Legislature(1993 - 1994)
05/11/1993 09:30 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.