Legislature(1997 - 1998)

04/21/1998 08:25 AM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
           HOUSE FINANCE COMMITTEE                                             
              APRIL 21, 1998                                                   
                 8:25 A.M.                                                     
                                                                               
TAPE HFC 98 - 119, Side 1                                                      
TAPE HFC 98 - 119, Side 2                                                      
TAPE HFC 98 - 120, Side 1                                                      
                                                                               
CALL TO ORDER                                                                  
                                                                               
Co-Chair Gene Therriault called the House Finance Committee                    
meeting to order at 8:25 a.m.                                                  
                                                                               
PRESENT                                                                        
                                                                               
Co-Chair Hanley                                                                
Co-Chair Therriault   Representative Kelly                                     
Representative Davies  Representative Martin                                   
Representative Davis   Representative Moses                                    
Representative Foster  Representative Mulder                                   
Representative Grussendorf                                                     
                                                                               
Representative Kohring was absent from the meeting.                            
                                                                               
ALSO PRESENT                                                                   
                                                                               
Tom Williams, Staff, Senator Sharp; Bob Bartholomew, Deputy                    
Director, Income and Excise Audit Division, Department of                      
Revenue; Ashley Reed, Lobbyist, Charitable Gaming                              
Association; Tina Lindren, Alaska Visitors Association,                        
Anchorage; Jeff Bush, Deputy Commissioner, Department of                       
Community and Regional Affairs.                                                
                                                                               
The following testified via the teleconference network:                        
Heather Dodson, Windsong Lodge, Anchorage; Marilyn Kasmar,                     
Anchorage; Matt Atkinson, Chair, Visitor's Bureau,                             
Fairbanks; Milton Wiltse, Director, Division of Geological                     
and Geophysical Survey, Department of Natural Resources,                       
Fairbanks; Julie Wild-Curry, Program Manager, Healthy                          
Families Program, Fairbanks; Alan Lemaster, Business Owner,                    
Gakona; Paul Smith, Business Owner, Tok;                                       
                                                                               
SUMMARY                                                                        
                                                                               
HB 369 "An Act relating to Medicaid coverage for certain                       
eligible children and pregnant women; relating to                              
primary care case management and managed care                                  
services as optional services and to premiums and                              
cost-sharing contributions under the Medicaid                                  
program; establishing the Healthy Families Alaska                              
program; and providing for an effective date."                                 
                                                                               
 HB 369 was HELD in Committee for further                                      
consideration.                                                                 
                                                                               
HB 408 "An Act establishing the Alaska Seismic Hazards                         
Safety Commission."                                                            
                                                                               
 HB 408 was HELD in Committee for further                                      
consideration.                                                                 
                                                                               
HB 478 "An Act relating to tourism; relating to grants for                     
tourism marketing; eliminating the division of                                 
tourism and the Alaska Tourism Marketing Council;                              
and providing for an effective date."                                          
                                                                               
 HB 478 was HELD in Committee for further                                      
consideration.                                                                 
                                                                               
SB 273 "An Act requiring that gross receipts and ideal                         
gross be used to account for charitable gaming                                 
activities; requiring municipalities to provide to                             
the state records concerning sales taxes assessed                              
for charitable gaming activities; requiring that a                             
charitable share of charitable gaming receipts be                              
dedicated to charitable uses; relating to reports                              
required for charitable gaming activities; relating                            
to payments to the state from gross receipts of                                
charitable gaming; relating to contracts between                               
operators or vendors and permittees; relating to                               
licensing of multiple-beneficiary permittees and to                            
the duties of a multiple-beneficiary permittee to                              
each holder of the permit; requiring a person                                  
employed as a gaming manager to be certified by the                            
state; limiting the expenditure of amounts of gross                            
receipts and ideal gross required to be paid to                                
permittees or retained by permittees; relating to                              
the amount of gross receipts and prizes allowed                                
under a permit or a multiple- beneficiary permit;                              
allowing operators to pool gross receipts, prizes,                             
and door prizes among permittees; and providing for                            
an effective date."                                                            
                                                                               
