Senate Standing Committee on Governmental Organization

Good morning and welcome. Committee on Governmental Organization for the California State Senate will come to order. This morning.

We have an informational hearing that will cover amendments to three tribal compacts and one new compact. Just a reminder to members and those that may be observing the hearing or participating in the hearing, this is an information only hearing.

We'll have a presentation from the governor's office, questions from Members. We will take public comment. If in fact there are members of the public that want to question or comment on the compacts.

Three of the four before us will be consolidated under a bill for the chair's authorship. There will be no vote taken by the Committee.

Again, this is an information only hearing. Bill will be amended with implementing language. Once it moves off the informational hearing, go to the Assembly floor and back to the Senate Floor for a vote. So appreciate everybody's participation this morning.

First one that we will take up is the compact between the state and the Cher-Ae Heights Indian Community of Trinidad Rancheria.

Appreciate everybody's participation this morning. I'd like to welcome Matthew Lee, senior advisor for tribal negotiations, office of Governor Gavin Newsom. Welcome.

Good morning. Thank you very much, Mr. Chairman, honorable Members, thank you very much for having me here.

Honored to be here and want to wish a warm welcome to representatives of tribal governments and also to other members of the public.

Just to sort of set the table for all four compacts that this Committee is going to be hearing about this morning. These are Tribal State Class 3 gaming compacts under a federal statute called the Indian Gaming Regulatory Act.

That federal statute sets up a cooperative framework where state governments and tribal governments negotiate with each other in good faith in an effort to establish these compacts, essentially quasi contractual agreements to regulate certain forms of gaming. We can't just include anything in those compacts. There's a list of topics within igra, a list of seven topics.

And in General, a good rule of thumb is to be fair game to negotiate over in a compact. Topic has to be directly related to Class 3 gaming.

If the state and the tribal government fail to agree to a compact, the tribe is able to sue the state in federal court and argue that we have failed to discharge our duty under federal law to negotiate in good faith.

If the court ultimately agrees with that, and one way that they can agree with that is if we have bargained for something that is too far afield from the topics that we're allowed to bargain for under igra.

If a court ultimately agrees that that we have failed to bargain in good faith, the state can lose its regulatory role. Can Lose its ability to bargain for a compact at all, and the tribe can ultimately have its Class 3 gaming activities regulated directly by the Federal Government. I'm very pleased to say that that didn't happen here.

I'm very grateful to the Sherry Heights Indian Community of Trinidad Rancheria for the comp compact we've been able to agree to in this case after extensive negotiations. It's consistent with the state's other recent compacts. The tribe would be allowed to operate up to 1200 gaming devices at up to three facilities.

There are sort of standard revenue terms to defray the state's own regulatory cost, something called the special distribution fund. There are also revenue contributions to an impact mitigation fund if the tribe operates more than 350 devices to defray impacts to local governments and so on.

There are terms to protect workers, terms concerning state minimum wage, harassment, discrimination, retaliation, a tribal labor relations ordinance addressing collective bargaining, so broadly consistent with the state's other recent compacts. A few minor differences here and there. There was a term in the tribe's existing compact that allowed it to use international or model or universal building codes.

Retained that term after extensive negotiation, so broadly consistent with the state's existing compacts. Very grateful to the tribe for having concluded this agreement here.

Thank you very much, Mr. Lee, for your and the administration's work. Could you also maybe briefly comment on the decision in Chicken Ranch? Absolutely.

It may affect the framework of the negotiations. I'm very glad you asked. So, as we were saying a moment ago, under igra, under this federal statute that these compacts are negotiated for under, there is a list of seven topics that we are allowed to bargain for. IGRA is a relatively unusual and a relatively novel federal statute.

And for complicated procedural reasons, it is not often the subject of litigation outside of California. So there have not been that many big precedential federal court cases fleshing out what IGRA actually means in its details.

One of the few cases was decided just a couple years ago called Chicken Ranch, after the a tribal government that sued the state, arguing that we had failed to bargain in good faith.

And in that case, the federal courts ultimately agreed because the state, as the federal courts came to interpret igra, the state had bargained far outside that list of seven permissible topics.

And in particular, the specific topics that the courts called out as problematic for the state to have sought to include in its compacts were broad environmental review provisions, similar to CEQA for any environmental impacts tied to the tribe's gaming facility, which was also very broadly defined.

