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9-10-1984 Interim Hearing on the California State Lottery Initiative Senate Committee on Governmental Organizations
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Recommended Citation Senate Committee on Governmental Organizations, "Interim Hearing on the California State Lottery Initiative" (1984). California Senate. Paper 73. http://digitalcommons.law.ggu.edu/caldocs_senate/73
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SENATE COMMITTEE ON GOVERNMENTAL /'o~GAN r·zAT :roN TRANSCRIPT OF PROCEEDINGS
INTERIM HEARING ON "THE CALIFORNIA STATE LOTTERY INITIATIVE"
STATE CAPITOL ROOM 4203 SACRAMENTO, CALIFORNIA
September 10, 1984
COMMITTEE MEMBERS:
Ralph c. Dills, Chairman William Campbell, V. Chair Alfred E. Alquist John Francis Foran Robert G. Beverly Bill Greene Paul Carpenter Barry Keene Ken Maddy Alan Robbins Herschel Rosenthal
STAFF:
Lindsay W. Miller, Principal Consultant Terry E. Frost, Senior Consultant Arthur Terzakis, Associate Consultant Billie Williams, Committee Secretary MEMBERS LINDSAY W. MILLER PRINCIPAL CONSULTANT RALPH C. DILLS CHAIRMAN TERRY E. FROST WILLIAM CAMPBELL SENIOR CONSULT ANT VICE CHAIRMAN
December 31, 1984
The Honorable David Roberti Chairman, Senate Rules Committee State Capitol, Room 205 Sacramento, CA 95814
Dear Senator Roberti:
Pursuant to Section 3523.1 of the Elections Code, the Senate Rules Committee requested the Senate Committee on Governmental Organization to hold public hearings on th~ California State Lottery Initiative.
The Senate Committee on Governmental Organization held an interim hearing on this subject in Sacramento on Monday, September 10, 1984. While existing law does not authorize the committee or the Legislature to alter or prevent the measure from appearing on the ballot, a number of significant issues were raised over the content and social implications of the initiative.
Included with this transcript of the hearing is a summary of the major points presented, including points raised by both the support and opposition. There are indications that legislation may be necessary to correct drafting errors and other portions which seem to be at cross purposes with existing legislative and administrative policies.
Sincerely, ~@. [J·&.J RALPH C. DILLS
RCD:dm I N D E X
2 Summary of Testimony i 3 Opening Statement, Chairman Dills 1 4 Testimony of Witnesses 5 John Vickerman 6 Legislative Analyst 2
7 Questions re: Odds 5 Resumption of Testimony 5 8 Questions re: Prize Limit 6 Resumption of Testimony 7 9 Questions re: Start-up Time 8 Questions re: Appropriation 11 10 Resumption of Testimony 12 Questions re: Budgeting Funds 17 17 1.1 Resumption of Testimony Questions re: Supplementary Funds 19 12 Resumption of Testimony 20 Questions on Testimony 21 13 Barry Fadem Californians for Better Education 25 14 Questions re: Money Generated 30 15 Questions re: Scientific Games/Bally 31 Questions re: Initiative Action 32 16 Resumption of Testimony 33 Questions re: Start-up Time 34 17 Resumption of Testimony 38 Questions re: Administration Expenses 42 18 Resumption of Testimony 43 Questions: 19 Security 46 Special Fund Mechanism 49 20 Offset 52 Intent Language 56 21 Appointments 57 II Start-up Timing 59 22 Agency Interface 61 II Californians for Better Education/Bally 66 23 !/ !I Offset 68 I! Use of Funds 691 24 Future Amendments 70 Deputy Directors 73 25 Start-up Funding 74 Sponsors 76 26 I, Lottery Machines 80 I·il I 27 Luncheon Recess 81
28 Afternoon Proceedings 82 Resumption of Witnesses
2 Allen Summer Attorney General's Office 3 Questions: 4 Security Audit Time Framework 5 Lonnie Mathis 6 Department of Finance
7 Questions: Meeting with Fadem 99 8 Small Business Participation 101 "Continuously Appropriated" 102 9 Barry Fadem 10 Questions: ll "Continuously Appropriated" 104 Meetings with State Agencies 107 12 Similar Initiatives 109 Austin Eaton Department of General Services 112 14 Questions re: Bidding Process 115 15 Reverend Harvey Chinn 16 Coalition Against Legalizing Lotteries 116 Nancy Jenkins l7 California PTA 121 18 Questions: Official Position of PTA 19 125 Funding 127 ADA 20 127 Legislature's Knowledge 129
21 Senator Albert Rodda 1311 22 Recess 1351 21 Thomas Griffen I Attorney, Education Law 24 1361 Questions: 25 Initiative vs. Legislative Aciton 137 Appointments 138 26 Supplant vs. Supplement 139 Fluctuation of Funds 140 27 Offset 142 ADA Fluctuation 143 28 Budget Cuts 147 Lynn Thompson Pajaro Valley Unified School District 149 2 Questions 3 Bingo 150 Familiarity with Initiative 151 4 Proposition 13 152 Police Problems 155 5 Gambling 158
6 Bob Rice Dixon Unified School District 160 7 Questions: 8 Budget cut of $250,000 163 CTA's Positino 164 9 Teresa Hillman 10 Student, San Francisco City College 165 l l Question re: Position of Student Government 167
12 Gary Hartman Elk Grove Unified School District 169 13 Reverend W. B. Timberlake 14 Committee on Moral Concerns 175
15 Adjournment 178 179 16 Certificate of Reporter
17 l R
II)
20
21
22
23
24
25
26 II il 27 I, II 28 II I Summary of Testimony
In order to gain a better understanding of lotteries and the initiative Mr. John Vickerman, Chief Deputy of the Legislative Analyst's Office, presented the committee with a brief overview of the proposed lottery initiative and background on how other lotteries operate.
Mr. Vickerman's testimony included information that there are currently 17 states plus Washington, D.C., conducting lotteries with a combined total sales of about $6.9 billion. Of that total approximately 40% is used for various government programs.
There are currently three general types of lottery games: instant games, numbers games and lotto. The instant game is one which provides for many winners with small payoffs. It is played by using a scratch card and results in 18% of sales in the 12 largest states. The numbers game requires the player to select three numbers. Drawings are held daily to determine the winners, this accounts for 55% of lottery sales in the 12 largest states. The lotto requires the player to pick numbers out of a field of numbers (such as Keno). This results in large payoffs and accounts for 27% of total lottery sales. Odds on winning a lotto game with a field of 44 and the bettor picks 6 numbers are 7,000,000 to 1.
Mr. Vickerman went on to explain that the initiative establishes the California Lottery Commission, composed of 5 members (appointed by the Governor subject to Senate confirmation), with broad powers to implement and oversee the lottery. The commission determines the type of games, how often drawings will be held, the price of lottery tickets, the amount and number of lottery prizes, and the locations where lottery tickets may be sold.
The act specifies the method for dividing the total handle with 50% of the amount bet to be returned in prizes, a minimum of 34% for education (based on FTE and ADA), and a maximum of 16% to he used for administration.
Lottery ticket sales must begin within 135 days after the passage of the act. The operations are exempted from the Administrative Procedures Act and general contracting procedures as practiced by other state operations. A continuously appropriated line of credit for $16,500,000 is appropriated to the commission for start-up costs. This appropriation is made from the General Fund and is subject to repayment with interest.
Mr. Vickerman estimated sales, based on $50 per capita, to exceed $1.25 billion per year when the system is fully operational.
i The following are some of the points made by the Proponents and Opponents of Proposition 37:
Proponents stated that:
An estimated $680 million would be raised for public education yearly or approximately $2 million daily.
The requirement that ticket sales must begin within 135 days is reasonable because other states have done so.
The fact that no lottery commission staff is authorized to conduct background checks for security investigations of potential employees and vendors is not important because the commission director will simply request such information from the Attorney General.
Intent language states that lottery revenues "shall not be used as substitute funds but rather shall supplement the total amount of money allocated for public education in California". As a result, the Legislature cannot cut back funds for education to offset monies produced by the lottery.
Opponents stated that:
Gambling is an unproductive endeavor and there are more sound, consistent ways of raising revenue that are less regressive.
In some states, lotteries have created a greater clientele and an environment where illegal gambling has continued to thrive.
The measure provides insufficient security to insure the integrity of the operation and provides no authorization for the commission to obtain confidential criminal history on prospective employees and vendors.
The commission is exempted from general state contracting procedures, in an attempt to ensure contract exclusively for one particular contractor, thereby passing existing controls placed on all other state agencies.
The commission is exempt from the Administrative Procedures Act which provides many controls to insure public input during the rule-making process.
There are no assurances that funds raised for education will be supplemental and not supplanting.
ii 1
1 P R 0 C E E D I N G S
2 --ooOoo--
3 CHAIRMAN DILLS: Good morning, ladies and gentlemen.
4 I'm Senator Ralph Dills, Chairman of the Senate Committee on
5 Governmental Organization.
6 We welcome you to this hearing on the subject of
7 Proposition 37, the California State Lottery Initiative.
8 We're going to proceed immediately because of a great
9 number of witnesses who desire to be heard, some 19 or 20-plus. lO The Proposition 37 proposes to amend the State
11 Constitution to authorize establishment of a California State Lottery and to add extensive new statutory law setting forth the 12 details of how the lottery would be operated and how revenues 13 would be distributed. 14 The California Constitution, as current written, 15 1 specifically prohibits the Legislature from authorizing lotteries 16 and prohibits the sale of lottery tickets the state. 17 Proposition 37 amends the Constitution to authorize the 18 establishment of the California State Lottery. In addition, the 19 !Constitution would be amended to prohibit the Legislature from 20 allowing casinos of the type currently operating Nevada and 21 New Jersey. 22 The statutory provisions of Proposition 37 are 23 extensive, and among other things, provide for the creation of a 24 California State Lottery Commission with net revenues from the 25 sale of lottery tickets to go to instructional programs in grades 26 kindergarten through 12, community colleges, the California State 27 universities and colleges and the University of California. 28 Our today will focus n content of e
2 sit plans for implementation of specific irements measure ss, a the social a cts o
4 ling our state.
5 We will hear from the Legislative Analyst's office rst
6 an ove of the content. The author of the In1t at
7 p a statement of intent and content. Sta s le for implementation will explain their 8 agencies re ll present their 9 involvement. The Attorney General's office And finally, proponents and opponents will state ir 10 t s while provid supportive testimony.
rsons WlS ng to address the ttee who aLe l2 on the nda will be given an opportuni to a 13 agenda has been completed. 14 this in mind, I would 1 to call r fir 15 tnes . 16 Welcome to t,hc' cornmi ttee and members, and others 1 be 17 us short 18 Mr. John is the Chief t 19
20 tl!r. Vickerman. 21 MR. ICKERMAN: Thank you, Mr. Chairman. 22
On my r is Davt0 Vas 1 W 's the ief t 23 r of ce, is available to answer any que t ns a 24 _._1 . 25 I have a prepared statement which I have gi n 26 tee, and I'll ze i s contents. Bas a 27
28 H ll II !\ II I " 3
1 going to first try to give an overview of the lottery, an
2 overview of Initiat 's provisions, and then especially
3 because of the nature of our office, talk about the seal
4 implications of the Initiative.
5 Before I go into that, I'd like to give you just a
6 synopsis of what are the types of lotteries in the United States
7 so you'll have some kind of a context to understand some of the
8 comments I'll make later.
9 First, as you know, California currently does not -- the
10 Constitution does not allow for lotteries, and that provision has
11 been in our Constitution since 1849. But there are 17 states, plus the District of Columbia, which do have lotteries. And in 12 1983-84, the total lottery sales were about $6.9 billion, a 13 rather hefty increase over the previous year's sales. And about 14 40 percent of these sales goes to the government as revenues. 15 Now, each state has its own types of games, but there 16 seems to be three general types that most states have. The first 17 type is the so-called instant game. And that is where they agree 18 to sell a certain number of tickets, and the person, sort of like 19 ,McDonald's card, takes and scratches off the coating on the 20 i \ticket, and you find out right away whether you won or not. 21 ! The key characteristic of this type of game is, you 22 II a lot of winners, hut they are very small winners. For example, 23 I,
1/ in Washington State, they had a $60 million, their third game, 24 II II and I had the statistics on that; 99.96 percent of the winners 25 $50 or less, and these winners received 75 percent of the 26 ~~were II lottery proceeds. 27 ,, 1\ II 28 I' II!
II 4
1 For , 6 mill le won a $2
2 00 $5; 50 000, b won $50; a
3 0 won the rest of the
I 4 And so, that is one of game, sual l
5 ner a of small winners. And eve state
6 exc 1 ha an instant game. On 2, we ta f 7 so-called in eastern 8
s. It's a fferent of 1 where 9 ck three rs. are lly dai s, and 10 v;ri s are not as as are the rs game 11 5 percent f total the st 12 states that we at are t numbers and 3 contract 1 on 18 percent for the s. 14 The rd of wh h is ve 15 I the ted States now, l Lotto. 16 newe t the fastest g of 7 s, you , say, s out f a f ld of 44. And l 18
I S odds are ve 19 end to be ve e if have 20 s the rolls over have a 21 occur Il noi just a week or re 22 sort of a Lotto a. In other the grows 23 and 24 I ' a ago, the n 25 States was $20 in New York. Then re, a
wa $4 in I 1 s. But here very 27
r f ve ' if volume is 28 5
1 And 27 percent of all lottery sales are this Lotto,
2 and this is the one that's growing the fastest, and probab one that you've heard most about in newspapers.
4 On Page 3 --
5 CHAIRMAN DILLS: Before we get to that, Mr. Vickerman,
6 lhave you had an opportunity to determine what your chances are in 44 6 7 a field of numbers to select numbers? MR. VICKERMAN: It's 7 million to one. 8 CHAIRMAN DILLS: Seven million to one? 9 MR. VICKERMAN: Yes. lO CHAIRMAN DILLS: Fairly odds, yes. 11 MR. VICKERMAN: Very long odds. 12 On Page 3 of our statement, the top part goes into the 13 legal provisions, which you've already mentioned, so I'll skip 14 over Constitutional provis s, then bottom , we 15 talk about the statutory provis of Prop. 37. 16 This Act establi s the Californ Lottery Commission 17 !and gives it broad powers to oversee the ra s of 18 I /I Jot tery with the sta ecti ve of max zi the revenues from 19 'I the lot 20 The Commission would be responsib for determining the 21 I type of games. In other words, the measure itself doesn't tell 22 I
if you what games are going to be played. The Commission has to 23 ,I 11 determine that. How often the drawings are going to be held, the 24 d II /I price of the lottery t , the amount and r of lottery 25
/1 prizes, and the locat where lottery tickets may be sold, all 26 II 11 of these decis , frankly, are going to influence revenue. 27 II II 28 I
I 8 I lj l And the measure also s 2 a law enforcement, one has to be a
3 ed c Accountant. s no more
4 ssioners be rs of same t
5
6 CHAIRMAN DILLS: Let's assume Gover no sn t a r cannot someone who s 7 i in work nee that s one of 8 s. And he submi sf tardi names for 9 ' ssion, and se Commi sioners have to be the iO
MR. VICKERMAN: That s rect, Senator, 2 CHAIRMAN DILLS: So, he names a rector. 3 f or ing con f his 4 ss 15 Director from s 6 I s ef date o II 7 II sf somet 1? 8 pil II the rector, has al s !9 II "p s on's con ion all, 20 have the s to ? 21
T I ICKERMAN: J_ ssume I pos
;I Senator. 's an aw 1 lot of s if s measure 23 !i I il sses are to have to made ve H ll 'I th s is more a . Counsel quest t i 25 II
26
27
28 9
They're going to have to determine, you know, who can
2 sell; what kind of s; what kind of games; a lot of
3 personnel decis And as I'll out, 're given this
4 16-and-a-half million dollar line of credit, which is a loan from
5 the General Fund, and the Initiative specifies that they have to start lottery sales by the end of March, first part of April, 6 within 135 days of this measure. 7 So, how you reconcile all se things of actually 8 moving this fast, I'm not sure. 9 Now, for example, Washington State moved about the same
time period. But, they bypassed a lot of competitive bidding up 11 there when they did that, and ran into a tremendous amount 12 of criticism. And I talked to the Director, and he said he'd 13 never do it 14 CHAIRMAN DILLS: There's no requirement competitive 15 bidding, however, s 16 MR. VICKERMAN: is, yes, some competitive, but 17 's not under State Compet ive Act. 're 18 treated more 1 a ivate corporation, ionally from the 19 !, sponsors' point of view, as a government entity. 20 But I'm not sure of the definitive answer to your 21 I jquestion, Senator. 22 II il SENATOR ROSENTHAL: What happens if it isn't done in 135 23 ! 24 jl days? MR VICKERMAN: I imagine the cou sue. I 25 I /think that's their 1 recourse. There s not penalty 26 II II lj sion, per say, in the tiative. You just nonnal 27 II ll!I course of law r that condition. 28 il I II 10
1 CHAIRMAN DILLS: They've got $16,500,000 1 of
2 MR VICKERMAN: 've got that.
3 CHAIRMAN DILLS: So, ?
4 MR. VICKERMAN: I'd think sue s ac
5 sue the Governor that hasn't done s act I'm sure,
6 Senator.
7 CHAIRMAN DILLS: vo 's a one
8 that goes to the Supreme Court, you have a few more s
9 delay for that determination.
I That really doesn't get them anywhere, does it?
11 II MR. VICKERJ.1AN: No. I 12 CHAIRMAN DILLS: Doesn't move it s II 13 II 14 MR. VICKERMAN: Well, we at, Senator I \ 15 ment the s of the
16 r states, the s I 11 time line probably l7 this is instant take on line, 18 just longer to bring and to go the process, ta 19 l to the equipment vendors. States li on the Lotto 20 il about 9 the other games. 1 matter, 's the 21 il So, I 11 'I meet s talk l1 il i! revenue est s, you have to ta about stant 23 'I :! iii' aval'l able il of 1985, but not a 1 1 of game 24 II Ji 'I 25 II II CHAIRMAN DILLS: And sellers of the stant i 26 ,,
MR. VICKERMAN: I think there's a provision that there's
2 a breaking point, yes. The seller pays o up to a certa
3 amount, and when you above a amount usually you t
4 the pay-off from the Commission. And the reason for that is, when you get a certain pay-off, you get into a secondary pool, 5 and the big money is in the secondary pool as far as the 6 individual winners. And this is how they maintain control. 7 CHAIRMAN DILLS: Will you later on get into the question 8 of the $16,500,000 and its continuous appropriation ? 9 MR. VICKERMAN: It's right on the bottom of Page 4 of 10 our statement, Senator. It's basically a temporary line of l l credit, a loan from the General Fund, that has to be repaid 12 within a year from the time the money is borrowed. This loan is 13 for one year, so if you borrowed in the beginning of the year, 14 you pay back that portion with the ; if you borrowed at 15 end of the year, pay back almost after you start. 16 CHAIRMAN DILLS: That's a continuous appropriat 17 MR. VICKERMAN: Yes. 18 CHAIRMAN DILLS: What does mean? 19 MR. VICKERMAN: Basically it means there's no 20 legislative or control of this money. It's up to the 21 I I Lottery Director to go to the Comptroller. He's got a line of 22 licredit, and he just puts in his claim and gets his money, with II jjthe proviso that he has to be repaid. 24 II CHAIRMAN DILLS: All right. 25 II Senator Greene. II 26 1: !) SENATOR GREENE: A question po t. 27 IIil ii 28 i'il
I 12
1 Does it a bill or an appropr to trans
2 money from the General ? VICKERMAN: No, sir, s measure doe
4 SENATOR GREENE: s does not st
5 MR. VICKERMAN: That's right. t 6 SENA'l'OR GREENE: And s transfer has not p MR. VICKERMAN: That's 7 SENATOR GREENE And 're ing the enactment 8 automat l lishes that? 9 MR. VICKERMAN: Yes, sir. lO SENATOR GREENE: Have we made provis the ll
12 HR. VICKERMAN: No, s r. 13 SENATOR GREENE: How does that place? 14 MR. VICKERMAN s is 15 , Senator, and a s 16 t 17 SENATOR GREENE: thank 18 MR. VICKERMAN: On bottom of 4, we 19 ! .., allocat .L lottery sales . s goes back to II 20 II p d l's que 50 rcent, goes to izes; II 21 II II rcent goes to then up to 16 pe 22 ll I!p s cost, inc to ret a ler 23 II il sell t or else. extent I" 24 li I' il 1 percent declines, p 25 I I!li excess p unc to 26 ,I'I! II,, 27 1 J-·
Frankly, we looked at I think a couple of pages back
2 we looked at the distr these rat s are pretty common
3 to what is done in most of the litan states. There are some small states where you 4 very administrative costs because of the small volume, but if you look at the big states, 5 these percentages are very comparab to what happens there. 6 Then, on the bottom of Page 5, it ta about where the 7 money goes. It's basically on a ADA, a per FTE basis. In 8 other words, it goes to four segments of education: K-12; 9 community colleges; California State University; and University
of California. And each student gets the same amount, about $92, Iwe figure, when it's fully operational. l2 I So, when you add up the ADA or FTE, K-12 gets about 80 13 percent of the total amount of money, and I'll go into the 14 details a little later on about the other 15 On Page 6 of our analysis, we start asking ourselves 16
1 some questions, to pinpoint or what are the seal l7 I implications of this measure. And we are saying on Pages 6 and 7 18 l how much would education get? 19 I Well, first you have to estimate the volume. As I 20 ment before, we're sort of looking at a measure where it 21 I
1 doesn't pinpo how many retailers are going to be handling the 22 I . ! t1ckets, or what kind of lottery games. So, we have to look at 23 i lithe experience of the other states to really infer what might 24 II in Cali We are not sure of other 25 ljstates is going to dupl activit sin California, because 26 ijwe've never had a lottery before, and numbers game experience 27 [I 28 II 4
1 of the eastern and stern states not same
2 we Cali
3 For example, one western state s game Wa i State last It 4 ' s 5 II di sa s.
6 On Page 8, we sical we at the 17
7 states, we sa best to est fiscal s
8 11 look at the per capita sales the metropol states II 9 II states close to us in geography; make an adjustment the
10 I' rs may not be as popular here as they are
11 ~~ s ' land, some of the eastern states;
/ that sales would $50 per 12 1 11 rter bill dol when the stem s 13 I' onal. I stress it's ful 14 il II You will have revenues 15 I! 'i for of the 16 li a full 's revenue 17 \j to II 'I In '85-'86, we t 18 l1 j; ' t f th instant, then you can on 19 II star.
1 II,. 85-'8 , il '11 on 1 revenues. We' I! II ca l l 1 as 1986-'87 just 21 !! fac s 1 s. I, I' "i: t~ow, s s te is r 23 il I' li talking And we've seen several different 24 ,,!i !i f rent time per 25 ,jII li $700 11 a I'm not sure 're t 26 i' li II about, whe r 're talk calendar; 1 re not, obv s 27 I!
28 15
1 talking seal. From the way we see their figures, the way
2 at the est , they looked at sales
Washington and Co ing the 1 period.
4 We say there's a couple problems with that methodology.
5 Number one, the sample is too small; and number two, the s
6 revenues are not typical of the on-going effect, which I'll get
7 to a little later on.
8 On 9, there's some ve interes statistics. 9 This is an overview of lottery sales throughout the United
IO States. First as you'll notice on the left-hand side, they grew
1 l from 5.2 billion to almost 6.9 billion between '82-'83 and l2 '83-'84. Very fast growth rate.
13 Secondly, you'll notice the capita grew from $50 to
14 $64 between those two years. Most states increased, but look at
15 these figures, and you'll see that zona, the per capita sales
16 !declined; Colorado they lined; and then Washington State declined. These are all the three new lottery states that only l1
18 !had instant sa t s during this iod; now they're inging on Lotto games to try to boost ir sales volume in the 19 future. 20 1 ,I at wide va t r sales 21 III' III states. Part of that is the ss ss, is , for example, Maryland has a a very heavy lottery 23 11 I' ,,11 state, and the game is the dominant there. 24 I! Ji So, each of these states has its own characteristic, 25 wide variat sa s volume. 26 I II 27 d II II 28 I' II !I H !I 6
1 , on the of 10, we start
2 issue was rai be ta
3 11 we 1 wou 0
4 Y.JOU be 13 rcent f
5 State S I 4.5; and u. c. ' 2.4 rcent of the
6 If you at the on 12, here we
7 state General money s
I 8 8 s of at -'85, we're
9 est of sales and a lO I son. II ll For le, when s are ful ope 1, we
12 II assume '11 get 400 s- 2 educat I 1 rcent of state to K-12 1984-'8 . 13 4. 2 contrast, U.C. would $12 14 one rcent of state 15
16 ' II The st rat is col s, and 17 ii II. u.c. If you take all four s , the $5 18 llS,, I ! course, s a f I 4 19 le to 3.8 f what state 20
21 , we r s 22 1 str s are go ng 23 i! 'I !i l1 How for these revenues, e 24 II /1 don't know you don' have track 25 'I 1! n to In '84-5 ls would some 26 !!
;! tail of s year, won't s 27 I! it II 28 il jl II ,,!l li II 17
se 's a
2 ting s
3 and some track
4 is sions 5 rst year or two, because 's the 6 revenues and e al because of s transition 7
8 SENATOR ROSENTHAL: Cou Commission at that point, 9 ing to be available for
budgeting, not g any money, for le, the first, but hold
the money for purpose? !2 MR. VICKERMAN: No, Senator. The way I read the 13 Initiative, the money s to the Comptrol r, then the 14 1 it out school distr s. 15 I don't e I it's 16 up to s it just goes out. 17 As soon as he is lly to so, i down 18 1 di 19 I t would con of the
Initi for to what And the 21 ssion is not action at of Senator. 22 II It's basically, the 23 il L'I ller; 24 'I II State Universit s, or U C. 25 !I One of s we talked on 13 and 14 J! 26 d II is how s are these revenues. we looked at it both 27 I II 28 I I I 1
1 a point of view a of Let
2 -term f t.
