Big Twin, Little Twins: Is California's Schwarzenegger Shrinking Nevada's Tourism Export Base

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"Big Twin, Little Twins Is California's
Schwarzenegger Shrinking Nevada's Tourism Export
Base?"

• R. Keith Schwer and Juliette Tennert
• Center for Business and Economic Research
• University of Nevada, Las Vegas
• Las Vegas, Nevada
• AUBER Annual Conference
• October 8, 2005

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Motivation for Study

• Will Governor Schwarzeneggers support of Indian
  Gaming result in import substitution for
  California and loss of business in Nevada?...

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Or

• As one Nevada casino mogul argues
• California gaming will create more gaming
  business for Nevada because people will want the
  real thing?

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Background

• California gaming revenues
• 5.2 billion per year
• Nevada gaming revenues
• 7.7 billion per year

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Early 1980s

• Tribes begin operating bingo games with prizes
  exceeding limit under state law
• State attempts to close operations
• Federal case California vs. Cabazon Band (1987)
• Tribes may not engage in forms of gaming
  prohibited by state tribes may engage free of
  state control in forms of gaming already
  regulated by the state.

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1988 Federal Indian Gaming Regulatory Act (IGRA)

• Regulate gaming activities on Indian lands
• Divides Indian gaming into 3 categories
• Class I gaming played in tribal ceremonies
  (under tribal jurisdiction)
• Class II games like bingo that are not
  explicitly forbidden by state constitution and
  are authorized by tribal resolution or ordinance
  (regulated by NIGC)
• Class III includes all other forms of
  gamingrequires a compact negotiated between the
  tribe and state and approval by NIGC
• Specifies purposes for which Indian gaming
  revenues may be used
• Fund tribal operations and programs
• Provide for the welfare of tribe members
• Promote tribal economic development
• Donate to charitable organizations
• Fund local government agency operations

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California Proposition 5

• Tribal Government Gaming and Economic
  Self-Sufficiency Act of 1998
• Allowed tribes to continue to operate video slot
  machines deemed illegal by state and federal
  governments
• No limit on number of statewide casinos
• No limit on number of tables and slot machines
  per casino
• Lowered gambling age to 18
• August, 1999 Proposition 5 nullified by
  California Supreme Court

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California Proposition 1A (March, 2000)

• Allows Nevada-style gambling in California
• Upheld in 9th U.S. Circuit Court of Appeals
• Governor Davis negotiates 60 new tribal-state
  compacts based on proposition
• Legalized video slot machines
• Requires tribes to reimburse state for the impact
  of casinos on local jurisdictions

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Schwarzenegger Negotiates 10 Indian Compacts
(2004)

• One is not approved by the legislature
• Compacts preserve Indian Tribes monopoly on
  casino-style gambling in California
• Require tribes to make initial payment of 1
  billion to the state and annual payments ranges
  between 150 million and 275 million

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Currently 55 Indian Casinos
2004 Renegotiated Compacts Pala Band of Mission
Indians Pauma Band of Luiseño Indians Rumsey Band
of Wintun Indians Viejas Band of Kumeyaay
Indians United Auburn Indian Community Buena
Vista Rancheria of Me-Wuk Indians Ewiiaapaayp
Band of Kumeyaay Indians 2004 New
Compacts Lytton Rancheria of California Coyote
Valley Band of Pomo Indians Fort Mojave Indian
Tribe
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Tribal Slot Machine Totals
California Tribal Casinos
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California and Nevada?
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Framework

• Gaming Revenue in Nevada (Reno, Las Vegas)
• f (export-base California, export-base
  elsewhere U.S., export-base non-U.S.
  seasonality, lags of gaming revenue, September 11
  dummy, number of Native American Casinos)

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Findings

• Seasonality is significant
• Lags of the gaming receipts are significant
• California income is positive, but insignificant
• U.S. income is positive, but insignificant
• California Indian Gaming is negative for Reno,
  but insignificant possible measurement issues

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Findings Continued

• California Indian Gaming is positive for Las
  Vegas, but insignificant possible measurement
  issues
• Differencing yields stationarity
• September 11th effect was negative

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Conclusion

• California Indian Gaming is effecting the Reno
• California Indian Gaming is not effecting the Las
  Vegas market, but there is no credible evidence
  that California Indian Gaming is materially
  increasing the Las Vegas market.
• Further research to overcome the limitations of
  some measures

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Bibliography

• Indian Gaming In California
• http//igs.berekely.edu/library/htIndianHaming.htm