BILL ANALYSIS �
AB 1042
Page 1
GOVERNOR'S VETO
AB 1042 (Hall)
As Amended August 12, 2013
2/3 vote
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|ASSEMBLY: |78-0 |(May 29, 2013) |SENATE: |39-0 |(September 9, 2013) |
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|COMMITTEE VOTE: |12-0 |(September 11, |RECOMMENDATION: |concur |
|(G.O.) | |2013) | | |
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|ASSEMBLY: |78-0 |(September 12, | | | |
| | |2013) | | | |
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Original Committee Reference: G.O.
SUMMARY : Makes modifications to an existing provision of law
that requires the Department of Finance (DOF), in consultation
with the California Gambling Control Commission (CGCC) to
calculate the total revenue in the Indian Gaming Special
Distribution Fund (SDF) that will be available for the current
budget year for local government agencies impacted by tribal
gaming. In addition, the bill appropriates $13 million from the
SDF to the CGCC to provide grants to local agencies for the
2013-14 fiscal year.
The Senate amendments appropriate $13 million from the SDF to
the CGCC to provide grants to local agencies for the 2013-14
fiscal year.
EXISTING LAW :
1)Creates the IGSDF in the State Treasury for the receipt of
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revenue contributions made by tribal governments pursuant to
the terms of the 1999 model Tribal-State Gaming Compacts.
2)Provides that the Department of Finance (DOF), in consultation
with the CGCC, shall calculate the total revenue in the IGSDF
that will be available for the current budget year for local
government agencies impacted by tribal gaming. DOF shall
include this information in the May budget revision.
3)Authorizes the Legislature to appropriate money from the IGSDF
for the following purposes:
a) Grants for programs designed to address gambling
addiction.
b) Grants for the support of state and local government
agencies impacted by tribal government gaming.
c) Compensation for regulatory costs incurred by CGCC and
the Department of Justice (DOJ) in connection with the
implementation and administration of compacts.
d) Payment of shortfalls that may occur in the Indian
Gaming Revenue Sharing Trust Fund (RSTF).
e) Disbursements for the purpose of implementing the terms
of tribal labor relations ordinances promulgated in
accordance with the terms of the 1999 compacts.
f) Any other purpose specified by law.
4)Establishes a method of calculating the distribution of
appropriations from the IGSDF for grants to local government
agencies impacted by tribal gaming. This method includes a
requirement that the State Controller, in consultation with
the Commission, deposit funds into County Tribal Casino
Accounts and Individual Tribal Casino Accounts based upon a
process that takes into consideration whether the county has
tribes that pay, or not pay, into the SDF. The distribution
formula "sunsets" on January 1, 2021.
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5)Establishes an Indian Gaming Local Community Benefit Committee
in each county in which gaming is conducted, specifies the
composition and responsibilities of that committee, and
requires that committee to make the selection of grants from
the casino accounts. Among other things, the committee is
responsible for establishing all application policies and
procedures for grants from the casino accounts.
AS PASSED BY THE ASSEMBLY , this bill made modifications to an
existing provision of law that requires DOF, in consultation
with the CGCC to calculate the total revenue in the SDF that
will be available for the current budget year for local
government agencies impacted by tribal gaming.
FISCAL EFFECT : According to the Senate Appropriations
Committee, $13 million appropriation from the SDF to the CGCC
(Special Fund). Other provisions of the bill are minor,
absorbable costs for DOF report (General Fund).
COMMENTS :
Purpose of the bill : According to the author's office, this
bill appropriates $13 million from the SDF to provide grants to
local agencies for the purpose of mitigating the adverse impacts
of tribal gaming in defined communities throughout California.
This appropriation represents a reasonable request to provide
local mitigation funds to communities surrounding the 21 tribes
who still pay into the SDF as provided by the existing 1999
Compacts - as well as other many other communities throughout
the state pursuant to a longstanding statutory allocation
formula.
