Legislature(2003 - 2004)

04/16/2003 07:00 AM House W&M

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS                                                                          
                         April 16, 2003                                                                                         
                           7:00 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Mike Hawker, Co-Chair                                                                                            
Representative Jim Whitaker, Co-Chair                                                                                           
Representative Cheryll Heinze                                                                                                   
Representative Norman Rokeberg                                                                                                  
Representative Bruce Weyhrauch                                                                                                  
Representative Peggy Wilson                                                                                                     
Representative Max Gruenberg                                                                                                    
Representative Carl Moses                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Vic Kohring                                                                                                      
OTHER LEGISLATORS PRESENT                                                                                                     
Representative Ralph Samuels                                                                                                    
Representative Harry Crawford                                                                                                   
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 236                                                                                                              
"An Act imposing a tax on employment; and providing for an                                                                      
effective date."                                                                                                                
     - HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE                                                                                 
HOUSE BILL NO. 240                                                                                                              
"An Act establishing a state lottery."                                                                                          
     - HEARD AND HELD; ASSIGNED TO WORKGROUP                                                                                    
PREVIOUS ACTION                                                                                                               
BILL: HB 236                                                                                                                  
SHORT TITLE:EMPLOYMENT TAX FOR EDUCATION                                                                                        
SPONSOR(S): REPRESENTATIVE(S)WILSON                                                                                             
Jrn-Date Jrn-Page        Action                                                                                                 
04/02/03 0739 (H) READ THE FIRST TIME -                                                                                         
04/02/03 0739 (H) W&M, FIN                                                                                                      
04/02/03 0739 (H) REFERRED TO WAYS & MEANS                                                                                      
04/10/03       (H) W&M AT 7:00 AM HOUSE FINANCE                                                                                 
04/10/03       (H) -- Meeting Canceled --                                                                                       
04/16/03       (H) W&M AT 7:00 AM HOUSE FINANCE                                                                                 
BILL: HB 240                                                                                                                  
SHORT TITLE:ESTABLISH STATE LOTTERY                                                                                             
SPONSOR(S): ECON DEV, INT'L. TRADE & TOURISM                                                                                    
Jrn-Date Jrn-Page        Action                                                                                                 
04/04/03 0769 (H) READ THE FIRST TIME -                                                                                         
04/04/03 0769 (H) EDT, W&M, FIN                                                                                                 
04/07/03       (H) EDT AT 5:00 PM CAPITOL 120                                                                                   
04/07/03       (H) Heard & Held                                                                                                 
04/07/03       (H) MINUTE(EDT)                                                                                                  
04/09/03       (H) EDT AT 5:00 PM CAPITOL 120                                                                                   
04/09/03       (H) Moved CSHB 240(EDT) Out of                                                                                   
04/09/03       (H) MINUTE(EDT)                                                                                                  
04/11/03 0933 (H) EDT RPT CS(EDT) NT 1NR 3AM                                                                                    
04/11/03 0933 (H) NR: DAHLSTROM; AM: KOTT,                                                                                      
04/11/03 0933 (H) HEINZE                                                                                                        
04/11/03 0934 (H) FN1: (REV)                                                                                                    
04/11/03 0934 (H) REFERRED TO WAYS & MEANS                                                                                      
04/16/03       (H) W&M AT 7:00 AM HOUSE FINANCE                                                                                 
WITNESS REGISTER                                                                                                              
LARRY PERSILY, Deputy Commissioner                                                                                              
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HB 236 and answered questions;                                                                
during hearing on HB 240, addressed fiscal note for                                                                             
CSHB 240(EDT).                                                                                                                  
REPRESENTATIVE TOM ANDERSON                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented gaming portions of CSHB 240(EDT)                                                                 
and answered questions.                                                                                                         
ACTION NARRATIVE                                                                                                              
TAPE 03-7, SIDE A                                                                                                             
Number 0001                                                                                                                     
CO-CHAIR JIM WHITAKER called the  House Special Committee on Ways                                                             
and  Means  meeting  to  order  at  7:00  a.m.    Representatives                                                               
Whitaker,  Hawker,  Heinze,  Weyhrauch, Wilson,  and  Moses  were                                                               
present  at the  call  to order.    Representatives Rokeberg  and                                                               
Gruenberg arrived as  the meeting was in progress.   Also present                                                               
were Representatives Samuels and Crawford.                                                                                      
[Not  on  tape, but  taken  from  the committee  secretary's  log                                                               
notes,  was that  there would  be no  public testimony  on either                                                               
bill today.]                                                                                                                    
HB 236-EMPLOYMENT TAX FOR EDUCATION                                                                                           
[Contains discussion pertaining to SB 137, the companion bill.]                                                                 
CO-CHAIR  WHITAKER announced  that  the first  order of  business                                                               
would  be  HOUSE  BILL  NO.  236,  "An  Act  imposing  a  tax  on                                                               
employment; and providing for an effective date."                                                                               
Number 0120                                                                                                                     
REPRESENTATIVE  WILSON, sponsor  of  HB 236,  told members  she'd                                                               
brought the  bill forward because  of the state's  current fiscal                                                               
situation.  There are no stable  sources of revenue in the state;                                                               
the Constitutional  Budget Reserve (CBR) is  almost depleted; the                                                               
state's fixed  expenses such as insurance,  fuel costs, Medicare,                                                               
Medicaid, and  so forth  keep increasing;  and the  population is                                                               
growing  rapidly.    When  the  economy  is  down,  there  is  an                                                               
increased need for services.   She said this leaves two practical                                                               
answers:   cut more from  the budget or  find a stable  source of                                                               
revenue.    Thus  HB  236   establishes  an  employment  tax  for                                                               
education; its companion bill in the Senate is SB 137.                                                                          
REPRESENTATIVE  WILSON, calling  this a  work in  progress, noted                                                               
that she'd requested  a legal opinion from  Legislative Legal and                                                               
Research Services as  to whether the proceeds  could be dedicated                                                               
based on  precedent.  She  reported that  there was a  school tax                                                               
prior to  statehood, but  it was  repealed in  1980; in  1962 the                                                               
proceeds were paid  into the general fund.   She said Legislative                                                               
Legal  and Research  Services told  her that  the new  school tax                                                               
could not  go into  a dedicated fund,  but the  legislature could                                                               
create a special  account within the general fund  to receive the                                                               
proceeds and  would then be  able to appropriate the  proceeds to                                                               
education and better keep track  of the amount collected.  Noting                                                               
that the Department  of Revenue had many questions  about how the                                                               
money would be collected and so  forth, she offered to go through                                                               
the bill section by section.                                                                                                    
Number 0417                                                                                                                     
CO-CHAIR HAWKER moved to adopt  the proposed committee substitute                                                               
(CS),  Version  23-LS0921\H, Kurtz,  4/14/03,  as  a work  draft.                                                               
There being no objection, Version H was before the committee.                                                                   
Number 0437                                                                                                                     
REPRESENTATIVE  WILSON explained  that  Section 1  creates a  new                                                               
chapter in  Title 43  that imposes  an employment  tax of  $100 a                                                               
year  on  each   individual  19  years  or   older  who  receives                                                               
compensation  of  at least  $1,000.    It requires  employers  to                                                               
withhold the tax  from the employee's paycheck; a  return must be                                                               
filed [by  the employer], who  sends the money to  the Department                                                               
of  Revenue.   A  provision  deals  with  whether the  amount  is                                                               
deducted from two  or more paychecks, which she  said spreads the                                                               
impact for  low-income people and  deals with paychecks  that are                                                               
less than  $50.  Section  1 also  makes employers liable  for the                                                               
tax unless there is proof provided  by the employer - in the form                                                               
of a paycheck stub, for instance  - that the tax already has been                                                               
withheld.   In order  to include  the self-employed,  it requires                                                               
individuals  who are  subject to  the tax  but haven't  had taxes                                                               
