Legislature(1999 - 2000)
04/22/1999 01:43 PM Senate L&C
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* first hearing in first committee of referral
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SENATE LABOR AND COMMERCE COMMITTEE
April 22, 1999
1:43 P.M.
MEMBERS PRESENT
Senator Jerry Mackie, Chairman
Senator Tim Kelly, Vice Chairman
Senator Dave Donley
Senator Loren Leman
Senator Lyman Hoffman
MEMBERS ABSENT
Senator Tim Kelly, Vice Chairman
COMMITTEE CALENDAR
SENATE BILL NO. 34
"An Act relating to tattooing and body piercing; and providing for
an effective date."
-MOVED CSSB 34(L&C) OUT OF COMMITTEE
SENATE BILL NO. 144
"An Act relating to charitable gaming and to gaming on state
ferries; and providing for an effective date."
-MOVED SB 144 OUT OF COMMITTEE
PREVIOUS SENATE COMMITTEE ACTION
SB 34 - No previous action to consider.
SB 144 - No previous action to consider.
WITNESS REGISTER
Senator Johnny Ellis
State Capitol Bldg.
Juneau, AK 99811-1182
POSITION STATEMENT: Sponsor of SB 34.
Ms. Catherine Reardon, Director
Division of Occupational Licensing
Department of Commerce and Economic Development
P.O. Box 110806
Juneau, AK 99811-0806
POSITION STATEMENT: Supported SB 34.
Senator Taylor
State Capitol Bldg.
Juneau, AK 99811-1182
POSITION STATEMENT: Sponsor of SB 144.
Mr. Bob Dahl, General Manager
Alaska Marine Highway System
Department of Transportation of Public Facilities
P.O. Box 25535
Juneau, AK 99802-5536
POSITION STATEMENT: Commented on SB 144.
Mr. Larry Myers, Director
Division of Income and Exise Audit
Department of Revenue
550 W 7th Ave., Suite 560
Anchorage, AK 99501-3566
POSITION STATEMENT: Opposed on SB 144.
Mr. Brett Freed, Economist
Division of Income and Exise Audit
Department of Revenue
550 W 7th Ave., Suite 560
Anchorage, AK 99501-3566
POSITION STATEMENT: Commented on SB 144.
Mr. Vince Usera, Assistant Attorney General
Department of Law
P.O. Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Commented on SB 144.
Mr. John Lopez
Alaska Bingo Supply
3707 Woodland Dr. #3
Anchorage, AK 99517
POSITION STATEMENT: Opposed SB 144.
Mr. Kent Hartzberg
P.O. Box 230915
Anchorage, AK 99523
POSITION STATEMENT: Opposed SB 144.
Mr. Michael Slezak, General Manager
Rookie World Stores
1014 W. Northern Lights Blvd.
Anchorage, AK 99523
POSITION STATEMENT: Opposed SB 144.
Mr. Terence Reese, Administrator
North Pole Moose Lodge
2297 Outside Blvd.
North Pole, AK 99705
POSITION STATEMENT: Opposed SB 144.
Mr. David Lambert
P.O. Box 71243
Fairbanks, AK 99707
POSITION STATEMENT: Opposed SB 144.
Ms. Ruth Ewig
2325 30th Ave.
Fairbanks, AK 99701
POSITION STATEMENT: Opposed SB 144.
Mr. James Showalter
Kenaitze
P.O. Box 988
Kenai, AK 99611
POSITION STATEMENT: Opposed SB 144.
Mr. George Wright
Alaska Native Brotherhood Camp 2
320 Willoughby
Juneau, AK 99801
POSITION STATEMENT: Opposed SB 144.
Mr. Doug Campbell
Kenai Native Corporation
215 Fidalgo, Ste 102
Kenai, AK 99611
POSITION STATEMENT: Opposed SB 144.
Mr. Steve Early
Last Chance
3511 Glenn Don Circle
Anchorage, AK 99504
POSITION STATEMENT: Opposed SB 144.
Mrs. Donna Early
Last Chance
3511 Glenn Don Circle
Anchorage, AK 99504
POSITION STATEMENT: Opposed SB 144.
Ms. Carol Segura
Tanaina Corp.
215 Fidalgo Ste 102
Kenai, AK 99611
POSITION STATEMENT: Opposed SB 144.
Ms. Diane Covey
Ninilchik, AK 99639
POSITION STATEMENT: Opposed SB 144.
ACTION NARRATIVE
TAPE 99-16, SIDE A
Number 001
SB 34-TATTOOS AND BODY PIERCING
CHAIRMAN MACKIE called the Senate Labor and Commerce Committee
meeting to order at 1:43 p.m. and announced SB 34 to be up for
consideration.
