Legislature(2017 - 2018)ADAMS ROOM 519
04/09/2018 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB78 | |
| HB216 | |
| HB129 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 129 | TELECONFERENCED | |
| += | SB 107 | TELECONFERENCED | |
| += | SB 78 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 216 | TELECONFERENCED | |
CS FOR SENATE BILL NO. 78(FIN)
"An Act creating the education endowment fund and the
dividend raffle fund; authorizing donations from the
permanent fund dividend for educational purposes and
to enter the permanent fund dividend raffle; relating
to transfers from the dividend raffle fund and the
education endowment fund; relating to the duties of
the Department of Revenue; relating to the definition
of 'gambling'; and providing for an effective date."
9:08:16 AM
SENATOR CLICK BISHOP, SPONSOR, thanked the committee for
hearing the bill. He shared that his heart and soul were in
education and workforce development. He relayed that 120
testifiers had stressed that need for education funding and
the lack of the raise in the average daily memberships
(ADM). He hoped one day the bill would be fully funded and
would be injecting new money into education; supporting
Pre-K, workforce development, STEM programs, and others. He
believed that the bill was a vehicle that used the power of
earnings as a renewable resource to help fund education in
the state.
Representative Grenn asked about the number of participants
and the average donation. He referenced a sheet titled
"Random Sample at 50,000 Participants giving $200 each"
(copy on file). He wondered what data the expectation of
participation was based on.
PETE FELLMAN, STAFF, SENATOR CLICK BISHOP, he replied that
the Legislative Finance Division had created the models for
the legislation. He said that another model used 10,000
participants. There was no way to know the number of people
would choose to participate in the raffle. He stated that
roughly 400,000 adults received permanent fund dividends
but that it was unknown how many people would choose to
donate to education.
Representative Grenn wondered about a marketing number or
promotions amount to generate interest in the lottery.
Mr. Fellman pointed to administration cost on the
spreadsheet, which were solely from the lottery portion of
the donations; the program was self-funded. He said there
would be minimal start up costs. He stressed that the
program would be self-sustaining after the first year.
9:14:12 AM
Representative Grenn was looking for a promotion cost. He
noted that the Department of Revenue fiscal note reflected
a cost of $10,000 for FY 19, under "services." He
reiterated his desire to understand the costs associated
with promotions and advertising.
Mr. Fellman answered there would be a cost to put the
raffle on the webpage, but the cost was not expected to be
significant.
9:15:33 AM
AT EASE
9:16:33 AM
RECONVENED
Mr. Fellman would follow up with the startup advertising
cost. He noted there had been a fiscal note from the
previous year that had been updated.
Representative Guttenberg understood that the raffle would
be created under the assumption that the payouts would be
don automatically. He asked what part of the raffle money
was subject to legislative appropriation.
Mr. Fellman replied that a legal opinion had been drafted
that addressed the issue of appropriation. The opinion said
that because they were private donations donated for a
private purpose, a court could say that the donations had
to be used for the purpose donated - education and a
raffle. According to a March 31, 2017 legal opinion from
Legislative legal Services (copy on file) donations made
for a specific purpose had to be used for the purpose for
which they were donated. He said that this did not mean
that the legislature could not attempt to appropriate the
funds, but that doing so would be a bold step that could be
challenged in court.
9:20:26 AM
Representative Guttenberg maintained discomfort with the
issue.
Co-Chair Foster asked Mr. Fellman to review the changes in
the CS.
Mr. Fellman complied. The first change reduced the cap on
the lottery in order for money to be more quickly put into
education. The changes were on Page 5 and deleted $500
million and inserted $300 million. The Education Endowment
Fund at $300 million in order for the fund to grow at a
quicker rate. The second change, on Page 6, reduced the
payout percentage for prizes to allow more money to be put
forward for education. The change on Line 5 of the page
deleted 10 percent and inserted 8 percent; on line 7,
deleted 5 percent and inserted 4 percent; on Line 9,
deleted 3 percent and inserted 2 percent; on Line 11
deleted 2 percent and inserted 1 percent. He stressed that
the bill was an effort to set up a system for extra
education funding. The effective date had been changed on
page 6, line 14.
9:23:43 AM
Representative Guttenberg queried the assumptions that
showed how long it would take for the fund to reach $300
million.
Mr. Fellman replied there was no way to know how much money
would move until it hit the cap and they did not know how
long it would take to hit the cap. When the $300 million
was hit, everything above that amount in the raffle balance
would flow into the education endowment fund.
