BILL ANALYSIS                                                                                                                                                                                                    

          |SENATE RULES COMMITTEE            |                       AB 1540|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |

                                   THIRD READING 

          Bill No:  AB 1540
          Author:   Gray (D)
          Amended:  8/31/15 in Senate
          Vote:     27  - Urgency


          NOTE:   On September 1, 2015, the Senate Governmental  
                 Organization Committee held an informational hearing on  
                 the tribal-state gaming compact entered into between the  
                 State of California and the Santa Ynez Band of Chumash  

           SUBJECT:   Tribal gaming: compact ratification

          SOURCE:    Author

          DIGEST:  This bill ratifies the tribal-state gaming compact  
          (Compact) entered into between the State of California and the  
          Santa Ynez Band of Mission Indians (hereafter "Tribe") executed  
          on August 26, 2015.  Additionally, this bill provides that, in  
          deference to tribal sovereignty, certain actions are not deemed  
          projects for purposes of the California Environmental Quality  
          Act (CEQA); and, stipulates, except as expressly provided, that  
          none of the provisions shall be construed to exempt a city,  
          county, or city and county, or the Department of Transportation  
          from CEQA requirements.


                                                                    AB 1540  
                                                                    Page  2

          Senate Floor Amendments of 8/31/15 gut the contents of the  
          original bill relating to tribal gaming, add an urgency clause,  
          and insert provisions pertaining to ratification of the tribal  
          gaming compact recently executed by the Governor and the Santa  
          Ynez Band of Chumash Indians.


          Existing law:

          1)Provides, under the Indian Gaming Regulatory Act (IGRA), for  
            the negotiation and conclusion of compacts between federally  
            recognized Indian tribes and the State for the purpose of  
            conducting Class III gaming activities on Indian lands within  
            a State as a means of promoting tribal economic development,  
            self-sufficiency, and strong tribal governments.  

          2)Authorizes expressly a number of tribal-state gaming compacts  
            between the State of California and specified Indian tribes. 

          3)Authorizes the conduct of Class III gaming activities to the  
            extent such activities are permitted by state law, a gaming  
            compact has been concluded by a federally recognized tribe and  
            the State, and the compact has been approved by the Secretary  
            of the Interior.  

          4)Limits the operation of Class III gaming activities to Indian  
            lands acquired on or before October 17, 1988.  Provides for  
            certain exceptions to conduct gaming activities on Indian  
            lands acquired after October 17, 1988.

          5)Defines Indian lands to mean all lands within the limits of  
            any Indian reservation, and any lands title to which is either  
            held in trust by the United States for the benefit of any  
            Indian tribe, or individual, or held by any Indian tribe or  
            individual subject to restriction by the U.S. against  
            alienation and over which an Indian tribe exercises  
            governmental power.

          6)Requires the State to negotiate to conclude a compact in good  


                                                                    AB 1540  
                                                                    Page  3

            faith with an Indian tribe having jurisdiction over the Indian  
            lands upon which the Class III gaming activity is to be  
            conducted.  Provides the U.S. district courts with  
            jurisdiction over any cause of action initiated by a tribal  
            government alleging that the State failed to negotiate in good  
            faith to conclude a compact.  Prescribes the remedy, mediation  
            supervised by the courts, if it is found that the State failed  
            to negotiate in good faith to conclude a compact.  

          7)Authorizes the Governor, under the California Constitution, to  
            negotiate and conclude compacts, subject to ratification by  
            the Legislature.

          This bill ratifies the Compact entered into between the State of  
          California and the Tribe executed on August 26, 2015 and  
          supersedes the 1999 compact between the Tribe and the State of  
          California.  Under the 1999 compact, the Tribe is authorized to  
          operate no more than 2,000 gaming devices (slot machines).   
          Under this Compact the Tribe may operate a maximum of 2,500 slot  
          machines at its current facility in Santa Barbara County.

