JOHN FUND'S POLITICAL DIARY

Indian Givers
Things are bad in California. Some legislators want to make them worse.

Monday, September 8, 2003 12:01 a.m. EDT

California's Lt. Gov. Cruz Bustamante drew rare criticism from fellow Democrats last week when he used a dubious loophole to accept more than $2 million in contributions from Indian casino interests. "It creates a bad impression in the media, and it could have been avoided," said state Democratic chairman Art Torres.

That's unfair. The Oct. 7 recall election is making the political pressure in California too intense to avoid at least a few unseemly political contributions. Several Indian tribes know their interests coincide with the elevation of Mr. Bustamante, whose brother Andrew is general manager of an Indian casino owned by the Mono tribe. They apparently intend to counter the impact of any negative publicity by pouring money into ads promoting Mr. Bustamante or touting his opposition to Ward Connerly's Racial Privacy Initiative. The Indian contributions are a reward for a politician who has been a compliant supporter. As Assembly speaker he once took to the floor and asked for a moment of silence to mourn restrictions on tribal gambling. It's also part of a larger effort to influence officials in Sacramento—an effort that is already paying off. This week Democrats plan to pass legislation that will ensure windfall profits for tribes that sell tax-free cigarettes.

That may only be the beginning in a whirlwind final week of the legislative session that promises to be one payout after another to special interests—the very behavior that put California in the financial soup in the first place.

Liberal lawmakers, fearing that a Republican might win the governor's mansion, are scrambling to pass as many bills as Gov. Gray Davis can sign before the recall. One bill would give Indian tribes the power to stop development on private land within five miles of a sacred tribal site; the potential for abusive shakedowns of developers should be obvious to anyone. Another bill would water down legislative term limits. A couple of bills awaiting action smell like such blatant attempts to enrich contributors that Gov. Davis may have to shy away from them.

The worst idea before the Legislature is Senate Bill 2, written by John Burton of San Francisco, the liberal president of the state Senate. It would compel businesses with more than 20 workers to pay almost all health insurance costs for employees—even part-time workers—and their dependents. Companies would have to pay at least 95% of health-care costs for low-income workers, and 80% for everyone else.

Jill Stewart, a columnist and former Los Angeles Times reporter, describes the measure as "closer to socialism than anything I've seen heading for approval in 20 years." This bill would create a powerful incentive businesses to stay below the 20-employee limit by stunting their own growth, or drop below the limit by laying off workers. Ms. Stewart reports the bill was ghostwritten by the Service Employees International Union, a major Democratic contributor.

The real beneficiary of the bill may not be the unions, but rather the Indian tribes. The Western Political Report says the bill was rewritten over the weekend and also includes a whopping cigarette-tax increase to $2.37 a pack, up from 87 cents. California's new tax would be the highest in the country outside New York City, creating a massive incentive to buy tax-free cigarettes from Indian stores or their Internet sites.

Normally a bill that raises taxes would require a two-thirds vote of both houses of the Legislature, giving minority Republicans leverage in slowing down the legislation. But Democrats plan to make SB 2 "revenue neutral" by adding a tax credit for employers who will suffer from the costs of mandated health care for their employees. Under that arrangement, the bill could pass with a simple majority. Some Republicans promise to take the issue to court, but that fight would take years to resolve.

The tax swap is estimated to gain the state $1.5 billion from higher cigarette taxes while it loses an equivalent amount in business tax credits. But revenue projections based on higher tobacco taxes are notoriously unreliable. A few years back, Quebec raised its cigarette taxes to exorbitant levels and lost so much revenue to smuggling and Internet sales that it had to roll the taxes back. New York City is getting less than half the $250 million a year in new revenue it expected from last year's mammoth increase in cigarette taxes, even after accounting for reduced demand for cigarettes. If Mr. Burton's projections in California are off by anything close to that, the state's huge budget deficit will grow substantially.

