Legislature(1995 - 1996)
02/19/1996 01:40 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL 307
"An Act prohibiting the sale of pull-tabs; and
providing for an effective date."
REPRESENTATIVE CYNTHIA TOOHEY, testified in support of HB
307 noting that the bill would simply prohibit politicians
and other political entities from receiving charitable
gaming proceeds. She said that no one should consider
politicians, or their attempts to influence the electoral
process, a legitimate use of charity money.
Representative Therriault MOVED that 9-LS1070\K, Luckhaupt,
2/7/96, be the version before the Committee. Representative
Brown OBJECTED for purposes of understanding how that
version differs from the prior versions of the bill. Co-
Chair Hanley explained that the original bill prohibited
pull tabs; the Judiciary version prohibited charitable
gaming except for raffles for political parties and
candidates; the Finance committee substitute prohibits all
charitable gaming including raffles.
Representative Toohey emphasized that politicians and
political parties should be removed from receiving any kind
of charitable money. Representative Brown asked
Representative Toohey if she continued to support the
original version of the legislation which excluded pull
tabs. Representative Toohey disagreed that was her intent.
Representative Brown removed her OBJECTION to adopting the
committee substitute. There being no further objection, CS
HB 307 (FIN) was adopted as the version before the
Committee.
DENNIS POSHARD, DIRECTOR, CHARITABLE GAMING DIVISION,
DEPARTMENT OF REVENUE, commented that the Department has not
taken a position on HB 307. He indicated that the
Legislature will need to make the policy calls regarding
that bill. He pointed out Departmental concerns of the
legislation.
1. The bill deals with campaign finance reform.
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Would the Department of Revenue be in charge of
policing campaign contributions. Could the
problem be better addressed through Title 15,
Alaska Public Offices Commission (APOC) statutes.
2. Will the legislation accomplish the intent. He
stressed that the contributions will not be
audited through the Department.
3. What would happen assuming a violation occurred.
The only recourse the Division would have, would
be to take action against the charity's permit.
There is no action or recourse that the Division
can take against the campaign or candidate that
receives that money.
Mr. Poshard reiterated that when a violation occurs, the
Division will take action against the charity's permit.
There will be no means of recourse against the candidate
that receive the money.
Mr. Poshard spoke to the advantages of placing the concern
under the jurisdiction of the Alaska Public Office
Commission (APOC). APOC has the expertise to deal with
campaign financing law. The Division does not have that
expertise, and it is not the focus of their program. Co-
Chair Hanley advised that the intent would be to prohibit
the contribution. Mr. Poshard reminded Committee members
that most of the groups included also report to APOC.
Representative Brown recommended that these concerns be
considered in the campaign finance reform and a rewrite of
the statutes.
Mr. Poshard explained that the Department has done extensive
research in how other organizations establish minimum
returns to the charity and minimum returns to the State.
The Administration is looking at ways to change how the
State initiates this action. Currently, there is a bill
being drafted which would increase the amount of revenue
received by the State and the charity and would streamline
the auditing procedures.
Representative Brown questioned the fundamental problem with
a political candidate receiving money from charitable
gaming, agreeing that it should be well regulated.
Representative Therriault asked if groups gathering money
for a political system are legitimate charities.
Mr. Poshard noted that a prohibition exists in using net
proceeds to pay a lobbyist. There is no prohibition against
a charitable organization to hire a lobbyist, but it is
illegal for them to pay the lobbyist from the net proceeds.
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Representative Toohey noted for the record that she has
received gaming contributions from pull tabs charities.
Representative Navarre elaborated on comments made by
Representative Martin pointing out that corruption in
politics goes far beyond contributions received from
charitable gaming. He voiced support for the original bill
over the committee substitute.
Representative Kohring mentioned that Alaska is the only
State which allows gaming proceeds to be used for political
contributions, and voiced concern for proceeds being used
for political purposes. Representative Toohey corrected
that few states do allow it.
Representative Brown inquired why the bill was drafted in
such a way that the sanction would affect only the "charity"
and not the candidate receiving the funding. Co-Chair
Hanley indicated that concern was addressed in the bill.
Representative Toohey pointed out that on Page 75, under the
Section "Elections", the statutes clarifies this issue. Mr.
Poshard stated that he did not know if the APOC statutes
contain a corresponding prohibition.
MARVEEN COGGINS, AID, REPRESENTATIVE CYNTHIA TOOHEY, agreed
that Alaska Legal Services specified that the candidate will
not be responsible but rather the contributor would be. She
suggested that language could be included stating that the
"candidate can not knowingly accept contributions that
constitute in whole or part the net proceeds of a charitable
gaming organization". Terry Cramer, Legal Services
attorney, recommended if that language was adopted, that it
be a new subsection to A.S. 15:17:070, labeled number (I).
(Tape Change, HFC 96-42, Side 2).
Co-Chair Hanley noted that he would oppose all the
amendments. They are not part of a comprehensive campaign
reform. Philosophically, he voiced a concern with gambling
money being used in politics. Representative Brown
countered that the likelihood of campaign reform is evident.
Representative Brown spoke to Amendment #1. [Attachment
their money was going. Mr. Poshard stated that it should
not be a problem for any business to comply with the
amendment. It would be easy to announce who would receive
the net proceeds from each evenings session.
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Representative Brown MOVED to adopt Amendment #1. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Brown, Grussendorf, Navarre, Therriault.
OPPOSED: Kelly, Kohring, Martin, Mulder, Parnell,
Hanley, Foster.
The MOTION FAILED (4-7).
Representative Brown MOVED to adopt Amendment #2.
