Legislature(1997 - 1998)
05/01/1997 08:03 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
May 1, 1997
8:03 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Ethan Berkowitz
Representative Fred Dyson
Representative Kim Elton
Representative Mark Hodgins
Representative Ivan Ivan
Representative Al Vezey
MEMBERS ABSENT
All members present.
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 29
Supporting an increase in federal funding for prostate cancer
research.
- MOVED HJR 29 OUT OF COMMITTEE
HOUSE BILL NO. 156
"An Act relating to charitable gaming; relating to the percentages
of gross receipts from charitable gaming that are required to be
devoted to charitable uses; requiring managers of charitable gaming
activities to be licensed; removing the authority for operators to
conduct charitable gaming; prohibiting permittees, members in
charge, and gaming managers from having certain financial interests
or associations with persons who have been convicted of certain
crimes; and providing for an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HJR 29
SHORT TITLE: FUNDING FOR PROSTATE CANCER RESEARCH
SPONSOR(S): REPRESENTATIVE(S) ELTON, Hudson, Kemplen, Austerman,
Kookesh, Berkowitz, Nicholia, Ivan, Dyson, Kubina, Sanders, Davies,
Rokeberg
JRN-DATE JRN-PG ACTION
03/14/97 665 (H) READ THE FIRST TIME - REFERRAL(S)
03/14/97 665 (H) HES, STATE AFFAIRS
04/02/97 913 (H) COSPONSOR(S): KEMPLEN, AUSTERMAN
04/02/97 913 (H) KOOKESH
04/03/97 977 (H) COSPONSOR(S): BERKOWITZ, NICHOLIA, IVAN
04/03/97 977 (H) DYSON, KUBINA
04/04/97 998 (H) COSPONSOR(S): SANDERS
04/09/97 1047 (H) COSPONSOR(S): DAVIES
04/10/97 (H) HES AT 3:00 PM CAPITOL 106
04/10/97 (H) MINUTE(HES)
04/11/97 1075 (H) HES RPT 6DP
04/11/97 1076 (H) DP: DYSON, GREEN, BUNDE, PORTER,
KEMPLEN
04/11/97 1076 (H) BRICE
04/11/97 1076 (H) ZERO FISCAL NOTE (LAA)
04/11/97 1076 (H) REFERRED TO STATE AFFAIRS
04/14/97 1103 (H) COSPONSOR(S): ROKEBERG
05/01/97 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 156
SHORT TITLE: CHARITABLE GAMING
SPONSOR(S): REPRESENTATIVE(S) MARTIN
JRN-DATE JRN-PG ACTION
02/24/97 445 (H) READ THE FIRST TIME - REFERRAL(S)
02/24/97 445 (H) STATE AFFAIRS, JUDICIARY, FINANCE
04/22/97 (H) STA AT 8:00 AM CAPITOL 102
04/22/97 (H) MINUTE(STA)
04/25/97 (H) STA AT 8:00 AM CAPITOL 102
04/25/97 (H) MINUTE(STA)
05/01/97 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
DENNIS POSHARD, Director
Charitable Gaming Division
Department of Revenue
P.O. Box 110440
Juneau, Alaska 99811-0440
Telephone: (907) 465-2229
POSITION STATEMENT: Provided testimony on HB 156.
REPRESENTATIVE TERRY MARTIN
Alaska State Legislature
State Capitol, Room 502
Juneau, Alaska 99801-1182
Telephone: (907) 465-3783
POSITION STATEMENT: Sponsor of HB 156.
J.J. "JACK" POWERS
P.O. Box 241113
Anchorage, Alaska 99524
Telephone: (907) 561-4711
POSITION STATEMENT: Provided testimony in opposition to HB 156.
ED BOUGEOIS, Representative
Anchorage Opera
1507 Spar Avenue
Anchorage, Alaska 99501
Telephone: (907) 279-2557
POSITION STATEMENT: Provided testimony in opposition to HB 156.
JOHN LOPEZ, Representative
Alaska Bow Hunters Association
6233 Prosperity Drive
Anchorage, Alaska 99504
Telephone: (907) 243-7003
POSITION STATEMENT: Provided testimony in opposition to HB 156.
MIKE SLEZAK
1014 West Northern Lights Boulevard
Anchorage, Alaska 99503
Telephone: (907) 561-3646
POSITION STATEMENT: Provided testimony in opposition to HB 156.
DAVE LAMBERT
P.O. Box 71243
Fairbanks, Alaska 99707
Telephone: (907) 459-7304
POSITION STATEMENT: Provided testimony in opposition to HB 156.
