1889 Institute's solution to gaming compact dispute: end the casino monopoly

Compact Dispute Solution: End the Casino Monopoly

With Governor Stitt and Oklahoma’s tribes at loggerheads over the gaming compact, it’s a good time to reconsider the tribes’ gambling monopoly altogether. While there is only one Las Vegas, Oklahoma is a casino state. Regardless of the compact dispute’s outcome, Oklahoma will remain a casino state. The question is, why should the tribes be exclusive operators of casinos?

Casino gambling exclusively allowed of tribes in other states arose from a legitimate need for impoverished reservations to generate some cash flow. In Arizona, where I lived for several years, I found reservations to be sad, undeveloped, poverty-stricken places with a few poorly-exploited natural attractions. But Oklahoma does not have reservations. Consequently, tribal members have integrated into the prevailing culture, apparently becoming just as prosperous as any other group of people.

Congress still recognizes Oklahoma’s reservation-less tribes, and this grants the tribes some privileges others of us do not enjoy. Given history, this might well be justified, but it is not apparent that there was ever a justification for a grant of a monopoly over an industry other than that it happened elsewhere.

Casinos in this state are not restricted to specific territories, although the laws and regulations on permissible locations can be restrictive, confusing, and arbitrary. Thus, casinos in Oklahoma are fairly ubiquitous. When headed north out of Texas on I-35 or I-44, it can be quite the adventure dodging vehicles with Texas plates slowing for casino exits. After the casinos, traffic clears.

That’s the reason casino gambling will not end in Oklahoma, despite the current dispute. Casinos bring too much money into the state, even with tribes the primary beneficiaries of surrounding states’ inhabitants’ gambling habits.

If casino gambling is not going away and it’s already all over the place, why should the tribal monopoly continue? A more competitive casino gambling industry will bring even more money into the state. Competitive industries are generally larger and richer than monopolized ones. The head-to-head competition that made Las Vegas great is relatively muted in Oklahoma by its limitation to tribes.

This is not just a practical issue but a moral one. As Howard Hughes pointed out to a U.S. Senator in the movie, The Aviator, granting monopolies is un-American. For those who have a moral problem with gambling, keep in mind that while casino gambling exploits a vice, so does selling liquor in a bar and selling state-sponsored lottery tickets out of a convenience store. If people want to keep casinos out of their communities, the legal means to do so can be more effective against a Steve Wynn than against tribes.

Let’s end the tribal monopoly over casino gambling in Oklahoma and open the industry to anyone willing to compete.

Byron Schlomach is the Director of the 1889 Institute, a non-profit education and research organization.

Low casino fees a problem for Henry administration too

Low casino fees a problem for Henry administration too

by Ray Carter

Director, Center for Independent Journalism

(December 6th, 2019) -- Gov. Kevin Stitt has said Oklahoma casinos are not paying market rates for geographic monopoly rights to operate gambling facilities, which significantly reduces state government funding. Stitt isn’t the first statewide officeholder to raise this issue.

In 2008, former State Treasurer Scott Meacham, who negotiated the state’s gaming compacts on behalf of former Gov. Brad Henry, opposed the opening of a tribal casino because it would result in a loss of revenue to state government, pointing to the lower fees paid by tribal casinos compared to the rates paid by state racetrack casinos, or racinos.

In a June 9, 2008 letter sent to the U.S. Department of the Interior, Meacham wrote that if the Shawnee Tribe was allowed to open a casino in Oklahoma City, the state would “be harmed” because of a loss in “direct gaming revenue” as gambling shifted from the racetrack to the tribal casino.

“The state receives 4 to 6% of tribal gaming receipts but receives 10 to 30% of horseracing gaming receipts,” Meacham wrote. “Therefore, state dedicated gaming revenues for education will also be harmed.”