The Western Political Report says "the scheme could give the tribes a virtual monopoly on the cigarette industry in California," as tribal smoke shops undercut legitimate nontribal retailers while paying no taxes to the state. Since Californians bought more than a billion packs of cigarettes last year, tobacco could conceivably make more money for the tribes than gambling.

But that presumes California will continue to keep its present limits on Indian gambling. Right now, the tribes operate 62,000 slot machines. Each takes in more than $300 in profit every day, since Indian slots pay back only about 70% on the dollar (far less than machines in Atlantic City and Nevada).

A growing number of complaints about Indian casinos prompted Gov. Davis to hold each tribe to a maximum of 2,000 slot machines. He also slowed down the applications of 35 tribes who want new gambling licenses. By backing Mr. Bustamante, the San Jose Mercury News reports, "Indian tribes have anted up for a man who has pledged to loosen the reins that Governor Gray Davis has held since he signed gambling compacts with 61 tribes." Contributions to Mr. Bustamante are "a cheap bet" for the tribes, observes Nelson Rose, a Whittier College law professor who tracks gambling issues. "In return they get a monopoly on a casino industry that this year alone is going to make $4 billion or $5 billion." Indian gambling interests already represent the biggest political contributor in California, having plowed $122 million into state political races in the past five years. If their clout leads to a further expansion of their profits under a Bustamante governorship, they could become a force that no one in California would want to—or could—challenge.

Even tribes outside California have gotten a piece of the action. In 2001 it was revealed that Sen. Burton, who played a leading role in getting Indian gambling approved in California, had received 2,500 shares in a company that was developing a casino in Wisconsin. Mr. Burton said "the shares were given to me in return for political advice" to the Menominee tribe and its non-Indian investors. Since he admitted he worked less than 20 hours on the project, and other investors had to pay $25 for each share they got, his compensation represented the equivalent of $3,125 per hour. The senator told the San Francisco Chronicle that he hadn't had to reveal his receipt of the shares on his financial disclosure forms because the casino company didn't do any business in California. After a barrage of criticism, Mr. Burton returned the shares, saying they "have become a pain."

Pain is exactly what Mr. Burton and the California Legislature may inflict on California's economy this week as they scramble to push through radical legislation that's designed to maintain their shaky hold on power. If ever California voters need to pay attention to what lawmakers are doing in their name, it's this coming week.

Against the Wall: One more opinion from the fabled Journal

Posted: September 19, 2003 -- 11:21am EST

Chalk up one more in-close attack against Indian tribes exercising their legal right of self-government. Attacks come regularly now; let's track it and answer as much of it as we can. Not long ago we commented on the unacceptable language used by National Review editor, Rich Lowry that seemed to characterize a whole people, an easy intellectual pose these days that is nevertheless suspect for its bigotry in assigning new overall stereotypes to American Indians.

This week, it's a perspective column in that well-established challenger of Indian country realities, The Wall Street Journal. Mostly, the Journal has published misleading editorials that travel far off the mark of what is truly happening in Indian country, its base of legalities in history and federal relations, and its connective tissue in Congress and in case law and constitutional reference. The present article, "Indian Givers," signed by John Fund is more intelligent, if just as objectionable, as earlier ones.

Without really stating his reasons, Fund strikes a pose of disgust against Indian contributions to political candidates. The pose attempts to make axiomatic the assertion that tribes getting involved in California politics should be labeled as "unseemly." But, as opposed to what, say, Arnold's multi-million dollar self-financing? Or Arianna Huffington's billion dollar back-up? Big money, corporations, the Christian right, the Hollywood left, everyone can give to political candidates without being called "sleazy," or again, "unseemly," everyone, that is, except Indian tribes.

