Battin bill honors state's contractual obligation to tribes

By VERNON WRIGHT | Saturday, March 22, 2008 10:25 PM PDT ∞

The tribal perspective was missing in a recent article on state Sen. Jim Battin's legislation that deals with Gov. Arnold Schwarzenegger's administration's artificial limit on machine licenses.

I. Nelson Rose, a professed expert on gambling, was quoted as saying that "the (Battin) bill has little chance of passing, because it does not require tribes to pay more money beyond what is agreed in their existing compacts ... If it's not going to give more money to the state, then the question is, why do it?"

Why indeed?

For starters, the 1999 tribal-state compacts to which Rose refers have not been revoked. They are still in effect and binding. Battin's bill recognizes that tribal gaming compacts negotiated in 1999, signed by 63 tribes and then-Gov. Gray Davis, ratified by the state Legislature and approved by the U.S. Interior Department, are a legal contract with the state.

These are the same agreements voters ratified by overwhelmingly passing Proposition 1A.

But Schwarzenegger refuses to talk about them. They have been ignored to support his exaggerated claims of money the state can extort from tribal gaming. These compacts allow a maximum of 2,000 machines per tribe, ensuring that the machines and revenues will be disbursed among many tribes, rather than concentrated in a few casinos.

Claiming there are no machines available under the terms of the 1999 agreement, the governor denies tribes, like the Rincon Band, the right to expand to the promised 2,000 slots.

Meanwhile, in 2004, Schwarzenegger gave five tribes an unlimited number of machines. Then, in 2007, he granted another five tribes 32,500 new machines.

An unofficial survey of tribes with 1999 compacts by Battin's office found 13 expressing interest in adding a modest total of 8,000 slots.

Compared with 35,000 new machines the governor has approved, 8,000 represents a small concession to preserve the integrity, legality and honor of tribal-state negotiations.

To justify his campaign that Indians should help bail the state out of its fiscal problems, Schwarzenegger urges casino expansion, but only if tribal governments pay a 25 percent fee on gross gaming revenues. That some tribes will pay this excessive amount does not excuse the governor from his legal obligation to honor the 1999 compacts.

It's one thing to charge more for 7,500 machines. But for tribes wishing to add a marginal amount of slots within the 2,000 maximum, the balance of profits shifts disproportionately. Rincon currently has 1,600 machines, for which we pay fees to the state ---- fees we accepted under the negotiated terms of the 1999 agreement.

According to the governor, to add 400 machines, we must now pay the 25 percent fee on gross revenue, not just on the new machines, but on all 2,000 machines.

Taxpayers would revolt if forced to pay the state 25 percent of gross income without deductions for costs or overhead. California corporations only pay a flat tax rate of 8.84 percent on profits and benefit from multiple deductions.

Yet Rincon is being asked to unfairly pay 25 percent without accounting for the true profit margin.

To add insult to injury, Indian casino gaming profits are tribal government revenues and cannot be taxed by the state.

This is why the money that tribes pay to play is called a "fee," not a "tax." There's an important legal distinction between a fee and a tax in federal Indian gaming law.

A fee must be negotiated and agreed to by both governments and directly benefit the tribes. Fees become illegal taxes when tribal governments are forced to give money to the state without mutual consent and a corresponding benefit ---- as in the political arm-twisting by the Schwarzenegger administration.

If it looks and feels like a tax, we believe, it should be called a tax, not a fee.

The 1999 compacts also prevent the governor from raiding trusts into which tribes pay gaming fees that fund 71 non-gaming tribes, pay for regulation and mitigate impacts on neighboring communities.

The Rincon Band has honored our agreements with the public and the state. Now it's the state's turn to live up to its agreements. We applaud Battin's efforts to set right what went wrong between one administration and the campaign politics of another.

Vernon Wright is chairman of the Rincon Band of Luiseño Indians.

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