HOUSE FINANCE COMMITTEE APRIL 20, 1995 1:40 P.M. TAPE HFC 95 - 88, Side 1, #000 - end. TAPE HFC 95 - 88, Side 2, #000 - end. TAPE HFC 95 - 89, Side 1, #000 - end. TAPE HFC 95 - 89, Side 2, #000 - #273. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:40 P.M. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Kelly Representative Grussendorf Representative Brown Representative Therriault Representatives Mulder, Parnell and Navarre were not present for the meeting. ALSO PRESENT Representative Bill Williams; Tom Dow, Vice President, Princess Tours; Kirsten Martin, Self, Anchorage; Sherrie Goll, Alaska Women's Lobby/KIDPAC, Juneau; Susan Burke, Attorney, Gross & Burke, Representing Princess Tours, Juneau; Dennis Poshard, Director, Division of Charitable Gaming, Department of Revenue; Jerry Luckhaupt, Attorney, Legal Counsel, Division of Legal Services; Curtis Lomas, Welfare Reform Program, Division of Public Assistance, Department of Health and Social Services; Jim Nordlund, Director, Division of Public Assistance, Department of Health and Social Services. SUMMARY HB 78 An Act relating to the maximum amount of assistance that may be granted under the adult public assistance program and the program of aid to families with dependent children; proposing a special demonstration project within the program of aid to families with dependent children and directing the Department of Health and Social Services to seek waivers from the federal government to implement the project. 1 HB 78 was HELD in Committee for further consideration. HB 286 An Act providing an exemption from gambling and certain alcoholic beverage laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state; relating to promotions on board cruise ships; defining 'cruise ship'; providing for exemption procedures for certain cruise ships before they can conduct gambling in the offshore water of the state; providing an exemption from the coin-operated device tax for cruise ships exempted from the gambling laws; and providing for an effective date. CS HB 286 (FIN) was reported out of Committee with "no recommendation" and with a fiscal note by the Department of Revenue dated 4/6/95. HOUSE BILL 286 "An Act providing an exemption from gambling and certain alcoholic beverage laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state; relating to promotions on board cruise ships; defining 'cruise ship'; providing for exemption procedures for certain cruise ships before they can conduct gambling in the offshore water of the state; providing an exemption from the coin-operated device tax for cruise ships exempted from the gambling laws; and providing for an effective date." REPRESENTATIVE WILLIAM WILLIAMS testified in support of HB 286. He stated that HB 286 would give the State authorization to offer an exemption from gambling statutes to cruise ships. The exemption would allow cruise ships to operate their casinos in Alaskan waters. He added that casino gambling aboard cruise ships is an amenity needed to keep Alaska on par with other cruise destinations. While gambling is not the main attraction of cruises, it is an accepted and expected part of the experience. Representative Williams added that the communities of Alaska would not be negatively affected by the legislation. Casino operations would be prohibited within three miles of a vessel's port of call. While in port the casino would remain closed, therefore removing the opportunity for non- ticketed people to participate in the activities. 2 Representative Williams concluded that the legislation would support the tourism industry and would raise State revenues. He urged Committee members' support the legislation. TOM DOW, VICE PRESIDENT, PRINCESS TOURS, testified in support of HB 286. The legislation would allow gambling aboard cruise ships within Alaskan waters for ticketed cruise passengers. Cruise ships would be required to pay a fee to the State for an exemption prior to conducting gambling under the legislation. Mr. Dow added that his company believes that there are no public policy reasons to prohibit the activity. There is public support to allow it to continue and with the provision of an exemption fee, there would be a simple method for the State to thus secure revenues from cruise lines who wish to continue to offer the entertainment option to their passengers. He added, there is little administrative expense or burden placed on the State for the collection of the revenues. Representative Brown asked if the fees recommended in this year's legislation were the same as those in the original legislation last year. Mr. Dow replied that the fees reflect what was passed last year from Committee and that those fees should generate $600 thousand dollars this year and more in the following year. Representative Brown referenced Section #6 and asked why the exception was necessary: This prohibition does not apply to on-shore excursions that are sold on board a cruise ship. Mr. Dow commented, last year an amendment was offered to the legislation. The legislation was directed at prohibiting or restricting promotions to gift shops. The language in the bill specifically excluded the sale of shore excursion products on board. Therefore, more narrowly defined the disclosure requirement to the area of gift shop promotional lectures. He pointed out, that practice has been applied frequently in the Caribbean areas although not a common practice in Alaska. Operators have attempted to do this over the years, although the Princess Line has never supported it. He understood the practice was not legal as informed by the Attorney General's office. Because the last year's legislation that was vetoed contained the exemption for shore excursion activities, that area was then readdressed. He added that it is common practice for cruise ship lines to offer shore excursion activities to passengers. The practice is a convenience for the passengers and to the vendors providing the service. Mr. Dow suggested that the 3 information could be disclosed on the shore excursion brochures. Representative Brown referenced correspondence from a local vendor who felt that the inclusion of the sentence in Section #6 would be detrimental to small and local vendors. Mr. Dow responded that the cruise lines has a responsible role to guarantee that activities that involve equipment and transportation are safe. He emphasized that the current system works for the greater benefit of most of the customers, passengers and vendors who are operating. Representative Martin voiced concern with "opening the door" to gambling in the State of Alaska. Mr. Dow responded that gambling would be available only to the passengers on the cruise ships. Representative Martin emphasized that the State of Alaska prohibits gambling. He asked if the legislation could proliferate gambling in the State. Mr. Dow explained that