Legislature(2003 - 2004)
03/31/2003 03:17 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 31, 2003
3:17 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Bob Lynn, Vice Chair
Representative Carl Gatto
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
Representative Nancy Dahlstrom
OTHER LEGISLATORS PRESENT
Representative Vic Kohring
COMMITTEE CALENDAR
HOUSE BILL NO. 148
"An Act instructing the State Board of Registration for
Architects, Engineers, and Land Surveyors to adopt minimum
technical standards relating to the practice of surveying."
- HEARD AND HELD
HOUSE BILL NO. 164
"An Act relating to the state's sovereign immunity for certain
actions regarding injury, illness, or death of state-employed
seamen and to workers' compensation coverage for those seamen;
and providing for an effective date."
- MOVED HB 164 OUT OF COMMITTEE
HOUSE BILL NO. 169
"An Act increasing the amount of revenue received by the state
from charitable gaming activities; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 148
SHORT TITLE:LAND SURVEY STANDARDS
SPONSOR(S): REPRESENTATIVE(S)HARRIS
Jrn-Date Jrn-Page Action
03/04/03 0377 (H) READ THE FIRST TIME -
REFERRALS
03/04/03 0377 (H) L&C
03/04/03 0377 (H) REFERRED TO LABOR & COMMERCE
03/31/03 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 164
SHORT TITLE:CLAIMS BY STATE-EMPLOYED SEAMEN
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
03/05/03 0435 (H) READ THE FIRST TIME -
REFERRALS
03/05/03 0435 (H) L&C, JUD, FIN
03/05/03 0435 (H) FN1: ZERO(ADM)
03/05/03 0435 (H) GOVERNOR'S TRANSMITTAL LETTER
03/05/03 0435 (H) REFERRED TO LABOR & COMMERCE
03/14/03 (H) L&C AT 3:15 PM CAPITOL 17
03/14/03 (H) <Bill Hearing Postponed>
03/31/03 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 169
SHORT TITLE:CHARITABLE GAMING REVENUE
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
03/05/03 0442 (H) READ THE FIRST TIME -
REFERRALS
03/05/03 0442 (H) L&C, FIN
03/05/03 0442 (H) FN1: (REV)
03/05/03 0442 (H) GOVERNOR'S TRANSMITTAL LETTER
03/05/03 0442 (H) REFERRED TO LABOR & COMMERCE
03/31/03 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
PETE FELLMAN, Staff
to Representative John Harris
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 148 on behalf of the sponsor
and answered questions.
SUSAN COX, Chief Assistant Attorney General
Civil Division (Juneau)
Department Of Law
Juneau, Alaska
POSITION STATEMENT: Presented HB 164 for the administration,
explaining how the injuries of state-employed seamen have been
handled under the workers' compensation and maritime law
systems.
BRAD THOMPSON, Director
Division of Risk Management
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Testified on HB 164, describing the numbers
and costs of state ferry crew claims under maritime law as
compared to the claims of other state employees covered by
Workers' Compensation.
DARRYL TSEU, Regional Director
Inland Boatmen's Union of the Pacific, Alaska Region
Juneau, Alaska
POSITION STATEMENT: Addressed concerns about HB 164 and
described the hazardous work conditions on board a ferry that
cause higher rates of accidents.
PAUL GROSSI, Director
Division of Workers' Compensation,
Department of Labor & Workforce Development
Juneau, Alaska
POSITION STATEMENT: Answered workers' compensation questions on
HB 164.
LARRY PERSILY, Deputy Commissioner
Office of the Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Presented HB 169 and proposed amendments on
behalf of the administration.
JAMES REID, Administrator
Juneau Moose Lodge
Juneau, Alaska
POSITION STATEMENT: Testified against HB 169, explaining how
charities that sell their own pull-tabs will be impacted.
DAVID SANDEN, General Manager
Multiple-beneficiary permittee (MBP)
Juneau Montessori Center
Southeast Alaska Friends of Montessori
Juneau Dance Unlimited
Juneau, Alaska
POSITION STATEMENT: Testified against HB 169 but proposed an
alternative sustainable gaming tax that would be split with the
municipalities where the money is raised.
BOB LOESCHER, President
Juneau Tlingit & Haida Community Council;
Advisor
Alaska Native Brother Grand Camp
Juneau, Alaska
POSITION STATEMENT: Opposed HB 169 and stated that local
governments should not be taxing pull-tabs.
TED BROWN
Alaska Indoor Sports
Anchorage, Alaska
POSITION STATEMENT: Testified against HB 169, noting that
increasing state revenues on charitable gaming from $2 million
to $12.5 million won't work.
DWIGHT McBRIDE, Operator
Ketchikan
POSITION STATEMENT: Opposed HB 169, stating that the pull-tab
market will not bear a lower gross income.
LEONARD WELLS
Homer
POSITION STATEMENT: Testified against HB 169, explaining that
people who are heavy pull-tab players will definitely notice a
lower payout rate.
TIM SMITH
Nome Fisherman's Association
Nome, Alaska
POSITION STATEMENT: Spoke in opposition to HB 169 and suggested
that the legislature remove the prohibition on electronic
gambling machines.
DAVID LAMBERT
Fairbanks, Alaska
POSITION STATEMENT: Opposed HB 169 and stated that few
manufacturers make 72 percent payout games.
JESSE VANDERZANDER
Alaska Outdoor Council;
Alaska Fish & Wildlife Conservation Fund
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 169 and
cautioned that decreasing the vendor and operator's shares could
close down their operations.
WAYNE STEVENS, Executive Director
Kodiak Chamber of Commerce
Kodiak, Alaska
POSITION STATEMENT: Spoke against HB 169, noting that the
reduced payout will reduce player participation, thereby cutting
revenue to charities.
DEBBIE BUSSDIEKER
Alaska Indoor Sports Distributing;
Kenai Peninsula Aerie 3525 Auxiliary
Kenai, Alaska
POSITION STATEMENT: Opposed HB 169, warning that the bill will
dramatically decrease pull-tab sales.
RICKY GEASE, Executive Director
Kenai Convention and Visitors Bureau
Kenai, Alaska
POSITION STATEMENT: Testified against HB 169, stating that the
state should not be setting price limits on the free market of
pull-tab payouts.
JOHN LOPEZ
Denali Gaming Supply
Anchorage, Alaska
POSITION STATEMENT: Opposed HB 169, explaining that it will
increase annual taxes from $3,000 to $30,000.
JIM PEOT, General Manager
Whaler Casino Supply
Anchorage, Alaska
POSITION STATEMENT: Testified against HB 169, noting that
players dictate the pull-tab market.
