California controversy: gold rush into casinos

California could soon be lighting at least some of its path out of fiscal darkness with the flashing bulbs of expanding Indian casinos. It's a trend, observers say, that is percolating in other cash-strapped states.

Fulfilling a campaign promise to push the state's 104 Indian tribes to pay their "fair share" of state government revenue, Gov. Arnold Schwarzenegger has been renegotiating federally mandated compacts with several tribes, most of whom currently pay nothing to the state.

Now, with two initiatives on the November ballot - Proposition 68 which could force tribes to pay 25 cents of every dollar to the state, and Prop. 70 which would require about nine cents - Mr. Schwarzenegger is trying to get tribes to voluntarily fork over higher percentages of their revenues. But to do so, he is offering them the opportunity to expand. It's a controversial tactic.

"California is in effect promoting the growth of casinos ... the goal of getting more revenue to run the government is one of the reasons," says Larry Berg, director of the Jesse Unruh Institute of Politics at the University of Southern California.

Last week Schwarzenegger concluded compacts with five Indian tribes that his staff says could produce $180 million annually for the state. Four of the compacts will bring the state 12 to 25 percent of the casino's annual take, far more than Prop. 70, which most analysts say is the more credible of the two initiatives.

In a fifth compact, Schwarzenegger signed a deal that runs counter to another one of his long-held opposition to casinos in urban areas. The Lytton Band of Pomo Indians, the northern California tribe, would be allowed to operate a giant 2,500 slot-machine casino in San Pablo, an eastern San Francisco Bay area city.

In a vote late last week, the California Assembly did not approve the urban casino, but most analysts say it will have to be approved in some form because the tribe has been given the right to run a casino by federal law.

Indian gaming was approved by Congress in 1988 as a way for isolated reservations to build up funds.

"The legislature has not yet realized that they don't get to decide whether or not a casino goes in, they only get to decide what is the best deal for the state," says Schwarzenegger spokesman Vince Sollitto. He and others say the legislature will have to revisit the issue in December or early 2005. "When they realize their responsibility under federal law, they will realize this is the best deal the state could get."

The four newly negotiated compacts approved by the legislature Friday include environmental, regulatory, and law-enforcement provisions that are more stringent than most California Indian gambling operations so far. "These are fair-share gaming agreements that also protect our communities," Schwarzenegger said in a statement.

Last year, the windfall to California was about $6 billion, about half the nation's total in collected gaming revenue. Casinos continue to be lauded by several tribes who feel gambling has become the best way to create jobs and fund community healthcare, education, infrastructure and other needs.

"People have to understand that [we are still] trying to struggle back from years of poverty to achieve what most Americans have taken granted for years in housing, water, electricity, education, and healthcare," says Ernie Stevens, president of the National Indian Gaming Association.

But opposition has been fierce on several fronts. Local community groups fear the unsavory social elements that casinos can foster - from gambling addiction to drugs to crime. Assemblywoman Loni Hancock (D), who represents the San Pablo area, complained to one newspaper, "This appears to be the new economic strategy for California and it's pathetic."

Other Indian tribes say the governor is trying to drive a wedge between tribes by securing separate deals with the most economically vulnerable. "The governor has asked tribes to step up and pay their fair share and so we responded with an offer to give them the going corporate tax rate," says Richard Milanovich, head of the Agua Caliente Band of Cahuilla Indians, which is backing passage of Prop. 70. The measure would give tribes unlimited gambling rights and would require them to pay about the equivalent of corporate income tax - about 9 percent. "He is trying to undermine our initiative by making separate deals to divide the Indian community," says Mr. Milanovich.

At the same time, Prop. 68 is backed by card clubs and racetracks - competitors with Indian casinos.Although polls show Prop. 68 has little chance to succeed, observers say the attention and debate around it is pressuring tribes to forge their own deals. Similar patterns are being noted in Wisconsin and Minnesota.

"Indian tribes are coming back to the negotiating table in several states because the states are looking for more revenue and [tribes] feel that if they don't cooperate, the state and federal government will find some way to exert plenary power to shut them down," says David Wilkins, a professor of native American history at the University of Minnesota.

Some tribes feel Schwarzenegger and other governors are invading tribal sovereignty to push for higher percentages of revenue. Others worry that states are trying to dip into the tribal tills.

"It is an irritation for me that these state governors are ... coming to the tribes to take care of their [fiscal] backlogs just as these tribes are turning the corner of self-sufficiency," says Jacqueline Johnson, executive director of the National Congress of American Indians. "For those tribes that can give more, that is great. For others who still can't deal with their basic needs, their advantage may be given up for a generation."