SENATE BILL NO. 78 "An Act creating the education endowment fund and the dividend lottery fund; authorizing contributions from the permanent fund dividend to the dividend lottery fund; relating to transfers from the dividend lottery fund and the education endowment fund; relating to the definition of 'gambling'; and providing for an effective date." 1:55:59 PM Vice-Chair Bishop MOVED to ADOPT proposed committee substitute for SB 78, Work Draft 30-LS0534\M (Martin, 4/5/17). Co-Chair MacKinnon OBJECTED for discussion. Co-Chair MacKinnon noted that the public hearing on the bill had been held on April 7, 2017. 1:56:44 PM PETE FELLMAN, STAFF, SENATOR CLICK BISHOP, shared that people had been uncomfortable with the word "lottery" being used in the legislation. He said that the word "raffle" had been chosen as a replacement because the bill was akin to a bucket raffle. He stated that throughout the bill the descriptions for "contributions" and "donations" had been clarified to indicate that the donations would be used for a specific purpose. He added that some language had been changed from "may to "shall" because it would clarify that the commissioner would use the donations for the programs that the bill created. He referred to the document, "Changes Proposed by Finance CS-Version 30-LS0534\M to CSSB78(EDC) (copy on file): Proposed Finance CS would change all references from "lottery" to "raffle" and it will change all references from 'contributions" to "donations" it also changes the "may" to "shall" Bill Title  Page 1, line 1: Delete "lottery" Insert "raffle" Page 1, line 2: Delete "contributions" Insert "donations" Page 1, line 2: Insert "for educational" Page 1, line 3: Insert "purposes and to enter the permanent fund dividend raffle" Page 1, line 3: Delete "lottery fund" Insert "raffle" Page 1 line 4: Delete "lottery" Insert "raffle"   *Section 1. AS 11.66.280(3) is amended to read.  Page 2 line 19: Delete "drawing" Insert "raffle"   *Section 2. AS 43.23.063. Education endowment fund.  Page 2 line 25: Delete "contributions" Insert "donations" Page 3 line 18: Delete "lottery" Insert "raffle" Page 3 line 19: Delete "contributions" Insert "donations" Delete "lottery" Insert "raffle" Page 3 line 20: Delete "lottery" Insert "raffle" Page 3 line 22: Delete "may" Insert "shall" Page 3 line 23: Delete "contributions" Insert "donations" Page 3 line 24: Delete "may "Insert "shall" Delete "lottery" insert "raffle" Page 3 line 28: Delete "lottery" Insert "raffle" Page 3 line 31: Delete "contributed" Insert "donated" Page 4 line 4/5 Delete "contributed" Insert "donated for educational purposes and to enter the permanent fund dividend raffle" Page 4 line 5: Delete "contributions" Insert "donations" Page 4 line 8: Delete "contributions "Insert "donations" Page 4 line 9: Delete "may" Insert "shall" Page 4 line 10: Insert "shall appropriate" Page 4 line 11: Delete "lottery" Insert "raffle" Delete "may" Insert "shall" Page 4 line 12: Delete "contributions" Insert "donations" Page4 line 13: Delete "Nothing in this section created a dedicated fund" Page 4 line 15: Delete "lottery" Insert "raffle" Page 4 line 15, 16: Delete "contribution to the fund" Insert "donation as provided in (b) of this section" Page 4 line 17: Delete "drawing" Insert "raffle" Page 4 line 19, 21, 23, 25: Delete "lottery "Insert affle" Page 4 line 26: Insert "Nothing in this section creates a dedicated fund.   *Section 3. This act takes effect January 1, 2018 1:59:02 PM Co-Chair MacKinnon asked about Page 4, line 9; and queried the purpose of changing the word "may" to "shall." Mr. Fellman explained that the language change was meant to specify that the money would be used exclusively for education. 1:59:58 PM Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO OBJECTION, it was so ordered. Senator Micciche wondered whether an individual could write-off $75 dollars as a donation to the Public Education Fund and the Education Endowment, while the $25 to the raffle fund would be non-deductible. Mr. Fellman answered in the affirmative. 2:00:58 PM Co-Chair MacKinnon solicited comments from the administration concerning the legislation. SARA RACE, DIRECTOR, PERMANENT FUND DIVIDEND DIVISION, DEPARTMENT OF REVENUE, replied that the fund would work similarly to the University of Alaska College Savings Program and would be another available option on the online permanent fund application. 2:01:29 PM Senator von Imhof considered the estimated 2 percent administrative costs and wondered whether the costs could fluctuate as the raffle became more popular. Ms. Race stated that the Treasury Division would be managing the account, while the Permanent Fund Division would be simply hosting the program through the application. She said that she could refer the question to the Treasury Division and have an answer sent back to the committee. Senator von Imhof wanted assurances that the administrative cost would be controlled. 2:03:00 PM Co-Chair MacKinnon noted that there was a one-time, fixed expense of $8 thousand. She asked Ms. Race whether there was anything she would like to highlight in the fiscal note. Ms. Race believed that the department could implement the proposed program online application. She said that the one- time charge was needed to make the changes necessary to implement the program. Co-Chair MacKinnon referred to the second page of the fiscal analysis (FN 3): This added option will require programming changes to be made to the division's database and online dividend application. It will take approximately 50 hours at $ 160.00 per hour for a total of $8,000. Ms. Race answered that the analysis was correct. 