MINUTES OF THE meeting
of the
ASSEMBLY Committee on Constitutional Amendments
Seventy-Second Session
March 14, 2003
The Committee on Constitutional Amendmentswas called to order at 11:51 a.m., on Friday, March 14, 2003. Chairman Harry Mortenson presided in Room 3161 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Mr. Harry Mortenson, Chairman
Mr. Bob McCleary, Vice Chairman
Mr. Don Gustavson
Mr. William Horne
Mr. Rod Sherer
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
Assemblywoman Chris Giunchigliani, District No.9, Clark County
Assemblywoman Kathy McClain, District No.15, Clark County
STAFF MEMBERS PRESENT:
Michelle Van Geel, Committee Policy Analyst
Sheila Sease, Committee Secretary
OTHERS PRESENT:
Lesley Pittman, Vice President, Station Casinos, Inc.
Debbie Cahill, Nevada State Education Association
Chairman Mortenson gave opening remarks and encouraged those present and interested in the bills that were being considered to sign in on the Guest List and requested that they check their position regarding the bills.
Assembly Joint Resolution 3 of the 71st Session: Proposes to amend Nevada Constitution to revise provisions governing right to vote and to repeal certain obsolete provisions. (BDR C-1009)
Chairman Mortenson informed the Committee that they would first open a work session on A.J.R. 3 of the 71st Legislative Session, which was sponsored by Assemblywoman Chris Giunchigliani, District No. 9.
Assemblywoman Giunchigliani reminded the Committee that, during testimony on February 28, 2003, the American Civil Liberties Union (ACLU) brought concerns forward, as did Assemblyman Horne, that some people may be adjudicated mentally incompetent but their condition may not be related to their ability to vote. After checking four other states, she modeled her amendment based on the wording used by those states. The amended language would read, “…who is currently adjudicated mentally incompetent with respect to voting.” She sent a facsimile to the ACLU and they felt the new language was acceptable, according to Assemblywoman Giunchigliani’s secretary. She stated that Dr. Richard Siegel, President of Northern Nevada American Civil Liberties Union (ACLU), indicated that he would work with the courts to assure that, in these types of cases, it would be specified if someone was losing their voting rights. Assemblywoman Giunchigliani realized that the imposition of this amendment would start the legislative process over, but she hoped the new resolution would comply without affecting the rights of those adjudicated mentally incompetent.
Chairman Mortenson indicated he would entertain a motion to amend and do pass on the resolution.
ASSEMBLYMAN McCLEARY MOVED TO AMEND AND DO PASS A.J.R. 3 OF THE 71ST LEGISLATIVE SESSION.
ASSEMBLYMAN HORNE SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
The hearing on A.J.R. 3 of the 71st Legislative Session was then closed.
Assembly Joint Resolution 1: Proposes to amend Nevada Constitution to allow Legislature to authorize State to operate lottery. (BDR C-748)
Assembly Joint Resolution 2: Proposes to amend Nevada Constitution to authorize state participation in certain nonprofit governmental lotteries. (BDR C-1006)
Chairman Mortenson then opened the hearing on A.J.R. 1 and A.J.R. 2 by commenting that they would be heard together because of their similarity and Assemblywoman Kathy McClain, District No. 15, would be testifying for both resolutions.
Assemblywoman Kathy McClain commented that the reason for pursuing the lottery was that the Governor’s Task Force on Tax Policy had said the issue should be looked at due to the lack of ability to generate revenues in this state. Rather than earmarking the money generated from a lottery, as was done with her bill during the last legislative session, it was decided to merely remove the prohibition from the Constitution of the State of Nevada, thus allowing future legislatures to determine how it would be enacted, what kind of an operation to have, and where the money would go. She reminded the Committee that the resolution would have to pass through two legislative sessions before going to a vote of the people.
Assemblywoman McClain continued, saying that A.J.R. 2, on which she was a co-sponsor, had a slightly different approach. The resolution addressed her long-term goal of removing the prohibition of lotteries from the Constitution of the State of Nevada and being able to contract with a multi-state lottery such as Powerball. She felt that a state-run lottery would not generate a great deal of money and there would be difficulty in attracting buyers who were seeking a big jackpot. There was no way to contract with a multistate lottery without amending the Nevada State Constitution.
