BILL ANALYSIS
SB 1369
Page 1
SENATE THIRD READING
SB 1369 (Cedillo)
As Amended August 18, 2008
Majority vote
SENATE VOTE :Vote not relevant
EDUCATION
(vote not relevant)
SUMMARY : Authorizes remote caller bingo as a game in which
specific tax-exempt organizations, as defined, may use audio or
video technology to link designated in-state facilities for the
purpose of playing bingo. Defines "bingo" as a game of chance
in which prizes are awarded on the basis of designated numbers
or symbols that are marked or covered by the player on a
tangible card in the player's possession and that conform to
numbers or symbols, selected at random and announced by a live
caller, as specified. Specifically, this bill :
1)Creates the game of remote caller bingo. Remote caller bingo
shall only be played using traditional paper or other tangible
bingo cards and daubers, and shall not be played using
electronic devices.
2)Permits a city, county, and city and county to adopt an
ordinance to allow the play of remote caller bingo games, as
specified.
3)Limits the operation of remote caller bingo to specified
not-for-profit organizations, as defined, a mobilehome park
association, a senior citizens organization and a school
district. The organization conducting the game shall have been
incorporated or in existence for three years or more.
4)Defines remote caller bingo games as game in which the
organization conducting the game uses audio or video
technology to link electronically any of its in-state
facilities for the purpose of the remote calling of a game
from a single location to multiple locations. The audio or
video technology used to link the facilities may include
cable, Internet, satellite, broadband, or telephone
technology, or any other means of electronic transmission, as
provided.
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5)Specifies that receipts of the game shall be used only for
charitable purposes and the organization conducting the game
shall determine the disbursement of the net receipts of the
game.
6)Makes it a misdemeanor for any person to receive or pay a
profit, wage, or salary from any remote caller bingo games.
Provides that a violation shall be punishable by a fine not to
exceed $10,000, which shall be deposited in the general fund
of the city, county, or city and county that enacted the
ordinance authorizing the remote caller bingo game.
7)Provides that a city, county, or city and county that enacted
an ordinance authorizing remote caller bingo game, or the
Attorney General (AG), may bring action to enjoin a violation.
8)Provides an organization authorized to conduct a remote caller
bingo game shall conduct the game only on property that is
owned or leased by the organization or the use of which is
donated to the organization, provided that the operation of
bingo games may not be a primary purpose for which the
organization is organized, as specified.
9)Places a limit of 750 persons who may be in attendance at any
location in the remote caller network. No minors shall be
allowed to participate.
10)Provides that a remote caller bingo game shall be operated
and staffed only by members of the authorized organization
that organized it. Those members shall not receive a profit,
wage, or salary from any bingo game, as described.
11)Provides prizes for remote caller bingo cannot exceed 37% of
the gross receipts of the game and overhead may not exceed
20%, as defined.
12)Specifies that a organization may contract for certain
services and those services are counted toward the 20%
overhead limit and none who contracts to provide services
shall hold any legally recognized interest in the game, as
specified.
13)Prohibits cash prizes, all prizes must be by check and
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appropriate taxes must be withheld if the prize is above
reporting limit requirements, as specified.
14)Provides the organization is the owner of the remote caller
bingo.
15)Provides the charity may not co-sponsor remote caller bingo
with other charities.
16)Provides the caller in remote caller game must be licensed by
the California Gambling Control Commission (CGCC). A game may
be called by a non-licensed caller if that person is
personally supervised by the licensed caller.
17)Provides vendors or remote caller technology and any person
maintaining the equipment used to operate remote caller game
must be licensed by the CGCC.
18)Provides vendors of equipment shall have their books audited
at least annually and shall report the findings to the CGCC no
later than 120 days after the close of their fiscal year and
that all financial records pertaining to a remote caller bingo
game shall be audited at least annually.
19)Provides that if the Governor or the President of the United
States declares a state of emergency in response to a natural
disaster or other public catastrophe occurring in California,
an organization authorized to conduct remote caller bingo
games may, while that declaration is in effect, conduct those
games, as specified, with more than 750 participants in a
single venue if the net proceeds of the games, after deduction
of prizes and overhead expenses, are donated to or expended
exclusively for the relief of the victims of the disaster or
catastrophe, and the organization gives the CGCC at least 10
days' written notice of the intent to conduct those games.
20)Raises the prize limits on traditional bingo from $250 to
$500.
