Senate Extraordinary Committee on Rules

It's my mom's birthday today.

Oh, well, happy birthday. Please give her our best. Did you send her flowers?

I'd better. I sent her pictures of me.

Well, that's awkward. There we go.

Are we done?

But did you send a birthday present?

All of a sudden you're going to see his thumbs moving on, 1-800-Florists.

That is a hard no. There is no birthday flowers.

Sorry I interrupted.

Yes, I sent her a birthday present. It wasn't flowers. I sent. I sent her birthday. Yes, I sent her a birthday present.

Okay, let's move on, everybody. We love you, Jonesy. All right, we're gonna call this meeting to order. If we can please establish a quorum. Madam Secretary, please call the roll.

[Roll Call] Quorum.

Quorum has been established. Five Members are present. Senator Laird will need to be able to leave. If we are still in session for Senate rules, you'll need to be able to leave and then come back. And due to another meeting, it is a busy time of year.

Ladies and gentlemen, we're going to start with some administrative business. And to Ms. Baxter, we appreciate your patience. We will be right back with you. We're going to start with governor's appointees not required to appear. In front of us, it's 2B through I. 2B through I. We'd like to take two motions.

The first motion is going to be for the following: B, C, D, F, G, H, I. We'll take item E as a separate vote.

So moved.

We have a motion by Madam Vice Chair. Madam Secretary, can you please call the roll?

[Roll Call] 5-0

5-0 vote that.

Mr. Chair, I would move item 2E.

Thank you so much. A motion on the floor moving two E is Senator Laird. Madam Secretary, can you please call the roll?

[Roll Call] 3-2

3-2 vote. That motion passes. Thank you. Ladies and gentlemen, Committee, we're now going to be moving on to Bill referrals, item number three on our agenda. Is there a motion to approve? We have a motion by Majority Leader Gonzalez. Madam Secretary, can you please call the roll?

[Roll Call] 5-0

So moved.

So moved. So moved.

5-0 vote. That motion passes. Ladies and gentlemen, Committee, we're now moving on to Committee appointments. Is there a motion to approve?

So moved. Leader Jones, you're recognized.

Just a quick comment on the committees, and this is on me. I've been meaning to get back to the pro tem on the Committee assignments and recognizing that we have a special election, not all the Senate seats are filled at this point in time. We do have a vacancy.

Leader Jones, you're recognized.

I'll be looking forward to having additional conversations about Committee as we move forward and get that position filled.

No. Thank you so much, Leader Jones. Look forward to our conversation. Do appreciate you. We have a motion for approval. Comment by Leader Jones. Look forward to our conversation. Thank you, Leader Jones. Madam Secretary, can you please call the roll?

[Roll Call]. 5-0

5-0 vote. That motion passes. We are now moving on to item number five on our agenda, which is the weekly Committee schedule. Is there a motion? We have a motion by Majority Leader Gonzalez. Madam Secretary, can you please call the roll?

[Roll Call] 5-0

5-0 vote. That motion passes. Break out the calendars. Madam Secretary, we're looking at the holiday schedule. That's right. My goodness.

We go now. Okay.

There we go. All right. Nice. There we go. Do we have a motion on the holiday schedule? We have a motion by Madam Vice Chair. Madam Secretary, can you please call the roll?

[Roll Call] 5- 0.

5-0 vote.That motion passes. We're now moving on to item number 7, floor acknowledgments. I do have some concern because. Yes. About the other Cal Poly in the system, presentation by Senator Laird. But is there a motion for approval?

I have concerns about the individual requesting the floor. The floor presentation.

So moved. And I call the question.

Good times. Keeping it good. Good times. All right. We have a motion by Leader Jones on item number seven. Madam Secretary, can you please call the roll/

Seven through nine?

Yes. I apologize. Yes. 7, 8 and 9. Thank you.

[Roll Call] 5 to 0.

