COME ON UP TO THE TABLE. AND
WE'RE GONNA GET WE'RE GONNA GET
STARTED IN ONE SECOND
. YEAH
.
OKAY GOOD AFTERNOON WE'RE HERE
TO GET STARTED WITH THE
ASSEMBLY GOVERNMENTAL
ORGANIZATION AN ASSEMBLY BUDGET
SUBCOMMITTEE SIX HEARING ON THE-
CALIFORNIA LOTTERY. WE WANTED
TO ALLOW THE UP TO HAVE AN
OVERVIEW OF WHAT THE LOTTERY IS
A PARTICULAR FROM LA OUT AS
WELL AS OUR NEW DIRECTOR MISTER
JOHNSON TO DISCUSS THE
CALIFORNIA STATE LOTTERY. ONE
OF THE REASONS WE'RE HERE IS TO
JUST RE EXAM AND THE- INCOME OF
LOTTERY WHICH HAS GONE UP AT
THE SAME TIME THE PERCENTAGE OF
MONEY GOING TOWARDS EDUCATION
HAS GONE DOWN SO WE DID WANT
TO. KIND OF UNDERSTAND AGAIN
SENSE AB ONE FORTY TWO WENT
INTO A FACT THE IMPACTS ON ON
BOTH SALES BUT ALSO IN TERMS OF
EDUCATION FUNDING WORKED WITH
SOME SOME OF THE DIRECT IMPACTS
ON. SO THIS TIME THE ME JUST
SEE IF THERE ANY OTHER COMMENTS
FROM THE DíAS. FOR MANY OF THE
MEMBERS. SURELY THANK YOU
CHAIRMAN TING FOR CONVENE THIS
IMPORTANT TIMELY INFORMATION
HERE IN THE STATE LOTTERY
CERTAINLY APPRECIATE ALL THE
STAFF WORK IN PREPARING US FOR
THIS OUR STATE LEGISLATIVE
ANALYST'S OFFICE FOR PREFERRING
OVERVIEW LOTTERIES MISSION
OPERATIONS AND ALSO WELCOME OUR
OLD FRIEND AND NEW COLLEAGUE IN
A DIFFERENT CAPACITY OF A
JOHNSON TO THE NEW DIRECTOR OF
THE STATE LOTTERY AS WELL AS
JOHN FITZ PATRICK WITH THE
PROPER FINANCE THANK YOU FOR
PARTICIPATING IN TODAY'S
HEARING. CERTAINLY THE CHAIRMAN
TOUCHED ON SEVERAL. ITEMS
RAISED. OF INTEREST. I'D LIKE
TO DIG INTO THOSE ALONG WITH US
MEMBERS BUT ALSO TAKE A LOOK AT
HOW WE MIGHT BE MORE EFFICIENT
GOING FOR NOW WE HAVE THE HOW
SHE BILL SOME YEARS AGO. TO
KIND OF REDUCE ADMINISTRATIVE
EXPENSES PUT MORE MONEY INTO
PRIZES THAT DOESN'T ALWAYS
RESULT AS I UNDERSTAND IT. IS
AND THE SAME CLIP OR RATE OF
GROWTH FOR BOTH EDUCATION AND
REVENUES BUT IT DOES AS I
UNDERSTAND PROVIDE OVERALL.
GREATER MONIES IN BOTH AREAS SO
LOOK FORWARD TO DELVING INTO
DETAILS THAT AND WELCOME
EVERYBODY THANK YOU ALL FOR
ATTENDING TODAY'S HERE. THANK
YOU. SEE SEE NO OTHER COMMENTS
WE WERE GOING TO START WITHOUT
HIM. OF HIS LATE THANK YOU SO
MUCH ANY DALY IT WITH THE
LEGISLATIVE ANALYST'S OFFICE
STAFF **** TO PREPARE A HANDOUT
WHICH I BELIEVE ARE IN YOUR
PACKETS. AND WILL BE USING THAT
AS A GUIDE FOR OUR COMMENTS
TODAY. IF YOU TURN TO PAGE ONE
OF YOUR HAND OUT WILL FOR START
OFF WITH SOME BACKGROUND.