SENATOR JOHNNY ELLIS, sponsor of SB 34, said this isn't the most
compelling issue this session, but to one family in his district it
is important. They contacted him because their child was infected
by a scam artist who was engaged in tattooing and body piercing in
the Anchorage area. Senator Ellis found that there is no licensure
or regulation of this growing industry in Alaska. This bill
proposes minimal licensure and regulation standards and fees from
the industry are proposed to cover the cost to the State.
SENATOR ELLIS said the bill proposes to add a new member the Board
of Barbers and Hairdressers and Cosmetology. There are less than
20 practitioners in Alaska now who have said this really needs to
be done.
There are no schools for this kind of training in Alaska and they
are proposing an apprenticeship with a licensed practitioner in the
CS. There would be a student license for a six month period. They
have changed the apprentice requirement from 350 hours to 75 hours
based on current common practice in other states.
CHAIRMAN MACKIE asked what the fees would be.
SENATOR ELLIS said it is about a $100 annual license fee for all
the folks. He said the legitimate practitioners support this bill;
and it is a legitimate concern to get rid of the bad actors, some
of which are victimizing young people.
CHAIRMAN MACKIE asked him to explain the effective date.
SENATOR ELLIS responded that they wanted a delayed effective date
so there would be time to gear up and give notice requirements.
Number 125
SENATOR LEMAN moved to adopt the Lauterbach version H to SB 34.
There were no objections and it was so ordered.
MS. CATHERINE REARDON, Director, Division of Occupational
Licensing, supported SB 34. She said her staff would be providing
support to the Board of Barbers and Hairdressers who would be
administering this program. The fee structure makes costs and fees
equal for all the professions within the Board of Barbers and
Hairdressers. It is very similar language to what went into the
Architects, Engineers, and Land Surveyors Board when the landscape
architects were added. Right now the fee is $100, but that could
go up or down. Since the fiscal note would be different for the
CS, they will prepare a new one if they pass it out.
SENATOR LEMAN asked if she was sure the current professionals
covered under this Board would accept the cost shifting that would
take place in the first year.
MS. REARDON said the Board certainly understood that.
SENATOR LEMAN asked if she was satisfied that the costs for these
20 people would be fairly minimal.
MS. REARDON answered that she thought the cost for the first two
years would be in the $10 range. She thought most of them would
come in under the grandfathering provision in the first two years.
Number 180
SENATOR LEMAN moved to pass CSSB 34(L&C) from committee with
individual recommendations. There were no objections and it was so
ordered.
SB 144-CHARITABLE GAMING & GAMING ON FERRIES
CHAIRMAN MACKIE announced SB 144 to be up for consideration.
SENATOR TAYLOR, sponsor, said SB 144 was introduced as a means to
make charitable gaming more accountable. It would authorize the
use of electronic video gaming machines capable of being linked to
a central computer system within the State greatly increasing our
ability to account for the millions of dollars spent annually on
charitable gaming in Alaska. Lack of accountability has been one
of the major concerns in this area as it fosters fraud and other
criminal activity. Many charities seem to be receiving less than
their fair share of the proceeds.
SB 144 also directs that the proceeds from video games be
distributed differently than pull tabs giving 30% to the permittee
or charity; 30% to the vendor; 15% to the State; and 25% to the
municipality in which the machine is located. If in the unorganized
borough, that share would go to the State. These are percentages
taken from other states. If the Alaska Marine Highway desires, SB
144 contains a provision allowing ferries to be licensed to operate
video games providing additional income and entertainment. It is
his hope that as Alaskan charities become more familiar with video
gaming and its accountability, they will gradually phase out the
less accountable pull tabs.
CHAIRMAN MACKIE asked if this would allow for placement of the
video gaming machines in licensed premises.
SENATOR TAYLOR answered yes.
CHAIRMAN MACKIE asked if this would harm current pull tab
operations in the State.
SENATOR TAYLOR said no; it is entirely optional. Many people are
concerned about the cost of starting up, but that has not been a
problem in other states. He did not want this bill in any way to
decrease or deplete the amount of resources that charities are
currently relying upon. This is making up a major percentage of
our charities' income stream. He is also not opposed to expanding
beyond the area where they would be only on licensed premises,
because there are many communities that are dry, as long as there
is a restriction on access to people under 21 years old.
