Facing a $14 billion budget deficit, the governor is nearing a $1 billion deal with the Indian gambling industry that will give away what few controls the state has over a booming business.
The outlined agreement would represent a continuing distortion of tribal gambling's origin as an opportunity to allow modest-scale casinos at rural reservations where few economic opportunities exist.
California is at a crossroads. Its response to the pressure to allow greater proliferation of gambling -- either by lifting the barriers on the scale of tribal operations or letting racetracks and card rooms into the game -- will determine whether this state will surpass Nevada as the nation's gaming mecca.
It's time to say no.
Since 1998, when voters legalized gambling on tribal land with the passage of Proposition 1A, the business has boomed to a $4 billion to $6 billion-a-year industry. Yet the state's general fund does not receive a penny of this money.
The proposition that authorized gaming has been distorted in many ways. Tribes that lost reservation land decades ago are now shopping for urban real estate to redefine as "historic land" for the sole purpose of opening casinos. The first such urban gambling spot could open next year in San Pablo -- thanks to a Dec. 2000 amendment by Rep. George Miller, which literally rewrote history to state that the site was "federally recognized tribal land" in 1988.
Potentially powerful opponents of gaming expansion have been co-opted. Major Nevada gaming firms that once fought California gambling are running operations here. Many Sacramento politicians are knee deep in casino cash. Schwarzenegger might want to remember that one of the reasons he sits in the governor's office today is the voter revulsion with the way his main rival, Lt. Gov. Cruz Bustamante, was raking in gaming donations.
Schwarzenegger is now looking at a proposal to waive the limit of 2,000 slots per casino in exchange for up to a $1 billion one-time payment and future royalties of up to $500 million per year on new slots.
Sure, Schwarzenegger is facing budget pressure, but he should consider the history of gaming in America: There is always going to be pressure to get bigger and gaudier, just as surely as hotels are routinely imploded on the Las Vegas Strip to make way for the latest temples of excess. Another axiom of life: Once government becomes dependent on a revenue source, politicians are going to be tempted to look for ways to expand it.
Schwarzenegger should reject the proposals to expand gaming. Once he does, Californians should consider the implications of two gambling measures on the November ballot.
One is backed by card rooms and racetracks that want to bring 30,000 slot machines into their facilities. The second is backed by a tribe with two Palm Springs casinos that wants to drop limits on the number of slots in exchange for a yearly tax of nearly 9 percent on revenues.
If any of these proposals comes to fruition, California will quickly surpass Nevada as the nation's top gambling state.
Past public votes make it clear that the casinos are here to stay. There have been some modest benefits: gambling employs thousands of dealers, bartenders and other workers.
A few reservations that were Third World backwaters where jobless families lived in shacks are now gated communities with schools and clinics. But those benefits do not fall evenly. Of the 54 casinos in operation, 15 control nearly half of the state's 62,000 slot machines, the primary money- maker. There is a $150 million fund supplied by big-casino tribes that pays tribes with small or no gambling operations.
The state's wealthiest tribes, though hardly united, are chafing at the existing rules. The sticking point is the ceiling on slot machines, which generate up to 80 percent of the take.
If this slot limit is dropped, there will be nothing to hold back a new wave of casino expansions. Schwarzenegger should consider the consequences:
-- Accepting the money will unleash gambling in the nation's most populous state. Free of limits, some of the casinos will soon be on a scale with the biggest on the Las Vegas Strip.
-- The tribes will gain the major benefits even though the state will reap short-term relief. Left out are nearby communities who have no control over building scale, traffic congestion or pollution linked to casino size.
-- More special-interest politics will flourish if the governor caves in to the casinos. Any future attempt to improve on this lopsided deal will be met with heavy-spending opposition from tribes.
-- "Reservation shopping'' will proliferate without limits on casino size. Shopping involves small, landless tribes hunting for prime casino land in urban areas. The Lytton Band of Pomo Indians has lined up a former card room in San Pablo for a future casino, and the Federated Indians of Graton Rancheria are negotiating for a site near Rohnert Park.
