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PRELIMINARY AND INCOMPLETE: PLEASE DO NOT QUOTE OR CITE WITHOUT PERMISSION.

CALIFORNIA’S GAMING PROPOSITIONS: HOW HAS THE EXPANSION OF GAMING RIGHTS AFFECTED

LOCAL COMMUNITIES?1

John L. Ortiz2

California State University, Sacramento

Sean P. Corcoran3 California State University, Sacramento

October 2004

ABSTRACT: In the past twenty years, the growth of tribal casinos has given the state of California the distinction of being second only to Nevada in the number of casino gaming operations. Upcoming state-wide propositions could potentially double the size of existing casinos in the state. Yet, there has been surprisingly little research on how legalized casino gaming has already affected the state of California. This study investigates the effects that California Native American casinos have had on California communities to date. In particular, it examines how casino gambling has affected local tax revenues and expenditures, bankruptcies, employment, and crime. In both cross-sectional and panel regression analysis, we find a modest correlation between Indian casinos and county employment rates. On the other hand, we find that counties with a larger casino presence experienced somewhat higher crime and higher rates of personal bankruptcy. This study also finds that casinos have a positive correlation with certain categories of tax revenues and expenditures. In most cases a stronger relationship was found when the number of Indian gaming tables, as opposed to the number of slot machines, is used as a measure of casino presence.

1 This research was conducted by Mr. Ortiz as part of the McNair Scholars Program at California State University, Sacramento, under the supervision of Sean P. Corcoran, Assistant Professor of Economics.

2 Undergraduate student and McNair Scholar, Department of Economics, California State University Sacramento, 6000 J Street, Sacramento, CA 95819-6082. Email: johnortiz6@yahoo.com, fax: 916-278-5768.

3 Department of Economics, California State University Sacramento, 6000 J Street, Sacramento, CA 95819-6082. Email: corcoran@csus.edu, phone: 916-278-7653, fax: 916-278-5768.

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Major Points of this Working Paper:

• In the past 20 years, the growth of Native American casinos has given the state of California the distinction of being second only to Nevada in casino gaming operations. Upcoming propositions could potentially double the size of existing casinos in the state. Yet, there has been surprisingly little research on how legalized gaming has already affected the state of California. This working paper investigates the effects that California Indian gaming casinos has had on California communities to date.

• We focus on outcomes at the county level, rather than town or city level. In future

research (with richer data) we intend to examine the effects of Native American casinos at a more local level.

• In order to look at the relationship between casino presence and various social and

economic outcomes, we used the 2004 Native American Casino directory to map casinos to counties and compute the aggregate number of slot machines and the aggregate number of gaming tables in each county. These counts constitute our measure of “casino presence” within a county.

• Key Findings:

o Examination of a panel of California counties between 1990 and 2000 finds that

(controlling for various county demographics) counties with a greater casino presence were associated with a somewhat lower unemployment rate than counties with a lesser casino presence. Using counts of gaming tables as our measure of casino presence, we find that a one standard deviation increase in gaming tables (about 42 tables) is associated with a roughly 1/3 percentage point lower annual average unemployment rate across counties (compared to a sample mean unemployment rate of about 7.8 percent in 2000).

o In a cross section of California counties in 2000, we find that counties with a

greater casino presence were associated with somewhat higher tax revenues, particularly in two major categories of taxes closely related to casinos and tourism—hotel occupancy taxes and tobacco taxes (gaming tables were used as our measure of casino presence).

o In a cross section of California counties in 2000, we find that counties with a

greater casino presence experience somewhat higher crime rates, in most categories of crime (again using gaming tables as our measure of casino presence). Aggravated assaults and violent crime were two categories of crime that were strongly related to casino presence.

o In a cross section of California counties in 2000, we find that counties with a

greater casino presence were associated with higher bankruptcy filing rates, especially non-business (i.e. individual) Chapter 7 filings. This result holds whether gaming tables or slots are used as a measure of casino presence.

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• Most of our results (excepting those on employment) are conclusions from cross-

sectional analyses of California counties in the year 2000. While we do control for a number of county-level demographics and economic variables in our analysis, there is always the concern that we have omitted potentially important unobserved variables that may be correlated with both casino presence (and size) and these county-level outcome variables. So, additional research involving a before-and-after approach will be required before firmer conclusions can be made. On the other hand, our results do seem to run parallel to Evans and Topeleski’s (2002) findings of increased employment, higher crime and rates of bankruptcy in U.S. counties after the opening of Native American casinos.

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I. Introduction

Over the past twenty years, the explosive growth of Native American casinos in

California has given the state the distinction of being second only to Nevada in the number of

casino gaming operations. In 2004, there were 162 gaming locations in California, including

tribal casinos, card rooms, race tracks, and cruise ships.4 Nevada—which allows all classes of

gaming—has 334.5 According to the annual directory of Indian casinos published by Native

American Casino magazine, Indian casinos in 2004 operated 53,631 slot machines in the state

along with 2,638 gaming tables.6

Casino-style gambling in California is likely to continue on its upward trajectory. On

June 21, 2004, California governor Arnold Schwarzenegger signed new compacts with five

gaming tribes, allowing them to significantly expand their existing operations.7 In addition, two

initiatives on the November 2004 ballot could potentially double the size of gaming industry in

the state, either through the expansion of existing tribal casinos or the legalization of slot

machines in local card clubs and race tracks. Despite the large and growing presence of casino

gaming in California, there has been surprisingly little research on how legalized gaming has

already affected the state’s communities. In this study, we conduct a preliminary investigation of

the effects that Native American casinos have had on California communities during the 1990 –

2000 period. In particular, we examine how casino gaming in California is related to tax revenue

4 from American Casinos and Gambling in the United States, http://us.casinocity.com (accessed April 15, 2004).