this precedence has been established in other states who share a gambling prohibition. The unique quality of Alaska as opposed to other coastal states, is that in Alaska, the cruise pattern tends to "hug" the inside passage. By some definitions, the cruise ship would be within the state territorial waters at all times. Representative Martin reemphasized that the cruise lines would be opening gambling for profit purposes as opposed to charitable donations. He asked the type of gambling available aboard the ships. Mr. Dow explained the various forms available to the cruise line passengers. Representative Martin voiced resistance to video gambling and credit card gambling. He felt that once the legislation moves through the Legislature, it would open up gambling possibilities throughout the State. Representative Brown referenced a memo from the Department of Revenue addressing the legalization of slot machines in the proposed legislation. Mr. Dow stated that current information from the Department indicates that there may be another section of State law that prohibits other coin operated devices. He stated that it could require an amendment. Mr. Dow added that it would be possible to pass the exemptive legislation and narrowly define what is involved without opening the State of Alaska to gambling. Representative Martin asked if Mr. Dow would object to an amendment indicating that proceeds from the gambling would not be allowed for political campaigning. Mr. Dow stated that there was no intention that the cruise operators would be using the proceeds to fund any outside activities. 4 SUSAN BURKE, ATTORNEY, GROSS & BURKE, REPRESENTING PRINCESS TOURS, JUNEAU, spoke to the need for a technical amendment. The Department of Law indicated that a problem existed from the drafting, which inadvertently excluded slot machines. Ms. Burke believed that the bill as passed last year adequately covers that concern. Although, having gone through the past two years legislative work, she recommended including the amendment. Ms. Burke noted that Amendment #1 [Attachment #1] would provide clear intent that slot machines would not be included in the exemption for cruise ships. Mr. Burke responded to Representative Martin's concern that under the equal protection doctrine, by passing the bill providing an exemption from casino gambling for cruise ships would not allow anyone in the State the authority to go to court and appeal for the same rights. She stated this was not a concern. Under the equal protection analysis, to treat one class of person different from another, would require good reason for doing so. Ms. Burke added, when speaking about commercial regulations to conduct the gambling activity, there would be no chance that a court would come to the conclusion that an equal protection problem existed. (Tape Change, HFC 95-88, Side 2). Ms. Burke noted that Amendment #1 would clarify existing law, adding new language AS 05.15.250. The effect would establish the fact of cruise ship exemption, and that any prohibitions resulting from lack of authorization listed would not apply to the cruise ships. Representative Martin voiced concern that the legislation would bring gambling to the State in order to generate more revenues. Ms. Burke noted that there would be a difference between having a gambling operation located on land in which everyone had access to gambling on board a cruise ship. The activity of gambling on the cruise ship would be an activity which in actuality would not take place in Alaska, although it would in a technical sense. Representative Therriault MOVED to adopt Amendment #1. Representative Martin OBJECTED for purposes of discussion. DENNIS POSHARD, DIRECTOR, DIVISION OF CHARITABLE GAMING, DEPARTMENT OF REVENUE, noted that the position paper distributed to Committee members resulted from a discussion with the Department of Law. However, he felt that the amendment was not needed because of Section 2(d) which would 5 address the concern. The area of a potential problem results from the regulations which were adopted in accordance with Title 43, the taxing provisions for coin operated devices. The basis for the particular regulation which makes Class 2 and Class 3 coin operated devices illegal, was the criminal and civil statutes which prohibit slot machines and coin operated devices. Mr. Poshard added, from discussions with Legislative Legal Counsel, the Department of Revenue's concern with the proposed legislation has been alleviated. Mr. Poshard commented that the main intent of the position paper was to address the relationship between the cruise ship gambling bill and the negotiations which are taking place with Klawock Native group involving a contract to conduct Class 3 gaming activities. Representative Martin asked for further information regarding the Native American court cases and the gambling concern. Mr. Poshard stated that there are several cases existing although he could not speculate on the relationship between those cases and the proposed legislation. Federal law requires entering into negotiations in good faith with any recognized Indian tribes as lands that could conduct gaming. Representative Martin asked if the State could prohibit a group of people from gambling. Mr. Poshard explained that the only basis for allowing the gaming to take place on Indian lands is through the Indian Gaming Regulatory Act which is federal law. No other states which have gambling prohibitions, have also permitted other types of gambling following the agreement with an Indian tribe on reservation land. A roll call was taken on the MOTION to adopt Amendment #1. IN FAVOR: Grussendorf, Kelly, Kohring, Therriault, Brown, Foster, Hanley OPPOSED: Martin Representatives Mulder, Navarre and Parnell were not present for the vote. The MOTION PASSED (7-1). Representative Grussendorf why the number 300 passengers qualified a boat as a "cruise" ship thus permitting gambling. Ms. Burke stated that it was the intent of the legislation to limit the gambling to the larger vessels which offer a big range of entertainment services. 