MINUTES SENATE FINANCE COMMITTEE April 17, 1993 9:40 a.m. TAPES SFC-93, #60, Side 1 (000-end) SFC-93, #62, Side 1 (000-end) SFC-93, #64, Side 1 (000-350) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 9:40 a.m. PRESENT In addition to Co-chairs Frank and Pearce, Senators Jacko, Kelly, Kerttula, Rieger, Sharp, and were present. ALSO ATTENDING: Senator Rick Halford, Senator Judith Salo, Shelby Stastny, Director, Office of Management & Budget; Nancy Bear Usera, Commissioner, Department of Administration; Raga Elim, Special Assistant, Department of Natural Resources; Nico Bus, Chief, Financial Services, Department of Natural Resources; C. E. Swackhammer, Deputy Commissioner, Department of Public Safety; John Hansen, Jr., Gaming Manager, Department of Commerce & Economic Development; Jerry Luckhaupt, Attorney, Legislative Legal Counsel, Legislative Affairs Agency; Paul Fuhs, Commissioner, Department of Commerce & Economic Development; Diane Kaplin, President & CEO, Alaska Public Radio Network; Rip Andrews, American Association of Retired Persons; Mike Greany, Director and David Tonkovich, and Karen Rehfeld, Fiscal Analysts, Legislative Finance Division; and aides to committee members. SUMMARY INFORMATION SB 50 - An Act making appropriations for capital projects; and providing for an effective date. Discussion was held with Shelby Stastny, Director, Office of Management & Budget; Raga Elim, Special Assistance & Legislative Liaison, Department of Natural Resources; and C.E. Swackhammer, Deputy Commissioner, Department of Public Safety. SB 50 was HELD in committee. SB 58 - An Act relating to the longevity bonus program. The committee adopted CSSB 58(FIN) work draft "E". Testimony was heard by Nancy Bear Usera, Commissioner, Department of Administration and Rip Andrews, American Association of Retired Persons in support of the bill. Senator Rieger MOVED a conceptual amendment in regard to the severability clause. The bill was HELD for a written amendment from legal services. SB 200- An Act allowing the holders of a multiple-beneficiary charitable gaming permit that consists entirely of noncommercial broadcasting stations or networks of such stations to sell a pull-tab series at more than one location during the same day if the sales are made at the customary business location of one or more of the holders, at another location by an employee of one of the stations or networks, or by a registered vendor; allowing permittees that are noncommercial broadcasting stations or networks of such stations to contract with vendors to sell pull-tabs on behalf of the permittee at retail establishments, eating establishments, and establishments with liquor licenses; allowing municipalities to prohibit vendors from conducting gaming activities within the municipality; relating to reports by the commissioner regulating charitable gaming to the legislature; requiring registration of vendors; relating to multiple-beneficiary charitable gaming permits and door prizes for charitable gaming; preventing persons with felony convictions or convictions for crimes involving theft or dishonesty or a violation of gambling laws from being involved in charitable gaming activities as a permittee, licensee, vendor, person responsible for an activity, fund raiser or consultant of a licensee, or employee in a managerial or supervisory capacity and providing exceptions for certain persons whose convictions are at least 10 years old and are not for violation of an unclassified felony described in AS 11, a class A felony, or extortion; prohibiting a prize or award of more than $250,000 in a pull-tab game that provides a right to participate in a lottery; requiring a vendor contracting with a permittee to pay the permittee at least 50 percent of the ideal net for each pull-tab series delivered to the vendor by the permittee; and providing for an effective date. The committee ADOPTED CSSB 200(FIN) word draft "E" and made amendments. Testimony was heard in support and discussion was had by Diane Kaplin, Alaska Public Broadcasting Commission; John Hansen, Jr., Gaming Manager, Department of Commerce & Economic Development; Jerry Luckhaupt, Attorney, Legislative Legal Counsel, Legislative Affairs Agency; and Paul Fuhs, Commissioner, Department of Commerce & Economic Development. Senator Kerttula voiced his concern with regard to legalized gambling by the state. CSSB 200(FIN) was REPORTED OUT of committee as amended with a "do pass" and with a zero fiscal note for the Department of Commerce & Economic Development. Co-chairs Pearce and Frank, Senators Jacko, and Rieger signed a "do pass." Senators Kelly and Kerttula signed a "do not pass," and Senator Sharp signed