TABER REHBAUM, Executive Director
The Greater Big Brothers/Big Sisters Fairbanks Area
P.O. Box 73924
Fairbanks, Alaska 99707
Telephone: (907) 452-8110
POSITION STATEMENT: Provided testimony in opposition to HB 156.
PAUL BLAIR, Representative
American Legion
P.O. Box 168
Glennallen, Alaska 99588
Telephone: (907) 822-3520
POSITION STATEMENT: Provided testimony in opposition to HB 156.
GARY LANGILLE, Representative
Small World Day Care Center;
Kodiak Chamber of Commerce; and
Kodiak Liquor License Association
512 Marine Way
Kodiak, Alaska 99615
Telephone: (907) 486-3313
POSITION STATEMENT: Provided testimony in opposition to HB 156.
EARL MICKELSON, Representative
American Legion Post Number 17
P.O. Box 687
Kodiak, Alaska 99615
Telephone: (907) 486-3258
POSITION STATEMENT: Provided testimony on HB 156.
KEVIN HARUN, Representative
Trail Side Discovery Camp Program
510 "M" Street
Anchorage, Alaska 99501
Telephone: (907) 274-3621
POSITION STATEMENT: Provided testimony on HB 156.
LANIE FLEISCHER, Executive Director
Big Brothers Big Sisters of Anchorage, Inc.
1057 West Fireweed Lane
Anchorage, Alaska 99503
Telephone: (907) 263-2022
POSITION STATEMENT: Provided testimony on HB 156.
TUESDAY SMITH
P.O. Box 56106
Fairbanks, Alaska 99705
Telephone: (907) 456-8044
POSITION STATEMENT: Provided testimony on HB 156.
WAYNE STEVENS, Executive Director
Kodiak Chamber of Commerce
P.O. Box 1485
Kodiak, Alaska 99615
Telephone: (907) 486-5557
POSITION STATEMENT: Provided testimony on HB 156.
ASHLEY REED, Lobbyist
Alaska Charitable Gaming Association
360 West Benson Boulevard, Suite 200
Anchorage, Alaska 99502
Telephone: (907) 562-2560
POSITION STATEMENT: Provided testimony in opposition to HB 156.
ACTION NARRATIVE
TAPE 97-54, SIDE A
Number 0001
The House State Affairs Standing Committee was called to order by
Chair Jeannette James at 8:03 a.m. Members present at the call to
order were Representatives James, Dyson, Elton, Hodgins and Vezey.
Members absent were Berkowitz and Ivan. Representative Ivan
arrived at 8:06 a.m.; and Berkowitz at 8:08 a.m.
HJR 29 - FUNDING FOR PROSTATE CANCER RESEARCH
The first order of business to come before the House State Affairs
Standing Committee was HJR 29, Supporting an increase in federal
funding for prostate cancer research.
CHAIR JEANNETTE JAMES called on the sponsor, Representative Kim
Elton, to present the resolution.
Number 0055
REPRESENTATIVE KIM ELTON noted that the resolution was straight
forward. We wanted the resolution to go to the President of the
United States on Father's Day along with the 1,000,000 signatures
being collected nationwide. The resolution addressed additional
funding for prostate cancer research. Prostate cancer afflicted
over 330,000 men per annum, particularly African-American men.
Some progress had been made, but the causal gene had yet to be
identified. Moreover, researchers believed that they had a good
chance of identifying the susceptibility to prostate cancer. The
resolution was passed out of the House Health, Education and Social
Services Committee with unanimous due pass. He encouraged members
to sign on as cosponsors.
Number 0169
REPRESENTATIVE AL VEZEY asked Representative Elton to repeat the
numbers he mentioned.
Number 0185
REPRESENTATIVE ELTON relied the actual number of men diagnosed with
prostate cancer was 334,500 per annum. And, about 9,000,000
American men were living with the disease.
Number 0215
REPRESENTATIVE VEZEY stated he did not object to the resolution,
except that it raised the specter of priorities. As a male, he
wanted to make it clear that prostate cancer was a low priority on
his list of health care concerns. It did not rank in magnitude
with the need for further research on Alzeheimer's disease - the
most devastating disease in society. He was concerned that we
might be putting this out of order. It was true that a lot of men
had prostate cancer, but it was rare that people died from it. It
was neither a major cause of death nor a major cause for the
quality of life.
Number 0304
REPRESENTATIVE MARK HODGINS moved that HJR 29 move from the
committee with individual recommendations and the attached fiscal
note(s). There was no objection, HJR 29 was so moved from the
House State Affairs Standing Committee.