GENE HANSEN
Alaska State Fraternal Order of Eagles;
Aerie 1037 Far North Eagles
Fairbanks, Alaska
POSITION STATEMENT: Spoke in opposition to HB 169 and predicted
that the Eagles' single permit income of $15,000 will be halved
as a result of the bill.
GREG PETERSON, Employee
Alaska Indoor Sports Distributing
Ketchikan, Alaska
POSITION STATEMENT: Testified against HB 169, criticizing those
who dismiss the genuine public outcry against this bill.
ACTION NARRATIVE
TAPE 03-25, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:17 p.m. Representatives
Anderson, Lynn, Gatto, Crawford, and Guttenberg were present at
the call to order. Representative Rokeberg arrived as the
meeting was in progress. Representative Kohring was also in
attendance.
HB 148-LAND SURVEY STANDARDS
Number 0055
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 148, "An Act instructing the State Board of
Registration for Architects, Engineers, and Land Surveyors to
adopt minimum technical standards relating to the practice of
surveying."
Number 0070
PETE FELLMAN, Staff to Representative John Harris, Alaska State
Legislature, presented HB 148 on behalf of the sponsor. He
noted that HB 148 is an effort to address problems with land
surveys. He testified that various types of surveys are done
for banks, title companies, and real estate companies. He said
that people who know what they want [in a survey] are generally
happy with the results. However, for people who are not well
versed in land surveying, they may overpay or they get surveys
that aren't accurate or don't satisfy the bank or real estate
company. Mr. Fellman noted that the surveying industry as a
whole maintains very high standards through organizations such
as the Alaska Society of Professional Land Surveyors, which is
affiliated with the American Congress on Surveying and Mapping.
He gave several examples of how the industry is concerned about
doing a professional job.
Number 0276
MR. FELLMAN noted that in Alaska, the governor appoints the
members of the Board of Registration for Architects, Engineers
and Land Surveyors. The board sets the minimum standards for
surveyor testing, required schooling, and experience. Housed in
the Division of Occupational Licensing [in the Department of
Community and Economic Development], the board adopts
regulations, makes licensing decisions, and takes disciplinary
action against surveyors who violate the law.
MR. FELLMAN, noted, however, that the board has not set minimum
standards for an actual survey, and that is the intent of HB
148. He said he researched [survey laws in] 26 states, and only
one state did not have minimum standards for surveys. He said
he is working with Patrick Kalen, director of legislative
affairs for the Alaska Society of Professional Land Surveyors,
who is presently in Colorado at a convention addressing national
minimum standards. Mr. Fellman conveyed Mr. Kalen's interest in
incorporating these national standards into HB 148.
Number 0484
REPRESENTATIVE GATTO asked Mr. Fellman about [March 29, 2003]
correspondence in the members' bill packets from [Jim Colver,
Surveyor] who wrote that the American Land Title Association
already has standards for surveys that must be followed for
title insurance.
MR. FELLMAN replied that there are standards for title
insurance, but the standards are not in statute. The industry
has a very good system in place, but Alaska's board has not
adopted any standards. He stated that the industry tries to
present itself in a professional manner, but that doesn't mean
[every surveyor acts professionally].
REPRESENTATIVE GATTO asked if each title company makes up its
own standards.
Number 0565
MR. FELLMAN said in practice there are important variations
between types of surveys. Sometimes title companies and banks
specify what should be included in a survey report; other times,
they depend on the surveyor to decide what to cover in the work
product. Some surveys locate corner posts, section lines, and
easements; other surveys show septic tanks, buildings, and other
improvements.
REPRESENTATIVE GATTO asked why a surveyor might object to this
bill.
MR. FELLMAN replied that if he were a surveyor, he would not
object to promoting high standards for the industry.
Number 0662
REPRESENTATIVE GUTTENBERG asked for examples of problems with
surveyors' work.
MR. FELLMAN said he did not personally know of any problems. He
said Mr. Kalen had told him that the lack of formalized norms
for surveying in Alaska leads to undesired results, and he
supported the sponsor taking this action. Mr. Fellman said he
doesn't want people paying for [elements of] a survey they don't
need or want.
REPRESENTATIVE GUTTENBERG asked if there might be different
kinds of surveys approved rather than a uniform survey.
MR. FELLMAN replied that Mr. Kalen said that if HB 148 states a
minimum standard for surveys, he may not be able to provide a
simple section line survey. By allowing the board to adopt a
standard, then professionals are making the determination [about
what type of survey is appropriate].
Number 0817
REPRESENTATIVE CRAWFORD asked what this bill does about bad
surveys. He asked if current state law makes a surveyor liable
for a bad survey. He described his experience of buying into
the Rabbit Creek Heights and Rabbit Creek View subdivisions
where the original survey was flawed. The municipality platted
the subdivision, he bought title insurance, then several years
later learned that the surveys were all bad. The landowners
cannot sell the property because they cannot acquire title
insurance on it. He asked if HB 148 does anything about double-
checking a surveyor's work.
MR. FELLMAN said a citizen can complain to the board, which can
take a surveyor's license. Mr. Fellman said he was only
familiar with this recourse.
REPRESENTATIVE CRAWFORD replied that the surveyor did lose his
license in Alaska, but that didn't help any of the homeowners.
He said the bills for new surveys are running into the hundreds
of thousands of dollars for each property owner. He said he
wondered how frequently this happens. The surveyor should be
liable for these costs--not the homeowners.
Number 0983
MR. FELLMAN said perhaps the board should consider requiring
surveyors to have liability insurance and bonding.
REPRESENTATIVE CRAWFORD said he would like the bill's sponsor to
address the problem of faulty surveys.
Number 1014
REPRESENTATIVE ROKEBERG asked why there is no testimony from the
board or from the Alaska Society of Professional Land Surveyors.
MR. FELLMAN said that Mr. Kalen [who is a member of the board]
is out-of-state at a surveyor's convention.
CHAIR ANDERSON noted that Mr. Colver, the surveyor who sent an
urgent email opposing HB 148, is not present to testify today.
MR. FELLMAN, responding to a question from Representative
Rokeberg, noted that Representative Harris wishes to have the
committee hold the bill.
REPRESENTATIVE ROKEBERG noted that it's important to hear from
board members about the bill.
Number 1123
CHAIR ANDERSON said that public hearing on HB 148 will be kept
open and that the bill will be held over.
HB 164-CLAIMS BY STATE-EMPLOYED SEAMEN
Number 1125
CHAIR ANDERSON announced that the next order of business would
be HOUSE BILL NO. 164, "An Act relating to the state's sovereign
immunity for certain actions regarding injury, illness, or death
of state-employed seamen and to workers' compensation coverage
for those seamen; and providing for an effective date."
