Legislature(1997 - 1998)

05/01/1997 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                            
                          May 1, 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                                                            
                                                                               
 HOUSE JOINT RESOLUTION NO. 29                                                 
 Supporting an increase in federal funding for prostate cancer                 
 research.                                                                     
                                                                               
      - MOVED HJR 29 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                                                         
                                                                               
 (* First public hearing)                                                      
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  HJR 29                                                               
 SHORT TITLE: FUNDING FOR PROSTATE CANCER RESEARCH                             
 SPONSOR(S): REPRESENTATIVE(S) ELTON, Hudson, Kemplen, Austerman,              
 Kookesh, Berkowitz, Nicholia, Ivan, Dyson, Kubina, Sanders, Davies,           
 Rokeberg                                                                      
                                                                               
 JRN-DATE      JRN-PG             ACTION                                       
 03/14/97       665    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/14/97       665    (H)   HES, STATE AFFAIRS                                
 04/02/97       913    (H)   COSPONSOR(S): KEMPLEN, AUSTERMAN                  
 04/02/97       913    (H)   KOOKESH                                           
 04/03/97       977    (H)   COSPONSOR(S): BERKOWITZ, NICHOLIA, IVAN           
 04/03/97       977    (H)   DYSON, KUBINA                                     
 04/04/97       998    (H)   COSPONSOR(S): SANDERS                             
 04/09/97      1047    (H)   COSPONSOR(S): DAVIES                              
 04/10/97              (H)   HES AT  3:00 PM CAPITOL 106                       
 04/10/97              (H)   MINUTE(HES)                                       
 04/11/97      1075    (H)   HES RPT  6DP                                      
 04/11/97      1076    (H)   DP: DYSON, GREEN, BUNDE, PORTER,                  
                             KEMPLEN                                           
 04/11/97      1076    (H)   BRICE                                             
 04/11/97      1076    (H)   ZERO FISCAL NOTE (LAA)                            
 04/11/97      1076    (H)   REFERRED TO STATE AFFAIRS                         
 04/14/97      1103    (H)   COSPONSOR(S): ROKEBERG                            
 05/01/97              (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                       
 04/22/97              (H)   MINUTE(STA)                                       
 04/25/97              (H)   STA AT  8:00 AM CAPITOL 102                       
 04/25/97              (H)   MINUTE(STA)                                       
 05/01/97              (H)   STA AT  8:00 AM CAPITOL 102                       
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 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.                            
                                                                               
 REPRESENTATIVE TERRY MARTIN                                                   
 Alaska State Legislature                                                      
 State Capitol, Room 502                                                       
 Juneau, Alaska 99801-1182                                                     
 Telephone:  (907) 465-3783                                                    
 POSITION STATEMENT:  Sponsor of HB 156.                                       
                                                                               
 J.J. "JACK" POWERS                                                            
 P.O. Box 241113                                                               
 Anchorage, Alaska 99524                                                       
 Telephone:  (907) 561-4711                                                    
 POSITION STATEMENT:  Provided testimony in opposition to HB 156.              
 ED BOUGEOIS, Representative                                                   
 Anchorage Opera                                                               
 1507 Spar Avenue                                                              
 Anchorage, Alaska 99501                                                       
 Telephone:  (907) 279-2557                                                    
 POSITION STATEMENT:  Provided testimony in opposition to HB 156.              
                                                                               
 JOHN LOPEZ, Representative                                                    
 Alaska Bow Hunters Association                                                
 6233 Prosperity Drive                                                         
 Anchorage, Alaska 99504                                                       
 Telephone:  (907) 243-7003                                                    
 POSITION STATEMENT:  Provided testimony in opposition to HB 156.              
                                                                               
 MIKE SLEZAK                                                                   
 1014 West Northern Lights Boulevard                                           
 Anchorage, Alaska 99503                                                       
 Telephone:  (907) 561-3646                                                    
 POSITION STATEMENT:  Provided testimony in opposition to HB 156.              
                                                                               
 DAVE LAMBERT                                                                  
 P.O. Box 71243                                                                
 Fairbanks, Alaska 99707                                                       
 Telephone:  (907) 459-7304                                                    
 POSITION STATEMENT:  Provided testimony in opposition to HB 156.              
                                                                               
 TABER REHBAUM, Executive Director                                             
 The Greater Big Brothers/Big Sisters Fairbanks Area                           
 P.O. Box 73924                                                                
 Fairbanks, Alaska 99707                                                       
 Telephone:  (907) 452-8110                                                    
 POSITION STATEMENT:  Provided testimony in opposition to HB 156.              
                                                                               
 PAUL BLAIR, Representative                                                    
 American Legion                                                               
 P.O. Box 168                                                                  
 Glennallen, Alaska 99588                                                      
 Telephone:  (907) 822-3520                                                    
 POSITION STATEMENT:  Provided testimony in opposition to HB 156.              
                                                                               
 GARY LANGILLE, Representative                                                 
 Small World Day Care Center;                                                  
 Kodiak Chamber of Commerce; and                                               
 Kodiak Liquor License Association                                             
 512 Marine Way                                                                
 Kodiak, Alaska 99615                                                          
 Telephone:  (907) 486-3313                                                    
 POSITION STATEMENT:  Provided testimony in opposition to HB 156.              
                                                                               
