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February 2007 California Tribal Casinos: Questions and Answers In 1987, a U.
Supreme Court decision involving two California tribes set in motion a series of federal and state actions that dramatically expanded tribal casinos here and in other states.
In this report, we answer key questions about tribal casinos in California and their payments to state and local governments.
Introduction On February 25, 1987, the U.
Supreme Court decided that neither the State of California nor Riverside County could regulate the bingo and card game operations of the Cabazon Band of Mission Indians and the Morongo Band of Cahuilla Mission Indians.
This court ruling, known as the Cabazon decision, set in motion a series of federal and state actions-including two ballot propositions-that dramatically expanded tribal casino operations in California and other states.
Only Nevada now has a larger casino industry.
In this report, we answer key questions related to 1 the history of tribal casino expansion in California and 2 payments from the casinos to state and local governments.
We also discuss proposed amendments to several tribal-state compacts that-collectively-would expand the industry significantly in Southern California.
State-Tribal Relations What Is Tribal Sovereignty?
check this out tribes possess a special status under U.
In 1787, the new U.
In 1831 and 1832, two U.
Supreme Court decisions determined that tribes in the U.
Certain jurisdictional rights were declared to be ones with which no state could interfere.
What Is the Federal Authority for Tribal Gambling Operations?
The Cabazon decision relied heavily on the principles underlying tribal sovereignty.
In its ruling, the U.
In a response to the Cabazon decision, the Congress passed the Indian Gaming Regulatory Act IGRA in 1988.
Under IGRA, gambling operations are divided into three categories with varying levels of tribal, state, or federal regulation, as shown in the nearby box.
Balancing state and tribal interests, IGRA generally requires that states and tribes enter into compacts to authorize the types of gambling commonly associated with tribal casinos today-such as slot machines-when state law permits similar gambling operations in any other context.
The act permits casino operations on Indian lands, which it defines as 1 reservation lands, 2 lands held in trust by the U.
The act requires states to negotiate with tribes that request the opportunity to enter into a compact.
The IGRA establishes the National Indian Gaming Commission within the U.
Department of the Interior DOI as a body to limit organized crime and corruption, ensure that tribes benefit from gambling revenues, best northern california indian casinos enforce the honesty and fairness of certain tribal gambling operations.
Class I games are 1 social games for prizes of minimal value or 2 traditional Indian games related to tribal ceremonies or celebrations.
These games are subject only to regulation by the tribes themselves.
The IGRA provides for regulation of Class II games by both tribes and the National Indian Gaming Commission NIGC.
In states allowing Class II games, like California, there are no limits on the number of Class II games that a tribe may operate.
Class III games sometimes called Nevada-style games include all other types of gambling.
These include slot machines, electronic games of chance, and many banked card games like blackjack.
According to the California Department of Justice, certain craps, roulette, and dice games are prohibited under the State Constitution and laws.
Tribes and states regulate Class III games pursuant to tribal ordinances and tribal-state compacts approved by the U.
Department of the Interior.
In California, the principal best set under 100 regulatory agencies are the California Gambling Control Commission and the Division of Gambling Control in the Department of Justice.
What Does the State Constitution Say About Read more Casinos and Other Types of Gambling?
California outlawed many forms of gambling soon after statehood.
Proposition 1A amended the Constitution to allow the Governor to negotiate compacts-subject to ratification by the Legislature-with federally recognized Indian tribes to operate certain types of gambling on Indian lands.
Games allowed by the amendment include slot machines, lottery games, and banked and percentage card games.
How Many Tribal-State Compacts Have Been Ratified click to see more the Legislature?
The Legislature has ratified 66 tribal-state compacts.
California also has dozens of tribes which are not federally recognized.
Compacts with five additional tribes were ratified in 2003 and 2004.
Several amendments to these compacts also have been ratified by the Legislature.
Most notably, the 2004 amendments to compacts with five tribes substantially altered the original financial framework of the 1999 compacts.
What Are the Differences Between the 1999 Compacts and the 2004 Compacts?
Key differences between the 1999 compacts and the 2004 compacts are summarized in Figure 1 see next page.
