Legislature(1997 - 1998)
02/02/1998 01:30 PM Senate JUD
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* first hearing in first committee of referral
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SENATE JUDICIARY COMMITTEE
February 2,1998
1:30 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chairman
Senator Drue Pearce, Vice-Chairman
Senator Mike Miller
Senator Sean Parnell
Senator Johnny Ellis
COMMITTEE CALENDAR
SENATE BILL NO. 199
"An Act relating to charitable gaming and to gaming on state
ferries; and providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
No previous action to record.
WITNESS REGISTER
Mr. Stan Filler
CHARR
PO Box 777
Sitka, Ak 99835
POSITION STATEMENT: Supported SB 199
Ms. Deborah Vogt
Department of Revenue
PO Box 114000
Juneau, Ak 99811-0400
POSITION STATEMENT: Commented on SB 199
Mr. Bob Bartholomew
Department of Revenue
PO Box 114000
Juneau, Ak 99811-0400
POSITION STATEMENT: Commented on SB 199
Mr. Jack Griffin
CHARR
Homer, Ak
POSITION STATEMENT: Supported SB 199
Mr. Carroll Raney
918 W. 14th Avenue
Anchorage, Ak 99810
POSITION STATEMENT: Commented on SB 199
Mr. Edward M. James
Eddie's Sports Bar
3911 Pawn Place
Anchorage, Ak 99508
POSITION STATEMENT: Supported SB 199
Mr. Dennis Poshard
Department of Transportation
3132 Channel Drive
Juneau, Ak 99801
POSITION STATEMENT: Commented on SB 199
ACTION NARRATIVE
TAPE 98-4, SIDE A
Number 001
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to
order at 1:37 p.m. and noted the presence of all members.
SB 199 - CHARITABLE GAMING & GAMING ON FERRIES
MR. JOE AMBROSE, staff to Senator Taylor came forward to present
the sponsor statement for SB 199. He stated the main idea behind
the bill was making charitable gaming more accountable. He said the
bill would authorize the use of video gaming machines capable of
being linked to a central computer system. He said this would
greatly increase our ability to account for the millions of dollars
spent annually on charitable gaming including pull tabs. He said
one of the major concerns expressed over the use of pull tabs is
the lack of accountability and susceptibility to theft, fraud and
other criminal activity. Many charities appear to be receiving less
than their fair share, according to the sponsor.
MR. AMBROSE said this bill directs proceeds differently than
currently done with pull tabs. It gives 30 percent to the charity
permittee; 30 percent to the vendor; 15 percent to the state and 25
percent to the municipality in which the machine is located. If the
machine is located in an unorganized borough, that share would go
to the state. MR. AMBROSE said the bill contains a provision
allowing the Alaska Marine Highway to be licenced for video gaming
if they so desire. He concluded that it is the sponsor's conviction
that as Alaska's charities become familiar with video gaming and
it's accountability, they will phase out pull tabs in favor of this
new technology.
SENATOR MILLER asked if he believed these games will replace pull
tabs.
MR. AMBROSE replied that is the goal. The issue was discussed in
the last legislature but there was concern expressed by the smaller
communities and charities. He thinks even these groups will
eventually opt to run the new games due to better accountability
and simpler administration.
SENATOR ELLIS asked if the bill covered video poker or video slots
or both.
MR. AMBROSE said strictly video poker, video keno and blackjack,
not slot machines.
SENATOR ELLIS asked if those games were specifically mentioned in
the legislation or if other types of gaming could be done in this
format. He said he has heard that casinos are moving toward video
gaming for all types of games of chance.
MR. AMBROSE said the bill generally referred to keno, blackjack and
poker but allows the department to regulate the types of games
allowed.
MR. STAN FILLER, from Sitka representing the Cabaret, Hotel,
Restaurant and Retailers Association (CHARR), supported the bill.