 EARL MICKELSON, Representative                                                
 American Legion Post Number 17                                                
 P.O. Box 687                                                                  
 Kodiak, Alaska 99615                                                          
 Telephone:  (907) 486-3258                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 KEVIN HARUN, Representative                                                   
 Trail Side Discovery Camp Program                                             
 510 "M" Street                                                                
 Anchorage, Alaska 99501                                                       
 Telephone:  (907) 274-3621                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 LANIE FLEISCHER, Executive Director                                           
 Big Brothers Big Sisters of Anchorage, Inc.                                   
 1057 West Fireweed Lane                                                       
 Anchorage, Alaska 99503                                                       
 Telephone:  (907) 263-2022                                                    
 POSITION STATEMENT:  Provided testimony on HB 156.                            
                                                                               
 TUESDAY SMITH                                                                 
 P.O. Box 56106                                                                
 Fairbanks, Alaska 99705                                                       
 Telephone:  (907) 456-8044                                                    
 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.                            
                                                                               
 ASHLEY REED, Lobbyist                                                         
 Alaska Charitable Gaming Association                                          
 360 West Benson Boulevard, Suite 200                                          
 Anchorage, Alaska 99502                                                       
 Telephone:  (907) 562-2560                                                    
 POSITION STATEMENT:  Provided testimony in opposition to HB 156.              
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 97-54, 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, Elton, Hodgins and Vezey.            
 Members absent were Berkowitz and Ivan.  Representative Ivan                  
 arrived at 8:06 a.m.; and Berkowitz at 8:08 a.m.                              
                                                                               
 HJR 29 - FUNDING FOR PROSTATE CANCER RESEARCH                               
                                                                               
 The first order of business to come before the House State Affairs            
 Standing Committee was HJR 29, Supporting an increase in federal              
 funding for prostate cancer research.                                         
                                                                               
 CHAIR JEANNETTE JAMES called on the sponsor, Representative Kim               
 Elton, to present the resolution.                                             
                                                                               
 Number 0055                                                                   
                                                                               
 REPRESENTATIVE KIM ELTON noted that the resolution was straight               
 forward.  We wanted the resolution to go to the President of the              
 United States on Father's Day along with the 1,000,000 signatures             
 being collected nationwide.  The resolution addressed additional              
 funding for prostate cancer research.  Prostate cancer afflicted              
 over 330,000 men per annum, particularly African-American men.                
 Some progress had been made, but the causal gene had yet to be                
 identified.  Moreover, researchers believed that they had a good              
 chance of identifying the susceptibility to prostate cancer.  The             
 resolution was passed out of the House Health, Education and Social           
 Services Committee with unanimous due pass.  He encouraged members            
 to sign on as cosponsors.                                                     
                                                                               
 Number 0169                                                                   
                                                                               
 REPRESENTATIVE AL VEZEY asked Representative Elton to repeat the              
 numbers he mentioned.                                                         
                                                                               
 Number 0185                                                                   
                                                                               
 REPRESENTATIVE ELTON relied the actual number of men diagnosed with           
 prostate cancer was 334,500 per annum.  And, about 9,000,000                  
 American men were living with the disease.                                    
                                                                               
 Number 0215                                                                   
                                                                               
 REPRESENTATIVE VEZEY stated he did not object to the resolution,              
 except that it raised the specter of priorities.  As a male, he               
 wanted to make it clear that prostate cancer was a low priority on            
 his list of health care concerns.  It did not rank in magnitude               
 with the need for further research on Alzeheimer's disease - the              
 most devastating disease in society.  He was concerned that we                
 might be putting this out of order.  It was true that a lot of men            
 had prostate cancer, but it was rare that people died from it.  It            
 was neither a major cause of death nor a major cause for the                  
 quality of life.                                                              
                                                                               
 Number 0304                                                                   
                                                                               
 REPRESENTATIVE MARK HODGINS moved that HJR 29 move from the                   
 committee with individual recommendations and the attached fiscal             
 note(s).  There was no objection, HJR 29 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 0440                                                                   
                                                                               
 CHAIR JAMES explained that the subcommittee addressed percentage of           
 gross in order to get away from lengthy and expensive audits                  
 conducted by the Charitable Gaming Division.                                  
                                                                               
 Number 0556                                                                   
                                                                               
 DENNIS POSHARD, Director, Charitable Gaming Division, Department of           
 Revenue, was the first person to testify in Juneau.  The committee            
 substitute changed the system of deriving benefit to the charities            
 to a percentage of gross.  The division was very much in favor of             
 going to a percentage of gross system in order to get away from               
 lengthy and expensive audits.                                                 
                                                                               
 MR. POSHARD further explained the committee substitute also                   
 licensed gaming managers which the division supported.  The                   
 division frequently found a manager's indiscretion during an audit.           
 Unfortunately, the only recourse was to take action against the               
 charity's permit.  It would be nice to have a tool to do something            
 to the responsible individual rather than the charity.                        
                                                                               
 MR. POSHARD further explained the committee substitute set the                
 percentage of gross at 10 percent for pull-tabs, 5 percent for                
 bingo, and 10 percent for all other activities -  multiple                    
 beneficiary permittees (MBPs), operators, and self-directed                   
 permitees.  Currently, pull-tabs returned about 9 percent of gross            
 to the charities, and bingo returned about 4 percent to the                   
 charities.                                                                    
                                                                               
 MR. POSHARD further stated the language in Sec. 23, according to              
 the sponsor, was supposed to read "not less than 16 percent of"               
 rather than "not less than 10 percent of".  Ten percent was the               
 current statewide average for vendors.  The sponsor did not intend            
 to decrease the return the vendors gave to the charities.                     
                                                                               
