Former top Schwarzenegger advisor surfaces on Indian gaming payroll


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Just days before state lawmakers convene to discuss legalizing Internet poker in California, a coalition of Indian gaming tribes is bracing to fight the proposal and has hired a former top advisor to Gov. Arnold Schwarzenegger to help make its case.

A study showing that Internet poker may hurt the state rather than help it is the first major public report issued by Mike Genest since he left as the state finance director in December. With the Senate Governmental Organization Committee planning an informational hearing Tuesday, leaders of both sides are focusing on whether Internet poker can help the state with its lingering budget crisis.


There is no legislation yet to create a state-sanctioned poker game on the Internet, but a group including Commerce Casino and the Morongo Band of Mission Indians has been lobbying lawmakers, and its own experts believe such games may bring in hundreds of millions of dollars to state coffers.

A rival group of Indian gaming tribes that opposes Internet poker hired Genest to vet the claims of proponents. On Friday, the California Tribal Business Alliance released a study by Genest that said allowing poker games on the Web would not solve the state’s budget woes and could actually be a money-loser for the state. State-sanctioned Internet poker would violate existing compacts that give Indian tribes exclusive rights to electronic gambling, allowing them to halt paying the state its $365-million cut of the proceeds from slot machines, concluded Genest.

That loss, Genest said, would not be fully offset by an annual increase in revenue of $53.6 million from a 10% participation tax on poker players and ‘an unknown, but probably not substantial increase’ in personal income tax collections from winning gamblers.

Genest’s findings were disputed by Patrick Dorinson, a spokesman for the Morongo Band. ‘We believe this will raise money for the state and the experts will tell you this will raise money for the state,’ Dorinson said.

One expert advisor to Commerce Casino, Whittier Law School professor I. Nelson Rose, said California Internet poker games could take in $1 billion each year. If the state took the same 25% cut from such games that it takes from Indian-run slot machines, it could generate $250 million for the state budget, he said.

-- Patrick McGreevy in Sacramento