Indian gambling official urges cap on tribal payments to states

Erica Werner

Thursday, March 25, 2004 | 9:40 a.m.

WASHINGTON -- Congress should cap the amount of casino revenue tribes can give to states because large payments can constitute an illegal tax, the head of the Interior Department's Indian gambling office said Wednesday.

George Skibine, director of the Bureau of Indian Affairs' Office of Indian Gaming Management, said at a Senate Indian Affairs Committee hearing that tribal payments should be capped at 10 percent or less of revenue.

That would be less than half the 25 percent paid by some rich tribes in Connecticut and New York and sought by Gov. Arnold Schwarzenegger in his ongoing negotiations with California tribes.

"The payment has to be something that is in exchange for a benefit. If the payment greatly exceeds the value of the benefit ... that's a tax, and that's prohibited," Skibine said. "I think that we should explore having a cap on the payment of net revenue. I think it should be single digits, maybe, or 10 percent ... if it goes above that I think it may be problematic for the tribes."

States cannot tax tribes because tribes are sovereign governments. But as Nevada-style tribal gambling has exploded and catapulted some Indians from poverty to extreme wealth, tribes that want to sign deals with states to establish casinos are increasingly agreeing to share their revenue.

Such agreements allow tribes to pay portions of their winnings to the state in exchange for a benefit -- for example a monopoly on gambling in a certain area.

The committee hearing was to consider a bill to amend the Indian Gaming Regulatory Act, including adding various conditions required for tribes to share revenue with states. Skibine said after the hearing that his department prefers a more straightforward cap, which is not currently in the bill.

Schwarzenegger, who ran for governor last year on a campaign promise to get more gambling revenue from tribes, sent a letter to Committee Chairman Sen. Ben Nighthorse Campbell, R-Colo., and to Vice Chairman Sen. Daniel Inouye, D-Hawaii, objecting to the proposed changes, which would make it harder to reach revenue-sharing agreements.

But a tribal leader at the hearing supported them.

"Tribal governments did not create these state budget problems, and tribal governments should not be looked to as a way out," said Ernest L. Stevens Jr., chairman of the National Indian Gaming Association.

Skibine also suggested that the committee clarify the conditions under which tribes can build off-reservation casinos, a controversial and growing trend that the Indian Gaming Regulatory Act permits under certain circumstances.

"When we receive those applications from tribes for land that is hundreds of miles from their reservation or for land that's even in another state, we are often contacted by congressmen that are essentially outraged that this can happen under IGRA and in fact feel that it was never the intent of Congress to permit it. We think that maybe the committee should consider clarifying this area," Skibine said.

The Indian Gaming Regulatory Act has not been amended since its passage in 1988 despite previous attempts similar to the one under way this year.