Davis Is Urged to Trade Slot Machines for Taxes

A Republican state senator called on Gov. Gray Davis on Tuesday to permit Indian tribes to expand their casinos in exchange for a new tax on gambling revenue.

As it is, California’s fast-expanding Indian gaming industry pays no state taxes on its annual revenue, which is estimated to be about $5 billion.

The suggestion by state Sen. Jim Battin (R-La Quinta) represents the confluence of the two biggest issues of the year in Sacramento -- how to close a budget shortfall Davis estimates at $34.8 billion over the next 18 months and whether tribes will gain the right to further expand operations.

The Davis administration and the tribes are preparing to begin renegotiating in March the number of slot machines that each tribe can operate. Davis agreed in the initial gambling compact in 1999 to permit each tribe to operate two casinos having a combined maximum of 2,000 slot machines. Several tribes seeking to expand their operations have called for eliminating the caps on the highly lucrative slot machines.

Battin, who is among the Legislature’s most ardent supporters of the tribes’ right to operate casinos on their lands, plans to detail his proposal at a California Nations Indian Gaming Assn. convention later this month at the Pechanga Resort & Casino. Several tribal representatives have voiced support for such a trade. Under federal law, states cannot impose taxes on tribes. Rather, tribes must agree to pay into state coffers.

“In a day when there is a $34.8-billion deficit, every little bit helps,” Battin said. “I think [tribes] would be interested in discussing it.”

Davis has floated the possibility of linking the issues. Davis press secretary Steve Maviglio said the governor “welcomes proposals to balance the budget, and certainly this is one area in which we are reviewing all our options.”

Like most Republican legislators, Battin opposes new taxes as a way to close California’s budget gap. But although he says he doesn’t believe that fees paid by tribes would be a tax, he also said that tribes could be a “pretty significant” source of revenue.

Casino-operating tribes make payments to federally recognized bands of Native Americans in California that have small casinos or no gambling operations.

But California’s tribes pay no state taxes, unlike gambling tribes in other states. Connecticut receives 20% of slot machine revenue from that state’s Indian casino. Battin would not say how much the tribes should pay, leaving the amount up to Davis and the tribes.

Battin is motivated less by a desire to see new taxes imposed than by his desire to help tribes, among his biggest campaign donors, have caps lifted on the number of slots they can operate.

“I’m a free-market person,” Battin said. “It doesn’t make any sense that we’ve imposed caps and are holding back thriving businesses.”