Legislature(1997 - 1998)

04/22/1997 08:03 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
             HOUSE STATE AFFAIRS STANDING COMMITTEE                            
                         April 22, 1997                                        
                            8:03 a.m.                                          
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Jeannette James, Chair                                         
 Representative Ethan Berkowitz                                                
 Representative Fred Dyson                                                     
 Representative Kim Elton                                                      
 Representative Mark Hodgins                                                   
 Representative Ivan Ivan                                                      
 Representative Al Vezey                                                       
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 All members present.                                                          
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 CS FOR SENATE BILL NO. 68(FIN)                                                
 "An Act relating to the Task Force on Privatization; and providing            
 for an effective date."                                                       
                                                                               
      - MOVED HCS CSSB 68(STA) OUT OF COMMITTEE                                
                                                                               
 * HOUSE BILL NO. 156                                                          
 "An Act relating to charitable gaming; relating to the percentages            
 of gross receipts from charitable gaming that are required to be              
 devoted to charitable uses; requiring managers of charitable gaming           
 activities to be licensed; removing the authority for operators to            
 conduct charitable gaming; prohibiting permittees, members in                 
 charge, and gaming managers from having certain financial interests           
 or associations with persons who have been convicted of certain               
 crimes; and providing for an effective date."                                 
                                                                               
      - HEARD AND HELD                                                         
                                                                               
 SENATE BILL NO. 124                                                           
 "An Act relating to salmon classics and race classics."                       
                                                                               
      - SCHEDULED BUT NOT HEARD                                                
 * HOUSE CONCURRENT RESOLUTION NO. 9                                           
 Proposing amendments to the Uniform Rules of the Alaska State                 
 Legislature relating to committee meetings; and providing for an              
 effective date.                                                               
                                                                               
      - SCHEDULED BUT NOT HEARD                                                
 SENATE BILL NO. 141                                                           
 "An Act relating to permits to carry concealed handguns; and                  
 relating to the possession of firearms."                                      
                                                                               
      - BILL CANCELLED (NOT YET PASSED BY SENATE)                              
 (* First public hearing)                                                      
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  CSSB  68(FIN)                                                        
 SHORT TITLE: TASK FORCE ON PRIVATIZATION                                      
 SPONSOR(S): SENATOR(S) WARD, Wilken                                           
                                                                               
 JRN-DATE      JRN-PG             ACTION                                       
 01/30/97       172    (S)   READ THE FIRST TIME - REFERRAL(S)                 
 01/30/97       172    (S)   STA, FIN                                          
 01/31/97       194    (S)   STA WAIVED PUBLIC HEARING NOTICE,                 
                             RULE23                                            
 02/06/97              (S)   STA AT  3:30 PM BELTZ ROOM 211                    
 02/06/97              (S)   MINUTE(STA)                                       
 02/11/97              (S)   STA AT  3:30 PM BELTZ ROOM 211                    
 02/13/97              (S)   STA AT  3:30 PM BELTZ ROOM 211                    
 02/13/97              (S)   MINUTE(STA)                                       
 02/18/97       392    (S)   STA RPT  CS  3DP 2NR    SAME TITLE                
 02/18/97       392    (S)   DP: GREEN,WARD,MILLER; NR:                        
                             MACKIE,DUNCAN                                     
 03/06/97              (S)   FIN AT  9:00 AM SENATE FINANCE 532                
 03/21/97              (S)   FIN AT  9:00 AM SENATE FINANCE 532                
 03/21/97              (S)   MINUTE(FIN)                                       
 03/21/97              (S)   MINUTE(FIN)                                       
 03/25/97              (S)   FIN AT  9:00 AM SENATE FINANCE 532                
 03/25/97              (S)   MINUTE(FIN)                                       
 03/25/97              (S)   MINUTE(FIN)                                       
 03/26/97       872    (S)   INDETERMINATE FN TO STA CS (GOV/OMB)              
 03/26/97       872    (S)   FIN RPT  CS  2DP 5NR      SAME TITLE              
 03/26/97       872    (S)   DP: SHARP, DONLEY;    NR: PEARCE,                 
 03/26/97       872    (S)   NR: PHILLIPS, ADAMS, TORGERSON,                   
                             PARNELL                                           
 03/26/97       872    (S)   FN TO CS (LAA)                                    
 03/26/97       872    (S)   INDETERMINATE FN TO FIN CS (GOV/ADM)              
 03/26/97       872    (S)   PREVIOUS IND FN APPLIES TO CS                     
                             (GOV/OMB)                                         
 03/27/97              (S)   RLS AT 10:45 AM FAHRENKAMP RM 203                 
 04/02/97       934    (S)   RULES TO CALENDAR AND 1NR   4/2/97                
 04/02/97       935    (S)   READ THE SECOND TIME                              
 04/02/97       935    (S)   FIN  CS ADOPTED UNAN CONSENT                      
 04/02/97       936    (S)   AM NO  1     OFFERED BY DUNCAN                    
 04/02/97       936    (S)   AM NO  1     FAILED  Y6 N13 A1                    
 04/02/97       936    (S)   ADVANCED TO THIRD READING                         
                             UNAN CONSENT                                      
 04/02/97       936    (S)   READ THE THIRD TIME  CSSB 68(FIN)                 
 04/02/97       937    (S)   PASSED Y14 N5 A1                                  
 04/02/97       937    (S)   EFFECTIVE DATE(S) SAME AS PASSAGE                 
 04/02/97       937    (S)   DUNCAN  NOTICE OF RECONSIDERATION                 
 04/03/97       964    (S)   RECON TAKEN UP - IN THIRD READING                 
 04/03/97       965    (S)   PASSED ON RECONSIDERATION Y15 N5                  
 04/03/97       965    (S)   EFFECTIVE DATE(S) SAME AS PASSAGE                 
 04/03/97       966    (S)   TRANSMITTED TO (H)                                
 04/04/97       983    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 04/04/97       984    (H)   STATE AFFAIRS, FINANCE                            
 04/17/97              (H)   STA AT  8:00 AM CAPITOL 102                       
 04/17/97              (H)   MINUTE(STA)                                       
 04/22/97              (H)   STA AT  8:00 AM CAPITOL 102                       
                                                                               
