By Jay Heiler

We have now completed a 2009 legislative session which was dominated by work on a balanced state budget, and yet failed to produce one. Or, if you prefer, failed to produce one that Gov. Jan Brewer would be willing to sign. This is in part the fault of the Legislature, in part the fault of the governor.Of course, many in those provinces will tell you that it’s mainly the fault of the Secretary of Homeland Security. Janet Napolitano may now be keeping the nation safe, but she did not leave the state fiscally sound.

Having said that, the matter is no longer about assigning blame but charting a way out. And it’s also true that given the state’s revenue shrinkage amid the current recession, the budget would be under stress even if it hadn’t been grown too quickly. It would just be under less stress, and the solution set would be less painful. The state’s politicians are now about the business of distributing that pain, not a job most of them relish.

It’s against this fiscal backdrop that the subject of the Arizona’s gaming policy has come due for review. Briefly expressed, that policy holds that some number of the state’s Native American tribes shall be allowed indefinitely to reap billions of dollars from gambling receipts, and everyone else shall reap precious little.

Now for a time and up to a point, that policy has been worthy of some support. In fact I was there, working for then-Gov. Fife Symington, when that policy was born. During Symington’s first term the federal Indian Gaming Regulatory Act (IGRA) imposed upon states the obligation to allow tribal casino operations, although limited in size, scope and place. And the idea that through their casino operations Arizona’s tribes might gain some overdue relief from persistent poverty was appealing to most Arizonans.

It’s worked out that way too, as nearly two dozen tribes have capitalized well on the exclusive franchise. Across 15 years they have collectively realized s billions of dollars in gaming profits, and they are now aggressively building new destination resorts around their casinos. One tribe has now boldly asserted its right to build such a place not on reservation land but right in the heart of Glendale. Despite the city’s resistance, they will most likely pull it off.

So here comes the point: Casino gambling is here to stay in Arizona. Already embedded in the community, it is going to become more so and it is going to grow. The only remaining public policy question is how effectively we are going to regulate and tax it for the benefit of all Arizonans.

When the state is $3.5 billion and more than 30 percent short on its budget, this question ought to be called by the state’s political leadership. It hasn’t been. Arizona’s racing industry has therefore called it, seeking permission to operate casinos on its existing racetrack properties and give the state 45 percent of the profits.

In the early going this would provide the state with a hundreds of millions in additional annual revenue, to spend on schools and universities, law enforcement and transportation, indigent care and other essential state responsibilities. If the state so chose, it could securitize that revenue and reap an enormous sum to help close the current budget shortfall, or it could simply enjoy the revenue going forward on an annual basis.

There are only two rational objections against allowing the tracks to open so-called “racinos,” which already exist in many states. The first is from gambling opponents who see it as an expansion of something they don’t like, but as noted above that expansion is going to happen anyway. Some people get this. Mike Huckabee was the featured speaker at the Center for Arizona Policy’s most recent annual event. He has already backed racinos in his home state of Arkansas.

The second objection, from the tribes and allied voices who might fear competition, is similarly flawed. The tribes will be fine; their operations will always have a long head-start and first-mover advantage, and they will be qualitatively different from the offerings at horse and dog tracks. They will continue to realize handsome profits for the benefit of their people. They have enjoyed an exclusive franchise for a long time and paid a tiny tax rate, a small fraction of what is paid by gaming operations in neighboring Nevada and elsewhere.

I grew up in the Thoroughbred racing business, tromping through the summer mud and across the frozen winter pastures of rural Cincinnati to feed and water the carefully-bred horses my dad hoped would hit it big. Today the industry — and it is a real industry with real jobs, real intellectual capital and long tradition that exist outside and beyond the wagering on races — has come under tremendous pressure from multiplying casinos. Arizona is actually well-positioned for a prominent place in Thoroughbred breeding and racing and the considerable economic benefits that would bring, but it will not happen without the racinos that have been permitted in other states.

Arizona’s gaming policy is untenable. Time and circumstances have predictably passed it by, like stakes horses dusting a $5,000 claimer on the backstretch. At the same time, the governor and the Legislature remain locked in a bitter dispute over how to balance the budget (they haven’t yet but must) and whether doing so will require new revenues (it will). A long list of vital state interests from education to law enforcement are hanging in the breach. The state’s gaming policy must be revised for the benefit of all Arizonans.

Jay Heiler is the former Chief of Staff under Governor Fife Symington. Currently, Mr. Heiler is a public affairs consultant representing the Arizona Racetrack Association.