Colorado Legislative Council Staff
STATE
REVISED FISCAL NOTE
(Replaces Fiscal Note dated February 1, 1998)
TABOR Refund Impact
General Fund Revenue Impact
Cash Fund Revenue and Expenditure Impact
Cash Fund Exempt Expenditure Impact
Drafting Number: Prime Sponsor(s): |
LLS 98-306 Rep. Young Sen. Bishop |
Date: Bill Status: Fiscal Analyst: |
February 26, 1998 House Appropriations Harry Zeid (866-4753) |
TITLE: CONCERNING THE REGULATION OF GAMES OF CHANCE, AND MAKING AN APPROPRIATION IN CONNECTION THEREWITH.
Summary of Legislation
STATE FISCAL IMPACT SUMMARY |
FY 1998/99 |
FY 1999/2000 |
State Revenues General Fund Bingo-Raffle Enforcement Cash Fund Department of State Cash Fund |
Possible Fine Revenue $823,283* (823,283) |
Possible Fine Revenue $700,695* (700,695) |
State Expenditures General Fund Bingo-Raffle Enforcement Cash Fund** Department of Law*** Department of Personnel*** Department of State Cash Fund |
$743,115 21,120 5,071 (685,768) |
$611,672 21,120 5,071 (685,768) |
FTE Position Change**** |
(1.0 FTE) |
None |
Local Government Impact — None |
*The revenues identified above include indirect costs and other expenditure items not included in the State Expenditures section of the fiscal note.
**See the Omissions and Technical or Mechanical Defects section of the fiscal note for a description of possible additional expenditures by the Colorado Bureau of Investigation.
***The amount shown for the Department of Law and the Department of Personnel are included in the Bingo-Raffle Enforcement Cash Fund.
****The Department of Regulatory Agencies would require 9.0 additional FTE in FY 1998-99 and 10.0 FTE in FY 1999-00. There would be a reduction of 10.0 FTE at the Department of State. The net FTE position change would be a reduction of 1.0 FTE in FY 1998-99 and zero in FY 1999-00.
This bill would create the Division of Charitable Gaming in the Department of Regulatory Agencies. The responsibility for enforcement of laws relating to bingo and games of chance would be moved from the Department of State. The function of the Division would be to enforce Section 2 of Article XVIII of the State Constitution. Duties and powers of the Division Director and investigators of the Division are identified in the bill. The bill would also create the Colorado Charitable Gaming Control Commission to consist of seven members appointed by the Governor, with the consent and approval of the Senate. The Commission would promulgate rules and oversee the enforcement functions of the Division. Specific powers and duties of the commission, including the power to conduct criminal background checks of applicants for charitable gaming licenses and inspection of premises, books, and documents of applicants and licensees are identified in the bill. Commission members would receive $50 for each day spent in the conduct of Commission business, and would be reimbursed for necessary travel and other expenses incurred in the performance of their official duties. The maximum annual compensation for Commission members shall not exceed $10,000.
The bill authorizes the assessment of monetary fines, not to exceed $500 per violation for a bingo-raffle licensee and $1,000 per violation for any other licensee, for violation of the statutes governing bingo-raffle games and games of chance or of rules adopted relating to those statutes. All fines assessed would be payable to the State Treasurer and would be deposited in the state General Fund.
All fees collected by the licensing authority shall be credited to the Bingo-Raffle Licensing Cash Fund for the purposes of financing the licensing activities of the Secretary of State. All fees collected by the enforcement authority shall be credited to the Bingo-Raffle Enforcement Cash Fund for the purposes of financing the enforcement activities of the Division of Charitable Gaming. Both funds shall be subject to annual appropriation by the General Assembly. Fees would be established in amounts sufficient to ensure that the total revenue generated approximates the direct and indirect costs incurred by the respective authorities in carrying out their duties.
The bill contains an appropriation clause to the Department of Regulatory Agencies for allocation to the Division of Charitable Gaming, and a corresponding decrease in the appropriation to the Secretary of State for bingo raffle enforcement. The bill would become effective July 1, 1998.
State Revenues
General Fund Revenue. The bill authorizes the assessment of monetary fines, not to exceed $500 per violation for a bingo-raffle licensee and $1,000 per violation for any other licensee, for violation of the statutes governing bingo-raffle games and games of chance or of rules adopted relating to those statutes. All fines assessed would be payable to the State Treasurer and would be deposited in the state General Fund. The amount of potential fine revenue has not been determined.
Cash Fund Revenue. Administrative fees will be established for approximately 1,804 entities that will be overseen by the Division of Charitable Gaming in the Department of Regulatory Agencies. Fees will be deposited into the Bingo-Raffle Enforcement Cash Fund for the purposes of financing the enforcement activities of the Division. It is estimated that the cash fund will receive $823,283 in FY 1998-99, and $700,695 in FY 1999-00. The fees will be set at a level that will be sufficient to cover the direct and indirect expenses of the Division. See the Facts and Assumptions section below for a further explanation of the revenue impact of the bill.