 BILL:  HB 156                                                               
 SHORT TITLE: CHARITABLE GAMING                                                
 SPONSOR(S): REPRESENTATIVE(S) MARTIN                                          
                                                                               
 JRN-DATE      JRN-PG             ACTION                                       
 02/24/97       445    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/24/97       445    (H)   STATE AFFAIRS, JUDICIARY, FINANCE                 
 04/22/97              (H)   STA AT  8:00 AM CAPITOL 102                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 CRAIG JOHNSON, Legislative Assistant                                          
    to Senator Jerry Ward                                                      
 State Capitol, Room 423                                                       
 Juneau, Alaska 99801-1182                                                     
 Telephone:  (907) 465-4940                                                    
 POSITION STATEMENT:  Provided testimony on SB 68.                             
                                                                               
 REPRESENTATIVE TERRY MARTIN                                                   
 Alaska State Legislature                                                      
 State Capitol, Room 502                                                       
 Juneau, Alaska 99801-1182                                                     
 Telephone:  (907) 465-3783                                                    
 POSITION STATEMENT:  Sponsor of HB 156.                                       
                                                                               
 DENNIS POSHARD, Director                                                      
 Charitable Gaming Division                                                    
 Department of Revenue                                                         
 P.O. Box 110440                                                               
 Juneau, Alaska 99811-0440                                                     
 Telephone:  (907) 465-2229                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 PAUL BLAIR                                                                    
 P.O. Box 168                                                                  
 Glennallen, Alaska 99588                                                      
 Telephone:  (907) 822-3520                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 MICHAEL SLEZAK                                                                
 1014 West Northern Lights                                                     
 Anchorage, Alaska 99503                                                       
 Telephone:  (907) 561-3646                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 GARY LANGILLE, Representative                                                 
 Kodiak Chamber of Commerce;                                                   
 Small World Day Care Center; and                                              
 Kodiak Liquor License Association                                             
 512 Marine Way                                                                
 Kodiak, Alaska 99615                                                          
 Telephone:  (907) 486-3313                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 EARL MICKELSON, Commander                                                     
 American Legion Post - Kodiak                                                 
 P.O. Box 687                                                                  
 Kodiak, Alaska 99615                                                          
 Telephone:  (907) 486-3258                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 JEFF HARMON, Representative                                                   
 Lions Club - Kodiak                                                           
 P.O. Box 1735                                                                 
 Kodiak, Alaska 99615                                                          
 Telephone:  (907) 486-5448                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 WAYNE STEVENS, Executive Director                                             
 Kodiak Chamber of Commerce                                                    
 P.O. Box 1485                                                                 
 Kodiak, Alaska 99615                                                          
 Telephone:  (907) 486-5557                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 97-47, SIDE A                                                            
 Number 0001                                                                   
                                                                               
 The House State Affairs Standing Committee was called to order by             
 Chair Jeannette James at 8:03 a.m.  Members present at the call to            
 order were Representatives James, Dyson, Hodgins and Vezey.                   
 Members absent were Berkowitz, Elton and Ivan.  Representative                
 Berkowitz arrived at 8:04 a.m.; Elton at 8:06 a.m.; and Ivan at               
 8:12 a.m.                                                                     
                                                                               
 CSSB 68(FIN) - TASK FORCE ON PRIVATIZATION                                  
 The first order of business to come before the House State Affairs            
 Standing Committee was CSSB 68(FIN), "An Act relating to the Task             
 Force on Privatization; and providing for an effective date."                 
                                                                               
 Number 0076                                                                   
                                                                               
 CRAIG JOHNSON, Legislative Assistant to Senator Jerry Ward,                   
 announced that Senator Jerry Ward did not have a problem with the             
 proposed committee substitute (0-LS0386/P, Cook, 4/18/97).  As                
 requested, an opinion from the Division of Legislative Legal and              
 Research Services was included as well.                                       
                                                                               
 CHAIR JEANNETTE JAMES asked Mr. Johnson if the legal opinion                  
 indicated that it was all right?                                              
                                                                               
 MR. JOHNSON replied, "Yes."                                                   
                                                                               
 CHAIR JAMES explained the committee substitute added the language             
 "and control excess growth in government" to page 1, line 14.                 
                                                                               
 CHAIR JAMES further explained that there was a legal opinion from             
 Tamara B. Cook, Director, Division of Legal and Research Services,            
 which indicated this was not a violation of the separation of                 
 powers.                                                                       
                                                                               
 Number 0274                                                                   
                                                                               
 REPRESENTATIVE AL VEZEY moved to adopted the committee substitute             
 (0-LS0386/P, Cook, 4/18/97) and move it from the committee with               
 individual recommendations and the attached fiscal note(s).                   
                                                                               
