Stitt bets big in taking on tribes on gaming compact

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Less than a year into his first term as governor, Gov. Kevin Stitt has engaged in a political and legal fight with some of the most powerful entities in the state, a move that will test his political capital and likely become one of the dominant policy issues of 2020. Illustration by Ben Felder
Former governor Frank Keating’s plan was to play the role of “bad cop,” while he suggested former governor Brad Henry “be the good cop.” That was the strategy as both prepared to meet with Gov. Kevin Stitt on a late September afternoon in Oklahoma City.

The lone topic of conversation — the casino gaming compact between Oklahoma’s tribal nations and the state.

Before the meeting, the two former governors met with several tribal officials to discuss the best way to convince Stitt to reconsider his position that the gaming compact needed to be renegotiated with higher fees paid to the state.

Keating warned the room it was “fundamentally and culturally indigestible” having someone like Stitt lead the state without any previous government experience prior to his election last year, according to three people in attendance who discussed the meeting details on the condition of anonymity because it was a private gathering.

Keating compared Stitt to someone who wants to be a police officer just because it looked cool on television, despite being unable to handle a weapon or confront people.

“This is the state version of Trump,” said Keating, arguing that Stitt’s impulsiveness was threatening the state’s relationship with the tribes.

Following the strategy session, Keating and Henry met with Stitt at the Governor’s Mansion, but the brief meeting did not result in the current governor changing his opinion.

Weeks later, Henry and Keating began appearing in commercials extolling the positive economic and cultural impact of the tribes across the state, part of an aggressive marketing campaign designed to build public support ahead of a potential legal fight.

Henry did not respond to a request for comment and Keating, when asked about his statements about Stitt, said in an email to The Frontier he believed the governor was “a solid leader and possesses a good heart and a good head.”

Less than a year into his first term as governor, Stitt has engaged in a political and legal fight with some of the most powerful entities in the state, a move that will test his political capital and likely become one of the dominant policy issues of 2020.

Through dozens of interviews with state and tribal officials, The Frontier has learned both sides expect the stalemate to continue into next year and both sides are preparing for a variety of legal options, including a likely hearing in federal court.

If the dispute continues into next year, those advising tribal officials have recommended pressuring Stitt on other fronts, including coming out against his proposed health care plan, which he is expected to announce more details on next year ahead of a statewide vote on Medicaid expansion that he opposes.

Reversing a recent strategy of not drawing too much attention, tribal officials plan to continue with the marketing campaign, reminding Oklahomans how much tribal nations invest in education, health care and infrastructure.

Stitt’s staff says he is prepared to make his case to Oklahomans, raising questions about the rapid growth of tribal businesses that do not contribute directly to the state tax base. Stitt has also said he could pursue an expansion of gambling beyond tribal control, including commercial casinos and sports betting; “I had a phone call with a commercial casino recently and they said … they would fly in tomorrow to sign an 18 percent deal with Oklahoma,” Stitt told The Frontier this week.

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A governor in disagreement with tribal nations is nothing new in Oklahoma as even Henry was chastised by tribal leaders during his tenure as the compact was being created.

But Stitt, a citizen of the Cherokee Nation, is hoping to get a larger share of the tribe’s nearly $2.3 billion in annual gaming revenue.

Keating, who served as governor from 1995 to 2003, told The Frontier the squabble threatened to distract the state from other issues that could benefit from the governor and tribes working together.

“Working together avoids icebergs,” Keating said. “I have said that if the USS Oklahoma goes down, we all go down together.”

Part 15

Approved by the state Legislature and Gov. Henry in 2004, and later approved by a statewide vote, the State-Tribal Gaming Act sanctioned casino-style gaming at horse tracks and on tribal land, a move made in part to save the state’s struggling horse racing industry.

The compact expires on Jan. 1, 2020, a fact acknowledged by both the governor and tribal leaders. What is in dispute is whether the compact automatically renews under the same terms and the same fee rate to the state.

