Legislature(2019 - 2020)GRUENBERG 120
02/25/2020 03:00 PM House STATE AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| HB239 | |
| HB190 | |
| SB80 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 239 | TELECONFERENCED | |
| *+ | HB 190 | TELECONFERENCED | |
| + | SB 80 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 239-ESTABLISH STATE LOTTERY BOARD/LOTTERIES
3:02:41 PM
CO-CHAIR KREISS-TOMKINS announced that the first order of
business would be HOUSE BILL NO. 239, "An Act establishing a
state lottery; providing for participation in multi-state
lotteries; establishing the Alaska State Lottery Board in the
Department of Revenue; relating to confidentiality of
information regarding lottery winners; requiring background
investigations by the Department of Public Safety; and providing
for an effective date."
3:03:05 PM
REPRESENTATIVE THOMPSON relayed that the lottery that would be
established under HB 239 would generate a much-needed source of
revenue for the state. He said that he recognizes the concerns
about the expansion of gambling and the effects that it would
have on the lives of Alaskans. He maintained that he shares the
concerns; he has worked hard to craft legislation that considers
the factors most closely associated with behavioral addiction;
and the proposed legislation would prohibit the type of activity
that exploits those factors. He referred to the invited
testimony of several experts familiar with the lottery industry
and problem gambling issues to address committee members'
questions.
3:04:20 PM
SETH WHITTEN, Staff, Representative Steve Thompson, Alaska State
Legislature, referred to documents in the committee packet: an
email dated 2/5/20 listing lottery sales in states with
populations similar to Alaska's; and a Gallup, Inc. poll report
[7/22/16], entitled "About Half of Americans Play State
Lotteries," which offers a demographic breakdown of the buyers
of lottery tickets along with information on problem gambling.
3:05:41 PM
JONATHAN CLONTZ, Chief Executive Officer (CEO), Wyoming Lottery
Corporation, relayed that Wyoming passed a law authorizing a
state lottery in 2013; the lottery was launched August 2014. He
stated that it was a small lottery due to Wyoming's low
population - about 375,000 adult residents. He described
Wyoming's lottery: one in-state game - "Cowboy Draw" - which is
a cash lottery game; and multi-state games - "Powerball," "Mega
Millions," and "Lucky for Life." Wyoming's lottery does not
include instant-win games or video lottery terminals; it does
not allow the use of debit cards or credit cards for purchases;
and there is a limit on the number of tickets which can be
bought at one location. As required by statute, the Wyoming
Council on Problem Gambling (WCPG) was established in
partnership with the Wyoming Department of Health.
MR. CLONTZ related that Wyoming borrowed money from a local bank
so as not to expend state general fund resources; the loan was
paid back several months early, at which time revenue began to
come into the state. There is a nine-member board of directors
appointed by the governor, and it operates as a quasi-
governmental instrument of the state. The state is continuing
to make the lottery a well-rounded full portfolio lottery.
3:08:33 PM
REPRESENTATIVE SHAW asked what Wyoming's net profit per year was
for the past three years from the lottery.
MR. CLONTZ responded that last year [2019] over $6 million was
transferred to the state; about $4 million was transferred in
2018; and about $2.5 million was transferred in 2017. The total
for the three years was about $12.5 million.
CO-CHAIR FIELDS asked for data on the distribution of lottery
users over economic demographics. He asked, "Are poor people
participating at a higher rate than other groups?"
MR. CLONTZ answered that the Wyoming Lottery Corporation
performs trigger studies on various issues to assess player
behavior and impacts on society. He stated that staff look at
the demographics of players - age and income; sometimes that
information is difficult to get. The results of two trigger
studies revealed that the most prominent player category was
ages 45-60 and middle-income.
CO-CHAIR KREISS-TOMKINS asked for an explanation of "trigger
study."
MR. CLONTZ explained that a trigger study is an internal study
"triggered" by an issue that warrants study, such as researching
the interest in a new game or examining problem gambling in a
certain community. It is performed in-house or through
contract.
3:12:51 PM
REPRESENTATIVE HOPKINS asked whether Wyoming participates in
multi-state lotteries and how the revenue-sharing is handled.
