Legislature(1995 - 1996)

02/19/1996 01:40 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  HOUSE BILL 307                                                               
                                                                               
       "An  Act  prohibiting   the  sale  of  pull-tabs;   and                 
       providing for an effective date."                                       
                                                                               
  REPRESENTATIVE CYNTHIA  TOOHEY, testified  in support  of HB
  307 noting that  the bill would simply  prohibit politicians                 
  and  other  political  entities  from  receiving  charitable                 
  gaming  proceeds.   She  said that  no  one should  consider                 
  politicians, or their  attempts to  influence the  electoral                 
  process, a legitimate use of charity money.                                  
                                                                               
  Representative Therriault MOVED that  9-LS1070\K, Luckhaupt,                 
  2/7/96, be the version before the Committee.  Representative                 
  Brown  OBJECTED  for  purposes  of  understanding  how  that                 
  version differs from  the prior versions  of the bill.   Co-                 
  Chair  Hanley  explained that  the original  bill prohibited                 
  pull  tabs;  the  Judiciary  version  prohibited  charitable                 
  gaming   except  for  raffles   for  political  parties  and                 
  candidates; the Finance  committee substitute prohibits  all                 
  charitable gaming including raffles.                                         
                                                                               
  Representative  Toohey  emphasized   that  politicians   and                 
  political parties should be removed  from receiving any kind                 
  of   charitable   money.      Representative   Brown   asked                 
  Representative  Toohey  if  she  continued  to  support  the                 
  original  version of  the  legislation  which excluded  pull                 
  tabs.  Representative Toohey disagreed  that was her intent.                 
  Representative Brown  removed her OBJECTION to  adopting the                 
  committee substitute.  There being  no further objection, CS                 
  HB  307  (FIN)  was  adopted   as  the  version  before  the                 
  Committee.                                                                   
                                                                               
  DENNIS  POSHARD,  DIRECTOR,   CHARITABLE  GAMING   DIVISION,                 
  DEPARTMENT OF REVENUE, commented that the Department has not                 
  taken  a  position  on  HB  307.    He  indicated  that  the                 
  Legislature will  need to  make the  policy calls  regarding                 
  that bill.   He  pointed  out Departmental  concerns of  the                 
  legislation.                                                                 
                                                                               
       1.   The  bill  deals  with  campaign  finance  reform.                 
                                                                               
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            Would the Department  of Revenue  be in charge  of                 
            policing  campaign  contributions.     Could   the                 
            problem  be  better  addressed through  Title  15,                 
            Alaska Public Offices Commission (APOC) statutes.                  
                                                                               
       2.   Will  the legislation  accomplish the intent.   He                 
            stressed  that  the  contributions   will  not  be                 
            audited through the Department.                                    
                                                                               
       3.   What would happen  assuming a violation  occurred.                 
            The only  recourse the Division  would have, would                 
            be to  take action  against the  charity's permit.                 
            There is no  action or recourse that  the Division                 
            can take against  the campaign  or candidate  that                 
            receives that money.                                               
                                                                               
  Mr. Poshard  reiterated that  when a  violation occurs,  the                 
  Division  will take  action  against the  charity's  permit.                 
  There will  be no  means of  recourse against the  candidate                 
  that receive the money.                                                      
                                                                               
  Mr. Poshard  spoke to the advantages of  placing the concern                 
  under   the  jurisdiction  of   the  Alaska   Public  Office                 
  Commission  (APOC).   APOC has  the expertise  to deal  with                 
  campaign financing law.   The  Division does  not have  that                 
  expertise, and  it is not the  focus of their  program.  Co-                 
  Chair  Hanley advised that  the intent would  be to prohibit                 
  the contribution.   Mr. Poshard  reminded Committee  members                 
  that  most  of the  groups  included  also report  to  APOC.                 
  Representative  Brown  recommended  that these  concerns  be                 
  considered in  the campaign finance reform and  a rewrite of                 
  the statutes.                                                                
                                                                               
