Californians set to vote on massive expansion of Indian casinos

The four measures on the Feb. 5 ballot are being hotly debated. Officials say the state needs the revenue.

With his elbows resting on a restaurant oyster bar, Greg Waldo – part Choctaw, part Shawnee, part Cherokee – explains why he has mixed feelings over a Feb. 5 California referendum that could dramatically expand Indian gambling operations statewide.

"Anything that could help native Americans get better education, more jobs, more opportunities is a good idea," he says. "But at the same time, I worry about the crime [that more gambling] can bring, whether government and the corporations that run these operations will be honest and fair, and that poorer tribes will not benefit at all."

Mr. Waldo's words help frame a debate heating up in California as the referendum date approaches. Proponents and opponents are battling over the issue through costly TV ads, including a plea by Gov. Arnold Schwarzenegger (R) that casino expansion will boost revenue for a state saddled with a $14 billion budget deficit.

In last week's budget speech, he declared a "fiscal emergency," warning that the state may be forced to release thousands of prison inmates early and proposing budget cuts for most state agencies.

California is not the only state looking to casinos for new income. Ten other states, including New York, Michigan, and Iowa, have similar expansion plans. Two states – Ohio and Massachusetts – are considering whether to introduce casino gambling.

"More and more states that are trying to fill budget gaps are finding expanded gambling operations are a way around … tax increases," says economist Donald Peppard at Connecticut College in New London, who studies the economics of gambling. "They don't have to raise the sales or income tax, but they get revenue anyway which is in effect voluntary … in that if you don't want to pay it, you don't gamble."

In television ads that began airing the first week of January, Governor Schwarzenegger urges voters to endorse Propositions 94, 95, 96, and 97, which would expand gambling operations. The measures were approved by the legislature last summer and were supposed to take effect this month, but a coalition of unions, competing gambling interests, other Indian tribes, and community groups campaigned to place the issue before voters.

The agreements allow four tribes – the Agua Caliente Band of Cahuilla Indians, the Pechanga Band of Luiseno Indians, the Morongo Band of Mission Indians, and the Sycuan Band of the Kumeyaay Nation – to add 17,000 slot machines to the existing 8,000. In exchange, the tribes will give the state between 15 and 25 percent of the revenue from the added machines.

Last May, Schwarzenegger estimated that the compacts would generate $293 million just this fiscal year, but state finance spokesman H. D. Palmer says this figure has since been revised downward to $154 million. The ads claim the state will receive $9 billion over 20 years.

"[The] likelihood is that all of this additional income is dust in the wind … if you look at the magnitude of the state budget," says Daniel Mitchell, a professor of management and public policy at the University of California, Los Angeles.

Others, such as California's nonpartisan legislative analyst, Liz Hill, give much lower revenue estimates. She says the state will get less than $200 million for the next few years, and less than $500 million a year in the distant future.

Revenues aside, opponents say the casinos will have negative impacts, including increased crime and traffic congestion in nearby areas, increased gambling addiction, and lack of guarantees over who will oversee the process.

Two of their biggest complaints revolve around the size of the expansion – more slot machines than in the top 12 Las Vegas casinos put together – and the concentration of one-third of the state's gambling profits into just four wealthy tribes.

"When California voters endorsed Indian gaming, they were told there would be a modest expansion," says Scott MacDonald, spokesman for the opposition coalition known as "No on the unfair gambling deals." "That is not at all what this is. Indian gambling was supposed to be a tide that raised all boats, but this instead is a private harbor that raises four yachts."

Hospitality industry unions opposing the compacts say they offer no guaranteed minimum wage, reduce safety standards (because the tribes are ruled by less-stringent federal laws) and allow tribal leaders themselves to oversee the formulas that send money to the state.

Moreover, they say, the money people spend on gambling is diverted from purchases that support retail and other businesses that pay sales tax.

The issue has been complicated by the fact that the US Interior Department has already approved the four compacts under allegedly mysterious circumstances. The compacts were sent to the department late last year, but Interior seemed to have lost track of them for 80 days. The compacts are automatically approved after 45 days if federal officials fail to act on them.

Despite the criticism, academics say much of the general public appears to place Indian gambling casinos in the same category as lotteries – a discretionary personal choice that happens to increase government revenues. "The public is not particularly exercised over this," says Barbara O'Connor, director of the Institute for the Study of Politics and Media at California State University in Sacramento.

A California Field Poll in December showed that 39 percent of primary voters were inclined to approve the compacts, 33 percent were disinclined, and 28 percent undecided.