Legislature(2003 - 2004)
02/23/2004 03:25 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 509-ALASKA GAMING COMMISSION CHAIR ANDERSON announced that the final order of business would be HOUSE BILL NO. 509, "An Act relating to establishing the Alaska Gaming Commission." Number 0691 REPRESENTATIVE ROKEBERG moved to adopt the proposed committee substitute (CS), Version 23-LS1768\I, Luckhaupt, 02/23/04, as a work draft. There being no objection, Version I was before the committee. Number 0655 SUE STANCLIFF, House Majority Office, Alaska State Legislature, presented HB 509 on behalf of Representative Kott, sponsor. She introduced Version I by saying the Alaska Gaming Commission will regulate all forms of gaming activity in Alaska; this includes current forms and additional forms that may be authorized by the legislature under AS 05.15." Reading from the sponsor statement, she said gaming activity currently allowed in AS 05.15.100 includes bingo, raffles, lotteries, pull-tab games, "classics," fish derbies, and contests of skill. If additional forms of gaming become legal in Alaska in the future, it will be critical that appropriate regulatory oversight be in place. MS. STANCLIFF said the goal of HB 509 is to put the regulatory framework in place by establishing the Alaska Gaming Commission within the Department of Revenue. This bill establishes parameters for a seven-member commission appointed by the governor and confirmed by the legislature; it clearly specifies commission makeup, qualifications for commissioners, meeting times, powers, and duties. It clarifies that the commission may not authorize a charitable gaming activity unless that activity is authorized under AS 05.15. It only gives the commission tools necessary to administer gaming once the legislature and governor adopt this activity into law. Number 0558 MS. STANCLIFF said Version I was a result of working with different members of the gaming industry, taking their recommendations and incorporating them. There is also a new fiscal note attached that will have minimal impact. Version I limits the ability of gaming to expand in Alaska, since it could only do so with the authorization of the legislature. The sponsor didn't feel it was appropriate to give the commission broad authority to do interstate gambling or take up extended gaming activities, she explained. Ms. Stancliff pointed out that while it had been recommended to appoint one member of the commission from the gaming industry, the decision had been to choose three. It would be a seven-member commission, which she characterized as large, and this was the reason for choosing three commissioners that would have direct industry ties. MS. STANCLIFF referred to changes on page 6 that would require the legislature to authorize various gaming activities. She said she'd verified the ages of people in the prohibited acts on page 6 and explained: It says a person "may not". And if you look on number 3, line 28, it says "knowingly sell or offer to sell a gaming product to a person under the age of 21." Now, for bingo it is age 19; pull-tabs is age 21. I felt that this was appropriate to put in here for the construction of this commission. MS. STANCLIFF related that the proposed commission was modeled after several states, including Idaho and Colorado. She said 47 states have commissions similar to the one proposed in this bill, with only Utah, Hawaii, and Alaska absent from this count. CHAIR ANDERSON said a representative from the Department of Revenue would stand by for technical questions. Number 0214 DARWIN BIWER, Cabaret Hotel Restaurant & Retailers Association (CHARR) for Alaska and for Anchorage, said his organization is totally in favor of HB 509. He felt the bill was overdue, since several types of gambling are legal in Alaska and some that are illegal need to be "cleaned up." He suggested this was not a bill for or against gambling, but a bill to regulate the present activities of gambling in Alaska. CHAIR ANDERSON asked how many members were in Alaska CHARR. MR. BIWER said he thought there were approximately 200 statewide members in CHARR; in Anchorage there were about 200. Number 0069 REPRESENTATIVE ROKEBERG noted that there is already gambling on licensed premises in Alaska. CHAIR ANDERSON offered his understanding that Mr. Biwer was in favor of the seven-member commission. TAPE 04-17, SIDE A Number 0033 CHAIR ANDERSON suggested the commission was proportioned throughout the state for the selection of the commissioners. MR. BIWER said he understood that the proposed CS indicates one commissioner from the pull-tab industry, one from the bingo industry, and one from the general gaming. He reiterated that this is to "clean up our act." He said illegal gambling is prolific around the state, especially in Anchorage. He wanted the commission to oversee electronic gaming, pari-mutuel gambling, and any other type of gambling in the state. CHAIR ANDERSON recalled that in the 1990s there was a charitable-gaming division under Department of Revenue. Now there is a need for coverage and analysis of gambling issues, whether or not there's expansion. The bill would also provides for enforcement and overview where there hasn't been any before. He suggested this is a preparation in case there is expansion as well. MR. BIWER recalled a visit last year from Dennis Jackson, former head of the Idaho State Lottery, to the House Special Committee on Ways and Means [and the House Special Committee on Economic Development, International Trade and Tourism as well]. He