The 5 Cent Empire

Native American tribes parlayed legalized gambling into a $22 billion lifeline. Now states want a piece of the action.

The long buses start rolling into the parking lot at the Grand Casino Mille Lacs long before the morning mist has lifted from the marshlands and maple trees. A steady line of white-haired warriors, armed with supersized plastic cups and beaded change purses, pile out of the buses and head straight for the palace. Inside, the band of brothers mark off rows of saved machines with American Legion hats and walkers and prepare to stuff coin after coin into the one-armed bandits. It’s 7:00 A.M., a Tuesday, in the middle of nowhere, and whole banks of nickel slots are already occupied.

That’s good news for Mel Towle, former CFO and current director of the Mille Lacs’s Corporate Commission, which oversees the business ventures of the Ojibwe (Chippewa) tribe. Raised near this lakeside reservation in central Minnesota, Towle still remembers the desperation that once gripped the Mille Lacs. “It used to be when you drove around the reservation, you could see the poverty. We were just about down and out.”

Back then, in the early 1990s, more than 70 percent of the band lived below the poverty level — appalling even by Native American standards. Some elders survived by living off the wild rice that grows in the wetlands around Lake Mille Lacs. Well water, lousy with iron, wasn’t drinkable. Jim Hamilton, an attorney who practices extensively in Native American law, visited the reservation during those bleak years. “I’d never seen anything like it,” Hamilton recalls. “It was subhuman.”

Legalized gambling brought the tribe back from the brink. Beginning with a small bingo parlor in 1991, the Mille Lacs have since built two glittering casinos. Gambling revenue has been plowed into scores of tribally owned start-ups, and the number of Mille Lacs living in poverty has declined to 15 percent. Local infrastructure like water and sewage systems has been improved, too, funded in part by the first municipal bond ever backed by casino revenues.

The miracle in Mille Lacs is not an isolated incident. In the nearly two decades since Congress okayed reservation casinos with the Indian Gaming Regulatory Act (IGRA), native gaming has skyrocketed. Tribes now operate 409 gambling operations in 28 states. For families in those bands, poverty levels have declined dramatically, down nearly 40 percent between 1990 and 2000. Last year, tribal gaming revenues topped $22 billion. No wonder Phil Hogen, chairman of the government’s National Indian Gaming Commission (NIGC), calls gaming “the most effective economic tool ever brought to Indian country.”

In fact, the unexpected success of Indian gaming is stirring up jealousy and antagonism off the reservation, providing unpleasant reminders of the ways Native Americans and their possessions have been treated in the past. Rival commercial-casino operators, which operate in 11 states, have begun to back campaigns to head off Indian casinos. They have been joined by unexpected allies, including evangelic organizations opposed to gambling.

The biggest threat to Indian gaming, however, comes from state politicians, who see native-casino revenues as a quick fix to yawning budget gaps. Governors like California’s Arnold Schwarzenegger have seized on a loophole in IGRA to demand sweeter deals from tribes, even though IGRA prohibits states from assessing charges on Indian gaming revenues.

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