Similarly, very broad requirements Regarding how tribes provided tort protections similar to the tort protections of California State law to people coming onto tribal land, the courts didn't say we couldn't bargain for tort protections at all. But the tort protections at issue in Chicken Ranch and prior compacts were overbroad.

We also used to bargain for a term requiring tribal government to enforce state court child and spousal support orders. And the federal courts told us that that was out of bounds.

So what you'll see in this compact and what you'll see in a few moments in some of the amendments that are up for consideration today is we no longer bargain for those off list prohibited terms under Chicken Ranch.

And we are in fact working to take some of our older pre Chicken Ranch compacts and update them in a way that is consistent with Chicken Ranch. And of course not to derail us too much.

I don't think it will surprise this body that the state and its fellow sovereigns, the tribes, sometimes disagree about exactly what Chicken Ranch means.

So there have been cases since Chicken Ranch in which the state has wound up in new litigation about the precise contours of Chicken Ranch and how it applies to new compacts or to other compact terms.

So with that as our backdrop, I am especially pleased that we've been able to reach the compacts and the compact amendments that we have here today.

Thank you very much, Mr. Lee. Are there questions on the compact? Mr. Lee? Thank you so very much. Are there any Members of public like to address the Committee? I'm sorry, one quick question, Senator Archuleta.

The extension of one year, is that why such a short time.

On the Picayune Chukchanti extension? And I'm very glad you asked about that. That is in a slightly different posture than the other compacts and compact amendments before this body today in Picayune specifically, that's a case where unfortunately, after extensive negotiations, the parties ultimately weren't able to reach an agreement.

And there is ongoing, an ongoing lawsuit between Picayune and the state. While that lawsuit plays out, you know, we are not interested in jamming the tribe or jamming the federal court. We think our case on the merits is strong and we intend to win that case on the merits.

So to allow that case to play out in an orderly way that doesn't jam our counterparty, doesn't jam the federal court. Our practice has been to continue to agree to these sort of rolling one year extensions to preserve the status quo while that lawsuit proceeds. Thank you, Mr. Chair.

Thank you, Senator. We did get a little bit ahead ourselves, but we cleaned up a little bit while we're at it. I don't see anyone from the General public wanting to comment on Shirai on Trinidad.

So we will conclude the hearing with respect to that and we will take up Picayune, which is a Fourth Amendment to that compact. And Mr. Lee, did you want to more broadly address this, provide any additional testimony on that?

Yes, absolutely. Absolutely. Mr. Chairman, just to be clear for the record, when I was speaking a moment ago about the situation in which unfortunately the state and the tribal government reached impasse and there's been resulting litigation and we've been extending a pre existing compact to maintain the status quo while that lawsuit proceeds.

That's this, this compact amendment here. The only other thing that you'll see in this compact amendment is a standard form to also allow the tribe to engage in off track wagering. As to horse racing, that's a standard term in many of our compacts. We don't see a reason not to do it here.

Thank you, Mr. Lee. I'd like to also welcome Michael Wynn who is a tribal secretary and at Picayune Rancheria. Welcome Sir.

Thank you very much. Addressed briefly just in our our native tongue, Hili Hili Hale Homa Hoya Wish Nim. Michael Wynn Nimchon Picayune Rancheria the Chukchansi Indians Yate Nomin. Greetings Chairman Padilla and Members of the Committee. My name is Michael Wynn.

I'm the tribal council secretary as stated for picking reentry of the churchhandsee Indians, a sovereign nation located within the exterior boundaries of California.

I'm humbled and blessed by the people that I serve to stand before you sitting in this venue and express the deep gratitude and humble respect that I have for the Indian Gaming Regulatory act that was already outlined by the state. That was much appreciated.

This promotes the framework for self determination under IGRA which allows tribes the opportunity to govern themselves with dollars that they do not have right to tax. As state governments and Federal Governments have right to taxation to provide the necessary funding to govern and fund themselves. Tribes do not have that opportunity.

And so IGRA came about and we're grateful to work with the Federal Government and the state on a collaborative effort to bring forward this compact amendment at this time that will continue to provide for. We've got roughly 1,200 employees at the casino. About 90, about 92 to 95% are non tribal.