recalled that Mr. Jackson explained two basic premises: gaming must be run like a business, and it requires airtight security. Mr. Biwer said he felt the commission would do that. Number 0252 REPRESENTATIVE GATTO offered his initial reaction, if there is a seven-member commission, with three representing the industry, and the commission is designed to clean up the industry, that this is overweighted. MR. BIWER responded that three out of seven is not a majority. REPRESENTATIVE GATTO said he was well aware of that and added, "You only need one more vote to do whatever you like as far as cleaning up the industry. It just seems overweighted." CHAIR ANDERSON suggested the weighting should perhaps be addressed by the sponsor. REPRESENTATIVE LYNN asked for clarification [page 2, line 14] on who might be the third member from the gaming industry. He surmised it would be from something that would come in the future. MR. BIWER said it could be an ice classic, for example, or a salmon derby. CHAIR ANDERSON said it isn't designated, but presumably will be someone from the industry. He suggested this is an important aspect for this committee to look at. MR. BIWER referred to page 2, lines [14-17], and said it would be someone holding a permit for a charitable gaming activity other than bingo or pull-tabs. Number 0423 REPRESENTATIVE GUTTENBERG asked Mr. Biwer, "Do you think this bill would be necessary if we weren't ready to expand gaming in this state?" MR. BIWER responded, "Absolutely." He said it is needed because of current illegal gambling activities. He referred to after- hours joints, gray machines, the need to tighten reporting on pull-tab revenue, and loss to the state of revenue from taxation as current issues that need to be dealt with. In response to remarks from Chair Anderson, who noted he used to work with CHARR, Mr. Biwer said the reporting system isn't airtight and remarked, "If you're against this bill, I would think you're in favor of not having control or regulation." CHAIR ANDERSON asked Mr. Biwer whether he has pull-tabs in his bar. MR. BIWER said no. Number 0566 REPRESENTATIVE GUTTENBERG asked what a gray machine is. MR. BIWER explained that those are illegal machines imported into the state that are in bars; there is an agreement with the manager or owner of a bar that they'll pay off. CHAIR ANDERSON pointed out that none of that money goes to the state, in addition to its being illegal. Number 0605 REPRESENTATIVE LYNN asked how this commission would address the problem of illegal gambling. MR. BIWER replied that if the commission had regulatory control, it would monitor and regulate illegal gambling. He noted that there may be a federal angle as well, and mentioned the Federal Bureau of Investigation (FBI) and interstate commerce related to shipping the machines. He said the Municipality of Anchorage won't prosecute this; when an after-hours joint does get busted, the penalty is lax, basically a "slap on the hands." REPRESENTATIVE LYNN asked whether the commission would use civil or criminal laws to come down on these activities. CHAIR ANDERSON suggested that the Department of Revenue answer that question later. Number 0732 ROBERT LOESCHER, Chairman, Legislative Committee, Alaska Native Brotherhood, Camp 2; President, Juneau Tlingit-Haida Community Council, said he represents a number of other community organizations. He testified in favor of HB 509 with recommendations and comments. He offered several suggestions including careful review of the provision in the bill that would create dual authority over establishments that serve alcohol and participate in gaming. He expressed concern that both the new commission and the Alcoholic Beverage Control Board ("ABC Board") would have authority, which could create conflicts in the state administration of this area. He also pointed out that a business in violation of a gaming law could lose its liquor license, suggesting this dual-authority situation should be examined. MR. LOESCHER noted that he'd submitted a letter to the committee and would give the highlights in his testimony. He said the way the commission is configured, four members could come from one political party; this might pose difficulty in terms of how this operates. Furthermore, he proposed having a five-person majority rather than the four-person majority presently in the bill; this would result in clear decision-making. MR. LOESCHER, pointing out that the executive director of the proposed commission would have the power to sign contracts and agreements, offered the belief that no contracts or agreements should be authorized unless it's authorized by the commission and the executive director has been directed to [by the commission] to execute agreements. Some of the agreements that could be contemplated in the future could be large decisions that would have a lot of effect on organizations, communities, and businesses. Stating support for the formation of the commission, he requested consideration of the comments he'd provided. Number 0940 REPRESENTATIVE ROKEBERG surmised that the letter Mr. Loescher had presented was based on another version of HB 509. He opined that some issues had been taken care of in Version I. He requested input from the sponsor. Number 0988 REPRESENTATIVE PETE KOTT, Alaska State Legislature, sponsor of HB 509, responded that he didn't believe a five-member quorum had been addressed. With regard to the last issue talked about by Mr. Loescher, he said Sec. 05.18[.030] on page 3, line 20, says the commission shall enter into