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.
Despite the still-impoverished status of many tribes — not to mention the sovereign status of those tribes — some think native bands should pony up. "Indian gaming is taking money from states," says Chad Hills, gambling research policy analyst at Focus on the Family, a religious group, "but it's not giving anything back."
This growing demand for cash puts plenty of pressure on tribal finance managers, who deal with a different list of stakeholders than do CFOs at publicly traded companies. Tribal finance executives must parcel out precious casino revenues to a long list of recipients, including the NIGC, tribal members, charities, municipalities, and state governments. They also have to set aside funds for vital services like police departments and schools. At the same time, they are expected to engage in long-term business planning that spans an astounding 140 years (see "Six Sigma? How about Seven Generations?" at the end of this article). And they must do all this while maintaining cordial relations with state officials — officials who could end a tribe's gambling exclusivity at any time.
Such statesmanship is not easy, particularly when local politicians want to scrap existing agreements — a sore point with Native Americans. Certainly, Tim Pawlenty, the governor of Minnesota, won few friends in Indian country when he tried to convince the Mille Lacs and two other tribes to fork over a combined $350 million each year to the state. When that failed, Pawlenty began negotiating a deal with other native nations.
The move infuriated members of several tribes, which had signed compacts with the state in 1989. "We think the state should stick to its agreements," says Towle, a former KPMG senior accountant. "We shouldn't be blackmailed into revenue sharing."
The Wonder of It All
Maybe not, but for now states seem to hold all the cards. When it passed IGRA in 1988, Congress intended to foster long-term economic development among tribes by setting up a framework for Indian gaming (then, mostly bingo). The act, which was established to regulate tribal gaming, requires tribes to send annual audits to the NIGC and stipulates that revenues from gaming go to fund native governments, local charities, and municipal agencies. It also permits bands to invest casino revenues in tribal businesses or projects aimed at promoting tribal welfare. "Our framework complies with each of the IGRA categories," confirms John Christman, treasurer of the Viejas Band of Kumeyaay Indians, in Alpine, California. "That's our working business model."
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