OKPOLICY.ORG
Ten years after Oklahoma voters approved gaming compacts with Native American tribes and racetrack gaming, the state is collecting over $140 million annually as its share of gaming revenues. However, years of growth in gaming revenue have now ended, which may be a sign that the gaming market in Oklahoma has reached a saturation point .
State Question 712, which Oklahoma voters approved in November 2004 with 59.4 percent support, had two principal components:
- It set up a model compact between the state and Native American tribes to regulate Class III tribal gaming operations. Under the compact, tribes were authorized to operate specified Class III games in return for making exclusivity payments to the state;
- It authorized a set number of gaming terminals at each of three racetracks (Remington Park, Will Rogers, and Blue Ribbons, which ceased operations in 2009), and authorized or prohibited specific categories of games.
The agreement also specified that three Tulsa-area tribes – the Cherokee, Muscogee (Creek) and Osage Nations – must pay a combined $2 million a year to Tulsa’s Fair Meadows Racetrack in exchange for it not installing Class III electronic gaming.
The state receives a share of gaming revenues generated by the compacting tribes and racetracks. The state’s share of adjusted gross revenues begins at 4 percent of tribal games subject to the compact (10 percent for card games), and at 10 per-cent of revenues from racetrack gaming. The state share rises if revenues from particular tribes and racetracks exceed certain thresholds.
After an initial $250,000 is allocated to the Department of Mental Health and Substance Abuse Services for gambling education and treatment, 87.5 percent of gaming revenues are deposited in the 1017 Education Reform Fund, with the remaining 12.5 percent allocated to the General Revenue Fund.
State gaming revenues grew rapidly in the first years after passage of SQ 712, reaching $132.1 million in FY 2010. In the last four years, however, growth has been much more modest. In FY 2014, gaming revenue declined for the first time, falling by $5.7 million, or 3.6 percent.
The recent flattening and modest decline in gaming revenues has two explanations, according to the FY 2014 report of the Oklahoma Gaming Compliance Report. The first is market saturation. Last year, revenue from Class III machines fell, even as the number of Class III machines games continued to rise, reaching 39,936 machines in 2014. Secondly, the state has seen a steady rise since 2008 in the number of Class II electronic bingo machines in tribal casinos. Under federal law and the state’s compact, tribes do not pay exclusivity fees on revenues from Class II gaming. Between 2008 and 2012, Class II machines as a share of all machines rose from 34 to 42 percent.
Although 31 tribes are part of the gaming compact, the lion’s share of tribal exclusivity fee revenue (69.0 percent in 2014) comes from just four tribes – Chickashaw (42.3 million), Choctaw ($19,7 million), Cherokee ($13.6 million) and Muscogee (Creek) ($9.1 million). At the same time, payments from 15 of the 31 tribes total less than $1 million. The Chickasaw continue to see the greatest growth in gaming revenue, up $9 million from four years ago, while revenue from the Choctaw has fallen. Of the 31 tribes that paid exclusivity fees to the state in 2014, 21 saw revenue fall compared to 2013, while 9 saw revenues increase (one, the Miami, made payments for the first time).
Revenue from electronic games made up 86 percent of tribal gaming revenues in FY 2014, while card games made up the remaining 14 percent of gaming revenue. However, revenue from card games grew by 5 percent last year, while revenue from electronic games fell by 6 percent.
Meanwhile, revenue from racetrack gaming terminals remains modest but study. The state received $20.6 million from racetrack gaming in FY 2014, virtually unchanged from the year before. Of this total, just under 90 percent came from machines installed at Remington Park and just over 10 percent from Will Rogers Down.
At a recent ceremony held at the Cherokee Nation’s Hard Rock Hotel and Casino to celebrate the tenth anniversary of SQ 712 , state and tribal leaders praised the contributions tribal gaming have made to Oklahoma. “The tribes have become the economic engines of the state that are moving things forward,” said Cherokee Nation Chief Bill John Baker. “That question itself [SQ 712] has created tens of thousands of new jobs, has increased economic activity in our state by billions of dollars, has created destinations all across our state where people come from outside our state to stay, play and spend money,” said former Governor Brad Henry.
There is no question that gaming will continue to play a major economic role for Oklahoma’s tribes and for the state as a whole. But it no longer seems a safe bet that the revenue payout to the state will continue to grow.