 MR. POSHARD noted the language in Section 1, "one-half of one"                
 percent was an increase in the tax that the state received.  The              
 state received a tax equal to about one-tenth of one percent, not             
 one-half of one percent.  The new language was an increase of                 
 around $700,000 or $800,000.                                                  
                                                                               
 Number 0916                                                                   
                                                                               
 CHAIR JAMES asked Mr. Poshard who paid the tax?                               
                                                                               
 Number 0920                                                                   
                                                                               
 MR. POSHARD replied the tax was paid by the charities.  It was paid           
 on the net profits received from their gaming activities.  The                
 committee substitute proposed to pay it on the gross receipts.  For           
 example, the net proceeds on the gross of $1 million would be                 
 $100,000 or a tax of $1,000 - one-tenth of one percent of the                 
 gross, not one-half of one percent.                                           
                                                                               
 CHAIR JAMES asked Mr. Poshard if the language should read one-tenth           
 of one percent to get the same number?                                        
                                                                               
 Number 0965                                                                   
                                                                               
 MR. POSHARD replied to get roughly the same amount that was going             
 to the state you would need to pick a figure closer to one-tenth of           
 one percent.                                                                  
                                                                               
 Number 0985                                                                   
                                                                               
 REPRESENTATIVE FRED DYSON stated he appreciated what the sponsor              
 wanted to accomplish, but setting the margins for a business was an           
 unfortunate road to start down.  We must be telling the charities             
 that they were not sophisticated enough to make these types of                
 judgements or that the industry was so slick that it could hood               
 wink some of the charitable gaming.  He asked Mr. Poshard if it was           
 impractical to require the gaming organizations to have their books           
 audited by an accountant, to allow the charities access the books,            
 and to guarantee a minimum percentage of return?                              
                                                                               
 Number 1115                                                                   
                                                                               
 MR. POSHARD replied there was currently a minimum percentage return           
 for operators.  There was also a maximum amount of expenses that a            
 charity could incur.  In addition, the operators and MBPs were                
 required to have a certified public accountant (CPA) review, submit           
 it to the division, and make it accessible to the charities that              
 they had a contract with.  A CPA review, however, was different               
 than an audit.  A review was a rough check.                                   
                                                                               
 Number 1190                                                                   
                                                                               
 REPRESENTATIVE DYSON asked Mr. Poshard if the approach he suggested           
 was impractical?                                                              
 Number 1214                                                                   
                                                                               
 MR. POSHARD replied it was not necessarily impractical.  An audit             
 would be expensive and difficult to perform.  The expense would be            
 attributed to the charities.                                                  
                                                                               
 Number 1256                                                                   
                                                                               
 REPRESENTATIVE DYSON stated by addressing the legislation we were             
 saying that charitable organizations were not sophisticated enough            
 to protect their own interests.                                               
                                                                               
 Number 1278                                                                   
                                                                               
 MR. POSHARD stated that was part of the reason for the legislation.           
 The bigger part, according to the division, was relieving the audit           
 burden.  The division's budget had been cut by one-third so it had            
 one-third less of its resources.                                              
                                                                               
 Number 1316                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Poshard if the operator would pay            
 the one-half of one percent of the gross receipts?                            
                                                                               
 Number 1336                                                                   
                                                                               
 MR. POSHARD replied, "No."  It was a tax or fee that the charity              
 paid.  It was called "a net proceed fee" in statute.  The charity             
 paid 1 percent of the net proceeds or the profits of their                    
 activities when they filed their annual financial statement with              
 the division.  The committee substitute would not change the                  
 process.  It would change how the fee was assessed - gross rather             
 than net.                                                                     
                                                                               
 Number 1394                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Poshard what would be the amount             
 that the division would need to operate with the budget cuts?  In             
 other words, what kind of tax would we have to include to not                 
 affect the division's budget?                                                 
                                                                               
 Number 1410                                                                   
                                                                               
 MR. POSHARD replied adding a new tax did not have anything to do              
 with the division's budget.  The division currently took in about             
 $2.2 million.  The division's budget request was $913,000, while              
 the division received only $601,000.  In addition to being cut, the           
 division was being moved to the Income and Excise Audit Division as           
 a program.  A new tax would not change the budget picture for the             
 division, it would only bring in more money for the state.                    
                                                                               
 Number 1446                                                                   
 REPRESENTATIVE HODGINS stated he wanted to make sure that the state           
 was receiving the appropriate dollars for the General Fund.  He               
 also wanted to make sure that the gaming industry was not being               
 subsidized.                                                                   
                                                                               
 Number 1464                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Poshard, if 16 percent was a                 
 conflict when 5 percent went to charities from bingo, and 10                  
 percent went to charities from pull-tabs?                                     
                                                                               
 REPRESENTATIVE HODGINS further asked Mr. Poshard to explain what              
 was "other activities" referenced in Sec. 14.                                 
                                                                               
 Number 1502                                                                   
                                                                               
 MR. POSHARD replied other activities included anything except bingo           
 and pull-tabs such as raffles and classics.                                   
                                                                               
 MR. POSHARD explained in 1993 the legislature enacted the vendor              
 arrangement at 70 percent of the ideal net.  It was paid up front             
 to the charities.  Operators were required to return 30 percent of            
 the adjusted gross which was usually less than the ideal net.  It             
 was enacted because the activity for the vendor was ancillary so it           
 could return a higher percentage.  Currently, the vendors returned            
 around 16 percent of the gross.  There was no conflict; they were             
 two different entities.                                                       
                                                                               
 Number 1649                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Poshard if the operators had the             
 5 percent annual return for bingo and the 10 percent annual return            
 for pull-tabs?                                                                
                                                                               
