Monday, January 7, 2008

CA Props 94-97; NO to Indian Gaming Compacts

Vote NO on expanded gaming. This deal is NOT good for CA, it's great for the four tribes, including civil rights violator Pechanga.

California Propositions 94–97: Indian Gaming Compacts – NO

By Peter L. StahlPete Rates the Propositions

Props 94 through 97 would allow four southern California Indian tribes to expand their casinos so they would be among the largest in the world. In exchange the tribes would pay billions of dollars into the state’s General Fund. Sounds like a painless solution California’s budget crisis, right? That’s certainly what the legislature and governor thought when they approved these compacts last June. But this isn’t a good way to balance the budget, and the agreements are tilted too heavily in the tribes’ favor anyway. We can do better—much better. Vote down the compacts to encourage a better solution to our budget crisis, or at least send the parties back to the bargaining table. OP: Trying to balance our budget with only four tribes is very poor planning.
The tribes in question—Pechanga, Morongo, Sycuan and Agua Caliente—currently operate five casinos in Riverside and San Diego counties. Their existing compacts with the state allow each of them 2,000 slot machines. Props 94-97 will increase this to 5,000 for Sycuan and Agua Caliente and 7,500 for Pechanga and Morongo. For comparison, the enormous MGM Grand in Las Vegas has only half that number at 3,700.
Calculating from one of the compacts, each slot machine brings in approximately $130,000 a year in net profit (after payouts), so the four tribes’ 8,000 machines currently bring in $1.04 billion profit a year. Under the existing compacts the tribes pay nothing to the state’s General Fund. Instead, they pay roughly $74 million (THIS WILL GO AWAY in the new compacts, so in effect, $1.5 BILLION comes off the $9 Billion they are promising) into special funds for local governments, poorer tribes, and other purposes. That’s an effective tax rate of 7%. OP: If you make over $63,000 in CA,you pay 9.3%! Pretty sweet for the tribes.

Props 94-97 will impose a new payment to the General Fund. It will start with a base of $123 million (11.8% of the profit on the existing 8,000 machines), and add 15% of the net profit from the first 20,000 new slot machines, plus an additional 10% of the net profit on the final 5,000 machines at Pechanga and Morongo. If the $130,000 per machine figure holds for all new slots, this would mean $675 million in new income for the General Fund once all 25,000 new slot machines are operational. Pretty sweet for the state.
Or is it?
The profits from all 33,000 machines will be about $4.3 billion, yielding an effective tax rate of 15%. This might be high for a regular business, but we’re talking about gambling. Compare it to the Lottery, which is “taxed” at a whopping 83%—that is, of income not used for prizes or operational costs, 83% goes to public education, with the rest used for retailer commissions and bonuses. Props 94-97 will turn that equation around for Indian casinos: 85% of profit will go to the tribes, (ALL 1800 people!) the rest to the state. Obviously we should negotiate a better deal. If these propositions fail, that’s what will happen.

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