 HCS CSSB 273 (FIN) was REPORTED out of Committee                              
with "no recommendation" and with a zero fiscal note                           
by the Department of Revenue, dated 2/27/98.                                   
SENATE BILL NO. 273                                                            
                                                                               
"An Act requiring that gross receipts and ideal gross                          
be used to account for charitable gaming activities;                           
requiring municipalities to provide to the state                               
records concerning sales taxes assessed for charitable                         
gaming activities; requiring that a charitable share of                        
charitable gaming receipts be dedicated to charitable                          
uses; relating to reports required for charitable                              
gaming activities; relating to payments to the state                           
from gross receipts of charitable gaming; relating to                          
contracts between operators or vendors and permittees;                         
relating to licensing of multiple-beneficiary                                  
permittees and to the duties of a multiple-beneficiary                         
permittee to each holder of the permit; requiring a                            
person employed as a gaming manager to be certified by                         
the state; limiting the expenditure of amounts of gross                        
receipts and ideal gross required to be paid to                                
permittees or retained by permittees; relating to the                          
amount of gross receipts and prizes allowed under a                            
permit or a multiple- beneficiary permit; allowing                             
operators to pool gross receipts, prizes, and door                             
prizes among permittees; and providing for an effective                        
date."                                                                         
                                                                               
TOM WILLIAMS, STAFF, SENATOR SHARP spoke in support of SB
273.  He noted that the legislation revises the charitable                     
gaming statutes to base the amount paid to charities on a                      
gross percentage as opposed to net proceeds.  In addition,                     
it creates a multiple-beneficiary permit.                                      
                                                                               
Representative Mulder questioned why an ideal net was not                      
used.  Mr. Williams observed that the concept of a broad-                      
based ideal net was considered.  The sponsor does not                          
support the concept because it does not assure that a                          
certain percentage, of every dollar gained, goes to the                        
charity.  The sponsor did not want to make the amount that                     
goes to the charity dependent on the prize pay out.  He                        
emphasized that the intent is to remove the State from the                     
issue of determining what the appropriate prize level is or                    
what is an allowable expense.  The mix of prizes and                           
expenses should be left to the business decision of the                        
charity and the operator.                                                      
                                                                               
BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE AUDIT                      
DIVISION, DEPARTMENT OF REVENUE spoke in support of the                        
legislation.  He noted that amendments have been drafted to                    
address concerns.  He maintained that the process and                          
percentages contained in the legislation are workable and                      
allow flexibility in prizes and expenses.  He spoke against                    
using an ideal net.  He observed that the appropriate level                    
of ideal net is not agreed on.                                                 
                                                                               
Representative Grussendorf noted concerns that businesses                      
that meet the 30 percent net requirement could not meet the                    
requirement for 7 percent of the adjusted gross.  Mr.                          
Bartholomew noted that Amendment 1 would address those                         
concerns (copy on file).   The percentage would be reduced                     
from 7 to 6.5 percent for an additional year.  The amendment                   
would phase in the increase.                                                   
                                                                               
Co-Chair Hanley MOVED to ADOPT Amendment 1.  Mr. Williams                      
explained that the legislation would go into effect January                    
1999.  For 1999, the percentage for pull-tabs would be 6.5                     
percent.  It would go to 7 percent in January 2000.                            
Amendment 1 would also change the charitable share on bingo                    
from 1.5 to 2 percent.                                                         
                                                                               
Co-Chair Hanley expressed support for the phase in proposal,                   
but expressed concern that operations not be put out of                        
business by the increase.  Mr. Bartholomew stressed that 7                     
percent was picked based on data available to the                              
Department.  The majority of operators would achieve 7                         
percent of gross.  The Department worked with operators that                   
were not in compliance with current law to look at ways of                     
adjusting expenses and prizes to fit into the proposed                         
level.  He felt confident that 7 percent of gross in the                       
second year would not adversely affect charitable gaming.                      
He observed that charity run operations pay themselves more                    
than 6.5 percent.  He did not think there would be a                           
significant change in the number of non-profit permits.  It                    
is not the intention to reduce the number of permits.                          
                                                                               