 Number 1654                                                                   
                                                                               
 MR. POSHARD replied it was the operators, MBPs, and self-directed             
 charities.  Vendors were only allowed to sell pull-tabs, not bingo            
 or any other type of activity.                                                
                                                                               
 Number 1666                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Poshard if other activities                  
 included food sales?                                                          
                                                                               
 Number 1671                                                                   
                                                                               
 MR. POSHARD replied, "No."                                                    
                                                                               
 Number 1679                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Poshard if the bill actually got             
 more money to the charities?                                                  
                                                                               
 Number 1690                                                                   
                                                                               
 MR. POSHARD replied there would be debate based on whether or not             
 a business could achieve a level of return as a result of the                 
 changes.  If an operator went out of business then obviously the              
 charities would get less money.  If the number was set at a                   
 revenue-neutral number then you would see more money going to the             
 charities over time.  But it would be hard to determine a revenue-            
 neutral number.  The structure would be great for the charities               
 because it would simplify their reporting and accounting                      
 requirements.                                                                 
                                                                               
 Number 1793                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Poshard if more money would go to            
 the charities if a dollar amount was set?                                     
                                                                               
 Number 1807                                                                   
                                                                               
 MR. POSHARD replied if people stayed in business the answer was,              
 yes.                                                                          
                                                                               
 Number 1814                                                                   
                                                                               
 CHAIR JAMES stated the reason for charitable gaming was to provide            
 money to the charities, not to create a gaming industry.  The                 
 industry was not the goal.  The charities were the goal.  There               
 would be fall out because of the changes that would affect the                
 charities.  The legislation did not prevent the charities from                
 operating the permits in another way, however.  She would be happy            
 to take the average - 9 percent and 4 percent.                                
                                                                               
 Number 1917                                                                   
                                                                               
 MR. POSHARD stated there were others that would be willing to take            
 over as a result of the fall out.                                             
                                                                               
 MR. POSHARD announced the arguments for the fiscal note were still            
 valid.  However, because of the committee substitute, the new                 
 fiscal note would most likely be zero.                                        
                                                                               
 Number 1975                                                                   
                                                                               
 REPRESENTATIVE IVAN IVAN stated he respected the intent of the                
 legislation.  However, the bill targeted the few who did not abide            
 by the regulations.  There were honest operators trying to do their           
 best to get money to the charities.  He asked Mr. Poshard to                  
 describe the licensing requirements for the managers.  He was                 
 concerned how it would affect the small communities.                          
                                                                               
 Number 2052                                                                   
                                                                               
 MR. POSHARD replied the managers would be required to take a test             
 similar to the operator's test.  A fee would probably be required             
 followed by the issuance of a certificate.  There was no intent for           
 them to be bonded, for example.                                               
                                                                               
 Number 2118                                                                   
                                                                               
 REPRESENTATIVE IVAN said he saw the intent of one individual being            
 responsible for the entire operation.  It was done in the smaller             
 communities.                                                                  
                                                                               
 Number 2134                                                                   
                                                                               
 CHAIR JAMES stated she really supported that part of the                      
 legislation.                                                                  
                                                                               
 Number 2185                                                                   
                                                                               
 REPRESENTATIVE ETHAN BERKOWITZ stated there were different types of           
 charitable operations.  He asked Mr. Poshard if it would be                   
 preferable to treat each of the operations differently?                       
                                                                               
 Number 2205                                                                   
                                                                               
 MR. POSHARD replied it would force or encourage the different                 
 operators to become whatever was the most lucrative for themselves            
 and the least lucrative for the charities.  He would not suggest              
 establishing a system based on an operator, MBP, or self-directed             
 charity, for example.  There was merit to establishing a system               
 based on the type of gaming activity, however.                                
                                                                               
 Number 2318                                                                   
                                                                               
 CHAIR JAMES stated, if she was an operator giving 5 percent to                
 charity and then was required to give 10 percent, she would look at           
 the payback to make up the difference.  The volume of players would           
 be more if the payback was higher.  In addition, we had not                   
 discussed basing the percentage of return on the volume of                    
 business.                                                                     
                                                                               
 TAPE 97-54, SIDE B                                                            
 Number 0001                                                                   
                                                                               
 MR. POSHARD stated he had tried to determine the elasticity of the            
 dollar for the different levels of return.  There were too many               
 variables involved, however.                                                  
                                                                               
 Number 0081                                                                   
                                                                               
 REPRESENTATIVE BERKOWITZ commented this issue would have been the             
 perfect opportunity to use the negotiated/regulation process that             
 Chair James introduced by including the industry to help determine            
 the figure.  The industry was needed to develop revenue for the               
 charities.  He would have preferred an approach that incorporated             
 the concerns of the industry at the ground floor rather than                  
 hearing them at the intermediate level in the process.                        
                                                                               
 Number 0118                                                                   
                                                                               
 CHAIR JAMES stated the committee process was exactly what he was              
 talking about.  The sponsor of the bill was here, the committee               
 members were here, and we were about to hear from the industry.               
                                                                               
 CHAIR JAMES reiterated her biggest interest was the charities as              
 opposed to the industry.  She understood the role of the industry             
 so she would balance the issues.                                              
                                                                               
 Number 0170                                                                   
                                                                               
 REPRESENTATIVE HODGINS noted that the 5 percent for bingo and the             
 10 percent for pull-tabs was the "minimum" amount of return to the            
 charities.  Some operators would be able to return more.  The most            
 popular operators would be the ones that gave the highest payback             
 to the customer and the most popular operators would be the ones              
 that gave the most to the charities.  There was a market test at              
 work.                                                                         
                                                                               
