HOUSE BILL 20 "An Act relating to dog mushers' contests." TOM WRIGHT, STAFF, REPRESENTATIVE IVAN IVAN, explained that HB 20 would authorize the dog mushers' associations to conduct statewide games of chance. The Division recognizes those associations which have been in existence for at least three years, with at least 25 Alaskan members and are a "not for profit" organization. Prizes would be awarded for the nearest guess of three uncertain elements in a sled dog race which were not determined before the start of the race. The intent would be to provide a mechanism to assist race organizing committees to become financially self-sufficient. Passage of HB 20 would also allow participants to purchase raffle tickets in which the contestant would guess the checkpoints, finish line arrival times, temperature when a particular team crosses the finish line, and the total number of dogs that finish the race, etc. The dog mushers' association would administer the contests in conjunction with State regulatory authority. Co-Chair Therriault distributed Amendment #1. [Copy on file-Attachment #1]. Mr. Wright spoke to the amendment, noting that it had been brought to the attention of Representative Ivan that the language in Section #2 was unclear and could possibly prohibit the conducting of sled dog races. He stressed that this was not the intent of Representative Ivan. Representative Martin asked if "raffle" referred to prizes or money. Mr. Wright replied that would depend on the association. Representative Martin suggested that "could" be a play on words and recommended the language be consistent. He questioned why the language "raffle tickets" was being used. Co-Chair Therriault identified that the only language being added was to Section #1, "dog mushers contest". Raffle tickets would not be included as the prize. Representative Martin felt that the bill could encourage "gambling". Mr. Wright clarified that the language used in the sponsor statement was not intended to confuse anyone. He agreed that use of the word "ticket" would be adequate terminology for the raffle. (Tape Change, HFC 97-17, Side 2). Representative Martin spoke to the zero fiscal note, 5 suggesting that the legislation could add an additional twelve races. He asked how the Department would oversee "above-board" operations of the legislation. DENNIS POSHARD, DIRECTOR, DIVISION OF CHARITABLE GAMING, DEPARTMENT OF REVENUE, responded that the activities would fall under the same minimum charity provisions and expense limitations of the ten percent adjusted gross income that other activities must adhere to. The amount of time that the Division would spend on enforcing provisions would be insignificant. He noted that pull-tabs, bingo and raffles provide ninety-nine percent of charity money in Alaska. Mr. Poshard reiterated that he did not anticipate additional costs for the Department to implement the legislation. The Department currently is implementing a new computer system which will free-up a significant amount of time for data entry work and processing applications. Co-Chair Hanley asked if an entity would need to be non- profit in order to qualify. Mr. Poshard advised, in order to receive a permit for any charitable gaming activity, the association must be a non-profit organization, having at least twenty-five Alaskan members, and having been in existence for at least three years before the time the application was filed. An additional requirement exists for the type of gaming that is proposed in Section #B, limiting that contest to a "dog mushers association". Co-Chair Hanley asked if the new games would fit into the cap of a gross amount an organization would need to have to qualify to receive a permit. Mr. Poshard thought that would fall under the cap as would any gaming activity. A cap is based on prize limit awards. Representative Grussendorf asked if there would be a limit to the number of races conducted. Mr. Poshard noted currently, statute provides a yearly $1 million dollar limitation. The limitation is determined through the award of prizes. The Division requires every charitable gaming activity to provide a financial statement including a detailed listing of expenses associated directly with gaming activities and a listing of how profits were spent. Each statement is reviewed closely by the Division. Mr. Poshard continued, the cap is established on the prize award up to $1 million dollars and including all activities. There is no language indicating that the activities can not be statewide; this does not differ from what currently is in statute. Presently, AS 05.15.690(12) states that: "Prizes can be awarded for the correct guess of the racing time of a 6 dog team". There is no language which limits it to being a statewide contest. Representative Martin reiterated his concern with the potential fiscal impact on the Department. He asked if an association could hire an operator. Mr. Poshard commented that there exists no prohibition from an association hiring an operator. The Division could issue an operators license if necessary, although, the operator would be required to "put up" a $25 thousand dollar bond. Representative Martin stressed his concern in bringing a new element to gaming and "gambling". In response to Representative John Davies, Mr. Poshard stated that the agencies would have to register and receive a permit with the Division in order to award prizes. Those activities are subject to the same provisions that any other gaming activities are subject