BILL ANALYSIS SENATE COMMITTEE ON SB 1751 GOVERNMENTAL ORGANIZATION HEARING DATE: May 10, 1994 STAFF ANALYSIS OF SENATE BILL NO. 1751 (Alquist) AS AMENDED MAY 5, 1994 SUBJECT California State Lottery Act of 1984 DESCRIPTION 1. SB 1751 would prohibit the Lottery from conducting any "banking" š or "percentage" game, any slot or card machine, contrivance, appliance, or mechanical device, as defined by Section 330 et seq. of the Penal Code. 2. Specifies that Lottery on-line terminals may only be used for the š sale of tickets and the dispensing of information unrelated to the results of a particular game. Also, no "thing of value" (money, coin, currency, check, allowance, token, credit, merchandise, property, or any representative of value. Section 330.2, Penal Code), may be dispensed as a prize from these terminals or devices, and no terminal or other device may be operated by a player in such a manner as to determine a winner. 3. Provides that no person may wager any "thing of value," as š specified. 4. Provides that under no circumstances, shall the Lottery use any š game that is a form of gambling in the type of casinos operating in Nevada and New Jersey, as specified in the California Constitution. 5. Contains a declaration by the Legislature that casino gambling is š contrary to the law and public policy of this state as reflected by the Constitution. 6. Provides that any person possessing a punchboard as described, š would be guilty of a misdemeanor, punishable as specified. 7. Clarifies that intent of the Legislature that a device used to š conduct a lottery drawing is not a slot machine as specified. 8. Defines a "gambling casino" to be any house, building, š outbuilding, structure, vessel, ship, craft, aircraft, vehicle, tent, or other place where one or more forms of gaming, slot or card machines, contrivances, appliances, or mechanical devices prohibited as specified, are played, dealt, conducted, or operated. (Continued) SB 1751 (Alquist) Continued Page 2 9. Declares that this measure furthers the purpose of the California š State Lottery Act of 1984. 10. Contains a "Cost Disclaimer" clause. BACKGROUND Proposition 37, passed by the California electorate on November š5, 1984, enacted the California State Lottery. Section 8880.1 of the šAct provides that "the people of the State of California declare that šthe purpose of this Act is support for preservation of the rights, šliberties and welfare of the people by providing additional monies to šbenefit education without the imposition of additional or increased štaxes." Additionally, Section 5 of this Act states that "no provision of šthis Act may be changed except to further its purpose by a bill špassed by a vote of two-thirds of the membership of both houses of šthe Legislature and signed by the Governor." In sponsoring this measure, the Traditional Values Coalition, šstates that SB 1751 is intended to clarify the Lottery Act's original šintent, which was that the Lottery may operate a variety of šlottery-type drawings and "instant ticket" games, but may not operate šcasino-type gambling games, including devices that are slot machines šor resemble slot machines. While the Lottery Act authorizes the operation of lotteries, the šsponsor believes it was never intended to permit slot machine type šdevices, or Nevada-style casino gambling. The sponsor says that California Indian Tribes have pointed to šthe authorized forms of gambling in California, especially the šCalifornia State Lottery, as a basis to assert California "permits šsuch gaming" as casino type gaming. One federal district court in šinterpreting the Indian Gaming Regulatory Act (IGRA), has assumed šthat under the California State Lottery Act, the Lottery is šauthorized to operate gaming machines that are indistinguishable from šslot machines used by Nevada and Atlantic City casinos. (Lottery šgame of Keno, Rumsey Indian Rancheria of Wintun Indians et al. v. šGovernor Pete Wilson, E.D. Cal. 1993, No. CIV-S-92-812 GEB! case on šappeal). (Continued) SB 1751 (Alquist) Continued Page 3 The sponsor believes that if the Lottery Act is not amended as šprovided for in this bill, there are "profound consequences of šopening up full scale casino gaming on Indian lands, which in turn šwill create the same kind of gaming elsewhere in California". The California State Lottery opposes the bill because it is so šbroadly and complexly drafted, that if enacted, it would prohibit šmost, if not all Lottery games by subjecting the Lottery to the šprovisions of Penal Code Section 330, which among other things, šprohibits "banking" and "percentage" games. Since all Lottery games šfit either one or both of these terms, the net effect would be a štotal prohibition of Lottery games. Other restrictions imposed by šthis measure would eliminate ticket validation and certain other šon-line promotional games and would also negate the entire Scratcher šautomation program. The Lottery points out that the loss of the Keno game alone šwould cause a sales loss of approximately $400 million per year, with š$133 million of that sum going to schools. The Lottery states that š"this legislation can not be construed, by any stretch of the šimagination to 'further the purpose of the Lottery Act' which is a šrequirement of law for any amendment of the Act, since the loss of šrevenue to public schools could exceed $650 million annually". Numerous Indian Tribes oppose this measure because they believe šthe following: 1) SB 1751 is a boldface attempt to reverse the hard fought š federal district court victory by Tribes in Rumsey v. Wilson, which ordered the Governor to negotiate with tribes on the scope of certain games they can offer to the public. The State has appealed this decision and it is set for oral argument on May 10th of this year. 2) Redefines a "slot machine," which is prohibited by criminal š law, to include electronic pull tab machines, which are lawful for the Lottery and Indian tribes (on their own lands) to offer to the public. These electronic pull tab machines are a critical source of tribal revenue that permits tribal self-sufficiency and reduces tribal dependence on government welfare programs. 3) Is similar to SCA 29 (Maddy) of last year in its purpose and š intended detrimental impact on tribal economic self-sufficiency through governmental gaming. SCA 29, sponsored by the Attorney General in an attempt to reverse his loss in federal court to the tribes in Rumsey v. Wilson, was refused passge in the Senate Governmental Organization Committee. (Continued) SB 1751 (Alquist) Continued Page 4 For all of these reasons, the tribes believe that SB 1751 should šbe defeated. The Association of California School Administrators and the šCalifornia State University, oppose this measure because they are šconcerned about how the bill is drafted. In its present form, the šbill appears to negatively impact the ability of the Lottery to offer šmost of their current games, which would all but eliminate funds to šschools from the Lottery. KNOWN POSITIONS: SUPPORT: Traditional Values Coalition OPPOSE: California State Lottery California-Nevada Indian Gaming Association Rumsey Rancheria of Wintun Indians Table Mountain Rancheria San Manuel Band of Mission Indians Viejas Band of Kumeyaay Indians Agua Caliente Band of Cahuilla Indians Sycuan Band of Mission Indians Barona Band of Mission Indians Morongo Band of Mission Indians Association of California School Administrators California School Board Association California State University Lottery Enterprises, Inc. WRITTEN COMMUNICATIONS: On file with Committee FISCAL COMMITTEE: Senate Appropriations * * * * * * * * * * SMH:bjw