Legislature(2021 - 2022)BELTZ 105 (TSBldg)
05/03/2021 01:30 PM LABOR & COMMERCE
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SB 130-ELECTRONIC PULL-TAB GAMES 1:49:53 PM CHAIR COSTELLO announced the consideration of SENATE BILL NO. 130, "An Act relating to electronic pull-tabs." 1:50:19 PM MELODIE WILTERDINK, Staff, Senator Mia Costello, Alaska State Legislature, Juneau, Alaska, introduced SB 130 on behalf of the Senate Labor and Commerce Committee. She read the following sponsor statement into the record: Traditional paper pull-tabs are multilayered tickets with perforated sections that when "pulled" by tearing the perforation, reveal symbols which indicate whether the player has won. Pull-tab gaming permits are exclusively available to charities in Alaska for fundraising, and Alaska charities have benefitted by receiving donations through pull-tab games. Senate Bill 130 would allow pull-tab operators the choice of providing paper pull-tab tickets or electronic pull-tab tickets, which are accessed onsite through a kiosk or tablet device. Electronic pull-tabs are played in the same manner as paper pull-tabs, but there are no physical tickets for operators to count, deface, or store. Benefits of electronic pull-tabs include increased security, easier tracking and reporting, and reduced fraud. Modernizing pull-tabs makes it less onerous for small businesses to become pull-tab operators in support of local charities. MS. WILTERDINK showed the committee the number of used pull-tabs from one bartender in a single shift and the number of used pull-tabs created from a single bar in six weeks to illustrate the paper waste that SB 130 has the potential to reduce or eliminate by giving operators the option to switch to electronic pull-tabs. CHAIR COSTELLO asked her to talk about eliminating both the potential for fraud and the administrative burden of parsing through used pull-tabs. 1:53:28 PM MS. WILTERDINK explained that the bar puts up the up-front payment and the charity is responsible for delivering the pull- tabs to the bar. She noted that many charities hire a third party to do deliveries, which reduces the profit to the charity by tens of thousands of dollars per year. Inside the bar, the profit on individual pull-tabs is small but the volume is high. The bartender counts out individual pull-tabs to customers and they may accidentally give extras. This is a loss to the charities but it is difficult to count and track individual pull-tabs. She relayed stories of people taking a winning pull- tab from one bar and slipping it in at another bar to receive payment twice. She said the fraud can be onerous and the responsibility falls on the bar owners who are putting up the up-front cash to support the charities. 1:54:43 PM SENATOR GRAY-JACKSON asked how a winning tab is paid. MS. WILTERDINK replied that winnings are paid in cash and that would not change with electronic pull-tabs. SENATOR GRAY-JACKSON offered her understanding that other states pay winnings from electronic pull-tabs with a check. She asked whether winners, particularly large winners, would receive a check in the mail. MS. WILTERDINK deferred the question to representatives from the Department of Revenue. 1:56:25 PM CHAIR COSTELLO clarified that the pull-tab kiosks would still be on the premises, not offsite. She noted that this bill is different from the charitable gaming bill the committee considered where individuals were able to donate to charities from their home using their own electronic device. 1:57:07 PM SENATOR MICCICHE joined the committee. SENATOR GRAY-JACKSON said the explanation answered her questions. CHAIR COSTELLO opened invited testimony on SB 130. 1:57:50 PM ANGIE FRAIZE, Communications Officer, Anchorage Police Department Employee Association (APDEA), Anchorage, Alaska, testified in support of SB 130. She advised that since 2017, APDEA has had a nonprofit arm called Anchorage Cops for Community that works to connect to the community in non-law- enforcement ways. In the first three years, they received close to $100,000 in gaming money to help meet the mission to foster and inspire community wellbeing through collaboration between the community and law enforcement. She listed some of the programs and projects and noted that they give to five main charities every year if the funds are available. MS. FRAIZE said SB 130 offers a way for community members to responsibly engage in gaming and help nonprofits. Transitioning to electronic pull-tabs brings this aspect of gaming up to modern times and makes it easier for everyone. 2:01:04 PM CHAIR COSTELLO opened public testimony on SB 130. 2:01:17 PM JOHN POWERS, Tudor Bingo Center, Anchorage, Alaska, said he opposes SB 130 right now because the gaming industry is evolving so rapidly. He noted that there are several versions of electronic pull-tabs and one looks and plays like a slot machine. The play is very rapid and he believes this could lead to overspending. He said he also supports maintaining the existing payout limits. He said states that have adopted electronic pull-tabs generally have specific rules and guidelines and he would request the committee table this bill at least this session and get input from industry leaders like himself. He referenced previous testimony and said his company also supports charities and they recycle all the used pull-tabs. He also suggested imposing limits on the number of terminals or machines in each facility to prevent a casino atmosphere. He reiterated his opposition to SB 130 without further input from people like himself. CHAIR COSTELLO clarified that SB 130 provides the option, not a mandate, for electronic pull-tabs. The regulation process will address the fine details to ensure compliance with the existing charitable gaming laws. 2:05:56 PM SENATOR GRAY-JACKSON asked Mr. Powers if he had pull-tabs at his bingo hall. MR. POWERS answered yes. SENATOR GRAY-JACKSON asked if he was aware that SB 130 offers a choice of transitioning to electronic pull-tabs or continuing to use paper. MR. POWERS answered yes but he is concerned that this change could lead to additional bad actors entering the industry in Anchorage and throughout Alaska. He said the big issue is that the charities suffer. SENATOR GRAY-JACKSON thanked him for his email. CHAIR COSTELLO returned to invited testimony and recognized Jack Tripp. 