3 Lo revenues the so
4 can some 1 1 the
5 else. But our r s
\ revenues also the economy, and s 6 1 , the 7 lsen i to s than, I I so lotterv revenues are not dist state 8 II _, 9 \1 revenues. II i! On Page 15, Tab 3, we show the phenomena of the 10 I< 'I 1 of lotte sales versus what happened a 11 li'I It le, a 12 zona s 12 II sa s of $9.5 ll month. 13 [!lotte in '81-'82, !The next year, to 6.3 mil , and 14 to 5 llion. 15 I Colorado, had sales of on f s 16 off, and were $27 mill a 17 had 12 months, less revenue in 12 18 27 to 19 the same 20 re actual ss revenue 12 21 ii li rst 7 lf II 22 II /! ii So, you do s lical 1 burst 23 1: li sm, and off. j, the 1 25 II f unless you constant new games to 26 li li the s sm of buyi the s. I!,, (I 19
l On Pages 15 and 16 is an issue that I mentioned before.
2 On 17 we ta s are distr
states, in is
4 the t line. If you at well-established lotte
the major states, 49 percent goes prizes; 10 for
6 administrative expenses; and 41 percent for pub c purposes. And
7 we assume that a these things are operational, we would be
8 very close to that under s Cali
9 11 There's one point that I sort of over in my
10 discussion, and that is this measure provides very specifically
I I that the lottery revenues shall be used -- it's the intent that I 12 they supplement rather than lant sting education revenues. 13 Now, these terms are subject to interpretation. I've seen one
14 counsel opinion by the proponents, which they say in effect: You
15 couldn't reduce amount of money the state is putting out
16 lnow, but there is ali grayer area of growth rates.
17 I And I think that is probab a good l analysis.
18 CHAIRMAN DILLS: How does one force s
19 the Governor to the full budget and ic ?
20 MR. VICKERMAN: I don't the issue is l budget,
21 Senator.
22 CHAIRMAN DILLS: Let's l not by
23 the l. s is lemental to is a 24 provided or to be provided. The two last Governors we've had the ls. 25 not to be all that generous we're e t to to 26 is amount of money which this is supp al? That's the st
28 MR. VICKERMAN: As you well know, Senator be
e is no solute
3 ls.
4 l now,
5 true.
6 so 've ca I I I I I I le that is ss le. If 8 I II II may a l course of act ,I 9 q I· CHAIRMAN DILLS: So sue slature 10 II 'I II so 11 II'I We 12 II II rs. 13 I,1/ CHAIRMAN DILLS: Out o that 6 14 II 11 II 1 i a ), 11 state, 16 II,j . VICKERMAN: issue we talked II II s effect wou a have 18 II p II because state rece s a i 19 II li II II !I II ii 21 !i II 'I !i II ]j I! II 23 I! ii !' 24 li " nII 25 I' I! !I !!,, II I! il !; 27 :! I' 28 \! II" •'li 21
l of the amount bet to the bettors rather than 50 percent; and it's
2 a much more active partie type of than there is in a
3 of the ry games. I'd be glad to answer any ques s. 4 SENATOR FORAN: I a coup of que s. First of 5 all, on your 9, where you list the other states, you list 6 Pennsylvania, which is out of proportion to every other state, 7 including New , and it's smal r population than New York, 8 of total sales in '83-'84, 1 billion 236 mil 9 The first question is why? Is there a reason for that 10 disparity among other states that are less populous? II MR. VICKERMAN: I think ir Lotto sa s took off 12 faster and higher than most other states, and they have very 13 heavy numbers games, too. But they into the Lotto business 14 ier, and had semi-weekly drawings the State of 15 Pennsylvania, where a lot of the Lottos are only weekly drawings 16 in other states. 17 SENATOR FORAN: One que is, if you take the 18 per tal lottery sales, and you at ta, let's 19 say, of District of Columbia, $157 per ta, or 20 Pennsylvania, 104 as the case may be, is there any way of 21 I comparing that to r state income tax as to what proportion it II li represents? 23 II i/ MR. VICKERMAN: The on I 've seen, Sen a tor, is
II that Mary , which is it was usual 25 /1 -- while I'm ta , I think I just red something here. I' i! :j II 27 ji 28 II I II [[means? i 25 II P sa s 26 II II i1 il 27 II :; 1: ji ,I
IIil "H I{ II ·. 23
l MR. VICKERMAN: I would assume so, but the only problem
2 is that you won't know in the init 1 period how much you're
3 to get. You could some of an X that s
4 in e s, to extent we get more money than is
5 anticipated, these cou be used for mid-year adjustments or some 6 other adjustments, yes.
7 SENATOR FORAN: But you could literally bank it all in
8 collective bargaining; is that correct?
9 MR. VICKERMAN: I don't see any prohibition against it. to SENATOR FORAN: That's the interpretation, and that
11 would be probably true, also, of the higher education
12 inst s.
13 MR. VICKERMAN: I would assume so, yes. All it says is
14 that it has to be used for instructional s, and that, I
15 wou read, is n the confines of s 1 purposes.
16 SENATOR FORAN: Wouldn't that result in, whatever the , budgetary support for l support 17 l stricts per ADA or , wouldn't this 18 basically the ining diffe 1? 19 MR VICKERMAN: Not neces ly. 20 SENATOR FORAN: What I'm trying to nd out is how the 21 school boards could make a that they be able to
If s is id on collective 23 II in p 1! bargaining, and they feel there's so much that they need for 24 I! /1 general support, ff becomes one re are more or 25 ·I li less blackjacked into one ition rather than the other as 2() ,, ;i :! opposed to the general support. 27 1\ 28 li I I
1 I MR. VICKERMAN: for the
2 at
3 s characterist s as
5 s col
6 i 's ctab
7 so r
8
9 VICKERMAN:
10 FORAN: But we don't You can use 't know Do we it 11
12 There are ce s 13 general genera 14 g 15
16 of 17 a eve 18 II rd s a ADA, 19 I! II le r 20 II :I,, I[ st out m 21 I! II to H II i VICKERMAN: I 't see where s i 23 I h rent from l ,,II \] 'i t be l I! 25 !f [' :'1 'I 26 1: !! il MR. Sure. 1: 27 II " 28 ,,:; [, li II II 1\ II 25
l SENATOR FORAN
2 SENATOR DILLS: We a of tter
4 ssed to who are
5 you are one o our s, we for
6 thorough investigat smatter. We'll excuse you at
7 are no l st
9 Mr. Barry Fadem, proponent of the Lottery Initiative.
10 MR. FADEM: Good morning, Mr. Chairman. Thank you for 11 s opportuni to before the
12 committee. I think whi State of California would like to have opportuni 13 to have an initiative named after them, I'd l to clear that I'm an 14 attorney. The be to I'm an in-state 15 attorney who ices law in San sco 16 I am appe on of i 17 II Education. I think each of of tee 18 I Better lists just some of 19 0 als,
ls 21 a. list 5 00
individuals s. It's continu to everyday.
I wou just 1 ttee to know that I'm 24
The rst comment I to s is
second of s hear on ct of i
I· II II 6
1 State Some of the matters were scus sever a
2 As ttee At in
3 on 1 some comments on the
5 li s Better were
6 about comments
7 that t General's of
8 and srepre s
9 unfortunate , are ing
10 its s s. 're of s
11 General's not to
12 to he
13 to make under the
14 Generals of 17 0 r states we
5 sh l I'll be r
17 General's as
18 1 of the State of Cali wou
19 We note in f
p General 0 the d il li !i f sence to a As i 21 I'li i il 22 II I'li 23 DILLS: Mr. Fadem I ve been n re a la t us.
a ng 25
26 to some ii some 27 II I [! j! 27
l We i you wou
2 we've a In ts ts contents, and so
4 lie r or not
5 s or some
6 tnesses at r p are you us.
8 MR. FADE1'1: Senator, I m 15
9 a scus of in the
10 However, at st General' l 1 sentative me; s t I to rst
13 I 11 move to a i of se
14 conta ti 1 s ta to
15 s 0 states, Lotte tors and
16 at
7 there were two areas as we sa f 18 to dra t One le the
19 state is to go into e must II assurance is the
II 11 and 1 21 i st as wou be i
Two we numerous comments on II,, !I jl
il With your ssi 1 to ju se !I the 26 II qI' l7 II II II i''I I I 28
1 CHAIRMAN DILLS: Senator Greene for a question or a comment. 2 lj
3 SENATOR GREENE: Yes, sir. I'd 1 to follow-up on the
4 Chairman's comments.
5 I as one , am sted in hearing your comments
6 re to the testimony of our Legislat Ana st, what if it ses, the transfer of the money from 7 I General Fund, what if there's not appointment. 8 II'I tand ty is a part of this, but it 9 there's much more basic things that I at least, 10 lseems to :e of s committee, am concerned with before we get ll /a one seem to r As a representative of 2 I !the 'm conce th the much more basic things, 13 I not being exc , but would not be priority on my 14 I secur
I~ Let s money; let's about education; 16 II I\ let's lk about it s re. 17 j: II MR FADEM: Let me start off, then, Senators, with your 18 11 II ss , I I 1 to s Analyst's 19 on, I , a j as have found out. Let me 20 llo II il ss the issue of revenues wou be generated by a 21 ii I~ i of Cali a. 22 II I' I th , as the Ana st and Mr. Vickerman 23 I! I 1i has out, c s area is ve difficult. 24 n p 11 a the exper 0 the other states as a means to 25 jl II we wou be in California. They 26 'Ij, 1.1 at a number of states. 27 II jl 28 !; II ll li 29
1 Cali Better Education, at
2 we cons ve conservat est s as to how much
3 wou rai did two s We of
4 what we consider to be the Western s, and
5 looked at the states of and Colorado. Washington's
6 per capita sales last year was approximate $59; Colorado's was approximate $66. The of two states is some $65. 7 Applied to California's populat result in l. 7 8 Ilion, which is not that diss lar from Legislative 9 Analyst's number. 10 One other factor went into our calcu as I l you've heard, it is required at least 34 of the 12 revenues raised by the lottery must go to public education. 13 However, based on the experience of the other 17 states, 14 tional has been an 3 amount of 15 unredeemed winning ts. 16 In addi , as I will scuss 17 p in the average 18 spent by the states admini of lottery is 19 much closer to 13 rcent. We fully , that the 20 amount of revenues 11 be avai le educat 21 will be much closer to 40
I'm not sure, I th was Senator Foran or Senator 23 il !jGreene who pointed to the State of If we had 24 I· I' j to use Pennsy 's expe of $1.2 billion,
/ population is approximately half of i is. There 26 ,j I! are those wou we'd ju f est t II 28 II 30 I 1 Isome 2.4 11 would be generated for California. However, we I 2 d not se a number We think the $1.7 billion is
a con f , because we the lotte to be very
4 success 1
5 CHAIRMAN DILLS: For the first year --
6 MR. FADEM: Correct.
II CHAIRMAN DILLS -- or first 12 months? I 8 MR. FADEM: First 2 months. ,J
9 III, CHAIRMAN DILLS: Wi experience, you expect it to II 10 I as it s apparently happened in Arizona, Colorado and re rd it was less than half of 11 \wai i I that· zona, 9.5 million to start, 5 million three or two years 12 I ' I 13 .I later; , 27.4 mill to start, 12 months later, 9.8 Wa , 26.7 mill to start, and 12 months later, 14 11 mil
15 II 1 . 6. II . FADEM We Senator, out of the 17 states 16 li 17 , 10 states reased sales second year. I 18 sales increas 294 the second year. I could II 19 " state -state for why we think they're ·Ili li 20 II,, II 1: 21 ILLS: There's the East and then 's the s 1 meet.
23 MR. FADEM Well ful 11 meet on the issue .c 24 .L , but number of states who have shown increases L ,,li a t maj of states. 25 !i /i We a well-run ef ient in the State of 26 II :I I' Ca i wi 1 s we are estimating, and the 27 I! I; 28 li 11
II,: i' I' "!i 31
line, when we get 1 think sometimes
2 lose of we're
3 is the amount of 1
4 ion. Based on our ca at a gure of approximate 5 $680 1 for CHAIRMAN DILLS: Did the Scienti Games, the Bally 6 Sc fie Games, initiate the action in zona, or Colorado, or 7 washington? 8 MR. FADEM: I don't know. I think 'd have to ask 9 that question of the representatives - 10 CHAIRMAN DILLS: You don't know? I l MR. FADEM: -- of i Games. !2 CHAIRMAN DILLS: Do you know who ific Games !3 are? 14 MR. FADEM: I am certa aware of who i c Games 15 are. I think this committee as well as public has knowledge 16 Sc i Games s a sor or contributor 17 to the effort of Californians for Better Education. 18 CHAIRMAN DILLS: So it isn't Barry Fadem. It's 9 Scienti c Games that's principal supporter. 20
MR. FADEM: I'm 1 COU you at quest ? I 21 't understand your question. 22 CHAIRMAN DILLS: All I was trying to find out if 23 s that in Arizona, Co and Washington,
whi are Western states to which I have refe whether or not
in any of those states the Company Bal 's
Scienti c Games was a sponsor or promoter of in those
states? just '81, 1 82. 32 I)
1 MR. FADEM: Well, Senator, since I do not have personal
2 me answer st s way.
3 the 7 states s --
4 , Senator Greene, of the 135-day
5 s t 17 states started a lottery, 13 out I 6 jOf 17 states a within 135 days. Second , for are interested 7 I CHAIRMAN DILLS: Was by initiative action? 8 I MR. FADEM: Somet s, I think -- I believe the 9 I II,, slature pas sometimes the people put it on. 10 II CHAIRMAN DILLS: How often was it an initiative? 11 1/ MR. FADEM: I 't answer, Senator. 12 II II i! CHAIRr,1AN DILLS: Then how can you say "sometimes"? 13 ji ,I MR. FADEJI.1: I'm ng is out of 17 states, 13 14 II that ti so 135 s of the 15 II states date of 16 II t CHAIRMAN DILLS: I r 17 II
IIli . FADEM: second I'd 1 to is that 18 li li CHAIRMAN DILLS: But of those 13 states, how many of 19 li II re is States islature did the
II ss r an i act? 11 !i,, FADEM: I can' an exact number. I; li CHAIRMAN DILLS: Cou us a guess? 23 I II,, ,, MR. FADEM: I I wou tell you, Senator. 24 i\ 1: li I! CHAIRMAN ILLS: Wel , you 13 of them have been 25 I! le to do t in 135 s I would ct that s 135 days 26 !i li1: 11 has come , and I it's come from Bally 27 ' u Sc 28 3
1 I'm to f out from MR FADEM 're
answer to 135 We're
4 $2 ll a for c For every s after state voters
6 CHAIRMAN DILLS: Oh, come now. You've me
7
8 MR. FADEM I comment
9 CHAIRMAN DILLS comment and show how stupid is. Go 10 MR. FADEM: Once s ative in li as we ll do, for s 2 ' at is not effect, we're 13 at $2 mill 14 In
c 1 who are $2 16 f a is reason the 135 was 17 at dates f states, we 18 fe t the 135 s wa I've to hear 19 any t leas , tha would 20 to me son cou not do n 135 21 I want to s one of
states stress that es to run 23 as a reve s s In 1 , we fee
manner s 25 times rmi le.
CHAIRMAN DILLS: r Senator Greene. 34
1 SENATOR ROSENTHAL: The reason I the question is a
2 one is that if state p s it upon the ballot, a has done the state I the llot, and Governor 5 lbei 1 of things, so that it's the Legislature does 6 ~ve 135 s, it, it
7 lmay be On the l it may not be. II if, for 135 s, because of way it 8 II 1\ gets onto the 1 , it's not possible to do it in 135 days? 9 j, il MR. FADEM: Senator, if I can answer your earlier point 10 II jl 're measure has not been put on by 11 \! rst, I! the lature. re been initiatives excuse 12 ·I I me, s ion s 1 going back four, six, and 13 I s are similar to some of 4 /e jthose s s. ana ses been done for several 15 I,II li 16 i! I'm also aware are a number of state agencies 17 II II be lved ing s Initiative who are 18 II i! li a que , making 19 'I li s wou be q 20 II jl concern about the fact 21 II II II t s gone and months of 22 !I i: l ss, we implementation of 23 1: ,1[ d ll In at 1 be done, 11 be done in a 24 li li li II shbowl. there 11 be great scrut pa to the 25 II I! of the 26 :! II I' 27 ii 28 ii II \i I! ll 35
Your s as to s if throws
2 ir can't 135 s, I t an answer answer it can done
4 135
5 CHAIRMAN DILLS You're ta two
6 Senator Ro 1. You're ability of to s 7 s , you 8 ment of state agenc s are a studying 9 what they have to do.
They 't to , just ss money on.
State Cornptrol sses it on to 1 s cts. 2 don't have to do any preparation that. 13 The 135 s has to do with which the ssion 14 to go out and to sell, 15 the records. must keep them to 16 -- so, state is to go now 17 far as what it s to 18 The is, is the Commiss or sponsors of 9 to ere at a one
re renee to all 0 the ? 21 MR FADEM: Senator lls as an I ll the I 1 I il comment t s rea men can differ, s may the
lr 11 lass c case. I, r/ I can on on the of II II r states, and th -- I of 26 II il s ta to eve rector the 1 states,
/I II 'i\ II II 1 ir staff, their personnel, other vendors ~ in the industry
2 seem not to be mentioned , other than Scientific Games.
3 And t is our col sdom can be done in 135 days.
4 CHAIRMAN DILLS: you talked to 17 of them, and you
5 11 still 't whether or not the islature or the initiative
6
7 ~1R. FADEM: When I wrap up my testimony, I'll be more II 8 ·I to return and g you exact number. I do not II 9 II it th me. li CHAIRMAN DILLS: Senator Greene. 10 ii II 11 SENATOR GREENE: Sir, I would like to ask you a couple II 12 ~~quest s. I've 1 ly it could take place that the 13 I, Governor example, cou be late in submitting the people who 14 II 1 make up Commission. The Senate could have a very real, 15 .I II st with one or two of the personalities. No II i/ effort made to interfere, just normal kinds of disagreements that l7 !, !I li st wi s and like s. 18 ll ll,, would firm in those instances if that 19 il ld t p e? Could you venture, or would you dare or be 20 to venture a guess as to, know, very legitimate kinds 21 of s? 22 MR. FADEM: Senator, we certain understand that 23 situat have arisen Sacramento over the years that have 24 cau de , the budget and s 1 that -- 25 SENATOR GREENE: s has nothing to do with the budget, 26 sir. 27
28 37
MR. FADEM We 1, the answer
SENATOR 'm ta
as is, are
4 eng of 11 So sn t p , or one of s of the sn't get
6 place Does mach run from of view? MR FADEM: We 1, you Governor rst. We Governor wou s law his
9 s the t SENATOR GREENE: But you can't count on sir. Is 10 supporting s
MR. FADEM You'd ask Governor. I have
read accounts is that he 13 1 to s. I don't know his opinion 14 on is ar one 5 In case the -- for some reason the s 6 not , I can today what 7 ~~were our 18 GREENE: But is of ? We 9 I jJknow cou I ss our s Ana t
21 J II st sa we cou II 11I rt an d 1 the d ll II s. 24 II lr SENATOR s II II we s 't there or two of il II lr II II 1\ II I 38
l MR. FADEM: Well, my answer is s. I would predict
2 would not come to ss we put the time
3 law reason that we wanted the
4 to be as quickly as possible. And we would
5 the elected representatives of the State of fornia are going to respect the will of the people. 6 ICa If there are delays that come about through no fault of 7 I 8 l the Governor's Office, or the Senate in confirming these I 9 I appointments, think we would take a reasonable approach.
10 II The purpose in putting those dates in there was to avoid i' a situat where the people of the State of California loudly 11 II la want a this state on November 6th, 12 III then S WOU go by, or months of need ss delay. 13 A rect answer to question, I think we would be 14 I I \i rea le if de occur no fault of the Governor's
11 Of or of the Senate. And I 't think we're at all 16 II rested in to court to compel action. I think we 17 II II ct that if reasonab delays occur, and the people of 18 II would J! the State of Cali a can unde those delays, we would be 19 il \I in that same It I' ll SENATOR GREENE: you.
21 uli :;li li CHAIRMAN DILLS: You may 1: i) MR. FADEM: I'd 1 to return to the theme of a 23 revenue-produc bus one of the other questions 24 li that here are some of the exemptions 25 !II II that are conta the iat 26 ii II i! li 28 39
from
and
award contract ces.
states, one of
re 1 f 1 ss, 8 , as a Senators can correct me I'm tate agency
Cali to revenue.
and a
maj our
In ss ili 14 out 5
n
even so
ss to 23 refore
rements. It 25
would not 27 40 I 1 lbe in a position to protect the citizens of California from
2 is s. 's s t prevents the
4 Lotte ss from making use and asking assistance from any
5 jstate agency. For example, I would expect that the Lottery sslon will contract with various agencies of the state to 6 assist For example, when the Commission begins to look for 7
J , or makes those nds of decisions, it'll be their 8 of ce I is whether or not to contract with the Department of 9 I,·I s to assist in that effort. 10 II General But an important point, the Initiative specifically 11 II s appl s to Attorney General's Office, the 12 II states, of General Services, any state agency that assists the 3
/I at their request 11 be compensated for it. No state 14 II II is to be a to r an additional load as a 15 .I /result of assistance Commiss 16 But strongest message that I can bring you today is 17 II,I II the need for f lity. You Mr. Vickerman talk about 18 p JJ there are a of unknowns terms of what 11 happen in 19 lifornia; how success HII 1 11 ; how big it will be. So, II I! il re are some tty decisions that can only be made as 21 H II li comes avai as the Commission starts down 22 II'I 11 road to a successful lotte 23 ,,li il,, li In to the ssion, who again is j! 24 i! !i i: il the Governor, confi by the Senate, as much 25 d i! lex ili were conta 26 ,,'I II j! 27 .I \! 28
I! II II 41
nt I' 1 to make is issue of the 16
f s
and s wha 16 real
4 means.
5 Well, we is
6 cit ens of Cali not want to State Lottery
7 Commiss a b check. 17 states country, I'm
8 aware of two we call a cap. This is not
9 must spend 16 of overall monies
10 for strat ll spend no more
I I than 16 monies col """'..L.u.Lstration.
12 What is 6 very often, right
13 off the top of 16 rcent wi l go to retailers.
14 These are duals s 11 sell the rage in the other 15 lotte t rece states in 5 16 s 16 f to now 11 l7 percent, and I don't of too many bus sses in state 18 much ss , that can run on 1 admini 19 costs. I ment average in other states is
c to we and I'm not sure if we 2 ' wou we c zens of
a wou 1 to max t could be spend in
area, not to ask s of for a blank
a cap s of 16
nt, even we that the 11 be much 26
28 42
1 CHAIRMAN DILLS: Have you or your group given the figure
2 the annual gross would run up to about $2 billion a year?
3 MR. FADEM: Senator, figures that we are using,
4 we're estimat gross sales at approximately, again
5 , $1.7 billion. When we use the 40 percent
6 of how much wou be available for public education, is where we come up with the $680 million figure for public 7
8 CHAIRMAN DILLS: Let's talk about 16 percent of 9 whatever. You promoters obviously at one time had said that 10 re wou an annual gross of about 2 billion. That means ll to $300 llion can be used for administration. That 2 't
MR. FADEM: That 't hay when you're generating $1.7 14 revenue. If I cou be pointed toward other either 15 s or bus sses the state of ifornia that 16 ss, I'd be more than happy to hear it. 17 But we think that that figure a small, small price to 18 two reasons. One is publ educat system of 19 a is ng out se revenues. 20 CHAIRMAN DILLS: Yes, we have the tears shed all the 21
22 MR. FADEM: Well, Senator, I won't try to bring a tear 23 your I 11 at st ss on to you the one personal 24 that I 11 allow myself today. 25 le talk about is there enough money for 26 t , have you had your door -- heard a knock on your door
28 'I !i"q
II l1
II!1 43
in recent memory and had a second ng on your door,
2 wi r stand out in street, the little girl
3 says to me, II a ?"
4 I you need a lar ?"
5 s l str , and s is in Walnut
6 where I l , was ing to se money for a field
7 tr to zoo.
8 To me, are the of people when we ask
9 about the 135 about an educational system lO that is desperate the , as I know 're well aware of. ll CHAIRMAN DILLS: Yes, we are also much aware of
12 tion 13. How Wa Concord --
13 MR. FADEM: If your ques
14 CHAIRMAN DILLS: How d wa and Concord vote?
15 went real for would do again. They'll go 16 I pre IV.
17 j, MR FADEM: is, is 1 not a lot of
18 money to be u for expenses, in comparison to
19 ,~ the amount of money be generated for public education,
20 II1 no it is not a of II st area on, and I'd be 21 II lj more than to answer committee, I'd II I! l to return to my area of , because if there's one II to 1 and for the people of 24 I! message that I'd l I It Cali to rstand, I recent weeks to some 2.5 II II i/ states. country, and I 26 of the II 11 hope we 11 fol
II,I p toughest, the most secure 28 II II II j[ II 44 II!
l The testimony given several weeks ago, Mr. Summer
2 te f that,
3 The t s not provide the
4 securi
5 Commission once appointed to adopt
6 s own lations."
7 Not true. I assume the Attorney General's Office has
8 the sition. Let me g a few examples. I'm going to
9 g re numbers to the law, and I'll just say "point".