The fees range from 4 percent to 10 percent and produced nearly $140 million in state revenue in Fiscal Year 2018.

Most of the state’s share goes to the Education Reform Revolving Fund, some towards Department of Mental Health and Substance Abuse Services and the rest in the general revenue fund.

The compact states an automatic renewal is triggered if the state has authorized any form of electronic gaming during the life of the compact. The tribes believe that authorization has already occurred through the Oklahoma Horse Racing Commission, which administers gaming licenses to horse tracks.

The governor’s legal team plans to argue the commission does not officially authorize gaming, but rather performs ministerial functions, distributing licenses already authorized by the state through the original compact.

Kevin Stitt listens to a question following a Governor candidate forum at First United Methodist Church in Tulsa on Wednesday, Oct. 3, 2018. DYLAN GOFORTH/The Frontier

The definition of the word “authorized” in Part 15 of the compact will likely be a major focus in a potential court battle.

Tribal attorneys don’t agree with the governor’s definition of authorize, but they also point to a 2017 decision by the state Legislature to expand electronic gaming at horse tracks to 24 hours.

“There’s the state Legislature expanding the play of electronic gaming at the horse tracks,” said Stephen Greetham, senior counsel to the Chickasaw Nation. “Even without the horse racing commission, there has been state action that would count as authorizing.”

The governor’s office will not say what specific strategy it will deploy if Jan. 1 arrives without a renewed compact, but they believe there are multiple options, including action by the federal government should the U.S. Attorney’s Office believe the tribes are not in compliance with the compact.

However, the U.S. Attorney’s Office has not yet indicated it would be interested in getting involved.

Both the governor’s office and the tribes have reached out to the U.S. Department of the Interior, the federal agency that ultimately approves compacts, issuing letters with an introduction to their legal opinions.

But most legal observers expect the first step to involve a lawsuit filed by either the governor or the tribes.

“Public statements have already caused sufficient injury for us to go to court tomorrow if we wanted to,” Greetham said.

“But that is not what the tribes want to do.”

Attorney General Mike Hunter, who Stitt made the state’s lead negotiator, met with tribal leaders on Oct. 28, but the tribes said the meeting was not productive.

“The State’s argument against renewal is not supported by any facts or law and arbitration is not presently justified,” wrote Matthew L. Morgan of the Oklahoma Indian Gaming Association, in a letter to Hunter a week after the meeting.

Hunter has hired the Michigan-based law firm Dykema Gossett PLLC to help negotiate with the tribes, a contract that could cost the state as much as $250,000.

However, if the matter goes to court, the state will likely seek another law firm, according to officials with the governor’s office.

State legislators have been relatively quiet on the issue, but leaders in both the House and Senate addressed the compact debate Wednesday during a panel hosted by the Oklahoma State Chamber.

Democratic leaders chastised the governor for picking a fight with the tribes, including Senate Minority Leader Kay Floyd, who worried about life after the compact issue is resolved.

“I’m deeply concerned that if this issue is resolved through litigation it is going to make it very difficult for the tribes and the state to work together moving forward,” said Floyd, D-Oklahoma City.

Senate Pro Tem Greg Treat said he understood Stitt’s desire for more revenue from gaming.

“I think that having attorneys and judges involved in arbitration would be the most advantageous for the state and the tribes,” said Treat, R-Oklahoma City. “But the Legislature is completely out of that process, we don’t have any say in the negotiations on the compacts, so I am watching like all of you are.”

“They don’t understand us”

For Stitt, the founder of a national mortgage company who rose to Oklahoma’s highest office on a promise to bring a business-minded approach to state government, the gaming compacts are about fair market value.

“What is that worth, this exclusive right to operate this monopoly called casino gaming?” Stitt asked in an interview with The Frontier.

Stitt points to compacts in other states that have higher fees and believes Oklahoma deserves a bigger cut, although some higher fees in other states kick in after higher levels of revenue.

