PRINTER'S NO. 431
No. 407 Session of 2003
INTRODUCED BY MELLOW, WAGNER, MUSTO, KUKOVICH, LAVALLE,
TARTAGLIONE, LOGAN, KITCHEN, SCHWARTZ, KASUNIC, COSTA, STOUT,
BOSCOLA AND STACK, MARCH 10, 2003
REFERRED TO FINANCE, MARCH 10, 2003
AN ACT
1 Amending the act of August 26, 1971 (P.L.351, No.91), entitled
2 "An act providing for a State Lottery and administration
3 thereof; authorizing the creation of a State Lottery
4 Commission; prescribing its powers and duties; disposition of
5 funds; violations and penalties therefor; exemption of prizes
6 from State and local taxation and making an appropriation,"
7 establishing the State Lottery Oversight Board and
8 prescribing its powers and duties; and further providing for
9 the powers and duties of the Secretary of Revenue.
10 The General Assembly of the Commonwealth of Pennsylvania
11 hereby enacts as follows:
12 Section 1. Section 302 of the act of August 26, 1971
13 (P.L.351, No.91), known as the State Lottery Law, is amended by
14 adding a definition to read:
15 Section 302. Definitions.
16 The following words and phrases when used in this chapter
17 shall have the meanings given to them in this section unless the
18 context clearly indicates otherwise:
19 "Board." The State Lottery Oversight Board established under
20 section 302.1.
21 * * *
1 Section 2. The act is amended by adding a section to read:
2 Section 302.1. State Lottery Oversight Board.
3 (a) Board established.--The State Lottery Oversight Board is
4 hereby established as an independent board to oversee and
5 evaluate the administration and operation of the State Lottery.
6 (b) Composition.--The board shall consist of nine members as
7 follows:
8 (1) The Secretary of Aging of the Commonwealth or a
9 designee.
10 (2) The Secretary of Revenue of the Commonwealth or a
11 designee.
12 (3) Three individuals appointed by the Governor as
13 follows:
14 (i) Two senior citizens.
15 (ii) One individual representing the Pennsylvania
16 Chapter of the American Association of Retired Persons.
17 (4) One individual appointed by the Majority Leader of
18 the Senate.
19 (5) One individual appointed by the Minority Leader of
20 the Senate.
21 (6) One individual appointed by the Majority Leader of
22 the House of Representatives.
23 (7) One individual appointed by the Minority Leader of
24 the House of Representatives.
25 (c) Qualifications.--Board members must be residents of this
26 Commonwealth at the time of appointment and throughout their
27 term of service on the board.
28 (d) Terms.--
29 (1) Terms of members shall be as follows:
30 (i) The board members appointed by the Governor
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1 shall serve for a term of four years.
2 (ii) The board members appointed by the legislative
3 leaders of the Senate shall serve for a term concurrent
4 with that of the appointing authority.
5 (iii) The board members appointed by the legislative
6 leaders of the House of Representatives shall serve for a
7 term concurrent with that of the appointing authority.
8 (2) Except as set forth in subsection (e)(2) or (3), a
9 member of the board is not eligible to serve more than eight
10 years.
11 (e) Vacancies.--
12 (1) Vacancies occurring on the board by expiration of
13 term, death, resignation, removal or any other reason shall
14 be filled within 30 days of the creation of the vacancy in
15 the manner in which that position was originally filled.
16 (2) A board member appointed to fill a vacancy for a
17 period of not more than one year is eligible for subsequent
18 appointment to two full four-year terms.
19 (3) A board member appointed to fill a vacancy for a
20 period of greater than one year is eligible for subsequent
21 appointment to a full four-year term but may not be
22 reappointed after the expiration of that term.
23 (f) Compensation; expenses.--The members of the board shall
24 receive no actual compensation for their services. However, all
25 expenses reasonably necessary for the members of the board to
26 perform their duties shall be paid to them. The Secretary of
27 Revenue and the Secretary of Aging shall not be eligible for
28 expense reimbursement. Notwithstanding any other provision of
29 law to the contrary, no lottery funds shall be used to pay the
30 expenses of board members, nor shall any lottery vendor or
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1 contractor directly or indirectly pay any of the expenses of
2 board members.
3 (g) Meetings.--The first meeting of the board shall be held
4 no later than 60 days after the effective date of this section.
5 A chairperson and a vice chairperson shall be elected at the
6 first meeting. Subsequent meetings shall be held on a quarterly
7 basis at a date and time determined by the chairperson.