HB 156 - CHARITABLE GAMING
The next order of business to come before the House State Affairs
Standing Committee was HB 156, "An Act relating to charitable
gaming; relating to the percentages of gross receipts from
charitable gaming that are required to be devoted to charitable
uses; requiring managers of charitable gaming activities to be
licensed; removing the authority for operators to conduct
charitable gaming; prohibiting permittees, members in charge, and
gaming managers from having certain financial interests or
associations with persons who have been convicted of certain
crimes; and providing for an effective date."
Number 0440
CHAIR JAMES explained that the subcommittee addressed percentage of
gross in order to get away from lengthy and expensive audits
conducted by the Charitable Gaming Division.
Number 0556
DENNIS POSHARD, Director, Charitable Gaming Division, Department of
Revenue, was the first person to testify in Juneau. The committee
substitute changed the system of deriving benefit to the charities
to a percentage of gross. The division was very much in favor of
going to a percentage of gross system in order to get away from
lengthy and expensive audits.
MR. POSHARD further explained the committee substitute also
licensed gaming managers which the division supported. The
division frequently found a manager's indiscretion during an audit.
Unfortunately, the only recourse was to take action against the
charity's permit. It would be nice to have a tool to do something
to the responsible individual rather than the charity.
MR. POSHARD further explained the committee substitute set the
percentage of gross at 10 percent for pull-tabs, 5 percent for
bingo, and 10 percent for all other activities - multiple
beneficiary permittees (MBPs), operators, and self-directed
permitees. Currently, pull-tabs returned about 9 percent of gross
to the charities, and bingo returned about 4 percent to the
charities.
MR. POSHARD further stated the language in Sec. 23, according to
the sponsor, was supposed to read "not less than 16 percent of"
rather than "not less than 10 percent of". Ten percent was the
current statewide average for vendors. The sponsor did not intend
to decrease the return the vendors gave to the charities.
MR. POSHARD noted the language in Section 1, "one-half of one"
percent was an increase in the tax that the state received. The
state received a tax equal to about one-tenth of one percent, not
one-half of one percent. The new language was an increase of
around $700,000 or $800,000.
Number 0916
CHAIR JAMES asked Mr. Poshard who paid the tax?
Number 0920
MR. POSHARD replied the tax was paid by the charities. It was paid
on the net profits received from their gaming activities. The
committee substitute proposed to pay it on the gross receipts. For
example, the net proceeds on the gross of $1 million would be
$100,000 or a tax of $1,000 - one-tenth of one percent of the
gross, not one-half of one percent.
CHAIR JAMES asked Mr. Poshard if the language should read one-tenth
of one percent to get the same number?
Number 0965
MR. POSHARD replied to get roughly the same amount that was going
to the state you would need to pick a figure closer to one-tenth of
one percent.
Number 0985
REPRESENTATIVE FRED DYSON stated he appreciated what the sponsor
wanted to accomplish, but setting the margins for a business was an
unfortunate road to start down. We must be telling the charities
that they were not sophisticated enough to make these types of
judgements or that the industry was so slick that it could hood
wink some of the charitable gaming. He asked Mr. Poshard if it was
impractical to require the gaming organizations to have their books
audited by an accountant, to allow the charities access the books,
and to guarantee a minimum percentage of return?
Number 1115
MR. POSHARD replied there was currently a minimum percentage return
for operators. There was also a maximum amount of expenses that a
charity could incur. In addition, the operators and MBPs were
required to have a certified public accountant (CPA) review, submit
it to the division, and make it accessible to the charities that
they had a contract with. A CPA review, however, was different
than an audit. A review was a rough check.
Number 1190
REPRESENTATIVE DYSON asked Mr. Poshard if the approach he suggested
was impractical?
Number 1214
MR. POSHARD replied it was not necessarily impractical. An audit
would be expensive and difficult to perform. The expense would be
attributed to the charities.
Number 1256
REPRESENTATIVE DYSON stated by addressing the legislation we were
saying that charitable organizations were not sophisticated enough
to protect their own interests.
Number 1278
MR. POSHARD stated that was part of the reason for the legislation.
The bigger part, according to the division, was relieving the audit
burden. The division's budget had been cut by one-third so it had
one-third less of its resources.
Number 1316
REPRESENTATIVE HODGINS asked Mr. Poshard if the operator would pay
the one-half of one percent of the gross receipts?
Number 1336
MR. POSHARD replied, "No." It was a tax or fee that the charity
paid. It was called "a net proceed fee" in statute. The charity
paid 1 percent of the net proceeds or the profits of their
activities when they filed their annual financial statement with
the division. The committee substitute would not change the
process. It would change how the fee was assessed - gross rather
than net.
Number 1394
REPRESENTATIVE HODGINS asked Mr. Poshard what would be the amount
that the division would need to operate with the budget cuts? In
other words, what kind of tax would we have to include to not
affect the division's budget?
