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Gambling on government

Posted: Tuesday, May 06, 2003

On a Tuesday night this winter at the Old Town Bingo Hall, more than 70 people crowded in from the cold to play bingo at a minimum price of $21 per game. Long tables were jammed with people of all ages dobbing at numbered pieces of paper with colorful ink blotters and chatting through a haze of cigarette smoke as a caller read off the next number.

While many were there having fun with friends or attempting to win a little money, everyone playing also was helping their neighbors.

"I'm giving to the charities," said Kitty Curren of Nikiski.

The neighbors, in this case, are the Peninsula Oilers minor league baseball club, a nonprofit organization that fields a team each summer in Kenai. Those who gain from the bingo games include the Oilers baseball team, young athletes aspiring to play baseball in the big leagues, central Kenai Peninsula residents hungry for summer activity at the ballpark, as well as the high school students the Oilers give college scholarships to each year.

Like the Oilers, many nonprofits depend on the dollars generated by bingo, raffles, derbies and pull-tab sales to support the activities and amenities that boost the quality of life in the peninsula's communities.

But if some state officials have their way, money now going to these charities may soon go instead to help bridge the state's fiscal gap.

House Bill 169 and Senate Bill 102 call for boosting the tax on pull-tabs from the current 3 percent of the amount left after prizes are paid out, to 5 percent of the total amount of receipts, supposing every individual pull-tab ticket in a bunch is sold at face value.

Here's an example: A box of 2,309 Mini Criss Cross pull-tabs, which sell for $1 each, would gross $2,309. Two hundred and seventy payouts in that group of pull-tabs equals $1,900, leaving a $409 ideal net for the seller.

The current 3-percent tax takes $12.27 from that net. A proposal from Gov. Frank Murkowski would pull out 5 percent of the gross, the $2,309, for a tax of $115.45, nearly 10 times the current tax.

Although one bill has been tabled until the next legislative session and the other shows little promise of becoming law this year, their shadows remain over the charitable gaming industry and the welfare of nonprofits that depend on gaming to pay the bills.

The Peninsula Oilers organization is one of more than 50 peninsula charitable gaming operations that together reported revenues in excess of $34.5 million in 2001, according to the Gaming Annual Report compiled by the state Department of Revenue.

Between pull-tabs for the booster club and the actual baseball operation two separate entities sales for that year for the organization grossed nearly $2.3 million.

Similar proceeds reported from organizations around the state encouraged Murkowski to propose a change to the way the popular pull-tab gaming is taxed. Murkowski's hope is that the change would raise an estimated $12.5 million in new revenues for the state.

Peggy Baxter, manager of the Oilers bingo and pull-tab operation, doesn't like Murkowski's proposal.

"They are going to tax us on money we never had," she said.

She said it is potentially dangerous to pull-tab sellers for the state to take its cut of the gross receipts before any prizes or expenses are paid without accounting for how long it might take to sell the pull-tabs if they sell at all.

In addition, the Oilers' bookkeeper, Linda Dunn, said the dollar amount the governor used to base his decision on recorded from 2001 receipts was an unusually high income year for gaming. Lots of people had lots of extra cash to spend that year, some of which was pumped into gaming.

For example, Cook Inlet Region Inc. paid a total of about $408 million to its nearly 7,000 shareholders in two disbursements just before January 2001 and again in May. The typical shareholder with 100 shares received a total of more than $65,000.

Also in 2001, nearly 600,000 Alaskans received the state's second-largest disbursement from the Alaska Permanent Fund $1,850. This came on the heels of a record payoff the previous year of $1,963.

"There was a lot of free money floating," Baxter said. "That will never happen again."

In a letter to state lawmakers, Dunn showed where the combined net for the Oilers club and the booster club grew 69 percent between 2000 and 2001, jumping from $258,281 to "a record high" $436,927. She said sales dropped 29 percent the next year, however, and said first-quarter figures for this year show that the downturn is continuing.

Movement on both bills has slowed down for the time being, due in part to opinions from the gaming community. Five of the seven members of the House Labor and Commerce Committee recommended the measure not pass before referring it to the House Finance Committee, and last week the Senate bill was tabled by that body's Labor and Commerce Committee, pending further study by a three-member task force that includes Sens. Ralph Seekins, R-Fairbanks, Hollis French, D-Anchorage, and Gary Stevens, R-Kodiak.

"My boss wanted to look further at the issue," said Doug Letch, Stevens' chief of staff. "It's a pretty important bill to those involved."

Letch said the committee responded to the fervor of opposition from many of the state's charitable organizations.

But the issue is still not dead. Although there is no activity scheduled on it this week, the House measure has yet to be decided one way or the other. The Senate measure still could pass, should the task force determine it feasible.

Leading up to next January when the Senate task force studying the bill is to reconvene, a number issues are expected to be considered. Like the Oilers organizations, other nonprofits will feel the blow from increased taxes on their lifeblood.

Justine Polzin, the executive director for Soldotna Chamber of Commerce, drafted a letter to send to state legislators, on behalf of 10 nonprofits in the central peninsula, including the chamber, the Oilers, the Kenai Peninsula Tourism Marketing Council and the Women's Resource and Crisis Center. The letter defined the impact to nonprofit operating budgets, should the tax measure be approved.

"Based on last year's sales, the nonprofits listed below paid $51,500 in taxes to the state," she said. "If the 5 percent of ideal gross had been in place, we would have paid $462,600 in taxes to the state. This takes $411,100 right out of our budgets, and we are only 10 of many."

Dunn said the trickle-down effect gaming creates would be impacted by the tax hike, from the jobs nonprofits and charitable gaming create, to gaming distributors and beyond. The Oilers paid more than $100,000 in payroll last year to 12 year-round, part- and full-time employees.

"This does not take into account the jobs and money that the charities themselves spend in our economy, or the service companies such as pull-tab distributors," she said.

Paul Fischer of Soldotna owns Alaska Wholesale Distributors. He said many of the gaming distributors in the state are small-time operations like his that could lose out in the face of proposed changes.

"If they keep adding these things, small businesses won't be able to stay in business," he said.

Rio Custodio works nights 20 hours a week at Old Town Bingo. She works as a caller making $11 an hour and has been there for three years. It is one of the few good-paying jobs that allows her the flexibility to work a day job with shifting schedules at Blockbuster in Kenai, she said.

"It would be hard to find another job that would work with my (daytime) schedule," Custodio said.

She said she needs both jobs, now that her husband, who lost his job when Big Kmart closed, is looking for work. The job helps pay the mortgage and bills and gives the family room to occasionally do something special.

"It's been hard, but this brings us extra money to do stuff with my kids like taking them out for ice cream," she said.



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