Tuesday, Sept. 21, 2004 | 8:55 a.m.
LOS ANGELES -- As they decide the fate of two gambling initiatives on Nov. 2, voters will also have a third choice -- Gov. Arnold Schwarzenegger.
Propositions 68 and 70 will undercut or wipe out the deals the Republican governor signed this summer with 10 tribes, who will pay a higher share of their revenues to the state in exchange for expanded gambling rights.
The campaigns mark a renewed battle over gambling rights and the first gambling-related issues on the ballot since March 2000, when voters passed a ballot measure that amended the state's constitution to permit tribes to operate casinos with slot machines on their reservations. This time, another group also wants to operate slot machines, the most lucrative game in any casino.
Proposition 68 would give tribes a bitter ultimatum: Either pay 25 percent of slot machine revenues to local governments or 16 card rooms and race tracks in six counties would be allowed to operate 30,000 slot machines. In return, the tracks and card rooms would pay 33 percent of their revenues to local governments to pay for public safety and services for at-risk children.
Proposition 70, which is being pushed by a group of casino-operating tribes, would transform tribal casinos into full-fledged Las Vegas-style casinos.
The initiative requires tribes to contribute 8.84 percent -- the tax rate for California corporations -- of their casino revenues to the state if they maintain their slot machine monopoly. Tribes would then be allowed to operate an unlimited number of slot machines over the current 2,000-per-tribe limit. They could also operate games now banned in the state, including roulette and craps.
Schwarzenegger campaign aides contend that if both measures are approved but Proposition 68 gets more votes the nonconflicting provisions of the two measures would take effect. If Proposition 70 gets more votes only its provisions would prevail, but 68 requires the courts to "harmonize" the two proposals' nonconflicting language.
That means if both measures get more than 50 percent of the vote and 68 tops 70, the aides say, the card rooms and race tracks would get slot machines and the tribes would get unlimited gambling, but the state would lose its share of the tribes' revenue because the tribes would no longer have a monopoly on slot machines.
"We call this the perfect storm," said Todd Harris, a spokesman for one of Schwarzenegger's campaign committees.
Supporters of Proposition 70 disagree with that analysis, but Proposition 68 backers concur.
The campaigns are being waged as many tribes resist making the same kind of concessions as the 10 tribes cut in deals with Schwarzenegger in June and August.
"Our big concern is that our sovereignty is not viewed as a commodity. We've bended as far as we're going to bend," said Deron Marquez, chairman of the San Manuel Band of Mission Indians, which recently backed out of negotiations with the state.
Of the 10 deals, nine were ratified by the Legislature. The Lytton Band of Pomo Indians awaits final approval of its deal, which would allow the tribe to open a casino in the Bay Area with up to 2,500 slot machines.
Proposition 68 represents the first time card rooms and race tracks have put a ballot initiative before voters. The idea has been developing since voters passed Proposition 1A in 2000 that permitted gambling on tribal land, and card rooms and tracks claim their revenues have taken a hit since then.
Before passage of Proposition 1A, the 1988 federal Indian Gaming Regulatory Act opened the way for tribes to operate gambling, including slot machines, on their reservations but only with approval by the governor.
Then-Gov. Pete Wilson refused, but a handful of tribes did it anyway and introduced Proposition 5 to back them up. Ultimately, the initiative passed but courts ruled it unconstitutional. Tribes then pushed Proposition 1A.
The state's 104 card rooms run an array of card games, including poker and baccarat. However, players bet against each another -- not the house -- and pay the house fees to play.
Proposition 68 was written to allow card rooms and tracks to operate slot machines, said Andrew Schneiderman, vice president and general counsel of the Commerce Casino in Los Angeles County.
"It's almost impossible for a casino with only card games to compete with a tribal casino that has full gambling and pays virtually no tax," he said. "We're happy to compete with them but we can't compete with them with both our arms tied behind our backs."
The initiative would allow 30,000 slot machines at five race tracks and 11 card rooms in Alameda, Contra Costa, Los Angeles, Orange, San Diego and San Mateo counties. The state's other card rooms would be able to lease some machines at the 16 locations and collect a portion of the winnings.
Proposition 68 consultants said local governments stand to receive about $1 billion a year from tribes if the initiative passes, an estimate consistent with a state report. Card rooms and race tracks, they noted, would provide about $2 billion a year.
All local governments in California would receive that money based on population. Of the 33 percent, half of 30 percent would pay for education for abused and neglected children and those in foster care, 35 percent for sheriff's and police departments and 15 percent for fire departments. The state would collect the money and then distribute it according to a population-based formula.
Counties and cities where the card rooms and race tracks are located would also receive 1 percent and 2 percent, respectively.
In exchange for paying the 8.84 percent tax to the state, Proposition 70 would let tribes sign a 99-year agreement to operate an unlimited number of slot machines and also Las Vegas-style table games, including roulette and craps.
The state would receive about $330 million above what it currently received from tribes in the first year, with revenues increasing about $30 million in consecutive years, Proposition 70 supporters said.
If passed, the initiative would allow tribes to amend existing compacts and also requires Schwarzenegger to offer a gambling agreement to a federally recognized tribe that lacks one.
The Agua Caliente Band of Cahuilla Indians introduced Proposition 70 to counter what they said was a bad image Schwarzenegger gave them when he said tribes needed to pay a "fair share" to the state, tribal chairman Richard Milanovich said.
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