Number 1410
MR. POSHARD replied adding a new tax did not have anything to do
with the division's budget. The division currently took in about
$2.2 million. The division's budget request was $913,000, while
the division received only $601,000. In addition to being cut, the
division was being moved to the Income and Excise Audit Division as
a program. A new tax would not change the budget picture for the
division, it would only bring in more money for the state.
Number 1446
REPRESENTATIVE HODGINS stated he wanted to make sure that the state
was receiving the appropriate dollars for the General Fund. He
also wanted to make sure that the gaming industry was not being
subsidized.
Number 1464
REPRESENTATIVE HODGINS asked Mr. Poshard, if 16 percent was a
conflict when 5 percent went to charities from bingo, and 10
percent went to charities from pull-tabs?
REPRESENTATIVE HODGINS further asked Mr. Poshard to explain what
was "other activities" referenced in Sec. 14.
Number 1502
MR. POSHARD replied other activities included anything except bingo
and pull-tabs such as raffles and classics.
MR. POSHARD explained in 1993 the legislature enacted the vendor
arrangement at 70 percent of the ideal net. It was paid up front
to the charities. Operators were required to return 30 percent of
the adjusted gross which was usually less than the ideal net. It
was enacted because the activity for the vendor was ancillary so it
could return a higher percentage. Currently, the vendors returned
around 16 percent of the gross. There was no conflict; they were
two different entities.
Number 1649
REPRESENTATIVE HODGINS asked Mr. Poshard if the operators had the
5 percent annual return for bingo and the 10 percent annual return
for pull-tabs?
Number 1654
MR. POSHARD replied it was the operators, MBPs, and self-directed
charities. Vendors were only allowed to sell pull-tabs, not bingo
or any other type of activity.
Number 1666
REPRESENTATIVE HODGINS asked Mr. Poshard if other activities
included food sales?
Number 1671
MR. POSHARD replied, "No."
Number 1679
REPRESENTATIVE HODGINS asked Mr. Poshard if the bill actually got
more money to the charities?
Number 1690
MR. POSHARD replied there would be debate based on whether or not
a business could achieve a level of return as a result of the
changes. If an operator went out of business then obviously the
charities would get less money. If the number was set at a
revenue-neutral number then you would see more money going to the
charities over time. But it would be hard to determine a revenue-
neutral number. The structure would be great for the charities
because it would simplify their reporting and accounting
requirements.
Number 1793
REPRESENTATIVE HODGINS asked Mr. Poshard if more money would go to
the charities if a dollar amount was set?
Number 1807
MR. POSHARD replied if people stayed in business the answer was,
yes.
Number 1814
CHAIR JAMES stated the reason for charitable gaming was to provide
money to the charities, not to create a gaming industry. The
industry was not the goal. The charities were the goal. There
would be fall out because of the changes that would affect the
charities. The legislation did not prevent the charities from
operating the permits in another way, however. She would be happy
to take the average - 9 percent and 4 percent.
Number 1917
MR. POSHARD stated there were others that would be willing to take
over as a result of the fall out.
MR. POSHARD announced the arguments for the fiscal note were still
valid. However, because of the committee substitute, the new
fiscal note would most likely be zero.
Number 1975
REPRESENTATIVE IVAN IVAN stated he respected the intent of the
legislation. However, the bill targeted the few who did not abide
by the regulations. There were honest operators trying to do their
best to get money to the charities. He asked Mr. Poshard to
describe the licensing requirements for the managers. He was
concerned how it would affect the small communities.
Number 2052
MR. POSHARD replied the managers would be required to take a test
similar to the operator's test. A fee would probably be required
followed by the issuance of a certificate. There was no intent for
them to be bonded, for example.
Number 2118
REPRESENTATIVE IVAN said he saw the intent of one individual being
responsible for the entire operation. It was done in the smaller
communities.
Number 2134
CHAIR JAMES stated she really supported that part of the
legislation.
Number 2185
REPRESENTATIVE ETHAN BERKOWITZ stated there were different types of
charitable operations. He asked Mr. Poshard if it would be
preferable to treat each of the operations differently?
Number 2205
MR. POSHARD replied it would force or encourage the different
operators to become whatever was the most lucrative for themselves
and the least lucrative for the charities. He would not suggest
establishing a system based on an operator, MBP, or self-directed
charity, for example. There was merit to establishing a system
based on the type of gaming activity, however.
Number 2318
CHAIR JAMES stated, if she was an operator giving 5 percent to
charity and then was required to give 10 percent, she would look at
the payback to make up the difference. The volume of players would
be more if the payback was higher. In addition, we had not
discussed basing the percentage of return on the volume of
business.