He cited charitable gaming as an excellent source of revenue for
communities. He quoted $22.4 million as the total proceeds from
gaming in 1995 and said this bill will help generate even higher
proceeds for charities and nonprofits. He said eventually all
groups will benefit from the increased accountability of these
games. In view of decreasing funding from the state and federal
governments, he sees this as a long term revenue source for
communities in the future. He said revenue would be provided to
local businesses, local government, and the State of Alaska. He
estimated the first year revenue at 107 million dollars with a 20
percent increase the following year. He said this was a
conservative estimate and added that every state that has
implemented this type of gaming has by far surpassed their original
expectations. He restated the point that the state needs new
revenue sources due to lower oil prices. He said this would provide
that necessary funding without the imposition of a state income or
sales tax. He said this bill will also allow the Marine Highway to
operate these games and retain 100 percent of the revenue
generated. He said the state currently has no direct means of
profiting from the visitor industry and this would help capture
some of the money he believes is leaving the state via on-line
gaming. He said on-line vendors have little or no accountability
and there is no guarantee of scrupulous practices. Implementing
this bill will ensure a safe gaming environment for Alaskans and
substantially benefit Alaskan businesses. He said the design of
these games prevents tampering and provides 100 percent
accountability for all transactions and revenues. He said these
games would be restricted to licenced beverage dispensaries and
adults over the age of 21. Rural areas could set up a secure
station for these games if there was no licenced location
available. He concluded that these conditions would prevent minors
from accessing these machines and the overall security and
accountability of gaming would be enhanced. Mr. Filler repeated
that this bill would provide much needed revenue for all groups
concerned and urged the support of the committee.
CHAIRMAN TAYLOR responded to SENATOR ELLIS'S earlier question,
saying only games authorized by the department could be played.
SENATOR PEARCE pointed out that on page 17, section 26, line 17 the
bill allows keno, video poker and blackjack. She said it seems
these particular games would have to be allowed. CHAIRMAN TAYLOR
agreed.
CHAIRMAN TAYLOR asked the witness what the proceeds of video gaming
are used for in the State of Oregon.
MR. FILLER believed it was education.
CHAIRMAN TAYLOR inquired about other states but MR. FILLER was
unsure.
SENATOR PARNELL was curious about one of the goals of the bill. He
asked if CHARR had a position on the supplement versus replacement
of pull tabs by these new games.
MR. FILLER said they had no position but their main concern was
improving accountability in regards to all gaming activities within
the state.
SENATOR ELLIS was astounded by the figures quoted on growth in
gaming in Oregon. He asked for information behind this explosion in
growth, wondering if it might be attributed to a population
increase or maybe a proliferation of these games in liquor
establishments.
MR. FILLER thought it may be due to an increase in tourism. In his
town, more than 30 percent of sales tax is paid by visitors to the
community and he imagines this also happens in other states.
SENATOR ELLIS asked MR. FILLER if he was familiar with studies
suggesting participation in gaming is limited to a small segment of
the population. The witness was not familiar with the studies.
CHAIRMAN TAYLOR stated pull tabs are just about everywhere. He
asked if he was operating a pull tab game and was required by law
to keep track of pay outs from a particular jar (as is the case
now), when the tickets dwindle and the pay out is not complete,
what prevents him from giving this information to a friend? MR.
FILLER knew nothing to prevent this.
SENATOR PARNELL asked if there was anything in the bill that would
stop this from happening. CHAIRMAN TAYLOR said this is a major
problem in the accountability and enforceability of the old system.
He said this would not be possible in the new system. He added
there probably are ways in which the games can be manipulated now
that hadn't even been discussed.
MR. FILLER agreed that there might be problems but, as it is now,
the charity gets their money up front and any money lost will be
his. He added that if anything improper occurs with the game he
could lose his liquor licence. He repeated his earlier point that
it is a good revenue-generating enterprise for many communities.
