High rollers? With big budget problems, is it time for Minnesota to gamble on new revenue streams?

MinnPost photo illustration by Corey Anderson

A casino at the Minneapolis-St. Paul International Airport? Electronic gaming machines in every Minnesota bar? A state-run casino? And, for the sports fan, why not a place to make a bet on the Vikings game?

State-sponsored gambling, which faced long odds in past legislative sessions,  might not be viewed so negatively this time around as legislators look everywhere for a few dollars to help solve the state’s massive budget problems.

A cross section of state legislators are expected to introduce a wide spectrum of gaming bills in coming weeks.

At least some old foes of gambling expansion aren’t immediately saying they’re opposed to thinking about some of the ideas. 

“We can’t gamble our way out of our problem,” said Rep. Marty Seifert, the minority leader of the House, “but …”

He mentioned an idea that Rep. Phyllis Kahn, DFL-Minneapolis, has proposed in the past for an airport casino. And he mentioned legislation Rep. Tom Rukavina, DFL-Virginia, has supported, which would put a form of slot machines in state bars.

“Ideas like that were dismissed outright in the past,” Seifert said. “They probably will get consideration.”

Bet against nothing this session, though surely the traditional opponents – tribal leaders, religious leaders, anti-gambling leaders – all will be back at the Capitol with the arguments that always have been made against any expansion in gambling. Even proponents of various forms of gambling are opponents of some other forms – and, of course, for the racetracks and the Indian casinos, of the resulting increased competition.

Pawlenty’s stand on gambling a wild card this time
For his part, Gov. Tim Pawlenty has been a gambling wild card. At times, he’s indicated he’s opposed to any gaming expansion in Minnesota. Yet, at other times he’s shown considerable interest. In 2005, for example, he was directly involved in unsuccessful negotiations with outstate tribal leaders about partnering with them in building a metro-area casino. 

The strength of a plan like that is that it would produce an instant jackpot for the state. The 2005 deal with the tribes, for example, called for the tribes to put up $200 million upfront to create the partnership. The weakness of that deal, however, was that the northern tribes said they didn’t have that kind of money.

In the past, similar plans have been floated with private groups to open a casino, always with the requirement of a large licensing rights payment upfront. Many have touted the Mall of America – with its huge traffic, including many visitors from outside the region — as the perfect place for such an attraction.

To date, no such grandiose plans have emerged this year, though all things are possible in this session. The common problem among the gaming bills that are coming together is that they won’t offer an immediate cash benefit to the cash-strapped state. 

Rukavina doesn’t think Pawlenty is in any position to oppose revenue ideas.

“Gaming’s only off the table if he wants to take it off the table,” said Rukavina. “I do know this. There’s no way Tim Pawlenty can simply get by by saying, ‘No new taxes.’ There’s no more money to steal from all those things like the tobacco fund.”

In the past, Rukavina has tried to float the idea of allowing bars to have up to five electronic pull-tab machines. Those machines apparently would look a lot like slot machines.

The immediate beneficiaries of the devices, Rukavina believes, would be the bar owners, who would be able to attract more customers. He says many of them have been hurt badly by the combination of the smoking ban and tough DWI laws.

In search of ‘voluntary revenue’

“I haven’t decided yet whether I’m carrying the bill,” Rukavina said. “But it does produce voluntary revenue.”

In his vision, the machines would supplant charitable pull tabs, which have been struggling. Revenues from the machines, which Rukavina says would be more popular than paper pull tabs because they’d operate more like slots, would be split between local charities and the state.

Seifert went so far as to suggest that electronic pull tabs might get support of local governments and school districts, if they can get in on the action. Given that local government aid probably will face even more cuts, he suggested, only half-jokingly, that county governments, municipal governments and school districts each could have one of the machines. 

Rukavina says studies have shown that the machines could annually generate millions of dollars for the state.

For her part, Kahn opposes the slot/electronic pull tab devices.

“They create harmful, addictive behavior,” she said.

But Kahn does think two gambling outlets could be beneficial to most Minnesotans.

Her simplest idea: A casino, inside the security area, at the Twin Cities airport, which means only those with a boarding pass would be able to use the casino.

“I’ve always said that gambling is a REGRESSIVE tax on stupidity,” said Kahn. “But an airport casino is a PROGRESSIVE tax on stupidity because the people who have boarding passes are from higher-income backgrounds.”

If she again pushes the legislation – and she probably will – she’ll also try to sell her colleagues on the fact that substantial numbers of the casino players would be out-of-staters just passing through Minnesota.

