Legislature(2003 - 2004)

03/13/2003 01:32 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                SB 102-CHARITABLE GAMING REVENUE                                                                            
CHAIR BUNDE announced SB 102 to be up for consideration.                                                                        
COMMISSIONER  BILL   CORBUS,  Department  of   Revenue,  informed                                                               
members  the Administration  supports this  legislation. He  said                                                               
revenues generated  from pull-tabs  amount to about  $270 million                                                               
per year, of which the State  of Alaska receives about $2 million                                                               
in taxes.                                                                                                                       
MR. LARRY  PERSILY, Deputy  Commissioner, Department  of Revenue,                                                               
said he would address the department's proposed amendment first.                                                                
SENATOR SEEKINS moved to adopt Amendment 1.                                                                                     
CHAIR BUNDE objected for discussion purposes.                                                                                   
MR. PERSILY  said in the rush  to introduce a lot  of legislation                                                               
and a comprehensive budget plan,  some bills needed a little more                                                               
tweaking  after  introduction.  This amendment  would  bring  the                                                               
legislation  closer  to  the Governor's  intent,  stated  in  his                                                               
speech,  that additional  tax  revenue would  not  come from  the                                                               
pockets of charities.                                                                                                           
MR. DAN  BRANCH, Assistant Attorney  General, explained  that the                                                               
way the  tax now works is  that the sale of  pull-tabs produces a                                                               
certain amount of revenue called  gross proceeds. Prizes are paid                                                               
out  to  the  participants  and taxes  are  deducted  on  income,                                                               
leaving the adjusted gross income.  Under current law, 70 percent                                                               
of that adjusted gross income may  be used to pay the expenses of                                                               
gaming;  the  other  30  percent  has to  go  to  the  charities.                                                               
Sometimes charities  operate the  games themselves  and sometimes                                                               
they  form a  multiple  beneficiary permittee  (MBP),  a kind  of                                                               
partnership where  they hire  a manager  to conduct  the pull-tab                                                               
sales.   Charities  can   also  use   operators  who   are  hired                                                               
professionals to  run the  games or  a vendor, such  as a  bar or                                                               
liquor  store, to  sell the  games (and  receive the  statutorily                                                               
mandated payment for them).                                                                                                     
Charities are guaranteed to get  30 percent of the adjusted gross                                                               
income if they use an operator  and, if they run their own games,                                                               
they  have to  make sure  they  get at  least 30  percent of  the                                                               
adjusted gross income for themselves.  If they use a vendor, they                                                               
buy the pull-tab  games from a distributor and  deliver the pull-                                                               
tabs to the vendor  who gives them a check for  70 percent of the                                                               
ideal net  of the games.   The ideal net  is the amount  that one                                                               
would  receive if  all the  pull-tab  games were  sold, less  the                                                               
prize payout.                                                                                                                   
MR.  PERSILY interrupted  to say  that  pull-tabs generated  $274                                                               
million in 2001 but of that  amount, almost $214 million was paid                                                               
out in  prizes. Of the  $60 million  left, about $36  million was                                                               
used to pay expenses, leaving a  little more than $23 million for                                                               
net proceeds to the charities.                                                                                                  
MR. BRANCH  continued by saying the  last piece of the  puzzle is                                                               
that a little bit of a tax is  paid as an expense of gaming, part                                                               
of  the  70 percent  of  expenses  that  is deducted  before  the                                                               
charities actually get their money.                                                                                             
SENATOR FRENCH  asked what  the difference  is between  ideal net                                                               
and adjusted gross income.                                                                                                      
MR. BRANCH answered  that ideal net is a concept  that is used in                                                               
vendor sales  because the permittees  of charities  buy pull-tabs                                                               
from a  distributor and  deliver them directly  to the  bar owner                                                               
and get their  payment right then. It is 70  percent of the ideal                                                               
net,  which is  the amount  of money  left over  if every  single                                                               
ticket in the series sold and the prizes were paid out.                                                                         
TAPE 03-11, SIDE B                                                                                                            
MR. BRANCH stated the vendor gets  to keep all the money he earns                                                               
for the  sale of pull-tabs  because he's paid the  upfront amount                                                               
to the  charities. He explained  that adjusted gross income  is a                                                               
concept that is used when talking  about the other types of pull-                                                               
tab sales -  those self-directed by the  charities themselves, by                                                               
MBPs or operators. He commented:                                                                                                
     That  is  arrived  at  with  a  different  mathematical                                                                    