MR. CLONTZ replied that Wyoming's lottery was launched with
Powerball and Mega Millions; once it received permission from
[the Multi-State Lottery Association (MUSL)] it began to sell
Powerball and Mega Millions products. He explained that the
member states pay a percentage into the jackpots according to
their sales; participating in the multi-state games relieved
Wyoming of the pressure of paying out a full jackpot. He
relayed that Wyoming could not launch an in-state game until it
had a reserve account built up to pay out full jackpots.
REPRESENTATIVE HOPKINS asked whether the multi-state lottery
tickets bring in as much revenue per ticket as the in-state
lottery tickets, considering they are taxed the same.
MR. CLONTZ responded that there are set pay-out percentages -
about 50 percent for the multi-state games as determined by
MUSL; Wyoming makes 21-22 percent from those games. For
Wyoming's in-state game, the pay-out percentage is set at 68
percent. The game is "branded" to suit the state; therefore,
the state wants people to win that game more; it wants to
encourage player loyalty to the brand. Wyoming does not make as
much in profit - 13 percent - compared with the multi-state
games; however, the volume of play is consistently higher.
3:16:39 PM
REPRESENTATIVE HOPKINS asked for the cost of administrative
overhead for the state lottery and hired staff.
MR. CLONTZ answered that the nine-member board borrowed $3
million for start-up; it hired staff; it contracted for
marketing, legal counsel, and information technology (IT); and
it paid for background investigations for retailers. He
explained that most of the services for the Wyoming lottery had
to be outsourced.
REPRESENTATIVE THOMPSON asked how long it took to pay back $3
million.
MR. CLONTZ said that the board estimated it would take 24
months, but it only took 16 months. The board made the decision
to pay off the debt before transferring revenue to the state.
3:20:09 PM
CO-CHAIR KREISS-TOMKINS asked what the projections are for net
revenue to Wyoming from the lottery, and whether revenue is
expected to plateau.
MR. CLONTZ answered that Wyoming is already seeing a leveling
off. There is always a spike in sales when jackpots are very
high; however, since the billion-dollar jackpots [came into
being], it takes a much higher jackpot to generate the same
level of excitement. He said that when jackpots are low, sales
are low; the Wyoming Lottery Corporation utilizes promotions to
stimulate sales and interest. He expressed that the lottery
needs another game in its portfolio that is a non-jackpot
reliant game. He reiterated that instant games are prohibited;
and too many draw games "start to cannibalize each other." He
maintained that the corporation must strike a careful balance.
He estimated that revenue will most likely level off to $4-5
million per year; adding another game may increase the revenue
$1.5-3 million.
3:24:02 PM
REPRESENTATIVE STORY asked whether scratch games are not allowed
because of charitable gaming in Wyoming.
MR. CLONTZ answered no, that is not the primary reason. He
explained that Wyoming is a conservative state; passing
legislation for a lottery was difficult; there were promises
made to not allow instant games because of a great concern for
problem gambling among residents. He said that he has not seen
evidence that the traditional draw games lead to gambling
problems; it occurs in connection with video lottery, casino
table games, and instant-win games. He offered that it is
likely that the prohibition may be removed in the future.
REPRESENTATIVE STORY asked about the WCPG and the issues it
addresses.
MR. CLONTZ reiterated that state statute required the council to
be established in partnership with the Department of Health.
The council found that Wyoming had many addiction treatment
specialists, but none specifically trained in problem gambling.
In the statute there is a requirement that up to $200,000 per
year be considered by the board of directors to be placed into
the problem gambling fund; the funds come from expired unclaimed
tickets. Money is set aside every year to be used in
association with problem gambling. The Department of Health
addiction treatment specialists identified gambling addiction
treatment training and sent staff to be trained. The
corporation contracted with a research company to study the
issue of problem gambling in Wyoming. The findings revealed
that it was not a significant issue, and in areas where there
were problem gambling issues, they were secondary and tertiary
to other addictions. The Wyoming Lottery Corporation
established a problem gambling hotline; the hotline received six
calls and four were due to the callers not being able to read
the print on their tickets. The council meets regularly,
conducts governance work, and attends conferences, but generally
there is not much for them to do. He stated that the
corporation has restricted the number of tickets a person can
buy in one transaction to 125, as a deterrent [to excessive
gambling]; and it does not allow the use of debit and credit
cards. The corporation partnered with the Department of Family
Services to integrate with its child support registry so that
lottery winners owing back child support could be identified and
the money transferred to that agency.