5-0 vote. That motion passes. We're now going to be moving back up to our agenda under governor's appointees. We're going to welcome Ms. Baxter to the table. We're going to take a 30 second break. Let her get settled and we'll be right back with you.

First of all, first of all, we want to take a moment to say thank you so much, Ms. Baxter, for your service to the people of California. We are grateful you're here. We're going to offer a three minute introduction. Please welcome any family and friends who may be here in person and or watching.

And then we're going to open it up after your opening statement to the Committee. Open it up for questions and comments. And again, we are grateful for your work on behalf of the people of California. The floor is yours. Three minutes.

Thank you. Good afternoon, Chair and Members of this Committee. It is simply an honor to be here before you today and to have been appointed by Governor Newsom to this position. This appointment is very meaningful to me. I am a proud career public servant going on 32 years with the State of California.

It is a privilege to work for the people of California and have a position that ultimately with the responsibility of protecting the people within our great state. For the past 12 and a half years, I have worked as a regulator in this industry.

For nearly nine years I was the California Gambling Control Executive Director and prior to that as the Assistant Director for the Bureau of Gambling Control within the Department of Justice. I have a vested interest in the continued success of this industry and the regulatory agencies that oversee it.

The expertise I have developed assist me daily as a Commissioner. The control gaming industry is a challenging and complex one. But I will continue to make decisions with an open mind, considering all stakeholder input and with facts and relevant laws and regulations as my guiding principles as I have throughout my career.

I would like to thank the hardworking staff of the Commission because they are truly small but mighty. And I would like to thank my family. My husband is here, Ian Baxter, right behind me, along with my mother, Tony Mclaughlin, also here.

And to my dad, who is watching Jim Mclaughlin and my daughter who is attending University in England, who says she's watching, but I'm not quite sure. But I want to thank them for always supporting me and being very understanding of the many long nights and weekends that have occurred during my career with the State of California.

So again, thank you for this opportunity and I welcome answering your questions.

Madam Commissioner, thank you. We're grateful that you're here. Your mom must be so proud and so wonderful to have your mom here and your husband as well. Thank you so much. We're going to open it up with Senator Laird. Floor is yours.

Thank you. Very much. And if your daughter's watching, it's midnight. So that I'll let you deal with it. Thank you for meeting with me. I really appreciated it and it was really educational.

And I think one of the interesting things, particularly with some people that submitted questions about things that might not be totally in your jurisdiction, I think there's a little misinformation about the role and the other Commission and how they relate, and I thought I'd just give you a chance to explain that.

I appreciate that. Senator Laird, that is often a point of confusion within our industry, even with the people that work in our industry. We have a bifurcated system for the regulatory agencies with the Bureau of Gambling Control being the enforcement and compliance arm, and we are the adjudicatory decision policy making body.

So there is often confusion about what our roles and responsibilities are. And there are things that do not lie within our jurisdiction as a Commission, but rather in the Bureau of Gambling Control's jurisdiction. So I appreciate that.

We also have done a lot of educational platforms to educate the industry and the Members of the public as to our bifurcated system and our individual roles and responsibilities. We have a lot of information on our website to help them with that and decipher who to contact when they have certain questions.

And maybe if you'd go just slightly deeper into it, like what it means to be regulatory or what it means to be operational. So people just have a vision of who does what.

Sure. So the process really starts with the Bureau of Gambling Control. So say you have an applicant that is looking to work within the card room or third party industry. They will submit an application to the Bureau of Gambling Control. And the Bureau of Gambling Control is the one that does the investigation.

They present their findings of their investigation to the Commission so that the Commission can review and decide whether or not the applicant is suitable to hold that license. And we are the body that issues that decision. But there are certain things that never make it to the Commission, such as gains approval that is not within our jurisdiction.

That is within the Bureau of Gambling Control's jurisdiction.

Okay, thank you. I really appreciate that.

Thank you.

