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Lottery, Idaho State

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Lottery, Idaho State AGENCY SUMMARY ORIGIN AND CURRENT STATE In 1986 by initiative, the people of Idaho voted on authorizing a Lottery for the first time. The initiative passed with 60% of voters saying "yes". However, it was challenged and was later declared unconstitutional by the Idaho Supreme Court. In 1988 the Idaho Legislature authorized another vote and in November 1988, a constitutional amendment was approved by 51% of Idaho voters that created the Idaho Lottery. Idaho set a new industry record by implementing a lottery within 200 days. The first Idaho Lottery Scratch ticket was sold on July 19, 1989. The Idaho Lottery’s first year resulted in $65 million in sales. The first dividend check of $17,225,000 was returned to the "People of the State of Idaho." The last major restructuring of the Idaho Lottery occurred in 2007. The Lottery is authorized to offer Draw Games, Scratch Games, and PullTab Games. The Lottery Performance Measures are: to exceed performance to the business plan for all products that we can influence (not including multi-state games Powerball and Mega Millions, since jackpot size is out of our control); to increase net revenues available for transfer to beneficiaries each year; and to perform better in a variety of criteria compared to our peer group of like lotteries. Over the last decade, the Idaho Lottery has returned $443.7 million to the People of Idaho, and $846 million since inception in 1989. Idaho Lottery Mission The mission of the Idaho Lottery is to responsibly provide entertaining games with a high degree of integrity to maximize the dividend for public schools and the Permanent Building Fund. Idaho Lottery Vision To become the highest performing jurisdiction in North America. Vision Realized In April 2014, the Idaho Lottery received a national award from the Public Gaming Research Institute. The “Sharon Sharp Good Causes Award” recognizes lotteries which have achieved the highest percentage increase in net funds contributed to its beneficiaries. ORGANIZATION The Idaho Lottery is a self-governing, dedicated fund agency comprised of the Idaho State Lottery Commission and Idaho Lottery staff. The Governor appoints the five-member commission with the consent of the Idaho Senate. Members serve five-year staggered terms. The Commission promulgates rules for the agency, approves contracts for major procurements, monitors all Lottery operations, and is the governing authority of the charitable gaming Bingo-Raffle Advisory Board. Idaho Lottery – Transition Information 2018 – Agency Summary Page 1 The Idaho Lottery Commission may not have more than three members from the same political party. The current commissioners are: Mel Fisher (Boise), Chairman (Republican, term expires January 1, 2023) Susan Kerrick (Lewiston), Commissioner (Democrat, term expires January 1, 2019) Craig Corbett (Grace), Vice Chairman (Republican, term expires January 1, 2020) Grant Brackebusch (Silverton), Commissioner (Republican, term expires January 1, 2021) Gary Michael (Boise), Commissioner (Independent, term expires January 1, 2022) Executive Director Jeffrey R. Anderson was appointed in 2007 and serves at the pleasure of the Governor. The Director is responsible for overseeing day-to-day Lottery operations, including security, marketing, sales, media relations, warehousing and inventory control, information systems and fiscal management. The Director appoints the Deputy Directors. The executive team is comprised of: Becky Schroeder, Chief Operating Officer Amber French, Deputy Director for Security and Enforcement Sherie Moody-St. Clair, Deputy Director for Marketing Larry Polowski, Deputy Director for Sales The Lottery sells its products through a network of 1,200 local retailers throughout Idaho. They are paid a 5% commission on total sales. An additional 1% of sales is distributed to retailers for cashing bonuses (paying winners up to $599) and selling bonuses (for selling winning tickets with big prizes). The Lottery has a statutory limit on advertising and marketing of 3.5%. The total in FY2018 was 1.4%. Ten percent of sales come from Idaho retailers near the Utah border. There are currently 45 full-time employees of the Idaho Lottery – two fewer than when the Lottery started in 1989. Net Lottery proceeds are returned to the State as an annual dividend. Beginning in 1989, the annual dividend was divided equally between the Department of Education’s Public School Building Fund and the State’s Permanent Building Fund. In 2009, a statutory change to the Lottery proceeds distribution formula fixed Public School and Permanent Building Fund dividends at FY2008 funding levels. When proceeds surpass that mark, ⅜ goes to the Permanent Building Fund, ⅜ to the Public School Building Fund, and ¼ to the Bond Levy Equalization Fund. In 2017, the Legislature eliminated the sunset date for the Bond Levy Equalization Fund provision, making the change in the Lottery’s funding formula to