Article by Erik Smith. Published on Monday, March 28, 2011 EST.

Budget Crisis Good Reason to End Tribal Monopoly on ‘Slots,’ They Say

They aren’t really slots, but who can tell the difference?

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, March 27.—Two big gambling proposals are surfacing in this year’s Legislature, and suddenly lawmakers are discovering the hidden charms of slot machines.

            That’s what a multi-billion-dollar budget shortfall will do for you.

            Two proposals are being floated in the final weeks of the 2011 Legislature, each of them with the potential to raise somewhere in the neigborhood of $400 million for the next two-year budget. And after years of argument, as lawmakers find themselves having to cut at least $3 billion in spending this year – they’re starting to see it as a matter of justice. Why should the tribes have all the gambling machines? 

            One proposal you may have heard of. The state Recreational Gaming Association made a big splash two weeks ago with a proposal that would allow cardroom operators to install what are essentially slots in their “mini-casinos.” But it’s not the only idea. The Washington Restaurant Association has quietly been floating another proposal that would allow the same type of machines to be installed in bars and taverns across the state, just like in Oregon.

            Both are a direct challenge to the state’s long-held restrictions on off-reservation gambling, and to the monopoly that Indian tribes now have on electronic gaming in this state. Call ’em proof that when the Legislature says everything is on the table this year – it ain’t kidding.

            “After the last revenue forecast, I think it’s going to treat them very seriously,” said Senate Republican Leader Mike Hewitt, R-Walla Walla.

            You hear the same sentiment all over the statehouse these days. Why not? people ask. Shouldn’t non-Indians have the same rights as tribal members? It’s not about gambling – it’s about discrimination! How can the Legislature stand for that? It’s still an uphill battle for advocates of off-reservation gaming, and you can count on tribes to put up a fight. But what years of public agitiation, lobbying and litigation couldn’t accomplish, the state’s budget crisis just might.

            And state Sen. Margarita Prentice, one of the idea’s staunchest opponents, can’t help but sigh. “Every time something like this comes up, they are going to do us a favor and expand gambling,” she said.

            Sin is In

            You might say it’s a trend story. Right now lawmakers are entertaining ideas that would have left previous generations of lawmakers aghast. There’s another run at privatizing the state liquor stores, talk about legalizing marijuana, even an assault on the Legislature’s new favorite taboo, tobacco, by permitting cigar lounges. Hefty license fees would be involved. Last year they tried taxing soda pop and candy bars, but the voters said no to that idea. So maybe the only sin they’ve left out is prostitution.

As for gambling, people have been grumbling about the arrangement ever since Washington tribes negotiated the deal that allowed them to place electronic gambling machines in their own tribal casinos, back in 1999. Nobody else got that privilege. The state didn’t insist on a cut of revenue in return for exclusivity, as has been done in other states.

Some people say Washington walked away from a fortune. And it doesn’t seem fair for one group to have an advantage – especially if the state can deal itself in.

            “We view this as a fairness issue,” said state Rep. Bill Hinkle, R-Cle Elum. “And I think that is going to be an important part of the debate if that can be communicated well to the public.”

            Not Really Slots

            The machines in question aren’t really slot machines like you see in Las Vegas. They’re what you call “electronic scratch ticket” machines, a circumlocution designed to comply with state gambling laws. The tribes got them because federal law allows them to offer any form of gambling that is allowed in the state as a whole. Since the state allows lottery scratch tickets, the tribes sued and won the right to offer the same sort of game in electronic form. The main difference between traditional slots and the scratch-ticket machines is that when you drop in your coin, you don’t have a chance of winning every time. The outcome is predetermined. You just don’t know which tap of the button will be a winner.