TAPE 97-54, SIDE B
Number 0001
MR. POSHARD stated he had tried to determine the elasticity of the
dollar for the different levels of return. There were too many
variables involved, however.
Number 0081
REPRESENTATIVE BERKOWITZ commented this issue would have been the
perfect opportunity to use the negotiated/regulation process that
Chair James introduced by including the industry to help determine
the figure. The industry was needed to develop revenue for the
charities. He would have preferred an approach that incorporated
the concerns of the industry at the ground floor rather than
hearing them at the intermediate level in the process.
Number 0118
CHAIR JAMES stated the committee process was exactly what he was
talking about. The sponsor of the bill was here, the committee
members were here, and we were about to hear from the industry.
CHAIR JAMES reiterated her biggest interest was the charities as
opposed to the industry. She understood the role of the industry
so she would balance the issues.
Number 0170
REPRESENTATIVE HODGINS noted that the 5 percent for bingo and the
10 percent for pull-tabs was the "minimum" amount of return to the
charities. Some operators would be able to return more. The most
popular operators would be the ones that gave the highest payback
to the customer and the most popular operators would be the ones
that gave the most to the charities. There was a market test at
work.
Number 0209
CHAIR JAMES asked the sponsor, Representative Terry Martin, if he
wanted to amend the committee substitute to include "16 percent"
rather than "10 percent"? Sixteen percent was the intent of the
subcommittee.
Number 0225
REPRESENTATIVE TERRY MARTIN, Alaska State Legislature, replied he
had learned to let the task force do its very best without any
pressure from the sponsor. He believed a minimum of 12 percent was
fair.
CHAIR JAMES explained the changes were on page 12 to Sec. 22 and
Sec. 23. The language "10" should be changed to "16".
Number 0303
REPRESENTATIVE HODGINS moved that the committee substitute (0-
LS0180/F, Luckhaupt, 4/29/97) be adopted with the noted language
change. There was no objection, CSHB 156(STA) was so adopted.
Number 0328
REPRESENTATIVE MARTIN stated that the major reason for gaming was
for charity, not the industry. Alaska was one of the few states
that used gaming for charity, while the rest of the states used
gambling for charity or state revenue. The discussion in regards
to "whetting the appetite" to get more volume was related to the
addictiveness to gambling.
Number 0379
CHAIR JAMES stated she did not have a problem with bingo parlors
selling pull-tabs because it was a community game. She did not
have a problem with a bar selling pull-tabs either because most
people went to a bar to socialize. However, she did have a problem
with pull-tab parlors because they were set up strictly for
gambling.
Number 0508
J.J. "JACK" POWERS was the first person to testify via
teleconference in Anchorage. As an operator, he was not opposed to
the discussion on percentages of gross and revenue-neutral bills,
but more homework was needed to be done. He cited the Governor's
task force and the forgotten recommendations. There were existing
loopholes in the statutes and regulations. There were the
political issues. Let's address these in other forms of
legislation. As an operator, he was not getting rich. He was
concerned about the non-profits. What about the non-sufficient
funds (NSF) checks? he asked. The operator was penalized for NSF
checks, not the non-profits. In conclusion, he could live with 6
percent of gross for pull-tabs and 1.5 percent for bingo, but not
with 16 percent of gross.
Number 0669
ED BOUGEOIS, Representative, Anchorage Opera, was the next person
to testify via teleconference in Anchorage. The Anchorage Opera
had realized over $100,000 in revenue over the past three years
from the gaming industry - four times what it had received from the
states' arts council. Gaming was a necessary and alternative means
of funding at a time when the arts was being cut drastically. He
declared, "If we lose this funding we risk going out of business
ourselves as do many non-profit organizations that derive a good
amount of their revenue from this source."
Number 0752
REPRESENTATIVE DYSON asked Mr. Bougeois if there was community
support for opera or were people just buying pull-tabs for the
return potentials?
Number 0791
MR. BOUGEOIS replied opera and many other art forms were important
to the development of the youth and for the entertainment of
adults. The price of a ticket for the opera would be very
expensive and not available to more citizens if it was not
subsidized. He believed, personally, that people would gamble no
matter what. Therefore, he preferred that the money derived from
gambling went to charitable organizations rather than elsewhere.