withheld by an employer to file a return.                                                                                       
REPRESENTATIVE WILSON  noted that Section 1  permits employees to                                                               
claim  a  refund from  the  state  if  there was  an  overpayment                                                               
because the  employee was  unable to prove  to the  employer that                                                               
the money was withheld already;  she said the department believes                                                               
this  is the  most effective  manner to  deal with  overpayments.                                                               
This section  also requires the  money collected to  be deposited                                                               
into  the general  fund (GF)  and accounted  for separately.   It                                                               
permits  the   legislature  to   appropriate  the   proceeds  for                                                               
education, and  defines the tax year  as July 1 through  June 30,                                                               
the state's fiscal year.                                                                                                        
Number 0704                                                                                                                     
REPRESENTATIVE  WILSON   discussed  Section  2,   the  transition                                                               
provision.   The  initial tax  is to  be remitted  and [a  return                                                               
filed] before  the 15th day of  the fourth month that  the tax is                                                               
in effect.  This is so  employers don't have to file every single                                                               
time  they [deduct  money], she  said, thus  reducing the  filing                                                               
frequency for small employers.   Furthermore, the timeframe gives                                                               
the department  and the  taxpayers more time  to prepare  for the                                                               
tax, simplifying  filing, and  improving customer  service during                                                               
the start-up phase.  Section 3 provides for an effective date.                                                                  
Number 0900                                                                                                                     
REPRESENTATIVE WEYHRAUCH asked whether this  tax would be owed by                                                               
an individual who  is self-employed, has a  business license, has                                                               
a simple LLC  [limited liability company], has  no employees, and                                                               
earns a couple of thousand dollars a year.                                                                                      
REPRESENTATIVE WILSON replied yes,  under proposed Sec. 43.45.021                                                               
[page 2, lines 16-18, subsection (d)].                                                                                          
Number 1008                                                                                                                     
REPRESENTATIVE  WEYHRAUCH  asked  whether  it is  a  function  of                                                               
employment or compensation,  and then surmised that  a person who                                                               
receives more than $1,000 and is over the age of 19 would pay.                                                                  
REPRESENTATIVE WILSON affirmed that.                                                                                            
REPRESENTATIVE WEYHRAUCH  asked whether the education  tax is the                                                               
way it was in the old statute, repealed in approximately 1981.                                                                  
REPRESENTATIVE WILSON said yes.                                                                                                 
REPRESENTATIVE WEYHRAUCH asked  why, if the intent is  to use the                                                               
funds  for education,  the [bill's]  title  doesn't say  so.   He                                                               
surmised that it is a "legislative sentiment."                                                                                  
REPRESENTATIVE WILSON said  she didn't know whether  it should be                                                               
in the title.                                                                                                                   
Number 1145                                                                                                                     
CO-CHAIR HAWKER offered his experience  that most payroll systems                                                               
are designed on a calendar-year  basis consistent with income tax                                                               
reporting  requirements of  the Internal  Revenue Service  (IRS),                                                               
whereas  this bill  uses [the  state's]  fiscal year.   He  asked                                                               
whether  Representative  Wilson  is  comfortable  that  business,                                                               
computer,  accounting,  and  reporting  systems  can  accommodate                                                               
multiple  tax years.   He  also asked  whether the  mechanism for                                                               
refunds is consistent  with the current mechanism  for refunds of                                                               
overpayments of ESC [Employment Security Contribution] taxes.                                                                   
REPRESENTATIVE  WILSON  said  [the  mechanism in  the  bill]  was                                                               
recommended by  the Department of  Revenue.  She deferred  to Mr.                                                               
Persily for further response.                                                                                                   
Number 1348                                                                                                                     
LARRY  PERSILY,  Deputy   Commissioner,  Department  of  Revenue,                                                               
indicated he would present his  testimony first.  Noting that the                                                               
original  bill  version  used  the calendar  year  of  January  1                                                               
through December 31, he pointed out  that Version H is similar to                                                               
the committee substitute  for SB 137 in [the  Senate], which uses                                                               
July 1 [as  the beginning of the year] and  has an effective date                                                               
of July  1, 2003.   Mr. Persily  told members that  although this                                                               
starting  date  doesn't  give  the   department  much  time,  the                                                               
department believes this date can be met.                                                                                       
MR.  PERSILY offered  to prepare  a fiscal  note [for  Version H]                                                               
either when the bill moves out  of committee or while it is under                                                               
consideration, and  said the  department would  have to  spend "a                                                               
fair  amount of  money fairly  quickly," depending  on when  this                                                               
bill  passes  this  session.    He estimated  a  need  for  about                                                               
$900,000 as a  "supplemental" for fiscal year 2003  (FY 03), with                                                               
a lapse  date to carry  into FY  04, and offered  the expectation                                                               
that a  lot of  the work would  be contracted out  to set  up the                                                               
program, a  web site, interaction  with employers,  and outreach.                                                               
He said  employers will need  withholding information by  June in                                                               
order to  set this  up for  their first payroll  in July.   Other                                                               
than that,  the fiscal note  would be  fairly similar to  the one                                                               
for  the original  HB 236.   He  emphasized that  with Version H,                                                               
funds  would be  needed  this year  to get  started  so that  the                                                               
program runs  well in FY  04 and there  is a full  realization of                                                               
the estimated $39 million a year in revenue.                                                                                    
Number 1623                                                                                                                     
CO-CHAIR HAWKER  asked about the ability  to accommodate multiple                                                               
tax  years  and  whether  there has  been  any  communication  or                                                               
concurrence with  industry, employers,  or vendors  of accounting                                                               
and payroll software in this regard.                                                                                            
MR.  PERSILY acknowledged  that  this is  a  little unusual,  but                                                               
offered his  belief that it wouldn't  be a problem to  change the                                                               
software settings to  recognize July 1 as the  [beginning of the]                                                               
fiscal  year, just  as the  state does.   He  suggested a  bigger                                                               
problem for employers might be  getting into the habit of closing                                                               
out the  fiscal year for their  employees on June 30;  this might                                                               
take a couple of years to get used to.                                                                                          
CO-CHAIR  HAWKER inquired  about communications  with vendors  or                                                               
people  who  write their  own  payroll  packages or  market  them                                                               
MR.  PERSILY, in  response to  this and  further questions,  said                                                               
there  have been  conversations with  "a couple,"  and the  first                                                               
reaction was that July 1  was unusual, but could be accommodated.                                                               
Existing systems can  handle it, but a change  would be necessary                                                               
because most have January 1 as a  default.  "But the ones we have                                                               
talked to  didn't believe it  would be an  insurmountable problem                                                               
to change  that date," he added.   "They would just  like as much                                                               
notice as possible."                                                                                                            
Number 1821                                                                                                                     
REPRESENTATIVE WILSON  explained that many e-mails  were received                                                               
from people  who didn't want the  money taken out of  their first                                                               
two paychecks  of the  year, right after  they'd spent  all their                                                               
money on  Christmas.   She said,  however, that  she was  open to                                                               
putting it back to January 1.                                                                                                   
Number 1943                                                                                                                     
REPRESENTATIVE  SAMUELS   asked  whether  someone  who   has  two                                                               
different  seasonal jobs  would  have to  go  through the  refund                                                               
process [if  too much  money had been  withheld] or  could he/she                                                               
stop the tax from being taken out [by the second employer].                                                                     
MR.  PERSILY highlighted  the provision  for  showing the  second                                                               
employer that the  tax has been paid, by showing  a pay stub, for                                                               
example.   If  it  were taken  out twice,  the  process would  be                                                               
similar to the way unemployment  taxes are refunded; for those, a                                                               
person fills out a form and sends  it in to request a refund.  If                                                               
an  employer  or  employee  made  a  mistake  and  there  was  an                                                               
overpayment, forms  would be available  [at the  department's web                                                               
site] and the person could file for and receive a timely refund.                                                                