MR. BOB DAHL, General Manager, Alaska Marine Highway System, said
they estimated how many machines could be put in each ship. The
larger ships could take four; the other probably three; for a total
of 16 machines. The fiscal note starts part of the way through
fiscal year 2001, so that year is 50% of figures for subsequent
full years. He thought the numbers were conservative, but because
ships don't fill the bars as communities do, he scaled down the
estimates. He said they would be happy to install the machines if
the Legislature and the Governor want them to do it. It would be
a revenue enhancing tool.
MR. LARRY MYERS, Director, Division of Income and Exise Audit,
explained that charitable gaming consists of two kinds of gaming:
pull tabs and bingo. Although it's not a perfect system, there are
certain safeguards in statute and regulations to help industry, as
well as the State. Some of the biggest safeguards are in the
expense areas; limitations on the amount of pull tab expenses which
cannot exceed 70% of Adjusted Gross Income and bingo expenses which
cannot exceed 90% of AGI. This is an effort to get most of the
money to the charities.
In fiscal year 97, $280 million worth of proceeds were gained; 76%
went to prizes ($213 million), 13% went to expenses ($42 million),
and 81/2 % ($23.7 million) went to the permittees. Out of the
expenses, the State received about $2 million in general fund
revenue.
MR. MYERS said a preliminary report for fiscal year 98 showing
charitable gaming through April 8 is on track.
CHAIRMAN MACKIE asked him what his website address was.
MR. MYERS answered www.revenue.state.ak.us/iea.
MR. MYERS said that charitable gaming would take on a whole new
concept with the passage of SB 144. They realize the theft and
fraud problems with accountability and these issues will continue
to exist no matter what we do, he said. SB 144 focuses on the
accountability, but it also reaches into new areas that raise
concerns within the Department. Their foremost concern is the
amount of money the charities will actually receive as there is no
limitation on the amount that can be assigned to expenses for a
permittee who contracts with a vendor. There are no provisions for
the Division to monitor the contracts so they know what the
standards are.
Certain costs, such as rent and telephone charges to hook up to the
computer, and staff time are passed back to the permittee which
would reduce their 30% take that's intended under the bill.
Experience has shown that when permittees go out and bargain with
vendors, they are not always in the best bargaining position and
that would continue under this system, as well. The have nots will
not be able to break into the arena. They would like to see
permittee organizations limited to charitable organizations. He
said these are all on-going problems that exist now and are not
addressed in this bill.
Number 360
SENATOR HOFFMAN asked for an example of a problem area with
expenses.
MR. MYERS responded that one of the biggest one is rent. There
have been instances where rent is two to two and half times over
fair market value. Accounting by a private accounting firms would
be more accurate.
CHAIRMAN MACKIE noted that these were his on-going concerns that
were not necessarily addressed in the legislation and asked if he
had ever drafted legislation to clean things up.
MR. MYERS said they introduced some last year which passed the
Senate, but didn't go through the House. Another concern he had
was tying in charitable gaming to where liquor is being served.
CHAIRMAN MACKIE said that is happening right now with pull tabs.
MR. MYERS said that is correct. Entering into machine play makes
the rate of play go up (according to other states' experience) and
that becomes more of a social concern. Money goes faster.
Purchase of the actual video lotteries is expensive, from $5,000 -
$10,000. Monies that might otherwise be going to charitable
organizations might be used to fund the start-up costs. Under this
bill the maximum win on a $2 bet is $1,000, another area of
concern, because the higher the prize, the more potentially
addictive the gaming could be.
CHAIRMAN MACKIE asked what the maximum win was now.
MR. MYERS answered that it is currently $500. He said they see a
change from a "low key" gaming atmosphere into a professional
style. Pull tabs are paper and have to be broken open; video
machines play with credits; it turns the money faster.
MR. MYERS concluded that the Department of Revenue is not
comfortable with video lottery.
CHAIRMAN MACKIE asked what the costs and revenues would be.
MR. BRETT FREED, Economist, explained that the total operating
costs start out in FY01 at $1,920,300. The State would assume the
costs of the central computing facility, so they would have to
either lease or purchase that facility and their figures reflect
leasing costs from International Gaming Technologies.
CHAIRMAN MACKIE asked if they needed 10 full-time positions.
MR. FREED said that was correct.
CHAIRMAN MACKIE asked want impact this bill would have to the
State. He asked if there was a broad range of figures because it's
hard to predict the level of play.
MR. FREED said that was correct; there is a high end and a low end.
Number 563
SENATOR DONLEY said he was concerned about impacts on the Federal
Indian Gaming Act and that there was a lot of exemptions going on
now. He thought they would all go out and buy unlimited numbers of
these machines and could charge any amount for the games.