In 2000, Congress passed the Shawnee Act, which restored the Shawnee Tribe’s federal recognition and gave it the right to secure land outside the assigned lands of other Oklahoma tribes. That meant much of the state was off-limits to the tribe, but property in Oklahoma County was available.

In 2005, tribal officials publicly discussed their desire to purchase land and build a casino in downtown Oklahoma City or Bricktown. By 2007, the tribe had a contract to buy property and announced plans to build a casino on 104 acres fronting Interstate 35 between Britton Road and Wilshire.

That effort drew opposition from the Remington Park racetrack and casino.

In a Feb. 28, 2008 letter sent to Meacham by Scott Wells, the general manager at Remington Park, Wells said the racetrack’s “business was negatively impacted by the opening of the Riverwind and Fire Lake Grand casinos in 2006.”

While that competition had been expected, Wells said racetrack officials did not expect to face competition from “a giant tribal casino 1.7 miles away from Remington Park ...”

Under legislation approved in 2004, slot machines at Oklahoma racetracks are taxed at rates between 10 percent and 30 percent. In contrast, under the various gaming compacts signed with tribal governments, the state receives only an “exclusivity fee” of 4 percent to 6 percent for slot machines at tribal casinos. The fee paid by tribal casinos is provided in exchange for the state barring competition in an area, which gives a tribal government monopoly rights to casino activity in that area.

In his letter opposing tribal casino operation in Oklahoma City, Meacham noted that if the proposed Shawnee Tribe casino lured gamblers away from Remington Park’s slot machines, state government would receive much less money due to the lower fee imposed on tribal slot machines.

The Shawnee Tribe’s effort to open an Oklahoma City casino fell by the wayside and the tribe eventually opened a casino near Guymon in the Oklahoma panhandle, more than 300 miles from the tribe’s headquarters in northeastern Oklahoma.

Meacham and Wells’ letters are both preserved in state archives.

The large gap in rates paid to the state on slot machines continues to be an issue and plays a large role in the current dispute between Stitt and tribal casino operators.

Tribal gaming compacts include language stating that each compact “shall have a term which shall expire on January 1, 2020.” Stitt says the compacts must be renegotiated before that expiration date, and has said the exclusivity fee paid by tribes should be increased to more closely match the rates paid in other states with similar casino markets. According to one estimate, 44 percent of tribal gaming compacts nationwide involve fees of 10 percent or greater, and Oklahoma’s casino market is far larger than most. Oklahoma is currently the nation’s third-largest state casino market and home to the world’s largest casino.

Despite the expiration date Stitt notes, tribal casino operators claim the compacts auto-renew every 15 years and have refused to negotiate.

United for Oklahoma, a publicity campaign funded by the state’s tribal casino operators that opposes renegotiation of the fees paid on slot machines, estimates tribal casinos’ total combined payments to Oklahoma state government since 2006 are more than $1.5 billion.

In addition to exclusivity fees, United for Oklahoma states that tribal casino operators also provided $80.5 million for tribal education programs, scholarships, and donations to Oklahoma education institutions in 2017. Combined with the share of exclusivity fee payments earmarked for education, the tribes report providing $198 million for education in 2017.

However, the amount paid through exclusivity fees and other forms by tribal casino operators is dwarfed by the payments that would have occurred had tribal casinos and racinos been placed on equal footing, records show.

In 2018 the 1,000 racino slot machines paid $24 million to state government. In contrast, the estimated 42,000 class III tribal casino slot machines paid a total of $119 million in state revenue share.

Broken down, that averages about $24,000 for each racino machine, but just $2,833 per Class III slot machine in tribal casinos. And tribal casinos pay no state fee on more than 28,000 Class II (Bingo-style) slot machines in their facilities.

Those figures indicate the state of Oklahoma would today receive payment of more than $1 billion annually from tribal casino operators had the fee on Class III slot machines in tribal casinos been equal to the rates imposed on the same slot machines in Oklahoma racinos, based on current per-machine averages.