a "no rec." CSSB 76- An Act requiring regulations relating to pull-tabs (JUD) adopted by the Department of Commerce and Economic Development to be consistent with the North American Gaming Regulators Association standards on pull-tabs; allowing permittees to contract with vendors to sell pull-tabs on behalf of the permittee; restricting the purchase of pull-tabs by certain persons; requiring the sale of pull-tabs by vendors to be solely by a pull-tab ticket dispensing machine; requiring receipts before certain prizes may be paid; prohibiting distributors from supplying pull-tabs to vendors; relating to registration of vendors; requiring the licensing of out-of-state manufacturers; allowing public or nonprofit broadcasting stations to sell pull-tabs at more than one location; preventing persons with certain convictions from being involved in charitable gaming activities as a permittee, licensee, vendor, person responsible for an activity, fund raiser or consultant of a licensee, or employee in a managerial or supervisory capacity and providing exceptions for certain persons whose convictions are at least 10 years old; relating to multiple-beneficiary charitable gaming permits and door prizes for charitable gaming; requiring Department of Commerce and Economic Development approval of contracts between charitable gaming permittees and operators before gaming may occur; limiting the amount of authorized expenses to a percentage of adjusted gross income for a charitable gaming activity; relating to the reporting and payment of a percentage of the adjusted gross income by operators to permittees; requiring Department of Commerce and Economic Development approval of contracts between permittees and operators; allowing the commissioner of commerce and economic development to issue orders prohibiting violations of state gaming laws; relating to the authority of the commissioner of commerce and economic development to suspend or revoke a permit, license, or registration; relating to the uses to which charitable gaming proceeds may be put; relating to `political uses' and `political organizations' as those terms are used in the charitable gaming statutes; and providing for an effective date. The committee rescinded its action adopting CSSB 76(FIN) work draft "M" and amendment 1. It then ADOPTED CSSB 76(FIN) work draft "S" and ADOPTED amendments 1, 2 and 3. CSSB 76(FIN) work draft "S" was REPORTED OUT of committee as amended with a "do pass" and with a zero fiscal note for the Department of Commerce & Economic Development and a new fiscal note for the Department of Revenue in the amount of $86.9. Co-chairs Pearce and Frank, Senators Jacko, Kelly, Sharp and Rieger signed "do pass." Senator Kerttula signed "no rec." These bills were scheduled but not heard: SB 59 - SCHOOL CONSTRUCTION & MAINTENANCE GRANTS SB 60 - APPROP:SCHOOL CONSTRUCTION GRANT FUND SB 165 - APPROP: ALYESKA SETTLEMENT FUND SB 180 - SCHOOL CONSTRUCTION DEBT REIMBURSEMENT SB 181 - SCHOOL CONSTRUCTION GRANTS SB 183 - APPRO: EXXON VALDEZ RESTORATION PROJECTS SENATE BILL NO. 50: An Act making appropriations for capital projects; and providing for an effective date. Department of Natural Resources: NICO BUS, Chief, Financial Services, Department of Natural Resources, came before the committee to speak to three projects. The first project was the RS 2477 Assertion Project from the federal government in the amount of $720.0. He said it was not part of the original Governor's budget. The state has been informed that there is a deadline to present the recommendations for approximately 1,500 right- of-ways to the Congress by May 1. The $720.0 pays for the mapping and identification for this presentation in order for the state to receive title and ownership. Co-chair Pearce asked the difference between this request and the request in the original SB 50 from the Governor for $2,265.0 for owner state assertion and land selections. He said in the land selection capital project, $175.0 was included for the most critical right-of-ways. The department understood that would be all that was asked for and those would be used as test cases dealing with the federal government. Because of the time frame of the statue of limitations, the request was amended to include all right-of-ways. The next project was the Alaska North Slope Royalty Oil Price Reopeners for $100.0 enabling the state to discuss oil price and methodology with the large oil companies. It will buy expert advice on such things as transportation costs, capitalization, destination value, etc. It will be used as a contingency fund if there is a need for it. The last amended request was funding for the Alaska Oil & Gas