And then just on one of the issues that we talked about a little, which is the issue of advertising. Yes. If you would talk about sort of, since you're dealing with that and maybe regulations, why that's important, what you're trying to limit, what you're trying to make sure people do. Right. Just talk about the issue of advertising.

Yes. Thank you. We do have a proposed regulation currently in play right now the public and the industry will get another look at that proposed language and have a 45 day comment period before it goes before the commissioners again.

But in high level summary, what that package does is it actually meets a requirement that the Commission has to promulgate regulations in the spirit of advertising to allow for the bureau of process to review and approve advertisement that's out there currently within the card room and third party industry.

What that package at a very high level does is defines what is deceptive advertising and what needs to be included in any sort of advertising that comes from this industry such as problem gambling statements and to also ensure that the advertisement is not appealing to underage gamblers as well.

Okay, thank you. I just make one comment and that is I teased the Kant for me when we started about how unique it is to move from the staff to an oversight position about whether she knew where the bodies were buried and she assured me there were no bodies.

But the thing that I was curious about is what it's like to move from that one side to the other. And I think this is a good thing. I don't think this is anybody that's doing anything but carrying the highest interests of the Department based on her experience into this position.

So I will be happy to support you and thank you for your willingness to serve.

Thank you.

Thank you so much. Senator Laird. Madam Vice Chair.

Thank you Mr. Chair. Thank you Madam for being here today. I appreciate it very much and I know that I supported you there last confirmation hearing that you had. I believe when you came before us or not. I have. This is my first. I appreciate your support again. Okay, well let's get there.

But I thought you were somebody on my notes. I have that. So I apologize for having misinformation and I apologize not having. When the Senate Pro Tem said that this has been like a two year session the last 30 days, it has been like a two year session.

So I do apologize for not having the opportunity to meet with you and ask you these questions. I do have some questions. I noticed in your, in the comments that you made when the Pro tem asked you to briefly introduce yourself. You talked about bipartisanship, you talked about engaging with stakeholders, being fair and balanced.

Not exactly those words, but that's what I got at it that you're looking at meeting with all stakeholders and making sure that all stakeholders are heard in this process. I take it from the questions that the former Chair of Natural Resources asked you, I'm assuming that's because that's a higher position than Senator.

So we use that in this Committee.

Here comes the oil and gas I was telling you about.

It's not associated. I do have a Gambling Casino who owns oil and gas and he may have questions for you, but not today. I guess some of the stuff that I got from community and from the input that came in from our consultants, there appears to be a little bit of a disconnect between some of the stakeholders that feel like when they challenge things that they're being either dismissed or maybe not so much dismissed.

But there's a feeling that if they arise or have a difference of opinion that they're not being heard. And some of the things that staff brought to me is like, you know, they challenged the fees. There were some fees that were challenged. And then come to find out there's $50 million in the Reserve for you guys. Is that not enough?

And some of the things that staff brought to me is like, you know, they challenged the fees. There were some fees that were challenged. And then come to find out there's $50 million in the Reserve for you guys. Is that not enough?

It looks like to me, based on the information I have, it's two years worth of your operating budget. And you know, is there a legit issue with an increase in fees when you have so much money in reserves? Not that I don't think you should have money in reserves, but I. What's the number that should be there?

I absolutely appreciate that question. Thank you, Senator Grove. With regards to the gambling control Fund, first off, that is a Fund that is actually monitored by the Department of Justice, not the Commission. But I do have direct knowledge upon the questions that you ask.

The Fund, if you actually look at the Fund based off of the proposed Governor's Budget that was just recently released, the Fund balance at the end of last fiscal year was actually only at a three month Reserve and the balance of that Fund was quite significant at some time.

And we actually went through an audit and they made recommended recommendations of how to reduce that Fund balance by doing an entire cost and fee analysis and restructuring our fees. So we actually have fees in place now to make sure that we do not have a surplus Fund in that Reserve.

