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October, 1966

The End of the Casino Era

Since the intoxicating days of the forties and fifties when new casinos were going up every six months, Nevada has been undergoing changes that will transform it from a gambling principality to a modern welfare state. Edward F. Sherman is a Texas attorney who witnessed the process as a legal aide to Governor Grant Sawyer.

by Edward F. Sherman

Just a generation ago Nevada was known to Americans chiefly as the state with the smallest population, the hardest to remember capital city (Carson City), and the largest deposits of valuable mineral ore in the union. But all that changed. Nevada legalized gambling in 1931, Reno became the "quickie divorce" capital of the country, and in 1946, gangster "Bugsey" Siegel opened the Flamingo, the first of the great luxurious casinos on the Las Vegas Strip. Nevada was suddenly plunged into the Casino Era. Almost overnight the entire state--its economy, its government, its values, and its traditions--was reshaped to meet the needs of the new order.

Today, twenty years later, the Strip is glittering and active, Las Vegas' Fremont Street is garish and crowded, and the steady clink of slot machines is heard all night along Reno's neon-studded main drag. But beneath this exterior there is something different, something changed from the heady days of the late 1940s and 1950s, when a new casino was going up every six months. In Nevada's banks and business houses, in the new subdivisions of Las Vegas and Reno, in the city halls, and most of all, in Carson City, there is suddenly an awareness that the Casino Era is drawing to a close.

Change has been slow in coming to Nevada because it was so totally committed to the Casino Era. When Nevadans realized after World War II that gambling had exceeded their wildest dreams of bringing tourists and dollars into the state, all resistance to the gambling establishment ceased. Impressed by the seemingly endless flow of silver dollars, they convinced themselves that they lived in a never-never land where gambling taxes could support the state without the need for income, estate, gift, or corporation taxes. The truth was that gambling taxes did not produce enough revenue, and that only Nevada's failure to provide even the basic social services permitted such low taxation.

Although many Nevadans still like to think of their state as a unique gambling principality like Monaco, the fact is that it is a vast, diverse area of 110,000 square miles, the seventh largest state in the union, with a population that is exploding at a rate of more than 5000 a month (Nevada's 1950 population of 160,000 almost doubled by 1960, tripled by 1965, and will quintuple by 1970). As more and more people come streaming into the state, the need for social services--for schools, universities, urban planning, water, welfare programs, and regulation of vested interests--becomes acute. But the unbalanced state economy, in which gambling still provides a quarter of the tax revenues and generates half of the economic activity, does not furnish a viable base from which to finance social services. Nevada is faced with the strong need to attract new industry in order to diversify its economic structure.

The failure of Nevadans to face up to facts about their state's economy was encouraged by a succession of weak governors whose passive laissez-faire administrations seemed content to let the gambling establishment have a free hand and to wallow in the imagined profits it created. The first break in this pattern occurred in 1958 when Grant Sawyer, a forty-year-old district attorney from Elko, Nevada, running his first statewide race, was elected governor. In eight years, Sawyer has succeeded in demonstrating that Nevada is badly in need of an activist governor not merely a glorified caretaker for the gambling interests.

Like many another good politician, Sawyer is a product of his region. He was born in Twin Falls, Idaho, but his father, a doctor, moved to Fallon, Nevada, near Reno, when he was a teen-ager. He graduated from the University of Nevada in 1941, served as an army lieutenant in the war, and after the war joined other young Nevadans with political inclinations by taking a patronage job with Senator Pat McCarran in Washington and studying law at Georgetown University. The job with McCarran made him one of the "McCarran people," an essential classification in those days for success in Nevada politics.

Outsiders find it difficult to grasp the importance of Senator Pat McCarran in Nevada politics. First elected to the Senate in 1932, in time he became chairman of three powerful Senate committees, the Senate Judiciary Committee, to which 40 percent of all Senate bills had to be referred, the Appropriations Subcommittee, and the Subcommittee on Foreign Aid. Thus, the senator from the least populous state in the union had one of the largest staffs in the Senate and controlled jobs in dozens of federal agencies.

