BILL ANALYSIS
Bill No: SB
357
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 357 Author: Ducheny
As Amended: April 1, 2009
Hearing Date: April 14, 2009
Consultant: Chris Lindstrom
SUBJECT
Tribal gaming: grants to local jurisdictions.
DESCRIPTION
SB 357 extends the sunset date, from January 1, 2010 to
January 1, 2021, on the law which specifies how Indian
Gaming Special Distribution Fund (SDF) local mitigation
grant monies are distributed.
EXISTING LAW
Existing law creates the SDF in the State Treasury for the
receipt of revenue contributions made by tribal governments
pursuant to the terms of the 1999 model Tribal-State Gaming
Compacts (compacts).
Existing law authorizes the Legislature to appropriate
money from the SDF for the following purposes:
1) Grants for programs designed to address
gambling addiction.
2) Grants for the support of state and local
government agencies impacted by tribal government
gaming.
3) Compensation for regulatory costs incurred by
the California Gambling Control Commission (CGCC)
and the Department of Justice (DOJ) in connection
with the implementation and administration of
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compacts.
4) Payment of shortfalls that may occur in the
Indian Gaming Revenue Sharing Trust Fund (RSTF).
This shall be the priority use of moneys in the SDF.
5) Disbursements for the purpose of implementing
the terms of tribal labor relations ordinances
promulgated in accordance with the terms of the 1999
compacts.
6) Any other purpose specified by law.
Existing law provides that the priority for funding from
the SDF is in the following descending order:
1) To make payments of any shortfalls that may
occur in the RSTF.
2) Grants for programs designed to address
gambling addiction.
3) Compensation to CGCC and DOJ for regulatory
functions that directly relates to Indian gaming.
4) Grants for the support of local government
agencies impacted by tribal gaming.
Existing law requires the Department of Finance, in
consultation with CGCC, to calculate the total revenue in
SDF that will be available for the budget year for local
government agencies impacted by tribal gaming. Requires
this information to be included in the May Budget revision.
Existing law establishes, until January 1, 2010, the
methodology for the allocation of SDF monies to local
governments that have tribal government gaming in its
jurisdiction. Authorizes eligible local governments to
establish Benefit Committees to award SDF monies to fund
grant projects pursuant to specified criteria.
Existing law requires each county that administers grants
from the SDF to provide an annual report to the Chairperson
of the Joint Legislative Budget Committee, the chairpersons
of the Senate and Assembly committees on governmental
organization, and CGCC by October 1 of each year detailing
the specific projects funded by all grants in its
jurisdiction. Counties that do not provide the annual
report required under current law to CGCC and the
Legislature are ineligible for funding from the SDF for the
following year.
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Existing law requires the State Auditor to conduct an audit
every three years and report its findings to the
Legislature regarding the allocation and use of SDF grant
monies.
Executive Order D-66-03 authorizes and requires CGCC to
collect and account for all SDF contributions under the
tribal-state gaming compacts.
BACKGROUND
Purpose of the bill. According to the author's office, "SB
357 would extend the sunset on the SDF local government
grant statute from January 1, 2010 to January 1, 2021.
This extension would ensure that the local government grant
allocation statute will be available for the remaining life
of the 1999 compacts, which expire in 2020."
Background. The SDF was established by agreement among the
signatory parties of the 1999 compacts and subsequently
created in the State Treasury by SB 1385 (Battin), Chapter
874, Statutes of 1999. SB 1385 and subsequent legislation
specify the allowable and priority uses of funds
appropriated by the Legislature from the SDF.
The 1999 compacts. Under the terms of the 1999 compacts,
tribes that operated more than 200 gaming devices on
September 1, 1999 make contributions into the SDF. There
were 38 tribes conducting gaming on September 1, 1999, of
which 28 had more than 200 gaming devices. As of today,
primarily due to renegotiated compacts under the
Schwarzenegger administration, 21 tribes make contributions
into the SDF.
The amount each tribe contributes into the SDF is based on
the average gaming device net win multiplied by the number
of gaming devices that the tribe had in operation on
September 1, 1999. Beginning in the 2008-09 fiscal year,
the SDF is projected to receive approximately $50 million a
year.
Budget Actions. The Budget Act of 2003-04 appropriated $25
million from the SDF to local jurisdictions impacted by
Indian gaming. The Budget Acts of 2004-05, 2005-06, and
2006-07, each appropriated $30 million from the SDF to
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local governments impacted by Indian gaming.
The Budget Act of 2007-08 included a $30 million
appropriation from the SDF to local governments impacted by
Indian gaming, however, the Governor blue-penciled that
appropriation. In his veto message the Governor stated:
"As evidenced in a recent Bureau of State Audits
report, there is great concern regarding whether these
funds are being used solely for their intended
purpose, which is to mitigate the impacts of having
tribal casinos in their communities. I will support
legislation that includes an appropriation for
mitigation funds if the process is reformed. With
this reduction, there still remained $283,000 for
payment to Del Norte County which reflects local
mitigation grant funding not received by Del Norte
County from the Indian Gaming Special Distribution
Fund in fiscal years 2003-04, 2004-05, and 2005-06."
The Governor's 2008-09 proposed budget did not include an
appropriation from the SDF for local mitigation. Neither
did the Governor's 2008 May Revise. $30 million in funding
from the SDF was ultimately made available for local
mitigation grants pursuant to AB 158 (Torrico), Chapter
754, Statutes of 2008.
The Governor's 2009-10 proposed budget and the 2009 Budget
Act did not include an appropriation from the SDF for local
mitigation grants.
