BILL ANALYSIS
AB 1369
Page 1
Date of Hearing: August 22, 2008
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Curren Price, Chairman
SB 1369 (Cedillo) - As Amended: August 20, 2008
SENATE VOTE : Vote not relevant
SUBJECT : Remote caller bingo.
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 pursuant to a local ordinance and state
regulation and oversight. In addition, 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. Raises the prize limit on
traditional bingo from $250 to $500 per game. Specifically,
this bill :
1)Permits a city, county, and city and county to adopt an
ordinance to allow the play of remote caller bingo games, as
specified.
2)Authorizes 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, except card-minding devices, as
described.
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. The
operation of bingo may not be the primary purpose for which
the organization is organized. Provides that no more than 750
players may participate in a remote caller bingo game in a
single location. No minors shall be allowed to participate.
4)Provides an organization shall not cosponsor a remote caller
bingo game with one or more other organizations unless one of
AB 1369
Page 2
the following are true:
a) All of the of the cosponsors are affiliated under the
master charter or articles and bylaws of a single
organization, and specified.
b) All of the cosponsors are affiliated through an
organization, as described, and have the same Internal
Revenue Service activity code, as specified.
1)Provides a maximum of 10 unaffiliated organizations, as
described, may enter into an agreement to cosponsor a remote
caller game, provided the game shall have not more than 10
locations.
2)Provide an organization permitted to conduct a remote caller
game shall not conduct a game more than one time per week.
3)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.
4)Defines remote caller bingo game as a 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. Remote caller bingo shall not include any site that
is not located within the state.
5)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.
6)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.
7)Provides prizes for remote caller bingo cannot exceed 37% of
AB 1369
Page 3
the gross receipts of the game and overhead may not exceed
20%, as defined.
8)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.
9)Prohibits cash prizes, all prizes must be by check and
appropriate taxes must be withheld if the prize is above
reporting limit requirements, as specified.
10)Provides the organization is the owner of the remote caller
bingo.
11)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.
12)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.
13)The CGCC shall regulate remote caller bingo, including but
not limited to, its licensure and operation. The CGCC shall
establish reasonable regulating criteria, and shall require
the licensure and registration of defined persons. Fees and
revenue collected for the licensure and registration shall be
deposited in the California Bingo Fund for the support of CGCC
and the Department of Justice (DOJ) exclusively for the
support in carrying out their duties and responsibilities
relating to this legislation.
14)Provides the caller in remote caller game must be licensed by
the CGCC. A game may be called by a non-licensed caller if
that person is personally supervised by the licensed caller.
15)Requires the organization to provide the CGCC audited records
regarding the operations of remote caller bingo, as specified.
16)Provides vendors of equipment used in remote caller bingo
AB 1369
Page 4
shall be licensed and have their books and records audited at
least annually by an independent California certified public
accountant (CPA) and shall report the findings to the CGCC, as
defined.
17)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.
18)Provides the CGCC shall submit a report to the Legislature,
on or before January 1, 2012, on the fundraising effectiveness
and regulation of remote caller bingo, and other matters that
are relevant to the public interest regarding remote caller
bingo.
19)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
specified. Provides electronics or video displays shall not
be used in connection with the game of bingo, except in
connection with the caller's drawing of numbers or symbols and
the public display of that drawing, as specified.
20)Provides that players who are physically present at a bingo
game may use hand held, portable card-minding devices, as
described, to assist in monitoring the numbers or symbols
announced by a live caller as those numbers or symbols are
called in a live game, as specified. A card-minding device
shall be approved by the CGCC, as defined. On and after
January 1, 2010 the CGCC and DOJ may inspect all card-minding
devices at any time, as defined.
21)Raises the prize limits on traditional bingo from $250 to
$500.
AB 1369
Page 5
22)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.
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
AB 1369
Page 6
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 bill
respects the recent AG opinion and specifically prohibits the
use of electronic "bingo" machines that provide charities with
less than 10% of the games revenues."