 Number 0331                                                                   
                                                                               
 REPRESENTATIVE ETHAN BERKOWITZ asked that the question be divided.            
 He wanted to make sure he understood the focus of the task force.             
 The concept of privatization was not necessarily the focus of                 
 creating a more streamline government.  Therefore, he wanted to               
 ensure that the task force had the reach to go beyond simple                  
 questions in regards to privatization.                                        
                                                                               
 Number 0376                                                                   
                                                                               
 CHAIR JAMES replied that was covered at the last meeting.                     
 Nevertheless, she called for a roll call vote to determine if the             
 question should be divided.  Representatives Berkowitz and Elton              
 voted in favor of dividing the question. Representatives James,               
 Dyson, Hodgins and Vezey voted against dividing the question.  The            
 question was not divided.                                                     
                                                                               
 Number 0470                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ stated the concept of privatization was an           
 overworked term.  His research indicated that it was a narrow focus           
 in terms of efficiency.  Therefore, the bill should be drafted so             
 that it was either narrow to focus on the term or broad to focus on           
 efficiency in general.                                                        
                                                                               
 Number 0518                                                                   
                                                                               
 REPRESENTATIVE VEZEY stated that privatization was a word with                
 5,000 applications, not definitions.  It covered a broad plethora             
 of ways to conduct business.  The task force in the bill was given            
 a very broad assignment.                                                      
                                                                               
 Number 0582                                                                   
                                                                               
 CHAIR JAMES stated that she was in the minority in regards to her             
 concerns that privatization and out sourcing had two different                
 meanings.  Privatization was a buzz word that took on different               
 connotations.  Her biggest concern was controlling excess growth in           
 government and she felt more comfortable with the bill since the              
 language was added.  She would be willing to move it out of the               
 committee.                                                                    
                                                                               
 Number 0675                                                                   
                                                                               
 REPRESENTATIVE KIM ELTON stated he objected because it seemed like            
 a wonderful summer project for somebody.  If this was a graduate              
 program, one graduate student would do it over the summer.                    
 Instead, a task force was being established to create another                 
 report.  Quite frankly, we could study privatization without a task           
 force; it was an unnecessary growth of government.                            
                                                                               
 Number 0723                                                                   
                                                                               
 REPRESENTATIVE MARK HODGINS stated that he had been a contractor              
 with the United States Postal Service for the past 19 years so he             
 knew that privatization worked.  A task force was not needed. There           
 were areas of government that could not be privatized but there               
 were a lot that could be privatized.  Therefore, he would vote in             
 favor of the bill.                                                            
                                                                               
 Number 0790                                                                   
                                                                               
 REPRESENTATIVE FRED DYSON wondered if part of Representative                  
 Berkowitz' objection was because it focused on only one way of                
 trying for a more efficient government.  Privatization was not the            
 only solution, but in defense of the bill, it did not preclude a              
 wise and intelligent use of the other things that could be used to            
 help government work better.  He would vote in favor of the bill              
 moving from the committee.                                                    
                                                                               
 CHAIR JAMES called for a roll call vote.  Representatives James,              
 Dyson, Hodgins, Ivan and Vezey voted in favor of the motion.                  
 Representatives Berkowitz and Elton voted against the motion.  The            
 HCS CSSB 68(STA) was so moved from the House State Affairs Standing           
 Committee.                                                                    
                                                                               
 HB 156 - CHARITABLE GAMING                                                  
                                                                               
 The next order of business to come before the House State Affairs             
 Standing Committee was HB 156, "An Act relating to charitable                 
 gaming; relating to the percentages of gross receipts from                    
 charitable gaming that are required to be devoted to charitable               
 uses; requiring managers of charitable gaming activities to be                
 licensed; removing the authority for operators to conduct                     
 charitable gaming; prohibiting permittees, members in charge, and             
 gaming managers from having certain financial interests or                    
 associations with persons who have been convicted of certain                  
 crimes; and providing for an effective date."                                 
                                                                               
 Number 0931                                                                   
                                                                               
 REPRESENTATIVE TERRY MARTIN, Alaska State Legislature, explained              
 the bill developed three years ago during a finance hearing with              
 the Department of Revenue and the Charitable Gaming Division.  It             
 was apparent that the legislature should consider evaluating gross            
 receipts versus net profit receipts from the operators and                    
 committees.  If the committees and departments were allowed to go             
 by gross receipts there would be major efficiencies and the                   
 committees would perhaps be more active in evaluating what they               
 could receive by taking a larger role.  In comparisons to other               
 states and even Canada, Alaska was out of line by allowing a higher           
 percentage to go to charities.  The only way to have a higher                 
 percentage, however, was to either decrease the rewards or the                
 operating expenses.  Furthermore, the budget for the Charitable               
 Gaming Division was depended on the bill.  Its budget had been                
 reduced by $300,000 instead of the original $500,000 in light of              
 the bill because additional accountants would be needed to review             
 the annual reports.  The major emphasis was the adjustment of the             
 gross receipts versus the adjusted net receipts for the true amount           
 of money that a charity received.  The major objection had been               
 from the multiple beneficiary permit holders in hopes that the                
 operating costs would be reduced when the opposite had happened.              
 He felt that the issue had been settled under former Governor                 
 Walter Hickel when the talk was a minimum of "only" 30 percent when           
 12 percent was going to charity.  Since that time, however, only 8            
 percent or 9 percent was going to charity.  What happened? he                 
 asked.  Multiple beneficiary permit holders was one of the reasons.           
 In conclusion, if we truly want gaming in Alaska to help private              
 charities then let's at least do what other states did - gave a               
 fair margin of the receipts to the committees.                                
                                                                               