MR. JACK GRIFFIN, from Anchorage and Homer, told the chairman that
California gaming proceeds go to education. He believed the
increase in gaming in other states is largely due to a decrease in
illegal gaming. He said there are 25 - 30 illegal, after-hours
gaming parlors in Anchorage alone. He said these places do not
generate any money for the state nor the federal government and he
believes if this bill passes the increase in gaming, and
subsequently revenue, would be immediate and substantial.
CHAIRMAN TAYLOR asked if people in Alaska can use a credit card to
place bets in other states via the Internet.
MR. GRIFFIN said he had read about this in the Anchorage paper but
did not know about it firsthand.
SENATOR ELLIS asked about the term "video lottery machine,"
wondering if the machines could play several games and perhaps
eventually be linked for the purpose of a statewide lottery.
CHAIRMAN TAYLOR replied that he did not know enough about the
technology to answer. He said his sole purpose for the bill was to
plug the cracks in the system and clean up gaming so the money ends
up where it is intended. He said he is firmly opposed to expansion
but wants to see the present system cleaned up.
MR. JACK GRIFFIN said in California the state lottery has its own
state lotto machines. He believes with today's sophisticated
technology it might be possible to hook a game like this into a
statewide lottery.
SENATOR ELLIS clarified that he was not suggesting this should
happen, only wondering if it was possible. He asked about MR.
GRIFFIN'S comment regarding illegal gambling. He asked if his
testimony was that these activities would decrease if this bill
passes or if he thought illegal gambling would disappear.
MR. GRIFFIN believed the activities would go down, but not go away.
Number 380
MS. DEBORAH VOGT, Deputy Commissioner for the Department of Revenue
came forward and expressed concern with the administration of this
program. She said the additional duties that would be placed on the
department would be hard to meet with their current diminished
resources. She feared having to decide what types of games would be
permitted since she sees high stakes on all sides. She said her
division is primarily a tax division now and she does not see it as
a policy making division. The fiscal note submitted does not set
out different expenses but reflects the increase in personnel she
envisions necessary to deal with this, perhaps four people. She
feels the Legislature should set the agenda on what types of games
should be played and other policy decisions. She does not believe
this to be the role of the Department of Revenue.
MS. VOGT questioned if this would result in a substantial increase
in gambling in the state or just a shift from one method to
another. She agreed with CHARR that other states have seen a
dramatic increase in revenue and commented that we currently have
the highest per capita gaming in the U.S. She thinks this bill
would push revenue even higher. She brought up the effect on Indian
gaming and believed it was a concern better answered by the
Department of Law. She said gaming was limited in the state in
order to keep out big casinos. CHAIRMAN TAYLOR said he did that.
CHAIRMAN TAYLOR asked how many people are currently employed to
take care of pull tabs. MS. VOGT responded four but MR. BOB
BARTHOLOMEW, also from the department, interjected it was in fact
seven people and MS. VOGT agreed.
CHAIRMAN TAYLOR said the projections show a significant increase in
gaming revenue and asked if the department believed they were
getting an accurate count on all the gaming going on in the state.
MS. VOGT replied they have a good handle on charitable gaming but
knew about illegal gaming only through rumor and anecdote. She said
they would like to do a closer audit on pull tabs and impose
tighter controls but granted there is the opportunity for abuses.
CHAIRMAN TAYLOR said the original legislation he introduced a few
years ago wiped out pull tabs entirely and asked how MS. VOGT would
feel about a sunset provision that faded them out over the next few
years.
MS. VOGT it would be easier to administer and it was a decision for
the people on his side of the table.
CHAIRMAN TAYLOR asked what other types of clean up she'd like to
see within the system and MS. VOGT responded that she would support
the efforts of SENATOR SHARP for simplification but would like to
see his bill limited to that alone. She reasoned that some of
CHAIRMAN TAYLOR'S colleagues would like to see gaming limited,
where others would like to see expansion and she is only after
simplification.