Now begins another heavy backlash against the Indian jurisdictions that protect and give strength to American Indian governments and their growing economic enterprises. The Native advances of the 1990s, only now being felt, are already under serious attack. Following the derivative lead of The Wall Street Journal, Time Magazine and the National Review, extreme right wing radio is also starting to rail against Indian tribal rights. The reality is that the American public largely comprehends and supports the tribal rights to self-government, but they must continually be reached. Indian country needs to talk to itself and to the American public. It needs to respond and answer constantly these kinds of confusing, convoluted and obfuscated perspectives as offered in these mainstream media outlets. Protecting and defending tribal economic development and what has been possible so far will take a highly intelligent, organized and concerted effort -- one that is capable of delivering factual content in real time.

Expect the beating up on Indians to continue from certain sectors of the extreme right. The Wall Street Journal editorial page has its line and spin. Of late O'Reilly and Limbaugh (who described Indians as "savages"), National Review's Lowry and now Fund and others are giving evidence of a coming cavalry charge. It's the current of the moment for certain sectors of the extreme right who have grown accustomed to lying to the American people to destroy the original governments and economies of Indian country. Interestingly, the Democratic Party of Clinton-Gore understood Indian self-government and its importance to revitalizing the results of horrible genocide and ethnocide, colonialism, federal negligence and corruption. And while the moderate right at the moment is not in control of the Republican Party, it was Richard Nixon who introduced the policy of tribal self-government after decades of termination and theft of Indian assets. Today, John McCain, R-Ariz., and other Republicans, understanding America's need to make good on its obligations to a constructive Indian policy, also back those "islands of freedom" so aptly described by California State Senator Tom McClintock, the conservative candidate of credential in the California recall.

If not ignorance, per se, there is certainly a sour smell to this kind of knee-jerk attack on tribal involvement in state-wide politics. According to columnist Fund, the tribes have used a "dubious loophole," which enabled them to give $2 million in contributions to Cruz Bustamante. But the "loophole" Fund points to is simply called the law, as when applied specifically to Native tribal governments. If it is legal, what makes it "unseemly," until or unless otherwise changed by law? Fund complains about Bustamante's brother Andrew running a casino for the Mono tribe. But this is not a reason for tribes "pouring money into Bustamante campaign," and labeling Bustamante as a "compliant supporter" of tribes. Bustamante is not a "compliant" supporter, Mr. Fund. In fact, he is an ardent supporter, one who on many occasions has exhibited his knowledge and commitment to tribal governments, as well as cultural and spiritual customs.

Again, this is loaded prose. Why not respect the tribal acumen in backing the politicians who have understood the tribal sovereignty position most clearly and are willing to work with and for the tribes in their compacts and other legal hurdles to set up enterprises that have proven to be great economic stimulants all across California. Why assume that Bustamante can be bought or influenced, when all the tribes have done is make open, if meaningful, contributions to his campaign. The same should also apply for candidate McClintock, who has also received tribal support. Bustamante's and McClintock's opinions on the issues, as they both gain status in the state, certainly will be theirs alone. Again the columnist is assuming a lot.

Indian country nonetheless is on a roll. Financial institutions are only now beginning to flourish. Tribal influence in politics is now present and growing. But tribal America needs more growth and economic stimulus than ever. The Journal piece bemoans Bustamante's support for expanded rather than restricted casinos. But perhaps Bustamante and even McClintock basically understand the tremendous economic benefits for various regions and the important constituencies now related to these enterprises.

Presently restricted to 2,000 machines per tribe, many people believe this limitation makes no economic sense. What possible reason is there to restrict tribal growth this way? Columnist Fund doesn't say who complained exactly but that "complaints about Indian casinos prompted Gray Davis to limit tribes to 2,000 machines." Since both Governor Davis and Cruz Bustamante are now promising to delimit the number of machines, it makes sense for the tribes to support them. This is not even a purely partisan thing, as anyone who truly understands business would acknowledge. What sense does it make to limit the growth and expansion of a successful industry that creates thousands of jobs and that generates significant tax revenues for the states and federal government? Where would McDonald's be if limited to 2,000 hamburgers per day? Or Texaco if limited to 2,000 gas pumps? Conservative Representative and candidate, Tom McClintlock is a tribal friend as well, for clearly understanding Indian freedom from state and federal interference. It bears repeating that McClintlock calls Indian reservations "islands of freedom," and that proper understandings on Native issues often cross the great American ideological divide.

