BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1369|
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UNFINISHED BUSINESS
Bill No: SB 1369
Author: Cedillo (D) and Battin (R), et al
Amended: 8/25/08
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : 66-3, 8/27/08 - See last page for vote
SUBJECT : Remote caller bingo
SOURCE : California Association of Nonprofits
Charity First
DIGEST : This bill 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.
Assembly Amendments (1) deleted the Senate version relating
to school lunch program application eligibility
requirements, (2) added the current provisions which
authorize "remote caller bingo" for specified tax-exempt
CONTINUED
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organizations, and (3) added Senator Battin as author and
added co-authors.
ANALYSIS :
Existing law:
1. Article IV, Section 19(c) of the California Constitution
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.
[Section 326.5(a) of the Penal Code]
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
percent 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.
This bill:
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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. Provides that 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 co-sponsors 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.
5. 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.
6. Provides an organization shall not conduct remote caller
bingo more than one day per week.
7. Specifies that receipts of the game shall be used only
for charitable purposes and the organization conducting
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the game shall determine the disbursement of the net
receipts of the game.
8. 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 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.
9. Provides prizes for remote caller bingo cannot exceed 37
percent of the gross receipts of the game and overhead
may not exceed 20 percent, as defined.
10.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.
11.Specifies that an organization may contract for certain
services and those services are counted toward the 20
percent overhead limit and no one who contracts to
provide services shall hold any legally recognized
interest in the game, as specified.
12.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.
13.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
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caller bingo game.
14.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.
15.The California Gambling Control Commission (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
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.
16.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 no later than May 1, 2009. CGCC is
directed to complete the normal public notice and
comment process, considering the comments of all
interested parties, as described.
17.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.
18.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.
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19.Requires the organization to provide the CGCC audited
records regarding the operations of remote caller bingo,
as specified.
20.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.
21.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.
22.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.
23.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.
24.Provides that players who are physically present at a
bingo game may use hand held, portable card-minding
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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.
25.Raises the prize limits on traditional bingo from $250
to $500.
26.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
authorized to conduct bingo in the city, county or city
and county, there is hereby created the Charity Bingo
Mitigation Fund.
27.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.
28.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 five
percent 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.
29.Specifies that each eligible organization may apply to
the CGCC no later than January 31, 2009, for the
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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.
30.Makes various legislative findings and declarations.
NOTE: AB 334 (Levine) is a companion measure which
appropriates up to $500,000, as determined by order
of the Director of the Department of Finance to the
CGCC for use in the 2008-09 fiscal year for purposes
relating to the regulation of remote caller bingo.
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
Section 326.5 of the Penal Code. 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
nonprofit 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
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$37 million in charitable giving." The percentage of gross
revenue paid out for charitable purposes over that time
period was approximately 16.5 percent.
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 Section 326.5(o) of the Penal Code.
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 Section 326.5(o) of
the Penal Code.
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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 Section 330(b) of the Penal Code and did not
fall within the definition of "bingo" contained in Section
326.5(o) of the Penal Code, 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
a state, in order to comply with its accommodation
requirements, to 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.
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United States 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 Section 326.5(o)
of the Penal Code 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 Section 326.5(o) of
the Penal Code.
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 Section 326.5(o) of the
Penal Code.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
According to the Assembly Appropriations Committee,
one-time General Fund 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
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necessary to oversee and regulate charitable bingo in the
state. These costs should be fully offset by licensing
fees. Ongoing 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 General Fund.
SUPPORT : (Verified 8/28/08)
California Association of Nonprofits (co-source)
Charity First (co-source)
Agua Caliente Band of Cahuilla Indians
American Legion
Archdiocese of Los Angeles
Barona Band of Mission Indians
California Catholic Conference of Bishops
California Narcotic Officers' Association
California Tribal Business Alliance
Catholic Charities of Los Angeles, Inc.
Ewiiaapaayp Band of Kumeyaay Indians
Ione Band of Miwok Indians
Morongo Band of Mission Indians
Pane and Pane Associates, Inc
Pechanga Band of Luiseno Indians
Pechanga Indian Reservation
Picayune Rancheria of the Chukchansi Indians
Rumsey Band of Wintun Indians
Rumsey Indian Rancheria
San Manuel Band of Mission Indians
The American Legion (Department of California)
Viejas Band of Kumeyaay Indians
Viejas Tribal Government
OPPOSITION : (Verified 8/28/08)
California Charity Bingo Association
El Camino High School Boosters Club
Lightning Games, LLC
Los Coyotes Band of Indians
Ramona Band of Cahuilla
Rincon Band of Luiseno Indians
ARGUMENTS IN SUPPORT : According to the author's office,
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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 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's
office 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's office 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 percent of the games' gross revenues to the
nonprofits, the author's office 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 percent of the gross revenue be used
for charitable purposes.
In support, 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
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their homes - but have the benefit of professional bingo
callers running the game."
The California Association of Nonprofits, 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."
ARGUMENTS IN 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 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
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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."
Lightning 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."
ASSEMBLY FLOOR :
AYES: Adams, Aghazarian, Anderson, Arambula, Beall,
Benoit, Berryhill, Blakeslee, Caballero, Charles
Calderon, Carter, Cook, Coto, Davis, De La Torre, De
Leon, Dymally, Emmerson, Eng, Evans, Feuer, Fuentes,
Fuller, Furutani, Galgiani, Garcia, Garrick, Hayashi,
Hernandez, Horton, Houston, Huff, Huffman, Jeffries,
Jones, Karnette, Keene, Krekorian, La Malfa, Laird, Leno,
Levine, Lieber, Lieu, Ma, Maze, Mendoza, Nakanishi, Nava,
Parra, Plescia, Portantino, Price, Ruskin, Salas,
Saldana, Silva, Smyth, Solorio, Strickland, Swanson,
Torrico, Tran, Walters, Wolk, Bass
NOES: Berg, DeSaulnier, Niello
NO VOTE RECORDED: Brownley, DeVore, Duvall, Gaines,
Hancock, Mullin, Nunez, Sharon Runner, Soto, Spitzer,
Villines
TSM:mw 8/28/08 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****