LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington St., Suite 301
Indianapolis, IN 46204
(317) 233-0696
iga.in.gov
FISCAL IMPACT STATEMENT
LS 7363 NOTE PREPARED: Mar 23, 2021
BILL NUMBER: SB 356 BILL AMENDED: Feb 4, 2021
SUBJECT: Tribal-State Compacts.
FIRST AUTHOR: Sen. Mishler BILL STATUS: CR Adopted - 2nd House
FIRST SPONSOR: Rep. Brown T
FUNDS AFFECTED: X GENERAL IMPACT: State & Local
X DEDICATED
FEDERAL
Summary of Legislation: The bill codifies the compact between the Pokagon Band of Potawatomi Indians
and the state providing for the conduct of tribal Class III gaming.
Effective Date: Upon passage.
Explanation of State Expenditures: Codification of the Compact: Current Indiana law provides that the
Governor is responsible for negotiating and executing a tribal-state compact on behalf of the state. It provides
that state may not enter into, amend, or modify a tribal-state compact without the ratification of the General
Assembly. Ratification of a compact by the General Assembly will require an enactment of a bill codifying
the compact. This bill codifies the compact between the Pokagon Band of Potawatomi Indians and the state.
Following the ratification of the compact by the General Assembly, the Governor must submit the ratified
compact to the Indiana Secretary of State and to the U.S. Secretary of the Interior for review and approval.
The initial compact term is 20 years with a renewal term of 10 years.
The bill’s requirements are within the routine administrative functions of the Governor and the General
Assembly and should be able to be implemented with no additional appropriations, assuming near customary
agency staffing and resource levels.
Class III Gaming Facility in South Bend: The bill provides that the current gaming facility owned by the
Pokagon Band of Potawatomi Indians located in the City of South Bend, Indiana, may lawfully conduct Class
III gaming that are conducted at other Indiana casinos. This gaming facility has been operating Class II
gaming since January 2018.
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The bill outlines the purposes of allowing Class III gaming at the South Bend location and sets guidelines
for approval for Class III gaming by the Indiana Gaming Commission (IGC). It defines gambling game as
a slot machine, a table game, or any wagering device allowed by the IGC. It allows the gaming facility to
install up to 3,403 gambling games. It allows online sports wagering and paid fantasy sports games only so
long as the wagers on such platforms are initiated by patrons who are physically present in the casino. The
bill disallows the facility to conduct wagering on horse racing or to operate a lottery.
The bill requires the gaming facility to remain in compliance with Indian Gaming Regulatory Act (IGRA).
It provides that the Band shall license, operate, and regulate all Class III gaming activities pursuant to the
compact, Band law, IGRA, and all other applicable federal laws. It clarifies that the gaming facility is not
regulated by Indiana and that patrons must refer to the Band or to the federal government to resolve any
issues or disputes with respect to the Band's Class III gaming operations.
It recognizes the "Certificate of Self-Regulation" issued to the Band by the National Indian Gaming
Commission (NIGC). It provides that if the Band's Certificate of Self-Regulation is revoked by the NIGC,
Indiana may, in its discretion and in coordination with the Pokagon Band Gaming Commission, engage in
compliance oversight activities regarding the licensing of all gaming officials and employees. Although it
allows the Band to license, operate, and regulate all gaming activities, it also provides guidelines and
restrictions related to hiring gaming officials and employees.
Additionally the bill requires the Band to do the following:
(1) Withhold state individual income taxes from gaming winnings of non-tribal patrons in the amount set
forth in Indiana law.
(2) Enact taxes on retail sales, food and beverage service, and hotel occupancy in an amount that is equal to
or greater than corresponding state and local taxes. The revenue from these taxes will not be shared with
Indiana.
(3) Make a good faith effort to utilize certified minority and women owned businesses.
(4) Withhold the amount of delinquent child support owed from a person’s winnings and transmit the amount
to the Child Support Bureau.
(5) Submit an emergency response plan.
(6) Follow the restrictions on political contributions as outlined in the compact.
(7) Make all reasonable attempts to follow the practices under the Indiana voluntary exclusion program.
(8) Eject or exclude a person from its gaming facility if that person is placed on the IGC’s exclusion list.
Indiana Gaming Commission (IGC): The bill specifies several duties for the IGC as it relates to monitoring
and overseeing the self regulation of the South Bend gaming facility by the Pokagon Band of Potawatomi
Indians. It is also assumed that most of the requirements set for the state in the bill will be fulfilled by the
IGC. The bill provides guidelines for the Band to share all investigative reports on any and all gaming
officials and employees. It provides guidelines for the state to be able to provide notice and inspect the
gaming facility and documents related to Class III gaming. It provides that if the Band's Certificate of Self-
Regulation is revoked then the state may inspect any part of the gaming operations without any prior notice.
It sets the requirements of confidentiality of the information shared with the state.