3:30:56 PM
REPRESENTATIVE STORY mentioned that she would like to see a copy
of any council reports to the Department of Health.
MR. CLONTZ agreed to provide them.
3:32:18 PM
BISHOP WOOSLEY, President, North American Association of State
and Provincial Lotteries (NASPL) and Director, Arkansas Lottery,
summarized his experience with the Arkansas Lottery and his
position on NASPL. He said that NASPL is an active organization
representing 53 lotteries across North America; its function is
to disseminate information benefitting the state and provincial
lottery organizations through education and communication. When
appropriate, NASPL advocates for positions of the association in
matters of general policy on lotteries.
REPRESENTATIVE THOMPSON asked for a description of the Arkansas
Lottery and whether it has draw tickets only or expanded gaming.
MR. WOOSLEY answered that the Arkansas Lottery launched in
September 2009; it began with instant ticket games - which
constitute 80 percent of sales; it then added draw games - 20
percent of sales - which included Powerball, Mega Millions, two
daily draw games, the regional game, Lucky for Life, and an in-
state lotto game called the "Natural State Jackpot." He
clarified for Representative Story that instant tickets
constituted 80 percent of sales and draw games 20 percent.
REPRESENTATIVE HOPKINS asked whether the other states in the
association support their nonprofits through charitable gaming.
MR. WOOSLEY answered that it varies from state to state; it
depends on the geographic location and the needs of the state.
The Arkansas Lottery supports scholarships for higher education;
other states support state general revenue, veterans, highways,
or a variety of charitable causes. He said that the newer
lotteries focus more on education.
REPRESENTATIVE HOPKINS stated that in Alaska, scratch tickets
are held by a permit holder; the permit holder can give a
certain percentage of the revenue from the scratch tickets to
the charitable and nonprofit sector. He asked whether Mr.
Woosley was familiar with any other states having a similar
arrangement for draw tickets.
MR. WOOSLEY answered negatively.
3:37:50 PM
MR. WHITTEN referred to an article on the Alaska Charitable
Gaming Alliance (ACGA) website, not included in the committee
packet, entitled "Governor Dunleavy's Senate Bill 188 expands
multiple levels of gambling," which read in part:
Rep. Steven Thompson, (R-Fairbanks), also has newly
proposed gaming legislation in the form House Bill
239, that would establish a lottery under a State
Lottery Board. In Thompson's case, there is neither
significant and costly new government infrastructure,
nor an alarming expansion of gaming. The best part of
his effort has been he included the Alaska Charitable
Gaming Alliance. Rep. Thompson communicated his
interest in meeting with our president, Sandy Powers,
to seek counsel on how his proposed legislation would
affect charitable gaming. He has been transparent and
thoughtful.
REPRESENTATIVE STORY asked whether Arkansas has a problem gaming
council or similar organization overseeing issues related to
lotteries.
MR. WOOSLEY answered, not specifically. He maintained that when
the Arkansas Lottery was started, it was required to submit
$200,000 per year toward problem gambling; after six years, the
Arkansas legislature eliminated that requirement. Arkansas now
commits to supporting a problem gambling helpline and receives
National Council on Problem Gambling (NCPG) certification
through NASPL for all games. He added that the legislature has
its own separate committee overseeing the Arkansas Lottery.
REPRESENTATIVE STORY asked Mr. Woosley to provide any
information he has about the [problem gambling] issues and
supports in place in Arkansas.
CO-CHAIR FIELDS asked for the annual cost of administering
charitable gaming in Alaska.
3:41:04 PM
DAN STICKEL, Chief Economist, Tax Division, Department of
Revenue (DOR), responded that he will provide that information
to the committee.
MR. WHITTEN stated that in fiscal year 2018 (FY18) the gross
sales for charitable gaming were $375 million; of that amount,
$35 million went to nonprofit organizations and $55 million to
administration. He offered to verify those numbers for the
committee.