Finally, Fund goes after the Democratic plan to impose a hefty tax increase on cigarettes. This too will help the tribes, who now will likely sell more tobacco products. But it is in his assumption that tribal lobbying for a bill to protect sacred sites will be nothing more than an "Indian shakedown" that Fund crosses the line. The tribes (pray for it), would have a voice over development within five miles of sensitive sacred areas.

Of course, the notion cannot be countenanced by Fund's crowd that tribes might be serious and in demand of basic respect in regards to sacred sites and ceremonial places. No, everything about the tribes must be painted as "sleazy," "unseemly," "tainted," and so on. These guys are trying to find the jugular. They haven't hit it yet. But they sure are trying.

To Indian leadership we say this. Our ancestors have experienced similar tactics and attacks many times throughout our history. Honor them by acting with the utmost vigilance and mobilize now to address these imminent threats. Running deep within the dark passages of the American Indian experience -- beyond the campaigns of death (to which California's Natives can fully attest) and the thefts of Indian assets and beyond the blankets infested with smallpox and the coerced religious conversions -- it must be understood that foreshadowing each successive wave has been an American blanket of lies.

JOHN FUND'S POLITICAL DIARY

Indian Givers—II
Tribes that run California casinos aim to run the whole state.

Wednesday, September 24, 2003 12:01 a.m. EDT

California state judge Loren McMaster ruled this week that Lt. Gov. Cruz Bustamante violated campaign laws by paying for a TV ad campaign with more than $3 million from Indian casinos and unions, donated in violation of state contribution limits. Richie Ross, Mr. Bustamante's campaign manager, says the campaign has already spent the money and thus can't comply with the judge's order to return it to the donors. The controversy will dog Mr. Bustamante's campaign as well as raise questions about the disproportionate influence that Indian casinos now exercise in California government.

When Californians voted in 2000 to give Indian tribes a monopoly on casino-style gambling in the state it was in part out of guilt for the exploitation and poverty that are part of the tragic history of indigenous Americans. But now the tables have turned, and massive political contributions from Indian tribes may determine who the state's governor will be and give the Indians unassailable political clout. Mr. Bustamante, the Democrat who is leading in the polls for the Oct. 7 recall election, is totally supportive of tribal interests. His own brother manages an Indian casino.

Key Indian tribes aren't satisfied with pumping more than $5 million into Mr. Bustamante's campaign. Polls suggest that Mr. Bustamante has stalled, so the only way to prevent a surge from Republican Arnold Schwarzenegger may be to shift some of his conservative support to maverick State Sen. Tom McClintock, who is running between 14% and 18% in the latest surveys. Last Friday the Morongo Band of Mission Indians began airing independent-expenditure ads in support of Mr. McClintock. The Sycuan Band of the Kumeyaay Nation has also ponied up a large sum for a similar independent expenditure.

John Stoos, Mr. McClintock's campaign manager, told me that his boss has nothing to do with the ad campaigns but welcomes them as appropriate support given the senator's longtime backing of tribal sovereignty. Jon Fleischman, a former president of the conservative California Republican Assembly, says "it makes sense that Bustamante would have his Indian tribe allies 'use' McClintock's candidacy to plow into Schwarzenegger from the right, and pull down his numbers."

