Legislature(2003 - 2004)
10/01/2003 11:07 AM Senate L&C
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* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
October 1, 2003
11:07 a.m.
TAPE(S) 03-39, 40, 41
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Gary Stevens
Senator Bettye Davis
Senator Hollis French
MEMBERS ABSENT
Senator Ralph Seekins, Vice Chair
OTHER MEMBERS PRESENT
Senator Thomas Wagoner
Representative Bob Lynn
COMMITTEE CALENDAR
SENATE BILL NO. 178
"An Act establishing a state lottery; and providing for an
effective date."
HEARD AND HELD
SENATE BILL NO. 186
"An Act relating to authorizing charitable gaming permittees to
use up to five electronic gaming machines at certain locations
with certain liquor licenses or certain other places where
access is restricted to persons 21 years of age or older as an
authorized form of charitable gaming; limiting the maximum
number of electronic gaming machines for which a vendor may have
an endorsement to not more than 10; relating to licensing
manufacturers and distributors of electronic gaming machines;
relating to local prohibition of electronic gaming; limiting the
authority of municipalities to tax electronic gaming machines;
relating to penalties concerning charitable gaming; making
conforming amendments; and providing for an effective date."
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
SB 178 - See Labor and Commerce minutes dated 5/1/03.
SB 186 - See Labor and Commerce minutes dated 5/1/03.
WITNESS REGISTER
Ms. Kelly Huber, Staff
Senator Taylor
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 178 and SB 186 for the
sponsor.
Mr. Larry Meyers, Deputy Commissioner
Tax Division
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
POSITION STATEMENT: Commented on SB 178 and SB 186.
Mr. Darwin Biwer
Darwin's Theory
416 G Street
Anchorage AK 99501
POSITION STATEMENT: Commented on SB 178 and SB 186.
Mr. Gary Superman
PO box 8425
Nikiski AK 99635
POSITION STATEMENT: Supported SB 178 and SB 186.
Mr. Frank Dahl
Cabaret, Hotel, Restaurant and Retailer Association (CHARR)
3437 Sagan Circle
Anchorage AK 99517
POSITION STATEMENT: Supported SB 186.
Mr. Gregory Peterson
Ketchikan AK
POSITION STATEMENT: Opposed SB 178 and SB 186.
Reverend Michael Keys
Central Lutheran
Alaska Synod of the Evangelical Lutheran Church of America
1420 Cordova
Anchorage AK 99501
POSITION STATEMENT: Opposed SB 178 and SB 186.
Mr. David Lambert
3431 Airport Way
Fairbanks AK 99709
POSITION STATEMENT: Supported SB 178 and SB 186 with changes.
Ms. Lynn Reese
PO Box 141086
Anchorage AK 99509
POSITION STATEMENT: Submitted written testimony.
Mr. John Perry
The Woodshed/Rippiking
PO Box 92827
Anchorage AK 99517
POSITION STATEMENT: Opposed SB 178 and supported SB 186.
Ms. Mary Magnuson, Legal Counsel
National Association of Fundraising Ticket Manufacturers (NAFTM)
No address provided
POSITION STATEMENT: Commented on SB 178 and SB 186.
Ms. Bernadette Bradley, Owner
Bradley House
PO Box 110003
Anchorage AK 99511
POSITION STATEMENT: Supported SB 178 and SB 186.
Mr. Larry Hackenmiller
CHARR
518 Farmer's Loop
Fairbanks AK 99712
POSITION STATEMENT: Supported SB 186.
Reverend Dennis Holoway
United Methodist Church
3402 Wesleyan Dr.
Anchorage AK 99508
POSITION STATEMENT: Opposed SB 178 and SB 186.
Mr. Tom Grey, Executive Director
National Coalition Against Gambling Expansion
Rockford IL
POSITION STATEMENT: Opposed SB 178 and SB 186.
Mr. Jerry Lewis
Alaska Bingo Supply
3707 Woodland Dr.
Anchorage AK 99517
POSITION STATEMENT: Supported SB 178 and SB 186.
Mr. Jeff Harmen
Juneau AK
POSITION STATEMENT: Supported SB 186 with changes.
Mr. David Sanden
Hidden Treasures
PO Box 210306
Auke Bay AK
POSITION STATEMENT: Commented on SB 178 and SB 186.
Mr. John Regan
3104 Delta Dr.
Anchorage AK 99502
POSITION STATEMENT: Commented on SB 178 and SB 186.
Ms. Rhonda Hotefi
Oregonians For Gambling Awareness
Oregon
POSITION STATEMENT: Opposed SB 178 and SB 186.
Mr. Alex Flyum
Elks 2127
345 W. Sterling Hwy.
Homer AK 99603
POSITION STATEMENT: Supported SB 178 and SB 186.
Mr. Ted Brown
5761 Silverado Way
Anchorage AK
POSITION STATEMENT: Supported SB 178 and SB 186.
Mr. Mike Loman
Wasilla Bar
574 Paystreak
Wasilla AK 99654
POSITION STATEMENT: Supported SB 186.
Ms. Louise Stutes
Kodiak CHAR
PO Box 170
Kodiak AK 99615
POSITION STATEMENT: Commented on SB 178 and SB 186.
Mr. Robert Gregory
Crazy Horse Saloon
PO Box 140662
Anchorage AK
POSITION STATEMENT: Supported SB 178 and SB 186.
Mr. Tim Smith
Nome Fishermen's Association
PO Box 396
Nome AK 99762
POSITION STATEMENT: Supported SB 186.
Mr. Randy Ruedrich
Republican Party of Alaska
1201 W. Fireweed
Anchorage AK
POSITION STATEMENT: Commented on SB 178 and SB 186.
Mr. Don McKee, Member
Two Rivers Grange
15 Farewell Ave.
Fairbanks AK 99701
POSITION STATEMENT: Opposed SB 178 and SB 186.