Number 2014                                                                                                                     
REPRESENTATIVE GRUENBERG asked about  people who have substantial                                                               
income from investments.                                                                                                        
REPRESENTATIVE WILSON  answered that  this is  [a tax]  on people                                                               
who work,  not on money earned  from a portfolio.   She suggested                                                               
that  people  [with  investment   income]  may  be  retired,  for                                                               
REPRESENTATIVE  GRUENBERG  asked  whether it  was  Representative                                                               
Wilson's  specific  intent  not  to include  those  people  [with                                                               
investment income], no  matter how much money they  make.  [There                                                               
was no audible response.]                                                                                                       
Number 2102                                                                                                                     
REPRESENTATIVE  WEYHRAUCH  asked  whether   there  had  been  any                                                               
brainstorming  about whether  the tax  could be  deducted from  a                                                               
permanent fund dividend (PFD) check.                                                                                            
REPRESENTATIVE  WILSON said  it had  come up.   Reiterating  that                                                               
this is a work in progress, she said she is open to suggestions.                                                                
Number 2139                                                                                                                     
REPRESENTATIVE GRUENBERG  surmised that  this would  "catch" some                                                               
people who  earn money in the  state but aren't eligible  for the                                                               
PFD.  He asked whether that was the intent as well.                                                                             
REPRESENTATIVE WILSON answered in the  affirmative.  She said she                                                               
wanted to  be able to collect  from people who come  to Alaska to                                                               
work and  make a  good income,  perhaps during  summer or  on the                                                               
North Slope,  and then leave;  these people wouldn't  be included                                                               
if this were  just connected to PFD checks.   She said 25 percent                                                               
of the people who work in Alaska aren't residents.                                                                              
Number 2231                                                                                                                     
MR. PERSILY brought attention to  a problem with withholding $100                                                               
from the PFD.   If it is assumed that someone  will receive a PFD                                                               
and there  is no withholding  of wages,  the person may  later be                                                               
deemed ineligible for  a PDF because of  residency, child support                                                               
[owed],  or prison  time.   Meanwhile, the  opportunity may  have                                                               
been lost to withhold wages  during the summer, for example, when                                                               
people often  are able to  find jobs.   Mr. Persily  told members                                                               
that  the  department has  tried  to  keep  the fiscal  note  for                                                               
operations as small as possible.   He suggested it makes sense to                                                               
use  payroll  withholding  as  a mechanism  or,  for  people  who                                                               
receive  compensation but  not wages,  to have  them "self-report                                                               
and self-pay."                                                                                                                  
Number 2341                                                                                                                     
CO-CHAIR  WHITAKER assigned  a subcommittee  to  meet and  report                                                               
back the next week with a  proposed CS.  He named Representatives                                                               
Weyhrauch, Gruenberg, and Hawker  as members, with Representative                                                               
Hawker   chairing;   he    asked   that   Representative   Wilson                                                               
[HB 236 was held over.]                                                                                                         
HB 240-ESTABLISH STATE LOTTERY                                                                                                
Number 2423                                                                                                                     
CO-CHAIR  WHITAKER announced  that  the final  order of  business                                                               
would  be  HOUSE BILL  NO.  240,  "An  Act establishing  a  state                                                               
[The  bill  was  sponsored  by the  House  Special  Committee  on                                                               
Economic  Development,  International  Trade and  Tourism,  which                                                               
Representative Heinze chairs.  During  the 4/9/03 hearing in that                                                               
committee,  Representative  Anderson  had  presented  the  gaming                                                               
portions  of what  became CSHB  240(EDT).   In  packets were  the                                                               
original  bill, which  pertained  only to  a  state lottery,  and                                                               
CSHB 240(EDT), which  added charitable gaming and  was officially                                                               
before the committee.]                                                                                                          
CO-CHAIR  WHITAKER  announced that  this  would  be a  discussion                                                               
among committee  members, that staff  may not be  recognized, and                                                               
that  [unspecified]  committee  substitutes that  were  available                                                               
would  not   be  brought   before  the   committee.     He  asked                                                               
Representative Anderson  to address  fiscal issues  pertaining to                                                               
electronic gaming machines (EGMs), including the fiscal notes.                                                                  
Number 2706                                                                                                                     
REPRESENTATIVE  TOM ANDERSON,  Alaska State  Legislature, pointed                                                               
out that Mr.  Persily [one of the preparers of  the Department of                                                               
Revenue's  fiscal  note  dated 4/15/03]  was  present  and  could                                                               
answer  technical   questions.    Representative   Anderson  told                                                               
members  it appears  the "EGM  amendment" [CSHB  240(EDT)] brings                                                               
the fiscal  note to $50  million.  There  is a start-up  cost, as                                                               
well as factors  relating to accounting and  services rendered by                                                               
the division  that will  oversee electronic  gaming.   He offered                                                               
his understanding  that the Department  of Revenue  had attempted                                                               
to compare  revenue from other  states such as South  Dakota, and                                                               
that  Mr. Luckhaupt,  the legislative  drafter, had  expertise in                                                               
gaming law.                                                                                                                     
REPRESENTATIVE  ANDERSON indicated  this bill  mirrors [much  of]                                                               
South Dakota's legislation.   Calling himself one  of the authors                                                               
in  terms   of  looking  at  electronic   gaming,  Representative                                                               
Anderson  alluded to  CSHB  240(EDT) and  said  Oregon and  Rhode                                                               
Island were  also reviewed.   He suggested  it was  difficult for                                                               
the Department of Revenue to  find a mirror image [when preparing                                                               
the fiscal  note], since  aspects of  CSHB 240(EDT)  deviate from                                                               
South Dakota's and Montana's formats.                                                                                           
REPRESENTATIVE  ANDERSON pointed  out  that CSHB  240(EDT) has  a                                                               
payout of  30 percent  to the  state; 30  percent to  the vendor,                                                               
which  would  be  a  club  licensee  or  a  full  liquor-licensed                                                               
dispensary - a  bar that serves people  over the age of  21;  and                                                               
10  percent to  the government  of the  locale where  the EGM  is                                                               
played.  He suggested this is  a unique and salient aspect of the                                                               
new bill version.                                                                                                               
REPRESENTATIVE ANDERSON referred to  the analysis attached to the                                                               
department's fiscal  note, emphasizing that some  things can't be                                                               
measured yet,  including the  first year's  play, who  will play,                                                               
the level  of tourism, the level  of migrant workers from  out of                                                               
state, and so  forth.  He offered his belief  that the Department                                                               
of Revenue  can testify that this  should bring in a  high amount                                                               
of income.                                                                                                                      
Number 3034                                                                                                                     
LARRY  PERSILY,  Deputy   Commissioner,  Department  of  Revenue,                                                               
discussed the  fiscal note.   He first addressed  the $52-million                                                               
estimate for fiscal  year 2009 (FY 09), indicating  that by then,                                                               
it is believed  activity will have ramped up  after several years                                                               
of people  getting used to  this and playing  the game.   He said                                                               
the $52 million breaks down  into three components, approximately                                                               
as follows:   $50 million for the state's share  from EGMs, which                                                               
is the  video terminals in  bars and private clubs;  $1.5 million                                                               
in  revenue  to  the  state from  [provisions  included  in]  the                                                               
original HB 240,  which provides for a  twice-a-year lottery with                                                               
a "50-50" prize drawing; and  $0.5 million in fees collected from                                                               
licensing operations  of EGMs.   The largest  chunk would  be the                                                               
state's share from [EGMs].                                                                                                      
MR. PERSILY explained  that in comparing this  with other states,                                                               
using  South Dakota  as a  reference, adjustments  were made  for                                                               
population differences,  including the number of  people over the                                                               
age of 21 -  the only ones who may play.   This legislation has a                                                               
municipal opt-out provision similar to  those for alcohol; thus a                                                               
municipality  may  vote  to  exclude  video  terminals  from  the                                                               
community.  However, [the fiscal  note] assumes no municipalities                                                               
opt out.   If any do, it  will reduce the $50-million  total.  He                                                               
