Legislature(1997 - 1998)
02/26/1998 08:40 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE 26 February 1998 8:40 a.m. TAPES SFC-98, #47, Sides A and B CALL TO ORDER Senator Bert Sharp, Co-chairman, convened the meeting at approximately 8:40 a.m. PRESENT In addition to Co-chairman Sharp, Senators Pearce, Phillips, Torgerson and Adams were present when the meeting was convened. Senator Donley arrived later and Senator Parnell was not present. ALSO ATTENDING: Richard Cross, Deputy Commissioner, Department of Education; John Cyr, President, NEA-Alaska; Deborah Vogt, Deputy Commissioner, Department of Revenue; Bob Bartholomew, Income & Excise Audit, Department of Revenue; Dennis Poshard, Legislative Liaison, Office of the Commissioner, Department of Transportation and Public Facilities; George Wright, ANB Camp 2; Gordon Evans, Alaska Bar Association; Dave Tonkovich, Fiscal Analyst, Division of Legislative Finance; and aides to committee members and other members of the Legislature. VIA TELECONFERENCE: Jim Blasingame, Anchorage; David Bundy, President, Alaska Bar Association, Anchorage; Charles McKee, Anchorage. SUMMARY INFORMATION SENATE BILL NO. 36 "An Act relating to transportation of public school students; relating to school construction grants; relating to the public school foundation program and to local aid for education; and providing for an effective date." Co-chair Sharp convened the meeting and asked Senator Phillips to make the necessary announcements regarding SB 36. Senator Phillips said the foundation formula bill was scheduled for public hearing tonight from 6:00 p.m. until 9:00 p.m. Co-chair Sharp confirmed that the first public hearing was scheduled for this evening and tomorrow evening from 4:30 p.m. until 6:30 p.m. and Saturday would continue from 10:00 a.m. until 3:00 p.m. or as needed. Senator Phillips advised there would be work draft form of the bill for the committee to consider with an attached proposed amendment on Tuesday. It was marked 0-LS0070\H.4, Ford, 2/25/98. For this evenings meeting the Department of Education would be present and distribute spread sheets based on the following assumption: one, FY '99 level of funding requested by the Governor; two, FY '99 ADM (average daily membership) of $130,800.55. The FY '99 foundation support includes $633,021,600 in general funds; $20,791,000 PL81874 funds and the public school trust funds of $7,118,700. This made for a grand total of $660,931,300 or $29,253.6 million more than the general fund only level of $631,677,700 as discussed earlier. Senator Adams asked if these numbers included new enrollees, single sites and other resources that perhaps are not included in this particular number. Co-chair Sharp said it included the Administration's student estimate. Senator Pearce referred to the projected FY '99 number of students from the Department of Education. The $633 million is the Governor's request for the foundation formula. The $3 million that was the next line down in the budget, the single site money, was not included in the run. Senator Phillips said further the amendment along with the spreadsheet from the Department would be distributed for Tuesday's meeting. The amendment corrected an error in the work draft, section twenty-six, which describes the funding for a two-year transition period. The spreadsheet, generated by the Department, would illustrate the per student funding formula using the new transition language. He said he felt everyone who was interested in the education of our children would appreciate the legislation allocating simply and equitably on a per student basis to individuals. He then asked the Co-chair to announce the schedule for public testimony this evening. Co-chair Sharp indicated that testimony would be limited to three minutes as customary this evening over a three-hour period. He wanted to work around the State giving everyone a chance to speak. He said the same guidelines would be followed Friday evening and Saturday. Senator Adams asked if it would be possible for the Department to come to the table and explain that with the given numbers how the single sites would be affected. Co- chair Sharp advised Senator Adams that the Department was given instructions to use assumptions and to do the spread sheets accordingly. When the bill comes back before the committee the department will provide a briefing. He cautioned that assumptions change and budgets are modified by the Administration and the Legislature. The starting point was the figures mentioned and the formula has some accommodations for single site allotments in the calculations. He hoped the spreadsheets would be available around noon today and they would be provided by wire service to all the LIO's along with the CS that has been made available electronically. Senator Phillips said he would provide any additional information Senator Adams required. Senator Adams expressed concern in no allocation being made to the North Slope and felt it was an error. He also said taxation of unincorporated areas was not simple and equitable. He again referred to the McDowell Study and said it was flawed and was done too quickly. Senator Phillips asked the Co-chair to allow time for Senator Adams to participate in a question and answer period with the McDowell group as he wasn't present at their original invitation before the committee. Co-chair Sharp advised he would try to get something set up again for next week. Senator Adams asked for approximately five