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Michigan’s economic development agency is preparing to eliminate jobs because of reduced revenue from the Legislature and a dispute with a Native American tribe over gaming proceeds the state receives in lieu of taxes.

The agency is facing “a significant shortfall in operating revenues” for the current fiscal year because the tribe that operates the Gun Lake Casino in Allegan County did not make a $7 million bi-annual payment to the state on June 1, Steve Arwood, president and CEO of the Michigan Economic Development Corp., said in a Monday statement.

Since they are exempt from state gaming taxes, Native American tribes that operate casinos throughout northern Michigan make payments to a state economic development fund through gaming compacts brokered by past governors.

According to a statement from tribal council of the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, also known as the Gun Lake Tribe, the compact provides that if the state started providing Internet lottery sales or other forms of electronic gambling within the tribe’s market area, the tribe could end the revenue-sharing payments.

“The state has decided to offer Internet lottery sales and electronic gaming within the tribe’s market area,” the statement said. “Despite these events, the tribe feels that a resolution to this disagreement is possible, which is why it made a state revenue sharing payment in December 2014 even though it was not required to do so.”

“It is not known when the dispute may be resolved,” Arwood said. “As this is a bi-annual payment, the revenue implication could be double over a full fiscal year.”

The MEDC also is bracing for a $15 million budget cut the Legislature and Gov. Rick Snyder for the fiscal year that begins Oct. 1.

That reduction in spending is largely the Legislature’s response to ballooning business tax credits that triggered a $325 million deficit in the state’s general fund operating budget. The MEDC administers the business tax credit program.

Because of the revenue reductions, Arwood said the agency is “undertaking a reorganization” and his statement did not rule out layoffs. A MEDC spokesman did not immediately know how many jobs could be affected by the reorganization plan.

“It goes without saying that the scale and scope of our program must be reduced,” Arwood said. “The budget reduction will include an impact to staff. While staff details are currently being evaluated, it should be understood by everyone that MEDC could be losing some truly great, hard-working and talented people, who are committed to the citizens of Michigan.”

Arwood warned lawmakers in May that a Republican-led effort to tap his agency’s revenue for road funding would cause him to “have to defund stuff.”

clivengood@detroitnews.com

(517) 371-3660

Twitter.com/ChadLivengood

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