Number 1154
SUSAN COX, Chief Assistant Attorney General, Civil Division
(Juneau), Department Of Law, gave a brief overview of HB 164,
which was introduced at the request of the governor. This
legislation seeks to amend AS 09.50.250 [Actionable claims
against the state] by which the legislature has waived the
state's immunity from law suits. She said the specific purpose
of this bill is to withdraw the state's waiver of immunity, or
its consent to suit, and instead provide workers' compensation
coverage for state-employed seamen in the case of injury,
illness, or death.
MS. COX explained that state-employed seamen, who work mostly
aboard the Alaska Marine Highway System ("Marine Highways")
[Department of Transportation & Public Facilities], have
remedies today under federal provisions of maritime law and the
Jones Act [46 U.S.C. 688], as do other seamen employed in the
private sector. For eight years, the state had collective
bargaining agreements with the unions representing the ferry
workers and provided workers' compensation coverage in lieu of
those maritime remedies. Then, a court decision in 1991 ruled
that the state could not by contract or collective bargaining
agreement waive the employee's individual rights to those
remedies. However, in an earlier case, the Alaska Supreme Court
wrote that if the state wished to provide workers' compensation
coverage instead of subjecting itself to litigation by its
seamen employees, the state could do so by changing the statute.
Number 1263
MS. COX said the purpose of the bill is to get out of the
business of litigating over injuries that occur when the
employee is a seamen. The state would instead provide workers'
compensation coverage. This would create a uniform system of
workers compensation for all state employees; there would [no
longer be] a separate scenario for state-employed seamen. This
legislation would not affect the rights of seamen who are not
state employees nor would it impose state law on federal
maritime law. The bill withdraws the state's consent to be sued
under federal maritime law.
Number 1323
REPRESENTATIVE GATTO asked why the fiscal note is zero despite
the cost savings to the state.
MS. COX explained that the statute of limitations for a claim
under the Jones Act is three years. The effective date of this
bill is July 1, [2003]. She said this means that for any injury
or illness that occurs prior to July 1, the seaman would still
have up to three years to file a lawsuit, and the state would
continue litigating these cases for several years.
Number 1376
MS. COX explained that she is employed by the Attorney General's
office to defend personal injury litigation; her position is
funded by the Division of Risk Management ("Risk Management")
[Department of Administration]. In the long term, the state
expects to stop litigating seamen's claims, but she said she
can't predict when there will be cost savings. She does expect
a legal challenge to this bill by a seaman or by a group that
prefers the old system under maritime law. She predicted the
case will go to the Alaska Supreme Court before it is settled.
Number 1412
REPRESENTATIVE CRAWFORD asked why the state was subject to the
Jones Act instead of covering employees with workers'
compensation. He questioned if seamen receive less benefits
under workers' compensation.
MS. COX provided background on HB 164. Before 1983, state-
employed seamen were covered by federal maritime law. In 1963,
the attorney general was asked whether Alaska ferry employees
were covered by this federal law or whether the state's worker
compensation law applied. The opinion of the attorney general
at that time was that because the state had agreed in statute to
be sued in personal injury actions, it had opened the door to
maritime law jurisdiction, and so the federal law would apply
unless the state closed that door. She said the purpose of HB
164 is to close the door a little. For a period of years, the
state had Jones Act coverage for these employees, but in 1983,
the ferry worker unions and the state decided through collective
bargaining to use the workers compensation system. She said
that system worked quite well for a period of eight years until
it was invalidated by the Alaska Supreme Court.
Number 1436
MS. COX explained the difference between workers compensation
and the current remedies under the Jones Act and maritime law.
Under maritime law, if workers are injured on the job, leave the
vessel, and cannot return to work for weeks or months, they
receive their wages to the end of the voyage, without the
deduction of any sick leave; they also get a $45 dollar a day
stipend until they have recovered sufficiently to return to
work. They can use sick leave or vacation leave to add onto the
$45 a day maintenance payment to get the equivalent of a regular
check until they return to work.
Number 1523
MS. COX noted that under workers compensation, if the workers
were going to be off work for a period of weeks or months, they
would receive a regular payment of 80% of their average net
wage, tax free, at no cost to their sick leave or annual leave
accounts. She said that for the employee who is not interested
in suing anyone, the wage replacement of workers' compensation
is a better deal than a $45 a day stipend. In both
circumstances, the injured workers' medical bills are paid.
MS. COX commented that under the Jones Act, employees who have
more serious injuries can hire an attorney. They have to prove
in court that the employer was somehow at fault for the injury.
They can file a lawsuit within three years, and they can seek
types of damages that are not recoverable under workers'
compensation. Those damages are pain and suffering, as well as
more money for their loss of earnings, and [repayment for] the
use of their leave accounts.
Number 1636
MS. COX testified that the other significant difference between
the two systems is that workers' compensation does not cover an
illness unless it's an occupational disease. Under the maritime
law maintenance and cure system, if workers get sick aboard a
vessel, regardless of whether it's related to working
conditions, they're entitled to all of the benefits they'd
receive for a work-related injury.
MS. COX concluded that the two systems are not mirror images,
but the administration thinks it's a fair trade [for state-
employed seamen].
Number 1688
REPRESENTATIVE ROKEBERG asked if the seamen employees are going
to consider this a fair trade.
MS. COX said all state employees, except the seamen, are covered
by the [Alaska Workers Compensation Act] and receive the same
benefits. The seamen have the traditional maritime remedies as
well as leave usage, retirement and benefits, occupational
disability, and a variety of other state benefits. She said the
litigation is costly and consumes a lot of resources which would
not be consumed in a no-fault system like workers' compensation.
Number 1746
REPRESENTATIVE GUTTENBERG asked if the savings are achieved by
the seamen losing their procedural rights under the maritime
law.
MS. COX replied that the workers' compensation is a no-fault
system. Under workers' compensation, there is a presumption
that when there is an injury in the workplace it is work-
related, so benefits flow in most cases without much dispute.
If there is an issue, the employee is entitled to the full
administrative hearing process as well as rights to appeal to
the superior court. Under HB 164, the employee would no longer
have the right to sue the State of Alaska for pain and
suffering, emotional distress, the value of the used leave,
attorneys fees, or interest. She summarized that the value of
the claim under the Jones Act is completely different under
workers compensation. The latter is an economic formula based
on the employee's earning history and the degree to which the
person is impaired.
Number 1850
BRAD THOMPSON, Director, Division of Risk Management, Department
of Administration, explained that his agency administers self-
insurance programs for state agencies, including the maritime
liability program. He explained the information contained in
the members' bill packet, which analyzes the claims for the
Marine Highways employees [under the Jones Act] compared to the
claims from state employees covered by workers' compensation.
