BILL ANALYSIS
SB 1369
Page 1
SENATE THIRD READING
SB 1369 (Cedillo)
As Amended August 25, 2008
Majority vote
SENATE VOTE :Vote not relevant
EDUCATION GOVERNMENTAL ORGANIZATION 13-0
(vote not relevant)
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| | |Ayes:|Price, Plescia, Charles |
| | | |Calderon, Davis, De Leon, |
| | | |Evans, Garcia, Jeffries, |
| | | |Levine, Mendoza, |
| | | |Portantino, Silva, Tran |
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APPROPRIATIONS 13-0
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|Ayes:|Leno, Walters, Davis, | | |
| |DeSaulnier, Emmerson, | | |
| |Furutani, Karnette, | | |
| |Krekorian, La Malfa, | | |
| |Lieu, Nakanishi, Nava, | | |
| |Solorio | | |
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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
playing bingo pursuant to a local ordinance and state regulation
and oversight. 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)Permits a city, county, and city and county to adopt an
ordinance to allow the play of remote caller bingo games, as
specified.
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2)Provides 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, mobilehome park
associations, senior citizen organizations and charitable
organizations affiliated with 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
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; or,
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 shall not conduct remote caller bingo
more than one day 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
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facilities for 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 prizes for remote caller bingo cannot exceed 37% of
the gross receipts of the game and overhead may not exceed
20%, as defined.
6)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. 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)Specifies that an 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.
8)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.
9)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.
10)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.
11)The California Gambling Control Commission (CGCC) shall
regulate remote caller bingo, including but not limited to,
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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 bill. Requires DOJ to conduct background
investigations for licensing purposes and conduct field
enforcement as it relates to remote caller bingo and other
duties, as defined.
12)Provides CGCC is directed to adopt appropriate emergency
regulations concerning remote caller bingo and card-minding
devices, as soon as possible, with the initial regulatory
action to be filed with the Office of Administrative Law (OAL)
no later than May 1, 2009. CGCC is directed to compete the
normal public notice and comment process, considering the
comments of all interested parties, as described.
13)Authorizes a loan from the Gambling Control Fund (GCF) to the
California Bingo Fund on or after January 1, 2009, in an
amount up to $500,000 to fund operating, personnel, and other
startup costs incurred by CGCC. Funds from the California
Bingo Fund shall be available to the CGCC upon appropriation
by the Legislature in the annual Budget Act. The loan shall
be repaid to the GCF, as specified.
14)Provides the caller in remote caller game must be licensed by
the CGCC. A non-licensed caller may call a game if a licensed
caller personally supervises that person.
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
shall be licensed and have their books and records audited at
least annually by an independent California certified public
accountant 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,
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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.
22)Provides in an effort to ease the transition to remote caller
bingo on the part of those nonprofit organizations that, as of
July 1, 2008, used electronic devices other than card-minding
devices to conduct games in reliance on an ordinance of a
city, county, or city and county that, as of July 1, 2008,
expressly recognized the operation of electronic devices other
than card-minding devices by organizations purportedly
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authorized to conduct bingo in the city, county or city and
county, there is hereby created the Charity Bingo Mitigation
Fund.
23)Provides that to allow the Charity Bingo Mitigation Fund to
become immediately operable, $5 million shall be loaned from
the accrued interest in the Indian Gaming Special Distribution
Fund (IGSDF) to the Charity Bingo Mitigation Fund on, or after
January 1, 2009, to make mitigation payments to eligible
non-profit organizations, as specified. Provides that
mitigation payments to be made by the Charity Bingo Mitigation
Fund shall not exceed $5 million in the aggregate. The
Charity Bingo Mitigation Fund shall be administered by CGCC.
24)Provides to reimburse the IGSDF, those nonprofit
organizations that conduct a remote caller bingo game, as
defined, shall pay to CGCC an amount equal to 5% of the gross
revenues of each remote caller bingo game played until that
time as the full advanced amount plus interest on the loan, as
described.
25)Specifies that each eligible organization may apply to the
CGCC no later than January 31, 2009, for the mitigation
payments in the amount equal to net revenues from the fiscal
year (FY) ending June 30, 2008, by filing an application,
including therewith documents and other proof of eligibility,
including any and all financial records documenting the
organization's net revenues for the FY ending June 30, 2008,
as the CGCC may require, as specified.
26)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
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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 : According to the Assembly Appropriations
Committee, one-time General Fund (GF) costs of approximately
$500,000 for CGCC to develop regulations and purchase equipment
necessary to test and monitor electronic card-minding devices.
CGCC estimates that they will need $2.5 million per year for 25
additional staff they believe will be necessary to oversee and
regulate charitable bingo in the state. These costs should be
fully offset by licensing fees. On-going costs in excess of $3
million for DOJ to oversee and enforce charitable bingo
regulations. Approximately one-half will be for licensing
activities, which would be covered by licensing fee revenue.
The remaining cost of $1.5 million will be GF.
COMMENTS :
Purpose of the bill . According to the author, this bill is
intended to provide non-profit organizations an opportunity to
increase their fundraising ability by authorizing remote caller
bingo, which will allow charities across the state to combine
their games and offer larger prizes than allowed under current
law. The author states, "The demand for services from
California charities is increasing due to the
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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."
In addition, this bill is intended to clarify current law by
clearly prohibiting electronic bingo. The author contends that
electronic bingo is illegal in the state and that it violates
the exclusivity agreements contained in the tribal gaming
compacts between the state and various Indian tribes
throughout California. Several tribes have notified the
Governor that they believe the existence of electronic bingo
parlors violates their exclusive right to operate gaming
devices. Should this matter not be settled in this legislative
session, the author argues that hundreds of millions of dollars
in state revenue will be lost because the tribes will no longer
be required to make payments to the state.
Finally, unlike current electronic bingo, which provides less
than 10% of the games' gross revenues to the nonprofits, the
author wants to assure that revenue generated by charitable
bingo games is used for charitable purposes. Toward that end,
this bill requires that a minimum of 43% of the gross revenue be
used for charitable purposes.
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.
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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
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).
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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
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
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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.
New Vision v. Sacramento County Board of Supervisors . In 2007,
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
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
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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
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
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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 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, allows 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, adds new
section to the Penal Code to authorize the play of "remote
caller" bingo games in California (Senate G.O. Committee).
AB 1924 (Jeffries), Chapter 216, Statutes of 2008, provides,
with respect to bingo games conducted by the Lake Elsinore Elks
Lodge only, an increase for proceeds that may be used for rental
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and overhead, to 20% of the proceeds before the deduction for
prizes, or $3,000 per month, whichever is less, as specified.
The language for AB 1924 has been incorporated into SB 1369.
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
FN: 0007625