2:08:31 PM JACK TRIPP, former owner, The Viking, Juneau, Alaska, advised that in the 32 years he owned the bar he ran a lot of pull-tabs and helped many charities. He referenced the suggestion to wait to ensure against bad actors and pointed out that the issue of fraud in gaming has been discussed for 20 years. He mentioned a catastrophic theft by bartenders that he once suffered and said it almost put him out of business but the charity absorbed none of the loss. He said electronic pull-tabs are a way to safeguard against bad actors. The play is encapsulated and there is no opportunity for theft. He said it makes sense and it removes the human error. He said people think pull-tabs generate a lot of money for the vender but venders receives just 30 percent. The profit margin on a game might be $300 so the vender would sell 3,000 tickets to make $90 before paying the bartender. He reiterated that removing the human time makes sense and will help clean up an industry that probably could use a little clean up. CHAIR COSTELLO asked if there were any unresolved concerns related to pull-tabs or if this is the right time to move in this direction. MR. TRIPP replied he thinks it is the right time. He thinks that people will like electronic pull-tabs and it will increase gaming, which will help the charities. The only people who will be hurt are the ones who opt to continue to use the paper pull- tabs. He added that it is difficult to steal from a machine but easy to steal from a pull-tab bin. 2:12:15 PM CHAIR COSTELLO continue with public testimony. 2:12:26 PM SANDY POWERS, representing self, said she operates Big Valley Bingo in Willow, Alaska. She has been looking at electronic pull-tabs for some time and her biggest concern is that the play is very fast and people may have a tendency to overspend. This has the potential to increase financial and societal problems. Additionally, it might bring in the tourism industry and she does not typically market to that industry. She acknowledged the reduced potential for theft with electronic pull-tabs but pointed out that businesses would still need to keep lots of cash on hand because faster play means the vender will pay out more money. CHAIR COSTELLO asked Scott Henneman to respond to the concern about the speed of play. She specifically asked whether play speeds up with electronic pull-tabs and if that can be programed into the device. 2:15:43 PM SCOTT HENNEMAN, Vice President, Business Development and Governmental Affairs, Grover Gaming, Omaha, Nebraska, testified in support of SB 130. He advised that speed of play for electronic pull-tabs can be regulated and programed into the device. Speed of play has not been an issue in the business he does in numerous states manufacturing both paper and electronic pull-tab products. He noted that he has been involved in charitable gaming for more than 30 years as a gaming regulator and working in the private sector manufacturing paper and electronic pull-tab products. MR HENNEMAN said e-tabs have modernized pull-tab gaming but they have the same fundamental characteristics. The only difference is that e-tab play is on a touch screen monitor with a digital display. He said the characteristics are like the paper game where there are finite and predetermined winners in a box of pull-tabs. Each game has a predetermined payout and profit, which is completely different and can be easily distinguished from a slot machine that uses a random number generator to determine its outcome. E-tabs are player-versus-player, which is unlike a slot machine where it is player versus a machine. Regarding what an electronic pull-tab might look like, he said it could be a standalone kiosk, a handheld tablet, or a device that allows players to play an electronic representation of the paper pull-tabs. All hardware and software are tested and approved by an independent laboratory to ensure that the games a charity offers meet the state's particular rules and regulations. He noted that the Department of Revenue would make those determinations. MR. HENNEMAN summarized that speed of play for e-tabs has not been an issue in his experience. A number of states already use them in fundraising activities. If approved, venders would have the option of switching to the electronic product. It is not mandatory but new players are familiar with and prefer to play games with a visual digital play accompanied by a sound stimulus. Charities do not have to store or manually add tickets to machines in the electronic format, there is no physical inventory to count, and monitoring is from an internet connection. The electronic format makes scheduling, ordering, and reporting to the regulatory agency more efficient. Furthermore, all communication with the regulatory agency is encrypted to maintain security and integrity. SENATOR GRAY-JACKSON asked if he currently uses electronic pull- tabs in his business. MR. HENNEMAN answered yes; Grover Gaming manufacturers the electronic devices and the tickets that are loaded through the internet to a controlled site at a bingo hall or a charitable gaming site that sells pull-tabs. Responding to another question, he clarified that he is a manufacturer as opposed to a vender. SENATOR GRAY-JACKSON asked if venders have said that electronic play has resulted in players spending more money, potentially more than they can afford. MR. HENNEMAN replied it has not been an issue that people are spending more with pull-tabs in the electronic format as opposed to the paper format. He cited the sales in the state of Minnesota as an example. Paper pull-tabs accounted for $1.4 billion in sales compared to $600 million in the electronic format. 