Follow the Money: Lawmakers and lobbyists place their bets

In the final days of state budget negotiations, there was a pressurized hush around the legislative complex as lawmakers feuded over the sudden addition of legalizing four casinos to the nearly $30 billion state budget.

The proposed addition was described as a rural incentive development program, outlining a $1.5 billion state investment and opening of three privately run casinos. The Lumbee Tribe would potentially run a fourth in Robeson County. The Department of Commerce would oversee it with licenses issued by the NC Lottery Commission. 

The issue had not been through legislative committee but instead was proposed to appear in the state budget. It drew fire from lawmakers, particularly the Freedom Caucus, led by Rep. Keith Kidwell, R-Beaufort; and Sen. Bobby Hanig, R-Currituck. The proposal cratered budget negotiations until Senate and House leadership decided to pull it from the budget. However, they urged lawmakers to prepare for more regulated gaming options to be debated in the next legislative session.

“I don’t know why those same folks had a real problem with us moving forward with some sort of gaming that would actually create jobs, particularly in rural areas,” said Berger.

“I think people will ask the question as to why certain gaming is okay, but casino gaming is something that is just totally off,” he added, likely referring to this summer’s passage of sports betting legislation, due to launch in January.

THE BET

An analysis completed earlier this year on the potential impact of three new resort casinos indicated an estimated $1.9 billion market in North Carolina. Spectrum Gaming Group conducted the study for Greater Carolina and said each facility’s home county would have about 3,000 jobs and $30 million in local tax revenue.

The casino policy in the budget draft legislation indicated that one company could run all three private casinos with a 22.5% tax on the casino’s gross revenue. The casino operators would also have to create at least 1,750 jobs, invest at least $500 million of their own money to develop each district, and have ten years of experience running casinos and developing/operating mixed-use, non-gaming real-estate projects. 

Only two companies could potentially meet the criteria set out in the draft proposal to run the casinos. One is Cordish Companies, a Maryland-based commercial real estate group that builds entertainment, retail, and sports facilities, including casinos. The other is the smaller Grover Gaming, a company based in Greenville, NC. The draft budget language also narrowed possible locations to Nash, Anson, and Rockingham counties.

“On its face, it appears that Grover lacks the income requirement set out in the draft budget language,” said Jim Stirling of the John Locke Foundation. “They also seem to be predominantly a video poker company but do have some land-based gambling. They also may fall short of the draft language requirement of 10 years of experience.”

Recent allegations were raised by Bob Hall, former executive director of Democracy North Carolina, who said that casinos have heavily contributed to key state lawmakers’ political campaigns, driving the effort to open casinos in the state. He said that more than $1.4 million was donated to legislative members in pursuit of casinos in North Carolina. However, on further inspection, the casino-specific impact on fundraising and lobbying is a narrow slice of the contributions from the overall gaming industry. 

Earlier in this legislative session, lawmakers readily passed, and Gov. Cooper signed, a bill allowing online sports betting in North Carolina starting in January 2024. Under that bill, the NC Lottery Commission will oversee the award of 12 online gambling operator licenses, charging $1 million for the application fee and an additional $1 million in renewal fees after five years. The state will tax operators an 18% privilege tax.

Eight sports venues, including Charlotte’s Spectrum Center, can apply for in-person sports books. Other North Carolina venues allowed under the law are PNC Arena, WakeMed Soccer Park, Bank of America Stadium, Charlotte Motor Speedway, North Wilkesboro Speedway, Sedgefield Country Club, and Quail Hollow Country Club.

THE REAL POWERBROKERS

According to records filed in the last quarter of each year, spending on lobbying efforts set new records in 2021 and 2022. In 2022, $65 million was spent on 745 registered lobbyists at the North Carolina General Assembly.

The emergence of policy that Republicans would have balked at a decade ago — gambling, medical marijuana, and billion-dollar earmarks — has also drawn attention to the power of certain lobbyists at the state legislature. The gaming industry’s bet on North Carolina illuminates a center of gravity for policy “wish lists” from the state legislature; at the core, a small contingent of lobbyists working for such new policy. 

There are a few big names in the lobbying game, with some overlap in those who work the legislative halls for gaming and also for NCInnovation, a privately-run economic development project. The project drew criticism this fall for getting a $1.4 billion earmark in the Senate budget proposal, which was later cut down to $500 million in the final conference report budget that went into law in September.

Four of the nine lobbyists working the legislature for NCInnovation funding also lobby for gaming companies. Lobbyists with firms like McGuire Woods, Powers Strategies, and Harrell & Associates represent both efforts and have deep professional histories with state government leadership. For example, David Powers has been a frequent legislative appointee to high-level state boards like the UNC Board of Governors from 2011 through 2023, plus Will Mitchell, who works for Power’s firm and previously interned in Speaker Moore’s office. La’Tanta McCrimmon worked for Gov. Roy Cooper in legislative affairs and Jim Harrell served in the state legislature from 2003 through 2008, when he was defeated by current Speaker Pro Tempore Sarah Stevens (R-Surry). 

The rest of the NCInnovation lobbying team include other legislative alum like former Berger staffer Thomas Sevier, and Dylan Reel who worked for House Rules Chairman Destin Hall.

Lobbyists for the gaming industry include prominent figures like Tony Copeland, North Carolina’s commerce secretary under Cooper, and Tracy Kimbrell, former general counselor for Sen Phil Berger’s office, both lobbying for Cordish. Grover very recently added former lawmaker and House Redistricting Committee chairman David Lewis to their lobbying team.

the price to lobby

The impact of these brokers at the NC General Assembly materialized in proposed policy this year, but also in what many sense as an anti-lobbyist sentiment running through the buildings. The new state budget doubles lobbyists’ registration fees to $500 and creates a $2,000 fast pass through security lines at the state government building. The increase means North Carolina now has the highest lobbyist fees in the nation. This could be bad news for small non-profits, who may second guess whether they should pay a lobbyist to work for legislation on their behalf. 

“The other scarier option is, are organizations going to say, ‘well, we are going to play with that threshold of how much time we spend down at the General Assembly, and maybe we won’t register a lobbyist, or register our policy staff.’” lobbyist Brian Lewis of New Frame told Carolina Journal. “The public needs to know who is down there talking. They need to know why one bill is moving and why another bill didn’t.”

Under state law, lobbyists’ hours at the General Assembly are capped. For unregistered “consultants,” they are not. The North Carolina Secretary of State’s office collects those lobbyists’ registration fees and passes them on to the state’s General Fund. A Secretary of State office representative told Carolina Journal that they did not request that legislative budget writers increase the lobbying fees. 

What’s Next?

As lawmakers wrap up this legislative session and look to 2024, Berger has assured the media that the casinos issue will return, with time for discussion, which may address some of the concerns of the Freedom Caucus members.

“They are not necessarily upset about the fact of casinos, but they just don’t like the way this was put in the budget, rather than going through the committee process,” Rep. Keith Kidwell, R-Beaufort, told Carolina Journal. Kidwell is currently running to replace Moore as House speaker. “Now there are some who say, ‘no casinos, period.’ But I think the reason we got as much pushback as we did was the process.” 

“A lot of these bills function as what I call a Freddy Krueger bill; right about the time you think they are dead, someone breathes new life into them,” he added. 

Jim Stirling of the John Locke Foundation researched this and other articles in Carolina Journal’s Follow the Money series.

The post Follow the Money: Lawmakers and lobbyists place their bets first appeared on Carolina Journal.