contracts and agreements necessary to carry out the provisions of the chapter, and on the next page it says the commission shall employ the director who is qualified and so forth. Number 1050 REPRESENTATIVE ROKEBERG asked Mr. Loescher if he there had been discussion of having three versus two members of the gaming industry. MR. LOESCHER replied, "We would fully support three." REPRESENTATIVE GATTO asked, "Would you support five? Would you support four? ... How do you arrive at the number that is important to you?" MR. LOESCHER replied: Considering the size of the commission, the commission shouldn't be ... too big, so that it couldn't make decisions, but it should be large enough that it at least have representation from the industry as we know it today, because there's a lot of experience there and they have familiarity with the regulatory development already. ... And the growth of the industry would probably evolve from these people that are involved. And so my thinking basically was to make sure that there was at least representation from the existing industry. MR. LOESCHER, in further response, indicated he believes it would be pragmatic to have at least a third of whatever size the [commission] is. REPRESENTATIVE GUTTENBERG suggested perhaps party affiliation should be further diminished so that no two members could be of any political party. MR. LOESCHER said he'd served on other commissions, having been appointed by President Clinton to the study commission on a national gasoline cap that had three members from the House of Representatives, three from the Senate, and three from the President. He said this was basically done on a party basis. He commented that in state government commissions are often appointed with members from the legislature, members of industry, or from citizens groups. Saying this is kind of unusual, he said his organization hadn't wanted to challenge where the people came from, as long as there was representation from the industry. Number 1187 CHAIR ANDERSON said he thought it was the intent to ensure there wouldn't be partisanship by having a limit. He then noted that the sponsor was shaking his head. REPRESENTATIVE LYNN asked about nonpartisan and undeclared persons, and asked whether they should be included also. REPRESENTATIVE ROKEBERG suggested the term "affiliation" rather than "party". CHAIR ANDERSON said Representative Lynn had brought up a good point, and noted that Representative Rokeberg had brought up a possible rewording. REPRESENTATIVE KOTT said, "No more than four from a particular party." He then asked about "nonpartisan" and said that's fine. [Chair Anderson called upon David Lambert, but then announced that Fairbanks was disconnected.] Number 1272 ED MOEGLEIN, Alaska Nonprofit Charitable Organizations, Soldotna, expressed concern about issues that may impact his organization's fundraising capabilities on behalf of charities they support. He explained: Each organization that belongs to our organization pays $50 annually to cover costs of mailing, phones, and copying. We've been having regular meetings twice a month, on the first and third Mondays. Our members are from a number of organizations that have statewide affiliations that represent the posts and lodges of the [American veterans], VFW [Veterans of Foreign Wars], American Legion, Disabled American Veterans, Moose, Elks, Eagles, as well as their state departments that oversee and promote the programs and charities of these lodges that post across the entire state. Also supporting us is the local chamber of commerce that also recognized our efforts and contributions to our communities. MR. MOEGLEIN said he was present to listen to others' testimony, get additional information, and support formation of the gaming commission. As for accountability with regard to pull-tabs, he said there is strict accountability as to the total amount of money taken in both by his organization and the vendors that sell pull-tabs for his organization; there are annual reports, and this also is reflected in the cost of the permit. He explained that his organization has no problem with the commission, but just wants the nonprofits to be fairly represented so they can continue to serve communities. He expressed the need for representation on this commission in order to address his organization's concerns. Number 1463 GREG PETERSON, Allied Charities, Ketchikan, testified against HB 509 and questioned the reason for and the intent of the proposed gaming commission. He expressed being stunned that there was new attention being paid to the gaming industry, since previous regulation had diminished through time due to decreased funding. Countering Mr. Biwer's comments, he said there are laws on the books that deal with after-hours joints and incorrect accounting in the pull-tab business, as well as investigators. MR. PETERSON said he feels the reason for this commission is that the Department of Revenue recommended that before Alaska enters into any video gaming, a commission be formed. He feels it isn't because of new concern or caring about the charitable gaming industry. He said, "We've asked and lobbied for all kinds of different things over the years to help ... clean up the industry; we've never been listened to once." He again questioned the reason and intent for the proposed commission. CHAIR ANDERSON said he'd talk to Mr. Peterson later about CAGE (ph), an organization Mr. Peterson is a member of; he expressed concern about whether that organization is registered with the Alaska Public