When money began to flow into Nevada after 1946 to build the great casinos, McCarran quickly established himself with the new gambling interests. He had always had a healthy respect for power and influence, and Nevada's new gambling magnates, many of them hoodlums from international syndicates, displayed raw power which made even McCarran look like an amateur. A compromise was worked out, with the gambling interests supporting the McCarran machine, and McCarran, in turn, providing political and governmental backing for anything the gambling establishment desired. McCarran liked Nevada small, and so did the casino owners. As McCarran's closest adviser, Reno millionaire Norman Blitz, expressed it, "Nevada must be kept small. Let industry go elsewhere. Large payrolls bring in large families which cost more money in taxes for public services." When McCarran died suddenly in 1954, there was no heir to his machine.

This was the situation when Grant Sawyer took over as party chairman in 1955. Recognizing the vacuum in the party, a group of young Democratic activists determined that the governor in Carson City could provide more effective leadership than a senator 3000 miles away. With Sawyer as the candidate, they set their sights on the 1958 governor's race.

Sawyer made an appealing candidate: he was boyish-looking, with wavy brown hair, dark-rimmed glasses, a self-confident manner, an engaging smile, a deep resonant voice, and a quick and active mind. In a campaign in which the issues played second fiddle to personalities, Sawyer defeated the popular but ineffective incumbent Republican governor Charles Russell. But the badly apportioned rural Senate remained Republican, and the Assembly was only narrowly Democratic.

Sawyer had not been elected as a reformer. He liked the fast life of Vegas, the luxury of the plush casinos, and the excitement of the Strip night life (a reporter's picture of him doing the twist in 1962 with a casino owner's wife made the front pages of papers around the country long before Bill Moyers' celebrated Watusi). He wore expensive clothes and was known as a big tipper, although he has never been more than a "nickel in the slot machine" kind of gambler.

But he had an idealistic side. He had a curiosity about things, which made him open to new ideas and remarkably free of bias and predisposition (he recently spent an afternoon questioning the members of a Zen Buddhist sect which had established a monastery in the ghost town of Virginia City, and later made good his promise to visit them). As Sawyer grew into the governorship, he became more and more aware of the limited opportunities and stunted public services available to Nevadans under the status quo.

The first Sawyer administration set a new breeze blowing through Carson City. His attractive wife was a popular hostess in the governor's mansion. His appointees, younger, better educated, and more imaginative, replaced some of the rural political plug horses who had always staffed the state government. Sawyer's first-term legislative programs were cautious and limited, but one important accomplishment was his "hang tough" gambling control bill. This was Nevada's first gambling regulation with teeth in it, and oddly enough it aroused little opposition from the gambling industry. By 1959, Nevada gambling was so badly tarnished that even the casino interests recognized that some type of reform was needed to restore public confidence. The Kefauver hearings of the early 1950s uncovered a vast network of hoodlum control of Nevada gambling, and the growing number of gangland murders and atrocities were impossible to hide.

Sawyer's "hang tough" gambling control bill created a state Gambling Control Board with investigative and enforcement units. In administering the bill, Sawyer appointed tough, highly qualified ex-FBI and law-enforcement officials to the new agency. For the first time the state possessed the ability to enforce the gambling laws and deny gambling licenses to undesirables.

By the end of his first term, Sawyer had proved himself to be a capable and popular administrator, but aside from the gambling bill, he had not pressed for major reform. His landslide re-election in 1962 gave him the mandate he needed to strike out in new directions. On the top of his list of concerns was reorganization of the state government, which had become encumbered over the years by a confusion of agencies, boards, and commissions, many of which the governor had no power to control. The ninety-nine-year-old governmental structure, unchanged since statehood and the advent of modern government, badly needed overhauling.