ACTION NARRATIVE
TAPE 03-39, SIDE A
SB 178-STATE LOTTERY
SB 186-CHARITABLE GAMING/ELECTRONIC GAMING
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 11:07 a.m. Present were Senators
French, Stevens, Davis and Chair Bunde. He announced that gaming
issues in Alaska would be discussed and noted that the National
Gambling Impact Study Commission, authorized by Congress, has
put some interesting information together. One fact from the
University of Buffalo said that 82 percent of people gamble and
that it is legal in some form in all states except Hawaii and
Utah. Lotteries exist in 37 states and casinos are legal in more
than half the states. Lotteries are the most prevalent form of
gambling.
CHAIR BUNDE stated that the Economics of Gambling by Professor
Earl Brenner, Department of Economics, University of Illinois,
points out some of the downside of gambling and its expansion.
His data indicates that while 82% of people gamble, about 10% of
gamblers account for 60 - 80% of all wagers and he had some
concern about the addicted or pathological gambler on a nation-
wide basis, which was estimated to cost $10,000 a year per
pathological gambler. The study focused on small populations and
said in a typical county of 100,000 adults, a casino would
create the additional social cost of $12 million annually and a
direct social benefit of $4 million.
CHAIR BUNDE noted that gaming is in Alaska currently - from
pulltabs to neighborhood cards games and those are not illegal
as long as the house doesn't take a cut or charge for their
services.
MS. KELLY HUBER, Staff to Senator Taylor, sponsor of SB 178 and
SB 186, said that SB 178 establishes a state lottery and creates
a corporation rather than a commission to run it. It would be a
quasi-governmental entity with a board of directors and an
executive director. She said last year they were told there was
potential revenue of $5 - $10 million. SB 186 allows for
electronic gaming machines to be added to the current gaming
statutes, permits automatic gaming through registered vendors,
establishes a minimum percentage to be paid from the income and
limits the number of machines.
She said that the reason Senator Taylor introduced these bills
was to have a starting point for discussions. He did not want
the charities that benefit from gaming to be hurt.
MR. LARRY MEYERS, Deputy Director, Tax Division, Department of
Revenue, said he oversees the gaming division in Alaska. He
explained that since SB 178 didn't cover specifics, he didn't
have revenue projections in the fiscal note. Alaska is unique in
that it's not contiguous with other states and few people cross
our borders. The population is small and for lotteries to be
successful, they have to rely on more than just one form
including instant winners so that people can get an immediate
reward to keep their interest going.
The corporation created in SB 178 would have to determine what
game would be played and then advertise it in order to be
successful. In that way it is different than most taxing schemes
run by governments. This is why it lends itself so well to a
corporate structure.
SENATOR FRENCH asked if the bill laid out where the percentages
were supposed to go in terms of payout and expenses.
MR. MEYERS replied no.
SENATOR FRENCH asked what the payout was in other states.
MR. MEYERS replied that the amounts vary all over. However, he
has referred to South Dakota for electronic gaming. It has a
similar population and is relatively new with some of its gaming
practices. South Dakota projected net income of $6.3 million
from lottery games and instant tickets.
SENATOR HOLLIS FRENCH asked him to explain his estimated income
of $1.3 million for Alaska.
MR. MEYERS replied that were a lot of variables to consider and
$1.3 million was probably in the lower range.
SENATOR FRENCH said the difference between the lottery and
pulltabs and video gaming is that in the lottery situation, the
state will create a corporation that will run it. The state
wouldn't just condone gambling, it would actually be promoting
it to get income.
CHAIR BUNDE asked what the state's net was on pulltabs now.
MR. MEYERS replied that gaming in Alaska is predominantly
pulltabs and bingo. In FY 2001, charitable gaming generated $350
million in gross sales. After prizes of $267 million, there was
approximately $84 million net of which $52 million went to
prizes and $30,700,000 was distributed to the permitees. Their
research indicates if other forms of gaming were introduced, the
markets would be competing against each other- depending on how
it is marketed. The best odds or the biggest prize would control
where the dollars are. One state introduced gaming to keep their
residents spending money in their home state instead of a
neighboring state.
CHAIR BUNDE asked how much the state got of the $350 million
gross.
MR. MEYERS replied about $2.5 million.
CHAIR BUNDE said he didn't have a moral issue with gambling, but
with the economics. "If there's a net gain for the state
considering the social costs, that's an important part of the
equation...."
SENATOR GARY STEVENS wanted to know where the $350 million gross
went.
MR. MEYERS explained that $267.7 million goes to prizes, which
leaves a net of $84 million to cover expenses and distributions
to the permittees. Out of that $84 million, $52 million covers
expenses leaving $30 million to be distributed to the permitees.
CHAIR BUNDE said he assumed that a lottery would require the
same kind of payout for it to be successful.
MR. MEYERS agreed.
CHAIR BUNDE said there is discussion that an Alaska lottery
could be connected to power ball and asked if he had information
that would encourage or discourage that.
MR. MEYERS responded that 24 out of 37 gaming states have
lotteries. He wasn't certain that South Dakota participated, but
he thought so.
CHAIR BUNDE asked him what he thought about SB 186.
MR. MEYERS replied that the fiscal note outlines their
estimations of what the revenue and expenses would be, but
Alaska doesn't have any experience in this kind of gaming and
they had to look at other states. Seven states have electronic
gaming machines and of those they looked at Oregon, Montana and
South Dakota. No revenues were projected for the first year as
there would be start up costs for computers and other things
that would be needed to run the program. In 2010, they projected
the state's share would be around $15 million.
SENATOR FRENCH asked if they had estimated the social costs of
gambling.
MR. MEYERS replied no.
