BILL ANALYSIS �
AB 1042
Page 1
Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1042 (Hall) - As Amended: May 8, 2013
Policy Committee: Governmental
Organization Vote: 16 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Department of Finance (DOF), in
consultation with the Gambling Control Commission (GCC), to
provide a recommendation regarding the anticipated revenue that
will be available in the Indian Gaming Special Distribution Fund
(SDF) from any additional tribal gaming operations. In addition,
requires DOF to provide to the Legislature the following
information during the annual budget process:
1)The total amount of projected payments in accordance with all
ratified tribal gaming compacts.
2)The total amount of payments received into the SDF in the
prior year.
3)The total number of tribes that make payments into the SDF.
4)The name of each tribe that makes payments into the SDF.
5)The amount of appropriations made each budget year in the
previous 10 years from the SDF to local government agencies.
FISCAL EFFECT
Costs of providing the required information during the budget
process should be minor and absorbable within existing DOF
resources.
COMMENTS
1)Purpose . According to the author, this bill is a follow-up to
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a California State Auditor (CSA) report from February 2011,
titled "The Indian Gaming Special Distribution Fund" (Report
2010-036). In that audit, CSA generally found a need for
increased oversight over the use of the local mitigation
grants that are provided to certain local governments in order
to mitigate the impact of an Indian casino. The author hopes
that by requiring DOF to provide more detail during the budget
process, it will give the Legislature the information it needs
to determine the funding level for local mitigation grants.
The author asserts that the current statute pertaining to the
DOF's and the GCC's role in the process of determining
potential appropriations from the SDF for local mitigation
implies that there is a specific and precise means of
calculating the total revenue in the SDF which shall be
available for appropriation by the Legislature.
Current law does not require DOF to provide a specific
recommendation for how the funds should be spent. It merely
requires a calculation of the total revenue in the SDF,
according to the author. He believes that the SDF would be
better served if a specific recommendation was put forth by
DOF, in consultation with the GCC. The recommendation would
not only assist in providing a long term sustainability of the
Fund but would provide the Legislature with a baseline
allocation to work from.
2)Is this bill necessary ? Despite the intent of this legislation
and the author's assertion that DOF does not provide specific
information for how SDF funds should be spent, the governor
does propose a state budget in January of each year that
includes his recommendation for how those SDF funds should be
distributed. In the past several years, due to the looming
insolvency of the fund, the governor's recommendation has been
to not provide local mitigation grants.
The governor's proposed 2013-14 budget assumes the SDF will
have approximately $36 million in revenue, after $40 million
is used to backfill the Indian Gaming Revenue Sharing Trust
Fund (RSTF). Of that $36 million, the governor proposes to
provide $19 million to the Department of Justice (DOJ), $2.7
million to the GCC, $8.3 million to the Department of Public
Health for the Office of Problem Gambling, and the remaining
$5.3 million would be held in a reserve for economic
uncertainties. The governor, once again, does not propose
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funding local mitigation grants. The revenue available in the
fund is approximately half of what was available in 2012-2013.
Presumably, by 2014-15 the fund will become insolvent and GF
will be needed to backfill the current fund obligations.
3)Background . Both the SDF and the RSTF were established in the
61 tribal-state gaming compacts negotiated in 1999 by
then-Governor Davis and ratified by the Legislature that same
year.
The 1999 compacts require each tribe that operates more than
200 slot machines as of September 1, 1999, before the compacts
were ratified, to deposit a percentage of its average net wins
(ranging from 7%-13%) into the SDF (the state General Fund
receives no revenue from the 1999 compacts). Twenty-one tribes
currently make contributions into the SDF.
Tribes with 1999 compacts are required to purchase slot
machine licenses by paying both a one-time fee and quarterly
fees based upon the number of slot machines the tribe
operates. These fees are deposited into the RSTF and are used
to support the annual $1.1 million payments to the 71
"non-compact" tribes. Unfortunately, the fee structure
established in the 1999 compacts designed to support the $1.1
million payments to the non-compact tribes does not generate
a sufficient level of funding necessary to support this
obligation, thus necessitating annual transfers (approximately
$33.5 million in 2012-13) from the SDF to address this
shortfall.
4)Special Distribution Fund . Along with covering shortfalls in
the RSTF, money paid by gaming tribes into the SDF is required
to be used for funding programs designed to address problem
gambling; support for any local or state government agencies
that are impacted by gaming; compensation for any DOJ
regulatory costs and investigation costs; and for implementing
any tribal labor relations ordinances that are promulgated in
accordance with individual gaming compacts.
5)Bureau of State Audits (BSA) Findings . 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 when the grants were not used to offset the
adverse effects of casinos. In addition, they found 10
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instances totaling $2.3 million where the purpose of the
grants stated in the application may have been somewhat
relevant but appeared to primarily address unrelated needs in
the communities. In addition the auditor found that in some
local communities a significant amount of the distribution
fund money was deposited into local government accounts which
earned interest that was used to pay general county
operational costs rather than for mitigation projects.
6)Related Legislation .
a) AB 2515 (Hall), Chapter 704, Statutes of 2012,
strengthens procedures governing the awarding of grants
from the SDF to ensure that the funds are properly used to
mitigate costs associated with tribal gaming. In addition,
this bill appropriates $9.1 million from the SDF to the
CGCC to provide grants to local agencies for the purpose of
mitigating the adverse impacts of tribal gaming. The
appropriation was not in the bill when it left this
committee or this house.
b) AB 1417 (Hall), Chapter 736, Statutes of 2011
appropriated $9.1 million from the SDF to the CGCC to
provide grants to local agencies for the purpose of
mitigating the adverse impacts of tribal gaming. The
appropriation was not in the bill when it left this
committee or this house.
c) SB 856 (Senate Budget and Fiscal Review Committee),
Chapter 719, Statutes of 2010, 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.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081