          The Tribe has agreed to pay the State its pro rata share of the  
          costs the State incurs for the performance of its duties under  
          this Compact as well as 6% of the casino's net win, to be shared  
          with tribes that are not gaming or that otherwise are not  
          substantially benefiting from gaming.  Additionally, this  
          Compact provides a framework for the sharing of gaming revenue  
          with the County of Santa Barbara and other local jurisdictions.   
          Specifically, the Tribe may take annual credits of up to 60% (of  
          the 6% net win) for infrastructure improvements and fire, law  
          enforcement, public transit, education, tourism and other  
          services including investments in renewable energy or water  
          conservation projects and non-gaming related economic  
          development and health care facilities that provide a mutual  
          benefit to the Tribe and the local community. 

          Pursuant to the 1999 compact, the Tribe currently pays $5.8  
          million annually into the Special Distribution Fund (SDF) to  
          cover the State's regulatory costs relating to tribal gaming,  
          including problem gambling programs, and $1.3 million annually  
          into the Revenue Sharing Trust Fund (RSTF) which is directed to  
          non-gaming and limited gaming tribes in California.  

          Under this Compact, it is estimated that the Tribe will pay  


                                                                    AB 1540  
                                                                    Page  4

          approximately $1 million annually into the SDF and approximately  
          $12 million annually into the RSTF or the Tribal Nation Grant  
          Fund (TNGF).  The Tribe's $12 million payment into the RSTF may  
          be offset by up to $7.2 million (the 60% credit referenced  
          above), as specified.    

          Brief History of the Chumash Tribe and Background

          According to information provided by the Tribe, the Chumash  
          Tribe is a federally recognized Indian tribe listed in the  
          Federal Register as the Santa Ynez Band of Chumash Mission  
          Indians of the Santa Ynez Reservation.  In fact, the Santa Ynez  
          Band of Chumash Indians is the only federally-recognized Chumash  
          tribe in the nation.  

          The Santa Ynez Reservation is located in Santa Barbara County  
          and was established on December 27, 1901.  In 1999, the Tribe  
          and the State entered into a tribal-state compact which enabled  
          the Tribe, through revenues generated by its gaming operation,  
          to improve the governance, environment, education, health,  
          safety, and general welfare of its citizens, and to promote a  
          strong tribal government, self-sufficiency, and to provide  
          essential government services to its citizens.  Pursuant to the  
          1999 compact, the Tribe operates 2,000 Class III gaming devices  
          and currently pays $5.8 million into the SDF and $1.3 million  
          into the RSTF annually.  

          Today, the Tribe is on a path to economic self-sufficiency as a  
          result of the revenue that has been generated over the past 15  
          years from its casino.  Some tribal members continue to live on  
          the reservation and others live in homes in surrounding  
          communities.  Currently, there are 249 residents on the Santa  
          Ynez Reservation and 97 homes.

          The Tribe's current casino operation, known as the Chumash  
          Casino Resort, has approximately 2,000 slot machines, offers 36  
          table games, restaurants, a hotel with 106 rooms and other  
          venues. The casino resort complex also employs approximately  
          1,680 people.  The Tribe reports that it is undergoing an  
          expansion which will add 212 hotel rooms and an extra 60,000  
          square feet of gaming floor.   
          In addition, the Tribe has a diversified business portfolio - it  
          owns or has ownership interests in a variety of businesses both  
          on and off of the Santa Ynez Reservation including three hotels  


                                                                    AB 1540  
                                                                    Page  5

          nearby in Solvang; an office building in Buellton which houses  
          various tribal business functions; and, a federally qualified  
          health clinic.