MR. CARROLL RANEY said he thinks of the revenue for municipalities
and schools. He sees this as a controlled vehicle to fund charities
and municipalities and provide relief for taxpayers.
MR. EDWARD JAMES, representing Eddie's Sports Bar, agreed with the
previous comments and said it is a bill where everyone is a winner.
He said it has worked in Oregon and with declining oil revenues it
is something we should look at.
SENATOR PARNELL asked how much a game would cost an establishment
to install.
MR. JAMES estimated perhaps $2,000 - $3,000.
SENATOR PARNELL asked if he currently operates pull tabs and MR.
JAMES said he does. SENATOR PARNELL then asked if he had a problem
replacing them with video machines if that was the choice and MR.
JAMES replied they would complement each other but would prefer the
machines as they are self-contained.
SENATOR PARNELL asked how many bowls of pull tabs he has and MR.
JAMES replied one box per bartender.
MR. DENNIS POSHARD, representing the Department of Transportation,
came forward and CHAIRMAN TAYLOR asked if the Marine Highway had
looked at this bill as a means to generate revenue. MR. POSHARD
replied that they had and were in the process of researching the
estimated profit as well as the costs of buying or leasing the
machines. CHAIRMAN TAYLOR suggested it might provide additional
revenue. He said cruise ships have them and it is doubtful they are
losing money on them. He restated his primary concern to clean up
the whole system and said a permittee may contract up to five
games, ten machines each with certain limitations.
SENATOR PEARCE asked for the Department of Law and MR. VINCE USERA,
representing the department came forward to answer her question
about Indian gaming. MR. USERA stated that the Indian Gaming
Regulatory Act (IGRA) mandated the State must negotiate in good
faith to allow recognized Indian tribes on Indian lands to run any
game available to other groups in the state. He said it was
difficult to be precise and the question was somewhat up in the air
due to the Indian Country issue. He said the prior enforcement
mechanism for IGRA was federal court but this has been negated by
the Supreme Court in the Seminole decision. He said the Department
of the Interior is currently promulgating regulations that would
allow the Secretary of the Interior to endorse a compact if the
state refused to do so. He said this has the potential for forcing
the state to negotiate for these games. He said, for the most part,
tribes would not have limitations on the number of games, they
would also have a better chance for large-scale capitalization and
this may result in large casinos being set up.
TAPE 98-4
SIDE B
Number 001
SENATOR PEARCE clarified that the Secretary of the Interior is in
the process of setting up regulations that usurp the state
authority to control casino gambling?
MR. USERA replied yes, but if certain types of games are not
allowed at all they would also be prohibited to the Indian tribes.
It is only in the case that a type of game was allowed to another
group that the state would have to negotiate in good faith with the
Indian tribes.
SENATOR PEARCE asked if the fact that the legislation is permissive
might allow the Secretary of Interior to say that the legislature
has not limited gaming and therefore casinos would be permitted.
MR. USERA said that case law supports the proposition that
negotiation would only be necessary in games already allowed.
SENATOR PEARCE asked if it was all right for the department to do
the allowing. MR. USERA said that was not an issue as long as it
was allowed.
CHAIRMAN TAYLOR explained it as a question of equal protection. MR.
Usera agreed, repeating it would not trigger the allowance of any
other types of games. CHAIRMAN TAYLOR said he was working under
that understanding and did not want to cause any expansion, only to
clean up the existing system.
MR. USERA said the last time this was brought up the Seminole case
had not been decided. Now that the case has been decided, the focus
is on the possible actions by the Secretary of the Interior, not
the Supreme Court.
SENATOR PEARCE asked who would own the machines and if the
permittee could simply go out and buy them. She fears some
charities may be less than enamored with that idea. CHAIRMAN TAYLOR
replied that if you consider the returns, the machines pay for
themselves fairly quickly. SENATOR PEARCE noted that the percentage
return to the organization is dramatically less than before, 30
percent versus 70 percent.
