Governor, Legislature tighten down charity gaming bill
NASHVILLE (AP) — Charity games in Tennessee will be put on a much shorter leash under a compromise brokered among Gov. Phil Bredesen, legislative sponsors and other officials.
The charity gaming bills originally would have opened the state up to for-profit operators. That raised the specter of the Rocky Top scandal of the 1980s, when large operators took advantage of the state’s lax laws and oversight to run bingo games that were highly profitable for them but did little for the charities the games were allegedly intended to benefit.
Charity games were included in the amendment to the Tennessee Constitution approved by voters in November 2002 that removed the prohibition against lotteries. That created the state lottery, but charity games were envisioned as next in line.
Lawmakers struggled to write a law that would allow legitimate charities to hold annual fund-raisers using games of chance — rubber duck races, cakewalks, raffles and the like — without opening the state up to unscrupulous operators.
The law still precludes gambling on what are considered games of skill — such as poker and blackjack — and the state constitution prohibits the use of casino-type games such as slot machines or roulette.
“I hope to be governor for the next seven years and I don’t want to preside over Rocky Top II,” Bredesen said Tuesday. “I’d had concerns expressed to me by members of the Legislature about what was going on, and the unstoppable freight train (of the bill) and I just looked at it and thought, ‘We’re setting ourselves up for some problems here.'”
Legislators wanted to allow third-party operators but regulate them to avoid a Rocky Top-like scandal.
As the bills were being rushed through the Legislature so charities could apply to hold fund-raisers before the General Assembly adjourns within the next two or three months, Bredesen slowed the process and helped negotiate a compromise that would alleviate the biggest worries.
The major components of the compromise are to:
— Eliminate third-party operators;
— Require that at least 50 percent of the proceeds from an event go to the charitable purpose for which it was held;
— Prevent a single location from holding more than one event per year;
— Allow outside vendors to provide goods and services to the charities, but to charge only a fair-market price regardless of the size of the event. In others words, their take can’t be defined as a percentage of the proceeds.
— Set a limit of $50 on cash prizes.
Bredesen said the third-party operators were his main concern.
“There didn’t seem to be any impediments in the way to have the same thing happen,” he said. “There was just an invitation for these third-party operators coming in and using older and defunct and pliable nonprofits and basically operating a gambling operation here. That was not the intent.”
Bredesen told legislators he would include money to fund the bills in a supplemental appropriation to this year’s budget, and also add the cost to next year’s budget. That cleared the way for the three bills, which were merged into one, to move forward without having to wait on the budget process.
The cost has not determined but is expected to be significantly less than $1 million per year.
Rep. Harry Tindell, D-Knoxville, presented the new version to the House Finance Committee on Tuesday and said it could be before the full House next week. The Senate is in a similar posture.
“I believe we’re getting closer to a finished product with the safeguards we all wanted,” Tindell said. “The governor’s office took the lead in saying that rather than try to regulate operators, let’s just do without them. Most charities don’t use operators anyway.”
The bill still carries criminal penalties, including a felony count for illegal third-party operators of games. The games can be conducted only by those registered as 501(c)3 organizations with the Internal Revenue Service, which is specified in the constitutional amendment adopted 16 months ago.
Charities are required to have been in business in Tennessee for at least five years. They also must have a physical presence in the county where the charity game is held.
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Read HB3250 at:
Tennessee General Assembly: http://www.legislature.state.tn.us/
The amendment code is 01269975