     formula. You  take the total amount  of pull-tabs sold,                                                                    
     the value  of them,  the gross,  and you  subtract from                                                                    
     that the prizes paid out and the taxes paid on income.                                                                     
SENATOR  FRENCH  asked  if  both  state  and  federal  taxes  are                                                               
MR. BRANCH explained  that the federal taxes  are deducted before                                                               
the adjusted gross income is  determined, but the state tax comes                                                               
off as  an expense and  is counted as part  of the 70  percent of                                                               
adjusted gross income expenses.                                                                                                 
CHAIR BUNDE  asked if vendors  work with ideal net  and operators                                                               
and  charities  who  operate  their own  pull-tabs  work  in  the                                                               
adjusted gross arena.                                                                                                           
MR. BRANCH said that is right.                                                                                                  
SENATOR  SEEKINS  asked if  there  is  a statutory  formula  that                                                               
prescribes what the prize money would  be from a $1,000 bucket of                                                               
MR. BRANCH replied there is not.                                                                                                
SENATOR SEEKINS asked if one  could return 70 percent and another                                                               
could return 80 percent.                                                                                                        
MR. BRANCH replied yes.                                                                                                         
SENATOR STEVENS asked what the state revenues and expenses are.                                                                 
MR.  PERSILY explained,  in terms  of the  tax on  pull-tabs, the                                                               
state gets about  $2 million per year and it  also gets licensing                                                               
fees of about $300,000. He submitted:                                                                                           
     In terms of the budget,  charitable gaming used to be a                                                                    
     division  separate within  the  Department of  Revenue.                                                                    
     Some  years  ago,  the   division  was  eliminated  and                                                                    
     reduced dramatically  - folded  into the  tax division.                                                                    
     Right  now  the  operating budget  for  the  charitable                                                                    
     gaming   section    within   the   tax    division   is                                                                    
     approximately $700,000  per year.  So, we do  make more                                                                    
     off  tax and  licensing fees  than we  spend on  direct                                                                    
     enforcement,  but  we'd  be  happy  to  spend  more  on                                                                    
     enforcement if the committee were so inclined.                                                                             
SENATOR STEVENS asked about additional costs to the state.                                                                      
MR. PERSILY replied  that the $700,000 are direct  costs from the                                                               
tax division  and that  some law  enforcement actions  take place                                                               
during the year  and, if added in, the total  would be increased.                                                               
He is reporting  just on that portion of the  tax division budget                                                               
that  is allocated  to charitable  gaming. From  that, they  send                                                               
some money over to the Department of Law.                                                                                       
MR. BRANCH said:                                                                                                                
     Within  the context  I just  explained,  what the  bill                                                                    
     before you would do is  it would increase the tax quite                                                                    
     a  bit, to  5 percent  of ideal  gross of  the pull-tab                                                                    
     sales as opposed  to 3 percent of the  ideal net.... We                                                                    
     figured about $12.5 million.                                                                                               
CHAIR BUNDE asked him to define ideal gross.                                                                                    
MR. BRANCH said that ideal gross  is a new concept that's defined                                                               
in the bill. He indicated:                                                                                                      
     As I said earlier, right  now the most that an operator                                                                    
     can charge in expenses including  his or her fees is 70                                                                    
     percent  of  adjusted  gross   income.  This  bill,  if                                                                    
     passed,  would  drop  that  to  65  percent.  So,  that                                                                    
     essentially  guarantees  an  additional  5  percent  of                                                                    
     adjusted gross  income going to the  charities with the                                                                    
     idea  that they  could use  that  money to  pick up  at                                                                    
     least part of this tax.                                                                                                    
     For vendors,  it's the same  kind of a deal.  It shifts                                                                    
     the amount  that the vendor  would have to pay  for the                                                                    
     pull-tabs to 75  percent of ideal net.  Right now, it's                                                                    
     at 70 percent - so, again,  a shift of 5 percent to try                                                                    
     and  give the  charities some  additional dough  to pay                                                                    
     this additional tax.                                                                                                       
MR. BRANCH said  the department is trying to make  it so that the                                                               
charities  won't be  any softer  than they  were before  but it's                                                               
hard to do  because of all of the variables.  The amendment would                                                               
