SB 1369: Act in haste, repent at leisure

SB 1369, which bans electronic bingo machines for fundraising, is a classic example of legislation that was not fully vetted in public, and put together by back room deals. In 2003, Governor Schwarzenegger pledged to veto these kinds of gut and amend bills that had not gone through the policy committees of both chambers, and for good reason. I and many others are hoping that he honors this commitment and vetoes SB 1369.

On behalf of many smaller charities throughout California, I hope that it is not too late.

In a mere 13 days, SB 1369, a school lunch program bill, was gutted and amended to benefit a powerful interest group. As a result, the legislation has become one of the Capitol’s most contentious and watched bills for pitting powerful gaming interests against hundreds of small charities. Nonprofits statewide depend on electronic bingo to finance critical programs. These charities include: Stanford Children’s Home, United Cerebral Palsy, Society for the Blind, Saddle Pals, Wounded Warriors Project, and WIND Youth Services.  

While the impact this bill will have on community-based charities is well-known — and should be enough to justify a veto on that argument alone — there are other lesser-known, long-term negative consequences hidden within SB 1369. One is the effect it will have on the California Lottery, and through that, on schools.

The lottery was originally intended as a financial resource for schools. Most recently, privatizing it was proposed as part of a solution to our state budget crisis, a situation that places ever greater pressure on charities to pick up where government has been forced to leave off.

While proponents of SB 1369 try to focus on the potential harm to the lottery they solve by removing the threat of a few hundred electronic games run by small charity organizations, there is no doubt that the rights granted by SB 1369 are far more threatening to the California Lottery. For one thing, SB 1369 opens a Pandora’s Box of unanticipated consequences. Its language could be read by many as triggering a re-interpretation of tribal compacts that could allow online gaming by existing casinos — or at the very least, their own online lotteries that would compete head-on with the State Lottery, itself legally prohibited to offer online play.

If this, as one of many unexplored consequences of SB 1369, comes true, online gaming will become more attractive, while the State Lottery will become less profitable —decreasing education funding and devaluing the lottery’s attractiveness for any private sector buyer, or for securitization by selling bonds in anticipation of future lottery revenues. Even at its most restricted interpretation, the implications of SB 1369 for the lottery are ominous. This includes its clearly stated intention to offer “Remote Caller Bingo” to large, statewide charities (shutting out smaller charities) and allowing them to offer “life-altering prizes”.

Essentially, this new form of remote caller bingo will cut into the Lottery’s profits and reduce the share of money directed to public education and diminish the value of the Lottery should it ever be privatized. It will also drive into extinction traditional paper/dauber Bingo for many other smaller community charities, leaving them with nothing other than bake sales and car washes to fund their good works.

Since the bill was never properly aired in public through the committee process, Californians will never know if by design, or mistake, SB 1369 will also lead to the expansion of gambling by activating provisions in federal law that will allow internet gaming in California.
Gov. Schwarzenegger needs to recognize SB 1369 for what it is and veto it as a last-minute rush job. If electronic bingo machines used by charities are such a high concern for the state, then at least legislators who are determined to outlaw them should be told to work within the process and do their job correctly. This reckless bill puts far too much at risk. It harms community charities, it threatens the viability of our state lottery and it leaves many unexplored ramifications for drastically altering gambling in California.

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