-- There is little effective oversight of gambling. Tribal sovereignty greatly undercuts state power to inspect, audit and punish gambling violations. Tribes claim they have an interest in clean operations, but this argument is illogical as operators can't be expected to publicize cheating or fraud on their premises.
-- The broader social cost of problem gambling should be weighed. In 1999, a federal commission, in calling for a pause in gambling's growth, concluded that 1.5 percent of adults had serious gambling problems and that the number will grow as the industry expanded. California shouldn't fulfill this prophecy.
Schwarzenegger must resist the temptation to expand casino gambling for a quick financial fix.
It's time to draw the line.
A history lesson
Here are the key dates in the expansion of casino gambling in California:
Early 1980s -- Citing their semi-independent status as sovereign nations, tribes begin to offer bingo with prize money.
1987 -- The casino door opens. The U.S. Supreme Court rules that California can't bar gambling on tribal land.
1988 -- To handle future gambling, Congress passes the Indian Gaming Regulatory Act. It mandates that tribes and state government establish compacts, or joint agreements on the types and size of gambling. Between 1988 and 1997, Indian gambling nationwide jumps from $212 million to $6.7 billion.
1998 -- Angry over compact talks with Gov. Pete Wilson, tribes spend $67.5 million on Proposition 5 to establish gambling rights in California. Nevada casinos spend $25 million on the losing side.
1999 -- Gov. Gray Davis signs 58 compacts allowing card games and up to 2,000 slot machines per casino. The state collects $150 million, nearly all of it for nongambling tribes. No money goes to the state general fund.
2000 -- Voters approve a second gambling measure, Proposition 1A. after the state Supreme Court strikes down the 1998 measure. The tribes spend $15 million this time against little opposition.
2004 -- Gov. Arnold Schwarzenegger and several tribes negotiate to reopen the compacts. Tribes are asking to end the 2,000-slot limit in exchange for a $1 billion payment. Other talking points: royalties on additional slots for future years and rules on labor, legal and environmental side-effects of casinos.
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The outlined agreement would represent a continuing distortion of tribal gambling's origin as an opportunity to allow modest-scale casinos at rural reservations where few economic opportunities exist.
California is at a crossroads. Its response to the pressure to allow greater proliferation of gambling -- either by lifting the barriers on the scale of tribal operations or letting racetracks and card rooms into the game -- will determine whether this state will surpass Nevada as the nation's gaming mecca.
It's time to say no.
Since 1998, when voters legalized gambling on tribal land with the passage of Proposition 1A, the business has boomed to a $4 billion to $6 billion-a-year industry. Yet the state's general fund does not receive a penny of this money.
The proposition that authorized gaming has been distorted in many ways. Tribes that lost reservation land decades ago are now shopping for urban real estate to redefine as "historic land" for the sole purpose of opening casinos. The first such urban gambling spot could open next year in San Pablo -- thanks to a Dec. 2000 amendment by Rep. George Miller, which literally rewrote history to state that the site was "federally recognized tribal land" in 1988.
Potentially powerful opponents of gaming expansion have been co-opted. Major Nevada gaming firms that once fought California gambling are running operations here. Many Sacramento politicians are knee deep in casino cash. Schwarzenegger might want to remember that one of the reasons he sits in the governor's office today is the voter revulsion with the way his main rival, Lt. Gov. Cruz Bustamante, was raking in gaming donations.
Schwarzenegger is now looking at a proposal to waive the limit of 2,000 slots per casino in exchange for up to a $1 billion one-time payment and future royalties of up to $500 million per year on new slots.
Sure, Schwarzenegger is facing budget pressure, but he should consider the history of gaming in America: There is always going to be pressure to get bigger and gaudier, just as surely as hotels are routinely imploded on the Las Vegas Strip to make way for the latest temples of excess. Another axiom of life: Once government becomes dependent on a revenue source, politicians are going to be tempted to look for ways to expand it.