MISSION THIRTY SEVEN IN
NINETEEN EIGHTY FOUR AMENDED
THE STATE CONSTITUTION TO
AUTHORIZE STATE LOTTERY THE
LEGISLATURE DOES HAVE THE
ABILITY TO CHANGE THE
PROVISIONS WITH A BILL THAT IS
ENACTED BY TWO THIRDS OF
MEMBERS OF BOTH HOUSES. THE
PROPOSITION AUTHORIZED A
VARIETY OF GAMES TO BE OFFERED
THEY CAN INCLUDES GAMES WHERE I
YOU CAN INSTANTLY WHEN VERSES
WITH OTHERS WHERE YOU SELECTION
NUMBERS. THERE ARE ALSO GAMES
THAT ARE MULTI STATE GAMES. THE
PROPOSITION ALSO CREATED A FIVE
MEMBER LOTTERY COMMISSION. TO
OVERSEE THE OPERATIONS OF THE
LOTTERY. THE COMMISSIONERS ARE
APPOINTED BY THE GOVERNOR AND
CONFIRMED BY THE SENATE. AS OF
TWO THOUSAND TEN STATE LAW DOES
REQUIRE AT LEAST 87% OF THE
TOTAL ANNUAL LOTTERY SALES
REVENUES BE USED FOR PRIZES OR
TO SUPPORT EDUCATION WITH AT
LEAST 50% OF THAT GOING TO
PRICES. ADDITIONALLY NO MORE
THAN 13% MAYBE SPENT ON LOTTERY
ADMINISTRATIVE EXPENSES WHICH
DOES INCLUDE BOTH PERSONAL COST
AS WELL AS RETAILER INCENTIVES
AND THINGS LIKE THAT. TO DATE
THE CURRENT SIZE OF THE
INDUSTRY IS ABOUT TWENTY THREE
THOUSAND RETAILERS INTO FIFTY
EIGHT COUNTIES ARE OFFERING
LOTTERY PRODUCTS. AFTER
WINNINGS AND SEVENTEEN EIGHTEEN
THE INDUSTRY GENERATED ABOUT
TWO POINT FIVE BILLION ONE
POINT SEVEN BILLION OF THAT
WENT TO EDUCATION AND ABOUT
EIGHT HUNDRED AND THIRTY
MILLION WENT TO SUPPORT LOTTERY
EXPENSES. IF YOU TURN TO PAGE
TWO OF YOUR HAND OUT THIS IS A
TABLE THAT SHOWS THAT LOTTERY
SALES AND EXPENDITURES HAVE
INCREASED STEADILY OVER THE
PAST. TEN YEARS THERE JUST A
COUPLE KEY THINGS THAT I WOULD
POINT OUT AND BRING TO YOUR
ATTENTION. FIRST IN TERMS OF
SALES AS OF TWO THOUSAND
SEVENTEEN EIGHTEEN WE ARE AT
SEVEN BILLION THAT IS AN
INCREASE OF FOUR BILLION
DOLLARS OR- A HUNDRED AND
THIRTY FOUR PERCENT. OVER THE
TEN YEARS. IN TERMS OF PRIZES
PRICES HAVE GONE UP BY ABOUT
THREE BILLION OR A HUNDRED AND
EIGHTY EIGHT PERCENT.