10 ~~The Government Code Section is 8880, and I will just give the
il II 30 s drawings shall always be open I to the lie with independent witnesses and audio and video tape 13 I s and inspections red. 14 Sect 38 ires Deputy Director for 15 at least years of law enforcement 16 I Se I I ll res pons le for examination of 7 II ons of all prospective employees, lotte game 18 II qualif \1 retailers, and ry suppliers. 19 il .56, 57, 58, 60 conta what we consider to be the most 20 l! II str requirements for bidders of goods and services to the I il Cali State Lotte of in the nation, luding :Id il bonds, s of income tax returns for the previous 23 II II II I, years, detailed corporate ownership statements. 24 !I II disc sure irernents far exceed anything required from 25 i! !\ 0 r Cali state supp s. li !! 27 ii I!., II 28 ~ ! II li IId ii !; II 45
1 The Assistant General also testified that 2 because Lotte s and Director are not designated as , as California, they
4 would not be access to con 1 criminal history
5 records at e state or 1 ls. So, and his quote was:
II IS 6 Commiss not going to able to do its own criminal 7
II 8 .71 says: 9 "No person shall be selected, 10 appointed or hired to be a 11 Commissioner, , deputy 12 director, or Commission employee 13 who has been convicted of a 14 fe or any gambl 15 0 II 16 I'll go to .38: 17 II Director ty 18 11 con th 19 Genera or his des as the 20 I I, for Security deems 21 lj neces to promote and ensure 22 /, II , security, hone , and li" II II irness of operat and admin- 24 !I li II is f the Lottery." 25 li
I!, Now, I'm not sure how I'd be sted to hear from 26 I II the Attorney General, are we be to that he would refuse to 27 28 II II II 46
l have his zed people check the names of prospective
2 emp s, key suppl rs, et cetera, and simply report back as to whether an individual has been cted of a felony or gambling- 3 re offense? I don't know. 4 CHAIRMAN DILLS: Just a minute. You don't know whether 5 or not 6 MR FADEM: I can't for -- 7 CHAIRMAN DILLS: the Attorney General has any 8 li of checking whether or not a person has been 9 of a lony or any gambling-related -- lO MR. FADEI"l: The law requires that the Deputy Director ll for Secur shall confer with the Attorney General to receive 12 I And I cannot speak for the Attorney General as 13
1 to when st is made, whether the Attorney 4 I General ll st. 15 as ion, and assumpt when we wrote the 16 I l , is that Attorney General, as well as other state 17 !I s, would fully cooperate the Co~nission to carry out 18 II II s !9 ,II' II But for the General's Office to testify that 20 II provisions, and basically it's an open 21 II are no 'I 11 slate, that the people in , once the In ative passes li jj and we a State Lottery, that there's not security is just 23 Jlfalse'I and misleading, and in contradiction with-- 24 il I' il CHAIRMAN DILLS: Your security provisions will be 25 II !! rtaken your own off rs whom you select -- 26 "Ll i! i' MR. FADEM: The -- 27 H
28 li II ]l II l: II 47
1 CHAIRMAN DILLS: -- will make a search of the employees
2 to the extent to determine whether or not they've been convicted
3 of a felony or any gambling-related offense.
4 Who will be doing that?
5 MR. FADEM: The way the law is written, is that the
6 Commission is given the power to make those checks. The
7 Commission is also given the power to avail themselves and request from other state agencies any assistance it needs to 8 carry out the mandates of the law. 9 For example, in the Office of Administrative Law, if the 10 Commission decided that it wished the Office of Administrative 11 Law to review its rules and regulations, the Commission could do 12 that. If the Commission wanted the Department of General 13 Services to review procurement contracts, whether it's for 14 pencils or for computers, the Commission could do that. 15 The Commission also has the responsibility to check out 16 all employees of Commission. If the Commission decided 17 CHAIRMAN DILLS: Do you have access to the Federal 18 Bureau of Investigation? Do you have access to the Justice 19 20
21
22 Your group is the one who's going to do the checking. 23 MR. FADEM: No, I am not the group. My group is 24 supporting this Ini , but the group that would be 25 responsible for doing that is the Commission appointed by the 26 Governor. 27 28 48
Fadem, attorney at law, is not involved in running
2 secur checks on s. 1 r , then. The Commission and 3 CHAIRl..ffiN DILLS:
4 its s are ones that 11 do the security check; ri 5
6 MR. FADEM: With the assistance of other state agencies. CHAIRMAN DILLS: What does that mean? 7 MR. FADEM: It means that the Deputy Director for 8 on one is going to pick up the phone and call the 9 General and say: Let's get together and talk about the 10 ss for wh we refer names to you and receive information ll to we should hire these people. 12 At when we wrote the law, we thought it was as i3 le as 14 CHAIRMAN DILLS: So go to A.G. or the district 15 or s I guess it's the Attorney General 16 I! , do our j for us. ij 7 II MR. FADEM: As I oned to you before, any action 8 II i ted any state agency 11 compensated. So, 9 il:. charac ze it as ing them to do someone's work. 20 II l1 I, If we had given the Commission the power and 21 II re ibil to do all that I think we may have faced q i accusat s of: We have Attorney General's Office here, with 23 il d Hall resources, and access to computer files, and cooperation 24 ): !I 11 th r en agencies. 25 :I IIli One of the Deputy Attorney Generals made, I think, the 26 :i i!most cogent statement last time, which was: We don't need to 27 I' !I 28 II :I II II II il tl 49
recreate the wheel. And in this case, for the Commission not to
2 avail itself of the chief law enforcement agency in the State of
3 California seemed to us not the way to go.
4 CHAIRMAN DILLS: Senator Keene.
5 He's the Chair of the Judiciary Committee and a very
6 prominent and eloquent and brilliant attorney.
7 SENATOR KEENE: Well, you're very kind to say that. I
8 don't think there's enough evidence to demonstrate all of that,
9 Mr. Chairman.
10 This is the Government Organization Committee, Mr.
11 Fadem, and those of us who love education nevertheless worry a
12 little bit about the organization of governmental activities. You're telling us that a considerable amount of revenue 13 will be generated by this activity. And there may be debates 14 over the precise amount, but the numbers that are offered are 15 very, very large. And yet, this money will not be available for 16 purposes other than education. 17 I'm interested in the concept of the special fund 18 mechanism that's being created. Usually when we -- not always, 19 but usually --when we set up a special fund activity, there's 20 some relationship between the activity that produces the revenue 21 and the activity that's being funded. For example, the Fish and 22 Game Preservation Fund comes from people who hunt and fish, and 23 lit's used for those activities exclusively. Another example 24 might be the Highway Funds, where people who travel the highways 25 pay for the roads and other transportation from the funds that 26 are generated. 27
28 50
l What possible linkage is there between the lottery
2 i and education?
3 MR. FADEM: Well, Senator --
4 SENATOR KEENE: Or if there's no need for there to be,
5 not? MR. FADEM: Well, Senator, as you may be aware, numerous 6 been introduced in the Legislature to implement a 7 have had the revenues tied to a variety of sources. Some 8 return directly to the General Fund, others have 9 earmarked it rect for education. 10 In our conversations with the other states, and out of 1l the 17 states, it's a hodgepodge of how it's administered there, 12 of a revenue-producing business was convincing to us 13 the necessity of setti up a separate fund that would not 14 , that wou allow the people of California to say: 15 see how much came into that fund; we see how much is 16 to prize winners; we see how much you use to pay expenses; 17 now we see how is coming to us the people through the 18 s 1 and other educational funding mechanisms. That was 19 our reasoning for structuring it that way.
I understand the examples that you've cited with the tie 21 of sh Games, et cetera. But those that have going together 22 Cali s for Better Education strongly wanted the money
committed to education. And that is the reason for the 24 structuring of the fund. 25 SENATOR KEENE: What I get from that, and I'm sure in 26 still your answer you won't agree with it, or maybe you 27
28 51
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19 20
21 22
23 24
25 26 27 28 52
l If a produced more revenues than education , or could cost-effective , where would those funds
3 'd stay within 4 MR. FADEM: I wou say fund and
5 stributed to the school boards. We obviously we do -- for a state that's next to 6 of students r classroom size, and I'm sure 7 aware of all the negatives on California education 8 , we do not anticipate that and did not anticipate that 9
\~~would be a problem for the life of the lottery. 10 II SENATOR KEENE: So, if there is no possibility that e at n cou be over funded through the production of revenues !2 II II the !3 I MR. FADEM: Based on education folks that we have l4 ta to, l s, parents 15 I SENATOR KEENE: would never feel could be 16 II \over 17 MR. FADEM: Yes, Senator, that would be a correct 18 I II statement 19 il SENATOR KEENE: If suf revenues were produced 20 il ful education, what would prevent the Legislature from 21 II ij it ord 's rationally assessing 22 1! 11 the of and saying that well, the lottery is 23 .! H II much, so we're to cut back our funding from II II General Fund sources? 25 II II MR. FADEM: I apprec asking the question. It's d 26 !I ll certa ly a I wanted to cover. 27 I'"il II il 28 II II II d !l 53
1 My law firm did research on intent clauses contained 2 within initiatives and legislative enactments. We had drafted a
3 very, very specific intent clause that has been discussed.
4 Mr. Griffen, who is on the list of witnesses to testify,
5 who is an acknowledged educational expert, can discuss in more
6 detail, but the intent clause that we put into the initiative
7 was:
8 "The People of the State of
9 California further declare that
10 it is their intent that the net
11 revenues of the California State
12 Lottery shall not be used as
13 substitute funds but rather
14 shall supplement the total amount
15 of money allocated for public
16 education in California."
17 But the question to me today is, if the Legislature sat down and said: We got $700 million from the lottery; let's take 18 the education budget and cut it by $700 million, I would maintain 19 20 that is in violation of the law. SENATOR KEENE: What about $500 million? At what point 21
22 does the Legislature's hands become tied in assessing the rational needs of education in saying that education is no longer 23 spending this cost effectively, so we're going to cut back? 24 MR. FADEM: I would say that the Legislature's hands are 25 never tied. All we did with the intent clause, which is general 26 language, is to at least tell the Legislature what the intent of 27 28 I 54 'the people are, and at such t as the islature meets and
2 !holds those s of scuss of, well, not 700
3 11 let's cut subtract that off. I'm at time, s come to Legis ture and 4 Isure say is not of the law. 5 I am not going to sit here today and say that 6 Cali for Better Education contemplates that we will be 7 go to court to compel the Legislature to follow the 8 We don't think 's going to be a problem. We 9 that the law is behind us in the drafting of the lO But I can't sit here today, Senator, and say to you: ll islature cannot have types of discussions. Those i2 erne s may not occur. At the time that issue arose, I think 13 we, 1 very strong that the money is a separate 14 ent a 1, not to be used by the 5 s in its 16 SENATOR KEENE: I'm hearing two answers coming from you, l7 'I \I I Let me see if I can on the record on this, 18 I I \ becau 'd l to be c sumed effect of 19 is. 20 II that il In your j , if the produced 700 million 21 II il l lars, cut back 700 million 22 'I :I l lars? !,!i il MR. FADEM: C no. 24 SENATOR KEENE: And if it were a lesser amount, say $500 25 that were cut back the s , would the
s 27
28 55
MR. FADEM: It is our strong opinion that the
2 Legislature cannot cut back funds for education to offset monies
3 produced by the lottery.
4 SENATOR KEENE: And if the Legislature cut back $100 5 million, and the lottery produced 700 million, would the
6 Legislature have the power to do that?
7 MR. FADEM: If the Legislature cuts back any revenues
8 for education because of the income produced by the lottery, that
9 would be in violation of our intent clause.
10 The tougher questions are, what other steps the l l Legislature might take that would have the effect of causing
12 cutbacks in education, while not expressly stating to the people
13 of California that we're going to offset. I would like to let
14 Mr. Griffen specifically address those questions.
15 SENATOR KEENE: I wish you would, because I think that's the crux of the issue. How do you ever establish that causal 16 effect? If you can't establish it, you may tie the hands of the 17 Legislature, which is attempting to cost effectively fund 18 education and use the tax payers' dollars well. 19 On the other hand, well, you see what the problem is. 20 MR. FADEM: I understand the problem. 21 Mr. Vickerman made reference to a legal opinion prepared 22 by Mr. Griffen, and as an attorney, I'd feel more comfortable 23 allowing him to discuss it. But it would address the very 24 questions you're asking. 25 CHAIRMAN DILLS: On the point that you were just making, 2() II ~the'I intent language, please explain to me who does public 27
28 56
1 promote s 1 rt welfare of the people? ic to your intent
the 3 s the ibe s and welfare of the
4 . FADEM: ng pub education serves 5 servat of s, 1 rties, and the 6 wou be answer to your question, 7 II Senator. 8 ,, CHAIRMAN DILLS: s the excuse that you can 9 11 II institut gambl in California v the lottery 10 !I 1 !I method. 'I MR. FADEM Senator, I would not call an excuse, to 2 II II f The of the State of Cali 3 III . I cons1stent 4 I
15
16
17
18
9 s l rt s and wel of the le,
way of re e rights,
we than an l 22 stem. 23 H
ilH CHAIRMAN Senator Greene. I' !! ll GREENE Counse me face my questions ii i[ s you :;It defen liIt , and you 't been as detailed and as accurate 27 n il II,, il ilI' II d,, 57
1 as I would expect you to be in some of your responses, and you
2 haven't had the body of information that I personally would
3 expect to come from you. So let me preface my question by saying
4 I'm not an opponent of the Initiative. I have voted for every measure which has gone through this Legislature of like item and 5 what have you, so I start basically on your side. 6 However, in listening to you here today, and in 7 analyzing your comments, I'm thinking that I'm going to change 8 that. 9 I am not in law enforcement, have no interests in it, no 10 interests in being in it, okay? I'm speaking from the point of 11 view of people. Some of them want to make some money on winning 12 it in the lottery, right? I represent poor people, right? 13 Now, I'm talking about how this works. This an unusual 14 profession. It isn't a profession which I would imagine there 15 are a lot of people in the nation that have a lot of experience 16 in it. 17 We're talking about selecting a Director, or a 18 Commissioner, or what have you. 19 What is the market out there across the United States of 20 people who have practical, on the job, management and operational 21 experience with an apparatus like this, separate and apart from 22 horse racing? 23 MR. FADEM: Senator, I would estimate that in the other 24 17 states from which personnel could come, there would be in 25 I excess of probably several hundred individuals who would be in a 26
1l position to operate a state lottery in California. 27 I' 28 II,, 58
1 'm aware a of se ls Governor's Of
5 , sure
SENATOR 7 se states
8 l4R. Correct 9 SENATOR GREENE: are, wou they 0 s to ll some f the
l state 3
4 to s 15
16
17 wou 18
can see 1 the 21 's
st or 23 se of 24 il II,, II the 25 II II !I II 26 !I 27 II "jl II 28 :Id II II II lj ,,I, 59
SENATOR GREENE: That's part of why I asked the 2 question.
3 MR. FADEM: Senator, I think I can honestly state that 4 there will be no lack of qualified applicants for this position.
5 SENATOR GREENE: Could you promise us that?
6 MR. FADEM: Well, at the Assembly hearing --
7 SENATOR GREENE: No, sir. This is the Senate.
8 MR. FADEM: Can I promise you that? The only point I
9 was going to make is that Assemblyman Floyd seemed to be willing
10 to put his hat in the ring for that position. I can at least
1 l guarantee one, perhaps, qualified member.
12 But Senator, yes, I would give you the guarantee.
13 SENATOR GREENE: I'm serious; I'm not kidding.
14 MR. FADEM: I will be serious. I would give you the
15 guarantee that in the United States there are several hundred
16 qualified individuals who could direct this lottery.
17 SENATOR GREENE: All right. Now, you went through once again, and this really, really troubles me, you went through all 18 the authority and what have you that this Initiative has, and you 19 referred to other agencies. 20 Having been around here a long time, I know that things 21 don't work the way you envision them and imagine them. Never 22 have, and I would say probably never will. I don't know if I'm 23 right or wrong. 24 I still get back to a very troubling question. Say, if 25 in the search we're held up, what happens? , if in the search 26 for people, say that we are just a littl bit more particular 27
28 60 II
ways l anyway. s
se t from 4 i r of 5
6 You I see 7 l have some out 8 of view. 9 s make some on sf 0 a or whatever ll
2 ng
s
Let
I seems
g is
s occurs that
Governor doesn't
to you wou be, fil
I would imagine that the lottery would not go into effect as is
2 required by law. SENATOR GREENE: Now we're getting down to some of the 3 Ps and Qs. 4 MR. FADEM: Now, I can't answer you as to whether or not 5 anyone in the State of California would go to court to try to 6 compel that. 7 I'm certainly not interested in appearing before you 8 today to say that that is something that I would want to do. I 9 don't anticipate that occurring, and I'm personally not 10 interested in having that happen. ll But if those appointments are not made, then the 12 lottery's not going to go into effect, and that's the best answer 13 I can give to you. 14 SENATOR GREENE: If all the other agencies must 15 interface with you, have you sat down with them, or made an 16 effort to sit down with them to just maybe talk across the table 17 about what thei~ mission would be? 18 MR. FADEM: Absolutely, Senator. We have -- I 19 personally have met with at least four state agencies. We also 20 j talked to some of the state agencies while we were in the 21
1 drafting. 22 !I SENATOR GREENE: Would you get personnel from them? 23 II II j! MR. FADEM: Yes, the Initiative is written so the 24 d ~~Director and the four Deputy Directors would be exempt positions. 25 The other employees of the lottery would be state employees. 1I 26 ll \I 27 I, 28 I I I 62 1 I One of quest State Personnel Board would 2 be do we can clericals stay
3 i new j se
5 r f s.
6 SENATOR GREENE: a 0 would
7 all state loyees,
8 II the ss their Directors of the III. 9 ? II ·I MR. FADEM: is correct, Senator. That not 10 1: ll . li lnC ll \lil II The 12 II \!own 13 il I correct
,I would state 15 i\ II 16 !I MR. FAD EM Yes, 17 11 I',I you 'I 18 II I, II up, 19 I!li I! st Laws ce. 20 II i) j, 21 II II statement. II our ef have met 23 )i [I f s I us named. 24 I,, i! s not mean we not want 25 I! II" I',[ II to r I' 26 II II l\ re i to our would 27 IIli
1: i: II 1: 63
work, and to get feedback from them, many of which we tried to
2 i
J The other comment, if I could, Senator Greene, I would
4 just like to comment, I apologize if I not go through and
5 g you the type of detail, because I've been through the
6 Initiative section-by-section hundreds of times, and I certainly did not want to create the impression that I did not want to give 7 you the type of detail. 8 If anyone has any question, I would go through section- 9 by-section. I'm here to answer all of your questions, Senator. 10 If I created the impression I wasn't giving the type of meaty 1 I detail you wanted, I apologize. 12 SENATOR GREENE: Well, you're the one that suffers, not 13 me. 14 It seems to me that on a matter such as this, that you 15 would come overly prepared, not underly prepared. 16 I t the impression, and I'm not ng personal, I'm 17 giving you an honest ssion that I'm gett defensive and 18 unprepared. 19 MR. FADEM: Senator, I'm sorry that's the impression 20 that's been given. We -- I have tried to be as open as possible 21 I with the committee. If there's a single question -- 22
11 SENATOR GREENE: I haven't read the Initiative. I have 23 II Jjother things to read, all right, relating directly to my 24 I ~~ constituents. So, I haven't sat d~n and read it. 25 MR. FADEM: I'm sorry. If I known that prior, I 26 il would have -- 27
28 11 64
SENATOR GREENE: You ld ssume that none of
MR FADEM ral s if I sect
SENATOR GREENE: IS ility, sir.
Now, you s me or an of rk
e, and I don't mea 1
You you sat down. I asked what agenc s sat
th to inter th to have everything place. You
to Senator Dil that you sat down to find out where
're c from
We I m talking What agenc
you sat th so that know what 're going to
do; when 're ng to do it; how 're ing to do
personne 's go to ake?
have sat down to at the re to go
rat once you starti line and the is
What s you done is wi ? Not to nd
're what the r attitudes are, but to
rk?
I meant on.
the State
of would
r I might
my with the state s to tell 65
SENATOR GREENE: I'm not saying that. I mean just to
2 talk to them. I mean, it requires preparation, doesn't it?
3 MR. FADEM: Oh, absolute Well, State Comptroller's
4 Of ce, Department of Finance, and I would welcome the
5 opportunity to sit down with the Attorney General's Office.
6 Those are the two specific agencies, though, the Department of
7 Finance and the State Comptroller's Office
8 SENATOR GREENE: Well, let me ask this question. Are
9 there any other state agencies that would interface and would be
10 a part of this if it were operational?
II MR. FADEM: I think the State Personnel Board would have
12 interface; the Attorney General's Office would interface. There
13 are numerous, Senator, required reports that will go to you, the
14 Legislature, State Comptroller's Office, the State Treasurer and
15 the Attorney General.
16 But the main agencies, I think, from an interface point of view, the critical ones would be State Comptroller's Office, 17 Department of Finance. Let me put at the top of the list, not as 18 an oversight, certainly the Governor's Office, since the Governor 19 obviously will have a very large part in making the appointments. 20 But those are the key agencies. 21 Between now and November, I will beat a path to each of 22 those agencies, and we are more than happy to sit down and talk 23 about the nuts and bolts of it the day after the election: The 24 people have approved the Initiative, now what do we do. And I 25 have a very strong feeling that a lot of those decisions and 26 discussions will take place long before November. 27
28 66
1 CHAIRMAN DILLS: Mr. Fadem, you said you were willing to
2 answer gues you been.
3 were you d the Cali ans for Better ? 4 MR. FADEM: I began working on this Initiative for 5 Ca forn s for Better Education -- I would expect that it would 6 be somet in October-November of last year, would be my exact 7 I guess approximate date. 8 CHAIRMAN DILLS: Who are the officers of that 9 organization? 10 MR. FADEM: Californians for Better Education is a ll I li 1 committee stered with the State of California, and 12 tl II I serve as Treasurer. 13 It is not a corporation, does not have corporate 14 I of cers. It is l r polit 1 committees that operate in 15 the State of California, and I serve as Treasurer. 16 I 1i II CHAIRMAN DILLS: Are you compensated by the Californians 17 II II Better Education? 18 II i! MR. FADEM: Yes, I am. 19 ij I! CHAIRMAN DILLS: And be it was organized, were you 20 !I II by the Bal zation Scientific Games? 21 il II,, II MR. FADEM: I have rece ation from Scientific II 'i il Games. law rm cializes in an area of the law that not 23 il ji'I many rms do, which is polit 1 law. We represent ballot 24 II II I! measure s, PACs, candidates -- 25 I' d CHAIRMAN DILLS: I'm sure you're quite competent. 26 MR. FADEM: Well, thank you, Senator. 27
28 67
1 CHAIRMAN DILLS: I'm just concerned that Californians
2 for Better Education came along as the afterthought, the carrot
3 before the donkey. The beginning of it, however, was the Bally's
4 Scientific Games.
5 MR. FADEM: No, I don't think that's correct, Senator.
6 Scientific Games did not contact me for the purpose of writing this Initiative. There may be some other folks in the process 7 you'd like to talk to. There's a campaign consulting firm by the 8 name of Wood and McDowell, who may or may not have had 9 conversations with Scientific Games. 10 The statement I was going to finish was that I do 1 1 represent Scientific Games for the purpose of filing major donor 12 reports under California law. I do not serve as legal counsel to 13 them in any other capacity, and we have filed public disclosure 14 statements as to exactly how much Scientific Games has 15 contributed, and that is a matter of public record. 16 CHAIRMAN DILLS: Apparently you made mention that you 17 wanted me in particular to get a copy of all of these school 18 people, and I just wonder how much money has come from the 19 California Association of Supervisors of Child Welfare Attendance 20 to the Californians for Better Education? California Coaches' 21 Association have endorsed it. They've put up a lot of money, I'm 22 sure. 23 MR. FADEM: Well, Senator, as you're well aware, in 24 California we are permitted monetary contributions, direct cash. 25 We're also permitted non-monetary contributions. 26
27
28 II 68
1 I can't speak personally as to what those groups have
2 doing, but I can tell you every group that is on that
3 document that you have is actively out there talking
4 to Word of mouth information is the best we can do in
5 some cases. CHAIRMAN DILLS: Senator Rosenthal. 6 SENATOR ROSENTHAL: I have several questions I'd like to 7 ask, and I want to pick up on Senator Keene's concern on the 8 education aspect in terms of reducing funding. 9 This year and last year, for example, the Legislature lO the Governor to put more money into education than had ll sly been done. 12 If, in fact, that's not the picture for next year, and l3 900 million, or 300 million more, or whatever is not there, 14 that be considered an offset against the gain from the 15 ? 16 MR. FADEM: I don't believe so, Senator. 17 SENATOR ROSENTHAL: How would the Legislature be able to 18 th a concept which says that you can't offset? Because, 19 no two s are exactly alike in terms of how much is put into 20 So, do you go back and say that as of 1982, for 21 , that's the amount that was given for education, and
there we can't reduce that amount because we now have a gain, 23 or do you look at 1984, in which there's a billion dollars more 24 n ion than there would have been? 25 MR. FADEM: I think the concept is that 1984, the year
we are in now, would used as the base year. 27
28 69
1 To provide more specific answers, if the committee would
2 lling to take a witness out of , if you'd 1 to
3 ss this and try to resolve these ques s --
4 SENATOR ROSENTHAL: Because no two years are exact same in terms of what the Legislature and the Governor finally 5 upon in terms of the amount spent for education. And if, 6 fact, it's less next year, at the same time as there's a gain 7 on the lottery, would that be considered an offset? 8 MR. FADEM: I understand the question. 9 SENATOR ROSENTHAL: That's one question. 10 Now, the salary of the Director is fixed at a certain !I figure, and it calls for cost of living. 12 Now, is that cost of living the same percentage as all 13 !I state employees, or is there some other formula of cost of 14 living, COLA? 15 ! MR. FADEM: It would be similar to other state 16 employees. 17 SENATOR ROSENTHAL: Couple of questions now in terms of 18 what the Legislature can or cannot do about the lottery as it 19 s law, if becomes law. 20 II What la tude will the Legislature have in terms of the 21 II II ting funds by statute which are ? In r words, !I II '1 see, there are different aspects of education, for example. 23 1 i,i Could it go for new school construction? Could it go for 24 il ~~maintenance of existing school buildings? Could go for 25 li program enhancement? 26 II 27 'i
28 I!
III II 70
1 MR. FADEM: It can go for specifically, and I'll direct
2 attention to .5, funds shall be used exclusively for the
3 of pupils and students; no funds to be spent for real p acquisition, or financing, or research, or any other 4 noninstructional purpose. 5 There are two elements at hand here. One was the 6 concept of allowing the local school districts as much 7 flexibility as possible. The school districts throughout the 8 state obviously have different needs. 9 SENATOR ROSENTHAL: Well, but for example, could it buy lO band instruments? Could it purchase sporting equipment? ll MR. FADEM: Well, the -- 12 SENATOR ROSENTHAL: I'm trying to find out -- 13 MR. FADEM: I think I can answer that. 14 The Supreme Court and other court decisions have clearly 15 public instruction does include, for example, 16 lar activities. And the Supreme Court of California 17 I \has ruled that those type if activities are very, very important 18 I !Ito the overall education of the pupil. So, in your example, band 19 ! i uni , footbal uniforms, those type of activities would be 20 ! covered under instructional purposes. 21 SENATOR ROSENTHAL: I see. 22 !II, il q The second question, could the Legislature amend in any 23 lt i) fashion, or would it require going back to the vote of the ij 24 I, 1/people, if, for example, there was a decision at sometime in the 25 il il future that perhaps some of those funds ought to go for another 26 il 11 purpose? 27 ,I li'i II 28 II II II 71
MR. FADEM: Well, I'll direct your attention to Section
2 5 of the Initiat to cover the very situation that you just
3 described and to build some flexibili into the law. We provide
4 that no provision of the act may be changed except to further
5 purpose by a bill passed by two-thirds of the members of both
6 Houses and signed by the Governor.
7 Now, if you want to label that as an escape clause, that
8 might be proper. But basically, we want to give the Legislature
9 the flexibility on a two-thirds vote,·of course, to change
10 provisions of the Initiative to further the purpose.
