BILL ANALYSIS Ó SB 374 Page 1 Date of Hearing: July 15, 2015 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Adam Gray, Chair SB 374 (Hall) - As Introduced February 24, 2015 SENATE VOTE: 35-0 SUBJECT: Tribal gaming: local agencies. SUMMARY: Deletes obsolete allocation provisions relating to the Indian Gaming Special Distribution Fund (SDF) and makes other code maintenance changes. Specifically, this bill: EXISTING LAW: 1)The federal Indian Gaming Regulatory Act of 1988 provides for the negotiation and execution of compacts for the purpose of authorizing class III gaming on Indian lands within a state. Additionally, the California Constitution authorizes the Governor to negotiate and conclude compacts, subject to ratification by the Legislature. 2)Creates in the State Treasury the SDF for the receipt and SB 374 Page 2 deposit of moneys received by the state from certain Indian tribes pursuant to the terms of gaming compacts entered into with the state. 3)Authorizes the Legislature to appropriate money from the SDF as follows: (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 the California Gambling Control Commission (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; and, (f) any other purpose specified by law. 4)Provides that the "priority" for funding from the SDF is in the following descending order: (a) to make payments of any shortfalls that may occur in the RSTF; (b) grants for programs designed to address gambling addiction; (c) compensation to the CGCC and DOJ for regulatory functions that directly relate to Indian gaming; and, (d) grants for the support of local government agencies impacted by tribal gaming. 5)Creates, until January 1, 2021, a County Tribal Casino Account SB 374 Page 3 in the treasury of each county that contains a tribal casino, which is funded according to specified formulas. 6)Requires the State Controller to divide the County Tribal Casino Account for each county that has gaming devices that are subject to an obligation to make contributions to the SDF into a separate account, known as an Individual Tribal Casino Account, for each tribe that operates a casino within the county. Each Individual Tribal Casino Account is required to be funded in proportion to the amount that each individual tribe paid in the prior fiscal year to the SDF, and used for grants to local agencies impacted by tribal casinos, as specified. 7)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 moneys. This bill deletes obsolete allocation provisions from specified fiscal years relating to the SDF and takes other minor code maintenance changes. FISCAL EFFECT: Unknown COMMENTS: SB 374 Page 4 Purpose of the bill : According to the author's office, this bill is simply intended to make technical, clarifying and conforming changes to current statutes pertaining to the SDF. The author's office also notes that at some point this bill may be used as a vehicle to address issues brought forth by various entities at a March 24, 2015 informational hearing conducted by the Senate Governmental Organization Committee titled, "Confronting Shortfalls in Indian Gaming Funds - the Special Distribution Fund (SDF) and the Revenue Sharing Trust Fund (RSTF)." During the informational hearing, the Legislative Analyst's Office (LAO) reported that the Legislature has ratified tribal-state gaming compacts with 73 of the State's 110 federally recognized tribes. Of these tribes, 58 currently operate 60 casinos. These compacts require that the tribes make payments to various state accounts under certain conditions. Specific payment requirements differ across tribes and depend on various factors, such as the number of slot machines operated and/or the average slot machine net win. Currently, 46 tribes make payments into the following three state accounts: (1) the RSTF receives payments from 37 tribes; (2) the SDF receives payments from 26 tribes; and, (3) the General Fund receives payments from 11 tribes. The LAO indicated that "as a result of amendments to several tribal state compacts that were ratified beginning in 2007, the SDF has seen significant decline in its fund balances. This is because the amended compacts decreased the amount of revenue that certain tribes are required to pay into the SDF by SB 374 Page 5 requiring that these tribes instead make payments to the General Fund." Furthermore, the LAO stated that "the expenditures in excess of revenues were supported by using prior-year fund balances in the SDF and that the SDF fund balance is expected to be exhausted in the current year." Prior legislation : AB 1916 (Hall), Chapter 600, Statutes of 2014. Created the "Tribal Nation Grant Fund" in the State Treasury, to be administered by the CGCC, for the receipt and deposit of moneys received by the state from Indian tribes, pursuant to the terms of tribal-state gaming compacts. AB 1042 (Hall), Chapter 746, Statutes of 2013. Required the Department of Finance, 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. In addition, appropriated $13 million from the SDF to the CGCC to provide grants to local agencies for the 2013-14 fiscal year. AB 2515 (Hall), Chapter 704, Statutes of 2012. Among other things, revised the procedures governing the award of grants from the SDF to ensure that the funds are properly used to mitigate costs associated with tribal gaming and appropriated $9.1 million from the SDF for grants to mitigate the impacts of tribal gaming on local governments for the 2012-13 fiscal year. AB 1417 (Hall), Chapter 736, Statutes of 2011. As introduced, this measure would have reorganized statutes pertaining to Indian gaming compacts primarily by moving them to a newly created Title 16.5 on Tribal Gaming in the Government Code. AB SB 374 Page 6 1417 was subsequently gutted in this committee to become the vehicle for the distribution of $9.1 million from the SDF to the CGCC to provide grants to local agencies. SB 856 (Budget and Fiscal Review), Chapter 719, Statutes of 2010. Among other things, appropriated $30 million from the SDF to restore funding deleted from the Budget Act of 2007 for grants to mitigate the impact of tribal gaming on local governments. AB 158 (Torrico), Chapter 754, Statutes of 2008. Enacted several recommendations proposed by the California State Auditor relative to the allocation and uses of proceeds from the SDF. SB 288 (Battin), Chapter 13, Statutes of 2006. Appropriated $20 million from the SDF for grants to local jurisdictions impacted by tribal gaming. SB 621 (Battin), Chapter 858, Statutes of 2003. Among other things, established priorities and procedures for specified funding to local governments from the SDF for mitigating impacts from tribal casinos and appropriated $25 million from the SDF to mitigate the impact of tribal gaming on local governments AB 673 (J. Horton), Chapter 210, Statutes of 2003. Among other things, specified that money in the SDF may be used to make payment of shortfalls that may occur in the RSTF and provided that payment for those shortfalls in the RSTF shall be the priority use of moneys in the SDF. Also, established a mechanism by which funds may be transferred from the SDF to the RSTF pursuant to specified provisions of the tribal-state compacts and appropriated the sum of $50.6 million for the purpose of making payments to eligible Indian tribes for the preceding fiscal year. SB 374 Page 7 REGISTERED SUPPORT / OPPOSITION: Support None on file Opposition None on file Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531