 Number 0209                                                                   
                                                                               
 CHAIR JAMES asked the sponsor, Representative Terry Martin, if he             
 wanted to amend the committee substitute to include "16 percent"              
 rather than "10 percent"?  Sixteen percent was the intent of the              
 subcommittee.                                                                 
                                                                               
 Number 0225                                                                   
                                                                               
 REPRESENTATIVE TERRY MARTIN, Alaska State Legislature, replied he             
 had learned to let the task force do its very best without any                
 pressure from the sponsor.  He believed a minimum of 12 percent was           
 fair.                                                                         
                                                                               
 CHAIR JAMES explained the changes were on page 12 to Sec. 22 and              
 Sec. 23.  The language "10" should be changed to "16".                        
                                                                               
 Number 0303                                                                   
                                                                               
 REPRESENTATIVE HODGINS moved that the committee substitute (0-                
 LS0180/F, Luckhaupt, 4/29/97) be adopted with the noted language              
 change.  There was no objection, CSHB 156(STA) was so adopted.                
                                                                               
 Number 0328                                                                   
                                                                               
 REPRESENTATIVE MARTIN stated that the major reason for gaming was             
 for charity, not the industry.  Alaska was one of the few states              
 that used gaming for charity, while the rest of the states used               
 gambling for charity or state revenue.  The discussion in regards             
 to "whetting the appetite" to get more volume was related to the              
 addictiveness to gambling.                                                    
                                                                               
 Number 0379                                                                   
                                                                               
 CHAIR JAMES stated she did not have a problem with bingo parlors              
 selling pull-tabs because it was a community game.  She did not               
 have a problem with a bar selling pull-tabs either because most               
 people went to a bar to socialize.  However, she did have a problem           
 with pull-tab parlors because they were set up strictly for                   
 gambling.                                                                     
                                                                               
 Number 0508                                                                   
                                                                               
 J.J. "JACK" POWERS was the first person to testify via                        
 teleconference in Anchorage.  As an operator, he was not opposed to           
 the discussion on percentages of gross and revenue-neutral bills,             
 but more homework was needed to be done.  He cited the Governor's             
 task force and the forgotten recommendations.  There were existing            
 loopholes in the statutes and regulations.  There were the                    
 political issues.  Let's address these in other forms of                      
 legislation.  As an operator, he was not getting rich.  He was                
 concerned about the non-profits.  What about the non-sufficient               
 funds (NSF) checks?  he asked.  The operator was penalized for NSF            
 checks, not the non-profits.  In conclusion, he could live with 6             
 percent of gross for pull-tabs and 1.5 percent for bingo, but not             
 with 16 percent of gross.                                                     
                                                                               
 Number 0669                                                                   
                                                                               
 ED BOUGEOIS, Representative, Anchorage Opera, was the next person             
 to testify via teleconference in Anchorage.  The Anchorage Opera              
 had realized over $100,000 in revenue over the past three years               
 from the gaming industry - four times what it had received from the           
 states' arts council.  Gaming was a necessary and alternative means           
 of funding at a time when the arts was being cut drastically.  He             
 declared, "If we lose this funding we risk going out of business              
 ourselves as do many non-profit organizations that derive a good              
 amount of their revenue from this source."                                    
                                                                               
 Number 0752                                                                   
                                                                               
 REPRESENTATIVE DYSON asked Mr. Bougeois if there was community                
 support for opera or were people just buying pull-tabs for the                
 return potentials?                                                            
                                                                               
 Number 0791                                                                   
                                                                               
 MR. BOUGEOIS replied opera and many other art forms were important            
 to the development of the youth and for the entertainment of                  
 adults.  The price of a ticket for the opera would be very                    
 expensive and not available to more citizens if it was not                    
 subsidized.  He believed, personally, that people would gamble no             
 matter what.  Therefore, he preferred that the money derived from             
 gambling went to charitable organizations rather than elsewhere.              
                                                                               
 Number 0892                                                                   
                                                                               
 JOHN LOPEZ, Representative, Alaska Bow Hunters Association, was the           
 next person to testify via teleconference in Anchorage.  He urged             
 for additional studies on this topic.  A 1995 report by the                   
 Charitable Gaming Division indicated that the commercial halls for            
 the operators and the MBPs would not meet the 10 percent of gross             
 receipts test on pull-tabs - operators were at 5.82 percent, and              
 MBP's were at 7.98 percent.  In addition, 10 percent would raise              
 the profitability requirement from 25 percent to 30 percent                   
 creating an additional burden of either controlling expenses or               
 cutting the number of prizes.  A study by the National Association            
 of Fundraising Ticket Manufactures indicated that there was no                
 elasticity of the dollar and the recommendation was to stay away              
 from the approach in the bill.                                                
                                                                               
 CHAIR JAMES asked Mr. Lopez who sold the pull-tabs for the Alaska             
 Bow Hunters Association?                                                      
                                                                               
 MR. LOPEZ replied Jack Powers.                                                
                                                                               
 Number 1005                                                                   
                                                                               
 MIKE SLEZAK was the next person to testify via teleconference in              
 Anchorage.  Lowering the percentage of payout would drive players             
 away.  We had already seen a number of high tier players drop out             
 because of the reduction in the payouts.  They were going to Las              
 Vegas or illegal gaming activities in the state.  "If they're not             
 going to spend their money on charitable gaming, they're going to             
 find some place to spend it to find that gaming activity that they            
 want to participate in."  he declared.                                        
                                                                               
