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Best of Liz Benston

Gaming Guru

Liz Benston

Control board, too, is doing more with less

29 December 2008

LAS VEGAS, Nevada -- The earnings slump in the gaming industry is partly responsible for the fact that the state agency that investigates casino owners, vets gaming deals and tests gambling equipment for reliability and fairness is short-staffed.

Gambling revenue funds roughly 50 percent of Nevada's general fund.

The Gaming Control Board has cut about $3.5 million from its $36.6 million budget. Those cuts will apply through June, and the agency faces up to 34 percent in additional cuts for the next biennium.

Unfortunately for regulators, economic downturns — even those disproportionately affecting the state's major industry — don't mean less work.

The recession has yielded fewer casino license applications than in previous years and many fewer licenses for nongaming businesses applying for slot machine licenses, such as bars, grocery stores, convenience stores and gas stations.

There have been just as many gaming license holders seeking to transfer their interests, however, Control Board Chairman Dennis Neilander said. Sales happen in any economy, especially when business is down, he said.

Also keeping regulators busy are reviews of the complex financing strategies, such as debt exchanges, that companies are using to stay afloat.

"The nature of the work changes, but there's still a lot of activity," Neilander said.

That's one reason why these cuts haven't been easily absorbed by the Control Board, which has seven divisions.

The agency hasn't needed to lay off employees because of a yearlong hiring freeze in most of those departments.

A few workers have been hired to replace departing workers in departments that generate revenue. Those include the Technology, Investigations and Corporate Securities divisions, which each charge fees for certain reviews needed to pass regulatory muster.

Fewer workers in these departments, the board argued, would result in less money for the state.

Departments affected by the hiring freeze include the Administration, Audit, Enforcement and Tax and License divisions, though the control board petitioned the budget office to fill several positions it said were absolutely needed.

Auditors are among the many board employees who don't generate direct fees for the state, yet are instrumental to the system. They conduct periodic audits of casinos and are frequently involved in disputes with casinos over whether certain items are subject to gaming taxes. Casino comps are generally tax-free, though casinos often pursue expanded definitions of what constitutes a comp. Diligent auditors have recovered millions of dollars for the state as a result of subsequent audits, which benefit the state directly as well as indirectly by upholding the regulatory process.

Neilander declined to comment on whether the control board's regulatory function has been compromised, saying he's running the department as best as he can under difficult circumstances.

The bottom line, however, can't be ignored — there are fewer people doing more work.

The board's operating budget fell as much as 14 percent this year after a number of job openings went unfilled, and is now about 11 percent below the original budget after some employees were hired.

Just about every state agency resisted the 14 percent cutbacks, arguing that its operation is vital to the state.

That argument is no more obvious than when applied to the Gaming Control Board, which has the responsibility of overseeing the economic engine that fuels public and private enterprise in Nevada.