added that  there are "prior  to" expenses  for the program.   He                                                               
opined that if  anything, the amount might be lower,  and that he                                                               
didn't believe it would be higher.                                                                                              
Number 3252                                                                                                                     
CO-CHAIR  WHITAKER inquired  about the  projected revenue  from a                                                               
lottery and EGMs and the expected loss of pull-tab revenue.                                                                     
MR.  PERSILY  answered that  from  the  twice-a-year raffle,  the                                                               
estimate  is about  $1.5 million;  about  $50 million  a year  is                                                               
expected from  EGMs.  Noting  that the department hadn't  come up                                                               
with  a specific  number, he  added  that from  looking at  other                                                               
locations,  the department  believes it  would significantly  cut                                                               
into pull-tab [revenue].  Referring to  page 3 of the fiscal note                                                               
analysis,  he  pointed out  that  the  department had  looked  at                                                               
Saskatchewan,  where pull-tab  gaming declined  63 percent  after                                                               
electronic  gaming  was  introduced.   Mr.  Persily  offered  the                                                               
expectation  that  even  if pull-tab  revenue  dropped  by  half,                                                               
charities would lose  $10 million to $12 million,  and the state,                                                               
under the current tax regime, would lose about $1 million.                                                                      
Number 3351                                                                                                                     
REPRESENTATIVE  ROKEBERG  asked  how  much  the  charities  would                                                               
receive under the EGM scenario.                                                                                                 
MR. PERSILY  answered that the  charities would receive  the same                                                               
percentage  as the  state  -  30 percent  -  but  that is  before                                                               
expenses; there  would be  some sizable  expense in  owning those                                                               
machines.   He  opined that  the charities  would still  come out                                                               
ahead  if the  estimates  are correct,  however,  and would  make                                                               
more, even after  expenses, than they do now with  pull-tabs.  He                                                               
added,  "As  we  pointed  out,  it'd   be  nice  to  see  in  the                                                               
legislation  some limitation  on expenses  so that  charities did                                                               
see a net gain."                                                                                                                
Number 3508                                                                                                                     
MR.  PERSILY,  in  response to  a  question  from  Representative                                                               
Weyhrauch, related  the belief  that if EGMs  are put  in, people                                                               
will  spend a  lot  less money  on pull-tabs  and  spend more  on                                                               
[EGMs];  how  much  that  would   affect  pull-tabs  is  just  an                                                               
estimate.   However, if a charity  was able to obtain  a location                                                               
to operate electronic  gaming, it probably would  make more money                                                               
than  through pull-tabs.   There  could  be a  loss for  specific                                                               
charities that  couldn't find  a bar to  operate in,  since there                                                               
would  be more  charities with  permits that  wanted their  games                                                               
played than there would be locations  to do so.  But charities in                                                               
total probably  would receive more money  from electronic gaming,                                                               
as the state would.                                                                                                             
MR.  PERSILY  clarified  that the  bill  doesn't  end  pull-tabs,                                                               
bingo, or raffles.  Those  would remain in statute, and charities                                                               
could still run  them.  In response to  Representative Wilson, he                                                               
explained that FY 09 is when  the height of revenue is expected -                                                               
about  $50 million,  before  expenses, to  the  state from  EGMs;                                                               
about  $1.5  million  from the  twice-a-year  lottery,  which  is                                                               
probably  a  high estimate;  and  about  $0.5 million  from  fees                                                               
collected from  vendors.   That is  why there is  a total  of $52                                                               
Number 3744                                                                                                                     
REPRESENTATIVE WILSON asked how much  would be the total net gain                                                               
from the EGMs for the state.                                                                                                    
MR. PERSILY responded that the  state would get about $50 million                                                               
in   income   before  expenses   and   the   expenses  would   be                                                               
approximately $2.5  million.  He  added that there could  be some                                                               
additional expense for advertising.                                                                                             
REPRESENTATIVE WILSON  commented that  it has  been statistically                                                               
proven  that once  gaming, EMGs,  and  lotteries are  in place  a                                                               
significant  expense is  incurred  in advertising  to keep  these                                                               
programs going.   She pointed out that other states  have spent a                                                               
lot of money on advertising on TV, and billboards, for example.                                                                 
Number 3849                                                                                                                     
MR. PERSILY clarified  that the figure he  mentioned with respect                                                               
to expenses  does not  include any funding  for advertising.   He                                                               
stated  that  whatever advertising  that  would  be necessary  to                                                               
promote  the  game would  be  in  the  state's best  interest  to                                                               
increase or  maintain the  revenue.   There would  need to  be an                                                               
advertising component added to the fiscal note, he commented.                                                                   
CO-CHAIR  WHITAKER  stated  for the  record  that  Representative                                                               
Joule had joined the meeting.                                                                                                   
Number 3913                                                                                                                     
REPRESENTATIVE JOULE  asked how communities would  decide if they                                                               
wanted to offer gaming.                                                                                                         
MR. PERSILY  responded that  in Section 21  there is  a provision                                                               
that  allows for  a community  to vote  as to  whether they  want                                                               
electronic gaming machines within their boundaries.                                                                             
Number 3938                                                                                                                     
REPRESENTATIVE JOULE  asked if there  was ever  any consideration                                                               
given  to reversing  the process.   In  other words,  a community                                                               
would have to vote to allow EGMs in their communities.                                                                          
Number 4011                                                                                                                     
REPRESENTATIVE HEINZE  said that Dennis Jackson,  former director                                                               
of  the Idaho  state lottery  and currently  the chairman  of the                                                               
National  [North American]  Association of  State and  Provincial                                                               
Lotteries is on line.  She  noted that he worked with Mr. Persily                                                               
while  he was  here last  week, and  could be  a great  source of                                                               
CO-CHAIR  WHITTAKER  explained  that  Mr.  Jackson  was  on  line                                                               
earlier, but is not at this time.                                                                                               
Number 4053                                                                                                                     
REPRESENTATIVE  WEYHRAUCH asked  Mr. Persily  what other  revenue                                                               
sources the  state has that  generates approximately  $50 million                                                               
per year other than oil.                                                                                                        
MR. PERSILY  replied that  if there  is an  advertising component                                                               
added to the fiscal note  the amount received would be comparable                                                               
to  HB  236,  the  employment   tax  bill,  which  would  produce                                                               
approximately   $39   million.       In   further   response   to                                                               
Representative Weyhrauch, Mr. Persily  related that all the fees,                                                               
taxes, and  assessments paid by the  commercial fishing industry,                                                               
in a good  year, would total gross receipts  of approximately $50                                                               
million before refunds to communities.                                                                                          
CO-CHAIR HAWKER  related his understanding  that the  state would                                                               
receive an amount theoretically  equivalent to what the charities                                                               
receive before  operating costs [are  deducted].  He  inquired as                                                               
to  the prize  payout factor  that was  used in  the fiscal  note                                                               
MR.  PERSILY  answered,  "Eighty-five    percent."    In  further                                                               
response to  Co-Chair Hawker, Mr. Persily  informed the committee                                                               
that pull-tabs  in Alaska  average a 78  percent payout  and thus                                                               
this proposal  would payout a  better percentage  than pull-tabs.                                                               
He  noted that  85  percent would  be a  bit  less than  Montana,                                                               
Oregon,  and South  Dakota.   He mentioned  that [the  85 percent                                                               
payout] is in between other  states' payout for video gaming, but                                                               
a  little  higher  than  the existing  payout  for  pull-tabs  in                                                               
Number 4319                                                                                                                     
REPRESENTATIVE   ROKEBERG  pointed   out  that   the  legislation                                                               
provides   for  10   percent  revenue   sharing  with   municipal                                                               
governments  on the  EGM portion.   He  inquired as  to why  that                                                               
percentage was chosen and why municipalities should participate.                                                                
REPRESENTATIVE ANDERSON  informed the committee that  he had been                                                               
the head  of the Anchorage  Cabaret Hotel Restaurant  & Retailers                                                               