MR. VINCE USERA, Assistant Attorney General, said a major impact
would be it allows an Indian tribe on Indian land uses of these
machines. This would include Metlakatla, Kake, Kluwock, and Angoon.
TAPE 99-16, SIDE B
He said we could negotiate compacts with them, but it's hard to say
what you could win. We could not insist that they hold down
numbers of the machines nor the amount of prizes they give away.
So the they would be allowed to do the same thing as the State, but
without the controls. Other than that there are no legal problems
with this bill.
SENATOR DONLEY said he knew Eklutna was interested in this, because
when they repealed Monte Carlo Night, pull tabs was the only thing
available. He asked if it wasn't obvious that putting this in
statute would give them the go-ahead.
MR. USERA responded that Eklutna didn't apply.
SENATOR HOFFMAN said that anyone could form a nonprofit to do this.
SENATOR DONELY noted that anyone doing that would have to abide by
state rules for the dollar amounts involved where if you do it
under the Indian Gaming Act, it's unlimited.
Number 530
MR. JOHN LOPEZ, Anchorage, said that the quality of life for every
resident in Alaska would be severely impacted if these machines are
made legal. He said the legislators have the moral responsibility
to see that this bill does not become law.
Number 500
MR. KEN HARTZBERG said he has been licensed by the State of Alaska
to conduct gaming activities for licensed non profits for 11 years.
SB 144 increases the income of liquor establishments and expands
gambling activity in the State. Laws prohibit playing bingo where
alcohol is dispensed. 15AAC.160.480 requires that a vendor may not
sell pull tabs to a drunken person. If the State is so concerned
about alcohol and bingo, how can they want to expand gambling and
add alcohol to it.
CHAIRMAN MACKIE asked if he operated pull tabs right now.
MR. HARTZBERG answered yes.
CHAIRMAN MACKIE asked if they were healthy for our social economy.
MR. HARTZBERG answered that they were healthier than alcohol. He
never had anyone leave his bingo hall and kill someone.
MR. MICHAEL SLEZAK, General Manager, Rookie World Stores, said that
he is involved in the sale of retail pull tabs to the general
public. He is also the editor of a national franchise newspaper
and he has an extensive insight into the gaming and gambling
activities in Alaska. The type of gambling proposed in SB 144 is
known throughout the gambling world as the crack cocaine of the
gambling industry. VLTs offer an extremely fast type of play
action that hooks the player with an array of visual and audible
stimuli that keep the player on the machine until he has expended
all available resources for play. When you couple these machines
to locations with a liquor license, you have a recipe for economic
disaster for the player. There is a very good reason that almost
every casino in the U.S. offers free drinks to players in a casino.
Alcohol lowers the natural inhibitions to the players and impairs
their reasonable thought process. Claims that people who are
intoxicated will be barred from play are gross exaggerations of the
reality in a gaming environment. Bar owners want this bill
strictly for their own economic gain and some bars allow parents to
bring their children.
CHAIRMAN MACKIE asked if the bill addressed the opportunity for the
bingo parlors and other locations where children aren't allowed,
would the industry support the option of having machines versus
pull tabs or something like that.
MR. SLEZAK said no, a lot depends on how things are structured.
Every time they have seen this bill it has been structured in such
a manner that is detrimental to everyone. He agreed with Mr. Larry
Meyer on what these machines would do to Alaska and he very rarely
agrees with him.
CHAIRMAN MACKIE said one of the attractive things about this bill
is the accountability.
MS. SLEZAK added that machines take away from pull tab sales and
destroy the pull tab market as it had in other states.
MR. LOPEZ inserted that there is equipment out right now that will
provide more accountability for pull tabs without going to the
addictive behavior of video.
MR. TERENCE REESE supported Mr. Lopez's opinion and opposed SB 144.
Number 370
MR. DAVID LAMBERT said he became involved with gaming about five
years ago and is currently an operator in Fairbanks. He is
concerned that this legislation bans operators from video gaming.
He said that pull tab sales would go down and the charities would
suffer. He would like to see the prize limitation on operators to
be raised to the same as vendors ($1 million) and have the
percentages reviewed. He didn't think he could survive on just a
30% margin.
MS. RUTH EWIG said she was sorry to see three usury bills in the
legislature which is a trend in the wrong direction. She is
opposed to SB 144 because of the negative social impacts. This
State should not be participating in or supporting something which
preys on the weaknesses of individuals and is ultimately
destructive to families. There are other means of raising money
for charities. She suggested they read the Internet Site NCALG.org
(National Coalition Against Legalized Gambling).
Number 345
MR. JAMES SHOWALTER, Kenaitze Indian Tribe, opposed SB 144 for all
the reasons already stated.