So definitely support to the local and California economy and we're definitely appreciative of the work that we've been through with the governor's office as well as the lawmakers in California and our continued efforts since 1999 when these discussions began. I wanted to touch basely base on the funding sources.

A lot of people seem to have a view that gaming tribes in California is about money and greed. And we've heard that term used a lot. And I appreciate that the state has not entered into that political realm.

But to touch base on what the tribe does with the revenues that are received under IGRAN would perform a lot of services to our tribal Members, which was a previously underserved, impoverished community, which is what brought about IGRA in 1988.

Thankful to some of the tribes down south that were working hard for the very same reason as to provide funding sources for an underserved community which happens to also be a sovereign nation. And I think that is another thing that is sometimes misunderstood.

That although Indians in California are California residents and citizens, they are members of a sovereign nation. So this is kind of a neat opportunity as to have sovereignty of the Federal Government, sovereignty of the state government as well as sovereignty of tribes all working together for the betterment of all three entities.

This continued compact extension or this bill would provide continued tribal revenues that support critical programs such as scholarships, mental health support programs, Boys and Girls club, a first ever language and culture restoration program. Revitalization as I like to term it. Because the unfortunate circumstances that the tribe has faced in the past in its relationship with California.

We are working together with California and we appreciate that support of IGRA to help provide the tribe with its necessary revenues to rebuild its past and its history. We also provide housing assistance to a previously underserved and impoverished community. Elder care services.

We have been able to provide health care for our tribal elders, which is a neat opportunity. Individuals of the tribe who are typically on because of their financial situation where on state care are now have that opportunity to be provided health care through the tribe and is a top notch service that we're able to provide.

So it helps the California community as well. Again, there's roughly 1500 jobs that are provided under this compact extension that would remaining continuity. We also support our local governments in providing annual funding that goes to help pay for emergency services. So it goes to the county sheriff's Department as well as CAL FIRE also.

I just wanted to thank the state on behalf of the tribe for the giving opportunity. We know it's IGRA law, but state still has some right to exercise its sovereignty. And we just really appreciate the opportunity to work together and we hope that we can come to an agreement in the future for that.

We don't need to come back for a compact extension in the future. And I just wanted again, thank the body existing and the California law legislation for working with the tribe on this very important project.

Thank you. Thank you very. Thank you. Secretary Wynn. Honored by your presence. Are there questions regarding this amendment? Question if not. Question. All right.

Thank you. Mr. Chair. Are you a Member of Sinaga?

Yes, ma'am.

Okay. So I also wanted to note for the record that tribal Members that are a part of Sinaga also put into a fund for other tribes that do not have the benefit of the casinos to assist them in their livelihood and housing and medical needs and so on.

So I just wanted to make sure people understood that, as the Secretary noted, you know, people have their own perceptions, but they have no idea to the degree that assistance is provided. So I just wanted to make sure people were aware of that for tribal communities that have casinos and those that do not.

Thank you, Senator Richards. Senator Archuleta.

Yeah, I would just like to thank the Secretary for coming. And over the years, I've noticed and heard more and more how the tribes are sharing, number one, but how important.

The mental health segment that you provide, the clinics that you've established, the firefighting equipment that you provide, the housing, obviously working within the community and not hoarding what you receive, but sharing what you receive and crossing the line into the local economies, which is so very important. And also the fact that you.

So with law enforcement, working very closely with them, so there aren't any activities at the casinos that would be detrimental to your status, your license, and negotiations for the future. So I want to commend that and the casinos that I visited, top notch, well run, clean, and certainly customer oriented. And I appreciate that.

And I just want to put that out there for the record. Thank you. Thank you.

All right. Thank you for that, Senator. I don't see any members of the public wishing to provide public comments. So thank you again, Secretary. Appreciate your work in this. And we will then conclude the hearing with respect to that amendment. We'll take up the first amendment to the compact between the state and Panola Valiant, California.

Mr. Lee, thank you again, Mr. Chairman. This compact amendment is a great example of the thing we were talking about a moment ago in terms of updating old compacts in light of intervening developments, as especially intervening legal developments like the Ninth Circuit's decision in Chicken Ranch.

This compact was originally negotiated, I believe, in 2011, took effect in 2012, and a lot has changed in the legal landscape and also just in terms of what the state would include in a compact. Since then, the tribe, as I understand it, has never gamed under this compact.