Number 0892
JOHN LOPEZ, Representative, Alaska Bow Hunters Association, was the
next person to testify via teleconference in Anchorage. He urged
for additional studies on this topic. A 1995 report by the
Charitable Gaming Division indicated that the commercial halls for
the operators and the MBPs would not meet the 10 percent of gross
receipts test on pull-tabs - operators were at 5.82 percent, and
MBP's were at 7.98 percent. In addition, 10 percent would raise
the profitability requirement from 25 percent to 30 percent
creating an additional burden of either controlling expenses or
cutting the number of prizes. A study by the National Association
of Fundraising Ticket Manufactures indicated that there was no
elasticity of the dollar and the recommendation was to stay away
from the approach in the bill.
CHAIR JAMES asked Mr. Lopez who sold the pull-tabs for the Alaska
Bow Hunters Association?
MR. LOPEZ replied Jack Powers.
Number 1005
MIKE SLEZAK was the next person to testify via teleconference in
Anchorage. Lowering the percentage of payout would drive players
away. We had already seen a number of high tier players drop out
because of the reduction in the payouts. They were going to Las
Vegas or illegal gaming activities in the state. "If they're not
going to spend their money on charitable gaming, they're going to
find some place to spend it to find that gaming activity that they
want to participate in." he declared.
CHAIR JAMES asked Mr. Slezak what his connection was to charitable
gaming?
MR. SLEZAK replied he was a life member of the Susitna Valley
Humane Society, and the general manager of Rippie World One in
Anchorage.
Number 1085
DAVE LAMBERT was the next person to testify via teleconference in
Fairbanks. The bill would create a slow and agonizing death for
the gaming industry. Testimony had indicated that 78 percent was
being returned to charitable organizations. The figure was higher
than any where else in the country. "If it's not broke why try to
fix it?" he asked. The division's budget was being cut so it was
trying to eliminate organizations to reduce its work load. If the
one-half of one percent would be a user fee that went directly to
the division, it could go after and deal with the bad guys rather
than hurting every body else. Moreover, in North Pole there was a
5 percent sales tax and a .3 percent tax on pull-tabs. The bill
called for another .5 percent and 10 percent tax while the average
pull-tab had an 18 percent payback leaving a 2 percent margin for
business. "Were do we go from there?" he asked.
Number 1265
CHAIR JAMES explained there was a 3 percent sales tax in the city
of North Pole and a 5 percent sales tax in Juneau. The 3 cents and
5 cents were eaten because it was not convenient to sell a pull-tab
for $1.03 or $1.05. In addition, rather than claiming the
winnings, most players bought more pull-tabs with their winnings.
A tax was not paid on the winnings, and every time the player used
his or her winnings to buy more pull-tabs the tax was eaten. It
should be a consideration when determining the percentage. She was
still open to the amount, but she would still like to have a
percentage of the gross.
Number 1341
TABER REHBAUM, Executive Director, The Greater Big Brothers/Big
Sisters Fairbanks Area, was the next person to testify via
teleconference in Fairbanks. Her agency held a gaming permit
played through an operator in town. It derived a significant
portion of its budget from pull-tabs. Her agency was opposed to
the bill because its annual fee would increase about 500 percent
placing an undue burden on the folks charitable gaming was
established to support. It would endanger reputable operators when
non-profits did not have the time to run a pull-tab operation
themselves.
Number 1478
PAUL BLAIR, Representative, American Legion, was the next person to
testify via teleconference in Glennallen. He was absolutely
opposed to the gross receipt or high percentage concepts. It was
obvious the committee was on a one-way street towards gross
receipts when it would destroy the gaming industry in Alaska as it
was known today. It would hinder the small operations like the
ones in Glennallen that did not deal with operators. It was
obvious that Representative Martin and James did not like gaming.
He would like to see the bill killed.
Number 1639
CHAIR JAMES stated that she put her personal belief on the table,
but she did not necessarily vote the way she personally believed.
She listened to the testimony.
Number 1664
REPRESENTATIVE HODGINS asked Mr. Blair if there were operators in
the Glennallen area or were the non-profits conducting their own
gaming activities?
Number 1681
MR. BLAIR replied all of the non-profits conducted their own gaming
activities. There were no operators.
Number 1698
GARY LANGILLE, Representative, Small World Day Care Center; Kodiak
Chamber of Commerce; and Kodiak Liquor License Association, was the
next person to testify via teleconference in Kodiak. Seventy-eight
percent of the revenue went to prizes while 22 percent went to
expenses leaving a low percentage for the non-profits to begin
with. Without killing the attractiveness of the game itself by
lowering the payout to the customer, he wondered if the committee
had looked at video gaming. Video gaming would give non-profits a
better chance of higher revenue because it would cut down on the
expenses, allow for easier audits, and take care of the fraud. He
did not understand the idea of the additional tax revenue,
especially since the Charitable Gaming Division's budget was being
cut.
Number 1835
CHAIR JAMES asked Mr. Langille if he would suggest replacing gaming
with videos or add to the existing games?