minutes at this evening's meeting to show why the study was flawed and then he would also put his comments in writing. Co-chair Sharp said he would allow Senator Adams five minutes before the taking of public testimony this evening. Senator Phillips concurred. Senator Torgerson requested that the McDowell group be given adequate time to respond to Senator Adams' questions and Co-chair Sharp they could respond next week. Senator Adams asked if there was anything else the Department required. Richard Cross, Deputy Commissioner, Department of Education was invited to join the committee. He advised they had all the information needed to do runs. He hoped they would be completed and checked by noon or shortly thereafter. Co-chair Sharp reiterated that the numbers were to be based on assumptions and were subject to change as far as total dollars. He set aside SB 36 until this evening at 6:00 p.m. He explained the committee would take public testimony for the next three days and then on Tuesday morning start in working on the bill at committee level. The next bill the Co-chair called was SB 273. SENATE BILL NO. 273 "An Act requiring that gross receipts and ideal gross be used to account for charitable gaming activities; requiring municipalities to provide to the state records concerning sales taxes assessed for charitable gaming activities; requiring that a charitable share of charitable gaming receipts be dedicated to charitable uses; relating to reports required for charitable gaming activities; relating to payments to the state from gross receipts of charitable gaming; relating to contracts between operators or vendors and permittees; relating to licensing of multiple-beneficiary permittees and to the duties of a multiple-beneficiary permittee to each holder of the permit; requiring a person employed as a gaming manager to be certified by the state; limiting the expenditure of amounts of gross receipts and ideal gross required to be paid to permittees or retained by permittees; relating to the amount of gross receipts and prizes allowed under a permit or a multiple- beneficiary permit; allowing operators to pool gross receipts, prizes, and door prizes among permittees; and providing for an effective date." The Co-chair explained that there had been one hearing had on the bill, one "listen only" teleconference and a new CS draft in the file. The explained most of the changes to the new CS were the amendments in the file to begin with were rolled into a new CS. Most of the topics in the amendments were discussed at the last meeting. The amendments were proposed by industry, charity groups and have been reviewed by the department and have no objections to the ones rolled in to the CS after working with various people involved. New amendments that were not in the folder before, numbered eight through eleven, and will be presented after Tom Williams reviews the CS draft. The raising of the prize limit amount was in question and that has been reassessed and changed upward to the point the Department feels is equitable. Tom Williams, staff to Senator Bert Sharp, was invited to join the committee. He identified the draft before the committee was the "T" version, 2/25/98. Attached was also a summary of the changes included in the draft CS. There are ten changes made; amendment #4 being the only one not included in the draft. That amendment dealt with the industry's request to increase the time frame in which a charity had to expend its charitable share from one year to two years. He felt the department was not supportive of that amendment. Section one: modified by amendment #8 to designate the additional fee currently collected by the State as a gaming fee. They returned to the current method of calculating it. He explained that in the original Senate Bill they were looking to change it to gross and now they were returning it to basing the State's fee on the charitable share or the amount the charity gets. Basically, the status quo is maintained by returning to the current method. Section six: modified by amendment #1 to require reporting the charitable share payment each calendar quarter instead of monthly. This will help insure operators, MBP's and self-directed permittees have the cash to pay the charitable share due timely. Sections ten and thirty-two: modified and a new section fifteen added by amendment #10 to further define the responsibilities of a gaming manager, to require MBP's (multiple beneficiary permittees) to utilize a gaming manager and to define a gaming manager as the principal individual with described responsibilities. Before there was concern the gaming manager definition was too broad and now has been narrowed by indicating they are basically the principal individuals and it would require MBP's to have a gaming manager. In reality, the department has advised that all MBP's currently do have a compensated gaming manager. Section twelve: modified by amendment #2, which reinstates the current provision, the department must advise the permittee the reasons for voiding a contract. That had been deleted in the original language. It further eliminates further specific reference to the department's ability to revoke or suspend the operator's license since the department already has that authority under another section of law, AS 05.15.07. Section thirteen: eliminated by amendment #3 which deletes the requirement a permit be played a minimum of one month by an operator who contracts to play the permit. Some