3:42:53 PM
KEITH WHYTE, Executive Director, National Council on Problem
Gambling (NCPG), relayed that NCPG was founded in 1972 and is
the national advocate for programs and services to assist
problem gamblers and their families. He stated that NCPG is
neutral on legalized gambling. He mentioned NCPG's membership:
gaming corporations and agencies, regulators, tribal
governments, healthcare, banks and other financial institutions,
and individuals - many of whom are in recovery from gambling
problems.
MR. WHYTE continued by saying that NCPG provides services to
help problem gamblers and their families: a national helpline
number; training and education of counselors; and a variety of
education, prevention, and treatment programs. He mentioned
that NCPG works with the lottery, casino, and charitable
industries to develop programs and policies helping them to
minimize harm.
MR. WHYTE maintained that he has 25 years of experience in the
gambling industry, both as executive director of NCPG and the
director of research for the American Gaming Association.
CO-CHAIR FIELDS asked whether the gaming industry funds NCPG.
MR. WHYTE answered, partly. He said that since it is a
membership organization, it is funded from dues. He added that
half of its revenues come from membership dues - the majority of
which are from gambling entities such as state lotteries,
casinos, and tribal governments. The other half is from its
annual conference, sales of education materials, and a few
grants. He maintained that there is no federal funding for
problem gambling programs. He reiterated that NCPG is neutral
on legalized gambling, does not accept restrictions on funds it
receives, and is very open and transparent in working with the
industry. Through membership, gambling entities make a just
contribution to helping mitigate the social costs that they help
generate.
REPRESENTATIVE THOMPSON mentioned his understanding that problem
gamblers are enticed to gamble more when there are instant
winners through scratch-off or video games, compared with once-
a-week draw games. He asked if that understanding was correct.
MR. WHYTE answered yes. He said that in general, the structural
characteristics of each form of gambling has a complex
relationship with gambling addiction; frequency is one of those
characteristics and is associated with increased development of
gambling problems. He offered additional structural
characteristics - speed of play and size of jackpot. He stated
that the construct is multi-dimensional.
REPRESENTATIVE STORY asked for more information on the social
costs of gambling.
MR. WHYTE replied that it is inevitable that some people who
gamble will develop problems. The costs of gambling problems
are not just borne by individuals, but by their families, their
communities, businesses, and ultimately the taxpayers. Based on
national data, it is estimated that the number of people with
gambling problems in Alaska is about 12,000. A very
conservative social cost estimate would assign $1,700 per severe
problem gambler per year for a total of about $20 million in
social costs. Social costs are primarily in criminal justice
and healthcare: about 70 percent of people with severe gambling
problems commit white collar crimes to finance their gambling;
people with gambling problems are more likely to visit emergency
departments, have poor physical and mental health, and have
other consequences of addiction. People who have one addiction
are more likely to have another. He stated that most private
insurers do not routinely reimburse for a diagnosis of problem
gambling; most social costs fall directly to the state. He
emphasized that every dollar spent on prevention and treatment
saves two or more dollars in social costs. He mentioned that to
date, the citizens of Alaska are not funding any problem
gambling programs.
3:50:54 PM
REPRESENTATIVE STORY asked for examples of NCPG working with the
gambling industry to minimize harm.
MR. WHYTE answered that staff developed a responsible gambling
verification program for the lottery industry, which includes
employee training, retailer training, advertising, and funds for
problem gambling. He stated that the program consists of
policies and procedures that will attempt to minimize the risk
of addiction for lottery products that are being sold. He
maintained that NCPG can never eliminate gambling addiction but
can attempt to mitigate and treat it. He said that both Wyoming
and Arkansas faced tremendous challenges, which Alaska would
face as well: no funds were spent on problem gambling prior to
the onset of a lottery and no problem gambling services were
available; this exacerbates social costs. He mentioned written
testimony, not included in the committee packet, that outlines
the lowest possible standards for Alaska to address the social
costs as it establishes its lottery. He stressed that research
demonstrates that the expansion of gambling increases both
participation and gambling problems. He maintained that putting
countermeasures in place - responsible gambling programs - and
integrating them into Alaska's behavioral health services is the
only ethical and economical way to approach this public health
issue.
MR. WHITTEN offered that he would submit Mr. Whyte's written
testimony to the committee.
[HB 239 was held over.]