  Mr. Poshard explained that the Department has done extensive                 
  research  in  how  other  organizations  establish   minimum                 
  returns to  the charity  and minimum returns  to the  State.                 
  The  Administration is  looking at  ways to  change  how the                 
  State initiates  this action.   Currently,  there is  a bill                 
  being drafted  which would  increase the  amount of  revenue                 
  received by  the State and the charity  and would streamline                 
  the auditing procedures.                                                     
                                                                               
  Representative Brown questioned the fundamental problem with                 
  a  political  candidate  receiving  money  from   charitable                 
  gaming,  agreeing   that  it   should  be   well  regulated.                 
  Representative Therriault  asked if  groups gathering  money                 
  for a political system are legitimate charities.                             
                                                                               
  Mr.  Poshard noted  that a prohibition  exists in  using net                 
  proceeds to pay a lobbyist.  There is no prohibition against                 
  a  charitable organization  to hire  a lobbyist,  but it  is                 
  illegal for them to pay the  lobbyist from the net proceeds.                 
                                                                               
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  Representative  Toohey  noted for  the  record that  she has                 
  received gaming contributions from pull tabs charities.                      
                                                                               
  Representative  Navarre  elaborated   on  comments  made  by                 
  Representative  Martin  pointing  out   that  corruption  in                 
  politics  goes   far  beyond  contributions   received  from                 
  charitable  gaming.  He voiced support for the original bill                 
  over the committee substitute.                                               
                                                                               
  Representative  Kohring mentioned  that Alaska  is the  only                 
  State which allows gaming proceeds to be used for  political                 
  contributions, and voiced  concern for  proceeds being  used                 
  for  political purposes.    Representative Toohey  corrected                 
  that few states do allow it.                                                 
                                                                               
  Representative Brown inquired  why the  bill was drafted  in                 
  such a way that the sanction would affect only the "charity"                 
  and  not  the  candidate receiving  the  funding.   Co-Chair                 
  Hanley indicated  that concern  was addressed  in the  bill.                 
  Representative Toohey pointed out that on Page 75, under the                 
  Section "Elections", the statutes clarifies this issue.  Mr.                 
  Poshard stated that  he did  not know if  the APOC  statutes                 
  contain a corresponding prohibition.                                         
                                                                               
  MARVEEN COGGINS, AID,  REPRESENTATIVE CYNTHIA TOOHEY, agreed                 
  that Alaska Legal Services specified that the candidate will                 
  not be responsible but rather the contributor would be.  She                 
  suggested that language  could be included stating  that the                 
  "candidate  can  not  knowingly  accept  contributions  that                 
  constitute in whole or part the net proceeds of a charitable                 
  gaming   organization".     Terry  Cramer,   Legal  Services                 
  attorney, recommended if that language  was adopted, that it                 
  be a new subsection to A.S. 15:17:070, labeled number (I).                   
                                                                               
  (Tape Change, HFC 96-42, Side 2).                                            
                                                                               
  Co-Chair  Hanley  noted   that  he  would  oppose   all  the                 
  amendments.   They are not part of  a comprehensive campaign                 
  reform.  Philosophically, he voiced  a concern with gambling                 
  money  being  used   in  politics.    Representative   Brown                 
  countered that the likelihood of campaign reform is evident.                 
                                                                               
                                                                               
  Representative  Brown spoke  to  Amendment #1.   [Attachment                 
  their money was  going.  Mr.  Poshard stated that it  should                 
  not  be  a  problem for  any  business  to  comply with  the                 
  amendment.  It would  be easy to announce who  would receive                 
  the net proceeds from each evenings session.                                 
                                                                               