She declared that recent polls showed that 78 percent of the people were in favor of a lottery. Powerball had the attraction of including 22 states, but did not include California. Thus, she felt that Californians would be coming to Nevada to buy Powerball tickets, as opposed to Nevadans going to California to buy their state lottery tickets, or to Arizona to buy Powerball. We would capture the lottery players in Nevada as well as the 60 percent of tourists from California. She continued that she felt that people from California or Arizona would not come into the state just to buy Powerball lottery tickets, but were more likely to stay for the weekend, spending money, and waiting to see if they won the big jackpot. It would be a draw to our tourism base, in addition to our regular casinos.
According the Assemblywoman McClain, A.J.R. 1 simply removed the prohibition of a lottery in the State of Nevada, leaving the decision to future legislative sessions as to how it would be managed.
A.J.R. 2 was a little more specific, in that it did not remove the prohibition of the state of Nevada running a lottery, but would allow the state to join into multi-state lotteries, Assemblywoman McClain declared. She had spoken with the director of the multi-state lottery called Powerball, who had informed her that Nevada would have to have a state-run lottery in order to contract with Powerball.
In the opinion of Assemblywoman McClain, it would be best to attempt combining both A.J.R. 1 and A.J.R. 2. She then referred to her handouts, Exhibit C, one of which showed that state-run lotteries received approximately 35 percent in revenue, 15 percent for advertising and operations, and 50 percent to the jackpot itself. Realizing that there was some opposition to a lottery in general, she encouraged the Committee members to review the information in her handouts. She also disagreed with those who felt a lottery was a regressive tax on poor people. It was true that lotteries did not raise a large percentage of a state’s budget, usually only 1 percent to 4 percent, depending on what portion of the budget was included in the calculations.
As part of her closing, Assemblywoman McClain stated that she felt it was important to give the voting public a chance to vote on the issue of lotteries.
Chairman Mortenson asked Assemblywoman McClain to address the specific differences in the two bills. In his interpretation, one bill was all-inclusive, and the second bill suggested that we only wanted to subscribe to lotteries that were state-run from other states.
Assemblywoman McClain reaffirmed the Chairman’s opinion, in that A.J.R. 1 simply removed the prohibition of lotteries from the Nevada State Constitution. A.J.R. 2 did not remove the prohibition, but it allowed the state of Nevada to contract with non-profit associations or other governmental entities.
Assemblyman Gustavson questioned whether the statistic stating that 70 percent of people were in favor of lotteries was from Nevada and what types of questions were asked.
The Las Vegas Review Journal had undertaken the poll approximately a month ago, according to Assemblywoman McClain, and the question asked was in the context of what other taxes would be supported by the respondent.
Assemblyman Horne indicated that he was very undecided on this issue. Because Nevada was unique, in that gaming was our primary industry, he expressed concern that Powerball might compete with that industry. He wondered how it affected other states.
In reply, Assemblywoman McClain referred to a portion of her handout (Exhibit C), entitled “Lottery Sales and Profit Analysis” which indicated that states with other gaming have lost revenue in lotteries. There was a correlation between the increase in casino gambling and the decrease in lottery proceeds. She stated that two states, New Jersey and California, had not seen a reduction in sales. It was uncertain if there was a correlation between gaming and lotteries and any effect there might be on either.
Assemblyman Horne pursued the issue by reiterating Assemblywoman McClain’s testimony that California had Indian gaming and New Jersey had gaming in Atlantic City, but there was no decrease in lottery sales.
Assemblywoman McClain agreed that, in looking at the numbers, it was a little strange that there had not been a decrease in sales. However, the size of the lottery jackpots in California was probably responsible for the continued sales of lottery tickets.
Assemblyman Horne indicated that it was speculative to assume that tourists would come to Nevada to buy lottery tickets. For the bulk of Californians and Arizonans, it was a much longer trip to come to Nevada to buy lottery tickets, whereas the reverse was not the case. He questioned that, if revenues were small, was it worth bringing in a lottery to compete if we were not going to realize a significant windfall.
In response, Assemblywoman McClain expressed her uncertainty as to whether or not an “only-state-run-lottery” would bring in a great deal of money. She was more convinced that Powerball would produce significantly more money. As a comparison, California lottery jackpots reach $30 million to $40 million, whereas Powerball jackpots consistently reached sums well over $100 million. Thus Powerball would be a huge draw and she was hoping that Nevada could get this in place before California saw the opportunity.