I I SENATOR ROSENTHAL: Well, could the Legislature, for
12 example, decide that as part of its educational concept they
13 wanted to do something for senior citizens? Could it pass it by
14 two-thirds vote of the Legislature, signed by the Governor?
15 MR. FADEM: Senator, my answer to you would be if
16 two-thirds of the members of the Legislature fe that they
17 wanted to do that, they would be able to.
18 SENATOR ROSENTHAL: I see, because, see, I'm not sure what changes in Initiative after it's voted on by the people, 19 which ones can be done by statute and which ones must be done by 20 Constitutional Amendment. 21 MR. FADEM: I 1 , and I may be subject to 22 correction, that the clause on furthering its purpose is the 23 exact same language contained in the law authorizing the FPPC, 24 which is a furthering its purpose.
We think that -- I'm not going to sit here today and say 26 that there are not commas or things that may want to be changed 27
28 72
1 by the Legislature. Our purpose was not to frustrate that
2 abili To enact an init ive by the people and set it into 3 cement, to us, is not a good idea, so we tried to provide for 4 ility by the two-thirds provision. 5 CHAIRMAN DILLS: You answered that you thought that the 6 ture might be able to spend some of these monies 7 MR. FADEM: No, that -- 8 CHAIRHAN DILLS: or by two-thirds vote allocate 9 monies for senior citizens. Didn't you say yes? I I MR. FADEM: Well, that was the example. My answer is ll l1that the Legislature, attempting to further the purpose of the 12 1
1 Initiative, if they wanted to by a two-thirds vote, with the 13 consent of the Governor -- 14 CHAIRMAN DILLS: But he specifically asked you about 15 citizens, and you said yes. 16 MR. I:i'ADEM: Well 17 CHAIRMAN DILLS: Now, the purpose, according to this, 18 le of the State of California, in support: 19 " ... for preservation of the rights, 20 liberties and welfare of the people 21 by providing additional monies to
benefit education without the im- 23 position of additional or increased 24 taxes." 25 what the intent and purpose says, so therefore, we 26 I( couldn't, we couldn't use any of the monies for senior citizens 27 ll II or anything other than for educational purposes. 28 !I II II 73
MR. FADEM: I agree that the Legislature could not
2 itself reach its hand into the fund to make those type of
3 distributions with the intent -- CHAIRMAN DILLS: Could the Commission say: Well, the 4 Legislature is showing us what it thinks, in spite of the fact 5 that the intent of the Initiative, the people have spoken on the 6 thing, we're going to do it anyway; we're going to let senior 7 citizens have some of the money. 8 MR. FADEM: Well, I think I can give you a safe answer 9 to that, because the Commission has no power to make those type 10 of decisions. II As you might know from the law, the movement of money 12 into the funds is not something that is discretionary. It is 13 something that is required by the law. l4 In answering the Senator's question, I may have been 15 caught in a negative pregnant. My intent was not to identify 16 that the beneficiary could be changed, for example, to senior 17 citizens. But the intent in the framing of this Initiative was 18 to permit the Legislature some flexibility, especially since they 19 are in a very important, what we consider watch dog position. 20 SENATOR ROSENTHAL: I have one other question. 21 The Director appoints the Deputy Directors? 22 MR. FADEM: Correct. 23 SENATOR ROSENTHAL: With whose affirmation? 24 MR. FADEM: Well the section, if I can read from it, the 25 Director has the responsibility to appoint the Deputy Directors. 26 The law does not provide for Commission review of those four 27 directors. 28 74 I.'I
1 I might simply point out that the Commission and the 2 Director are all appointed by the Governor. We would anticipate
3 we a very good, we think, checks and balances system
6 Legislature and the Governor's Office and the Commission.
7 SENATOR ROSENTHAL: Is their salary in the legislation
8 Deputy Directors? Who determines what that would be?
9 MR. FADEM: Yes, the Initiative specifies that the
10 Commiss shall determine the compensation of each Deputy
11 We did not provide a specific dollar figure there, but
12 Commission has that responsibility.
i3 SENATOR ROSENTHAL: I have no further questions, Mr.
14 CHAIRMAN DILLS: Senator Greene. 15
16 SENATOR GREENE: I have a question that just came to I I l7 II Heaven forbid, but what if we get into another fiscal !8 II , and it is the agreed upon attitude of the administration i9 II,, ll islature, and let's say, even the leadership of the 20 /I and community that the amount of revenue available to us in 21 illj /!that fisca , and the responsibilities, and duties, and II 22 1! 'l s of the state would best be tended to, and it would be 23 il ,,iJ most equitable if, say, the funding for education were kept at 24 II i! s current level, or maybe even reduced. Now, this is agreed 25 ,, i! ii upon , say, the education community. 26 :l 'l 27 II li ,,ll H 28 'i II li il l\ II 75
Does this Initiative force that money to be transferred
2 anyway? MR. FADEM: The question is --
SENATOR GREENE: From the General Fund to this fund? 4 MR. FADEM: This money never goes in the General Fund. 5 SENATOR GREENE: It's transferred from the General Fund 6 to this fund. 7 MR. FADEM: I think I lost you there. 8 The money from the lottery goes directly to the State 9 Lottery Education Fund, and does not make its way into the 10 General Fund, so that they are kept -- I can point you to the II section. 12 SENATOR GREENE: But the first money isn't. The first 13 money comes from the General Fund. 14 MR. FADEM: Oh, I'm sorry, you're talking about the 15 initial temporary line of credit. 16 SENATOR GREENE: Yeah, what happens if that's the case? 17 If we're looking at that in the next seal year? 18 We're not likely to be, and I certainly don't want us to 19 I be. But, you know, I want to know the answer to that question 20 I I your opinion. 21 I MR. FADEM: So, you question is, if the Legislature is 22 il unable to provide that -- 23 SENATOR GREENE: Provide, and 's say it's agreed upon 24 ~~ by a majority of all parties concerned. 25 MR. FADEM: Well, one answer would be, and this is a 26 serious answer, is that obviously the lottery is not going to be 27
28 76
1 to go effect unless that money is provided. If that
2 the case
3 SENATOR GREENE: Does it have to be provided in that
4 exact llar amount? Cou it be provided in some lesser dollar
5 amount?
6 MR. FADEM: Oh, Senator, one thing that I should point
7 jout, line of credit, you ask for what is needed as you
8 !go along. That is the absolute limit that can be asked for, but
9 )! just like any other type of line of credit, the Commission could
10 1! request $500,000 to do initial work. II I',! I! SENATOR GREENE: So it's transferred incrementally? I! 12 II MR. FADEM: It can be. And the concept behind the line 13 11 of c t was, why ask the state to come up and to give $16
14 I llion all on first day that the request is made, when in
15 I $16 1 may not be necessary; $5 million may be enough. I 16 ·It is 1. I SENATOR GREENE: Thank you. 17 II I'm f 18 II shed. II CHAIRMAN DILLS: I had a question or two of you a while 19 li ,: re to your employment. I'm still confused, II I! on a higher level, but anyway confused as to the 21 i! J: ic of the Californians for Better Education.
Perhaps I should read to you a portion of an editorial 23 that appeared in one of the local papers yesterday talking about 24 sit 37: 25 "Although the proposal is being
pushed by a front group ironically 27
28 77
l calling itself Cali s for Better
2 Education, s actual promoter is an
3 Atlanta out t that manu s and sells lottery tickets nat , with 4 the equal ironic name Scientific Games. 5 It's a subsidiary of Bally Manufacturing, 6 the nation's major producer of slot 7 machines. 8 "So far, virtually all of the $1.1 9 million spent to get Prop. 37 on the 10 ballot has come from the Georgia operators. II They expect to spend another $2 million to 12 $3 million convincing California voters 13 that the enticement to get rich quick is 14 the painless way to help finance public 15 education. Bally's Scientific Games has 16 pushed through s lar initiat s in a 17
18 lotteries and reportedly is behind a l9 similar lottery proposal on the Oregon 20 ballot this November." 21 Having read that to you, I am attempting to clari who 22 really are the sponsors of s particular ballot proposition, 23 and who really is the Californians for Better Education? 24 MR. FADEM: Senator, what r was that from? 25 CHAIRMAN DILLS: Sacramento Bee, ste IS • 21) II!; I 27 II II 28 II i 78
1 MR. FADEM: Thank you. I have not seen that, but thank
2 you parts to me.
3 I don't know I will try to make this as clear as
4 ss California law requires that an individual serve as
5 p If a committee were permitted by California law to do
6 so, the nt of this Initiative would be Californians for
7 1 Better tion.
8 Who is Californians for Better Education? I've provided I 9 'an exhaust list of the organizations. They range from a
10 Supervisor in San Francisco to numerous other elected officials, 1 boards throughout California.
l2 CHAIRMAN DILLS: Any officers? You're the Treasurer?
13 MR. FADEM: I am the Treasurer.
14 th respect to your specific question on Scientific
15 Games' lvement, as a matter of public record, they are a
16 '!, contr 1 What seems to be overlooked, and what I will be happy to 17 J! show the 18 l1 II CHAIRMAN DILLS: No, no, just tell us whether or not 19 li i' s n on that is reportedly the situation, are these 20 I I il statements factual? 21 l! il ll'I MR. FADEM: I am not going to comment on the factual 22 q :1 nature of an l. 23 '! I 11 tell you that Scientific Games is a supporter of 24 • 3 7 California. That is no secret. Are they the backer, 25 s beh it, that is patently absurd. 26
27
28 79
CHAIRMAN DILLS: You don't know who's the backer of
2 Scientific Games? MR. FADEM: Who's the backer of Scientific Games? Who's 3 the President of the company? 4 CHAIRMAN DILLS: Yes, who? Who runs Scientific Games? 5 MR. FADEM: I believe that the President of Scientific 6 Games is a Mr. Bauer, who has appeared or at least was here -- 7 CHAIRMAN DILLS: Was that the Bally 8 MR. FADEM: No, Senator, just a little bit of history 9 for those who like to tie the name Bally with Scientific Games. 10 Scientific Games was a company that's been in operation I 1 for about 12 years, involved in numerous other states via the 12 lottery contracting process. 13 It was only two years ago that they were purchased by 14 Bally International, so Scientific Games has been in the lottery 15 business long before Bally purchased them. 16 I also might point out that Bally owns Magic Mountain 17 here in Cali , and numerous other entertainment companies. 18 jscientific Games, along with I would guess anywhere from 15 to 20 19 vendors in the lottery industry, will be actively looking to bid 20 here in California. 21 Our campaign report, which is due September 22nd for the 22 period of June 30th through September 22nd, I think will show you 23 some other companies the United States who are also in the 24 1sameI business as Sc i Games, who 11 also be contributing 25 lito our effort. So, I think shortly you will see that Scientific 26 ~~Games is not the only supporter of the lottery measure in the 27 28 I I, II 80
1 !state of California, and that there are a number of other
2 es who would like to help the citizens of California get
3 what want, and what they want is a lottery. CHAIRMAN DILLS: You have provided that no lottery games 4 I 5 luse theme of bingo, roulette, dice, baccarat, blackjack, 6 I 7, draw poker, slot machines, dog racing, or horse racing. Then, in another place, you have inserted slot machines. 7 II il was that insert put there? 8 1\II II 9 II MR. FADEM: Could you give me the reference number? il ll CHAIRMAN DILLS: I'm trying to find it. 10 II II 1l II MR. FADEM: Could you give me the specific reference to II 12 1 slot nes? I I CHAIRMAN DILLS: Specific to slot machine is 8880.28(a). 13 I MR. FADEM: Well, .28(a) states that they are not 14 il tted to use themes of those bingo, et cetera. That's in 15 I'.I I' ,I a specific reason, as is the prohibition for the first 16 II II the Constitution that there shall be no casinos in 17 II i! Cali a. For those -- 18 ,,•I II II CHAIRMAN DILLS: Why don't you copy the exact Penal Code I 19 ,I li ! sect ? I it's called hie verba. 20 1 1: I'" li MR. FADEM: Well, Senator, are you starting to raise the lottery issue? I'd be more than happy to comment on that. 22 I'm aware of a Leg. Counsel opinion that states that 23 s Initiative would not permit video lotteries, and I'd like to 24 II i! lie , and I done it privately, and will continue to do 25 I! !!,I i! intent behind s Ini ative was to permit the II sion complete flexibility to select whatever game it wished 27 ii ii -ro institute. and I would more than -- 28 i; \,.., li ll !! li ii 81
CHAIRMAN DILLS: Including slot mach s
2 MR. FADEM: Not including slot machines. It
J specifically says that.
4 Video lotteries is a lottery game currently being tested
5 in Illinois. No one knows what's going to happen with it.
6 There are also other lottery games currently in
7 development that I can't sit here and tell you 10, 20, 30 years
8 from now may be in effect. But the intent of this Initiative, we
9 think it is clearly stated, is that the Commission would have the power to select whatever lottery games are available at the time.
II I'm sure you're aware of the Illinois $40 million man.
12 That particular game was Lotto. You've heard the Leg. Analyst make reference to number games, instant tickets. We could not 13 hope to describe in our Initiative all the lottery games that may 14 be in effect in coming years. 15 But the intent of this Initiative was clearly to permit 16 any type of lottery games selected by the Commission. 17 CHAIRMAN DILLS: Any further questions or comments? 18 Thank you very much, Mr. Fadem. 19 Allen Summer is the next witness. 20 Your attention, please. In view of the , we shall 21 be in recess until the hour of 1:30. 22 {Thereupon the luncheon recess was taken.) 23 --ooOoo-- 24 I 25 ,I 26 I It 27 II 28 11 :I II 82
AFTERNOON PROCEEDINGS
2 --ooOoo-- CHAIRMAN DILLS: The committee will come to order.
4 The next witness is the Chief, Legislative Affairs
5 of the Attorney General, Allen Summer. Mr. Chairman, members, Allen Summer from 6 MR. SUMMER: General's Office. 7 Let me, if you will, by way of introduction, lay our 8 on the table. 9 The Attorney General and most law enforcement officials
California have consistently opposed any major expansion of 11 l California. As a matter of public policy, we do not 12 I !believe that the State of California should be in the business of 13 1. ji promoting gambling. Gambling is an unproductive endeavor, as the 14 ,I II this morning sa , for consumer, for the bettor, it 15 II te I• ! is r ff. There are more sound, consistent ways of raising 16 I 1 revenue that are less regressive. 17 [i , from po t of view of law enforcement, the 18 li states has been that public lotteries do not 19 ii I,'I i! necessari away funds from illegal gambling. In fact, in ,,li some urisdictions, they've created a greater clientele and an 21 II !! I! ronment where illegal gambling has continued to thrive and it I' jl actually off of the state operations. 23 !) li
/i So 1 from law enforcement's view in general 1 I doubt that 24 're ever going to support a major expansion of gambling, and 25 li II,, ,, larly a lottery. 26
27
28 83
When we get to this speci c measure that's on the
2 llot in November, some of highl have been touched on
3 this morning. One of the major problems is period for
4 implementation. Tickets must go on sale within 135 days. If it
5 passes in November, slature, of course, is out of session
6 and doesn't return until January. As you know better than I, it would require an urgency vote of both Houses to put in a clean-up , 7 bill in time, and then we're talking January-February, with the 8 clock still running, and tickets required to go on sale in March. 9 The Initiative itself provides very little directly in 10 the way of security. It says one of the Commission members I I must have a law enforcement background, and one of the Deputy 12 Directors must have a law enforce background, and the Deputy 13 Director in charge of the security should consult with the 14 General as rector feels necessary. 15 The real teeth of any security provisions will have to 16 wa until the Commiss itself is , con rmed by the 17 Senate, and then lat 18 To meet the 135-day deadl , its regulations are 19 j exempted from the Administrative Procedures Act, which means 20 there's no public review, no public comment, no irement that 21 I I the Commission consult th the General or any other law /, :,:~· enforcement of cial in promulgating regulat that are 23
/ ng to provide the real security for the lottery. 24 1 1 Another ques we have is how much formation can we 25 I 1 give to the lottery. The sman this ng took it for 26 1 II /! granted that as soon as the Commission is , the 27
28 II l\ li II 84
1 ss 11 just call the Attorney General and ask us to
2 start running rap checks on all these people. I· 3 II Under the Penal Code, 11105, it's clear who gets II 4 1 cr 1 history information, and it's a crime in I co:elf 5 to give such records to anybody who does not have such II 6 zat s I iti does not give the Commission or any 7 Ii 11 of its staff direct, expressed authorization to receive 8 lllH<::::llUJC 1 story information. 9 II cr II As some of you may recall, we had a major fight just 10 I! \! a ago, at the end of the session last year, when
11 Senator carried a bill to allow the Olympic Committee to 12 j !have access to criminal records to do rap checks on those 13 II were going to be working at the Olympics: working 14 I' emp s 1 at the at game sites. The Olympic Committee 15 1 J[ to run checks on se ind ls. 16 I Senator Ed Davis carried a bill to do that. The bill 17 by the ACLU, by the Teamsters Unions. California has 18 of tight controls over confidential criminal 19 who gets access to it and how those records can be used. 20 s Initiative does not give the Commission clear 21 i access records. if, as the proponents assume, that 22 p !j . ;;,, l sses and the Commission is just going to call the Attorney 23 ); iiGeneral and ask us to start running hundreds or thousands of rap 24 i1 checks on le ing jobs with the Commission, contracts d 25 II li ti to sell s and goods, or clerks at 7-lls to sell the 26 tickets themselves, 's only a matter of time until we 27
28 85
1 end up in litigation and have to go into court to defend what is
2 really a drafting oversight and drafting prob the
3 Initiative itself.
4 There are a couple other points. The Initiative
5 provides for a security check nine months after the tickets go on
6 sale. If it passes, there's a 135-day deadline in which they're
7 to go from scratch to total implementation of a billion dollar I 8 operation in public funds, and the rst security audit does not take place until nine months after the tickets are sold. 9
10 Then, if you read the language closely enough, that independent security audit is not given to the Attorney General 11 or any other law enforcement official in California. 12 The same with their independent fiscal audits. There's 13 internal fiscal audits which they provide to the Attorney 14 General, but the Initiative requires them also to go to an 15 outside, independent rm to conduct an audit. That audit is not 16 given to the Attorney General or any law enforcement 17 official. 18 So you ask what our response is, we're largely in the 19 same boat you are. We just read the Initiat and respond to 20 what's there. And what's there is very litt in black and 21 I /white. It all bets on what's going to come down the road: the 22 I !commission to be appointed; to promulgate regulations without 23 I jlpublic review or comment; a security audit nine months after 24 ,I !I 1: tickets have been on sa1e; with no direct roll for the Attorney 25 II General or any other law enforcement of cial. 2() I! 27 II II 28 II II II II 86
1 I want to just touch on one last point, and that's just
2 mechanics of the security check. I asked the Sergeant just
3 be lunch to pass out a packet like this, which I think you
4 have.
5 I this is what we are doing today at the Attorney
6 !General's Office on card clubs. You know, a year ago the , is said that all card clubs in California, anyone who 7 I 8 I owned, operates, or had an interest in a card club, must register 1with the A.G. And this is the kind of background check that 9
10 1i we're doing on them.
\1 The easiest form of a check, of course, is just a 11 records check. You take the fingerprints so you confirm 12 II 'I ity, that John Smith is the right John Smith, and run him 13 j through the A.G. 's state records and the F.B.I.'s records. We do 14 400,000 of those a year. Anybody licensed by the state goes 15 one of those fingerprint checks: real estate agents, 16 agents, bank employees, that's not a major problem. 17 takes about two weeks, and that can be done, assuming that 18 figures and the time frame are within any bounds of reason. 19 But what has been discussed in the past, and the
11 s that was posed to our office last week on the Assembly III' 21 I' I' was: Could we do a background check in time? A background 22 11 s I' 1: is more than just a records check. It goes behind just 23 ll L,, of convictions; it looks to arrests that didn't end in I 24 I' il tion; a seal background, as you see in the 12 pages that II 25 II II !! card clubs have to fill out; does this individual have a lot 26 /) ,:ri of s, just go through bankruptcy, is there a problem there; 27 ,,II 28 87
has been banned, say, by Horse Rae Board from attending
2 the tracks, can do strat wouldn't show up necessa on a 's something we'd
4 want to know. se ki of take far th card clubs, 5 which seems to be most recent and closest example we can come 6 up with, there are slight over 600 card clubs in California, 7 and when take an interest or managerial 8 role in them, it's about 750 peop have to go through the 9 checks and materials have in of you. 10 We had almost months lead time on that program. II The Governor signed bill of st year, and it 12 had a delayed operative date until July. 13 All of those card clubs were ongoing businesses. In 14 every case were 1 local entity, the city or 15 the county, and most cases, they also had an A.B.C. liquor 16
I1 1'1cense. So, were ongo sses; they were regulated 17 I 1!at the local level; were licensed one state agency. I B ,I We still a budget of $350,000, four full-time 19 /lernp s Sacramento, and s to do the 20 I I scene 1 st s where necessary. Our experience 21 i I is 's ng to through those kinds 22 I !I of checks for the card c s. 23 ,, ~ I lr !i Now, guess is as as ours as to how many s 24 'I \j are lved se In , is si 2.'i ,, /1 Certain I wou assume 'd want of for !I If :r ss rs and direct ernp s. 27 II 28 II rl
I 88
1 The Initiative seems to imply the same level of
2 inves for major contractors, because they're required to
3 t their tax records. It doesn't say who's supposed to do
4 , but they're required to submit them. So, it's
5 just an open door. How many people do they want to screen, and how closely 6 I Ido want to screen them, given our track record of about five 7 I 8 lweeks for each one? Again, those are all questions that must be answered 9 I lldown the road, and that really comes down to our major objection 10 I ito th s. It's got a built-in time clock of a rather short period ll II to start selling tickets; no regulations in place today; no 12 II II 11 rement of public hearing or comment to implement those 13 I regulations; no security audit until nine months after the 14 ts have been sold, and even then that's not given to the 15 It On all of this for a program that, by Leg. Analyst's 16 I A.G. le , is ng to involve a billion dollars or more in public 17 II IIli funds. 18 ii II in, it just doesn't seem to be a prudent way to run a 19 I' II , even if you reach the policy decision that you want to 20 '!i ,I 1 1 run a lottery in California. 21 1: I! Beyond that, I will answer your questions. 22 CHAIRbffiN DILLS: The independent audit is, according to 23
24 " r the first 9 months of sales 25 to the public, the Commission shall 26 engage an independent firm experienced 27
28 89
1 in securi procedures, luding but
2 not limited to computer securi and
3 systems security ... all aspects of security the operation of the 4 lottery." 5 So, they don't ever have to come to the A.G. 6 MR. SUMMER: Exactly. 7 CHAIRMAN DILLS: So they will have been operating, or 8 could have been operating, for nine months without any kind of a 9 check on them. Then, when they do it, when they do get a check, 10 it will be the firm that they have chosen. I l MR. SUMMER: Exactly, and that report does not go to the 12 A.G. or any other law enforcement official. 13 When the proponent this morning said: Is the A.G. going 14 to ignore the mandate of the voters; quite simply, this provision 15 mandates nothing for the A.G. to do. 16 What we're talking about is how much can we do within 17 the language given, how much can we read into it. And in the 18 areas particularly of criminal justice records, it's a very 19 sensitive issue, and we're going to end up litigation if we 20 just assume, thout expressed authorization, that we can run rap 21 checks on hundreds of thousands of people. 22 I ,I CHAIRMAN DILLS: "The portion of the report 23 II containing the overall evaluation of 24 II the Lottery in terms of each aspect of 25 /I security shall be sented to 26 I Commission, Governor, the State 27
28 II 90
1 Controller, the State Treasurer, and
2 the islature."
