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. 8 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. 9 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. 10 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% 11 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. 12 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. 13 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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