Conservation Commission for $100.0 to evaluate the Alaska Prudhoe Bay Reservoir models that large oil companies have done. This is important for the state in order to maximize the production of oil and determining the most appropriate time for gas sales. The money will be used for consultants to evaluate the existing models. SENATOR TIM KELLY asked why the full time state consultants could not take on this project. Mr. Bus said that their time was already being taken up by North Slope work with the large oil companies to insuring production is up to standards. In answer to Senator Sharp, Mr. Bus explained that the Alaska Oil & Gas Conservation Commission's responsibility was to maximize existing reservoir analysis for the state to optimize production. The reservoir in the request is for future oil and gas explorations. Co-chair Pearce pointed out that their is a confidentiality issue that may be a problem if the commission was asked to share information. Co-chair Pearce asked how many models would be analyzed. Mr. Bus said that the oil companies are asserting that the most advantageous time to sell gas would be in the year 2000. This reservoir study would make an independent determination regarding the oil company's conclusion. RAGA ELIM, Special Assistant, Department of Natural Resources, said that there were three models by oil companies and the request would retain a consultant who would evaluate these existing models and provide an independent analysis of that information to help the state determine the appropriate time to shift to gas sales. SHELBY STASTNY, Director, Office of Management & Budget, said that the chairman of the commission had told him, because of the intense pressure to start gas sales and the oil companies reluctance to agree that it is not feasible for at least ten years, this independent study was needed to make a determination for the state. Co-chair Pearce said that the latest phase of the gas handling facility on the north slope was going on line this year. Since all the gas in Prudhoe Bay is being reinjected to help produce oil, she felt that the companies know what they are talking about and that they are using all the gas right now. She felt the state would lose some oil production if gas was sold off at the present time. She agreed that the state needed this information as a base for decision making. In answer to Senator Kelly, Mr. Elim said that there is one vacancy on the Alaska Oil & Gas Conservation Commission. Mr. Elim said that the vacancy must be filled by a public member. SENATOR STEVE RIEGER asked for an explanation regarding the difference between gas sales and reinjection. Mr. Elim said that the oil companies have given their time frame for optimum gas revenues to be between 2015 and 2030. There is increasing interest for potential gas sales. Given the time frame that the state is hearing from the oil industry, the state is asking for independent information to find out if that information is accurate. Senator Rieger said that he would like to know what the dynamics would be to cause the interests of the state to diverge from the oil companies. Mr. Stastny said that according to Harold Hines, special assistant to oil & gas commission in the Governor's office, when gas sales do begin it will be around $300-500 million of revenue a year. It seemed that the oil companies may not have that same interest since they have a pipeline of oil and have enough gas to satisfy customers from other sources. So he could see a divergent interest occurring at the present time. Department of Public Safety: C. E. SWACKHAMMER, Deputy Commissioner, Department of Public Safety, said that the department had two items for budget amendments. The first was a $50.0 appropriation to correct the ventilation system in the Kodiak jail which is a settlement of a lawsuit. He explained that the poor condition of the Kodiak jail caused inmates to bring a lawsuit against the city. This request would provide the state's contribution for clean air for prisoners. In answer to Senator Sharp, he said that the Kodiak jail is a contract facility but it was cheaper for the state to help with the jail improvements than to build a new facility. He said that the jail would eventually need to be replaced. He said $50.0 would pay the state's portion of the lawsuit. Mr. Swackhammer said that the request of $150.0 was for the cost of seizing vessels that were caught fishing illegally. Last year vessels from 20 to 200 feet were seized. It will result in income to the state for penalties. If the state decides to be aggressive to correct the illegal fishing activity, then seizure must be made and the funds must be provided to accomplish