BILL ANALYSIS
Bill No: AB
1924
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Dean Florez, Chair
2007-2008 Regular Session
Staff Analysis
AB 1924 Author: Jeffries
As Introduced: February 12, 2008
Hearing Date: June 10, 2008
Consultant: Chris Lindstrom
SUBJECT
Charitable bingo: overhead.
DESCRIPTION
AB 1924 raises the limit on the portion of gross proceeds
from bingo games that may be used for the rental of
property and for specified overhead, from 20% or $2,000 per
month, whichever is less, to 20% or $3,000 per month,
whichever is less.
EXISTING LAW
Article IV, Section 19(c) of the California Constitution
states that, "the Legislature by statute may authorize
cities and counties to provide for bingo games, but only
for charitable purposes." Current statute limits the
operation of bingo games in California to nonprofit
organizations and certain other entities and requires that
profits from charity bingo be used for charitable purposes
only.
Existing law permits cities, counties, and cities and
counties to allow bingo games to be conducted by specified
organizations for charitable purposes, subject to
provisions of law which, if violated, constitute a crime.
Existing law requires that the proceeds of bingo games
shall be used only for charitable purposes, with certain
AB 1924 (Jeffries) continued
Page 2
exceptions, including an exception providing that no more
than 20% of the proceeds before the deduction for prizes,
or $2,000 per month, whichever is less, may be used for the
rental of property and for overhead, including the purchase
of bingo equipment, administrative expenses, security
equipment, and security personnel.
Existing law defines bingo for the purposes of these
provisions as a game of chance in which prizes are awarded
on the basis of designated numbers or symbols on a card
that conform to numbers or symbols that are selected at
random.
Existing law prohibits the total value of prizes awarded
for any bingo game from exceeding $250 in cash or kind, or
both, for each separate game that is held.
BACKGROUND
Purpose of the bill. According to the author's office,
"since 1994, which was the last time the dollar amount
limit was increased, costs have increased significantly.
This bill will allow charitable organizations who depend on
bingo as a significant fundraising source to cover their
basic costs of running the operations. At the same time,
maintaining the 20% limit will ensure that the amount
retained for expenses is reasonable."
Background. In 1976, California voters approved
Proposition 9, an amendment to the Constitution specifying
that "the Legislature by statute may authorize cities and
counties to provide for bingo games, but only for
charitable purposes." The Legislature implemented this
constitutional provision by enacting Penal Code section
326.5. The statute authorizes the playing of bingo where
the games are conducted by a specified tax-exempt
organization for charitable purposes pursuant to local
ordinance. In general, these ordinances specify
limitations of days, locations, and hours of operations of
bingo games. Local governments have the responsibility to
regulate and enforce their ordinances.
AB 1216 (Chapter 394, Statutes of 1993). In 1993, AB 1216
(Harvey) was enacted into law. AB 1216 raised the portion
of proceeds from bingo games to be used for the monthly
rental of property and specified overhead costs, from 20%
AB 1924 (Jeffries) continued
Page 3
or $1,000, whichever is less, to 20% or $2,000, whichever
is less. Supporters of AB 1216 stated the $1,000 limit on
administrative expenses, which was last raised in 1981, was
no longer sufficient to cover bingo-operating costs.
Charities stated an increase was needed because it has
become necessary for nonprofits to hire security due to the
increase in armed robberies at bingo games.
Non-parlor v. parlor bingo. In November of 1982, the
Senate Governmental Organization Committee conducted an
interim hearing on bingo regulations. The hearing revealed
that initially following the passage of Proposition 9 of
1976, bingo games licensed by local governments were small
neighborhood affairs held weekly or monthly as an
incidental fundraising activity. However, the Committee
found in 1982, some six years after the passage of
Proposition 9, that the trend has been for larger
entrepreneurial types of bingo operations conducted in
so-called bingo parlors. These operations are
commercialized and held usually in custom designed
facilities on a seven day a week basis, hosting up to three
sessions a night, raising and handling large sums of money.