Association (CHARR),  and one  aspect of  CHARR's mission  was to                                                               
generate sources  of revenue for  charities with whom  they work.                                                               
The CHARR  reviewed the  option of  EGMs and  several legislators                                                               
contacted  CHARR suggesting  the  review  of alternative  revenue                                                               
sources, such  as EGMs.   As  CHARR reviewed  alternative revenue                                                               
sources,  a  task  force  comprised of  various  folks  from  the                                                               
community was formed.  Although  CHARR's task force report didn't                                                               
endorse  EGMs, it  analyzed EGMs  in other  states and  suggested                                                               
that a municipal distribution would  be beneficial.  He explained                                                               
that sharing income [derived from EGMs] was the intent.                                                                         
REPRESENTATIVE  ANDERSON, in  further response  to Representative                                                               
Rokeberg,  related that  he believes  the intent  of the  amended                                                               
legislation  is that  if  an  EGM is  played,  there  would be  a                                                               
determination regarding  where the  EGM was played.   If  the EGM                                                               
was played  in an organized borough  or first class city,  the 10                                                               
percent would  go to that  organized borough or first  class city                                                               
while the 10 percent derived  from EGMs in an unorganized borough                                                               
would go to state.                                                                                                              
REPRESENTATIVE ROKEBERG  inquired as  to how this  proposal would                                                               
compare  with  other  states  that  adopted the  EGM  play.    He                                                               
surmised  that   there  is  a  relationship   between  the  state                                                               
distribution/income vis-a-vis the local share.                                                                                  
REPRESENTATIVE  ANDERSON  directed attention  to  page  5 of  the                                                               
fiscal  note where  the  explanation  delineates the  differences                                                               
between Montana, Oregon, South Dakota  and the [proposal embodied                                                               
in HB 240].                                                                                                                     
TAPE 03-7, SIDE B                                                                                                             
REPRESENTATIVE  ANDERSON  continued  by  noting  that  he  hasn't                                                               
investigated the levels going to  local communities.  However, he                                                               
related his  belief that this  legislation is unique  compared to                                                               
other states  because of the  extra distribution.   He reiterated                                                               
that [this legislation] proposes a unique 4-way split.                                                                          
REPRESENTATIVE HEINZE informed the  committee that Mr. Jackson is                                                               
now back on-line.                                                                                                               
CO-CHAIR  WHITAKER informed  Mr.  Jackson that  the committee  is                                                               
discussing the  fiscal implications  of EGMs as  well as  a state                                                               
lottery for Alaska.                                                                                                             
Number 4521                                                                                                                     
DENNIS JACKSON,  GTECH Corporation,  informed the  committee that                                                               
he is  the former lottery  director for the  State of Idaho.   He                                                               
explained that GTECH is the  world's largest manufacturer of EGMs                                                               
and supplier  of computerized systems that  control lotteries and                                                               
video lottery machines.  Mr. Jackson  said that he would be happy                                                               
to act as  a resource, although he didn't believe  it wouldn't be                                                               
appropriate to advocate any solutions for Alaska.                                                                               
REPRESENTATIVE HEINZE  inquired as to the  experience Mr. Jackson                                                               
has  had in  other states  with lotteries  versus EGMs  regarding                                                               
what each brought to the charities and the general fund.                                                                        
MR. JACKSON  informed the committee  that currently there  are 39                                                               
states with  some type of lottery.   Only two states,  Hawaii and                                                               
Utah,  have no  gambling at  all.   In  terms of  revenue to  the                                                               
state,  he  estimated  that  around 18-20  percent  of  every  $1                                                               
wagered on  the lottery  goes to  the state.   For  instance, the                                                               
Idaho  state  lottery returns  about  $20  million to  the  state                                                               
government and  those funds  are used for  education.   The video                                                               
lottery produces  significantly higher  [returns].   He estimated                                                               
that  electronic  gaming  in  Alaska  would  probably  result  in                                                               
returns in the of amount $60 million year.                                                                                      
Number 4220                                                                                                                     
REPRESENTATIVE   HEINZE   recalled   that  Mr.   Jackson   viewed                                                               
Commissioner Persily's quotes  as low.  She asked  if Mr. Jackson                                                               
still believes that to be the case.                                                                                             
MR.  JACKSON confirmed  that he  believes Commissioner  Persily's                                                               
estimates to  be a bit  conservative, based on his  experience in                                                               
other  states.   However,  he  highlighted  that states'  returns                                                               
range   from  conservative   to  highly   optimistic,  which   he                                                               
attributed to the type of  legislation passed and how restrictive                                                               
it is.   He  reiterated that  he believes  Commissioner Persily's                                                               
estimates are conservative, although they aren't wrong.                                                                         
COMMISSIONER   PERSILY  said   that  the   fiscal  note   may  be                                                               
conservative  and   the  department  would  rather   err  on  the                                                               
conservative side.                                                                                                              
Number 4033                                                                                                                     
REPRESENTATIVE   ANDERSON   recalled  Representative   Rokeberg's                                                               
earlier  question  regarding  the  two  states  that  have  local                                                               
COMMISSIONER  PERSILY,  in  response to  the  question  regarding                                                               
whether   other  states   share  any   revenue  from   EGMs  with                                                               
municipalities directly, said he didn't  know and deferred to Mr.                                                               
MR.  JACKSON  confirmed  that  there  are  states  in  which  the                                                               
proceeds from [EGMs] are shared  with municipalities, although it                                                               
isn't standard  as a  general rule.   Generally,  if there  is an                                                               
entity  other  than  the  state government  that  shares  in  the                                                               
proceeds, it is a municipality or some gambling prevention fund.                                                                
Number 3838                                                                                                                     
MR.  JACKSON, in  response  to  Representative Heinze,  clarified                                                               
that he  believes if  a lottery is  to be a  success, that  is to                                                               
produce the  maximum revenue  for good  causes as  intended, then                                                               
the  legislation  should allow  [the  lottery]  to operate  as  a                                                               
business.   This  is a  unique enterprise  for state  government.                                                               
Generally,  the  only places  in  state  government that  have  a                                                               
profit  motive are  gambling or  liquor sales.   Those  lotteries                                                               
that  are successful,  that is  those that  generate the  maximum                                                               
return for good  causes, have "good" legislation  that allows the                                                               
lottery oversight entity to make good business-like decisions.                                                                  
REPRESENTATIVE  HEINZE informed  the committee  that Mr.  Jackson                                                               
had worked with  her to develop the two CS's  he thought would be                                                               
good legislation for EGMs and lotteries.                                                                                        
Number 3702                                                                                                                     
REPRESENTATIVE WILSON inquired  as to how much  money some states                                                               
have set aside for problems associated with gambling.                                                                           
MR.  JACKSON answered  that the  amount  of money  set aside  for                                                               
problems associated  with gambling varies. For  example, Nebraska                                                               
[puts  aside] the  first $500,000  and then  1 percent  of sales.                                                               
Generally, [the  funds set aside for  these purposes] is up  to 1                                                               
percent of the revenue [generated by the] gambling.                                                                             
REPRESENTATIVE HEINZE asked if Mr.  Jackson had any idea how much                                                               
a lottery would impact pull-tab sales.                                                                                          
MR.   JACKSON   said   he   was  sure   there   would   be   some                                                               
"cannibalization"  of  pull-tab  sales.    However,  he  couldn't                                                               
provide  any  estimates  because  it would  depend  upon  whether                                                               
lottery products would  be offered in the same  venue as pull-tab                                                               
sales.    Typically, lottery  products  are  sold in  convenience                                                               
stores  and small  grocery stores  versus the  adult settings  of                                                               
bars and taverns where pull-tabs  are generally sold.  Therefore,                                                               
there wouldn't  be a tremendous  loss of sales  because pull-tabs                                                               
and lottery products aren't offered in the same venue.                                                                          
Number 3438                                                                                                                     
COMMISSIONER  PERSILY, in  response to  Co-Chair Hawker,  related                                                               
his understanding that Co-Chair Hawker  is interested in how much                                                               
more [revenue] would be available  for distribution to the state,                                                               
municipalities, and  vendors as  the payout percentage  drops [or                                                               