the seizures. Discussion was had by Senators Jacko, Rieger, Co-chair Pearce, and Mr. Swackhammer regarding the high cost of moving the seized vessels. In answer to Senator Sharp, Mr. Swackhammer said cost recovery had been realized through fines in the amount of about $1 million. Mr. Stastny said that last year the money had to be taken out of other budget items to fund the seizure of three vessels and that was when it was decided that a revolving fund be established for this purpose. Mr. Swackhammer said that legislation was being drafted and would be ready next session between the Departments of Public Safety, Fish & Game, and Law to develop a fund such as Mr. Stastny described. Senator Jacko asked for a detailed break down of the costs for moving the three seized vessels. Mr. Swackhammer said that he would provide that information to the committee. SENATE BILL NO. 58: An Act relating to the longevity bonus program. Recess 10:15am Reconvene 10:18am Senator Sharp MOVED for adoption of CSSB 58(FIN) work draft "E" dated April 16, 1993. No objections being heard, it was ADOPTED. Senator Sharp said that the bill phased out all new applicants to the longevity bonus program by December 31, 1996. It would stairstep down benefits that new applicants can receive after January 1, 1994. Everyone already in the program would continue to receive $250 a month. Section 2 said that if a person is disqualified from receiving a bonus for purposes called for that they may not reapply for application unless they apply before the cut-off date as set forth in this legislation. Section 3, items 5 and 6, set out certain disqualifications. Co-chair Pearce said that it was intended that the draft have a severability clause for the section that disallows those seniors who move to Alaska after their eligibility year. In answer to Senator Kelly, Senator Sharp said that all present situations, including medical leave, that are exempt from disqualification remain so, and that only those that become disqualified under present statutes have to reapply under the new regulations. NANCY BEAR USERA, Commissioner, Department of Administration, spoke in support of CSSB 58(FIN). She said the Governor's proposal had tried to protect the original intent of the longevity bonus program which was to provide uninterrupted residence and provide an opportunity and an incentive for long-time Alaskans to stay in the state of Alaska. Because of the lawsuit in 1983 that made terms of the original program unconstitutional, the program now had 23,000 participants and is growing at a rate of $5 million a year. Over the life of the program, this translates into $150 million cost to the state to continue paying each year's worth of new entrants into the program and unaffordable. The resources spent on this not needs-based program will be money unavailable to provide more meaningful services to seniors in the future. The long term plan is to protect participants and provide a reasonable phase out of the program. She said that the department was in the process of designing a package of bills that expand assisted living opportunities for seniors as well as expand the program "elders against abuse". This would provide a safety net for the future with a more meaningful package for current seniors and those to come. She said this was the seventh year of debate of this issue and she felt it was hard for the seniors for this issue to be remain undecided. Once this issue was decided, the state could then move on into other areas for seniors. RIP ANDREWS, American Association of Retired Persons, said that a letter had gone out to the committee regarding SB 58. He said that his organization would prefer an annuity bill but did support the Governor's phase out bill rather than the House version which was an immediate cut off of January 1, 1994. Co-chair Pearce said that additional language in the CSSB 58(FIN) was needed relating to disqualification on page 2, lines 28 through page 3, line 1. She questioned the need for a severability clause for Section 2. Senator Sharp said that he had requested the advisability from legal on that issue and was expecting an answer momentarily. Co-chair Pearce announced that CSSB 58(FIN) would be held in committee. SB200 SENATE BILL NO. 200: An Act allowing the holders of a multiple-beneficiary charitable gaming permit that consists entirely of noncommercial broadcasting stations or networks of such stations to sell a pull-tab series at more than one location during the same day if the sales are made at the customary business location of one or more of the holders, at another location by an employee of one of the stations or networks, or by a registered