Offices Commission for lobbying purposes. Number 1614 CHAIR ANDERSON, upon determining no one else wished to testify, closed public testimony. REPRESENTATIVE DAHLSTROM stated: With all due respect to the maker of this bill, I am going to disagree with many of the things that I've heard this afternoon. ... I acknowledge that we currently have pull-tabs and we have other games that are being played. In acknowledging that and in knowing that they're there, to me that does not make it right. And as the gentleman who previously just spoke [said], we do have laws and regulations that are in place that I feel should be held accountable, and ... that we need to enforce the laws that are there as far as regulating. An example that continues to be brought up today are the after-hour joints. I personally don't ever want to see our state become dependent on money that comes in, in this form. And I also believe that setting regulations for money that comes in, in the wrong way isn't right. I don't think you can take something that I believe is wrong and make it right by creating regulations for it. Again, with ... respect for the maker of ... the bill, I have no intention of being any part of ... moving this ... commission forward. I feel that this is part of an overall plan of allowing electronic gaming and other gambling to become legal. And I just cannot support that. REPRESENTATIVE ROKEBERG commented with regard to the Alaska Native Brotherhood letter that Mr. Loescher had presented: His first point about ... the duplication of responsibility between this new Alaska Gaming Commission and the, presumably, ABC Board, which is under the Department of ... Revenue, ... in Section 1 of the bill, ... I'd like to state for the record that it's my interpretation of the bill that the license or permit referred to in Section 1 are the bill's licenses and permits under AS 05.15 and not under Title 4. ... Representative Kott, is that correct? So, I just want to make sure that's on the record, and we don't need to amend it in any way. ... That takes care of that one issue they brought up. It is a valid point of clarification; I think it's necessary. CHAIR ANDERSON said Representative Kott, for the record, agrees. Number 1753 REPRESENTATIVE ROKEBERG began discussion of Conceptual Amendment 1. He referred to page 2, line 12, and suggested adding "affiliation or" after "political". Thus it would say "members of the same political affiliation or party". He explained that a nonpartisan person isn't a member of a party. CHAIR ANDERSON asked whether the sponsor concurred with encapsulating those registered voters as well. [There was no audible response.] Number 1820 REPRESENTATIVE ROKEBERG moved to adopt the foregoing as Conceptual Amendment 1, leaving to the drafters wording such that any registered voter in Alaska could qualify for that position, whether a party member or not. REPRESENTATIVE GUTTENBERG said it seemed simple but could be complex. For example, there couldn't be a full commission of nonpartisan or unaffiliated persons. REPRESENTATIVE ROKEBERG specified that he was trying to make it more open to all people. Number 1883 CHAIR ANDERSON asked whether there was any objection to Conceptual Amendment 1. REPRESENTATIVE GUTTENBERG said he wasn't sure it answered the problem, but he wouldn't object. CHAIR ANDERSON announced that Conceptual Amendment 1 was adopted. Number 1899 REPRESENTATIVE ROKEBERG moved to adopt Conceptual Amendment 2, on page 2, line 11, changing the number from "four" to "three" of the seven members. There being no objection, it was so ordered. Number 1920 REPRESENTATIVE ROKEBERG began discussion of Conceptual Amendment 3, page 2, line 12. He said: The three member commission that are permittees, I'd make that two members and they could just hold the charitable gaming permit under [AS] 05.15 and not make them bingo, pull-tab, whatever. They'd just have to have a permit and they'd be two of the seven members. ... The reason I'm going to this method is I would be concerned about if the people that are regulating themselves may have too much weight. The current statutory structure would be overweighted in this group. One of the charges, quite frankly - and I don't think anybody is trying to hide anything here - is for this commission to look at the policy and the future policy of the State of Alaska. So, if we get too many members that are ingrained in the current status quo, we won't get any movement at all; we won't make any changes, and I don't think that's the intention of the bill. REPRESENTATIVE ROKEBERG clarified that two of those members would be permittees. He said sometimes it's hard to get people who are qualified or who want to serve who are particular kinds of licensees or permit holders. CHAIR ANDERSON clarified: "So, rather than one bingo commissioner and one pull-tab commissioner and then a third unknown, there will be two commissioners with permits, and not designated bingo or pull-tab, just open." Number 2037 REPRESENTATIVE ROKEBERG moved to adopt Conceptual Amendment 3, page 2, line 12, to delete "three" and insert "two" and further have it read, "Two members of the commission must be involved in charitable gaming in this state, and hold a permit under AS 05.15." The rest of the sentence would be deleted. CHAIR ANDERSON, hearing no objection, announced that Conceptual Amendment 3 was adopted. CHAIR ANDERSON remarked that he understands and respects Representative Dahlstrom's philosophy, but said: I think that ... this is important. The commission is