HSTA - 02/09/95 HB 44 - GAMING PROCEEDS/ DEFINE CHARITABLE ORG'NS Number 119 TOM ANDERSON, Legislative Assistant to Representative Terry Martin, stated he was there to speak on HB 44 as a representative of Representative Terry Martin. He said he wanted to pass out copies of an information sheet that referenced portions of the bill. He said this was the Internal Revenue Service's 501C listing of tax exempt nonprofit corporations. He mentioned there was debate at the previous meeting concerning Representative Martin's intention of excluding all other categories of IRS nonprofits on this list, other than the 501C3 category. This is the category covering religious, educational, charitable, literary and several groups. He mentioned that Representative Willis had expressed concerns about excluding unions from being able to obtain gaming permits. It was Representative Martin's preference to include only those groups listed under the 501C3 category. He had also expanded his bill to allow 501C10 organizations, 501C19 groups, and possibly the category of 501C23. Thus, Representative Martin was willing to include an amendment to include these additional categories, but would prefer to not expand beyond these groups. He said the intent of this bill was to try to get politics out of "charitable gaming." They were also trying to analyze who can get gaming permits and who can't. Representative Martin felt that if the idea was to try to support charitable organizations, why should a union be allowed to have a permit or cemetery companies? He thought it was better to specify those types of organizations considered a charity. CHAIR JAMES asked if there were any questions or comments for the sponsor. Number 189 REPRESENTATIVE ROBINSON said she had at the last meeting, asked if raffles were included in this bill. She said she was told that they weren't, and then when she talked to Legal, they informed her that raffles were included. She stated she did not know what was wrong with political groups doing a raffle. She argued that people who participate in a raffle know what they are buying and who they are supporting. MR. ANDERSON agreed that raffles were presently included in the bill, but this could be amended if this was the wish of the committee. He said when they drafted the bill, that they were trying to focus on the gaming idea, and realized later that they had included things such as raffles. Number 206 CHAIR JAMES asked if this bill would preclude these people from having gaming permits, or if they were just saying they could not use the proceeds for political purposes. MR. ANDERSON said the way the bill was written presently, it said that these people could not have gaming permits. This bill says no one can have them except 501C3 organizations. The bill is excluding a lot of groups as a result of a miscommunication with Legal Services. He stated they were proposing to include the other listed 501 categories and would consider exempting raffles. He further stated they were trying to make the bill more definitive by saying that just bingo and pull-tabs would be included. He said they were actually attempting to do two different things with this bill, to prevent gaming proceeds from going to political groups and to define who should qualify for a charitable gaming permit. REPRESENTATIVE ROBINSON stated this was why she felt the committee didn't have all of the information. She said she still did not know all of the groups that would be affected by this bill. She said she thought it was a mistake to include attempts to exclude political groups from the proceeds of charitable gaming and attempts to define who should have a gaming permit in the same bill. She said it seemed that in some ways we had politics involved in this bill, instead of really looking at the issue at hand. She further stated that at the last meeting it was mentioned that individuals did not know who they were supporting with gaming proceeds, when last year a law was passed that required vendors to post a sign saying who the proceeds were going to, and so this was not true. She said she was still trying to figure out where they were trying to go with this bill. Number 247 REPRESENTATIVE PORTER said he thought this was a reasonable effort to try and get gaming proceeds out of politics, without an entire election reform bill. He said he thought that what this bill needed was for the committee to come to a conclusion on who it is they want to have the ability to have permits for bingo and pull-tabs, the most favored type of gambling in Alaska. He mentioned he was under the impression that raffles were not included in this bill and that could be fixed very easily. He stated the reason the committee should consider trying to limit the types of organizations that can participate in charitable gaming is that the Act was originally intended to support charitable organizations only. This was why, he said, it was called charitable gaming and not credit union gaming or union gaming. He stated the problem with saying that everyone could have a gaming permit, but just to not allow the proceeds to go into politics, is the accounting nightmare of trying to figure out which proceeds came from gaming and where they were spent, as opposed to where their other revenues were spent. He thought it would be much simpler to only expend the resources necessary to insure that gaming proceeds go to charities, as originally intended, rather than expecting the Division of Gaming to try and audit where the proceeds from gaming were being spent. Number 287 REPRESENTATIVE IVAN was concerned that this bill was too broad and was