TABOR Refund Impact
Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.
State Expenditures
Background. Under current law, bingo and raffles are administered by the Licensing Section of the Department of State (DOS). As a cash funded department, the DOS generates funds through the collection of fees. A November 1996 report of the State Auditor contained a performance audit of the Department of State, Bingo/Raffles Enforcement and Customer Service. Based on Department of State cash receipt records, analysis, and budget documents, the report identified total revenues of $1,380,000, including $1,189,000 in nonprofit fees; $150,000 in mfg/sup/agent fees; $38,000 in landlord fees; and $3,000 in miscellaneous revenues in FY 1995-96. Expenditures included $590,000 in direct costs, $360,000 in indirect costs, and $146,000 for a reversion allocation. Excess revenue was identified as $284,000.
Further analysis by the office of the State Auditor based on information contained in the FY 1996-97 budget request for DOS shows that the Department of State currently utilizes 11.5 FTE for licensing and enforcement of bingo and raffles. The analysis indicates that since Licensing is also responsible for other functions, $685,768 and 10.0 FTE is estimated to be a reasonable estimate of the direct costs for the Department of State related to enforcement of bingo and games of chance. This figure does not include $178,171 for the proportionate costs of administration allocated by DOS to Bingo/Raffles Enforcement and Customer Service since these items would remain at the Department of State.
Department of Regulatory Agencies. The Department of Regulatory Agencies has identified direct cost need for $743,115 and 9.0 FTE in FY 1998-99, and $611,672 and 10.0 FTE in FY 1999-00 in order to carry out the responsibilities for enforcement of laws relating to bingo and games of chance. Additional expenses of $80,168 in FY 1998-99 and $89,023 in FY 1999-00 will be incurred that would be included in the fee structure established by the Commission. A summary of expenditures for the Department of Regulatory Agencies is provided in Table 1.
Table 1. HB 98-1299 Department of Regulatory Agencies Summary of Expenditures |
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|
FY 1998-99 |
FY 1999-2000 |
Personal Services* Operating Expenses Travel Board Meetings Capital Outlay ADP Capital Outlay Legal Services Admin. Law Judges Centralized Data Processing Leased Space Vehicle Lease |
$487,476 23,204 22,500 21,384 68,511 57,396 21,120 5,071 1,800 18,933 15,720 |
$485,680 23,188 19,500 12,192 5,768 2,500 21,120 5,071 2,000 18,933 15,720 |
Total Expenses |
$743,115 |
$611,672 |
*A schedule of personal services by position is provided in the Assumptions Section.
Department of State. The Department of State has an administrative appropriation for FY 1997-98 of $3,802,310 and 71.0 FTE, cash funds. This amount is from fees, taxes and other sources of revenue collected by the Department. The November, 1996 Audit Report by the State Auditor shows that the Department of State Licensing Division utilizes 11.5 FTE for licensing and enforcement of bingo and raffles, including administration of charitable solicitations, credit service bonds, and public notaries. Data compiled by the State Auditor suggests that 1.5 FTE would be sufficient at DOS to review license applications for bingo licenses and to provide administrative functions related to issuing licenses. Moving the responsibility for enforcement of laws relating to bingo and games of chance to the Department of Regulatory Agencies should result in a reduction in the budget of the Department of State by $685,768 and 10.0 FTE (see the Facts and Assumptions section below)
Expenditures Not Included
Pursuant to the Joint Budget Committee’s budget policies, the following expenditures have not been included in this fiscal note:
• health and life insurance costs; $20,115
• short-term disability costs; $860
• indirect costs; $57,177
• workers’ compensation; $1,161
• risk management $855
Fee Impact on Individuals, Families or Business
Pursuant to Section 2-2-322, C.R.S., which requires legislative service agency review of legislative measures which include the creation or increase of any fee collected by a state agency, the following analysis is provided. License fees will be determined by the Colorado Charitable Gaming Control Commission after the transfer of authority occurs based on the cost structure that is established to operate the Division. The new fee structure will affect approximately 1,574 bingo/raffle licenses, 62 landlord licenses, 15 manufacturer licenses, 15 manufacturer admin. licenses, 32 manufacturer’s agent licenses, 15 supplier licenses; 15 supplier’s admin. licenses, and 76 supplier’s agent licenses.
Spending Authority
The fiscal note would imply that the Department of Regulatory Agencies would require a cash fund appropriation from the Bingo-Raffle Enforcement Cash Fund in the amount of $743,115 and 9.0 FTE in FY 1998-99 for allocation to the Division of Charitable Gaming in order to implement the provisions of the bill. Of this amount, the Department of Law would require $21,120 cash fund exempt, and the Department of Personnel would require $5,071 cash fund exempt. The Department of State would require a decrease of $685,768 and 10.0 FTE in the Secretary of State Cash Fund.