21)Defines traditional "bingo" as a game of chance in which
prizes are awarded on the basis of designated numbers or
symbols that are marked or covered by the player on a tangible
card in the player's possession and that conform to numbers or
symbols, selected at random and announced by a live caller, as
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specified.
22)Provides that electronics or video displays shall not be used
in connection with the game of bingo, except as specified.
23)Provides that players who are physically present at a bingo
game, other than a remote caller game, as defined, may use
card-minding devices, as described.
24)Makes various legislative findings and declarations.
EXISTING LAW :
1)Article IV, Section 19(c) of the Constitution of the State of
California provides that the Legislature by statute may
authorize cities and counties to provide for bingo games, but
only for charitable purposes.
2)Permits bingo games to be conducted "by organizations exempted
from the payment of the bank and corporation tax by Sections
23701a, 23701b, 23701d, 23701e, 23701f, 23701g, and 23701l of
the Revenue and Taxation Code and by mobilehome park
associations and senior citizens organizations," if the
proceeds are used only for charitable purposes and the games
are conducted in a city, county, or city and county pursuant
to an ordinance enacted under the constitutional provision.
[Penal Code Section 326.5 (a)]
3)Permits cities and counties to allow bingo games to be
conducted by nonprofit organizations for charitable purposes
in accordance with certain conditions. Provides that a
violation of these provisions is a misdemeanor, as specified.
4)Requires that the proceeds of bingo games be used only for
charitable purposes, with certain 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, and a prize cap of $250 per game.
5)Defines Bingo 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.
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FISCAL EFFECT : Unknown
COMMENTS :
Purpose of the bill . According to the author, "The demand for
services from California charities is increasing due to the
economy, unemployment and our state budget cuts. At the same
time, charitable donations are down and charities are faced with
turning away people for whom it is their mission to serve.
Charities desperately need new tools to increase their ability
to raise funds to keep up with the demand for their services.
SB 1369 does just that by building upon and clarifying the
charity bingo statute that was created by the Legislature many
years ago."
The author maintains that remote caller bingo would enable
charities to link several bingo games to a central location
using video technology. The game will be available to veteran's
groups, churches, schools, and other non-profits and charities -
large and small. The author states, "by requiring remote caller
bingo to be regulated by the Department of Justice (DOJ) and the
CGCC, it will ensure that there is no fraud and that only
legitimate charities, in service for at least 3 years, conduct
these games. There are licensing, reporting and auditing
requirements for the charities. Additionally, local ordinances
must allow for bingo for a charity to participate."
The author maintains, SB 1369 "does not change the traditional
paper and dauber game that our grandparents used to play to
raise money for their favorite charity. Accordingly, the
amendments respect the recent AG opinion and specifically
prohibit the used of electronic "bingo" machines that provide
charities with less than 10% of games revenues."
According to information provided by the author, "numerous times
over the past few decades the AG has stated that video bingo
violates the Penal Code and the machines are illegal slot
machines. There has never been a reported appellate decision on
the definition of "card" as it relates to bingo, but there have
been several legal opinions from the AG and others publicly
declaring "card" as something tangible and not on a video
screen." SB 1369 recognizes that the answer to increasing
charity revenue is not to tolerate flagrant violation of
California law through use of illegal slot machines. Rather,
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the answer is to increase opportunities for legitimate bingo
games."
The author states, "by maintaining reasonable restrictions on
both traditional bingo and newly authorized "remote caller"
multi-location bingo games, SB 1369 is consistent with current
public policy on charity fundraising and provides the tight
regulation needed for games with unlimited prizes." The author
further maintains, "it is about time that we improve charity
bingo in an effort to help non-profits and charities continue
their much needed work in our communities."
Background :
In 1976, California voters approved an amendment to the
Constitution specifying, "the Legislature by statute may
authorize cities and counties to provide for bingo games, but
only for charitable purposes." [California Constitution,
Article IV, Section 19 (c)] 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.
Furthermore, the federal government requires charitable
non-profit organizations to file annual returns that are subject
to audit.
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 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%.
