No disparity in gaming industry purchasing yet, study says

Indiana’s $2.5 billion dollar gaming industry is spending fairly on minority-owned and woman-owned contractors, according to a five-year disparity report out Thursday.

“There hasn’t been and there is not a disparity,” said Indiana University Public Policy Institute Senior Policy Analyst Drew Klacik. He and fellow analyst Rebecca Nannery conducted the Indiana Gaming Commission Disparity Study — the state’s fourth such edition.

But the share of spending with those firms has been sliding down since at least 2009. And while the state’s 12 casinos and racinos spend more than expected with individual disadvantaged businesses, the actual number of firms is lower than expected, according to the study.

The analysis called those trends “concerning” and wrote that they should be monitored annually “to avoid disparity findings in the next study.”

“This trend suggests casinos and racinos must remain vigilant and committed to ensuring that [minority business enterprise] and [woman business enterprise] vendors continue to enjoy the economic benefits associated with the gaming industry,” the report said of the downward slide in share of spending.

And though gaming facilities tend to spend more on the individual firms, “the result of this greater spending is that fewer [minority business enterprise] and [woman business enterprise] firms are sharing in the economic opportunity created by casino and racino spending,” the report said.

What’s disparity?

The disparity analysis estimated a potential level of spending with all ready, willing and able minority- and woman-owned firms, dubbed “capacity.”

To make sure they were counting all vendors, even those not certified as minority- or woman-owned, researchers engaged in outreach to firms. They also compared gaming facility data with certification data from Indiana and some local governments.

And to get to a dollar amount for capacity, researchers did some math.

They multiplied total actual spending of casinos on contractors, by the percentage of ready, willing and able businesses, arriving at $48 million for minority-owned firms and $74 million for woman-owned firms.

Researchers compared those numbers back against actual spending, known as “utilization.”

Hoosier casinos and racinos spent more than $1.6 billion in total from January 2017 through December 2021, according to the report. About $199 million — or 12% — of it they spent on minority-owned businesses, while $148 million — or 9% — went to woman-owned firms.

Disparity is the difference — a negative one — between potential and actual spending. There is none, at least not yet.

But spending with these firms has otherwise been on the decline since 2009, with expenditures for minority-owned businesses hitting a low (8%) in 2021 and woman-owned firms reaching a low (also 8%) in 2020.

Still, the gaming industry is far ahead of most Indiana governments. That’s because it’s composed of private firms, with fewer restrictions, Klacik, the researcher, said.

“Governments have to do blind, sealed bidding — casinos don’t. They they have the opportunity to pay to use a [minority- or woman-owned business] and not choose the lowest[-cost] response,” Klacik said. “So casinos have managed, much to their credit, to avoid incurring disparity in any of the four categories.”

Should gaming facilities get worse, however, the Gaming Commission can take action.

Deputy Director Jenny Reske said the agency looks at each casino’s spending annually, and if one were to be low, it would undertake some “good-faith efforts” and keep the agency in the loop. Then, the agency would analyze the casino’s work and decided whether it needed to take additional action.

“Based upon the findings of this study, we might conduct a more thorough analysis of the industry as a whole, on an annual basis, during this next five-year period to ensure if we are sliding toward disparity, that we have an accurate handle on what’s occurring and we have some perhaps, corrective measures,” Reske concluded.