6 Establishing that number would eliminate a small boat claiming status in order to offer gambling. She remarked that the language would close any possible loop holes. JERRY LUCKHAUPT, ATTORNEY, LEGAL COUNSEL, DIVISION OF LEGAL SERVICES, stated that the operator of the cruise ship would have to apply for the exemption as specified in Section 2 of the legislation. The definition would exclude anyone who is not eligible to obtain an exemption. Each ship would have to apply for an exemption separately and each ship could loose their exemption separately. Representative Therriault MOVED to report CS HB 286 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 286 (FIN) was reported out of Committee with "no recommendations" and with a fiscal note by the Department of Revenue dated 4/06/95. HOUSE BILL 78 "An Act relating to the maximum amount of assistance that may be granted under the adult public assistance program and the program of aid to families with dependent children; proposing a special demonstration project within the program of aid to families with dependent children and directing the Department of Health and Social Services to seek waivers from the federal government to implement the project." Co-Chair Hanley provided an overview of HB 78. He pointed out that the intent of welfare reform is to get people off welfare. According to a recent survey by the State Department of Health and Social Services, 88% of Aid to Families with Dependent Children (AFDC) clients in Alaska have indicated that they would rather work than be on welfare. Co-Chair Hanley stated that HB 78 would provide for the Department of Health and Social Services to apply for a series of waivers from the usual provisions governing AFDC programs. A "workfare" project would be established and would require able-bodied recipients who were not working at least 15 hours a week to perform community service or have their benefits reduced. Co-Chair Hanley concluded that the legislation would provide positive incentives to work in the form of higher income allowance and higher vehicle allowance. The costs of child care and transportation necessary for participation in the 7 program would be covered by the Department. He added that HB 78 would be an initial step towards breaking the cycle of dependence on welfare by rewarding hard work. Co-Chair Hanley provided a sectional analysis of the legislation. HB 78 amends existing statutes for the AFDC program. The legislation would authorize the Department to seek federal approval to operate four experimental AFDC demonstration projects under the authority of Section 1115(a) of the Social Security Act, which would authorize imposition of certain modified AFDC eligibility criteria and requirements for participation in a mandatory work program for project participants. The project would establish a ratable reduction in benefit payments for the AFDC program statewide. Co-Chair Hanley added, under the waiver, a person would be allowed to receive up to $200 hundred dollars for the first amount of money made and that, they would be able to keep 1/3 of the remainder made. This would provide an incentive for people while also allowing them to improve their status by working and at the same time would help the State by reducing the amount of money spent. (Tape Change, HFC 95-89, Side 1). Co-Chair Hanley continued explaining each section of the bill. He reiterated that the Department would be responsible for paying the child care costs as well as transportation costs. One of the fiscal notes included would cover those expenses. JIM NORDLUND, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, stated that Section #7 would establish an AFDC unemployed parent demonstration project, to assist two-parent families establish self-sufficiency within three years. He added that Section #8 would establish a self-employment demonstration project to assist AFDC recipients in reducing their need for benefits by allowing them to establish and operate a microenterprise. Co-Chair Hanley commented that the current system prohibits participants from saving money as it would place them over the asset limit. Representative Grussendorf spoke in favor of the proposed programs, although expressed hesitation on the proposed program funding. He communicated that the money to fund the program would be taken from those already poor and making them more poor for making the experiment work. Mr. Nordlund added, a rateable reduction of 1.7% amounting to 8 $13 dollars per month per one adult and child unit would be added. He stressed that the current system would operate the same, although there would be demonstration projects for certain selected persons receiving AFDC. The auto exemption would not apply for all AFDC participants in the State. Co-Chair Hanley commented on Section #9, the "diversion" demonstration project, which would offer short term financial assistance to job-ready AFDC applicants in order to avoid long-term financial support. Representative Martin asked the intent of the language on Page 8, Line 18, "(2) disregard up to $500 each month in nonbusiness income set aside for the development or operation of the microenterprise;". CURTIS LOMAS, WELFARE REFORM PROGRAM, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, explained that language provided a provision to allow an individual to set aside income from some source other than a business as a way to capitalize. The provision would allow the AFDC individual to accrue up to $500 dollars per month and place into a business capital account with a maximum limit of $10 thousand dollars. That amount would not be considered as income. Representative Martin questioned how the Permanent Fund Dividend checks and share holding reimbursements would affect a persons qualifications to receiving welfare subsidies. Mr. Nordlund stated that the bill would have no effect on any AFDC recipients dividend check resulting from the "hold harmless" provision in current law. Mr. Lomas added, in terms of the PFD checks, the "hold harmless" would allow a four month investment limit. Currently, a person could set aside the check into a savings account and continue to have their eligibility protected for up to four months. If that person chose to place that saved amount into a microenterprise account, a limit would no longer exist. Mr. Nordlund added that there would be administrative costs associated with the new demonstration projects. In order to move forward with welfare reform, to move people from welfare to work, new ideas must be tried. He applauded all demonstration projects found in the bill stating that they are good ideas and worthy of testing. Representative Martin criticized encouraging any further exemptions to the welfare program. Mr. Lomas clarified information regarding dividend payments received from Native corporations. He stated that as a part of the 1988 Native Claim Settlement Act, a $2 thousand dollar limit was 9 established in federal law; this was not a state policy. He added that this was not an exclusive Alaskan policy as referenced by Representative Martin. KIRSTEN MARTIN, SELF, PRISONERS OF WELFARE WORKING ON WINNING, ANCHORAGE, provided the Committee with a handout of the monthly expenditures for the average AFDC recipient. [Attachment #2]. She asked for further consideration of the portion of the legislation requiring the under eighteen welfare recipient to live with the parent which would require that parent's income to be the determinant in deciding the medical expenses of the AFDC recipient. She directed her concern to "breaking" the grandparent's "pocket book". Ms. Martin requested that