ADMINISTRATIVE EXPENSES HAVE
GONE UP BY FOUR HUNDRED AND
THIRTY SEVEN MILLION OR A
HUNDRED AND 10% AND EDUCATION
HAS GONE UP BY SIX HUNDRED AND
THIRTY SEVEN MILLION OR 63%
TURNING TO PAGE THREE OF YOUR
HAND OUT WE TALKED ABOUT
EDUCATION. ALSO INCREASING OVER
THE PAST TEN YEARS. THIS
PROVIDES A MORE DETAILED
BREAKDOWN OF WHERE THE FUNDING
IS ALLOCATED BY THE DIFFERENT
EDUCATIONAL AND CITIES. AND YOU
CAN SEE ON THIS CHART THAT
ABOUT 80% OF THE FUNDING. ON
AND ON ANY ARE GO THROUGH CASE
TO. EXCUSE ME K. THROUGH TWELVE
SCHOOLS. THE LOTTERY REVENUE
DISTRIBUTIONS ARE GENERALLY
ALLOCATE ON A QUARTERLY BASIS
AND THEY'RE BASED ON AVERAGE
DAILY ATTENDANCE OR THE
EQUIVALENT FULL TIME
ENROLLMENTS. TURNING TO PAGE
FOUR OF YOUR HAND OUT WHAT WE
JUST TALKED ABOUT THE ACTUAL
AMOUNT OF MONEY GOING TO
EDUCATION INCREASING WE WOULD
KNOW THAT THE SHARE OF LOTTERY
SALES GOING TO EDUCATION HAS
DECLINED. AND YOU CAN SEE THAT
ON THE FIGURE BEFORE YOU ON
THIS PAGE AND SPECIFICALLY THE
AMOUNT TO GOING TO EDUCATION
HAS DECREASED FROM THIRTY FOUR
POINT 7% IN 200-091-0220 THREE
POINT 8% IN TWO THOUSAND
SEVENTEEN EIGHTEEN. ON THE FLIP
SIDE THE AMOUNT GOING TO PRIZES
HAS INCREASED FROM 52% IN
200-091-0260 FOUR POINT 3% IN
TWO THOUSAND SEVENTEEN EIGHTEEN.
THE NEXT TWO PAGES OF YOUR HAND
OUT PAGES FIVE AND SIX.
PROVIDES A MORE DETAILED BREAK
DOWN ON THE USE OF EDUCATION
FUNDS. SO THE FIRST THING TO
NOTE HERE IS THAT THERE ARE
LEGAL REQUIREMENTS THAT
DICTATES HOW THE FUNDING CAN BE
USED. PROPOSITION THIRTY SEVEN
DID PROVIDE SCHOOLS COMMUNITY
COLLEGES AND UNIVERSITIES WITH
QUITE A BIT OF FLEXIBILITY AND
HOW THEY COULD USE THE FINES
BUT IT DIDN'T NEED TO BE USED
FOR THE EDUCATION OF STUDENTS.
IT COULD NOT BE USED FOR
ACQUIRING PROPERTY CONSTRUCTING
FACILITIES ORIFICE OR FINANCING
RESEARCH. OPPOSITION TWENTY
WHICH WAS AN ACT IN TWO
THOUSAND PLACE TO SOME
ADDITIONAL RESTRICTIONS ON
SCHOOLS AND COMMUNITY COLLEGES.
AND REQUIRED THAT THEY USE A
PORTION OF THEIR FUNDING WHICH
IS CURRENTLY ABOUT THIRTY
PERCENT. THE CIVIC LEE FOR
BOOKS AND INSTRUCTIONAL
MATERIALS. IF YOU LOOK AT THE
FIGURE THE PIE CHART IN FRONT
OF YOU ON THIS PAGE YOU'LL SEE
THAT FOR K. THROUGH TWELVE
SCHOOLS. THEY GENERALLY USE
MOST OF THEIR LOTTERY FINDINGS
FOR TEACHER SALARIES AND
INSTRUCTIONAL MATERIALS. FOR
COMMUNITY COLLEGES AFTER YOU
SET ASIDE THE- THE MANDATORY
KIND OF SPENDING ANY LOOK AT
THEIR DISCRETIONARY PORTION.
THEY GENERALLY USE THAT FOR
ADMINISTRATIVE SUPPORT TO
ACADEMIC DEPARTMENTS AND TO
FIND STUDENT SERVICES SUCH AS
COUNSELING. FOR THE
UNIVERSITIES THEY GENERALLY
ALLOCATE THE FUNDING TO THEIR
CAMPUSES THE CSU DOES RETAIN
ABOUT 25% OF THE FUNDING FOR
SYSTEM WIDE INITIATIVES. WHEN
IT GOES TO THE CAMPUS IS THE
CAMPUSES TEND TO USE THE
FUNDING FOR VARIOUS PRIORITIES
WHICH INCLUDE ADMINISTRATIVE
SUPPORT TO ACADEMIC DEPARTMENTS
REPLACING INSTRUCTURE
INSTRUCTIONAL EQUIPMENT AND
PURCHASING LIBRARY MATERIALS.
