Legislature(2003 - 2004)
01/15/2004 01:48 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 15, 2004
1:48 P.M.
TAPE HFC 04 - 4, Side A
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 1:48 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Hugh Fate
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Bill Stoltze
MEMBERS ABSENT
None
ALSO PRESENT
Peter Ecklund, Staff, Representative Bill Williams; Steven
Porter, Deputy Commissioner, Department of Revenue; Mark
O'Brien, Chief Contracts Officer, Office of the
Commissioner, Department of Transportation & Public
Facilities
SUMMARY
CSSB 102(L&C) am(efd fld)
An Act increasing the amount of revenue received
by the state from charitable gaming activities,
and relating to taxes on pull-tabs.
CSSB 102 (L&C) am(efd fld) was HEARD and HELD in
Committee for further consideration.
CS FOR SENATE BILL NO. 102(L&C) am(efd fld)
An Act increasing the amount of revenue received by the
state from charitable gaming activities, and relating
to taxes on pull-tabs.
Co-Chair Harris MOVED to adopt the work draft, #23-GS113
1\S, Luckhaupt, 1/13/04, as the version of the legislation
before the Committee. There being NO OBJECTION, it was
adopted.
Co-Chair Harris inquired about updated fiscal notes. Co-
Chair Williams noted that a new note would need to accompany
the work draft just adopted.
Representative Stoltze questioned limiting public testimony.
He pointed out "heightened" and "individual" concerns
regarding the legislation.
PETER ECKLUND, FINANCE COMMITTEE STAFF, REPRESENTATIVE BILL
WILLIAMS, addressed the two major changes from the previous
version of the bill. The first change is indicated on Page
2. The previous version of the bill had a 50% net tax on
pull-tabs. By current regulation, the top prize awarded is
$500 dollars. The new adopted committee substitute has an
11.5% ideal net tax for games that have a prize of $500 or
less. On Lines 2-14, Page 2, it is suggested to increase
the upper limit of prizes to $1,000. There is a graduated
tax schedule associated with these payouts.
The other major change will authorize Alaska Marine Highway
Systems to have pull-tabs in the bars on the ferries. The
proceeds of that would go into the Alaska Marine Highway
Fund to help operations of that system. The 11.5% tax
suggested in the bill will raise $5 million dollars more
than current revenues from the 3% sales tax. The current
tax on pull-tabs is 3% on the ideal net. The previous
version of the bill had it at 15%, whereas, the proposed
committee substitute has it at 11.5%.
Mr. Ecklund explained that current regulations limit the
prize to $500 dollars or less. Currently, there is a 3%
ideal net tax on any pull-tab because all the games are $500
dollars or less. Changing that tax on those types of gains
and raising the prize winnings from $500 dollars to $1000
dollars top prize.
Co-Chair Harris clarified that right now, the maximum for a
single prize is $500 dollars. Mr. Ecklund stipulated that
was for a single prize.
Representative Fate commented that it would be an 8%
increase.
Representative Fate questioned if the consequences of that
change have been considered. Mr. Ecklund stated that the
Department of Revenue has been attempting to gauge the
impact on the industry. There will be different effects on
each operation and some charities will have to adjust what
they receive. He recommended that the Department of Revenue
testify regarding the change.
Representative Joule asked if there was a current list of
what the losses will be to the communities. Mr. Ecklund
responded that he only had a list of the communities that
have a local sales tax.
Representative Joule asked if any additional money was
going to be "realized" to the charities. Mr. Ecklund
replied that the minimum paid to the charities has not been
changed in this legislation.
Representative Stoltze commented that the pay out will have
an impact on the amount of "play and the margins".
Representative Croft noted that the money would not come
from "no where". If the charities receive the same amount
and there is a tax, where will the money come from and who
would pay.
Mr. Ecklund explained that there are only a few areas that
it can come from, one operations and/or expenses, which
could lower the payout, ration if there is elasticity in the
market. Some charities may receive less money.
Representative Croft thought that some portion of the amount
will come from the municipalities because of their local
taxation ability. He stressed that it will be coming from
local pockets, the operators or the payout amount.
Representative Croft requested the numbers when they are
made available on how the action affects the local
communities.
Representative Stoltze inquired the actual "real" number of
the net in order that the merit can be determined.
Co-Chair Williams explained that he had requested that
discussion and asked that Mr. Ecklund address the tax
concept to local governments. Mr. Ecklund advised that
there had been no changes from the previous version. There
is a local prohibition for sales tax and/or taxing pull-
tabs.
Representative Joule noted that it would be a loss of $80
thousand dollars to one of his communities. That is a
substantial amount considering the additional loss of
revenue sharing. These actions create a need for a "larger
debate" on the State's fiscal crisis.
Co-Chair Williams reminded members that the proposed
legislation is a revenue generating measure.
STEVEN PORTER, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
commented that the Department would be working on a fiscal
note attempting to address the community issues and impacts.
Representative Croft asked Mr. Porter what would happen with
a 20% split with communities. He requested that number be
run, in hopes that it might "soften" the impact. Mr. Porter
noted that he could understand the State's part of the
split, but how would it be split among the communities. Mr.
Porter offered to work on some ideas.
Representative Hawker asked about potential Internal Revenue
Service (IRS) consequences with the increased payout levels.
Mr. Porter replied that there are cost consequences and that
they would let members know the repercussions of that
reporting.
Co-Chair Harris pointed out that the legislation will have
an effect on the Alaska Marine Highway System (AMHS).
MARK O'BRIEN, CHIEF CONTRACTS OFFICER, OFFICE OF THE
COMMISSIONER, DEPARTMENT OF TRANSPORTATION & PUBLIC
FACILITIES, advised that the Department is considering the
bill, however, has had little opportunity to determine the
fiscal effect on the Alaska Marine Highway System. He added
that if it is legal and financially viable to put pull-tabs
on the ships, the Department is interested in looking at it
as a source of revenue. The action would be consistent with
the Governor's position on creating new revenue streams.
Co-Chair Harris questioned if a dedicated fund for the
Alaska Marine Highway System would be an issue. Mr. O'Brien
understood that current structure would deposit the revenue
into the Alaska Maine Highway Fund. He noted that the
details have not been fully developed at this time.
Representative Joule asked if this was intended to deflect
costs of running the Alaska Marine Highway and if it would
then be deducted out the current general fund budget.
Mr. Ecklund explained that the manner in which the bill is
currently structured, the revenues will be placed into the
Marine Highway Fund. Through the budget process, the fund
plus the revenues from the previous year are added to the
general fund monies to create the total AMHS budget. The
more money raised in that fund each year, would help reduce
the general fund needed for the ferry system.
Representative Croft referenced Page 4, and the revenue from
pull-tab activities. He asked if that would be revenue from
all pull tab activities or the revenue generated from those
activities on the ferry. Mr. Ecklund advised it would only
be that revenue generated on the ferry system.
Representative Hawker commented on the pre-emption of local
sales tax on pull-tab activities. He referenced "home rule"
and "general law" in Section 8. Representative Hawker asked
if it would prohibit taxation by all municipal entities.
Mr. Ecklund understood that it would prohibit all local
taxation. He offered to get the information clarified.
Co-Chair Williams clarified that portion has not yet had a
public hearing. It was added on the Senate Floor, with not
much debate. He acknowledged that there are people that
would like to see that area of the bill remain and of
course, some would like to see it removed. Co-Chair
Williams pointed out that the Governor understands that
there will be revenue measures not supported.
ADJOURNMENT
The meeting was adjourned at 2:15 P.M.
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