The Indians apparently agree. The Morongo TV ad touts the news that "independent polls show that McClintock has the momentum to win." Sources tell me they have seen a memo from David Quintana, the legal counsel for the California Nations Indian Gaming Association, that was sent to tribal leaders. In it Mr. Quintana raised a warning flag about Mr. Schwarzenegger's positions and his reliance on several aides to former governor Pete Wilson, a skeptic on the expansion of Indian gambling. "This is war, we're going after Arnold Schwarzenegger," the memo concluded. The decision to invest in an effort to stop Mr. Schwarzenegger was made at a private strategy meeting last month, from which several more-moderate tribes were excluded. Participants discussed the need to keep Mr. McClintock in the race on "life support."

In an interview, Mr. Quintana complained that Mr. Schwarzenegger has directly attacked Indian tribes as "a special interest" but added that "any internal memo written by me about him should not be viewed as representative of the position of the tribes." But since that memo was written, millions in Indian casino money has flowed to promote Mr. Bustamante and Mr. McClintock at the expense of the Republican front-runner—at least until Judge McMaster's order halted some of the most brazen expenditures.

The irony is that Mr. Quintana is a Republican who previously served as tribal liaison for Senate Republican leader Jim Brulte. Worried that Indian tribes were giving exclusively to Democrats, Mr. Brulte had Mr. Quintana organize a summit with Indian leaders in 2001 to make a pitch for them to back Republicans also. Mr. Brulte remains a strong supporter of tribal sovereignty but admits he now has concerns about Indian interference in politics.

Indeed, Republicans are in danger of becoming as addicted as Democrats to Indian money. This summer, GOP state Sen. Jim Battin sent sales pitches to three Indian tribes offering them the services of his consulting firm in public relations and advertising. Mr. Battin sits on a committee that oversees gambling issues and represents a San Diego district with several Indian casinos. At first he defended his solicitations and noted that California law permits lawmakers to have outside business interests. Then mounting criticism from fellow senators, including Mr. Brulte, prompted him to drop his effort at rustling up business from the tribes.

But savvy Republicans say they can never compete with Democrats in pandering for Indian support. Last year Indian tribes made a large independent expenditure on behalf of the Libertarian candidate in a key state Senate race in an unsuccessful effort to steer votes away from the Republican nominee. That political play resembles the one the Indians are now making to keep Mr. McClintock in the race for governor.

The Indians' tactics are reminiscent of Gov. Gray Davis's intervention in the GOP primary for governor last year, when he spent some $10 million on TV ads attacking former Los Angeles mayor Richard Riordan in a successful effort to derail his candidacy and in favor of conservative Bill Simon. Mr. Davis went on to defeat Mr. Simon narrowly, only to face a recall effort this year after he was accused of covering up the severity of the state's fiscal crisis.

The Indians have also used their clout to punish Democrats. In 2001, Antonio Villaraigosa was on the verge of becoming the first Latino mayor of Los Angeles. But the Indian tribes recalled that in 1998, when Mr. Villaraigosa was Assembly speaker, he backed a bill to force the tribes to grant collective-bargaining rights to their employees, most of whom are non-Indian. The tribes plowed $350,000 into an effort to defeat Mr. Villaraigosa, who narrowly lost. This year they also contributed heavily to an effort to deny him a seat on the Los Angeles City Council. He won nonetheless. "Even the dimmest politicians in this state are fully aware of the Indians' ability to put them out of a job," concluded the Los Angeles Times.

So too are regulators. John Hensley had a long career in law enforcement and retired in 2000 as the No. 2 man at the U.S. Customs Service, where he had specialized in money-laundering investigations. A member of the Comanche tribe of Oklahoma, he was tapped in 2000 by Gov. Davis to chair the state's new five-member Gambling Control Commission, which theoretically has oversight responsibilities over Indian casinos. He told me the state body is especially needed because the National Indian Gaming Commission has a grand total of only 65 employees, including only two investigators and one auditor for the entire West Coast. But Mr. Hensley's commission was starved of both funds and cooperation. It never had more than four members, and the office of Attorney General Bill Lockyer said that enforcement of Indian gambling was the responsibility of local sheriffs rather than the AG's office.

