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ARIZONA STATE LEGISLATURE
Forty-ninth Legislature – First Regular Session
SENATE JUDICIARY AND HOUSE OF REPRESENTATIVES JUDICIARY
COMMITTEE OF REFERENCE
FOR THE SUNSET HEARING OF THE ARIZONA DEPARTMENT OF GAMING
Minutes of Interim Meeting
House Hearing Room 5 -- 10:00 a.m.
Co-Chairman Ash called the meeting to order at 10:08 a.m. and attendance was noted by the secretary.
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Senator John Huppenthal, Co-Chairman |
Representative Cecil Ash, Co-Chairman |
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Senator Chuck Gray |
Representative Adam Driggs |
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Representative Steve Montenegro |
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Representative Anna Tovar |
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Senator Ken Cheuvront |
Representative Ben Miranda |
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Senator Richard Miranda |
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Senator Russell Pearce |
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Opening Remarks
Stacey Weltsch, House Judiciary Analyst, explained that the mission of the Department of Gaming is to protect the public, ensure compliance with the Gaming Compact and regulate the gaming industry. The last Sunset hearing for this agency was held in 1999 and the Legislature passed a bill to continue the Department for 10 years. The termination date of the Department of Gaming is July 1, 2010.
Arizona Department of Gaming
Mark Brnovich, Director, Arizona Department of Gaming (Department), thanked the Co-Chairmen and Members for the opportunity to present information on gambling and gaming in Arizona. He opined that the Department is not a proponent of the gambling or casino industry and explained that the Department’s function is to ensure that the Tribal State Gaming Compacts (Compacts) are complied with and well regulated in Arizona. He presented a power point on The History of Gaming and explained that history has shown that when gaming and gambling are not well regulated, serious social costs and criminal activity occur. The Department enforces fair and honest gaming activity, maintains the integrity of these operations and protects the public’s health, safety and welfare.
Co-Chairman Huppenthal commented that the public’s changed perception of gambling could be a sign of an unhealthy infection of the popular culture.
Mr. Brnovich emphasized that the purpose of this presentation was to put into context society’s current relationship with gambling compared to where it was in its early days. The Department’s primary focus is that gambling be well regulated. He reviewed the history of gambling and its place in present day.
Co-Chairman Huppenthal stated that humanity is partial to games of chance. Games in popular culture like football and basketball are games of chance in that no matter how skilled a team is there is always a chance that another team can win. What makes a game exciting is the combination of skill and chance. He continued that hunting is like a game of chance – you can fail over and over again, but in the end it is profitable. Gambling is designed to be unprofitable. It is destructive and takes advantage of man’s human nature. In no way should society create a positive moral foundation for gambling.
Co-Chairman Ash concurred with Co-Chairman Huppenthal and informed the Committee that Mr. Brnovich was asked to present a study of history of gambling and how it arrived at its popularity today.
Senator Gray suggested that the presented history might be one-sided. There has been no mention of states or cities that have abolished gambling for society’s benefit. He asked for an accurate history. Co-Chairman Ash reiterated the purpose of the background that was being presented.
Mr. Brnovich continued with the presentation, stating that as its popularity grew, gambling, a cash-intensive industry, attracted more and more corruption which produced a public backlash. An example of this occurred in 1823 when a federal lottery found its organizers taking all the money and cheating all the people out of their winnings. The Supreme Court ordered Congress to pay the winners of that lottery. With the influx of criminals, communities took the law into their own hands which caused such chaos that by the late 1870’s Louisiana was the only state that had a lottery. Ultimately two Supreme Court cases resulted in the prohibition of lotteries by the federal government. By the 1930’s gambling was illegal in most states and was largely frowned upon by the public due to its negative influences, including political corruption.
Representative Montenegro asked a question regarding a Supreme Court ruling in California about state regulation. Mr. Brnovich explained that a state can regulate an activity but cannot prohibit a tribe from doing that same activity. For example if a state allows Class 3 gambling like lotteries, it cannot prohibit tribes from running other Class 3 gambling activities. He continued that most Indian law is controlled by the Federal government and the Indian Regulatory Act states that if a state authorizes forms of Class 3 gaming it must negotiate with tribes to allow them to do the same types of gaming. In response to a follow-up question, Mr. Brnovich confirmed that a state can prohibit gambling if it passed legislation. Discussion ensued on the passing of Proposition 202 in 2002 that set in state statute by voter initiative the authorization of the Tribal Compacts for the next 20 years.