IF YOU TURN TO PAGE SEVEN OF
YOUR HAND OUT WE DID TALK ABOUT
YOU KNOW QUITE A BIT OF MONEY
OF BILLION THE OVER BILLION
DOLLARS GOING TO EDUCATION
HOWEVER ONE OF THINGS THAT WE
DID WANT TO BRING TO YOUR
ATTENTION IS THAT. A LOTTERY
FUNDS DO REPRESENT A SMALL
SHARE OF THE TOTAL AMOUNT OF
FUNDING THAT'S GOING TO
EDUCATION ESSENTIALLY LESS THAN
2% AND IF YOUR BEFORE YOU
PROVIDE THAT BREAK DOWN BY
ENTITY AND YOU CAN SEE THAT IT
RANGES FROM 005% FOR YOU SEE TO
ABOUT ONE POINT. SEVEN CENTS.
FOR COMMUNITY COLLEGES. IF YOU
TURN TO PAGE EIGHT OF YOUR HAND
OUT. THERE ARE VARIOUS FACTORS
THAT CAN INFLUENCE THE AMOUNT
THAT'S GENERATED FOR EDUCATION.
AND HERE WE LAY OUT ABOUT SEVEN
OF THE MAJOR FACTORS. THAT CAN
IMPACT THAT. THE FIRST FACTOR
RELATES TO THE TYPES AND
VARIETY OF GAMES THAT ARE
OFFERED. AND THAT REALLY.
APPEALS TO DIFFERENT
DEMOGRAPHICS OF. CUSTOMERS AND
SO THIS WOULD IMPACT WHETHER
AND- WHETHER OR NOT NEW
CUSTOMERS WERE ACQUIRED AS WELL
AS THE FREQUENCY WITH WHICH
EXISTING CUSTOMERS WOULD PLAY
THE GAMES. THE SECOND FACTOR
RELATES TO PUT HIS STRUCTURE
AND PRIZE AMOUNTS AND SIMILARLY
YOU KNOW THIS IS GOING TO
APPEAL TO DIFFERENT
DEMOGRAPHICS OF CUSTOMERS. AND
CUSTOMER WILLINGNESS WILL
REALLY THAN DEPEND ON HOW
ATTRACTIVE THEY FIND THE PRICE.
THE THIRD FACTOR IS THE EASE OF
PURCHASING HOW EASY IS IT FOR
INDIVIDUALS TO ACTUALLY OBTAIN
THESE PRODUCTS AND SO THAT WILL
THEN DICTATE CUSTOMER
WILLINGNESS TO PURCHASE THE
PRODUCTS AS WELL AS THE
FREQUENCY WITH WHICH THEY DO
SELL. THE FOUR AFTER IS RELATED
TO CUSTOMER SERVICE AND PLAYER
EXPERIENCE SO FOR EXAMPLE HOW
EASY IS IT FOR AN INDIVIDUAL
WHO WINS TO THEN GET THEIR PAY
OUT. ESSENTIALLY THIS SIMILARLY
WOULD IMPACT THEIR WILLINGNESS
TO PLAY A GAME AND THE
FREQUENCY WITH WHICH THEY PLAY.
THE FACTOR RELATES TO THE
AMOUNT SPENT ON MARKETING. THE
AMOUNT THAT SPENT ON MARKETING
CERTAINLY CAN INCREASE PUBLIC
AWARENESS AND THEREBY GENERATE
ADDITIONAL SALES A MORE IS MORE
PEOPLE PARTICIPATE IN PREVENT.
A PURCHASE THE PRODUCTS HOWEVER
AT SOME POINT THERE IS A
THRESHOLD THAT IS REACHED WHERE
ANY ADDITIONAL MONIES THAT
POINT IN MAY NO LONGER ACQUIRE.
