“Racinos”

Aug. 13, 2009

Transcript:

Ted Simons:
Casino games at race tracks is not a new idea. Voters defeated ballot measure in 2002 that would have allowed slot machines at dog and horse tracks. But times change and the budget deficit continues to grow, state lawmakers are looking for new ways to generate revenue. As David Majure reports, the racing industry is offering to help.

David Majure:
The state of Arizona is facing a current year budget deficit of more than $3 billion. Massive shortfalls are expected to continue for the next few years.

Speaker 1:
The bill makes general fund other fund, appropriations.

David Majure:
Meanwhile, state lawmakers are running out of options to balance the budget without raising taxes or drastically cutting services. But Arizona race tracks are riding to the rescue. They say they'll generate hundreds of millions of dollars for the state each year if given the right to operate casinos at existing horse and dog tracks. In exchange for that right, these racinos would give 45% of their gaming profits to the state.

Mark Brnovich:
Without a doubt, this proposal would be a game changer.

David Majure:
Mark Brnovich is director of the state department of gaming, which regulates Arizona's Indian casinos. Tribes sign compacts in 2003 agreeing to contribute between 1-8% of their gaming profits to the state, depending on how much revenue they produce. Since 2003, tribal contributions have totaled more than half a billion dollars.

Mark Brnovich:
If gaming goes off tribal lands, the tribes will only be required to provide three-quarters of 1% per quarter, so we'll see that money immediately dry up as far as those about the 90-100 million dollars a year the state has been getting thus far.

David Majure:
Limitations on tribal casinos would also disappear. The result of a provision in gaming compacts.

Mark Brnovich:
Provision 3H is commonly referred to as the poison pill. It provides that if gaming ever does go off tribal lands, that the Indian communities can operate casinos without regard to the number of casinos, types of games, and as well as number of machines. In other words, it would open the door for full-blown Las Vegas-type casino gambling in Arizona.

David Majure:
He says any gambling, whether on or off reservation, must be properly regulated.

Mark Brnovich:
My primary concern is the director of a law enforcement regulatory agency is to ensure the integrity of gaming here in Arizona. The department of gaming works very closely with our tribal partners to ensure the integrity of gaming and it's very, very important that gaming be well regulated and we have a consistent regulatory structure throughout this state. As a student of gambling history and a student of history, as a former prosecutor, I know when gambling is not well regulated, it will lead to crooks, cheats, corrupting influences, which affects gaming throughout the state, whatever form it may take.

Ted Simons:
Joining me to stalk about the racinos and the proposal is Sheila Morago, executive director of the Arizona Indian gaming association. Good to see you. Thanks for joining us.

Sheila Morago:
Thanks for having me.

Ted Simons:
The idea of allowing casinos at tracks, taxing them or getting 45% of the proceeds, why is that a bad idea?

Sheila Morago:
Obviously we've already done this. You mentioned it before the break. Voters overwhelmingly said no to this proposal in 2002. Given three options, they chose the limited regulating scheme that we currently have in the state.

Ted Simons:
Voters said no to it but why do you think it's a bad idea?

Sheila Morago:
There's a couple of things. One is, it changes the -- it's a game-changer for the state of Arizona. The voters said no, and we have limited regulated gaming. This is an agreement that took us three years to work out with the state. It's an agreement amongst tribes. One of the biggest things that we have in the state of Arizona is nongaming tribes. This will impact them the most. We have nongaming tribes in the bottom of the Grand Canyon, five in the state, and those people have transfer agreement was metro tribes that will go away. And they just can't afford to have that happen.

Ted Simons:
The other side will say that this will help the state avoid massive budget cuts, perhaps tax hikes as well. Your response to that?

Sheila Morago:
You know, any additional revenue is probably good, and that's what they're looking for right now. But in the long run, the numbers that the tracks are putting out right now really don't add up. Unless we find somebody to do an independent study on it, or an independent analysis on this, we've got to know whether or not it's worth the long-term repercussions to the state.

Ted Simons:
One of those repercussions would be lifting limits on tribes and what they can put in their casinos and what kind of games they can offer. Some would argue that would actually help the tribes open it up and whatever amount of slot machines that are wanted or needed or required our requested, go for it.

Sheila Morago:
That would be great if you have all great big market. If you look at the state of Arizona, there's only two markets that can hold multiple facilities. And that would be phoenix and Tucson. Again, we're talking about rule -- rural tribes and nongaming tribes. Those rural tribes in White Mountain t. Apache, even cliff castle in camp surrendered, they don't have those feeder markets. So you're talking about creating two really separate entities in terms of the metro tribes who could probably absorb some of that increase, and then the rural tribes who can't.

Ted Simons:
The tribes and their contribution to the state, the idea here is to help get money to the state. To keep budget cuts and tax hikes at bay. What do the tribes contribute to the state?

Sheila Morago:
The tribes contribute forever. If you looked way before we had gaming, when the state was first getting populated by non-Indians, they shared food, they shared water, they shared -- they took care of people as they were going across the state of Arizona to California and up into Utah. And always have shared. That's the culture we have in our Indian communities. But with the advent of gaming, we agreed to share some of our profits with the state in lieu, and in exchange for exclusivity. This is profits that our governments really need. If you look at the poverty in the Indian communities, we have centuries of poverty to overcome.

Ted Simons:
Some critics would say that number should be increased somehow, especially in these troubling times. Is there thought that there could be or should be some kind of an increase in that money going to the state, and would that be a wise move politically?

Sheila Morago:
Well, again, this was -- you have tribal communities who really need this money. They have very bad infrastructure problems. We still have the highest mortality rate than any given population in the -- in the nation, actually. And we have the highest rate of diabetes in the world in our Indian communities. So the money we get from gaming is to take care of those problems. And what we share with the state was a negotiated agreement between us and the state. Understandably, the state is in a world of hurt. But the question is whether or not the money that they're going to get or increases is worth the change in the state of Arizona.

Ted Simons:
Saying that the state is in a world of hurt, that also means a lot of citizens who might otherwise use casual income to go ahead and play whatever they want to play at casinos and tracks and whatever, that they're going to hold on to their money maybe more than they otherwise would. Again, anything that gets the economy in Arizona moving, does that not help the tribes, all tribes?

Sheila Morago:
It does. But we're seeing a decrease. We've seen a decline in our revenue stream for the last five quarters. We're holding steady right now, but when you have an industry that is totally dependent on everybody's disposable income, and people as you said just don't -- are holding on to that pretty tight, that is the end of the line. People, no matter how many options they have, they're not going to be letting go of that money.

Ted Simons:
So let's say, for example, let's speculate. If this were to actually happen, if the poison pill were taken and they go ahead and allow gaming at race tracks, how would the tribes respond?

Sheila Morago:
Well, immediately, add machines. But you've got to understand, we have machines that are still not in use. The full complement of the machines available to us are not in use because the population hasn't grown into those areas. So there's only going to be certain areas that we'll be able to increase those. The bet limits go up. More importantly, our revenue sharing creases to go to the state go down to one-quarter to 1% which is about to enough to make sure the department of gaming is still running. So that proven and stable revenue stream that education has seen that the health care industry has seen and the department of gaming and the office of tourism receives will go away. For a speculative revenue stream.

Ted Simons:
All right. Thank you so much for joining us. We appreciate you being on "Horizon."

Sheila Morago:
Thank you for having me.