The 2004 compacts allowed five tribes-two in Northern California the Rumsey Band of Wintun Indians and the United Auburn Indian Community and three in Southern California the Pala Band of Mission Indians, the Pauma Band of Luise帽o Indians, and the Viejas Band of Kumeyaay Indians -to operate an unlimited number of Class III slot machines in exchange for payments to the state General Fund for machines added after ratification of the compacts.
By contrast, tribes could operate no more than 2,000 machines under the 1999 compacts.
Unlike the 1999 compacts, the 2004 compacts require payments to the General Fund, as well as payments expected to be used to support a bond that will repay loans made by a state transportation account to the General Fund in 2001-02 and 2002-03.
The 2004 compacts also require that tribes negotiate with local governments concerning enforceable memoranda of understanding to address environmental, public safety, infrastructure, and other demands related to casinos.
Figure 1 Differences Between 1999 Compacts and 2004 Compacts 1999 Compacts 2004 Compacts How many Class III slot machines are authorized?
路 Up to 2,000.
路 Unlimited number of machines.
路 Total number of machines statewide limited to 61,957.
Which state funds receive tribal compact moneys?
路 Revenue Sharing Trust Fund RSTF : Payments on a per machine basis.
路 Special Distribution Fund SDF : Payments based on percentage of revenue from machines operated as of September 1999.
路 SDF: No payments.
What support is provided for local governments affected by casinos?
路 SDF provides grants to these local governments.
路 Tribes must negotiate with local governments on agreements including potential payments to address infrastructure, safety, and other issues.
What ability do state regulators have to inspect casino facilities and machines?
路 General compact language concerning inspections of public and nonpublic areas and access to records and equipment.
路 More specific compact language concerning testing of machines.
Regulators may inspect a certain number of machines up to four times per year.
When do the compacts expire?
路 December 31, 2020.
路 December 31, 2030.
Tribal Casinos in California How Many Casinos Currently Operate in California?
As of March 2006, 53 tribes operated 54 casinos with Class III machines in California.
The Agua Caliente Band of Cahuilla Indians operates two facilities-in Rancho Mirage and Palm Springs-as allowed under the 1999 compacts.
There are some tribes with ratified compacts that do not have a casino, and other tribes have had casinos in development since March 2006.
Where Are Casinos Concentrated, and What Are Some of the Largest?
Southern California casinos also operate in Imperial, San Bernardino, and Santa Barbara Counties.
Industry estimates indicate that Thunder Valley Casino is one of the highest revenue-generating casinos in the country and the highest-ranked facility by this measure in California.
How Many Slot Machines Are Operating at Tribal Casinos?
Prior to passage of the measure, tribes operated an estimated 20,000 slot machines at about 40 casinos, despite the unclear legal environment of the time.
As of March 2006, tribes operated over 58,000 Class III devices.
Continued expansion is likely, even if the Legislature does not ratify several compacts agreed to by the Governor and tribes in 2006.
These compacts would allow Southern California tribes to operate up to 22,500 additional Class III devices.
In addition to Class III devices, Class II devices-which are not governed by the tribal-state compacts-are at some casinos.
Tribal Payments to State and Local Governments How Much Do Tribes Pay to California Governments?
State Government Funds: Compact Revenues.
Tribes make payments to several state government accounts under the terms of the tribal-state compacts.
Under the 1999 compacts, non-compact tribes are those federally recognized tribes operating 350 or fewer Class III gaming devices.
These moneys help relieve the General Fund of a potential cost to repay the transportation funds.
Combined, these two revenue sources nj slots best online just over 0.
Unless the Legislature ratifies additional compacts or amendments early in 2007, state revenues in 2006-07 will grow slightly above the 2005-06 levels.
Indian Gaming Special Distribution Fund 140 路 Fund RSTF shortfalls.
路 Gambling addiction programs.
路 Grants to local governments affected by tribal casinos.
路 Other purposes allowed by law.
Designated Account for Transportation Bond 101 路 Repay state transportation accounts for loans made to benefit the General Fund in prior years.
路 Loan repayments may occur either through 1 the sale of bonds secured by these annual tribal payments or 2 direct repayment of transportation accounts from this fund.