Recent controversy involving electronic bingo machines : Bingo
in California is a significant and cash intensive business
enterprise. The revenues generated by not-for-profit and
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charitable bingo at locations across the state are in the
millions of dollars a year. The actual amount of revenues
generated and the amounts expended on prizes, rent, expenses and
overhead, and given to charities is unclear because there is no
statewide reporting requirements in current law. In Sacramento
County, it has been reported that hundreds of bingo machines are
in use helping bingo operators generate over $50 million in
gross revenue. Bingo operators and the charities that they
support maintain that electronic bingo machines are popular with
the public and are needed to better compete with tribal casinos.
Various tribes throughout California have stated that the use
of electronic bingo machines by nonprofit groups violate their
exclusive right to operate slot machines and their obligation to
make revenue sharing payments to the state. The new and amended
compacts negotiated by the Schwarzenegger Administration,
contain exclusivity clauses that allow tribes to suspend
payments to the state if anyone other than another federally
recognized tribe is allowed to operate gaming devices in
specified areas of the state.
Administrative and other recent enforcement actions : In 1987,
the AG issued a published opinion that an electronic system of
bingo which substituted a hand computer with stored bingo card
"matrices" for the traditional paper or cardboard bingo cards
did not qualify as bingo within the meaning of Penal Code
Section 326.5(o).
In 1998, the AG issued an unpublished opinion that a bingo
player may use an "electronic aid" in conjunction with
traditional bingo cards to notify him or her when a game has
been won. At least implicitly, the opinion indicated that
physical, paper cards were still required in order for the game
to qualify as "bingo" under Penal Code Section 326.5(o).
In 2004, the AG's Division of Gambling Control issued a notice
that, in its view, certain electronic bingo game systems then
operating in California were "slot machines" as defined by Penal
Code Section 330(b) and did not fall within the definition of
"bingo" contained in Penal Code Section 326.5(o), and that such
games therefore could not lawfully be played in California.
On August 10, 2007, the AG's Division of Gambling Control issued
a Law Enforcement Advisory notice regarding "Electronic Bingo",
stating that it considered "?electronic systems of bingo that
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substitute computers with stored bingo matrices, in lieu of
paper or cardboard bingo cards, to be unauthorized by Penal Code
Section 326.5." On the same date, the Division of Gambling
Control began issuing letters to known users of electronic bingo
games notifying them of its conclusion and stating: "If you or
your organization operate bingo games not authorized by Penal
Code Section 326.5, the devices employed in the play of the game
may be subject to seizure and destruction pursuant to Penal Code
Section 335a. Further, the party or parties responsible for the
operation of such games and devices could also be subject to
criminal proceedings
Pending litigation : In Video Gaming Technologies, Inc., et al.
v. Bureau of Gambling Control, et al. in the Eastern District of
California, Video Gaming Technologies (VGT), a manufacturer of
electronic bingo devices, together with two charitable
organizations and two disabled persons filed a complaint on June
4 2008, under the Americans With Disabilities Act, seeking
injunctive and declaratory relief against enforcement of Penal
Code prohibitions on slot machines or devices by the Bureau of
Gambling Control, alleging that enforcement denies reasonable
accommodation to the disabled for convenient play of bingo. It
appears the substantive legal question is whether the ADA
requires require a State, in order to comply with its
accommodation requirements, must refrain from the enforcement of
its criminal laws and permit the use by disabled individuals of
devices that are prohibited by those same criminal laws. Upon
the filing in Sacramento, a motion for temporary restraining
order was held the morning of June 5 and that was granted along
with an order to show cause re preliminary injunction, to be
heard on June 25th, 2008. At that hearing, U.S. District Judge
John A. Mendez issued a preliminary injunction against the
state.
In New Vision v. Sacramento County Board of Supervisors , New
Vision challenged certain provisions of a Sacramento County
ordinance authorizing the play of bingo without a paper "card".
In making the ruling, Sacramento Superior Court Judge Patrick
Marlette reviewed the applicable statute, the challenged
provisions of the bingo ordinance, and the various
administrative and Legislative materials summarized above, and
found that Penal Code Section 326.5(o) was not intended to, and
does not authorize the County to permit electronic bingo, i.e.,
the playing of bingo without the use of a physical, paper or
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cardboard card. Specifically, Judge Marlette ruled that the
provisions of the County bingo ordinance that purport to
authorize "paperless" electronic bingo games are declared to be
invalid as contrary to Penal Code Section 326.5(o).
