Golden Gate University School of Law GGU Law Digital Commons California Senate California Documents 9-10-1984 Interim Hearing on the California State Lottery Initiative Senate Committee on Governmental Organizations Follow this and additional works at: http://digitalcommons.law.ggu.edu/caldocs_senate Part of the Legislation Commons 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 This Hearing is brought to you for free and open access by the California Documents at GGU Law Digital Commons. It has been accepted for inclusion in California Senate by an authorized administrator of GGU Law Digital Commons. For more information, please contact [email protected]. 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 <!talifornia iJ.Irgislaturr ARTHUR TERZAKIS ALFRED ALQUIST ASSOCIATE CONSULTANT ROBERT G. BEVERLY PAUL CARPENTER BILLIE J. WILLIAMS SENATE COMMITTEE COMMITIEE SECRETARY JOHN FRANCIS FORAN BILl GREENE ON DOROTHY MATSUMOTO BARRY KEENE GOVERNMENTAL ORGANIZATION SECRETARY KEN MADDY ALAN ROBBINS ROOM 5048, STATE CAPITOL HERSCHEL ROSENTHAL SACRAMENTO, CALIFORNIA 95814 TELEPHONE: 445-1193 :r J RALPH C. DILLS ::; 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.