Indian gaming in
California is a complex and controversial public policy issue. For an overview,
see the related Hot Topic, Indian Gaming
in California. Essentially, California is grappling with the issue in the
regulatory framework of a 1988 federal law requiring gaming tribes and state
governments to enter into compacts regulating gaming on tribal lands. After
a series of negotiated compacts and the passage of statewide ballot measures
in 1998 and 2000, the issue shows no signs of abating. Two Indian gaming measures
are on the ballot for the November 2004 general election.
In the 2003 gubernatorial recall
campaign candidate Schwarzenegger called on California's gaming tribes to contribute
more of their gambling revenue to the state, and after he became governor he
began renegotiating compacts with the leading gaming tribes. One of the critical
negotiating issues was whether to increase the number of slot machines allowed
per tribe in return for more state revenue from gaming operations. Under existing
compacts each tribe was limited to 2,000 slot machines which could pay up to
$300/day/machine.
Meanwhile, as negotiations
continued, a coalition of California card clubs and race tracks qualified an
initiative for the November 2004 ballot called the "Gambling Revenue Act
of 2004," which became Proposition 68. Proposition 68 would require
all 53 gambling tribes to pay 25% of their gross revenue to the state. Refusal
by even one tribe to pay would trigger a provision allowing racetracks and card
clubs to install slot machines at their sites, thus breaking the tribes' monopoly
on casino-style gambling.
The gaming tribes
countered Proposition 68 by qualifying their own initiative for the November
ballot, the "Indian Gaming Fair-Share Revenue Act of 2004," which
became Proposition 70. Proposition 70 would put an 8.84% tax on the tribes'
gambling revenue, equal to the state's corporate tax rate, and would remove
all limits on the scope and size of gambling the tribes could offer in their
casinos.
Governor Schwarzenegger
announced his opposition to both Propositions 68 and 70, and as an alternative
put forward a set of compacts renegotiated with the five leading gaming tribes.
Announced on June 21, 2004, the compacts preserve the tribes' monopoly on casino-style
gambling, but require the tribes to make an initial $1 billion payment to the
state, and thereafter annual payments estimated to range between $150 million
and $275 million. Under the compacts tribes may exceed the 2000 limit on the
number of slot machines, but must pay increasingly more to do so. Tribes must
also submit to various environmental, labor relations, and building safety constraints.
Significantly, tribes must abide by binding arbitration in certain kinds of
disputes with local governments and customers. The compacts were approved by
the state legislature, as all such compacts must be. The governor negotiated
five additional compacts in August 2004, and the legislature approved all but
one involving a controversial casino expansion in the city of San Pablo. The
passage of Proposition 68 or 70 would undo all of the compacts negotiated by
the governor.
If both Propositions
68 and 70 pass, the provisions of the measure with more votes take effect.
Proposition 68
essentially makes this proposition to the gaming tribes: pay 25% of your "net
win" to the state or lose your monopoly on casino-style gambling. "Net
win" is the take from all slot machines after prizes are paid out, not
including operational expenses. Tribal casinos in Connecticut and New York pay
up to 25% in their respective states, and Proposition 68 backers view 25% as
a "fair share." The tribes would also have to comply with state laws
on environmental protection, gambling regulation, and political campaign contributions.
If Proposition 68 passes, California's 64 gaming tribes (those with tribal compacts) would have 90 days to agree to the 25% charge. If even one dissented, the tribal gaming monopoly would end, and casino-style gambling would be open to card clubs and racetracks.
If casino-style
gambling were enabled in card clubs and racetracks, they could install up to
30,000 slot machines. Card clubs would pay 30% of the net win to the state and
between 1% and 2% to the county and city hosting the casino. Racetracks would
pay an additional 20% into a fund to benefit the horse racing industry.
In both monopoly
and non-monopoly scenarios, the net win revenue would go to a new Gaming Revenue
Trust Fund, and the bulk of it would be redistributed to local governments throughout
the state for additional child protective, police, and firefighting services.
Net win revenue could be over $1 billion in either scenario, according to the
Legislative Analyst.
Proposition 68
proponents say that the gaming tribes consume public services, but pay almost
nothing in taxes from casino income, and that in return for their slot machine
monopoly, the tribes should pay taxes on a par with gaming tribes in other states.
If the tribes are unwilling to do so, proponents contend, the monopoly should
end, and card clubs and racetracks should have the option of offering slot
machines too.
The official ballot
argument against Proposition 68 contends that the proposition is "really
a deceptive attempt to change California’s
Constitution to create huge Las Vegas-size commercial casinos on non-Indian
lands throughout California." Opponents also object that almost none of
the net win revenue would go to the state, and that because Proposition 68 would
negate the current gaming compacts, the state would suffer a substantial revenue
loss. Opponents claim that the compacts negotiated by Governor are a better
deal for the gaming tribes and California taxpayers.
According to press reports, Proposition 68 backers ended their effort to pass the measure on October 6, 2004, after having spent more than $20 million on the campaign. In the face of poor showings in public opinion polls and strong opposition from Governor Schwarzenegger, backers concluded that the measure had no chance of passage and suspended their advertising campaign.