permittees may take their permit to an operator in order to raise a limited amount of money and that may not require it to be played for a full month. They may only need it played a week or two to raise sufficient funds. Section sixteen: modified by amendment #5 to make MBP's subject to most of the same requirements placed on operators. Section twenty-five: modified by amendment #6 to reduce the minimum period for which a gaming manager's certificate and an MBP's permit can be revoked to one year instead of two and making the penalty the same as it is for operators. Initially it had been proposed as a two-year minimum, dropping that back down to one year. Section twenty-six: modified by amendment #7 to increase the gross receipt maximum to properly convert to the equivalent maximum that exists under current law. It had been originally thought the limits should be $1.2 million, but when the department later recalculated it it appeared the limit should be $1.3 million to keep it equivalent. Section thirty: modified by amendment #9 to exclude Federal excise taxes collected from the definition of "gross receipts". The original legislation had defined gross receipts as excluding local sales tax, and the other issue was Federal excise tax. It becomes most important on pull-tabs, being one quarter of one percent and there is question as to how that is being enforced. It is being excluded from the definition of "gross receipts". Section three: a new section added and the title updated by amendment #11 to make it clear that gaming records collected by the department are public information and they only have to be disclosed ninety days after receipt of those records. It further reiterates that the department must, after ninety days, make sure those records are available. Mr. Williams then concluded his testimony and advised the Co-chair that the Department was available to respond to specific questions. Senator Adams referred to amendment #4 and said it was not in the CS, asking what was the pleasure of the chair regarding this matter. Co-chair Sharp said that was the amendment that would have allowed up to two years for charities to spend the proceeds instead of one year which sort of lapsed the reporting of proper expenditures into future years and making it more difficult to track. The Department was not enamoured with that possibility. He suggested the Department come forward and explain further. Bob Bartholomew, Deputy Director, Income and Excise Audit Division, Department of Revenue was invited to join the committee. He asked Senator Adams to repeat his question. Senator Adams referred again to amendment #4, which was not included in the CS and asked what was the problem with deleting one to two years? Mr. Bartholomew explained that under the current statutes and regulations the non-profit organizations could request an extension from the Department to have an extra year to spend the charitable proceeds they receive. There are many requests received and they are approved. The intent was to get the money to the non-profits and the money then be used for whatever their purpose was. There is an option in law today that allows the organizations to carry it forward. There was a strong feeling that two years was a more reasonable time frame to allow them to spend the proceeds. It is just more difficult to track but nothing the Department could not live with. Co-chair Sharp asked if the Department wanted to treat it as an exception request item rather than just a standard item and automatically allow it? Mr. Bartholomew indicated it was the Department's first choice. Senator Adams asked the Department's position on the ten amendments in the CS? Mr. Bartholomew said the Department supported the amendments and has worked through them, feeling they do improve the bill. Senator Adams MOVED CSSB 273(FIN) "T" version be adopted in lieu of the original bill for working purposes. There being NO OBJECTION it was ADOPTED. Co-chair Sharp indicated there were two individuals signed up to testify regarding the bill. Senator Torgerson said he had a few questions of Mr. Bartholomew. He asked if the Department would be supplying the reply forms for everyone to report on? Mr. Bartholomew said that if the bill were to pass they would definitely redesign the forms, work with the industry and then have them out and available by January 1. Senator Torgerson asked about everyone filing annual reports by certain time periods and having to have certain information in those annual reports. He thought there would have been some kind of clarification that they could not just go out and do some kind of annual report and send it to the Department. Mr. Bartholomew responded that the authority given the Department under the regulations, section two of this bill, was where the reports were defined and also the method of accounting. They now have the regulatory direction to provide that. Senator Torgerson asked clarification of the "gaming manager" for a smaller operation. The person actually operating the game is not the one responsible for the money or the accounting or anything else. He thought that was going to be defined as to someone who has something to do with the money. (pause on tape) The example he gave before was "a person that is employed by a non-profit to run the gaming program we are now requiring them to be fingerprinted." All this person does is take the money and put it in the bank. A separate person is the primary person in charge. Then