3 But,
4 portion of the report containing
5 specific recommendations shall be
6 confidential and shall be presented
7 only to the Commission and the Governor. S lar audits of security shall be 8 I \, conducted biannually thereafter." 9 i! "II ly they don't want the Legislature to know. Only the 10 11 ii'I self, which had hired the people, plus the Governor, 11 II \...'-JUU\LL people, are ent led to this information, and 12 II the s is not entitled to it. 13 MR SUMMER: You're reading it the same way we are. It's 14 I IJ certain s that would do a security audit and then not 15 I lg to either the Legislature or the Attorney 16 who are the logical position to react and respond. 17 ~~general, CHAIRMAN DILLS: Thank you. 18 ,I Senator Foran. 19 SENATOR FORAN: My question is going to deal with the 20 if s of the time framework. 21
22 MR. SUMMER: That's what I read. 23 SENATOR FORAN: That's 135 days in which the system has 24 ional? Is that what it means? 25 MR. SUMMER: Tickets must go on sale, I think is the 26 se use. 27 II (/ 28 li lj lj II ii il 91
l SENATOR FORAN: Is 135 days what it says? Operational 2 means tickets go on sale?
3 MR. SUMMER: Subsection 25:
4 "the Commission shall initiate
5 operation of the Lottery on a
6 continuous basis at the earliest
7 feasible and practical time.
8 Public sales of tickets or shares
9 shall begin no later than 135 days
10 after the effective date of this
l I Chapter."
12 SENATOR FORAN: The effective date is November 6th; that's the election day. 13 NR. SUMMER: It should be the date of the election, 14 I unless there's a delayed date provided. 15 SENATOR FORAN: So, it's November 6th even if it's not 16 certified until November 8th or 9th. November 6th is the date; 17 right? 18 MR. SUMMER: I believe so. 19 SENATOR FORAN: Now, the Legislature convenes on 20 December 3rd. 21 MR. SUMMER: Right. 22 SENATOR FORAN: The Senate must confirm the Commission, 23 and no decision can be made until the Senate confirms the 24 !decision; is that correct? 25
1 MR. SUMMER: Well, that's not clear. It could be, in 26 II 1jother gubernatorial appointments, the Governor can appoint 27 \I 28 r 92 ! 1 subject to Senate confirmation, and they can hold an act unless
2 the Senate af ly rejects. That's the normal operation.
3 SENATOR FORAN: Now, let's explore that. You're our
4 f 1 officer.
5 The election occurs on November 6th.
6 MR. SUMMER: Right.
7 SENATOR FORAN: The Legislature, and more particularly
8 1 the Senate, convenes on December 3rd, according to my ji 9 Jl information. On December 3rd the Senate convenes, and presumably II •Id 10 ·1 Rules Cornrni ttee then has names submitted, at which time they will I ll I act. And let's say normal we meet for two or three days. I 12 we can ourn on the 5th. II 13 jl MR. SUMMER: Right. ,I 14 II SENATOR FORAN: I'm not trying to just put words in your II 15 I'm just to run the thing through. II II So, but 11/6, the time is running, the 135 days are 16 .I II 17 II So we have run, as of December 3rd to the 5th, almost I! 18 ll 0 s right?
19 II MR. SUMMER: I'm following you so far. II ll SENATOR FORAN: 's 30 days, so we have 105 left. p ll 21 j: Now, thin the framework of the 3rd to the 5th, then if 1: j! the rnor s the names, and if the Rules Committee t! 1: li 23 I' s names, and all of these things. II ,,il 24 I' Let's say for the purposes of discussion that they do H li act at that time because two days, I'm not so sure that 25 li il II is s wou be prepared to vote one way or the other, 26 l! /i even if are supportive. It doesn't make any difference. 27 d 28 93
I'm not trying to be argumentative.
2 Then we reconvene, I believe, on the 8th, because this
3 year the day after New Year's is not a convenible day. So, we 30 4 convene on the 8th. Now you've got another days; is that right? 5 MR. SUMMER: Right. 6 SENATOR FORAN: That's 60 days from 135, which leaves 7 you 65 days. After you deduct 60 days from 135 days, then you 8 have 65 days, and then, presumably again, presuming the names are 9 submitted, that the Legislature then must confirm the names that 10 have been submitted, which goes first to the Rules Committee of I I the Senate and then to the Senate itself. 12 MR. SUMMER: To the Floor. 13 SENATOR FORAN: If we were very optimistic, at least a 14 week would transpire, if not longer. But let's say for the 15 purposes of discussion it's only a week, so that's 67 days out of 16 135. 17 Now, the point that -- I didn't want to necessarily walk 18 through this except I figured it was necessary to do so, to have 19 I you, as the chief 1 counsel for the state, or in your 20 I !(representative capacity as that body-- 42 days. 21 I ,1 If all these things that I have recited were to come to 22 l pass, and I don't think they're that far fetched. 1 23 il II MR. SUMMER: No, I think it's a reasonable time-frame, I 24 i I believe. 25 I I SENATOR FORAN: In 42 days, is it legally possible to do 2() !II, \\the things that have to be done with respect to determining what 27 \'type of game, instant ticket or Lotto or whatever, number one? 28
II 94
1 I Number two, from a legal point of view, what are the 2 I s if is physically impossible to do that?
3 J~ And I've given you, I think, a time frameworks that are
4 ilquite liberal, because 7 days after the Legislature convenes is a
5 ~~very close thing. I'm giving you 67 days that I think are i 6 !rea le to take off 135 days.
7 I When you get to that stage, how do you conform to the l language of the Initiative? And if you don't, what are the legal 8 li 9 ll consequences?
1 10 II That s my question to you.
11 1/ r>1R. SUMMER: Well, the first point hits upon sort of the !catch 22 that the drafters have worked into. 12 Normally it would not be possible, under the time 13 II II s for the Administrative Procedures Act, to promulgate 14 1 1 the lations the time that you've just calculated out. 15 Usual it takes about 135 days on a very fast track to get 16 in: in 30 days, circulation for public input; publ 17 11 II period of time for reflection; and a 30-day 18 1\ pe before the regulat goes into implementation. 19 II I[ I' SENATOR FORAN: So that's out; that's okay. II I! !I MR. SUMMER: Right, so to avoid that, they've exempted 21 i! !I il themse s, also exempts themselves from hearings -- il i; SENATOR FORAN: I don't want to argue. I'll give you 23 ii the issue. 24 I I want to know the time frame. OAL is out of the 25
26 MR. SUMMER: Right. 27
28 95
SENATOR FORAN: We understand that. That's in the
2 terms, and the people who vote for the initiative, OAL is out.
3 So, I'm presuming that.
4 Now, I'm saying that the Legislature and the Governor,
5 or the appointive power, has done everything it can.
6 How can you put the lottery into operation, legally, 7 within that framework? And if you cannot, what are the legal
8 consequences?
9 I'm presuming that they have already exempted out OAL.
10 MR. SUMMER: Right.
11 Well, at that point whether they can legally implement l2 it within the time remaining, there's no restriction on them.
13 They can move as fast as they can, put whatever regulations they
14 want to implement in the next day, and start going as fast as
15 they can go because they're exempted from all the normal
16 requirements.
17 If they fail to make it what recourse is available? I
18 assume a tax payers' suit, probably somebody who has standing, a
19 local school official could conceivably file suit, but I don't
20 lknow who against. If the Governor has already taken all actions
21 'that he can, if he's made the appointments; if the Senate has
22 confirmed, then the only party that they can name as the I 23 /Defendant would be the Commission itself. And if they can
24 I convince the court that it's just impossible to perform, conceivably the court -- it would be a tough question. I don't 25 think it's ever come up before. Therefore, the court would be 26 breaking new ground. I doubt that they would order the 27
28 96
1 lcommiss to perform an impossible act, but structure is set up
2 seem to have a time limit that they're mandated to
3 tiat that gives them an out if
4 can't.
5 SENATOR FORAN: Is there any liability that occurs if it I
6 isn't confi ? MR. SUMMER: Personal liability? No, I wouldn't think 7
8 I so j, They would be arguing -- you know, they'd be seeking a 9 I! II l!wr of Mandate. Then the court would, I guess, be forced to 10 li il ask· is that a ministerial duty or is that a discretionary 11 II ..
1j function? On the face of it, it would look more to be a 12 scretionary question. The Commission is charged to safeguard 13 I 1\ pub c welfare; public funds are involved. And if they 14 II t was sib to meet 135-day time limit, and 15 II I! meet those other obligat , I f it hard to believe that a 16 II lj court wou say that's a mere ministerial duty to start selling 17 !, II !l the t s. 18 II II But Init certain raises those issues and 19 \! s such a law suit.
CHAIRMAN DILLS: Senator Greene. 21 SENATOR GREENE: I have one question.
Is there any other lottery measure which has been
voters of any other state which is structured in the 24 or similar manner as this as relates to the points that 25 cove in the r of your testimony: Records 26 the nine months running. Is there any other lottery 27
28 97
measure which has been initiated by initiative in any of the
2 states which is structured identical or similar to this in that
3 regard?
4 MR. SUMMER: Not that I am aware of, but in full candor,
5 I have not checked the lottery provisions in other states.
6 California will be
7 SENATOR GREENE: You're not in a position to be able to respond to my question? 8 MR. SUMMER: Right. 9 SENATOR GREENE: Thank you. 10 CHAIRMAN DILLS: Other questions? And additional ll comments? 12 MR. SUMMER: No, that's it. 13 CHAIRMAN DILLS: Thank you very much. 14 Gilbert Marguth. Anyone representing him or the Office 15 of the Department of Education, Superintendent of Public 16 Instruction? 17 All right. Clifford Allenby. 18 MR. MATHIS: Chairman and members, Lonnie Mathis with 19 the Department of Finance. 20 We appreciate the opportunity of participating. I think 21 I we're getting a lot of information at the same time you are. 22 I We don't have a prepared statement, but we would like to 23 il /lbring you up to date as to some of the things that we've been 24 I doing. 25 As was indicated, we have had some meetings with various 26 I 1people that are working in this area. We've had meetings with 27
28 II 98 I 1 the proponents. We have a small group right now that consists of
2 s ive Ana st, the Comptroller, and the Department of
3 F We're ng to together, do advance planning on 4 I 5 a lottery. It really is no different than what 1. I 6 lwe've done on prior initiatives, such as 13 and the one that cut tax. 7 1 II We would hope to have the group enlarged to include some 8 II I• - 9 \) or the that have been brought in today: the Attorney
10 J! General should be part of our effort; General Services, the II of General Services should be included; DPA should be 11 II ; else that would be associated with it, the 12 II \Treasurer, because they will have some accounts that they'll have 13 1I 1 to set up, and there would be some banking responsibilities that 14 \ wou invo them. 15 q So, we're attempting at s point to put together a 16 effort. The 135 days would be a short period of time. 17 t li Last week, I part in a national conference that 18 li ted lotteries. And I think everyone would agree 19 II was II 135 days will be -- it's a tight schedule, 20 I! li H,, it wou be a difficult task. Nobody really seemed to think li " t vlas an ss , but I think, as you've brought out 22 )i , it certa ly wou be a difficult task, and there are a 23 lot of a the you could stumble. 24 I would be very happy to answer any questions. I've 25 I: I! 1il1 rea d th e I iat I'm ly familiar with it. 26 II II 27 I' liii I' 28 •' 99
We see a lot of areas -- some of the major areas, I
2 we would see we would want to some advance in wou some of areas 've touched:
4 re lers; we would be talk having contact
5 th, based on what other states , we would probably 6 15,000 retailers or so to service a lottery the size we're
7 talk You would have , major requirements. It
8 real is a very major ef You a lvement with
9 personnel; all the questions that have been brought out this
10 morning, whether they would be 1 servants ll CHAIRMAN DILLS: Senator Greene.
12 SENATOR GREENE: When did the meetings commence?
13 MR. MATHIS: I didn't real get involved in it, Senator, until a r -- 14 SENATOR GREENE: No, my que wasn't when did you get 15
16 My que was: When did commence? 17 MR. MATHIS: I was one that met Barry Fadem and 18 so on, so I'm one Finance 19 SENATOR GREENE: was meet held? 20 MR. MATHIS That was -- it wasn't st It was 21 the week before last. 22 SENATOR GREENE: what date? 23 MR. MATHIS: Let's see, it was 14 days 24
CHAIRMAN DILLS: Be or a Assembly G.O.
ttee meet ? 100
1 MR. MATHIS: It was after that meeting.
2 SENATOR GREENE: Who initiated the meeting?
3 MR. MATHIS: Well, I was very interested in
4 SENATOR GREENE: You tiated the meeting?
5 MR. MATHIS: I requested it. It was coordinated through
6 myself and ller's Office.
7 SENATOR GREENE: I'm not challenging anything. I'm just
8 ng to get some speci c information. II 9 II MR. HATHIS: I wanted to have a meeting, because we're I! 10 the process -- II SENATOR GREENE: The Department of Finance initiated the 11 I'.I 12 /!meet The not initiate the meeting? II MR. MATHIS: No. 13 II SENATOR GREENE: And your level of authority is where in 14 lj rector of the Department of Finance? 15 I relat to the
16 MR. MATHIS: (No re . ) I! \. SENATOR GREENE: I just want to see the level of contact 17 II I! th 18 IIli !! I> if Here's I'm to establish. 19 11 il d MR. MATHIS: I see him day. 20 1: I' li SENATOR GREENE: But I don't know what your position is. 21 !; li ji II don't even quest what pos ion is, but I don't know, so I'li j\ 'm asking. 23 Are you one or two or three steps from the Director, or 24 ? 25 1'1R. MATHIS: I guess you'd say I'm like three steps. 26
27
28 101
1 SENATOR GREENE: See, what I'm to find out is,
2 when was meeting held; iti it; and was the
3 1 of authori of state agency. 's all I want to
4 know.
5 you.
6 CHAIRMAN DILLS: Under the In iative, is there any
7 requirement, we do have the law se with reference I 8 Ito contracting lus of or small business I 9 \participation in the contracts?
10 I MR. MATHIS: Well, the tiative does not spell out lin that detail. There's a great deal of lity, as I read
12 II the Init exactly wou contract. They cou use the Department of General Se s; they 13 I 14 I cou subject it to those cond if so des , but as I
15 ~~read it, I 't see those rements.
16 CHAIRMAN DILLS: They're not
17 MR. MATH S: That's my I There is, in EDP area I understand, in General 18 II 19 /I Se s -- I you're to talk later, il II a of closer 's my
21 II under that EDP area, is that they II 11 have to fol certa s. q h II CHAIRMAN DILLS: Could you me a t on some II jl II 11 that is me s 11 a mystery? IIq II .71 of 25 II 8880, I! "There is established a 26
II II 1 of t to be 27 II i! !I li li IIp :1 102
1 drawn from the State General Fund
2 to the State Lottery Fund estab- shed by this Chapter in the 3 amount of $16,500,000.00 which 4 is continuously appropriated for 5 carrying out the purposes of this 6 Chapter." 7 "Continuously appropriated" is an expression that raises 8 certain hackles among Senator Boatwright and some of the other 9
11 persons on the Finance Commit tee. We have endeavored to 10 eliminate this business of continuous appropriations. ll 1 I Now, le it goes on to further say that this is for a 2 II I temporary purpose, and so on, what then is the result of that 13
1 rement it shall be "continuously appropriated" for this 14 ? 15 Does that mean for each year there shall be 16 lable, if they sh it, $16,500,000? 7 II \I MR. MATHIS: Well, as I -- what section was that? 18 I CHAIRMAN DILLS: On my copy, Page 34, Section 8880.71, 19 I Jjsect 4 . 20 II II MR. MATHIS: It's my understanding -- let me comment 21 !I le I'm looking for it -- the loan is strictly limited to 22 H !I l[one year. So, it does not go on each year. So, it's only one 23 H 'i
dII 24 !! H ii I'm sure 're liar with the position that we've 25 II :1. I! taken your committee when we have a bill which has a 26 ii 11 i/ con s ia tion in it. We share the same concerns that 27 II '' II:i you do • We want it to be ject to review. 28 li il IIli ll,, II 103
I presume that the reason that 've it in here is
2 to facil to t up and ng, and it
3 is a loan that wou
4 They would be le to, r address , but on one year. i one year.
6
7 CHAIRMAN DILLS: If it's for one year, what's the ssion "cont 8 "? I 't understand it. If it's just for one year, you 9 't have to have it continuously appropriated.
If 's ss le, or f lt to II rway in 135 days, or any reasonable amount of time the 12 rst year, then that money is 11 for next year? can 13 on t until they get could 14 could go ahead mon s. have a 15 of just say: Mr. ller, is l6 no revenues in. They can 17 all people they wish to. 18 MR. MATHIS: cou do to extent 1 the 19 1 million was 20 CHAIRMAN DILLS: It's cont s When 21 run out of 6.5, well cou over next
!j year. 23 II I t r need for ss II Jl "cont 25 I!II !l I know it s do. It e s the t 26 II :\ il process; it el nates the s and the Governor 27 II II !I look at t and ng it in t 28 li !I
I! 104
Senator Ro l.
SENATOR ROSENTHAL: I just wonder whether what they mean
and then 135 days, you would be into 3 passage of s e of he fiscal riod, and so, you would have from that 4 until a year from that period, which would take you to the 5 second year. I don't know. 6 CHAIRMAN DILLS: We an operation here that is on a 7 year sis, and we have our budget, which is on a seal 8 ar bas s. And raises the hiatus that the Senator's made 9 0 . lO llment II Senator Greene. ll I,il II ti SENATOR GREENE: Mr. Fadem just walked out the door. 12 I! i! the catch here. 13 II CHAIRMAN DILLS: wanted to leave. 14 I SENATOR GREENE: Se , why don't you see if you can 15 c h out hall re. he can answer some of 16 1 the quest s. 7 II CHAIRMAN DILLS: other questions of s tness? 8 II d Thank , Mr. Mathis. l9 II ij MR MATHIS: you. 20 II Ji ii CHAIRMAN DILLS: I have two s of information here. 21 II IId 22 I!q !j And the other is a request, at least from one of the 23 Senator Greene, that you respond to a question with 24 containment your I it ive act of the 25 "cont s iated". This is fficult for us 26 [i to understand. 27 f\ li 28 105
1 MR. FADEM: Let me try to answer the question this way.
2 State 1 r's Of ce a means
3 -- a 1 of c t as far as I , is a
4 1 t bit unusual. State of Cali has not that 5 very often.
6 The "continuous appropriated" language, as far as I
7 stand, and the State Comptroller's Of can correct me,
8 pe ts the situation that a line of credit is tead of
9 asking for the $16 million all at one time, and those of us who
10 have drafted the Initiative don't think the Commission's ever going to need that full amount, the "continuously appropriated"
language would permit the Commission to make requests from the 12 state on an incremental basis as it went along. 13 In other words, the day the Commission wishes to 14 I I avail itself of that money, can a amount that they 15 II 1 at t to st 16 1$16.5 mill 17 was i reason "continuously 18 I \appropriated", but I would certainly yield to the State 19 I 1 r's ce if my interpretation is 20 CHAIRMAN DILLS: If you have not up line of 21 !'I I' t to extent of s f wou cont over i! ' 11 I, 1nto r fiscal period or calendar , at which time you !I d li cou I MR. FADEM: I'd to look at the I 1
16.5 11 was l ted to the rst ca year of 106 III
It was certainly not contemplated -- I was just looking
in the back. I think the language would permit
3 to occur, , if the Commission had not availed itself
4 1 6 •
5 CHAIRMAN DILLS: It says only during the 12 months after
6 effect of the Act, and only for the purpose of
f ing l t 1 start of lottery. 7 But to us, s appropriation means something else 8 t se. 9 MR. FADEM: Yeah, the purpose was not to allow the lO ss to a blank ck $16.5 million for the next 1l 5 s. The language was intended -- that's why the 12 s line of c , may be drawn only during the 12 !3 effective date of the Act, and only for the 14 se of nanc i tial 15 I provision also requires it to be 16 thin 2 months. n fact, the State of Washington, as 7
8 tar 9 :! II 11 need 12 months ij ant that Commission 20 I; lj 21 !I But aga the speci words that you're looking at, 22 :;il I ii II iated 11 were intended as to permit the q 23 I 1 request ssion. Ins of having the 24 receive 16.5 and on need 5 llion or 7 25 was that was se ted. 26
27
28 107
1 CHAIRMAN DILLS: Suppose you use 1 of credit for
2 $5 11 , and then on it states it shall repaid
3 to the state General Fund within 12 months of the advance of sa
4 funds.
5 Do you , then, to $5 1 within 12
6 months?
7 MR. FADEM: Correct.
8 CHAIRMAN DILLS: For each increment that you would get on this line of credit, it must be repaid separately within 12 9 I 10 jmonths?
1 l MR. FADEM: That's correct, but based on the experiences
12 in the other states, Senator, it is not anticipated -- first of
13 I all, we don't think the Commission will need the whole $16
14 j million, and that the initial -- once they ask for the initial st, that 11 probably be it. 15 CHAIRMAN DILLS: Senator Greene had a question. 16 SENATOR GREENE: A third 17 stion has now come up. When did you meet with the Comptrol 's Office? 18 I MR. FADEM: I met as recently as a week ago. 19 ,I,, SENATOR GREENE: No, the time, very first? MR. FADEM: First t ? 21 II II SENATOR GREENE: Did you meet Comptroller II li !/ first? 23 I!
II11 MR. FADEM: Senator, I'm not trying to the 24 ii stion. )i I! SENATOR GREENE: Approximately. 26 II II 'I !1 II II II II l1 II rl 108
1 MR. FADEM: Approximate I would say at the beginning
SENATOR GREENE: of this ?
4 FADEM: Well, I have a copy of a letter from the ller, Mr. Cory, which states to us that he did not 5 ee any lem in lementing the Ini ative. And whatever 6 is on that letter was of the meeting. 7 II lj SENATOR GREENE: All right, well that was going to be my 8 Inext st 9 II II j! So the Comptroller initiated the meeting? 0 tl II II MR. FADEM: No, we sted the meeting. Californians II li Bette 12 II II SENATOR GREENE: You requested it subsequent to a II 4 il MR. FADEM: Oh, that is correct. 15 .I SENATOR GREENE: And imately when after -- 16 :I ll . FADEM: reason I'm hesitant, we talked to ~ ! l7 II 'I SENATOR GREENE: I'm ing to get a date or approximate t8 II II 9 I,,, MR. FADEM: Well, our init l meeting wi the 20 II II ro ler's Off was pr to i of the measure to 21 q ll,, Su~nary. That occurred on December 7th, so 22 II I' :1 !I SENATOR GREENE: December 7 of '83? 'I 23 H "d '! MR. FADEM: De r 7th, '83 is when the Initiative was 24 ii \i I for Tit and Summary. The meeting with the State 25 li rol 's f ce was 26
27
28 109
1 SENATOR GREENE: Then after the letter in January, when
2 you sat down to ly talk about se specifics of
3 implementing, meeting took place on what date after January, 4 approximately?
5 MR. FADEM: I'll guess thin a month of that.
6 SENATOR GREENE: Okay, so approximately February, and
7 you initiated that meeting?
8 MR. FADEM: Correct. SENATOR GREENE: And you met with the Comptroller 9 himself or his personnel? 10 MR. FADEM: Met with his personnel. II SENATOR GREENE: What level of personnel? 12 MR. FADEM: Met with Mr. Gerkovitch, who as far as I
know is the legal counsel. 14 SENATOR GREENE: You met with the legal counsel, okay. 15 Now, the Department of Finance, you met with for the 16 I time two weeks ago as the result of a meeting requested by 17 IJ first I' them; correct? t was their testimony. 18 MR. FADEM: That is correct. 19 SENATOR GREENE: Now, third question: Is there any 20 I jother initiative in this category with which your firm, national 21 I
II in , has been -- I'm referring back to your parent body, so 22 the only reason I say that --which this corporation has 23 ~~that's
11 instituted which is structured in the same manner or similar to 24 II Jj this as relates to after the Commission and everything is of and 25 l1 running, as to the first time that they will come forth and will 26 I' 11 be required to produce evidence relating to earnings, profits, 27 II l1 expenditures, persons involved? 28 I ! 110
1 Is there any other initiative with which your
2 been assoc ?
3 MR. F'ADEM: law firm? SENATOR GREENE: No, no, no. 4 MR. FADEM: Oh, Californians for Better Education? 5 SENATOR GREENE: No, your parent body, which is Atlanta, 6 i , is it? You mentioned a gentleman; you said he owns 7 Isevera r th s. That's your parent body. 8 MR. PADEM: The Californians for Better Education is 9 SENATOR GREENE: No, your national parent body, sir.
lv1R. FADEM: Oh, National Association of State Lotteries? l l SENATOR GREENE: Is that your parent body? I'm going to 2
~? Whoever is, is there any other 3 MR. FADEM: I'm involved with a lottery measure that 14 on the ballot Oregon, if that's what you're 15 ask ng. 16 ! il SENATOR GREENE: I'm really not trying to find out what 17 il 11 you're ssoc with. I'm trying to get to the structure. 18 II Is there any other is structured in that same 19 II !/manner as relates to the Commission's operations, the f st u . !J tlme come with any reports? 21 ll;, ,,!I Are any of the r tiatives structured similarly or
I!i! ,i ical ? 23 l! 11 MR. FADEM Out of the other 17 states, I would say that 24 li l! I,, lf two-thirds of them are very much patterned after our 25 II
I'[I t sy tern of ts going to the Legislature, security
ii system. 27 iii' !i jf li H li I! II ll 111
1 But the California law, and I'll call it the greatest
2 hits of the lottery states, we tried to select those features from other state , according to states, had
4 worked best.