create an increase  in the cash flow going through  the system by                                                               
setting a cap on the prize payout of 72 percent. He explained:                                                                  
     The  key  is the  formula  for  adjusted gross  income.                                                                    
     Adjusted  gross income  is the  gross you  receive from                                                                    
     pull-tab sales  minus the prizes  and minus  the taxes.                                                                    
     What the bill does is it  makes the new tax - 5 percent                                                                    
     of ideal  gross - one  of the things you  subtract when                                                                    
     you're trying to determine how  much the adjusted gross                                                                    
     income is.  So, you've got adjusted  gross income minus                                                                    
     taxes,  minus prizes.  So, the  smaller  you make  that                                                                    
     prize figure,  the more you're going  to have available                                                                    
     for  adjusted  gross  income to  pay  the  expenses  of                                                                    
     gaming  and  to pay  the  charities.  So the  charities                                                                    
     should have more money and  they'll be able to shoulder                                                                    
     the burden.                                                                                                                
MR. PERSILY clarified that the tax  is paid by the charities, not                                                               
by the operators  or the vendors. The purpose  of the legislation                                                               
and the amendment  is to get more money to  the charities so they                                                               
can essentially have  the same amount of money  they started with                                                               
before all this.                                                                                                                
SENATOR SEEKINS commented,  "In other words, the tax  is going to                                                               
be paid  by the  reduction in  the number of  winners and  so the                                                               
losers are going to pay the tax."                                                                                               
MR. BRANCH said that is correct.                                                                                                
MR. PERSILY added that charitable  gaming is very competitive. He                                                               
told members:                                                                                                                   
     If location A  has a game that pays off  more in prizes                                                                    
     than location B, people are  going to go to location A.                                                                    
     So, by  setting a  limit in statute,  the intent  is to                                                                    
     insure   that   no   charity  is   at   a   competitive                                                                    
     disadvantage because  we don't  want to  hurt charities                                                                    
     with this legislation.                                                                                                     
CHAIR BUNDE removed his objection and Amendment 1 was adopted.                                                                  
2:35 p.m.                                                                                                                       
MR.  DAVID  SANDEN  said  he  represents  the  Juneau  Montessori                                                               
Center,  Southeast Alaska  Friends of  the Montessori  and Juneau                                                               
Dance Unlimited.  He explained that  those organizations  used to                                                               
be separate,  but now operate  under a  multi-beneficiary permit.                                                               
The old proposal  would have bankrupted them. He  referred to his                                                               
handout and  explained that  currently they  sell a  pull-tab for                                                               
$1; of that $.80 is the prize  payout and they are left with $.20                                                               
as their  adjusted gross income.  The amendment will  change that                                                               
amount to $.38.                                                                                                                 
CHAIR BUNDE  asked if the  multi-beneficiary permit makes  them a                                                               
vendor as well.                                                                                                                 
MR. SANDEN  replied that they do  vend, but a vendor  is a liquor                                                               
license owner  who acts like  an operator and takes  a percentage                                                               
for his own profit.                                                                                                             
SENATOR FRENCH  asked Mr. Sanden  why the amendment  would change                                                               
the adjusted gross income to $.38.                                                                                              
MR. SANDEN  answered because  currently they  pay out  80 percent                                                               
but the  amendment changes  that to  a 72  percent cap.  Of that,                                                               
30.5 percent currently  goes to charitable proceeds,  which is .5                                                               
percent above the minimums. Twenty-five  percent of that, exactly                                                               
what the Governor proposed, is  their sales tax liability here in                                                               
Juneau.  The  Governor's  proposal  would make  it  the  same  in                                                               
Anchorage  and Fairbanks.  Their  payroll cost  is 18.5  percent;                                                               
their  cost for  the single  pull-tab  is 13  percent; the  fixed                                                               
costs for rental and utilities,  etcetera, equals 10 percent; and                                                               
3 percent  goes to the state  as the current ideal  net tax. That                                                               
amounts to 100  percent of their adjusted gross  income. He noted                                                               
that  it  has   to  be  split  70   percent  expenses/30  percent                                                               
SB 102 would take their  charitable proceeds down to 8.5 percent,                                                               
putting them  out of  compliance. Taxes  would double  because 25                                                               
percent goes to the city and  25 percent to the state. They would                                                               
