How Arnold Schwarzenegger Violated Tribal Sovereignty
States and governors just can’t seem to control themselves; they cannot keep their hands out of tribal pockets. The concept that tribal governments have rights and financial needs has eluded them for so long they have become accustomed to ignoring them.
But occasionally a governor gets a hand slap for reaching too far into tribal pockets and breaching our sovereignty. An example is the Rincon Band of Luiseño Indians' legal victory over former California Governor Arnold Schwarzenegger for illegal taxation and bad faith in renegotiating Rincon’s gaming compact.
The case affirms that occasionally tribes have the power to tip the imbalance of power states enjoy.
Schwarzenegger was a political blackmailer from the outset of his career as a California politician. He used tribes and gaming income as a wedge issue in his run for governor. It may not have been “playing the race card,” but it was a none-too-subtle “us versus them” strategy.
In an expensive television campaign, he asserted that the former governor’s deal with the gaming tribes had been too favorable to California Indians. He vowed that he make tribes pay their “fair share.” The backdrop for the campaign was the state’s continuing budget deficits and the voters’ "no new taxes" mentality.
Schwarzenegger found a painless solution for California voters: Tax the rich gaming Indians. It didn’t matter that most California tribes are far from rich—they're actually closer to destitute—and only a few tribes earn big bucks through gaming.
Schwarzenegger carried out his promise to make tribes pay more. He accomplished that by renegotiating compacts or approving new compacts with tribes only when they agreed to be taxed at 15 percent and up to 25 percent of net win. Since there was no consideration of overhead and deductions for operations, a net win for the Rincon Band, asking to renegotiate to add 900 new slot machines, would have actually been a 30 to 40 percent tax.
Furthering his arrogance and his administration’s failure to abide by the law that protects tribal gaming from grasping governors, he placed the tribal fees into the state’s treasury, not IGRA-approved revenue sharing trust funds.
Gaming, according to federal law, was meant to help tribal governments and communities get on our feet. That's a fact—a fact that didn't fit into Schwarzenegger's political agenda or register on his administration’s radar. Tribal sovereignty certainly wasn’t high on his list of concerns either.
Aside from the illegal use of tribal fees and monetary excesses, some of the more egregious aspects of the Schwarzenegger compacts stripped tribes of sovereign immunity where disagreements existed, requiring arbitration or adjudication in state courts. Then there were MOUs that required tribes to hand over large amounts of tribal funds to local governments, supposedly to mitigate impacts—these had to be negotiated and signed before state approval, thus giving local governments leverage to demand excessive amounts of future tribal earnings to pay for obligations local governments, not tribes, owed their taxpayers.
For Rincon, the issue was sovereignty: Tribes cannot be forced to trade away our sovereignty to engage in an economic pursuit. The legal question, however, was also important: Could the Governor just thumb his nose at IGRA? The Rincon law suit dragged on for six years, with the Schwarzenegger administration issuing excuses for why they could not approve a compact with the Rincon Tribe every step of the way. Excuses like “There are no more slot machine licenses available for Rincon,” despite the fact that many tribes signing the Schwarzenegger compacts were given unlimited licenses—for a price, a very high price. Giving 98 percent of our earnings to the state was a price that Rincon refused to pay.
The final argument the state put forth to the U.S. Supreme Court was the most honest, although still illegal: “The state has fiscal problems and we need tribal money.” A bit of irony, as there has been some reversal in the monetary status of some tribes, but it was the same old argument: “The state comes first, and tribes sacrifice.”
What we learned is what Indians have always known—the state will almost always place its rights and needs above the tribes. Moreover, many non-Indians will almost always place their needs over tribal needs. We knew we had the law—IGRA—on our side, and if the case was decided on its merits, as it was in the San Diego Federal Court and 9th Circuit Court of Appeals, we would win. We realized the risk in trusting that judges will follow the law over politics, in any given court, at any given time.
But this time the Supreme Court did the right thing and let the lower court decisions stand.
Even with the risks implicit in our law suit, many tribes united around our lawsuit and court-ordered negotiations, viewing it as an opportunity to improve present and future compacts. With the leverage of the courts and IGRA, we are working with a new governor to stop the wholesale extortion of tribes being forced to agree to the Schwarzenegger demands. The first things we are inking out of the new compact are conditions that violate our sovereignty.
We believe this governor offers an opportunity for a more cooperative relationship and mutually beneficial agreement. Herein lays the hope that states and governors can finally begin to view tribes as partners, rather than impediments, or ATMs.
Bo Mazzetti is Chairman of the Rincon Band of Luiseño Indians.
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