California gambling officials met with representatives from the gaming tribes Wednesday to try to work out one of the more important details in the compacts: How to monitor and measure gaming revenues.
At issue are “minimum internal control standards,” or MICS, which outline how to keep track of money from the moment it leaves a gambler’s hands to when a portion of it ends up in state coffers. No other gaming issue so directly pits tribal sovereignty against the state’s desires to attain guaranteed gaming revenues. Meanwhile, critics of tribal gaming say a recent federal-court decision could leave the state in legal limbo, unable to verify revenue numbers reported by the tribes.
The Tribal-State Regulatory Association is examining regulations proposed by the state. This body consists of representatives from each of the state’s 66 gaming tribes, plus one seat each for the state Gambling Control Commission and the Bureau of Gambling Control in the state justice department. Tribes were provided with this document in early April, but it has yet to be made public. The Assembly Governmental Organization Committee, which oversees gaming, will also take up the MICS issue at a hearing on May 14.
“I know there is the perception that there is a gap in the enforcement of regulations,” said Anthony Miranda, chairman of the California Nations Indian Gaming Association. “I don’t think that’s the case.”
However, an October decision in the District of Columbia Circuit Court has some gaming critics worried. The court reiterated two earlier decisions that had been appealed by siding with the Colorado River Indian Tribes over the federal National Indian Gaming Commission. Known in gaming circles as the CRIT decision, it found that the NIGC did not have the power to oversee Class III tribal gaming, such as slot machines.
This is important for California because earlier tribal compacts cited federal MICS. This left the state in the position of establishing MICS with the tribes. In fact, a March 2 letter from GCC chairman Dean Shelton to some of the states most important tribal-gaming leaders laid out these worries in stark terms. The CRIT decision, Shelton said, “altered the regulatory landscape for tribal gaming in California. It goes on to reference today’s meeting at the Fantasy Springs Resort Hotel & Casino in Indio.
“In the light of the CRIT decision, we wanted to have a more active role,” said Anna Carr, deputy director of the state GCC.
In fact, the second sentence of the draft regulations cites the decision using very similar language. The regulations state, “Each tribe shall engage an independent Certified Public Accountant to provide an annual audit” using “agreed-upon procedures.” These reports would be due to the state within 120 days of the end of each tribes gaming fiscal year.
There are a number of potentially thorny issues. One section lays out procedures for on-site external audits performed by the GCC, something sure to upset many tribal-sovereignty purists. There is also a 30-day dispute resolution procedure if the tribe and the state disagree over these audits.
Assembly GO chairman Alberto Torrico, D-Newark, said he has two major concerns. First, what, if any, enforcement power the state will have, given the potential “vacuum” created by the CRIT decision. The other concerns the methods of determining “net win,” or what the state gets a percentage of.
He went on to say that a letter sent last week by the Department of Finance to many in the Legislature amounted to pressure to fast-track five amended gaming compacts. The letter warned of $1.26 million in lost revenues for every day past May 15 that the compacts remain in limbo.
Torrico said that the Tribal-State Regulatory Association is a contentious body that so far has only ever approved one set of regulations: for emergency
evacuation procedures for casinos. In other words, he said, getting an expedited sets of MICS by the May 15 deadline is unlikely.
“I don’t think the governor has the authority to fast-track these compacts,” Torrico said.
Gaming critics say they want a more open process, leading to a statewide set of MICS. GCC’s Carr noted that once the tribes agree to MICS, they will go through a standard period of public comment and review.
Cheryl Schmit, director of the anti-gaming group Stand Up for California, said her group has two main goals when it comes to MICS. The first is making sure the state has the access rights to enforce whatever compacts they eventually sign; the second is ensuring that the same MICS are in effect for every tribe.
“Can you imagine the nightmare it would create for regulators if each compact is just a little bit different?” Schmit said. “We need a uniform policy.”
Contact Malcolm Maclachlan at