After two years of unrelenting attacks, a frustrated Mr. Hensley announced he was leaving last year. He reluctantly stayed on until May of this year in hopes that Mr. Davis would name a suitable replacement. When he didn't, Mr. Hensley left. He is appalled that the governor has now promised the tribes that if he isn't recalled from office he would allow them to name two of the members on the Gambling Control Commission.

Gov. Davis has gone further and also promised to sign a bill that would give Indian tribes the power to stop development on private land within five miles of a sacred tribal site. The Indians would themselves be allowed to select the sacred sites and then keep their location secret. The potential for abusive shakedowns of developers is obvious to anyone. The bill failed at the 11th hour in the state Legislature this month, but even its opponents say it will likely pass and become law if either Mr. Davis or Mr. Bustamante is the governor.

The Indians are seeking all these additional advantages at a time when they are already sitting pretty. The Los Angeles Times calls them "California's principal growth industry." Because they enjoy tribal sovereignty and pay no property, sales or corporate taxes, the state's 54 Indian casinos rake in over $5 billion a year, a sum bigger than the take in Atlantic City and more than half that of neighboring Nevada. Indian slot machines can legally offer a payout of only 70 cents on the dollar, compared with 90 cents at Las Vegas casinos. They can allow gamblers under 21, and they also make a pretty penny selling tax-free cigarettes.

To protect all that loot, the tribes have become the biggest political givers in the state by spending $125 million on California politics since 1998. Untold millions that can't be traced have been contributed by individual tribal members who are flush with cash from payouts of casino profits. Indian tribes are also exempt from the contribution and issue-advocacy bans in the McCain-Feingold campaign-finance law.

Of course, only a small minority of Indians benefit from any casino bounty. The New Republic reports that of 300,000 Californians who identify themselves as Indians only 32,000 are members of federally recognized tribes who can offer gambling. Less than a third of that number belong to the tribes that now operate casinos. Some of the wealthiest casino tribes have very few members: Rumsey has 42, Cabazon has 25, and the Augustine tribe has only one adult member. The tribes with casinos do contribute to a fund that doles out some money to other tribes, but Indians from unrecognized tribes don't benefit at all.

Opponents say that nationwide gambling has developed problems that call into question its claims as economic self-sufficiency program. Leo McCarthy, a former Democratic lieutenant governor, worries that the Indians are on the verge of winning approval for new gambling palaces that are much closer to cities. He fears that the number of problem gamblers in California could double to 1.4 million, a tremendous social burden the tribes will do little to pay for. "If gambling isn't properly regulated it attracts loan sharking, money laundering, drugs and organized crime," says Mr. Hensley. "Groups of dubious Indian descent often act as front-men for powerful non-Indian investors hoping to reap gambling riches," says journalist Micah Morrison. "They often influence politicians into looking the other way at whatever they do."

Jill Stewart, a syndicated columnist, says that Indians should be concerned that their image is quickly changing from that of people who deserve a helping hand to become self-sufficient to one of "sneaky, backroom players in politics who are increasingly viewed as bad neighbors." Most Indians don't benefit from gambling, but all are tarred by the tactics of the casino owners. Neal McCaleb, the head of the federal Bureau of Indian Affairs, also is concerned about the hardball tactics he sees in California. "It makes me wonder what's next."

An ever more powerful Indian gambling lobby, it would appear. Just last week the Pauma Indian Band, which has 176 members, announced it had inked a $250 million deal to build a giant Caesar's Palace casino and 500-room hotel on tribal land in San Diego. Should Mr. Davis survive or Mr. Bustamante succeed him, the betting is that the Indian casino owners would become the lobbying kingpins of state government. "In Sacramento, the tribes never lose," says Dan Walters, a columnist for the Sacramento Bee and the dean of the Capitol press corps. "They always get their way. That may be even more true after the election in October."