Co-Chair Hanley questioned the effect of shifting the net                      
pay out by a half percent.  Mr. Bartholomew replied that a                     
reduction in a half a percent pay out on prizes would result                   
in an increase in gross.  Prize pay-outs would have to be                      
managed to average between 77 and 78 percent to achieve the                    
percentage of gross.                                                           
                                                                               
Representative Mulder disclosed that he is a board member of                   
a charity that would be affected by the legislation.                           
                                                                               
In response to a question by Representative Mulder, Mr.                        
Bartholomew stated that, based on the 1997 reports, almost                     
100 percent of the operators are in compliance.                                
                                                                               
There being NO OBJECTION, Amendment 1 was adopted.                             
                                                                               
SB 273 was HELD in Committee for further consideration                         
during the meeting.                                                            
HOUSE BILL NO. 369                                                             
                                                                               
"An Act relating to Medicaid coverage for certain                              
eligible children and pregnant women; relating to                              
primary care case management and managed care services                         
as optional services and to premiums and cost-sharing                          
contributions under the Medicaid program; establishing                         
the Healthy Families Alaska program; and providing for                         
an effective date."                                                            
                                                                               
JULIE WILD-CURRY, PROGRAM MANAGER, HEALTHY FAMILIES PROGRAM,                   
FAIRBANKS spoke in support of the Healthy Families Program.                    
She acknowledged the benefit of a control group, but                           
stressed that resources would be better spent to provide                       
services.  She noted that the states of Hawaii and Arizona                     
have conducted studies with control groups.  Research showed                   
that their programs resulted in a more nurturing home and                      
environment and more positive parent child interaction.                        
There were no cases of child abuse or neglect in those                         
studied during a 10-year period.   She summarized that the                     
program can reduce the cost to society.                                        
                                                                               
HB 369 was HELD for further consideration during the                           
meeting.                                                                       
HOUSE BILL NO. 478                                                             
                                                                               
"An Act relating to tourism; relating to grants for                            
tourism marketing; eliminating the division of tourism                         
and the Alaska Tourism Marketing Council; and providing                        
for an effective date."                                                        
                                                                               
MATT ATKINSON, CHAIR, VISITOR'S BUREAU, FAIRBANKS spoke in                     
support of HB 478.  He observed that the goal of the                           
legislation is to shift tourism marketing to the private                       
sector.  He maintained that a new method of tourism                            
marketing is needed.  State support for tourism marketing                      
has been reduced from $15 million dollars in FY 90 to $6.7                     
million dollars in FY 98.  The Alaska Visitor's Association                    
has worked to create a new plan.  He maintained that the                       
plan would combine the marketing activities of the Alaska                      
Tourism Marketing Council (ATMC), Alaska Visitors                              
Association (AVA) and the Division of Tourism.  It would                       
decrease confusion, duplication of effort and increase                         
private sector contributions.                                                  
                                                                               
PAUL SMITH, BUSINESS OWNER, TOK spoke in support of the                        
legislation.  He stressed the need to protect small highway                    
businesses.                                                                    
                                                                               
ALAN LEMASTER, BUSINESS OWNER, GAKONA spoke in support of                      
the legislation.  He observed that the state of Alaska                         
spends $4 million dollars to market tourism while the state                    
of Queensland in New Zealand spends $40 million dollars in                     
tax money.  He stressed that there has been a decline in                       
tourism.  He maintained that small and large business must                     
carry the ball.                                                                
                                                                               
HB 478 was HELD in Committee for further consideration                         
during the meeting.                                                            
HOUSE BILL NO. 408                                                             
                                                                               
