Tribal casino oversight push hits legislative, legal hurdles

But Gov. Arnold Schwarzenegger's budget request to add 14 regulators to the commission and establish a state "audit and compliance unit" to oversee Indian casinos may be in peril.

The new staff positions -- to be funded with $1.7 million from the state Indian Gaming Special Distribution Fund that casino tribes pay into -- were rejected last Monday by a state Senate budget committee. An Assembly budget panel later declined to take a vote.

The budget struggle is stirred by questions over the extent of California's authority to govern the state's burgeoning $7 billion tribal gambling industry and nearly 60 casinos. It comes as lawmakers consider gambling agreements to allow five Southern California tribes a major expansion of up to 22,500 new slot machines.

The Schwarzenegger administration says the state stands to reap a piece of the action worth $13.4 billion to $22.4 billion in tribal revenue-sharing payments over the next 25 years.

But the compacts are being considered amid concerns -- fanned by a U.S. Court of Appeals decision last year -- over who is minding the store in the state's lucrative Indian gambling industry.

The ruling in favor of the Colorado River Indian Tribes of Arizona declared that the National Indian Gaming Commission lacked authority to regulate Nevada-style games at tribal casinos.

Assemblyman Alberto Torrico, D-Newark, chairman of a committee reviewing the five tribal compacts, said he was worried that the state's ability to determine casino profits and payments due the state "could be compromised based on the regulatory void" created by the court decision.

Schwarzenegger responded by seeking more state regulators. The new state unit would be similar to casino audit units created in Arizona and Washington before the federal appellate court decision.

"The Gambling Control Commission needs these additional positions to ensure the tribes are meeting the terms of their compacts," said Sabrina Lockhart, a spokeswoman for the governor. "These inspections ensure the integrity of the gaming operations as well as patron protection."

But the nonpartisan Legislative Analyst's Office questions whether the state needs the new staff after Gambling Control Commission staffing was expanded from 45 employees to 65 last year. And it questions the state's authority to audit tribal casinos and enforce "internal control standards" for reliability of casino games, security and cash flow.

Jason Dickerson, the Legislative Analyst Office's principal fiscal and policy analyst, told a Senate budget subcommittee Monday that the state can't inspect tribal casino operations without negotiating permission from the tribes.

Arguing against the 14 new state regulators, he said: "It would be our concern that it would take months or years ... to reach an agreement with those tribes" for casino oversight.

His comments followed a March 19 letter by U.S. Sen. Dianne Feinstein that urged the Senate Committee on Indian Affairs to re-establish the National Indian Gaming Commission's role in regulating Indian gambling. With legal appeals exhausted, the commission this month began circulating proposed legislation to restore its authority.

"It is critical that we increase the level of oversight and regulation to address the rapid growth of tribal gaming in California," Feinstein wrote. She added: "Even if the state were to take measures to address the current oversight deficiencies, it could take years for an updated, effective enforcement regime to be established."

Recently, a task force of state officials and representatives of casino-operating tribes convened at a tribal casino resort near Indio in an attempt to draft a uniform policy for oversight of California tribal casinos.