Legislature(1995 - 1996)
03/20/1996 01:30 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
TAPE 96-24, SIDE B
Number 020
SB 277 GAMING: FERRIES, VIDEO LOTTERY & MISC
SENATOR TAYLOR moved adoption of a committee substitute. SENATOR
ADAMS objected to the motion.
SENATOR TAYLOR explained the committee substitute allows pulltab
gaming to continue, videogaming to occur in the future, and
videogaming on the ferries.
JOE AMBROSE, legislative aide to Senator Taylor, sponsor of the
measure, commented on the SB 277. The original version was
designed to do away with pulltabs entirely, and replace them with
video lottery machines. Charitable organizations statewide argued
that many of the smaller operations would be negatively impacted by
a total ban on pulltabs. The committee substitute is a compromise
proposal that would still prohibit the funding of political
activities by income derived from charitable gaming, including
contributions to candidates for public office, or to groups that
support candidates for public office. It would delete political
and labor organizations from the definition of a bona fide civic or
service organization qualifying for a charitable gaming permit.
MR. AMBROSE continued. The main thrust of SB 277 is the
introduction of video lottery machines. These machines will make
charitable gaming in Alaska more accountable. They are capable of
being linked to a central computer where a permanent record of all
transactions can be kept. SB 277 directs that the proceeds of
video lottery machines be distributed differently from those of
pulltabs. Charities would retain 30 percent, 30 percent would go
to the vendor, 15 percent would go to the state, and 25 percent
would go to the municipality in which the machine is located.
Proceeds from machines in unorganized boroughs outside
municipalities would go to the state. If the Marine Highway System
so desires, SB 277 provides it to license video lottery gaming on
state ferries.
Number 082
SENATOR ADAMS asked what entities can have permits, and whether
permits can be sublet to another contractor.
MR. AMBROSE replied the permittees are basically the same group
that can currently sell pulltabs, with the exception of political
and labor organizations. It does not impact pulltab operations
currently in place. Regarding subletting permits, SB 277 prohibits
the use of an operator. The videogaming machines would have to be
located in a licensed premise; each premise would be limited to ten
machines.
SENATOR ELLIS asked about a reference made to this type of gambling
as the "crack cocaine" of gaming.
MR. AMBROSE responded he saw that reference today for the first
time.
SENATOR ELLIS questioned the payouts on existing pulltabs versus
payouts on videogaming. To his knowledge, pulltab prizes are
relatively low compared to videogame prizes.
MR. AMBROSE stated SB 277 specifically defines the parameters of
payouts and maintains the existing framework.
SENATOR ELLIS inquired whether it makes the payout identical to
current payouts for pulltab prizes.
MR. AMBROSE deferred that question to the Director of the Division
of Charitable Gaming. He added the intent was to maintain similar
payouts while providing a more accountable mechanism to replace
pulltabs, not to expand the whole area of gaming in Alaska.
SENATOR ADAMS noted there is no fiscal note accompanying SB 277.
MR. AMBROSE indicated the state ferries would become permittees if
they were to become licensed, therefore a fund could be set up to
use the income from the games on ferries for operations.
SENATOR ADAMS asked how much revenue the permits would generate.
MR. AMBROSE referred to a position statement submitted by the
Marine Highway System which contended SB 277 would cost it money.
The fiscal note for the original bill, which should be the same for
the committee substitute, shows an annual revenue of $15,600 per
vessel with three machines. The ferry system believes it will have
to hire extra employees.
Number 167
SENATOR ELLIS assumed the video machines offered a slot machine
type of game on a video screen, and questioned whether the machines
can be programmed to play all kinds of games not currently allowed
under Alaska statute.
MR. AMBROSE stated that the term "video lottery" would include
video poker and video keno, but it would be up to the Division of
Charitable Gaming to decide which games would be allowed.
SENATOR ELLIS asserted that even though the bill is not intended to
expand gambling in Alaska, it would grant to the executive branch
the authority to do so.
MR. AMBROSE stated he meant the bill would not up the stakes as far
as payouts. The Department of Law has advised that SB 277 could
have an impact on previous decisions made by the legislature.
SENATOR ELLIS commented that the legislature staked out a fairly
clear path last year in trying to limit gambling in the State of
Alaska, and felt it is curious why this majority would want to
grant to this executive the power to expand gambling in the state.
Both the administration and the majority seemed to be of one mind
on casinos and Monte Carlo Nights last year.
SENATOR TAYLOR stated the original intent was to clean up the
pulltab operations by creating more accountable transactions. Any
member of the benefitted organization could get a print out showing
exactly what was played. That approach met with tremendous
opposition from charitable organizations. The use of video lottery
games has worked very well in other states, such as North Dakota,
and provides a financial base for those affected. He added he
would not support the measure either if it will result in the
executive branch using that as an excuse to provide a negotiated
agreement with various other sovereigns as to where they may wish
to create full casino-type gambling in Alaska. The whole question
of where the state may or may not be going in the arena of gambling
needs to be addressed as it was not resolved last year.