SENATOR STEVENS asked if municipalities could choose whether or
not they want to participate.
MR. MEYERS replied that there is a current opt out provision in
charitable gaming law for municipalities. He added that a
municipality can be a corporation and if they chose to be the
permittee, they could take 30% plus their 25% and actually take
in 55 percent if they chose to play.
CHAIR BUNDE asked if electronic gaming was more likely to be
promoted by the businesses that have the machines or would the
state have to promote it.
MR. MEYERS replied following South Dakota's scheme, the state
would not own the machines and the vendors would be actively
promoting. Oregon is the only state that owns the machines
themselves.
CHAIR BUNDE announced that Senator Wagoner arrived at the Kenai
LIO.
SENATOR FRENCH asked if there was a reason the Department of
Revenue didn't make an estimate of what the social cost of
gambling is.
MR. MEYERS replied that Health and Social Services normally
handles those issues.
SENATOR FRENCH asked if Mr. Meyers had read articles about the
social cost of gambling and he replied that he had.
MR. DARWIN BIWER, owner of Darwin's Theory, an Anchorage bar,
said he was involved in the Anchorage charitable gaming issue as
a member of CHARR. He said a problem with a lot of studies on
gambling is that Internet gambling is relatively new and it's
hard to quantify. However, he said the state could help pay for
education and roads with the money it brings in from gambling.
He would have to expand his clientele and promote gambling as
well. He figured it was a partnership between businesses, the
state and municipalities and it had to work efficiently.
MR. BIWAR informed them that Mr. Dennis Jackson, the former head
of the Idaho lottery, has two major issues with gaming
legislation. Gaming has to be run like a business corporation
and it has to have a strict monitoring and enforcement structure
in place.
MR. BIWAR supported those ideas in SB 176 as well as
establishing the education account within the commission. He
felt that a class C felony penalty was okay, but penalties for
further offenses needed to be addressed.
Regarding SB 186, he felt on page 12, line 9, that there could
be a problem with inspections if the charities owned the
machines and contracted with the vendor, because the bill says
that the vendor should pay all of the expenses. He felt that
issue should be dealt with by individual contract. Anything over
$600 needed to have a 1099 filed with the IRS and Oregon has a
$600 maximum.
TAPE 03-39, SIDE B
He reminded them that no state had ever gambled their way out of
debt.
MR. GARY SUPERMAN, from Kenai, said he owns an establishment
that could be affected by this and felt this was a viable
mechanism for creating a new revenue stream for the
municipalities. He said while the municipality of Kenai was
doing okay now, in the future they were looking at deficit
spending, like the state, and were looking for ways to augment
their revenues without going to the general public.
SENATOR FRENCH asked if he saw any downside at all to this
concept, especially the electronic gambling machines (EGM).
MR. SUPERMAN said the only downside he had been exposed to is
that abuse of gaming may increase by 1 - 2 percent. He felt
there was lots of gambling in Alaska and that the state enabled
it to begin with.
SENATOR FRENCH said that a study of 331 gamblers indicated that
machine gambling was the most problematic form and he felt they
needed to keep that in mind.
MR. FRANK DAHL, from Anchorage, supported gaming saying it would
increase revenues for his business and the state. He figured the
state would get as much as $50 - $100 million more per year. It
is a good alternative to taxes and using the Permanent Dividend
Fund. He felt there were addiction and crime issues, but other
states say they don't see any increase in crime and see a very
small problem with addiction. Most of the crime issues in
Anchorage had to do with the after-hours gaming places. Police
have told him there are 17 of those in Anchorage and, if those
were turned into legitimize operations, the result would be less
crime. He didn't see a problem with the pulltab people having
EGMs in their establishments as long as they play with the same
rules. He thought a lot of pulltab operators are concerned about
competition.
He reminded the committee that gaming is completely voluntary
and that churches and other organizations across the state are
the recipients of pulltab permits and they use the money for a
good cause.
SENATOR FRENCH asked if it could be demonstrated that the social
cost of gambling is higher than the amount of money the state
was going to get, why wouldn't the state just look at it just as
a business proposition.
MR. DAHL replied that he thought that would be a good argument,
but in the states he has looked at the opposite is true.
SENATOR FRENCH said that South Dakota went through a period when
they had video gambling from 1989 - 1994. Then their Supreme
Court said that video gambling was unconstitutional and shut it
down. The voters reauthorized it under new language after 14
weeks. During that time the gambling clinics that dealt with
problem gamblers went from having 16 inquiries per month and
treating 10 serious cases to having nothing. Once it was
reauthorized, the problem started creeping back again. There
seems to be a tight correlation between video gambling and
problem gambling.
MR. DAHL responded that he felt that it was finding the matter
of degree and the right balance in our society.
MR. GREGORY PETERSON, Ketchikan resident, said he has read a lot
of articles about the problems associated with gambling and
pointed out that you have to be 21 to play pulltabs and the 26
operators and 4 MVPs do only a small portion of the actual
gaming. Individual permittees do most of it. He was very much
against video electronic games, but asked the committee to
consider if a bill were passed to give 40 percent of the revenue
to the state and 40 percent to the charities and 15 percent to
the municipalities and 5 percent to the bar owners, he asked if
they would support that.
He summarized saying that the state and the charities are
benefiting from the current system and he couldn't understand
why people wanted to change it and take money away from the
people who are benefiting now.
REVEREND MICHAEL KEYS, Alaska Synod of the Evangelical Church of
America, said that state sponsored gambling is not a good
solution to the fiscal challenges we face. Independent studies
have indicated there are impacts that are absolutely devastating
to communities and families and that fact has to be taken very
seriously. When the state sponsors gambling, it is violating one
of its prime responsibilities to protect its citizens. The state
of Oregon has documented big problems with legalized gambling
like prostitution, bankruptcy, etc. The province of Alberta also
has a study that shows the problems with gambling.
