Gambling Expert Sheds Doubt on Calif. Slots Plan

A California gambling authority told a group of satellite wagering representatives Monday that he believes a racetrack-sponsored slot machine initiative has little or no chance of passage should it qualify for the state's November ballot.

"The main impact of that initiative is it gives Governor (Arnold) Schwarzenegger a hammer to hold over the Indians' head," said I. Nelson Rose, author of a syndicated column, "Gambling and the Law," and a tenured professor at Whittier Law School in Costa Mesa, Calif. He made his comments during the California Authority of Racing Fairs' annual satellite conference in Monterey, Calif.

He said Schwarzenegger, who painted the tribes as a special interest monopoly unwilling to pay a fair share of its casino profits to the state during last year's recall election, can make the Indians uncomfortable by threatening to endorse the track initiative.

"He'll make a deal with the tribes for, I'd say somewhere between 5 and 10 percent (of their net casino profits). He's already put into his (state) budget that he's expecting half a billion dollars for that. Then he'll come out against the initiative and say we know longer need it," Rose predicted.

The Gaming Revenue Act of 2004 would give five racetracks and 11 card clubs in the state 30,000 slot machines if all the tribes that currently have gaming compacts don't immediately agree to pay 25% of their casino profits to the state. Supporters are gathering signatures in order to qualify the measure for consideration of voters. Most of the revenue generated by the additional slot machines would go to fund public and educational programs, but a portion also goes to the racing industry, mostly for purses.

Rose noted that tribes have proposed three slots initiatives of their own. The most dangeous of these to racing is sponsored by the Agua Caliente Indians, he said. It would provide for the tribes to pay 8 3/4% of revenue to the state, but would give them an unlimited number of slot machines and make Class 3 gaming -- lotteries and pari-mutuel gambling -- illegal. Current compacts limit approved tribes to 2,000 slot machines per casino.

"Ten years ago I would have said all these initiatives are dead," Rose said. "Today, it probably depends on Schwarzenegger. If he comes out in favor, it probably has a pretty good chance of succeeding."

Such backing for the track/card club proposal is certainly unlikely, however, if the tribes modify their agreements with the state.

Rose said the Morongo Band of Indians has pledged $50 million to defeat the racetrack initiative should it be necessary.

"And that's just one tribe. That just shows you that they can't be paying their fair share, if they can spend $50 million to defeat one initiative."

But he said that kind of money to be used for political purposes means tremendous power. Racing, which was at one time among the leading campaign donors in the state, has been dwarfed by the tribes' political influence, he said.

"It is amazing to see how the tribes have changed that," Rose said. "Those compacts created a gambling industry half the size of Las Vegas practically overnight.

"The one thing that horseracing, the bingo charities and the card clubs can argue is that they need to have a level playing field ... But you aren't going to get slot machines."

Instead, he predicted continuing expansion of gaming on California Indian land, which could reach $6 billion in total wagering in 2004. That's not surprising, Rose noted, given the availability of casinos and since California, with 34 million residents, has a greater population than Canada (at 31 million).

Nationally, Rose said, introduction of slot machines or video lottery terminals at the tracks, so-called "racinos," have stemmed a decline in pari-mutuel handle since they were introduced in the mid-1990s.

"Racinos have saved racing," he maintained.