In following up on Assemblyman Horne’s question, Assemblyman Gustavson was concerned because Powerball was played in 22 other states thus perhaps reducing Nevada’s proceeds, as opposed to running our own state-run lottery. He asked what would the percentage difference of revenue be between Powerball and a state-run lottery.
A guarantee of 50 percent came from Powerball, according to Assemblywoman McClain. There would be other charges such as advertising and promotional items that would be deducted from that 50 percent. The infrastructure for Powerball was already established, and she doubted that it would cost the state any money at all to bring such a lottery to Nevada.
Assemblyman Gustavson agreed that the mechanics for Powerball might already be in place, but if the winner got 50 percent and the state of Nevada got 50 percent, he asked how the Powerball organization would make any money.
Assemblywoman McClain explained that Powerball was a nonprofit organization, and only claimed a small percentage for operation. She continued that, even if only 40 percent came into the state coffers, it would still bring in many millions of dollars that we were not now receiving.
Assemblyman Gustavson stated that he did not understand all the mechanics.
Assemblywoman McClain offered to secure more specific information on Powerball. The Chairman indicated that he felt such information would be helpful to the Committee and he would appreciate it if she would do so.
Assemblyman Sherer asked if there was a possibility of the gaming industry running lotteries in general through some of the casinos.
Assemblywoman McClain explained that every state that ran a lottery had their own state lottery. North Dakota was attempting to contract with Powerball without running their own state lottery. She suggested that we keep an eye on that situation to see how it works out.
Assemblyman Sherer questioned Assemblywoman McClain as to whether she had contacted any casinos or the Nevada State Gaming Commission, to which she responded in the affirmative, explaining that not only had she spoken with many casinos but also at length with the Gaming Control Board. She was trying to find some way to form a nonprofit organization of our own at the state level and contract with Powerball. However, the Nevada State Constitution still needed to be amended.
Chairman Mortenson asked Michelle Van Geel, Committee Policy Analyst, to present a summary of the past history of lotteries in the state of Nevada.
Ms. Van Geel explained that the most recent change was from the 1987 and 1989 Legislative Sessions, when a resolution to exempt charitable and non-profit lotteries from the constitutional prohibition was passed in the Legislature, and subsequently was approved by the voters in 1990. Since the 1970s, when lottery popularity increased, there were 25 measures considered in the Nevada Legislature.
Chairman Mortenson read some of the highlights from Ms. Van Geel’s research. In 1975, during the 58th Legislative Session, the Assembly Joint Resolution to remove the constitutional prohibition against lotteries died in the Assembly Judiciary Committee. In the 59th Legislative Session, the issue died in the Assembly Commerce Committee. During the 61st Legislative Session in 1981, the resolution died in the Senate Judiciary Committee, and during the 62nd Legislative Session in 1983, it died in the Senate Government Affairs Committee and the Assembly Judiciary Committee. In 1985, during the 63rd Legislative Session, it died in the Assembly Judiciary Committee, and during the 64th Legislative Session, the issue passed, to be returned in 1989 to the 65th Legislative Session, where it died in the Senate Judiciary Committee. In 1991 and 1993, it died in the Senate Judiciary Committee. In 2001, it died in the Senate Government Affairs Committee. The Chairman continued that the Committee on Constitutional Amendments had the choice as to whether they wanted to pass A.J.R 1 and A.J.R. 2, thus making Assemblywoman McClain and a number of other people happy, or not pass it and stick with tradition.
Chairman Mortenson thanked Assemblywoman McClain for her testimony and for assuming the testimony for Assemblyman Williams.
Lesley Pittman, Vice President of Station Casinos, Inc., was called to the witness table. She declared that while she was speaking in opposition to A.J.R. 1, she wanted to recognize and commend Assemblywoman McClain’s efforts to seek out ways in which to enhance state revenues. However, Ms. Pittman felt there were a host of other revenue alternatives that were less regressive in nature and were more consistent with the historical standpoint that the legislature had taken on public policy in the gaming industry. They do not believe the state of Nevada should be in the gaming business, she opined. A state-run lottery would unfairly compete with our state’s largest private industry, our largest employer, largest purchaser of goods and services, and largest property taxpayer. For the last several years, members of the legislature had looked for areas of state operations that compete with private businesses. The establishment of a lottery would be inconsistent with that effort.