CHAIRMAN TAYLOR said he believes that when the numbers are run they
will make more money. He pointed to the lack of accountability
within the system now and said we have somewhat of a handle on it
only by listening to testimony. He thinks the new system with
machines keeping track of all the money will be better and the
public will be better off. He said he always considered pull tabs
paper slot machines and would like to see them all shut down in
favor of this new, simple, technology that won't require five or
six more people to administer.
CHAIRMAN TAYLOR supported MS. VOGT'S clean up measures and wants to
see the fine tuning happen so "everyone gets first count" as one
witness said.
MR. JOE RILEY, an Anchorage bar owner, recounted how in 1959 it was
declared there would be no gambling in Alaska but the next day
exceptions were made for the Nenana Ice Classic, and then churches
and charitable organizations. He said he doesn't sell pull tabs. He
does not like them as they have too many loose ends. He thinks by
the time the charity gets the money from the game it has dwindled
from the original amount.
MR. JACK LEWIS, representing the Anchorage Restaurant and Beverage
Association and owner of the Sourdough Mining Company and the
Peanut Farm, passed out brochures about the Oregon lottery. He
argued that we now has information we did not previously have
regarding the track record of this type of gaming. He pointed out
that in negotiations with the oil companies, Alaska has a weak
position. He believes if we have other sources of revenue we will
hold a better bargaining position in negotiations of our natural
resources. He concluded that other states have exceeded their
projected revenues in every case.
SENATOR PEARCE stated she has always supported the use of machines
to improve accountability but had never envisioned the charities
having to buy them. She made a conceptual amendment to use the
video lottery machines to replace pull tabs. CHAIRMAN TAYLOR asked
if there were any objections and if SENATOR PEARCE wished to place
a time frame on the amendment.
SENATOR PEARCE said January 1st, 1999. CHAIRMAN TAYLOR asked if
everyone understood the amendment. SENATOR ELLIS said the committee
had not heard from a single charitable organization and this
amendment might change their position on whether or not they
support the bill. He said a large capital investment would be
necessary and he would not feel comfortable voting on this
amendment until he had heard from them. He pointed out they had
already heard from bar owners, the state and other supporters but
not from these people who would also be directly affected by the
bill.
CHAIRMAN TAYLOR agreed it will cause a reduction in opportunity
since it requires a person be over 21 and in a licenced
establishment. He said theses issues were raised two years ago and
it is true that a shrinkage of opportunity may occur. He also
agreed the cost will increase up front but he thinks this can be
resolved between the permittee and the licenced establishments to
the satisfaction of both parties.
SENATOR ELLIS said he believed CHAIRMAN TAYLOR to be familiar
enough with the amendment to know that this will eliminate pull
tabs in certain places. He added that even so the revenue, as well
as the potential for growth, will be much greater from these video
machines. He thinks the state will see a net increase in the gaming
dollars.
CHAIRMAN TAYLOR said there is no way to gauge that as no other
state has eliminated pull tabs and replaced them with machines. He
believes that the current system is fairly sloppy and the
charities, municipalities and the state will see a greater benefit
from the new system. He does not know if this will be due to an
exchange of dollars from one mode of gaming to another or an
increase in gaming overall.
CHAIRMAN TAYLOR asked if there was sustained objection to the
conceptual amendment.
SENATOR ELLIS maintained his objection, saying it would be an undue
burden on the charities to switch from pull tabs to machines that
may cost $2,000 - $3,000. He said he would withdraw his objection
if they heard from the charitable community that they would be
amenable to this change.
SENATOR PEARCE said, all things considered, the cost of the
machines would be covered for active charities.
CHAIRMAN TAYLOR called for the roll and the amendment passed four
to one.
CHAIRMAN TAYLOR said this legislation would next move to Finance.
SENATOR MILLER made a motion to move SB 199 as amended out of
committee with individual recommendations. Without objection, the
bill passed from committee.
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