The author further states, "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, 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's about time that we improve charity
bingo in an effort to help non-profits and charities continue
their much needed work in our communities."
AB 1369
Page 7
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
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
AB 1369
Page 8
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
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
AB 1369
Page 9
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 it was granted along
with an order to show cause regarding preliminary injunction, to
be heard on June 25, 2008. U.S. District Judge John A. Mendez
issued a preliminary injunction against the state at the hearing
on June 25, 2008.
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
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
AB 1369
Page 10
therefore are not invalid under Penal Code Section 326.5(o).
In support : The California Tribal Business Alliance (CalTBA)
states, "the benefit of remote caller bingo is that it allows
charities to dramatically boost their ability to raise money
through the operation of bingo." CalTBA further states, "SB
1369 also clarifies existing law as to what constitutes bingo in
California." The bill makes clear that bingo is a game played
with paper and daubers. Similarly, it makes clear that the only
electric devices allowed in the play of bingo are devices which
remind players when their numbers are called, and the
transmission equipment for remote caller bingo." The bill also
creates appropriate oversight and regulation of remote caller
bingo by CGCC.
The Rumsey Indian Rancheria states, this bill "prevents any
unlawful gaming expansion, thus upholding the Tribe's
exclusivity in our amended gaming compact." SB 1369 makes a
significant effort to clearly state the intention of charitable
bingo operations, imposes clear boundaries of prize winning, and
limits any unlawful gaming growth within our region."
The California Catholic Conference of Bishops, states, "many
Catholic parishes depend on bingo receipts for funding their
charitable programs but are unable to find enough volunteers to
run local bingo games. SB 1369 would use the economy of scale
and modern technology in order to allow bingo players to gather
in parish halls near their homes - but have the benefit of
professional bingo callers running the game."
The California Association of Nonprofits (CPC), a statewide
membership organization of over 2,000 diverse nonprofits states,
this bill "provides for a very strictly defined accountability,
thus protecting the public, at the same time, it makes
charitable bingo more appealing and accessible. Significantly,
it also provides the highest return for charitable purposes from
bingo of any state in the nation. For decades, bingo has
generated many millions of dollars for charitable causes. In
recent years, bingo has lost much of its audience. As a result,
schools, hospitals, health care, and many other important
community needs have suffered a loss of financial support."
Opposition : The California Charity Bingo Association states,
since 1974, charities have been authorized, subject to local
control, to offer bingo for charitable purposes. Countless
AB 1369
Page 11
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 further maintains, "SB 1369 also eliminates
charitable bingo's ability to take advantage of modern
technology and provide reasonable accommodations for ADA
qualified patrons. This bill prohibits the use of electronic
aids to bingo and, instead authorizes a bingo minder of the type
in use 20 or more years ago." The opposition maintains,"
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."
El Camino High School Booster's Club states, "if passed, this
bill will blow a hole in the $4.6 million that currently
supports charities in Sacramento County, including the El Camino
and Mira Loma High School Booster Clubs, the Senior Gleaners,
WIND Youth Services, Society for the Blind, Disabled Sports USA,
Stanford Home for Children, United Cerebral Palsy and many more.
In advocating for the passage of this bill, Indian tribes
supporting this bill have presented questionable information and
attempted to convey a sense of urgency for the measure, as
opposed to thoughtful, deliberate consideration by the
Legislature."
Lighting Games, LLC writes, "this bill takes a dramatic step of
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 legislation to harm charities."
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
AB 1369
Page 12
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)
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)
REGISTERED SUPPORT / OPPOSITION :
Support
AB 1369
Page 13
Agua Caliente Band of Cahuilla Indians
American Legion
California Association of Nonprofits
California Catholic Conference of Bishops
California Tribal Business Alliance
Morongo Band of Mission Indians
Pechanga Band of Luiseno Indians
Rumsey Band of Wintun Indians
San Manuel Band of Mission Indians
Viejas Band of Kumeyaay Indians
Opposition
California Charity Bingo Association
El Camino High School Boosters Club
Lightning Games, LLC
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531