Legislature(1993 - 1994)
05/11/1993 09:30 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 168(FIN) am:
An Act establishing a testing program for charitable
gaming permittees and operators; relating to the duties
of a member in charge; requiring regulations relating
to pull-tabs to be consistent with North American
Gaming Regulators Association standards on pull-tabs to
the extent permitted by charitable gaming laws;
allowing permittees to contract with vendors to sell
pull-tabs on behalf of the permittee at an
establishment holding a package store license and
certain establishments holding a beverage dispensary
license; allowing municipalities to prohibit vendors
from conducting gaming activities within the
municipality; restricting the purchase of pull-tabs by
permittees, licensees, and vendors and their owners,
managers, and employees; requiring receipts before
prizes of $50 or more may be awarded in pull-tab games;
prohibiting distributors from supplying pull-tabs to
vendors; relating to the distribution of pull-tabs from
one distributor to another distributor; requiring the
registration of vendors and regulating activities
involving them; requiring the licensing of out-of-state
pull-tab manufacturers and increasing the annual
licensing fee for pull-tab manufacturers; requiring the
department regulating charitable gaming to approve
contracts between permittees and operators before
gaming may occur; preventing persons with felony
convictions or convictions for crimes involving theft
or dishonesty or a violation of gambling laws from
being involved in charitable gaming activities as a
permittee, licensee, vendor, person responsible for the
operation of an activity, fund raiser or consultant of
a licensee or vendor, or employee in a managerial or
supervisory capacity, and providing exceptions for
certain persons whose convictions are at least 10 years
old and are not for violation of an unclassified felony
described in AS 11, a class A felony, or extortion;
relating to multiple-beneficiary charitable gaming
permits and door prizes for charitable gaming;
requiring operators to pay permittees at least 30
percent of the adjusted gross income from a pull-tab
activity and limiting operators to expenses of not more
than 70 percent of the adjusted gross income from that
activity; requiring operators to pay permittees at
least 10 percent of the adjusted gross income from a
charitable gaming activity other than pull-tabs and
limiting operators to expenses of not more than 90
percent of the adjusted gross income from that
activity; requiring a permittee who uses a pull-tab
vendor to enter into a contract with that vendor;
requiring a vendor contracting with a permittee to pay
the permittee at least 70 percent of the ideal net for
each pull-tab series delivered to the vendor by the
permittee; requiring that operators report an adjusted
gross income of at least 15 percent of gross income;
allowing the commissioner regulating charitable gaming
to issue orders prohibiting violations of state gaming
laws; relating to the authority of the commissioner
regulating charitable gaming to suspend or revoke a
permit, license, or registration; prohibiting the
payment of any portion of the net proceeds of a bingo
or pull-tab game to a registered lobbyist; providing a
penalty for false statements in gaming license
applications; providing communities with the authority
by local option election to prohibit charitable gaming
within the community; and providing for an effective
date.
CO-CHAIR DRUE PEARCE announced that CSHB 168(FIN) am was
before the committee. She said that the Senate's gaming
legislation, SB 76 would probably not leave House Finance.
She invited John Hansen, Jr., Gaming Manager, Department of
Commerce & Economic Development to join the members at the
table and speak to CSHB 168(FIN) am.
JOHN HANSEN, JR. said that he would review the differences
between SB 76 and CSHB 168(FIN) am. He said that the house
version eliminates the use of net proceeds of bingo or pull
tabs to pay a lobbyist. He said vendor and vendor locations
were the same as in SB 76 except the percentage going to the
permittees was raised to 70 percent. The number of
locations a permittee can use is limited to five. In regard
to those percentages being returned to permittees that use
operators, the only change is the amount will be annualized.
The permittee will use 30 percent on pull tab activity and
10 percent on all other activity on an annual basis. If an
operator has a bad quarter, they could pay 20 percent in one
quarter and 40 percent in the next quarter, and would be in
compliance with the law.