He pointed out that this is really a very unjust form of
taxation. Studies have proved that poor and lower wage earners
not only spend more money proportionally of their income, but
more money on gaming overall than those who are wealthier. The
reality is that this revenue burden is being put on the people
who are least able to afford it. He felt the legislature should
take some leadership on this issue saying that every single
person needed to contribute to the common good. He urged them to
do the research necessary to find out what the social impacts
really are.
CHAIR BUNDE asked if he would eliminate gambling that is already
allowed.
REVEREND KEYS replied that his establishment doesn't do those
kinds of activities now and his concern is that the gaming they
are talking about would be state-sponsored.
REPRESENTATIVE BOB LYNNE asked why poor folks would have less
free will than rich folks.
REVEREND KEYS replied that when they target a market whose
dreams and hopes are more challenged, the state is taking part
of their will away and it's a fact that advertising influences
people. He felt the state had a responsibility to protect the
common good.
SENATOR FRENCH said he thought the reverend's strongest
objection was that the state shouldn't promote these activities,
but he wanted to know how he felt about electronic gaming
machines that the state would simply be condoning.
REVEREND KEYS replied when a business is taxed for its business,
that is one thing, but when you start talking about 30 - 50
percent returns, you are a major player. He felt the state was
trying to game its way out of a fiscal crisis, which is
irresponsible.
CHAIR BUNDE announced a five-minute break.
MR. DAVID LAMBERT, from Fairbanks, thought the state would
benefit from allowing operators to sell the lottery tickets,
because some of the major bingo halls are run under operators.
Concerning SB 186, he knew it was not the intent to expand to
numerous locations and he didn't want electronic games to be put
just anywhere, but he wanted them to consider how current
operators could qualify to have electronic gaming machines so
they wouldn't go out of business. He also thought the prize
limitations should be changed to allow more non-profits to be
able to participate in electronic gaming.
TAPE 03-40, SIDE A
CHAIR BUNDE announced that Senator Seekins would be heading a
task force that would further explore pulltabs and the
definition of non-profit charities. He said at this point, that
definition is fairly broad. Senator Seekins will be asking about
the location issue, i.e., whether a charity that is located in
Ketchikan should be able to have a pulltab operation in
Anchorage. He asked him his opinion of that issue.
MR. LAMBERT replied that he does not like to see non-profit
organizations from Juneau come into the Fairbanks area. He noted
that some permits are run in Fairbanks are from non-profit
organizations that are located in rural villages without a large
enough population base to support a pulltab operation.
He also thought that permits should be regionalized. He is an
operator in both Fairbanks and North Pole and he would not run a
Fairbanks permittee out of the North Pole location, because he
feels that funds raised in North Pole should stay in North Pole
for its non-profits.
CHAIR BUNDE asked Mr. Lambert to share his view with Senator
Seekins. He then called Lynn Reese to testify. Ms. Reese said
she would submit written testimony. Chair Bunde then called Mr.
Perry to testify.
MR. JOHN PERRY, representing the Woodshed Nightclub and
Rippiking, an Anchorage operator, told members he has been
involved in almost every aspect of charitable gaming in Alaska
for 15 years, so he has watched the industry mature and become
more honest. He said he is opposed to SB 178, simply because he
does not believe that state involvement will be fiscally and
socially responsible. He stated:
Fiscally, you're talking about setting up a
corporation that's going to market lotteries and
hopefully make money. Well, you only have 600 and some
thousand people in Alaska. How are you going to give
away a million dollar prize, which is what it's going
to take to really generate interest in it? And if
you're gonna give away a million dollar prize, are you
going to give it every week? If you give it away every
week, that's a lot of tickets to sell, you know, just
to break even to pay for the prize, let alone pay for
all the infrastructure, all the marketing that's gonna
go on. I think it's unreasonable to think that that's
going to be possible.
MR. PERRY said he would hate to see valuable state resources
used to support a white elephant. He explained that the Woodshed
Nightclub and Rippiking support SB 186, with the exception that
they would like to see operators be able to utilize SB 186. He
said as an operator, Rippiking employs 3 to 4 people; and when
electronic gaming first comes into a state, pulltab sales
typically drop 50 percent for the first two years. If
Rippiking's sales dropped 50 percent, it would go out of
business. The video poker would allow it to remain in business
by providing another gaming activity for their customers.
MR. PERRY said restricting operators will have a second effect.
It will force people who may want to play video poker to go to a
bar. He noted that many people who go to pulltab stores do not
drink and have no desire to go to a bar. He pointed out that the
minimum age to enter a pulltab store is 21.
CHAIR BUNDE asked if the minimum age is 21 to enter a place that
conducts bingo and pulltabs.
MR. PERRY said most bingo halls do not allow children because
they are disruptive and the minimum age to play is 19. According
to the statute, such a place is supposed to have a separate area
for the pulltab operation to avoid commingling of the age
groups. He said, in response to the concern about the social
costs of gambling, a lot of gambling is going on in Alaska. He
believes video gaming would allow some of that revenue to come
into the state coffers and will create additional jobs if
operators are not penalized. He estimated there might be 10
machines per bar in 700 or 800 bars and those machines will
require maintenance. He said if operators were penalized, the
job situation would remain about the same. He said video poker
machines on average generate $95 per day in gross sales per
machine. He suggested lowering the maximum prize amount to $500
to prevent a get rich quick mentality while still providing an
activity for people. He said the Woodshed Nightclub and other
bars in downtown Anchorage would generate more revenue from
tourists if it had video poker games in its bar.
MR. PERRY summarized that it is important to look at the
economics of providing this revenue source for non-profit
organizations, vendors, the state and local governments because
the benefits will far outweigh the social costs that may be
involved. He said allowing video poker will not solve the
state's fiscal problems, but it would help.
