The economic ripple effects of tribal gaming and federal contracting

When Native economies thrive, their neighboring economies thrive. New work from the Center for Indian Country Development (CICD), presented at a July webinar on “Economic Impact Beyond Tribal Economies,” provides data about the deep and wide economic impact of the two largest and fastest-growing sources of revenue in Indian Country: tribal gaming and federal contracting. This research, said CICD Director and Minneapolis Fed Vice President Casey Lozar, demonstrates “the symbiotic relationship between tribally owned enterprises and local and regional economies.”

Spillover effects

CICD Senior Research Assistant Elliot Charette presented on “Quantifying Gaming Spillovers,” based on a working paper, written with Alice Tianbo Zhang and Matthew Gregg, that quantifies the “agglomeration spillovers” created by tribal casinos. That is, the authors estimate how casinos not only bring in their own business but also attract visitors to nearby businesses, both on and off reservation.

The significant direct economic impact is known. In 2023, 527 tribally owned gaming operations nationally generated about $42 billion in revenue. Charette and his colleagues dived deeper into how that massive impact spills over to other enterprises.

They examined how consumer traffic to local businesses changed when nearby tribal casinos reopened after COVID-19 stay-at-home orders were lifted. Because tribes reopened casinos on a week-by-week basis, the research employed high-frequency data based on cell phone locations. For example, the researchers estimate that foot traffic to businesses within 0.5 miles of a casino increased by roughly 200 percent when a tribal casino reopened. In other words, nearby businesses saw three times as many visitors after reopenings because casinos act as anchors to surrounding businesses—that is, they are place-based investments that are large enough to have a systemic effect on the communities they inhabit. This spillover was substantial up to 1.5 miles away, with the largest effects among leisure and hospitality businesses located both on and off reservation.

In his presentation, Charette pointed to the policy implications of the research findings that show the inextricable connections between tribal economic activity and its surrounding region. For one, in Indian Country, tribal and state governments often have overlapping or double-taxing authority. Charette said that taxing the same business or economic activity twice likely impedes economic activity. He concluded that this “interconnectedness provides additional rationale and incentives for closer economic cooperation between tribal and state governments.”

Tribes, small businesses, and subcontractors

Next, CICD Policy Analyst Jacqui Baldwin-LeClair presented on “Interconnection of Native-Entity Enterprises to Small Business Subcontractors,” based on analysis developed with CICD Research Assistant Ava LaPlante. Their findings mirror those that Charette presented.

Federal contracting is an expanding revenue source for Native entities, defined as tribes, Alaska Native Corporations, and Native Hawaiian Organizations. CICD research shows that Native-entity enterprises regularly subcontract to small businesses, many of which are non-Native-owned.

In 2022, for example, 7.1 percent of the dollars earned from prime federal contracts awarded to Native-entity enterprises were, in turn, awarded to small business subcontractors. Moreover, 92.9 percent of the total small business subcontracts from Native-entity enterprises’ prime contracts go to non-Native-owned businesses. The research also examined small business subcontracts that were part of contracts awarded to Native-entity enterprises for construction projects. It found that nearly 76 percent of these contracts included subcontracting to small businesses located within 250 miles of the project’s primary worksite. So, like the impact of casinos on local and regional economies, Native enterprise subcontracts affect regional small businesses, Native-owned and non-Native-owned.

Identifying other areas for meaningful research

The two pieces of CICD quantitative research teed up a conversation among UCLA Professor Randall Akee, Cherokee Nation Businesses Chief Economist Tralynna Sherrill Scott, and CICD Director Lozar.

“This [research] shows that when tribes do well, everyone around them does well,” said Scott, who pointed to the direct correlation between gaming and the proliferation of tribal engagement with federal contracting.

She said the Cherokee Nation leveraged cash flows from its gaming operations to support its federal contracting work. “Federal contracting can be a result of gaming spillover,” Scott said, thus linking the relevance of both CICD analyses.

Akee, Scott, and Lozar brainstormed about other research areas that could produce the kinds of insights triggered by the CICD’s gaming and subcontracting impacts work and, therefore, inform policymakers. “It’s a heavy lift to get the data, to do the analysis, to do it right, and to put it out there in a format that is also digestible and usable by the policy world, [and] the advocacy world, because it shouldn’t all be just academic speak,” said Akee.

Those other explorations could include the impact of health care facilities and services on surrounding Native-owned and non-Native-owned businesses, and the economic effects of tribal housing, natural resources, unemployment, and even Native life expectancy. Akee urged tribal leaders to tell researchers “where the opportunities for research are.”

“States and tribes don’t always play nice together,” Scott said, “but when we have … emotionless studies that show the true impact of tribes across the nation, those can be taken to the policymakers.”

Echoing the findings of the CICD research, Scott added: “States and tribes, if they worked together, could have such a greater impact than working against each other.”