not pass the sales tax on  to the consumer, which has been tried,                                                               
because  their gross  revenues would  drop by  60 percent,  which                                                               
would put them  out of business so they would  have no choice but                                                               
to absorb the tax. He continued:                                                                                                
     To  put this  in perspective,  what makes  gaming work,                                                                    
     what makes the gears grind  without grinding to a halt,                                                                    
     is the  playbacks - and  the playbacks are $2,  $5, $10                                                                    
     winners.  Those  get  changed over  the  counter  in  a                                                                    
     matter  of  seconds.  But,  under  a  sales  tax,  what                                                                    
     theoretically  the city  thinks we  can do  is somebody                                                                    
     buys  $20 in  pull-tabs,  gives a  bunch of  playbacks,                                                                    
     they hand  those over and instead  of instantly getting                                                                    
     their playbacks, they  have to dig in  their pocket for                                                                    
     $.15 or $.10  or $.20. It just grinds  the logistics of                                                                    
     gaming  to  a  halt.  So, we've  basically  said  we'll                                                                    
     absorb that 25  percent of tax, which we  have with the                                                                    
     city of Juneau.                                                                                                            
     And then  you might ask  are your expenses  higher than                                                                    
     any other  type of  business. No,  in fact  I challenge                                                                    
     you  to  find any  other  business  in the  state  that                                                                    
     returns a  30.5 percent  profit, which  my organization                                                                    
     currently  does  while  absorbing   a  28  percent  tax                                                                    
     burden. And you further might  ask how can we create an                                                                    
     equitable tax  structure on  gaming statewide.  This is                                                                    
     long  overdue and  I think  we can  do it  while making                                                                    
     sure we  have proper regulation and  no profiteering in                                                                    
     the industry, thus insuring  permit holders receive the                                                                    
     maximum possible return. This is how you do it...                                                                          
MR.  SANDEN   explained  that  first  local   sales  taxation  on                                                               
charitable  gaming  would have  to  be  outlawed; the  3  percent                                                               
current ideal net  tax would have to be increased  to 20 percent;                                                               
then another  very small tax  would have  to be created  on bingo                                                               
paper, which is  currently not taxed; and the  new revenues would                                                               
be  split  50/50  with  the  municipalities.  He  explained  that                                                               
Anchorage, which generates the most  gaming proceeds of all, gets                                                               
none of the revenues but would under his proposed scenario.                                                                     
SENATOR FRENCH asked if Juneau is  the only locality with a local                                                               
sales tax.                                                                                                                      
MR. SANDEN  replied that he  thought Hoonah and another  place in                                                               
the Mat-Su  Valley near the  fair grounds charge a  nominal sales                                                               
He further  explained that  1 percent  of the  additional revenue                                                               
could  be put  into  the general  fund to  be  split between  the                                                               
municipalities to step up enforcement  of gaming regulations. All                                                               
management would have to be  licensed, not just the operators. He                                                               
suggested  increasing  the  mandated  minimums  on  operators  to                                                               
prevent profiteering,  as they should  be able to  pay themselves                                                               
$70  to $100  per  hour. He  noted that  some  operators are  now                                                               
paying   themselves  over   $200.   Then,  since   the  cost   of                                                               
distributors is  the second highest  expense and everyone  has to                                                               
go through a number of  them, the distributors should be required                                                               
to reveal their  books once per year and pay  taxes on any profit                                                               
over 40 percent.  He said another important point is  the need to                                                               
eliminate ghost charities,  as a lot of nonprofits  exist only on                                                               
paper. He  pointed out that is  a huge abuse of  gaming and needs                                                               
to be stopped.                                                                                                                  
MR. SANDEN said  he knows it was not the  Governor's intention to                                                               
put these groups in jeopardy, but  he concluded that if he wasn't                                                               
paying  a 5  percent  sales tax,  he  would be  able  to pay  the                                                               
proposed tax and stay in business. However, he can't do both.                                                                   
MR. PERRY GREEN, Anchorage resident,  agreed with Senator Seekins                                                               
when he  said the losers would  end up paying this  tax. Pull-tab                                                               
sales would decrease by 70  percent. The number of charities that                                                               
are now  serviced would  also drop by  70 percent.  Stores around                                                               
the state  will close and over  500 people will lose  their jobs;                                                               
thousands  of kids  and  charities will  lose  their funding.  He                                                               
