Time for the state to look seriously at slot machines?

State Sen. Dick Day, a Republican from Owatonna, couldn't even get a hearing this session from DFL leadership for his perennial bill that would open Canterbury Park and the Running Aces horse track to slot machines.

The fact that Day's gambling expansion amendment to the Senate finance bill last week went down by only a 29-33 bipartisan vote spoke to how desperate legislators are to plug the projected $4.6 billion, two-year budget gap.

Gov. Tim Pawlenty and the Legislature face unpopular choices of spending cuts and tax increases.

The three Indian tribes closest to the Twin Cities have reason to worry about slot-machine competition that the Minnesota State Lottery and the Minnesota Horsemen's Grassroots Committee for Racinos estimate could raise $81,000 per machine, or up to $250 million in revenue annually by 2011.

Most legislators don't favor the expansion. But 20 years after the state negotiated a casino compact, there is less patience in St. Paul with the Minnesota tribes that operate the lucrative Mystic Lake, Prairie Island and Grand Casino operations, which are the Indian gaming operations closest to the Twin Cities.

Minnesota is one of the few states that has failed to negotiate consideration in lieu of corporate income and property taxes from Indian casinos. Meanwhile, the tribes spend several million dollars annually on campaign contributions, mostly to DFLers, and on more than three dozen professional lobbyists.

Pawlenty has proposed to plug the budget gap with a variety of spending cuts and $1 billion in interest-bearing state bonds. The DFL-dominated Legislature likely will send Pawlenty a two-year revenue bill that will include spending cuts and tax increases. Pawlenty has vowed to veto it.

State spending is under control, accept for health care, as growing numbers of uninsured Minnesotans turn to government-subsidized plans and clinics. For now, Minnesota has an acute budget problem caused by the recession and layoffs. I think the economy has bottomed and will start growing this year. Regardless, fiscal 2010-2011 will be in deficit without more cuts or revenue.

Minnesotans favor "racinos" at Canterbury Park and Running Aces in Anoka, according to surveys by the state horsemen's association. The industry also employs hundreds on farms, at the tracks and in the veterinary and accessories businesses. Most Minnesotans say gambling is acceptable entertainment, according to past surveys by the horsemen's group.

The addition of slot machines at these two racetracks, which already sponsor card games, would be done by private operators who hire people and pay taxes.

It also likely will detour some business from the most popular Indian casinos.

A few years ago, Pawlenty tried to threaten the Indian gaming industry into contributing $350 million annually to the state in lieu of taxes or he would invite Las Vegas interests to Minnesota. The threat was bashed by the Indian Gaming Association and also lacked support in the Legislature.

Studies by the Federal Reserve Bank of Minneapolis and the state lottery have estimated that Indian casinos gross $1 billion to $2 billion in annual revenue. The tribes dispute that. They are their own sovereign governments, not required to disclose financial information and not subject to state corporate income or property taxes.

The Shakopee Mdewakanton Sioux own Mystic Lake, the state's largest casino and biggest target for gambling-expansion advocates. The tribe has annually distributed to each of its couple hundred members tens of thousands and even hundreds of thousands of dollars, according to a 1990s lawsuit during a tribal dispute.

Gambling, like alcohol and cigarettes, can be a dangerous vice. They also have never been taxed heavily enough to cover the public safety and health costs that result. State taxes on booze and smokes should rise to better cover related costs.

And the tax rate on Minnesota families making $250,000-plus annually in income or capital gains should be raised from 7.85 percent back to the 1999 level of 8.35 percent. That's short of the 9 percent some DFLers want. They also make a good point that the Minnesota middle class, thanks to local property tax hikes and fees, now pays a bigger percentage of income in total taxes than the wealthy.

Thoughtful legislators are wrestling with the gambling "expansion" as part of the overall budget dilemma. Sen. Dick Cohen, DFL-St. Paul, who opposed Day's gambling expansion last week, rightly said that it's no panacea.