HOUSE FINANCE COMMITTEE March 15, 1995 1:30 P.M. TAPE HFC 95-46, Side 2, #000 - end. TAPE HFC 95-47, Side 1, #000 - 683. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:45 p.m. PRESENT Co-Chair Hanley Representative Martin Co-Chair Foster Representative Mulder Representative Brown Representative Navarre Representative Grussendorf Representative Parnell Representative Kelly Representative Therriault Representative Kohring ALSO PRESENT Dennis Pofhard, Director, Division of Charitable Gaming, Department of Revenue; Jeff Prather, Chief of Audit and Exams, Division of Charitable Gaming, Department of Revenue; Keith Perkins, Sitka; Nancy Lethcoe, Alaska Wilderness Recreation and Tourism Association; John Litten, Member, Alaska Tourism Marketing Council; Bob Dindinger, Vice Chair, Alaska Tourism Marketing Council; Rod Mourant, Staff, Representative Kott. SUMMARY HB 44 An Act providing that a political use is not an authorized use of charitable gaming proceeds; prohibiting the contribution of charitable gaming proceeds to candidates for certain public offices, their campaign organizations, or to political groups; providing that a political group is not a qualified organization for purposes of charitable gaming; relating to what is a qualified organization for the purpose of charitable gaming permitting; and providing for an effective date. CSHB 44 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Revenue, dated 2/22/95. HB 220 An Act relating to the duties of the commissioner 1 of commerce and economic development concerning the Alaska Tourism Marketing Council; relating to the per diem travel expenses of the council's board of directors; relating to the powers and duties of the council; extending the termination date of the council; and providing for an effective date. CSHB 220 (L&C) was reported out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Commerce and Economic Development, dated 3/8/95. SB 55 An Act repealing the sunset of the enhanced 911 emergency reporting systems. SB 55 was rescheduled to 3/20/95. HOUSE BILL NO. 44 "An Act providing that a political use is not an authorized use of charitable gaming proceeds; prohibiting the contribution of charitable gaming proceeds to candidates for certain public offices, their campaign organizations, or to political groups; providing that a political group is not a qualified organization for purposes of charitable gaming; relating to what is a qualified organization for the purpose of charitable gaming permitting; and providing for an effective date." Representative Martin MOVED to adopt Amendment 1 (Attachment 1). Representative Mulder OBJECTED for purpose of discussion. Representative Martin explained that the amendment was requested by the Division of Charitable Gaming. Amendment 1 removes licensees and vendors from the reporting requirements of AS 05.15.060. The amendment also allows the Division access to the accounts of organizations which are required to report to the Division. DENNIS POFHARD, DIRECTOR, DIVISION OF CHARITABLE GAMING testified in support of Amendment 1. He reiterated concerns expressed to the Committee during the 3/14/95 House Finance Committee meeting, regarding the Division's funding level. He emphasized that, with limited staff time, additional reporting requirements would result in less time available for field audits and investigations. He noted that contributions over $100.0 hundred dollars by permittees, vendors, or licensees to political candidates or their campaign organizations must be reported to the Alaska Public Offices Commission (APOC). He stressed that it is necessary to retain the requirement that any qualified organizations 2 or municipality, who maintains a permit, report net proceeds to the Division of Charitable Gaming. He observed that the Division needs to have access to accounts that charitable gaming proceeds are transferred into by permittees to ensure proceeds are not used for any purpose that is prohibited by the legislation. Representative Mulder WITHDREW his objection. There being NO OBJECTION, Amendment 1 was adopted. Representative Mulder MOVED to adopt Amendment 2 (Attachment 2). Representative Martin OBJECTED. Representative Mulder summarized that HB 44 eliminates "political uses" as a designation or beneficiary of gaming proceeds; and provides that "political use" is not a proper use of pull-tab revenue. He explained that Amendment 2 would exclude the provision that "political use" is not a proper use of pull- tab revenue. He spoke in support of allowing political contributions from gaming. He pointed out that associations are limited to a $1.0 thousand dollar contribution. He noted that if a political party derives $20.0 thousand dollars from a political pull-tab operator, that the entire amount can go to an individual running for office. He asserted that the amount of money that can be filtered legally through a political party from an operator to an individual legislator would be limited. He did not feel that the $1.0 thousand dollar contribution would present a problem. Co-Chair Hanley clarified that, under Amendment 2, operators could still give unlimited