            They don’t have levers, so you can’t call them one-armed bandits. But other than that the machines look like slots, they act like slots, and as far as the public is concerned, that’s what they are. They’ve proven a big draw at the Indian casinos – about two-thirds the $1.7 billion they pull in every year. Meanwhile, off the reservation, non-tribal establishments are stuck with old-fashioned paper pulltabs and punchcards. People visit the state’s 63 cardrooms, many of which call themselves mini-casinos, and they see the table games – up to 15 in each establishment. “But when people go to a casino, they expect to see slots,” said Dolores Chiechi of the Recreational Gaming Association.

So they keep driving to the reservation, she said. And that’s just not right.

            “We like to say that we’re playing Pong in a Wii world,” she said.

            Lessons From 2004

            It’s the most serious push for the Recreational Gaming Association since 2004, when it teamed up with the Restaurant Association and other interests and spent a million dollars promoting Initiative 892. The measure would have allowed electronic gaming statewide. But they couldn’t match the tribes, which spent $5 million to defeat it. Part of the problem, Chiechi said, was that the tribes raised fears of wide-open gambling in every neighborhood in the state.

            That’s one reason the cardrooms have gone their own way this year. The fewer the outlets, the less likely the public will object. The Gaming Association commissioned an Elway Research poll that showed 62 percent of the public favored allowing electronic gaming machines in non-tribal locations.

            It commissioned another study that showed just how much the state could make. The proposal would limit each establishment to 200 machines. Suppose the mini-casinos install an average of 125 and give the state 30 percent of the net. According to Gaming Market Advisors, a Las Vegas research firm, the state’s take would be as much as $157 million the first year, rising to $206 million by 2016.

The group also contemplates giving local governments the option of imposing a five percent tax – so they’d get a cut, too. The study says the mini-casinos would capture about 9 percent of the electronic-gaming market, but the tribes would quickly rebound from the lost revenue, because their mammoth casinos offer them an inherent advantage.

Chiechi said a bill will likely be dropped shortly, setting the debate in motion.

            A Restaurant Counter Plan

            The Washington Restaurant Association is pushing a rather different idea. It would allow electronic gaming in bars and taverns – wherever a liquor license is held, and where minors are excluded. The Restaurant Association proposal hasn’t surfaced in a formal way, but its advocates have been raising it on the Hill. And this one, depending on how it is configured, could raise even bigger bucks for the state.

            The details here are a little less precise. But the restaurateurs are talking about an arrangement more like the one that exists in the state of Oregon, where the state lottery owns and maintains the machines and takes a 75 percent cut. Each establishment would be limited to perhaps 10 machines. Here the state would take closer to half, and in a move designed to quell tribal opposition, the restaurants would give the tribes a share of the take as well, in a revenue-sharing arrangement.

            It all depends on how the deal is configured, said Bruce Beckett, government affairs director for the Restaurant Association, but the state could make upwards of $200 million a year. And that may be a bit on the conservative side. Oregon’s program allows video poker, which isn’t contemplated here, but the smaller Beaver State makes $1 billion every two years.

            It’s a matter of crafting a deal that appeals to lawmakers, Beckett said. “It’s always been our feeling that there’s a huge opportunity here,” he said. “If the Legislature wants to hammer it out, we stand ready to hammer it out.”

            And you can be sure that if the cardrooms start getting action, the restaurants will want a seat at the table.

            60 Percent Vote Required

            There’s an overlap in the two proposals. The cardroom operators would qualify under the restaurant proposal, but the number of machines they could offer would be sharply limited, and they certainly wouldn’t be the only game in town. The restaurant proposal offers the bigger potential payoff, but the tradeoff would be higher costs for machine installation, and a wider spread for machine gambling.

            But there’s one pitfall for both proposals. The state constitution requires a 60 percent vote of both houses of the Legislature for any expansion of gambling. And given likely tribal opposition, that’s a pretty high bar to overcome. The tribes’ big-spending campaign contributions have earned them plenty of friends at the statehouse. The state Indian Gaming Association didn’t return a call for this story, but Samish tribe lobbyist Mike Moran said the tribes are gearing up for a two-front war:  “This is the most frightening session I have faced in 23 years as a staffer and a lobbyist before the Legislature.”  

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