5 Ibid. Does not include gambling machines in airports, service stations, etc.

6 from Native American Casino magazine, April 2004.

7 “State Nears Five Gaming Pacts,” Sacramento Bee, June 16, 2004.

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collection, expenditures on social services, individual and business bankruptcies, employment,

and crime, at the “community” (county) level.

II. A Brief History of Gaming in California

Hill (1998) provides a concise history of the gaming industry in California to 1998. Prior

to that year, gambling in California consisted primarily of the state lottery (authorized in 1984),

wagering on horse races, “charitable” gambling (church bingo, for example), and so-called “card

rooms.” Card rooms have a long history in California, dating to the gold rush era; these facilities

are authorized by the state to provide a casino-like environment to players, but are not permitted

to “bank,” or hold a stake in the outcome of the game. In May 2004, there were 91 of these card

rooms licensed by the California Gambling Control Commission, down from 176 in 1997 (Hill,

1998). In 1997 there were 41 Native American gambling operations on California reservations,

but these consisted almost entirely of bingo halls, off-track betting, and card room-like

operations. At that time, many reservations operated video machine gambling (which offered

simulated card games or slot machine-like games), although these were controversial and

considered by many at the time to be illegal.

After the historic U.S. Supreme Court decision in 1987 in California v. Cabazon and

Morongo Bands of Mission Indians, Congress passed the Indian Gaming Regulatory Act (IGRA)

which formally separated gambling activities into three classes: Class I (social, traditional, or

ceremonial games), Class II (bingo, and card games already authorized by a state), and Class III

(horse racing, casino-style card games, and video and slot machines). Tribes wishing to offer

Class III games were required to enter into tribal-state agreements over the nature and scope of

their operations. As of 2002, over 200 federally recognized tribes were operating casinos under

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tribe-state compacts nationwide (Evans and Topieski, 2002). Most tribes in California, however,

did not reach agreements with the state until 1999, after long and acrimonious negotiations with

then-governor Pete Wilson and the ultimate passing of Proposition 1A, which explicitly

authorized the governor to negotiate compacts with Indian tribes.8 Since 1999, 63 tribes have

negotiated compacts with the state of California and 53 are currently operating casinos. A list of

these casinos, together with counts of slot machines and gaming tables located in each, is

provided in Appendix A.9

On June 21, 2004, California governor Arnold Schwarzenegger renegotiated existing

compacts with five gaming tribes, allowing them to significantly expand their current operations.

These new compacts allow the tribes to increase the number of slot machines in their casinos by

2,000 machines (double the previous limit). In return, California will receive a $1 billion bond

for transportation measures this year, and annual payments of up to $250 million per year until

2030.10

In November 2004, California voters will face two propositions, each having the potential

to vastly change the nature of gaming in the state of California, and render these newly signed

compacts null and void. These propositions, if passed, could result in the legalization of slot

machines in California card clubs, or the expansion of gaming rights for tribal casinos. In either

case, the California state government stands to gain — either through a tax on slot machine

revenues or an increase in corporate tax revenues from gaming Indian nations.

8 See http://www.cgcc.ca.gov/enabling/1A.pdf for a description of Proposition 1A. A “model” tribal-state compact is provided by the California Gambling Control Commission at http://www.cgcc.ca.gov/enabling/tsc.pdf.

9 Counts of slot machines and tables come from the Native American Casino magazine directory, 2004.

10 “State Nears Five Gaming Pacts,” Sacramento Bee, June 16, 2004.

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The first of the propositions (Proposition 68), entitled the “Gaming Revenue Act of

2004,” is strongly supported by the state’s horseracing and card room industries and gives the

governor permission to renegotiate tribal-state compacts to allow for a 25 percent tax on all

current slot machines and gaming devices, and to force Indian reservation casinos to comply

with state laws and accept state court jurisdiction.11 Currently, the state courts do not have

jurisdiction on tribal land, and infringement on the rights of tribal courts could lead to the

destruction of tribal nations’ sovereignty. If the gaming tribes do not agree to this tax on slot

machines and gaming devices, the proposition authorizes sixteen racetracks and non-tribal

gaming casinos (primarily card clubs) to operate 30,000 new slot machines or gaming devices,

provided they pay a 33 percent revenue tax to fund public safety, regulatory programs, and

education. Such an expansion of gaming activities to racetrack and card rooms could have a

profound affect on the California economy. According to Munk (1995), existing slot machines

in California average approximately $200 a day. If Munk’s estimate is correct, the legalization

of an additional 30,000 slot machines could generate over $700 million in tax revenue for the

state.