vendor; allowing permittees that are noncommercial broadcasting stations or networks of such stations to contract with vendors to sell pull-tabs on behalf of the permittee at retail establishments, eating establishments, and establishments with liquor licenses; allowing municipalities to prohibit vendors from conducting gaming activities within the municipality; relating to reports by the commissioner regulating charitable gaming to the legislature; requiring registration of vendors; relating to multiple-beneficiary charitable gaming permits and door prizes for charitable gaming; preventing persons with felony convictions or convictions for crimes involving theft or dishonesty or a violation of gambling laws from being involved in charitable gaming activities as a permittee, licensee, vendor, person responsible for an activity, fund raiser or consultant of a licensee, or employee in a managerial or supervisory capacity and providing exceptions for certain persons whose convictions are at least 10 years old and are not for violation of an unclassified felony described in AS 11, a class A felony, or extortion; prohibiting a prize or award of more than $250,000 in a pull-tab game that provides a right to participate in a lottery; requiring a vendor contracting with a permittee to pay the permittee at least 50 percent of the ideal net for each pull-tab series delivered to the vendor by the permittee; and providing for an effective date. Co-chair Pearce said that SB 200 was before the committee. She pointed out that several years ago the legislature had given public radio the authority to develop a statewide game in order to raise money for an endowment to replace general fund that are used to support public radio. She invited Diane Kaplin, President & CEO, Alaska Public Radio Network, to join the committee at the table and speak to the bill. End SFC-93 #60, Side 1 Begin SFC-93 #62, Side 1 DIANE KAPLIN said that in 1967 a Presidential Carnegie Commission created the concept of the public broadcasting system in the United States. It set out the aspirations of what the public broadcast system could do. One of the important aspects was how the system would be financed and that a tax would be collected on every television and radio set sold in the U.S. That tax section was not adopted, and, annually, a battle is fought over funds for financing pbs. In Alaska, a very large percentage of our population receives only public broadcasting, and it has become more of an issue. The legislature has supported substantial amounts of funding for public broadcasting with the investment at $6 million annually. With the decline of oil revenues in 1986, public broadcast has been looking for new ways to raise revenues recognizing a decline of state grants. Today, 32 percent of state grants have been lost. In 1986, all stations carried the public national radio schedule, now only three carry it because of the cost. Several countries including Denmark, Canada, Norway, Finland and England use games to finance their system. There was a federal law that prohibited on air contests or games. PBS approached Senator Stevens to get that federal law changed and in 1989 the charity gaming act was signed. At that point, pbs in Alaska approached the legislature and HB 587 was passed to allow an on-the-air game. Last year, the legislature appropriated $50,000 to hire experts to put together a game to fund an endowment for support of pbs. Dave Rose, former member of the permanent fund dividend corporation, was hired, and he has set up a plan for an endowment trust fund. She explained that SB 200 would allow pbs to move towards the goal of setting up a game and the endowment. A poll taken last year of 3200 Alaskans said that 84 percent approved or were neutral about the subject of the appropriateness for pbs to raise money on the air by a game. Senator Kelly said he was opposed to SB 200 but asked if SB 200 allowed for the sale of pull tabs on the ferry system. JOHN HANSEN, JR., Gaming Manager, Department of Commerce & Economic Development, said that pull tabs would be able to be sold on the ferries. Senator Kelly felt that would be a problem. He said he was also opposed to pull tabs being sold in restaurants. Ms. Kaplin said that in rural areas that might be the only place that could sell the pull tabs. Mr. Hansen said that SB 200 would allow any retail establishment to sell pull tabs. Senator Jacko MOVED for adoption of CSSB 200(FIN) work draft "E". No objections being heard, it was ADOPTED. JERRY LUCKHAUPT, Attorney, Legislative Legal Counsel, Legislative Affairs Agency, suggested that the words "pull tab series or the" on page 7, line 14 be deleted. Senator