necessary, and not just from the testimony we have heard, but from my experience in the industry, and also looking at legislation last year, which really didn't move anywhere. But through analysis we determined that, and I think the [House Special Committee on Ways and Means] also determined that a gaming commission is the first step, an essential foundation, whether gaming expands or does not expand. And I think Mr. Biwer testified to that, that ... CHARR did not come here saying, "Hey, we support or are against other issues of gaming." They came to support the Alaska Gaming Commission concept because it will increase enforcement. ... The last testifier stated that he didn't think it would help, but I do. I do think it will help. And I think that it will prevent those gray machines and [illegal] gaming and gambling, and it will make it more stricter. And so I support the bill to that end. Number 2059 REPRESENTATIVE GUTTENBERG stated: In the early 90s I was involved peripherally in gaming, and watched ... the funding and the enforcement officers and investigators ... through a variety ... of governors kind of dissipate, and oversight kind of diminish. ... If Mr. Meyers is still on [teleconference], I would like him to comment on the state of charitable-gaming oversight now, because basically what we're doing is saying the system we have doesn't work, and we want to replace it with this commission. So how is it broken? ... Is it a matter of ... [nonenforcement]? Is it a matter of no investigations? Is it a matter of inadequate laws or regulation? Number 2129 LARRY MEYERS, Deputy Director, Tax Division, Department of Revenue, explained that one of the programs for which he has oversight is the charitable gaming unit. He offered background as follows: Charitable gaming used to be a division. In 1997, for budget reasons, they were reduced from a division to a unit. The division used to comprise ... 13 people. At the time that it was transferred over into the income and excise audit division at that time, there were seven folks that transferred over: one supervisor, two accounting techs, two auditors, ... and two investigators. Since that time, the unit has not grown in size. ... During the six or seven years ... that it's been under my responsibility, we've tried to increase the enforcement. ... We haven't had any new positions. I think that ... we have shown that we've done a lot with the tools that we have had, but gaming continues to grow. It is a ... very controversial area. ... It deals in a lot of cash, and there are some problems out there. We've tried to set out in our annual report some of the major cases that we've worked and some of the good that we've brought to the industry, and it is an industry that needs a lot of oversight. MR. MEYERS, in response to Representative Guttenberg, said there are two investigators statewide, over 1,200 permittees, approximately 200 complaints a year, and two auditors. In response to Representative Gatto, he said the most common complaint has come from people who have felt there was insider action, that is, collusion between select players and the person running the game. Number 2239 REPRESENTATIVE KOTT agreed there have been some troubling aspects in this particular area. He said this committee has in its possession a bill from the governor that deals with pull- tabs, but there are problems with that bill and thus it has been referred back to this committee. He remarked, "It's a continuation of various activities that are somewhat problematic in this state regarding gaming." Turning to the current bill, he told members: Right now, this commission is not needed. Regardless of what one of the members said, this commission is not needed to implement or expand gaming operations in this state. We can do it without this commission. Now, what we're saying is there's an extra layer here that's first going to have to evaluate everything around the state to determine whether or not whatever it is, is good for the State of Alaska. Once that recommendation is made and forwarded to us, then the legislature, in the same process we would go through right now, ... would have to introduce legislation and pass it through the committee process. So this particular commission allows for a second layer. But thirdly, and probably more importantly, is that this protects us against an initiative process. [If] an initiative comes forward, I think most of you have recognized in the various polls that there's some forms of gaming opportunities in this state that would probably pass, albeit a lottery or maybe the electronic gaming machines. That goes on the ballot in the form of an initiative and passes. Guess what we got? We got it. We don't have the luxury of going back and debating the issue. At least we have the commission that is in place to deal with it and to regulate. I think that's the most important aspect of this because I believe it's coming. Number 2330 REPRESENTATIVE ROKEBERG moved to report CSHB 509 [Version 23- LS1768\I, Luckhaupt, 2/23/04], as amended, out of committee with individual recommendations and the accompanying indeterminate fiscal note(s). REPRESENTATIVE DAHLSTROM objected. Number 2350 A roll call vote was taken. Representatives Lynn, Rokeberg, Gatto, and Anderson voted in favor of reporting the bill from committee. Representatives Guttenberg and Dahlstrom voted against it. Therefore, CSHB 509(L&C) was reported from the House Labor and Commerce Standing Committee by a vote of 4-2.
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