          Furthermore, the Tribe currently pays Santa Barbara County over  
          $2 million a year for a full-time on reservation deputy sheriff  
          and two full-time fire fighter paramedic positions in the Santa  
          Ynez and Solvang Fire Stations.  The Tribe is also funding a  
          $1.6 million ladder truck to be housed in the Solvang Fire  
          Key Components of this Compact
           Scope of Class III Gaming Authorized and Financial Terms. Under  
          this Compact, the Tribe may operate a maximum of 2,500 gaming  
          devices, banking or percentage card games, and any devices or  
          games that are authorized under state law to the California  
          State Lottery, provided that the Tribe will not offer such games  
          through use of the Internet unless others in the state not  
          affiliated with or licensed by the California State Lottery are  
          permitted to do so under state and federal law.  The Tribe shall  
          not engage in Class III Gaming that is not expressly authorized  
          in the Compact.
           Authorized Gaming Facility. The Tribe may establish and operate  
          not more than two gaming facilities and engage in Class III  
          Gaming only on eligible Indian lands held in trust for the  
          Tribe, located within the boundaries of the Tribe's reservation  
          as those boundaries exist as of the execution date of this  
          Compact, as legally described in the Compact.  If the Tribe  
          chooses to operate more than one gaming facility, then one of  
          the two gaming facilities shall have no more than five hundred  
          (500) gaming devices and shall have a primary purpose other than  
          gaming authorized under IGRA.
           Exclusivity.  Provides that in the event the exclusive right of  
          Indian tribes to operate Class III gaming in California pursuant  
          to the California Constitution is nullified by the enactment,  
          amendment, or repeal of a state statute or constitutional  
          provision or the conclusive and dispositive judicial  
          construction of a statute or the state Constitution by a  
          California appellate court after the effective date of this  
          Compact, that gaming devices may lawfully be operated by   
          non-Indian entities, the Tribe shall have the right to: (1)  


                                                                    AB 1540  
                                                                    Page  6

          terminate this Compact, in which case the Tribe will lose the  
          right to operate Class III gaming authorized by this Compact or  
          (2) continue under this Compact with entitlement to a reduction  
          of the rates specified below following conclusion of  
          negotiations, to provide for (a) compensation to the State for  
          the reasonable costs of regulation, as defined; (b) reasonable  
          payments to local governments impacted by tribal government  
          gaming; (c) grants for programs designed to address gambling  
          addiction; and, (d) such assessments as may be permissible at  
          such time under federal law.   
           Payments to the SDF.  The Tribe shall pay to the State on a pro  
          rata basis the costs the State incurs for the performance of all  
          its duties under this Compact, as established by the monies  
          appropriated in the annual Budget Act for the performance of  
          their duties under the Class III Gaming Compacts each fiscal  
          year for the California Gambling Control Commission (CGCC), the  
          California Department of Justice, the Office of the Governor,  
          the California Department of Public Health Programs, Office of  
          Problem Gambling, the State Controller, the Department of Human  
          Resources, and the Financial Information System for California,  
          or any agency or agencies the State designates as a successor to  
          them.  The Tribe's pro rata share of the State's costs in any  
          given year this Compact is in effect shall be calculated using  
          the following equation: 

          "The maximum number of gaming devices operated in the gaming  
          facility for the previous fiscal year as determined by the State  
          Gaming Agency, divided by the maximum number of gaming devices  
          operated by all federally recognized tribes in California  
          pursuant to tribal-state Class-III gaming compacts during the  
          previous fiscal year, multiplied by costs, equals the Tribe's  
          pro rata share." 
           Payments to the RSTF or the TNGF.  If the Tribe operates more  
          than three hundred fifty (350) gaming devices at any time in a  
          given calendar year, it shall thereafter, including in that  
          calendar year, pay to CGCC, for deposit into the RSTF or the  
          TNGF, six percent (6%) of its net win from its operation of  
          gaming devices in excess of three hundred fifty (350).