Number 235
TIMOTHY REED, testifying via teleconference from Kenai, asked if a
non-profit organization could own the video lottery machine
outright and receive 60 percent of the revenues.
SENATOR TAYLOR replied that is his understanding.
MR. REED questioned how many machines a non-profit organization
could own, and whether one game could be played per machine.
SENATOR TAYLOR responded each permittee could have a total of ten
permits, and the machines could be programmed to play any number of
games, although only one game could be played at a time.
MR. REED inquired about the percentages for the city and state.
SENATOR TAYLOR answered those figures will generate significant
revenues and may replace municipal assistance revenue sharing. He
requested input on those amounts, as the percentage amounts are not
fixed.
LOIS PILIFANT, representing the Soldotna Senior Center, asked if
all ten machines could be operated in one location. SENATOR TAYLOR
agreed.
MS. PILIFANT stated she was confused by the charitable
organizations that were concerned that video lottery gaming would
result in a loss of revenue since video gaming would only replace
paper pull tabs. She believes paper pull tabs are harder to
control and account for.
SENATOR TAYLOR explained those organizations were concerned they
would lose money because the pull tabs allow more customers access
at one time, where ten video machines would allow only ten people
to play at a time.
MS. PILIFANT asserted several employees would be required to sell
more than 10 pull tabs at a time, and such an operation would not
be considered small. She noted the Soldotna Senior Center runs a
small pull tab operation and raises most of its own operating
revenue. It receives very little money from the Older Alaskans
Commission. The video lottery games would require less paperwork
and fewer employees.
Number 330
MARY MAGNUSON, representing the National Association of Fundraising
Ticket Manufacturers, a small trade association in Minnesota that
produces pulltabs and bingo paper for charity gaming purposes,
expressed concern about SB 277 because it will create economic
problems for pulltab manufacturers. Currently five states allow
some sort of video lottery gaming, primarily in bars, not
necessarily for charitable purposes but to generate revenue for
those states. Four other states allow video lottery gaming only at
racetracks to stem the tide of declining pari-mutuel revenues.
Seven or eight states have struggled with this issue in the last
few years, and have rejected the notion of legalizing video lottery
for the following reasons. Video lottery gaming typically involves
an expansion of gambling: it is new, popular, and has attracted
many businesses that might not otherwise be involved because of the
revenues generated. The amount of money spent of video lottery
gaming is generally higher than the amount spent on other forms of
gambling. In Alaska, the per capita wagering on pull tabs and
bingo is approximately $465 per capita per year, almost twice that
of any other state. That amount is likely to increase with video
lottery gaming. In Oregon, $717 is spent per capita on video
lottery, and South Dakotans spend $625 per capita. States that
have been faced with this issue have been concerned about expansion
and that video lotteries separate the player from his/her money
faster than any other form of gambling.
MS. MAGNUSON advised that studies have shown that video gambling is
the single most addictive form of gambling ever invented. Although
all gambling is addictive, the higher incidence of compulsive
gambling, pathological gambling, and problem gambling typically
result from video gambling. She explained that is why it was
termed the "crack cocaine" of gambling by a clinical worker in Las
Vegas. The machines are designed to make it easy to stay at for a
longer period of time and removes the social aspect of other games.
Many states have had to implement problem gambling programs which
are funded by the state. In Minnesota, that program gets $1.5
million per year and reaches only the tip of the iceberg in the
problem gambling areas.
MS. MAGNUSON explained the third reason states have been less
likely to legalize video gambling in the last few years is because
Louisiana was the last state to legalize video gambling in any kind
of tavern environment in 1993. This year the newly elected
governor has called a special session for the purpose of repealing
the video gambling law, because of scandals involving organized
crime infiltration and certain government officials, and other
problems associated with video gambling. The governor plans to
offer for local option riverboat gambling and land based casinos in
New Orleans, and give the voters the opportunity to repeal all
gambling within the state. States have had to look at these issues
and make the public policy decision as to whether the social costs
outweigh whatever benefits might be achieved through the
legalization of video gambling.
MS. MAGNUSON believed pulltabs are accountable as they contain
serial numbers and bar codes. Electronic systems are available to
accurately record products sold to each distributor and permittee
in the state. She offered to work with regulators to increase
accountability.
SENATOR TAYLOR commended Ms. Magnuson for her discussion on the
vicious nature of the competition. He added he has represented
approximately 30 bars in the state. The single biggest problem for
bar owners is that they are cash based businesses, with several
employees handling cash before it is accounted for. Even though
cash registers are more sophisticated, pulltabs are still sold out
of shoeboxes. Employees are able to monitor how much prize money
has been awarded and how much is available in the batch. He
announced the bill would be held to wait for further comment.
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