Costly Battle Over Casinos Looms

*Schwarzenegger aims to raise up to $20 million to defeat two initiatives. He is set to sign his own tribal deal Monday to boost state coffers.

By Peter Nicholas, Times Staff Writer

SACRAMENTO â€" Gov. Arnold Schwarzenegger is preparing to raise as much as $20 million for an aggressive campaign to defeat two gambling initiatives on the November ballot.

Schwarzenegger's political advisors are assembling a campaign team and planning to open a headquarters for the effort. One initiative could end Indians' monopoly on Nevada-style gambling; the other would allow unlimited expansion on tribal land.

The governor has promised to oppose the initiatives as part of a deal he is scheduled to sign in the capital Monday, whereby a handful of Indian casinos would contribute $1 billion to the state and $275 million a year thereafter. They would in turn be able to expand their gambling operations.

Money from the tribes is considered important to another Schwarzenegger goal: delivering a state budget on time, with no new taxes.

"We will raise the money we need to be competitive. Obviously, we have the governor and we will use him appropriately," said Beth Miller, a Schwarzenegger political strategist. "It's going to be an expensive campaign."

As Schwarzenegger girds for the fight, his policy of not accepting campaign donations from tribes could be reconsidered.

During the recall, he released a TV spot in which he made the tribes the face of "special interests" flooding the capital with campaign donations.

"All the other major candidates take their money and pander to them," he said in the ad. "I don't play that game."

Now that at least some tribes are entering into long-term agreements with the state â€" and would no longer be negotiating with the governor â€" Schwarzenegger aides suggest that the campaign money would not necessarily be tainted.

"It can change their status…. It's an interesting question," said one Schwarzenegger aide, speaking on condition of anonymity.

Sponsors of the two initiatives said they were not about to surrender to the governor.

The Agua Caliente Band of Cahuilla Indians is pushing the initiative that would allow unlimited expansion of gambling on Indian land and in return require that tribes pay 8.84% of their net revenue to the state.

Tribal spokesman Gene Raper said in an interview: "We're not deterred at this point as to whether we go ahead…. We never expected the governor to be with us."

Greg Larsen is spokesman for the other initiative â€" backed by racetracks and card rooms â€" that would require the tribes to pay 25% of their profits to local governments. If they refused to abide by that or any of the measure's other provisions, the tracks and card rooms would split 30,000 slot machines and give 33% of profits to police, fire and education programs.

Voters will "clearly see through the issues and understand what's at stake," Larsen said.

The looming fight could prove awkward for one of the governor's main political aides. George Gorton gets a retainer fee from one of the campaign committees promoting Schwarzenegger's agenda. He is also a strategist working for the card club-racetrack initiative.

Gorton said Friday that he would continue in both roles, having cleared it with the governor's office. "It's not like it's the first time anything like this has ever happened," he said. "Political consultants frequently end up on opposite sides of their friends."

Schwarzenegger has turned tribes from political foil into favored partner. For tribes participating in his deal, this "is a complete turnaround. Now we're talking about a full partnership," said a senior aide to the governor.

The governor's office said aides would not speak for the record about the deal until it was formally signed.

The Indians are but the latest constituency the governor once demonized, only to embrace as "partners" under the demands of the job. As a candidate, he ran against Sacramento, holding up a broom at a campaign stop outside the Capitol to symbolize a commitment to sweep the building clean of special interests.

But as governor he has assiduously courted some of the same legislative leaders who have helped define the Capitol culture.

"What we've seen is basically a 180-degree turnaround, which, by the way, is somewhat understandable if you understand California politics, where interest groups are so powerful in setting and carrying out the public agenda," said Larry Gerston, a political science professor at San Jose State.

Schwarzenegger is still predicting that he will sign a budget before the new fiscal year begins July 1. But there are stubborn points of disagreement with Democratic leaders.

The pending deal with the tribes would help the governor on several fronts. It would permit him to say he delivered on a major campaign promise: forcing the Indians to give up a larger chunk of their winnings to help the state close its deficit. It would pressure the remaining 100-plus tribes to join the pact. Every tribe that buys in boosts the annual payments to the state.

And it would mean a windfall for the state budget. That could speed the budget's passage.

Schwarzenegger had estimated in his budget that he would wrest $500 million from the Indians through the negotiations. If the figure turns out to be $1 billion, that means extra money for state roads that need repair, extra money available for programs that serve the disabled and frail elderly, extra money for higher education.

As it now stands, the Democrats desire a budget that has about $2 billion more spending than Schwarzenegger wants to see.

"It's very helpful," said Assembly Speaker Fabian Nuñez (D-Los Angeles). "The more money in the coffers, the easier it is to negotiate. This gets us closer."

What Schwarzenegger has gotten from the Indians to date falls short of what he had once anticipated. He had talked of negotiating for 25% of casino profits, or more than $1 billion per year. The figure now being mentioned is 15%.

Schwarzenegger's office says that is all he could get. Had he demanded a bigger piece of the pot, the tribes would have walked away, according to one aide.

"These were negotiations that had taken months," the aide said. "The nature of negotiations implies give and take."

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