amounts to political parties. Representative Martin spoke in opposition to Amendment 2. He noted that some legislators have received large contributions through gaming organizations. He asserted that the amendment would defeat the purpose of the legislation. Representative Mulder asserted that the amendment would enhance the opportunity for the legislation to be adopted by the Legislature and signed into law. He acknowledged that pull-tab operators have influence over the political process. He noted that an individual or organization holding a pull-tab permit could still give unlimited amounts to political parties. He insinuated that he would support an amendment to restrict contributions to political parties. He emphasized that there would be a clear identifiable trace of any contributions. Representative Martin urged members to do what they think is best without regard to a threat of veto. He maintained that every dollar given to a politician is being taken away from 3 charity. He observed that proceeds to charities are diminishing. Representative Mulder asserted that Amendment 2 has merit. He noted that over $250.0 thousand dollars in net proceeds went from pull-tab operators to political parties or their subdivisions in 1994. He asserted that Amendment 2 would result in more money to charities. Representative Therriault stated that the legislation does not go far enough. He stressed the need for people to know what the proceeds of charitable gaming are supporting. Representative Brown noted that her Amendments 4 and 5 would address Representative Therriault's concern. Representative Martin recalled that large amounts have been given to legislators by political parties as a result of gaming proceeds. Co-Chair Hanley pointed out that the contributions referred to by Mr. Martin were legal. Co-Chair Hanley stated that he did not feel that proceeds from charitable gaming should be directed to political parties. Representative Kohring agreed with the remarks by Representative Hanley. Representative Grussendorf spoke in support of Amendment 2. He emphasized the need to "sell the product". He suggested that the legislation would be more acceptable to other members with the adoption of Amendment 2. A roll call vote was taken on the MOTION. IN FAVOR: Mulder, Navarre, Brown, Grussendorf, Foster OPPOSED: Kohring, Martin, Parnell, Therriault, Kelly, Hanley The MOTION FAILED (5-6). Representative Brown provided members with Amendment 3 (Attachment 3). She noted that Amendment 3 removes "all" and inserts "in an aggregate amount of more than $100 in a calendar year." She explained that the amendment would require contributions to be reported the Division of Charitable Gaming consistent with APOC recording requirements. She MOVED to adopt Amendment 3. Representative Martin OBJECTED. Representative Brown explained that Amendment 3 will require organizations to report any contributions from funds other than gaming funds. In response to a question by Co-Chair Hanley, Representative 4 Brown stated that the intent of the amendment is to be consistent with APOC reporting requirements. Co-Chair Hanley noted that the amendment could be interpreted to mean that reporting would be required once the $100 hundred dollar level was reached in those types of contributions. The total of three different contributions of $50 dollars to separate individuals would have an aggregate affect of more than the $100 hundred dollar reporting limit. Co-Chair Hanley MOVED to adopt a conceptional Amendment 3 to be consistent with the intent that all contributions in excess of $100.0 hundred dollars to a candidate or a political party, per individual entity be reported to the Division of Charitable Gaming. There being NO OBJECTION, it was so ordered. Representative Brown provided members with Amendment 4 (Attachment 4). She explained that Amendment 4 requires that: "Each pull-tab in a series, or each jar or other receptacle containing a series of pull-tabs, must clearly identify to the public the permittee that will benefit from the sales of that pull-tab series." In response to a question by Co-Chair Hanley, Representative Brown clarified that permits must be posted. She noted that several permits could be obtained. She emphasized that it may not be clear that "this jar goes with that permit, over there on the wall." JEFF PRATHER, CHIEF OF AUDIT AND EXAMS, DIVISION OF CHARITABLE GAMING, DEPARTMENT OF REVENUE clarified that each set of pull-tabs is associated with a permit. Representative Brown expressed concern with the expense of printing labels on pull-tabs. Representative Brown explained that the charitable identification does not have to be printed on each tab. There is an option to put a sign on each jar. In response to a question by Representative Martin, Mr. Prather explained that there are 10 licensed pull-tab manufactures, all of which are in the lower 48 states. Distributors purchase the tabs and sell them to the operators and permittees. He noted that it would be "impossible" for the name of the charity to be put on the pull-tab at the manufacturer's level. A roll call vote was taken on the MOTION to