The frequency of claims per 100 FTEs [full-time equivalents] was
based on five years experience for all state employees. For the
Marine Highways employees, the rate of claim was 41 per 100
FTEs, whereas the overall injury rate for other state employees
was 8 claims per 100 FTEs. In contrast, the five state agencies
with the highest number of claims had a rate of claim of 10 per
100 FTEs. The average cost per 100 claims was $197,000 for
ferry employees compared to $64,000 for other state employees.
MR. THOMPSON explained why his agency's fiscal note did not show
a savings. He said the fiscal note reflects the agency's actual
funding. Each year the agency receives an appropriation for the
claims they expect to come due, a pay-as-you-go plan. The
agency covers many other state programs besides the maritime
unit and has unfunded liabilities of approximately $100 million.
Number 2001
MR. THOMPSON estimated a significant savings from HB 164. Under
workers' compensation coverage, he said he expects the average
cost for 100 FTE seamen to drop from the $197,000 figure to
$64,000 - typical for the other employees - or a reduction of
$133,000 per 100 FTEs. He estimated that applying that savings
to the 650 employees in the maritime unit would result in about
$865,000 in direct expense reduction. He said he can't show
that in a fiscal note because his agency is still dealing with
the ongoing, outstanding liabilities. He said there will be
significant savings down the road.
Number 2049
REPRESENTATIVE GUTTENBERG said that he and Representative
Crawford come from the construction industry which has a really
high accident rate. He described these numbers as amazing. He
asked how worker safety programs affect the equation.
MR. THOMPSON replied that the Alaska Marine Highway System does
have an active safety program with follow-up investigations of
accidents onboard the vessels. His financial information shows
the Risk Management dollars expended in claims, for the
attorneys for both sides, as well as the remedies paid to the
employee. He said there are other state costs that are not part
of the Risk Management budget. For example, the Marine Highways
budget must cover the unearned wages that are paid to the
employees who are not able to finish their sailing, he said.
Number 2107
REPRESENTATIVE ROKEBERG asked several questions about the
comparative data on the frequency and cost of state-employed
seaman claims.
MR. THOMPSON replied that these numbers - on a per 100 FTE basis
and a five year average - reflect the expected average savings,
based on the injury rate for the top five departments. He said
the average annual savings is based on a 100 FTE analysis,
applied to the roughly 655 positions in Marine Highways.
REPRESENTATIVE ROKEBERG asked Mr. Thompson whether he had
researched the rates of injury by employment for other states.
Number 2160
MR. THOMPSON said he has not seen comparisons of maritime units
for other states. To a follow-up question from Representative
Rokeberg, Mr. Thompson replied that the Department of Labor &
Workforce Development, Division of Workers Compensation,
analyzes the claims by job category. He recalled that those
numbers are similar to the ones he presented today, about 8
injuries per 100 FTEs. He said the Division of Workers'
Compensation would not have claim information on the maritime
unit.
Number 2193
REPRESENTATIVE CRAWFORD said he was dumbfounded as to why the
legislature didn't hear about these potential savings last year.
MR. THOMPSON replied that this [approach to saving money] has
been thought of before but not presented [to the legislature].
CHAIR ANDERSON noted that there are two fiscal notes, one from
the Division of Risk Management and the other from the Division
of Workers' Compensation.
Number 2252
DARRYL TSEU, Regional Director, Inland Boatmen's Union of the
Pacific, Alaska Region, explained that he represents union
members in both private and public employment. He said that
union attorneys are reviewing HB 164.
Number 2296
MR. TSEU said that his concerns involve the workers' claims for
the more serious injuries. He said he has personally witnessed
traumatic maritime accidents, for example, a fellow worker who
was permanently disabled with broken legs and a skull fracture
when a line separated. He said this worker was compensated for
the work he was no longer able to do. He said the accident
rates of ferry workers and other state workers are not easily
compared. An office injury doesn't compare with falling down a
stairway on a vessel. For example, on the MV Bartlett, the crew
carries all food from the car deck to the galley up a 20 - 30
foot ladder with an angle of 60 degrees and six-inch wide steps.
MR. TSEU noted that he is also concerned about the [lack of
savings in] the fiscal note.
MR. TSEU mentioned the problem of treating public employees in
the union differently from the workers with private employers.
TAPE 03-25, SIDE B
Number 2378
MR. TSEU said private and public employers should have to follow
the same rules in caring for their employees. As a merchant
mariner employed by the state since 1991, he said he has
personally seen the problems of getting medical bills paid
through [Risk Management's agent]. He said it is not
necessarily true that the state covers medical bills when there
is a injury or accident on board the vessel. He said his union
has been aggressively looking for health care outside the state
but has had trouble getting key figures about costs and
accidents from the state. He questioned whether there will be
significant savings [by changing to the workers' compensation
system]. He said the Marine Highways has become more active in
lowering the injuries and costs through on-board safety
programs. But, he said, maritime work, like construction, has a
higher percentage of injuries on the job. On the ferries,
things move around on the ships, and ships must navigate 20- and
30-foot seas. That movement of a vessel presents more occasions
for injuries.
Number 2271
REPRESENTATIVE GATTO said he understands that a job on a moving
ship is more dangerous, but he asked how that related to
insurance. He asked why one insurance plan is better than the
other for [seamen].
MR. TSEU replied that the Jones Act set out more protection for
sailors. The difference in compensation between vessel
employees and other employees are significant. Vessel employees
do not have the pay scales of the normal state worker, for
example, merit increases. People with 20 years experience are
often paid the same as those with 2 or 3 years experience. And
he said that training requirements and costs are steep. He said
no other state employee has to invest $500 in training just to
get a job as a dishwasher.
REPRESENTATIVE GATTO asked again why a person with a dangerous
job needs to have different insurance. He said he understands
that there will be more claims and the claims will be more
expensive.
Number 2164
MR. TSEU said that he could not answer that question because
he's not an insurance expert. He said that workers'
compensation limits what an individual may rightly deserve.
Currently, the legal system helps determine how much an injury
is worth.
MR. TSEU, in responding to a question from Representative Gatto,
said he didn't think merchant mariners deserve anything special;
he said he's here to protect the existing rights of his fellow
workers.
Number 2097
REPRESENTATIVE CRAWFORD described his experience when he fell
during construction work on the Sullivan Sports Arena. His
workers' compensation benefit was divided by 52 weeks, so it
amounted to about one-fifth of his weekly wage, and he missed
the entire work season that year. He asked how such an accident
would be treated for a seasonal employee of the Marine Highways.
MR. TSEU replied that about 40 percent of the employees are
seasonal, which means that in the seniority system, a person may
work only two or three months in the first several years.
Therefore, it takes three to five years of seasonal work to earn
any benefits such as sick leave or vacation time. Under the
Jones Act, a person receives maintenance and cure stipends of
$45 a day. He said ferry workers don't tend to misuse their
leave; they use it because it's easier to use than filing claims
with Risk Management's insurer, Pacific Claims, Inc. He
described problems with the company, such as checks being late
and the figures not matching.
