Making casinos work, as IGRA intended

Cy Kauchick, a onetime lobbyist for the Bois Forte Band of Chippewa in Minnesota, was at the Iron Rangers Party, an annual political gathering in late 1988, when an anxious Democratic Governor Rudy Perpich approached him with an idea to create jobs.

“OK, here’s what I want to do,” Perpich said, and he proceeded to outline plans to form a legislative committee to negotiate tribal-state casino agreements, or compacts, with Minnesota’s 11 American Indian tribes.

The compacts would allow the seven Chippewa (Ojibwe) bands in Northern Minnesota and four Sioux (Dakota) tribes to the south to expand their bingo operations with casino-style slot machines, creating jobs for citizens of their impoverished reservations and nearby communities.

Expanded gambling permitted under the recently enacted Indian Gaming Regulatory Act (IGRA) of 1988 would be particularly beneficial in rural Minnesota, notably the economically deprived Iron Range, a region of 11 struggling iron ore mines near Lake Superior.

“Let’s get it done,” Perpich told the lobbyist and longtime friend.

“Perpich’s plan was to develop something in rural Minnesota that would generate employment and income revenue without costing the state a ton of money,” recalls John McCarthy, executive director of the Minnesota Indian Gaming Association (MIGA).

“This fit the bill. It was as perfect as you could get.”

“In his heart of hearts, Perpich saw an opportunity to benefit not only the tribes, but surrounding communities,” says attorney Henry Buffalo. “It would create jobs and it wouldn’t cost the state a cent.”

Billion Dollar Baby

Nearly 30 years later, the 11 slot machine compacts agreed to in 1989—and separate blackjack agreements negotiated and signed into law two years later—are credited with creating a $1.5 billion gambling industry employing roughly 15,300 people. Tribal government gambling is Minnesota’s 14th largest employer.

Minnesota compacts mirror the original intent of IGRA as envisioned by Congress. The agreements created a partnership between equally sovereign tribes and the state to strengthen tribal governments and economies and, in doing so, benefit surrounding, non-indigenous communities. Seventy percent of casino jobs in Minnesota are held by non-Indians.

Tribal government gambling in Minnesota is an unmitigated success, providing health care, housing, education and other social and government services to Indian communities.

Although the needs of many indigenous citizens remain unmet, there has been remarkable social and economic progress on Minnesota Indian reservations, where the 11 tribes operate 18 casinos, many with hotels.

Tribes pay some $500 million a year in wages and benefits and another $126 million in payroll taxes. They also contribute millions of dollars to state and local charities.

Minnesota lawmakers were the first in the country to approve Indian casino compacts, agreeing to the slot machine agreements almost a year to the day after the October 1988 enactment of IGRA. The negotiations were relatively amicable.

But elsewhere in the United States, the birth and evolution of what is now a $31.2 billion tribal government gambling industry in 29 states has been anything but smooth. Nor do compacts reflect the congressional intent of IGRA.

Compact negotiations, casinos on newly acquired lands and other gambling-related controversies have in many regions of the country driven a political wedge between tribal, state and local governments.

Revenue sharing, machine limits, casino exclusivity, regulatory authority, jurisdictional issues and new forms of gambling have created a myriad of legal and political problems in many states with tribal gambling.

Meanwhile, gambling disputes in the Land of 10,000 Lakes—when they do arise—have been resolved constructively and relatively free of political strife.

Credit for the success of casino gambling in Minnesota goes to enlightened state and tribal officials who nurtured a respectful relationship while settling lawsuits over tax issues and hunting and fishing treaty rights long before bingo halls and casinos appeared on the horizon.

“Minnesota tribes have more agreements with the state than perhaps any other state in the country,” McCarthy says. “There were several lawsuits involving treaties that went to court. There were hunting and fishing treaty rights and a tax case.

“The tribes beat the crap out of the state every time they went to court. Finally, the state woke up and said, ‘Why don’t we work with these guys instead of going to court?’

“There was history between tribes and the state,” McCarthy says, when gambling became an issue in the early 1980s. “There was a relationship. It was kind of unique.”

“We have a lot of history in Minnesota, working on hunting and fishing rights, which kind of helped during compact negotiations,” agrees Kevin Leecy, former chairman of the Bois Forte Band of Chippewa. “We had an understanding.

“We have to respect other governments, whether they are federal, state or tribal.”

The strong, traditional leadership in Minnesota that fought to protect treaty rights in the 1970s era of tribal self-determination continued with the emergence in the 1980s of tribal gambling.

Tribes were led by leaders such as Leecy of Bois Forte and Art Gahbow, Marge Anderson and Melanie Benjamin of the Mille Lacs Band of Objibwe, Norman and Stanley Crooks and Leonard Prescott of the Shakopee Mdewakanton Sioux Community, Myron Ellis of the Leech Lake Band of Chippewa, Roger Jourdain of the Red Lake Band of Chippewa and others.

“It was important that there was an existing relationship between the state and the tribes,” says attorney Mary Magnuson, who as head of the state attorney general’s gaming division served as counsel for the legislative team negotiating the Minnesota casino compacts.

