Cherokee adopts budget reflecting lower casino revenues
After more than two months of operating under a continuing resolution, Tribal Council has approved a new budget for the Eastern Band of Cherokee Indians.
Budget approval was delayed from the typical deadline of Sept. 30, which aligns with the end of the tribe’s fiscal year, to allow the incoming administration of Principal Chief Michell Hicks to have a say in the process and to make adjustments for declining casino revenue projections for fiscal year 2024.
In April, an estimated $515 million was expected to flow back to tribal government and per capita distribution from the Tribal Casino Gaming Enterprise in fiscal year 2024, but by the end of August that prediction had fallen to $438.3 million. By the first week in October, it had dropped to $422.6 million.
“If we would not have made any changes to the budget, we would have ended up being budgeted at 97.5% of what the projected gaming was, which we were not comfortable with that,” said Finance Director Brandi Claxton. “The goal from Council was to get to 85% of that projected gaming. So to do that, to meet that, between the tribal government and the school we needed to cut $24 million from the budget.”
Cuts include $2.1 million from eliminated vacant budgeted positions; $4.7 million from tribal operations achieved primarily through contracts, training, travel and office supply reductions; $2.5 million from a decrease in pension contribution; shifting $5 million from the Capital Investment Plan fund balance to the General Fund; reappropriating $5.5 million in American Rescue Plan funding to cover general operating costs under the law’s lost revenue category; using $2.5 million from fund balance for housing and decreasing Cherokee Central Schools funding by $1.8 million, achieved by decreasing raises from 15% to 7.5% and increasing fund balance use by $250,000.
“The word ‘cuts’ is being used, but it’s not only that,” Hicks said. “It’s also adjusting some of the budgetary line items. I just want to make sure that language is clear.”
The final budget totals $842.3 million, of which $181.3 million is for per capita distributions. The next biggest categories are salaries and personnel costs, which will increase by $611,00 compared to the original FY24 proposal to $180.4 million, and internal transfers, which will decrease by $12.8 million to $148.5 million. Also up from the original FY24 proposal are entity transfers at $83 million; contracts, services and fees at $60.5 million; other program operating costs at $52 million; reserves or unused lines at $50.6 million; capital, equipment and leases at $33.3 million; and member services at $20.2 million. Debt decreased by $1.2 million from the original proposal to $33 million.
While the tribe’s forecast predicts that proceeds from the casinos in Cherokee and Murphy will decline over the next three years, total distributions from tribal business enterprises are expected to grow more than 50% between fiscal years 2024 and 2026. That’s mainly due to explosive growth anticipated from Qualla Enterprises , which is predicted to send $260 million back to the tribe in fiscal year 2026. The business began growing cannabis this year and has millions of dollars’ worth of product in storage. However, because it does not yet have a way to legally transport it for sale to the dispensary on the main Qualla Boundary, the business does not yet have any revenues.
The tribe’s Cannabis Control Board has begun issuing medical cards that will enable marijuana sales for medical use once those logistics are figured out. In a September referendum vote, tribal members voiced overwhelming approval for legalized recreational use for adults 21 and over, a change that would vastly expand the potential customer base if implemented.
Also by fiscal year 2026, Kituwah LLC is forecast to return $5.3 million to the tribe and EBCI Holdings LLC is forecast to return $18.9 million. Each entity has a different distribution plan, with tribal operations to receive anywhere between 35% and 50% of those distributions.
After discussing the budget on air for about 10 minutes, Tribal Council held a 20-minute off-air discussion before coming back for a vote. Snowbird/Cherokee County Council Member Adam Wachacha started the seven-minute discussion that foll owed by asking for a delay before the vote.
“I would rather have more time to be able to vet this,” he said. “I would like to actually compare it to the last two budget years so I can see what’s moving.”
However, other Council members disagreed. Big Cove Rep. Richard French offered thanks to the executive and finance offices for their hard work, saying that they’ve often been in the office after hours bringing the budget to the finish line.
“These people’s been working on this budget, and I don’t think that they would bring this budget in here if it hadn’t been vetted out through all the programs and ready to go,” he said.
Painttown Rep. Sean “Michael” Stamper applauded the Finance Department’s work in tracking the changes, saying that although he’s “very upset” that the Tribal Alcoholic Beverage Control Commission did not take any cuts, he’s satisfied with the rest of the document.
“The rest of the budget I’m comfortable with, so that’s why I’m going to make a second to pass this budget,” he said.
A move to table the budget failed, with only Wachacha and Big Cove Rep. Perry Shell voting in favor. A subsequent move to adopt the budget passed with all present Council members except Wachacha in favor. Birdtown Rep. Jim Owle was absent.