          "Net Win" is defined as the drop from gaming devices, plus the  
          redemption value of expired tickets, less fills, less payouts,  
          less that portion of the gaming operation's payments to a  


                                                                    AB 1540  
                                                                    Page  7

          third-party wide-area progressive jackpot system provider that  
          is contributed only to the progressive jackpot amount. 
           Credits Applied to the RSTF or the TNGF.  The State agrees to  
          provide the Tribe with an annual credit for up to sixty percent  
          (60%) of the payments otherwise due to be paid into the RSTF or  
          TNGF for the following: 

          1)Payments by the Tribe to the County of Santa Barbara and local  
            jurisdictions operating facilities or providing services  
            within the County for purposes of improved fire, law  
            enforcement, public transit, education, tourism, and other  
            services and infrastructure improvements intended to serve  
            off-reservation needs of County residents - such payments  
            shall be subject to approval by the County or local  
            jurisdiction in the County and at least twenty percent (20%)  
            of the annual credits must be utilized for the above stated  

          2)Non-gaming related capital investments and economic  
            development projects by the Tribe on or off tribal trust lands  
            that the State or State designated agency agrees provides  
            mutual benefits to the Tribe and the State because, for  
            instance, they have particular cultural, social or  
            environmental value, or diversify the sources of revenue for  
            the Tribe's general fund; 

          3)Investments in, and any funds paid to the State in connection  
            with, renewable energy projects that, in part, serve the  
            gaming facility, to include facilities that incorporate  
            charging stations for electric or other zero-emission vehicles  
            that are available to patrons and employees of the gaming  

          4)Payments to support capital improvements and operating  
            expenses for facilities within California that provide health  
            care services to tribal members, Indians, and non-Indians;
          5)Investments by the Tribe for water treatment and conservation  
            projects; and,
          6)General welfare benefits provided by the Tribe for health  
            care, education, and cultural or vocational purposes to  
            non-enrolled members of the Tribe and other Native Americans  


                                                                    AB 1540  
                                                                    Page  8

            in the community.

          All excess authorized credits that cannot be applied in any one  
          year because they would exceed the sixty percent (60%) may be  
          applied as an annual credit in all following years that this  
          Compact is in effect, in the same percentages, until completely  
           Quarterly Contribution Report.  At the time each quarterly  
          payment is due, the Tribe shall submit to the State a report,  
          prepared and certified by an authorized representative of the  
          gaming operation. The report must include: (a) calculation of  
          the maximum number of gaming devices operated each day, (b) the  
          Net Win calculation, (c) the amount due the SDF, (d) calculation  
          of the amount due to the RSTF/TNGF, and (e) the total amount of  
          the quarterly payment.
           Additional Compact Elements
            Gaming Ordinance and Regulations.  Provides that all gaming  
            activities conducted under this Compact shall, at a minimum,  
            comply with (1) a gaming ordinance duly adopted by the Tribe  
            and approved in accordance with IGRA, (2) all rules,  
            regulations, procedures, specifications, and standards duly  
            adopted by the National Indian Gaming Commission (NIGC), the  
            Tribal Gaming Agency, and the State Gaming Agency, and (3) the  
            provisions of this Compact, as specified.

           Licensing Requirements and Procedures.  Provides that all  
            persons in any way connected with the gaming operation or  
            gaming facility who are required to be licensed or to submit  
            to a background investigation under IGRA, and any others  
            required to be licensed under this Compact, including, without  
            limitation, all gaming employees, gaming resource suppliers,  
            financial sources, and any other person having a significant  
            influence over the gaming operation, must be licensed by the  
            Tribal Gaming Agency and cannot have had any determination of  
            suitability denied or revoked by the CGCC.  Also, every gaming  
            employee must obtain, and thereafter maintain current, a valid  
            tribal gaming license, as specified.
           Minimum Internal Control Standards (MICS).  Requires the Tribe  
            to adopt and comply with standards that meet or exceed the  
            federal NIGC standards.  The MICS are incorporated in this  
            Compact as an appendix (Appendix D), which shall be updated  


                                                                    AB 1540  
                                                                    Page  9

            periodically by the State Gaming Agency and Tribal Gaming  
            Agency, to ensure the MICS keep up with changing technology  
            and industry standards. 