As a function of the original 1999 Tribal-State Compacts, these
local mitigation funds are vital to many local communities and
counties throughout the state, as they support critically
important allowable purposes such as public safety, wastewater,
fire, and transportation. These funds are even more vital
during difficult budget and economic times and could be used to
stimulate economic activity as a result of the investing the
money in infrastructure mitigation projects.
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It is important to note that the SDF is a fund that is distinct
from the General Fund and the monies included in the SDF may not
be used for purposes other than specified tribal gaming-related
purposes - and the allocation of these funds would not have an
impact on the General Fund this year.
Moreover, while there has been concern regarding the
sustainability of the SDF in the past, the SDF's condition is
set to improve tremendously given recent Compacts (Graton,
Rincon, and North Fork) approved by the Legislature, which
direct millions of dollars into the SDF - and similar such
compacts will likely further improve the SDF's condition.
It has been reported that the recently approved Federated
Indians of Graton Rancheria Compact (AB 517, Hall, Chapter 12,
Statutes of 2012) will generate significant revenue to the SDF
and RSTF when the casino opens this year. This Compact requires
payments into the SDF, by the Tribe, of $1.4 million per year
during the first seven years of the Compact and 3% of the net
win from all gaming devices thereafter, to reimburse the state
for the costs of regulating gaming activities and to provide
programs for education and treatment of problem gamblers. The
Compact requires payments by the Tribe to the RSTF to fund the
tribal governmental programs of non-gaming and limited-gaming
tribes. The RSTF provides payments of $1.1 million per year to
non-gaming tribes, which are defined as those tribes that do not
operate more than 350 gaming devices. If the Tribe operates the
maximum number of gaming devices authorized under the compact,
the Tribe would pay the following amounts to fund such programs:
(1) $8.9 million (at 3,000 slots) annually for years 1-7; and
(2) $12.1 million (at 3,000 slots) annually for years 8-20.
When Graton begins paying into the RSTF, the amount of funds
that will need to be transferred from the SDF to backfill
shortfalls in the RSTF will decrease substantially and will
result in a larger fund balance available in the SDF that can be
distributed for purposes deemed by the Legislature such as those
being used for grants to local communities to mitigate the
impact of tribal gaming.
In addition, the recently approved North Fork Rancheria Band of
Mono Indians of California Compact (AB 277, Hall, Chapter 51,
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Statutes of 2013) will also generate significant revenues to the
benefit of the RSTF and the SDF. According to the Tribe, it is
projected that the North Fork Rancheria project will contribute
between $250 million and $300 million to the RSTF or Tribal
Nation Grant Fund (TNGF) for nongaming tribes during the life of
the Compact. Should the gaming facility's financial performance
far exceed reasonable projections, the Tribe, in furtherance of
the Tribe's and the state's goal to ensure that all California
tribes benefit from tribal gaming, has agreed to make additional
payments to the state (RSTF and TNGF) for revenue sharing with
non-gaming tribes and limited-gaming tribes.
The goal of the bill is to ensure solvency within the SDF while
allowing for a reasonable mitigation appropriation each year to
the communities surrounding the 21 tribes who continue to pay
into the SDF, as mandated in the existing 1999 Compacts.
The bill also contains language to follow-up on a California
State Auditor's report from February 2011, titled "The Indian
Gaming Special Distribution Fund" (Report 2010-036). In
general, the State Auditor found a need for increased oversight
over the use of the local mitigation grants that are provided to
certain local governments in order to mitigate the impact of an
Indian casino. The author's office states that this bill is
intended to provide more detail during the budget process so
that the Legislature is better informed to determine the funding
level for local mitigation grants.
The author's office points out that existing law does not
require DOF to provide a specific recommendation as to how the
funds should be spent - it merely requires a calculation of the
total revenue in the SDF. It is the author's belief that the
SDF would be better served if a specific recommendation was put
forth by DOF, in consultation with the CGCC. Such a
recommendation would assist in providing a long term
sustainability of the SDF and a baseline allocation to work
from.
