The windswept plains and boundless prairies of Oklahoma are home to 38 federally-recognized American Indian tribes with varied and rich cultural traditions and histories. But one thing most have in common is tribal government gaming, a thriving industry that generated nearly $2 billion in 2006, a 25 percent increase over the previous year.

However, roposed federal regulations governing electronic bingo games may seriously impact the revenue stream to the tribes, not to mention the state and local communities that benefit from a share of casino revenues, jobs and other ancillary benefits of economic growth on once-impoverished tribal lands.

Thirty-six tribes currently operate 90 casinos. While gamblers can try their hands at table games and the more lucrative Las Vegas-style slot machines, referred to by regulators as Class III devices, many prefer the bingo machines, or Class II slots.

“These games are fun and easy to play,” said David Qualls, chairman of the Oklahoma Indian Gaming Association (OIGA). “Lots of folks love these bingo-styled games.”

Oklahoma has 30,044 Class II machines, far more than the other 27 states with tribal government gaming. Florida ranks second with 8,615, but earlier this year, the Seminole Tribe, operators of all but one of Florida’s eight casinos, negotiated an agreement with the state and federal governments allowing it to install the more profitable Class III slots.

Proposed changes to Class II gaming machine regulations by the National Indian Gaming Commission (NIGC) could make the bingo machines obsolete, forcing some Oklahoma tribes out of the gambling business.

“Every tribe in Oklahoma stands to lose from these regulations,” Qualls said. “But the smaller tribes will get hit the hardest. The bingo-based Class II games are their bread and butter. They will disproportionately bear the weight.”

The proposed regulations will create a greater distinction between Class II and Class III games and conceivably shut down Class II gaming machines by 2013. The NIGC said the regulations are necessary because technological advances are making Class II devices too similar to Class III machines.

Tribal leaders are angry for a number of reasons, not the least of which is the fact that federal law requires tribes seeking the more lucrative Class III machines to enter into agreements, or tribal-state compacts, with the states in which they are located. The compacts generally require tribes to share revenue with the states and permit at least limited oversight of gaming operations by state regulators, a move most tribes see as an intrusion into their sovereignty.

They are also distressed that the proposed regulations will slow the pace of the bingo games and make them far less competitive with Class III devices. This limits the tribes’ leverage in negotiating more favorable compacts with the states.

Tribes contend the NIGC is seeking unwarranted control of tribal gaming. They also charge the regulatory agency with not adequately consulting with the tribes on the new rules. Machine manufacturers are standing behind the tribes in their protests.

If It's Not Broken...

Oklahoma attorney Jesse D. Green said the NIGC is “creating a solution without a problem.” Green has worked for 10 years on the legal issues surrounding tribal gaming. He has represented tribes such as the Seneca-Cayuga and the Chickasaw Nation.

“We’ve already been to court twice over these issues, and we are preparing to litigate if this aggressive action goes forward,” Green said.

The Chickasaw, operators of Riverwind, the state’s largest casino, have both Class III and Class II devices, but many casinos in rural communities use only the bingo machines.

“I would say that 70 percent of the machines in Oklahoma are Class III games, but there are a lot of small, local operations in rural communities, say 50 or 60 miles from a metropolitan base, and their customers are playing Class II games,” Qualls said. “Those tribes depend on their local visitors who maybe come play those games four times a month,” and face huge losses in income, he said.

“They won’t be able to use [Class II machines] if these regulations go through,” he said.

Gaming revenue provides a wide variety of government services and infrastructure on tribal lands. Indian gaming experts believe if the Class II machines become illegal under the proposed rules, tribes who depend on and own Class II machines stand to lose hundreds of millions of dollars, if not more.

A Red Paper sent to NIGC Chairman Philip N. Hogen by the OIGA said, “These regulations will roll back the collaborative efforts of the tribes and its gaming industry partners which have resulted in better education, health care, housing, and general welfare for Indian people. What federal law describes as the regulatory province of the Indian governments and regulatory agencies, with oversight from the NIGC, is being usurped by the NIGC without congressional approval.”

The proposed changes will also impact the state and local communities that share in the gaming revenues.

“Thanks to tribal gaming dollars, the roads in many parts of rural Oklahoma have never been better, and there will be even greater improvements in the future so long as tribal economies remain robust,” said attorney Elizabeth Homer, a citizen of the Osage Indian Nation. “Tribal governments are providing an array of governmental services from police and fire protection to water, sewer, and other infrastructure thanks to funds generated by gaming. And these services benefit everyone, not just tribal members.”