language be changed to exempt that responsibility. Mr. Lomas instructed that federal law computes the income of a parent when the child is living with them. He added that the bill could change that policy, however, the way the legislation is structured, there is a federal option to require teens to live at home. To change that language would depend on the State of Alaska adopting that option. He added, that section of the bill was not a demonstration project, but was a portion of the bill which was an exercise as an option of federal law. To change that "treatment" would require a waiver of that portion of the bill. Representative Martin interjected that supporting that waiver would encourage more teenage parents to leave home. Representative Martin cited the responsibility of the biological father. Ms. Martin discussed the lengthy time it takes for the Child Support Enforcement Agency to enforce child support. She personally has waited for five years without any child support compensation. Co-Chair Hanley advised that there is not much flexibility within current laws. Representative Brown asked what a cut to the benefits would mean to someone receiving AFDC. Ms. Martin affirmed that she was fortunate in that she currently received rental assistance. Without rental assistance, she stated that she would most likely lose her housing. Ms. Martin stressed that a ($15) fifteen dollar cut would be dramatic for someone on such a "tight" budget. Ms. Martin emphasized that all shelters and most churches are full; food banks have reached their limit. She stated that many people will loose their homes and the end product will be that many more children will be taken by Division of Family and Youth Services (DFYS) because the parents will no longer be adequately able to support the child's needs. She added, 10 currently there are not enough foster parents for the children needing home placements. Ms. Martin remarked that she was involved in creating a self sufficiency group with other AFDC recipients through local networking. Some of the items targeted through the networking are child care and transportation needs. She agreed that there are failures in the present system, although there are many AFDC recipients who are trying to find ways to better themselves. SHERRIE GOLL, ALASKA WOMEN'S LOBBY/KIDPAC, JUNEAU, stated that HB 78 was clearly the most rational approach considered by the Legislature, pointing out that it was full of things which removed disincentives for families to become employed and stay employed. Ms. Goll focused on specific areas of concern with the proposed legislation. The first concern of the Women's Lobby is the teen parent project. Ms. Goll pointed out that Alaska has a high teen birth rate. In 1993, 1189 teenagers had babies. The total case load of teen parents on AFDC is 141. She noted that the vast majority of teenagers who are having children, are living at home with their parents and being supported. Ms. Goll applauded the exemptions for those with no parental support, or if the home of the teenager was an abusive situation and the teen could not live there. She pointed out that 70 recipients would be affected by the project. In determining each case, investigation would be required. Ms. Goll emphasized that her main concern would be with the health care needs of a pregnant teenager. Pregnant teenagers have poor health outcomes which often mean poor health outcomes for their children. Premature births are much more common in teens, and most of the low birth weight babies born prematurely will have health problems throughout their life. Ms. Goll emphasized that prenatal care is important as is good nutrition as well as the delivery of the child. In considering the parents income, the minor will be required to live at home as a condition of eligibility. Unless the parent of the minor is also on welfare, the teen would not be eligible for any assistance. The concept of holding the parents income harmless in some way so that the teen could be eligible for assistance necessary for her to have a healthy baby needs to be reconsidered if that section remains in the bill. Ms. Goll continued addressing other issues regarding the personal responsibility of the "other" parent of the new 11 baby. In 60% of the cases where a teenage girl is pregnant, the father of that child is an adult. Ms. Goll recommended that the State provide active child support collection. The other 40% of the fathers are teen age boys. The family of the teenage girl is required to take personal and financial responsibility for the teenager and new baby, although the same responsibility is not required of the teen dad's family. Ms. Goll emphasized that consideration of that section of the bill be given deeper scrutiny or that section of the bill be dropped. Ms. Goll requested that one other exemption be considered. (Tape Change, HFC 95-89, Side 2). Ms. Goll stated that if a student is enrolled in a four year education program, they should not be required to work 20 hours a week as well. Ms. Goll spoke to the "unemployed" parent project. Until a few years ago, AFDC was only available to single parents who had dependent children. In 1988, there was a change in federal law, which indicated that law broke-up families. The federal law mandated on states that two parent families should be included in welfare eligibility when one of the parents was unemployed. She pointed out that at that time case loads grew significantly. She noted that by October, that mandate could be terminated. Much of the JOBS training money currently is distributed for the two parent families. Those are the persons who will be greatly affected by the hundred hour rule. That group could most benefit from the limit and could live within that restraint. Ms. Goll opposed the rateable reductions. Without subsidized housing, of which only 20% percent of the AFDC recipients qualify, an AFDC recipient could not make it with a $15 dollar monthly reduction. She emphasized that the costs of welfare changes should be offset with increased child support collections. Ms. Goll noted that major changes on the federal level would be occurring by October. She added that these changes will probably block grant the funds and will most likely come with less restrictions, rather than new and different restrictions. However, the welfare system will be redesigned. She requested that the Committee consider putting off changes to the welfare system until the federal changes have been made. Ms. Goll suggested changing the effective dates for applying for the "waivers" until January, 1996. 12 Ms. Goll urged the Committee to consider off-setting the cost of the programs other than on the "backs of the poor". She pointed out that action would hurt 14,000 children in Alaska. HB 78 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 3:55 P.M. HOUSE FINANCE COMMITTEE APRIL 20, 1995 1:40 P.M. TAPE HFC 95 - 88, Side 1, #000 - end. TAPE HFC 95 - 88, Side 2, #000 - end. TAPE HFC 95 - 89, Side 1, #000 - end. TAPE HFC 95 - 89, Side 2, #000 - #273. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 1:40 P.M. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Kelly Representative Grussendorf Representative Brown Representative Therriault Representatives Mulder, Parnell and Navarre were not present for the meeting. ALSO PRESENT Representative Bill Williams; Tom Dow, Vice President, Princess Tours; Kirsten Martin, Self, Anchorage; Sherrie Goll, Alaska Women's Lobby/KIDPAC, Juneau; Susan Burke, Attorney, Gross & Burke, Representing Princess Tours, Juneau; Dennis Poshard, Director, Division of Charitable Gaming, Department of Revenue; Jerry Luckhaupt, Attorney, Legal Counsel, Division of Legal Services; Curtis Lomas, Welfare Reform Program, Division of Public Assistance, Department of Health and Social Services; Jim Nordlund, Director, Division of Public Assistance, Department of Health and Social Services. SUMMARY 13 HB 78 An Act relating to the maximum amount of assistance that may be granted under the adult public assistance program and the program of aid to families with dependent children; proposing a special demonstration project within the program of aid to families with dependent children and directing the Department of Health and Social Services to seek waivers from the federal government to implement the project. HB 78 was HELD in Committee for further consideration. HB 286 An Act providing an exemption from gambling and certain alcoholic beverage laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state; relating to promotions on board cruise ships; defining 'cruise ship'; providing for exemption procedures for certain cruise ships before they can conduct gambling in the offshore water of the state; providing an exemption from the coin-operated device tax for cruise ships exempted from the gambling laws; and providing for an effective date. CS HB 286 (FIN) was reported out of Committee with "no recommendation" and with a fiscal note by the Department of Revenue dated 4/6/95. HOUSE BILL 286 "An Act providing an exemption from gambling and certain alcoholic beverage laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state; relating to promotions on board cruise ships; defining 'cruise ship'; providing for exemption procedures for certain cruise ships before they can conduct gambling in the offshore water of the state; providing an exemption from the coin-operated device tax for cruise ships exempted from the gambling laws; and providing for an effective date." REPRESENTATIVE WILLIAM WILLIAMS testified in support of HB 286. He stated that HB 286 would give the State authorization to offer an exemption from gambling statutes to cruise ships. The exemption would allow cruise ships to operate their casinos in Alaskan waters. He added that casino gambling aboard cruise ships is an amenity needed to keep Alaska on par with other cruise 14 destinations. While gambling is not the main attraction of cruises, it is an accepted and expected part of the experience. Representative Williams added that the communities of Alaska would not be negatively affected by the legislation. Casino operations would be prohibited within three miles of a vessel's port of call. While in port the casino would remain closed, therefore removing the opportunity for non- ticketed people to participate in the activities. Representative Williams concluded that the legislation would support the tourism industry and would raise State revenues. He urged Committee members' support the legislation. TOM DOW, VICE PRESIDENT, PRINCESS TOURS, testified in support of HB 286. The legislation would allow gambling aboard cruise ships within Alaskan waters for ticketed cruise passengers. Cruise ships would be required to pay a fee to the State for an exemption prior to conducting gambling under the legislation. Mr. Dow added that his company believes that there are no public policy reasons to prohibit the activity. There is public support to allow it to continue and with the provision of an exemption fee, there would be a simple method for the State to thus secure revenues from cruise lines who wish to continue to offer the entertainment option to their passengers. He added, there is little administrative expense or burden placed on the State for the collection of the revenues. Representative Brown asked if the fees recommended in this year's legislation were the same as those in the original legislation last year. Mr. Dow replied that the fees reflect what was passed last year from Committee and that those fees should generate $600 thousand dollars this year and more in the following year. Representative Brown referenced Section #6 and asked why the exception was necessary: This prohibition does not apply to on-shore excursions that are sold on board a cruise ship. Mr. Dow commented, last year an amendment was offered to the legislation. The legislation was directed at prohibiting or restricting promotions to gift shops. The language in the bill specifically excluded the sale of shore excursion products on board. Therefore, more narrowly defined the disclosure requirement to the area of gift shop promotional lectures. He pointed out, that practice has been applied frequently in the Caribbean areas although not a common practice in 15 Alaska. Operators have attempted to do this over the years, although the Princess Line has never supported it. He understood the practice was not legal as informed by the Attorney General's office. Because the last year's legislation that was vetoed contained the exemption for shore excursion activities, that area was then readdressed. He added that it is common practice for cruise ship lines to offer shore excursion activities to passengers. The practice is a convenience for the passengers and to the vendors providing the service. Mr. Dow suggested that the information could be disclosed on the shore excursion brochures. Representative Brown referenced correspondence from a local vendor who felt that the inclusion of the sentence in Section #6 would be detrimental to small and local vendors. Mr. Dow responded that the cruise lines has a responsible role to guarantee that activities that involve equipment and transportation are safe. He emphasized that the current system works for the greater benefit of most of the customers, passengers and vendors who are operating. Representative Martin voiced concern with "opening the door" to gambling in the State of Alaska. Mr. Dow responded that gambling would be available only to the passengers on the cruise ships. Representative Martin emphasized that the State of Alaska prohibits gambling. He asked if the legislation could proliferate gambling in the State. Mr. Dow explained that this