From an estimated $100 million when the act was passed in 1988, revenue from Indian gaming reached $1.2 billion in 1992, $3.2 billion in 1994, and exceeded $6 billion in 1996. As we reported last year, casinos accounted for most of the Indian gaming revenue, and a few large casinos accounted for a major portion of the casino revenue. In 1996, according to the Commission, for every $1 in revenue derived from Indian bingo gaming, almost $15 derived from Indian casino gaming. Although tremendous growth in total revenue has occurred, not every Indian gaming operation has been successful. In addition, not every operation has been without controversy. One contentious issue concerns the types of casino games that can be played within states. The Indian Gaming Regulatory Act of 1988 established several requirements. One requirement is that net revenues from tribal gaming are to be used to (1) fund tribal government operations or programs, (2) provide for the general welfare of the Indian tribe and its members, (3) promote tribal economic development, (4) donate to charitable organizations, or (5) help fund the operations of local government agencies. In addition, tribes may distribute a portion of their net revenues directly to tribal members as per-capita payments. However, such a distribution requires a revenue allocation plan that must be approved by the Secretary of the Interior. The act established three classes of gaming to be regulated by a combination of tribal governments, state governments, and the National Indian Gaming Commission. Briefly, Class I gaming includes traditional forms of Indian gaming connected with tribal ceremonies or celebrations and is regulated solely by the tribes. Class II gaming includes bingo and other similar games and is regulated by the tribes and the Commission. Class III gaming includes casino games and slot machines and, although the Commission has regulatory responsibilities under the act, is regulated primarily by the tribes and states according to a compact that governs the gaming activities. For ease of discussion, we use “Indian bingo gaming” to refer to all Class II gaming and “Indian casino gaming” to refer to all Class III gaming. The compact for Indian casino gaming is a negotiated agreement that establishes the state’s and tribe’s regulatory and oversight roles and specifies the games allowed. It may include provisions concerning the standards for the operation and maintenance of the gaming facility, the application of the tribe’s and the state’s laws and regulations that are related to the gaming activity, and the state’s assessment of the amounts necessary to defray the costs of regulating or overseeing the gaming activity. A compact may cover a single gaming operation or multiple operations, depending upon what is negotiated. The act requires that tribes and states negotiate compacts to balance the interests of both the state and the tribe. In addition, the Secretary of the Interior must approve the compacts. The act also requires that the tribe’s governing body must pass a tribal gaming ordinance or resolution before the tribe can have casino gaming. Furthermore, if a management company is to run the gaming operation, a management contract is required. Per the act, the Commission must approve tribal gaming ordinances or resolutions and management contracts. At the end of fiscal year 1997, of the 275 Indian gaming operations, 203 had casino gaming, according to the Commission. Of these 203, 141 were operating with an approved compact, while 62 were not. Of the 57 Indian casinos in the four states that we visited that had Indian gaming, 45 were operating with a compact approved by the Secretary. Three tribes in Washington operated the remaining 12 without a Secretary-approved compact. Of those, 11 casino operations of two tribes contained slot machines, which Washington does not allow, and Washington would not agree to a compact allowing them. According to state officials, these two tribes are allowed to operate under a court order until pending litigation on this issue is settled. The other tribe with one operation had a compact approved by the state but not by the Secretary, as of the end of fiscal year 1997. The tribe has since submitted the compact for approval, and approval was granted on March 30, 1998. In these four states, about 60 percent of all of the federally recognized tribes (46 of 78) have negotiated compacts, but not all have opened casino operations or had successful operations. Figure 1 shows the number of Indian casino gaming operations by state. The National Indian Gaming Commission is headed by a Chairman and two associate commissioners. The Commission grew from a total staff of 9 in fiscal year 1991 to 37 in fiscal year 1997. With the staffing increases, the Commission’s organization evolved to its current organizational structure, which includes a Chief of Staff and a General Counsel reporting to the Chairman. Reporting to the Chief of Staff are two primary oversight offices—the Office of Contracts and Audits with 3 staff and the Office of Enforcement with 16 staff, including 6 field investigators. The Office of General Counsel has five staff. The Commission’s revenue increased from $1.6 million in fiscal year 1991 to $3.8 million in fiscal year 1997. The revenue came from fees on Indian bingo operations, federal appropriations, and cost