And the reason why you're seeing the surplus that you are right now is because there was just a $45 million General Fund repayment. And that amount is actually earmarked for current settlement negotiations to go back out to the industry.

So while it might look like there's a significant surplus in that gambling control Fund, $45 million of that 47 million surplus is actually earmarked for a settlement negotiation. And so, we actually also took steps at the end of the audit and during early Covid years to secure a two year Fund.

I'm sorry, two year fee waiver for the industry, which also reduced the balance of the Gambling Control Fund.

Okay, no, thank you very much for that information. The other question I had that there are some concerns with the gambling control account, which is I think you addressed with Senator Laird. So just make sure that I understood that, that they're two separate things. Ex parte communications, things like that.

It was a memo that I issued.

There were questions about in 2023 as the role Executive Director, there was a stakeholder memo - is what I've been told, about prohibiting stakeholders from having any direct contact to commissioners citing a provision in the Gambling Control Act. Was that a memo that you issued?

Okay and can you tell me that there are concerns that this section prohibiting. I know there's concerns about ex parte communication which we, you know, all would make sure we would not want to happen. But the broader interpretation is it runs counter to the Bagley King Act. So. So I was wondering what your thoughts are on that.

And it does allow. That would allow the commissioners and Members to have discussions with Members of the public on non licensing matters. But I guess my understanding is that. And I could be wrong, but my understanding is that there's zero communication being able to be afforded to those that have issues.

Well, if I can elaborate on that letter that you are referencing, that was issued by me as an Executive Director and it was actually issued for several years prior to the one that you're likely referring to back in 2023.

That memo actually states that they are not to have communication directly with the commissioners with anything coming before the commissioners to take action on. It does not state anywhere that they are to not ever have any sort of communication with the commissioners.

But you also would have to question what else is there to communicate with the commissioners other than the items that are coming before them.

And so one of the policies and procedures that we actually put in place under being Executive Director was to really ensure that the communication went through the proper staff first so that all the commissioners received the same information about any issue that was coming before them.

Okay. No, I appreciate you clarifying that.

And I guess the last question that I think I have is is there some this long standing we dealt with 549 and all this stuff last year there's this long standing dispute between the state's card rooms and obviously our tribal indigenous populations here in the State of California regarding whether current card room operations violate state gambling laws.

And I guess, and again this is just my vague, uneducated understanding of the process. Those card Rooms, gaming operations are approved by the Division of the Department of Justice, right? No?

The investigations come from the Department of Justice and the the findings are forwarded to us. The Commission is the licensing issuing body.

Okay, so if you guys license a table game, you wouldn't ever license a table game for a card room that violates the ballot measure that was passed though, Right?

I apologize. Let me just clarify what I just said. Yes, the licenses that we issue are for the entities and the individuals working within those entities. When it comes to the games, the games are solely within the Department of Justice.

Got it. That's what I thought when I started out and you corrected me, so I thought, oh, I'm wrong.

No, I apologize.

No, it's all good. It's all good. I should be well versed on this stuff, and I'm not. It's a. I've never been, you know, a good gambler. So I apologize.

So I guess the, the Tribe successfully got with 549 the standing to be able to do this and the card room operations generally as well. They have active licenses. How would this impact the CGCC or the DOJ regulatory activities if you can't comment on DOJ and the cost of such activities?

I guess, if, like, are you guys going to go out and start acting on this or what's your thought process? What's your idea with your experience how this is all going to play out?

So whatever the result is from the litigation, the compliance and enforcement would be handled by the Bureau of Gambling Control. The Commission would actually have zero impact from the resulting litigation based off of SB549.

Okay. All right. Well, thank you very much. Thank you for being here. Thank you.

All right. Well, thank you very much. Thank you for being here. Thank you.

Thank you so much. Senator, we'd like to be able to look to other Senators for any questions or comments, please.