8 (h) Quorum.--A majority of the nine members of the board
9 shall constitute a quorum for purposes of conducting official
10 business of the board.
11 (i) Duties.--The board shall have the following duties and
12 responsibilities:
13 (1) To meet no less than four times a year, at the call
14 of the chairperson.
15 (2) To elect a chairperson and a vice chairperson.
16 (3) To make recommendations to the General Assembly
17 concerning changes to the operation and the administration of
18 the State Lottery.
19 (4) To review the monthly and annual reports received by
20 the board from the secretary under section 303(b).
21 (5) To review the performance of the secretary with
22 respect to the operation and administration of the State
23 Lottery.
24 (6) To contract with an independent auditor for purposes
25 of conducting an annual audit of lottery receipts,
26 expenditures and other fiscal and performance matters.
27 (7) To issue an annual report to the Governor, the
28 Secretary of Revenue, the Secretary of Aging, the chairman
29 and minority chairman of the Aging and Youth Committee of the
30 Senate and the chairman and minority chairman of the Finance
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1 Committee of the House of Representatives summarizing:
2 (i) The board's meetings and other actions taken by
3 the board.
4 (ii) The audit of the State Lottery's finances and
5 operations conducted by the independent auditor retained
6 by the board.
7 (iii) The board's review of the performance of the
8 secretary as it relates to the administration and
9 operation of the State Lottery.
10 (iv) The recommendations made by the board regarding
11 changes to the administration and operation of the State
12 Lottery.
13 Section 3. Section 303 of the act, added November 21, 1996
14 (P.L.741, No. 134), is amended to read:
15 Section 303. Powers and duties of secretary.
16 (a) Powers and duties enumerated.--In addition to the powers
17 and duties provided by law and the act of April 9, 1929
18 (P.L.177, No.175), known as The Administrative Code of 1929, the
19 secretary shall have the power and it shall be his duty to
20 operate and administer the lottery, and to promulgate rules and
21 regulations governing the establishment and operation thereof,
22 including, but not limited to:
23 (1) The type of lottery to be conducted.
24 (2) The price, or prices, of tickets or shares in the
25 lottery.
26 (3) The numbers and sizes of the prizes on the winning
27 tickets or shares.
28 (4) The manner of selecting the winning tickets or
29 shares.
30 (5) (i) Except as provided in subparagraph (ii), the
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1 manner of payment of prizes to the holders of winning
2 tickets or shares.
3 (ii) For new nonmultistate on-line, pari-mutuel
4 games with prizes of $1,000,000 or more and payable in
5 more than one installment, the player shall have the
6 option at the time of purchase to accept, as full payment
7 of the player's share of the prize won, a lump sum of the
8 prize money allocated to the first place prize category,
9 divided equally by the number of tickets determined by
10 the lottery to be entitled to claim a first place prize,
11 provided that the player specified the lump-sum option at
12 the time of purchase and received a mark on the ticket
13 confirming such request. In cases where the prize pool
14 for the first place prize is not sufficient to fund the
15 guaranteed lump-sum prize as announced by the lottery,
16 the prize pool shall be increased as necessary by the
17 lottery. Players shall be bound by their prewinning
18 choice.
19 (6) The frequency of the drawings or selections of
20 winning tickets or shares, without limitation.
21 (7) Without limit as to number, the type or types of
22 locations at which tickets or shares may be sold.
23 (8) The method to be used in selling tickets or shares.
24 (9) The licensing of agents to sell tickets or shares
25 provided that no person under the age of 21 shall be licensed
26 as an agent.
27 (10) The manner and amount of compensation, if any, to
28 be paid licensed sales agents necessary to provide for the
29 adequate availability of tickets or shares to prospective
30 buyers and for the convenience of the public.
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1 (11) The apportionment of the total revenues accruing
2 from the sale of lottery tickets or shares and from all other
3 sources among:
4 (i) the payment of prizes to the holders of winning
5 tickets or shares;
6 (ii) the payment of costs incurred in the operation
7 and administration of the lottery, including the expenses
8 of the division and the costs resulting from any contract
9 or contracts entered into for promotional, advertising or
10 operational services or for the purchase or lease of
11 lottery equipment and materials; and
12 (iv) for property tax relief and free or reduced
13 fare transit service for the elderly as provided in
14 section 311. No less than 30% of the total revenues
15 accruing from the sale of lottery tickets or shares shall
16 be dedicated to this subparagraph.