 Number 1296                                                                   
                                                                               
 CHAIR JAMES asked Representative Martin if he had a sectional                 
 analysis of the bill?  It was a complicated bill.                             
                                                                               
 CHAIR JAMES explained the took 30 percent of the gross up front and           
 gave it to the charities, and eliminated the audit requirement by             
 the department thereby saving money.  She asked Representative                
 Martin if there was an increase in tax?                                       
                                                                               
 Number 1339                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied the tax had not been adjusted.  It              
 had been brought up by the different committees, however.  The tax            
 was at 3 percent now.                                                         
                                                                               
 Number 1349                                                                   
                                                                               
 CHAIR JAMES asked Representative Martin if the tax would bring in             
 more money?                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied the tax would bring in more money in            
 revenues, but it did not have to if the committee decided                     
 otherwise.  It was adjustable.  The tax right now was at 3 percent.           
 It was up to the committee to decrease it for example if it wanted            
 to.                                                                           
                                                                               
 CHAIR JAMES stated the committee did not want to go in that                   
 direction.                                                                    
                                                                               
 Number 1388                                                                   
                                                                               
 REPRESENTATIVE DYSON commented he was uncomfortable setting a fixed           
 profit margin.  He would be outraged by government doing that in              
 any other industry.  It was laudable but we were saying to the                
 charities that they were not smart enough to pick an operator that            
 would give a reasonable cut of the receipts.  He asked                        
 Representative Martin why the charities were not smart or                     
 sophisticated enough to require reputable operators?                          
                                                                               
 Number 1455                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied the original concept of "gaming" in             
 Alaska was acceptable because it helped the poor and homeless.  The           
 concept of "gambling" was viewed in the same vein as prostitution             
 when the only difference between gaming and gambling were the                 
 letters "b" and "l".  The same methods were used in gambling as               
 they were used in gaming.  Therefore, the idea was to allow for a             
 fair percentage to go to the charitable organizations.  And,                  
 according to the data, the organizations involved in gaming were              
 getting away with an awful lot in the name of charity.                        
                                                                               
 Number 1586                                                                   
                                                                               
 REPRESENTATIVE DYSON asked Representative Martin why were the                 
 charities not able to pick reputable operators that would give them           
 a very fair cut of the gross receipts?                                        
                                                                               
 Number 1569                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied it was a delicate situation.  The               
 last complainant said the operator told him to find somebody else.            
 A lot of times a charity did not know who were the good operators             
 until after the fact as in business.  Right now the operators were            
 doing well without giving too much to charities.                              
                                                                               
 Number 1622                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Representative Martin how much the 1             
 percent tax equaled to as a net percentage?                                   
                                                                               
 REPRESENTATIVE MARTIN replied $270 million.  The tax was not                  
 changed in the bill, only the receipts.  More taxes would go to the           
 division, however.                                                            
                                                                               
 REPRESENTATIVE HODGINS replied a 1 percent net would be easy to               
 look at while a 1 percent gross would be harder to look at.                   
                                                                               
 REPRESENTATIVE HODGINS asked Representative Martin what the profit            
 was on a box of pull-tabs?                                                    
                                                                               
 Number 1697                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied it depended on the type of pull-tabs.           
 Moreover, if an operator knew he had to give 20 percent on a box of           
 pull-tabs, for example, he could give to the charity the money in             
 the beginning.  It would then be up to the operator to sell all of            
 the pull-tabs.  The winning factors could be adjusted so that they            
 paid a 75 percent payout.                                                     
                                                                               
 Number 1744                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Representative Martin if the bill                
 affected volunteer operations?                                                
                                                                               
 Number 1772                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied volunteer operators such as the                 
 American Legion did it all internally.  They knew what the profit             
 would be from the beginning.  It was the operator that needed to be           
 evaluated in terms of what it did for charity. It was also hoped              
 that the charities would become more active in regards to the                 
 operators.                                                                    
                                                                               
 Number 1832                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Representative Martin, for                       
 clarification, if the bill mostly impacted operators and not                  
 volunteer type organizations?                                                 
                                                                               
 REPRESENTATIVE MARTIN replied, "Yes."                                         
                                                                               
 Number 1884                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ wondered if the bill was another                     
 Republican tax plan by taxing the gaming industry 1 percent.                  
                                                                               
 REPRESENTATIVE MARTIN replied he was not taxing the gaming                    
 industry.  The tax was in current law.  He would prefer no tax, but           
 someone had to protect the charitable organizations through either            
 general funds or receipts.                                                    
                                                                               
 Number 1921                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ asked Representative Martin if his beef              
 was with the operators?                                                       
                                                                               
 REPRESENTATIVE MARTIN replied his beef was if the state wanted to             
 legalize gambling for charities then they should get a fair shake.            
                                                                               
 REPRESENTATIVE BERKOWITZ asked Representative Martin if the fair              
 shake would come from the operators?                                          
                                                                               
 REPRESENTATIVE MARTIN replied the fair shake would be the                     
 monitoring of the operators to ensure that expenses added on as net           
 costs would be looked into in a fair way.                                     
                                                                               
 REPRESENTATIVE BERKOWITZ commented, if we were concerned about how            
 operators behaved, more effort would be spent on training and                 
 regulating them.                                                              
                                                                               
 REPRESENTATIVE MARTIN replied if you wanted charitable gaming a               
 cautious approach was needed.  There was potential for corruption             
 and misuse of the money in gambling - $270 million was not a small            
 amount of money.  Who would monitor the operators?  he asked.  The            
 charities did not want to monitor them so the only answer was to              
 look at the gross receipts.                                                   
                                                                               