Thank you. And thank you so much for what you do. And I have for me personally about two and a half card rooms in my district between, you know, the Bell Gardens, Commerce and then on the border of Hawaiian Gardens. So similar to Senator Grove, not as well versed, but need to be.

And this is, you know, obviously still very new to many of us, but just trying to find the intermix.

And I think this is building off of what Senator Laird had mentioned on the difference between obviously the gambling control and DOJ with the Commission and specifically for the General understanding by employers and prospective employees about who is and who is not qualified to work in card rooms. I know that's mainly handled by the gaming Control.

But how are you working in relation with them on that specific issue and when proposed issues continue to arise?

When it comes to suitability decisions of individuals that work within card rooms or for the third party providers, the final decision does rest with the Commission and the bureau does the investigations and they will present their findings to us so that we can make our decisions based on their investigation.

Within our Gambling Control Act, there are various sections that define what are mandatory denials or what are discretionary denials or what the eligibility to hold such licenses are & how that's all outlined in terms of whether an individual is a person of good character, honesty or integrity.

And do you think at this time that the employer understands fully about this sort of intermix between both entities?

I think they definitely understand with regards to the licensing process for the entities or the individuals. Yes. They've all been through it a multitude of times with various applicants.

Okay, thank you. And then just one other question. I know you probably mentioned this before, but what actions can the Commission take on its own to give themselves more flexibility in the approval and denial of applications?

I think that when the Commission has seen opportunities to provide more flexibilities, we have done proposed legislation and sought out those flexibilities through legislation.

We just did a couple recently and were thankfully able to get some flexibilities within a recent Bill that was passed and that also provided some flexibilities to our industry Members as well in terms of like multiple licenses and being able to consolidate them if you do have multiple licenses without our industry instead of having a separate application and process for each one of them.

So we have sought out those legislative remedies for a couple recently.

Thank you.

Great. Thank you very much.

Thank you so much, Madam Majority Leader. Leader Jones.

Thank you, madam. Mr. Chair. Mr. Pro Tim, thank you. The Vice Chair did dig down on one of my questions on the on the surplus. So thank you for responding to that.

I wanted to kind of get a little bit more detail on the ex parte communication and the interaction between the commissioners and the industry. In lots of cases, lots of industries, there's functions, you know, professional education events, conferences, social gatherings.

In that can you kind of talk, is there interaction between the industry leaders and the commissioners in those type of situations?

We do, when we're able to, we do go out and visit card rooms, we try to take those opportunities to take at least two commissioners and we can't take more than two commissioners at one time because of ex parte violations and bag leaking.

So whenever we have that opportunity, we do try to go out to the actual card rooms as well as tribal casinos to meet with our industry Members and have discussions of what we can discuss. Again, nothing that's going to come before us for review or approval.

We also, the Commission in itself is taking a very active role in attempting to initiate additional training opportunities in person. Specifically because just me being past Executive Director, I know that that's extremely effective when we're in person and actually able to have that face to face dialogue with our industry members.

We also just recently in the past year did a forum where we invited various industry members to come and speak to us about any concerns that they have. In addition, we also have the Gaming Policy Advisory Committee where we have equal parts industry Members as well as public Members hat's another form in which they can bring discussions and ideas and possible solutions to us as a Commission.

That's another form in which they can bring discussions and ideas and possible solutions to us as a Commission.

So I mean, kind of the bottom line is you're not sequestered in a silo where people don't have access to you. It's seems like. Or that's kind of what I'm hearing.

We are not in a silo and we aren't locked up with a key or anything like that. And I think the industry takes every opportunity afforded to them to come and discuss matters with us in the public forum as well.

Okay. I represent several tribal areas and gaming and I've noticed some of them have. And I don't know if any in my area have done this, but several tribes throughout the state have now started applying to the Federal Government for their gaming regulations rather than the State Commission. I think the number is around 20%, maybe more.