changes].   If the payout  factor changes  from 85 percent  to 75                                                               
percent, he guessed it would be substantial.                                                                                    
CO-CHAIR HAWKER turned  to the three benchmark  cases provided on                                                               
page 5 of  the fiscal note and pointed out  that the prize payout                                                               
rate is  in excess  of 90  percent.   He requested  a sensitivity                                                               
scale report  for evaluation.   He inquired  as to the  basis for                                                               
the conclusion  that every Alaskan over  21 years of age  will on                                                               
average invest $403.                                                                                                            
COMMISSIONER PERSILY  answered that  South Dakota  was used  as a                                                               
reference case.   "Slightly less  than Montana, much  higher than                                                               
Oregon,"  he  related.   There  is  no scientific  evidence  that                                                               
specifies how much  an Alaskan will invest  in electronic gaming,                                                               
and therefore the  department reviewed other states.   In further                                                               
response to Co-Chair Hawker,  Commissioner Persily explained that                                                               
South Dakota was  chosen as a reference because the  games in use                                                               
there operate  close to what  is envisioned in  this legislation.                                                               
Furthermore, South Dakota is a smaller state.                                                                                   
Number 3039                                                                                                                     
REPRESENTATIVE ROKEBERG  inquired as to Mr.  Jackson's opinion of                                                               
Alaska having a biennial lottery.                                                                                               
MR. JACKSON  said that  the twice a  year legislation  isn't what                                                               
those in the  industry would refer to as a  lottery, but rather a                                                               
raffle.  He opined that  such wouldn't be successful in achieving                                                               
any dividend  return to  the state.   Mr. Jackson  suggested that                                                               
Alaska should  consider joining a  multi-state lottery  and those                                                               
drawings are generally held twice a week.                                                                                       
REPRESENTATIVE  ROKEBERG asked  if Alaska  could be  connected to                                                               
these other states through the Internet.                                                                                        
MR. JACKSON  replied yes, and noted  that Alaska is a  bit unique                                                               
in that  there may be  lottery terminals located where  there are                                                               
no telephone lines.   He explained that a  lottery system usually                                                               
works through a terminal connected  by a telephone line connected                                                               
to a  central computerized system.   He suspected that  in Alaska                                                               
that system  would probably  have to be  wireless.   He indicated                                                               
that he had thought [an option  for Alaska would be] Powerball, a                                                               
multi-jurisdictional  game,  which  is  currently  played  in  24                                                               
jurisdictions.    If  Alaska joined,  Alaska would  be part  of a                                                               
game played  by other jurisdictions  and some 70  million people.                                                               
In  further response  to  Representative  Rokeberg, he  confirmed                                                               
that there  are other  small population states  that are  part of                                                               
the  Powerball association.   He  explained that  the larger  the                                                               
Powerball  jackpot  the more  likely  people  are  to play.    He                                                               
informed the committee that the  following states are involved in                                                               
Powerball:   Oregon, Idaho, Montana, South  Dakota, Nebraska, New                                                               
Mexico,  Arizona,  Indiana,  West  Virginia,  and  Rhode  Island.                                                               
Generally,   the  small   population  states   are  involved   in                                                               
Number 2725                                                                                                                     
REPRESENTATIVE ROKEBERG asked  if the state sells  its own prizes                                                               
or games at the same terminal  as the Powerball, would there be a                                                               
third   party  administrator   system  that   would  handle   the                                                               
administration [of the game] on line.                                                                                           
MR. JACKSON replied yes.  He  envisioned that if a lottery was in                                                               
place  in Alaska,  the state  would seek  a competitive  bid from                                                               
companies that  run these computers  and have a large  library of                                                               
games from  which the company  would recommend specific  games to                                                               
fit the state's needs or desire.                                                                                                
REPRESENTATIVE ROKEBERG  turned to electronic gaming  and related                                                               
his  understanding   that  legislation  is  designed   such  that                                                               
individual  vendors would  purchase or  lease machines  and there                                                               
would  be a  central computer  system.   He  asked if  electronic                                                               
gaming  machines are  available for  both purchase  and/or lease.                                                               
Furthermore,  would it  be possible  for the  State of  Alaska to                                                               
contract with another  state to tie into that  state's system and                                                               
have that state manage the operation.                                                                                           
MR. JACKSON said  that as a general rule, states  that have video                                                               
lottery under state control, of  which there are few states, have                                                               
machines  that are  connected to  a  central computerized  system                                                               
maintained by  a vendor.   He  said he guessed  that it  would be                                                               
problematic to "piggyback" with  another state because typically,                                                               
the  system is  located in  a state  and that  state pays  a fee,                                                               
which  is usually  a  percent of  sales.   He  commented that  he                                                               
wasn't sure that it wouldn't be best  for a state to have its own                                                               
Number 2414                                                                                                                     
REPRESENTATIVE  ROKEBERG requested  that Mr.  Jackson comment  on                                                               
the ramp-up  time for  both the  lottery and an  EGM system.   He                                                               
related his assumption that if  there was a request for proposals                                                               
(RFP) out for a contract  administrator a lease purchase would be                                                               
less  capital intensive,  and  therefore he  asked  if those  are                                                               
available in the industry.                                                                                                      
MR.  JACKSON replied  yes.   He  predicted that  most people  who                                                               
would compete  for this business  would suggest that  this system                                                               
based on  participation -- a  percentage on sales of  the lottery                                                               
or  the net  win on  the video  lottery.   Therefore, the  vendor                                                               
would be  the state's partner and  thus the vendor would  have an                                                               
interest in  sales as does  the state.  Furthermore,  [the vendor                                                               
would have  a vested  interest] in  providing a  good maintenance                                                               
program  for  the  machine.    With  regard  to  the  timing,  he                                                               
indicated that  from the moment  of request it would  probably be                                                               
possible  to obtain  a  computerized system  within  four to  six                                                               
months.   However, the process  from the time Alaska  would issue                                                               
an  RFP [request  for proposals],  the  time for  the company  to                                                               
review it  and respond, and  the time  for a question  and answer                                                               
period, and evaluation by the state would be around one year.                                                                   
REPRESENTATIVE  ROKEBERG requested  that Mr.  Jackson review  the                                                               
pitfalls  in drafting  legislation, particularly  in relation  to                                                               
the administrative side.                                                                                                        
MR.  JACKSON  commented  that   he  has  reviewed  Representative                                                               
Heinze's legislation, which  looks good.  He  reiterated the need                                                               
to  operate  [a gambling  venture]  in  a business-like  fashion.                                                               
Sometimes,  due to  the  controversy  surrounding this  business,                                                               
legislation will  restrict advertising or attempt  to tax lottery                                                               
proceeds.  The aforementioned legislates  the business into a bad                                                               
business, and therefore  he suggested not going that  route.  Mr.                                                               
Jackson said  that the legislation  should relate to  the lottery                                                               
commission and  director that this  business should  be conducted                                                               
in  a manner  that  is  consistent with  the  sensibility of  the                                                               
citizens  of  the state.    Furthermore,  the legislation  should                                                               
include strong language with regard  to security.  He opined that                                                               
there  should be  a  security director  employed  by the  lottery                                                               
commission and  this security director should  perform background                                                               
checks  on operators,  employees,  et cetera  in  order to  avoid                                                               
people  with  a  dubious  past.   He  indicated  that  he  helped                                                               
Representative Heinze  with her legislation and  it embodies much                                                               
of what he believes is the best legislation for Alaska.                                                                         
REPRESENTATIVE HEINZE  noted her appreciation to  Mr. Jackson and                                                               
Jerry  Luckhaupt,   Attorney,  Legislative  Legal   Services  and                                                               
Research, for their work on this legislation.                                                                                   
Number 1856                                                                                                                     
REPRESENTATIVE  ROKEBERG   pointed  out  that  the   fiscal  note                                                               
specifies   the   need   for  investigators,   accountants,   and                                                               
