Gambling a solution for California?

The Golden State considers whether more Las Vegas-style gambling is an answer to its giant budget shortfall.

With the fiscal woes of America's largest state hanging over Arnold Schwarzenegger like a Hollywood steadi-cam, the governor's promise to become a revenue "collectinator" is facing key tests.

First is a stop-gap measure going to voters next month: a $14 billion bond measure. But beyond that, the question is how to bring the budget into balance for the long haul, and the governor's promised effort to bring in more gambling revenue is emerging as a key part of that debate.

The ensuing battle could alter the face of rural and urban California for decades. At issue: Negotiating the "fair share" for the state's 104 Indian tribes to pay the state in gambling revenue, and whether nontribal businesses such as racetracks should be allowed to run slot machines.

No matter what the outcome, as three related initiatives head for the fall ballot, it appears that gambling could well expand substantially across the state. Government tax coffers are likely to receive a concomitant boost, albeit one that will only bridge part of the yawning shortfall.

The apparent tradeoff of gaming expansion for better fiscal health is controversial, with many raising moral and social considerations in opposition. One side says gambling brings crime and other unsavory elements to communities, while devastating the lives of many who become addicted to wagering. The other says a large number of once-destitute native Americans have become self-sufficient, even affluent - largely without negative side effects. A middle position holds that since Indian gambling was approved by state voters four years ago, the best road is to regulate it as well as possible, trying to mitigate the worst problems.

"It's a really sad state of affairs that a state of 36 million people with the fifth largest economy on earth is going to rely on gambling to help balance their budget because people are too tight to do it in other ways," says Larry Berg, founding director of the Jesse Unruh Institute of Politics at the University Southern California "It's darn despicable."

Last month, the Agua Caliente Band of Cahuilla Indians proposed an initiative to allow unlimited expansion of Indian casinos, slots, and other Las Vegas style gambling. Under the new proposal, the state would receive 8.8 percent (California's corporate tax rate) of casino income. About 50 tribes currently run casinos and slot machines statewide, generating about $5 billion in revenue, more than any state except Nevada, with $7.7 billion.

"Schwarzenegger told recall voters he thought California Indian tribes should pay their fair share [of taxes], and so they are stepping up to the plate to do so," says Gene Raper, consultant to the Cahuilla tribe. "Our proposal generates significant state revenue and keeps casinos on tribal land away from the urban areas" where people fear casino-related problems.

In November, a group called Californians for Public Safety and Education filed an separate initiative that would require tribes to pay 25 percent of their revenue or allow 30,000 slot machines to 11 non-Indian card clubs and five racetracks in the state. Those card clubs and race tracks, which are backing the initiative, would then donate 25 to 30 percent of their earnings to local governments.

Analysts say the initiative is trying to capitalize on a climate of public interest in getting more money from tribes. In Connecticut, for example, tribes pony up 25 percent of casino earnings.

A third initiative, filed by a coalition of groups focused on the impacts of casinos to neighboring communities, authorizes the governor to enter voluntary negotiations with tribes to replace existing compacts. The measure says "tribes must not pay less than what a California business conducting lawful gambling would pay in state and local taxes." It also calls for mitigation of casino impacts in accord with California's Environmental Quality Act.

Several law enforcement associations are voicing opposition to the racetrack and card-club measure, backed with studies showing increased crime rates and social problems in communities where gambling has expanded, such as Palm Springs.

One option for tribes is to renegotiate their compacts with the governor's office independently of one another. Analysts predict little more than $500 million in Indian gaming revenues for a state that faces a $37 billion gap in 2003. "All of the gambling options," says Mr. Berg, "underline this state's penchant to obtain a quick fix for something where there is none."