Do you have some thoughts on that as to why the tribes are taking that seems like a. I don't know how extreme it is, but it's a pretty significant step to take that route then continue to work with the state. Do you have some thoughts on that?

I am not privy to those conversations. The Commission's not privy to those conversations. The negotiations between the tribes are solely between the governor's office and the tribal government. And I just don't have enough information to comment on that.

Okay. And just kind of final curiosity. I used to serve on a City Council and you know, moving from the Executive Director to the Commission is kind of like going from the city manager to the elected City Council position. I don't know if that would be peculiar, not unheard of.

So I was just wondering what created the situation. If you can share. You know, that seems. It's just interesting to me that that's a move that you're making.

Thank you. Honestly, it came down to I do have a lot of experience in this industry and I wanted to apply that in a decision making role. Okay.

All right, that's fair.Thank you.

Thank you. Thank you, Senator.

Thank you so much. Hey, see, there we go. There we go Oh alright, let's keep moving. All right. Would like to see if there's any additional questions or comments from the Committee at this time before we go to public comment. Hearing and seeing none, we'd like to be able to open up public comment. We're going to welcome any individual to be able to step forward.

That's all right. He wasn't at wcu. There we go. zero. All right, let's keep moving. All right. Would like to see if there's any additional questions or comments from the Committee at this time before we go to public comment. Here in C9, we'd like to be able to open up public comment. We're going to welcome any individual to be able to step forward.

zero. All right, let's keep moving. All right. Would like to see if there's any additional questions or comments from the Committee at this time before we go to public comment. Here in C9, we'd like to be able to open up public comment. We're going to welcome any individual to be able to step forward.

We're going to respectfully request that you provide us your first and last name. If you're with an organization this, that organization. You have 30 seconds and I'll give a prompt.

Good to see you, Senator. Thank you. Mr. Chair, Members, Jim Evans, former Senate staffer and former chair of the Gambling Control Commission when it hired Stacy to be the Executive Director. Very proud to say that I was the driving force and it was the best decision I made in five and a half years.

I was there easily and I was pushing her to be on this Commission when I left, actually. So that's getting to the question that Senator Jones had just really quickly.

Probably in my 20 plus years of state service, one of the most professional and public service oriented individuals I've ever met and has the added benefit of being one of the most qualified people ever to be appointed this Commission, including myself, which, you know, goes without saying.

And I would just say that, you know, kudos to the Governor for seeing that and his team to seek out somebody who's very well qualified for this. I urge your aye vote on her confirmation.

Thank you so much, Mr. Evans. Good to see you. Appreciate your testimony. We're going to welcome anyone else. Please step forward. We're taking comments in support. Comments in support. First, last name. If you're with an organization, if you could please state that affiliation. We're going to do a last call for those who are in support.

Seeing no one rise. We're now going to ask for anyone who would like to stand in opposition. If you could please come forward to the podium at this time. We're looking for folks in opposition. Seeing no one rise, we're going to bring it back to Committee Members.

We would like to be able to see if there is a motion or if any individual has any additional questions or comments. Madam Majority Leader, we have a motion. All right, Madam Majority Leader, we're good. Motion on the floor. Let's call the roll, please.

[Roll Call] 5-0.

5-0 vote. Congratulations, Mana. Commissioner. The next stop will be the Senate Floor for final. For final vote. We are grateful that you're here. Thank you so much for your continued work. On behalf of the people of the State of California.

Thank you.

Thank you. Congratulations. Thank you so much. Thank you. We're very grateful. And to mom and hubby. My goodness. Good stuff. It's good to see you. All right, ladies and gentlemen of Committee and to all those who are here in the hearing room, that concludes today's public portion of the agenda.

We truly appreciate folks who testified, everyone who is here in attendance. We are going to take a few minutes before we go into Executive session, and we'll be asking all folks, respectfully, respectfully, to please clear the room for Executive session. We'll be right back with you.