Jacko MOVED an amendment deleting the words "pull tab series or the" on page 7, line 14, including a change to the title to that affect. No objections being heard, the words were deleted and the title changed. Senator Kelly asked how the pull tab game would be played. Ms. Kaplin said that the pull tabs would be mailed in and a drawing would be held. She said that it could be held several times a year, limited to twelve hours of broadcasting a year over the air. The station would be prohibited from using operators, and the game would be conducted by Alaska public radio network. It would not receive any state moneys to fund the games. She said that the majority of the funds would go into an endowment. Mr. Hansen said that public radio would have to get special permission to hold funds for more than one year. Ms. Kaplin said the board of directors met on February 2 and established a trust fund. She said that 50 percent of the funds would go into a general endowment for public broadcasting statewide and the balance would be divided into separate endowment accounts for each broadcasting station. She said that there was some concern that funds should be retained by the communities that raised them. Senator Kelly felt that the endowment should be outlined in the bill. Ms. Kaplin said that she did not object to that. In answer to Co-chair Pearce, Mr. Luckhaupt said that a certain percent could be put into an endowment. Discussion was had by Senators Rieger, Pearce, Mr. Luckhaupt and Mr. Hansen regarding the endowment and existing statutes regarding the use of the gaming funds. Senator Kelly MOVED for adoption of a conceptual amendment that would provide for at least half of the adjusted gross income to go into an endowment with the Commissioner's approval. Mr. Hansen said that under SB 76 at least 30 percent of the adjusted net income would be required to be shown as net proceeds. Mr. Hansen said that gross sales were defined as the dollar paid for the pull tab game. After prizes are subtracted it is called the adjusted gross income. After expenses are paid the result is net proceeds. Under SB 76, 30 percent of the adjusted gross income is required to be reported as net proceeds. In answer to Senator Kelly, Mr. Hansen said that in addition to regular reports, SB 200 required a special report to the legislature. Senator Kerttula asked for the amendment to be in writing rather than a conceptual amendment. Co-chair Pearce announced an at ease. Recess 11:10am Reconvene 11:23am Senator Kelly MOVED for adoption of amendment 3 on page 7, line 24 (copy of file). No objections being heard, it was ADOPTED. Senator Kerttula voiced his opposition to using gambling to fund public broadcasting. He said that he understood the need for becoming independent from state funds but asked about the moral issues around gambling and how it would effect the image of public broadcasting. Ms. Kaplin said that discussion had been going on for years on this subject. Some local boards were opposed to using gambling as a way to raise funds. This was one reason the recent poll was done. Every station is locally owned and operated by a community board. Each station will have to make this decision for themselves. She said that the game would be aimed at viewers who wanted to be supportive of public broadcasting and would not target traditional gamblers or presented in gambling institutions. The choice may come down to giving up public broadcasting and its services or participate in the game for support. She believed that some stations would opt not to participate. Senator Kerttula maintained his opposition to allowing gambling in the state and proposed that the state could be seen as an advocate of gambling. He questioned what other forms of gambling could be approved. He maintained his objection to public broadcasting participating in gaming and felt it set a bad tone. Senator Rieger MOVED for adoption of amendment 4 adding the words "the earnings of which may be used" after the word fund to amendment 3 (copy on file). Senator Sharp OBJECTED. Discussion was had by Co-chair Pearce, Senators Rieger, Jacko, Sharp, and Mr. Luckhaupt regarding the sunset of the bill and the possibility of earnings from the endowment supporting public broadcasting. Senator Sharp withdrew his objection. No further objections being heard, amendment 4 was ADOPTED. Co-chair Pearce asked Mr. Luckhaupt what would happen to the endowment after the sunset date in the present proposed bill. Mr. Luckhaupt said that when the bill sunsets, the language restricting endowment uses would end and his opinion was that public broadcasting could then use the endowment at that time. Senator