 Number 2025                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ explained he met a young woman who was               
 dying who put together some charitable gaming efforts that were               
 skimmed off by unscrupulous operators.  The failure was in the                
 state's ability to ensure the ethical behavior of the operators.              
 The problem, therefore, was regulating the operators rather than              
 telling the market directly how to behave.                                    
                                                                               
 Number 2074                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied the major weakness over the years had           
 been that the operators were in complete control.  They had put an            
 absolute stop to looking into their industry.  We were the                    
 responsible ones.  It was not just a revenue generating bill as               
 claimed by some.  The simplest and most efficient way was to put              
 the operators on a separate accounting system of gross receipts.              
                                                                               
 Number 2123                                                                   
                                                                               
 CHAIR JAMES stated she did not view pull-tabs as an industry.  They           
 were here because charities needed a method to raise revenue for              
 their causes.  In addition, the revenues gleaned by the state,                
 however calculated, should cover the administrative cost of the               
 program.  A charity should get the maximum amount after covering              
 the administrative cost - expenses and payouts.  She needed to know           
 the administrative cost to determine if 30 percent was a good                 
 amount.  There was no way that the state could take enough as a               
 percentage to pay for the types of audits that Representative                 
 Berkowitz mentioned.  However, audits could be avoided if there               
 were not any loopholes.  It was similar to the flat tax versus                
 graduated tax system debate.  She asked for a schematic of the                
 administrative expenses to determine if 30 percent was a good                 
 amount.                                                                       
                                                                               
 Number 2315                                                                   
                                                                               
 REPRESENTATIVE ELTON stated there was a market dynamic here that              
 assumed at some point sales would go down.  He asked Representative           
 Martin what would happen to the sales if 30 percent of the gross              
 went to charities?  Would charities end up with less because sales            
 dropped dramatically? for example.                                            
                                                                               
 Number 2345                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied he did not want to make any                     
 assumptions.  But in comparison to other states, Alaskan charities            
 were not getting their fair share.  The bill adjusted the factors             
 involved.  It was a big mess according to the Internal Revenue                
 Service (IRS).  The IRS did not know what truly was going to                  
 charity and what the operators were keeping for themselves.                   
                                                                               
 Number 2405                                                                   
                                                                               
 REPRESENTATIVE ELTON stated he would like to know what charities              
 were actually getting in other states at 30 percent.  It would                
 indicate the balance.  An amount of gross going to a charity would            
 mean nothing while an amount of money on the other hand would give            
 the market dynamic.  It was frustrating because the information               
 should be available.                                                          
                                                                               
 Number 2435                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied he did not know if that type of                 
 information was available or not.  The national industry studied              
 the dynamics under legalized gambling.  The studies indicated that            
 many states wanted to pull back on legalized gambling because they            
 found out it was not raising the expected revenues.  There was a              
 diminishing factor of the market.                                             
                                                                               
 TAPE 97-47, SIDE B                                                            
 Number 0001                                                                   
                                                                               
 REPRESENTATIVE ELTON stated he did not disagree with the goal but             
 an arbitrary figure like 30 percent scared him.  He applauded the             
 effort of getting to the balance that gave more to charities but              
 not of picking a number out of the air.                                       
                                                                               
 Number 0028                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied, "You can choose any number you want,           
 if the major goal is to make sure a fair amount in comparison to              
 other cities and states is going to charity."  If the free market             
 dictated, however, the charities would receive even less money.               
                                                                               
 Number 0040                                                                   
                                                                               
 CHAIR JAMES stated she did not know if 30 percent was the right               
 number.  Testimony further down the road would help determine if              
 the number was right.  It would be important to look at what the              
 operators were claiming as expenses, assuming they were correct.              
                                                                               
 Number 0097                                                                   
                                                                               
 REPRESENTATIVE IVAN asked somebody to speak about the statutes                
 being repealed in Sec. 32.                                                    
                                                                               
 CHAIR JAMES explained that a sectional analysis had been requested            
 that would explain the repealed statutes.                                     
                                                                               
 Number 0121                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ stated he agreed with the objective of the           
 bill.  He did not like the approach, however.  Furthermore, the               
 difference between Democrats and Republicans was that Republicans             
 felt - in general - people were greedy without altruistic                     
 intentions.  He agreed with the approach strangely enough.  The fix           
 was to deny that the less than benign impulses were restrained                
 through enforcement.  Therefore, the weak link in the bill was not            
 providing enforcement of the operators.                                       
                                                                               
 Number 0161                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied there was enforcement in current                
 statute.  Enforcement would not be needed if the receipts went to             
 gross because the charities themselves would find out real quick if           
 they had been cheated.  The enforcement would be by making the                
 charities more active.  He did not mind if the committee wanted to            
 look at the current enforcement in statute for adjustments.  In               
 addition, he did not mind if the committee wanted to adjust the               
 gross receipt figure of 30 percent either.                                    
                                                                               
 Number 0218                                                                   
                                                                               
 CHAIR JAMES explained the difference between Democrats and                    
 Republicans was that Democrats supported collective rights while              
 Republicans supported individual rights.                                      
                                                                               
 Number 0246                                                                   
                                                                               
 REPRESENTATIVE HODGINS explained it would take a very convincing              
 argument to change his mind about operators and why they were                 
 needed.  A charity was lazy if it needed an operator to generate              
 funds.  He did not like operators from Anchorage going to the Kenai           
 Peninsula and taking dollars out.  He would love to see that either           
 the charities raise their own money; or not to get a permit, if               
 they wanted an operator to raise money for them.  That was the way            
 he wanted to see the pull-tabs and bingo industry go.                         
                                                                               