"An Act establishing the Alaska Seismic Hazards Safety                         
Commission."                                                                   
                                                                               
MILTON WILTSE, DIRECTOR, DIVISION OF GEOLOGICAL AND                            
GEOPHYSICAL SURVEY, DEPARTMENT OF NATURAL RESOURCES,                           
FAIRBANKS spoke in support of HB 408.  The legislation                         
creates a seismic hazards safety commission.  The state of                     
Alaska has had an effective disaster emergency response                        
group that has worked out responses to seismic events.  He                     
stated that less has been done to avoid the adverse impacts                    
of earthquakes.  Other states have established similar                         
commissions as a result of Alaska's 1964 earthquake.                           
Policies implemented in California have reduced the loss of                    
life and property.  Because of disasters in the lower 48                       
states, federal disaster relief is being reviewed.  Draft                      
federal legislation has contained a requirement for state                      
mitigation measures to be in place for federal eligibility.                    
There are approximately 20 seismic hazards commissions in                      
the United States, including the state of Vermont.  He                         
stressed that the legislation could result in a decrease in                    
loss of life, property and cost of recovery.  It could also                    
help coordinate post activity events.  He noted that seismic                   
research activity continues.                                                   
                                                                               
Representative Foster expressed his support for the                            
legislation.                                                                   
                                                                               
HB 408 was HELD in Committee for further consideration.                        
HOUSE BILL NO. 478                                                             
                                                                               
"An Act relating to tourism; relating to grants for                            
tourism marketing; eliminating the division of tourism                         
and the Alaska Tourism Marketing Council; and providing                        
for an effective date."                                                        
                                                                               
TINA LINDREN, ALASKA VISITORS ASSOCIATION, ANCHORAGE                           
stressed that the legislation is a response to indications                     
by the Legislature that industry should increase its                           
contribution to marketing.  She maintained that reductions                     
in state support has put Alaska at a competitive                               
disadvantage.  The legislation would consolidate statewide                     
marketing into one nonprofit organization.  The state of                       
Alaska would grant to the nonprofit organization.  There                       
would be a reduction in state general funds and an increase                    
in private sector funds.  Communities would be able to                         
leverage their own marketing plans in conjunction with the                     
overall program.  She observed that bylaws would be needed                     
for the new organization.  The state of Alaska would be able                   
to impose conditions on the funds through the grant                            
contract.                                                                      
                                                                               
(Tape Change, HFC 98 - 119, Side 2)                                            
                                                                               
Ms. Lindren observed that the legislation would eliminate                      
the Division of Tourism.  She emphasized that there is a                       
continued role for the state in tourism.  The state would                      
continue planning and coordination functions.  She reviewed                    
the legislation.  She noted that the purpose of the ATMC and                   
the Division of Tourism are identical.  The legislation                        
deletes reference to both entities and leaves their                            
responsibilities in the Department of Commerce and Economic                    
Development.  Section 4 creates a new grant program.                           
Section (b) provides that materials produced and marketing                     
information and tourism related data generated under a grant                   
are the sole property of the qualified trade association.                      
Revenues raised would be retained as part of the funding                       
mechanism.  Materials would be provided Department of                          
Commerce and Economic Development on request.  Materials                       
would not be part of the public record.  This retains                          
current law.  She observed that names from mailing lists                       
would have no value if they were under public records.  A                      
qualified trade association may not use money granted to                       
lobby a municipality or an agency of a municipality or to                      
lobby the state or state agency.   Section (e) defines a                       
qualified trade association:                                                   
                                                                               
"qualified trade association" means a private,                                 
nonprofit organization whose primary purposes are the                          
promotion of tourism within the state encouraging                              
tourists to visit the state and that has a statewide                           
membership consisting of representatives of all major                          
sectors of the visitor industry, including hotels,                             
airlines cruise lines, wholesale and retail travel                             
agencies, visitor attractions, and convention and                              
visitors bureaus.                                                              
                                                                               
