Department of Finance lowers estimated revenue from compacts

The Department of Finance has lowered the estimate for the financial
contribution to the state from the five amended Tribal Gaming Compacts
from $506 million to $382 million for the current fiscal year.

The changes were detailed the revisions in a letter sent Thursday to two
dozen legislators, consultants and budget officers. The letter cites
“testimony presented by the tribes” during hearings on the compacts in
the Senate Governmental Organization (GO) Committee hearings held on
April 10 and 11th . It also notes “two tribes will not be adding
devices at the level originally thought, and it will take more time to
receive and install the new devices than assumed.”

Many budget analysts, including the non-partisan Legislative Analyst, have voiced skepticism about the administration’s budget assumptions regarding the compacts.In his January proposal, Schwarzenegger estimated the state would receive more than half a billion dollars from the five pending new compacts.

The Department issued the original estimates on January 10 during
Governor Arnold Schwarzenegger’s annual early-year budget presentation.
The letter states “if we knew then what we know now,” not only would the
current year estimates be lower, but the 2008-9 estimate would also be
reduced from $542 million to $428 million.

The letter goes on to note that even this year’s lower estimates won’t
be met if they compacts aren’t approved by May 15. Each day after that,
the letter says, will cost the General Fund $1.26 million.

The letter also notes that the Administration plans to transfer $40
million of the gaming revenue starting in 2008-9 to shore up the Indian
Gaming Revenue Trust Fund (RSTF). Copies were sent to both the Senate
and Assembly Appropriations, Budget and GO Committees, as well as
Legislative Analyst’s Office and the State Gambling Control Commission.

According to the January budget numbers, the state already faces a
“gross operating deficit” of $1.8 billion for the current year, Finance
Director Mike Genest noted at the time that the state was basically set
to break even once they “backed out” payments on the deficit bond and
other factors.

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