House panel hears electronic pull-tab bill with 35% manufacturer cap

The House Labor and Commerce Committee heard testimony Monday on a bill that would cap manufacturer fees for electronic pull-tabs at 35 percent, a rate critics say is too high and will hurt charities.

House Bill 386, sponsored by Senator Jesse Bjorkman, would allow electronic pull-tab games in Alaska while capping what manufacturers can charge at 35 percent. The bill would also reduce the bar take from 30 percent to 25 percent for electronic games and limit tablets to one per six occupancy or a minimum of 10 devices, whichever is greater. The bill drew divided testimony during an earlier House committee hearing, with operators and industry representatives disagreeing over the proposed fee structure and tablet limits.

Manufacturer cap sparks debate

Bjorkman said the 35 percent cap creates negotiating space above a published agreement between a distributor and manufacturer at 31 percent.

"Currently, there is no cap on what a manufacturer can take as a cost of their contract to provide paper pull tabs. There is none at all. Zero. Unlimited," Bjorkman said. "The bill before us establishes a manufacturer cap at 35 percent, and that is a cap that charities can negotiate down from, but it is a ceiling."

But operators testified the cap is significantly higher than Minnesota's model, which the bill is partly based on. Jerry Lewis, an Anchorage operator, said Minnesota manufacturers charge 20 percent while House Bill 386 would allow 35 percent.

"Secondly, they did not ask what do vendor locations in Minnesota receive when they play a game. The answer is 15 percent. Again, what we have been saying for the last year. But House Bill 386 allows it to be 25 percent," Lewis said.

Lewis also noted Minnesota bars can have only six tablets in play, while House Bill 386 sets a minimum of 10. He added that the bill would eliminate lottery ticket sales in bars.

Mack Miners, a Juneau operator with 27 years in the pull-tab business, said the higher percentages would reduce charity revenue.

"I saw that the percentages were very high and that the charities would suffer. And under this Minnesota bunch, the same thing is going to happen. They are going to take a large percentage. The charities are going to end up not making so much money," Miners said.

Tablet limits and rural concerns

The bill caps tablets at one per six occupancy or a minimum of 10 devices, whichever is greater.

Co-chair Zack Fields asked whether the bill should include a maximum cap. Bjorkman said he would accept a limit of 25 tablets.