Bingo parlor operators are currently authorized to charge
each of the nonprofit organizations it hosts up to 20% of
its monthly gross proceeds or $2,000 a month, whichever is
less, in rent and specified overhead charges. If parlor
operators are allowed to increase the amount in rent and
overhead charges by up to $1,000 per month for each
nonprofit organization it hosts, the net effect may be a
loss of revenue for nonprofit and charitable organizations
and an increase in the amount of income realized by parlor
operators and landlords upwards of tens of thousands of
dollars a year. Additionally, it could be argued that
parlor operators may be able to use any windfall profits to
purchase or lease bingo equipment, such as electronic bingo
machines.
Percentage of gross revenue generated for charitable
purposes. According to a May 2006 report by the California
Research Bureau titled, Gambling in the Golden State - 1998
Forward, "charitable bingo can be a big business, as in the
case of the Hawaiian Gardens Bingo Club, which is the
largest non-tribal bingo parlor in the state, operating
seven days a week. Between 1997 and 2003, the club brought
AB 1924 (Jeffries) continued
Page 4
in more than $200 million in revenue and paid out almost
$37 million in charitable giving." The percentage of gross
revenue paid out for charitable purposes over that time
period was approximately 16.5%.
According to figures reported by the Sacramento County
Sheriff's Department for the first two quarters of the
2006-2007 fiscal year, parlor bingo organizations generated
more than $17.2 million in gross revenue (i.e., gross
receipts) and paid out approximately $1.67 million (9.63%
of gross revenue) in charitable giving (see chart below).
For the same period, non-parlor bingo organizations
generated more than $3.2 million in gross revenue and paid
out approximately $600 thousand (18.37% of gross revenue)
in charitable giving (see chart below).
------------------------------------------------------------
| |
| Sacramento County Sheriff's Department |
| FY 2006-2007 1st & 2nd Quarters Combined Summary for Bingo |
| Organizations |
| Parlor and Non Parlor |
| |
| 02/15/07|
| |
------------------------------------------------------------
|-----+--------+--------+------+--------+------+--------+------|
| | | | | | | | |
| | Gross |Prizes/ | % of | | % of | Net | % of |
| | | | | | | | |
| |Receipts|Payouts |Gross |Expenses|Gross | Profit |Gross |
| | | | | | | | |
|-----+--------+--------+------+--------+------+--------+------|
| | | | | | | | |
|Parlo|$17,207,|$13,065,|75.93%|$2,484,8|14.44%|$1,657,5|9.63% |
|r | 528.67 | 080.24 | | 84.20 | | 64.23 | |
| | | | | | | | |
|-----+--------+--------+------+--------+------+--------+------|
| | | | | | | | |
|Non | | | | | | | |
|Parlo| | | | | | | |
|r |$3,241,4|$2,193,6|67.68%|$452,338|13.95%|595,409.|18.37%|
| | 18.15 | 69.97 | | .29 | | 89 | |
|-----+--------+--------+------+--------+------+--------+------|
| | | | | | | | |
AB 1924 (Jeffries) continued
Page 5
|Total|$20,448,|$15,258,|74.62%|$2,937,2|14.36%|$2,252,9|11.02%|
| | 946.82 | 750.21 | | 22.49 | | 74.12 | |
| | | | | | | | |
--------------------------------------------------------------
Arguments in opposition. The California Coalition Against
Gambling Expansion (CAGE) argues, in pertinent part, that
"while overtly intended to support the charitable ends of
nonprofits, this bill will actually be yet another windfall
to the growing, bingo parlors and casino vendors that
substantially profit from this gambling enterprise covered
in "charitable bingo" veneer. This measure would raise the
ante to these profiteers and likely continue to expand this
growing gambling sector."
Stand Up For California (SUFC) argues that "third parties
have staked out a cottage industry, by offering to host
games for charities, providing locations, equipment,
security and management. Who are these entrepreneurs?
