New casino proposals for downtown Minneapolis and the Iron Range. A new governor who has openly supported a state-run casino in the Twin Cities. And a new, well-organized push to add slot machines in bars, restaurants and horse tracks.

The historic Republican takeover of the Legislature and the urgent search for solutions to the state's $5 billion budget deficit are galvanizing gambling advocates like rarely before at the Capitol. Lawmakers and observers on both sides of the contentious issue say it's a pivotal moment in the long battle over who can host and profit from Minnesota's multibillion-dollar gambling industry.

Gone are long-held assumptions that a DFL-controlled Legislature and its deep-pocketed political supporters in the Indian casino world will automatically be able to block any competitive threat to tribal casinos across the state.

"I believe if something is going to happen, it has to be this year," said state Rep. Tom Hackbarth, R-Cedar, a sponsor of numerous gambling bills over the years. "The tribes have done a great job helping their people with the facilities that they have. But there needs to be some competition. There's nothing that says they deserve to have a monopoly on gambling in the state of Minnesota."

Tribal groups and their political allies are gearing up for a high-stakes showdown this spring.

Citizens Against Gambling Expansion (CAGE), which includes GOP heavyweights Jack Meeks and state party chairman Tony Sutton, is organizing an opposition campaign with a new website and petition drive. It's also utilizing the Minnesota Republican Party's apparatus to keep anti-gambling pressure on lawmakers. Promoting a political platform that opposes more gambling, Meeks sent an e-mail to local GOP leaders last month urging them to "hold our elected leaders accountable."

"I think the threat is greater this year than it has been in the past just because of the unknowns, so many new members and [new] leadership," Meeks said in an interview last week. "If it's ever going to break, this is the year it's going to break.''

In a sign of how ugly the battle may become, Sutton on Friday accused pro-gambling forces of smearing him.

Randy Sampson, CEO of the Canterbury Park racetrack in Shakopee, told the Star Tribune that Sutton's wife, Bridget, approached him through a mutual friend late last year after the GOP swept into power in St. Paul. According to Sampson, Bridget Sutton wanted to know if Sampson would be interested in hiring her husband as a consultant to help in its quest to put slot machines at the track.

Sampson said the pitch came from businessman Bill Lethert, who Tony Sutton has described as a friend. The idea never went anywhere, Sampson said.

"I told [Lethert] I have some concerns," Sampson said. "The fact he's a Republican chairman -- I'm not sure how that would work. The fact that he'd been with CAGE, how would he be able to effectively represent us?"

Both Sutton and his wife denied pursuing work with Canterbury or asking Lethert to speak on their behalf.

"It's a baldfaced lie," Sutton said. "These guys are so desperate. This is about a lot of money for them. So they'll say whatever they've got to say."

Bridget Sutton, also a board member with CAGE, said she met with Lethert after the election. But she said Lethert brought up the idea of having a meeting with his pro-gaming friends. She said she reminded Lethert of her husband's long-standing opposition to the expansion of gambling.

"I said, 'But if you want to talk with him, it's up to you,''' she said, referring to her husband. "That's the last I heard of it."

Lethert declined to comment for this story.

'Some tough decisions'

Gambling has been a source of controversy in Minnesota politics for decades.

Ever since slot machines were outlawed in 1947, gambling interests have been clawing to get back in the game. After pull-tab charitable gambling was legalized in 1981, voters approved a lottery in 1988 and the state inked a gambling compact with seven tribes in 1989.

Today, there are 18 tribal casinos across Minnesota. They generate estimated revenues of at least $1.5 billion a year. But unlike some states, Minnesota's agreement with the tribes requires them to pay only a minimal regulatory fee. That has been a source of political controversy for nearly 20 years. Other states have generated hundreds of millions of dollars from gambling.

Tribal gaming interests are one of Minnesota's most formidable political blocs. They have spent millions of dollars in state races over the years, including about $1 million in 2010. The vast majority of that money has gone to the DFL, but tribal interests have also given money to groups with close ties to the GOP that have opposed the expansion of gambling, including CAGE and the Taxpayers League of Minnesota.

John McCarthy, executive director of the Minnesota Indian Gaming Association, said the tribes are ready to answer critics and make the case that the state has enough gambling. He said it doesn't make sense to approve slots at race tracks, commonly known as a racino, in a gambling market that he claims is already saturated and not bringing in new customers.

McCarthy said the tribes are waiting to see how the new Republican majorities react to their agenda. Though they have heavily supported DFL campaigns over the years, McCarthy said the tribes could send more campaign contributions to the GOP caucus if things go their way this year.

"If the people in power, the party in power, doesn't expand gambling or is a part of the reason gambling doesn't get expanded there's going to be some tough decisions as to how the tribes deal with that," McCarthy said.

A 50-50 chance?

While DFLers are expected to come to the tribes' assistance and oppose gambling legislation, Senate Minority Leader Tom Bakk, DFL-Cook, said he sees one window of opportunity for gambling proponents. If legislators are unable to solve the deficit problem through spending cuts alone, there could be pressure to expand gambling as part of a larger budget solution.

"That's the only way I could see it happening," Bakk said. "That's the one caveat I'd give, but it's a big one."

Gambling proponents have filed legislation that would allow bars and restaurants to have electronic gambling machines as long as they already offer charity gambling, such as paper pull-tabs. The idea is strongly backed by many bar and restaurant owners, who see video bingo and other gambling machines as a way to prop up sagging revenues, said Frank Ball, executive director of the Minnesota Licensed Beverage Association. It represents 3,500 retail liquor outlets across the state.

Ball said the move would generate $600 million in tax revenue for the state. "We think the planets are aligned for us," he said. "We're talking about jobs. We're talking about new revenue for the state."

Another proposal expected later this month is a racino bill that would allow slots at the state's two horse tracks in the Twin Cities area -- Canterbury Park and Running Aces in Columbus. The group pushing the proposal said it would generate $125 million annually in tax revenue. The proposal was pushed for years by Dick Day, when he was a Republican state senator. Now, he's president of Racino Now and lobbying for the cause.

"There was a huge sea change in the last election," Day said. "That doesn't mean we'll be able to get a bill passed; it's kind of 50-50 and still up in the air, but it has really changed."

Brad Schrade • 651-222-1636 Staff writers Baird Helgeson and Rachel E. Stassen-Berger contributed to this report.