Ms. Lindren observed that statutes that currently deal with                    
the Division of Tourism and the ATMC are repealed.  Section                    
6 contains an effective date.  She spoke in support of a                       
one-year transition to setup a new organization.                               
                                                                               
In response to a question by Representative Davies, Ms.                        
Lindren provided members with a copy of the proposed budget                    
for the "New Millenium Plan" by the Alaska Visitors                            
Association (copy on file).  She compared budget numbers                       
provided by the Department of Commerce and Economic                            
Development (copy on file) with those contained in the Plan.                   
She discussed funding levels of Pay to Play programs.  She                     
noted that the AVA budget is currently $805 thousand                           
dollars.                                                                       
                                                                               
HEATHER DODSON, PRESIDENT, ALASKA VISITORS ASSOCIATION                         
ANCHORAGE CHAPTER, WINDSONG LODGE, ANCHORAGE spoke in                          
support of the legislation.  She maintained that it is time                    
for a change.                                                                  
                                                                               
Ms. Lindren observed that the Plan would reduce the general                    
fund contribution over a three year period from $5.3 to $4.0                   
million dollars.  Industry contribution would be increased                     
from $1.4 to $6 million dollars.  The total combined budgets                   
of the ATMC and Division of Tourism is $6.7 million dollars.                   
Part of this is not for marketing activities.  Approximately                   
$650 thousand dollars is spent by the AVA to produce the                       
vacation planner.  The AVA contributes approximately $1.4                      
million dollars to the state of Alaska.                                        
                                                                               
Representative Davies expressed support for the legislation.                   
He questioned how confident is the private sector that the                     
money would be collected.  He asked how smaller business                       
would be affected.  Ms. Lindren noted that there are no                        
guarantees.  She emphasized that it is in the industry's                       
interest to promote the entire state of Alaska.  Small                         
communities and businesses need the Plan more than large                       
ones since they have no means of their own to generate                         
tourist to Alaska.  Smaller businesses would be charged less                   
under the Plan then they are currently paying.  More money                     
would come from larger companies.  Larger communities would                    
participate more than they currently do. She observed that                     
state marketing has been reduced to printing and                               
distributing the vacation planner.                                             
                                                                               
Ms. Lindren discussed funding sources.  There is a cruise                      
formula based on the number of passenger days in Alaska.                       
There is an amount for businesses based on employee numbers.                   
Larger businesses would pay more than smaller businesses.  A                   
number of Pay to Play programs, such as the vacation planner                   
would raise revenues.  Businesses can pick and chose among                     
Pay to Play programs to pick ones that will benefit their                      
businesses.  There is no hammer to make sure that everyone                     
participates.  The budget estimate is conservative.                            
                                                                               
Representative Davies expressed concerns regarding the Pay                     
to Play portion of the Plan.  Ms. Lindren envisioned that                      
participation would be charged for in a number of things                       
such as trade shows.  A new marketing plan would have to be                    
created.                                                                       
                                                                               
JEFF BUSH, DEPUTY COMMISSIONER, DEPARTMENT OF COMMUNITY AND                    
REGIONAL AFFAIRS clarified that the Department does not                        
oppose the privatization of tourism marketing in Alaska or                     
the elimination of the ATMC.  He expressed concerns with                       
portions of the Plan.  He observed that the nonprofit                          
organization would be greatly dependent on contributions                       
from the cruise industry.  He expressed concern that there                     
would be bias in favor of industry sectors that give large                     
contributions.  He observed that the Division of Tourism has                   
focused on a highway tourism program in the last year.                         
Significant funds have been received from the Alaska Marine                    
Highway System.  He expressed concern that this kind of                        
promotion would not exist under the plan.  The Alaska Marine                   
Highway System competes with the cruise industry and the                       
cruise system would have control over the program.  He                         
proposed multiple contracts for tourism marketing.  He                         
acknowledged that a large portion of the funding might go to                   
a single contract.  Some money should be retained for                          
programs that might not be a priority of the private                           
organization that receives the grant.  Winter tourism is                       
very important to the Fairbanks area.  He observed that an                     
aurora borealis program has been successfully marketed to                      
Japanese tourist to come to Fairbanks.  He stressed that                       
this kind of a grant should be allowed.                                        
                                                                               