"While AB 1924 may seem innocuous providing a change to
increase the portion of gross proceeds that may be used for
the rental of property and for specified overhead it has
the potential to create a significant unintentional impact
resulting in the expansion of an unregulated gaming
industry. What are the good reasons and or evidence for
the need of an increase in rent and overhead costs? Is
there a record of armed robberies, embezzlements, fraud,
sophisticated financial schemes or theft that has created a
need for this increase in overhead payments? Have the
vendors raised their prices? Or are these host operators
seeking revenues to purchase questionable bingo machines to
enhance their bottom lines?
"Clearly as evidenced by the Hawaiian Gardens Bingo Club or
the annual revenues from a handful of charities offering
bingo in Sacramento County, charitable bingo can be a very
lucrative business. Will this increase in overhead
payments simply become revenue to reinvest in the expansion
of a cash intensive unregulated bingo industry? Will this
new revenue be used for the purchase of bingo machines that
have been deemed in violation of the California Penal Code
Section 326.5 in the Bureau of Gambling Control Advisory 9
August 10, 2007? Voters approved the game of Bingo in 1976
to provide funds to charities and the needy they service,
not the venders, operators and others.
AB 1924 (Jeffries) continued
Page 6
"Legislators may wish to consider the need for greater
oversight over large bingo operations in California, such
as authorization of local and state financial auditing of,
and financial reporting by, organizations that operate
bingo games 4 or more days a week and generate more than $1
million in gross revenues per year. Moreover, the
Legislature may want to explore the need for licensing or
registration of any person having a direct or indirect
interest in the provision of goods or services to an
organization conducting bingo games, or having an interest
in the real property leased by such an organization, and
that such persons may not serve as a director, officer or
employee of the organization.
"Local governments just don't have the technical expertise
to determine if a bingo machine violates the law. While
money is going to charities --- others are making a multi
million dollar bundle on this unregulated cottage gambling
industry. Perhaps it is time for the game of Bingo to be a
State authorized game."
Staff Comments. The increase in rent and certain overhead
costs may be warranted for parlor and non-parlor bingo
operators since the last time the limit was raised was in
1993. However, no letters have been received in support of
the bill. The sponsor provided the Committee with a
breakdown of its monthly bingo expenses which amount to
$1,800, but did not provide any figures relative to its
monthly gross bingo revenues. The amount the sponsor
expends per month on rent and overhead is below the current
$2,000 per month limit. The sponsor currently operates its
bingo operations at a local bowling alley which donates the
room where the bingo games are conducted.
PRIOR/RELATED LEGISLATION
SB 1626 (Steinberg), 2007-2008 Legislative Session .
Changes the definition of bingo to allow it to be played on
an electronic replica of a bingo card. Prohibits the use
of an electronic bingo card if that use constitutes a slot
machine or device, as defined in Section 330a, subdivision
(d) of Section 330b, or Section 330.1. (Scheduled for
hearing on April 22, 2008 in this committee - Pulled by
author)
AB 1924 (Jeffries) continued
Page 7
SB 1328 (Cedillo), 2007-2008 Legislative Session . Adds a
new section to the Penal Code to authorize the play of
"remote caller" bingo games in California. (Scheduled for
hearing on April 15, 2008 in this committee - Pulled by
author)
AB 1314 (Strickland), 2007-2008 Legislative Session .
Would have authorized the use of "electronic" cards in the
play of bingo games. (Never heard in the Assembly)
AB 1216 (Harvey), Chapter 394, Statutes of 1993 . Raises
the portion of gross proceeds from bingo games that may be
used for the monthly rental of property and specified
overhead costs, from 20% or $1,000, whichever is less, to
20% or $2,000, whichever is less.
SUPPORT: (As of June 6, 2008)
None on file.
OPPOSE: (As of June 6, 2008)
California Coalition Against Gambling Expansion
Stand Up For California
FISCAL COMMITTEE: No.
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