Schwarzenegger Faces California Indian Casino Dilemma

LOS ANGELES (Reuters) - Arnold Schwarzenegger boasts to voters that he will pull in up to $2 billion from California Indian casinos if he becomes governor but he faces the exact same problem encountered by embattled Gov. Gray Davis -- most tribes don't want to pay and by law they don't have to. And that is because they are sovereign entities and state laws don't apply to them. The rules for casinos are set by agreements between California and the tribes and cannot be changed without tribal consent.

Schwarzenegger, looking for new sources of revenue to ease the state's fiscal crisis, said this week he aims to bolster the budget by $1 billion to $2 billion by renegotiating the agreements with the tribes struck by Davis.

Davis, facing am unprecedented recall vote next Tuesday on whether he should keep his job, an event triggered by the fiscal crisis, has spent most of the year on a similar quest to extract more money from the tribes. In January he called for tribes to pay $1.5 billion into the budget. Since then he has reduced his target to $680 million and failed to raise a penny. The casinos give the state about $130 million a year, with part of that money going to social problems to aid people with gambling addiction.

"The tribes do not have to give any more than they have already given," said Deron Marquez, chairman of the San Manuel band in southern California, which has one of the biggest casinos in the state. He said that tribes provide jobs and pay for services from the state but have been demonized in advertisements by Schwarzenegger and seen Davis try to undermine their power.

"We've all seen how successful Davis was in achieving his $1.5 billion. He has not even been able to engage the tribes that are most likely to provide that kind of revenue stream. I would rather close my casino than give more money to the state of California," Marquez said.

California, like other states, is unable to tax federally recognized Indian tribes, which are sovereign governments roughly on par with the 50 U.S. states. The prime bargaining chip the state has is the power through negotiations to agree on the scope and regulations for casino gambling, and Davis has already signed 20-year deals, or compacts, with 64 tribes.

Three of those were struck recently and provide for some revenue sharing with the budget, but the casinos have not been built yet and will be relatively small to begin with.

More are in the works, including one outside San Francisco by a tribe, the Federated Indians of Graton Rancheria, which has proposed a compact in which it will pay the local government $200 million over 10 years.

A MONOPOLY

Tribes have a voter-approved monopoly on slot machine gambling in the state, and many that have built casinos into an industry with estimated revenue of $3 billion to $6 billion per year are wary of changing their deals. They have contributed millions of dollars in the recall campaign, mostly in support of Lt. Gov. Cruz Bustamante, who is friendly with tribes. "The ones who have compacts say come back when the compacts expire," said Bob Stern, president of the Center for Governmental Studies which focuses on campaign finance and elections. "If the tribes want new slot machines and new casinos that is where they can enter into negotiations. That is the leverage (for the state)," he said.

Only about a dozen tribes have casinos big enough to consider expansion beyond the terms of their compacts. Davis is in talks with some tribes, but his spokeswoman, Amber Pasricha, declined to identify the tribes or comment on the talks. "The state cannot just say, 'give us X amount of money' without giving something in return," said Pasricha. "The governor is doing what he can and is required to do under law, which is negotiate."