Representative Ortiz asked whether the changes in the
reduction of the percentage of payouts the were based on an
intuition that they could reduce the incentive to
participate. He asked if the sponsor assumed that
participants would be people who really wanted to donate to
education or people who were attracted to participating in
a game of chance.
Mr. Fellman responded that in modeling the program over a
ten-year timespan, there came a point once the cap was hit
of the possibility that more money could be paid out than
was being put in or that little would remaine in the
endowment. He said that the reduction would leave more
money in the raffle fund. He thought that the motivation
for playing the raffle was a moot point since the money
ultimately went to fund education. He reiterated that as
the program matured, money would be put into education
every year and a small percentage of the raffle fund would
be used to pay out prizes. He elaborated on the powerful
way that the multiplication of earnings on the endowment
would benefit education funding in the state.
9:28:34 AM
Representative Ortiz supported the bill. He thought that
the level of participation based on the reduced pay-out
should be considered.
Representative Wilson understood that participation in the
raffle was limited to the once a year dividend application.
Mr. Fellman answered in the affirmative. A participant had
to be 18 years of age and they could not use their
children's money to donate to the raffle. He added that
playing could only be done with PFD money and a person had
to be a resident. They could participate in $100
increments. Every $100 got a person one raffle ticket in
the bucket. They could use their entire PFD in $100
increments.
Representative Wilson recalled that the University of
Alaska had a raffle program.
Mr. Fellman answered that with the college fund a person
could donate and get a scholarship; another program put
their name in a raffle for a chance to double their
dividend. He agreed that there were similar programs
working in the state.
9:31:22 AM
Representative Wilson asked for examples in other locations
where lotteries had positively impacted education.
Mr. Fellman answered that many states were using lottery
money to help fund education. He said that the success rate
varied for different programs in different states. He
stated that some states used 70 percent of lottery money
for education funding, while other states supplemented
education funding with lottery monies. He said that it was
not a guarantee that the lottery money would not supplant
other general fund money, but some states had been able to
reduce the amount of state money that was put into
education because of lottery funding.
Co-Chair Seaton MOVED to ADOPT the proposed committee
substitute for SB 78, Work Draft 30-LS0534\Y (Martin,
3/14/18). There being NO OBJECTION, it was so ordered.
9:33:34 AM
Vice-Chair Gara believed Senator Bishop wanted more money
for education and job training. He had two concerns that he
believed could be addressed. If they wanted the money to
supplement education funding he thought it needed to be
addressed in the bill. He worried that the fund would
supplement general funds dollars, rather than increasing
education funding. He stressed the importance that donors
receive assurances that the money they donate will go to
increase education spending. He understood that no money
would go into education until the endowment reached $300
million.
9:35:52 AM
Mr. Fellman replied in the negative. He explained that
every year 50 percent of the raffle funds would go directly
to education; 25 percent of all donations would go into the
endowment fund and 25 percent would go into the raffle
fund. Everything above the $300 million cap would go
directly to the endowment.
Vice-Chair Gara reiterated his desire that language be
written into the bill that defined whether the fund would
be used as additional funding or supplemental funding.
Mr. Fellman answered that the money would go to education.
He said that he had no control over how the legislature
would appropriate to education in future operating budgets.
He said that the level of funding for education in the
future would be established by formulas in statute and the
choices made by the legislature. He stressed that the money
would help the state. He was not sure how guarunte4es could
be written into the language that funding for education
would increase as a result of the legislation.
Vice-Chair Gara agreed that it was not possible to bind
future legislatures. He thought that the legislature used
"may spend" language often and that a provision could be
written into the bill that distributed the raffle fuds
through the foundation formula. A future legislature could
decide to honor or not honor the decision. He wanted to let
people know that their money may only be going to supplant
other funding to education.
Mr. Fellman thought that the issue garnered further
discussion and believed that language could be crafted that
addressed the concern.
9:39:57 AM
Co-Chair Foster asked Mr. Fellman to review the sectional
analysis.
Mr. Fellman complied, stating that Section 1 amended
gambling laws. Section 2 gave priority over donations - if
people were donating to other things the raffle was at the
bottom of the priority list. Section 3 created the
endowment fund and the dividend raffle fund. The effective
date was January 1, 2019.
SB 78 was HEARD and HELD in committee for further
consideration.