NEW CUSTOMERS OR MAY NOT
GENERATE ADDITIONAL SALES AT
THE SAME RATE THAT IT HAD DONE
SO IN THE PAST. THE SIXTH ISSUE
RELATES TO A TELLER INCENTIVES
THAT RETAILERS HAVE INCENTIVES
AND THE VERY BY LOTTERY PRODUCT
BUT THAT WILL REALLY KIND OF
DETERMINE HOW WILLING RETAILERS
ARE TO OFFER THE PRODUCTS AS
WELL AS TO PROMOTE THEM. THE
FINAL FACTOR THIS PAGE IT
RELATES TO RESPONSIBLE AND
PROBLEM GAMING PROVISIONS THIS
IS SOMETHING THAT BOTH THE
STATE AND THE COMMISSION HAVE
BEEN KIND OF REALLY. FORCEFUL
AND THINK THAT IT IS A PRIORITY
BUT THIS WILL THAT IMPACT SOME
OF THE OTHER FACTORS THAT WE
DISCUSS THE FOR EXAMPLE HOW
EASY IT IS FOR INDIVIDUAL TO IS
TO PURCHASE PRODUCTS. SO IF YOU
TURN TO PAGE NINE OF YOUR HAND
OUT IN TOTAL THESE FACTORS
REALLY IMPACT THE AMOUNT THAT'S
GENERATED FOR EDUCATION IN TWO
WAYS ONE IS THAT IT CAN
INCREASE THE TOTAL POT THE
TOTAL AMOUNT OF REVENUE THAT'S
COMING IN. THE SECOND WAY THAT
IT CAN CREE SAID IS THAT THE
TOTAL AMOUNT OF REVENUE MAY NOT
CHANGE. THE AMOUNT AVAILABLE TO
DISTRIBUTION CAN INCREASE SO
FOR EXAMPLE YOU BRING DOWN YOUR
COSTS BUT REVENUES ARE THE SAME.
SO THEN IF YOU TURN TO THE
FINAL PAGE OF YOUR HAND OUT
PAGE TEN. WE WERE ASKED TO
PROVIDE A LITTLE BIT OF CONTEXT
AND KIND OF COMPARISON TO OTHER
STATES. WE WOULDN'T KNOW THAT
IT IS REALLY IMPORTANT TO KEEP
KEY FACTORS POLICY OPERATIONAL
ARE FACTORS IN MIND AS YOU'RE
THINKING ABOUT THESE
COMPARISONS. SO AS AN EXAMPLE
CALIFORNIA MAY NOT OFFER THE
SAME GAMES. AS OTHER STATES.
ANOTHER EXAMPLE IS THAT
CALIFORNIA'S APPROACH TO
RESPONSIBLE GAMING MAY MEAN
THAT WE MIGHT NOT BE AS
AGGRESSIVE ABOUT MARKETING
PRODUCTS AS OTHER STATES. ARE
THAT BEING SAID WE DO HAVE A
FEW FACTORS FOR YOUR
CONSIDERATION. SOME TWO
THOUSAND SEVENTEEN EIGHTEEN
THAT'S THE WHERE THESE FACTORS
ARE ARE GOING AT. IT THE DATA
POLLS FROM TWO THOUSAND
SEVENTEEN EIGHTEEN DATA.
APPROXIMATELY FORTY FOUR STATES
AND THE DISTRICT OF COLUMBIA
OFFER A LOTTERY PRODUCTS. AND
SO OUR FIRST METRIC COMPARES
SALES TO RETAILERS. AND THE
RELATED TO THIS CALIFORNIA
AVERAGED ABOUT THREE HUNDRED
THOUSAND IN SALES PER RETAILER.
ABOUT TWENTY TWO STATES AND THE
DISTRICT OF COLUMBIA AVERAGE
HIGHER AMOUNTS WITH THE HIGHEST
AVERAGING ABOUT ONE MILLION
DOLLARS PER RETAILER. THE
SECOND FACTOR LOOKS AT SALES
AND POPULATION. CALIFORNIA
AVERAGED ABOUT A HUNDRED AND
SEVENTY FIVE DOLLARS PER
CALIFORNIAN OR NEARLY TWO
HUNDRED AND THIRTY DOLLARS PER
CALIFORNIA OVER THE AGE OF
EIGHTEEN. ABOUT TWENTY SEVEN
STATES AND THE DISTRICT OF
CALIFORNIA AVERAGE HIGHER SALES.