MR. GEORGE WRIGHT, Alaska Native Brotherhood Camp 2, opposed SB 144
because it is devastating for charities that don't want to
patronize bars or be connected to the alcohol trail. There are no
sales tax limitations on this. Charities should not be burdened
with the responsibilities of paying for the telephones or the hook
ups. He agreed with Mr. Meyers and added that enforcement is a
problem, but charitable gaming brings in $2.2 million to the State
right now. The gaming investigator's budget has been cut from
$900,000 to $600,000 and when you have only a few investigators to
cover the State, you can't deal with the people who are dealing
from the charities. Exclusivity of location is wrong and will cut
out a lot of charities.
CHAIRMAN MACKIE asked if he would support the bill, if it allowed
for the locations that currently sell pull tabs.
MR. WRIGHT said if the industry could have input on those types of
changes, he would consider supporting it. He would want the
industry involved.
MR. DOUG CAMPBELL, Kenai Native Corporation, asked them not to move
SB 144 as written. They believe it has no benefits to charitable
gaming. Most of the people who participate in gaming in the State
are natives and this bill would add alcohol to gaming which is a
serious concern in the native community. He said the bill is a
redistribution of funds to new entities, particularly
municipalities. They need to do what the legislature has done and
cut services, cut their budget, and get things under control.
MR. STEVE EARLY opposed SB 144.
MS. DONNA EARLY opposed SB 14 because it could only harm the
communities. She thought a task force should work on this issue.
MS. CAROL SEGURA, Tanaina Corp. opposed SB 144. She explained that
they have bingo and people are there from 7:00 - 10:30. There is
no alcohol involved; it is a gathering place for a lot of people.
Some of them have alcohol problems and they want to get away from.
Putting machines in the bars would really hurt them.
Number 252
MS. DIANE COVEY, MVP beneficiary of Pull tabs, said her agency
would lose at least 50% or more of their funding and wouldn't be
able to withstand the cut. They rent their facility, a senior
center, and serve more than 4,000 meals yearly to the home bound
and disabled. That is above and beyond what they serve as meals at
the center. Passage of SB 144 would probably eliminate this and
other services they provide. The cost to the State of doing these
services far outweighs the 15% share they would be getting out of
the games. The committee should rethink this bill and consider
litigation in Virginia and North Carolina for gambling addiction
that far outweighed any benefits.
Number 224
SENATOR TAYLOR responded that people acting as operators for
charitable gaming, the single biggest problem the Department of
Revenue has faced, have problems like excessive rent and excessive
charges against charities for accounting purposes. This bill would
finally give charities a fair count and a fair take. Most of the
operators testifying have their machines placed in bars today,
except for the bingo operators. But as soon as we talk about
machines, we hear about all the evils and social concerns.
Basically, we are talking about money, whose hands the money is
passing through, and are the charities getting a fair amount.
SENATOR TAYLOR said that every state that has put these machines in
has paid for the added expense by operation of the game itself and
returned significant profits to their states.
SENATOR TAYLOR said he didn't want to hurt the bingo facilities
saying that studies have shown that drinking has gone down in a
community (a dry ones) where there is a good social activity going
on.
Number 150
SENATOR LEMAN said he opposed this legislation more from
philosophical grounds. He didn't like to teach people they can get
rich quick.
CHAIRMAN MACKIE agreed that this was a controversial issue.
SENATOR DONLEY said he shared the concern about pull tabs in bars
and didn't feel comfortable expanding gambling activities where
there is alcohol.
CHAIRMAN MACKIE handed the gavel to Senator Leman.
SENATOR MACKIE moved to pass SB 144 from committee with individual
recommendations. SENATOR DONELY objected because he thought that
the issue of alcohol should be resolved before it moved from
committee.
SENATOR MACKIE said he didn't have his same concerns.
SENATOR HOFFMAN said he was concerned that growth of gambling as
projected by the Department of Revenue was from $3 million - $7
million. This business was projected to grow to a $100 million per
year. These figures mean that gambling would triple in just a few
years and he was concerned with that.
SENATOR TAYLOR responded that he thought there would be an
expansion of gaming, but there would be greater accountability and
better revenue returns.
TAPE 17, SIDE A
Number 001
CHAIRMAN LEMAN asked if there were further objections. SENATOR
DONLEY continued to object. SENATORS HOFFMAN, LEMAN, and MACKIE
voted yes; and the motion carried.
CHAIRMAN LEMAN returned the gavel to Senator Mackie.
CHAIRMAN MACKIE adjourned the meeting at 3:20 p.m.
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