It provides guidelines for informal dispute resolution between the Band and the state. In the event that the
Band and the state are unable to resolve a claim or dispute through the informal process, the party asserting
noncompliance or seeking an interpretation of any provision of the compact may pursue resolution through
an action brought in a United States District Court or agree to pursue resolution through binding arbitration.
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The bill provides that the Band shall make semi-annual reimbursement payments to the IGC towards the costs
it incurs in carrying out functions authorized by the compact. The payment is equal to $50,000 or 0.05% of
the semi-annual net win, whichever amount is greater. This would result in the IGC receiving at least
$100,000 annually. If the Band's Certificate of Self-Regulation is revoked, then the Band shall thereafter be
responsible for reimbursing the state for the actual costs incurred by the IGC, in carrying out compliance
oversight functions. The total amount of each such reimbursement payment in that case shall be capped at
0.3% of the semi-annual net win.
Child Support Bureau: The bill provides the process for withholding delinquent child support from the
winnings at the South Bend gaming facility. It requires the bureau to provide information to the Band
concerning persons who are delinquent in child support. The bureau’s current level of resources should be
sufficient to implement these changes.
Additional Information:
Indian Gaming: The Indian Gaming Regulatory Act of 1988 (IGRA) establishes the jurisdictional framework
that governs Indian gaming. IGRA establishes three classes of games with a different regulatory scheme for
each class. Class I gaming is defined as traditional Indian gaming and social gaming for minimal prizes.
Regulatory authority over Class I gaming is vested exclusively in tribal governments.
Class II gaming is defined as the game of chance commonly known as bingo (whether or not electronic,
computer, or other technological aids are used in connection with the games) and, if played in the same
location as bingo, pull-tabs, punchboards, tip jars, instant bingo, and other games similar to bingo. Class II
gaming also includes non-banked card games (games that are played exclusively against other players rather
than against the house). IGRA specifically excludes slot machines or electronic facsimiles of any game of
chance from the definition of Class II games. Tribal governments are responsible for regulating Class II
gaming with oversight from NIGC. In Indiana, the Pokagon Band of Potawatomi Indians opened its Four
Winds South Bend casino as a Class II gaming facility on January 16, 2018.
The definition of Class III gaming is extremely broad. Class III gaming is often referred to as full-scale
casino-style gaming. It includes all forms of gaming that are neither Class I nor II. Games commonly played
in casinos, such as slot machines, black jack, craps, and roulette, would fall in the Class III category, as well
as wagering games and electronic facsimiles of any game of chance. IGRA restricts tribal authority to
conduct Class III gaming. It sets requirements that must be met before a tribe may lawfully conduct Class
III gaming. A compact between a tribe and a state is required in order for a tribe to engage in Class III
gaming. In August 2019, the Pokagon Band of Potawatomi Indians submitted a request to the Governor to
commence tribal-state compact negotiations for the purpose of authorizing Class III gaming at its Four Winds
South Bend casino. This bill codifies that compact.
Explanation of State Revenues: Summary: The bill impact state revenue due to: (1) A revenue sharing
agreement at a rate of 8% of the net win at the South Bend gaming facility. (2) Loss of tax revenues from
displacement of gaming activities at brick-and-mortar casinos and racinos.
The following table shows the net impact in FY 2022 to FY 2024 on state funds.
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 Source of Impact Funds FY 2022 (in $ M) FY 2023 (in $ M) FY 2024 (in $ M)
8% Revenue Sharing State $0 $5.0 - $9.2 $8.6 - $15.8
Riverboat and State General
($4.5) - ($6.2) ($9.1) - ($12.5) ($9.1) - ($12.5)
Racino Taxes Fund
Riverboat and State Dedicated
$0 ($0.1) - ($0.1) ($0.1) - ($0.1)
Racino Taxes Funds
Total All State Funds ($4.5) - ($6.2) ($4.2) - ($3.4) ($0.6) - $3.2
Note: The 8% revenue sharing amount shown in the table is net of the $1 M distributed to the Pokagon
Indiana Education Fund.
Additional Information:
Revenue Sharing Agreement: The Band is required to make annual payments to the state in the amount of
8% of the net win at its South Bend gaming facility. The bill provides that in exchange the Band receives
exclusive rights for a gaming operation by creating an exclusivity area. The area is comprised of the Indiana
counties of Elkhart, Fulton, Jasper, Kosciusko, LaGrange, Lake, LaPorte, Marshall, Miami, Noble, Porter,
Pulaski, St. Joseph, Starke, Wabash, and Whitley. The bill exempts existing commercial facilities, charitable
gaming, Type II gaming, Hoosier lottery, and off-track satellite facilities from exclusivity considerations. In
the event that the state breaches its obligations regarding expanded gaming in the exclusivity area, the Band's
obligation to make the annual revenue sharing payment to the state immediately ceases as of the date of the
breach.
