VI. Round 2: negotiating slots at Foxwoods.

• Author: Clarkson, Gavin
• Position: Leveraging Tribal Sovereignty for Economic Opportunity: A Strategic Negotiations Perspective

1. Context of Negotiating Slots at Foxwoods

   When Governor Weicker took office in early 1991, the state was in the throes of a financial crisis. Projections indicated that for the 1990-91 fiscal year ending June 30 Connecticut would incur a deficit between $800 million and $1 billion. (371) After the state had enjoyed nearly a decade of operating surpluses in the 1980s, Connecticut was facing its fourth consecutive year of deficits. (372) Furthermore, revenue and spending estimates for the 1991-92 fiscal year suggested that unless the state took corrective action, Connecticut would face a deficit of approximately $2.7 billion in its $7.8 billion budget; proportionately, this deficit would be the largest shortfall for any state in the country. (373)

   In large measure, a deep national recession caused significant fiscal woes for Connecticut. Historically, the state had derived over half its revenue from an eight percent sales tax and taxes on corporate income. The slowdown in economic activity, however, led to a sharp decline in corporategenerated tax revenue. (374) To make up for this decline in revenue, Governor Weicker-after one month in office-proposed a personal income tax, which was enacted into law. (375)

   Although the state expected the personal income tax would eliminate much of the budget shortfall, it was still an unproven source of revenue, and estimates of the amount it would generate varied. Most agreed, though, that the new tax alone would not be enough to close the gap in Connecticut's finances. (376) To balance the budget, the state would have to make deep and unpopular cuts in government expenditures. (377) Indeed, the governor fought with the state legislature to trim outlays to the limits of what was politically feasible. (378)

   This combination of a new income tax and severe spending cuts enabled Connecticut to achieve a budget surplus in 1991-92 for the first time in five years. (379) Feeling optimistic and sensing that the public was weary of sacrifice, Governor Weicker promised legislators in the spring of 1992 that he would not raise taxes for the remainder of his term. (380)

   Despite the 1992 budget surplus, however, economic conditions in Connecticut continued to deteriorate. Rooted in the defense industry, Connecticut's economy suffered severe setbacks as military contracts were canceled in the post-Cold War environment. (381) In January 1992, Connecticut's unemployment rate reached 7.5%, the highest it had been in a decade. (382) In the spring of 1992, General Dynamics' Electric Boat shipyard in Groton, the largest private-sector employer in southern Connecticut, announced that it would lay off half of its 17,000 workers over the next five to six years. (383) In December 1992, Hartford-based Pratt & Whitney, which surpassed Electric Boat as the state's largest private-sector employer, planned to lay off 5000 members of its Connecticut workforce. (384) This decision would be the third round of major layoffs at the jet-engine manufacturer in less than twelve months. (385) Furthermore, the layoffs would result in thousands of additional job losses at the Connecticut companies that supplied materials to Pratt. Pratt's announcement prompted The Hartford Courant to write, "It's fair to say Connecticut is going through the darkest economic period since the Depression." (386)

   As layoffs continued unabated around the state, Connecticut budget officials pared back their tax-revenue forecasts. Estimates of tax collections fell so sharply that by December 1992, the legislature's Office of Fiscal Analysis was projecting a shortfall of $424 million for the 1993-94 fiscal year on a budget of approximately $8 billion, assuming existing programs were maintained and expenditures were adjusted only for inflation. (387) Having promised not to raise taxes and aware that lawmakers had little appetite for further spending cuts, Governor Weicker found himself in a predicament that afforded little maneuvering room. (388) Yet, if Governor Weicker and the General Assembly did not act soon to prevent the budget shortfall, a financial crisis would engulf the state. There seemed to be no give: the governor and legislature had to produce a balanced budget for the 1993-94 fiscal year.

   In the southeast corner of the state, meanwhile, the Pequots were building a casino that looked as if it would become a gold mine. Unfortunately for Governor Weicker and Connecticut legislators, the state could not tax profits the casino earned. For all the excitement the Pequots' casino generated, the state would not share in the spoils, but the Pequots' success quickly attracted other gambling interests to the state.

   By the fall of 1992, Governor Weicker, who remained opposed to legalized gambling, faced mounting political pressure kindled by commercial gambling heavyweights. Trump, Bally, Harrah's, and Mirage lobbied state legislators to secure licenses for non-Indian casinos. (389) Mirage owner Stephen Wynn made particularly aggressive overtures to the state, promising to create jobs and provide attractive tax benefits. (390) Wynn and his big-league gambling compatriots pointed out that the state treasury was missing out on the gambling boom at Foxwoods because the Pequots were not required to pay taxes on their casino's profits or their personal earnings. (391) At best, in the case of Foxwoods, the state was receiving an incidental benefit of state income tax paid by non-Indian employees. (392) Why, asked Wynn, if casinostyle gambling was introduced within state boundaries, should the state's taxpayers be denied the chance to share in casino earnings? (393) He spent several million dollars lobbying state legislators and sponsoring...