BILL ANALYSIS Ó
Bill No: AB
1417
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
AB 1417 Author: Hall
As Amended: June 22, 2011
Hearing Date: July 6, 2011
Consultant: Art Terzakis
SUBJECT
Tribal Gaming: local agencies
DESCRIPTION
AB 1417 appropriates $18.2 million from the Indian Gaming
Special Distribution Fund (SDF) to the California Gambling
Control Commission (CGCC) for grants to mitigate the
impacts of tribal gaming on local governments.
EXISTING LAW
Existing law creates the SDF in the State Treasury for the
receipt of revenue contributions made by tribal governments
pursuant to the terms of the 1999 model Tribal-State Gaming
Compacts and authorizes the Legislature to appropriate
money from the SDF for the following purposes: (a) grants
for programs designed to address gambling addiction; (b)
grants for the support of state and local government
agencies impacted by tribal government gaming; (c)
compensation for regulatory costs incurred by the CGCC and
the Department of Justice (DOJ) in connection with the
implementation and administration of compacts; (d) payment
of shortfalls that may occur in the Indian Gaming Revenue
Sharing Trust Fund (RSTF); (e) disbursements for the
purpose of implementing the terms of tribal labor relations
ordinances promulgated in accordance with the terms of the
1999 compacts; and, (f) any other purpose specified by law.
Existing law establishes a method of calculating the
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distribution of appropriations from the SDF for grants to
local government agencies impacted by tribal gaming. This
method includes a requirement that the State Controller, in
consultation with the CGCC, deposit funds into County
Tribal Casino Accounts and Individual Tribal Casino
Accounts based upon a process that takes into consideration
whether the county has tribes that pay, or not pay, into
the SDF. The distribution formula "sunsets" on January 1,
2021.
Existing law establishes an Indian Gaming Local Community
Benefit Committee in each county in which gaming is
conducted, specifies the composition and responsibilities
of that committee, and requires that committee to make the
selection of grants from the casino accounts. Among other
things, the committee is responsible for establishing all
application policies and procedures for grants from the
casino accounts.
Existing law requires the State Auditor to conduct an audit
every three years and report its findings to the
Legislature regarding the allocation and use of SDF grant
monies.
Existing law also creates in the State Treasury the RSTF
for the receipt and deposit of moneys derived from gaming
device license fees that are paid into the RSTF pursuant to
the terms of specified tribal-state gaming compacts for the
purpose of making distributions to non-compacted Tribes
(e.g., federally-recognized non-gaming and tribes that
operate casinos with fewer than 350 slot machines).
Revenue in the RSTF is available to CGCC, upon
appropriation by the Legislature, for making distributions
of $1.1 million annually to non-compact tribes.
BACKGROUND
Purpose of AB 1417 : According to the author's office, this
measure ensures a statewide appropriation of $18.2 million
from the SDF for local mitigation monies this year. As a
function of the original 1999 tribal-state compacts, these
local mitigation funds are important to many local
communities and counties throughout the state, as they
support critically important allowable purposes such as
public safety, fire and transportation.
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Indian Gaming Special Distribution Fund (SDF) : The SDF was
created by the 1999 Tribal State Compacts and is currently
financed by 21 tribal governments that each operates more
than 200 gaming devices as of September 1, 1999. The
compacts do not prioritize the use of SDF funds. SB 621
(Battin), Chapter 858, Statutes of 2003, however, specifies
the funding priorities for the SDF in the following order:
§ Covering annual funding shortfalls in the RSTF,
which distributes grants of $1.1 million per year to
tribes that have no casino or only a small casino
(with fewer than 350 slot machines).
Funding programs that address problem gambling
managed by the Department of Alcohol and Drug
Programs. The Legislature appropriated a total of $4.3
million for this purpose in fiscal year 2008-09. In
addition, the Legislature appropriated $4 million to
Alcohol and Drug Programs from this fund for local
assistance.
Paying the operating costs for the Indian gaming
regulatory functions of the CGCC and of the Department
of Justice.
§ Grants to local governments to address the effects
of tribal casinos on local infrastructure and public
services.
