OKLAHOMA CITY — Casinos across the state were having one of their best revenue years in a decade — then the pandemic hit.

The deadly virus forced Oklahoma’s 128 licensed casinos to shutter their doors in March.

State records show a key source of revenue that flows into state coffers — known as exclusivity fees — all but evaporated overnight.

Casino exclusivity fee revenues were down nearly 34% from January through July 2020 compared with the same period in 2019, according to an analysis of data provided by the Office of State Management and Enterprise Services.

At the state’s two commercial race tracks and casinos — Remington Park and Cherokee Casino Will Rogers Downs — revenue was down about 34% from January through June compared with the same period in 2019, according to an analysis of data released by the Oklahoma Tax Commission.

The sudden reversal in casino fortunes may prove devastating for public schools and other core services when lawmakers reconvene next year to hash out the upcoming budget.

Over the past decade, lawmakers have become heavily reliant on the casino gaming fees, which fund common education and other services for Oklahomans.

Voter-approved compacts have long granted Oklahoma’s tribes the sole right to operate casinos in exchange for paying the state exclusivity fees ranging from 4% to 10% on a certain subset of games known as Class III.

In budget year 2019, those exclusivity fees generated about $148.2 million, the state's gaming association reported. The commercial race tracks generated about $28.5 million for Oklahoma coffers, state records show.

Under the compacts, the Department of Mental Health and Substance Abuse Services receives $250,000 for gambling education and treatment. The bulk of the remainder — 88% — flows to public schools. The state’s general revenue fund receives the rest — 12%.

“Obviously, that’s going to hurt us in terms of funding education for the upcoming fiscal year,” said House Minority Leader Emily Virgin, D-Norman. “That’s always a very important part of our revenue and the education budget.”

In a normal year, the tribal gaming fees are “a very steady stream of funding” the Legislature can count on for education, she said.

Virgin said she doesn’t know how the Legislature will make up the lost revenue as casinos struggle to recover from the pandemic upending their business models.

“Ultimately, we’re going to be in a very tough position,” she said. “We may need to look at new revenue streams. We’d be looking at a cut to education in the overall budget if something doesn’t change.”

Virgin said the shortfall in exclusivity funds is just one reason why the state needs a second federal stimulus package. She said that would shore up the budget and protect core services from devastating budget cuts.

'Devastated'

Oklahoma’s casinos typically have an economic impact of nearly $9.8 billion and support nearly 76,000 jobs, according to an American Gaming Association analysis.

Matthew Morgan, chair of the Oklahoma Indian Gaming Association, said casino exclusivity payments were $3.5 million over 2019’s numbers during the first eight months of the budget year. The industry was averaging about $12.5 million in exclusivity fees a month until February.

Then COVID-19 devastated the industry. Casinos voluntarily started shutting their doors March 15. By March 22, the entire industry was shuttered completely for safety reasons, Morgan said.

In May 2019, state records show casinos paid nearly $12.2 million in exclusivity fees. In May 2020, they paid $20,804.

Casinos slowly started reopening May 1.

June 2019 netted nearly $13 million for state coffers. June 2020 netted just $2.8 million, state records show.

Recovery has been slow for casinos as many patrons are hesitant to return to the entertainment venues. For safety reasons, tribes have limited casino capacity, continue to shut down popular games like poker, and canceled big-draw concerts, Morgan said.

A lot of eateries remain closed or restricted. People aren’t traveling as much, so hotel rooms are vacant. Older Oklahomans living in more rural communities haven’t returned for their traditional “senior breakfasts” and morning meet-and-greets.

“(COVID) just devastated us,” Morgan said. “We’re classified as an entertainment- and leisure-type business. There’s a lot of families and individuals that are hurting, and they’re worried about where their next paycheck comes from. They’re not spending their time in any entertainment venues. We will have less customers, less revenue coming in until we’re able to recover from the pandemic.”

July’s numbers show casino exclusivity payments are down about 5.6% from the year prior, state records show.

Tribes also are feeling the squeeze. For many, gaming operations make up the bulk of the revenue they use to fund programs and services, Morgan said.

In addition, the vast majority of Oklahoma tribes never laid off a single worker while they were shuttered.

Morgan said each tribe is not only looking at its savings, but trying to forecast what it's going to do in terms of economic development, and how it can best serve residents. No one knows yet how long they’ll have to weather the unexpected pandemic and when business will return to normal, he said.

Janelle Stecklein covers the Oklahoma Statehouse for CNHI's newspapers and websites. Reach her at jstecklein@cnhi.com.