Legislature(1993 - 1994)

05/11/1993 09:30 AM FIN

Audio Topic
* first hearing in first committee of referral
+ 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                 
  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                 
  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                 
  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                 
  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)                 
  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                 
  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                 
  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.                                       
  The meeting was adjourned at approximately 10:15 a.m.                        

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