include the Bond Levy Equalization Fund permanent. Since 1989, the Lottery has transferred $846 million to the State of Idaho. MAJOR ACCOMPLISHMENTS Consistent, predictable revenue continues. Sales have set records each year for the past twelve years. Net revenues are subject to the product mix in any given year and are strongly influenced by the performance of big jackpot games that have the highest margins. Idaho Lottery – Transition Information 2018 – Agency Summary Page 2 DIVIDEND SALES TRANSFER FY14 209,643,000 $49,000,000 FY15 210,940,000 $45,000,000 FY16 236,820,000 $49,500,000 FY17 240,687,000 $48,500,000 FY18 265,085,000 $53,500,000 $ 1,163,175,000 $ 245,500,000 Lottery Gaming System Contract Bid, Award, and Conversion. Following a competitive bidding process in the summer of 2016, Intralot USA was selected as the Successful Vendor for a ten-year contract to provide Lottery Gaming System services for the Idaho Lottery. Intralot had held the previous contract for ten years. The contract provides for a secure central gaming system capable of delivering, managing, and accounting for all current in-state and multi-state Draw Games, inventory control and logistics for the full complement of Scratch Games, and other related services. It provides for an upgrade in technology, higher quality services to players and retailers, and improved security and integrity of lottery games in the Gem State. The conversion required every Idaho Lottery retailer in Idaho to replace their ten-year old equipment and terminals with new, state-of-the-art equipment. The process of replacing equipment in 1,200 location spread across Idaho’s vast geography took eight weeks to complete. This included comprehensive communication plans and training materials for the thousands of retailer employees. All new back office and reporting functionality is in place, including a new Internal Control System and disaster recovery site in Helena MT. A post-conversion satisfaction survey of retailers showed 97% were satisfied with how their new equipment was installed and 98% were satisfied with their trainer. The new contract pays Intralot 2.26% of sales for all equipment, gaming software licenses, and personnel. It is an exceptionally fair price and very favorable to Idaho relative to other small lotteries in the USA. New Lease and Major Office Remodel completed in 2017. The Idaho Lottery main office has been in the same downtown Boise location since the Lottery began operations in 1989. The location is convenient for customers and the parking is free. The previous lease expired on December 31, 2017. The Lottery initiated discussions with the building owner in September 2015 in order to have adequate time to negotiate an acceptable renewal or plan for a move to a new location. The result was very favorable and the Lottery Commission approved the request for a ten year lease at their November 2016 commission meeting. • The Lottery returned 1,702 square feet of suboptimal space. • All work groups were moved to the first floor, except the Security and Enforcement Division. • The lease rate was reduced by $0.63/ sq. ft. to $18.50/ sq. ft. • Overall costs were reduced in year one by $40,776 or 14.5%. • Annual increases of 2.5% remain the same as in the previous lease. • Turnkey Tenant Improvements for the building were paid entirely by the landlord. • Modifications to the lease save the Lottery $6,000 per year in electrical costs. Idaho Lottery – Transition Information 2018 – Agency Summary Page 3 Remaining in the current location produced annual cost savings and eliminated a minimum FY2018 budget request of $300,000 for relocation expenses. The Lottery initiated a warehouse space needs analysis when we were nearing the end of our lease contract and determined that a more efficient warehouse layout would allow for the return of nearly 8,500 square feet. With the assistance from the Division of Public Works, an RFP was published and the result was a smaller, more efficient negotiated leased space, a lower per square foot rate and a savings of nearly $60,000 per year. Game Changes Last Four Years. • The first $25 Scratch Game was introduced for our 25th Anniversary in 2014. • InstaPlay Games, including Idaho Jackpot, were launched in October of 2014. • Lucky for Life introduced in Idaho, February 2015. • Powerball game matrix change, October 2015. • Sum It Up! added to Idaho Pick 3, January 2016. • Wild Card 2 game is retired, February 2016. • Idaho Cash introduced, February 2017. • Hot Lotto Sizzler game is retired, October 2017. • Mega Millions price increases to $2 per play and game matrix changes, October 2017. • Lotto America introduced nationally and in Idaho, November 2017. SHORT AND LONG TERM CRITICAL NEEDS Four appointments will be necessary in January 2019. All four require consent of the Idaho Senate. 1. Idaho Lottery Commission a. Idaho Lottery Commissioner Susan Kerrick’s term ends January 1, 2019. She has been an engaged and thoughtful commissioner. She is willing to be reappointed. Ms.
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