Representative Mulder asked if Mr. Bush's concerns could be                    
addressed under the proposed program.   Mr. Bush noted that                    
the legislation would fund a single grant, which would run a                   
marketing program.  He questioned how much control the State                   
could place on the operation of the grant.  He noted that                      
the program would not be competitive.  The state of Alaska                     
would have to choose between awarding the AVA the grant or                     
not having a tourism program.  The State's ability to                          
negotiate terms of the agreement would be limited.  He added                   
that there is no guarantee for a private match.  He                            
maintained that there should be a required match and a                         
competitive award.  He stated that unless formal proposals                     
are required in a competitive situation there is a loss of                     
accountability.                                                                
                                                                               
Mr. Bush did not see that there would be much more money                       
going to tourism under the Plan than under the current                         
system.  He observed that state funding would be reduced by                    
approximately 25 percent over three years.  Local                              
communities would pick up a significant percentage of this                     
decrease.  He maintained that state funding would be                           
transferred to local municipal funding.  Municipalities have                   
contacted the Divisions with concerns regarding contribution                   
levels.                                                                        
                                                                               
Representative Davis noted that tourism marketing in the                       
State has merged into one large group.  Mr. Bush explained                     
that the Department is not advocating that state funds be                      
split into small pieces.  He clarified that the Department                     
is concerned about the small amount that the Division of                       
Tourism uses to do things like run the Tok visitor center or                   
specialized programs for highway traffic and winter tourism.                   
There needs to be attention to the little pieces.                              
                                                                               
Representative Davis noted that section 3 establishes                          
tourism promotion in the Department of Commerce and Economic                   
Development.  Mr. Bush stressed that the Department would                      
not be provided any funding for promotion.  The Department                     
would retain one or two positions for general tourism land                     
use planning activities to assist the Department of Natural                    
Resources.  All marketing and promotional activities would                     
be given to the nonprofit.  Representative Davis stressed                      
that the legislation states that the Department of Commerce                    
and Economic Development would "promote" tourism.  Mr. Bush                    
stressed that it is a funding issue.  If the Legislature                       
gives the Department money, the Department would find a way                    
to promote tourism under the legislation.                                      
                                                                               
HB 478 was HELD in Committee for further consideration.                        
HOUSE BILL NO. 369                                                             
                                                                               
"An Act relating to Medicaid coverage for certain                              
eligible children and pregnant women; relating to                              
primary care case management and managed care services                         
as optional services and to premiums and cost-sharing                          
contributions under the Medicaid program; establishing                         
the Healthy Families Alaska program; and providing for                         
an effective date."                                                            
                                                                               
MARILYN KASMAR, ANCHORAGE spoke in support of HB 369.  She                     
maintained that it makes good sense to increase eligibility                    
levels for Medicaid to 200 percent of the federal poverty                      
level.  There are 23,900 children and 800 pregnant women in                    
Alaska that do not have insurance coverage.  The expansion                     
would offer coverage to 11,600 of the uninsured children and                   
all 800 of the pregnant women.  Uninsured children are more                    
likely to have greater medical expense later in life.  She                     
noted that 41 states provide better care for pregnant women                    
and children than Alaska.  She asserted that the expansion                     
could be paid through the $31 million dollar savings in the                    
federal F/MAP rate (the federal match in Medicaid payments).                   
She stressed that congressional leaders have indicated that                    
reauthorization of the money will be difficult if it is not                    
used for health care.  For every .28 cents spent on health                     
care for children Alaska will receive .72 cents from the                       
federal government.                                                            
                                                                               