           Patron Disputes.  Provides that the Tribe (through its tribal  
            gaming agency) must attempt to resolve patron disputes within  
            three days of the play or operation of any game, including  
            refusal to pay to a patron any alleged winnings from any  
            gaming activities.  If a patron is dissatisfied with the  
            resolution, the Tribe shall inform the patron in writing with  
            15 days of the right to resolution of the dispute by the  
            Tribal Gaming Agency.  If dissatisfied with the resolution,  
            the patron has the right to seek resolution in either the  
            Tribe's tribal court system or through the tribal claims  
            commission.  The Tribal Gaming Agency shall conduct an  
            appropriate investigation, provide to the patron a copy of its  
            procedures concerning patron complaints, and render a decision  
            in accordance with industry practice.  The decision shall be  
            issued within 60 days of the patron's request.  Any party  
            dissatisfied with the award of the tribal court or tribal  
            claims commission may, at the party's election, appeal to the  
            tribal appellate court or seek binding arbitration which shall  
            be settled by a retired judge, in accordance with the  
            streamlined arbitration rules and procedures of Judicial  
            Arbitration and Mediation Services (JAMS).  The Tribe agrees  
            to wave its sovereign immunity in order to be compelled in  
            federal or state court to abide by the resolution of  

           Public and Workplace Liability.  Requires the Tribe to obtain  
            and maintain a commercial general liability insurance policy  
            which provides coverage of no less than $10 million and adopt  
            a Tort Liability Ordinance stipulating that California tort  
            law governs claims.  Also, provides that California tort law  
            shall apply to specified claims if the Tribe fails to adopt a  
            Tort Liability Ordinance.  

           Environmental Protections.  Requires the Tribe to prepare a  
            Tribal Environmental Impact Report (TEIR) and negotiate  
            mitigation of any off-reservation impacts.  The Tribe's  
            failure to prepare an adequate TEIR when required shall be  
            deemed a breach of this Compact and furthermore shall be  
            grounds for issuance of an injunction or other appropriate  
            equitable relief.  A completed TEIR must be filed with Santa  


                                                                    AB 1540  
                                                                    Page  10

            Barbara County, the Department of Justice, the State  
            Clearinghouse and the State Gaming Agency.  Also, projects  
            that have commenced prior to the effective date of this  
            Compact, including the "hotel expansion project" will be  
            subject to the relevant terms and conditions of the Tribe's  
            1999 compact then in effect.

           Labor Provisions.  Provides that the gaming activities  
            authorized by this Compact may only commence after the Tribe  
            has adopted an ordinance identical to the Tribal Labor  
            Relations Ordinance (TRLO), referenced as Appendix C of the  
            Compact, and the gaming activities may only continue as long  
            as the Tribe maintains the ordinance.  If the Tribe employs  
            250 or more persons in a tribal casino facility, then the  
            provisions of the TLRO become effective.  The TLRO provides  
            for a secret ballot election.  The new TLRO proscribed by this  
            Compact is modeled after the Tribe's 1999 TLRO with several  
            modifications.  The new TLRO provides for union neutrality.   
            The Tribe will not oppose a union organization but can  
            advocate the benefits of working for the Tribe.  A labor union  
            must issue a Notice of Intent or Organize (NOIO).   For a  
            period of 365 days following delivery of a NOIO, the union  
            shall not engage in strikes, picketing, boycotts, attack  
            websites, or other economic activity at or in relation to the  
            tribal casino or related facility.  During the 365 days after  
            the Tribe received the NOIO, the union must collect dated and  
            signed authorization cards and complete the secret ballot  
            election.  Failure to complete the secret ballot election  
            within 365 days shall preclude the union from delivering  
            another NOIO for a period of two years (730 days).  After the  
            certification that 30% of the employees have expressed an  
            interest in the union, a notice of election shall be issued  
            and the election shall be concluded within 30 calendar days  
                                                thereafter.  Secret ballot elections shall be held at the  
            workplace and at least one neutral location.  Employees may  
            mail in ballots provided they are received by election day.   
            Mediation for any collective bargaining agreement impasse  
            shall be made in conjunction with the Federal Mediation and  
            Conciliation Service (FMCS).  The mediation process is modeled  
            on the Agricultural Labor Relations Act and authorizes the  
            mediator to resolve the impasse.  According to the  
            Administration, the appeals procedures have been streamlined  
            significantly in comparison to the Tribe's 1999 TLRO.   
            Disputes are presented to an arbitrator with expertise in  