The second proposition (Proposition 70), put forth by the Agua Caliente Band of Cahuilla

Indians and entitled the “Indian Gaming Fair-Share Revenue Act of 2004,” seeks to remove

existing limitations on the number of slot machines each casino can operate.12 It also seeks to

remove the limitation of two casinos that each tribe can operate, and allow for the legalization of

certain Class III casino games such as roulette and craps. This proposition would also extend the

life of the renegotiated contracts from 20 to 99 years. In return, the tribal casinos would agree to

11 See http://www.ss.ca.gov/elections/bp_nov04/prop_68_text_of_proposed_law.pdf.

12 See http://www.ss.ca.gov/elections/bp_nov04/prop_70_text_of_proposed_law.pdf.

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pay the California corporate tax of about nine percent on operating revenues. This could

translate into several hundred million dollars annually for the state.13

If both propositions are passed, each contains a contingency plan that would deal with

any inconsistencies between the two. The Gaming Revenue Act directs the courts to adopt all

provisions of both measures to the greatest extent possible. The Fair Share Revenue Act,

however, simply allows for the measure with the greatest number of votes to override the other.

In either case, California is likely to gain tax revenue that can fund special programs such as

education, law enforcement, and transportation. On the other hand, the expansion of gaming in

California may have a number of other effects on California communities. In this paper, we set

out to investigate the social and economic impact that existing casinos have already had on local

communities.

III. Related Literature

The effect of casino gambling on local communities has long been an interest of social

scientists. For example, Gazel, Rickman, and Thompson (2001) examined the effects of casinos

on crime in a panel study of Wisconsin counties. Barron, Staten, and Wilshusen (2002) showed

how gambling relates to bankruptcy filings across many counties in the U.S. Rivenbark (1998)

focused his research on tax revenue collections in Mississippi. Yet, despite the large and

13 An approximation here is more difficult, as it is unknown how much Indian reservation casinos actually generate in revenues (they are not required to report their financial status to the state due to their sovereignty, however, they do report to the federal government).

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growing size of California’s gaming industry, there has been surprisingly little research on how

gaming has affected California communities.14

Most communities legalize gambling to take advantage of the positive economic effects

that are thought to “spill over” into the local economy (Eadington 1998). However, the nature

and size of these economic effects are likely to vary with the type of gambling activity under

consideration. As Eadington (1998) explains, “destination resort” casinos appear to have a much

bigger influence on tourism and the local economy than local urban casinos that are thought to

“cannibalize” the surrounding business district. Eadington notes that most patrons of urban

casinos reside in the local community, so money spent in the casino takes away from other

entertainment businesses that might have benefited from it. Tribal gaming casinos tend to be

stylized in the form of destination resort casinos, because they are located on Native American

reservations, which are often far from major cities. These casinos typically include a hotel

connected to the casino, and visitors are often bussed in from remote locations.

A thorough assessment of the local impact of a casino requires an analysis of the

community both before and after gaming is introduced. Gazel (1998) suggests guidelines to

evaluate the positive and negative economic affects on the surrounding community. He

emphasizes the importance of accounting for many variables when conducting a cost-benefit

analysis of any particular casino, and concludes that the “market structure” of the casino plays an

important role in the net outcome for local economies, referring to the distinction between resort

destination casinos and local urbanized casinos.

A perfect example of how state governments approve gambling facilities in the interest of

filling state coffers can be found in the cases of Deadwood, South Dakota and Black Hawk,

14 This is primarily due, we suspect, to the very recent growth of Native American casino operations in

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Cripple Creek, and Central City, Colorado (Blevins and Jensen, 1998). The initial intent of

legalizing gambling in those communities was to create tourism for the then-dying old western

towns, and to stimulate economic growth. Blevins and Jensen conclude that the net effect of

legalized gambling was essentially zero — increases in gaming revenue were almost entirely

consumed by the rising costs of infrastructure, law enforcement, and administrative expenses.

These authors also found that, along with an increase in crime, there was a rise in the trend of

local businesses switching to gambling as a source of revenue to a point that local residents had

to drive to nearby towns to shop for everyday amenities.

Crime rates are one of the most studied and dissected phenomena related to gaming

activity. In an analysis of the effect of gaming on local crime rates, Friedman, Hakim, and

Weinblatt (1989) discovered through the use of a quasi-experimental design that the level of

crime in the Atlantic City region rose dramatically after the introduction of casino operations

there. Likewise, Gazel, Rickman, and Thompson (2001) find a direct relationship between

casino operations and crime in Wisconsin. Like the Friedman et al study, Gazel et al also find

strong “spillover” effects of crime on adjacent communities. Miller and Schwartz (1998) review

additional literature on the relationship between crime and casino gambling.

Bankruptcy filings have gained attention from researchers in recent years because of the

rise in individual filings in the United States (and the coincident rise in gambling). According to

Barron, Staten, and Wilshusen (2002) there has been a noticeable increase of filings in

communities where casinos have been constructed (even when controlling for such variables as

debt usage and expense shocks). Giacopassi, Nichols, and Stitt (2000) investigated sixteen

communities in Mississippi, Iowa, Illinois, and Missouri—eight communities that had recently

California, much of which has occurred since 2000.