SDF Contributing Tribes : (1) Barona Band of Mission
Indians; (2) Big Sandy Band of Mono Indians; (3) Big
Valley Rancheria; (4) Bishop Paiute Tribe; (5) Cabazon
Band of Mission Indians; (6) Cahuilla Band of Indians;
(7) Chicken Ranch Rancheria; (8) Colusa Indian Community;
(9) Hopland Band of Pomo Indians; (10) Jackson Rancheria
Band of Miwuk Indians; (11) Mooretown Rancheria; (12)
Redding Rancheria; (13) Robinson Rancheria; (14) Santa
Rosa Rancheria; (15) Santa Ynez Band of Chumash Indians;
(16) Soboba Band of Luiseno Indians; (17) Sycuan Band of
Kumeyaay Indians; (18) Table Mountain Rancheria; (19)
Tule River Indian Tribe; (20) Twenty-Nine Palms Band of
Mission Indians; and, (21) Tyme Maidu Tribe Berry Creek
Rancheria.
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SDF Budget Actions : The Budget Act of 2003-04 appropriated
$25 million from the SDF to local jurisdictions impacted by
Indian gaming. The Budget Acts of 2004-05, 2005-06, and
2006-07, each appropriated $30 million from the SDF to
local governments impacted by Indian gaming. The Budget
Act of 2007-08 included a $30 million appropriation from
the SDF to local governments impacted by Indian gaming;
however, the Governor blue-penciled that appropriation. In
2008, AB 158 (Torrico), appropriated $30 million from the
SDF to counties for mitigating Indian casino impacts. In
2010, SB 856 (Senate Budget and Fiscal Review Committee),
appropriated $30 million from the SDF to restore $30
million in funding vetoed by the Governor in the 2007-08
Budget Act. The bill required the funds be divided
amongst the locals based on the amounts paid into the SDF
in the 2006-07 fiscal year.
It has been noted, in the past, that if the annual $30
million appropriation were to continue for local mitigation
grants, and the SDF continues to be used to fund the $40
million annual RSTF shortfall, estimates suggest that the
SDF will have a shortfall of approximately $37 million in
2012-13. Under the 2007 compact amendments, the state is
obligated to cover the RSTF annual shortfall if the SDF
cannot.
In mid-May of this year, the CGCC notified the Budget and
Fiscal Review Committees of each House that for the 2011-12
fiscal year, it estimated 71 Tribes would be eligible for
RSTF distributions of $1.1 million each for total estimated
RSTF payments of $78.1 million. The CGCC noted that RSTF
revenue for 2011-12 is projected to total approximately $51
million. Accordingly, the CGCC anticipates RSTF shortfalls
of $27.1 million to be transferred from the SDF in FY
2011-12.
Bureau of State Audits (BSA): In July 2007, the BSA
released an audit of the local mitigation grants funded by
the SDF. The auditors reviewed 30 local grants made to six
counties totaling $12.1 million. BSA found five instances
totaling $505,000 where grants were not used to offset the
adverse effects of casinos. In addition, they found 10
successful applications totaling $2.3 million where the
rationale for the grants as stated in the application
appeared to primarily address unrelated needs in the
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communities. The auditor also found that in some
communities, a significant amount of the distribution fund
money was deposited in local government accounts that
earned interest used to pay general county operational
costs rather than for mitigation projects.
In February of 2011, BSA conducted a follow-up audit and
found that local benefit committees still have trouble
complying with the distribution requirements. The audit
found that in 2008-09, of the $30 million appropriated by
the Legislature for local mitigation grants, local
governments could not provide evidence that $3.2 million in
grant funding was used to mitigate the impact of a casino.
Legislative Analyst's Concerns: In the Legislative
Analyst's Office (LAO) analysis of the 2009-10 budget, and
in earlier reports, they noted that the local grants have
outlived their usefulness due to the major changes in the
SDF. The law governing the local grants was implemented
when the SDF was flush with revenue, paid in large part by
tribes that no longer pay into the fund. In addition,
these tribes have separate obligations under their new
compacts to enter into enforceable agreements with local
jurisdictions to mitigate the effects of their casinos on
nearby counties. In addition, the LAO points out that
two-thirds of the funding is provided to Riverside, San
Diego and San Bernardino counties (with 43% going to
Riverside alone) and all of the amended compacts for tribes
that no longer pay into the SDF are located in Riverside
and San Bernardino counties. Therefore, under this new
scenario, the allocation formula no longer makes sense.
The LAO recommends that any continuation of the local
grants emphasize two key priorities:
Ensure that only the highest-priority local
infrastructure, problem gambling, and public safety
needs resulting from casinos receive funding.
Ensure that any county receiving mitigation
payments from a tribe with a recently amended compact
does not also receive substantial SDF grant funding
related to that tribe.