CHAIR BUNDE said he attended a seminar in Las Vegas in which he
learned that success in a gambling venture is dependent on an
influx of out-of-town, out-of-state, out-of-country money.
Otherwise, dollars from the local economy are just being traded.
He thanked Mr. Perry for his testimony and continued taking
public testimony.
MS. MARY MAGNUSON, legal counsel to the National Association of
Fundraising Ticket Manufacturers (NAFTM), a group of companies
that manufacture products for the charitable gaming industry,
made the following comments about the effects of any kind of
electronic gaming on the charitable gaming market. NAFTM does
an annual report on the status of charity gaming around the
country and in Canada. She noted that she recently attended a
National Conference of Legislators from gaming states and
offered her perspective on how the state budget crises have
impacted charity gaming. She said that NAFTM has noticed, as it
has gathered statistical data for its report this year, that a
significant number of states have looked to expanded gaming as
an opportunity to raise state revenues. She told legislators
that can sometimes be a two-edged sword. NAFTM has tried to
convey that church groups, social service organizations, arts
and cultural groups and civic organizations depend on charity
gaming as a source of revenue. During the last 10 years, social
service organizations have endured a $35 billion decrease from
the federal government. The federal contributions to the arts
organizations have decreased by nearly 45 percent. She said that
according to her morning newspaper, more than 5,000 people in
Minnesota will no longer be eligible for state sponsored health
care because of their budget problems. They are hoping that
various non-profit agencies will be able to fill the gap.
MS. MAGNUSON said her point is that many non-profit groups rely
on charitable gaming for necessary revenues to provide social
services, arts and cultural functions and civic duties and that
expanded gambling opportunities do have an impact on charitable
gaming. She asked committee members to consider that for
revenues are raised, other revenues will be lost to the non-
profit organizations that are dependent upon them. She told
members that during the 2003 legislative cycle, 27 states
considered expanding gaming opportunities, most notably video
and electronic gaming activities in racetracks, bars and
restaurants. With the exception of the State of Maine, not one
legislature passed an expanded gambling initiative. The piece of
legislation that was passed by the Maine Legislature was
promptly vetoed by the Governor. She said legislatures are
obviously concerned about the issue and its impacts are
measurable.
MS. MAGNUSON pointed out that Louisiana's gaming industry was
thriving until video gaming was introduced in 1992. Since then,
the revenues raised from charitable gaming for non-profit groups
have decreased by 65 percent and continue to decline. NAFTM said
revenues in Nebraska have decreased nearly 43 percent due to
riverboats in Iowa. Revenues in Texas have declined by nearly 30
percent since that state legalized amusement-style slot
machines. She asked members to consider that many non-profit
organizations will no longer be able to use charity gaming to
raise revenues if they must compete with expanded electronic
gaming opportunities.
CHAIR BUNDE asked if, in Louisiana, the [non-profits] were
unable to use the same types of gambling devices as those used
by private interests.
MS. MAGNUSON said they were not. In Louisiana, [non-profit
organizations] were limited to conventional Bingo games and
pulltab games at the Bingo games and at the veterans and
fraternal clubs. The video slots were in racetracks, bars and
taverns and at truck stops, where they are very popular.
CHAIR BUNDE jested that's what you do when you don't have
scenery. He thanked Ms. Magnuson and called Bernadette Bradley.
MS. BERNADETTE BRADLEY said she would be testifying on her own
behalf. She is the owner of the Bradley House in South Anchorage
and is a member of the Alaska Cabaret, Hotel, Restaurant and
Retailers Association (referred to as CHARR). She said she does
not believe this legislation will affect the Bingo games as they
have a very loyal clientele. She told members she would like to
tell them about her experiences with gambling in Anchorage. When
she was in her early 20s, she went to an after hours
establishment to play the slot machines. She hit a jackpot, but
the manager promptly put an "Out of Order" sign on the machine
and refused to pay her. She said that happens every day in
Anchorage. Money that is being made illegally is being taken
from citizens. She said people wonder why there are so many
after-hours places in Anchorage. The Anchorage Police Department
believes that is because prosecution is expensive and time
consuming and whenever one place closes, another immediately
opens.
MS. BRADLEY said that she and her mother visit Las Vegas two or
three times per year. She was told that Alaska Airlines has
reported that 80,000 Alaskans fly to Las Vegas each year so a
lot of money is leaving the state to gamble in Nevada. She said
if this legislation passes, she will play the video poker
machines.
MR. LARRY HACKENMILLER, a Fairbanks bar owner and a member of
CHARR, said he supports SB 186. The proposal to create a gaming
commission is a wise move. If a commission is established, then
any future expansions and deliberations will fall under its
realm and it would have the facts, which would make decision
making easier. However, he does not want the issue of creating a
commission to hold up the bill. He said electronic gaming is
already a proven technology. The security features are
unsurpassed. The reporting requirements are the best thing that
could happen to charities. Right now, many charities have
volunteers doing their paperwork. They enjoy the funding from
pulltabs, but voluntary staff sometime jeopardizes permits
because they do not know how to deal with the red tape and
paperwork required. The state could easily get the information
it needs instantly. He said that no NSF checks are involved with
electronic gaming. The electronic transfers are immediate.
Government agencies do not have to fill out paperwork. If the
vendor does not get the money in the right account, the machines
shut down and the vendor would have to justify why the funds
were not paid.