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adopted casino gambling and eight that had not. They found a distinct relationship between the

rate of bankruptcy filings and the presence of riverboat and casino gambling in those state.

Interestingly, of the eight gambling communities studied, only one had a decline in bankruptcy

filings.

In a paper closely related to this one, Evans and Topoleski (2002) examined many of the

social and economic effects of Native American casinos on counties throughout the United

States. While they found a significant and positive impact of these casinos on employment and

poverty reduction (particularly on the Indian reservations themselves), they also found increased

violent crime, auto thefts, larceny, and bankruptcy rates in counties with casinos, relative to

counties without casinos.

IV. Data and Methodology In this paper, we use both cross-sectional and panel data analysis of California counties to

relate local casino presence to various social and economic variables. Using the 2004 edition of

the Native American Casino Directory (published annually by Native American Casino

magazine), we mapped tribal casinos in California to their county of residence and aggregated

the number of slot machines and gaming tables located in these casinos to the county level.

These county aggregates serve as our measures of “casino presence,” and are illustrated in

Figures 1 and 2.15 Slot machine offerings ranged from a low of 90 (in Modoc County) to a high

of 12,440 (in Riverside County). Tables ranged from only two per county (in both Modoc and

15 We chose to use total slots per county and total gaming tables per county as our measure of county casino presence, rather than the number of casinos per county, to avoid the difficulties of studying the effects of individual casinos of varying sizes.

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Lassen counties) to 333 (again, in Riverside County).16 Indian casinos are located throughout

the state of California, in a diverse array of environments (urban, rural, mountain, and coastal).

We regress measures of various county social and economic outcomes on our measures of casino

presence (slot and table counts), and control for a number of demographic and local economic

condition variables from the 2000 (or 1990 and 2000) Census of Population and Housing. Our

dependent variables can be placed in four general categories: fiscal (tax revenues and

expenditures), employment, bankruptcy filings, and crime. We discuss each briefly below.

Our selected county-level revenue measures were obtained from RAND California for

the years 1992 – 2000, and include (among other things) general revenues, sales and use taxes,

cigarette and tobacco taxes, permit revenues, and hotel occupancy taxes.17 We examine revenues

because—as stated in the proposed ballot initiatives—taxation is one of the primary motivations

for the recent Propositions. If a casino has any kind of positive effect on a community, through

either the creation of jobs, imported wealth, or second-hand spending of the imported wealth,

then it should be reflected in the amount of tax revenue generated by the community. If a

community is negatively affected (say through cannibalization, gambling loss claims, or a rise in

unemployment), we should observe a decrease in tax revenues.18 To the extent that fiscal

benefits are provided to levels of government other than the county, we are unable to measure

16 Because of our focus in this paper on Native American casinos, our county-level measure of tables excludes gaming tables in card rooms. For most counties, the number of tables in card rooms is insignificant, the one notable exception being Los Angeles County, home to the four largest card rooms in the state (Commerce Casino, Bicycle Casino, Hollywood Park, and Hawaiian Gardens, offering a total of 559 tables). In future research, we hope to incorporate measures of card room tables in our analysis.

17 See http://ca.rand.org/stats/statistics.html.

18 Although the state of California is not currently receiving tax revenues from slot machines in tribal gaming facilities, 10 percent of revenues do go to other non-gaming tribes for the betterment of native Californians as a whole (see http://www.cgcc.ca.gov/rstfi.html for details). Additionally, 3 percent of gaming revenues are collected by the local community to fund public programs.

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those here.19 County-level expenditure data was also collected from RAND California for the

same years. We looked specifically at expenditures on social services, public health, police

protection, medical care, and drug and alcohol abuse services (among other categories).

Our county-level employment data was obtained both from the Bureau of Economic

Analysis and RAND California, for the years 1990 – 2000. Eadington (1999) states, “a second

area of gains from casino gambling is the promises of ancillary economic benefits from having a

casino, such as job creation…” Supporters of casinos often claim that employment levels rise

with the addition or expansion of gaming to a community. We analyze county unemployment

rates to evaluate this claim.

County-level bankruptcy counts and bankruptcy rates (per 1,000 persons) were obtained

from RAND California for the years 1996 – 2000 (RAND, in turn, obtained its data from the

Administrative Office of the U.S. Bankruptcy Courts). We examine both Chapter 7 and 13

bankruptcies, among business and non-business (i.e. individual) entities.

Our county-level crime data (all in rates per 100,000) were also obtained from RAND,

and cover the years 1982 – 2002. We look at a number of categories of crime, including

burglaries, arson, domestic violence, motor vehicle theft, and robberies.

Finally, all demographic (control) variables come from the 1990 and 2000 decennial

Censuses. Descriptive statistics for these demographic variables are shown in Table 1.

Ideally, we would like to study California counties in a “before-and-after” type analysis,

where the “before” period includes years prior to the establishment of casino operations (in the

case of most tribal casinos in California, the early 1990s), while the “after” period includes some

years following the establishment of the casino. This is the approach taken by Evans and

19 In future research we intend to examine social and economic effects at more local levels (city and

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Topieski (2002) in their examination of Indian casinos nationwide. We do use this approach in

our analysis of unemployment—essentially, relating changes in unemployment to changes in

casino presence over the 1990 – 2000 period—however, this approach could not be used with

other outcomes due to data limitations (for example, our bankruptcy data begins in 1996).