Mr. Brnovich explained that the Indian Regulatory Act was designed to promote tribal economic development, self sufficiency and support tribal government. It also provides that revenue can only be used for certain purposes like the support of tribal operations and the promotion of tribal economic development. It does not allow states to tax tribal gaming. He submitted that the money is designed to promote tribal welfare. He reminded the committee that Proposition 202 was designed to enhance the regulatory structure in Arizona and money would be allocated to address problem gambling. Mr. Brnovich summarized the role of the Compacts which includes the fair and honest operation of gaming activities, maintaining the integrity of gaming and protecting the health, safety and welfare of the community.
Mr. Brnovich reviewed various duties within the Department which all emphasize the safety and welfare of the industry and community. He added that the Office of Problem Gambling provides effective support for the prevention, treatment and education of problem gambling.
In discussing the current dip in casino revenues, Senator Gray suggested that with the proliferation of casinos a point of saturation has been reached and casinos are now taking business from each other. Mr. Brnovich concurred and added that the current economic status is also a factor.
In response to Representative Montenegro’s question, Mr. Brnovich cited Exodus as the first mention of gambling in the Bible and added that he is not suggesting that it is a positive reference there or anywhere else in the Bible. His point is to show the struggle with gambling by mankind.
Mr. Brnovich explained to Senator Gray and the Members that the Department’s primary function relates to the Compacts and has limited authority over other gambling entities like horse tracks and the lottery, which have their own regulatory commission.
Senator Gray asked if Mr. Brnovich has an opinion on consolidating the different commissions in these budgetary times and if there might be any loopholes in the hiring process of the Department that might allow criminals to infiltrate the system. Mr. Brnovich stated that his primary concern is that the Department maintain its role as an individual regulator of Gaming. He does not want the background checks and certification of vendors to be compromised and stated that the Department would not assume a role in promoting or encouraging gambling. He continued that he would like to work with legislators on the issues. The Department is also working on proposals with the Governor’s Office to ensure checks and balances. Discussion ensued regarding the standards set in the Compacts for hiring employees.
Representative Montenegro asked about a tribe in the West Valley that is proposing to build a casino on land purchased initially for business use in the middle of a community. Mr. Brnovich replied that the Department is a regulatory agency and does not have jurisdiction over this development. There are several tribes opposed to this plan as well as the City of Glendale but it is a federal issue and it will be up to the Department of Interior to decide the allowance of the Tohono O’odham Nation to use that land for gambling. He explained that the Compacts’ provisions must be complied with by the tribes, but if the Federal government grants them the land there is nothing the Department can do.
In response to Senator Gray’s question, Mr. Brnovich stated that the Department will have full regulatory authority over the casino if it is built and the Compacts would apply.
Discussion ensued regarding gaming revenue, the National Indian Gaming Commission and the inspection of slot machines. Mr. Brnovich submitted that random inspections of these devices are enough of a deterrent to possible manipulations of the machines. This is a proactive function.
In response to a question from Co-Chairman Ash, referring to page 8 of the Arizona Department of Gaming Annual Report 2009 (Attachment 1), Mr. Brnovich explained that gaming devices pay out 80 percent of the profits and the house keeps 20 percent. In response to another question, Mr. Brnovich stated that two percent of casino winnings are used to fund the help line for problem gamblers and treatment providers. Co-Chairman Ash asked if there is organized crime in Arizona gaming. Mr. Brnovich opined that as a result of the vigorous regulatory structure of the Department there is not organized crime in Arizona but acknowledged that criminals are attracted to cash-intensive industries.
Mr. Brnovich explained to Co-Chairman Ash that the Department’s budget is determined by the Legislature and is subject to Legislative oversight. The funds come from travel revenue and are consistent with salaries in other state agencies.
Senator Gray asked about background checks for employees other than the certified police officers and if a system is in place to ensure conformity. Mr. Brnovich confirmed that all employees submit to fingerprinting and background investigations, including past employment, criminal records, present and past associates and references. Discussion ensued on the process of internal audits and the accountability of the auditing teams.
Co-Chairman Huppenthal moved that the Committee of Reference recommend that the Department of Gaming be continued for ten years. The motion carried by a roll call vote of 6-0-0-4 (Attachment 2).
Without objection, the meeting adjourned at 11:31 a.m.
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Sarah Griffith, Committee Secretary
December 2, 2009
(Original minutes, attachments and audio on file in the Chief Clerk’s Office; video archives available at http://www.azleg.gov)
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COR-SENATE JUD AND HOUSE JUD
2
November 10, 2009
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