     This bill actually  works against the new  goals of the                                                                    
     new regulations  that were just enacted.  For instance,                                                                    
     they want to have operators  return 35 percent and they                                                                    
     want  MBPs  to  return   30  percent  after  they  just                                                                    
     encouraged people  who are MBPs  to become  operators -                                                                    
     and now  they're asking them  to return more  money. It                                                                    
     just doesn't make sense.                                                                                                   
He  said that  of approximately  $350 million  per year  in gross                                                               
sales in gaming, $267 million is  paid out in prizes, $50 million                                                               
in expenses, the  net to the charities is $30  [million], and the                                                               
state  gets about  $2.2 to  $3  million. Mandating  a 72  percent                                                               
across-the-board   payout  equates   to   the  state   regulating                                                               
something to  a point where  people will be  forced to go  out of                                                               
business.  About  1,400  permittees   are  making  money  off  of                                                               
charities in  Alaska. Oklahoma,  which gets  10 percent,  and has                                                               
four  times the  population,  has  183 permittees.  Massachusetts                                                               
gets 10  percent, but it  also sells  lottery tickets so  you get                                                               
them both at the same time.                                                                                                     
MR. GREEN said  the proposed taxes in  the legislation presuppose                                                               
that  the  net to  charities  will  increase,  but the  net  will                                                               
actually decrease.  There will be  fewer charities and  they will                                                               
lose  players because  the  72 percent  is not  a  fair game.  He                                                               
thought the net to charities  would decrease to about $9 million.                                                               
The state  would be the big  winner and receive $6.2  million, as                                                               
opposed  to  the current  $2.2  million.  He concluded,  "In  the                                                               
meantime, many  of the charities  that now  depend on it  will go                                                               
out of business."                                                                                                               
MR.  GREEN  said,  "To now  put  a  5  percent  of the  gross  is                                                               
phenomenal.  This is  not  Las Vegas.  This is  a  little bit  of                                                               
social gambling."                                                                                                               
MR. GEORGE WRIGHT, operator, said he  has been a permittee and an                                                               
CHAIR BUNDE asked him to define MBP.                                                                                            
MR.  WRIGHT explained  that a  permittee is  a charity,  like the                                                               
Moose Lodge, that sells its  games in-house. Charities that don't                                                               
have an  outlet like that  can get  together and sign  a contract                                                               
and  become partners  (up  to  six charities).  They  can hire  a                                                               
manager or MBP (as an employee)  to manage the gaming affairs for                                                               
all six  charities. His became  so large  that it got  divided up                                                               
and he became an operator - with a large investment.                                                                            
He said the state doesn't  understand charitable gaming. They are                                                               
bringing this legislation  forward now after they  spent one year                                                               
writing regulations  for the industry  that entirely  changed it.                                                               
He said this [legislation] would  drive the ANB completely out of                                                               
business. There is no  way they can pay a 10  percent tax. If the                                                               
state  wants to  raise more  revenue from  gaming, it  should sit                                                               
down with  industry and come  up with  a plan instead  of putting                                                               
something together at the last minute and trying to pass it.                                                                    
MR.  WRIGHT pointed  out  that as  long  as he  has  been in  the                                                               
business, since  1992, neither the  local police  department, the                                                               
Alaska  State  Troopers  nor  the Division  of  Gaming  has  ever                                                               
arrested, convicted  or charged  anyone that was  caught stealing                                                               
from the industry.                                                                                                              
MR.  WRIGHT said  the offenders  had to  be taken  to court  on a                                                               
civil  charge. The  attorney general  said  he was  not going  to                                                               
spend  government dollars  chasing  a gambling  debt. He  opined,                                                               
"It's not a gambling debt, it's charities."                                                                                     
He  pointed out  that  over 70  percent of  the  Meals on  Wheels                                                               
program  in Ninilchik  is  funded by  pull-tabs.  He accused  the                                                               
Administration  of  inventing  the  new term  "ideal  gross  net"                                                               
because it wants to pass this bill.                                                                                             
MR.  BOB  LOESCHER,  President and  Chair  of  the  Tlingit-Haida                                                               
Community  Council (THCC),  said  THCC has  a  gaming license  to                                                               
operate pull-tabs,  bingo and raffles.  He is also an  advisor to                                                               
the Alaska Native  Brotherhood Grand Camp, which has  a permit to                                                               
operate the  same games. President  Clinton appointed him  to the                                                               
