Legislature(1997 - 1998)
04/22/1997 08:03 AM House STA
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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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