SACRAMENTO, Calif. - Mired in an economic slump and facing a budget shortfall in the tens of billions of dollars, California Gov. Gray Davis is considering a plan that would expand Indian gaming while tribes would hand over an estimated $1.5 billion into the state coffers.
The $1.5 billion in revenue generated by the tribes could not come in the form of taxation, which is a violation of federal law. The state would have to make a deal in the form of a revenue sharing agreement with the tribes. Tribes already are paying into a specific $95 million fund, in which the dollars are earmarked for specific mitigation projects to offset the burdens on local infrastructure. Though specific payments are on a sliding scale for tribes, larger tribes pay about 7 percent of their net profits into the funds.
As a comparison the states of New York and Connecticut have agreements with each respective state's tribe for approximately 25 percent of their profits. However casinos in Las Vegas, a state where taxes are low, are estimated by various sources to be somewhere around 6 percent of their total take. Reaction from tribes has been largely hostile and some have expressed skepticism that tribal gaming operations could even generate that kind of revenue.
This potential plan comes on the heels of Davis' announcement of across the board cuts in state programs and services after he announced in December that California is facing a $34 and a half million budget shortfall. Republicans in the state legislature are claiming that the budget shortfall is closer to $21 billion and claim the governor is using inflated numbers to justify tax increases. Davis' office says that the numbers used by Republicans are from the state legislative analyst who whittles down the figure of the deficit by cutting programs that are widely assumed will be cut. Meanwhile, Davis spokeswoman Hillary McLean says her boss is using figures that count every state dollar on the table.
No matter what the exact figure is, the state is in need of increased revenue. Though Davis was initially reluctant to raise taxes, McLean reports that the Governor will ask for $8 billion in revenue in the form of higher income taxes for the wealthiest Californians and regressive taxes such as an increase in sales and cigarette taxes.
McLean makes it clear that Gov. Davis has not yet decided whether or not he would lift the current gaming device cap, currently at 2,000 machines in order to strike a deal with the tribes. However, McLean does say that the Governor would have to give the tribes something in return.
"Though the Gov. Davis has not said he would agree to this (lifting the cap) he would, as in any negotiation, have to give the tribes something in return," said McLean. Perhaps one sign of the reluctance on the part of gaming tribes to fork over a larger piece of their earnings is typified by San Pascual chairman Allen Lawson who has often been a minority voice among tribal leaders in giving concessions to the state.
However, this time Lawson is upset with the governor's proposal and claims that giving in to his demands would be an infringement on tribal sovereignty. "We didn't create this problem, I mean this budget deficit, so why would we have to bail them out," said Lawson. When questioned about the revenue sharing plans in Connecticut and New York, Lawson counters that those are entirely different sovereign entities. "This is not Connecticut or New York, those sovereign governments made their own agreements with their states. We don't feel that they have to be our models."
Another problem that Lawson has with the Davis plan is that the $1.5 billion would amount to approximately half of all tribal gaming profits, estimated by both state and tribal gaming officials as nearly $3 billion total. Lawson questions the right of the state to take in a full half of all of these earnings, and wonders what other business would willingly submit to such a proposal.
Mary Ann Andreas, vice-chairwoman of the California Nations Indian Gaming Association, a Sacramento-based lobbying group claims tribes already pay enough and is disturbed by press reports that she feels are portraying tribal leaders as greedy. Andreas points to the $151 million already paid out by tribes, including the $95 million mitigation fund with the remainder being a revenue sharing fund for non-gaming tribes and those with only small operations.
"This doesn't even include the millions that tribes give away in charity, I mean were already paying our fair share," said Andreas. Numerous press reports also quoted Davis, in a speech to the Sacramento Press Club, as saying that he believes that sovereignty is a "two way street," and that tribal businesses must "share in the burdens as well."
However, it remains to be seen if California tribes would be willing to pay up. The key seems to be in the compact re-negotiations, the first in what is supposed to be periodic re-negotiations of the original state tribal compacts signed in 2000 after the passage of Proposition 1A.
Tribes will likely have to wait until the negotiations open up sometime in the coming months. Gov. Davis has only recently appointed a negotiation team that includes former California state Supreme Court Justice Cruz Reynoso and will meet with the California Attorney General's office in mid February to set a date for the compact re-negotiations.
McLean believes that the re-negotiations will most likely take place sometime in the early spring.