 Number 0298                                                                   
                                                                               
 REPRESENTATIVE MARTIN replied he agreed in his heart.  Most                   
 charities did not want to get involved with gambling.  It was                 
 important that the charities become more active in the process and            
 as a result they would make more money.                                       
                                                                               
 Number 0380                                                                   
                                                                               
 DENNIS POSHARD, Director, Charitable Gaming Division, Department of           
 Revenue, was the next person to testify in Juneau.  This was a                
 simple bill with very complicated consequences.  The bill was                 
 simple because it only did the following three things:  removed               
 operators as a legal means of conducting gaming activity,                     
 established the method to determine the amount that went to                   
 charities as a percentage of gross, and licensed gaming managers.             
 Consequently, the amount of tax that went to the state changed to             
 1 percent of the gross receipts or roughly a tax increase of 1000             
 percent.  It was unintended and according to discussions with                 
 Representative Martin the level should be set back to .1 percent to           
 equal what it was today.                                                      
                                                                               
 MR. POSHARD further explained the current method used to derive at            
 the public benefit either through net proceeds or a minimum                   
 percentage of gross receipts required the division to police the              
 expenses through long and contentious audits.  Therefore, the                 
 department strongly supported going to a system of gross receipts;            
 it would be more efficient.                                                   
                                                                               
 MR. POSHARD further explained the department supported licensing              
 gaming managers.  Many operators went to a multiple beneficiary               
 permitees (MBP) status which had evolved to take advantage of the             
 current system.  Typically errors were found in an audit but it was           
 difficult to prove that the individual was responsible as opposed             
 to the charity.                                                               
                                                                               
 MR. POSHARD further explained there were charities that did not               
 have the capital means to get involved in gaming; they did not have           
 the expertise for example.  Therefore, a well regulated operator              
 provided a legitimate service to charities.                                   
                                                                               
 MR. POSHARD further explained the fiscal note was an assumption at            
 the 30 percent gross level.  It would not only put operators out of           
 business but some vendors and charities as well.  It would be more            
 difficult for charities to remain in compliance causing a                     
 significant reduction in the amount of gaming and the amount of               
 money going to charities.                                                     
                                                                               
 MR. POSHARD further explained the information on the impact to the            
 industry at various percentages that Representative James and Elton           
 were asking for was not possible.  No one had done studies on the             
 elasticity of a pull-tab or bingo dollar.  The economist within the           
 Department of Revenue also indicated it would be difficult to come            
 up with a schedule internally.  There were too many factors                   
 involved so it boiled down to a judgement.                                    
                                                                               
 MR. POSHARD further explained the current statewide average return            
 to charities was 9 percent for pull-tabs and 4 percent for bingo as           
 a percentage of gross.  In addition, the current prize payout for             
 pull-tabs was 78 percent and above 90 percent for bingo.  The                 
 profits ranged from 60 percent to 80 percent depending on the pull-           
 tab.  The fixed expenses would be affected at a forced 30 percent             
 causing a reduction in the amount of money going to charities.                
                                                                               
 MR. POSHARD further explained, in conclusion, that the division               
 supported two out of the three changes to the bill.  It did not               
 want to get involved with changing the charitable gaming pie - the            
 prize payouts, the expenses, and the amount of money that went to             
 the charities.  The state currently took $2 million out of the                
 charitable gaming pie and the division received about $900,000 to             
 run the program.  This year it appeared that the division would               
 only receive about $600,000.                                                  
                                                                               
 Number 1124                                                                   
                                                                               
 CHAIR JAMES asked Mr. Poshard what was the percentage of net that             
 the operators received?                                                       
                                                                               
 MR. POSHARD replied it was 30 percent of adjusted gross for pull-             
 tabs and 10 percent for bingo and all other activities for an                 
 operator.                                                                     
                                                                               
 CHAIR JAMES asked Mr. Poshard if the bill changed bingo?                      
                                                                               
 MR. POSHARD replied the bill changed the percentage of gross to 30            
 percent for all activities.                                                   
                                                                               
 CHAIR JAMES asked Mr. Poshard if the 9.43 percent in comparison to            
 other states included bingo?                                                  
                                                                               
 MR. POSHARD replied, "Yes."  The 9.43 percent was the total amount            
 of public benefit derived - money to charities and state revenues.            
                                                                               
 CHAIR JAMES stated, if we changed the figure to 10 percent of the             
 adjusted gross, the amount that charities received would increase             
 by a sizeable amount.                                                         
                                                                               
 MR. POSHARD replied the 9.43 percent was gross, not adjusted gross.           
                                                                               
 CHAIR JAMES asked Mr. Poshard if we were talking about the actual             
 payout or the available payout?                                               
                                                                               
 MR. POSHARD replied it depended on the charity.  The charity had              
 the option to account for it either way - actual or available.                
                                                                               
 CHAIR JAMES asked Mr. Poshard if the charity would be paid the                
 ideal gross up front or after the operator sold the pull-tabs in a            
 bar for example?                                                              
                                                                               
 MR. POSHARD replied currently there were two choices - a lease                
 agreement or a vendor arrangement.  In a lease agreement the                  
 charity leased space in a bar and sold the pull-tabs itself.  In a            
 vendor arrangement the bar paid the charity 70 percent of the ideal           
 net up front and sold the pull-tabs itself.                                   
                                                                               
