BILL ANALYSIS. The Senate amendments appropriate $13 million from the SDF to the CGCC to provide grants to local agencies for the fiscal year.

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1 CONCURRENCE IN SENATE AMENDMENTS AB 1042 (Hall) As Amended August 12, 2013 Majority vote BILL ANALYSIS ASSEMBLY: 78-0 (May 29, 2013) SENATE: 39-0 (September 9, 2013) COMMITTEE VOTE: 12-0 (September 11, RECOMMENDATION: concur (G.O.) 2013) 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 fiscal year. The Senate amendments appropriate $13 million from the SDF to the CGCC to provide grants to local agencies for the fiscal year. EXISTING LAW : 1)Creates the IGSDF 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. 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.

2 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, )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. 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

3 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 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, 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 ). 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

4 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 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, 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 ) 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 appropriated $25 million from the SDF to local jurisdictions impacted by Indian gaming. The Budget Acts of , , and , each appropriated $30 million from the SDF to local governments impacted by Indian gaming. The Budget Act of included a $30 million appropriation from the SDF to local governments 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 Budget Act. The bill required the funds to be divided amongst the locals based on the amounts paid into the SDF in the 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. Analysis Prepared by : Eric Johnson / G. O. / (916)

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