Number 1949
REPRESENTATIVE ROKEBERG asked Mr. Tseu to clarify whether he's a
business agent or a member of the union's professional staff.
MR. TSEU replied that he's the regional director and a union
member; he's an employee with the State of Alaska on leave
without pay.
REPRESENTATIVE ROKEBERG reminded Mr. Tseu that his union and 12
other bargaining units groups opted out of the state health
insurance system several years ago.
Number 1897
MR. TSEU explained that this change occurred before his time [as
regional director]. He said the Division of Retirement and
Benefits [Department of Administration] has had trouble
providing the information the union needs to select another
health care insurer. He said his union officials signed a
letter of agreement with the previous administration, saying
they would try to find other alternatives for health care.
REPRESENTATIVE ROKEBERG noted that the prior governor forced
several collective bargaining units out of the state [health
insurance] pool. He asked if the union currently has health
insurance.
MR. TSEU said that whenever there is an injury on the vessel,
it's the responsibility of the employer to pay for all expenses
related to work injuries. He said that the insurance that is
provided to all state employees should not have to be used to
cover any accident or illness; the employer should pay these
expenses.
Number 1773
REPRESENTATIVE ROKEBERG asked Mr. Tseu to clarify whether the
union supports or opposes the bill.
MR. TSEU said the union neither supports nor opposes the bill
but is looking at it carefully. The union is waiting for a
response from the Attorney General's Office [Department of Law].
He expressed concern that there may be a savings of $850,000
[through Risk Management] but [increased] expenses of $2 million
[in workers' compensation]. These numbers need to be examined,
he said, whether it's here or in the House Judiciary Standing
Committee [the next committee of referral].
CHAIR ANDERSON noted that the judiciary committee can look at
the legal issues associated with coverage under the Jones Act.
Number 1695
PAUL GROSSI, Director, Division of Workers' Compensation,
Department of Labor & Workforce Development, appeared before the
committee to answer questions.
REPRESENTATIVE ROKEBERG asked Mr. Grossi about the incidents of
injury per employment type as presented by Mr. Thompson.
MR. GROSSI replied that there are no incidents of accidents for
state employees as high as ferry workers at the rate of 41 per
100 FTEs, as noted by Mr. Thompson. The highest rates would be
in the construction and timber industry, he said. He explained
that the fishing industry, which is not covered under workers'
compensation, also has a very high incident rate. He does not
have accurate statistics on seamen [because they are currently
covered by the federal maritime laws]. Upon questioning by
Representative Rokeberg, he said that he has not researched
national statistics for seaman claims.
Number 1615
REPRESENTATIVE ROKEBERG noted that such statistics would be very
interesting because there is such a large discrepancy between
ferry workers and other state employees.
MR. GROSSI said he will research the requested information.
REPRESENTATIVE ROKEBERG asked if an employee's primary health
insurance carrier is reimbursed when an employee wins a workers'
compensation claim.
MR. GROSSI said the private insurance carrier would be
reimbursed by the workers compensation carrier. However, the
state is self-insured for workers' compensation.
MR. ROKEBERG said he was concerned to hear from Mr. Tseu that
seamen's claims [through Risk Management's carrier] were not
being properly reimbursed.
Number 1559
MR. THOMPSON said the average loss rate of [41] per 100 FTEs
comprises both injuries and illnesses. Workers' compensation
typically only responds to an occupational illness, an illness
that arises out of the scope of duties. A seaman has the
ability to file a claim for any life illness, such as the flu or
a toothache, for example. He said that's the real reason the
frequency rate for seamen is significantly different than other
occupational statistics.
REPRESENTATIVE ROKEBERG asked about sick days in addition to the
maintenance and cure stipends, whether this is an instance of
double-dipping.
MR. THOMPSON said that if a person becomes ill during the one-
or two-week voyage, the person leaves the vessel and receives
wages for the voyage plus the maintenance rate of $45 a dollar
until reaching maximum medical cure. An employee can actually
benefit [financially] for time away from work for an illness not
occupationally caused.
Number 1461
REPRESENTATIVE GUTTENBERG asked if the $45 a day was a type of
per diem while stranded in a "foreign" port after getting ill or
injured.
MS. COX clarified that the system flies the worker back home to
the duty port if the person leaves the ship sick. At home the
person collects $45 a day until fit for duty. The person also
collects a full paycheck for the voyage, and no sick leave is
used. A person in that circumstance can get more money from the
wages and the $45 a day than working a normal shift. After the
end of the voyage, the person who is still out ill or injured
collects the $45 a day and can file leave slips to bring the
amount up to a normal pay check.
MS. COX, answering a question from Representative Gatto, said
that wages earned through workers' compensation are not taxable;
it's a percentage of the average net paycheck.
REPRESENTATIVE ROKEBERG asked Ms. Cox about the likelihood of
lawsuits if the bill passes.
Number 1321
MS. COX replied that the Office of the Attorney General has been
contacted by the law firm that handles the claims for the
injured and ill Marine Highways employees. The attorneys have
raised legal issues and submitted a memo to the Senate Labor and
Commerce Standing Committee, and her office is preparing a
response. She said she expects if the bill passes, a seaman
unhappy with the workers' compensation remedy would file a
lawsuit; then the state would file a motion saying seamen no
longer have the right to file lawsuits. Then, she said, there
would be a legal challenge about whether this bill works, and it
would probably end up in the Alaska Supreme Court.
REPRESENTATIVE ROKEBERG said he supports the bill in terms of
reducing the state budget.
Number 1251
REPRESENTATIVE ROKEBERG moved to report HB 164 out of committee
with individual recommendations and the accompanying two fiscal
notes.
Number 1234
REPRESENTATIVE GUTTENBERG objected. He said he would like to
see concrete values for the [maritime law and workers'
compensation] systems; he would like to see a side-by-side
comparison of the benefits available.
CHAIR ANDERSON said he will try to get that information from the
Department of Law and suggested that Representative Guttenberg
vote no recommendation on the bill. The bill could then move on
to the judiciary committee where the legal issues would be
reviewed. He said the House Labor and Commerce Standing
Committee could forward the requested information.
REPRESENTATIVE GUTTENBERG also requested information on other
maritime industries to compare with Alaska's accident rates.
Number 1150
REPRESENTATIVE GUTTENBERG said he maintained his objection.
REPRESENTATIVE ROKEBERG suggested that this means of saving
money might be preferable to grounding some ferries.
REPRESENTATIVE CRAWFORD said he is troubled by the bill. He
said if there's $890,000 to be saved, he wants to save it, but
not at the expense of workers' protection. He said he does not
favor moving the bill until the committee gets more information.