                                                                    AB 1540  
                                                                    Page  11

            labor law and appropriate challenges to the arbitrator's  
            decision may be presented to a state superior court.

           Enhanced Audit and Compliance Review Procedures.  In addition  
            to providing for an annual independent audit, the Compact  
            allows the state to conduct its own annual audit and compact  
            compliance review. 

           Inspection and Testing of Slot Machines.  Requires slot  
            machines to be tested, approved and certified by an  
            independent gaming test laboratory or state governmental  
            gaming test laboratory to ensure they are being operated  
            according to specified technical standards.  Also, requires  
            the Tribal Gaming Agency to maintain adequate records that  
            demonstrate compliance with software and hardware  
            specifications.  In addition, authorizes the State Gaming  
            Agency to annually conduct up to four random inspections of  
            slot machines in operation to confirm that the slot machines  
            are operating in conformance with these standards. 

           Prohibitions Regarding Minors.  Provides that the Tribe shall  
            prohibit persons under the age of eighteen (18) years from  
            being present in any room or area in which gaming activities  
            are being conducted unless the person is en route to a  
            non-gaming area of the gaming facility, or is employed at the  
            Gaming Facility in a capacity other than as a gaming employee.

           Health and Safety Standards.  Provides that the Tribe has  
            agreed to adopt and comply with State public health standards  
            for food and beverage handling and federal water quality and  
            safe drinking standards applicable in California.

           Problem Gambling.  Requires the gaming operation to establish  
            a program, approved by the Tribal Gaming Agency, to mitigate  
            pathological and problem gaming by implementing specified  

           Alcohol Provisions.  Makes it explicit that the purchase,  
            sale, and service of alcoholic beverages shall be subject to  
            state law (the Alcoholic Beverage Control Act).  If the Tribe  
            permits the consumption of alcoholic beverages in the gaming  
            facility, the Tribe must prohibit persons under the age of  
            twenty-one (21) years from purchasing, consuming, or  
            possessing alcoholic beverages.  The Tribe must also prohibit  


                                                                    AB 1540  
                                                                    Page  12

            persons under the age of twenty-one (21) years from being  
            present in any room or area in which alcoholic beverages may  
            be consumed.

           Tobacco Provisions.  Provides that the Tribe agrees to provide  
            a non-smoking area in the gaming facility and to utilize a  
            ventilation system throughout the gaming facility that  
            exhausts tobacco smoke to the extent reasonably feasible under  
            state-of-the-art technology existing as of the date of the  
            construction or significant renovation of the gaming facility,  
            and further agrees not to offer or sell tobacco to anyone  
            under 18 years of age.

           Emergency Services Accessibility and Possession of Firearms.  
            Provides that the Tribe must make reasonable provisions for  
            adequate emergency fire, medical, and related relief and  
            disaster services for patrons and employees.  Also, prohibits  
            the possession of firearms by any person in the gaming  
            facility at all times except for federal, state, or local law  
            enforcement personnel, or tribal law enforcement or security  
            personnel, as authorized.