Mr. Hansen went on to say that out-of-state pull tab
manufacturers' licensing fee has been raised from $500 to
$2500. He said he saw no problem in raising the fee for the
ten licensed manufacturers in the country. Another option,
is that local municipalities or villages under the same
ordinances that allow them to prohibit liquor, could also
prohibit pull tabs or gambling entirely. In addition, the
members in charge of these organizations must take a
competency test on the responsibilities and financial
aspects of gaming activities.
SENATOR JAY KERTTULA said that a senator who had
constituents in the bush questioned the new test
requirements. He voiced his concern that the test might be
too difficult for some constituents.
Mr. Hansen said that the test would be no more difficult
than filling out a financial statement. He felt some
individuals in these organizations were in charge of multi-
million dollar gaming enterprise and the need for a test was
imperative. He explained it would be a written examination
that spoke to the responsibili-ties of the organization,
need for a separate gaming account, filling out a financial
statement, and understanding the basics of the financial
statement like gross receipts and deductible taxes. He saw
the test as, not a restriction, but as an educational tool.
If the individual would fail the test, he/she could retake
it. Discussion followed between Senator Kerttula and Mr.
Hansen regarding the concept of the test. Mr. Hansen said
that the effective date of the new legislation is 1995
allowing the department time to provide training in these
areas.
SENATOR GEORGE JACKO asked questions regarding the testing
location. Mr. Hansen said that it could be done by mail
through the department. Mr. Hansen said that the fiscal
note would provide funding for several positions. One of
those positions would be used to train, educate, and
administrator this test. Travel would be provided for
training the organizations. Senator Jacko voiced his
opposition to the test.
SENATOR TIM KELLY asked if the test was given four times a
year would the individual have to take it that often. Mr.
Hansen said the member in charge would only be required to
pass the test once.
Mr. Hansen continued testimony on CSHB 168(FIN)am. He said
it provided for the distribution of pull tabs from one
distributor to another allowing smaller distributors in
Alaska to take advantage of a discount from an in-state
distributor rather than being forced to buy from an out-of-
state distributor. This bill would also raise the legal age
of a pull tab player from 19 to 21.
SENATOR BERT SHARP voiced his opposition to CSHB 168(FIN)am.
He said that by raising the percent paid to permittees to 70
percent, it would make permittees option to go to a vendor
almost nonexistent. Or at least reduce the number of
vendors willing to go that percent and would force them into
an operator situation. The operator only has to pay them 30
percent. He felt that it channeled more money to the
operators than to the charitable organizations. He said
that he felt this legislation allowed big time gambling to
thrive on the charitable permittees.
PAUL FUHS, Commissioner, Department of Commerce & Economic
Development, said that when vendors were originally
considered a few years ago, the percentage was 75 percent.
He said that there was little difference between the
operator and the vendor. There had been talk that this is a
gaming expansion bill. He felt that it was not, and that
this bill would shift a bigger percent of the money to
charities. He explained that the only difference between an
operator and vendor is that the operator has to pay for a
sublet space. The vendor has already paid all its overhead
expenses.
Senator Sharp agreed but said that this bill would force the
charitable organization to accept the overhead of the
operators. If, in fact, the vendors cannot afford to have
the operator fronting the 70 percent, big time operators
would be the only ones available.
Senator Rieger asked for clarification regarding the section
on felons being prohibited from gaming. Mr. Hansen said
that under current law, a person that committed a
misdemeanor was banned for life from gaming. Under this
bill, if ten years had elapsed, the person who committed the
misdemeanor could be considered as an employee. Discussion
was had between Mr. Hansen and Senator Rieger regarding this
issue. Co-chair Pearce said that legal services had drafted
and redrafted this legislation to make these issues clear.
Senator Kelly asked if there were any gaming activities that
could go directly or indirectly to lobbyists under this
legislation. Mr. Fuhs said that the only thing that changed
from the Senate bill was that paper raffles would be
allowed. Co-chair Pearce pointed out that was the only way
organizations like Alaska Women's Lobby and the
Environmental Lobby could pay salaries to their employees.