precedence has been established in other states who share a gambling prohibition. The unique quality of Alaska as opposed to other coastal states, is that in Alaska, the cruise pattern tends to "hug" the inside passage. By some definitions, the cruise ship would be within the state territorial waters at all times. Representative Martin reemphasized that the cruise lines would be opening gambling for profit purposes as opposed to charitable donations. He asked the type of gambling available aboard the ships. Mr. Dow explained the various forms available to the cruise line passengers. Representative Martin voiced resistance to video gambling and credit card gambling. He felt that once the legislation moves through the Legislature, it would open up gambling possibilities throughout the State. Representative Brown referenced a memo from the Department of Revenue addressing the legalization of slot machines in the proposed legislation. Mr. Dow stated that current information from the Department indicates that there may be another section of State law that prohibits other coin operated devices. He stated that it could require an 16 amendment. Mr. Dow added that it would be possible to pass the exemptive legislation and narrowly define what is involved without opening the State of Alaska to gambling. Representative Martin asked if Mr. Dow would object to an amendment indicating that proceeds from the gambling would not be allowed for political campaigning. Mr. Dow stated that there was no intention that the cruise operators would be using the proceeds to fund any outside activities. SUSAN BURKE, ATTORNEY, GROSS & BURKE, REPRESENTING PRINCESS TOURS, JUNEAU, spoke to the need for a technical amendment. The Department of Law indicated that a problem existed from the drafting, which inadvertently excluded slot machines. Ms. Burke believed that the bill as passed last year adequately covers that concern. Although, having gone through the past two years legislative work, she recommended including the amendment. Ms. Burke noted that Amendment #1 [Attachment #1] would provide clear intent that slot machines would not be included in the exemption for cruise ships. Mr. Burke responded to Representative Martin's concern that under the equal protection doctrine, by passing the bill providing an exemption from casino gambling for cruise ships would not allow anyone in the State the authority to go to court and appeal for the same rights. She stated this was not a concern. Under the equal protection analysis, to treat one class of person different from another, would require good reason for doing so. Ms. Burke added, when speaking about commercial regulations to conduct the gambling activity, there would be no chance that a court would come to the conclusion that an equal protection problem existed. (Tape Change, HFC 95-88, Side 2). Ms. Burke noted that Amendment #1 would clarify existing law, adding new language AS 05.15.250. The effect would establish the fact of cruise ship exemption, and that any prohibitions resulting from lack of authorization listed would not apply to the cruise ships. Representative Martin voiced concern that the legislation would bring gambling to the State in order to generate more revenues. Ms. Burke noted that there would be a difference between having a gambling operation located on land in which everyone had access to gambling on board a cruise ship. The activity of gambling on the cruise ship would be an activity which in actuality would not take place in Alaska, although 17 it would in a technical sense. Representative Therriault MOVED to adopt Amendment #1. Representative Martin OBJECTED for purposes of discussion. DENNIS POSHARD, DIRECTOR, DIVISION OF CHARITABLE GAMING, DEPARTMENT OF REVENUE, noted that the position paper distributed to Committee members resulted from a discussion with the Department of Law. However, he felt that the amendment was not needed because of Section 2(d) which would address the concern. The area of a potential problem results from the regulations which were adopted in accordance with Title 43, the taxing provisions for coin operated devices. The basis for the particular regulation which makes Class 2 and Class 3 coin operated devices illegal, was the criminal and civil statutes which prohibit slot machines and coin operated devices. Mr. Poshard added, from discussions with Legislative Legal Counsel, the Department of Revenue's concern with the proposed legislation has been alleviated. Mr. Poshard commented that the main intent of the position paper was to address the relationship between the cruise ship gambling bill and the negotiations which are taking place with Klawock Native group involving a contract to conduct Class 3 gaming activities. Representative Martin asked for further information regarding the Native American court cases and the gambling concern. Mr. Poshard stated that there are several cases existing although he could not speculate on the relationship between those cases and the proposed legislation. Federal law requires entering into negotiations in good faith with any recognized Indian tribes as lands that could conduct gaming. Representative Martin asked if the State could prohibit a group of people from gambling. Mr. Poshard explained that the only basis for allowing the gaming to take place on Indian lands is through the Indian Gaming Regulatory Act which is federal law. No other states which have gambling prohibitions, have also permitted other types of gambling following the agreement with an Indian tribe on reservation land. A roll call was taken on the MOTION to adopt Amendment #1. IN FAVOR: Grussendorf, Kelly, Kohring, Therriault, Brown, Foster, Hanley OPPOSED: Martin 18 Representatives Mulder, Navarre and Parnell were not present for the vote. The MOTION PASSED (7-1). Representative Grussendorf why the number 300 passengers qualified a boat as a "cruise" ship thus permitting gambling. Ms. Burke stated that it was the intent of the legislation to limit the gambling to the larger vessels which offer a big range of entertainment services. Establishing that number would eliminate a small boat claiming status in order to offer gambling. She remarked that the language would close any possible loop holes. JERRY LUCKHAUPT, ATTORNEY, LEGAL COUNSEL, DIVISION OF LEGAL SERVICES, stated that the operator of the cruise ship would have to apply for the exemption as specified in Section 2 of the legislation. The definition would exclude anyone who is not eligible to obtain an exemption. Each ship would have to apply for an exemption separately and each ship could loose their exemption separately. Representative Therriault MOVED to report CS HB 286 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 286 (FIN) was reported out of Committee with "no recommendations" and with a fiscal note by the Department of Revenue