Additionally (as Appendix A shows) many casinos in California did not officially begin

operations until 2000 or after, precluding a use of 1990 – 2000 comparisons. Thus, most of our

specifications use cross-sectional analysis, and should thus be interpreted with caution.

One concern is that any association between counties with greater casino presence and

socio-economic outcomes may be due to the presence of Indian reservations themselves (which

are traditionally high-poverty, high-unemployment areas). While this would likely be an

important issue when analyzing states with large Indian reservations (like New Mexico),

reservations in California are actually quite small in relation to their surrounding counties, as

Figure 3 indicates (the smaller the reservation, the less likely county statistics will be influenced

by reservation demographics).

V. Results We first use a panel of 58 California counties (1990-2000) to examine the relationship

between Indian gaming and county unemployment rates. The results are shown in Table 2.

Controlling for various county demographics (in particular, the race and age distribution of the

county), and allowing for a statewide time trend, this study finds that counties with a greater

casino presence were associated with somewhat lower unemployment rates. This negative

association holds whether slots or gaming tables are used as the measure of casino presence,

although the relationship is statistically significant only when gaming tables are used as our

town).

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measure (also, statistical significance is only at the 15 percent level; imprecise estimates are

likely due in part to our small sample size). This difference may potentially be attributed to the

labor requirements of gaming tables versus slot machines—to the extent that table games are

more labor-intensive, it seems reasonable that we would find a stronger relationship when tables

are used as our casino measure. Using this measure, we find that a one standard deviation

increase in casino tables (about 42 tables) is associated with roughly a 1/3 percentage point lower

unemployment rate across counties. Given a sample mean unemployment rate of about 7.8

percent, this would appear to be a small but nontrivial difference in unemployment rates.

In Table 3 we examine the relationship between various categories of county tax

revenues and expenditures and casino presence in a cross-section of all California counties in

2000. Controlling for various county demographics (again, the race and age distribution of the

county and the urban population share), and various economic variables (median family income,

and the county unemployment and poverty rates), this study finds that counties with a greater

casino presence were associated with somewhat higher tax revenues. All revenue variables,

except for business licenses and “less than city wide secured and unsecured taxes,” showed a

positive correlation when regressed against both the number of slot machines and the number of

Indian gaming tables, although few were statistically significant (again likely due to small

sample sizes). However, the relationship between room occupancy tax revenues and tobacco tax

revenues with both the number of slot machines and the number of tables was found to be

statistically significant at the 10 percent (tobacco tax) or 15 percent (hotel room occupancy tax)

level. By our calculation, a one standard-deviation increase in the number of gaming tables was

associated with an approximate $1.68 increase in per capita tobacco tax collection (compared to

a sample mean of $5.23 per capita) and a nearly $11.45 increase in per capita room occupancy

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tax (versus a sample mean of $22.34). The relationship between casino presence and county-

level expenditures on medical care, mental health, public health total social services and welfare

cash aid grants was largely statistically insignificant. One interesting exception, however, is the

relationship between casino presence (as measured by gaming tables) and police expenditures

(significant at the 15 percent level). By our estimation, a one standard deviation rise in gaming

tables was associated with a $15.33 rise in police expenditures per capita (the mean of which was

$96.22 in 2000).

In Table 4 we examine the relationship between county crime rates and casino presence

in a cross-section of all California counties in 2000. Controlling for county demographics and

various economic variables (median family income, and the county unemployment and poverty

rates), we find that counties with a greater casino presence were associated with somewhat

higher crime rates, in most categories. When regressed against the number of slot machines, all

crime variables, excepting arson, larceny, and domestic violence calls, showed a positive

correlation (although all are statistically insignificant). When regressed against the number of

gaming tables all results were qualitatively similar to those using the number of slot machines,

excepting a negative correlation with willful homicides. Only aggravated assaults and violent

crimes were statistically significant at the 10 percent level when regressed for the number of

tables. The California crime index (a composite measure of crime) was also somewhat

significantly related to the number of tables (just under the 15 percent level of significance).

Finally, we looked at the relationship between bankruptcy filings and casino presence in a

cross-section of all California counties in 2000 (Table 5). Controlling for county demographics

and various economic variables we find that counties with a greater casino presence were

associated with higher bankruptcy filings (we examine three categories of bankruptcies: Chapter

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7, Chapter 13, and All Bankruptcies).20 When regressed against the number of slot machines all

variables, except business filings in the All Bankruptcies category, showed a positive correlation.

When regressed against the number of Indian gaming tables business filings under all three

categories showed a negative correlation. Casino presence was significantly related to both non-

business and total Chapter 7 filing rates across counties, whether measured using slot machines

or the number of tables (at the 5 percent level). The number of tables also showed a strongly

significant correlation, at the 5 percent level, with non-business filings in the All Bankruptcies

category, while showing only a somewhat significant correlation (at the 15 percent level), with

total filings in the same category. The number of slot machines was only somewhat significantly

related to business and total filings, in the All Bankruptcies category, at about the 15 percent

level.