MR. HACKENMILLER said the bottom line is the amount of money
will be determined by the degree of participation by fellow
community members. If a community is not into gambling, it will
not make a lot of money. He suggested including a provision in
the bill to allow municipalities to restrict permits to local
organizations. He does not feel that is an issue the state
should be involved in. He said he questions what the term
"poverty level" means anymore but if the state is worried that
people will spend their welfare checks on electronic gaming, one
way to solve the problem is to give them no more money. He said
that apparently the state has a lot of "gamboholic" programs
that are abused. He said many of the [social] problems have
already been identified and addressed by other states. He
admitted that electronic gaming will result in a decrease in
pulltab sales and the ticket manufacturers are concerned not
because of the decrease of revenue to charities, but because the
manufacturers will be losing revenue. He said although the
pulltab business will be directly impacted, pulltabs will still
have their place in Alaska.
MR. HACKENMILLER said this bill is set up so that the vendor
would be a bar. Package stores, operators or Bingo Halls are not
included. The bill also would allow him, as a bar owner, to have
10 video gaming machines, but each permittee can have a maximum
of five machines. He expressed concern about Section g on page
12, which says, "The contract between the vendor and permittee
must contain allocations that permit all the costs of
purchasing, leasing, operating and monitoring the electronic
gaming machines to the vendor." Because, if he didn't own or
lease the machines, he didn't know why he would be responsible
for the costs of purchasing, operating and monitoring. He noted
that he is the one who has to have the liquor license; he also
has to have the cash available for the payment of it and is
obliged to make sure the funds are deposited in the electronic
gaming account.
SENATOR FRENCH asked if he thought the state should be able to
limit the amount of money a person can gamble away on a machine
in any given day.
MR. HACKENMILLER replied no.
CHAIR BUNDE asked if he knew of firewalls or something that
would prevent a hacker from messing with computer central of a
video gaming process in a state.
MR. HACKENMILLER replied that G-Tech is one of the groups that
has the information on a central computer and they have security
necessary to prevent this type of thing.
REVEREND DENNIS HOLOWAY, United Methodist Church, said he sees
his anti gambling stance as one of compassion. Legalized
gambling has a downside particularly among the poor who can
least afford it. "Those who suffer from addiction to gambling
will eventually come back to the state for aid for themselves
and for their families."
REVEREND HOLOWAY said that the state will not have funds to deal
with such individuals and will outsource them and their needs to
the faith based communities, because they are people of
compassion and can't turn their backs on them. This is the
beginning of a dehumanizing cycle that could be stopped by not
passing this legislation. He said if his son or daughter was
caught in this cycle, it would not be just a small negative
downside - quite the contrary.
CHAIR BUNDE asked him if he thought existing gambling should be
curbed.
REVENEREND HOLOWAY replied that his denomination is opposing
adding on other elements of gambling.
REPRESENTATIVE LYNN asked what his position was on the issue of
free will.
REVEREND HOLOWAY responded that free will was more of a clear
issue for people who are middle class on up. People who have
less income often represent minority groups where all kinds of
issues are tied in with race.
REPRESENTATIVE LYNN asked if he was saying that free will was
relative.
REVEREND HOLOWAY replied that as a white person he is still
trying to understand what it means to have white privilege in a
racist society. "I think for many ethnic minorities, they don't
have the same choices that we have in our society."
They don't have equal access to some jobs, for instance, because
they are not white.
MR. TOM GREY, Executive Director, National Coalition Against
Gambling Expansion, said he was surprised that the task force
had no knowledge of the National Gambling Impact Study that was
commissioned by Congress to extend over the course of two years.
Five million dollars was spent examining the rapid expansion of
gambling in the Lower 48. The report says that of all the forms
of gambling, convenience gambling has the least amount of
economic benefit and the most social impact and cost. It advises
states to not do it. Of the nine commissioners, four of them
were from the gambling industry. Twenty-five states have already
said no to gambling expansion; 19 have said no to putting slot
machines at race tracks; six states have said no to expanding
casinos and five had said no to putting a lottery in. He felt
that they have realized the social cost.
TAPE 03-40, SIDE B
MR. GREY said the people of South Dakota put the question of
removing them on the ballot and the governor said if they were
removed, they would have the highest tax increase in their
history, as 14 percent of their budget was based on their
income. Given that, 52 percent voted to keep it, but 48 percent
voted to remove them. He felt that 48 percent was a persuasive
percentage.
MR. JERRY LEWIS, Alaska Bingo Supply, said he had been involved
in gaming all of his professional life. He has heard and
believes that SB 186 would eliminate pulltabs and replace them
with slot machines. He didn't know if they would bring in any
more money, but that we should learn from other peoples'
mistakes. South Dakota tried limited stakes gaming and
lotteries, which didn't work; Nevada is petrified to put in any
charitable gaming; however, Colorado has a very strong limited
stakes historical gaming and is a very good example. The first
year that it opened there $17 million was generated for the
state and last year $90 million was generated. It could easily
generate $10 - $20 million for the state and leave the
charitable gaming industry to prosper on its own the way it is.
MR. LEWIS suggested taking three Colorado cities that are close
to a population base, like Whittier, and two close to Juneau and
one close to Fairbanks and approve limited stakes gambling, and
see what happens.
In Colorado, the industry is heavily regulated and there has
been no corruption. Licenses are very expensive and you don't
get one if you have a background. The Historic Action Committee
determines how the buildings are built, how the parking lots are
laid out and seeks to maintain the history of the three towns of
Cripple Creek, Black Hawk and Central City. He felt that the
pulltab industry would be enhanced with electronic gambling. He
didn't feel that SB 186 would affect the bingo halls that much,
but he thought the others would have to change.
CHAIR BUNDE said he had been to the casino in Black Hawk and
asked what he meant by limited stakes.
MR. LEWIS replied that it limits the games that can be played
and has a $5 maximum bet. Black jack, poker and slot machines
are the only games that can be played in Colorado.
CHAIR BUNDE asked if alcohol was available at no cost like in
Las Vegas.
MR. LEWIS replied that is up to the casino. He added that the
impaired laws in Colorado are very strict. If you are impaired
in any way, you can't gamble and casinos close at 2:00 a.m.