“I do think I’m the right guy at the right time,” Stitt said, referring to his willingness to take on an issue he is convinced the majority of Oklahomans will agree with him on.

In her last year in office, former Gov. Mary Fallin said she was intentionally leaving the matter of renegotiating to the next governor.

Bill Anoatubby, governor of the Chickasaw Nation. Courtesy Chickasaw Nation

Where Stitt sees the debate in business terms, Chickasaw Nation Gov. Bill Anoatubby said the issue is about a sovereign nation protecting its economic interests.

Anoatubby said the problem goes beyond Stitt.

“We as tribes, regardless of who we are dealing with, they don’t understand us,” Anoatubby said referring generally to governors of the past. “They don’t know who we are or how we operate. We have a constituency that we serve.”

While tribes often operate as separate entities with unique interests and cultures, they have united around this debate, Anoatubby said.

“We are together on this,” he said.

Just a few weeks before the compact end date, Anoatubby said he was hopeful a deal could still be reached. But negotiations between the tribes and the governor have yet to start, even informally between staffers and lawyers, according to officials on both sides.

Anoatubby said tribes will only negotiate new fees when Stitt admits the compact automatically renews.

“How asinine is that?” Stitt said. “How good is your argument when you’re only willing to discuss it if you say first admit I was right?”

Conceding the renewal point could cost Stitt leverage to negotiate as the tribes would not be required to agree to higher fees.

However, the governor would still have leverage because tribes are interested in pursuing other forms of gambiling, such as sports betting that would require legislative approval and a new compact, Greetham said.

Stitt said he is open to other forms of gambling, along with eventually discussing new compacts for other tribal businesses that do not currently pay taxes.

“That would be difficult for us to accept,” Anoatubby said when asked about expanding compacts to other businesses.

“Any kind of reallocation of our funds, and a lot of those funds do come from gaming, it’s going to change how we function. We are real careful about those dollars.”

Public tug of war

Stitt’s critics say his feud with the tribes is contrary to his mantra of always looking to bring new business to the state.

“I see the state bending over backwards to lure big corporations like Amazon or Boeing to come to Oklahoma but when they have the tribes in their own backyard they want to stick it to them,” said Christine Pappas, chair of the department of politics, law and society at East Central Oklahoma University. “Amazon doesn’t care about Oklahoma, but the tribes care. This is their land.”

In Ada, home to East Central University and the Chickasaw Nation headquarters, Pappas said the impact of the tribes is felt by nearly everyone.

“Almost every single person in Ada either works for the tribe, someone in their family does or they participate in some type of tribal program,” said Pappas, who acknowledged the Chickasaw Nation has also supported the university.

“Without the Chickasaw Nation, Ada would be a dying ghost town.”

Tribal leaders plan to make that case across the state in numerous other rural communities where tribal investment has brought new roads, schools and health centers.

“Do we feel that we would serve the communities better than the state of Oklahoma? The proof’s in the pudding on how we’ve been able to serve the communities,” Seminole Chief Greg Chilcoat told the Tulsa World last month.

During the September meeting with Keating, Henry and tribal officials, the topic of conversation included theories into what was motivating Stitt to renegotiate the compacts, angering a large economic engine like the tribal nations.

Some in the room suspected he was against gambling because of his Christian faith, while others guessed he was trying to make commercial gaming a reality.

Stitt maintains his sole motivation is a better deal for the people of Oklahoma.

While Stitt said he is confident his legal argument will win in court, he also believes he is beginning to win the battle for public opinion, especially as he addresses the issue in speeches across the state in recent weeks.

“I know I’m on the right side,” Stitt said. “This is my job.”

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Ben Felder

Based in Oklahoma City, Ben Felder joined The Frontier in 2019 and covers education and politics. He previously covered education and government as an investigative reporter at The Oklahoman before becoming the newspaper’s news director. Felder can be reached at ben@readfrontier.com. Follow him on Twitter @benfelder_okc
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