17 (11.1) The production and merchandising of promotional
18 items for the lottery.
19 (12) Such other matters necessary or desirable for the
20 efficient and economical operation and administration of the
21 lottery and for the convenience of the purchasers of tickets
22 or shares and the holders of winning tickets or shares.
23 (13) The performance of the powers and duties heretofore
24 vested in the State Lottery Commission.
25 (b) Additional powers.--In addition to the powers enumerated
26 under subsection (a), the secretary shall:
27 (1) Conduct an annual review of the qualifications and
28 performances of the security director, the head of the
29 lottery drawing team and other employees who participate in
30 lottery security activities and make appropriate changes as
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1 warranted.
2 (2) Prepare a comprehensive annual marketing plan prior
3 to the beginning of each fiscal year. The plan should be
4 provided to the board, to the Comptroller's Office in the
5 Department of Revenue and to the Department of the Auditor
6 General.
7 (3) Adopt written policies and procedures which require
8 specific lead times to start all negotiations for promotions
9 and which require that funds may not be expended prior to
10 having all agreements executed.
11 (4) Establish a procedure that requires lottery staff
12 members who decide to reject, modify, bypass or ignore the
13 result of an official drawing or spin to file a written
14 report with the secretary or other appropriate governing body
15 within 24 hours of the decision. All such records shall be
16 available for review by auditors conducting regular audits of
17 lottery activities.
18 (5) Implement and follow business procedures related to
19 sponsorships, including an annual plan, a cost accounting
20 system to track all costs associated with each sponsorship, a
21 method of analyzing the effectiveness of the various
22 sponsorships, a system of control over perquisites received,
23 and a policy for use of these perquisites that furthers the
24 mission of the lottery.
25 (6) Implement and monitor comprehensive policies,
26 procedures and oversight concerning travel expenses for
27 lottery officials, including senior management officials.
28 (7) Conduct and document cost benefit analyses of all
29 sponsorships and promotions on a yearly basis.
30 (c) Contracts; competitive bidding.--
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1 (1) Notwithstanding any other law to the contrary, all
2 contracts for goods and services, including, but not limited
3 to, lottery equipment and materials and promotional,
4 advertising and operational services, valued in excess of
5 $5,000 shall be competitively bid in accordance with 62
6 Pa.C.S. Pt. I (relating to Commonwealth procurement code).
7 (2) All contracts for goods and services must be entered
8 into with vendors who have their primary place of business
9 located in this Commonwealth. If the goods and services
10 sought by the lottery are not produced, manufactured or
11 provided by any vendor within this Commonwealth, the
12 secretary may enter into a contract for such goods or
13 services with a vendor whose principal place of business is
14 located within the United States. The secretary may enter
15 into a contract with a company whose principal place of
16 business is not located in the United States only where the
17 goods or services sought to be procured are not produced or
18 available within this Commonwealth or the United States.
19 (3) Any contract entered into by the secretary in
20 violation of this section shall be void ab initio.
21 (4) The secretary shall not circumvent the competitive
22 bidding policy by permitting a third party to purchase goods
23 and services on the lottery's behalf. The secretary may not
24 authorize payment to any third party for any goods or
25 services purchased under such arrangement.
26 [(b)] (d) Reports.--The secretary shall report monthly to
27 the Governor [and], the Legislature and the board the total
28 lottery revenues, prize disbursements and other expenses for the
29 preceding month, and shall make an annual report, which shall
30 include a full and complete statement of lottery revenues, prize
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1 disbursements and other expenses, to the Governor [and], the
2 Legislature and the board, and including such recommendations
3 for changes in this chapter as the secretary deems necessary or
4 desirable.
5 (e) Audit.--The secretary shall allow an independent auditor
6 hired by the board to conduct an annual financial and
7 performance audit, including a review of security procedures and
8 security operations, of the State Lottery operation. The
9 independent auditor shall have access to all books, papers,
10 videotapes, documents and records of the State Lottery in order
11 to complete the audit. Nothing in this act shall interfere with,
12 diminish or negate the power of the Department of the Auditor
13 General to investigate State Lottery activities. The Department
14 of the Auditor General shall have access to all records of the
15 State Lottery, including, but not limited to, the work papers
16 discovered or produced by any independent auditor who may be
17 hired pursuant to this subsection.
18 Section 4. This act shall take effect in 60 days.
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