THE THIRD FACTOR THEN LOOKS AT
PRIZES AND SALES ABOUT 64% OF
CALIFORNIA'S LOTTERY SALES
REVENUES ARE GENERATE ARE
RETURNED AS PRIZES ABOUT TWELVE
STATES RETURNED A GREATER
PROPORTION WITH HIGHS REACHING
ABOUT 74% THE FOURTH COMPARATOR
IS ABOUT HOW FUNDING IS USED IN
OTHER STATES SIMILAR TO
CALIFORNIA AND THERE ABOUT TWO
THIRDS OF THE LOTTERY'S THAT
ALSO PROVIDE FUNDING TO
EDUCATION PURPOSES. OTHER
LOTTERIES ALSO DO FIND VARIOUS
OTHER BENEFICIARIES ARE
PROGRAMS INCLUDING PROBLEM
GAMING ECONOMIC DEVELOPMENTS
RESOURCES ENVIRONMENTAL
PURPOSES AND STATE AND LOCAL
GOVERNMENTAL FUNDS. THE FINAL
FACTOR ON THIS LIST LOOKS AT
BENEFICIARIES ARE THEY NOT
GOING TO BENEFITS YEARS
COMPARED TO SALES AND ON THAT
ABOUT 24% OF CALIFORNIA'S
LOTTERY SALES REVENUES WENT TO
EDUCATION WHICH IS OUR
BENEFICIARY. AND ABOUT TWENTY
NINE OF THE STATE'S GENERATED.
TURNED A GREATER PROPORTION TO
THEIR BENEFICIARIES BUT MOST OF
THEM ARE WITHIN ABOUT TEN
PERCENTAGE POINTS OF CALIFORNIA.
SO WITH THAT WE'RE HAPPY TO
ANSWER ANY QUESTIONS EITHER NOW
AT THE END OF THE PRESENTATIONS.
IT WILL DO IS JUST WAIT TILL
EVERYONE TALKS AND THEN. ASK A
QUESTION SO WHAT WE GO DOWN MR
JOHNSON. WELCOME THANK YOU
THANK YOU SIR. GOOD AFTERNOON
CHAIRMAN CHIANG AND GERMAN GRAY
IT'S A PLEASURE TO BE HERE
TODAY MEMBERS OF THE COMMITTEES
AND I'M REALLY EXCITED TO BE
ABLE TO TALK TO TODAY ABOUT.
THE CALIFORNIA STATE LOTTERY.
WANT TO START BY PROVIDING YOU
A BRIEF INTRODUCTION PRO
FOLLOWED BY AN OVERVIEW OF HOW
THE LOTTERY WORKS. FIRST AND
FOREMOST I WANT TO SAY I'M
HONORED TO SERVE THE GOVERNOR
THE CAPACITY LOTTERY DIRECTOR I
TAKE THIS RESPONSIBILITY
SERIOUSLY. I UNDERSTAND THAT AT
THE END OF THE DAY I WILL BE
JUDGED ON HOW SUCCESSFUL THE
LOTTERY IS IN MAXIMIZING
SUPPLEMENTAL FUNDING TO
EDUCATION WHICH IS IN FACT OUR
MISSION. AND MAKING PRUDENT
FINANCIAL DECISIONS. IN MY
SHORT TIME AT THE LOTTERY JUST
A LITTLE UNDER TWO MONTHS. I'VE
ENJOYED WORKING WITH THE
MANAGEMENT AND RANK AND FILE
EMPLOYEES ARE THE BACKBONE OF
HOW THE LOTTERY DELIVERS ON ITS
MISSION. THIS MISSION IS DEAR
TO MY HEART. AS A COLLEGE
STUDENT AT CAL STATE HAYWARD
NOW NOTICE CAL STATE EAST BAY I
MENTORED HIGH SCHOOL STUDENTS.
AT NEWARK MEMORIAL HIGH SCHOOL.