           Workers' Compensation.  Provides that the Tribe agrees to  
            participate in the state's workers' compensation program with  
            respect to employees at the casino.  All disputes arising from  
            the workers' compensation laws shall be heard by the State  
            Workers' Compensation Appeals Board pursuant to the California  
            Labor Code.  The Tribe acknowledges the jurisdiction of the  
            Board in such manners.  Furthermore, the Tribe agrees that it  
            will participate in the state's unemployment compensation  
            program for providing benefits and unemployment compensation  
            disability benefits to employees at the casino.  The Tribe  
            shall withhold all taxes due to the state, except for Tribal  
            members living on the Tribe's reservation, and forward such  
            amounts to the state.  

            Effective Date. Provides that this Compact shall not be  
            effective unless and until all of the following have occurred:  
            (a) the Compact is ratified by statute in accordance with  
            state law and (b) notice of approval or constructive approval  
            is published in the Federal Register.  Once effective, this  
            Compact shall be in full force and effect for State law  
            purposes for 25 years following the effective date.


                                                                    AB 1540  
                                                                    Page  13

           Amendment by Agreement.  Provides that the terms and  
            conditions of this Compact may be amended at any time by the  
            mutual and written agreement of both parties during the term  
            of this Compact, provided that each party voluntarily consents  
            to such negotiations in writing.  Any amendments to this  
            Compact shall be deemed to supersede, supplant and extinguish  
            all previous understandings and agreements on the subject.  

           Additional Relevant Background Information 
          Indian Gaming Regulatory Act (IGRA)

          In 1988, Congress enacted the Indian Gaming Regulatory Act  
          (IGRA) to provide a statutory basis for the operation and  
          regulation of gaming on Indian lands.  IGRA provides that an  
          Indian tribe may conduct gaming activity on Indian lands if the  
          activity "is not specifically prohibited by federal law and is  
          conducted within a State which does not prohibit such gaming  

          IGRA distinguishes between three classes of gaming (Class I,  
          Class II, and Class III) and provides for different forms of  
          regulation for each class.  Class I gaming includes "social  
          games" for minor prizes or "traditional forms of Indian gaming."  
           Class II gaming is defined to include bingo and card games that  
          are explicitly authorized by the laws of the state, or that are  
          not explicitly prohibited by the laws of the state and are  
          played at any location in the State, so long as the card games  
          are played in conformity with those laws and regulations.  Class  
          III gaming includes such things as slot machines, casino games  
          and banked card games such as black jack and baccarat.  Class  
          III gaming may only be conducted under terms of a compact  
          negotiated between an Indian tribe and a State.  

          IGRA was enacted against a legal background in which Indian  
          tribes and individuals generally are exempt from state taxation  
          within their own territory.  IGRA provides that with the  
          exception of assessments permitted under the statute, to defray  
          the State's costs of regulating gaming activity, IGRA shall not  
          be interpreted as conferring upon a State authority to impose  
          any tax, fee, charge, or other assessment upon an Indian tribe  
          to engage in Class III activity.  Nor may a State refuse to  
          enter into negotiations based on the lack of authority to impose  
          such a tax, fee, charge, or other assessment.


                                                                    AB 1540  
                                                                    Page  14

          When a tribe requests negotiations for a Class III compact, IGRA  
          requires the State to negotiate with the Indian tribe in good  
          faith.  IGRA provides a comprehensive process to prevent an  
          impasse in compact negotiations, which is triggered when a tribe  
          files suit alleging that the State has refused to negotiate or  
          has failed to negotiate in good faith.

          Before 2000, The California Constitution prohibited Class III  
          gaming.  In 2000, California voters approved Proposition 1A  
          which had been proposed by the Governor and passed by the  
          Legislature.  Proposition 1A amended the California Constitution  
          to permit the State to negotiate compacts with federally  
          recognized Indian tribes for certain Class III gaming  
          activities.  Because non-Indian parties were still forbidden  
          from operating gaming facilities, Proposition 1A granted Indian  
          tribes a "constitutionally protected monopoly on most types of  
          Class III games in California."