                                                                               
                               10                                              
                                                                               
                                                                               
  Representative Brown MOVED to adopt  Amendment #1.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Brown, Grussendorf, Navarre, Therriault.                 
       OPPOSED:       Kelly, Kohring, Martin, Mulder, Parnell,                 
                      Hanley, Foster.                                          
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative   Brown   MOVED   to  adopt   Amendment   #2.                 
  [Attachment  #2].    She  noted  that  the  amendment  would                 
  identify where the pull tab money  would be going.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Grussendorf, Kelly, Navarre, Brown.                      
       OPPOSED:       Kohring,   Martin,    Mulder,   Parnell,                 
  Therriault,                   Foster, Hanley.                                
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative Brown MOVED to adopt Amendment #3 which would                 
  adjust upward  by 10%, the  amount of adjusted  gross income                 
  that  goes to charities from pull tab activity.  [Attachment                 
  comparison to other  states in the percentage  being donated                 
  to charities.   He stressed  that only 8.7%  is returned  on                 
  each  dollar  to  the  charity.     Currently,  some  states                 
  contribute up  to 34%  on bingo and  pull tab dollars.   Co-                 
  Chair Hanley OBJECTED to adoption of Amendment #3.                           
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Kohring, Navarre, Brown, Grussendorf.                    
       OPPOSED:       Kelly,    Martin,    Mulder,    Parnell,                 
                      Therriault, Hanley, Foster.                              
                                                                               
  The MOTION FAILED (4-7).                                                     
                                                                               
  Representative  Brown  spoke   to  Amendments  4,  5   &  6,                 
  [Attachments   4,5  &  6],   which  address  increasing  the                 
  operators license fee, the distributors license and the pull                 
  tab manufactures license.   Mr.  Poshard commented that  the                 
  fees  established have  not  been changed  in  a few  years.                 
  Gaming regulations are lower than other jurisdictions.                       
                                                                               
  Representative Mulder  questioned if the fees collected off-                 
  set  operations  within  the  Department  of Revenue.    Mr.                 
  Poshard replied, not entirely.   A 3% pull tab tax  and a 1%                 
                                                                               
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  fee on the  ideal net  proceeds are also  collected.   Those                 
  taxes,  in  addition to  the  fees,  are double  the  annual                 
  budget.                                                                      
                                                                               
  Representative Brown MOVED to adopt  Amendment #4.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Kohring,   Martin,    Mulder,   Parnell,                 
                      Therriault, Kelly, Foster, Hanley.                       
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative Brown WITHDREW Amendments #5 & #6.  She spoke                 
  to  Amendment #7.    [Attachment #7].   The  amendment would                 
  close a  loop-hole in  gaming activity.   Mr. Poshard  added                 
  that there is  a limit on  bingo activity.  More  than $1000                 
  dollars  can  not be  given away  on  one activity  or $5000                 
  dollar  per session.   There is  no statutory  limitation on                 
  pull tab prize pay-out.  Mr. Poshard recommended limiting it                 
  to $500 dollars.                                                             
                                                                               
  Representative Brown MOVED to adopt  Amendment #7.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown, Grussendorf.                             
       OPPOSED:       Martin,  Mulder,  Parnell,   Therriault,                 
                      Kelly, Kohring, Hanley, Foster.                          
                                                                               
  The MOTION FAILED (3-8).                                                     
                                                                               
  Representative  Brown explained  Amendment #8.   [Attachment                 
  of charities which could participate.   Currently, there are                 
  more  charities  than  operators  available.    Mr.  Poshard                 
  elaborated that a  charity's maximum contract would  be $500                 
  thousand dollars  annually.  There are a number of charities                 
  seeking to have  the permit paid  by an operator.   Reducing                 
  the amount would then  force an operator to contract  with a                 
  greater number of  charities to conduct activity.   Co-Chair                 
  Hanley  questioned how many  permits would be  taken off the                 
  market.   Mr. Poshard responded  that there are 24 political                 
  groups who have permits.                                                     
                                                                               
  Representative  Navarre  spoke against  the  amendment.   He                 
  thought that  it would  force more  people  moving to  Multi                 
  Benefit Permitees (MBP),  thus reducing the number  of slots                 
  available.  MBP's have a greater  cap from which to operate.                 
                                                                               