Ms. Pittman continued, stating that some were skeptical that a lottery would actually compete with Nevada’s hotel/resort industry, but perhaps they were not aware of today’s lottery games, which were no longer the typical scratch cards. In an effort to keep the games interesting and to attract new and younger players, the lottery industry had developed new technologies, such as the Video Lottery Terminal (VLT), which were rapid-fire lottery games that were nearly indistinguishable from a slot machine. Doubters might also be swayed by a 2003 report made by the Arizona Lottery Commission, which showed that lottery play in Arizona had dropped nearly 25 percent due to the proliferation of Tribal gaming operations there. Ms. Pittman declared that, in addition to being contrary to Nevada’s historical public policy, a lottery would do little to help solve our state’s fiscal problems, due to nominal revenues, and the redistribution of existing gambling dollars away from “bricks and mortar” casinos that paid 6¼ percent in gaming taxes, created jobs, and also required capital investment. A lottery would not create very many jobs and required almost no capital investment.
In continuing her opposition to A.J.R. 1, Ms. Pittman reminded the Committee that, in previous years, legislators had taken the direction, in terms of what was required to participate in gaming in our state, of setting minimum standards for non-restricted gaming operators in an effort to ensure privileged licensees provided maximum economic benefits back to the communities in which they operated. In the more populated areas of our state, a potential licensee must build a resort/hotel, as defined by law, in order to obtain a non-restricted gaming license. The reason for this law was to spur capital investment that, in turn, increased the property tax rolls and helped create jobs. Lotteries did not create capital investment opportunities, as well as not creating jobs.
Ms. Pittman referred to her handout (Exhibit D), which included information from the National Gambling Impact Study Commission’s report to Congress on the principal demographics of lottery players. The report showed that lotteries disproportionately impacted lower-income individuals and families, as well males, African-Americans, high school dropouts, and people in the lowest income category and those categories were heavily over-represented among the top 20 percent of lottery players. Lottery directors were under constant pressure from state political leaders to maintain revenue levels and, if possible, to increase them. In lotteries, as in no other state function, in order to remain competitive and maximize revenues, states would have to implement tools of commercial marketing, including product design, promotions, and advertising. A state’s duty to advertise and market lottery products to maximize revenues would be based on motives such as getting non-players to play, encouraging players to play more often or to play more types of games, and encouraging lapsed players to start playing again. Ms. Pittman asked if the state of Nevada wanted to be involved in those types of activities.
Based on data from other states that were similar to Nevada in population size, Ms. Pittman did not believe that a lottery would raise substantial amounts of revenues. She again referred to her handout (Exhibit D), which included a table that identified state revenues and lottery revenues for each jurisdiction that currently allowed a lottery. New Mexico, in 1997, realized about $20 million in annual revenue from their lottery and, in 2002, that number rose to $29 million. Station Casinos did not believe that Nevada would realize that kind of revenue because Nevada gamblers were sophisticated gamblers who understood the payout odds of a particular wager and would opt to take advantage of the better odds offered by the changing jackpots that currently existed in our state, such as QuarterMania, MegaBucks, and the tens of thousands of slot machines and video poker machines that were offered.
In her concluding remarks, Ms. Pittman expressed the belief that Nevada would have much more gaming competing for the same dollar as the lottery, so a lottery in Nevada would not generate nearly the revenues that it did in New Mexico. Some individuals with whom Ms. Pittman had spoken offered the caveat of reducing the competitive impact on Nevada’s hotel/casino/gaming industry by restricting point-of-service lottery ticket sales to non-restricted hotel/casinos. However, Station Casinos believed that such a restriction, if it were enacted, would be short-lived. Station Casinos believed lottery administrators were charged with maximizing return revenues and they would be back before the Nevada State Legislature in future sessions asking for point-of-service locations for lottery ticket sales to be expanded to enhance access and convenience for their lottery customer.
Assemblyman Gustavson asked Ms. Pittman if the gaming industry and Station Casinos would be willing to pay more money to help out with the budget deficit and if so, how much more they would be willing to pay.