5 I don't think there's any other state in the country
6 that has, you know, this exact type of initiative. SENATOR GREENE: Would you say it's similar? 7 MR. FADEM: Similar? Colorado -- I haven't looked at 8 Arizona recently, but Colorado, the State of Washington.
SENATOR GREENE: In other words, they established a 10 Commission which goes into operation. The first reports, l I accounting and what have you, that they are required to make is 12 nine months after their operation begins? 13 I'm speaking of that point only. 14 MR. FADEM: I cannot specifically tell you how many 15 states have a nine months' security report that is due. 16 I can tell you out of the 17 states, there are only two 17 that do not have any Commissions; they have a State Lottery 18 nirector, no Commission. But I believe 15 out of the 17 states 19 1 I 1 do have Commissions similar structures as we have in this 20 jl 11 i t 21 SENATOR GREENE: When you say 11 S lar", would you say 22 I II 11great resemblance or little resemblance? 23 I' II MR. FADEM: Great resemblance. II 24 II i[ SENATOR GREENE: Thank you. 25 II I'm finished. 26 I I CHAIRMAN DILLS: Thank you very much. 27 t! 28 ,I I ,I II 112
1 Our next ss is Austin Eaton, Department of General
2 s. . EATON Mr. Chairman s, I'm Austin Eaton
4 of General Services.
5 I'd j st l to pre my remarks here with the
6 , the role of state controll s, has g to the 7 General Serv the Initiative, and that this 8 ere i jj creates an , total independent, Lottery Commiss ,! i! The r granted to the Commission extends to all areas 10 !I \! I' lished by the rtment of General Services or ll II norma i! d r ces, procurement, construction, 12 I,il s, consultant services. 13 li contracts for s means is the lottery would not be required to 14 jl What ss l serv s of the Department's 5 II use of Procurement for the sing of suppl s and 16 I! I the se of such big ticket items as 17 I ,III n les; would not be required to use the professional services 18 II I: f the Office f the State Architect for construe on contracts; 19 ll !; i to use the fessional s of the 20 II ,!Ji j! ce of for negotiation of office 21 i' lease, nor the Office of Real Estate for the acquisition of 22
23 Contracts serv s consultant services would 24 be subject to review and approval of the 25 's l Off And s is contrary to the intent 26 the is as recently as 1982, when in 27
28 113
companion bills authored by Senator Pres and Assemblywoman
2 were new s s as recent as two years
3 In the language of Initiat
4 Genc~ral Se s wou not have inter th the lottery
5 by the Act unless the sted the Department's
6 s on an as basis.
7 The Department has no review or approval authority over lottery's proposed awards goods, services, and 8 constructing contracts. 9 The exemption granted the lottery is in contrast to the 10 intent of the California Legislature that state agencies be II ject to the use of s of our Department in our role 12 as the state's business management agency and as a control 13 agency. 14 We've asked to provide a 1 overview of the 15 state contract review process, and that is the Department of 16 General Services' 1 fice reviews pro ssional and 17 consultant ce contracts for compliance with selection 18 methods as stated the contract bid, as well as reviewing the 19 I !1 contract for terms consistent with best interests of the 20 state. 21 I I In add to be by our Legal Office, II contracts over $100,000 and under $150,000 must reviewed by 23 !I the f Counsel of Department, and contracts over $150,000 24 )I II must also signed Director of the of General 25 II Se s. 26 li I! II 28 l\ I, II ·Ili 114
1 There s one notable -- I think EDP was mentioned
2 l and that's notable e on, where the Legal Office
3 doe 't we have our own f of
4 !Procurement has elec c data processing staff that
5 !those contracts. And that's because professional consultant
6 !contracts se areas are h ly technical and our EDP staff
7 I is the best lif to do that work. They look for
8 I and select methods which will accomplish what the
9 state agency needs, as well as being consistent with the state's
10 elec c data processing policies. I' 1j Staff also ides whether or not sole source II i2 II contracts from state agencies for professional and
13 11 consultant se ces are justified.
14 s contract process, we believe, has worked to benefi of state ensuring that contracts are properly 15 , and that state's interests are l protected. t6 ,, is ss, coupled with the requirement that 17 II II" I' tate agencies use standard state contracts commodities and 18 !I 'I t their rchase requirements to the state central 19 II II s ity, minimizes possibility of graft, fraud 20 llII II !! and col sion. 21 II ii II In answer to the quest as to whe r we 1 ve that 22 l!,, :l . . t tl.~ b ng ld be required for the procurement of 23 il I' whether such contracts for commodities should 24 i! ottery i! control ies, we can respond that the 25 II be reviewed 1',, l ve sea id ss, led th the vendor bid 26 :~ i! st system, ensures the lowest possible price and equity in 27 reatment f vendors. 28 115
Other elements the t lacks, and
are present n state' system,
rna of a 's list; the ic
4 of bids; a hearing process rough
5 vendors ir st against proposed awards
6
7 And the soc area, Mr. Chairman, you
8 brought s is no th compl with the Small Bus ss Procurement Act, which grants a 9 preference to California small 10 ses. That provision is missing. II The approach 12 CHAIRMAN DILLS: Excuse me. 13 As we slature are a two- 14 rds vote, and Governor it, to in the interest 15 s Initiative 16 require the bidding 17 s' s ru s regu s, what time would be 18 involved getting to b and ing the protests and 19 I so on?
MR. EATON: I wou norma bidding process 21 II wou run 60 for most s, if there is a 22 !j Jl protest that run from 30-60 ing II upon nature of that st. 24 ii 11 CHAIRMAN DILLS We had some in on a while ago 25 li II we on had 68 after the s met. 26 .I !j II I
5 II some other states. In these three states, at least, the lj 6 te 's treated no fferently than other state agencies,
7 to use the serv of the central purchasing agency II 8 l as well as being subject to the review and regulation of the I var s state control agenc s. 9 p q That concludes my remarks. 10 I·li II CHAIRMAN DILLS: Could you provide us with a copy of 1 l p p statement, please? 12 n I! ·I st by members of the committee or staff? 13 II II you very much. 14 II Reve Ha 15 II I! REV. CHINN: Mr. Chairman, I'm Harvey Chinn, the 16 I j Execut irector of the Coalit Against Legalizing Lotte s. 17 II nk it's somewhat symbolic that this is the day 18 li
11 after Adrniss , and we are now 134 years old. The 19
/1 Canst tut o s state was one year before it became
liad sta. t e, we had to all in order, and our founding fathers 21 I' .,H the Constitution back 1849 a provision banning state 22 I; ]otter s. 23 I that s has served our state very well, a 24 scr that we have built this state on hard work, and 25 creat , and energy, effort, responsibility, and 26 self respect now it's being proposed that we 27
28 117
1 would change some of s and turn to ling to support our
2 to re i s 1
3 It's a of this comes
4 of state efforts. I ve the 131-page
5 of all the funds
6 came from c Garnes, is a wholly owned subsidiary of
7 the Bal
8 No one over half a million
9 dollars of was a pro ssional
10 organization, that professional signatures to put this on
1 I j the ballot.
12 statement made this would be
13 competitive , and would be able to get
14 contracts.
15 I a of Ba , their 1983
16 f al s. I this expecting to
17 f a lot of re of various I educat , but I iled to nd the word 18 ,j tab
19 II education in the entire II the President of 20 1 a letter s 11 s back on March 21 II the Bally to lithe 31st, this statement: jl II "Several new states 23 II II Cali a are to vote 24 If,, II on the re 25 'I I' r 26 li li the ts for our 27 li il bus ss." 28 I !iI, I ,I p 118 II I
1 So cert.ain , communications between the President of the Bally
3 here n California to enhance their pro ts and their corporate
11 pro ts tter s. 4 I! 5 II Senator Greene asked the question about any other s ll be on the ballot in the State of Oregon. 6 I states. What li i to be on the ballot there is very similar, almost word 7 II word to ll be on the ballot here in California, 8 II II rf3C ient is going to be economic development in the State of 9 II II Jl L'I p I do have a statement here that the Secretary of State ll 1: She said: 12 i[ made in 1l \: you have an out of state 13 " il]\ I company dumping in $150,000 on a 14 II d gambling initia ve when several 15 II II citizens' itions have failed, 16 li I,I ,, s is ve alarming." 11 ]! j) I , I'm ry to establish that what we do have here is 18 il ,,I; out of state corporation, the gambling business, 19 i' li ch is pulating the ative process, putting a lot of 20 n o state in order to increase their corporate 21 its, or gambling pro here in the State of California. 22 we announced our organization in a press conference 23 5th day of Ju , we had a tremendous amount of response from 24 s f community, a lot of letters and telephone 25 alls from educators; we lots of telephone calls also from 26 enforcement. I have a whole le here of letters from school 27
28 119
superintendents, two that came I got during the
2 noon hour, saying not favor the lottery; they were
3 inst Proposition 37. Senator , who has headed up the Committee on 4 Education here in the State Senate for many years and also the 5 Committee on , will speak about the opposition of 6 education. 7 Nancy Jenk is also here from the State PTA. 8 I also have a file of letters that come from police 9 chiefs; a file of letters that come from sheriffs, including 10 sheriffs of the large counties in our state, Los Angeles and San I I Diego, Kern County, Alameda County, Sacramento County, all 12 opposing Proposition 37. 13 As far as the churches go, we're opposed to the 14 exp tation of s. We l individuals have 15 worth. We just rea ly are that rs wou 16 mult ly the ll of citizens of s state th so many 17 lottery tickets a and come up with a figure of how many 18 billions of dollars that do come up. 19 I would to make a comment on $40 million that 20 I j was won in Illinois just about eight or nine days ago. A lot of 21 [!publicity has been given to the man who won this money. 22 I The paper said he and s had teamed up to buy $35 worth 23 i I I of lottery tickets a week over a of several months. That 24 1
J figures out to over $1800 a year. 25 But the citizens of Illinois are stu now with $80 26 II
J\ million worth of worthless paper. That s all the people who've 27
28 il
Ii I, l 120
l these amounts of money now just have paper that is II II noth II a ri te rat would come in to California, 11 4 l some scheme would sell -- have to sell ·II I 80 1 worth of t in order to provide a $40 mil 5 II ze s 50 rcent of the total sales -- but if a 6 would come California and organize a 7 I ss they would go out and sell $80 mill worth of 8 1! bus !i'I ' 11 stocK , or bonds, or certi cates, or debentures, one person 9 1: "il would end up th half that money, and the rest of citizens 10 II !: of the state would end up th worthless paper, $80 million worth lt II :' ti of thless r, s committee would have investigations; 2 II you 1 d have the Securi Exchange Commission coming in; the 13 ll JIConsumer'I Protection Movement would get involved to see how you 14 !I 1 rests of citizens of this state. 15 I! it We're havi p here a scheme, a gambling scheme 16 I,'I II ch most of customers are going to have to lose. It's 17 !I j: i1 he on it can money is for most of the people who 18 li I' "I• se t ckets that are go to have to lose. 1: 19 :1 II li And we feel is not the business of state to i! out market a product where mo t of the people are going to
to se order to any money for the state. It's
i l s ss le r the state to gamble self r 23 We hope that this hearing and the information comes 24 up test comes those who see the dangers 25 s, 11 he to pe the popu ion that this is not in 26 st terests of our state. 27
28 121
1 CHAIRMAN DILLS: Any questions of Reverend Chinn?
2 Thank you very much.
1 Next witness, please.
4 MS. JENKINS: Mr. Chairman, members of the committee,
5 I'm Nancy Jenkins, a volunteer serving the State PTA here in the
6 Legislature, representing their interests on education and parent
7 education.
8 Our concern with the Initiative as it is written covers
9 three main areas: first, the impact on the overall funding picture for public education in the State of California; and 10 secondly, the impact that this will have on local communities 1 l from the perspective of being parents of young people in the 12 community; and thirdly, questions that we have, if this does 13 pass, on assuring accountability on the part of the Commission 14 when it does deal with the public's money to a very great extent. 15 I have an information sheet that I will share with you 16 that is going out to our members. First of all may I state, the 17 degree of apprehension that our state organization feels about 18 this Initiative and what it will do to education funding cannot 19 lbe put into a few simple words. We have fought long and hard to 20 find adequate long-term funding that would come from reliable 21 sources, and a broad base of revenue sources that would indeed 22 fund education that our children so desperately have needed these 23 past few years. 24 We fear that this Initiative will delude the voters of 25 our state into thinking that they have answered these problems; 26 that they have addressed public funding of education. And it is 27
28 II 122 'I
1 real abhorrent to our organization that a state as rich as 2 I ia is would use any por of gambling funds to support l . 3 J .. l.C of our s nts. .I 4 II we find as we talk to people is that they do not I! 5 I rstand what is in the Constitution via this Initiative, and 6 I is n actual statute. Many of our people say: Gee, at last I we've funds education in Constitution. 7 II 8 ll So, we have made an effort to educate people that the ll I' 9 :1 on the Constitution refers strictly to the 11 I' ·I e lishment of the lottery and the prohibition of the casinos; 10 \I I! rest of the Act, which is indeed extensive as ll il that i
12 !1 we've hea this morning, is where the education funding is ed. And we have s that it has been our 13 li•I in working with islature that they indeed can 14 li with a two- rds vote any statute that 1 the 15 II If neces to change. 16 I II We: are icular conce as we look at the 17 II II It t when it's juxt sed against some of the r 18 il IIll i' ni ati ve , such as Jarvis IV. If that proposit were to 19 1: ss, and state were in with financial crises as we 20 just to come through, and we are now in a stable 21 at the moment, we would feel that the Legislature, in 22 sing its best judgment funding all services, might very well 23 called upon to do a bi 1 that wou , by two-thirds vote, 24 'I, I, mon s from that designated for education to becoming 25 1: II11 mon1.es· the General to be used across the board of 26 ces 27
28 123
1 We feel that most people think that $500 million is a
2 great deal of money, and certainly it is to me, I should say.
3 But, when you look at the $13 billion price tag that education, K
4 through graduate school in this state, costs the state, then you
5 begin to have a little bit of an idea that 400 million, 500
6 million will indeed not be an answer to the needs of education. Our further concern in the area of this is because the 7 proponents chose to write the Initiative with restrictions on the 8 local governing board. At first glance we were very pleased to 9 think that this money would all go to instruction of pupils. But 10 then we realized that it proceeded to tie the hands of the local 1 1 boards of education in their efforts to address one of the most 12 pervasive problems we have today, and that is to provide adequate 13 space for our children, or a safe climate, where learning is 14 conducive because of the atmosphere that the child is sent to 15 each day. 16 We find it ironic that of all the people in California, 17 's only children that are mandated to go to an institution 18 !through no choice of their own. Prisoners end up in prison by 19 /something they have chosen to do themselves, but our children are 20 llput into institutions, and we find that because of the lack of 21
1 funds for capital outlay, since Prop. 13, we have a terrible need 22 I 1 for adequate classrooms. And this Initiative, for whatever 23 I rlreason, has decided that it is best to preclude boards from 24 1, !addressing those concerns at the local level. 25 I We further feel that because the funds will be on the 26 \!bargaining table, that the monies may be used by local boards for 27 I',I 28 I! II !I !I 124 I
l commitment. That is something that you might find in
2 a -standing program, settling salary or wage, benefits. if for reason lottery would not
4 revenues, if it would fluctuate, or if it would, in the case of New York, be held in abeyance for a period of time 5 I New York quit the lottery for about a year until they got 6
7
8 the s s out if they had used the monies for ongoing 9 I jcornrnitments. 10 I I At the l community area, we're very concerned that ll II the games 11 be so the small neighborhood shopping 12 I' 1l centers where our ldren are most apt to be. That is the local 13 ry store, the 1 drugstore, even the local liquor store. 14 II I And r more, that VLT, the video lottery 15 na s, will be a st attractive kind of play for l6 young people. 17 We know that there is an age limit of 18; we cannot see 18 how the local ty is going to be able to control that any !9 r than have been able to control the purchase of 20 c aret.tes, and beer and ne. 21 I I three sons. I know how ir system works. 22 rtunate 're old enough now for me to not worry so 23 , but do know how the system works, so we have no assurance 24 law enforcement, no money to back up their 25 l re ibili es, 11 able to ascertain that any 26 that ever p s the tery, particularly a lottery 27 1 game, 11 indeed 18 years or older. 28 125
We feel that it does increase the monies that these
2 local little stores will have to carry for instant pay, and
3 therefore will be an even more attractive target for robberies
4 and so forth.
5 Last, and I will not dwell on this because you've had
6 the experts talking with you, but we do have concern that the way
7 we sense the Initiative to be written, there is not the assurance that is usually prevalent when a state takes on a responsibility. 8 We would ask the Legislature, if this passes, to do what 9 they can do to promote the integrity of the Commission by 10 assuring the public that their funds were being handled in a 11 businesslike, astute and honest fashion. By saying that we mean, 12 the controls that government has always used to assure that its 13 business was handled properly: the Comptroller's Office; the 14 Legislative Analyst, et cetera. 15 I thank you for your attention. I can only tell you 16 that we have grievous concerns as to how the public will think 17 they solved the education finance problems of this state. 18 CHAIRMAN DILLS: May I ask you, are you speaking today 19 as an individual, or are you speaking as a representative of the 20 California State Parent-Teachers Association, who have taken a 21 II position? 22 ~ MS. JENKINS: I'm speaking as their official 23 I, representative. 24
1\ We studied the lottery when it was rst being 25 circulated as a petition. We've had a long-standing position 26 against supporting the lottery. 27
28 126
Our members asked us to study the issue again, and so we 1 In fact, the task force 2 tab ished a task March. to us at March meeting of our State Board of 3 in upheld standing statement to not 4 And they furthermore at that time 5 sa they would not uphold a lottery for 6 ng educat at any level, because it was not to 7 cons a rel le, long-term source of revenue. 8 We then reaffirmed our position to oppose this once the 9 ative qualified.
So, we were looking at this very early in the Spring, as ll it become a ballot measure. So, our position is 12 1 s ion adopted by the State Board of Managers in 3 I was asked to come give testimony. 14 rmation that I have is going out to our 15 rs at the strict and council level, because it's diff1cul 16 L f jj or us o reach our almost one million members. We do have to go II our ls of communication. And I will leave that for 18 II !!the members of the committee. !9 CHAIRMAN DILLS: I'm Chairman of the Subcommittee of 20 that s K-12. We presented to the Governor, through the 21 ttee and it also went over to the Assembly, and they 22 the amount of money which was considerably in excess of 23 q lithe $9 billion 636 million, which eventually was signed by the 24 I~ 1: rnor. Of that $9 billion 636 million, if K-12 were to get 25 II !I II the amount f money that the lottery proponents state that they 26 "il d would get, 1 operational, would be $400 million, which is 27 [: ll ;I rox 4.2 of the funding. 28 II li li,, i 127
Does the PTA cons that $400 million is a significant
2 amount of money wi re renee to schools to such an extent that
3 we must rely games of chance to se that amount of money?
4 MS. JENKINS: No, sir. We certainly do not, and that's
5 one of our gravest apprehensions.
6 The mentality that might prevail, even in the
7 Legislature, but most assuredly in the general public, and even
8 among our own members, might very well preclude them from feeling
9 the necessity to do what we've been doing each Spring in our ritual as we come to Sacramento as write to you and seek our full 10 COLA. ll This does not bring education up to the full COLA at 12 all. And yet, it may be perceived to do that in the eyes of the 13 general public. 14 And our rs to you most often came from parents, but 15 even their friends. So, 's this mentality that we're afraid 16 will descend upon California. 17 The last two marvelous education. 18 We have seen a real sensitivity, a sense of responsibility on the 19 part of the Legislature to fund educat , and we've made, you 20 know, great strides in the monies that have been put toward that. 21 The Governor has supported educat 22 So, we don't want something to happen that would 23 jeopardize that feeling. And $400 mill , while it is not an 24 insignificant amount of money, is not worth it. 25 CHAIRMAN DILLS: How many students ADA and K-12? 26 I 27 II II 28 I 128
MS. JENKINS: Approximately 4 million; I think it's a
2 1i over that at this time.
3 CHAIRMAN DILLS: So how much --
4 MS. JENKINS: Approximately $100 per student per year per ADA. 5
CHAIR~1AN DILLS: Do you fear that the people will get 6 that $400 million, that's a lot of bucks, and therefore 7 over -- how many school districts are there? 8 MS. JENKINS: I think it's 1,043, actually. 9 I CHAIRl".lAN DILLS: Whatever, spread over not necessarily 10 !I 1 11 districts, but by ADA, a matter of $100 for each of those for 1 l .. the le of the year. l2 II !: The public, as you see it, might get the idea that there 13 II j real was some signif contribut being made to finance \4 ation 15 MS. JENKINS: Yes. And even more to our worry is the 16
I 'ile are structured now. Ca fornia is very unique. We are 17 I I il sta rted since Proposition 13. 18 I' II Our concern is even more that not just the general 19 1! II l! l Governor the Legislature, because this year, 20 !! lithe sal was three point something percent COLA, and of 2l H /I course, schools needed desperately the full 6 percent COLA. 22 ":) And re was qu a deal of discussion and negotiations back 23 q i( and to assure schools of getting that full COLA. 1! 24 ii II Well, I think we need to be the responsibility of the 25 II li tota 1 state. This is a service that is much too important to be II 26 I' il '· ft to 27 l:
28 ,,1! I'li I' !i I! 129
1 CHAIRMAN DILLS: Thank you.
2 Any other questions? Senator Greene.
3 SENATOR GREENE: Are you saying that you think that 4 members of the Legislature may be lulled by this? For example,
5 are you saying that you think I might be lulled by this? I'm a
6 member of the Legislature.
7 MS. JENKINS: I have been in Sacramento as a volunteer
8 for the area of education for three years now, and very active
9 back home prior to that.
10 And it's only within the last few years that the
11 !Legislature in total seems to have become very, very sensitive to
12 the needs of education and aware that they were now funding the
13 total education budget. I think our districts are funded close to 90 percent. 14 SENATOR GREENE: The Legislature always knew what it was 15 doing. 16 MS. JENKINS: Well, there were financial problems that 17 precluded the Legislature doing what you had to do. 18 SENATOR GREENE: I'm dealing with your comment and want 19 to ask you a question. 20 Do you think, and I ask my original question. And I'm 21 serious about it, because there's a problem if you think we don't 22 know. I don't know where the problem is, but if you think we 23 don't know, then -- do you really believe that? 24 MS. JENKINS: I would have to say when the funds for 25 this whole state were in a state of chaos after the passage of 26 Proposition 13, and you were having to bail out not only schools, 27
28 130 'I 1 but many, many other services across the board, we all had to our turn at low fund
SENATOR GREENE: But we knew what we were doing when we 3 d that. We conscious , and llingly, and 4
5 MS. JENKINS: Yes, I would say that almost all of the 6 ture , but I did hear comments made in the committee I 7 that education had more than enough funds and didn't 8 any more. I would not presume to say that if I had 9 II II not heard that comment made by a member of the committee. iO II SENATOR GREENE: That just might have been a member that !Ili li !I t p in the same level of importance as you 12 ii IJ place !3 II MS. JENKINS: Obv s 14 I SENATOR GREENE: ch is also valid. Bu it didn't 15 d 't know. just d 't agree with 16 I
17 I I 11 MS. JENKINS: They 't agree with the State PTA, not 18 II me personal !9 •I :I SENATOR GREENE: Okay. I don't mean it personally. I'm 20 ii
!Id say 21 "I 'I It MS. JENKINS: Right. 1i SENATOR GREENE: The reason I asked that question is 23 because you've never come and talked to me. 24 MS. JENKINS: Senator, I'll rectify that immediately. 25 (Laughter) 26
27
28 131
1 SENATOR GREENE: That's I wondered what was your
se at on s s of one you couldn't say
4 MS. JENKINS: So o my workload is such that I am
5 very involved with fie committees, but I'll certainly 6 rectify that oversight.
7 CHAIRMAN DILLS: Thank you. 8 A former member and Chairman of the Education Committee,
9 former member and Chairman of the Finance Committee, probably
10 IMr Education himself in California, the next witness, Albert
ll Rodda.
l2 SENATOR RODDA: Thanks refreshi my memory, Senator
13 Dills.
14 I have four pages of single-spaced typed material that I '11 be a brief 15 am going to present to you. However, I I summarization. 16 I 17 I'm very much impressed with the data that you've collected today and with the information. As a consequence of 18 that, I've decided that much of my presentation is redundant, and 19 I've tried to el that which I regard as redundant. 20 I'll from my scrat and my s bbling what I 21 nk may be of I won't ab to it, though, 22 because it's not very clear, so accept my apologies if I 23 make mistakes.
I the lottery as an te means of 25 financing the schools. It will provide a source of revenue ich 26 is recogni as uncertain and will not adequately to 27
28 132
1 finance costs of educa anal programs to which the
2 revenues been committed.
1 This has to our attention, and I strongly J
4 believe that's a true statement of the fact.
5 rmore, the Lottery Initiative does not comply with of 6 any zed inciples of sound, public finance and t , ei r in abili th respect to ability or benefit. 7 it is well zed that the 'revenues generated from the 8 of lottery tickets will be derived from moderate to 9 Is Therefore, it's not a fair means 10 ~~~ income citizens primarily. Ito obta to generate public revenues. II II The is is practically den any ability to l2 II jj dete the allocat of a substantial source of revenue for i3 the of the publ schools. The Initiat mandRtes, l4 I there a very restr ted form of earmarking of state 15
16 The apportionment 11 weaken the efforts of the 17 II !j is to reduce the spari t s among communi 8 II 11cII e str1c. t s, an e ff ort now rna d e an d a very 19 li il controvers 1 context. 20 il 11 Also, the rmu la is contrary to the Serrano decision, 21
II• that is not too serious an issue today, given the 22 II1 j stantial re rms that islature has with 23 ' ire t to t But still is contrary to that 24 is 25 As a means of raising revenues, it will prove very 26 ·cost to collect. Only 34 percent of the revenues raised will 27
28 133
be allocated to public service, support of education. In
2 contrast, the general sa s tax will , it is estimated 3 for fiscal year 1984-'85, $9.6 billion. This source of revenue
4 will be collected and the program administered by the Board of
5 Equalization, and it is being funded next year at a level of $95
6 million. So, of $9.6 billion, $9.5 billion will be available to
7 finance government services. The same data relates also to the personal income tax
9 and the cost of its collection.