Another of Sawyer's second-term objectives was to break the power of an important rival in the state capital, the legislative counsel. In a number of small Western states, legislative counsels have been established over the years to provide research and drafting assistance to the legislators. Nevada's legislative counsel, an amiable and pedantic ex-Assembly clerk named Jeff Springmeyer, appointed in 1946, had gradually increased his powers and authority, enlarged his staff, and made himself indispensable to legislators and executive agencies alike.

Sawyer's active involvement in legislative affairs undercut Springmeyer's influence. Springmeyer countered with legislative roadblocks against the governor's programs and with embarrassing check audits of his office and mansion. Beginning his second term, Sawyer decided to work for a bill to consolidate the legislative counsel with another agency and make nonlawyer Springmeyer ineligible to be its head.

Sawyer's third objective was a progressive legislative program. In a blunt message to the legislature he outlined bills for education, conservation, high-way safety, civil rights, water control, and regulation of securities and land sales. It was the most ambitious program ever proposed by a Nevada governor.

Sawyer's legislative strategy relied on surprises and nonpartisanship. His reorganization, drafted by aides in less than two months, had the advantage of taking both the legislators and the vested interests by surprise. He hoped to push it through before substantial opposition developed. He had enough votes in the Democratic Assembly to pass the reorganization, but the Senate was controlled by the Republicans, 9 to 8.

The reorganization bills passed the Assembly easily and came before the Senate. In the first test, the Senate committee hearings, the nine Republicans voted as a bloc and methodically cut the heart out of the reorganization. Then James Slattery, a conservative Republican senator from a rural district with a population of 675, bolted and voted for the original administration bill. The other reorganization bills were quickly passed in only slightly modified form. A week later, after the close of the session, the governor fired the director of state welfare, a lady who had held the post for thirteen years and who was also an arch-enemy of Senator Slattery. When Republicans charged that a deal had been made, the governor denied it, saying that he had been considering the dismissals for a long time. Deal or not, it was all over. Springmeyer was removed as legislative counsel through the bill reorganizing his office, 70 percent of Sawyer's legislation was passed, and Nevada had a new director of welfare and its first reorganized government since statehood in 1864.

The first test of Sawyer's newly won power came shortly after the 1963 reorganization. One of the bills which the governor had lost in that session was a bill to create a state park at beautiful Lake Tahoe, which was rapidly being threatened by encroaching casinos, motels, restaurants, and cabins. Although the session was over, Sawyer made it clear that he considered that the fight was on. He organized an overnight camping trip to the proposed park area, inviting a number of state officials and conservationists. The newsmen put on hiking boots and shouldered sleeping bags, and sent back pictures of the governor brewing coffee at the campsite above sparkling Lake Tahoe.

Public support for the Tahoe park began to reach the legislators. Those from northeastern Nevada, where Lake Tahoe is situated, found increasing pressures upon them to get a park. Governor Sawyer decided that the time was ripe and called a special session of the legislature to consider a critical school funding problem posed in certain school districts, particularly Clark County, together with a request for Lake Tahoe Park. The northeastern legislators, with public pressure on them, made a deal with the Clark County legislators, who wanted school appropriations. Sawyer had done a masterful job of combining two bills badly needed by different sections of the state. Both bills passed.

The 1964 elections were the first voter test of the Sawyer administration after the reorganization. The Assembly remained Democratic, and the Senate passed into Democratic control for the first time in the twentieth century. With the threat of the Senate's veto removed, Sawyer was in firm control of the 1965 legislative session. Controversial bills which had failed in the past, such as civil rights, the creation of a department of mental hygiene, securities regulation, advertising regulation, and an administrative procedures act, were all part of the successful Sawyer package.

Sawyer's personal influence upon Nevada affairs was also demonstrated during the Watts riots of 1965. A rumor had started in Las Vegas that a busload of armed Negroes who had escaped from Watts were on their way to Las Vegas. Excited whites made a run on firearms stores, and the Negro section was tense, many Negroes having been sent home by their worried employers. The governor and his able executive administrator, Richard Ham, went directly to the Negro section, the "Westside," stopped on the streets to talk and shake hands, visited the largest club in the area. Within minutes the word had spread through the Westside that the governor was there. The band played, the governor joked, and moved on to another club, and the tension began to ease.