National  Gambling Impact  Study Commission,  which does  a study                                                               
every 20 years  where he spent two and half  years studying class                                                               
2 and 3 gaming. He informed members:                                                                                            
     This tax that the Governor  wants is misplaced. If they                                                                    
     want to put pull-tabs out  of business, then you should                                                                    
     consider the  policy aspects first  of just  taking out                                                                    
     of  business rather  than  doing it  the  way they  are                                                                    
     doing it right now by taxing it out of business.                                                                           
MR.  LOESCHER said  he believes  gaming is  a state  concern. The                                                               
City and  Borough of Juneau (CBJ)  should not be in  the business                                                               
of  managing,  regulating and  taxing  gaming.  The CBJ  does  it                                                               
anyway with its  5 percent sales tax. He said  THCC's gaming is a                                                               
social thing; THCC uses what little  revenue it gets to pay for a                                                               
community  hall at  Salmon Creek,  which serves  as a  center for                                                               
community  activities. Children's  cultural  events, singing  and                                                               
dancing,  and drug  and alcohol  abuse programs  are held  there.                                                               
Without gaming income, THCC would  have great difficulty managing                                                               
its  community programs.  If another  5 percent  tax is  added to                                                               
what THCC already  pays in taxes, it would be  running a deficit.                                                               
Pull-tabs  are a  supplement to  bingo games,  which THCC  offers                                                               
twice a week.                                                                                                                   
MR. LOECHER concluded by saying members should reject SB 102.                                                                   
MR. DAVID  MASSEY, JDHS Midnight  Sons Softball, opposed  SB 102.                                                               
He said  he worked in  the Division  of Investments for  26 years                                                               
and  "this  doesn't fly  mathematically,"  one  reason being  the                                                               
suggestion that  you can  still game at  72 percent  payback. His                                                               
experience has been  that an operation will  start losing players                                                               
at anything past 70 percent.                                                                                                    
TAPE 03-12, SIDE A                                                                                                            
MR.  MASSEY  said  whatever  the  state wants  to  call  it,  the                                                               
adjusted  gross income  is not  the equivalent  of cost  of goods                                                               
MR. MAC MEINERS, Juneau Gun Club,  said he is also the designated                                                               
member  in charge  for United  Fishermen of  Alaska, and  was the                                                               
designated member in charge for the  Juneau Ski Club. He set up a                                                               
flip  chart  for  the  committee and  illustrated  how  adding  5                                                               
percent in Juneau  would take all of the profit  out of the game.                                                               
He said the playbacks are the biggest part of the game.                                                                         
MR. G. PETERSON,  Alaska Indoor Sports Distributors,  said he has                                                               
been in  the industry for  seven years  and works every  day with                                                               
the nonprofit organizations that  this legislation would directly                                                               
impact. He  reviews their quarterly  reports, annual  reports and                                                               
other  statements  and doesn't  see  big  bank accounts  full  of                                                               
surplus  money.  He said  they  are  struggling to  fund  medical                                                               
emergencies,  burial  assistance,   heating  oil  for  Headstart,                                                               
seniors  organizations,  teen  centers, Little  League,  etc.  He                                                               
maintained, "What  you are  taxing is  their ability  to disburse                                                               
funds to people  in need. Make no mistake about  it, SB 102 takes                                                               
money directly from the needy people."                                                                                          
MS.  JULIE COZZI,  Executive Director  of the  Haines Chamber  of                                                               
Commerce,  told  members the  Haines  Chamber  of Commerce  is  a                                                               
nonprofit organization that has a  gaming license. It handles the                                                               
pull-tab  revenue it  gets with  vendor assisted  pull-tab sales.                                                               
Two bars in Haines sell on  the Chamber's behalf. The vendors are                                                               
struggling  and are  hardly  able  to hang  on  with the  already                                                               
slumping economy. She opposed SB 102 in its present form.                                                                       
MR. GENE HANSON, Paternal Order  of Eagles, Fairbanks, opposed SB
102. He said  his organization has donated about  $22,000 to burn                                                               
victims, families  with terminal cancer,  the food bank,  etc. He                                                               
asked how many  people on the committee had  played pull-tabs and                                                               
no one  had. Mr. Hanson  suggested that they  try it just  to see                                                               
what it is  like and that would answer a  whole lot of questions.                                                               
He maintained:                                                                                                                  
     If you're  going to put  a tax  on, it shouldn't  be on                                                                    
     the front  end; it  should be  on the  back end  and 10                                                                    
     percent wouldn't  be a hard  hit on anybody  I wouldn't                                                                    
     believe. We could live with that.                                                                                          