Number 1064
A roll call vote was taken. Representatives Gatto, Rokeberg,
Lynn, and Anderson voted in favor of moving HB 164 out of
committee. Representatives Guttenberg and Crawford voted
against it. Therefore, by a vote of 4-2, HB 164 was reported
out of the House Labor and Commerce Standing Committee.
HB 169-CHARITABLE GAMING REVENUE
Number 1051
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 169, "An Act increasing the amount of revenue
received by the state from charitable gaming activities; and
providing for an effective date."
Number 0987
LARRY PERSILY, Deputy Commissioner, Office of the Commissioner,
Department of Revenue, presented HB 169 on behalf of the
administration. He noted that the committee members' packets
contain amendments proposed by the administration. The
amendments insure that the bill fulfills its intent - to hold
the charities harmless from the additional tax. The amendment
limits the payout on pull-tabs to no more than 72 percent;
currently pull-tabs in Alaska are limited to a 78 percent
payout. By reducing the prize payout, additional revenue is
available to flow through to charities so they can pay the
increased tax and be held harmless. In most cases, according to
the department's calculations, the charities would receive more
revenue for their charitable purposes than they do now under the
existing law.
Number 0885
MR. PERSILY testified that the bill, with the proposed
amendments, increases the amount that goes to charities from
operators. Currently 30 percent of adjusted gross income goes
to charities; under this amended bill, it would be 35 percent.
In an operator-run game, 35 percent of the adjusted gross income
would go to charities, minus prizes and federal taxes. The
amended bill would also change the amount that goes to charities
from vendor-operated games. Right now, vendors can retain 30
percent of the ideal gross, which is the amount of money that
would come from selling all the pull-tabs in the box minus the
prizes. Under this legislation, vendors could retain 25
percent, thereby increasing the money going to charities.
MR. PERSILY noted that there is opposition to HB 169, as there
is to any change in charitable gaming and to any increase in the
tax that goes to the state. There is concern in the industry
that if the prize payout is reduced, people will game less, and
there will be less revenue. He testified that if this
legislation is adopted with a prize payout limit of 72 percent,
Alaska would be competitive with the national average.
Number 0786
REPRESENTATIVE GUTTENBERG asked whether there's a fixed payout
with any box of pull-tabs.
MR. PERSILY replied that all boxes of pull-tabs are sold with a
fixed return. The buyer specifies the desired return: 70
percent, 72 percent, 75 percent or 80 percent payout. Its up to
the purchaser to identify the desired rate of payout.
CHAIR ANDERSON noted that he and many committee members sit on
the boards of charities that rely on charitable gaming to
partially fund their organizations. He said he didn't think
that a person playing pull-tabs would notice that the payout was
lower or would chose not to play for that reason. He asked
whether the amendments to HB 169 would give more money to
charity and raise state revenues.
Number 0650
MR. PERSILY responded that by lowering the prize payout, it's
the players who are picking up the tab for the tax. He said out
of a $1,000 worth of pull-tabs, instead of $780 in prizes, there
would be $720 in prizes. In one sense, it's a user fee - the
player is the one paying the tax, he said. The charity writes
the check, but it's the player receiving the lower prize payout
that allows the money to flow through to the charity to cover
the tax. This assumes that the amount of gaming activity stays
the same, and all other revenue stays the same.
CHAIR ANDERSON disclosed that he is on the board of the
{Anchorage] Big Brothers, Big Sisters organization, which
depends on charitable gaming. He said he is a strong advocate
for charities getting a good return.
Number 579
MR. PERSILY, replying to a question from Representative
Crawford, noted that a 2001 report from the National Association
of Fundraising Ticket Manufacturers showed 73 percent as the
average payout for prizes on charitable gaming.
REPRESENTATIVE CRAWFORD mentioned that casino slot machines in
Las Vegas typically pay out 89 percent, and that if that payout
is lowered, people don't play it nearly as much. He said that
there's a point [in gaming, in general] where if people don't
get that return, they stop playing. He asked why casinos aren't
lowering their payout rates if they could do it.
CHAIR ANDERSON noted that casinos have a higher payout rate
because they are for-profit operations, as opposed to the gaming
in Alaska, which benefits charities.
MR. PERSILY responded that in Las Vegas, it's a matter of
competition. In Alaska, there are no casinos and no
competition. He said the administration believes that if the
law says the maximum prize payout is 72 percent, the games are
not going to lose business to a competitor down the street.
Number 0311
JAMES REID, Administrator, Juneau Moose Lodge, said HB 169 is a
bad bill. Charity organizations of all kinds rely on revenue
from the gaming industry, although it's not sufficient to
completely support the charities. He described the lodge's
three most popular games out of the five games they carry:
Criss-Cross with a gross profit of $514, Razzle with $464 gross
profit and payout of 84 percent; and Mumbo with a gross profit
of $439 and an 82 percent payout. If the payout on a game is
reduced by 14 percent to 72 percent, he questioned whether
patrons are going to continue to play it. Of the $514 received
from the [Criss-Cross] game, he said, $141.06 goes to the
charity after he pays sales tax, the cost of the game, mortgage,
utilities, supplies, and payroll.
MR. REID explained that the Moose Lodge supports numerous
charities in Juneau including Moose Heart, Moose Haven, Big
Brothers, Big Sisters, Glacier Swim Club, youth football,
baseball, and others. He said that if the state wants to take 5
percent, he will therefore pay the state an additional $124.45
in taxes, leaving $16.61 for charities. He said as a charity,
the Moose Lodge will not be making more money under this bill.
TAPE 03-26, SIDE A
Number 0012
MR. REID testified that he favored the bill not passing, thereby
avoiding a flood of requests from charities to the state for
lost revenue. He explained how his money is tied up from
several days to a month while he sells his boxes of games. He
noted that the bill addresses pull-tab operators [for-profit
businesses that contract with charities to sell their pull-tabs]
but it doesn't address permit-holders [charities that sell their
own pull-tabs].
MR. REID explained at the request of Chair Anderson that an
operator sells pull-tabs out of a pull-tab parlor for various
charities. The Juneau Moose Lodge, the Eagles, the VFW, and the
American Legion are all fraternal organizations that sell pull-
tabs out of their own establishments and can only sell to their
members. Anyone can go into a pull-tab parlor or bar and buy
pull-tabs, he said. Therefore, the revenue for a fraternal
organization [called a permit-holder or a permittee] is limited
to gaming by its members. If the state doesn't [send] back to
the charities the [money] they will be losing under this bill,
HB 169 is not a good [idea], he said.