10 Furthermore, I believe that as far as I can read the
l I Initiative, that it fails to provide compensation to local
12 government for law enforcement services that may be necessary to
13 provide. In this respect, it violates the Gann Initiative, or the so-called SB 90 mandate, which we all remember. 14 CHAIRMAN DILLS: And also Senate Bill 90 of 15
16 SENATOR RODDA: Yes, Senate Bill 90 of Senator Dills, correct. 17 I think I was one of the few that voted against it; I'm J 8 sorry. 19 CHAIRMAN DILLS: You were. And I know why, because we 20 had a one cent sa s tax. 21 SENATOR RODDA: Not enough compliance with Serrano. 22 il It is inappropriate to cla , as the proponents do, that !I !I public education will have a source of supplementary 24 II 1ncorne.. The state budget 1s. deve on t h e s1s· o f current 25 II needs, and many educational expendit res or apportionments are 26 fl !I subject to annual modi cation, depending upon will of the 27 I Legislature and the Governor. 28 I l III. 134
1 Despite the Proposition 37 language, school funding at
2 state level therefore could decline over time without any
3 ear established re to the level of revenue
4 there be, obscurely hidden, a relation of that
5 s to school funding will make the problem 6 I more complex the future, and more difficult for the state to 7 therefore, a reasonable and responsible program of 8
9 II school f II As I view the Initiative, I interpret it as being one of I' ce and a case of pol ical expedience. It is an 11 1/ se f- jl ation of the seal problems of public education as a 12 II 'I s gaining voter support an approach to the problems of II ch fails practically all criteria to conform l4 II !I principles of government. It will, however, 15 benef c 1 to the sponsors; the end justifies the means, so 16 seems. 17 If , the Lottery Initiative will produce 18 ng as a rnment finance sm, one which is !9 iz le th respect to public finance, 20 as a se is nonbeneficial. Perhaps it should be placed 21 n the re to as ilk, the term I used to use when I 22 s, and the term was used to classify harmful, 23 i ur s, nonbeneficial s or products. 24 Thank you very much. 25 CHAIRMAN DILLS: stions of the Senator? 26
27
28 135
1 Thank you, Senator Rodda. We appreciate your
2 participation.
3 We will have a f respite here order to not be 4 accused of slave labor.
5 (Thereupon a f recess was taken.)
6 CHAIRMAN DILLS: Carl Adams, District Attorney, Sutter
7 County. I 8 Foglia, not
9 Thomas Griffen.
10 UNIDENTIFIED WITNESS: I'm here for Ed Foglia, who was
1 l here earlier and asked if I could read his testimony to this
l2 committee.
13 CHAIRMAN DILLS: Whom? is past President 14 UNIDENTIFIED WITNESS: Ed Foglia, of the California Teachers' Association. 15 CHAIRMAN DILLS: Are you e to assert that the 16 CTA, because is past President of it, is support of the 17 proposition? 18 UNIDENTIFIED WITNESS: No, that's not what I said. CTA 19 has taken a neutral position. 20 Ed was here and wanted to read his testimony, asked if I 21 cou read it for him. 22 CHAIRMAN DILLS: I think not. If he can't stay, he's on 23 list, but he chose not to be here. 24 You can just ave the documentation here. 25 Those who come and use such titles as "Past President" 26 of the CTA obviously are using title for the purpose of 27
28 136
1 ssing us California Teachers' Association is in
2 f I is not the case. Thomas Griffen
MR. GRIFFEN: Senator Dills, members of the committee, 4 name s s Griffen. I'm an attorney in California 5 cial zi education law. 6 I was asked to come today to make a couple of comments 7 on the r t of the ls to rece funds under the Lottery 8 at rate and apart from the state budget act. 9 lin II CHAIRMAN DILLS: Who asked you to come? 0 li li MR. GRIFFEN: Californians for Better Education. I! If CHAIRMAN DILLS: Thank you. ii i! II il Senator Greene. 13 li !I SENATOR GREENE: Sir, 're t gentleman Mr. Fadem 14 rred to on several occas s as their educational expert? 15 I MR. GRIFFEN: That is correct. 16 I' il SENATOR GREENE: You're going to make more than just a 17 I' !iIf ew comments. You I re go to walk us through it. 18 li II MR. GRIFFEN: I'll to answer your questions on this l9 il il il issue as I see it. 20 II '! SENATOR GREENE: I would hope that would be part of your 21 II !I normal sen tat since you are doing it for the first time. I 22 'i . GRIFFEN: Yes. 23 Before I do so, however, Mr. Fadem asked me to pass out 24 in re to a stion that I think you 25 Senator. 26
27
28 137
1 Of the 17 states that have a lottery in effect at the
2 time, 11 of those states the lottery through the
3 iative process those states, and s it through
4 legislative action. I have a st of those states, if you're
5 interested, but that's how it breaks out into the 17, 11 to 6.
6 In addition, another piece of information that I believe
7 is appropriate in response to a question
8 CHAIRMAN DILLS: Just a moment. With reference to the 11 who adopted the lottery 9 statutes, was it a Constitutional Amendment also? 10 MR. GRIFFEN: I don't know whether it was a I 1 Constitutional Amendment or 12 CHAIRMAN DILLS: How many of those initiatives were 13 sponsored or funded by the Bally Manufacturing, or the Scientific 14 Games, or any of their holdings? 15 MR. GRIFFEN: I have no idea. 16 CHAIRMAN DILLS: I see. 17 MR. GRIFFEN: I just have a list of the states in which 18 I they adopted the proposal. 19 In addition, with respect to the 135-day implementation 20 pe I believe it's provis of Government Code now 21 that Governor's appointees can begin to serve before the Senate 22 acts on their appointments. They can serve for up to a year, or 23 until the Senate rejects their confirmation. 24 So, because the Legislature would not be in session 25 during the early period of implementation, it's my understanding 26 that if the Governor makes appointments to the Commission, or to 27
28 138
Director's pos , that those persons can beg to· serve
to form their duties subject to confirmation of the
3 te when the Senate comes session.
4 CHAIRMAN DILLS: It really a phony. That is to say,
5 f of the Senate doesn't mean anything for one
6 You've got your Commissioners setting everything
7 a their buddies.
8 MR. GRIFFEN: Well, there have been instances, as you
9 where the Governor's appointments have been refused. CHAIRMAN DILLS: I'm aware of that.
MR. GRIFFEN: In which case the appointee must leave i 1
2 CHAIRMAN DILLS: We have hearings on them. !3 MR. GRIFFEN: Yes. 14 of Init itself, in Section 15 880. tates islative intent of the peop as clearly, I 16 ,,I !I th' k as t can be stated. The intent stated there in two 17 II ln I' f-- terent p s is that the s raised by the Lottery 18 11 I ! In ls are addi onal mon to benefit 9 i II at , and that the net revenues from the lottery shall not 20 I! ij il be sed as st funds, but rather shall supplement the 21 'I // tota amount of money al for public education in 22 ,, H . !Call a. 23 ,, il Now, at the sent t as you know, education is !: 24 ! ~
/1 funded, at least at the K-12 level, through the concept or 25 If l! i of a revenue 1 t. And the revenue limit is the 26 ! ~ ji" statu tori formula that essentially computes the amount 27 ,, I' !! I,I 28 ii II li i 139
1 of state aid that's available by taking the revenue limit and
2 deducting certain other kinds of income that school district
3 may have. So, some incomes, such as property tax revenues, are
4 deducted from that to compute the state aid, and other kinds of
5 income, such as st income, for example, is not deducted
6 from that. That's income over and above the revenue limit.
7 At the present time, of course, any monies from a source
8 such as the lottery are not deducted. They would be on top of
9 lthe revenue limit and on top of the computation of state aid.
10 I think it could be clear that if the Legislature, for example, would amend that formula to reduce the amount of state ll aid available by the amount of the lottery revenues, it would be 12 clear that that is a form of supplanting. That would be a way in 13 I which the -- 14 CHAIRMAN DILLS: Which, however, you could not prevent. 15 If we decided to change the formula on the revenue limit, why, 16 there's nothing you can do about it. 17 I MR. GRIFFEN: I think the question of what can be done 18 rabout it, if it is a violation-- if it is pure supplanting, 19 !assume that the Legislature does indeed supplant I CHAIRMAN DILLS: I don't know what pure supplanting 21 I II means. 22 !I MR. GRIFFEN: Well, that would an instance -- I think 23 ,,II, !)that would be pure supplanting where the that section of the 24 II !Education Code is amended to reduce-- ssly reduce state a 25 ,! by amount of the lottery revenues. 26 lj
27 II pII
If II II,I 140
CHAIRMAN DILLS: Do you really think we're going to 1 I worry 2 I it too , because the amount of money you would , even as ng r $400 ll , or 600 million, or
r i is, that isn't go to a significant amount
5 MR. GRIFFEN: Well, many of the school districts that 6 I've ta to would regard a $95-$125 per pupil rease as a 7 I s f amount. 8 SENATOR ROSENTHAL: We heard earlier that the amount 9 to a school district could be used, for example, for the 10 ining, teachers' sa ies. 11 wou if, in fact, there was an ase 2 r and then a shing of the lottery funds the following 13 In s on wou the schools then be? 14 MR. GRIFFEN: Well, the schools would be cautioned not 15 t lves to in the salary schedule that they 16 not next 7 SENATOR ROSENTHAL: What are they going to do? Buy 8 cl s th it? 9 I mean, goes to schools for educational 20 ses is to ide rs, or a s, or part of the budget, 21 whatever. It' not some ng we're just going to buy 22 ,, ;j ii some more r c We're ta ng dollars that are 23 '! to probab for salaries or benefits. 24 Now, i state then rece s less money the following
year the , and re's some states that have, what 26 would se school distr ts be expected to do? 27
28 141
1 MR. GRIFFEN: Well, as a 1 matter SENATOR ROSENTHAL: ir s in August
based this year
ss, and ? 4 ing to t turn it MR. GRIFFEN: I can a number of 5 s, Senator 6 For one thing, they use their t year's money under 7 I lthis as a reserve, so that r appropri of money that they 8 I jean get under the Initiative is always a year after the 9 !receipt of it, because these monies can be carried over from 10 II to year by a school dis So, if they receive $100 the first 1t li r of operation, they on receive a few dollars 12 I !pupil because they don't start rece money until maybe April 13 of 1985. They don't have to spend that the 1984-85 14 II or school year. They can that over budget that 15 amount in the 1985-86 budget, wait until 1986-87 budget to 16 I !appropriate, and spend the money they got the previous year, and 17 I !so forth. 18 II II Another thing can do is the fluctuations are 19 ~I II ir ctable. If the expected is $90 a 1, and li II maximum \.YOU $125 a pupil, 21 I' Ji could the 90 for expenses, as sa s, and 22 tl fl II a reserve or into a for itures 23 h li it, !I remainder. And if they buy equipment wi 24 'I II 11 or put it into de , and paint an extra 25 'I I, b ·1d· 11 u1 1ng needs wouldn't to do, then, the 'I lr II llowing year if that sn't 27 It II [! II "ij J, II II I 142 ! I ,, 1 As a practical matter, schools spend 85 percent of their
I. 2 1.ncome on a ies, because it's a very labor intensive service
3 to
4 can also, in terms of services, use it to increase the number of aides, classroom aides, for example, or classified 5
6 employees that can be laid off on a shorter notice than certi cated employees. 7 So, there are some ways that school districts can use to 8 ly spend money not knowing precisely how much money 9 going to get from one year to the next. In fact, as a
II 1 matter, they're not guaranteed of getting the same
i\ level of from the state or the property tax revenues, l2 II 1 ther. And yet, there is enough play in the bud~et between the 13 ongo ses and the discretionary expenses that they can 14 ab that kind of fluctuation. 15 SENATOR ROSENTHAL: Follow up question, then. 16 1, In the past two years, the Legislature and the Governor 17 II to larger sums of for education. Next year 18 Jl have
11 that may not be case. It may be reduced in the budget by 19 il $ 3 0 l 20 'I I' Wou that be considered an offset? 21 II II i'1R. GRIFFEN: I think it depends upon why the money is \!il 22 i!
:I If money is reduced by $100 million because the 23 ll :i ii . 1 il schoo.~s 100 llion out of the lottery -- 24 ll SENATOR ROSENTHAL: Suppose the Governor reduces it, or 25 II ll,, he decides he wants $2 billion for reserves? For whatever ' !i reason, the Governor does not sign a budget that has the same 27 !! II 11 amount of money it next year. It is reduced by $300 million. 28 ;I II li It 143
Wou cons an offset?
MR sel . wou be an of f
3 s reduced of f
4 SENATOR ROSENTHAL: 's go that.
5 MR. GRIFFEN: Well, I'm not sure of
6 SENATOR ROSENTHAL: No one is to say because
7 we're $500 1 , we can reduce budget by $300
million. I S 8 Obvious f to say
9 How do reasons Governor or the
10 Legislature reduces the amount of money?
ll MR. GRIFFEN: In many won't. It'll be a f cult, 12 1 to la
13 CHAIRMAN DILLS: Senator Greene. SENATOR GREENE: 14 I just one st I The s 15 I you're are per 125 per Is to $90 ? are your rs and your
? 1 MR. GRIFFEN , I mean, I 8 't est s. I mean, know, 9 ss I ss, is as ,, as lse's
SENATOR GREENE were 21 us ? MR $90 I was us on is of I 1/ the test s morning, I , of $92. !I II SENATOR GREENE: So in the initiat of II 'I I i ;;:;,,C' 're s 11 90 nd every school
/ student in K-12 Cali ? II 27 /I
III'
II II II 144
1 MR. GRIFFEN: Well, Mr. Vickerman estimates $90; the
2 !proponents estimate $125.
3 l SENATOR GREENE: Well, are a proponent.
4 I MR. GRIFFEN: Yes.
5 1 SENATOR GREENE: So you're saying how much?
6 MR. GRIFFEN: I'd $125. 7 I SENATOR GREENE: Fine. Thank you. 8 MR. GRIFFEN: Whatever is, that's, you know, what it I 9 li turns out to be. II l! CHAIRMAN DILLS: Yes, that's a very astute statement. lO I! 11 ,,liThe is ahead of us. i! !] 12 II Arizona, rst year, the first 12 months raised 9.5 II II i' 13 llion. The rd year it was down to 5 million. \i I' 14 II Colorado, rst year, 27.4; second year, 9.8 million. II 15 I! t,qas ton, 26.7 first seven-and-a-half months~ the next :1 /I 16 2 months, 83-84, down to 13.6. 1\ I. MR. GRIFFEN: Yeah, it seems probably there are a couple 17 II 18 II of at work there. I~ CHAIR!v1AN DILLS: Yes, there sure were. 19 II "II 1! MR. GRIFFEN: One is that in the first year, when it's ,\1 II 'I I' novel, le may play it higher than maybe in the 21 ,,11 1: II year. I' CHAIRMAN DILLS: And so the school boards set their 23
24 on the basis of the contemplation that they're going to plus r is, because the first year around it 25 looks like a deal. Then the people learn how they've been 26 scorched, and so don't buy it thereafter. But the school 27
28 145
l boards have th the anti 're to 92, or as i , $ 5 addit l student ADA.
And so, where are
MR. GRIFFEN Wel , the most of other
5 states CHAIRMAN DILLS: Well, I'm history. If this 6 isn't correct, 1 me 's wrong about figures I just 7
8 MR. GRIFFEN: You read two or i of 9 seventeen. tO CHAIRMAN DILLS: read three states have recently ll it Western sphere. 12 MR. GRIFFEN: Most of the Eastern states as well that 13 \went it earl show a in revenues the second year, a year, it starts picking up 15
16 I It's also clear 17 11 CHAIRMAN DILLS: Those are the f s you , the 18 I.'I ! lEast, not what exists out the West. Because 've had the 19 I , the s system and all of there for years I 21 II MR. GRIFFEN: 1, 's The second r! [!year's of a recent state to it does not !I il II trate r it's East or West II CHAIRMAN DILLS: 're jus smarter out they're li \I learn 26 ,I II II I',j II li 28 jl rl
I' II 146
1 MR. GRIFFEN: Well, if the revenues go back up again in
2 h rd year and fourth year in Washington and Arizona, I mean,
3 nt is districts do not have to budget money that they It 4 There is fluctuations with the economy in the
5 revenues from a lottery. The same as a matter of fact, it l 6 jseems to less fluctuation with the economy than the sales tax,
7 t as fluctuation as the state income tax, but there are
8 I some fluctuations with the economy.
9 I There are also some fluctuations that -- or some changes
10 !that occur the first two, three years the lottery does not seem I jlto reflect it'll do over a ten-year period, because of the .I \i nove of it. !2 I: !3 jl But it is new money for schools, whether it's $90 a il or $125 a pupil, or $200 a 1. l4 CHAIRMAN DILLS: I'm not entirely sure that that's a 15 correct tatement, se the monies that are bei spent to buy 16 \!lottery tickets could be spent for goods and services on which l7 hli sales tax could be imposed, and it's not necessarily new !8 1 . 's just fting over the use of the money. 19 1i " Instead of buying products for the family and so on, il :j t 1 re a risk, which -- what was the percentage? One to hovJ 21 L !I i! ll ? One to seven llion odds to be able to get one of ~ i :l ·i these ce, , fat $40 million things. 23 I '! il ll MR. GRIFFEN: What are the odds if we don't have a 24 II II ? 25 ll 'I SENATOR GREENE: If you play two and make 100, you're 26
ii 27 j) \i I! i! 28 !\ :I ,Ii· II il 1: II 147
CHAIRMAN DILLS: Yes, sir.
2 Any quest ?
3 MR. GRIFFEN: re ct to a remedy, and one of the !Senators asked can the slature does
5 and say so, it's dif , as you , for a
6 iff, or a dis , or who is beneficially
7 interested to t j ction over s , but
8 essentially it's a money allocation problem not dissimi from
9 Serrano
10 CHAIRMAN DILLS: We have Supreme Court of the State
11 of California, and other courts of California, claim bills, and
12 they say: We shall pay. And Legislature said: Oh, yeah?
13 MR. GRIFFEN: That's
14 The pu ing never came to shoving on Serrano because the
15 court finally ruled that slat response was
16 liance with the court
17 I wouldn't care to see a Constitutional confrontation of
18 type.
19 CHAIRMAN DILLS: I wou care to be on the side of j the 20 l Commission to force s to not take a look I its , and s li might th 21 I at , re renee to support of Is, and claiming that because $300 1! II
j\ million was cut out Governor, or 1 or
24 II s , which is not as now, that that was irement of not us money for 25 // order to beat this I, l. I 'd have to a pre good lawyer to 26 II 27 I! prove that. II II II II II 148 II l MR. GRIFFEN: There's nothing in the lottery that, of
2 !course, ires General Fund not to have a crisis in the
3 years.
4 CHAIRMAN DILLS: You see, you should know, people within 5 the hearing of my voice, particularly some of the ladies that are
6 out front don't like what we have to say, you ought to be
7 aware of the fact that first call, the very first call on any
8 mon s, even before we legislators get our money, the very first
9 on the monies, General Fund of the State of California, is
0 lie schools. l l You don't need a Constitutional Amendment such as t s,
!2 an initiat act such as this. It's there; the guarantee is re. And it's up to the Legislature to find ways to implement
14 t.
15 Going into 1 business may not necessarily be to go. 16 !i,, MR. GRIFFEN: In conclusion, Senators, the lottery 11 17 il !lg California's schools extra money. Proposition 37's legal 18 I! il that absolutely clear. If any effort is made to 19 !I anguage makes il il , and we don't ant ipate that there will be, II !I but any would be met, I'm convinced, by a legal 21 !, II :I 'I l 22 !i The extra educational revenue will go directly to a 23 j I 1 local school dis ct, to people who we believe are best able 24 l Ito set their pr ties and it to use. It'll make a 25 i ) 1 s ficant contribution to school financing in this state. 26 Thank you. 27
28 149
1 CHAIRMAN DILLS: Thank you.
2 Lee rg. son.
MS. THOMPSON: H name is Thompson. I am
5 Pres of Board f Trustees of Pajaro Valley fied 1 6 Di CHAIRMAN ILLS: Bird, pajaro. 7 MS. THOMPSON: 8 ?
MS. THOMPSON: Well, we lude parts of three count s:
Santa Cruz, North San County. And our
0 s are Wat 12 As a I am acute aware that 13 ' is cts have Los s and Pajaro Valley, 14 for stance, are st are different, 15 and needs. s state, its to 6 and fund mechanism, cannot 17 de a need . 18 We, on 1 s, are in a ition to do 19 We the 11 be about by s
1 give us extra s, and it 11 also give us at the 21 1 1 thal, s , to be to use 22 IId I[ se s as our 1 communi s need, as we see them. 23 !1 il CHAIRMAN DILLS: Can't use for capital outlay. 24 II 'I MS THOMPSON: 's true, can' se it for capital
II outl we can -- wel , for 1 stance, I thank you II II p for SB 813, re a great science program rl li ll in our s. li II \1 il 150
1 Unfortunately, in our elementary schools, there's not a
2 f curriculum up to the secondary education level, because
3 in the sh for basic skills, science got eased out of the picture in many, many school districts, probably the majority of 4 I 5 I school districts throughout the state in the elementary level.
6 These monies could be used as a one-time shot to
7 I in-service teachers. Most elementary school teachers of the
8 II average elementary -- 11 9 II CHAIRMAN DILLS: We provided for that in our 813. jl 10 I I4S. THOMPSON: Well, not to buy -- not for as much in-
11 I~~ service and --
12 j CHAIRMAN DILLS: The Legislature did. 13 I MS. THOMPSON: Not in elementary schools. 14 CHAIRMAN DILLS: Oh, yeah, it did. The Governor just
15 cut some things out.
16 MS. THOMPSON: And also for equipment in elementary schools? I don't believe so. 17
18 CHAIRMAN DILLS: All right. You may proceed. MS. THOMPSON: Okay. 19 Well, possibly that's so. I wasn't aware of that. I 20 was only aware that we were able to purchase these in our 21 s levels. 22 Also, we could buy band uniforms; we could beef up our 23 arts program; use it in a lot of one-shot areas that aren't 24 won't come back year after year with exact funds. 25 CHAIRMAN DILLS: Do you mean you're not using bingo yet? 26
27
28 151
1 . THOMPSON: A f l s cts are. We sell
D b l you
s.
5 MS. THOMPSON: Well, I don't care have
6 or not, to tell you II Are any s ons? 7 IJ SENATOR GREENE: I 8 'I a st I 9 Are you, as a familiar with this Init ? lO MS. THOMPSON: , I as familiar I l I are. I 't read it, I sk over 2 las t. 13 IIi II SENATOR GREENE: You 't it. 14 MS. THOMPSON: I have over it.
SENATOR GREENE But you're test for 6 MS. THOMPSON: Yes.
,, SENATOR GREENE: You' te 1 II I) haven't read, and you are a l board 19 II II MS. THOMPSON I read over it, but more I I II lose , and you're one lis to my test II II SENATOR GREENE: I a you face a st li II il o than t 23 H rl II are other reasons llq jl tha re s? 25 ,, I' MS. THOMPSON: am I ng s? 26 11 II,I I'
II\II 1: il I' jl il 152
SENATOR GREENE: That's right, other than the fact that
2 I it g s you more money?
3 MS. THOMPSON: Other than the fact that it will give me
4 more money'?
5 SENATOR GREENE: Or your students. You've already stated that. 6 MS. THOMPSON: Yes. 7 SENATOR GREENE: Are there any additional reasons why 8 you're supporting it? 9 MS. THOMPSON: Not really, other than it will enable us 10 students. And unfortunately, that deals with money.
SENATOR GREENE: Well, we all know that. 12 How did your community vote on Prop. 13? 13 MS. THOMPSON: For Prop. 13. 4 SENATOR GREENE: Well, you made your decision then, 15 d 't you? 16 I MS. THOMPSON: On what? Not on Prop. 3 7. 17 III. SENATOR GREENE: You made your decision -- 18 II MS. THOMPSON: I think they're two different 19 !I sit s. 20 i/ SENATOR GREENE: but they effect the same areas of 21 I I, governmental policy and program and services. II 22 ~ ! >I q MS. THOMPSON: Well, I believe that if you're saying 23 ;j 11 that Prop. 13 and Prop. 37 are the same, then it wouldn't even be 24 H !I I) brought in the first place. I don't believe they're the same 25 /1 at all. 26 :! ij I 27 li
28
1\
It li 153
I'm sure are of that ef the
same areas of t sn' 're same
proposit
GREENE 1 know; we rst
5 You to cut now want to replace
6 proposi , is I'm saying. And 've named band
7
8 s it s le your I' 9 !community cannot for s? I can. I 't know if 10 'I MS. THOMPSON: jyou're famil wi lle, but is a low-income area. A l I I of k s 2 SENA'l'OR GREENE: Well, I sent a low- area, so III, 1 ' I d But I still ask same que 14 II un ers MS THOMPSON: was your s ? II II SENATOR GREENE: it can't 16 and it? You , okay? IS 17 I i I ssent
MS. THOMPSON: is one I
jlII we could II ll SENATOR GREENE: But nk that s would be a it [I way see, 're 1 member talking to s I! ,,': li ttee, a s To me, is is a ous
I',I i matter. it's ust o , but to me it's 24 I! '! l' ii s IJ II II I'm lis to tes as a -- are you II II ii e or selected? II l' I
11 II li 154
MS. THOMPSON: I'm elected.