Kelly said that he did not disagree with that. Senator Jacko asked, of the amount raised by the endowment, how much would be generated from federal matching funds. Ms. Kaplin said that it is a substantial amount. Matching funds would be 13 cents on the dollar, and in rural areas or native stations it varies between 19 and 26 cents on the dollars. Senator Sharp asked if it was their intention to advertise pull tabs on public broadcasting. Ms. Kaplin said that advertising on the air was prohibited by law. She said that the law allowed 12 hours a year on the air for the game and most of that time would be used for the on-the-air drawing. Senator Sharp said it would disturb him, especially because of the young people, if there was a promotion on the air. Senator Kerttula said that "friends" of the station could buy air time on other stations or newspaper ads. Ms. Kaplin maintained that any advertising would be disallowed by law. Mr. Luckhaupt said that there cannot be any gaming advertising or promotions on commercial broadcasting. The twelve hours that Ms. Kaplin mentioned are an exception provided in this legislation. End SFC-93 #62, Side 1 Begin SFC-93 #64, Side 1 PAUL FUHS, Commissioner, Department of Commerce & Economic Development, said that several years ago the legislature had passed authorization for APRN to hold a game. He said that because of existing statutes, APRN had not been able to hold a game that the department could authorize. He said that the department and APRN needed clarification from the legislature regarding what could be authorized in order to proceed. He said that he was not opposed to SB 200 but said that the Governor was opposed to extending gambling in Alaska. Senator Jacko MOVED for passage of CSSB 200(FIN) as amended from committee with individual recommendations. Senators Kerttula and Kelly OBJECTED for the record. CSSB 200(FIN) was REPORTED OUT of committee with a "do pass" with a zero fiscal note for the Department of Commerce & Economic Development. Co-chairs Pearce and Frank, Senators Jacko, and Rieger signed a "do pass." Senators Kelly and Kerttula signed a "do not pass," and Senator Sharp signed a "no rec." Recess 11:50am Reconvene 12:05pm CS FOR SENATE BILL NO. 76(JUD): An Act requiring regulations relating to pull-tabs adopted by the Department of Commerce and Economic Development to be consistent with the North American Gaming Regulators Association standards on pull-tabs; allowing permittees to contract with vendors to sell pull-tabs on behalf of the permittee; restricting the purchase of pull-tabs by certain persons; requiring the sale of pull-tabs by vendors to be solely by a pull-tab ticket dispensing machine; requiring receipts before certain prizes may be paid; prohibiting distributors from supplying pull-tabs to vendors; relating to registration of vendors; requiring the licensing of out-of-state manufacturers; allowing public or nonprofit broadcasting stations to sell pull-tabs at more than one location; preventing persons with certain convictions from being involved in charitable gaming activities as a permittee, licensee, vendor, person responsible for an activity, fund raiser or consultant of a licensee, or employee in a managerial or supervisory capacity and providing exceptions for certain persons whose convictions are at least 10 years old; relating to multiple-beneficiary charitable gaming permits and door prizes for charitable gaming; requiring Department of Commerce and Economic Development approval of contracts between charitable gaming permittees and operators before gaming may occur; limiting the amount of authorized expenses to a percentage of adjusted gross income for a charitable gaming activity; relating to the reporting and payment of a percentage of the adjusted gross income by operators to permittees; requiring Department of Commerce and Economic Development approval of contracts between permittees and operators; allowing the commissioner of commerce and economic development to issue orders prohibiting violations of state gaming laws; relating to the authority of the commissioner of commerce and economic development to suspend or revoke a permit, license, or registration; relating to the uses to which charitable gaming proceeds may be put; relating to `political uses' and `political organizations' as those terms are used in the charitable gaming statutes; and providing for an effective date. Senator Sharp MOVED to RESCIND prior committee action adopting CSSB 76(FIN) work draft "M" and amendment 1. No objections being heard, prior action was RESCINDED. Senator Sharp MOVED for ADOPTION of CSSB 76(FIN) work draft "S" dated April 16, 1993. No objections