HB 369 was HELD in Committee for further consideration.                        
SENATE BILL NO. 273                                                            
                                                                               
"An Act requiring that gross receipts and ideal gross                          
be used to account for charitable gaming activities;                           
requiring municipalities to provide to the state                               
records concerning sales taxes assessed for charitable                         
gaming activities; requiring that a charitable share of                        
charitable gaming receipts be dedicated to charitable                          
uses; relating to reports required for charitable                              
gaming activities; relating to payments to the state                           
from gross receipts of charitable gaming; relating to                          
contracts between operators or vendors and permittees;                         
relating to licensing of multiple-beneficiary                                  
permittees and to the duties of a multiple-beneficiary                         
permittee to each holder of the permit; requiring a                            
person employed as a gaming manager to be certified by                         
the state; limiting the expenditure of amounts of gross                        
receipts and ideal gross required to be paid to                                
permittees or retained by permittees; relating to the                          
amount of gross receipts and prizes allowed under a                            
permit or a multiple- beneficiary permit; allowing                             
operators to pool gross receipts, prizes, and door                             
prizes among permittees; and providing for an effective                        
date."                                                                         
                                                                               
Co-Chair Therriault MOVED to ADOPT Amendment 2, on behalf of                   
Senator Sharp (copy on file).  Representative Mulder MOVED                     
to amend Amendment 1, change 17 to 18.  He explained that                      
the amendment would raise the charitable share for pull-tabs                   
to 18 percent of the gross.  He spoke in support of the                        
amendment to Amendment 2.                                                      
                                                                               
BOB BARTHOLOMEW, DEPUTY DIRECTOR, INCOME AND EXCISE AUDIT                      
DIVISION, DEPARTMENT OF REVENUE stressed that the average                      
amount needed to hold harmless charities is 16 to 17 percent                   
of the gross.  He asserted that 17 percent would hold the                      
greatest amount harmless.                                                      
                                                                               
In response to a question by Co-Chair Therriault, Mr.                          
Bartholomew observed that a 77 percent prize pay-out would                     
provide 16 percent of gross.  For non-profits to receive 18                    
percent of gross, prize pay-outs would have to be                              
approximately 73 - 74 percent.  Representative Davis noted                     
that there are variations in prize pay-outs.  Mr.                              
Bartholomew observed that prize pay-outs run from                              
approximately 72 to 85 percent.                                                
                                                                               
(Tape Change, HFC 98 -120, Side 1)                                             
                                                                               
Mr. Bartholomew observed that prize pay-outs are driven by                     
what has been previously paid.  Pay-outs can be higher or                      
lower, but they must average to the amount needed to meet                      
the percentage of gross.  He acknowledged that charities can                   
negotiate for a higher share, but stressed that it is                          
difficult.                                                                     
                                                                               
Representative Davies expressed concern that the level of                      
share is at a level that would force some people out of                        
business.  Mr. Bartholomew agreed that the industry has                        
raised the issue.  He stressed that the Department has                         
attempted to find the level that would hold operations                         
harmless.                                                                      
                                                                               
TOM WILLIAMS, STAFF, SENATOR SHARP stated that the sponsor                     
recommended 17 percent, but does not object to 18 percent.                     
                                                                               
There being NO OBJECTION, the amendment to the amendment was                   
adopted.  There being NO OBJECTION, Amendment 2 was adopted                    
as amended.                                                                    
                                                                               
Representative Martin MOVED to ADOPT Amendment 3 (copy on                      
file).  Mr. Bartholomew explained that Amendment 3 would                       
strengthen controls over how money received by non-profits                     
from gaming is spent.  The amendment prohibits commingling                     
of charitable gaming proceeds with other funds.  He noted                      
that it is hard to ascertain if money is spent appropriately                   
when it is commingled with funds for other purposes.  The                      
proceeds would have to be spent directly out of the gaming                     
account.                                                                       
                                                                               
