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(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

LFC Files.

SUMMARY

Synopsis of Bill

House Bill 615 changes the Indian gaming revenue sharing agreement by reducing the rate applied against tribal gaming machines net win from 16 percent to 8 percent. (Net win is machine revenue less prize payouts and regulatory costs.)

The bill also reduces the gaming tax rate from 25 percent to 15 percent. The gaming tax is applied against the net win of horse track and fraternal organizations' gaming machines.

FISCAL IMPLICATIONS

The fiscal impacts of the proposed changes depend critically on the assumptions made about the level of gaming activity and compliance with both current and the proposed law changes.

The proposed change to the Indian gaming revenue sharing rate is estimated to result in a $7 million revenue loss. Indian gaming net win is estimated to be $322 million. If the reduction induced all gaming tribes to pay the revenue sharing, the state would receive $25.8 million. While many gaming tribes have indicated that they would likely comply with a rate reduced to 8 percent, the Jicarilla and Mescalero tribes, which have made no payments, have not signaled a willingness to do so. Assuming that these tribes will not pay, reduces the presumed level of net win that will pay to somewhere around $270 million. Multiplying $270 million by 8 percent yields $21.6 million. Total tribal gaming revenue also includes regulatory fees which are not addressed by this bill. Assuming that tribes continue to pay $3 to $4 million annually in regulatory fees implies that total revenue from Indian gaming would be $24.6 to $25.6 million. Choosing a rounded mid point results in a tribal gaming revenue estimate of $25 million in FY 2000. (Note: regulatory fees would bring in $6 to $7 million if there were complete compliance; the $3 to $4 million estimate is based on current levels of compliance.) The current FY 2000 revenue estimate is that Indian gaming will bring in $32 million. The estimate is based solely on the payment levels made during the last calendar year. They assume no changes in activity level or compliance. Subtracting the $25 million estimate from $32 million FY 2000 revenue estimate results in a $7 million loss to the general fund from the provisions changing Indian gaming revenue sharing rate.

Non-tribal gaming is just beginning and thus the revenue estimates for this activity are highly speculative. The FY 2000 revenue estimate is that the state will receive $26 million from non-tribal gaming, about $24 million of this is expected from the gaming tax. Reducing the gaming tax from 25 percent to 15 percent, or by 40 percent, would reduce gaming tax revenues by approximately 40 percent. Thus the change to the gaming tax rate is estimated to result in a loss of $9.6 million.

The total estimated loss to the general fund due to the changes proposed in the bill is $16.6 million.

BT/njw