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  Mr.    Poshard    agreed   with    Representative   Navarre.                 
  Representative Brown asked if charities  would be better off                 
  with an operator or with a MBP.  Mr. Poshard noted  that the                 
  rate of return would  be higher with an MBP,  although, they                 
  would  then be capable of contracting with  only six.  As an                 
  operator, they would be  able to contract with twelve.   The                 
  charity  could  make  twice as  much  money  under the  MBP,                 
  although only half the charities would receive benefit.                      
                                                                               
  Representative Brown  withdrew Amendment  #8 as  it was  her                 
  intention that the amendment benefit the charities.                          
                                                                               
  Representative  Brown  explained  Amendment  #9 which  would                 
  increase the tax from  3% to 5%  on the gross receipts  plus                 
  prizes awarded from  the pull tabs.   [Attachment #9].   She                 
  noted  that  this would  generate  $800 thousand  dollars in                 
  program receipts annually to the general fund.   Mr. Poshard                 
  advised that increasing  the tax would create new  funds for                 
  the State, a  tax collected by the distributors and remitted                 
  on a quarterly basis.                                                        
                                                                               
  Following comments by Representative  Martin, Representative                 
  Brown  suggested a  change  to delete  the  language in  the                 
  amendment "less prizes  awarded".   Mr. Poshard pointed  out                 
  with removal of  that language,  the tax  would become  much                 
  more  substantial.    He voiced  concern  that  the proposed                 
  percentage would change the gross  without also changing the                 
  return to the  permitees.  That would  dramatically decrease                 
  their net proceeds.                                                          
                                                                               
  Mr.  Poshard added,  that he  would prefer a  5% tax  on the                 
  gross,  changing how  the  charities receive  their payment.                 
  Currently, those conducting activity  would be expending the                 
  tax to the permitees.                                                        
                                                                               
                                                                               
  (Tape Change, HFC 96-43, Side 1).                                            
                                                                               
  Representative Brown  asked to replace  the deleted language                 
  with the language as originally written.                                     
                                                                               
  Representative Brown MOVED to adopt  Amendment #9.  Co-Chair                 
  Hanley OBJECTED.                                                             
                                                                               
  A roll call was taken on the MOTION.                                         
                                                                               
       IN FAVOR:      Navarre, Brown.                                          
       OPPOSED:       Mulder,   Parnell,  Therriault,   Kelly,                 
                      Kohring, Martin, Foster, Hanley.                         
                                                                               
  Representative Grussendorf was not present for the vote.                     
                                                                               
                                                                               
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  The MOTION FAILED (2-8).                                                     
                                                                               
  Representative  Navarre   MOVED  to  adopt   Amendment  #10.                 
  [Attachment   #10].      Representative   Martin   OBJECTED.                 
  Representative Navarre pointed out that  the amendment was a                 
  portion of the  bill which passed from  Committee last year.                 
  Currently, a municipal  exemption has not been  applied for,                 
  resulting in  MBP's doing the  same thing  as operators  and                 
  competing  against small organizations,  driving them out of                 
  business.   The  amendment  is an  attempt  to  allow  those                 
  municipalities, if  they choose,  to regulate  the level  of                 
  gaming in their communities.                                                 
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #10.                  
                                                                               
       IN FAVOR:      Navarre, Brown.                                          
       OPPOSED:       Parnell,  Therriault,   Kelly,  Kohring,                 
                      Martin, Mulder, Hanley, Foster.                          
                                                                               
  Representative Grussendorf was not present for the vote.                     
                                                                               
  The MOTION FAILED (2-8).                                                     
                                                                               
  Representative Martin MOVED to report CS HB 307 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal note.  There being NO OBJECTION,  it was                 
  so ordered.                                                                  
                                                                               
  CS  HB 307 (FIN)  was reported out  of Committee  with a "do                 
  pass" recommendation  and  with a  zero fiscal  note by  the                 
  Department of Revenue.                                                       

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