there is a separate person who is the accountant. Then there is a board of directors who runs the whole organization. Is it the intent to fingerprint everybody? (pause on tape) Mr. Bartholomew said it was the intent of the gaming manager sections to be able to make sure there is one person who can be held accountable to make sure the gaming activities comply with the statute. Currently that is the requirement for the operator run businesses. They are required to be licensed. It is the MBP permits and self-directed operations where there are situations people are hired as gaming managers. This was defined in the CS on page seven, line nine. He advised Senator Torgerson that he would have to decide whether the person who should be the gaming manager is either the person he described or someone else within the organization. That is what they tried to put in the definition. Section thirty-three defined "gaming manager" as the "principal individual who manages". They are trying to narrow it down to one individual and it would have to be identified who that one person was. Section eleven, page seven, line nine provided further guidelines. Senator Torgerson asked if section eleven was in conflict with section thirty-three? (pause on tape) Which one would have precedence? He said not necessarily one who was employed as manager had a responsibility to balance the books. Mr. Bartholomew said if one were an MBP they were absolutely required to appoint a gaming manager. If one was self- directed the intent was only if one were compensated as a gaming manager. Senator Torgerson again referred to page seven, line nine, "the accurate accounting of total amount of gross receipts" and there is a definition of "gaming manager". This is in conflict with the definition of "gaming manager" on page fifteen. He thought these were two different definitions. Deborah Vogt, Deputy Commissioner, Department of Revenue was invited to join the committee. She explained the definition on page seven related to only MBP's where it was required there be a gaming manager. With a self-directed charity the definition is a little looser and requires the person have both the responsibility for the reporting and the management of the game and be compensated for it. (Miscellaneous conversation between Ms. Vogt and Mr. Bartholomew.) Senator Torgerson said he would be happier if the same definition on page seven was the definition of "gaming manager". Mr. Williams explained that the definition of the "gaming manager" was to define in general terms what a "gaming manager" represented. The specific statement on page seven, lines nine through twelve, said that if there was a gaming manager that generally oversees everything their responsibilities must include particular duties. This was recommended language by the industry. There was a broad definition and then some specific responsibilities that were added of what a "gaming manager" was supposed to do. Senator Torgerson asked if the person he described was supposed to know which one of the definitions he fell under? He said he was referring to someone being in violation, not one that was to be fingerprinted. Mr. Bartholomew said the bill required that if there were a compensated manager in a gaming operation then a gaming manager would have to be appointed. If the intent was to have a self directed gaming activity, do they have to be subject to getting a license or certificate or not? Currently, someone in the organization would still be required to come to the Department and get a certificate as a gaming manager. That is how it is presently structured. The only way a gaming manager would not be required was if no one was compensated for that managerial role. Co-chair Sharp indicated that a "clerk" would not fall into that category. He said Senator Torgerson was referring to someone who just stands and sells the pull-tabs, collects the money and turns in it to someone else. They would not be classified as a manager under these terms. Senator Torgerson said that an operation having half-a-dozen employees, one person in charge of those employees, could be just the manager and not the person in charge. That person would not have anything to do with accurate accounting or other things which instead would be handled by the board of directors or the primary person in charge. He said that was the person who should not have to be fingerprinted. There was, however, no problem with the person in charge being fingerprinted if that was the intent of the bill. Mr. Bartholomew referred the Senator to the definition outlined on page fifteen. This section would narrow it to one person. He said there might be a loophole as far as the primary person being able to appoint someone other than whom was truly in charge and the Department may have to look at the definitions again to get the right balance. Senator Torgerson did not agree and said one could be the principal person in charge and not receive compensation. Mr. Bartholomew agreed and said the definition would have to be changed and allow flexibility for the principal individual to be other than the person who is compensated. Ms. Vogt voiced her concern as to the ambiguities as to who is the person in charge and who is to be licensed or not. It would have to be cleared up. Senator Torgerson said he would be happy to work with the Department regarding this matter because it does not cover the concern he has. Co-chair Sharp referred to the situation Senator Torgerson