SENA'I'OR GREENE: I'm looking at you, listening to
3 as an e school board member from that comrnunity. And
4 these quest
5 MS. THOMPSON: And you're telling me to go out and tell
6 that should
7 SENATOR GREENE: No, ma'am. I'm not telling you to do
8 I don't have -- I'm not that kind of person, and
9 not my re lity. You do as you want to do. II ij I'm asking you questions. 10 I! ii" t 1 MS. THOMPSON: Well, your question was, why don't the II,I II i2 ii le in our community band uniforms for their own kids. il I':I 3 SENATOR GREENE: Yes, ma'am, that's it. II 14 l! MS. THOMPSON: I'm tell you that a lot of peop 15 l the communi can't af rd to buy band -- I SENATOR GREENE: , but they knew that v1hen they 16 I
' voted 17 i I i· t8 II were ng to have to do thout. Right? 19 II II MS. THOMPSON: . 13 was against taxes, enforced 20 ilq l1 taxes the islature. s is not. 21 II,, .,1! II SENATOR GREENE: se taxes supported education, not 22 !; is Those taxes effected education. 23 MS. THOMPSON: I can't help how the people voted.
SENATOR GREENE: I'm on asking for your -- 25 (' M.::;. THOMPSON: , well let me answer you, please. 26 . 13 was taxes. That was the essence of it. 27
28 155
1 s is not. s is not the county sending me a bill for taxes s s. s my free
If I want go out and $500 of
4 s, I can do i , but no tax collecter is sending a
5 me s.
6 That's a free agency. That's a God-given A free And I don't 's same at all.
SENATOR GREENE: less of program was 8 structured, then, you say we shou do it? 9 MS. THOMPSON: Yes, I do. lO SENATOR GREENE: All r you. 1 l MS. THOMPSON: Not ss of how 's I
llI it's structured now. 3 li SENATOR GREENE: In r s, haven't read this, 14 I I you like way 's s 15 MS. THOMPSON: I over it. I have not 6 I memorized it, I bel I've probably read it more in depth 17
18 SENATOR GREENE: Well, if you've it at all you 19
MS. THOMPSON: 's true 2 SENATOR GREENE: But I to
MS. THOMPSON: Yes you 23 CHAIRMAN DILLS: Senator Ro 1.
SENATOR ROSENTHAL: What if as a result of a ry
are more po ce lems in your ty? The kids are 26 ng the and 't be, and as a result of it, and I 156 II
1 know r community is similar to mine or not, the i 2 lk these litt stores th the machines, you know, with the I s 3 ll MS. THOMPSON: Video games? 4 SENATOR ROSENTHAL: The drug problem that accompanies 5 I of thing. 6 ,jt do you think will pay for those costs, even though 7 I tting more money schools, one-shot payments 8 lyou may be jjwhatever Then your community will be back here asking for more 9 II local government in order to pay for more policing. 10 II you a relat ? ll I! dI' l1 . THOMPSON: I see what vou're saying, but I think 12 I,I I' li 1 s a ical ques I don't -- I personally don't j 3
11 foresee that ni a , large amount of numbers our 14 1 1 area. I can on our area. 15 ENATOR ROSENTHAL: Do you have computer game stores in 16 rea? l7 I II II I' MS. THOMPSON: A few, not ve many. 8 II II SENATOR ROSENTHAL: is in there? 9 ;/ ,,'I !I MS. THOMPSON: Urn, a lot of kids and a lot of -- II 20 lj 11 il SENATOR ROSENTHAL: Do you have a drug problem in your 21 !I 11 area 22 !!;: MS. THOMPSON: Yes. 23 SENATOR ROSENTHAL: Is there any relationship between 24 kinds of situations, of kids congregating, and the drug 25
26
27
28 157
MS I l and
i
I s I m s it
II,,
MS. THOMPSON: So you don't want
i SENATOR ROSENTHAL No no m the
h
I/ MS. THOMPSON: As I stated, our I can
I) on speak for, our lice forces n the
/I Is, rect We 're very
I don't a
DILLS: Senator
We
came over , as usual 7 to r
Same stance.
MS. s r. s
si
SENATOR CARPENTER: I pleased to see school
their the ts are. 158
MS. THOMPSON: I would like to say one more thing in
2
3 Six of seven ildren gone through the public
4 stem. And I have one child left in the publ
5 stem. And it's too late for my other six, but for urge a speedy, speedy passage of Prop. 37. 6 Thank you. 7 CHAIRMAN DILLS: You'll have to wait unti November 3rd 8 ,or when the people get it. 9 !I As I gather from your testimony, you don't care where 10 li comes from, so as you get it. 11 I!I jl d ,,., II . THOMPSON: No, that's not true. You want me to go !L IIli I! 13 II II RMAN DILLS: Yes. 4 II MS. 'rHOMPSON: No, that's not true at alL I certain 15
16 HAIRMAN DILLS: You want more money, and we don't want 17 any more ocal taxes. We are for Prop. 13 because it 18 of f r homes, we want somebody from Los Angeles, 9 re won't be very many people in your area. course, 20 't these ngs, because they're too smart. 21 're not go to anything but a ticket.
MS. THOMPSON: Thank you, Senator Dills, for summariz 23 tatementr a I real appreciate that, I don't think you 24 summed it up r 25 No, that's not the case at all. In fact, I certain do 26 care where the s come 27
28 9
I prefer the s to come vo And I bel
is a vo reas taxes are
not.
't eve it's dif rent
from state se the state s
6 , and s it. Look at on the Fund de
and ars It s le.
And a t st. We don't even know
10 to 1 so we're it re's no money
2 coffer, t it , so to speak, and gets
13 short changed. to a
14 to even ll at CHAIRMAN DILLS: So, want to one more able II 160 II 1 I tllR. RICE: I'm Bob Rice, Assistant Superintendent, Dixon
-F' 2 "-l School District. I'm a member of California Association
3 Schoo Bus ss Officials who, as you are aware, has
4 al endorsed the lo I am also representing our schoo strict Board, who has officially endorsed the lottery. 5 May I ? 6 CHAIRMAN DILLS: Certainly. 7 MR. IUCE: I've been a teacher or principal for several 8 and the last seven years I've been Assistant 9 Business and Personnel, so my job is school lO ts. And in that respect, that's most of what I'm ll ing talk about today, what actually happens in the school 2
i 3 CHAIRMAN DILLS: Please don't try to educate us, who 14 ing for st well, I've been up here since 15 I • m rr:1an of the Finance Cormni ttee Subcommittee that 16 been ing desperate each year to get adequate and 17 for the local school districts. And we have 18 and it's to Governors, and they've vetoed 9 Now, br down to the level of where we are, not 20 re we should be in ac th the thi s that you nd 21 u • 22 MR. RICE: Let's start at end, then, if I'm not 23 o be al to speak as I wish. 24 CHAIRMAN DILLS: You may as you wi
MR. RICE: When am I ing to be allowed to start? 26 CHAI~~N DILLS: Right now, Mr. Rice. Right now. 27
28 6
MR. RICE:
is of
rest to us f assistance to s our
re not s or
ch we'
you, can now.
I wou 1 to heard you here
t sess
MR. RICE: I was re.
CHAIRMAN DILLS: I never saw you.
MR. RICE You ren ng You wou 't
me
Cou current status of 1
? I'll fer to I wanted to
to ve rst two 15 CHAIRMAN DILLS one, 't be so
MR. ICE: We , I'm not.
CHAIRMAN DILLS: You're not t -skinned. Go
us ful
j: MR. ICE: t's current status of 1 If.r,, II in s state 1 not j s i' II II Ji q,, i' I',, .,,, s tate of states per capita
I for educat on -- !I II l. II II II MR. RICE: s 0 0 50 are 49th out f 5 II II c s ize is h We are 39 in expenditures 'd I' II r 1: i' 11 II 1/ 1: IIli 'I 162 !I 1 II Last June a poll of Superintendents done by the 2 !Association of California School Administrators' Thr_u__ s_t __M_a~g~a~z~i_n~e,
3 9 percent of the superintendents in the poll said that they
4 was inadequate.
5 The state, in my op ion, has done its best to finance
6 I truly believe that. That I believe that you have,
7 I too.
8 But is not enough. We need to diversity our funding.
9 The state must continue its positive efforts in education, but we
10 \have got to add some other sources of income. ' We have attempted to do that in our district with bingo, tl las you have mentioned, and a number of other districts have done 12 !I lithat. Churches have done that with raffles, and so on, for a 13 time, so we're not new. 14 The lottery isn't going to solve all of education's 15 , but it can he And s I'm precluded from going 16 I I the other areas that 17 I• I' CHAIRMAN DILLS: No, no, again I say no. Go right ahead 18 l !j and g us the who barrel. i9 II MR. RICE: Well, I don't want to take a lot of time. I 20 il j! had about four or five minutes proposed, but much of that has 21 ,I 'I !I on other things to this point. 'i 1\ Last year, we had approximately $225,000 in budget cuts. 23 ,,'i 'I i/At the very lowest estimate of the Legislative Analyst, we would q 24 j, ~~receive about $250,000 in a four-year of operation of the 25 ,\lottery, which means that those cuts would not have had to occur. 26 I' i! :!And they were not f ld trip type cuts. They were layoffs of 27 !! il !! 28 il ''I '• II I· ll 163
ies and
ir
tt
Excuse me
had last r $2 5 00 cuts?
CHAIRMAN D
MR. RICE: the schoo ct's of educat 1 CHAIRMAN DI ?
RICE was not te to
In to nta a
t
CHAIRMAN I t
s formu was 2 5, 00 less the
t
You
our
ar.
and 3
I've sai
n do 164
CHAIRMAN DILLS: Then where did the $225,000 cut come
2
3 MR. RICE: I'm talk about last year, not this year, d 4 se we not the amount of money that we were g ing to
5 seems to be an assumpt that we know how much money
I ng to from the state -- 6 I II CHAIRMAN DILLS: There is never that assumption around 7 II q 8 'I MR. RICE: and we never know from the lottery. We 9 I I I t know from ei r one. And we're pretty much used to 0 !!don II II 1 th that. ll II,, II quest on that? 2 II II 1 There s an earlier statement ment that the .) .III II ali i\ ' Association was the lottery. They 4 II II neu ral on the are leaving it up to thei 15 II a f liates. 16 I· tl CHAIRf•1AN DILLS: I not that. \~ho said t? 17 il II 11 MR. RICE: San D San Jose 18 II'I II !II' CHAIRMAN DILLS: No, no, no. 19 II :i II MR. RICE: Oakland, Pomona Teachers' Associa on -- 20 !) :I ii CHAIRMAN ILLS: No, who sa the CTA was aga t the 21 ij 'I ">I l/ ? Are asserting I said that? 22 MR. RICE: No, I'm not. 23 CHAIRMAN DILLS: Well, then, who said it in this forum 24
25 MR. RICE: I'm not sure. It was something that I heard
morning. 27
28 165
CHAIRMAN DILLS: s sa s you're
MR. was ei r
there made
I ' ng to is not t I
three o st
s state 1
as well as the San
San Jose and l ' Assoc and
Pomona I As soc 11 be
t i s' Associ
Californ a As of cials. 3 I 't want educators do not
t And I
1
are r wanted to say, I've
I appreci the I avai , and I
g next some
CHAIRMAN D ff. You just tell us
If 've
wa your
Teresa
HI 1
m Tere 1 I m San Francisco
now I also have a
12 stem. 166
1 l m ve in of the Initiative. Something
2 out was it would not give us very much
3 s ni ative s to lement educat I'm aware 4 t tion is under funded. I was serving on the 5 H tee at Ci College last year when our funds 6 1we cut, so the ss was frozen to have a Dean of Library 7 I Serv s. 8 Due large to tuition, our enrollment has dropped 9 drastically s year, and that will effect our funding r next 0 II l: ii r. Our classes are overc Many classes had to be l 1 II ,III III' 2 II !l The nt that s ll cor our children or our 3 !I , peop have ility on how they spend their 4 ll i\ themselves. As a s , I have to budget my money, 5 going to twist arm to put money into a vending 16 II III, 1 H which I don t alre have budgeted entertainment or 7 ii jj recre l 8 I I find that I have that in my budget, then 9 II:\ :1 q anal I could se a ticket, pos to earn ,,!J 20 !i !I n -- t some extra And I 't see that there's 21 11 il \Jrong that. We alre have gambling casinos I;'I
l a; we' the se races and the card rooms. So, I 23 l that having a initiative will hurt our poor, 24 or t doesn't already have the 25 le, if it's on the street corners tossing
s, r. 27
28 167
our on inve , on a
s s 's a le, 's
If you a are gher,
ld be our cho
I
community
7 San Francisco, I was to begin education
8 an A.A.
9 1 And it was because we had was funds. ll tand Legislators have provided our was Governor s. And we
last summer up Finance
t get an which we 4 of the veto, were not success 1
And just for s measure, and to
/ prepare to iz s educat on i 1 II communi I Our ind cates s governmen
of government at San
MS. HILLMAN Yes, sir. 2 CHAIRMAN DILLS: And as act
s government has a s
? 26 168
1 MS. HILLMAN Sir, we d not have a full quorum at
2 our s in the hosp l right now, and so
3 of quorum, pass this
5 CHAIRMAN DILLS: So your representation today is of your
6 on as a member of that g , not a entative of the
7 a position at 've
8 . H LLMAN: Of c l I'm senting the s s
9 It was not done -- unofficially I am. It was
lO cially because -- due to a lack of quorum. But it
il the sensus of eve involved that I've spoken th, we do 2 the other s s have spoken this. 3 DILLS: Well, I th 4 HILLMAN: l you're saying is, now, to 5
l 16 II CHAIRHAN LLS: you very much. We welcome your 7 !l il 'I re on r occasions, too, whenever we, ! 8 H II s , to overr a Governor's veto, and whenever 9 !I ;I,, ~ 1 !I tre ng ourse s the l ts, perhaps, of our 20 !! iJ !l 'I ance here to to persuade istrations, the 21 'I H 'i 11 are not fund our 22 •I And we'd welcome to come back and 23
24
25
26 CHAIRMAN DILLS: Thank you. 27
28 169
Art Carter.
Bel Hall.
Hartman.
MR. HARTMAN: , Senator. It's end of a
've sat testimony throughout the day, I'm
6 that I want to acknowledge and appreciate the Senators
7 stu it through this
8 'd to a statement, if I It
9 take approximately four to five minutes, and at that t
10 happy to answer questions. i l
12
13
15
16
7
18 CHAIRMAN DILLS: Do sent Elk Grove School
19 ? MR. HARTMAN: you, I was to
21 No, I do not. I sent simply myself and my very 1 of e s at Casadero in
you. 23 Grove Unified School Distr community invo is, I'm an of in ; lr 11 ve invo soccer for 25 r I!I I m a church in 1 f and have for
1\ many p i!
\! II !I 170
I was contacted mail original by the Californians
2 tter ion, and with their brochures and information.
3 sent for l material, which I read very carefully, and
4 reed to out of Prop. 37 after, fact,
5 those mate als.
6 , 1n turn, invited me to be one of the participants
7 s forum, and that's how I got re, as it were. 'I 8 To the statement, I would like to address two of the rna 9 or s are often raised by opponents of the
I a iforn State Lottery. 0 I II The first word is morality and the second word is money, ll I' 'd l take them in order, if I might.
IIil ,, I would wholeheartedly t 3 jl to finance education. If it were 4 II
about nancing I I 15
ng in favor of lS sition. 16 I !I , I re re would choose to 17 li I! il is not the best way to II ll ii !9 I' 'I' he po I would agree my 20 III• !! s that s pouring more money into the educational 21 ll !j ;, gulle would n no way, or form change the quality of 22 ~ ! :I 23 i\ educat Howeve , as you ll see in s prepared statement, il'I II I do think that to not address some money problems that we have 24 1: !! li st.i l in the ls, in sp of that thanks again to
I! SB 8 3, we are in r shape and we 26 II ~ ! that. But we're not through the woods yet, and I 27
28
l: II [\ I 171 .I ld 1 to share se fics, and to do so,
ndows of morali
i 1'-·~ c
taxes, 1 taxes,
'schools, as now are s
course, our schools are through General Funds
is taxes are 1 I ling for schools? CHAIRMAN ILLS: Pe one of answers is is
I! 10 fically set aside I MR. HARTMAN: s is true Jl II CHAIRMAN DILLS: a II I! MR. HARTMAN: s is true. I CHAIRMAN DILLS: So, t's renee. A g II ference. II MR HARTMAN: , Senator. That wou my point exactly, that because it is set II I! s speci cal , we a, as it were again, an incent to 8 II II ct above ch the slators are le to 11 r! II [I st the Governor's , we have an addit amount we II II can count on, as some of my earl have testi p,j II rms of ho it in reserves and do some one- s, I, ,,l) I won't redundant on 23 II!I 'I !I In te of -- thank for s I sa q \; li current legis to plight of s ls, and 'I !1 contrary to some earl test today, I st 11 have some moral I' rl II to pose. III 11 il: I[ II II li II II 172 I'II II s to one 1 II Is it moral that I must still staff 32 II 2 !. in my h school in order to live within the budget II 3 For 1 years, I was an lish teacher before I entered this
4 a ni at le I was in my c ssroom, with 32 students t s classes, s students, I fought against 5 5 or 160-p I teachers still must face. If I spent just 5 6 If reali day attending to the paper work that my 160-plus 7 II j students d each , I would spend no less than 10 and l/3 8 I s each evening 1n do nothing but grading papers. 9 II fu 1
1\ Obvious , I did not hav8 10 and 1/3 hours; obv s I \0 !I 'I II not a tend to that. II We must !'fOSS the issue of class size. j sf 2 II ll 11 fact, number one problem th our schools in the State of 3 [! 1 l • Our classes are too big ind l attention. 14 I Is i moral that we staff in our counselor/student 5 os at a ratio of 400 to 1? I don't have to re you the 16 II !I l s to tell you of our high school students
17 ll,I il lems: parental lems; sonal problems; g 18 il !I on goes list.
9 !I·I "il There are many students my high school do not see 20 il :I ,!
I th it 11, fact, us with more quality teachers 27 173
is i moral after years of co we I fess s per I' 1 it S II 4 I Is to !lose 5 II 6 we cannot of a
7 se students must are to be, in
8 of our wel worse , our tern?
I wou to ze a very, very f 10 I 11paragraph that I wish I d I did not, so I will share f I llII 1 l. You a Commiss vJe appointed almost 3 years ago to state of our schools 14
15 lr II I to 6 ,I lj our Is we done to 17 I· s, we wou be justif ;!11 jl 1 act of II I,·I II 11 That's Pres Rona I Sacramento Bee, I! I!'I 21 ;i II li s one II i! MR 23 li,. j! ·c d lL I there is in [• f I !!i I li no that f s at f we wou
II s and s of lots and lots of money, manpower 26 I, !1, and to s enemy that's at our s to II our pre II,, t II
II 174
If sounds corny, you'll have to excuse me. I still
2 it. It's ve prec s, and we must, we must fight to
4 But thE~rc' s no greater p ility of our losing our
5 racy if we il to educate our students what it s to an Amer and t it means to be l in tne 6 ' incr 7 f the free.
To do that it takes a great deal of money. I would just
9 y say it ike is: I posed moral questions. They are not
10 r than nor no less the moral questions of my
1 l s. I also posed questions.
12 No, you cannot just say that if you spend more money,
13 to win war. But you can also not say that if
14 more money, you're not inq to win the war.
15 it r way: f you less money, you're more
16 to se i . nts have sa 17 I'm simp ng, as some of my r c r way to t the islature and the 18 I'm aware of process now and how it is 19 that 813, we lost s we hoped to be seei as a 20 t of 'm awa f all But we must ss 21 alternat ways, and if we do not do so, I'm afraid war is 22 lost. 23 Let me focus, and then I'm through, I promise. 24 I a h h school, a very small h s l, 25 ternative high s 1, 250 s I have a budget, and once 26 my 1 bills and my teachers' salaries, and all those 27
28 175
s, I a for f
2 et al o $50 per 'm a lie
Yes, Senator 0 125 year r wou
t my on-site and 's extreme s
5 I
6 CHAIRMAN DILLS Have you had occas to write the Pres of Un States to ss to that
8 you've to u ? Because he 't seem to
9 MR. HARTf.ffiN : Sacramento Bee art le wou probably
10 concur th that.
I I No, I not at I have ten the past,
2 and I certa will 13 I Thank you CHAIRMAN DILLS: Any que of witness? 14 I you. 5 II , on 6 I cone the were on I. tten However, we st an 17 II lind 1 desires Timber 18 to Is there ? se !9 else desires to t
REV. TIMBERLAKE: I realize I was g 21 i somet lar
, but we we a conf We were le to
ii so 1 it 1 and I ' n f and ng the 24 II II II I the effort of ttee to get at the 25 I! 'I !i very basis quest ld state 26 (I II 1: ss on rt of educa p d II ij II II II II 176 'I .Ili II CHAIRMAN DILLS: Would you indicate whom you represent? II 2 1 REV. TIMBERLAKE: I'm W. B. Timberlake, Execut
3 II ctor, ist the Committee on Moral Concerns. And our 4 II has taken a stand on s. 11 li 5 ii,, s that I would spoken about, I am aware, 6 !I have been t up by the people on the comm ttee, or by some II 7 tl tnesses such as: police security, minors' \ ~ ii 8 II t , the islative power to accommodate future II 9 !i app into account what the lottery might ,,I jl il ve poor odds, the worst type of gambling. 10 !i \: !i" d not recall saying, which we feel is ve y l l I: i· 'i 2 lj t, it's ve bad for the state to be in 1 1, 13 li bus ness, it's worse that schools, which teach the young II II 14 \i peop e and s is the new ng in schools, how to make r choice not moral choices but p r cho s, would 15 \1 p il
li•i i ing, 1 a sense, taking the money from gambling 16 ii II 17 II that choice would be ve wel , be li 1~ The ng that we'd l to dwell on 1 we're not ing to 18 !( ]) I' ii ry to ay that the sent school system is immoral, because 19 I'
20 what the last witness seemed to say that it's to
21 f these th s: short lass, short , shorter
22 subjects, and so forth. He's us a different word of morality
23 we're nterested in.
24 But I wou say this, he seemed to say that he would .,_ lL le to some he f and I think this may 25
26 teach to pupils, that you mustn't be bad
i +- ' l 'f= ral, but -· '- s al to be a little 1mmora .... , especially l~ 'you re goir:.g to ge some money out of it. 28 177
1 real I do not was brought was stated s tnesses, is in regard to
amount of each person the state has a
4 can be expec to spend. And I think we're overlooking
5 Pennsylvania, for example, there are -- each
6 spends $75 on the lottery. We're not talking actually
7 each person, because two out of three people 11 not 8 kind of money on the lottery, because nearly a third would
9 minors; many others would be married people, probably 8
10 million families in the State of California, 3.2 or 7-8 million
11 of 3.2 on the average, and if the husband is in the lottery thing, the wife will not be, or limi
13 You're really talking about, by their own statistics, if divide up the population of those who are apt to play
15 or will play it or have access to play it, you're talking about, on a billion dollar gross, you're talking about each player who
7 s regularly will be spending at least $225-$250 each year. Now, this is going to effect very much, more than any 18 other k of gambl 's going to ef very much more 19 , the financial welfare of famil s, because this is not
of ling which you have to buy transportation, buy a 1 , and go out and do the horse race gambling.
not the kind where a few people, maybe, are working th
s is the thing that you can walk in off the street.
You 't even have to walk in off street if the machines are . out on the sidewalk. You've all seen the pictures, in the poor
areas of town, hundreds and thousands of people lined up with
se that they get $40 million. 1 We point out, of course, that for every $40 ll
2 , that it takes 80 Ilion people, 80 million spending a
3 , to g to that one man $40 mill That's
4 of the finances are needed by these faml 1es
5 a ve deleterious way.
6 , we would it is uneconomic; it's bad for
7 it's nd of gambling that will effect families
8 card par rs, or b , or horse racing. And we are
9 sed to it.
10 TtJe' 11 to answer any questions. Thank you. You've ji ·very s. 11 li I< ti" CHAIR1\1AN DILLS: else who's suffering from 12 I! words, or othe se feel the necess 13 for making a lill 'I atement 14 II 11 f I thank a of you who did come, and the 15 II il r r generous time, and ive us for no 16 I'I II rlng how long you've been out there. 17 d I'fi \I This mee ing is adjourned. 18 p (The is Hearing of 19 the Senate Committee on I, 20 il ]!'I 21
22 mate 4:20P.M.) 23 --ooOoo-- 24
25
26
27
28 179
CERTIFICATE OF SHORTHAND REPORTER
2 I, EVELYN MIZAK, a Reporter of the State of
4 Cali a, do hereby certify:
5 That I am a disinterested person herein; that the
6 ing Interim Hearing of Senate Committee on Governmental
7 'Organization was reported in by me, Evelyn Mizak, and
1,· h - . . 1 t ereafter transcr1bed 1nto iting. 1 'I I' I further certi that I am not of counsel or attorney I for any of the parties to said hearing, nor in any way interested I l I ,! in the outcome of said hearing.
12 Ill (£ IN WITNESS WHEREOF' set hand is ,__cjJf!___ day of September, 1984. I 1l 14 II II 15
16 II,, II ~~~-Short Repo er 17 ,!I' 18
II,[ Jl 19 II 20 1: II jl 21 ,,II
22 li 1! )II i; II li 24
25
26
27 ,,il li 28 il II,, ,,tl III' d i'rl