Background :
Indian Gaming Special Distribution Fund : In 1999, anticipating
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voter approval of Proposition 1A, the governor negotiated and
the Legislature approved legislation ratifying compacts with
many tribes. The State eventually entered into 61 of these
tribal-state gaming compacts (1999-model compacts). The
1999-model compacts later received final federal approval as
required by the IGRA, and they are effective until December 31,
2020. In consideration for the State's willingness to enter
into these compacts, the tribes agreed to provide to the State,
on a sovereign-to-sovereign basis, a portion of their revenues
from gaming devices in the form of license and operation fees.
These fees provide money for two funds: the IGRSTF, which
distributes money to tribes that do not have compacts or that
have compacts and operate fewer than 350 gaming devices, and the
SDF. Unfortunately, the fee structure established in the 1999
compacts designed to support the $1.1 million payments to the
non-compact and limited gaming tribes does not generate a
sufficient level of funding necessary to support this
obligation, thus necessitating annual transfers (approximately
$33.5 million in 2012-13) from the SDF to address this
shortfall. The SDF funds are to be used for purposes as stated
above in the analysis.
ISDF contributing Tribes : 1) Barona Band of Mission Indians; 2)
Big Sandy Band of Mono Indians; 3) Big Valley Rancheria; 4)
Bishop Paiute Tribe; 5) Cabazon Band of Mission Indians; 6)
Cahuilla Band of Indians; 7) Chicken Ranch Rancheria; 8) Colusa
Indian Community; 9) Hopland Band of Pomo Indians; 10) Jackson
Rancheria Band of Miwuk Indians; 11) Mooretown Rancheria; 12)
Redding Rancheria; 13) Robinson Rancheria; 14) Santa Rosa
Rancheria; 15) Santa Ynez Band of Chumash Indians; 16) Soboba
Band of Luiseno Indians; 17) Sycuan Band of Kumeyaay Indians;
18) Table Mountain Rancheria; 19) Tule River Indian Tribe; 20)
Twenty-Nine Palms Band of Mission Indians; and, 21) Tyme Maidu
Tribe Berry Creek Rancheria.
ISDF 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 local governments
impacted by Indian gaming. The Budget Act of 2007-08 included a
$30 million appropriation from the SDF to local governments
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impacted by Indian gaming; however, the Governor blue-penciled
that appropriation. In 2008, AB 158 (Torrico), appropriated $30
million from the SDF to counties for mitigating Indian casino
impacts. In 2010, SB 856 (Senate Budget and Fiscal Review
Committee), appropriated $30 million from the SDF to restore $30
million in funding vetoed by the Governor in the 2007-08 Budget
Act. The bill required the funds to be divided amongst the
locals based on the amounts paid into the SDF in the 2006-07
fiscal year. In 2011, AB 1417 (Hall), Chapter 736, Statutes of
2011, appropriated $9.1 million from the SDF to the CGCC to
provide grants to local agencies for the purpose of mitigating
the adverse impacts of tribal gaming. AB 2515 (Hall), Chapter
704, Statutes of 2012, also appropriated $9.1 million from the
SDF for mitigation grants.
GOVERNOR'S LINE ITEM VETO MESSAGE :
I am signing Assembly Bill 1042 but reducing the
amount appropriated from the Indian Gaming Special
Distribution Fund as noted below.
I am committed to providing support to local
government agencies impacted by gaming but I continue
to have serious concerns about the long-term solvency
of the Indian Gaming Special Distribution Fund. There
is a structural imbalance which needs to be addressed.
I have made a concerted effort to negotiate compacts
which will begin to address the problem. Opposition,
however to two recently negotiated compacts has
prevented the revenue which would have been generated
to benefit this special fund. This has led to a
potential shortfall and subsequent pressure on the
General Fund.
For these reasons I am reducing the appropriation from
$13,000,000 to $9,100,000.
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Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
FN: 0002941