Representative Foster expressed concerns that the amendment                    
would be difficult for small rural operations.  He asked                       
what the penalty would be for noncompliance.                                   
                                                                               
Mr. Bartholomew explained that the worst penalty would be                      
for them to lose their license.  He observed that the                          
charity would already have a gaming account.  The amendment                    
does not require a new account.  Some non-profits transfer                     
funding into their operating account.  Under the amendment                     
funds could not be transferred to the operating account.                       
There would not be a criminal penalty.                                         
                                                                               
Co-Chair Therriault summarized that the Department would                       
approach the organization to get them to follow the rules.                     
Mr. Bartholomew stressed that the Department offers a chance                   
to come into compliance.                                                       
                                                                               
Representative Foster questioned if there was a problem in                     
rural areas.  Mr. Bartholomew emphasized that the chance of                    
having sanctions would be small.  It would make it easier to                   
follow the flow of money.                                                      
                                                                               
Representative Martin spoke in support of the amendment.  He                   
emphasized that the amendment would not hurt charities.  The                   
intent is to require large non-profits to keep the funds                       
separate from operating expenses.  Mr. Williams stated that                    
the sponsor does not object to the amendment.  He did not                      
think that the amendment would be onerous.                                     
                                                                               
A roll call vote was taken on the motion.                                      
                                                                               
IN FAVOR: Mulder, Davis, Martin, Therriault                                    
OPPOSED: Davies, Foster, Kelly                                                 
                                                                               
Co-Chair Hanley and Representatives Grussendorf, Kohring and                   
Moses were absent from the vote.                                               
                                                                               
The MOTION FAILED (4-3).                                                       
                                                                               
Representative Martin MOVED to ADOPT Amendment 4 (copy on                      
file).  Amendment 4 would raise levels paid to charities                       
from 7 to 8.5 percent.  Mr. Bartholomew stated that an                         
increase of 1.5 percent would significantly change the                         
financial pie.  More money would go to non-profits, but the                    
unintended consequences of that large of an increase are                       
unknown.  The intent of the legislation was to keep the                        
financial pie fixed.                                                           
                                                                               
Representative Davis spoke against the amendment.  He                          
maintained that the amendment would force operators out of                     
business, which would hurt charities.                                          
                                                                               
Representative Martin spoke in support of the amendment.  He                   
asserted that not enough money is going to charity.                            
                                                                               
A roll call vote was taken on the motion.                                      
                                                                               
IN FAVOR: Martin, Therriault                                                   
OPPOSED: Davies, Davis, Foster, Kelly, Mulder                                  
                                                                               
Co-Chair Hanley and Representatives Grussendorf and Moses                      
were absent from the vote.                                                     
                                                                               
The MOTION FAILED (2-5).                                                       
                                                                               
Amendment 5 was withdrawn.                                                     
                                                                               
ASHLEY REED, LOBBYIST, CHARITABLE GAMING ASSOCIATION spoke                     
against the legislation.  He observed that the industry                        
maintains concerns regarding the legislation.  He stressed                     
that there is no guarantee that the legislation will be                        
revenue neutral.  He stressed that small operations have                       
higher costs than large operations.  He maintained that                        
charities would suffer from the legislation.                                   
                                                                               
Co-Chair Therriault MOVED to report HCS SB 273 (FIN) out of                    
Committee with the accompanying fiscal note.  There being NO                   
OBJECTION, it was so ordered.                                                  
                                                                               
Representative Martin maintained that true charities do not                    
have to worry.                                                                 
                                                                               
HCS CSSB 273 (FIN) was REPORTED out of Committee with "no                      
recommendation" and with a zero fiscal note by the                             
Department of Revenue dated 2/27/98.                                           
ADJOURNMENT                                                                    
                                                                               
The meeting adjourned at 10:30 a.m.                                            
House Finance Committee 13 4/21/98 a.m.                                        

Document Name Date/Time Subjects