SB 170-GAMING; ELECTRONIC PULL-TABS  1:46:51 PM CHAIR BJORKMAN reconvened the meeting and announced the consideration of SENATE BILL NO. 170 "An Act relating to gaming; relating to bingo; relating to pull-tabs and electronic pull- tab systems; and providing for an effective date." 1:47:30 PM KONRAD JACKSON, Staff, Senator Jesse Bjorkman, Alaska State Legislature, Juneau, Alaska, presented a brief recap of SB 170 and stated that SB 170 would legalize electronic pull tabs in Alaska, with a few minor cleanup changes. Rising inflation has increased paper pull tab costs from about half a cent to 47 cents, significantly reducing nonprofit margins. SB 170 would add electronic pull tabs as a lower-cost supplement to paper versions, aiming to improve nonprofit profitability while keeping paper pull tabs in place. 1:49:34 PM CHAIR BJORKMAN solicited a motion. 1:49:37 PM SENATOR MERRICK moved to adopt the committee substitute (CS) for SB 170, work order 34-LS-0213\T, as the working document. 1:49:49 PM CHAIR BJORKMAN objected for purposes of discussion. 1:49:53 PM MR. JACKSON presented the summary of changes from version I to version T for SB 170. [Original punctuation provided.] Summary of Changes ver. I to ver. \T  Section 4. Inserted new section. Amends AS 05.15.080(b) requires the annual reports to the department include the source and monetary value of marketing or promotional material received from a distributor. The following sections are renumbered accordingly. Section 20. AS 05.15.180(e) is amended to clarify that the top prize for a bingo session may not be more than $10,000 and not more than $2500 for a bingo game. The total value of all door prizes may not exceed $40,000 per month or $480,000 per year. Drafting convention changes were made to paragraphs 1, 2 & 3. Section 25. Amends new AS 05.15.181: Subsection (g) is amended to prohibit a manufacturer from providing or receiving gifts or anything of value. Amends subsection (i) to prohibit a manufacturer from distributing electronic pull-tabs to a distributor if an ownership interest in that distributor is held by the manufacturer. 1:51:45 PM MR. JACKSON continued with the summary of changes for SB 170: Section 26. AS 05.15.183(a) is further amended to prohibit the issuance of an electronic pull-tab endorsement to a distributor's license should an ownership interest be held by a manufacturer, a parent or sister company or subsidiary of a manufacturer. (Pg 12 ln 18-20) Section 29. AS 05.15.183(h) is amended: (8) Removed the term "subsidiary". (9) Restricts distribution of electronic pull-tabs by a distributor from a manufacturer referenced in AS 05.15.181(i). (Pg 10, ln 25 to Pg 11, line 1) Inserts new paragraph (10) Specifying a distributor may not distribute a pull-tab game to a permitee or licensee that is owned or managed by a close relative of an owner or employee of the distributor. Amends (j) by adding a reporting requirement for all marketing or promotional items provided under this subsection to include the value and location where the items will be used or displayed. (Pg 14, ln 1215) Amends (m) specifying a contract may not include an incentive or bonus and there may not be a penalty based on the length of the contract. (Pg 14, ln 25-27) Section 32. Amends AS 05.15.186 (e) to specify the ideal payout may not exceed 90%. Senate Bill 170 - 34- LS0213\ver I to ver T Section 37. Amends AS 05.15.187 (j) to require the designated person in charge must be onsite and provide direct oversight of the gaming system(s). (Pg 17, ln 29-30) Amends (k) changing optional limits on tablets in play to mandatory limits. Adds an alternate method of calculating the number of tablets which may in play on a premises (based on occupancy or 10 tablets, whichever is greater). Former paragraph (n) is deleted and the remaining paragraph is re-lettered. Amends re-lettered (n) to remove $250 gift cap. (No gifts may be accepted.) 1:54:54 PM MR. JACKSON continued with the summary of changes for SB 170: Section 41. Amends AS 05.15.188 (l) establishing permitee payout to a vendor for electronic pull-tabs may not be more than 25 percent. (q) is amended to require monthly payments by a vendor to a permitee be made not later than the 15th day of the month for the previous month's sales. Allows a distributor to assist a vendor in the transfer of these payments subject to department approval. Grants the department authority to adopt appropriate regulations. (t) is amended to remove $250 gift cap. (No gifts may be accepted.) Section 47. AS 05.15.690(40) is amended to expand the definition of a "qualified organization" to add a school-based booster club in existence for less than three years if the club is supporting an activity which has been in existence for three years prior to application. (Pg 21, ln 10-15) Section 51. Conforming changes. Section 52. Adds new transition section to permit adoption of regulations by the department. Following sections are renumbered. Section 53. Adds immediate effective date for Sec. 52. Sections 54 and 55. Conforming changes. 1:57:34 PM SENATOR DUNBAR noted that [version T], Section 20, increases the limits from $20,000 to $40,000 per month and from $240,000 to $480,000 per year, effectively doubling them to account for inflation. He said Section 4, "Amends [AS 05.15.080(b)] require annual reports to the department, include the source and monetary value of marketing or promotional material received from a distributor" and asked why tracking those promotional items is necessary. 1:58:33 PM MR. JACKSON replied that tracking promotional items relates to removing the $250 cap on gifts by eliminating gifts altogether while still allowing marketing and promotional materials. He said Section 4 requires that the source and value of those marketing and promotional materials be reported to the department. SENATOR DUNBAR asked who receives the materials from the distributor. MR. JACKSON replied that the materials are coming from a vendor to a licensee. SENATOR DUNBAR asked why the state is concerned about where the materials come from. MR. JACKSON replied this section relates to gifts. The goal is to eliminate gifts to ensure that anything of monetary value is tracked to prevent improper or unethical activity. SENATOR DUNBAR stated that the concern is whether a distributor could use gifts to encourage vendors to carry only its products, potentially pushing competitors out of the market. He asked whether less scrupulous activities lead to monopolistic behavior. MR. JACKSON replied that one concern is that gifts could create the appearance of buying influence to place a particular company's pull tabs in a business. He said promotional and marketing materials are common in most industries, though the goal is to avoid perceived influence. 2:01:29 PM CHAIR BJORKMAN commented that limits on vertical integration, gifts, and exclusivity are intended to maximize competition among manufacturers and distributors, which helps protect and maximize the profits of nonprofit organizations. He said allowing significant inducements or market control by one supplier could raise costs and the ability of charities to generate revenue. Charitable gaming in Alaska exists to fund nonprofits, not to maximize private profit, so strict statutory guidelines are necessary to protect the public interest. 2:03:38 PM CHAIR BJORKMAN removed his objection; found no further objection and CSSB 170 was adopted as the working document. 2:03:52 PM CHAIR BJORKMAN held SB 170 in committee.