Indian gambling on the table.

States and tribes have a history of disagreements. Now decisions in the West may affect Indian-sponsored gaming nationwide.

The debate over Indian gaming in New Mexico is more than a controversy; it is a case study in how a public policy dispute can be played out in two arenas - the political and the legal. And how action, or inaction, in one arena can cause a reaction in the other.

The battle over Indian gaming is now years old, and it has drawn in legislators, governors, prosecutors, judges and justices, lawyers and lobbyists. It has involved tribal, state and federal governments. Hundreds of millions of dollars are at stake.

"The situation in New Mexico has manifested just about every quirk and bizarre turn in the road that anyone could imagine," says Richard Hughes, a lawyer for tribes. "It has been a completely unpredictable roller-coaster ride.

"The experience has been unique compared with other states," Hughes says. "And strangely, it doesn't seem to get closer to resolution."

The Legislature this year approved, and Governor Gary Johnson signed, legislation for new state-tribal compacts for Indian casinos. But the compacts require tribes to share a large chunk of their casino revenue with the state, and that may be illegal. Another complication: Gambling opponents are pushing for a referendum on the legislation in the November 1998 general election.

The debate over Indian gaming in New Mexico, however, is much more than a good story. What has occurred could have dramatic effects on negotiations or renegotiations of state-tribal gaming compacts around the country.

MORE THAN JUST BINGO

A decade ago, Indian gaming meant high-stakes bingo. Today, it is about Las Vegas-style casinos from one shore of this nation to the other. There is the wildly successful Foxwoods casino in Connecticut, where patrons from New York City arrive by the busload. At the Ft. Randall Casino in South Dakota, ranchers and farmers drive long distances in pickup trucks for the companionship of nightly poker games. Guests at the Inn of the Mountain Gods resort in New Mexico can hunt for big game during the day and gamble for high stakes at night.

This remarkable change in America's landscape began with a landmark Supreme Court decision in 1987. The Court, in a case pitting the state of California against the Cabazon Band of Mission Indians, ruled that a state prohibition against gambling extends to tribal land, but the prohibition doesn't apply if gambling is legal elsewhere in the state. That meant tribes could set their own rules for any kinds of gambling already permitted by the state - for example, they could determine pot sizes in bingo games.

Congress and President Reagan responded to the Supreme Court decision by approving the Indian Gaming Regulatory Act of 1988 (IGRA). Recognizing that states have interests in matters that occur within their borders, Congress required tribes to negotiate with states on the conduct of any casino-style gambling.

Tribes - who traditionally have had troubled relations with states - complained that the law infringed on their rights of self-government. Wendell Chino, president of the Mescalero Apache Tribe in New Mexico, called the law "sloppy and shoddy." He said, "If the majority of this country was subjected to such a bad process of lawmaking, they'd be outraged. But Indian tribes are asked to swallow a bad law."

Time has shown that Chino was both right and wrong. Some less than skillfully worded provisions of IGRA opened the door for court interpretation and constitutional problems. But in general, the court decisions in the early years of IGRA favored tribes, especially on the issue of what casino games they could offer.

Today there are about 165 state-tribal compacts for casino-style gambling in some two dozen states. Tribes don't publicly disclose how much they rake in, but estimates of annual gross revenues range from a few million to several billion dollars. Tribes have used profits to build schools, hospitals, roads and other needed facilities. Casinos pay for police departments, cultural preservation efforts and more. Some tribes distribute gaming profits directly to members.

As in any business, there have been power struggles and corruption.

And for a variety of reasons, ranging from locations in sparsely populated areas to cultural concerns, about 400 of the nation's 500-plus tribes have no casino gambling.

The explosion in Indian gaming has paralleled - and sometimes helped feed - the wildfire growth in off-reservation gambling - from state-run lotteries and video machines to riverboat casinos.

NEGOTIATIONS TRICKY

In a few states, the issue of Indian gaming is still unresolved. New Mexico, with 22 tribes and pueblos, is one of those. California is another.

By mid-1989, and without any state-tribal compact, at least one New Mexico tribe was already operating slot machines. That year, tribes began asking Governor Garrey Carruthers to negotiate compacts for casino gambling. There was talk, but no deal.

When Carruthers left office at the end of 1990, the tribes went to Governor Bruce King, who had been returned to office for an unprecedented third term. He entered into negotiations despite his long-held opposition to gambling.

King was presented in late 1991 with negotiated compacts that allowed the Mescalero Apaches and Sandia Pueblo to operate slot machines that mimicked bingo and pull-tab games. But King refused to sign. The action in the political arena caused a reaction in the legal arena: Tribes sued.

The Indian Gaming Regulatory Act requires states to negotiate in good faith with tribes seeking compacts for casino gambling. If a state refuses to do so, the law says, a tribe can file a "bad-faith" lawsuit in federal court to force the state to come to the bargaining table. And if negotiations and mediation ultimately fail, the Interior Department secretary is required to prescribe the rules under which the tribe can operate casino gambling.