adopt Amendment 4. IN FAVOR: Brown, Grussendorf, Navarre, Kelly, Kohring, Mulder, Therriault, Foster, Hanley 5 OPPOSED: Martin Representative Parnell was absent from the meeting. The MOTION PASSED (9-1). Representative Brown provided members with Amendment 5 (Attachment 5). She explained that Amendment 5 would require that: "Before a bingo game begins, the identity of each permittee that will benefit from that game shall be announced to the public." Mr. Pofhard did not think the amendment would present a problem to operators. Representative Martin observed that several games are played each night. Mr. Prather noted that bingo games are conducted in sessions of 11 games. Each session can only be conducted for one permittee. There can be more than one session in a day. He suggested that "session" be inserted and "game" be deleted. Representative MOVED to AMEND Amendment to insert "session" and delete "game". Representative Therriault noted that a player may enter in the middle of a session. (Tape Change, HFC 95-47, Side 1) Representative Brown spoke in support of the insertion of "session". Representative Therriault OBJECTED. A roll call vote was taken on the MOTION to amend Amendment 5. IN FAVOR: Brown, Grussendorf, Navarre, Kelly, Kohring, Martin, Mulder, Foster, Hanley OPPOSED: Therriault Representative Parnell was absent from the meeting. The MOTION PASSED (9-1). Representative Navarre provided members with a copy of AS 05.15.124 (copy on file). He noted that in 1993 multiple- beneficiary permittees were allowed. Multiple-beneficiary permittees do not qualify under the operators provisions. He noted concerns that municipal governments may not prohibit multiple-beneficiary permittees under AS 05.15.124. He MOVED to insert "multiple-beneficiary permits" in AS 05.15.124, to allow municipal regulation; and to amend the title to accommodate the amendment. There being NO OBJECTION, it was so ordered. Representative Martin MOVED to report CSHB 44 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. Representative Brown OBJECTED for purpose of discussion. She emphasized that serious campaign 6 finance reform is needed. She asserted that the legislation cuts off a source of funds that is a broad, diffused base of collections which is financing some of the activities that are needed to run for office. She did not think there was a huge difference between the influence that follows from this source of money versus other sources of money that come into the political process. Representative Navarre did not feel that political parties should be eligible for gaming permits. He emphasized that the problems in charitable gaming will not be fixed by the legislation. There being NO OBJECTION, CSHB 44 (FIN) was passed out of Committee with individual recommendations and with the accompanying fiscal note. CSHB 44 (FIN) was reported out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Revenue, dated 2/22/95. HOUSE BILL NO. 220 "An Act relating to the duties of the commissioner of commerce and economic development concerning the Alaska Tourism Marketing Council; relating to the per diem travel expenses of the council's board of directors; relating to the powers and duties of the council; extending the termination date of the council; and providing for an effective date." ROD MOURANT, STAFF, REPRESENTATIVE KOTT testified in support of HB 220. He stressed that the legislation assists in tourism expansion and diversification of the state's economy. He noted that the legislation allows the Commissioner of Department of Commerce and Economic Development to contract with a qualified in-state trade association to promote Alaska as a visitor destination through a cooperative marketing effort. The contract term would be expanded from two to four years. Mr. Mourant noted that section 2 recognizes a need for outside travel on the part of the Alaska Tourism Marketing Council (ATMC). He noted that ATMC reimbursable travel is currently limited to in-state travel. Section 2 would allow per diem and travel expenses for travel outside the state at a standard allowable rate. Mr. Mourant observed that sections 3 and 4 alleviate the effort of promoting Alaska as a tourist destination from the director level to the commissioner level. Section 5 amends the sunset date from 1996 to December 30, 1999. He noted 7 that the fiscal note accompanying HB 220 is simply the ATMC proposed operating budget. JOHN LITTON, MEMBER, ALASKA MARKETING TOURISM COUNCIL testified via the teleconference network from Sitka. He testified in support of HB 220. He noted that a trip he took to New York City to promote Alaska tourism resulted in the Good Morning America television show being broadcast from Juneau. The trip was not reimbursable. He emphasized that the legislation will assist the operations of the Council. KEITH PERKINS, MEMBER, CITY AND BOROUGH OF SITKA ASSEMBLY testified via the teleconference network from Sitka. He testified in support of HB 220. He noted that he is also a member of the Alaska Visitor's Association. He stressed support for ATMC's effort to market Alaska. NANCY LETHCOE, ALASKA WILDERNESS RECREATION AND