California Must Hedge Its Bet

Californians are beginning to realize that casino gambling has not been a great bet for them. While more than 50 -- and counting -- casino tribes are grossing an estimated $5 billion a year, they contribute less than 5% to government coffers or to noncasino tribes. Yet everyone in California is burdened with the increasing social costs of tribal gambling: from traffic control to crime fighting, environmental degradation and liability suits.

In light of this, Gov. Arnold Schwarzenegger must renegotiate the gambling compacts struck between the tribes and the state so that they serve not only the interests of the tribes but all 34 million Californians.

Schwarzenegger should take a warning from my home state, Connecticut. We charge our two casino tribes 25% of their slot machine revenues to do business in the state. That's close to $400 million a year. But even so, Connecticut is working to curtail Indian gaming and grappling with the damage the casinos are inflicting on surrounding towns and cities. We have seen a significant rise in pathological gambling among men, women and teenagers, in gambling-related suicides, bad debts and petty and major crimes, to say nothing of traffic congestion, loss of local tax revenue, loss of zoning and environmental control and declining residential property values.

Indian casinos were allowed in Connecticut for much the same reason they were let into California -- historical guilt. Citizens and political leaders felt empathy for the downtrodden and thought gambling was an easy fix.

In Connecticut, officials mistakenly believed that by giving the Pequots a monopoly on slots, in exchange for 25% of the winnings, the state could limit the spread of gambling. Under the terms of the deal, if the state allowed non-Indian casinos, the Pequots could stop payments. This has, so far, kept non-Indian gambling illegal, but meanwhile, tribal casinos are proliferating. Today, the Pequots' Foxwoods Casino has been joined by the nearby Mohegan Sun Casino -- they are, respectively, the two largest in the world -- and another 13 or so Indian bands are seeking a piece of the action.

The state government seems to be permanently on the defensive against those increases -- and against the law of unintended consequences. As one of the Pequots' lead attorneys told me: "Never underestimate the ignorance of your opponents. People can be real stupid sometimes."