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Losing Hand for the State

Davis shouldn't count on tribal casino gambling money to help balance the state budget. California can't afford the ante.

January 25, 2003

Gov. Gray Davis says he is counting on a $1.5-billion share of tribal casino gambling profits to help balance the out-of-whack state budget. He'd be better off trying to win the money on "Jeopardy" or "Who Wants to Be a Millionaire." It certainly won't be "The Price Is Right." The tribes are going to demand a lot for that kind of money. How about a casino on the state Capitol lawn -- or across Spring Street from Los Angeles City Hall?

Davis announced his goal before he appointed a team Jan. 16 to renegotiate the gambling compacts signed with about 60 tribes in 1999; his move left the negotiators little flexibility. Davis said he wanted to correct unspecified ambiguities in the original compacts and to secure "our fair share" of gambling proceeds. There are about 50 casinos, taking in an estimated $5 billion a year, mostly from 51,000 slot machines.

Because of tribal sovereignty, the state cannot tax casino earnings. Under the compacts, however, the tribes do give the state 7% of net revenue from slot machines, an estimated $95 million this year, to pay for the state's minimal regulatory program and to help local governments offset the effect of casinos on traffic and public services. The fee is based on the number of slots in operation at the time the compacts were signed and before the major expansion of tribal casinos. Aside from a larger share for the state, Davis says he wants the tribes to correct environmental, traffic and law enforcement problems created by some casinos.

Some tribes see this as an opportunity to raise the compact's limit on slot machines, currently 2,000 per tribe. Others want to make it easier to build casinos in metropolitan areas, as tribes are attempting to do in San Pablo, on the east side of San Francisco Bay, and in West Sacramento.

The tribes got good deals from the original compacts, altruistically intended to help Indians be self-sufficient after so many years of government abuse but influenced by $120 million in political contributions by the tribes. Some tribes have since become very wealthy. Others are just beginning to see the revenue-sharing money they were promised.

California voters, who agreed to the first wave of casino expansion, saw that vote as a matter of fairness. The next round carries a heavier moral burden: Should the state permanently approve more and grander casinos just for the cash it would get? That is not justification for the environmental and social problems more casinos would bring. As tough as the state's fiscal condition is, California should balance the budget by looking elsewhere.

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