Towns that were once on the brink of disappearing have made economic comebacks due to Indian gaming. “Pawhuska is a lovely little town that, just five years ago, was suffering from a long, steady decline,” Homer said. “Today, there aren’t many empty buildings left, as most are occupied by tribal offices or new restaurants and shops.

“The economic growth of the Osage Nation has brought life back into the town,” Homer said, “and the other towns and communities within the reservation, like my hometown of Hominy, are benefiting as well. This is but one example of a trend playing out across Oklahoma and many other parts of the country as well. It is distressing to contemplate anything that would reverse it.”

Further Impacts

Some predict a 25 to 70 percent revenue loss, a devastating blow to rural communities that depend solely on the gaming industry. The casinos also generate thousands of jobs in small towns throughout Oklahoma.

“What happens to all these people if the regulations go through?” Homer said. “I think, inevitably, the loss in tribal revenues will produce layoffs and trigger an economic backslide that will reverberate throughout the entire economy of the state, harming individuals, families, communities, schools, charitable organizations, county and local governments, and businesses.”

A study commissioned by the NIGC by the Analysis Group anticipates lower revenues, higher costs and a substantial loss of casino jobs. It also found that on a local scale, reclassifying Class II machines into Class III would affect most Oklahoma tribes. But despite the commissioned report’s findings, the NIGC continues to move forward.

OIGA asked Robert Dauffenbach, director of the Center for Economic and Management Research at the Price College of Business at the University of Oklahoma, to review the economic impact study commissioned by the NIGC.

Dauffenbach applied a prominent impact analysis tool used to measure indirect and induced impacts described in the NIGC’s study. Using the Analysis Group median numbers, the model showed a significant indirect and induced economic impact, both in terms of additional lost jobs and revenue.

Dauffenbach looked at the impacts both nationally and in Oklahoma. Relying on the nationwide data from the Analysis Group model, Dauffenbach calculated that, once indirect and induced costs are identified, the total number of lost jobs could exceed 35,000, and the total economic impact could be more than $3 billion.

In Oklahoma, said Dauffenbach, the impact is likely to be equally severe. Using a figure equivalent to 59 percent of the national median number (arrived at by using Analysis Group’s percentage of games in Oklahoma, and applying it to the financial figures), the Dauffenbach reported that the state could face a job loss of more than 18,500 jobs, and a total financial impact of more than $1.1 billion.

OIGA sent a copy of Dauffenbach’s analysis along with a letter to the NIGC in early March asking them to reconsider the proposed regulations. Many people want to know why the NIGC is continuing to push for the regulatory changes when reports clearly show perilous outcomes in Indian Country, the letter stated.

For the Good of the Industry?

Hogen said he believes the proposed regulations are for the good of the industry. But he does acknowledge that they will put a burden on tribes.

“A lot of the equipment some tribes have placed on their Class II gaming floors today won’t meet the new requirements, and compliant replacement equipment will likely be somewhat less lucrative,” Hogen said. “Thus, there will be some considerable short-run cost associated with these regulatory steps.”

Under the proposal rules, tribes will be offered a five-year grandfather provision that would permit temporary use of existing Class II machines.

“Class II gaming has been the bedrock of Indian gaming and continues to play a vital role in the expanding industry,” Hogen said. “In order to preserve and respect the importance of Class II gaming, we are moving forward keeping all comments in mind and will act in a way to distinguish Class II gaming from Class III gaming.”

This past February, tribal members and state officials gathered in Miami, Okla., for a congressional field hearing and appeared before Reps. Dan Boren, D-Oklahoma, and Tom Cole, R-Oklahoma, to talk about the potential impact from the regulations.

Both representatives, who sit on the House Natural Resources Committee, have expressed concern about the impact of proposed regulations and the serious consequences that could arise if the NIGC goes forward with its plan to adopt the changes.

The 137-day comment period for the proposed regulations ended Mar. 9. The NIGC will review the comments and decide whether to apply the new rules.

“No one but the NIGC wants this to happen,” Qualls said. “Class II gaming is good for Indian Country. People need to call their local congressmen and let them know what we stand to lose. It is not just about our rights as tribal governments, it is about the economic impact this could have on the whole state.” igwb

Maya Dollarhide is a Brooklyn, N.Y., writer. She can be reached at mdollarhide@yahoo.com.