Departments Contacted
Secretary of State Regulatory Agencies State Auditor
The Department of State indicates that it presently allocates 8.0 FTE to the functions that would be transferred to the Department of Regulatory Agencies, and that personal services costs for these employees are $426,487. The Department of State has identified a total of $487,117 and 8.0 FTE as the total amount that it believes should be reduced from its budget related to the transfer of this function. These figures conflict with the estimates provided by the State Auditor.
Omissions and Technical or Mechanical Defects
The bill specifies that the Colorado Charitable Gaming Control Commission will have the power to enter into agreements with the Colorado Bureau of Investigation (CBI) and state and local law enforcement agencies for the purpose of performing criminal background investigations and criminal records checks on applicants applying for licensure and for the investigation of violations of bingo statutes or any rule of the Commission. The Commission may enter into agreements with the CBI to conduct criminal background investigations, but it is not required. Since the bill is permissive in this regard, and the level of the investigations will be determined in the future by the Colorado Charitable Gaming Control Commission, the potential costs for CBI to perform investigations has not been included in the fiscal note. Depending on the level of involvement requested of the CBI, the costs could be significant. For example, CBI indicates that if 40 complete background investigations are required annually, the cost would be $223,580 and 3.0 FTE. This assumes 2.0 Criminal Investigator II and 1.0 Program Specialist II, and that each investigation will require two weeks to complete. This indicates a cost per investigation averaging $5,590.
FACTS AND ASSUMPTIONS
Assumptions
1. That the Secretary of State will retain the authority to issue Bingo/Raffle licenses to qualified non-profit organizations. All other licensing and enforcement authority will be transferred to the Division of Charitable Gaming or the Colorado Charitable Gaming Control Commission.
2. That the Licensing Authority will retain 1.5 FTE to administratively issue Bingo/Raffle licenses.
3. That the Division of Charitable Gaming will require 9.0 FTE in FY 1998-99, and 10.0 FTE in FY 1999-00 to implement the enforcement authority required by the bill. A summary of personal services requirements for the Department of Regulatory Agencies is shown in the table below.
HB 98-1299 Department of Regulatory Agencies Personal Services Summary |
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|
FY 1998-99 |
FY 1999-2000 |
Compliance Investigator I (5.0/5.0)* Auditor I (1.0/1.0) Auditor II (1.0/1.0) Administrative Assistant III (1.0/1.0) Administrative Assistant II (0.0/1.0)) Management Group 12 Profile (1.0/1.0) Medicare and PERA Expenses Contract Computer Programmer |
$240,540 30,348 40,656 33,456 0 64,452 53,024 25,000 |
$240,540 30,348 40,656 33,456 20,544 64,452 55,684 --- |
Total Personal Services Expenses (9.0/10.0) |
$487,476 |
$485,680 |
*The number of annual FTE are shown in parentheses.
4. That the Secretary of State will retain the authority to issue Bingo/Raffle Licenses to qualified non-profit organizations. All other licensing and enforcement authority is the responsibility of the Division of Charitable Gaming.
5. That the Division will process quarterly reports from 15 manufacturer licensees, 15 supplier licensees, and 1,574 bingo/raffle licensees.
6. That all fees and fines will be determined by rule of the Commission. Based on 1996 figures, fees will be collected from approximately 1,804 entities.
7. That it will be the responsibility of the Commission to determine and establish which violations are punishable by fine, and the levels of those fines. The amount of fine revenue cannot be determined at this time.
8. That license fees will be determined by the Colorado Charitable Gaming Control Commission after the transfer of authority occurs. Fees would be established for approximately 1,574 bingo/raffle licensees, 62 landlord licensees, 15 manufacturer licensees, 15 manufacturer admin. licensees, 32 manufacturer’s agent licensees, 15 supplier licensees; 15 supplier’s admin. licensees, and 76 supplier’s agent licensees.
9. That the annual reduction of the budget of the Department of State as a result of the bill is shown in the table below.
HB 98-1299 Department of State Bingo Enforcement Budget Estimates |
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|
FY 1998-99 |
FY 1999-2000 |
Investigator II (1.0/1.0) Investigator I (5.0/5.0)* Auditor I (1.0/1.0) Administrative Assistant III (2.0/2.0) Administrative Assistant II (1.0/1.0) Medicare and PERA, etc. Operating and Travel Other Expenses** |
$55,680 238,752 38,791 62,790 25,305 57,044 45,620 161,786 |
$55,680 238,752 38,791 62,790 25,305 57,044 45,620 161,786 |
Total Personal Services Expenses (10.0/10.0) |
$685,768 |
$685,768 |
*The number of annual FTE are shown in parentheses.
**Includes a proration of budgeted items for legal services, administrative law judges, computer services, leased space, risk management, and workers compensation.