kennewick, Johnson and Kretz. Another bill with the same sponsors, House Bill 2046, requires legislative approval before the governor signs new compacts with tribes and other groups or organizations.Your support matters.
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