State Government Funds: Taxes.
In addition to funds paid pursuant to the compacts, tribes and their members pay certain state taxes.
The laws surrounding the taxability of tribes, tribal members, and related enterprises are complex.
Tribes and their members are not subject to several types of taxation due to the lack of authority granted to states for this purpose under federal law.
Tribal members living on reservations, for example, are not subject to state income tax, and tribal casinos do not pay the corporate income tax.
Regarding the sales and use tax, tribes are generally expected to collect taxes on purchases made by nontribal members for consumption or use off of reservations.
Local Government Funds: Compact-Related Revenues.
Chapter 858, which sunsets on January 1, 2009, provides that priority for distribution of SDF grant moneys be given to localities with one of the tribes that contributes to the SDF currently, 25 tribes statewide.
A few local governments receive significant read more directly from tribes under mitigation agreements reached with tribes for such things as traffic and law enforcement costs.
Local Government Funds: Taxes.
In addition to the funds described above, local governments also receive some revenue from the taxation of certain tribal activities and transactions.
As in the case of the state, local government has only a limited ability to tax such enterprises.
Property taxes and hotel occupancy taxes, for example, do not apply to reservations.
What Is the Revenue Sharing Trust Fund RSTF?
Purpose of the RSTF.
In addition to ratifying the 1999 compacts, Chapter 874, Statutes of 1999 AB 1385, Battinestablished the RSTF.
Under the various tribal-state compacts, tribes make payments to the RSTF in exchange for licenses to operate up to 2,000 slot machines.
Chapter 874 provides that the RSTF upon appropriation by the Legislature fund distributions to non-compact tribes pursuant to the provisions of the 1999 compacts and subsequent compacts.
The 1999 compacts were among the first in the country to share casino revenues with tribes that do not have compacts.
Payments Into the RSTF.
Figure 4 shows the payments that 1999 compact tribes make into the RSTF.
These payments are based on source number of slot machines that the tribes operate.
Subsequent compacts and amendments have specified other levels of payments.
Through 2002, RSTF funds were insufficient to fund the full annual payment to each non-compact tribe.
Chapter 210, Statutes of 2003 AB 673, J.
The Legislature has transferred SDF moneys to fund the RSTF shortfall each year since 2002-03.
What Is the Special Distribution Fund?
Purpose of the SDF.
Chapter 874 also establishes the SDF.
Payments Into the SDF.
Figure 5 shows the payments that 1999 compact tribes make into the SDF.
These payments are a percentage of the average slot machine net win a measure of slot machine revenues on machines operated by the tribe on September 1, 1999.
Most recent compacts or amendments have not required tribal payments into the SDF.
Over the last several years, the SDF has collected more revenues each year than the Legislature has spent out of the fund.
We discuss the potential effects on the SDF of compacts pending before the Legislature later in this report.
What Are the Tribal Transportation Bonds?
Bond Sale Has Been Delayed and Amount of Bond Proceeds Uncertain.
It is not known when or if the bonds will be sold.
Compact Funds Transferred to State Highway Account SHA.
Under current law, the administration may use the annual payments to 1 repay the transportation loans or 2 support the planned bond issue that would repay the transportation loans.
The Legislature, however, may amend the law and direct that the funds be used for any other purpose.
As a result, the amount of bond proceeds to be generated from the sale are likely even lower than previously estimated.
Trailer bill language also modified the allocation of future bond sale revenues, providing that they would fund projects under the Traffic Congestion Relief Program.
This action would further reduce the amount of any future bond.
Proposed Compacts Which Tribes Have Proposed Compacts Or Amendments That Have Not Been Ratified By the Legislature?
Nine proposed Class III casino compacts or amendments have not been ratified by the Legislature, as listed in Figure 6.
In this section, we will focus principally on the five proposed compact amendments that we refer to as the 2006 compacts, given that they recently have generated the most discussion among legislators and the public.
The 2006 compacts are those with the Agua Caliente Band of Cahuilla Indians, the Morongo Band of Mission Indians, the Pechanga Band of Luise帽o Indians, the San Manuel Band of Mission Indians, and the Sycuan Band of the Kumeyaay Nation.