“There was familiarity with all the parties and their respective legal positions.”

It also helped that tribal leaders in Minnesota and throughout the Great Lakes region were active on Capitol Hill monitoring court rulings and drafting federal legislation that would later become IGRA. They also were instrumental in founding the National Indian Gaming Association.

They included Buffalo, a Red Cliff Chippewa from Wisconsin who represented the Fond du Lac Band of Lake Superior Chippewa, operators of an off-reservation casino in Duluth, and Kurt BlueDog, a Sisseton-Wahpeton Sioux and attorney for the Prairie Island Indian Community.

“We were all in a better place to go back to our states and start negotiating compacts when IGRA was signed,” Buffalo says.

IGRA: Intent and Reality

The Perpich administration agreed to compact provisions as stated in IGRA. The state did not seek revenue sharing, caps on the numbers of machines or waivers of tribal sovereignty in settling civil liability disputes and government jurisdictional matters—issues that would later generate controversy in other states. Perpich was confident tribes could regulate gambling.

“The governor was not insistent on a lot of state control or regulatory requirements,” Magnuson says, beyond limiting the facilities to video machines.

“Compacts in Minnesota, in many ways, are the closest to the original, stated intent of IGRA,” says James Klas of KlasRobinson, a Minneapolis marketing and financial research firm doing business in Indian Country.

“I used to joke that we in Minnesota tend to follow the rules. If the rules say, ‘This what you’re supposed to do,’ we say, ‘OK, that’s what we’ll do, then.’ And so we did.

“It worked out great.”

IGRA was intended to allow tribes to operate bingo-style games, including machines, as Class II devices without interference from the state. IGRA requires tribes operating Class III, casino-style gambling and machines to enter into regulatory compacts with states in which they are located.

The Minnesota compacts are in perpetuity and do not require tribes to share gambling revenues with state and local governments.

The Minnesota agreements subject tribes to minimal state oversight, but do not require waivers of tribal sovereignty in civil disputes and environment and regulatory issues.

Most compacts since the Minnesota agreements have termination dates, infringe on tribal sovereignty and require tribes to share casino revenues with states and local jurisdictions, despite the fact IGRA generally prohibits revenue sharing as a form of illegal taxation. The compacts require varying degrees of state oversight of Class III, casino-style gambling.

“Once the Minnesota compacts were adopted and people began to see there was more money involved than they imagined, states that came after were very aggressive in their compact negotiations,” says Marsha Kelly, president of MSK Ventures and director of communications for MIGA.

IGRA provisions require that states enter into good-faith negotiations on Class III compacts. It specifies that states failing to negotiate could be sued in federal court.

But the U.S. Supreme Court in Seminole v. Florida (1996) ruled that such lawsuits violate states’ 11th Amendment protections.

The Seminole ruling tipped compact negotiation leverage to the states. Tribal advocates accuse states of using leverage in compact negotiations to extort revenue and other concessions from tribes.

IGRA also intended that compact negotiations be limited to the scope and regulation of gambling on Indian lands.

But compacts enacted after the Seminole decision include not only revenue sharing with state and local governments, but regional or statewide casino exclusivity, governmental jurisdictional issues, land and water rights and even labor relations.

With the exception of Mississippi—where the late Choctaw Chief Phillip Martin in 1992 negotiated a tribal-friendly compact with then-Governor Kirk Fordice—few native governments have agreements as favorable as those in Minnesota.

The Mississippi compact has no termination date or revenue sharing. The Mississippi Choctaw is the only tribe in the country with no oversight by the state or National Indian Gaming Commission.

Bingo was Priority

Minnesota tribes were among some 108 indigenous communities throughout the country operating “gray area” bingo machines or pull-tab gambling in the decade leading up to the U.S. Supreme Court ruling in California v. Cabazon Band of Mission Indians (1987).

The late Norman Crooks, then chairman of the Shakopee Mdewakanton Sioux Community, is credited with introducing high-stakes bingo machines to the state after a 1979 visit to the pioneering Seminole facility in Florida.

“Norman came back, and that’s when it all started,” McCarthy says. “He kind of figured out, ‘This is not rocket science. We can do this.’”

Draft legislation on Capitol Hill to regulate what was approaching a $100 million bingo industry shifted in favor of the tribes after lower court rulings supported the right of indigenous governments to operate gambling on Indian lands.

However, when the Supreme Court in late 1986 agreed to hear the Cabazon case, tribes feared justices would overturn lower court rulings, wiping out a bingo industry facing opposition from states, Nevada casino companies and parimutuel gambling interests.

But the Supreme Court in Cabazon came down for the right of tribes to operate gambling on Indian lands without interference from the state.

The final draft of IGRA largely supported indigenous governments, with the exception of compact provisions that subjected tribes to oversight by the state, an infringement on Indian sovereignty and self-governance.

Ojibwe leader Roger Jourdain, chairman of the Red Lake Band of Chippewa, joined Mescalero tribal Chairman Wendall Chino and others in filing a lawsuit to do away with IGRA’s compact provision. The case was dismissed.