Schwarzenegger should reject the proposals to expand gaming. Once he does, Californians should consider the implications of two gambling measures on the November ballot.
One is backed by card rooms and racetracks that want to bring 30,000 slot machines into their facilities. The second is backed by a tribe with two Palm Springs casinos that wants to drop limits on the number of slots in exchange for a yearly tax of nearly 9 percent on revenues.
If any of these proposals comes to fruition, California will quickly surpass Nevada as the nation's top gambling state.
Past public votes make it clear that the casinos are here to stay. There have been some modest benefits: gambling employs thousands of dealers, bartenders and other workers.
A few reservations that were Third World backwaters where jobless families lived in shacks are now gated communities with schools and clinics. But those benefits do not fall evenly. Of the 54 casinos in operation, 15 control nearly half of the state's 62,000 slot machines, the primary money- maker. There is a $150 million fund supplied by big-casino tribes that pays tribes with small or no gambling operations.
The state's wealthiest tribes, though hardly united, are chafing at the existing rules. The sticking point is the ceiling on slot machines, which generate up to 80 percent of the take.
If this slot limit is dropped, there will be nothing to hold back a new wave of casino expansions. Schwarzenegger should consider the consequences:
-- Accepting the money will unleash gambling in the nation's most populous state. Free of limits, some of the casinos will soon be on a scale with the biggest on the Las Vegas Strip.
-- The tribes will gain the major benefits even though the state will reap short-term relief. Left out are nearby communities who have no control over building scale, traffic congestion or pollution linked to casino size.
-- More special-interest politics will flourish if the governor caves in to the casinos. Any future attempt to improve on this lopsided deal will be met with heavy-spending opposition from tribes.
-- "Reservation shopping'' will proliferate without limits on casino size. Shopping involves small, landless tribes hunting for prime casino land in urban areas. The Lytton Band of Pomo Indians has lined up a former card room in San Pablo for a future casino, and the Federated Indians of Graton Rancheria are negotiating for a site near Rohnert Park.
-- There is little effective oversight of gambling. Tribal sovereignty greatly undercuts state power to inspect, audit and punish gambling violations. Tribes claim they have an interest in clean operations, but this argument is illogical as operators can't be expected to publicize cheating or fraud on their premises.
-- The broader social cost of problem gambling should be weighed. In 1999, a federal commission, in calling for a pause in gambling's growth, concluded that 1.5 percent of adults had serious gambling problems and that the number will grow as the industry expanded. California shouldn't fulfill this prophecy.
Schwarzenegger must resist the temptation to expand casino gambling for a quick financial fix.
It's time to draw the line.
A history lesson
Here are the key dates in the expansion of casino gambling in California:
Early 1980s -- Citing their semi-independent status as sovereign nations, tribes begin to offer bingo with prize money.
1987 -- The casino door opens. The U.S. Supreme Court rules that California can't bar gambling on tribal land.
1988 -- To handle future gambling, Congress passes the Indian Gaming Regulatory Act. It mandates that tribes and state government establish compacts, or joint agreements on the types and size of gambling. Between 1988 and 1997, Indian gambling nationwide jumps from $212 million to $6.7 billion.
1998 -- Angry over compact talks with Gov. Pete Wilson, tribes spend $67.5 million on Proposition 5 to establish gambling rights in California. Nevada casinos spend $25 million on the losing side.
1999 -- Gov. Gray Davis signs 58 compacts allowing card games and up to 2,000 slot machines per casino. The state collects $150 million, nearly all of it for nongambling tribes. No money goes to the state general fund.
2000 -- Voters approve a second gambling measure, Proposition 1A. after the state Supreme Court strikes down the 1998 measure. The tribes spend $15 million this time against little opposition.
2004 -- Gov. Arnold Schwarzenegger and several tribes negotiate to reopen the compacts. Tribes are asking to end the 2,000-slot limit in exchange for a $1 billion payment. Other talking points: royalties on additional slots for future years and rules on labor, legal and environmental side-effects of casinos.
http://www.sfgate.com