In response to Stitt’s call for renegotiating compacts, officials with 29 tribal governments in Oklahoma signed a letter saying they believe the compacts “automatically renew” on Jan. 1, 2020 and that “rates under the present Gaming Compact should not change.” The chief of the Shawnee Tribe was among the signatories.

Small: Deduction cap may play role in casino debate

Deduction cap may play role in casino debate

By Jonathan Small

When it comes to the ongoing debate over renegotiation of state-tribal gaming compacts, there’s an elephant in the living room everyone pretends to ignore for now, but that may soon play a big role in negotiations.

In 2018, lawmakers voted to cap income-tax deductions at $17,000 per return. That’s a problem for Oklahoma casino operators—several of whom supported the 2018 tax hikes—because it hits many of their customers. It turns out a lot of people lose a lot of money in Oklahoma casinos. This fact was highlighted recently when the senior counsel of the Chickasaw Nation said California is the only state where more money is spent on gambling than Oklahoma, and on a per-person basis California gets just $90 per citizen versus $407 in Oklahoma.

The huge per-person gap is a reflection of the size of the losses experienced by gamblers in Oklahoma.

Oklahoma’s casino interests are promoting a bill to exempt gambling losses from the deduction cap even as they resist Gov. Kevin Stitt’s call to renegotiate gaming compacts.

Stitt has the stronger case on the merits. But he may also have more leverage thanks to the casinos’ desire for a gambler tax break, which would act as an indirect taxpayer subsidy of their operations.

In Oklahoma, only tribal governments can operate casinos. In exchange for area monopolies, they pay a state fee in return. But Stitt has shown Oklahoma’s share is far less than in most comparable gaming markets.

Tribal casino fees in Connecticut, New York and Florida all run up to 25 percent. In Oklahoma, the fee on slot machines tops out at 6 percent. Notably, two Oklahoma tribes are entering an Arkansas market despite its top rate of 20 percent.

Casino operators counter that other states’ gaming compacts charge less, and sometimes nothing. But those markets don’t compare to Oklahoma, which has the nation’s largest casino.

At the same time, Oklahoma casino operators argue our gaming compacts auto-renew and the 6-percent fee remains locked in place throughout eternity. But Oklahoma’s gaming compacts state “this compact shall have a term which shall expire on January 1, 2020.” Why include a concrete expiration date in a contract with no expiration?

In exchange for higher fees, the governor has said he is open to allowing casinos to offer sports betting, a lucrative proposition. And the proposed gambler tax break looms in the background, even if no one is discussing it in public.

Oklahoma gambling is a monopolistic enterprise, not a free market. Taxes on gambling in Oklahoma are less than taxes on a bottle of water or groceries. Most businesses are subject to either corporate or pass-through income taxes. Businesses and homeowners pay property taxes, but not casinos. Especially in this situation, the governor has made a strong case Oklahoma casinos should at least pay market rates. And there’s no reason this can’t be a win-win for both sides.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.

The Legacy

The following column is from Stephens County conservative activist Steve Fair.

The Legacy!

This has been a tough year. I just got out of jail and now the doctor is saying I have lung cancer and cirrhosis of the liver. He tells me there is not much hope and that I have just months to live. He just shook his head when I told him I had abused my body for the school children of Oklahoma. He just doesn’t ‘get it.’

It all started back in 1982 when Oklahoma voters approved pari-mutuel gambling- you know betting on the ponies. There were commercials saying the money I gambled at the track would help educate the kids. I’ve always been about helping kids so I started going to the track every week doing my part to help the schools. In about a year, I had gotten to where I was going every day after work and on my lunch break. I wasn’t winning anything, but I took comfort in knowing that I was helping Oklahoma kids by betting on the ponies. I ‘got it.’

Read the rest here.

Steve is an amazing gentleman, and a prolific and faithful writer. This column is one of my favorite of his pieces. Satire with a sting of truth. You simply must read the entire article!