Who really lost the California recall election?

Who really lost the California recall election?

Who really lost the California recall election?

Who's winning, who's losing, and why.
Nov. 3 2003 10:44 AM

Indian Burn

How the recall election broke the back of California's Indian tribes.

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Arnold vows to make them pay; how did it come to this?

The most important result of the California recall is not the victory of Arnold Schwarzenegger. It's the defeat of the state's most aggressive special interest group: casino-rich Indian tribes.

Going into the recall election the California tribes enjoyed a degree of political power unmatched by any other interest group in the state, perhaps the country. The tribes' public image was the envy of the lobbying community. They were seen as formidable, yet essentially benign—using their vast resources to do good works. By the end of the recall, however, the tribes' promiscuous spending on political campaigns had rightly come to be seen as special interest politics at their very worst.

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Not only did the tribes bet heavily on losing candidates—$8 million in direct and indirect contributions to Democratic Lt. Gov. Cruz Bustamante, another $3 million to Republican state Sen. Tom McClintock—but they suffered incalculable PR damage. First, Bustamante came under attack from independent candidate Arianna Huffington for taking tribes' casino money *. Almost immediately, Bustamante's polling numbers began to tank. Next, the tribes found themselves targeted directly by Schwarzenegger, whose most effective campaign ad featured the candidate in a stump speech excoriating casino-owning tribes as "special interests" who "make billions, yet pay no taxes and (give) virtually nothing to the state." The ad ended with Schwarzenegger pledging to force the tribes to "pay their fair share."

Indian tribes first moved vigorously onto the political stage in the early 1990s, after Congress gave them the right to build casinos on reservation land (in states that did not prohibit casino-style gambling). Designed to help Indians achieve economic self-sufficiency, the deeply flawed Indian gaming law has conferred little benefit on the vast majority of California Indians, while making fortunes for a relative handful of tribal leaders and their (mostly non-Indian) financial backers. Tiny tribes—often with only dozens of members—located near California cities hit the jackpot, while Indians in more remote parts of the state gained nothing. By the mid-'90s California's casino tribes, though flush with gambling profits, worried that prospects for future growth might be dimmed by a strained relationship with then-Gov. Pete Wilson. In the most brazen use of money in politics ever seen in California (or anywhere else, for that matter), the tribes proceeded to spend more than $100  million to buy—er, win—passage of two ballot measures that, among other things, guarantee that the tribes will never face any competition from non-Indian casinos.

How did things go so badly so quickly for the tribes? Certainly their conspicuous spending on political races has bred public skepticism. In the past five years California tribes spent over $20 million on political campaigns—not including the $11 million they just blew on the recall. This ranks the tribes first among moneyed special interests in Sacramento—ahead of public-school teachers, prison guards, and trial lawyers (in that order). The more money the tribes spend, the harder it is to avoid scrutiny, and the harder it is for them to maintain the illusion, so valuable in earlier political campaigns, that they are political neophytes.

Public support for the tribes has depended on the perception that casino gambling, although a financial windfall, is fundamentally fair as a means of redressing a historic injustice against Indians. But many tribes have alienated voters and local public officials by claiming that their unique "sovereign" status gives them a blanket exemption from all manner of state and federal laws. This aggressive stance, while correct as a matter of law, has been especially unpopular when made by tribes seeking to expand their gambling operations from rural reservations to new locations closer to San Diego, Los Angeles, and Sacramento.

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The same claim of sovereignty is behind tribes' refusal to pay taxes. Although federal law precludes state taxation of tribes, there is no restriction on voluntary agreements, as part of "compacts" negotiated between states and tribes, for payments in lieu of taxes. A few states have reached such agreements with casino-owning tribes, most notably Connecticut, which is paid 25 percent of the gross profits from Foxwoods, the biggest gambling venue in the country. However, California tribes—whose total income from casinos is estimated at $5 billion a year—pay no taxes under the compacts that they signed with Gray Davis starting in 1999. (They do, however, pay about $130 million a year to a state-operated trust fund, which redistributes the money to tribes that do not own casinos.) Paying no taxes may be a legally defensible position for the tribes but not a politically wise one, particularly during a recession.

Public support for the tribes has also been undercut by revelations that profits from casinos have flowed to so few Indians. The financial rewards of casino ownership are greatest for tribes with the fewest members—which, perversely, assures a concentration of gambling wealth in a very few hands. Among tribes that have done well for the very few: the San Manuel Band of Mission Indians, whose casino generates $100 million a year for only about 110 tribal members ($900,000 each); and the Table Mountain Rancheria tribe (Sacramento), whose 100 members each receive approximately $350,000 per year. The most extreme case is the Augustine Band of Cahuilla Mission, which owns a casino near Palm Springs. The tribe's total membership is one person.

The tribes' fall from grace in the recall election gives hope that the Indian gambling juggernaut may be finally slowing down. Certainly, the tribes' ability to influence events directly through campaign contributions has been diminished. Having deep pockets for campaign contributions does the tribes little good if candidates are afraid to take their money. Past beneficiaries of the tribes' largess include Sen. Barbara Boxer, House Minority Leader Nancy Pelosi, state Senate leader John Burton, and state Attorney General Bill Lockyer. The battering Bustamante took in the recall will hopefully make them more reluctant to accept future contributions from tribes.

The gambling tribes have been weakened, but have they been permanently crippled? The tribes' influence in Sacramento will be tested soon enough, as Schwarzenegger tries to make good on his campaign promise to force them to pay their "fair share" of taxes. Although tribes are under no legal obligation to renegotiate their zero-tax compacts, Schwarzenegger still has considerable leverage to bring them to the table. Among other things, he can threaten a ballot initiative to strip the tribes of their special monopoly over casinos. This would be nothing short of disastrous for most tribes.

The tribes will, for the foreseeable future, have more money to spend than any other interest group in California. It's hard to imagine that high-level state officials can resist for very long the tribes' jumbo contributions, particularly if they see other politicians at the local or federal level accepting them. On the other hand, it's unlikely that the tribes' standing with the public will ever recover fully from the trashing inflicted in the recall. Their new image as a traditional, bottom-feeding, special interest group will be hard to change.

Correction, Nov. 3, 2003: The article originally referred to Arianna Huffington as a Democrat. In fact, before she withdrew from the recall race, Huffington was running for California governor as an independent. Return to the corrected sentence.