2:23:29 PM SENATOR STEVENS joined the committee. CHAIR COSTELLO asked if any states that offer both options saw electronic sales become a higher percentage of sales. She also asked if his experience is that less revenue is coming from the electronic format than the paper format. MR. HENNEMAN replied it depends on the state but Grover Gaming has worked to ensure that electronic pull-tabs do not cannibalize existing products like paper pull-tabs and bingo. There is a social aspect to the paper products but that does not disappear with the electronic format. Players can take the tablet to their table or sit at a booth or stool and play. He said Alaska is in the top six markets of paper pull-tabs in the country but the player base in aging. He said he believes the state will see more incremental sales if it offers electronic pull-tabs as an option. He reiterated that it depends on the state but some states that offer both options have seen an increase in paper pull-tab sales. 2:26:39 PM NANCY DECHERNEY, Executive Director, Juneau Arts and Humanities Council, Juneau, Alaska, stated that she was calling to support SB 130. Nonprofits benefit from pull-tab gaming but small businesses find it cumbersome to run these gaming operations. SB 130 offers the option to use electronic pull-tabs, which she believes will alleviate the administrative burden. The electronic format will be easier to manage, easier to track, and perhaps make more money for nonprofits in the state. 2:27:59 PM MACK MEINERS, representing self, Juneau, Alaska, stated that he has been involved in charitable gaming for over 20 years in various locations throughout the state. He agreed that there has been some trouble in bars with misplaced and lost tickets but Mr. Tripp clarified that the vender pays for any losses. He emphasized the need for strict quality control. MR. MEINERS said he believes Grover Gaming offers a good opportunity to clean up the game and provide a choice of electronic or paper play. He said he supports the option of using electronic pull-tabs and he believes it will increase the opportunity to raise money for charities. That is the point. 2:33:12 PM JOHNATHON GREEN, Attorney, Kempell, Huffman, and Elise, Wasilla, Alaska, advised that his firm was hired to analyze whether SB 130 would expand requirements for the state to negotiate with tribal entities for class III gaming. He said the short answer is no. He offered to elaborate if there were questions. CHAIR COSTELLO polled the members and determined that further elaboration was not necessary. 2:34:39 PM DAVID LAMBERT, representing self, Fairbanks, Alaska, stated that he is a charitable gaming operator who has raised funds for over 30 nonprofits. He pointed out that over the last 30 years, everything associated with charitable gaming has gone up but a $1 pull-tab still costs just $1. He said it is important to offer options to attract a new player base and that includes electronic pull-tabs. He suggested addressing the concern about casinos by limiting the number of machines per location. He said modernizing the game by offering electronic pull-tabs as an option for players would resolve the problem with backlogs on paper pull-tabs. SENATOR STEVENS asked what number of machines per location he would recommend. MR. LAMBERT said he believes six machines per location would be reasonable because each machine can hold 20-30 games. CHAIR COSTELLO asked Ms. Mitchell with the Department of Revenue whether SB 130 would expand the application process for somebody to sell electronic pull-tabs. 2:38:05 PM KATRINA MITCHELL, Gaming Manager, Tax Division, Department of Revenue, Juneau, Alaska, asked if the question was whether adding a new game type such as electronic pull-tabs would require a change in the application process. CHAIR COSTELLO clarified that she was relaying Mr. Lambert's concern about too many devices in one location creating a casino atmosphere. MS. MITCHELL answered that a licensee is not limited in the number of paper pull-tab games he or she may offer at one time. She supposed that limiting the number of electronic pull-tab games would require a change in the statute or regulations. CHAIR COSTELLO said she did not believe there was interest in any limitations because the free market is providing the limits. She asked if the administration had a position on the legislation. 2:39:56 PM COLLEEN GLOVER, Director, Tax Division, Department of Revenue, Anchorage, Alaska, said the administration does not have a position on SB 130. CHAIR COSTELLO asked if she believes that electronic pull-tabs would reduce record keeping errors. MS. GLOVER answered that DOR does not have enough information to make a determination, but they are have reached out to Grover Gaming and other states that have passed similar legislation to understand how this would work and to confirm that the electronic format would be more secure. 2:40:51 PM At ease 2:43:01 PM CHAIR COSTELLO reconvened the meeting. 2:43:10 PM CHAIR COSTELLO closed public testimony on SB 130. 2:43:18 PM SENATOR REVAK moved to report SB 130, work order 32-LS0811\A, from committee with individual recommendations and attached fiscal note(s). CHAIR COSTELLO found no objection and SB 130 was reported from the Senate Labor and Commerce Standing Committee.