          Rincon Decision 

          The U.S. Supreme Court in July 2011 refused to consider the  
          decision of the Ninth Circuit Court rejecting a Class III  
          Tribal-State Gaming Compact negotiated by Governor  
          Schwarzenegger with the Rincon Band of Luiseno Mission Indians.  
          The issue of this case's impact on Indian gaming throughout the  
          country has been a topic of great debate.

          As noted, IGRA authorizes states to receive compensation for  
          costs related to tribal gaming such as regulation and gaming  
          addiction, and to offset the effects of casinos on surrounding  
          communities.  However, states are prohibited from assessing  
          taxes on tribal casino revenues, so unjustified payments to a  
          state's General Fund are no longer permissible unless the tribes  
          are getting something in return for the required payments, such  
          as those authorized by IGRA.  

          Another vehicle for state receipt of casino payments above those  
          payments must be in exchange for some benefit deemed "exclusive"  
          to the tribe. To this end, it is fact that a number of other  
          state (Governors) have attempted to create "exclusive grants" in  


                                                                    AB 1540  
                                                                    Page  15

          favor of compact signatory tribes in return for payments to the  
          state treasuries.

          Rincon challenged the legality of California's "second  
          generation" compacts pursuant to which the signatory tribes  
          would be entitled to increase their slot machine count in return  
          for paying percentages of the new slot machine revenue to the  
          state's General Fund.  The Ninth Circuit had affirmed a lower  
          court decision that the new financial concessions were nothing  
          more than a state tax on tribal casino revenues which is  
          prohibited by IGRA.  

          Rincon had refused to sign the amended compact which already had  
          been executed by several other tribes choosing instead to demand  
          that it be given the expanded gaming opportunity without making  
          the new financial concessions.  The Ninth Circuit Court  
          concluded that a "non-negotiable, mandatory payment of 10% of  
          net win into the State treasury for unrestricted use yields  
          public revenue, and is [therefore] a tax, and that the court was  
          therefore required to consider the State's demand as evidence of  
          bad faith under IGRA's statutes."  

          The court noted that "the State could rebut the presumption of  
          bad faith by demonstrating that the revenue demanded was to be  
          used for the public interest, public safety, criminality,  
          financial integrity, and adverse economic impacts on existing  
          activities, but the State's need for general tax revenue was  
          insufficient to demonstrate good faith." 

          Prior/Related Legislation

          AB 475 (Bigelow, Chapter 8, Statutes of 2015) ratified the  
          tribal-state gaming compact entered into between the State of  
          California and Jackson Rancheria Band of Miwuk Indians, executed  
          on February 1, 2015.

          AB 315 (Bigelow, 2015) ratifies the amended and restated  
          tribal-state gaming compact entered into between the State of  
          California and the United Auburn Indian Community, executed on  
          August 14, 2015.  (Pending on the Assembly floor) 

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


                                                                    AB 1540  
                                                                    Page  16

          SUPPORT:   (Verified8/31/15)

          Agua Caliente Band of Cahuilla Indians 
          Barona Band of mission Indians
          Blue Lake Rancheria Tribe
          California Labor Federation
          International Association of Bridge, Structural & Ornamental  
          Iron Workers 
          Office of the Sheriff Santa Barbara County 
          Rincon Band of Luiseno Mission Indians
          San Manuel Band of Mission Indians
          Santa Ynez Band of Chumash Indians 
          State Building and Construction Trades Council
          Sycuan Band of the Kumeyaay Nation
          Tribal Alliance of Sovereign Indian Nations
          UNITE HERE
          United Auburn Indian Community

          OPPOSITION:   (Verified8/31/15)

          None received

          Prepared by:Arthur Terzakis / G.O. / (916) 651-1530
          9/1/15 20:33:08

                                   ****  END  ****