EDITORIAL PARTING SHOT DAVIS CUTS ONE LAST SWEETHEART DEAL WITH INDIAN CASINOS.

ON his way out the door, recalled Gov. Gray Davis has decided to repay a favor to his old friends in the Indian-gaming industry.

His going-away present: A sweetheart deal allowing the Fort Mojave Indian Tribe to build a 350-slot casino some 3.5 miles outside of Needles on non-reservation land - a first. All this tiny tribe, which already operates casinos in Nevada and Arizona, has to do is pay California a piddly 5 percent of its profits.

It's quite a deal. In California, where most businesses are taxed and regulated to the hilt, the one industry that gets virtual free rein is the one that's among the most lucrative and the most socially harmful.

Yes, Indian tribes are special. The people of California have decided that, based on this nation's history, American Indians are due some sort of recompense, specifically the dedicated revenue stream that gaming provides. But casino gambling must necessarily fall within certain reasonable parameters, and Davis' latest deal breaks them all, just like all the others he's negotiated.

It should go without saying that the casinos, which benefit from state infrastructure and services, while also imposing social costs on California, should pay their fair share.

In Connecticut, tribes pay a 25 percent tax to the state. Even if that figure is unrealistically high for California's smaller tribes, it's certainly closer to what's appropriate than the 5 percent pittance that the Davis administration has negotiated with the Fort Mojave Indian Tribe and others.

But the cheap cost of doing business is only the beginning of the tribe's good fortune.

Next on the list of Davis' giveaways is his agreeing that any legal disputes arising from the casinos will be settled not within the state legal system, but in tribal courts - that is, by judges ultimately on the payroll of the casinos.

Then there's the casino's location.

The Needles facility will be the first in the state not actually located on an Indian reservation. The purpose is to keep the casino away from the downtown area, thus minimizing its impact on the local community, but the resulting precedent is enormous: Indian casinos can now go anywhere.

Where next: San Francisco, Santa Monica, next to the Staples Center in downtown Los Angeles?

California is rapidly getting a massive expansion in legalized gambling without the benefit of significantly increased tax revenues enjoyed by other states. It's an arrangement that solely benefits the Indian gaming industry, much of which has nothing to do with the tribes at all, and not the state's residents.

But then the people of California didn't spend millions to help Davis keep his office, and the casinos did. The people, in fact, voted to give Davis the boot, and now the outgoing governor is happy to return the favor.

Fortunately, Davis' unseemly work on behalf of the Indian gaming industry can be undone. The deal needs to be approved by both the Legislature and Gov.-elect Arnold Schwarzenegger, who can fairly be expected to hold the casinos to a far higher standard than Davis has.

Still, the bad precedent Davis leaves behind will surely make his successor's job more difficult, and for no good reason. This is a decision that should have been left for Schwarzenegger, who, unlike Davis, hasn't been soundly rejected by the state's voters.

The honorable course of action for Davis in these, his final weeks in office, would be to take care of routine business while leaving big decisions for Schwarzenegger. Instead, he has chosen serving special interests over the people, ending his administration precisely the way he ran - and lost - it.