What Are the Key Provisions Of the 2006 Compacts?
How Are They Similar to the 2004 Compacts?
Earlier in this report, we compared the 1999 compacts and the 2004 compacts.
The 2006 compacts are similar in many respects to the 2004 compacts.
Like the 2004 compacts, the 2006 compacts would allow tribes to operate more than 2,000 slot machines.
The tribes would be able to operate the machines at one, two, or three gambling facilities on Indian lands depending on the tribe and the compact amendment involved after negotiating with local government officials on measures to mitigate effects of casino development.
The agreements contain similar language allowing state regulators to inspect casino facilities and machines.
While their contributions to the RSTF would increase, their best northern california indian casinos to the SDF would end.
How Are They Different From the 2004 Compacts?
Figure 7 lists some key differences between the 2004 compacts and the 2006 compacts.
Legislation implementing the 2004 compacts directed a large portion of the revenues that these tribes pay to the state to repay state transportation loans.
The minimum annual payments under the 2006 compacts, by contrast, would go to the General Fund.
Figure 7 Differences Between 2004 Compacts and 2006 Compacts 2004 Compacts 2006 Compacts How many Class III slot machines are authorized?
路 Unlimited number of devices.
路 5,000-7,500 per tribe, depending on the compact.
Which state funds receive tribal compact moneys?
路 Special Distribution Fund SDF : No payments.
路 SDF: No beste online casino />Estimated to average 15 percent of added machines revenue as of 2004.
路 General Fund: Added payments of 15 percent of revenues from machines 2,001-5,000 and 25 percent from machines 5,001-7,500.
What are some key compact provisions concerning labor relations?
路 Signed authorization cards from 50 percent of best northern california indian casinos certifies union as exclusive bargaining representative.
Tribal neutrality required during organization process.
路 Signed authorization cards from 30 percent of employees triggers secret ballot election to determine if majority wish to certify the union.
Tribal neutrality not required.
When do the compacts expire?
路 December 31, 2030.
路 December 31, 2030.
Financial Health of SDF Would Be Affected by Proposed Compacts.
Should the Legislature ratify all of the proposed 2006 compacts, SDF revenues likely would drop substantially as several tribes with large casinos would cease making payments into the SDF.
Because tribal financial information is confidential, we are unable to estimate the amount of the decline with specificity, but we suspect that revenues would decline by over 50 percent.
Under the terms of several of the proposed compacts, RSTF shortfalls then would be offset by tribal revenues that otherwise would be paid to the General Fund.
Therefore, if the Legislature ratifies this web page proposed compacts, it may need to consider the current funding priorities of the SDF in statute, as well as the appropriation amounts for various purposes included in the annual budget act.
General Fund Revenue Projections Overstated.
This projection is not realistic.
Additional expansion of General Fund revenues would depend largely on how fast the tribes with 2004 and 2006 compacts bring new slot machines online.
Given the pace at which the 2004 compact tribes have expanded and the economics of the casino industry, we expect that expansion of casino operations would be gradual, rather than sudden and dramatic.
Such an increase in only a few months, however, is very unlikely.
Even in the longer term, tribes may not opt for aggressive business expansion strategies, and it is possible that some tribes will find that it is not in their best interests to expand to the maximum number of slot machines allowed under the 2006 compacts.
Other businesses, for example, may offer a greater rate of return for some tribes and a chance for them to diversify their portfolios.
Addressing RSTF and SDF Shortfalls Will Reduce General Fund Benefits.
Offsetting the growth of General Fund revenues would be the requirement in the 2006 compacts that the state use some of the new revenues to address shortfalls in the RSTF.
This requirement could increase General Fund costs in the tens of millions of dollars annually.
In addition, as a result of declining SDF revenues, the Legislature could face funding shortfalls for gambling addiction, regulatory, and local government programs.
The billions of dollars are only possible if one sums decades worth of annual payments.
Even assuming that all of the 2006 compacts are ratified and a few more similar compacts are ratified in the future, we expect that compact-related sources will provide the General Fund with less than 0.