She said that it had never been the intention of the
legislation to prohibit paper raffles.
Senator Kerttula asked Commissioner Fuhs if he supported
CSHB 168(FIN) am. Commissioner Fuhs answered affirmatively.
Senator Kerttula asked him if the administration would
attempt to eliminate pull tabs. Commissioner Fuhs said that
he didn't know if the courts would support the decision to
eliminate pull tabs.
End SFC-93 #74, Side 1
Begin SFC-93 #74, Side 2
Commissioner Fuhs said that this bill at least offered more
moneys to charities. He thought the legislature should
propose a separate bill to do away with pull tabs.
Commissioner Fuhs said that the Governor did not support
gaming.
Co-chair Pearce asked Representative Moses, sponsor of HB
168, if he would like to testify. He declined. She asked
Senator Donley if he would like to testify on CSHB 168(FIN)
am.
SENATOR DAVE DONLEY said he would like to speak to his
concerns regarding CSHB 168(FIN) am. He said that he
supported the Department allowing the flexibility to
increase the fees up from the statutory minimum. Since it
is not an option under the title of this bill, he said he'd
like to explore ways to maximize return to the charities.
As far as the 70 percent being too high, he felt that was
not true. He said he took a different position than Senator
Sharp regarding the 70 percent. He stated that the
Commissioner had pointed out that the liquor industry had
formally agreed to a 75 percent level and were even paying
expenses. Not only is the percent lower in this bill but
the charities have to pay for the pull tabs, taxes and the
permit for the bar which drops the 70 percent much lower.
He said gaming was extraordinarily profitable. He said
under present regulations there is no ability for bartenders
to sell pull tabs. This bill allows employees of the bar to
sell pull tabs. He voiced his concern regarding this issue.
Senator Donley also voiced his concern that it was not
difficult to become an operator. He said several larger
bars have become operators and handle gambling in their
bars. The intent was not to make it difficult to become an
operator. He supported this legislation in that it provides
that vendors pay the charities up front. He felt this was a
good step towards better accountability. He spoke in
support of CSHB 168(FIN) am but was concerned with the
connection between alcohol and gambling. He reiterated his
concern that charities would have to pay expenses for the
vendors. He again proposed that the Commissioner be given
the authority to raise the percent for charities by later
legislation.
Co-chair Pearce asked Senator Donley if he was concerned
about the connection of political contributions to gaming.
Senator Donley said that he had voted in support of the
Senate bill that did prohibit political contributions from
gaming. He said that he felt it targeted certain
individuals and political motivation had been the reason it
was prohibited, but overall he thought it was a good policy
decision.
Senator Sharp asked what the percentage of the total gross
was on the average operator for all the permits and fees.
Commissioner Fuhs said that if the permittees run their own
permits they pay back about 40 percent, showing expenses to
be 60 percent. Operators run about 23 percent and can go as
low as 15 percent. Senator Sharp asked again what the taxes
and the permits that Senator Donley referred to that the
permittee would have to pay to a vendor. Commissioner Fuhs
said that it was about 10 percent and 3 percent for taxes
for pull tabs. This would be subtracted from their 70
percent leaving them a net of 57 percent, compared to 30
percent at present. Commissioner Fuhs agreed that because
of this new legislation, more permittees would go directly
to a vendor. Senator Sharp answered that he thought 70
percent of nothing was going to be nothing.
Co-chair Frank MOVED for passage of CSSB 168(FIN) am from
committee with individual recommendations. No objections
being heard, CSSB 168(FIN) am was REPORTED OUT of committee
with a fiscal note for Department of Revenue in the amount
of $381.0 with individual recommendations. Co-chairs Pearce
and Frank signed "do pass." Senators Sharp, Kerttula,
Jacko, and Rieger signed "no recommendation." Senator Kelly
had left the meeting and did not sign.
ADJOURNMENT
The meeting was adjourned at approximately 10:15 a.m.
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