Legislative Analyst's Office

Analysis of the 2002-03 Budget Bill

Department of Justice (0820)

Under the direction of the Attorney General, the Department of Justice (DOJ) enforces state laws, provides legal services to state and local agencies, and provides support services to local law enforcement agencies.

Budget Proposal

The budget proposes total expenditures of $620 million for support of the DOJ in the budget year. This amount is $29 million, or about 4 percent, less than estimated current-year expenditures. The requested amount includes $324 million from the General Fund (a decrease of $30 million, or 8.4 percent), $135 million from special funds, $28 million from federal funds, and $133 million from reimbursements.

Division of Gambling Control

Chapter 867, Statutes of 1997 (SB 8, Lockyer), established the Division of Gambling Control to enforce gambling regulations (mainly cardrooms) throughout the state. With the passage of Proposition 1A (March 2000), which legalized Las Vegas-style gaming on Indian lands, the division, along with the California Gambling Control Commission, assumed the state's regulatory responsibility for tribal gambling. For 2001-02, the division is authorized 158 enforcement agents, auditors, and support staff. Of these, approximately 67 positions are used to support cardroom regulatory actions with the remaining 91 positions engaged in tribal regulatory activities.

The budget proposes expenditures of $14.6 million for support of the Division of Gambling Control. This represents a $1.8 million, or 14 percent, increase over current-year spending. Almost 60 percent of the 2002-03 expenditures will come from the Indian Gaming Special Distribution Fund, and about 33 percent will be from the Gambling Control Fund. The remaining expenditures will be funded from fines, penalties, and reimbursements. Of the proposed increase, $1.3 million is requested to implement "License 2000," a data system to track the licensing of certain groups of individuals employed in, or connected to, gambling facilities.

The Division Is Slow in Processing Tribal Applications Of Key Personnel

We recommend the enactment of legislation requiring the division to complete the background reviews for tribal license applications within 180 days. Background reviews not completed within the 180 days should be forwarded to the Gambling Control Commission with an explanation as to why the review has not been completed.

The division is responsible for investigating the qualifications of individuals who, under current law, must apply for state (cardroom) or tribal (Indian casino) gambling licenses. These individuals include: (1) those who have a financial interest in the gambling establishment; (2) key employees of the gambling establishment, primarily management and those who handle money; (3) other employees of the gambling establishment; and (4) suppliers of gambling equipment and resources.

Background investigations for cardroom and tribal license applications are similar. A significant difference, however, is that during the background investigation process cardroom applicants do not work while awaiting approval of their application, but tribal employees may begin work immediately upon receiving a license from the tribal gaming agency. The agency then sends the employees' applications to the division for review of background checks. Upon completion of the review, the division forwards the applications to the Gambling Control Commission with recommendations for action. The commission may then notify the tribe of a "finding of unsuitability" for an applicant and request the employee be dismissed. However, up to that point the employee is allowed to work inside the gambling establishment.

Application Reviews Have Exceeded Normal Processing Time. The division began receiving applications from tribal gaming agencies in October 2000. The division received its first 16 applications for key employees by the end of December 2000, and an additional 137 by June 30, 2001. As of January 1, 2002, no completed tribal key employee applications with recommendations from the division have been delivered to the commission. The first 16 applications are now over 1 year old and have not been acted on by the commission. This means that tribal casinos have employed individuals in their casinos, whose background may ultimately be found to be unsuitable, for over a year without the commission being able to determine if they are suitable for employment in a gambling establishment.

For the current year, 245 license applications have been received to date. The division anticipates receipt of a substantial number of applications before the end of 2001-02 and the number to be even greater in 2002-03. The division estimates that for most license applications, it takes 25 hours or less to complete the background investigations. Some licenses, most notably those for suppliers of equipment and resources for casinos, may take up to 120 hours to complete.

Current law sets a limit on the length of time the division may take to complete the background investigations for state-licensed gaming (card room) employees at 180 days. Under current compacts between the state, the federal government, and gaming Indian tribes in the state, it is the role of the state to shield the tribes from "organized crime and other corrupting influences." We believe it is essential that the state process all gaming applications in a timely manner so as to ensure the protection of the tribes and gaming patrons from employees whose background may be found to be unsuitable. Accordingly, we recommend that the Legislature enact legislation to set a limit of 180 days for background investigations for tribal gaming employees. This would be consistent with current requirements regarding cardroom employee background checks. Further, we recommend that if the division has not completed its investigation within this time period, it turn over the application to the commission with an explanation as to why the investigation has not been completed.

Feasibility Study Report Must Complete Review Process

We withhold recommendation on $1.3 million and two permanent positions for the division and $73,000 for the California Gambling Control Commission (including $58,000 in Item 0855-001-0367 and $15,000 in Item 0855-001-0567) for the License 2000 database project until the Department of Information Technology and the Department of Finance have completed their reviews of the project's feasibility study report.

License 2000 is a database management system that will aid the division in tracking gaming license information. The database system is intended to support a variety of gambling oversight functions including: (1) background investigations for initial license applications and renewals; (2) enforcement and compliance activities; (3) audits; and (4) tracking gaming devices (slot machines) in gambling facilities. The system will also be used for division staff workload time and expense reporting. The division is requesting $1.3 million to develop and establish the database in 2002-03. In addition, the Gambling Control Commission has requested $73,000 to provide equipment and software that will allow it to access the database.

According to the division, the project feasibility study report has been submitted to the Department of Information Technology and the Department of Finance for review. Pending the completion of that review, we withhold recommendation on the request for the project's funding.

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