As was the situation with many Indian reservations, the Ojibwe and Dakotas of Minnesota in the 1970s and ’80s were impoverished and in dire need of a means of driving economies, rebuilding communities and governments and creating jobs.

“I think for many of its weaknesses, the bottom line for many of the tribes was there will be an overall positive benefit for us,” Buffalo says of IGRA and its controversial compact provisions.

Unlike the Ojibwe bands—with leasable lands and hunting, fishing, timber and other natural resources—the Dakota tribes in the south were particularly destitute.

“They were the poorest of the poor,” Kelly says. “They had no natural resources. They had no fish and game. They were out there on the prairie, between a rock and a hard place.”

“The Sioux reservations were a lot poorer than the Ojibwe, who had a lot more going for them,” Kauchick says. “The Sioux were selling pottery.”

With the pace picking up in the months before and after the Cabazon decision and the final drafting of IGRA, tribal lobbyists in Minnesota begin working legislators in St. Paul.

Perpich backed away from his earlier opposition to gambling and conceded to allowing tribes to operate slot machines. He remained opposed to table games. He also convinced Attorney General Horatio “Skip” Humphrey to drop his opposition to tribal gambling.

A bill was passed giving Perpich authority to negotiate a deal with the tribes, who agreed to negotiate as a group.

“There were not a lot of lawyers in Minnesota who knew Indian law,” recalls John Jacobson, an attorney for the Lower Sioux Indian Community. “We talked a fair amount about how to approach negotiations in the first round. It made sense for everybody to go in together.”

Those appointed to the negotiating committee—Rep. Rebecca Kelso, Senator Don Dicklich and Dorothy McClung of the Department of Revenue—were empathetic, if not sympathetic, to the tribes.

Meanwhile, legislators were not aware gambling on Indian lands would become a large and powerful industry. Their interest and input in the negotiations was minimal.

“I don’t recall any legislators having any strong views about what a compact should look like or what should be in it,” Magnuson says.

The term “revenue sharing” did not come up.

“I have never believed that the purpose of IGRA was to provide economic benefit to the states,” Magnuson says. “I believe the purpose of IGRA—as stated in the preamble—was to provide economic self-sufficiency to tribes.

“Does that create some spinoff economic gain to the states? Of course it did. Now you have people employed. You have economic offshoots that benefit the states. I think Minnesota did what the federal law envisioned.”

Within months after the slot machine compacts were signed into law, the Lower Sioux Indian Community filed a lawsuit seeking the right to offer blackjack at the casinos. Other tribes joined in the litigation, which they won before a federal magistrate.

Republican Governor Arne Carlson, who succeeded Perpich, agreed not to appeal the case if all 11 tribes signed identical blackjack compacts and agreed not to pursue other forms of gambling.

The blackjack compacts were signed in 1991.

Protecting What They Have

Minnesota tribes have always been politically astute. In the early years of self-determination—struggling to protect hunting and fishing treaty rights but lacking resources—they hosted legislators and elected officials at fish fries and social gatherings.

“When they couldn’t write checks, they fried a lot of walleye,” Kelly says. “They worked to get out the vote. They got people mobilized on behalf of legislators.”

“We would do 50, 60 fish fries a year: walleyes and wild rice,” Kauchick says. “We didn’t have money, but we were involved.”

Today, Minnesota tribes have the resources to discourage occasional efforts by state officials to expand lottery and commercial gambling.

They have political consultants, research statistics, a unified MIGA and McCarthy, a veteran advocate who has worked for tribes since the Lyndon Johnson administration, before the era of tribal self-determination.

Tribes generally keep a low profile but worked with the state in allowing limited charitable gambling machines in taverns. A financial partnership between the Shakopee Sioux and Canterbury Park discouraged talk of slot machines at the racing facility.

“I’ve been at the front lines of many of these fights,” Leecy says. “There’s not a better lobby tool than educating legislators, showing them exactly how Indian gaming benefits Minnesota.”

There is occasional uproar over the lack of revenue sharing, Leecy says, but casino jobs create revenue for the state and its citizens.

“There is revenue sharing. A portion of the revenue does go to the state,” Leecy says. “It may not be termed a revenue share, per se, but it is. We pay the employees who pay the taxes.”

And life on the reservations has become more tolerable.

“There were tribal leaders who stood up and said, ‘We have this federal law, IGRA. We need to find a way to make it work in Minnesota,’” says Norman Deschampe, chairman of the Grand Portage Band of Lake Superior Chippewa. “They were very courageous people. They did a great job.

“We need to invest gaming dollars in our young people so they can go out and get the education they need to achieve careers and provide for their families.

“We also want to create an atmosphere on our reservations where our band members have a place they can come back to and make a living and make a better life for themselves, because this is their home.”

Author: Dave Palermo

Dave Palermo is an award-winning metropolitan newspaper reporter. He has written about American Indian governments for more than 20 years, working as an advocate for several tribes and tribal associations. He also has co-authored books on gambling and gambling law. He can be reached at dgpalermo1@gmail.com.