In response to a lawsuit brought in U.S. district court by the Mescalero Apaches and Sandia Pueblo, King's lawyer, former state Attorney General Paul Bardacke, cited the 11th Amendment of the Constitution, which generally protects states from being sued in federal court against their will.

A U.S. district judge in Albuquerque ruled in King's favor. But the Mescalero Apaches and Sandia Pueblo appealed to the 10th U.S. Circuit Court of Appeals in Denver. And in September 1994, the court found that tribes could sue the state in a bid to obtain contracts.

By that time, eight tribes were operating slot machines despite the lack of compacts. U.S. Attorney John Kelly had entered into nonprosecution deals with the tribes just a few months before the appeals court ruling. The tribes agreed to limit their number of slot machines, pending a resolution of the tribal-state stalemate.

The demands of New Mexico tribes also had grown by 1994. They no longer wanted just bingo and pull-tab machines. Their goal was full-scale casino gambling. They argued that a state law allowed charities to operate so-called Las Vegas-night fund raisers and, therefore, they were entitled to casino gambling, as well.

Tribes in the fall of 1994 began to add poker and blackjack games to their casinos.

The appeals court ruling came during the heat of a gubernatorial race pitting the Democratic incumbent, King, against Republican Gary Johnson, an Albuquerque businessman seeking his first elected office.

Johnson had promised that, if elected, he would negotiate compacts with the tribes. That pledge attracted more than $190,000 in campaign contributions from tribes. Never before had they given such a large amount in an election. Gambling had provided the cash for a new force in New Mexico politics.

Johnson won the election, declined to ask the Supreme Court to review the appeals court ruling in favor of the tribes and began compact negotiations with Indian leaders. Those negotiations were continuing when the Legislature convened in January 1995 for a 60-day regular session. The issue was now firmly back in the political arena.

IS IT UP TO THE GOVERNOR?

The Indian Gaming Regulatory Act says a state must negotiate with tribes seeking compacts, but the law doesn't define who or what a "state" is. Is it the governor? The legislature? A combination? Legal experts said each state needed to decide the issue.

Up until 1995, the New Mexico Legislature essentially hugged the sidelines in the state-tribal gaming dispute. It never expressed an interest in having representation at compact negotiations or in having compacts presented to it for approval. Legal experts told lawmakers in early 1995 that they could inject themselves into the compact process. But as negotiations involving the governor and tribes continued, the Legislature declined to do that. There were, however, some concerns among lawmakers and legal analysts that Johnson would exceed his authority under the New Mexico Constitution if he signed compacts.

But Johnson, at a hastily arranged 8 a.m. ceremony on Feb. 13, 1995, signed compacts for a dozen tribes to operate full-scale casino gambling. Fear of a legal challenge to the governor's authority drove the timing of the signings, Johnson's chief negotiator, Fred Ragsdale, said later. Ragsdale also has said he asked the administration about seeking the Legislature's approval, but was told no. That proved to be the wrong decision.

The administration rushed the compacts to Washington for review by the Interior Department. Its approval came in March 1995. That set the stage for a return to the legal arena.

State Representatives Max Coil of Santa Fe and George Buffett of Albuquerque, and Guy Clark, executive director of the New Mexico Coalition Against Gambling, filed a petition with the state Supreme Court in April 1995 seeking to have the compacts invalidated.

They argued that Johnson lacked authority under the New Mexico Constitution and state laws to bind the state to the compacts. In addition, they claimed the compacts permitted gambling that was prohibited by state law and that the compacts were in conflict with other state statutes. In July 1995, the New Mexico Supreme Court said it agreed.

The court said the governor couldn't enter into compacts unless the Legislature authorized him to do so or unless the Legislature approved the compacts.

The court also disagreed with the "broad assertion" that charities could conduct any form of casino gambling at Las Vegas-night fund raisers. The justices, in a second opinion on gambling a few months later, found that New Mexico law didn't permit any casino-style gambling and charities were told to end such fund-raising. The Supreme Court had ripped out the legal underpinnings allowing tribes to operate casinos.

With U.S. Attorney Kelly now threatening to force their casinos to close, tribes responded in both the legal and the political arenas. They filed a lawsuit in federal district court that argued the compacts were still valid because the Interior Department approved them before the Supreme Court ruling on Johnson's authority. Tribes also began lobbying the Legislature to approve new compacts allowing casinos.

The 1996 Legislature declined to act, leaving the controversy in the hands of the federal courts. Before the close of the year, three district judges and the loth U.S. Circuit Court of Appeals had ruled the compacts were no longer valid because Johnson lacked authority to enter into them. Gambling opponents in New Mexico had demonstrated to their counterparts in other states that challenges to compacts could be successful.

The appeals court stayed its ruling pending the tribes' appeal to the U.S. Supreme Court, allowing casinos to continue to operate and giving tribes time to work the political field.

With all 72 seats in the House and all 40 seats in the Senate up for election in November 1996, tribes pumped more than $300,000 into legislative campaigns in hopes of a new legislature that would approve compacts. The gamble paid off.