MR. JIM  STUCKEY, State Director,  Loyal Order of  Moose, opposed                                                               
SB  102 because  of concern  about  its potential  impact on  the                                                               
people  who  run  the  service   organizations.  He  stated,  "In                                                               
particular, I think the service  organizations and people who run                                                               
their own permits  should be excluded from this  bill, because it                                                               
would just devastate them."                                                                                                     
He said he had  a chance to look at the amendment,  but it is the                                                               
most  ridiculous thing  he had  ever  seen. He  opined, "It  just                                                               
would not work."                                                                                                                
MS.  ANN WALASZEK,  Executive Director  of the  Kenai Chamber  of                                                               
Commerce and  also representing the  Kenai Tourism  and Marketing                                                               
Council,  both  nonprofit  organizations, said  they  oppose  the                                                               
bill. She  told members,  "It would  definitely hurt  funding for                                                               
the organizations."                                                                                                             
MS. JUSTINE  POLZIN, Executive Director  of the  Soldotna Chamber                                                               
of   Commerce,  comprised   of  630   small  businesses   in  the                                                               
surrounding area,  said she  is very much  opposed to  this bill.                                                               
She  pointed out  that operators  are  not allowed  on the  Kenai                                                               
Peninsula.  She said  they paid  $9,000  in taxes  last year  and                                                               
would have paid $60,000 in taxes if this bill goes through.                                                                     
CHAIR  BUNDE asked  if everyone  listening at  the Anchorage  LIO                                                               
opposed  this bill.  One person  answered no.  He asked  who that                                                               
MR.  PETER ROBERTS  said he  owns  a small  business in  downtown                                                               
Anchorage that  was undermined  by the  use of  charitable gaming                                                               
proceeds, authorized by the State of  Alaska. He said many of the                                                               
organizations  that get  this  money are  not  charities and  are                                                               
actually encouraged to waste the  money, because by law they must                                                               
spend  the net  proceeds  within one  year.  The gaming  statutes                                                               
require that  game proceeds be  used for charitable  purposes. He                                                               
thought the real  charitable organizations are the  ones that are                                                               
most  upset about  the organizations  that abuse  the money  they                                                               
actually get.  He explained that he  owns a bike rental  store in                                                               
downtown Anchorage. He pointed out:                                                                                             
     The  organization  Earth,  which   is  run  by  Michael                                                                    
     O'Callahan, receives  more than  $40,000 and  they went                                                                    
     out and bought themselves  bicycles and paid themselves                                                                    
     a  salary  so they  could  loan  bicycles for  free  to                                                                    
     tourists in  downtown Anchorage under the  pretext that                                                                    
     they were mitigating car  use and preventing pollution.                                                                    
     I have made numerous appeals  to the gaming division of                                                                    
     Department  of Revenue  to do  something  about it  and                                                                    
     they  absolutely  refused.  I  have  been  waiting  for                                                                    
     written  explanations and  they won't  give them  to me                                                                    
     and I  have filed suit over  it and was dismissed  on a                                                                    
     procedural  issue. All  I'm saying  is that  charitable                                                                    
     gaming -  there are two  sides to the issue.  The issue                                                                    
     that  you're  dealing  with  now in  terms  of  how  to                                                                    
     regulate  the  operators  and get  the  money  that  is                                                                    
     supposed  to  go to  charities  -  if you're  going  to                                                                    
     address  this issue,  make sure  that  you address  the                                                                    
     other side of the issue  and that is how the charitable                                                                    
     gaming   gross  proceeds   are  spent.   The  so-called                                                                    
     charities   themselves   should   be  the   very   ones                                                                    
     encouraging  you  to do  this,  because  the ones  that                                                                    
     spend the money responsibly should be just as upset as                                                                     
     I am.                                                                                                                      
CHAIR  BUNDE closed  the  hearing and  asked  everyone to  submit                                                               
written  testimony, which  he would  distribute to  all committee                                                               
members.  He said  he did  a quick  scan and  found that  the per                                                               
capita amount  of money  spent per  year in  Alaska on  bingo and                                                               
pull-tabs varies from  over $300 per person in  Anchorage to over                                                               
$4,000 in Anaktuvuk  Pass, over $7,500 in  Brevig Mission, $6,900                                                               
in Eek,  $4,500 in  Gambell and  well over  $1,000 in  many other                                                               
CHAIR BUNDE  said the  bill would  be held  for further  work and                                                               
adjourned the meeting at 3:35 p.m.                                                                                              

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