Local Benefit Committees : Existing law establishes Indian
Gaming Local Community Benefit Committees with specified
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local government and tribal representation that are
responsible for establishing SDF grant application policies
and procedures, determining grant eligibility, and
selecting grants from Individual Tribal Casino Accounts or
County Tribal Casino Accounts based on "nexus test
criteria" that mainly takes into consideration the
geographical proximity of an applicant local government
jurisdiction to the tribal casino.
All grants from Individual Tribal Casino Accounts are
required to be made only upon the affirmative sponsorship
of the tribe paying into the SDF from whose Individual
Tribal Casino Account grants are available for
distribution. Priority uses for the receipt of grant money
from Individual Tribal Casino Accounts are as follows: law
enforcement; fire services; emergency medical services;
environmental impacts; water supplies; waste disposal;
behavioral; health; planning and adjacent land use; public
health; roads; recreation and youth programs; and,
childcare programs.
PRIOR/RELATED LEGISLATION
AB 1020 (Chesbro) Chapter 27, Statutes of 2011. Repealed
the ratification of the tribal-state gaming compact entered
into between the State of California and the Habematolel
Pomo of Upper Lake, executed on September 2, 2009, and
instead ratified a new tribal-state gaming compact entered
into between the two parties, executed on March 17, 2011.
AB 1039 (Perea) 2011-12 Session. Would declare the intent
of the Legislature to establish a fair and proportionate
system to award SDF grants. (Pending in Assembly Rules
Committee)
AB 742 (Nestande) 2011-12 Session. Among other things,
would require grant applicants applying for local
mitigation funding from the SDF to demonstrate how the
grant will be used to mitigate the impact of a casino. In
addition, would require all local Indian Gaming Local
Benefit Committees adopt a conflict of interest code.
(Pending in this committee)
SB 856 (Budget and Fiscal Review) Chapter 719, Statutes of
2010. Among other things, appropriated $30 million from
the SDF to restore funding deleted from the Budget Act of
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2007 for grants to mitigate the impact of tribal gaming on
local governments.
AB 158 (Torrico) Chapter 754, Statutes of 2008. Enacted
several recommendations proposed by the California State
Auditor relative to the allocation and uses of proceeds
from the SDF.
SB 288 (Battin) Chapter 13, Statutes of 2006.
Appropriated $20 million from the SDF for grants to local
jurisdictions impacted by tribal gaming. Also made a
statement of intent that this appropriation be used for
workload associated with specified Indian gaming compacts.
SB 621 (Battin) Chapter 858, Statutes of 2003. Among other
things, established, until 1/1/2009, priorities and
procedures for specified funding to local governments from
the SDF for mitigating impacts from tribal casinos. Also,
appropriated $25 million from the SDF to mitigate the
impact of tribal gaming on local governments.
AB 673 (J. Horton) Chapter 210, Statutes of 2003.
Specified that money in the SDF may be used to make payment
of shortfalls that may occur in the RSTF and specified that
payment for those shortfalls in the RSTF shall be the
priority use of moneys in the SDF. Also, established a
mechanism by which funds may be transferred from the SDF to
the RSTF pursuant to specified provisions of the
tribal-state compacts and appropriated the sum of
$50,568,787.99 for the purpose of making payments to
eligible Indian tribes for the preceding fiscal year. In
addition, established and provided for the funding of the
Office of Problem and Pathological Gambling in the
Department of Alcohol and Drug Programs.
AB 1385 (Battin) Chapter 874, Statutes of 1999. Among
other things, ratified 57 tribal-state gaming compacts and
created two special funds in the State Treasury (SDF and
RSTF) for the deposit of revenues derived from Indian
gaming and gaming device licensing fees. Also, designated
the Governor as the state officer responsible for
negotiating and executing compacts between the State and
federally recognized Indian tribes located in the State.
SUPPORT: As of July 1, 2011:
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Barona Band of Mission Indians
Santa Ynez Band of Chumash Indians
Table Mountain Rancheria
California Nations Indian Gaming Association
League of California Cities
Mark Lewis, Mayor City of El Cajon
Phil Larson, Chairman Fresno County Board of Supervisors
Regional Council of Rural Counties
California State Association of Counties
SUPPORT (continued)
County of Santa Barbara
Dianne Jacob, Supervisor, 2nd District, San Diego County
Board of Supervisors
Sharp Grossmont Hospital
San Miguel Consolidated Fire Protection District
California State Sheriffs' Association
Fresno County Sheriff's Office
Bonnie Dumanis, San Diego County District Attorney
OPPOSE: None on file as of July 1, 2011.
FISCAL COMMITTEE: Senate Appropriations Committee
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