MR. LANGILLE replied he was not suggesting that pull-tabs should be
taken away. Reports indicated that people liked video gaming
better so that pull-tabs eventually fell away. The Charitable
Gaming Division would prefer to deal with a computer print out
every month rather than having to track down pieces of paper from
everybody.
Number 1880
EARL MICKELSON, Representative, American Legion Post Number 17, was
the next person to testify via teleconference in Kodiak. The
American Legion sold only to its members. Therefore, it should be
treated differently. Vendors and operators should be treated
differently as well. In addition, he wondered what the concept of
"ideal gross" meant in Sec. 22 and Sec. 23. He agreed with using
gross receipts for auditing for the division, but not for the
charities. The ideal net was the only thing that really counted
because a gross percentage took away the ability of an operator to
determine the payout to the customers.
Number 2065
CHAIR JAMES stated she understood because the only room to make up
for the additional percentage was in the payout.
Number 2099
REPRESENTATIVE HODGINS explained the ideal gross was the amount of
money left over after the payout.
Number 2126
MR. POSHARD explained Sec. 27 defined ideal gross - "(23) `ideal
gross(NET)' means an amount equal to the total amount of receipts
that would be received if every individual pull-tab ticket in a
series were sold at face value". For example, 4,000 tickets at $1
a piece would equal an ideal gross of $4,000.
CHAIR JAMES stated there was a problem because not every pull-tab
would be sold. She wondered if pull-tabs could be pulled and
counted differently.
Number 2258
MR. POSHARD replied there was a prohibition on pulling games. The
gross would be reduced if the games were discounted, for example.
Number 2339
KEVIN HARUN, Representative, Trail Side Discovery Camp Program, was
the next person to testify via teleconference in Anchorage. In
reality the gaming industry was a lot less than a $220 million
industry because of the prize payouts. In addition, it was a
diverse industry ranging from a pull-tab parlor to the American
Legion. Legislation was needed, therefore, to meet the needs of
each sector.
TAPE 97-55, SIDE A
Number 0001
MR. HARUN further stated the fee of one-half of one percent was a
very big increase for charities. It was a tax increase. It did
not make sense when the industry already was bringing in enough
money to cover its cost. In conclusion, he would go back and look
at some of the recommendations from the Governor's task force.
Number 0141
LANIE FLEISCHER, Executive Director, Big Brothers Big Sisters of
Anchorage, Inc., was the next person to testify via teleconference
in Anchorage. Big Brothers Big Sisters over the last six years had
been making between $50,000 to $60,000 every fiscal year on its
pull-tab and bingo permit played by Jack Powers. As a result of
the money from its permit, it had been able to double the number of
kids matched with an adult mentor. The goal was to increase that
number by 150 percent by the year 2000. "We definitely need the
money from our charitable permit in order to reach that goal," she
declared. She did not see how the money could be replaced. The
operators in Alaska were reputable compared to other states, and
they returned a significant amount of money to the charities.
Number 0359
CHAIR JAMES asked Ms. Fleischer if she had a position on licensing
managers?
Number 0379
MS. FLEISCHER stated any rules that applied to operators should
apply to MBP holders and self-directed operations.
Number 0422
TUESDAY SMITH was the next person to testify via teleconference in
Fairbanks. She was testifying today as a customer, even though she
held an operators' license. The winnings from a pull-tab shop were
being re-spent over and over. She could play a total of 3,000 to
4,000 tickets with a $300 winning, for example. This was forcing
the games to turn into a 35 percent ideal net rather than a 25
percent ideal net. Therefore, they would just get her money 10
percent faster by decreasing the gross and what she could re-spend
with her winnings.
Number 0572
WAYNE STEVENS, Executive Director, Kodiak Chamber of Commerce, was
the next person to testify via teleconference in Kodiak. The
chamber ran a self-directed game using its own employees.
Operators were not allowed in Kodiak by ordinance. He appreciated
the work of the subcommittee. The committee substitute was a much
improved version. However, an increase from 1 percent of ideal net
to .5 percent of the gross was an increase by a factor of five
decreasing the amount of money that went to the charities.
Number 0653
REPRESENTATIVE HODGINS asked Mr. Stevens what a factor of five
would be in real dollars?
Number 0662
MR. STEVENS replied the 1 percent fee paid last year was $771,
while one-half of one percent of the gross as proposed in the
committee substitute would have been $3,855.
REPRESENTATIVE HODGINS asked Mr. Stevens what was the volume in
gross receipts?
MR. STEVENS replied the gross receipts was roughly $700,000.
