High court may decide on state's bid for revenue

High court may decide on state's bid for revenue


The U.S. Supreme Court asked the Obama administration Monday to weigh in on whether California can require Indian tribes to share hundreds of millions of dollars in gambling revenue with the state when they expand their casinos.

The Ninth U.S. Circuit Court of Appeals in San Francisco ruled in April that Gov. Arnold Schwarzenegger was violating federal law in insisting that tribes seeking approval for more slot machines turn over some of their revenue to the state. The law prohibits states from taxing Indian tribes.

The state has asked the Supreme Court to review the ruling and noted that the U.S. Interior Department has approved tribal compacts with revenue-sharing agreements in many states, including California. However, the department recently cited the appeals court ruling when it rejected a contract the Schwarzenegger administration had negotiated with another Indian tribe.

Fifteen California tribes with revenue-sharing contracts generated $370 million for the state in the fiscal year that ended in July, the state Finance Department said.

The potential national significance of the case was underscored Monday when the court asked President Obama's Justice Department to submit its views. The administration's position could determine whether the justices decide to take up the case in their 2011-12 term or let the appeals court ruling stand.

The case comes from San Diego County, where the Rincon Band of Luiseño Mission Indians proposed in 2003 to add 900 slot machines to the 1,600 it already operates at its casino.

The Schwarzenegger administration said it would approve the expansion only if the state received $38 million of the expected $40 million annual profit from the expansion.

Federal law requires Indian tribes to negotiate casino agreements with their states and allows a state to collect a portion of casino revenue to help pay regulatory costs, defray local governments' casino-related expenses and subsidize tribes that have no casinos. But the law prohibits states from directly taxing tribes to increase state revenue.

The appeals court, in a 2-1 ruling, said the state's demand amounted to a tax.

Federal law was not intended to give states control over Indian gambling to the extent that "each state can put the opportunity to operate casinos up for sale to the tribe willing to pay the highest price," Judge Milan Smith said in the majority opinion.

The case is Schwarzenegger vs. Rincon Band, 10-330.