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Alabama, facing deficit, reluctantly mulls gambling and taxes


MONTGOMERY, Ala. » After years of subjecting it to crackdowns and police raids, Bible Belt oratory and admonitions about corruption, Alabama lawmakers are now seeking fiscal salvation from an old nemesis: gambling.

The state Senate president, a Republican, is pushing a state constitutional amendment that would not only institute a state lottery, but also allow traditional slots and casino table games at several racetracks across the state.

The House Republican caucus, while supporting an array of limited tax increases, is championing a stunning and unexpected offer from the Poarch Band of Creek Indians, the state’s only federally recognized tribe: In exchange for a compact giving the tribe exclusive gambling privileges in Alabama at its three casinos, as well as setting aside land for a fourth, the tribe would foot the bill for nearly the entirety of next year’s state budget deficit.

With Alabama facing a revenue shortfall of over $260 million — possibly far, far over depending on how one counts — Gov. Robert J. Bentley continues to insist that a package of tax increases is the only long-term answer. Some Republican leaders have weighed the taboos and, it appears, picked their poison.

"Republicans, by and large, aren’t big advocates of gaming," said Del Marsh, the Senate president. "But they sure as hell don’t like taxes."

It was not that long ago that the state’s long, intrigue-filled war over gambling was still running hot.

State officials, insisting that the proliferating electronic bingo devices around Alabama were actually illegal slot machines, raided and shut down booming racetrack resorts and small bingo halls. The state attorney general, a Republican, sued the Poarch Creek Indians in 2013 on similar grounds. Since late 2010, a passel of lawmakers, lobbyists and casino operators has twice been rounded up on federal bribery and corruption charges, prompting back-to-back trials, both of which ended in a recitation of not-guilty verdicts.

Internal memos of national Republican Party officials have been leaked describing how anti-gambling Republicans in Alabama secretly took campaign money from Mississippi casino interests. Wiretaps have been worn in the halls of the Alabama Statehouse. Private investigators have tailed state officials.

For some Republicans, gambling was worse than a mere vice: It was the domain of Democrats. The state’s last Democratic governor, Don Siegelman, campaigned on and unsuccessfully pushed for a lottery. The state’s racetrack kingpin, a gregarious self-made millionaire named Milton McGregor, has been among the state’s most generous Democratic campaign donors.

"At the end of the day, I don’t know if they were really anti-gaming as much as pro-getting elected," said Bobby Singleton, a Democratic state senator who welcomes the change of heart.

But now the Republicans have won just about everything. And the revenue shortfall looms.

Bentley, a Republican who won re-election last year promising no new taxes, has been barnstorming the state in recent weeks laying out the grim consequences of the shortfall. Hundreds of court employees could be laid off, thousands of families could lose state assistance, and most state parks could close. He insists that his proposed $541 million package of tax increases, mostly on cigarettes and car sales, is the only way to achieve fiscal sustainability.

The plan had a cold reception in the Republican-dominated Legislature; the state party even passed a resolution rebuking it. But Bentley insists that there has yet to be a better proposal. Of the Senate president’s plan to expand gambling, the governor recently described it, according to The Montgomery Advertiser, as "the worst piece of legislation I have ever seen."

Marsh’s plan would legalize and tax so-called Class III gambling — traditional slot machines and table games — at several racetracks around the state; allow the governor to enter into a separate compact with the Indian-owned casinos; set up a state lottery; and create a commission to regulate it all.

Marsh acknowledged the surprising politics but pointed out that his draft bill includes language barring racetrack operators like McGregor from making campaign contributions (a similar bill was introduced in the House on Wednesday). And though, as the governor has pointed out, this plan might take some time to start paying dividends, Marsh insisted that it would create thousands of jobs while negating the need for tax increases.

"I understand that people don’t view the lottery and gaming casinos as a conservative value," said state Rep. Corey Harbison, a Republican who expressed openness to some of the plans being discussed. "But people also don’t view tax increases as a conservative value. I’m open to lottery and gaming before I am a tax increase."

The Poarch Creek Indians were paying close attention. Business at their Creek casinos has boomed as competitors have been shut down. In recent years, Indian gambling revenues have grown faster in Alabama than in almost any other state, according to Alan P. Meister, the author of The Indian Gaming Industry Report. The tribe has built new restaurants, renovated casinos and in 2014, opened a 286-room hotel that features an enormous shark tank. Marsh’s bill, by opening up gambling around the state, would pose a huge threat.

There had been some talk of a compact before, and it would not be rare: A number of states have entered into compacts granting gambling exclusivity to a tribe in exchange for annual payments to the state. But this proposal would be different; it would front-load those payments, roughly $50 million a year, in a $250 million sum that could help solve the current budget predicament.

"We of course heard from state legislators that the deficit is constantly growing," said Stephanie Bryan, the chairwoman of the tribe. "So there may be interest that there’s something that gaming can do for the state."

No one in the Legislature had even considered such a proposal until an executive with the tribe began floating it at several gatherings in recent weeks, including at a dinner meeting of the House rural caucus, where the idea took many aback.

"I didn’t think anyone there at the time thought it was serious," said Rep. Randall Shedd, a Republican.

The Poarch Creek proposal may be something of a defensive maneuver against Marsh’s proposed amendment, but it has a virtue that his bill lacks: It could produce the money immediately.

Both are being taken seriously. Supporters of Marsh’s plan express unease at giving the Poarch Creek Indians a long-term monopoly on gambling and see it as shortsighted. Others, like the House leadership, see exclusivity as a selling point, a way to keep gambling contained and in the hands of a group that has shown it can prosper and regulate itself.

Still, others are astonished to find what is going on in the Alabama Statehouse.

"I think the magnitude of the problem has a lot of people considering things they’ve never considered before," Shedd said. "I’m shocked."

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