Essentially, Proposition
70 would:
- Continue the
tribal gaming monopoly, with no limits on the number of machines, facilities,
or types of games on Indian land. Casinos could offer roulette and craps (currently
forbidden), and have any number of slot machines.
- Tax Indian gaming
income at the state corporate tax rate, currently 8.84%, and waive most other
state and local taxes and fees on tribal gambling activities.
- Require the
governor to negotiate new 99-year compacts at a gaming tribe's request. Existing
compacts expire in 2020 or 2030.
- Require gaming
tribes to prepare environmental impact studies for new and expanded casinos.
The Legislative
Analyst says the amount the state would receive in gaming revenue from Proposition
70 is uncertain, and tribal payments to local governments would be reduced by
millions of dollars annually.
Proposition 70
supporters say that the state should treat tribal gambling operations as it
would any other business, and tax them the same way. It is not fair, they maintain,
to burden the gaming tribes with alleviating the state's budget difficulties,
as Governor Schwarzenegger has attempted to do with his renegotiated compacts.
Proponents note that, unlike Proposition 68, Proposition 70 restricts tribal
gambling operations to Indian lands.
Proposition 70
opponents contend that its monopoly status makes tribal gaming unlike other
businesses, and that the fiscal relations between gaming tribes and state and local
governments are best governed by the compacts negotiated by the governor. Proposition 70, opponents say, is a tax giveaway to the gaming tribes and an open door
to an unprecedented expansion of gambling operations in the state. Opponents
also object to the lack of an auditing requirement for independently confirming
taxable gaming income, and criticize the 99-year compact provision as too long.
Via the California
Secretary of State. The text, legislative analysis and ballot arguments are
from the Official
Voter Information Guide. Campaign finance data is from the
Cal-Access database of campaign receipts
and expenditures.
Proposition
68:
Text
Legislative
Analysis and Ballot Arguments
Campaign Finance:
Individual
Campaign Committees
Total Contributions
and Expenditures (select "Nov. 2004 election" and "Prop.
68" in dropdown boxes)
Proposition
70:
Text
Legislative
Analysis and Ballot Arguments
Campaign Finance:
Individual Campaign Committees
Total Contributions
and Expenditures (select "Nov. 2004 election" and "Prop.
70" in dropdown boxes)
Public
Interest Sites
League of Women Voters of California Education Fund
Impartial analysis of Proposition 68: In
Depth and Pros
and Cons
Impartial analysis of Proposition 70: In
Depth and Pros
and Cons
California Budget Project
Gambling and the future of California: Propositions 68 and 70 examined
California Journal
Ballot
propositions: Analysis of the November propositions by California Journal editors in the October issue.
Advocacy Sites
A
Fair Share for California
Pro Proposition 68. "Supported by horse racing & card clubs."
Vote No on Prop 68
"Californians Against the Deceptive Gambling Proposition, a coalition
of Indian gaming tribes, major funding by United Auburn Indian Community and
Pala Band of Mission Indians."
Governor Schwarzenegger's Committee for Fair Share Gaming Agreements
Opposed to both Propositions 68 and 70. "Major funding from Governor Schwarzenegger's California Recovery Team."
Yes on Prop 70
"Major funding by Agua Caliente Band of Cahuilla Indians, San Manuel Band of Mission Indians and other Indian gaming tribes."
"Times
California exit poll results," Los Angeles Times Poll, Nov.
2, 2004.
Los
Angeles Times Poll
"Late-breaking
surge of No votes on Prop. 66 (three strikes limits) puts outcome in doubt.
Declining support for Prop. 62 (open primary). Heavy No vote on two Indian
gambling measures.," Field Poll, Oct. 30, 2004. (Release #2146).
Field
Poll
"Gambling initiatives: voters oppose Prop. 70 four to three: three to one opposition to Prop. 68 before backers suspended advertising, Field Poll, Oct. 9, 2004. (Release #2138).
Field Poll
"U.S.
Senate race, key ballot measures," Los Angeles Times Poll, Sept. 24, 2004.
Los Angeles Times Poll
“Support for open primary; health insurance referendum lags despite health care worries,"
PPIC Statewide Survey, Sept. 2004.
PPIC Statewide Survey (See p. vi.)
"Propositions 68 and 70: both gaming initiatives not appealing to state's
voters," Field Poll, Aug. 13, 2004. (Release #2128).
Field
Poll
"Two competing gambling initiatives supported by a majority of the state's voters," Field Poll, June 9, 2004. (Release #2120).
Field Poll
Hubbell, John
M.
"Props. 68 and 70 go down big -- voters like the governor's deals," San Francisco Chronicle, Nov. 3, 2004.
San
Francisco Chronicle
"Gambling
and the Future of California: Propositions 68 and 70," California
Budget Project Budget Brief, October 2004.
California Budget Project
Skelton, George.
"Tribes in Prop. 70 Fight Cite Sovereignty but Need to See Reality,"
Los Angeles Times, Oct. 18, 2004.
