Legislature(1995 - 1996)

03/20/1996 01:30 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ 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           
 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               
 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           
 LOIS PILIFANT, representing the Soldotna Senior Center, asked if              
 all ten machines could be operated in one location.  SENATOR TAYLOR           
 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                
 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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