Under Minnesota law, Kahn said, the casino would have to operate through the state lottery, with 40 percent of profits going to the environmental trust fund and 60 percent to the general fund. Past studies show that could provide $11 million to the trust fund and $16 million annually to the state.

She’s tried to convince tribal leaders that an airport casino wouldn’t hurt Indian gaming.

“You’re not going to have people pay for a boarding pass so they can go to an airport casino,” she said. “But they (tribal leaders) are concerned that once the camel (in this case, the state) gets its nose under the door, it will just want more.”

An airport casino, though, is small change, compared with Kahn’s big idea. She wants to have the state open a sports bookmaking operation.

As it stands now, Kahn said that plan would have one big obstacle: the federal government. As federal law currently stands, she said only Atlantic City and Las Vegas are allowed to have sports bookmaking.

“To challenge federal law,” she said, “we’d have to pass legislation and then have the government tell us we can’t do it.”

Next step, she said, would be the courts. And she believes the chance of winning in court would be huge, because bookmaking already is lawful in Las Vegas and Atlantic City.

The big money is in bookmaking
The potential for revenue is huge. Minnesotans already wager an estimated $1 billion-plus a year on sporting events, either through online venues or through illegal bookmaking operations.

“That’s serious money, and the state could tax it at any amount it chooses,” Kahn said, adding that she believes sports wagering is the least harmful of all gambling.

Expect professional sports franchises to join other gambling foes if bookmaking legislation shows any sign of life.

Then, of course, there’s the racino idea.  Sen. Dick Day, R-Owatonna, is said to again be preparing legislation that would put a full-fledged casino at the racetracks, with the state taxing revenues. These casinos would be in direct competition with the Indian gaming industry, which pays no direct taxes on gaming revenues.

Kahn opposes the racino concept.

“Gambling has been the greatest economic development tool the tribes ever have had,” she said.

And Rukavina is nervous about it. He fears that it would negatively affect tourism in outstate Minnesota.

“We have two reasons people travel (outstate),” Rukavina said. “To go to the lakes and to go to the casinos.”

Still, there’s part of all these ideas that have appeal to Rukavina.  

“If people stay home, instead of going off to Las Vegas, that’s a net gain, isn’t it?”

 Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.

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Comments (6)

  1. Submitted by Haddayr Copley-Woods on 01/09/2009 - 11:10 am.

    Why are we even discussing this? We have written agreements with several nations not to have state-sponsored gambling.

    But, I guess if it’s an agreement with Indians, we don’t have to honor it, huh? I mean, breaking treaties with Indians is a long and proud Minnesota tradition.

  2. Submitted by Ron Gotzman on 01/09/2009 - 12:38 pm.

    I still remember the bumper sticker in the early 80’s, “another tax payer for horse racing.”

    The problem with the state budget is not lack of revenue.

  3. Submitted by Ted Snyder on 01/09/2009 - 12:44 pm.

    Along with violating agreements with First Nation people, state sponsored gambling to shore up the budget is bad public policy. Minnesota needs to decide what kind of a state it wants to be, how much it will cost and tax ourselves accordingly. Politically a much harder task, but also a much healthier route. The years of “no new taxes” magical thinking by the right has taken its toll on the budget and on the level of political discourse we have here. I lived in many states before I came to Minnesota — what has kept me here has been the amenties (like state parks), the valuing of excellent public education (all levels), the well maintained infrastructure. All that has eroded under the delusional thinking of the anti-tax crowd. All they look at is what is cost, not that we get for our taxes. Newsflash: quality is expensive. Expanding gambling to pay for state functions is dishonest and will further erode life here. I want rightsized government, intelligently operated and delivering good value for the tax dollar. I will happily pay for that.

  4. Submitted by Patrick Guernsey on 01/10/2009 - 01:28 pm.

    What makes people think the tribes wouldn’t run the state out of business? If I were them, if the state went into the gambling business, I’d improves some odds and cut prices at the buffets and shutter the state’s casninos in the process!

  5. Submitted by Rod Loper on 01/10/2009 - 02:13 pm.

    With all the people sitting at $15 to $100 dollar
    tables at our tribal casinos I have no problem with increaing our progressive income tax. The
    well off are clearly undertaxed (as well as stupid).

  6. Submitted by Tom Poe on 01/12/2009 - 08:47 pm.

    “Population and job growth, the drivers of Las Vegas’ economy in the 1990s and early 2000s, have slowed dramatically. They’re projected to grow 1.6 percent and 2.6 percent, respectively in 2009.”

    Doesn’t sound like gambling is much of an economic stimulus plan to me.

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