NewsBank
(UCB)
Morain, Dan.
"Lot of Money Is on Table in Gambling Proposition Ads," Los
Angeles Times, Oct. 14, 2004.
NewsBank
(UCB)
Barfield, Chet.
"'Fair share' depends on who's asked: Indian casinos' payout to state
spurs debate," San Diego Union Tribune, Oct. 10, 2004.
San
Diego Union Tribune
Hubbell, John
M.
"Backers surrender on gaming measure: Prop. 68 would have ended tribes'
casino monopoly, San Francisco Chronicle, Oct. 7, 2004.
San
Francisco Chronicle
Morain, Dan.
"Chamber to join foes of Prop. 70: The state business group will raise funds to oppose the initiative that would
allow unlimited casino expansion on Indian reservations," Los Angeles Times, Oct. 1, 2004.
NewsBank (UCB)
Simerman, John.
"Measures put future of gaming to voters: Backers say Props. 68 and 70 tap casinos for a "fair share"; Opponents say result would be Vegas-style gambling," Contra Costa Times, Sept. 30, 2004.
NewsBank (UCB)
Kovner, Guy.
"Props. 68, 70 spending may top $100 million: Record spending anticipated as gaming measures compete," The Press Democrat, Sept. 30, 2004.
NewsBank (UCB)
Hubbell, John M.
"Ad Watch: Propositions 68 and 70, San Francisco Chronicle, Sept. 29, 2004.
San Francisco Chronicle
Hubbell, John M.
Governor Does Radio Ad against Gambling Ballot Measures," San Francisco Chronicle, Sept. 29, 2004
San Francisco Chronicle
"2 Bad Bets on Gambling [editorial], San Francisco Chronicle, Sept. 26, 2004.
San Francisco Chronicle
Garvey, Megan.
"Both Gambling Measures Failing: But Voters Favor Funding Stem Cell Research and Requiring Businesses to Pay for Health Coverage," Los Angeles Times, Sept. 24, 2004.
NewsBank (UCB)
Morain, Dan.
"Casino Battle Taken to Television: Costly Campaigns Are Launched by Tribes Who Back Governor's Deals vs. Those Who Decry Them," Los Angeles Times, Sept. 21, 2004.
NewsBank (UCB)
Hubbell, John
M.
"Indian Casinos' Foes Sue Horse Racing Tracks: Backers of Prop. 68 among
the Plaintiffs," San Francisco Chronicle, Sept. 17, 2004.
San Francisco Chronicle
Sallady, Robert.
"Foes Say Gampling Vote Could Foil State: Quirks Involving Two Propositions
Could Lead to Unlimited, Untaxed Indian Gaming, Contend the Governor's Lawyers:
Other Experts Scoff," Los Angeles Times, Sept. 15, 2004.
NewsBank
(UCB)
Walters, Dan.
"California, Indians and Gambling: Where Do We Go from Here? Sacramento
Bee, Sept. 13, 2004.
NewsBank
(UCB)
Sweeney, James
P.
2 Anti-tax Activists Split with Governor on Casinos," San Diego
Union Tribune, Sept. 10, 2004.
NewsBank
(UCB)
Wiegand, Steve.
"Mixed Views on Prop. 70: Two Taxpayer Groups Back Gambling Bid: 3rd
Says No," Sacramento Bee, Sept. 10, 2004.
NewsBank
(UCB)
"Propositions 68 and 70 Are a Bad Bet: Vote No [editorial], San Jose Mercury News, Aug. 30, 2004.
NewsBank (UCB)
Morain, Dan.
"California on Path to Become Nation's Gambling Capital: a Boom in Tribal
Gaming Could Double the State's Casino Revenue in Coming Years, Los
Angeles Times, Aug. 25, 2004.
NewsBank
(UCB)
"The Trouble
with Casinos [editorial]," Los Angeles Times, Aug. 21 2004.
NewsBank
(UCB)
Hubbell, John
M.
Indian Casino Measures Take Dive: Poll Finds Governor Has Not Begun to
Fight Them, San Francisco Chronicle Aug. 13, 2004.
San
Francisco Chronicle
Wiegand, Steve.
"Changes Ordered in Ballot Wording: Arguments on Three Propositions Are
Rewritten in Court," Sacramento Bee, Aug. 10, 2004.
NewsBank
(UCB)
Weintraub, Daniel.
"High Stakes for Governor in Ballot War Over Casinos," Sacramento
Bee, July 25, 2004.
NewsBank
(UCB)
Morain, Dan.
"Tribes Confront Gov. on Casinos: They Will Underwrite Prop. 70, Which
Gives Them the Unfettered Right to Grow Business: It Undoes Deals Others Struck
with the State," Los Angeles Times, July 17, 2004.
NewsBank
(UCB)
Wiegand, Steve.
"Governor Spells out His Ballot Views: He Signs Arguments Opposing Two
Gambling Initiatives and Prop. 66, But Favoring Prop. 69, Sacramento
Bee, July 8, 2004.
NewsBank
(UCB)