 CHAIR JAMES asked Mr. Poshard if the 1 percent was paid on the 70             
 percent of the ideal net?                                                     
                                                                               
 MR. POSHARD replied, "Correct."                                               
                                                                               
 CHAIR JAMES asked Mr. Poshard if he knew how many were done in a              
 vendor arrangement as opposed to a lease agreement?                           
                                                                               
 MR. POSHARD replied of the total pull-tab activity at $208 million            
 the vendors accounted for about $22 million or 10 percent.                    
                                                                               
 Number 1433                                                                   
                                                                               
 CHAIR JAMES stated she supported a change so that the division                
 would not have to audit expenses.  It was a waste of time and it              
 did not get to the problem.  She asked Mr. Poshard if the bill                
 would disallow vendors?                                                       
                                                                               
 Number 1484                                                                   
                                                                               
 MR. POSHARD replied the bill did not outlaw vendors.  However, if             
 a vendor was required to pay 30 percent of the gross receipts up              
 front there was not a lot of room left for profit.  The task force            
 heard that the 70/30 arrangement was too high.  Therefore, anything           
 that would change the profit to the vendor would result in fewer              
 vendors.                                                                      
                                                                               
 Number 1618                                                                   
                                                                               
 CHAIR JAMES asked Mr. Poshard if the vendors would have to have a             
 license?                                                                      
                                                                               
 MR. POSHARD replied vendors currently registered with the division.           
                                                                               
 Number 1641                                                                   
                                                                               
 REPRESENTATIVE HODGINS stated in the example of the wholesale                 
 scenario the charities were lazy because they would get their money           
 up front.  He asked Mr. Poshard if the Moose Club for example would           
 be required to hold a certain percentage as profit, or would all              
 proceeds be considered?                                                       
                                                                               
 Number 1745                                                                   
                                                                               
 MR. POSHARD replied, "Yes, to both."  All of the proceeds would be            
 considered, but if they did not equal 30 percent of the gross                 
 receipts, the club would be out of compliance resulting in a                  
 suspension or revocation of its license.                                      
                                                                               
 Number 1805                                                                   
                                                                               
 REPRESENTATIVE ELTON asked Mr. Poshard if there was anything that             
 established elasticity in the slot machine business?                          
                                                                               
 Number 1843                                                                   
                                                                               
 MR. POSHARD replied, "Yes."  That was why in Las Vegas the payouts            
 were posted.                                                                  
                                                                               
 Number 1879                                                                   
                                                                               
 REPRESENTATIVE ELTON asked Mr. Poshard what percentage of charities           
 used operators?  And what percentage of the gaming revenues were              
 derived through operators?                                                    
                                                                               
 Number 1895                                                                   
                                                                               
 MR. POSHARD replied about 15 percent to 20 percent of the charities           
 used operators.  Operators accounted for about 33 percent of the              
 gross gaming activity and about 23 percent of the total money to              
 charities.                                                                    
                                                                               
 Number 1929                                                                   
                                                                               
 REPRESENTATIVE ELTON asked Mr. Poshard if there should be a                   
 different system for bingo?                                                   
                                                                               
 Number 1944                                                                   
                                                                               
 MR. POSHARD replied it was a policy call.  In his opinion, he would           
 say, yes, because they had different types of prize payout                    
 structures.  Bingo generally paid out more in prizes than pull-               
 tabs.                                                                         
                                                                               
 MR. POSHARD distributed to the committee members a handout titled             
 "Charity Gaming in North America:  1995 Report".                              
                                                                               
 CHAIR JAMES announced she would put the bill in a subcommittee to             
 look at it further.                                                           
                                                                               
 Number 2061                                                                   
                                                                               
 REPRESENTATIVE IVAN said he respected the intent of the bill, but             
 he was concerned about the tough reporting requirements for the               
 smaller communities and the impact.  The state was so large.  He              
 asked Mr. Poshard if he saw a problem in the smaller communities              
 such as Akiak?                                                                
                                                                               
 Number 2161                                                                   
                                                                               
 MR. POSHARD replied the division did not see a lot of problems with           
 operators and vendors in the smaller communities.  There was not a            
 bar in Akiak for example.  Typically, it was the local governing              
 body that applied for the permit which hired a person from the                
 community to keep track of it.  There were some problems of                   
 accuracy under the current system because they were required to               
 account for everything.  The bill would probably simplify reporting           
 thereby making things easier for the smaller communities.  That did           
 not mean it would make it more difficult to achieve profitability,            
 however.                                                                      
                                                                               
 Number 2364                                                                   
                                                                               
 PAUL BLAIR was the first person to testify via teleconference in              
 Glennallen.  The discussion had been interesting.  It looked like             
 you were going in the right direction by changing the gross                   
 receipts to the ideal net, and the 1 percent to .1 percent.  The              
 payout on pull-tabs at 30 percent would cause a loss for the                  
 operators.  It was good to see discussion surrounding the                     
 percentages in a favorable way for all.                                       
                                                                               
 TAPE 97-48, SIDE A                                                            
 Number 0001                                                                   
                                                                               
 MR. BLAIR further said that he was not in favor of the bill as                
 written now, but would be in favor if amended as discussed today.             
                                                                               
 Number 0111                                                                   
                                                                               
 CHAIR JAMES announced he would have another chance to testify when            
 the subcommittee came back with a committee substitute.                       
                                                                               