2:04:09 PM Senator von Imhof queried the mechanics of the drawing. 2:04:43 PM AT EASE 2:05:27 PM RECONVENED Mr. Fellman relayed that the department had communicated that it was already doing online advertising for other programs such as college savings program and thought it would be very simple to add the raffle to those advertisements. 2:06:12 PM Senator Micciche understood that a person who turned 18 March 31, the deadline for the application, would be eligible to participate in the raffle. Ms. Race replied in the affirmative. She stressed that the option to participate would only be available on an adult application. Co-Chair MacKinnon asked what would happen if an estimated dividend did not cover the cost of the preordered raffle tickets. Ms. Race responded that the division would consider it in the same way it currently handled garnishment, contribution or assignment. Co-Chair MacKinnon understood that the program would be administered through regulation. Ms. Race answered in the affirmative. Co-Chair MacKinnon referred to an order of priority for vetting those who owed the state money in the form of court fines, child support, etc. She asked whether the bill specifically prevented people from purchasing raffle tickets if they had fiduciary obligations to the state. Ms. Race stated that involuntary deductions were always taken out first; the administration recommended that language be written into the bill that addressed voluntary deductions. 2:09:34 PM Co-Chair MacKinnon said that the bill would be held until the language was inserted. She requested that Ms. Race work with the bill sponsor to update the legislation. 2:10:05 PM Co-Chair MacKinnon noted that there were multiple voluntary deductions that could be made, and she hoped to hear recommendations from the administration and the committee in the immediate future. Senator Micciche probed the prioritization of deductions, whether voluntary or involuntary. Ms. Race specified that garnishments would always be paid out first, then the university college savings program, any funds available after that would be distributed to Pick.Click.Give recipients in the order they were selected. 2:11:43 PM Senator von Imhof thought it would make sense to put the raffle alongside the Pick.Click.Give program as a voluntary donation to education. 2:12:20 PM Senator Micciche agreed with the payment priority list set out by the administration. He thought that it needed to be decided whether the raffle would come before or after Pick.Click.Give on the priority list. Ms. Race agreed. 2:12:52 PM Co-Chair MacKinnon asked whether the sponsor had any recommendations. Vice-Chair Bishop appreciated the conversation and stated that he was open to the committee's thoughts on the legislation. Senator Micciche feared that the raffle could take funds away from organizations already in the Pick.Click.Give program, which could result in the state having to pay for additional services. Co-Chair MacKinnon reiterated that involuntary deductions already had a priority payment written into statute. She stated that the issue to consider was how to order voluntary contributions for payment. 2:15:00 PM Vice-Chair Bishop referred to $388 million spent annually on raffle tickets in the state. Senator von Imhof wondered whether there could be a way to let an applicant know when they had exhausted their total dividend and had no more available funds to donate Ms. Race replied in the negative. She stated that at the point in time that the dividend application was being administered, the amount of the dividend was not known. She continued that individuals selected their contributions based on a projected dividend amount. 2:17:20 PM Co-Chair MacKinnon asked whether statute allowed for a prorated reduction of a Pick.Click.Give. donation when the actual dividend amount was less than the original donation. Ms. Race stated that the distribution of the voluntary donations to Pick.Click.Give would have priority based on the order in which the organizations were chosen. 2:18:52 PM Senator Micciche thought that if would be difficult to choose whether to donate to Pick.Click.Give or the raffle. 2:19:54 PM Vice-Chair Bishop agreed with Senator Micciche. Co-Chair MacKinnon stated that with the support of the sponsor, she would draft a committee substitute, which would be sent in a timely manner to offices for review. Mr. Fellman spoke to the concern addressed by Senator Micciche. He thought that the language could be structured to allow a person pinking the lottery first and then picked an organization from Pick.Click.Give then the lottery could be the last priority for payment. Co-Chair MacKinnon wondered whether a modification in the prompting programming for donations would be possible and queried the cost of making changes to the application prompting programming. Ms. Race replied that modifying the program was possible. She felt that further research should done to determine a specific cost. She noted that Pick.Click.Give and the university savings program were separate choices that would be made when applying for a dividend, the lottery would create a third choice. 2:22:08 PM Co-Chair MacKinnon hoped Ms. Race could work with division programmers to understand the details and cost of any necessary changes. SB 78 was HEARD and HELD in committee for further consideration. 2:23:17 PM AT EASE 2:23:56 PM RECONVENED