 CHAIR JAMES asked Mr. Slezak what his connection was to charitable            
 gaming?                                                                       
                                                                               
 MR. SLEZAK replied he was a life member of the Susitna Valley                 
 Humane Society, and the general manager of Rippie World One in                
 Anchorage.                                                                    
                                                                               
 Number 1085                                                                   
                                                                               
 DAVE LAMBERT was the next person to testify via teleconference in             
 Fairbanks.  The bill would create a slow and agonizing death for              
 the gaming industry.  Testimony had indicated that 78 percent was             
 being returned to charitable organizations.  The figure was higher            
 than any where else in the country.  "If it's not broke why try to            
 fix it?"  he asked.  The division's budget was being cut so it was            
 trying to eliminate organizations to reduce its work load.  If the            
 one-half of one percent would be a user fee that went directly to             
 the division, it could go after and deal with the bad guys rather             
 than hurting every body else.  Moreover, in North Pole there was a            
 5 percent sales tax and a .3 percent tax on pull-tabs.  The bill              
 called for another .5 percent and 10 percent tax while the average            
 pull-tab had an 18 percent payback leaving a 2 percent margin for             
 business.  "Were do we go from there?" he asked.                              
                                                                               
 Number 1265                                                                   
                                                                               
 CHAIR JAMES explained there was a 3 percent sales tax in the city             
 of North Pole and a 5 percent sales tax in Juneau.  The 3 cents and           
 5 cents were eaten because it was not convenient to sell a pull-tab           
 for $1.03 or $1.05.  In addition, rather than claiming the                    
 winnings, most players bought more pull-tabs with their winnings.             
 A tax was not paid on the winnings, and every time the player used            
 his or her winnings to buy more pull-tabs the tax was eaten.  It              
 should be a consideration when determining the percentage.  She was           
 still open to the amount, but she would still like to have a                  
 percentage of the gross.                                                      
                                                                               
 Number 1341                                                                   
                                                                               
 TABER REHBAUM, Executive Director, The Greater Big Brothers/Big               
 Sisters Fairbanks Area, was the next person to testify via                    
 teleconference in Fairbanks.  Her agency held a gaming permit                 
 played through an operator in town.  It derived a significant                 
 portion of its budget from pull-tabs.  Her agency was opposed to              
 the bill because its annual fee would increase about 500 percent              
 placing an undue burden on the folks charitable gaming was                    
 established to support.  It would endanger reputable operators when           
 non-profits did not have the time to run a pull-tab operation                 
 themselves.                                                                   
 Number 1478                                                                   
                                                                               
 PAUL BLAIR, Representative, American Legion, was the next person to           
 testify via teleconference in Glennallen.  He was absolutely                  
 opposed to the gross receipt or high percentage concepts.  It was             
 obvious the committee was on a one-way street towards gross                   
 receipts when it would destroy the gaming industry in Alaska as it            
 was known today.  It would hinder the small operations like the               
 ones in Glennallen that did not deal with operators.  It was                  
 obvious that Representative Martin and James did not like gaming.             
 He would like to see the bill killed.                                         
                                                                               
 Number 1639                                                                   
                                                                               
 CHAIR JAMES stated that she put her personal belief on the table,             
 but she did not necessarily vote the way she personally believed.             
 She listened to the testimony.                                                
                                                                               
 Number 1664                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Blair if there were operators in             
 the Glennallen area or were the non-profits conducting their own              
 gaming activities?                                                            
                                                                               
 Number 1681                                                                   
                                                                               
 MR. BLAIR replied all of the non-profits conducted their own gaming           
 activities.  There were no operators.                                         
                                                                               
 Number 1698                                                                   
                                                                               
 GARY LANGILLE, Representative, Small World Day Care Center; Kodiak            
 Chamber of Commerce; and Kodiak Liquor License Association, was the           
 next person to testify via teleconference in Kodiak.  Seventy-eight           
 percent of the revenue went to prizes while 22 percent went to                
 expenses leaving a low percentage for the non-profits to begin                
 with.  Without killing the attractiveness of the game itself by               
 lowering the payout to the customer, he wondered if the committee             
 had looked at video gaming.  Video gaming would give non-profits a            
 better chance of higher revenue because it would cut down on the              
 expenses, allow for easier audits, and take care of the fraud.  He            
 did not understand the idea of the additional tax revenue,                    
 especially since the Charitable Gaming Division's budget was being            
 cut.                                                                          
                                                                               
 Number 1835                                                                   
                                                                               
 CHAIR JAMES asked Mr. Langille if he would suggest replacing gaming           
 with videos or add to the existing games?                                     
                                                                               
 MR. LANGILLE replied he was not suggesting that pull-tabs should be           
 taken away.  Reports indicated that people liked video gaming                 
 better so that pull-tabs eventually fell away.  The Charitable                
 Gaming Division would prefer to deal with a computer print out                
 every month rather than having to track down pieces of paper from             
 everybody.                                                                    
                                                                               
 Number 1880                                                                   
                                                                               
 EARL MICKELSON, Representative, American Legion Post Number 17, was           
 the next person to testify via teleconference in Kodiak.  The                 
 American Legion sold only to its members.  Therefore, it should be            
 treated differently.  Vendors and operators should be treated                 
 differently as well.  In addition, he wondered what the concept of            
 "ideal gross" meant in Sec. 22 and Sec. 23.  He agreed with using             
 gross receipts for auditing for the division, but not for the                 
 charities.  The ideal net was the only thing that really counted              
 because a gross percentage took away the ability of an operator to            
 determine the payout to the customers.                                        
                                                                               