Number 0723
ASHLEY REED, Lobbyist, Alaska Charitable Gaming Association, was
the next to testify in Juneau. There was no testimony today from
the public that supported the bill. The goal to eliminate auditing
was laudable, but the bill was not designed to accomplish that.
The bill was designed to discourage gaming and ultimately the
amount of money that would go to charities. It was not a good
piece of legislation and contradictory to the goals articulated
around the table. In addition, the committee substitute was not
the result of the discussions at the subcommittee hearing. The
gaming industry was complex and this bill was not going to resolve
the issues. He suggested keeping the bill and working on it. The
gaming industry was not opposed to satisfying the concept but, the
legislature needed to recognize the various operations and the
various associated expenses. If the simplification of auditing was
the purpose, why wasn't there a machine bill, for example. There
were other ways to accomplish the goal. Representative Martin
moaned and groaned when he heard the suggestion because it would
probably increase gaming. He reiterated this was a complex issue.
He encouraged the committee to hold on to the bill and work on it.
There was not one person from the public that testified in favor of
the bill.
Number 0917
CHAIR JAMES asked Mr. Reed to suggest some of the other ways to
eliminate auditing.
Number 0930
MR. REED replied the easiest way would be a machine bill. A
machine would produce a computer printout.
CHAIR JAMES asked Mr. Reed if a machine should replace what there
was already?
MR. REED replied a machine could either replace or supplement what
there was already. In addition, there were various types of gaming
activity so that different gross percentages should be applied.
Increasing the averages would only put charities out of business.
Number 0975
CHAIR JAMES stated the issue was creating a constituency that would
eliminate the possibility of taking a different approach. She
cited the permanent fund dividend as an example. There was a pot
of money that could not be touched because of the pressure from the
created constituency. She liked the idea of a computer gaming
system, but she would not want to add it to the current system.
She would want to replace it otherwise the problems would not be
eliminated.
Number 1067
MR. REED stated a machine system would control the cost because it
did away with operation costs for example. If the goal was to put
more money into the charities it was an approach to consider as
well as legislation that would allow for larger prizes to increase
playing, for example. He did believe that the legislature should
take on the issue with the support of the industry, but not with
this piece of legislation. The bill was not designed to help the
industry; it was designed to discourage gaming.
Number 1113
CHAIR JAMES asked Mr. Reed if a tier system was possible with the
current volume of business?
Number 1142
MR. REED replied she would have to ask the industry. There were
different types of expenses associated with the industry. For
example, selling pull-tabs in a hall was cheaper than a stand-alone
store in a strip mall. Therefore, both volume and operation costs
would need to be considered.
Number 1190
CHAIR JAMES asked Mr. Reed what was his position on licensing
managers?
MR. REED replied he had not talked to his client about that because
the bill was so bad. He would get back to her later.
Number 1207
REPRESENTATIVE IVAN stated he was afraid of the impact on the small
communities.
Number 1249
CHAIR JAMES asked Representative Ivan if he had a problem with
licensing the mangers?
REPRESENTATIVE IVAN replied he had not addressed that issue with
his constituents yet. Currently, in the small communities the
whole government was accountable to the citizens through its budget
process in which reports were included on the gaming proceeds.
Number 1285
CHAIR JAMES asked Representative Ivan if he had any pull-tab
parlors in the rural districts that he represented?
REPRESENTATIVE IVAN replied pull-tab parlors occurred in the larger
communities such as Bethel. He had not heard of any complaints
from his constituents, otherwise he would be the first one to
include licensing managers in the bill.
Number 1303
CHAIR JAMES explained she had problems in her district with
managers.
Number 1317
REPRESENTATIVE MARTIN stated video gaming would absolutely wipe out
any small people. Individuals that would control video gaming
would also control gambling. The National Conference of State
Legislators (NCSL) for three consecutive years had ruled out and
asked Congress to prohibit video gambling statewide because it was
addictive.
Number 1359
REPRESENTATIVE HODGINS asked what was the payout limit on a single
prize?
MR. POSHARD replied the limit was $500 per ticket.
Number 1384
MR. REED stated, for the record, that he was not advocating the
passage of machine legislation. If accountability was the goal, it
was an example of the easiest way to get there.
Number 1403
CHAIR JAMES stated there used to be pull-tab parlors that sold
other items such as shirts. However, in the audit process for the
Charitable Gaming Division the sales were based on the inventory
rather than the actual sales. She would prefer that the pull-tab
parlors sold other items, but belied the audit process was the
reason why they did not sell other items.
CHAIR JAMES announced the bill would be held over until a later
date yet to be determined.
ADJOURNMENT
Number 1505
CHAIR JAMES adjourned the House State Affairs Standing Committee
meeting at 10:02 a.m.
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