Legislature(2003 - 2004)

10/01/2003 11:07 AM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    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.                                                                                  
                                                                                                                                

Document Name Date/Time Subjects