dated 4/06/95. HOUSE BILL 78 "An Act relating to the maximum amount of assistance that may be granted under the adult public assistance program and the program of aid to families with dependent children; proposing a special demonstration project within the program of aid to families with dependent children and directing the Department of Health and Social Services to seek waivers from the federal government to implement the project." Co-Chair Hanley provided an overview of HB 78. He pointed out that the intent of welfare reform is to get people off welfare. According to a recent survey by the State Department of Health and Social Services, 88% of Aid to Families with Dependent Children (AFDC) clients in Alaska have indicated that they would rather work than be on welfare. Co-Chair Hanley stated that HB 78 would provide for the Department of Health and Social Services to apply for a 19 series of waivers from the usual provisions governing AFDC programs. A "workfare" project would be established and would require able-bodied recipients who were not working at least 15 hours a week to perform community service or have their benefits reduced. Co-Chair Hanley concluded that the legislation would provide positive incentives to work in the form of higher income allowance and higher vehicle allowance. The costs of child care and transportation necessary for participation in the program would be covered by the Department. He added that HB 78 would be an initial step towards breaking the cycle of dependence on welfare by rewarding hard work. Co-Chair Hanley provided a sectional analysis of the legislation. HB 78 amends existing statutes for the AFDC program. The legislation would authorize the Department to seek federal approval to operate four experimental AFDC demonstration projects under the authority of Section 1115(a) of the Social Security Act, which would authorize imposition of certain modified AFDC eligibility criteria and requirements for participation in a mandatory work program for project participants. The project would establish a ratable reduction in benefit payments for the AFDC program statewide. Co-Chair Hanley added, under the waiver, a person would be allowed to receive up to $200 hundred dollars for the first amount of money made and that, they would be able to keep 1/3 of the remainder made. This would provide an incentive for people while also allowing them to improve their status by working and at the same time would help the State by reducing the amount of money spent. (Tape Change, HFC 95-89, Side 1). Co-Chair Hanley continued explaining each section of the bill. He reiterated that the Department would be responsible for paying the child care costs as well as transportation costs. One of the fiscal notes included would cover those expenses. JIM NORDLUND, DIRECTOR, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, stated that Section #7 would establish an AFDC unemployed parent demonstration project, to assist two-parent families establish self-sufficiency within three years. He added that Section #8 would establish a self-employment demonstration project to assist AFDC recipients in reducing their need for benefits by allowing them to establish and 20 operate a microenterprise. Co-Chair Hanley commented that the current system prohibits participants from saving money as it would place them over the asset limit. Representative Grussendorf spoke in favor of the proposed programs, although expressed hesitation on the proposed program funding. He communicated that the money to fund the program would be taken from those already poor and making them more poor for making the experiment work. Mr. Nordlund added, a rateable reduction of 1.7% amounting to $13 dollars per month per one adult and child unit would be added. He stressed that the current system would operate the same, although there would be demonstration projects for certain selected persons receiving AFDC. The auto exemption would not apply for all AFDC participants in the State. Co-Chair Hanley commented on Section #9, the "diversion" demonstration project, which would offer short term financial assistance to job-ready AFDC applicants in order to avoid long-term financial support. Representative Martin asked the intent of the language on Page 8, Line 18, "(2) disregard up to $500 each month in nonbusiness income set aside for the development or operation of the microenterprise;". CURTIS LOMAS, WELFARE REFORM PROGRAM, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, explained that language provided a provision to allow an individual to set aside income from some source other than a business as a way to capitalize. The provision would allow the AFDC individual to accrue up to $500 dollars per month and place into a business capital account with a maximum limit of $10 thousand dollars. That amount would not be considered as income. Representative Martin questioned how the Permanent Fund Dividend checks and share holding reimbursements would affect a persons qualifications to receiving welfare subsidies. Mr. Nordlund stated that the bill would have no effect on any AFDC recipients dividend check resulting from the "hold harmless" provision in current law. Mr. Lomas added, in terms of the PFD checks, the "hold harmless" would allow a four month investment limit. Currently, a person could set aside the check into a savings account and continue to have their eligibility protected for up to four months. If that person chose to place that saved amount into a microenterprise account, a limit would no longer exist. Mr. Nordlund added that there would be administrative costs associated with the new demonstration projects. In order to 21 move forward with welfare reform, to move people from welfare to work, new ideas must be tried. He applauded all demonstration projects found in the bill stating that they are good ideas and worthy of testing. Representative Martin criticized encouraging any further exemptions to the welfare program. Mr. Lomas clarified information regarding dividend payments received from Native corporations. He stated that as a part of the 1988 Native Claim Settlement Act, a $2 thousand dollar limit was established in federal law; this was not a state policy. He added that this was not an exclusive Alaskan policy as referenced by Representative Martin. KIRSTEN MARTIN, SELF, PRISONERS OF WELFARE WORKING ON WINNING, ANCHORAGE, provided the Committee with a handout of the monthly expenditures for the average AFDC recipient. [Attachment #2]. She asked for further consideration of the portion of the legislation requiring the under eighteen welfare recipient to live with the parent which would require that parent's income to be the determinant in deciding the medical expenses of the AFDC recipient. She directed her concern to "breaking" the grandparent's "pocket book". Ms. Martin requested