VI. Conclusion

This paper represents a preliminary analysis of the relationship between Native American

casino operations and various social and economic outcomes in California counties. While we

have found evidence of a modest positive relationship between casinos and employment (as

measured by the annual average unemployment rate) and between casino operations and various

categories of county tax revenues (in particular, tobacco taxes and hotel occupancy taxes), we

also find suggestive evidence that California counties with a greater casino presence spent more

per capita on police, and experienced greater rates of crime, as measured by the California crime

index and the rates of aggravated assaults and violent crime. We also find a strong, statistically

20 Chapter 7 bankruptcy filings wipe out all qualifying debt with no repayment required; Chapter 13 filings provide an individual or business with a way to consolidate debt under federal law and repay creditors a portion of what is owed over time. More individuals in the U.S. file for Chapter 7.

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significant relationship between casino presence and bankruptcy rates (especially non-business

Chapter 7 bankruptcies).

Most of our results (excepting those on employment) are conclusions from cross-

sectional analyses of California counties in the year 2000. While we do control for a number of

county-level demographics and economic variables in our analysis, there is always the concern

that we have omitted potentially important unobserved variables that may be correlated with both

casino presence (and size) and these county-level outcome variables. So, additional research

involving a before-and-after approach will be required before firmer conclusions can be made.

On the other hand, our results do seem to run parallel to Evans and Topeleski’s (2002) findings

of increased employment, higher crime and rates of bankruptcy in U.S. counties after the

opening of Native American casinos. In addition, our finding that greater tax revenues are

somewhat offset by higher police expenditures seems to agree with those of Blevins and Jensen

(1998). Friedman, Hakim and Weinblatt’s (1989) study of casinos and crime also found a

significant increase in all forms of crime, except larceny, with the opening of a casino.

Interestingly enough, larceny was one of the few variables in our study that showed a negative

correlation with Indian casinos.

We also note that our gaming table measure of casino presence tended to have a much

stronger (and frequently more statistically significant) relationship with these outcomes than our

slots measure. Future work seeking to understand this difference is warranted.

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References

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Figure 1: Counts of Slot Machines Operated by Native American Casinos in California, by County, 2004

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Figure 2: Counts of Gaming Tables Operated by Native American Casinos in California, by County, 2004

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Figure 3: Native American Reservations in California Source: U.S. Census Bureau, 2004

24

Table 1

Descriptive Statistics (Source: 2000 Census, unless otherwise specified)

Variable Mean Std. Dev. Min Max

Demographic and economic variables Percent black 0.033 0.035 0.000 0.147 Percent Hispanic 0.228 0.154 0.036 0.724 Median family income 49,635 12,794 34,103 88,934 Poverty rate 0.145 0.049 0.058 0.239 Unemployment rate 0.082 0.030 0.030 0.141 Percent of population between ages 18 - 24 0.091 0.025 0.047 0.183 Percent of population between ages 65+ 0.126 0.034 0.073 0.194 Percent residing in urbanized area 0.699 0.291 0.000 1.000 Population density 621 2,229 2.000 16,565 Unemployment rate, year average (RAND)

0.079

0.048

0.016

0.260

County-level casino measures Slot count 663.9 1,544.4 0 10,600 Table count 15.5 41.9 0 292 Slot count, conditional on slots > 0 (N=23) 1,674.1 2,100.3 90 10,600 Table count, conditional on tables >0 (N=21) 42.8 61.5 2 292

Source: for demographic and economic variables 2000 Census (unless otherwise specified); the Native American Casino 2004 directory for slots and tables counts.

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Table 2 Tribal Casinos and Unemployment in California Counties, 1990 - 2000

(Standard Errors in Parentheses)

County Unemployment County Unemployment Rate (Year Average) Rate (Year Average)

Percent Black -32.9675 -32.1919 (22.7392) (22.2767) Percent Hispanic 33.2966 33.8843 (6.8914) (6.7106) Percent aged 18-24 7.1906 6.7083 (20.8954) (20.4861) Percent aged 65+ 27.6862 29.0650 (20.8777) (20.4658) Number of Casino Slots -0.0001 (0.0002) Number of Casino Tables -0.0084 (0.0054) Year = 2000 -2.2826 -2.2724 (0.3802) (0.3723) Constant 0.3432 0.0927 (3.7841) (3.7149) Sample size 92 92 Dependent variable mean, 1990 8.70 8.70 Dependent variable mean, 2000 7.87 7.87

Notes: each regression includes county fixed effect (not shown).

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Table 3 Relationship Between Native American Casinos and California County Revenues

and Expenditures (per capita), 2000 Regression Coefficient on:

