Gambling a part of the budget dispute in New Mexico

Barry Massey

Sunday, March 5, 2000 | 12:23 p.m.

SANTA FE - Gov. Gary Johnson says the budget, not gambling, is the main reason he plans to call the Legislature back to work in a special session.

But the thorny issue of gambling - whether the state should change the payment rate for tribes with casinos - is inextricably part of the budget debate.

Here's why: the state anticipates collecting $15 million from tribes with casinos in the fiscal year starting July 1. That's part of the $3.4 billion in taxes, interest earnings and other revenues that lawmakers proposed to spend in next year's budget to finance public schools and general government operations ranging from prisons to the court system.

However, Johnson says the $15 million isn't likely to materialize next year unless the Legislature approves new gambling compacts as requested by tribes. He considers it fiscally imprudent for lawmakers to spend the projected gambling revenues in the state's budget without new tribal-state compacts.

That's one of the reasons why Johnson is likely to veto the budget package passed by the Legislature last month.

But Democratic leaders say Johnson is overreacting. Legislative budget analysts consider the potential risk of losing the $15 million - roughly one-half of 1 percent of general revenue collections - as within acceptable limits given the traditional ups-and-downs of the state's total revenue projections. Oil and gas prices, for example, are higher than expected and could mean the state collects more than projected from severance taxes.

In the view of some Democrats, the Republican governor is using the budget as an excuse for calling a special session of the Legislature.

"This special session is more about gambling than it will be about the budget," says Rep. Max Coll, D-Santa Fe, a gambling opponent and chairman of the House committee that handles the budget. "I don't think the budget will change a whole lot, but I think we're going to go into a special session to deal with gambling."

Currently, only three tribes are making full "revenue-sharing" payments to the state and they've threatened to stop or reduce their payments if lawmakers don't deal with tribal objections to 1997 gambling compacts.

Tribes contend the existing agreements require a payment rate - 16 percent of slot machine proceeds - that is illegally high under a federal law that allows for casinos on Indian lands.

In their latest proposal to lawmakers, tribes have offered to pay the state 7.5 percent of their slot machine proceeds, which totaled more than $300 million in 1998. Tribes that haven't paid the state in full under existing compacts would have to do so before they signed the new agreements.

The prospect of increased revenues from gambling makes the issue a wild card in the budget debate. If new Indian gambling agreements are approved, the state stands to collect more money from tribal casinos - probably at least $10 million extra annually - and potentially more than $70 million in back payments from tribes that have withheld their "revenue sharing" from the state.

From a budget standpoint, those back payments translate into $70 million to spend on one-time projects and programs.

Although next year's gambling revenues represent a small slice of the monies expected to flow into the state's general budget account, the $15 million isn't chicken feed.

For example, $15 million will pay for at least a 1 percent average pay raise for teachers and other public school workers across the state. It's more than twice the $6 million budget of the Economic Development Department.

So why is gambling a part of the budget debate facing the Legislature when it returns to work in a special session? One reason: money.