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 20030S0407B0431 - 2 -
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 20030S0407B0431 - 3 -
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 20030S0407B0431 - 4 -
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 20030S0407B0431 - 5 -
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. 20030S0407B0431 - 6 -
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 20030S0407B0431 - 7 -
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.-- 20030S0407B0431 - 8 -
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 20030S0407B0431 - 9 -
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. A3L72BIL/20030S0407B0431 - 10 -