Dependent Variable: County Mean,

2000 Number of

Slots Number of

Tables County Revenues per Capita, Selected Categories: Business Licenses 1.06 -0.00015 -0.00574 (0.00013) (0.00488) Total Licenses and Permits 20.80 0.00100 0.04420 (0.00151) (0.05473) Room Occupancy Tax 22.34 0.00686 0.27266 (0.00503) (0.18228) City-wide Secured and Unsecured Taxes 156.36 0.01082 0.46349 (0.01245) (0.45126) Less than City-wide Secured and Unsec. Taxes 8.74 -0.00044 -0.01523 (0.00101) (0.03670) Total Property Taxes 173.80 0.01219 0.50345 (0.01330) (0.48242) Sales and Use Taxes 28.67 0.00079 0.03925 (0.00194) (0.07029) Tobacco Tax (AB 75 and Proposition 99) 5.23 0.00084 0.04033 (0.00064) (0.02312) Grand Total Revenues 1,279.36 0.04787 2.12806 (0.05469) (1.98108) County Exp.per Capita, Selected Categories: Drug and Alcohol Abuse Services 23.38 0.00213 0.09260 (0.00219) (0.07971) Medical Care 29.55 -0.00127 -0.02883 (0.00300) (0.11040) Mental Health 67.69 -0.00167 -0.04735 (0.00202) (0.07416) Police 96.22 0.00874 0.36532 (0.00630) (0.22826) Public Health 68.83 -0.00284 -0.06786 (0.00385) (0.14088) Social Services, Administration and Programs 37.29 0.00138 0.01627 (0.00352) (0.13134) Total Social Services 41.27 -0.00029 -0.04716 (0.00471) (0.17244) Welfare Administration 115.88 0.00693 2.38286 (0.00654) (2.05382) Welfare Cash-aid Grants 140.27 -0.00198 0.22105 (0.00454) (0.28255) Total Welfare 256.15 0.00496 0.33109 (0.00776) (0.23639) Grand Total Expenditures 1,199.90 0.05361 -0.11004 (0.05657) (0.16523)

Notes: All regressions include controls for county median family income, percent black, percent Hispanic, the county unemployment rate, poverty rate, the fraction of the population aged 18-24, and population density.

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Table 4 Relationship Between Native American Casinos and

Crime Rates (per 100,000 persons), California Counties, 2000 Regression Coefficient on:

Dependent Variable: County Mean, 2000 Number of Slots Number of Tables FBI Crime Index 3,373.8 0.0216 1.5851 (0.0872) (3.1851) California Crime Index 1,526.1 0.0503 2.3548 (0.0461) (1.6716) Aggravated Assaults 333.3 0.0159 0.7638 (0.0120) (0.4348) Arsons 37.9 -0.0013 -0.0644 (0.0029) (0.1054) Burglaries 751.0 0.0292 1.3037 (0.0323) (1.1756) Forcible Rapes 30.3 0.0005 0.0229 (0.0012) (0.0456) Larceny Thefts 1,809.8 -0.0274 -0.7052 (0.0489) (1.7912) Motor Vehicle Thefts 326.9 0.0043 0.2093 (0.0136) (0.4969) Property Crimes 1,077.9 0.0334 1.5132 (0.0376) (1.3683) Robberies 80.0 0.0005 0.0562 (0.0032) (0.1186) Violent Crimes 448.2 0.0169 0.8415 (0.0143) (0.5176) Willful Homicides 4.5 0.0000 -0.0013 (0.0003) (0.0124) Domestic Violence Calls 57.9 -0.0023 -0.0829 (0.0023) (0.0846)

Notes: all regressions include controls for county median family income, percent black, percent Hispanic, the unemployment rate, poverty rate, % of population aged 18-24, percent living in urban area, and population density. Coefficient estimates in bold are statistically significant at (about) the 5% level. Coefficients in italics are significant at about the 15% level.

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Table 5 Relationship Between Native American Casinos and Bankruptcy

Rates (per 1,000 persons), California Counties, 2000 Regression Coefficient on: Dependent Variable: County Mean, 2000 Number of Slots Number of Tables Chapter 7 Bankruptcies Nonbusiness 3.10526 0.00015 0.00553 (0.00007) (0.00269) Business 0.09825 0.00000 -0.00012 (0.00001) (0.00019) Total 3.20351 0.00015 0.00544 (0.00008) (0.00271) Chapter 13 Bankruptcies Nonbusiness 0.55263 0.00001 0.00072 (0.00004) (0.00135) Business 0.03509 0.00000 -0.00010 (0.00001) (0.00018) Total 0.59298 0.00001 0.00051 (0.00004) (0.00145) All Bankruptcies Nonbusiness 3.66140 0.00016 0.00623 (0.00009) (0.00309) Business 0.15789 -0.00001 -0.00028 (0.00001) (0.00026) Total 3.81754 0.00015 0.00586 (0.00009) (0.00311)

Notes: all regressions include controls for county median family income, percent black, percent Hispanic, the unemployment rate, poverty rate, % of population aged 18-24, percent living in urban area, and population density. Coefficient estimates in bold are statistically significant at (about) the 5% level. Coefficients in italics are significant at about the 15% level.