By way of response, Ms. Pittman stated that they stood in support of the Governor’s budget proposal, which included a ¼ percent increase in gross gaming tax, as well as having agreed to pay a ¼ percent gross receipts on non-gaming tax revenues. “We are at the table,” she declared.
Assemblyman Horne asked Ms. Pittman if it would be possible to confine the resolution to exactly what type of lotteries that were wanted, thus countering the argument that Video Lottery Terminals (VLTs) would draw players away from the casinos.
Ms. Pittman responded by reminding the members that they were the legislature. She felt the greater issue was the competition for the gambling dollar.
Referring back to Ms. Pittman’s handout (Exhibit D), Assemblyman Horne commented that demographics had been done on the average lottery player, but he wondered what the average gambler was like, because there was no comparison in the handout. Perhaps the average gambler was poor, black, male, etcetera.
Ms. Pittman offered to get the demographics inasmuch as Station Casinos did considerable research. She then referred to the fact that Station Casinos were all very different and thus catered to a different class of customer.
Assemblyman Horne interrupted Ms. Pittman by reminding her that the discussion was not about lotteries competing with Station Casinos, but with gaming. In the broader picture, if lotteries only catered to the poor and disenfranchised, this being one of the reasons lotteries were not wanted, then it begged the question as to what type of people were likely to gamble. He referred to Assemblywoman McClain’s figures showing the popularity of lotteries and stated that the citizens of Nevada should decide whether or not they wanted a lottery.
Ms. Pittman thought the issue needed to be delved into a little deeper so that when the question was being asked of the voters whether they supported a lottery, they should recognize that there would be some impacts that were associated with a lottery, not the least of which was that it would not be a panacea for our state’s economic troubles.
Assemblyman Horne stated that if the issue went on the ballot, he was sure Station Casino and others would have a campaign to educate the people.
Assemblyman McCleary commented that he did not have a question for Ms. Pittman, but wanted to respond to something that Assemblyman Horne had said. He stated that he did not like the idea of a lottery, but not for the same reasons as Assemblyman Horne. He was uncertain whether a lottery would compete with gaming or not, but his personal objection was that such a measure would break the quorum for state government to be in the gaming business. He declared that he just did not like it as a policy point. He recalled Assemblyman Horne expostulating, “The citizens of Nevada should decide whether or not they wanted a lottery.” However, he continued, anything that leaves this body was a recommendation from this body. The Legislature would be deciding more than 1,000 issues because the legislators were elected to represent their constituents. He stated that he felt that not everything could be brought to a vote and this issue was one which would change the Nevada State Constitution. He apologized if he sounded disrespectful.
Assemblyman Horne clarified the reason he posed the question of “why not let the people decide?” Because it was such a serious thing to amend the Constitution of the State of Nevada, the citizens should have the opportunity to have their input. Whether that input would be in the form of electing their elected officials or casting a ballot, that was the reason why legislators were here.
Chairman Mortenson reiterated that it was up to the vote of the people if the Legislature recommended it.
Assemblyman McCleary commented that he thought it should be good policy before letting it out of this Committee. He still did not think it was good policy and, with all due respect to Assemblywoman McClain, he did not agree with her on this issue.
Chairman Mortenson then called on those wishing to speak from a neutral position.
Debbie Cahill, of the Nevada State Education Association (NSEA), came to the witness table and stated that NSEA had supported the issue of a lottery during the previous legislative session because half of the money was earmarked specifically for education. She indicated that, if this amendment were adopted, it would be a valid source of revenue. She wanted to bring to the attention of the Committee that other states had tended to use lottery returns to supplant General Fund revenue, which had led to budgeting problems due to the fact that lottery revenue, like gaming revenue, could be volatile. If a proposal were to come forward to enact a lottery and have the money earmarked for education, the NSEA wanted that money to supplement, not supplant, ongoing revenues.
Chairman Mortenson called on two others whose names appeared on the Guest List, but they indicated they were not present to speak.
The hearing on A.J.R. 1 and A.J.R. 2 was closed by Chairman Mortenson, who stated that he was not interested in taking any motions on the resolutions, but that they would be held for future consideration.
There being no other business, Chairman Mortenson adjourned the meeting at 12:39 p.m.
RESPECTFULLY SUBMITTED:
Sheila Sease
Committee Secretary
APPROVED BY:
Assemblyman Harry Mortenson, Chairman
DATE: