Clamping down on gaming
Critics say state's proposed rules could hurt beneficiaries
State gambling regulators are betting that proposed rules will fix some of the problems with charitable gaming, a $310 million-a-year industry in Alaska.
The stakes are high, Crimson Bears baseball coach Jim Ayers reminded state officials at a hearing Thursday in Juneau. He doesn't want to take chances with the system that pays for many youth sports in Juneau.
"There's only one group of people that could lose in this deal," Ayers said. "The kids."
The proposed rule that most concerned Ayers would force the man who manages gambling for his nonprofit and numerous others to either become a licensed operator with a $25,000 to $100,000 bond, or manage only one gaming permit.
The proposed regulations also establish rules for "multiple beneficiary permits," in which up to six nonprofits may join together under a single permit.
Operators, unlike managers, could lose their license and their bond if they don't follow the rules - including the requirement that at least 30 percent of pulltab proceeds and 10 percent of bingo proceeds go to charities.
As it is now, when an unlicensed manager fails to pay out the required minimums, the charities can lose their permits. The manager, however, can continue running new permits for other charities.
Forcing managers to put up bonds, Department of Revenue Deputy Commissioner Neil Slotnick believes, will help the charities.
"Our major goal, of course, is always to insure more money goes to charity at the end of the day," Slotnick said.
But the division also must implement and enforce the law with a staff of seven, he said.
Charity games are the only type of gambling allowed in Alaska. In 2000, game permits went to 1,100 organizations, ranging from fraternal organizations to tribal councils and fishing derbies.Officials with the state Department of Revenue, in their annual report on gaming for that year, said that since 1982 the amount of money spent on pulltabs and bingo in Alaska has risen from $25 million to $310 million a year. But payouts to charity have gone up only from $5 million to $28 million a year. Charities got 22 percent of the gross receipts in 1985 but just 9 percent in 2000, the state said.
Gaming managers and permit holders had more questions than complaints at the Juneau hearing to take public comments on the proposed rules, which could take effect Jan. 1.
A few people suggested ways to further strengthen the regulations.
"This would change how we do business overnight," said David Sanden, who manages pulltabs for three Juneau nonprofit organizations. When the new rules go into effect he, too, will have to either become a bonded operator or the three nonprofits will have to form a multiple beneficiary permit.
Sanden didn't object. In fact, he told officials from the Department of Revenue the proposed rules don't go far enough. He suggested licenses be required for anybody managing legal gambling. Then those licenses could be taken away if the laws weren't followed, he said.
"I think everybody in the room knows there have been people who have just been shysters and gotten one permittee (charity) in trouble with gaming, then just walk on down the street and find another group just dying to get into gaming," Sanden said.
The committee that wrote the regulations had considered licensing, said Steve Borcherding, who served on the mostly industry committee that proposed the rule changes. But the committee couldn't agree at what point to take away a license.
All kinds of businesses fail for many reasons, and it's not clear when to blame the manager, Borcherding said. Instead, he said, it should be the responsibility of the nonprofit's board and members to oversee, hire and fire gambling managers based on their performance.
"The managers have become way too empowered, to the point that members in charge don't know what's happening," Borcherding said.
Many of the proposed rules were directly in response to past problems in charitable gaming, such as fake pulltabs that were circulating in the state and a rogue shipment of bingo papers. To prevent that, distributors will be required to keep records of the inventory they receive and sell, but the records can be as simple as a stash of invoices and sales slips, Borcherding said.
"Make sure you know where your stuff is, is what it comes down to," Borcherding said.
The most widespread change created by the new regulations will be the methods of accounting used by bingo halls and pulltab parlors. Expenses will be subtracted as they are accrued, instead of waiting until the bills are paid, said gaming unit supervisor Jeff Prather.
"The reports are going to reflect the reality. They'll just be more accurate," Prather said.
The proposed regulations also go further to prevent conflicts of interest than the existing regulations do.
Juneau Deputy City Attorney John Hartle asked state officials to consider future changes to make it easier for cities to collect sales tax, such as having the nonprofits report their gaming revenue based on where it was earned, making audits public, and pulling the permits from nonprofits that don't pay sales tax on the pulltabs.
The city this year was working with two pulltab operators on a plan to collect about $450,000 in back sales taxes and interest due from 1998 to 2001.
Written testimony will be accepted on the proposed gaming regulations until Sept. 13.