It has yet to build a gaming facility or do the other practical things that one needs to do to actually operate a casino. But it is getting closer than ever.

And as the tribe does get closer, we're very grateful to the tribe for coming back to us in a spirit of collaboration and pointing out that this old now 14 year old compact had some terms in it that wouldn't pass muster in a compact being negotiated today and that frankly the state wouldn't bargain for today.

And so in that spirit we updated those four Chicken Ranch terms that I mentioned. We narrowed the definition of gaming facility, we narrowed the the scope of the compacts torts coverage. We eliminated the requirement to conduct environmental review and we eliminated the requirement to enforce state court orders regarding child and spousal support.

All of those four changes we believe are, you know, flow directly from Chicken Ranch, are consistent with Chicken Ranch. In addition to that, we update updated the compact's revenue terms. Back when this compact was originally negotiated, the state took a very broad approach to revenue sharing.

And the compact as it was originally bargained for required just flat revenue sharing based on a percentage of net win. That's not the approach we take today. To echo a point that the tribal secretary for PICU made a moment ago. As a general matter, states don't have the power to tax their fellow governments, the tribes.

And although states can defray their regulatory expenses and there are limited circumstances under which revenue sharing is permissible, we have to be careful to make sure that we are actually staying within those limits.

And so to make sure we are staying within those limits to today we have a separate special distribution fund which is aimed chiefly at defraying the state's regulatory costs. We have an impact mitigation fund that is a separate concept for defraying local impacts.

And then there is the revenue sharing trust Fund which is pure revenue sharing with non gaming and limited gaming tribes. So consistent with that more granular, more specific, more sort of carefully tailored approach, we updated the revenue terms in this compact to be consistent with the position that the state takes in its compact today.

Because of the number of devices that the compact authorizes, which is under 1200, I believe it's still 900 unchanged. There is no revenue sharing trust Fund obligation in this compact. There is a limited impact mitigation Fund obligation if the tribe operates more than 350 devices which is that fairly standard. Term.

And then there is also that regulatory cost defraying, special distribution Fund. So those are the updates we made to this compact. All very much in line with the state's other recent compacts. And just to flag one other very technical update to reflect the state's growing, I think, appreciation and respect and regard for tribal sovereignty.

The fact that when we sit across the table from a tribe, we really are sitting across the table from a fellow government. There was one technical term that we made sure to update to, to treat tribal governments in the same way that we treat state and local and Federal Governments.

So, very grateful to the tribe for its spirit of collaboration and engagement. Very grateful for the opportunity to update that compact to match the current State of our compacts and federal law.

Thank you very much, Mr. Lee. And you basically answered the questions I had, particularly with respect to alignment with Chicken Ranch and with respect to gaming status. So appreciate those comments. Are there questions on this from Members, Senator Blakespear?

Yes, thank you. I appreciate the information here. Could you just come up a little bit of a level and summarize the situation with revenue sharing in a bigger picture way so I can understand that a little bit better?

Absolutely, Senator. So the. So I think there are three things to watch. The first thing to watch is that as a starting point, states do not have the power to tax a tribal government.

So anything that looks like a tax, any, you know, the kind of tax that the state can levy against, you know, non tribal businesses, businesses that are directly subject to state sovereignty and regulatory control, we can't tax tribal governments in that same way.

What we can do is under the federal statute that regulates tribal gaming, the state is allowed to recover its own costs associated with that regulatory framework. And separately, the state is also in limited circumstances.

The short version is that if the state offers a tribal government a meaningful concession and the sort of paradigmatic, you know, classic meaningful concession that the state has offered tribal governments in California. California is exclusivity, an exclusive right to offer certain forms of Class 3 gaming, most notably slot machines.

Only tribal governments in California can operate slot machines. And in exchange for that exclusive right or some other meaningful concession like that, it is permissible for a tribe to agree to share revenue. So it's not something that we can extract coercively. It's not something that we can.

Sorry, I'm just going to interrupt you to get more directly at what I'm interested in. So I get all that. Conceptually, I'm more interested in the actual numbers. Like what? Can you provide some understanding of the numbers themselves.