described. The only recourse the Department has if things are not being accounted for they can revoke the manager's or operator's license. But it is not intended to hold a "clerk" as a "manager". Mr. Williams further explained the concept saying they were trying to license individuals that were being compensated and running the gaming operations. If they failed to live up to their legal obligations of submitting the charitable share or otherwise complying with the law the Department had means by which they could prevent them from continuing in that role or moving into another entity to serve in that role. He noted the initial emphasis was on MBP's and this legislation would require they use a gaming manager. It further defined a "gaming manager" as someone who controls the gaming operation and is compensated. MBP's were the only ones required to have a gaming manager. Senator Torgerson said he still felt the bill as worded did not comply with what Mr. Williams further explained. George Wright, manager Alaska Native Brotherhood, Camp 2, Gaming Operations, Juneau, was invited to join the committee. He explained he was also member in charge of an MBP. He said they had looked extensively at the bill and concurred with the comments made by Senator Torgerson regarding fingerprinting. He also felt that the one who handled the money from the time of sales until it went to the bank that person was the one who should be on file. The individual who reviews paperwork only should have the right to privacy. He said the bill as is would not benefit charities. He quoted Senator Pearce from 1995: "The Legislature clearly directed ... that the flow of money be shifted in favour of the charities. The privilege of conducting charitable gaming in Alaska is to benefit the charities." He said the bill presently before the committee did not benefit the charities. He said the argument regarding the seven percent on pull-tab gross does meet the same minimum standard as the thirty percent of the adjusted gross. That could only be true in calculation except for those communities that have sales tax. He pointed out that no consideration was made for sales tax exemptions. He noted that the City of Juneau already takes five percent of the gross. Mr. Wright voiced concern over the one percent return in bingo. One point five percent of the gross in bingo, with no accountability of the operator's proceeds was a phenomenal amount of money. In reviewing of his files he said ANB had approximately nine bingos in a year. If they calculated the one percent, according to the new rule, the Fourth of July bingo operator would deposit $442 to the charity and $42,000 into his own pocket. He felt this was criminal and this legislation would deprive the charities proceeds. This bill would legalize what the Department of Revenue had been fighting forever. It should be insured that charities get their fair portion. He further referred to the recommendation of the Task Force in 1995 to increase the Department of Revenue's gaming budget to protect the charities. He said it was wrong to legalize what the operators have been doing in the past. In further discussion with Co-chair Sharp, Mr. Wright said that under this bill he would be setting himself up for a good retirement. Senator Torgerson asked Mr. Wright what $137,000 represented as part of the gross. Mr. Wright responded that was after the price payouts. He further explained that was actual funding raised based on his spreadsheet. He said the gross was considered after prizes were paid. His charity received forty-five percent of all bingo operations. Senator Pearce asked Mr. Wright to repeat his statement. He repeated: "...forty-five percent of all bingo operations." Senator Pearce asked if that was forty-five percent of the net after the payout or forty-five percent of the total gross? Mr. Wright said it was forty-five percent of the adjusted gross, after the prize payout. Senator Pearce further asked if the remaining fifty-five percent was used for administrative costs and payment to the State and Mr. Wright concurred. He said it could also be as high as sixty percent depending on the amount of people drawn. He advised the committee that everything he deposits goes into his charity's account. Senator Torgerson asked what the average of other operators was? He said he would be happy to amend the bill to give forty-five percent of gross receipts to charities. Mr. Wright responded that after his meeting with the Department of Revenue yesterday he felt the minimum should be eleven percent. He said there was a gaming war in bingo going on in Anchorage because everyone was competing for the "dollar". He said the prices had been driven down to approximately twenty-five cents per six cards. In other places in Alaska the price for six cards was between one and three dollars depending on the prize payout. He felt the bill was aimed at cleaning up Anchorage's problem but it was not giving any consideration to the rest of the State. He further advised the committee that if the bill passed out today in it's present condition approximately nine out of thirteen charities in Juneau would have to close due to the City's tax. Also, competition would be allowed to come in with deep pockets and they have no reporting and accountability requirements and could spend their money on anything they wanted to. However, a local permittee would have to meet their needs and would not have an unlimited supply of funding. He said once the