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Appendix A: Operating Native American Casinos in California, September 2004

Casino Name Tribe City Opening Date # of Slots

# of Tables

Agua Caliente Casino Agua Caliente Band of Cahuilla Indians Rancho Mirage 4/1/2001 1140 41 Alturas Casino Alturas Rancheria Alturas 11/1/1999 90 2 Augustine Casino Augustine Band of Cahuilla Indians Coachella 7/18/2002 700 0 Barona Valley Ranch Resort and Casino Barona Band of Mission Indians Lakeside 1984-1991 2000 63

Black Bart Casino Sherwood Valley Rancheria Band of Pomo Indians Willits 3/15/1996 248 0

Black Oak Casino Tuolumne Band of Me-Wuk Indians Tuolumne 5/15/2001 600 6 Blue Lake Casino and Bingo Blue Lake Rancheria Anza 6/1/2002 350 12 Cache Creek Indian Bingo and Casino Rumsey Band of Wintun Indians Brooks 6//1985-1992 1800 72 Cahuilla Creek Casino Cahuilla Band of Mission Indians Brooks 1996 220 5 Casino Morongo Morongo Band of Mission Indians Cabazon 1983-1992 2000 46 Casino Pauma Pauma Band of Mission Indians Pauma Valley 5/15/2001 850 22

Cher-ae-Heights Casino Cher-Ae-Heights Indian Community of Trinidad Trinidad 3/15/1998 330 8

Chicken Ranch Bingo and Casino Chicken Ranch Rncheria Band of Me-Wuk Indians Jamestown 5/1985-1994 254 0

Chukchansi Gold Resort and Casino Picayune Rancheria of the Chukchansi Indians Coarsegold 6/25/2003 1800 46

Chumash Casino Resort Santa Ynez Band of Chumash Indians Santa Ynez 5/1/1994 2000 54 Colusa Indian Casino and Bingo Colusa Indian Community Colusa 1987-1994 777 11 Diamond Mountain Casino Susanville Indian Rancheria Susanville 1996 150 2 Eagle Mountain Casino Tule River Band of Yokuts Indians Porterville 1996 750 10 Elk Valley Casino Elk Valley Rancheria Crescent City 11/1/1995 275 5 Fantasy Springs Casino Cabazon Band of Mission Indians Indio 1980-1992 1600 47 Feather Falls Casino Mooretown Rancheria Oroville 6/1/1996 1000 12

Gold Country Casino Tyme Maidu Tribe-Berry Creek Reservation Oroville 9/9/1996 900 20

Golden Acorn Casino Campo Band of Kumeyaay Indians Campo 8/15/2001 750 12 Harrah's Rincon Casino and Resort Rincon Band of San Luiseno Indians Valley Center 8/9/2002 1600 42 Havasu Landing Resort and Casino Chemehuevi Tribe Havasu Lake 12/1/1994 220 5 Hopland Sho-Ka-Wah Casino Hopland Band of Pomo Indians Hopland 1996 1200 16 Jackson Rancheria Casino Hotel Jackson Band of Mi-Wuk Indians Jackson 1991 1500 40 Konocti Vista Casino at the Lake Big Valley Rancheria Lakeport 1994 650 10

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La Jolla Trading Post/Casino La Jolla Band of Mission Indians Pauma Valley 2002 30 0 Lucky 7 Casino Smith River Rancheria Smith River 9/11/2000 300 3 Lucky Bear Casino and Bingo Hoopa Valley Tribe Hoopa 10/1/1997 85 0 Mono Wind Casino Auberry Big Sandy Rancheria Auberry 6/1/1996 329 8 Paiute Palace Casino Bishop Paiute Tribe Bishop 4/1/1996 300 7 Pala Casino Resort and Spa Pala Band of Mission Indians Pala 4/3/2001 2000 77 Palace Indian Gaming Center Santa Rosa Rancheria Tachi Yokut Tribe Lemoore 1985-1993 2000 26

Pechanga Resort and Casino Pechanga Band of Luiseno Mission Indians Temecula 1995 2000 85

Pit River Casino Pit River Tribe Burney 5/1/1996 100 4 Red Fox Casino Cahto Tribe of the Laytonville Rancheria Laytonville 1992 96 0

River Rock Casino Dry Creek Rancheria Band of Pomo Indians Geyserville 4/3/2003 1600 16

Robinson Rancheria Bingo and Casino Robinson Band of Pomo Indians Nice 10/1/1993 680 12 Rolling Hills Casino Paskenta Band of Nomlaki Indians Corning 7/31/2002 650 12 San Manuel Indian Bingo and Casino San Manuel Band of Mission Indians Highland 8/86-4/94 2000 23 Shodakai Coyote Valley Casino Coyote Valley Band of Pomo Indians Redwood Valley 2000 500 5 Soboba Casino Soboba Band of Mission Indians San Jacinto 5/15/1996 2000 24 Spa Hotel and Casino Agua Caliente Band of Cahuilla Indians Palm Springs 4/10/1995 1000 30 Sycuan Casino Sycuan Band of the Kumeyaay Nation El Cajon 1983-1991 2000 60 Table Mountain Casino and Bingo Table Mountain Rancheria Friant 1988-1993 2000 29 Thunder Valley Station United Auburn Indian Community Lincoln 6/9/2003 1906 100

Trump 29 Casino Twenty-Nine Palms Band of Mission Indians Coachella 1995 2000 60

Twin Pine Casino Middletown Rancheria Band of Pomo Indians Middletown 11/1/1994 400 6

Valley View Casino San Pasqual Band of Mission Indians Valley Center 4/18/2001 1150 12 Viejas Casino Viejas Band of Kumeyaay Indians Alpine 9/1/1991 2000 70 Win-River Casino Bingo Redding Rancheria Redding 1993 751 18

Source: California Gambling Control Commission (September 2004) and Native American Casino magazine annual directory, April 2004.