Hoover Digest

Good Odds in California

Saturday, October 30, 2004

I was puzzled by California’s attitude toward gambling during my first week as the newly appointed police chief of San Jose. I am still perplexed, more than a quarter of a century later, by the fuss over Governor Schwarzenegger’s attempt to lower the deficit by extracting more state revenue from Indian gambling casinos.

A few days after I took over as San Jose’s top cop, a prosecutor from the county district attorney’s office visited and stunned me by accusing San Jose cops of widespread gambling corruption. He gave me a letter he had written to the IRS suggesting that the police be investigated for not declaring ill-gotten gratuities. Coming from the NYPD and the Kansas City, Missouri, Police Department, I had done some research to make sure that I was not taking command of a corrupt agency. All accounts from other experts, and friends in the FBI, were that the SJPD was clean.

But the prosecutor displayed pictures of uniformed police officers standing next to wheels of fortune and other obviously illegal gambling devices. When I realized that these were pictures of cops, authorized to moonlight in uniform, who had been hired by churches and other charitable organizations because city ordinances required security at their fund-raisers, I laughed.

The prosecutor then showed me a section of the California penal code that had been passed in response to some southern California religious groups stating that any police officer who had knowledge of illegal gambling and who failed to take action was guilty of a crime. Ordinarily, a crime requires criminal intent, or mens rea, as the lawyers like to say. But there it was. Knowledge of illegal gambling and no action by a cop equaled a crime. And the gambling, whether by charities or not, was illegal thanks to a plenitude of anti-gambling legislation originating from pious groups to the south.

The next day, I had the vice squad inform every charitable organization in California’s third largest city that the police department would begin to gather evidence of illegal gambling at the request of the district attorney’s office, which would then consider it for prosecution. I also notified all members of the force that they could no longer take off-duty security jobs for charities engaged in questionable fund-raising.

The uproar was immediate. Soon the elected DA who ran the office told me to relax; no one was trying to set up me or the police department. Nevertheless, from then on, during my 15 years as police chief, I was somewhat uneasy whenever I attended nonprofit organizations’ luncheons or dinners and they held raffles for charitable purposes. I was also well aware that, despite my stern memorandums, some units in the police department ran baseball, basketball, and football pools to support sports efforts for themselves and underprivileged children.

The new governor has pressured the Indian casinos into pledging to pay an additional $400 million or so a year in addition to the $95 million they now pay to the state. But this is peanuts in an annual state budget nudging $105 billion. The governor should use his star power to back a constitutional initiative to legalize casino gambling throughout California. If successful, he could eliminate the state income tax and create the biggest economic boom in California’s history.

Some folks hit on the new governor for not imposing more red tape on the Indian casinos. Still others echo a class-war theme: Expanding legalized gambling exploits the poor and minorities (not true, gamblers with more money gamble away more).

Many opponents of expanded Indian gambling object to what they view as extracting revenue from immoral sources. Never mind that California runs its own lottery and that horse racing, poker rooms, bingo, and a lot of other gambling is now legal and often heavily taxed. Legalized gambling, in fact, is regulated to lessen the endemic problems of cheating, loan-sharking, and exploitation in illegal gambling, which, despite its lawlessness, greatly exceeds casino gambling. Quibblers over gambling, along with the governor, are missing the opportunity to permanently eliminate California’s long-term budget problems and to restore businesses, jobs, and fiscal health to the Golden State.

The past gives us an insight into how the opposition is able to cow politicians. Kevin Starr, the retired official historian of California, wrote in Endangered Dreams: The Great Depression in California that many midwesterners, fleeing their hard farm years for the sunshine of California, brought with them an abiding faith in the value of backbreaking manual labor and a religious belief in the value of suffering over pleasure. They were a major force in the Progressive movement in southern California, which helps explain the state’s Sabbath blue laws and criminal prohibitions against gambling, alcohol consumption, and partisan local elections (which they viewed as synonymous with corruption).

Legal historian Laurence M. Friedman, in Crime and Punishment in American History, opined, “in 1931, Nevada legalized gambling, an excellent decision for Nevada.” Legalized gambling there gave rise to greatly expanded tourism, business growth, and plentiful jobs during the Great Depression.

But Nevada’s decision wasn’t so wonderful for adjacent California. The novelist Raymond Chandler sent his Depression-era hard-boiled private eye Phillip Marlowe into elegant illegal casinos protected by corrupt cops and political machines in southern California in his book The Big Sleep, which became a movie classic starring Humphrey Bogart and Lauren Bacall. Not only did illegal gambling lead to enormous corruption and violent crime in California, it siphoned off countless California bucks to Nevada.

Through the years, Nevada’s take from the hordes of Californians traveling to Reno and Las Vegas to leave billions of California dollars in their neighboring state has greatly increased. The result is that, unlike California, Nevada has no personal income tax and considerably lower taxes on businesses and individually owned homes. Around 67 percent of Nevada’s revenue comes from gaming. And it’s fair to estimate that much of that money, if not most of it, comes from Californians. Nevada’s governor recently complained that California’s legalized Indian casinos had halved Nevada’s total revenue. In contrast, approximately 50 percent of California’s general fund revenue comes from personal income taxes.

So why doesn’t the Terminator go all the way and propose a constitutional initiative legalizing casino gambling in any California county that approves of it, instead of just taxing casinos restricted to Indian reservations? The Terminator then ought to go for broke. He should use his celebrity status to eliminate the outdated, silly laws that gather revenue from some forms of gambling but not from others—and wipe out California’s deficit in the process. That, combined with reasonable ceilings on spending, would restore the Golden State’s promise of jobs and prosperity.

Of course, it would be a gamble to see if the governor could get it through. But as someone who has spent most of his life as a cop, I’m willing to bet that the voters would rather see the police going after murderers, robbers, rapists, and burglars than going after bookies.