reimbursements for conducting background investigations on contractors and processing fingerprints. While the revenues from fees and appropriations have remained fairly constant and are the primary sources of revenue, cost reimbursements have increased dramatically. Expenditures have also increased in the last 7 years—from $1.2 million to $4.6 million. The Commission’s expenditures for the last 4 fiscal years have outpaced its revenues. The Commission used prior years’ carryover balances to make up the difference. Figure 2 shows the Commission’s sources and amounts of revenue and expenditures over the 7-year period. Established by the Indian Gaming Regulatory Act of 1988, the Commission is responsible for ensuring that both Indian bingo and casino gaming operations are in compliance with the act and its regulations. For example, the Commission is responsible for ensuring that the tribe has an approved tribal ordinance concerning the conduct of bingo and casino gaming. In the first few years of existence, the Commission focused its efforts on its responsibility to promulgate regulations. Later, the Commission focused on reviewing and/or approving various gaming reports and submissions for both bingo and casino gaming as well as on its monitoring activities. It reviews or approves (1) tribal ordinances for bingo and casino gaming that establish how tribes will comply with the Commission’s regulations; (2) management contracts that establish the relationship between the tribe and its gaming operator, including the payment to be made for this service; (3) annual independent audits of the financial statements; and (4) background investigation reports. The Commission monitors compliance with its regulations and the requirements of the act. Monitoring activities include examining records of the gaming operation and inspecting the gaming facilities. As a part of its monitoring, six Commission field investigators made over 500 field visits in 25 states during the last 2 years. These visits involved discussions about compliance requirements as well as examinations of the records and inspections of the operations. Also, the Commission took 55 enforcement actions in the last 2 years for violations of the act or of the Commission’s regulations. Much variety exists among the five state gaming agencies that we reviewed that regulate or oversee casino gaming; differences exist in their organization, staffing levels, and funding levels. These differences are not, by themselves, an indication of effectiveness. They merely reflect differences in the scope and level of the state agencies’ responsibilities. For example, the gaming agencies vary from a small organization that reviews compliance and operations at least quarterly to a relatively huge organization that has 24-hour continuous monitoring. Some states’ programs have some unique aspects. For example, Washington limits the number of gaming tables that a casino may have, and Arizona limits the number of slot machines on the basis of tribal membership. Michigan, on the other hand, considers the number of machines in a casino to be a business decision made by each individual operation. (Apps. III through VII provide the details of each state’s program.) The five state gaming agencies varied from a large, multibodied organization to much smaller units. The larger organizations are in New Jersey and Nevada, which primarily oversee billions of dollars in non-Indian casino gaming. The smaller units are in Arizona, Michigan, and Washington—states that oversee Indian casino gaming with many fewer total gaming dollars involved. All five state agencies, although structured differently, include audit and investigations functions. For fiscal year 1997, staffing and expenditures in the states with the larger, more complex organizations were much greater than for the smaller organizations, as would be expected. The number of gaming operations in a state, however, does not correlate directly to the state agency’s staffing level. For example, for 17 Indian casinos, Michigan committed 2 staff to oversee gaming operations. Washington, which has 11 Indian casinos, committed 24 staff to oversee the gaming operations. As we discuss later, staffing and funding levels reflect the states’ roles in oversight or regulation. Table 1 illustrates the staffing and funding variations among the states. Although revenue sources vary somewhat, the gaming agencies in all five states receive their funding from gaming operations within the state; state tax dollars are not used. Generally, the states are reimbursed for the expenditures they actually incur for their licensing, certification, or oversight costs. Arizona bills the tribes for services provided, but if bills for services do not cover all expenditures, Arizona allocates the remaining amount (shared enforcement expenditures) on the basis of the number of gaming machines an operation has. New Jersey also bills for services provided but allocates any remaining costs equally among the casinos. Michigan bills the tribes equally for staff wages and benefits and bills for other expenses as they are incurred. Nevada, depending on the compact, charges the tribes a 1-percent fee or bills for services provided. Washington either bills for services or charges a flat fee, at the option of the tribe. Nevada, Michigan, and New Jersey receive additional revenue from gaming.