However, Judge Marlette also applied a different analysis to the
provisions of the County ordinance governing electronic bingo
aids. Provisions of the County bingo ordinance also provide
that "players must have at their disposal paper cards that
electronic cards represent such that a winning bingo could be
verified on the paper or cardboard card itself." The
requirement that players have paper cards means that the game,
when played with electronic bingo aids, is not a "paperless"
game. These provisions of the County bingo ordinance that
require the electronic bingo machines to produce paper results
therefore are not invalid under Penal Code Section 326.5(o).
Opposition : The California Charity Bingo Association states,
"Remote caller bingo is not new at all. In fact, the most
successful bingo operators in the state - the tribal gaming
operators - have offered remote caller bingo in the past only to
discontinue its use because of poor market performance. In
other words, remote caller bingo has failed to meet its mark
even for the most successful bingo operators. SB 1369 also
eliminates charitable bingo's ability to take advantage of
modern technology and provide reasonable accommodations for ADA
qualified patrons. SB 1369 prohibits the use of electronic aids
to bingo and, instead authorizes a bingo minder of the type in
use 20 or more years ago. Bingo minders of the type described
in this bill are as commercially unappealing as remote caller
bingo. Since 1974, charities have been authorized, subject to
local control, to offer bingo for charitable purposes.
Countless community-based programs have become heavily dependent
on contributions from charitable bingo. In order to keep up
with the demands placed on charities, new technology has evolved
to increase revenues available for charitable purposes. SB 1369
will cut off those streams of revenue and place all programs
dependent on charitable bingo revenues in jeopardy." The
opposition maintains, that under this bill, "charities will
suffer, community based organizations will suffer, programs will
suffer and local governments will experience increased demands
on their general funds to pick up the slack."
Lighting Games, LLC writes, "this bill takes a dramatic step of
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outlawing electronic bingo for charitable purposes. This is a
major policy matter that deserves deliberative consideration -
in the face of the State's declining economy now is not the time
to rush to harm charities." The opposition further writes, as
is often the case with last minute legislation, there are many
structural flaws in the approach proposed in SB 1369, including
but not limited to, the following: 1) Under the California
Constitution regulation of bingo is left to local authorities;
2) there is no funding mechanism for the regulatory authority
granted to the CGCC; 3) there is no proposed mechanism for the
annual audits called for in the bill; 4) the bill authorizes
"remote live caller bingo" which is currently not used anywhere
in California; is now the time to authorize a new form of bingo
with an unproven track record?; and, 5) eliminating electronic
bingo, as currently played in California, will reduce regulatory
oversight of transactions conducted at bingo halls.
Related and previous legislation :
SB 864 (Battin), 2007-08 Legislative Session. Defines "bingo"
to permit games in which players use paper bingo cards that can
combine the use of an electronic aid that notifies the player of
a winning card; prohibits the use of electronic systems that
store bingo cards on computers in lieu of paper cards. (Assembly
G.O. Committee - Failed passage in committee)
SB 1626 (Steinberg), 2007-08 Legislative Session. Would allow
bingo to be played on an electronic replica of a bingo card, so
long as it is not a slot machine (Senate G.O. Committee).
SB 1328 (Cedillo), 2007-2008 Legislative Session. Would add new
section to the Penal Code to authorize the play of "remote
caller" bingo games in California (Senate G.O. Committee).
AB 1924 (Jeffries), 2007-2008 Legislative Session. Increases,
from $2,000 to $3,000 per month, the amount of bingo proceeds
that may be used to pay for the rental of property and for
overhead, including the purchase of bingo equipment,
administrative expenses, security equipment, and security
personnel (Senate GO Committee).
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)
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SB 1959 (Polanco), 2001-2002 Legislative Session. Would have
required a local jurisdiction to perform an annual financial
audit, if an organization in its jurisdiction operates bingo
games four or more days a week, and generates more than $1
million in gross revenues per year. Would have required CGCC to
promulgate regulations establishing standards for such an audit,
including a criminal and financial background investigation of
the organization, to ensure that the funds raised are expended
for the designated charitable purposes of the organization.
Would have provided that a local jurisdiction, by ordinance, may
require the 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,
may not serve as a director, officer, or employee of the
organization. (Died in Senate Appropriations)
SB 832 (Polanco), 2001-2002 Legislative Session. Would have
required, among other things, CGCC to regulate bingo games in
the state. Would have authorized CGCC to adopt any other
requirements it deems necessary to assure bingo games are
conducted in accordance with California Law. (Never heard in
the Senate)
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
FN: 0007274