The bill defines "net win" as the total amount wagered on each slot machines, minus the total amount paid
to players for winning wagers. It excludes promotional wagers in calculating net win. It also excludes Class
II games and table games from the calculation of net win. Although Class II games are excluded from the
calculation of net win, it separately provides a formula for revenue sharing from Class II games in the event
that the Band continues to conduct Class II gaming. The bill defines the payment period as a 12 month fiscal
period beginning on August 1 and ending on July 31 of each year. It requires the Band must make one annual
payment within 60 days of the ending of the payment period. It allows the first payment period to be shorter
than 12 months due to start of the operations mid way in the payment period.
It is estimated that the process to approve the compact will take an additional 3 months after passage of the
bill. Assuming that it will take 3 to 6 months for the Band to upgrade the current Class II gaming facility to
a Class III gaming facility, operations at the new casino could start by January 1, 2022. Based on a starting
date of January 1, 2022, it is estimated that the first payment of revenue sharing for a 7 month period from
January 1, 2022, to July 31, 2022, will be received in September 2022. The first full year revenue sharing
payment will be received in September 2023 and continue each year thereafter. The bill states that the funds
received under the revenue sharing agreement will be set aside for appropriation by the General Assembly.
It is estimated that the South Bend gaming facility will generate between $160 M and $280 M in annual
gaming receipts. The revenue sharing is not applicable to table games related gaming receipts. Additionally
the facility will receive full credit for promotional wagers in calculating the net win. The net win after
deducting table games and promotional wagers is estimated to be between $120 M and $210 M. This will
result in a revenue sharing amount between $9.6 M and $16.8 M. After allocating $1M annually to the
Pokagon Indiana Education Fund, the remaining $8.6 M to $15.8 M will be received by the state. Only a
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portion of this revenue will be received in the first year because the Class III gaming facility will be
operational for only part of the payment period.
The actual fiscal impact would depend on various factors such as ownership, facility attributes, market
factors, and the likely shift of business to the South Bend gaming facility from casinos in Gary, East Chicago,
Hammond, Michigan City, and Anderson.
Riverboat and Racino Taxes: The opening of the Class III facility will also reduce the casino/racino adjusted
gross receipts at the competing commercial riverboats and racinos in northern and central Indiana. Part of
the impact from the South Bend facility is already occurring since the facility opened as a Class II gaming
facility in January 2018. The additional impact on gaming revenues will reduce annual state revenues by
about $9.2 M to $12.6 M. A partial impact will occur in FY 2022, and the full year impact will begin in FY
2023.
Pokagon Indiana Education Fund: The bill allocates up to $1 M of the annual revenue sharing payment to
provide funding for public postsecondary and vocational education for eligible Band citizens. It deposits the
revenue in the Pokagon Indiana Education Fund to be administered by the Band. The fund will be used solely
to make payments directly to Indiana public institutions of higher learning or workforce development and
training programs approved by the Indiana Department of Workforce Development for eligible Band citizens.
Explanation of Local Expenditures:
Explanation of Local Revenues: City of South Bend: The bill provides that the Band may, at its discretion
and without any involvement by the state, make arrangements directly with South Bend to help fund
operations of local government agencies as the Band and the city may determine to be appropriate. The Band
currently provides 2% of its win from Class II gaming at the South Bend gaming facility to the local units.
The money is equally divided between the city of South Bend and the South Bend Redevelopment
Commission. If that agreement continues into the future, the increase in gaming operation as a result of the
transition to Class III gaming will result in additional revenue distributed to South Bend and the
redevelopment commission.
Riverboat and Racino Taxes: The loss of riverboat wagering taxes, riverboat supplemental wagering taxes,
and the county wagering fee will reduce distributions of these taxes to local units. The total fiscal impact to
the local units is shown in the table below.
Source of Impact Funds FY 2022 (in $ M) FY 2023 (in $ M) FY 2024 (in $ M)
Local Units with
Riverboat and
Riverboat and ($1.1) - ($1.4) ($2.1) - ($2.7) ($2.1) - ($2.7)
Racino Taxes
Racino
Note: This table does not show any potential additional revenue sharing distribution received by the
city of South Bend.
State Agencies Affected: Governor’s Office; General Assembly; Indiana Gaming Commission; Department
of Child Services.
Local Agencies Affected: South Bend; Local units with a riverboat or racino.
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Information Sources: National Indian Gaming Commission, 2019 Annual Report. Indiana Gaming
Regulatory Act, https://www.nigc.gov/general-counsel/indian-gaming-regulatory-act; Presentation to the
Budget Committee, Tribal-State Class III Gaming Compacts under Indiana and Federal Law; Indiana
Gaming Commission - Annual Reports: https://www.in.gov/igc/2362.htm
Fiscal Analyst: Randhir Jha, 317-232-9556.
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