to. He added, there is a 10% minimum contribution, although there exists no maximum award amount. On raffle type activities, the expected norm return would be 30% to 40% of the adjusted gross. Representative Gary Davis asked about the amount of revenue the Department would expect to receive through tax associated with the legislation. Mr. Poshard explained, the main income received would be generated through a 3% tax associated with pull tabs and collected from those distributors. There is a 1% tax fee placed on any organizations net proceeds. The Department issues few mushing permits and little money is associated with these as they tend to award more prizes than funds received. Representative Davis commented that each year there is a lot of time taken with this type legislation. He suggested that the Legislature should not be involved with permitting decisions; instead it should be handled directly by the Division which has the expertise and regulations already in place. In response to Co-Chair Hanley, Mr. Poshard explained that "raffles and lotteries" were defined in AS 05.615.690.37. They are basically defined in the same way: "The selling of rights to participate in the awarding of prizes in a game of chance, conducted by the drawing for prizes, by lot". He agreed that the line between a raffle and a lottery was gray. Representative Martin stated that the legislation did not meet the definition of a raffle, but rather a lottery. Mr. Poshard explained that it was different because of the distinction between having an active guess on the part of the participant rather than a drawing by lot. Co-Chair Hanley added that the result would be different. 7 Representative Grussendorf referenced Section #1, pointing out the discrepancy between the five year snow machine licensure requirements, and those of the dog mushers' contests. Mr. Poshard emphasized that if an organization or dog mushing association formed at this time, they would have to wait three years before eligibility to any gaming activity. The five year limit was placed on snow machines and resulted from an amendment by Senator Frank last year in Senate Finance. Co-Chair Therriault commented that Mr. Lambert of Fairbanks disclosed concerns with the legislation. Amendment #1 would address these concerns by deleting the language, "conducted by a dog mushers' association,". [Copy on file]. DAVE LAMBERT, (TESTIFIED VIA TELECONFERENCE), FAIRBANKS, noted his support for Amendment #1. He said that the Dog Mushers' Association had been near extinction until three years ago when they implemented pull tabs. He observed that the proposed legislation would give the public a "personal" interest in dog racing. (Tape Change, HFC 97-18, Side 1). Representative Martin voiced concern with passage of Amendment #1. He felt it would open the market to professional gambling. Mr. Lambert pointed out that many of the current dog mushing races would be eliminated if that language remained in the bill. Representative Martin asked if contests were limited to those that were in the system before 1959. Mr. Poshard explained that the Division may issue permits or licenses to conduct any of the activities listed in Section #B. Any other activities can be listed as permits, if they existed prior to 1959. Representative Grussendorf recommended that snow machine classics be included in the amendment. Co-Chair Therriault stated that by making an additional deletion to the amendment, would allow other entities to operate races. Mr. Poshard added, Amendment #1 would take (12)A back to the current language as it exists in statute. Co-Chair Hanley MOVED to adopt Amendment #1. Representative Martin OBJECTED for purposes of discussion. Discussion followed regarding elimination of language in Section (12)A and the effect that would have on the language in Section (12)B. Representative Martin agreed that only the dog mushing association should have exclusive rights. Mr. Lambert commented that the three year eligibility quota could affect dog mush racing. Representative Martin WITHDREW his OBJECTION to Amendment #1. There being NO 8 additional OBJECTION, Amendment #1 was adopted. Representative Grussendorf suggested adding language to Page 1, Line 9, indicating dog mushing activities. Co-Chair Hanley summarized that the new games of chance in Section (B) would need to be in existence for at least five (5) years rather than the current three (3) years before contest permitting. Co-Chair Therriault recommended referencing AS 05.15.690(12)B in that language change. Co-Chair Hanley suggested making the motion a conceptual amendment for Legal Services to draft. Mr. Wright recommended the language change be inserted on Page 1, Line 9. Representative J. Davies asked why the change was needed. Representative Grussendorf thought that three (3) years could make this a more viable option. Representative Grussendorf MOVED to adopt the conceptual amendment. Representative G. Davis OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Grussendorf, Martin, Moses, Therriault, Hanley OPPOSED: Davis, Foster, Kelly, Mulder, Davies The MOTION FAILED (5-5). Representative Foster MOVED to report CS HB 20 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. Representative Martin OBJECTED. A roll call vote was taken on the MOTION. IN FAVOR: Foster, Grussendorf, Moses, Mulder, J. Davies, G. Davis, Hanley, Therriault OPPOSED: Kelly, Martin The MOTION PASSED (8-2). CS HB 20 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Revenue dated 1/24/97.