Number 0339
DAVID SANDEN, General Manager, Multiple-beneficiary permittee
(MBP), Juneau Montessori Center, Southeast Alaska Friends of
Montessori, and Juneau Dance Unlimited, said the governor made a
mistake by not consulting the gaming industry when developing
HB 169. He said the governor should raise the $12.5 million by
using a different approach. He described the three types of
gaming operations in Alaska. Operators post a bond with the
state and sell pull-tabs; their objective is profit, and the
state forces them to give money to charity. An MBP consists of
several nonprofits who get together and hire a manager who
reports directly to the charities' boards. The third type is
the self-directed permittee like the Moose Lodge in Juneau; it
sells its own pull-tabs and is accountable to its members. The
other party is the vendor, for example, a bar owner or liquor
license owner, who buys a box of pull-tabs from a nonprofit
group, and then sells the pull-tabs and takes all the risk of
theft.
MR. SANDEN said he believes there can be a sustainable gaming
tax. The governor's proposed 5 percent tax sounds like a small
number, but it's a huge increase. He suggested staying with the
current 3 percent tax on the ideal net that is paid up front
when buying pull-tab games. He proposed increasing that 3
percent tax to 20 percent, having the state collect it and then
distribute back 50 percent to the municipalities where it is
raised [instead of having local governments collect their own
sales tax on pull-tabs]. He did support strengthening the
regulations about who can participate in charitable gaming. He
said some legal permittees are really ghost charities.
Number 0678
REPRESENTATIVE CRAWFORD recalled that last year the committee
defeated a bill which was a gross receipts tax on all
businesses. He said HB 169 looks like another gross receipts
tax bill rather than a tax on the profits of gaming.
Number 0695
BOB LOESCHER, President, Juneau Tlingit & Haida Community
Council; Advisor, Alaska Native Brotherhood [ANB] Grand Camp,
explained that these organizations are self-directed social
organizations that have permits for pull-tabs and some raffles.
He described the bill as ill conceived. He said there's a
difference between social organizations and commercial operators
[for-profit businesses that contract with a charity], especially
in motivation. He said his organization uses the funds to
operate the community council buildings, to pay death benefits,
and to fund youth and cultural programs. Many of these projects
involve no state funding, and there is a real need for this
money.
MR. LOESCHER said he believes that gaming is a state concern,
and that municipalities should not be collecting a sales tax.
He said his groups could handle the [increase in the] proposed
state tax if there was not already a Juneau sales tax of 5
percent. If the state caps the winnings at 72 percent, the
market will be substantially depressed, he predicted. He warned
that his groups will be driven out of business, having to pay
the city sales tax, an increased state tax, and loosing
customers because of the 72 percent cap on prize payout. He
explained that they use the pull-tabs as draw for their bingo
games, which doesn't make much money either. He urged the
committee to kill this bill.
Number 943
TED BROWN, Alaska Indoor Sports, explained that his company is a
pull-tab distributor. He said he sells pull-tab games around
the state at different payout rates, and he does not believe the
72 percent payout will work. Such a dramatic change [dropping
the payout rate] at once will cause a downturn in playing, he
predicted. He noted that people get used to a particular game,
for example, Criss Cross, and they will notice [if there's a
different rate or a different game being offered]. He suggested
that players be taxed on their winnings rather than the gross
for all the cards they play.
MR. BROWN said there's no room to increase taxes on charitable
gaming. After expenses are backed out, what's left goes to
charities; an [increased] tax depletes that even further. To
increase gaming revenues to the state from $2 million to $12.5
million won't work, he predicted. The current formula is 3
percent of the ideal net or adjusted gross. He described that
as fair and equitable and asked the point of changing a formula
that works. The change from 3 percent of the ideal net to 5
percent of the gross on the average game represents 37 percent
of the profit dollars generated, and he questioned how anyone
can take a 37 percent hit and survive. Charities are not well
organized, but they are starting to respond to problems raised
by this bill, he added.
Number 1190
MR. BROWN, responding to a question from Chair Anderson,
explained that the eight most popular games being played in
Juneau, for example, will have to be replaced with new games
that have a lower payout of 72 percent. He said players will
notice the change [in their favorite games] and will not
participate.
1275
CHAIR ANDERSON noted that he will hold the bill in committee and
will keep public testimony open.
Number 1300
DWIGHT McBRIDE, Operator, testified that he has been in business
since 1989 and currently operates 13 permits. He noted that
people are trying to grasp what HB 169 will do to the charities.
He predicted that he would have to close three of his four
stores. He said this bill will ruin gaming.
Number 1488
LEONARD WELLS introduced himself as a pull-tab vendor at a bar
and also as an employee who sells pull-tabs for the American
Legion. He said that the majority of the [witnesses] at the
Senate hearing [on a similar bill] could not testify because
there also was not enough time. Regarding HB 169, he pointed
out that the 72 versus the 78 percent [payout] is very important
to the [serious] players [who take some of their winnings as
more pull-tabs or buy-backs]. He said for the people who only
buy a few pull-tabs, the payoff doesn't make much difference.
He opposed HB 169 as written.
Number 1584
TIM SMITH, Nome Fisherman's Association, explained that there is
[already] a 4 percent city sales tax on gross receipts for pull-
tabs; an additional 5 percent state tax on the gross would take
nearly half (indisc.). With this [proposed] ideal net, the cost
of the games, accounting, equipment, supplies, and postage
doesn't leave a lot for the charities. The state can't take [an
additional] $12 million out of charitable gaming without it
impacting the charities, he reasoned. There's only so much
discretionary [money available for charitable games]. In rural
Alaska, many villages use pull-tab sales to fund their
government operations because they don't have a big tax base.
This is a painless tax that provides for rural governance. The
state will have to make that up somehow if the [villages] lose
the pull-tab revenue.
MR. SMITH said that currently, some vendors are working for 30
percent. If it is cut back to 25 percent, that's not a very
good deal for the vendors, he said, and it's [already] difficult
to talk some of these vendors into running pull-tabs now. Their
share of the ideal net is 30 percent. They pay for the pull-
tabs up front. They're responsible for the any losses from
fraud, theft, or errors, and those losses come out of their
share. If you reduce their share to 25 percent of the ideal
net, a lot of them won't vend pull-tabs.
MR. SMITH commented that everyone appreciates the need to raise
more revenues for the state. He proposed removing the
prohibition on electronic gaming machines; they would provide
more revenue for the state as well as more revenue for the
charities. His organization opposes HB 169 as written.
Number 1744
DAVID LAMBERT testified that he runs a fundraising business that
represents 17 nonprofits. He said that this business put about
$1 million into the Fairbanks economy last year. With a five
percent [increase, his business] would have lost $88,500
dollars, 28 [of his employees] would have lost their jobs and 17
nonprofits would have received $0. He said that it's getting
tougher to operate a business. Rent and payroll costs are going
up every year; there's no room for a 5 percent increase. Most
manufacturers make 72 percent payoff games. The Department of
Revenue is giving out false information. The players are very
aware of the percentage [of payout]. His fastest moving games
are the ones that pay out at 85 percent; there's entertainment
value in them. He asked how many people [actually] support this
bill. He said it would be good to have hearings where everyone
who wanted to testify could testify.