SENATOR FRENCH asked how much a person could play at bingo in a
night.
MR. LEWIS replied that he had no idea, but there are several
riverboats, for instance, that have limited the amount of loss
possible in a certain day. His experience is that that doesn't
work very well and there are ways around it.
CHAIR BUNDE thanked him for access to his information.
MR. JEFF HARMEN, Juneau, said SB 186 was introduced to create
revenue for the State of Alaska, but he felt that concept should
be clarified, because charities will be affected greatly. He was
also concerned that expanding electronic gaming would kill
pulltabs. He is not against gaming machines and felt that they
solve a lot of problems that pulltabs have, but he is opposed to
the way the money is split up.
Currently CHARR owners are going to get $2 for every $1 that the
charity gets. That concerns him because that is where the
biggest share of the money is going. The government receives 35
percent versus the charities' 30 percent cut and that concerns
him, also, because the charities will take the biggest hit on
this. He felt the charities do a better job with the dollar than
the government can as far as supporting the people that actually
need the money.
CHAIR BUNDE recessed the meeting until 3:00 p.m.
MR. DAVID SANDEN, MVP Manager for several businesses in Juneau,
said he would concentrate on the numbers and felt that the
fiscal note was in the ballpark. In the first year, SB 186 is
projected to bring in no revenue, which attests to the massive
costs of start-up. However, it would be interesting to know how
many of those dollars would stay in-state and what interests
would actually consume all the revenue during the first year.
It is also projected that there will be $1.1 billion of gross
wagers. There are 410,000 residents in Alaska over the age of 21
and that would be the equivalent to $2,682 per resident spent on
gaming each year. He explained that gaming is a concentrated
vice with only a minority of the population participating. He
commented that when taxation is shifted from any one group to
another, whether it is a vice or not, it's interesting.
MR. SANDEN, Hidden Treasures in Juneau, pointed out that when
you compare the $1.1 billion fiscal note in SB 186 with what is
actually being spent on pulltabs in the state, you find that
those numbers mean that electronic gaming will attract new
people to gambling in the state of Alaska. Currently, pulltabs,
unlike electronic gaming, incur a physical limitation on how
much money an individual can spend. With electronic gaming the
physical limitation disappears because it's much more efficient
and a more attractive form of gambling. That draws more people
into the demographics of that gambling pool. "Make no mistake
about it, you will bring new faces into the gambling arena in
the state of Alaska...."
He personally has stopped four people from gambling because of
their gambling addiction. Electronic gambling will increase
those numbers.
By 2010, the Department of Revenue is predicting $15 million for
the state, which he thought was accurate. Early last session, he
proposed a 20 percent ideal net tax split 50/50 with the
municipalities and state based on where the gaming revenue is
raised. That would have raised $15 million as well.
MR. SANDEN said that the only way to bring more non-profits into
gaming is for a permittee to meet their cap and then another one
could step in. With electronic gaming there are no limits
whatsoever to the activity any one permittee is allowed to
partake in. Market forces would dictate that they concentrate.
CHAIR BUNDE asked him to send them his written testimony.
MR. SANDEN concluded by pointing out that it would be hard to
limit gaming to people 21 years old, because minors can go in a
bar accompanied by their parents. He summarized a concept in a
research paper on gaming:
I'd like to expound on two general issues before
finally concluding. The first of these relations is
the role of gambling in any economic system. It is a
transfer item. This means that money is merely
transferred from one individual to another. There is
no creation of wealth or consumer goods. The pie has
not been enlarged. As economic professors like to
illustrate, such problem with the United States is
that we are not creating enough wealth...
MR. JOHN REGAN, Anchorage resident, said he thought the
legislation was slanted. He wanted to know why EGMs would be
allowed only in bars; and, if you want to raise money, why
prohibit them anywhere? He wanted to know if gaming money could
be used to purchase them as very few non-profits have excess
money they can purchase the machines with and doing that would
be taking money away from where it needs to go. He asked why the
state should have to offer a vendor 30 percent to install an EGM
when the game should be the drawing card. He also asked why
charitable gaming was established in the first place. He thought
it was supposed to be people helping others than themselves.
CHAIR BUNDE reminded everyone that the committee does not intend
to take any action on these bills, but is here to gather
information.
MS. RHONDA HOTEFI, Oregonians For Gambling Awareness, said she
runs this organization after her brother who committed suicide
due to his gambling addiction. She said that people who have
lost their jobs are being asked to gamble more so the state can
work on their budget deficit that they are not able to control.
Their video gaming machines have added more problems, which
resulted in less money for their state overall.
TAPE 03-41, SIDE A
MR. ALEX FLYUM, Elks 2127, said he is in favor of the gaming
machines, because they are always swamped with requests for more
money for things like scholarships or organizations that help
people with drug problems and others. He said they have a gaming
permit from the state and use pulltabs now.
MR. TED BROWN, Anchorage resident, said he is a salesman for a
distribution company that sells pulltabs. He reminded them that
the permittee is the charity and if they are supposed to be
getting helped out, why are they the ones who have to spend
millions of dollars on the video game machines. He thought the
bar-owners who are members of CHARR are the ones who would make
most of the money. He asked them to find out what the social
cost would be from other states so they know what they are
walking into.
He estimated that out of 100 pulltabs, a person would get about
80 back to rip again on the same dollars; you can play the same
money over and over and that is the physical limitation. A
person could take all day to play $1,000, but it may generate
$10,000 in sales. A person could go through $1,000 on a machine
in a half-hour with no problem at all and there is no limit.
MR. BROWN explained that even though a charity is a permittee,
they cannot be self-directed and the machines would have to be
only in places where there are people 21 years and older.
