BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1417 (Hall)
Hearing Date: 8/25/2011 Amended: 6/22/2011
Consultant: Maureen Ortiz Policy Vote: GO: 11-0
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BILL SUMMARY: AB 1417 appropriates $18.2 million from the
Indian Gaming Special Distribution Fund to the California
Gambling Control Commission to provide grants to local agencies
for the purpose of mitigating the adverse impacts of tribal
gaming.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Grants $9,100
$0 $0 Special*
*Indian Gaming Special Distribution Fund
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STAFF COMMENTS: SUSPENSE FILE.
Committee amendments reduce the appropriation to $9.1 million.
The $18.2 million appropriated in this measure will be used to
provide grants to local governments for the purpose of
mitigating the adverse impacts of tribal gaming.
Existing law creates the Indian Gaming Special Distribution Fund
(SDF) 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
gambling addiction programs, b) grants for the support of state
and local government agencies impacted by tribal gaming, c)
compensation for regulatory costs incurred by the California
Gambling Control Commission and the Department of Justice in
connection with implementation and administration of compacts,
d) payment of shortfalls that may occur in the Indian Gaming
Revenue Sharing Trust Fund, e) disbursements for the purpose of
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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.
However, pursuant to compact renegotiations that took place with
several of the larger gaming tribes during the previous
administration, revenue from those tribes is directed into the
state General Fund, instead of the Special Distribution Fund.
New and amended tribal-state gaming compacts require tribes to
negotiate directly with local governments to mitigate casino
impacts rather than contribute to the distribution fund.
Consequently, the SDF is expected to become insolvent in FY
2013-14. If $18.2 million is appropriated pursuant to this
measure, the fund will likely become insolvent by FY 2012-13 and
any future obligations to backfill the Revenue Sharing Trust
Fund (RSTF) will have to be made from the General Fund.
Existing law also 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. The committee is responsible
for establishing all application policies and procedures for
grants from the casino accounts.
The State Auditor is required to conduct an audit every three
years and report its findings to the Legislature regarding the
allocation and use of SDF grant monies. Appropriations have
been made from the SDF for local community grants in prior years
as follows: $25 million in 2003-04; $30 million in 2004-05,
2005-06, 2006-07, 2007-08, 2008-09, and 2010-11. The Governor
blue penciled the $30 million appropriation in 2007-08 but that
funding was later restored through the budget act. However,
declining revenue going into the SDF and the annual obligation
to cover any shortfall in the Revenue Sharing Trust Fund, make
it impossible for the SDF to maintain a $30 million annual
appropriation for grants to local communities.
There are 71 non-gaming tribes that will be eligible for RSTF
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distributions of $1.1 million each during FY 2011-12 for a total
payment of $78.1 million. The California Gambling Control
Commission notes that the RSTF revenue for 2011-12 is projected
to total approximately $51 million which will result in a
shortfall of about $27.1 million which must be transferred from
the SDF in FY 2011-12.
In July 2007, the Bureau of State Audits reported numerous
instances where the grant funds provided to local governments to
mitigate the effects of gaming were used inappropriately or for
entirely unrelated purposes. In February 2011 the State Auditor
conducted a follow-up review of 20 grants awarded by benefit
committees in seven counties 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, nearly $400,000 was
used for projects that were unrelated to the casinos' impact or
not proportionally related to any adverse impacts; local
governments could not provide evidence that $3.2 million in
grant funding was used to mitigate the impact of a casino; one
county granted all of its funds totaling $336,000 to an entity
that was not eligible to receive the money; and five local
governments received $1.2 million less than the amount the law
set aside for them. The auditor further concluded that nearly
25% of the benefit committee members in the seven counties
reviewed failed to provide a statement of economic interest.
The Legislative Analyst Office, in its review of the 2009-10
budget, concluded that local grants have outlived their
usefulness due to the major changes in the revenue stream to the
SDF. As a result of several compact renegotiations by the
previous administration, many tribes no longer contribute to the
SDF. These tribes instead 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) and
all of the amended compacts for tribes that no longer pay into
the SDF are located in Riverside and San Bernardino counties.
It is the LAO's conclusion, therefore, that the current
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allocation formula is inappropriate and outdated.
Government Code Section 12713 provides that the Department of
Finance, in consultation with the Gambling Control Commission,
shall calculate the total revenue in the Indian Gaming Special
Distribution Fund that will be available for the current budget
year for local government agencies impacted by tribal gaming.
The Department of Finance then includes the information in the
May Revision of the state budget. The projected balance of the
SDF as of June 30, 2012 is estimated to be $43.7 million and due
to the structural imbalance with expenditures exceeding
revenues, the fund is expected to have a negative balance by FY
2013-14. Therefore, no money was appropriated in the May
Revision for local government mitigation grants this year.