Oh, yeah, absolutely. So three buckets. There's that revenue sharing trust fund that isn't at issue here. That's revenue sharing based on a percentage of net win with tribes that either don't game or that only offer limited forms of gaming. Not an issue in this compact.

There's the special distribution fund, which is chiefly aimed at defraying the state's regulatory costs. That's based on a pro rata share formula, which is basically the number of gaming devices, meaning slot machines operated by a specific tribe, divided by the total number of gaming devices in the state.

That number varies, but off the top of my head, I want to say it's about 450 per device, but don't quote me on that. I'd have to run that number down based on last year's numbers. $450 it costs per machine, I believe. So I can certainly check that figure if you like.

Okay.

Yeah. I guess I was more interested in understanding the amount coming in and then the amount that we are able to defray. So. So like you're talking about the pro rata share formula, defraying the regulatory costs. What, the actual amount of money. Not amount that the machine costs, but the amount of money.

So the amount that a tribe pays is based on a formula tied to the number of gaming devices that it operates. Every year, the Legislature makes an appropriation for regulatory costs associated with tribal gaming.

And that appropriation, which is typically in the ballpark of $30 million, sometimes as high as $40 million, that appropriation is divvied up amongst the gaming tribes according to the number of gaming devices they operate.

Okay. That I understand what they give.

Yeah, I'm not fully following what. Because it gets to the. I was understanding that these devices produce money because people are gambling using them, and then there's money that comes back to the state to defray the cost that we're spending.

So it seems like what you're saying is that we're giving money, but I was thinking more that we're getting money back.

So can you try to get at quantifying and what metrics we use to satisfy whether or not there's a recovery here in terms of state costs and how that plays into the distinctive sovereignty question?

Thank you, Chair. That's what I'm getting at. That helps. Thank you. That does help.

Thank you, Mr. Lee. Yeah, absolutely. And the special distribution fund payment that I am trying to describe, that's a payment made by the tribe to. To the state based on the number of devices that the tribe operates.

And the number of devices that the tribe operates is significant because that's a proxy for the proportionate share of each tribes of the regulatory cost that each tribe imposes on the state's, the state's regulators based on the size of its gaming operation.

I don't know if there's somebody else who can answer this question or maybe, or maybe I just need a private briefing or something, but I'm not sure if you're just not going into the actual numbers enough for this to be helpful.

I'm very sorry to hear that, Senator. Very happy to offer a private briefing. Is there a specific number you're looking for?

Well, I think as the chair just stated. Do you want to restate your question about.

I think the Senator is trying to get at is having a clearer understanding because these dynamics sometimes are particular to the compact. And then there's a broader question about the state's policy of how we justify or quantify recovery in quotes in light of the jurisdictional distinctions and in light of federal preemption.

Those are very good questions from the state's lens. I think if there's something that's more appropriate for an in person briefing, I know that yourself and, or I think the chief consultant, Mr. Lopez, has offered that as well. Is that, is that accurate?

Yeah, I mean, just as this is an oversight hearing, to me it seems like we should be able to have this understanding and I don't feel that we do. So that's why I would like to elicit it in a public way.

But if we're not, if we're not really able to get that information either because you don't have it or you're not able to summarize it, then maybe we could get it privately.

I'm very sorry, Senator. What information haven't I shared that would be helpful right now?

Well, do you have like actual numbers? 30 million, 100 million. 1/3 cost recovery equals this amount like the actual number.

I am happy to follow up with the numbers based on this year's appropriation. That number does shift on the so every year the Legislature makes an appropriation of between 30 and 40 $1.0 million and then that amount is divvied up amongst the tribes. So happy to run down specific numbers. Okay, I'll yield back to the chair.

Thank you, Senator. I think questions are spot on. I'm reminded by the chief consultant. I think what the center is getting at is she's looking for quantification of sourcing from the tribe and how we account for that with Respect to recovery of. Of state costs. If you don't have those numbers in front of you, it's understood.

I think the center is looking to get an understanding of what that looks like compact by compact, and I know we can easily get that data. Absolutely. So thank you. Are there other members who have questions on this particular amendment with respect to Pinoleville? All right. I don't see.

I don't see any members of the public who want to provide comment on this particular amendment. So we'll conclude on that matter and move to the first amendment, to the compact between the state and Sequan Band of Kumeyaay. And please proceed, Mr. Lee.