being heard, it was ADOPTED. Co-chair Pearce outlined the changes in CSSB 76(FIN) work draft "S". She said that felony exclusions remained in the bill, net proceeds from pull tabs and bingo (not raffle proceeds) are prohibited for direct campaign contributions to candidates as in the prior bill, net proceeds are also prohibited for payment to registered lobbyists, third party vendor language has been tightened, multiple beneficiary permits allowed, the APRN section has been removed, and language was removed allowing the use of vendor machines for pull tabs. She said that an amendment had been prepared to allow package stores to participate in the sale of pull tabs. She invited John Hansen, Jr., Gaming Manager, Department of Commerce & Economic Development to rejoin the members at the table. Senator Sharp MOVED for ADOPTION of amendment 1 on page 15, line 16 of CSSB 76(FIN) work draft "S". Mr. Hansen said that amendment 1 was a technical amendment that would give an exception to the Department of Labor that would allow 16 to 19 year olds to work in restaurants where pull tabs are sold. The way the bill is drafted, it basically excludes those establishments from being able to sell pull tabs as vendors. No objections being heard, amendment 1 was ADOPTED. Senator Sharp MOVED for ADOPTION of amendment 2 on page 15, line 11, with consideration of the title. Co-chair Pearce explained that amendment 2 would add package store licenses back into the third party vendor. In answer to Co-chair Pearce, Mr. Hansen said that package stores were at the present time selling pull tabs in Alaska. No objections being heard, amendment 2 was ADOPTED. Mr. Hansen said that currently in Alaska pull tabs are authorized and allowed to be sold in any location. This bill would provide for permittees to go directly to bars and liquor stores and receive a minimum of 50 percent of the net proceeds at the time they deliver the pull tabs. Under current, these sales are occurring using operators or permittees. When they use an operator they receive a minimum of 15 percent of net proceeds, that minimum is usually the maximum. Discussion was had by Mr. Hansen and Senator Kelly regarding net proceeds, expenses and profit. Co-chair Pearce invited Paul Fuhs, Commissioner, Department of Commerce & Economic Development, to come before the committee again and speak to SB 76. Mr. Fuhs said that the Governor was opposed to gambling but if the state was going to authorize it, he felt profits should be going to the charities. He said that gaming associations were opposed to the legislation. He explained that every bar could have pull tabs under the existing law, and of the 1,320 permittee locations in Alaska, 537 are bars. The advantage of this legislation is that the charities would get 50 percent instead of 15 percent under existing legislation. He said that his department was in support of prohibiting proceeds for use for campaign contributions. Discussion was had by Senator Kelly, Mr. Fuhs and Co-chair Pearce regarding the difference between using third party vendors and operators. Mr. Fuhs estimated that the combination of stopping the diversion of gaming proceeds to campaign contributions and lobbyists and the increase in the percentages would result in about $10 million more a year going to charities than under existing legislation. He said that about $16 million net goes to charities at the present time. Co-chair said that a new fiscal note for the Department of Revenue shows $86.9 but because of the addition of an auditor position it could provide $100.0 additional revenue for the department. Senator Rieger asks for clarification regarding permittees expenses. Mr. Hansen said that under CSSB 76(FIN), if a permittee chooses to use an operator or a vendor, or operates the game out of their own bingo hall, they are not going to be allowed to use more than 70 percent of the adjusted gross income for overall expenses which leaves 30 percent for charities. Senator Kelly MOVED for ADOPTION of amendment 3 adding a comma and the words "directly or indirectly" after the word "portion" on page 9, line 19. No objections being heard, amendment 3 was ADOPTED. Senator Kelly MOVED for passage of CSSB 76(FIN) as amended with individual recommendations. CSSB 76(FIN) work draft "S" was REPORTED OUT of committee as amended with a "do pass" and with a zero fiscal note for the Department of Commerce & Economic Development and a new fiscal note for the Department of Revenue in the amount of $86.9. Co-chairs Pearce and Frank, Senators Jacko, Kelly, Sharp and Rieger signed "do pass." Senator Kerttula signed "no rec." ADJOURNMENT The meeting was adjourned at approximately 12:40 p.m.