Number 1867
JESSE VANDERZANDER, Alaska Outdoor Council; Alaska Fish &
Wildlife Conservation Fund, explained that about 12,000 people
are members of thee two groups. The two organizations fund
college scholarships for fish and wildlife management and for
women in outdoor management, the collection of oral histories of
hunting and trapping tales, and hunter education, all programs
that rely on gaming. He said HB 169 would cripple their
operations. Their groups have two sources of these funds --
through vendors and operators. If HB 169 passes, the groups'
vendor said he would not run any more games if his margin was
reduced; it's just barely worth it to him now. Mr. Vanderzander
said he has to plead with this vendor to run the games.
Regarding the operator, if he was cut 50 percent, 5 of his 10
stores would shut down. When one store shuts down, an entire
charity could shut down because that charity receives 100
percent of its cut from that one store. If the groups' operator
goes out of business, their gaming is totally gone. He said his
organizations have very serious concerns about this legislation.
Last year their vendor paid $933 in taxes; this bill would
increase it to $7,200. His organizations oppose HB 169.
Number 2001
WAYNE STEVENS, Executive Director, Kodiak Chamber of Commerce,
stated that the governor proposes to hold harmless the
nonprofits in [changes to the] charitable gaming [statute]. The
transmittal letter for HB 169 describes problems with operators
and references placing the same restrictions on vendors. The
City of Kodiak disallowed pull-tab operators many years ago,
therefore only nonprofits and vendors are allowed to run
charitable gaming in Kodiak. Reducing payout to players will
reduce participation. While the bill's [proponents] claim to
offset increases in taxes by raising the amounts paid to
nonprofits, less [playing] will mean less money for the
nonprofits. Mr. Stevens predicted that players will move to on-
line computer gaming, a serious competitor to pull-tabs in
Alaska. The drafters of this bill failed to understand the
psychology of gaming; passage of this bill will drive players
away. He urged the committee not to pass HB 169.
Number 2025
DEBBIE BUSSDIEKER, Alaska Indoor Sports Distributing; Kenai
Peninsula Aerie 3525 Auxiliary, noted that of the $274 million
generated by pull-tab gaming [last year], $214 million was paid
out in prizes, leaving $60 million. She asked committee members
to consider what portion of the $274 million currently generated
by pull-tab gaming was generated by 28 percent profit games.
She testified that she has repeatedly heard from many players
that they won't be able to play 28 percent profit games. She
noted that the players are intelligent people; they play for the
odds. The number one game currently sold is a 15 percent profit
game. This bill will decrease [pull-tab] sales dramatically,
she warned.
Number 2165
RICKY GEASE, Executive Director, Kenai Convention and Visitors
Bureau, testified that his group runs a multiple-beneficiary
permittee with the Peninsula Oilers. He sits on the board of
directors of the Kenai Chamber of Commerce and the Kenai Tourism
Marketing Council, all of which depend on charitable gaming to
run their operations. He said nonprofits exist and are not
taxed for a good reason -- they fill a vital void between
government and business. He said it's horrible to solve a
budget crisis on the backs of nonprofits; it takes valuable
money out of [Alaskan] communities. He said he doesn't believe
the state should set price limits on the free market [of pull-
tab payouts]. He described a payout of 72 percent as an inane
idea. The 'ideal gross' in this bill is monopoly money, he
said. He doesn't agree that by changing the current gaming,
another $17 million will flow into the state. He said it's a
matter of putting out an inferior product and expecting people
to pay more for it. The bill is calculated on the assumption
that gaming expenses will drop 13 percent. Last year, his
organizations paid $3,000 in taxes, calculated on the net; if HB
169 passes, they will pay $30,000 more taxes based on the ideal
net. He said that $30,000 will come out of his facilities and
out of scholarships. His groups are adamantly opposed to HB
169.
Number 2296
JOHN LOPEZ, Denali Gaming Supply, stated that the governor has
received erroneous advice on HB 169. He said he believes there
will be economic consequences. He said it's not true that
gaming operates in a vacuum; players will not continue to play
with the same frequency when the prizes are reduced. He
believes the economic burden will be higher than the tax
benefits gained: loss of jobs, real estate vacancies, and loss
of services to the community by nonprofits. There are no
provisions [in HB 169] for rising expenses in gaming operations
and the mandated net proceeds associated with compliance. In a
gaming environment where overhead is heavily regulated, HB 169
will make certain gaming operations noncompliant or insolvent.
He cited the Department of Revenue's information from the
National Association of Fundraising Ticket Manufacturers; the
total national average prize payout of 73 percent includes pull-
tabs as well as bingo, raffles, and state lotteries.
TAPE 03-26, SIDE B
Number 2375
MR. LOPEZ continued that Alaska has donated large sums of money
to charities by using high percentage payout games. He said
that charitable gaming is shrinking nationwide. This bill gives
no consideration to the amount of prizes that a player gives
back.
Number 2275
JIM PEOT, General Manager, Whaler Casino Supply, stated that he
distributes pull-tab supplies to people who vend them throughout
the state. He said he is vehemently opposed to HB 169. He
agreed with earlier comments that the market is dictated by the
players. The average profit on pull-tabs is far less than 28
percent. He disagreed with earlier testimony that proposed a 20
percent tax on ideal net tax instead of a 5 percent gross; that
would be the equivalent of a 650 percent tax increase for the
charities. If HB 169 passes, Mr. Peot predicted that there will
be a lot less money for charities and for operators. He said
that players are not going to pay more money for the pull-tabs.
Players have a fixed amount of money that is either gone in 20
minutes or an hour; they won't be coming in with more money.
The whole premise of [HB 169] that players will come up with
extra money for the [lower payout] games is way off the mark.
Number 2157
GENE HANSEN, Alaska State Fraternal Order of Eagles; Aerie 1037
Far North Eagles, noted that the state Eagles have one permit
with one vendor, which produces $11,000 to $15,000 gross income
per year. He listed the numerous causes that would receive less
money [if HB 169 passes]. Many people, such as families whose
houses burn down, have no other source of assistance. He asked
the committee not to pass HB 169.
Number 2080
GREG PETERSON, employee, Alaska Indoor Sports Distributing,
commented that he is offended that the administration so quickly
dismisses the grass roots, genuine public outcry against this
bill. He said [opponents of HB 169] are people who know what
harm this legislation will bring on their communities and on
their charities. He urged the committee to hold the bill.
[HB 169 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:50 p.m.
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