supervision.    Representative  Rokeberg  said  that  HB  240  is                                                               
somewhat  unique  because  of  the   use  of  Title  4,  beverage                                                               
dispensary  licenses as  a background  or basis.   Therefore,  he                                                               
asked  if  this legislation  would  also  include restaurant  and                                                               
eating place licenses.  He asked  if there are some ways in which                                                               
administrative costs  for the lottery  could be cut  by reviewing                                                               
the functions of  the Alcoholic Beverage Control (ABC)  Board  in                                                               
relation to background checks and  the licensure procedures under                                                               
Title 4.                                                                                                                        
COMMISSIONER PERSILY said there could  be some savings.  However,                                                               
he pointed  out that  the legislation  proposed an  EGM operation                                                               
run within  [the Department  of Revenue] while  there would  be a                                                               
separate lottery commission  to run the twice a year  raffle.  In                                                               
a letter to  the co-chair of the House Special  Committee on Ways                                                               
and Means, the department suggested  that it might be appropriate                                                               
to combine those into one operation.   However, there would be no                                                               
savings   with  regard   to   investigation   staff  because   no                                                               
investigation  staff was  included  for  the lottery  commission.                                                               
For the electronic gaming portion,  the department requested five                                                               
positions for  investigations.  For  comparison, he  informed the                                                               
committee  that in  Montana  there are  13  investigators and  in                                                               
Oregon there are  30-40 investigators.  With  regard to combining                                                               
it with the  ABC Board, Commissioner Persily pointed  out that it                                                               
has four investigators for the  entire state and thus are already                                                               
stretched thin.  Therefore, he  didn't believe there would be any                                                               
savings realized by combining this  with the ABC Board.  However,                                                               
he recognized  that it might  make sense  to put the  lottery and                                                               
electronic gaming together under one operation.                                                                                 
REPRESENTATIVE  ROKEBERG said  that  it seems  that  some of  the                                                               
activities,  such as  the background  checks,  are already  being                                                               
undertaken by the ABC Board.   Therefore, he opined that there is                                                               
significant  synergy because  these machines  would be  placed in                                                               
Title 4  establishments.  He requested  that Commissioner Persily                                                               
comment on  the notion of  the present staff  administering pull-                                                               
tab and bingo operations.                                                                                                       
COMMISSIONER PERSILY agreed that [the  ABC Board] would perform a                                                               
background check for a liquor  license, and therefore it wouldn't                                                               
be necessary to do it twice  if the individual is also running an                                                               
EGM.    In  further  response   to  Representative  Rokeberg,  he                                                               
explained  that  the charitable  gaming  section  within the  Tax                                                               
Division has eight positions to  police and enforce, license, and                                                               
audit the returns for raffle,  bingo, and pull-tabs.  In calendar                                                               
year  2001,  charitable  gaming  in  Alaska  grossed  about  $350                                                               
REPRESENTATIVE   HEINZE  interjected   that  the   new  amendment                                                               
[committee substitute] covers the above.                                                                                        
Number 1417                                                                                                                     
COMMISSIONER  PERSILY  returned  to the  question  regarding  why                                                               
South Dakota was  chosen as a reference case.   He explained that                                                               
South Dakota limits [EGMs] to  10 units per establishment and the                                                               
machines  are only  allowed  in bars,  just  as this  legislation                                                               
proposes.    With regard  to  the  potential  to make  money  off                                                               
tourists, Alaska isn't unique in  having a tourist component.  In                                                               
fact,  Alaska's  tourist component  is  small  compared to  other                                                               
states.   For  instance, South  Dakota  has about  twice as  many                                                               
tourists  as  Alaska.    Furthermore,   the  issue  with  Alaskan                                                               
tourists is that  most arrive on cruise ships  that have casinos.                                                               
Therefore, the  fiscal note doesn't  factor in a large  amount of                                                               
money coming from the tourists as compared to other states.                                                                     
Number 1251                                                                                                                     
CO-CHAIR  WHITAKER  remarked  that  it should  be  clear  to  the                                                               
committee  that there  are  some challenges  with  regard to  the                                                               
fiscal discussion  on this  issue.   Representative Heinze  has a                                                               
committee substitute and it would  behoove the committee to study                                                               
it.   Co-Chair Whitaker  acknowledged that  there are  people who                                                               
are  very   concerned  about   gambling  and   EGMs.     He  also                                                               
acknowledged  that  from a  moral  perspective,  this is  a  very                                                               
controversial issue.  Therefore,  he announced that the committee                                                               
members  have half  an hour  during  which they  may discuss  the                                                               
moral implications  and the  cost associated  with EGMs  and/or a                                                               
REPRESENTATIVE  CRAWFORD  related  his  belief  that  [with  this                                                               
legislation] "a  bad moon  is coming over  Alaska."   He informed                                                               
the committee that he grew up  in Louisiana where he saw what the                                                               
gambling  industry  did.   Therefore,  he  suggested that  before                                                               
Alaska enters into  this, one should take a long  hard look at it                                                               
because  there  have been  many  implications  that haven't  been                                                               
addressed today.   He pointed out that South  Carolina has banned                                                               
electronic gaming after several years  experience with it.  South                                                               
Carolina at one point had 34,000 EGMs.   He noted that one of the                                                               
governor's  of South  Carolina  lost his  job  because he  fought                                                               
against gambling interests.  He  recalled that in Louisiana $1 of                                                               
every  $3  donated to  political  campaigns  comes from  gambling                                                               
interests.  Therefore, he predicted  that [the gambling industry]                                                               
would be the dominant factor  in political campaigns [if gambling                                                               
is  allowed in  Alaska].   Former South  Carolina governor  David                                                               
Beasley said in  his state of the state speech  that studies show                                                               
that every dollar  spent on gambling costs another $3  to pay for                                                               
its consequences.  Furthermore, every  dollar placed in a machine                                                               
is a dollar less for  local businesses, family budgets, food, and                                                               
clothes.   Representative Crawford  noted that the  great refrain                                                               
is "You can't  legislate morality."  However,  he questioned what                                                               
one   would  call   the  body   of  law   forbidding  drug   use,                                                               
prostitution, and a variety of  human behaviors legislatures have                                                               
deemed inappropriate for the state.   Routinely [legislators] are                                                               
asked  to decide  between right  and wrong,  and this  is another                                                               
case.    Representative  Crawford requested  that  [gambling]  be                                                               
banned  once and  for all.   He  related his  personal experience                                                               
with some of  his renters in Louisiana and  how gambling consumed                                                               
them  to the  point  he had  to  evict  them.   This  is such  an                                                               
insidious  question being  considered  in this  legislation.   He                                                               
highlighted some of the ill  partners to gambling such as suicide                                                               
and prostitution.   Representative Crawford  said that this  is a                                                               
moral  and  an  economic  issue,  and  this  state  can't  afford                                                               
[electronic gaming]  because the [state]  would pay out  far more                                                               
in other costs  than the few dollars that  [gambling] might bring                                                               
Number 0709                                                                                                                     
MR. JACKSON  agreed there  is no question  that there  are people                                                               
with  compulsive problems  related to  gambling.   How large  the                                                               
problem  is  depends  upon  with  whom  one  talks  or  the  poll                                                               
reviewed.  As  a member of the industry, Mr.  Jackson pointed out                                                               
that [gambling] is  one of the largest growing  businesses in the                                                               
country.  He said this is  a decision that Alaskans must make and                                                               
he wouldn't attempt to influence the state one way or the other.                                                                
Number 0449                                                                                                                     
REPRESENTATIVE  ROKEBERG  related  that it's  clear  that  Alaska                                                               
already has  gaming, and  therefore the  question is  whether the                                                               
state  wants  to expand  it  or  maintain  the  status quo.    He                                                               
recalled  that there  have been  at least  two advisory  votes on                                                               
which the people of Alaska  rejected legalized gambling, the last                                                               
being  in 1990.    However,  he recalled  that  those votes  were                                                               
considering casino gambling.  With  passage of the federal Indian                                                               
Gaming  Act, there  has been  a revolution  in this  country with                                                               