 Number 0145                                                                   
                                                                               
 MICHAEL SLEZAK was the next person to testify via teleconference in           
 Anchorage.  This was not exactly a $270 million industry, it was              
 more of a $40 million to $50 million industry because the play                
 backs were not real dollars, but a generated byproduct.  Some                 
 communities such as Juneau had a sales tax of 5 percent of the                
 gross that did not take into account the prize payout.  A 30                  
 percent of the gross receipts would kill pull-tabs and gaming in              
 Alaska.  A percentage of gross was not a bad concept.  The problem            
 was generality of the industry.  Pull-tabs stores, bingo halls, and           
 moose clubs did not have the same overhead costs.  Bingo halls, for           
 example, were a feeding area for pull-tabs.  There were a lot of              
 things to consider to come up with a viable adjusted gross                    
 percentage which had not been discussed today.                                
                                                                               
 Number 0420                                                                   
                                                                               
 GARY LANGILLE, Representative, Kodiak Chamber of Commerce; Small              
 World Day Care Center; and Kodiak Liquor License Association, was             
 the next person to testify via teleconference in Kodiak.  It seemed           
 that it was a top-down approach with little consultation and                  
 arbitrary action in regards to the state dealing with non-profits             
 until there was legislation.  This was not a good way for                     
 government and non-profits to deal with each other; it led to poor            
 legislation and bad relations.  Section 1 (b) was just another blow           
 to non-profit fund raising.  Gaming was to allow non-profits to               
 raise their own money so that they were less dependent on hard                
 pressed government revenues.  Gaming was not to be used as a source           
 of government revenue.  Therefore, why was this needed if the                 
 current pull-tab tax revenue was greater than what the division               
 spent?  In addition, he wondered if Sec. 16 (3) (c) applied to a              
 non-profit group that wanted to fight a tax on its industry?                  
 Furthermore, a 30 percent of the gross receipts going to charity              
 was not practical.  In Kodiak we did not allow operators so all of            
 the money went to the non-profits.  We could not meet the standard.           
 There were games that paid up to 84 percent in payouts so the                 
 numbers did not match.  The cutting back of game prizes would kill            
 the sales of the pull-tabs and put us out of business.  We did                
 support provisions on the right to examine books and records - Sec.           
 5.  We also supported Sec. 11.  In general, more consultation and             
 work was needed on the bill.                                                  
                                                                               
 Number 0602                                                                   
                                                                               
 EARL MICKELSON, Commander, American Legion Post - Kodiak, was the             
 next person to testify via teleconference in Kodiak.  He echoed a             
 good share of what Mr. Langille brought up.  It seemed that we were           
 back to putting lids and controls on operators yet the concept of             
 gaming expressed in the statutes was for non-profit.  There were              
 operators that were for profit.  We supported the bill to the                 
 extend that it did away with operators.  "We don't need them.  We             
 haven't needed them here."  Only 15 percent to 20 percent of the              
 non-profits used operators.  If you did not drop the operators then           
 the controls should be addressed separately.  We did not support 30           
 percent, we could not live with it.  In addition, the state revenue           
 for audits could be performed at 1 percent of the net.                        
                                                                               
 Number 0786                                                                   
                                                                               
 JEFF HARMON, Representative, Lions Club - Kodiak, was the next                
 person to testify via teleconference in Kodiak.  The city of Kodiak           
 passed an ordinance to not allow operators and we get by just fine            
 without them.  Operators were essential for some non-profits in the           
 state but the bill was a "big anvil to try to kill a little fly."             
 Unfortunately, the bill would kill all the rest of us at the same             
 time.  The bill should be renamed to "a bill to destroy charitable            
 gaming in the state of Alaska."  In addition, the club was proud of           
 its operation and would invite an audit of its books at any time.             
 He personally resented the comments that charities were lazy or               
 stupid.  Sometimes they just did not have the wherewithal to do it.           
 The passage of the bill would result in less services rendered by             
 the non-profits to the communities so that the same non-profits               
 would go to the legislature looking for money.  The bill was not              
 well written; it simply took out the wording "ideal net" and                  
 inserted the word "gross".  Take the bill back to the subcommittee            
 and give it further thought on its impact.                                    
                                                                               
 Number 0936                                                                   
                                                                               
 WAYNE STEVENS, Executive Director, Kodiak Chamber of Commerce, was            
 the next person to testify via teleconference in Kodiak.  The                 
 chamber was a non-profit organization designated as a 501(3)(6).              
 It ran a self-directed game with its own employees.  It took a very           
 proactive role in its gaming activity.  The chamber felt it was               
 being penalized by the suggestion of passing the bill.  Gaming was            
 a good fund raising activity for the chamber.  It had its own                 
 accountant that monitored the income and expenses.  He took                   
 exception to the statement that HB 156 would help alleviate                   
 criminal activity often plagued by the gaming industry by forcing             
 the gaming permitees to file quarterly reports.  The chamber                  
 submitted all reports required annually and quarterly.  The net               
 proceeds were far greater than what Mr. Martin alluded to, we                 
 already paid 1 percent on the net proceeds and 3 percent to the               
 state for the cost of the games.  The passage of the bill would not           
 increase revenue to the state; it would shut down self-directed               
 gaming and eliminate a stable funding stream to non-profit                    
 organizations in Kodiak and throughout the state.                             
                                                                               
 Number 1034                                                                   
                                                                               
 CHAIR JAMES announced the subcommittee would include the following            
 committee members:  Representative Hodgins, Berkowitz and James.              
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 Number 1063                                                                   
                                                                               
 CHAIR JAMES adjourned the House State Affairs Standing Committee              
 meeting at 9:53 a.m.                                                          
                                                                               
                                                                               

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