TOURISM ASSOCIATION (AWRTC) testified via the teleconference network from Valdez. She provided members with a letter to Co-Chair Hanley (Attachment 6). She noted that AWRTC feels there is an imbalance in the membership of the Alaska Tourism Marketing Council. She stated that the imbalance has led to an unintentional bias of the Council which is unfavorable to small Alaskan owned and operated rural tourism businesses. She noted that her letter details areas in which the imbalance is evident. Ms. Lethcoe referred to suggestions for amendments listed in her letter. She stated that the definition of "qualified trade organization" should be expanded to include "hunting, sport fishing, and wilderness outfitters and guides." Ms. Lethcoe suggested that the Governor appoint 12 seats to the Council and the qualified trade association appoint 8 seats to the Alaska Tourism Marketing Council. She added that the qualified trade association should be required to appoint members that represent various sectors of the tourism industry. She emphasized the need for a "fair playing field" for the making of decisions regarding the expenditures of state funds. Mr. Mourant noted that AS 44.33.705 governs the appointments to the Board. He noted that the Alaska Tourism Marketing Council appoints 10 members. The Director of Tourism is also a member of the Board. In addition, the Governor appoints 10 members. He observed that statutes state that the Governor shall ensure that the Board is broadly representative of the different regions of the state and the various sectors of the visitor industry. He pointed out that if the definition of a qualified trade organization is 8 expanded to include the recommendations by AWRTC then camp grounds, food services, gift stores, tour and charter small plane operations and helicopter operations would also need to be considered. He maintained that the current definition already includes the recommendations by the AWRTC. Representative Brown noted that concerns have been expressed concerning which audiences will be targeted by the Council. She observed that the perception exists that cruise traffic has been overly targeted as opposed to independent travelers. She pointed out that any change would have to take under consideration the ongoing relationship with the large operators, who fund a large portion of the program. BOB DINDINGER, VICE CHAIR, ALASKA MARKETING TOURISM COUNCIL responded to comments by members. He noted that it takes eleven affirmative votes to take any action by the Council. He asserted that it is virtually impossible for the trade association to manipulate or take advantage of the process. He added that the trade association, by its own policy appoints 3 of its 10 participants on a geographic basis. The other 7 seats are appointed based upon their cash contributions to the program. He pointed out the 90 percent of the industry's cash contribution comes from less then 10 companies. He observed that legislative action has raised the percentage of industry contribution from 10 to 25 percent. He noted that appointments based on contributions range from $250.0 thousand dollars to 60.0 thousand dollars. Representative Brown referred to remarks by Ms. Lethcoe. Mr. Dindinger observed that the Council's funding has been reduced. He noted that when more money was available the Council was able to fund special interest marketing. He emphasized that the current funding level requires generic, centralized marketing. He asserted that all concerns have equally shared the pain of downsizing. In response to a question by Co-Chair Hanley, Mr. Mourant noted that "shall" was changed on page 1, line 11 to "may". Mr. Dindinger stated that the Council is not concerned by the change. Representative Brown noted that the change reflects the difference in language on page 1, lines 8 and 9. She did not think the change to "may" would constitute a problem. Representative Brown asked if the Council has considered marketing over Internet. Mr. Dindinger responded that the Council is actively investigating the possibility of utilizing network marketing technology. Mr. Mourant noted the expense of investing in computer network marketing. Representative Grussendorf noted that the contract term is 9 being changed from 2 to 4 years. He asked how the contract would be affected if the state did not appropriate funding. Mr. Mourant noted that everything is subject to legislative appropriation. Representative Martin spoke in support of network marketing. He expressed concern with the fiscal note. Co-Chair Hanley explained that the fiscal note by the Department of Commerce and Economic Development reflects the Council's operating budget. He noted that the fiscal note does not obligate future legislatures. He observed that the Council's funding level will be debated. Representative Mulder MOVED to report CSHB 220 (L&C) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 220 (L&C) was reported out of Committee with a "do pass" recommendation and with a fiscal impact note by the Department of Commerce and Economic Development, dated 3/8/95. ADJOURNMENT The meeting adjourned at 3:00 p.m. 10