that language be changed to exempt that responsibility. Mr. Lomas instructed that federal law computes the income of a parent when the child is living with them. He added that the bill could change that policy, however, the way the legislation is structured, there is a federal option to require teens to live at home. To change that language would depend on the State of Alaska adopting that option. He added, that section of the bill was not a demonstration project, but was a portion of the bill which was an exercise as an option of federal law. To change that "treatment" would require a waiver of that portion of the bill. Representative Martin interjected that supporting that waiver would encourage more teenage parents to leave home. Representative Martin cited the responsibility of the biological father. Ms. Martin discussed the lengthy time it takes for the Child Support Enforcement Agency to enforce child support. She personally has waited for five years without any child support compensation. Co-Chair Hanley advised that there is not much flexibility within current laws. Representative Brown asked what a cut to the benefits would mean to someone receiving AFDC. Ms. Martin affirmed that she was fortunate in that she currently received rental 22 assistance. Without rental assistance, she stated that she would most likely lose her housing. Ms. Martin stressed that a ($15) fifteen dollar cut would be dramatic for someone on such a "tight" budget. Ms. Martin emphasized that all shelters and most churches are full; food banks have reached their limit. She stated that many people will loose their homes and the end product will be that many more children will be taken by Division of Family and Youth Services (DFYS) because the parents will no longer be adequately able to support the child's needs. She added, currently there are not enough foster parents for the children needing home placements. Ms. Martin remarked that she was involved in creating a self sufficiency group with other AFDC recipients through local networking. Some of the items targeted through the networking are child care and transportation needs. She agreed that there are failures in the present system, although there are many AFDC recipients who are trying to find ways to better themselves. SHERRIE GOLL, ALASKA WOMEN'S LOBBY/KIDPAC, JUNEAU, stated that HB 78 was clearly the most rational approach considered by the Legislature, pointing out that it was full of things which removed disincentives for families to become employed and stay employed. Ms. Goll focused on specific areas of concern with the proposed legislation. The first concern of the Women's Lobby is the teen parent project. Ms. Goll pointed out that Alaska has a high teen birth rate. In 1993, 1189 teenagers had babies. The total case load of teen parents on AFDC is 141. She noted that the vast majority of teenagers who are having children, are living at home with their parents and being supported. Ms. Goll applauded the exemptions for those with no parental support, or if the home of the teenager was an abusive situation and the teen could not live there. She pointed out that 70 recipients would be affected by the project. In determining each case, investigation would be required. Ms. Goll emphasized that her main concern would be with the health care needs of a pregnant teenager. Pregnant teenagers have poor health outcomes which often mean poor health outcomes for their children. Premature births are much more common in teens, and most of the low birth weight babies born prematurely will have health problems throughout their life. Ms. Goll emphasized that prenatal care is important as is good nutrition as well as the delivery of the child. In considering the parents income, the minor will be 23 required to live at home as a condition of eligibility. Unless the parent of the minor is also on welfare, the teen would not be eligible for any assistance. The concept of holding the parents income harmless in some way so that the teen could be eligible for assistance necessary for her to have a healthy baby needs to be reconsidered if that section remains in the bill. Ms. Goll continued addressing other issues regarding the personal responsibility of the "other" parent of the new baby. In 60% of the cases where a teenage girl is pregnant, the father of that child is an adult. Ms. Goll recommended that the State provide active child support collection. The other 40% of the fathers are teen age boys. The family of the teenage girl is required to take personal and financial responsibility for the teenager and new baby, although the same responsibility is not required of the teen dad's family. Ms. Goll emphasized that consideration of that section of the bill be given deeper scrutiny or that section of the bill be dropped. Ms. Goll requested that one other exemption be considered. (Tape Change, HFC 95-89, Side 2). Ms. Goll stated that if a student is enrolled in a four year education program, they should not be required to work 20 hours a week as well. Ms. Goll spoke to the "unemployed" parent project. Until a few years ago, AFDC was only available to single parents who had dependent children. In 1988, there was a change in federal law, which indicated that law broke-up families. The federal law mandated on states that two parent families should be included in welfare eligibility when one of the parents was unemployed. She pointed out that at that time case loads grew significantly. She noted that by October, that mandate could be terminated. Much of the JOBS training money currently is distributed for the two parent families. Those are the persons who will be greatly affected by the hundred hour rule. That group could most benefit from the limit and could live within that restraint. Ms. Goll opposed the rateable reductions. Without subsidized housing, of which only 20% percent of the AFDC recipients qualify, an AFDC recipient could not make it with a $15 dollar monthly reduction. She emphasized that the costs of welfare changes should be offset with increased child support collections. Ms. Goll noted that major changes on the federal level would 24 be occurring by October. She added that these changes will probably block grant the funds and will most likely come with less restrictions, rather than new and different restrictions. However, the welfare system will be redesigned. She requested that the Committee consider putting off changes to the welfare system until the federal changes have been made. Ms. Goll suggested changing the effective dates for applying for the "waivers" until January, 1996. Ms. Goll urged the Committee to consider off-setting the cost of the programs other than on the "backs of the poor". She pointed out that action would hurt 14,000 children in Alaska. HB 78 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 3:55 P.M. 25