excluding organizations in his area that were intended for charitable purposes. CHAIR JAMES said she wanted to assign this bill to a subcommittee to work out the details. She asked for Representatives Porter, Ivan, and Robinson to sit on this committee and to work this bill with Representative Martin's office. She also asked that they contact Representative Gene Therriault's office, as he had submitted a similar bill. She asked Representative Porter to chair the subcommittee. REPRESENTATIVE ROBINSON asked if in the subcommittee there would be greater leeway for interpretation of this bill. She didn't know if it was better for the sponsor to do this, but she wanted to know the fiscal impact of this bill for the state. She thought there were a lot of groups that were going to be affected by this bill, that were not necessarily 501C3 organizations, but could be considered charitable groups. Thus, she wanted a clear list of all organizations that would be affected by this bill. REPRESENTATIVE PORTER said he could alleviate any concerns about the fiscal impact of this bill. He said the Division of Gaming brings in about $1.4 million and spends about $350,000. MR. ANDERSON reiterated that the idea of this bill was to limit who would be eligible for a gaming permit and to ban all political activities and groups from benefitting from the proceeds of charitable gaming. He said they had program receipts and documentation, which they had not yet presented to the committee, that backed up how much money was going to political organizations. CHAIR JAMES stated she thought the goal of this exercise was to eliminate any gaming or gambling from being used for political reasons. Number 335 REPRESENTATIVE JOE GREEN asked if the mission of the subcommittee was to study not just who owns the permit, but who the operators were. He was concerned that with inflated operating costs, there might still be a large sum of revenue from gaming diverted to political purposes. CHAIR JAMES said she thought every cent that came into a permit as a result of selling or collecting from this activity, that none of these funds should be allowed to go to supporting political activities. She said it should not matter whether the funds came from the owner of the permit or the operator, as she understood the intent of the bill sponsor. Number 360 REPRESENTATIVE ROBINSON wanted to point out that this bill could affect organizations who only had gaming money available for funding political education and advocacy activities. She emphasized that she thought the intent of this bill was to insure that gaming proceeds did not go to support political candidates; not necessarily to prevent a citizens group from raising revenue and then be able to educate the legislature on issues that were important to them. Now she thinks that she is hearing otherwise. CHAIR JAMES answered she thought the intent was to limit gaming proceeds from being used for advocacy. She said the idea behind this was that these groups should raise their own funds, without depending on a gimmick to trick people into giving them the money, to support something they may or may not consent to. She said to allow that, was to allow these organizations to, in effect, prey on the people. She stated that because there was extensive conversation needed on this bill, she would prefer they hold any other discussion until they heard the report of the subcommittee. She also asked that the subcommittee keep her informed of the schedule of their meetings, as she wanted to participate. She also urged the subcommittee to speak to their peers, so they could try and get a well rounded bill coming out of committee. Number 386 REPRESENTATIVE ED WILLIS stated this bill just seemed to be getting broader and broader. He said he was wondering, that because the Governor had just appointed a commission to study the gaming issue, if it might not be better for the subcommittee to work with this commission or possibly wait for their recommendations. He said not only was there this bill, but also several other gambling issues before the legislature this session. He thought maybe the Governor's commission should study all of these issues and come back with a recommendation. CHAIR JAMES said she could understand his concerns, but his very own testimony spelled out the underlying problem, which was that the legislature had allowed charitable gaming in this state and that proceeds from this activity were supporting political causes. She felt this was the underlying problem and how they decided to fix it, was the decision of this legislature. She said they could not wait for the commission to find a solution because there had been a lot of commissions and their advice was not always followed. Thus, she thought that to wait for their decision could be a long process, which might not amount to anything, and she would just prefer to keep this bill moving through the process. MR. ANDERSON added that in Representative Martin's view, that commission was extremely deficient in its whole representation of the gaming industry, in that it was made up almost entirely of gaming operators and had little representation from the charitable organizations. He said the commission was very lopsided. CHAIR JAMES stated she felt there was no reason to belabor the issue now until they heard the recommendations of the subcommittee. She requested Representative Porter to chair the subcommittee. She said they would be moving down the agenda to HB 38, as the sponsors for the other two bills had not yet arrived. She called for Representative Con Bunde to come up and testify as the bill sponsor.