BILL ANALYSIS Ó AB 1417 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1417 (Hall) As Amended August 31, 2011 Majority vote ---------------------------------------------------------------------- |ASSEMBLY: |75-0 |(May 26, 2011) |SENATE: |35-0 |(September 7, 2011) | ---------------------------------------------------------------------- ------------------------------------------------------------------------ |COMMITTEE VOTE: |16-0 |(September 9, 2011) |RECOMMENDATION: |concur | | | | | | | ------------------------------------------------------------------------ Original Committee Reference: G.O. SUMMARY : Appropriates $9.1 million from the Indian Gaming Special Distribution Fund (SDF) to the California Gambling Control Commission (CGCC) to provide grants to local agencies for the purpose of mitigating the adverse impacts of tribal gaming. The Senate amendments delete the Assembly version of the bill, and instead appropriate $9,100,000 from the SDF to the CGCC to provide grants to local agencies, as specified. EXISTING LAW : 1)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. AB 1417 Page 2 2)Establishes a method of calculating the 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. 3)3) 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. 4)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. 5)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. AS PASSED BY THE ASSEMBLY , this bill reorganized statutes pertaining to Indian gaming compacts primarily by moving them to a newly created Title 16.5 on Tribal Gaming in the Government Code. This bill also made other technical, non-substantive changes. FISCAL EFFECT : According to the Senate Appropriations Committee, appropriates $9.1 million from the SDF (Special fund) to the CGCC to provide grants to local agencies for the purpose of mitigating the adverse impacts of tribal gaming. COMMENTS : This bill was substantially amended in the Senate and AB 1417 Page 3 the Assembly-approved provisions of this bill were deleted. Purpose of the bill : According to the author, this bill ensures a statewide appropriation of $9.1 million from the Indian Gaming Special Distribution Fund (SDF) for local mitigation monies for fiscal year 2011-2012. The author points out, under current law this appropriation is made via a Special Fund (SDF) not the General Fund. 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. In this lean budgetary year, local governments are depending on this money to mitigate the costs associated with having casinos within their jurisdictions. This $9.1 million appropriation represents a reasonable request to provide local mitigation funds to communities surrounding the 21 tribes who still pay into the SDF as provided by the existing 1999 compacts - as well as other many other communities throughout the state pursuant the longstanding statutory allocation formula. Indian Gaming Special Distribution Fund (SDF) : The Indian Gaming Special Distribution Fund (SDF) was created by the 1999 Tribal State Compacts and is currently financed by 21 tribal governments that operated more than 200 gaming devices as of September 1, 1999. The California Government Code specifies that the money deposited into the SDF is available for appropriation by the Legislature to address four needs, prioritized as follows: 1) Supporting the RSTF to ensure that it can distribute $1.1 million annually to each tribe that does not have a compact or that has a compact and operates fewer than 350 devices; 2) Funding problem-gambling prevention programs managed by the Department of Alcohol and Drug Programs; 3) Paying the operating costs for the Indian gaming regulatory functions of the CGCC and the Department of Justice (DOJ); and, 4) Supporting local governments impacted by tribal gambling. 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 AB 1417 Page 4 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. Local Benefit Committees : Existing law establishes Indian Gaming Local Community Benefit Committees with specified 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. SDF budget actions : 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. 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. Government Code Section 12713 provides that the Department of Finance, in consultation with the GCCC, 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 AB 1417 Page 5 by FY 2013-14. Therefore, no money was appropriated in the May Revision for local government mitigation grants this year. In addition, under current law, the General Fund is obligated to cover the RSTF annual shortfall if the SDF cannot. Bureau of State Audits (BSA) : In July 2007, the Bureau of State Audits reported 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 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. 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. Legislative Analyst's concerns : 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. It is the LAO's conclusion, therefore, that the current allocation formula is inappropriate and outdated. Prior legislation : SB 856 (Budget and Fiscal Review Committee), Chapter 719, Statutes of 2010. Among other things, appropriated $30 million from the SDF to restore funding deleted from the Budget Act of 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 AB 1417 Page 6 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. Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531 FN: 0002890