However, any child in Alaska can go into a bar accompanied by a
parent. The state won't let him have electronic pulltab gaming
dispensers even if they are behind a bar and the bartender is
administering it. Every pulltab in the state is administered by
a human being who is looking at another human being and making
sure he is 21 years old, for instance. "A machine, you walk up
to like a pack of cigarettes and I hope you're 21 - hope you're
18. Pull the handle, poke the button, put the money in...."
He hoped the money that's generated would help a lot of people
who need it. However, already 1.5 percent of gamblers have a
potential addiction problem or are already addicted. That's
roughly 10,000 people in Alaska. So, if a report says that video
gaming adds only another 1.5 percent, that's approximately
18,000 people - who are over 21 years old and potentially heads
of households. If there are two kids in each household, that
affects 60,000 human beings in the state of Alaska. Then they
are talking about treatment centers, bankruptcies, divorce and
domestic violence because the state wanted to get $15 million.
MR. MIKE LOMAN, Wasilla Bar, supported SB 186 because the
revenue would help close the fiscal gap and more revenue would
be generated for charities and local governments, which
eventually works its way back into the economy. He also wanted
to avoid additional taxes for as long as possible.
He did not see anything in the bill that set aside money for
those who cope with a gambling addiction, which was addressed in
another bill. He felt that the state should receive a higher
percentage of revenue than 15 percent when the machine is in a
municipality, since they are the ones who going to put up all
the money to develop the program. He suggested using language
saying that the machines had to be in a specific area where
people had to be 21 years or older to be there.
MS. LOUISE STUTES, Kodiak CHARR, said she is a beverage license
holder in Kodiak, as well as a vendor for pulltabs. She thought
this was a wonderful way to increase revenue for everybody
involved. "Kodiak and all the license holders in Kodiak are
greatly in favor of the electronic gaming machines."
CHAIR BUNDE asked her if she thought there was a difference
between a charity and a non-profit.
MS. STUTES replied that there wasn't. It was the terminology
that she is used to using.
MR. ROBERT GREGORY, Crazy Horse Saloon, said that they have only
one pulltab jar - only one charity they are benefiting now. With
electronic gaming machines they would be able to have as many as
five charities they could help. Even though they are not a
panacea, they could facilitate more drug treatment facilities or
whatever.
SENATOR FRENCH asked why they have just one pulltab jar right
now.
MR. GREGORY replied that they only sponsor one charity at a time
so they can monitor the situation and keep it under control and
there is a question of space. Also, the establishment owner is
paying for the upkeep, electricity, maintenance and security.
Electronic gaming is all self-contained and the overhead would
be higher than with pulltabs.
4:00 - CHAIR BUNDE announced at 10-minute break.
MR. TIM SMITH, Nome Fisherman Association, said he had testified
before a number of committees on electronic gaming in the past.
He noted that whenever they talk about electronic gaming, they
never hear any opposition from the people who will be paying the
taxes and that doesn't happen often with a revenue bill. The
opposition comes from three sources: people who would never use
the machines themselves, but are driven to protect other people
from making decisions on how to spend their own money;
professional campaigners usually from out-of-state working for
organizations who are trying to reduce gambling in general and
permittees and people who support charitable gaming.
MR. SMITH did not think the state should tell people how to
spend their money. Most of the talk about addiction is
misguided. He did not think that he should be prevented from
gambling on either the stock market or gaming. He felt that new
opportunities would be created with electronic gaming and that
pulltabs would not go away completely. He also felt that
revenues would increase dramatically if electronic gaming were
authorized; in Oregon they tripled.
CHAIR BUNDE asked if he saw a conflict in running both pulltabs
and electronic gaming.
MR. SMITH replied that he didn't see a problem.
CHAIR BUNDE announced a recess and called the meeting back to
order at 5:15 p.m.
MR. RANDY RUEDRICH, Republican Party of Alaska, read a short
resolution into the record as follows:
Whereas the Republican Party of Alaska supports the
financial integrity of the family; and,
Whereas the Republican Party of Alaska supports
bolstering the local and state economies by
encouraging the work ethic; and,
Whereas casinos and other forms of gambling adversely
affect both the family and the poor in our state; now,
Therefore be it resolved that Republican Party of
Alaska does not support the expansion of gambling in
the state including video poker or slot machines -
adopted May 31, 2003 by the Central Committee of the
Republican Party in Homer, Alaska.
He explained that the Central Committee discussed the concept of
lotteries, video poker and slot machines and there was
substantial effort to divide those issues. It was felt that
lotteries were a different endeavor and narrowed the opposition
to the specific video poker and slot machine type processes
rather than the more generalized lottery activities.
CHAIR BUNDE noted that there was testimony in opposition to
lotteries because it takes a significant investment of state
time and money to promote them. It would necessitate the state
taking far more ownership of the lottery than it would for video
poker, for instance. States that have successful lotteries don't
have a just one form of lottery; they have some groups that are
instant payoffs and others that are periodic.
SENATOR STEVENS said some people's underlying concern is
addiction.
MR. RUEDRICH said that was the underlying theme as some people
had seen family members or others who were close to them become
totally overwhelmed by the gambling process.
MR. DON MCKEE, Fairbanks Two Rivers Grange, said they have
pulltabs in three different locations and this is one of their
ways of raising funds for a playground and other charitable
projects. But he understands that the bills cut the funding the
charitable organizations will get.
CHAIR BUNDE reminded him that these bills are just a vehicle for
the legislature to consider in their deliberations on what to do
with gambling in Alaska.
MR. MCKEE said further that he did not favor slot machines and
electronic devices. Pulltabs was as far as he wanted to go.
CHAIR BUNDE thanked everyone for the testimony and said there
would be further opportunity to testify on these issues in
Juneau.
CHAIR BUNDE adjourned the meeting at 5:55 p.m.
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