Although Sawyer's political mystique in Nevada is impressive and his legislative successes and prestigious administration of the statehouse real enough, he is having a tough race in his bid this year for a third four-year term. He is opposed by Lieutenant Governor Paul Laxalt, forty-three, an attractive and articulate attorney who won the GOP gubernatorial nomination last September easily while Sawyer was fighting off five opponents in the Democratic primary. Laxalt starts with the advantage of being able to blame the shortcomings of the Casino Era on Sawyer and the entrenched Democratic machine, without himself having to disavow the era. Sawyer finds himself in the uncomfortable position of having been an apologist for Nevada gambling who never admitted, despite his record of reform, that the value system of the Casino Era had to be rejected. Thus Sawyer, who has tried to be all things to all voters, is having difficulty showing, on the one hand, that he has done enough to meet the needs of his changing state, and on the other hand, that he has not gone too fast.

Paul Laxalt is one of those amazingly confused political creations of the American West. An early Goldwater supporter in 1964, he has tried to erase the stigma of his right-wing associations by backing a denunciation of the John Birch Society at the GOP state convention last June and bringing in Governor Romney to campaign for him. He is at times a distressingly naive politician (during the 1965 legislative debate on the Sawyer civil rights bill, which he opposed, he asked an opponent in all seriousness whether he would like his daughter to marry a Negro), but he is handsome and charming, has good rapport with the press, and has a large following from the influential Basque community from which he comes. He provided effective leadership for the Republicans in the legislature during his four years as lieutenant governor, despite his failure to stop the Sawyer reorganization. Since then he has become more liberal, and now charges the Sawyer administration with taking insufficient measures to attract industry to Nevada and to counteract rising unemployment in Clark County. He has even won over some labor support by defending the "right to strike" in the aftermath of last year's crippling test-site strike and a violent cab dispute this year.

Sawyer also has problems in his own party. The Nevada Democratic Party is beset with factionalism, and although the governor is nominal head of the party, he does not control it. Nevada's senators, Democrats Alan Bible and Howard Cannon, have their own factions within the party. Bible still holds remnants of the old McCarran machine and is closest to the Sawyer camp. Cannon is Sawyer's most important Democratic rival, with a well-organized machine in populous Clark County. Cannon supporters distrust Sawyer's political intentions, pointing out that should Sawyer be re-elected this year, he would be available to run against Cannon in 1970. Sawyer supporters blame the Cannon machine for Laxalt's election as lieutenant governor in 1962, and Cannon supporters blame the Sawyer machine for Cannon's squeaky eighty-four-vote victory over Laxalt in the 1964 Senate race. Both camps know that a return to factional fighting would be disastrous for the Democratic Party, but backbiting is a way of life for Nevada Democrats, and distrust will probably continue to plague the party.

The problems of the gambling industry hang heavily over the 1966 Nevada elections. The gambling industry is in its deepest trouble since gambling was legalized in 1931, with average winnings by the casinos down and more and more Nevadans talking of higher gaming taxes. The legislature has authorized a $120,000 study to see whether gambling taxes should be raised. A new civic organization formed by Joe Matthews, a former Los Angeles political worker who came to Nevada to work on the 1964 centennial, is calling for gambling taxes to be tripled and is attempting to collect 14,000 signatures for a statewide referendum next year.

Meanwhile, the federal government is not making things any easier. The Justice Department, the FBI, and the Internal Revenue Service have been investigating Nevada gambling for some time. In 1962, Attorney General Robert Kennedy sent a task force of agents into Nevada to search for links between the casinos and organized crime. This summer, the FBI agent in charge at Las Vegas testified at a U.S. court hearing in Denver that in 1963 the FBI had wiretapped the office of Ruby Kalod, major owner of the Desert Inn and the Stardust casinos. Governor Sawyer immediately called upon Nevada district attorneys to prosecute federal agents for violation of Nevada's anti-wiretapping law. The crux of the controversy is that the federal government believes that racketeers are running some casinos behind "fronts," that gangster funds are being sent into Nevada to be "cleaned up" through phony gambling transactions, and that casinos are "skimming" (removing house winnings from casino counting rooms before they are tallied for tax purposes). Although it is likely that the FBI has not used wiretapping in Nevada for several years, Nevada officials, smarting from criticism of their regulatory procedures, are out to get their pound of flesh.