Employees of at least six tribal casinos are unionized.
Organizing efforts have occurred at some other California casinos.
In this section, we discuss the labor relations provisions of the 1999, 2004, and 2006 compacts.
Unions are granted access to eligible employees to discuss organization and representation issues.
Upon receipt of signed authorization cards from 30 percent or more of eligible employees, a secret ballot election is called to determine if a union will be certified as the exclusive collective bargaining representative of a bargaining unit of employees.
The union must win a majority of those eligible employees voting in the secret ballot election.
Should such best northern california indian casinos union win certification, it would then bargain collectively for employees in its bargaining unit.
The 2004 compact tribes without existing collective bargaining relationships with a union agreed to adopt an amended TLRO.
Under the required amendments, a union has the option of offering a tribe that it will not strike or picket tribal facilities and will submit all issues to binding arbitration.
The union then may obtain signed authorization cards from 50 percent or more of eligible employees and be certified as the exclusive collective bargaining representative of the employees.
In contrast to the provisions of the 1999 compacts, there are no secret ballot election requirements.
This process may make it easier for unions to be certified as the exclusive representative of employees of tribal casinos and related facilities.
Other Issues Can Tribes Establish Casinos in Urban Areas or Outside of Their Tribal Lands?
The IGRA permits casino operations on Indian lands, which it defines as 1 reservation lands, 2 lands held in trust by the U.
Tribes, therefore, may seek to rebuild a land base by having the federal government acquire lands in trust for their use through a lengthy, complex process.
In some cases, this can mean that tribes seek to establish a land base in areas such as urban or suburban areas not associated with the tribes in recent history.
Throughout the nation and in California, conflicts occasionally have arisen between tribes wishing to establish a casino particularly on recently acquired trust lands and nearby communities resisting such development.
The rules governing where tribes may operate casinos are extraordinarily complex.
In recent years, however, the general trend seems to have been for federal and state policymakers to make it more difficult for tribes to open casinos on recently acquired trust lands.
DOI has not approved many pending requests of tribes to acquire trust lands for the purpose of establishing casinos and has established rules requiring environmental reviews and support from nearby community leaders before approval will be granted.
Such criticisms have been one reason why the Legislature has not yet ratified some proposed compacts.
What Powers Does the State Have to Ensure That Tribes Meet Their Obligations Under the Compacts?
Legislature Expanded CGCC in 2006-07.
The CGCC administers the RSTF and SDF and has the principal responsibility for monitoring and auditing Class III casino activities.
How Much Does the State Provide to Prevent and Treat Problem Gambling?
To date, much of this funding has been used to provide grants to problem gambling telephone services including publicity for these lines and to fund research activities related to problem gambling in the state.
In some cases, local mitigation agreements or local SDF grants are also used to fund efforts to prevent gambling addiction.
New Funding for Treatment.
Have the Socioeconomic Conditions of California Tribes Improved?
As described earlier, improvement of tribal living conditions was the principal purpose for the enactment of IGRA by Congress.
The socioeconomic gaps between American Indians living on reservations and the rest of the national population remained significant, as of the 2000 U.
Per capita income at that time was less than one-half of the U.
For Some Tribes, Conditions Have Improved.
While Census and other authoritative demographic data focused on tribal members is limited, it is clear that the expansion of tribal casinos has dramatically improved socioeconomic conditions for some tribal members in California.
These positive economic effects seem to be concentrated among members of tribes with some of the largest casinos.
For Most Tribal Members, Unclear That Casinos Have Helped Much.
The majority of California tribal members do not benefit directly from a casino.
In addition, particularly for large tribes sometimes with hundreds or thousands of members and large geographic territoriesthe amount may have a limited effect on the socioeconomic conditions of most click here />Conclusion Previously approved tribal-state compacts bind the state for the coming decades.
How many more slot machines and casinos should be authorized?
Acknowledgments This report was prepared by and reviewed by.
The Legislative Analyst's Office LAO is a nonpartisan office which provides fiscal and policy information and advice to the Legislature.
LAO Publications To request publications call 916 445-4656.
This report and others, as well as anare available on the LAO's Internet site at www.
The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814.

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