market was cornered one could set the table stakes as they wished. Co-chair Sharp asked the next testifier to be brief because this was a working meeting and not one in which testimony was going to be taken. Roger McCoy, contractor for sale of pull-tabs for non-profit organizations was invited to join the committee. He has five years experience. He specified he would address the language intent of the bill as referred to pull-tabs only. He said current law took into account the allowable expenses for operation of each and every sales outlet for operators, MBP's and self-direct sale by permittees. There was a minimum of thirty percent of the adjusted gross set for non- profit organizations. In the case of vendors there was a minimum of seventy percent was set for the non profit organizations and a maximum of thirty percent for the vendor. Mr. McCoy said this bill would no longer take into consideration the expense costs of operators, MBP's or self direct sale by permittees, but did base the permittees' profit percentage on gross receipts or ideal gross, regardless of the location or sales within the State. Other language inserted stated the Department of Revenue would revoke the permit of a vendor, operator, MBP and the non- profit organization if the specific percentage due to the permittees were not paid within a specific time period. He further said that since operational expenses differ from sales outlet to sales outlet, community to community, none of the percentages of pay out prize money was the same. He asked how one Statewide average pay out percentage be used to determine the Statewide percentage to a non profit organization. He said due to this language vendors would no longer sell pull-tabs for non-profit organizations. Operators, MBP's and self-directed sales by permittees would not be able to meet or provide the seven percent sales to the non-profit organizations which would require the Department of Revenue to revoke the permits of those operators, MBP's and the non-profit organizations. He referred briefly to his exhibit breaking down the two most common games played by vendors. He noted the current law and SB 273 and how they applied. He said if there were lost tickets, bad checks or anything else happened to the game the vendor would lose. Ninety percent of pull-tab stores would have to close their doors. The other ten percent left would be able to make it because all of the competition would no longer be in business. He explained that no consideration had been given in the bill for the cost of liability insurance, wages, workmen's compensation and the general cost of doing business going up. Non-profits would no longer be able to rely on revenue for their organizations. Co-chair Sharp thanked Mr. McCoy for his examples he submitted to the committee. Mr. McCoy noted for the Co- chair that the winner pay out was eighty-three percent. Co- chair Sharp indicated there was then room for adjustment. Mr. McCoy noted high operation costs and too many pull tab operations in competition. He said no one was making it. Co-chair Sharp noted again for the record that teleconference was "listen only" and any comments could be submitted in writing. Senator Phillips objected and said all teleconference sites should be allowed to testify or some arrangement should be made for the further taking of testimony. Co-chair Sharp said he would set aside the bill. He had no commitment to hear public testimony today. He has heard testimony from all over the State previously on this bill. A new CS with amendments submitted from all individuals involved was now before the committee. He said this bill has been opened to the public process since June of last year. Senator Donley concurred with the Co-chair. Co-chair Sharp further indicated that the file contained full documentation from every major vendor in the State. He said he wanted to make sure the charities get their monies up front and off the top and that was what this bill proposed to do. He is not interested in increasing the intake of the charities at the expense of anyone else, only to simplify the reporting, which should save operators a few dollars. He said his intent was to move the bill if there was nothing else to come before the committee. Senator Donley voiced concern over two areas of the bill. One was already addressed by the Co-chair and the other was in section three of the bill, which opened records for public scrutiny. He wanted to make sure the language meant what it said and whether or not the Department actually opened the records up within ninety days. Co-chair Sharp recalled Bob Bartholomew to join the committee and asked for the Department's interpretation of this section. Mr. Bartholomew responded that the previous testimony had been accurate. He explained that any delays were due to the fact that many reports were under review. What the Department has agreed to do, even though the gaming records were currently public, was ninety days after they were received, do a review and regardless of whether they were under review or being considered for audit, they be made available. The financial information would be made available immediately, either electronically or by making copies. Individuals could come in, look at the records and then make copies of what was specifically needed. Senator Donley indicated that this explanation was more consistent with existing statutory requirements. Senator Donley referred to section twenty-seven, page fourteen and