In the wiretap controversy, Nevada seems to be right and the FBI wrong. But thoughtful Nevadans know that the real issue is whether Nevada regulatory procedures are sufficient. It is unlikely that either Sawyer or Laxalt will call for a tougher gaming control bill, but defects in the present regulation are becoming more apparent.

Sawyer has managed to stay on the good side of the majority of the gambling interests despite his reforms. The casinos were not happy with his 1959 gaming control bill, but they accepted it grudgingly. Although the new legislative programs have cost money and so have increased the need for higher taxes, Sawyer has opposed Matthews' referendum to increase gambling taxes. No one really knows whom the casinos are supporting in the Sawyer-Laxalt race. One casino owner, Major Riddle of the Dunes, informed his employees by memo that they should "re-elect...certain people who are running the legislature, governorship and various other offices who have made it possible for the success of the various hotels and casinos," and that word "re-elect" doesn't seem to leave much room for doubt. On the other hand, Laxalt has stated that economy and budgetary controls should be exercised instead of raising taxes, to which the casinos say "Amen," and he is said to be receiving sizable contributions from several casinos.

It is doubtful whether the term "the gambling establishment" means much anymore in Nevada. The Nevada Resort Association, which purports to speak for casinos and clubs and provides a ratings sheet on candidates, represents only eleven casinos. The operators of the big casinos, such as Moe Dalitz of the Desert Inn and the Stardust, Mrs. Warren Bayley of the Hacienda and the New Frontier, and Bill Harrah of Harrah's Club, do not speak for more than a segment of the industry. About all that can be said with certainty is that the gambling industry is fragmented, that the casinos will support both gubernatorial candidates as long as either has a chance of winning, and that, in a tight spot, as is foreseen in the near future, they will attempt to bring their combined influence to bear on all levels of Nevada government.

With only a month remaining in the campaign, Sawyer and Laxalt are engaged in one of the hardest fought gubernatorial contests in recent years. Sawyer stands on his record of sound fiscal and administrative policies, strong leadership, reform of state government, and progressive legislation. Laxalt points to Sawyer's failure to attract sizable new industries, the downturn in Las Vegas' building boom, and the increase in unemployment, weaknesses of Sawyer's labor policies, mismanagements in some executive departments, and heavy-handedness of administration tactics. This campaign has come closer to discussing real issues than any other in the past, owing, no doubt, to the fact that Nevada--its economy, its values, and its future --is at a critical juncture. Few solutions, however, have been proposed, and there seems to be more fundamental agreement between the two contenders than dissension. Both agree that education must get more money, state institutions must be improved, labor problems settled, urban planning started, and state government made more responsible. Laxalt tends to express a conservative's dislike for governmental controls while criticizing Sawyer for failure to take action to meet problems. Sawyer talks about bold action while defending status quo policies and painting an overly rosy picture of the true situation. But both have shown an awareness that the Casino Era is ending and that gambling is no longer a Nevada deity, despite their reluctance, at the moment, to propose sweeping reforms. The bookmakers now give Sawyer a slight edge, but they always add that it's a horse race to the finish.

1966 is a pivotal year for Nevada. The gubernatorial election is another sign that Nevada has embarked on the road to becoming just another American state. Difficult days are ahead for its gaming industry, and the transition pains of the post-Casino Era may be unpleasant. But the Casino Era is drawing to a close, and few Nevadans will mourn its passing.

Copyright © 1966 by Edward F. Sherman. All rights reserved.
The Atlantic Monthly; October, 1966; "Nevada: The End of the Casino Era"; Volume 218, No. 4; pages 112-116.

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