Wednesday, February 07, 2007

Gov. Arnold Schwarzenegger's bet that the state could balance its budget
next year with revenue from bigger Indian casinos is unrealistic, a report
released Friday by the state's nonpartisan Legislative Analyst said.
Schwarzenegger's proposal to let tribes install some 22,500 new slot
machines and then collect more than $500 million in new fees and taxes from
them is critical to his plan to wipe out the state's chronic budget deficit
next year. Legislative Analyst Elizabeth Hill, who in recent weeks has
blasted the governor's spending plan for relying on rosy revenue
projections, on Friday took aim at its Indian gambling component, saying it
would likely take three to 10 years for the state to realize the revenue
boost Schwarzenegger is counting on in a matter of months. "The governor's
budget assumes that annual general fund revenues related to tribal-state
compacts grow from $33 million in 2006-07 to $539 million in 2007-08," Hill
wrote. "This projection is not realistic."
What's more, according to her report, the compacts could leave California on
the hook for millions in unexpected costs. The compacts would require the
state to spend millions of the projected revenue increase in coming years to
help poor tribes that don't operate casinos - money Schwarzenegger is
relying on for the budget. The compacts also would let the richest tribes
stop paying into funds for gambling addiction and other programs, the
analyst said. "The Legislature could face funding shortfalls for gambling
addition, regulatory, and local government programs," she wrote. H.D.
Palmer, spokesman for the governor's finance department, downplayed Hill's
concerns and said the administration sticks by its projections. "We're
confident given the number and timing of the devices we've assumed in these
agreements that we have the right dollar amounts," Palmer said. "These
tribes are ready to immediately put the machines in place that form the
basis of our revenue projections." Another large hurdle for the governor's
Indian gambling plan is the Democratic-controlled state Legislature. The
Assembly in September squashed the pending compacts, which Schwarzenegger
has already signed, over concerns they would weaken the power of casino
workers to unionize. The deals still face heated opposition from unions,
card clubs, the horse racing industry and the antigambling lobby. Democratic
leaders also have said they would need substantial changes before they win
approval.