Friday, January 25, 2008

Indian Casinos - Support Expansion?

On February 5th Californians will vote on four propositions (94-97) amending Indian Gaming Compacts with four southern California tribes permitting them to increase their number of slot machines from roughly 2,000 to 5,000 in two cases and up to 7,500 in the two others, in return for uncertain increased payments to the state. The amendments also call for them to adhere to stricter environmental protections and to sharing revenue with non-gaming tribes.

Among others, Governor Schwarzenegger supports the propositions largely because he is confident the amended compacts will provide substantially increased payments to the state which California badly needs at this time. Is this a no-brainer and should these amendments obviously be supported? I don't think so, though California can definitely use more revenue .

The primary reasons for the federal government's support for permitting officially recognized Indian tribes to build and operate casinos on tribal land were to help members escape very wide-spread poverty and to enable the government to gradually reduce government subsidy payments. This support, reflected in policy initiatives by the Reagan Administration in the 1980's and two U. S. Supreme Court rulings, resulted in enactment by Congress of the Indian Gaming (not gambling!) Regulatory Act in 1988. It was so badly written, filled with loopholes, and conflicting interpretations that, many years later, armies of high-priced attorneys were still debating the definition of a slot machine. According to many critics, the Act created a system tailor-made for abuse. From the perspective of the country as a whole, our experience with the casinos has for the most part been very mixed and disappointing overall.

In 2001 there were 290 Indian casinos in 28 states with total revenues of $12.7 billion, with Time magazine estimating that collective net profit of $5 billion. According to the Bureau of Indian Affairs, there were as many as 562 federally recognized tribal governments in the U. S. in 2003, many having only a handful of members. Revenue from gaming is so lop-sided that Indian casinos in just five states with nearly 50% of the 1.8 million Native American population (Montana , Nevada, North Dakota, Oklahoma, and South Dakota) account for just 3% of casino proceeds! On the other hand, casinos in California, Florida and Connecticut with 3% of the population collect as much as 44% of all revenue!

A substantial amount of the profits are going to the tribal leaders of a small number of tribes, such as the 635 member Mashantucket Pequot in Connecticut, owner of the large Foxwoods casino, and 1,309 member Mohegan also in Connecticut, owner of the also large Mohegan Sun casino, as well as their non-Indian financial backers. Most of the casinos are barely breaking even, because they are relatively small, are located on reservations in isolated areas, and likely are not managed as well as they could be. Their members are therefore not receiving very significant benefits. That's also true with many of the casinos in California, though the casinos covered by the four propositions to be voted on are, as I understand it, doing very well as are their members.

Notwithstanding all the revenue and profits being earned, the thousands of jobs created, and ongoing support of the Congress, the Administration and most of our state governments, the unemployment rate for our Native Americans is a shocking 49% and those employed, but still living below the poverty line, is an equally shocking 33%! It would certainly appear that the revenue-sharing provisions that are part of most of the Indian compacts are not working as intended. One of the reasons is that oversight and enforcement is weak.

These are some of the reasons why I am not convinced that simply expanding a small number of successful casinos makes any sense, without seriously looking into, and effectively dealing with, the many reported abuses and important disparities, and especially the major social problems still facing the bulk of the Indian population. I am also concerned about marketing-savy expanded casinos inducing Californians to increase their gambling activities, taking significant risks, at a time when too many of our residents are financially very vulnerable and probably cannot afford it. They, and maybe even the state, would be better off if they instead used their gambling moneys to increase retirement or college education savings, or spent the money for home improvement or other priority personal needs to tax-paying companies.

Californians should therefore not support the four propositions and lobby instead with our politicians to comprehensively review the major issues facing our Native American population to decide what's appropriate. Importantly, this should include consideration for eliminating the current income tax-exemption for the casinos. That should in fact help to replace some of the revenues given up by voting down the four ill-conceived propositions.


rjcsail said...

The worst thing we can do to the Native Tribes is to continue allowing them to rely in such out of mainstream economic solutions as gaming.

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