Arguments in support. The Barona Band of Mission Indians
(Barona) points out that the 1999 compacts require that
"the State's share of the Gaming Device revenue shall be
placed in the Special Distribution Fund, available for
appropriation by the Legislature for, among other things,
grants, including any administrative costs, for the support
of state and local government agencies impacted by tribal
government gaming ."
Further, Barona points out that the compact also states,
" it is the intent of the parties that Compact Tribes will
be consulted in the process of identifying purposes for
grants made to local governments . Proponents contend that
there are several implicit factors in this 1999 compact
statement, including: (1) this statement clearly refers to
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the 1999 compact "parties", which are currently the State
of California and the 21 tribes that continue to be parties
to the 1999 compacts, (2) given this, the consultation on
local government grants refers solely to those tribes that
operate under the 1999 compacts, (3) SDF-paying tribes must
be primary in any process of guiding local government
mitigation grants. To further underscore this point,
proponents believe it is important for state leaders to
remember that each 1999 compact is an individual agreement
between the state and a single tribal government - and
local government mitigation grant funds must be viewed in
that context, and (4) moreover, State support of SDF-paying
tribes' ability to operate within the parameters of the
1999 compacts (including local government grant provisions)
strengthens the parties government-to-government
relationship.
Barona notes that the current statute that outlines the
formula for allocation of local mitigation funds is
generally reasonable. Particularly given that the statute
requires SDF funds for local mitigation purpose to have the
consent of SDF-paying tribes before being allocated. These
funds benefit the SDF-paying tribes' local communities in a
manner that is consistent with the 1999 compacts, the
Coyote Valley case and the recent Rincon decision. The
formula should be maintained and the sunset date should be
extended for the life of the 1999 compacts, which expire in
2020.
Finally, Barona contends that at the time of the 1999
compacts, SDF-paying tribes had - and continue to have - a
reasonable expectation that the local government grant
component of the compact would continue to be honored via
annual appropriations of monies to mitigate local impacts
of SDF-paying tribes' gaming operations.
The California Association of Tribal Governments (CATG)
member tribes support the underlying principals of the 1999
tribal-state compacts and Proposition 1A, which intended
Indian gaming revenue to be used in part to support local
governments impacted by tribal government gaming, and to
provide payments to non-compact tribes. State law provides
that payments to non-compact tribes are the priority use of
the SDF.
Although the CATG supports payments from the SDF to
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impacted local communities, in the near future there must
be a discussion and solution to address the distribution
formula within Government Code Section 12718. The January
30, 2009 analysis from the Legislative Analyst's Office,
reports the SDF balance will be depleted as early as 2011
or as late as 2015 if SDF funding to local governments
continues at the previous appropriation levels. The LAO
notes that because of the decline in payments by gaming
tribes into the SDF, "the SDF now has a large,
unsustainable structural deficit that must be addressed by
the Legislature within the next few years." The LAO
recommends significant changes to the local grant funding
process in order to sustain the long term viability of the
SDF. Because many of its member tribes are beneficiaries
of payments from the SDF, the CATG and its member tribes
have a legitimate interest in sustaining the long term
viability of the SDF.
PRIOR/RELATED LEGISLATION
AB 158 (Torrico), Chapter 754, Statutes of 2008 . Extended
the SDF local mitigation grant funding law by one year, to
January 1, 2010. Appropriated $30 million from the SDF to
eligible local jurisdictions to mitigate the impacts of
Indian casinos on local communities. Enacts safeguards
recommended by the State Auditor to ensure that the local
grant monies are used to mitigate the impacts of Indian
casinos and not used for unrelated purposes. Allows the
membership of the 7 member Indian Gaming Local Community
Benefit Committee to be modified in situations where there
is only one city within 4 miles of an Indian casino.
AB 1389 (Torrico), 2007-2008 Legislative Session . Would
have extended the SDF local mitigation grant funding law by
six months, to June 30, 2009. Would have made local
mitigation grant funding from the SDF contingent upon an
appropriation in the budget. Would have enacted the
recommendations made by the State Auditor to ensure that
the local grant monies are used to mitigate the impacts of
Indian casinos and not used for unrelated purposes. Would
have allowed the membership of the 7 member Indian Gaming
Local Community Benefit Committee to be modified in
situations where there is only one city within 4 miles of
an Indian casino. Held in Senate Rules Committee.
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AB 132 (Garcia), 2007-2008 Legislative Session . Would
likewise incorporate many of the recommendations of the
recent California State Auditor on the SDF, as well as
appropriate $30 million from the SDF for local government
grants in augmentation of the amount appropriated in the
2007 Budget Act. (Died in the Assembly)
AB 1265 (Cook), 2007-2008 Legislative Session . Would have
authorized a local benefit committee to select grants to
the California Department of Transportation. (Died in the
Assembly)
SB 288 (Battin), Chapter 13, Statutes of 2006 .
Appropriates $20 million from the SDF for grants to local
jurisdictions impacted by tribal gaming. Modifies the
annual reporting requirement of counties that receive SDF
grant monies.
SB 621 (Battin), Chapter 858, Statutes of 2003 .
Establishes, among other things, priorities and procedures
for specified funding to local governments from the SDF for
mitigating impacts from tribal casinos.
AB 1385 (Battin), Chapter 874, Statutes of 1999 . Created
the Indian Gaming Special Distribution Fund in the State
Treasury and specified the allowable uses of funds
appropriated by the Legislature from the SDF.
SUPPORT: As of April 10, 2009:
Barona Band of Mission Indians
California Association of Tribal Governments
California Nations Indian Gaming Association
County of Riverside
OPPOSE: None on file as of April 10, 2009.
FISCAL COMMITTEE: Senate Appropriations Committee
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