Legislature ponders new gaming types

Bet on it?

Posted: Friday, October 03, 2003

Projections show the Kenai Peninsula Borough could reap approximately $2 million annually from new forms of gambling under consideration by the Alaska Legislature, according to assembly member Gary Super-man of Nikiski.

Wednesday, Superman told a Senate Labor and Commerce Committee panel holding hearings in Anchorage that Senate Bill 178, which would establish a state lottery, and Senate Bill 186, which would authorize charitable gaming permits for electronic gaming, could help municipalities across the state.

Superman told the committee he was "wearing a couple of hats," and was speaking as a municipal official, while acknowledging that as a bar owner, he could be affected by decisions regarding the two bills. Superman also is a board member of the Alaska Cabaret, Hotel Restaurant and Retailers Association, which supports the bills.

Superman said municipal officials have the same challenge as state lawmakers trying to make ends meet and are looking for new revenue streams that don't involve increasing property or sales taxes. Just as the state faces a looming fiscal crisis, the Kenai Peninsula Borough sees one on the horizon.

"We are a little bit behind the curve," Superman said. "We have, at this point, a fairly decent general fund balance. However, like yourselves, we continue to draw that down each year. At some point in the not-too-distant future we would be in the same crisis as the state."

Municipalities have watched state funding dry up over the past decade. Superman said the addition of a lottery and electronic gambling machines to the current mix of pull-tabs and bingo games would increase revenues to the state, the municipalities and the charitable agencies that depend on them as a source of operating funds.

"We see a projection for the Kenai Peninsula Borough of a $2 million new revenue stream," he said. "That would go a long way to fix some of the future problems not all of them, but we in the municipalities are looking for ways to augment our revenues other than going to the general public. I think the state should do exactly the same thing."

As an example of what adding $2 million to borough coffers might mean, Superman pointed to the difficulty the Kenai Peninsula Borough School District has in covering the cost of co-curricular activities.

"As a matter of fact, that amounts to around $2 million," he said, adding that the gaming revenue stream would be "just one possible way for us to plug that hole in the future."

Superman acknowledged that the new gaming revenue was not a panacea for all ills, saying, "We are not going to gamble our way to prosperity."

However, it would relieve some of the pressure to look at sales taxes and income taxes, he said.

From a statewide perspective, supporters of allowing the new forms of gambling in Alaska argue it could add much-needed revenue to state coffers and ultimately to the strained education budget.

Opponents counter that the payoff in state revenues won't match the cost of start-up and operations, and could easily be overwhelmed by the social costs inherent in legalized gambling.

Those were central themes presented Wednesday during the Senate Labor and Commerce Committee hearing chaired by Sen. Con Bunde, R-Anchorage. Testimony was taken by teleconference from several locations around the state, including Kenai.

Larry Meyers, deputy director of the Department of Revenue's Tax Division, said current permitted gambling essentially pull-tabs and bingo produced gross revenues of around $351 million in fiscal year 2001. Out of that some $267.7 million was paid out in prizes. Another $52.6 million covered associated expenses and taxes, which included the state's share of around $2.5 million. That left a net of $30.6 million available to charities that utilized pull-tabs, bingo and raffles to raise funds.

Analyzing Senate Bill 178 (state lottery), the tax division said it was unable to estimate the revenue and expenses associated with the passage of the bill. In a fiscal report issued Tuesday, the division said expenses and revenues would be contingent on a number of factors, including the number of games regulated.

As for the electronic gambling machines envisioned in Senate Bill 186, information was more in depth. The proposed law would permit video gaming terminals in bars, private clubs and package liquor stores, with the net revenue shared 30 percent to organizations, 30 percent to vendors (mostly bars), 15 percent to the state, and 25 percent to municipalities.

Meyers said, however, that if SB 186 passed, the state was not projected to see any revenue in 2005 as it began to cover start-up costs (including the cost of a central computer system connected to every electronic gaming machine in the state). By 2010, at which point the system would be considered "mature," the state could see about $15 million per year.

There was nothing in the fiscal notes, however, accounting for the possible social costs of broadening the available outlets for legalized gambling in Alaska. Those, according to critics, could be substantial, even devastating to communities and individuals.

"State-sponsored gambling is not a good solution to the fiscal problems we face," said Michael Keys, pastor of the Central Lutheran Church. He disagreed with some who suggest that gambling is low-impact, that the activity is voluntary and without social cost.

"If you look at the independent studies that have been done, even the national gambling impact studies, and see the impacts that are absolutely devastating to communities and families, I'd think you'd have to take that very, very seriously," he told the committee.

He pointed to Oregon, a state to which Alaska revenue officials look for expense and income data, as an example of a state addicted to gambling. He then reminded state lawmakers of their duty.

"First and foremost, with state-sponsored gambling, the state is violating one of its prime responsibilities, to safeguard and protect its citizens," he said. "As senators, you have to take that very seriously. If you have state-sponsored gambling, you are contributing to addiction in your communities."

He also said gambling was "an unjust form of taxation," since it lures people in the lower-income brackets to spend money they don't have. He said people in the higher-income brackets are not the ones playing the games.

Greg Peterson, a Ketchikan resident and an employee of Alaska Indoor Sports Distributors, which supplies pull-tabs, said he opposed the addition of the new gambling machines. He said it could end the jobs of people who now sell pull-tabs.

"State charities are benefiting from the current system," he said. "I don't understand why people want to come in and screw it up and take money away from people who are benefiting now."

During his testimony, Superman said some studies show a possible increase in the numbers of gambling abusers of 1 to 2 percent.

"That has to be qualified by the fact that there is plenty of gambling about now, and the state enabled it to begin with," he said. "We have problem gamblers at this point. I don't see that as an extremely large concern."

He said he believes people are responsible for their own actions.

According to data compiled from a variety of sources and provided to the committee in their hearing packets, gambling fails the cost-benefit test. Even conservative estimates suggest costs outweigh benefits three to one. Those costs would impact even nongamblers through increases in crime, lost productivity, bankruptcy and family distress among other things, opponents said.

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