LEGISLATURE MAKES A DECISION

The Legislature, in its 60-day session ending in March, approved legislation that includes a model compact for Johnson and the tribes to sign. The legislation also allows slot-machine gambling at horse-racing tracks as well as veterans' and fraternal clubs.

The structure of the compact was decided in much the same way as the content of any bill. A model compact was introduced, then subjected to numerous committee hearings and amendments. Tribes could voice their support or objection to an amendment, but there essentially were no negotiations.

The most dramatic vote on the gambling legislation took place in the House. The first vote was a tie, meaning the bill failed. The House, however, reconsidered the vote on the following day. Representative Debbie Rodella of San Juan Pueblo switched her vote from no to yes, allowing the legislation to pass. The Senate easily approved the measure.

Johnson signed the bill, and the law was to take effect June 20. The governor and tribes could sign compacts soon after and send them off to the U.S. Interior Department for approval. But there are problems. The biggest is that tribes will have to share 16 percent of their slot-machine income with the state. Tribes also will have to pay an estimated $7 million a year in regulatory fees.

The Indian Gaming Regulatory Act allows states and tribes to negotiate compacts that provide for reimbursement of actual state costs in regulating Indian casinos. But $7 million would far exceed New Mexico's regulatory expenses.

IGRA says that nothing in the section dealing with state regulatory costs "shall be interpreted as conferring upon a state or any of its political subdivisions authority to impose any tax, fee, charge, or other assessment upon an Indian tribe or upon any other person or entity authorized by an Indian tribe to engage in Class III (casino gambling) activity."

The Interior Department has approved agreements in a few states that allow tribes to share revenues with states. But the department policy has been that tribes must get something of value in exchange - a monopoly or near-monopoly on casino gambling.

The question for the department is whether New Mexico tribes are getting something worth 16 percent of their machine revenues. The tribes will be the only entities in New Mexico allowed to have table games, but they will face machine gambling competition from racetracks, and veterans' and fraternal clubs.

Tribes openly expressed their distaste for the regulatory fees and revenue-sharing provisions in the model compact, but they were forced to accept the provisions in order to obtain legislative approval.

Tribes could - and still may - argue that the state negotiated the compacts in bad faith. But the U.S. Supreme Court in a ruling last summer involving the state of Florida and the Seminole tribe, gutted the provision of IGRA that allowed tribes to sue states for bad faith negotiations. A court finding of bad faith required a state to negotiate further.

As a result, New Mexico - or any other state - could refuse to enter into a compact, and tribes would have no remedy under IGRA. The Interior Department is studying the possibility of setting up some new administrative remedy for tribes that are stymied by states, but the department is sure to face a legal challenge from state interests if it does so.

Once Johnson and the tribes sign the compacts, the Interior Department will have 45 days to review them. Interior officials have openly expressed concern about the 16 percent revenue-sharing provision. They have said that if they find it unacceptable, the remaining parts of the compacts will be rejected, as well.

OTHER STATES ARE WATCHING

Should the Interior Department approve, other states likely will seek revenue-sharing deals in compact negotiations or renegotiations. "What happens in New Mexico will be kind of critical," said Michael Cox, former general counsel for the National Indian Gaming Commission, an arm of Interior, and now a lawyer in private practice. "This is going to put the department to the test."

Cox disagrees with Interior's interpretation of the tax provision of IGRA. He believes that while the law doesn't authorize a tax, a tribe can enter into a compact that does.

A department finding in favor of the New Mexico revenue-sharing plan could spark another lawsuit by gambling opponents, who have threatened to use the no-tax provision of IGRA to challenge the compacts. And coupled with the Supreme Court's Seminole decision, it also could be bad news for tribes in other states facing compact negotiations or renegotiations. That's because, like the New Mexico tribes, they might be pressured to accept such deals with states.

"Afterward they are going to be saying they were held up," Cox said.

George Skibine, director of Interior's Indian Gaming Management Office, said he didn't know how many compacts would be coming up for renegotiation in the next few years. But, he said, all the compacts in Wisconsin, a major Indian gaming state, will expire in the next two years.

"The states that are going to want to insist on some type of revenue sharing could just walk away" if tribes don't agree, Skibine said.

New Mexico tribes are in the awkward position of lobbying Interior for compacts that, if approved, would be a blow to tribes in other states. But said Hughes, "This is the only deal we got."

The New Mexico tribes continue to seek a Supreme Court review of the lower court rulings that held the previous compacts invalid. Meanwhile, the New Mexico Coalition Against Gambling is gathering petition signatures for a possible referendum on the legislation that allows for the new compacts.

"There's always the likelihood of something unexpected happening here," Hughes said. "But it's very hard to say what that will be."

Thom Cole, an investigative reporter for the Albuquerque Journal, has written extensively on Indian gaming in New Mexico and other states. He, the newspaper and its staff won the 1994-95 New Mexico Press Association public service award for coverage of Indian gaming. Cole has worked as a statehouse reporter in New Mexico, Pennsylvania, West Virginia and Ohio.