[Attachment #2]. She noted that the amendment would
identify where the pull tab money would be going. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Grussendorf, Kelly, Navarre, Brown.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Foster, Hanley.
The MOTION FAILED (4-7).
Representative Brown MOVED to adopt Amendment #3 which would
adjust upward by 10%, the amount of adjusted gross income
that goes to charities from pull tab activity. [Attachment
comparison to other states in the percentage being donated
to charities. He stressed that only 8.7% is returned on
each dollar to the charity. Currently, some states
contribute up to 34% on bingo and pull tab dollars. Co-
Chair Hanley OBJECTED to adoption of Amendment #3.
A roll call was taken on the MOTION.
IN FAVOR: Kohring, Navarre, Brown, Grussendorf.
OPPOSED: Kelly, Martin, Mulder, Parnell,
Therriault, Hanley, Foster.
The MOTION FAILED (4-7).
Representative Brown spoke to Amendments 4, 5 & 6,
[Attachments 4,5 & 6], which address increasing the
operators license fee, the distributors license and the pull
tab manufactures license. Mr. Poshard commented that the
fees established have not been changed in a few years.
Gaming regulations are lower than other jurisdictions.
Representative Mulder questioned if the fees collected off-
set operations within the Department of Revenue. Mr.
Poshard replied, not entirely. A 3% pull tab tax and a 1%
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fee on the ideal net proceeds are also collected. Those
taxes, in addition to the fees, are double the annual
budget.
Representative Brown MOVED to adopt Amendment #4. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Kohring, Martin, Mulder, Parnell,
Therriault, Kelly, Foster, Hanley.
The MOTION FAILED (3-8).
Representative Brown WITHDREW Amendments #5 & #6. She spoke
to Amendment #7. [Attachment #7]. The amendment would
close a loop-hole in gaming activity. Mr. Poshard added
that there is a limit on bingo activity. More than $1000
dollars can not be given away on one activity or $5000
dollar per session. There is no statutory limitation on
pull tab prize pay-out. Mr. Poshard recommended limiting it
to $500 dollars.
Representative Brown MOVED to adopt Amendment #7. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown, Grussendorf.
OPPOSED: Martin, Mulder, Parnell, Therriault,
Kelly, Kohring, Hanley, Foster.
The MOTION FAILED (3-8).
Representative Brown explained Amendment #8. [Attachment
of charities which could participate. Currently, there are
more charities than operators available. Mr. Poshard
elaborated that a charity's maximum contract would be $500
thousand dollars annually. There are a number of charities
seeking to have the permit paid by an operator. Reducing
the amount would then force an operator to contract with a
greater number of charities to conduct activity. Co-Chair
Hanley questioned how many permits would be taken off the
market. Mr. Poshard responded that there are 24 political
groups who have permits.
Representative Navarre spoke against the amendment. He
thought that it would force more people moving to Multi
Benefit Permitees (MBP), thus reducing the number of slots
available. MBP's have a greater cap from which to operate.
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Mr. Poshard agreed with Representative Navarre.
Representative Brown asked if charities would be better off
with an operator or with a MBP. Mr. Poshard noted that the
rate of return would be higher with an MBP, although, they
would then be capable of contracting with only six. As an
operator, they would be able to contract with twelve. The
charity could make twice as much money under the MBP,
although only half the charities would receive benefit.
Representative Brown withdrew Amendment #8 as it was her
intention that the amendment benefit the charities.
Representative Brown explained Amendment #9 which would
increase the tax from 3% to 5% on the gross receipts plus
prizes awarded from the pull tabs. [Attachment #9]. She
noted that this would generate $800 thousand dollars in
program receipts annually to the general fund. Mr. Poshard
advised that increasing the tax would create new funds for
the State, a tax collected by the distributors and remitted
on a quarterly basis.
Following comments by Representative Martin, Representative
Brown suggested a change to delete the language in the
amendment "less prizes awarded". Mr. Poshard pointed out
with removal of that language, the tax would become much
more substantial. He voiced concern that the proposed
percentage would change the gross without also changing the
return to the permitees. That would dramatically decrease
their net proceeds.
Mr. Poshard added, that he would prefer a 5% tax on the
gross, changing how the charities receive their payment.
Currently, those conducting activity would be expending the
tax to the permitees.
(Tape Change, HFC 96-43, Side 1).
Representative Brown asked to replace the deleted language
with the language as originally written.
Representative Brown MOVED to adopt Amendment #9. Co-Chair
Hanley OBJECTED.
A roll call was taken on the MOTION.
IN FAVOR: Navarre, Brown.
OPPOSED: Mulder, Parnell, Therriault, Kelly,
Kohring, Martin, Foster, Hanley.
Representative Grussendorf was not present for the vote.
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The MOTION FAILED (2-8).
Representative Navarre MOVED to adopt Amendment #10.
[Attachment #10]. Representative Martin OBJECTED.
Representative Navarre pointed out that the amendment was a
portion of the bill which passed from Committee last year.
Currently, a municipal exemption has not been applied for,
resulting in MBP's doing the same thing as operators and
competing against small organizations, driving them out of
business. The amendment is an attempt to allow those
municipalities, if they choose, to regulate the level of
gaming in their communities.
A roll call was taken on the MOTION to adopt Amendment #10.
IN FAVOR: Navarre, Brown.
OPPOSED: Parnell, Therriault, Kelly, Kohring,
Martin, Mulder, Hanley, Foster.
Representative Grussendorf was not present for the vote.
The MOTION FAILED (2-8).
Representative Martin MOVED to report CS HB 307 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 307 (FIN) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Department of Revenue.
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