The Future for Indian Casinos in California

Richard Rubin
Attorney Richard Rubin has taught at the University of San Francisco, Berkeley and Golden Gate University, is a regular columnist for the Marin Independent Journal and was Chair of the California Commonwealth Club Board of Governors, 2017-2019.

Casino gambling may be foundering in Atlantic City where four casinos are closing their doors this month but it is flourishing in California because of gaming on Indian land. Now voters will be asked whether to extend Indian casinos away from Reservations when they consider Proposition 48 on the November ballot.

In California, those with plenty of spare cash or just feeling lucky can chose from a practically limitless array of gambling destinations to see their dreams come true.

This is all because of a small, obscure and impoverished Indian tribe known as the Cabazon Band of Mission Indians living for decades out of a few trailers on several parcels of rough scrabble patch just outside Indio in Riverside County and was facing a dismal future when inspiration struck.

In 1980 with no knowledge of the complexities of gaming laws or any experience running gambling parlors, they decided to open a few bingo and poker halls to bring in a little revenue.  It touched off what has become a second “gold rush” as Indian-owned casinos began sprouting up all over the state.

At first their entrepreneurial actions went unrewarded with the heavy hand of the law coming down hard upon the tribe as local police and the Riverside County Sheriff swooped in, shuttering the gambling operations, making arrests and confiscating money and merchandise.

Undaunted the tribe sued in federal court arguing that the seizure of their property was illegal and that their rights as a sovereign nation had been violated. The lower courts agreed and in 1986 the Supreme Court did as well, ruling that the regulation of Indian gaming was within the exclusive jurisdiction of Congress and the state had no right to interfere.

The court was not without historic support for its ruling and cited no less an authority than the U.S. Constitution which gives the federal government the ultimate power to regulate commerce with foreign nations, among states and with Indian tribes.

These views were further reinforced in two Supreme Court cases in 1831 and 1832 where Indian tribes were declared to be “independent political communities.”

The high court’s actions in the landmark Cabazon decision paved the way for the explosion of Indian casinos in the state which now number 68 in 27 counties running the length of California from Del Norte County on the Oregon border to Imperial and San Diego Counties in the south.

All told the state now boasts 258 Indian and commercial casinos—many attached to plush resorts offering first class amenities which rival those in every other state including Nevada which invented the state-of-the-art casino.

Topping the numbers charts statewide are bucolic Mendocino County, (88,000) on the picturesque north coast which has five all by itself with four in neighboring Humboldt (135,000) and four more in next door sparsely populated Lake County (64,000).

They are easily outdone by San Diego and Riverside Counties which have 21 between them, including several that have been built on grandiose scale.

Riverside County in the heart of the Inland Empire is home to the largest in the state, the Pechanga Resort and Casino in Temecula. This is gambler paradise featuring a mother lode of 3,400 slot machines on 188,000 square feet of floor space with games to suit every high roller’s taste.

For those running low on chips it’s just a short walk to the 1,200 seat Pechanga Showroom Theater where the entertainment venues are likely to include Journey, Backstreet Boys, Carrie Underwood, David Copperfield and Jerry Seinfeld to name a few.

As Las Vegas went into an economic swoon during the Great Recession along with many other cities, the Indian gambling interests, sensing an opportunity, moved their investments into nearby localities in friendly California.

Overnight, California, with all of its 109 Indian tribes empowered now to flex their legal muscle, began carving out territory which has turned barren properties into giant bonanzas.

The casino craze has altered the state’s economy with Indian casinos alone taking in $6.96 billion in gaming revenue in 2012, the latest year for which there are figures. That amounts to 25% of nationwide tribal revenues, the largest haul, followed by Oklahoma, Washington, Florida and Connecticut.

According to a recent study, when nongaming operations are factored in, Indian casinos across the country are pumping out $91 billion annually with $31 billion going into wages that support 700,000 workers and contribute about $9 billion in taxes to local, state and federal governments.

Yet, even with all this prosperity, the California Legislative Analyst is reporting a $30 million annual shortfall which the tribes must pay into several funds under the federal government’s strictly written but poorly enforced gaming compacts because they are distributing more money than they are collecting.

Since the state has very limited taxing authority with tribal members living on reservations not subject to state income tax and with casinos exempt from paying corporate income taxes, the coffers can run dry fairly quickly.

A bigger question is whether living conditions for many Indian tribes has noticeably improved. For those operating the largest casinos the answer is yes. For the majority of tribal members who do not directly benefit from the gambling frenzy, these riches have not trickled down.

When Congress passed the Indian Gaming Regulatory Act in 1988 it had three goals in mind: economic development, self-sufficiency, strong tribal governments. Coming to the aid of financially beleaguered states was not one of them.

The burgeoning gambling industry has certainly furthered those aims, but California has yet to see the billions in revenues it anticipated over the life of these compacts which could eliminate its chronic structural deficits.

However since casinos have become highly lucrative enterprises, entrepreneurial tribes following in the footsteps of the pioneering Cabazon Indians are now looking for ways to expand their holdings by seeking ratification of broader compacts, and these are igniting controversy.

One such proposal is the subject of Proposition 48 which will be on the November ballot. It would allow the North Fork Rancheria of Mono Indians in Madera County to build a Vegas-scale casino a long way from the reservation but close to freeways—a development which has local farmers and Central Valley businesses up in arms.

Proponents, including Governor Brown, contend it will mean thousands of jobs. Opponents argue this breaks a promise made to voters that tribes could build casinos only on reservations and this will merely take jobs away from existing casinos.

What we can be certain of is the durability of gambling as a permanent fixture of the state’s bursting economy and the inevitable winnowing out of unprofitable Indian casinos over time as competition intensifies.

That would still leave the state with more than enough casinos to fill 15 Atlantic Cities without any overcrowding and in easy reach of 80% of the population.

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