said he had tried to encourage charities to do this on their own ten years ago. He said it would offer them incentive to do their own gaming operations rather than use operators, thus to maximize their profit. He agreed that it was a relevant public policy concern that was glaring in the existing statutory scheme. However, it was not a problem created by this legislation. It may be a good idea, he said, to level the playing field now that there was little essential distinction between "managers" and "operators". Mr. Bartholomew responded, saying that truly self-directed permittees would be the ultimate goal, and probably there were not as many of these permittees as would be preferred. Operators needed more permits. Therefore, it would allow more charities to participate. On the flip side, if they were competing with an MBP there may be an unfair advantage. He said he did not know if the difference of how an operator was required to have more permits in play would cause an undue burden. Senator Donley said he did not want the discussion be limited to the idea of increasing the permits the operator could play. He wanted the discussion to include reducing the maximum dollar amount for the MBP's to encourage them to take in more members so that greater numbers of charities could gain from the law. Mr. Bartholomew concurred. He said there were some MBP's that were close to being self- directed. There were others that were more of a professional gaming management. He felt that could not be split, however, if the cap were lowered on what an MBP could play some self-directed operations would be affected. MBP's, he said, were supposed to be a co-op of permits, set up to run as if it were self-directed. He advised the committee that in reality a couple of there were and most of them were not. Senator Donley said the whole purpose of the bill was to encourage the small percentage that was actually running the games themselves, but it had not really worked effectively that way. The vast majority went the professional manager route. Senator Torgerson wanted discussion on section twenty-eight and referred to testimony presented earlier regarding sixteen percent ideal gross. He asked if sixteen percent was an arbitrary number? He said that if the numbers were going to continue at sixteen percent then vendors would have to be taken out because they would not operate at that price. Mr. Bartholomew responded regarding the vendor percentage of sixteen, saying the prizes could vary from sixty percent to eighty or eighty-five percent of gross. For both the pull tab percentage at seven percent and the vendor percentage at sixteen percent, the department looked at a prize pay out that was working at about seventy-seven or seventy-eight percent. For the bill to be revenue neutral a prize pay out would be at about seventy-seven or seventy-eight percent. He also said the department received conflicting information. People tell them that if the prize pay outs are lowered below seventy-seven percent no one will game. (Tape change from #47, side B to #48, Side A at 10:20 a.m.) Mr. Bartholomew continued saying that another issue needing to be clarified was the effective expenditures. Current law, without this bill, State minimums required to be paid to non-profit organizations excludes expenditures from the equations. Only a percentage of the adjusted gross, which is gross less prizes, had to be paid. He said that this bill, going to a percentage of gross, only regulated the State minimum. Expenditures were not brought into the equation and it was not a change in the current law. Profit about the minimum was not regulated. Instead that was open to the non-profits and the gaming industry. He clarified that the department recommended, in regulating gaming, assuring the charities get the minimums and reducing the resources needed to regulate gaming. Senator Torgerson asked about MBP's only being required to pay seven percent back to the charities. Mr. Bartholomew indicated that was correct. He asked further explanation of the example given today, that MBP's would only have to pay $155 to the beneficiary, but a vendor would have to pay $355.04. Mr. Bartholomew said it was definitely not the intent to force out vendors. The vendor structure, as currently in law today, said they must pay seventy percent of the adjusted gross. An MBP must pay thirty percent of the adjusted gross. The difference, he said, was because vendors did not have to lease a new hall, had no expenditures and no payroll. An MBP does have rent, payroll and other expenses. Senator Torgerson asked the number of pull-tabs sold by MBP's and vendors. Mr. Bartholomew said 1995 information indicated vendors sold $22 million gross receipts of pull- tabs, MBP's sold $22 million gross receipts and operators had $88 million gross receipts. He further noted that MBP's volume probably had gone up and operator volume down. Senator Donley said he felt the legislation was important even though he would support reducing some of the dollar amounts to maximize the opportunities to more charities in the State. He would support further delving into the maximums and whether they were appropriate or not and if they were the best public policy. Senator Phillips MOVED CSSB 273(FIN) and WITHOUT OBJECTION it was REPORTED OUT with individual recommendations. Co-chair Sharp called the next bill, SB 285. SENATE BILL NO. 285 "An Act relating to state procurement practices." Co-chair Pearce referred to the