Thank you again, Mr. Chairman. This is another compact amendment that I'm very pleased to have been able to reach in light of the ninth Circuit's decision in Chicken Ranch, makes those same post. Chicken Ranch changes that we've already discussed in terms of torts, family law, environmental review, the definition of gaming facility.

In addition to that, recognizing that the state has, in other circumstances, wound up in litigation with similarly situated tribes, we were able to avoid litigation here. Both sides were able to reach a mutually beneficial understanding as to certain other terms.

The state and tribe agreed that the existing compact, which is now 10 years old, would be extended for an additional 10 years. The tribe agreed not to sue to challenge certain provisions of the compact, certain definitions, and also those revenue terms that we've been discussing.

And the state also agreed that, and this is a very common term in our more recent compacts, that in the event that the state legalized new forms of gaming, that we would come to the table and bargain in good faith over those new forms of gaming, all consistent with what we've done in our other compacts, all consistent with Chicken Ranch, and resolves a potential disagreement that had come up between the tribe and the state after Chicken Ranch.

And we're very grateful to the tribe for working through that.

Thank you very much, Mr. Lee. And sort of relevantly, there are provisions in this amendment that prohibit either party from challenging revenue provisions. You want to expand on that a little bit?

Yes. So one of the disagreements that has arisen between the state and certain tribal governments after Chicken Ranch goes to the validity of these revenue sharing provisions that we've been discussing.

Precisely because the state is not able to tax tribal governments, the state's position has been that the revenue provisions that we've been discussing, the special distribution fund, the impact mitigation fund, the revenue sharing trust Fund, that those are all that those have been permissible under IGRA and that they remain so after Chicken Ranch, we have seen litigation from tribes who take a different view.

We are very pleased and grateful that the tribal government here was willing to agree that it would not bring that kind of lawsuit against us in exchange for the deal that we were able to reach here to resolve this potential dispute.

Thank you very much. I understand that Chair Martinez is scheduled to join us remotely, is that correct? Can we set that up? Bring in the Chair.

Good morning, Mr. Chairman and fellow Members of the Senate Go Committee. My name is Cody Martinez. I'm the elected Chairman of the Suquan Band of the Kumia Nation here in eastern San Diego County.

I'd like to take the time this morning to thank Senator Padilla for his support and also thank Mr. Lee and also other Members of the Governor's office for holding a series of proactive conversations and negotiations to get us here to this point. Sequan is very happy with the outcome of this amendment process for our compact.

It'll allow us to continue to operate a well regulated casino operation. Operation for many more years into the future. This November 23, Saquon celebrates 42 years of Indian gaming here in Southern California. We truly feel that we are a model of the ultimate intent of the Indian Gaming Regulatory Act.

As was mentioned by a previous tribal leader, Sequan celebrates that we employ over 3,000 team members, the large majority of which are non Indian. And we were able to provide highly competitive paying jobs with superior benefits.

And we look forward with a solid, strong compact and the support from the Legislature to be able to do this for many more years into the future.

So again, we'd like to thank Members of the GEO Committee for their support and the governor's office and Mr. Matt Lee for summarizing a lot of the core components of our amended compact. And thank you all for your time this morning.

Thank you, Mr. Chairman, for joining us this morning. Are there questions for Members of the Committee on the First Amendment to this compact? All right, thank you Mr. Chairman, for joining us. I don't see any Members of the public who want to provide public comment.

So that would conclude the information hearing on this matter without any further business. Senate Committee on Governmental Organization will. I'm sorry, Senator Richardson, you are recognized.

I'm sorry, Mr. Chair. I just wanted to follow up on the question of our colleague. Did I understand you to say that the gentleman from the Administration would provide us with background information?

You know, I don't know if it's annual report or what you would call it, but I would just suggest maybe for the last two or three years, as some of us are newer Members on the Committee, and it might be helpful to see has there been growth or, you know, get more of a true State of the financial situation regarding the compound.

Mr. Lee? Yes, absolutely. Those. Those funds are administered by the Gambling Control Commission. I'm happy to go work with the Commission to pull those numbers and provide them to Committee staff.

Great. And the chief consultant also indicates that we can. Committee staff can provide that information as well. All right. With that, the Committee will adjourn. Thank you all for your participation. Thank you.