regard  to  the  pervasiveness   of  casino  gambling  throughout                                                               
country.   Fairly recently, the  legislature reviewed  the gaming                                                               
laws in  Alaska in light of  the federal act to  restrict Alaskan                                                               
tribes from  entering into gaming  as a matter of  public policy.                                                               
He related  his belief  that the growth  of Indian  gaming across                                                               
the country  has broken down  a lot  of barriers.   For instance,                                                               
only  two states  don't have  some form  of gaming.   This  issue                                                               
should be  reviewed in  context of the  national policy  and what                                                               
has happened in other jurisdictions.                                                                                            
TAPE 03-8, SIDE A                                                                                                             
Number 0007                                                                                                                     
REPRESENTATIVE  HEINZE  said that  she  has  a  list of  all  the                                                               
lotteries  in North  America and  wanted to  share the  following                                                               
information.   The  Arizona lottery  provided $355.91  million to                                                               
education alone;  the California lottery provided  $14 billion to                                                               
education,  the   Colorado  lottery  provided  $8.5   million  to                                                               
education,  the Connecticut  [lottery] provided  $4.8 billion  to                                                               
the  state's general  fund, and  the  Indiana [lottery]  provided                                                               
$387.5  million  for education.    She  offered to  provide  this                                                               
information to anyone interested.                                                                                               
REPRESENTATIVE WILSON  said the  legislature needs to  be careful                                                               
with its  approach to  this because  there is  no desire  to make                                                               
things worse in the state.   She said she understood how pointing                                                               
to how much  [gambling] contributes to education  in other states                                                               
can look  good.  However,  she expressed  the need to  review how                                                               
much  of an  increase  in education  spending  occurred in  those                                                               
states.   Alaska  is  very  unique in  that  it  has the  highest                                                               
suicide  rates,  alcohol  problems, and  fetal  alcohol  syndrome                                                               
incidences in the nation.   Representative Wilson recalled living                                                               
in  North  Carolina  when  the   neighboring  State  of  Virginia                                                               
implemented  a  lottery.   In  Virginia,  during the  first  year                                                               
everyone  played the  lottery.   However,  after  the first  year                                                               
people  from  high and  middle  income  levels quit  playing  the                                                               
lottery.  Overall, lower income  people continued to play because                                                               
it  was the  only way  they could  make it  "big."   Furthermore,                                                               
grocery stores saw a decrease  in income, which meant that people                                                               
were  spending their  grocery  money [gambling].    The State  of                                                               
Virginia found  that the social  problems of the  state increased                                                               
dramatically.   In Canada, a  group established  the "Responsible                                                               
Gambling Council,"  which is a nonprofit  bipartisan organization                                                               
to  help  communities deal  with  the  problems [associated  with                                                               
gambling].     She   related  the   following  quote   [from  the                                                               
aforementioned council]:  "The study  also revealed that gambling                                                               
problems are clearly  related to poor health.  About  one in four                                                               
moderate  or  severe  problem gamblers  reported  being  under  a                                                               
doctor's care for  emotional or physical problems  due to stress.                                                               
And more than  one in three reported  feeling seriously depressed                                                               
at times.   About one in fifteen ... severe  problem gamblers had                                                               
considered   suicide."     She  continued,   "The  authors   also                                                               
identified  a  significant   relationship  between  gambling  and                                                               
substance abuse.   The proportion of Ontario  adults who reported                                                               
having  an alcohol  or drug  problem increased  from 6.1  percent                                                               
among  nongamblers  to  24.2  percent  among  those  with  severe                                                               
gambling  problems."    Representative Wilson  pointed  out  that                                                               
Alaska is  ratcheting down [funding] in  prevention areas related                                                               
to alcohol centers, although there  should be increased [funding]                                                               
in these  areas due to  the problems in  the state.   However, if                                                               
gambling is  implemented in this state,  [the legislature] should                                                               
determine  how  [funding]  could  be  increased  in  these  areas                                                               
because  she predicted  an increase  in  the problems  associated                                                               
with [gambling].                                                                                                                
REPRESENTATIVE  WEYHRAUCH informed  the committee  that "National                                                               
Indian  Gaming  Industry"  appointed  Robert Loescher  who  is  a                                                               
valuable local resource.                                                                                                        
Number 0755                                                                                                                     
REPRESENTATIVE CRAWFORD  recalled hearing  that the  revenues the                                                               
state receives from video lotteries is  a tax on the willing, but                                                               
he said it  would soon become a tax on  the desperate because the                                                               
"willing," the upper and middle  income people, tend to drop out.                                                               
However,  lower income  people are  hurt  the worst  and hit  the                                                               
hardest by any gambling scheme.   Representative Crawford related                                                               
the following  statistic about South  Carolina.  Each  year South                                                               
Carolina is $424,000 poorer because  of machine gambling; that is                                                               
the cost to  the general populace.  The  players individually use                                                               
a  total of  $610 million  annually.   South Carolina  dug itself                                                               
into a  hole and he  said he didn't want  Alaska to do  the same.                                                               
He  returned to  what happened  in  his home  state of  Louisiana                                                               
which failed to  outright ban gambling.   However, Louisiana went                                                               
to a  local option and all  but five of sixty-four  parishes have                                                               
banned video  gaming.  Representative Crawford  opined that [this                                                               
legislature] isn't taking the necessary time to consider this.                                                                  
Number 1012                                                                                                                     
REPRESENTATIVE  HEINZE   informed  the  committee  that   on  the                                                               
Internet  the National  Association  of  State Lotteries  website                                                               
contains a  wealth of knowledge  regarding some of  the questions                                                               
being discussed today.                                                                                                          
REPRESENTATIVE  ANDERSON pointed  out  that in  the most  current                                                               
Newsweek  magazine,  there  is   a  report  that  specifies  that                                                               
approximately  $6 billion  was spent  on Internet  gaming in  the                                                               
U.S. alone.  He said  he didn't believe Internet gaming generates                                                               
any taxes or  fees that go to  any state.  He  echoed the earlier                                                               
comment that gaming already exists in Alaska.                                                                                   
Number 1214                                                                                                                     
MR. JACKSON related that whenever  "we" do demographic studies of                                                               
lottery players  across the  county, which  all states  do rather                                                               
regularly, in  almost every  state it is  found that  the average                                                               
lottery  player mirrors  the  average citizen  of  state in  age,                                                               
income, and  education.  In  Idaho the average lottery  player is                                                               
around  age 35  with some  education past  high school  and earns                                                               
approximately  $30,000 a  year.   Mr. Jackson  related that  when                                                               
[GTECH]  studies people  across  the nation,  there  are a  small                                                               
percentage of people who merely want  to play and there are small                                                               
percentage  of people  who believe  that  no amount  of money  is                                                               
worth the  evil of gambling.   Therefore, most people are  in the                                                               
middle and  wouldn't want to restrict  someone else's opportunity                                                               
to  play.   In  the  last  study,  2-3  people polled  said  that                                                               
lotteries are an acceptable way to raise money.                                                                                 
Number 1447                                                                                                                     
REPRESENTATIVE  CRAWFORD  clarified  that  he  was  referring  to                                                               
problem gamblers  who are in the  lower income and thus  would be                                                               
more impacted.   The surveys  are of every player,  and therefore                                                               
the occasional player skews the averages.                                                                                       
CO-CHAIR WHITAKER announced  that there would be  a working group                                                               
on this  matter.  He appointed  Representatives Heinze, Rokeberg,                                                               
Whitaker, and Moses  to discuss this subject and,  if the working                                                               
group  so  desires,  bring  legislation   to  the  committee  for                                                               
[HB 240 was held over.]                                                                                                         
There being no  further business before the  committee, the House                                                               
Special  Committee on  Ways and  Means meeting  was adjourned  at                                                               
8:59 a.m.                                                                                                                       

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