fiscal note from the Alaska Railroad now in the files. She said the bill had been held pending a question on what the cost would be from the Railroad. She noted that it had not been changed. Senator Phillips said he was philosophically opposed to the bill. He had a concern about the Railroad union labor agreement. Co-chair Sharp advised that Mr. Jim Blasingame was available to testify via teleconference from Anchorage. Senator Phillips asked that Mr. Blasingame explain the union labor agreement they have and how this bill would affect the agreement. James B. Blasingame, Vice President, Corporate Affairs, Alaska Railroad Corporation testified before the committee via teleconference from Anchorage. In response to a question from Senator Phillips he said the subcontracting provision they have in their labor agreement allows employees to subcontract work of less that ten calendars day. If the work being contracted requires ten calendar days or more to complete, (1) the subcontracting will only be done when managerial skills are not available on the property; or (2) skilled personnel are not available on the property from active or laid off employees; or (3) if adequate and required equipment is not available on the property; and (4) the required time of completion cannot be met with the existing skilled personnel or equipment available on the property; or (5) such work cannot be performed by the railroad at a reasonable competitive cost. Their definition of "reasonable competitive cost" is not more than five percent in total cost of the proposed contract. Senator Phillips asked who would be trusted more in making the improvements when there is a railroad crossing on a particular project. He said he felt he would have to side with the railroad employees who know their business rather than the general contractors. Co-chair Pearce advised if there were no more questions the committee would take a brief at ease to gather a quorum. (10:35 a.m. at ease) Following a brief at ease, Co-chair Pearce called the committee back to order. Senator Adams MOVED SB 285 and WITHOUT OBJECTION it was REPORTED OUT with appropriate fiscal notes and individual recommendations. Co-chair Pearce passed the gavel back to Co-chair Sharp. SENATE BILL NO. 234 "An Act extending the termination date of the Board of Governors of the Alaska Bar Association." Senator Adams MOVED SB 234 with individual recommendations. Senator Donley OBJECTED. Co-chair Sharp indicated there were a few individuals signed up to testify regarding the bill. Senator Donley said he had been asked to inquire about certain operations of the Bar Association. He said he prepared a list of questions for the Bar, faxed them this morning and was now anticipating a response. He requested the bill be held in committee pending their response. Co-chair Sharp said that at a prior hearing they had not responded to the Auditor's recommendations. However, the response is now in the file. David Bundy, president, Alaska Bar Association testified before the committee via teleconference from Anchorage. He appeared at the last meeting. He said the reason the bill was held because Senator Donley indicated he had questions for them. The initial requested information had been provided and they had a conference with him yesterday. He noted for the record that he was present at the teleconference cite since 8:30 a.m. They had not received the new set of questions from Senator Donley. He did advise the committee that the Association did not operate on State money, rather on membership dues and there was no fiscal impact to the State on the functioning of the Association. They supported the bill and hoped it would be moved forward soon so they could get on with the reauthorization of the Bar. Senator Pearce requested a short at ease. (10:37 a.m. at ease) Following a brief at ease, Co-chair Sharp asked if Mr. Charles McKee was still present to testify via teleconference from Anchorage. Charles McKee testified before the committee via teleconference from Anchorage. He said he was at a loss regarding the activities of the Bar. Co-chair Sharp advised that questions had been posed by Senator Donley and the bill would be held in committee pending response by the Bar. Gordon Evans, president, Juneau Bar Association advised that he would be available to answer any questions the committee might have. Co-chair Sharp announced SB 234 would be put into subcommittee. Senator Pearce, chair; Senator Sharp and Senator Adams were appointed and he said they would work with Senator Donley. Senator Torgerson asked about the motion to move the bill out of committee. Senator Phillips said he would amend Senator Adams' motion to move the bill and instead move that it be held in committee pending response from the subcommittee. Senator Torgerson reminded the committee that the motion was made to move the bill and the new motion to amend would not be appropriate. Senator Phillips withdrew his motion. Co-chair Sharp said the original motion before the committee was by Senator Adams to MOVE the bill and noted the OBJECTION of Senator Donley. After a roll call vote called by the Secretary the bill was HELD in committee by a vote of five nays pending subcommittee report. Co-chair Sharp reminded the committee there was a 4:30 p.m. budget meeting and 6:00 p.m. public testimony hearing on SB 36. ADJOURNMENT Co-chair Sharp recessed the committee until 4:30 p.m. SFC-98 -19- 2/26/98
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