BILL ANALYSIS �
AB 742
Page 1
Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 742 (Nestande) - As Amended: March 31, 2011
Policy Committee: Governmental
Organization Vote: 16 - 0
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill requires grant applicants applying for local
mitigation funding from the Indian Gaming Special Distribution
Fund (SDF) to demonstrate how the grant will be used to mitigate
the impact of a casino. In addition, all local Indian Gaming
Local Benefit Committees adopt a conflict of interest code.
FISCAL EFFECT
Costs associated with local governments ensuring that local SDF
grants are actually used to mitigate the negative impact of a
casino should be absorbable within existing resources.
COMMENTS
1)Rationale . The author states that the intent of this bill is
to address several of the State Auditor's recommendations
stemming from February 2011 report entitled, "The Indian
Gaming Special Distribution Fund (Report 2010-036)." In its
review of the SDF and the benefit committees, the Bureau of
State Audits recommended that local benefit committees require
that each grant application clearly show how the grant will
mitigate the impact of the casino on the applicant agency. In
addition, the auditor recommends that benefit committee adopt
conflict-of-interest codes that comply with the political
reform act.
The author contends this bill will provide clarification of
existing law and provide direction to local benefit committees
attempting to implement the distribution of SDF grant funds.
AB 742
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2)Bureau of State Audits (BSA) Findings . In July 2007, the BSA
released an audit of the local mitigation grants funded by the
SDF. The auditors reviewed 30 local grants made to six
counties totaling $12.1 million. BSA found five instances
totaling $505,000 where grants were not used to offset the
adverse effects of casinos. In addition, they found
10successful applications totaling $2.3 million where the
rationale for the grants as stated in the application appeared
to primarily address unrelated needs in the communities. The
auditor also found that in some communities, a significant
amount of the distribution fund money was deposited in local
government accounts that earned interest used to pay general
county operational costs rather than for mitigation projects.
In February of 2011, BSA conducted a follow-up audit and found
that local benefit committees still have trouble complying
with the distribution requirements. The audit found that in
2008-09, of the $30 million appropriated by the Legislature
for local mitigation grants, local governments could not
provide evidence that $3.2 million in grant funding was used
to mitigate the impact of a casino.
3)Legislative Analyst's Concerns . In the Legislative Analyst's
Office (LAO) analysis of the 2009-10 budget, and in earlier
reports, they noted that the local grants have outlived their
usefulness due to the major changes in the SDF. The law
governing the local grants was implemented when the SDF was
flush with revenue, paid in large part by tribes that no
longer pay into the fund. In addition, these tribes have
separate obligations under their new compacts to enter into
enforceable agreements with local jurisdictions to mitigate
the effects of their casinos on nearby counties. In addition,
the LAO points out that two-thirds of the funding is provided
to Riverside, San Diego and San Bernardino counties (with 43%
going to Riverside alone) and all of the amended compacts for
tribes that no longer pay into the SDF are located in
Riverside and San Bernardino counties. Therefore, under this
new scenario, the allocation formula no longer makes sense.
The LAO recommends that any continuation of the local grants
emphasize two key priorities:
a) Ensure that only the highest-priority local
infrastructure, problem gambling, and public safety needs
resulting from casinos receive funding.
AB 742
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b) Ensure that any county receiving mitigation payments
from a tribe with a recently amended compact does not also
receive substantial SDF grant funding related to that
tribe.
This legislation does not include either of the LAO
recommendations.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081