 Number 2065                                                                   
                                                                               
 CHAIR JAMES stated she understood because the only room to make up            
 for the additional percentage was in the payout.                              
                                                                               
 Number 2099                                                                   
                                                                               
 REPRESENTATIVE HODGINS explained the ideal gross was the amount of            
 money left over after the payout.                                             
                                                                               
 Number 2126                                                                   
                                                                               
 MR. POSHARD explained Sec. 27 defined ideal gross - "(23) `ideal              
 gross(NET)' means an amount equal to the total amount of receipts             
 that would be received if every individual pull-tab ticket in a               
 series were sold at face value".  For example, 4,000 tickets at $1            
 a piece would equal an ideal gross of $4,000.                                 
                                                                               
 CHAIR JAMES stated there was a problem because not every pull-tab             
 would be sold.  She wondered if pull-tabs could be pulled and                 
 counted differently.                                                          
                                                                               
 Number 2258                                                                   
                                                                               
 MR. POSHARD replied there was a prohibition on pulling games.  The            
 gross would be reduced if the games were discounted, for example.             
                                                                               
 Number 2339                                                                   
                                                                               
 KEVIN HARUN, Representative, Trail Side Discovery Camp Program, was           
 the next person to testify via teleconference in Anchorage.  In               
 reality the gaming industry was a lot less than a $220 million                
 industry because of the prize payouts.  In addition, it was a                 
 diverse industry ranging from a pull-tab parlor to the American               
 Legion.  Legislation was needed, therefore, to meet the needs of              
 each sector.                                                                  
                                                                               
 TAPE 97-55, SIDE A                                                            
 Number 0001                                                                   
                                                                               
 MR. HARUN further stated the fee of one-half of one percent was a             
 very big increase for charities.  It was a tax increase.  It did              
 not make sense when the industry already was bringing in enough               
 money to cover its cost.  In conclusion, he would go back and look            
 at some of the recommendations from the Governor's task force.                
                                                                               
 Number 0141                                                                   
                                                                               
 LANIE FLEISCHER, Executive Director, Big Brothers Big Sisters of              
 Anchorage, Inc., was the next person to testify via teleconference            
 in Anchorage.  Big Brothers Big Sisters over the last six years had           
 been making between $50,000 to $60,000 every fiscal year on its               
 pull-tab and bingo permit played by Jack Powers.  As a result of              
 the money from its permit, it had been able to double the number of           
 kids matched with an adult mentor.  The goal was to increase that             
 number by 150 percent by the year 2000.  "We definitely need the              
 money from our charitable permit in order to reach that goal,"  she           
 declared.  She did not see how the money could be replaced.  The              
 operators in Alaska were reputable compared to other states, and              
 they returned a significant amount of money to the charities.                 
                                                                               
 Number 0359                                                                   
                                                                               
 CHAIR JAMES asked Ms. Fleischer if she had a position on licensing            
 managers?                                                                     
                                                                               
 Number 0379                                                                   
                                                                               
 MS. FLEISCHER stated any rules that applied to operators should               
 apply to MBP holders and self-directed operations.                            
                                                                               
 Number 0422                                                                   
                                                                               
 TUESDAY SMITH was the next person to testify via teleconference in            
 Fairbanks.  She was testifying today as a customer, even though she           
 held an operators' license.  The winnings from a pull-tab shop were           
 being re-spent over and over.  She could play a total of 3,000 to             
 4,000 tickets with a $300 winning, for example.  This was forcing             
 the games to turn into a 35 percent ideal net rather than a 25                
 percent ideal net.  Therefore, they would just get her money 10               
 percent faster by decreasing the gross and what she could re-spend            
 with her winnings.                                                            
 Number 0572                                                                   
                                                                               
 WAYNE STEVENS, Executive Director, Kodiak Chamber of Commerce, was            
 the next person to testify via teleconference in Kodiak.  The                 
 chamber ran a self-directed game using its own employees.                     
 Operators were not allowed in Kodiak by ordinance.  He appreciated            
 the work of the subcommittee.  The committee substitute was a much            
 improved version.  However, an increase from 1 percent of ideal net           
 to .5 percent of the gross was an increase by a factor of five                
 decreasing the amount of money that went to the charities.                    
                                                                               
 Number 0653                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Stevens what a factor of five                
 would be in real dollars?                                                     
                                                                               
 Number 0662                                                                   
                                                                               
 MR. STEVENS replied the 1 percent fee paid last year was $771,                
 while one-half of one percent of the gross as proposed in the                 
 committee substitute would have been $3,855.                                  
                                                                               
 REPRESENTATIVE HODGINS asked Mr. Stevens what was the volume in               
 gross receipts?                                                               
                                                                               
 MR. STEVENS replied the gross receipts was roughly $700,000.                  
                                                                               
 Number 0723                                                                   
                                                                               
 ASHLEY REED, Lobbyist, Alaska Charitable Gaming Association, was              
 the next to testify in Juneau.  There was no testimony today from             
 the public that supported the bill.  The goal to eliminate auditing           
 was laudable, but the bill was not designed to accomplish that.               
 The bill was designed to discourage gaming and ultimately the                 
 amount of money that would go to charities.  It was not a good                
 piece of legislation and contradictory to the goals articulated               
 around the table.  In addition, the committee substitute was not              
 the result of the discussions at the subcommittee hearing.  The               
 gaming industry was complex and this bill was not going to resolve            
 the issues.  He suggested keeping the bill and working on it.  The            
 gaming industry was not opposed to satisfying the concept but, the            
 legislature needed to recognize the various operations and the                
 various associated expenses.  If the simplification of auditing was           
 the purpose, why wasn't there a machine bill, for example.  There             
 were other ways to accomplish the goal.  Representative Martin                
 moaned and groaned when he heard the suggestion because it would              
 probably increase gaming.  He reiterated this was a complex issue.            
 He encouraged the committee to hold on to the bill and work on it.            
 There was not one person from the public that testified in favor of           
 the bill.                                                                     
                                                                               
 Number 0917                                                                   
                                                                               
 CHAIR JAMES asked Mr. Reed to suggest some of the other ways to               
 eliminate auditing.                                                           
                                                                               
 Number 0930                                                                   
                                                                               
 MR. REED replied the easiest way would be a machine bill.  A                  
 machine would produce a computer printout.                                    
                                                                               
 CHAIR JAMES asked Mr. Reed if a machine should replace what there             
 was already?                                                                  
                                                                               
 MR. REED replied a machine could either replace or supplement what            
 there was already.  In addition, there were various types of gaming           
 activity so that different gross percentages should be applied.               
 Increasing the averages would only put charities out of business.             
                                                                               
 Number 0975                                                                   
                                                                               
 CHAIR JAMES stated the issue was creating a constituency that would           
 eliminate the possibility of taking a different approach.  She                
 cited the permanent fund dividend as an example.  There was a pot             
 of money that could not be touched because of the pressure from the           
 created constituency.  She liked the idea of a computer gaming                
 system, but she would not want to add it to the current system.               
 She would want to replace it otherwise the problems would not be              
 eliminated.                                                                   
                                                                               
 Number 1067                                                                   
                                                                               
 MR. REED stated a machine system would control the cost because it            
 did away with operation costs for example.  If the goal was to put            
 more money into the charities it was an approach to consider as               
 well as legislation that would allow for larger prizes to increase            
 playing, for example.  He did believe that the legislature should             
 take on the issue with the support of the industry, but not with              
 this piece of legislation.  The bill was not designed to help the             
 industry; it was designed to discourage gaming.                               
                                                                               
 Number 1113                                                                   
                                                                               
 CHAIR JAMES asked Mr. Reed if a tier system was possible with the             
 current volume of business?                                                   
                                                                               
 Number 1142                                                                   
                                                                               
 MR. REED replied she would have to ask the industry.  There were              
 different types of expenses associated with the industry.  For                
 example, selling pull-tabs in a hall was cheaper than a stand-alone           
 store in a strip mall.  Therefore, both volume and operation costs            
 would need to be considered.                                                  
                                                                               
 Number 1190                                                                   
                                                                               
 CHAIR JAMES asked Mr. Reed what was his position on licensing                 
 managers?                                                                     
                                                                               
 MR. REED replied he had not talked to his client about that because           
 the bill was so bad.  He would get back to her later.                         
                                                                               
 Number 1207                                                                   
                                                                               
 REPRESENTATIVE IVAN stated he was afraid of the impact on the small           
 communities.                                                                  
                                                                               
 Number 1249                                                                   
                                                                               
 CHAIR JAMES asked Representative Ivan if he had a problem with                
 licensing the mangers?                                                        
                                                                               
 REPRESENTATIVE IVAN replied he had not addressed that issue with              
 his constituents yet.  Currently, in the small communities the                
 whole government was accountable to the citizens through its budget           
 process in which reports were included on the gaming proceeds.                
                                                                               
 Number 1285                                                                   
                                                                               
 CHAIR JAMES asked Representative Ivan if he had any pull-tab                  
 parlors in the rural districts that he represented?                           
                                                                               
 REPRESENTATIVE IVAN replied pull-tab parlors occurred in the larger           
 communities such as Bethel.  He had not heard of any complaints               
 from his constituents, otherwise he would be the first one to                 
 include licensing managers in the bill.                                       
                                                                               
 Number 1303                                                                   
                                                                               
 CHAIR JAMES explained she had problems in her district with                   
 managers.                                                                     
                                                                               
 Number 1317                                                                   
                                                                               
 REPRESENTATIVE MARTIN stated video gaming would absolutely wipe out           
 any small people.  Individuals that would control video gaming                
 would also control gambling.  The National Conference of State                
 Legislators (NCSL) for three consecutive years had ruled out and              
 asked Congress to prohibit video gambling statewide because it was            
 addictive.                                                                    
                                                                               
 Number 1359                                                                   
                                                                               
 REPRESENTATIVE HODGINS asked what was the payout limit on a single            
 prize?                                                                        
                                                                               
 MR. POSHARD replied the limit was $500 per ticket.                            
                                                                               
 Number 1384                                                                   
                                                                               
 MR. REED stated, for the record, that he was not advocating the               
 passage of machine legislation.  If accountability was the goal, it           
 was an example of the easiest way to get there.                               
                                                                               
 Number 1403                                                                   
                                                                               
 CHAIR JAMES stated there used to be pull-tab parlors that sold                
 other items such as shirts.  However, in the audit process for the            
 Charitable Gaming Division the sales were based on the inventory              
 rather than the actual sales.  She would prefer that the pull-tab             
 parlors sold other items, but belied the audit process was the                
 reason why they did not sell other items.                                     
                                                                               
 CHAIR JAMES announced the bill would be held over until a later               
 date yet to be determined.                                                    
 ADJOURNMENT                                                                   
                                                                               
 Number 1505                                                                   
                                                                               
 CHAIR JAMES adjourned the House State Affairs Standing Committee              
 meeting at 10:02 a.m.                                                         
                                                                               

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