THESE WERE STUDENTS WERE
SEEKING HIGHER EDUCATION
OPPORTUNITIES BUT FACED A MERRY
OUT OF CHALLENGES. IT MAKES ME
PROUD TO SAY THAT THIS PROGRAM
WHICH I WORKED IN THIRTY YEARS
AGO IN NINETEEN EIGHTY NINE WAS
A LOTTERY FUNDED PROGRAM IT WAS
FUNDED BY LOTTERY DOLLARS. SO
IN A SENSE I FEEL LIKE I'VE
COME FULL CIRCLE. I WANT TO
ASSURE YOU THAT I UNDERSTAND
THE CONCERNS RAISED IN RECENT
AUDIT OF THE LOTTERY. PLEASE
KNOW THAT WE ARE ADDRESSING
THESE FINDINGS AND MINISTRY TO
FLEE. AND I'VE ALREADY ALREADY
BEGUN. TO IMPLEMENT CHANGES
THAT WILL HELP ADDRESS THE
INTERNAL CONTROL GAPS THAT HAVE
BEEN IDENTIFIED. I WILL
CONTINUE MY ASSESSMENT REVIEW
AND OVERSIGHT THEN STRENGTH AND
ALL AGENCY POLICIES AND
PROCEDURES FROM TOP TO BOTTOM
TO ENSURE THAT THEY'RE
FOLLOWED. AND PRACTICED. THIS
WILL IMPROVE EFFICIENCIES TO
HELP OUR MISSION. I ALSO WANT
TO INCREASE TEAMWORK AND
COMMUNICATION TO REINFORCE A
CULTURE OF EXCELLENCE AND
COLLABORATION AMONGST OUR
LOTTERY TEAM MEMBERS. FUTURE
GOALS INCLUDE MAINTAINING
RESPONSIBLE GROWTH IN SALES AND
BRINGING IN ADDITIONAL
CONSUMERS. IN DOING SO WE
REBUILD THE PUBLIC'S TRUST AND
RESTORE CONFIDENCE IN OUR
AGENCY. HAVING SAID THIS I WANT
TO ASSURE YOU THAT WE ARE AN
OPEN BOOK A FULLY TRANSPARENT
AND ACCOUNTABLE STATE AGENCY.
LET ME TAKE A FEW MOMENTS TO
PROVIDE AN HONOR AN OVERVIEW OF
HOW THE LOTTERY WORKS. FIRST AS
HAS BEEN EXPLAINED PROPOSITION
THIRTY SEVEN WAS APPROVED BY
BALLOT INITIATIVE IN NINETEEN
EIGHTY FOUR. TO ESTABLISH A
STATEWIDE LOTTERY AS AN
INDEPENDENT STATE AGENCY
AUTHORIZED TO SELL LOTTERY
PRODUCTS. THE LOTTERY ACT IS
THE STATUTORY FRAMEWORK. THAT
OUTLINES LOTTERY GAMES IN
OVERALL OPERATIONS. THE LOTTERY
COMMISSION CAN EXERCISE ALL
POWERS NECESSARY TO EFFECTUATE
THE PURPOSES SPELLED OUT IN THE
LOTTERY ACT. THE LOTTERY'S
OPERATIONS ARE SOLELY SUPPORTED
BY THE SALE OF LOTTERY TICKETS
IT DOESN'T DRAW FROM MORE
RECEIVE GENERAL FUND DOLLARS.
AND FINALLY THE LOTTERY DOES
NOT RETAIN OR CARRY OVER ANY
SURPLUS FUNDING. THE LOTTERY
ACT REQUIRES ALL UNCLAIMED
PRIZE MONEY EARNED INTEREST AND
ANY SURPLUS FUNDS FROM MONTHS
SPENT AND MINISTRY OF EXPENSES
TO BE SPENT SHE'S ME TO BE SENT
TO PUBLIC EDUCATION EVERY
FISCAL YEAR. PROPOSITION THIRTY
SEVEN DID NOT PROPOSE THAT THE
LOTTERY BE THE SOLE FUNDER FOR
THE STATE'S EDUCATION BUDGET.
FOR A VOTERS APPROVED THIS
PURPOSE AND INTENT AS DESCRIBED
IN THE GOVERNMENT CODE IN
SECTION EIGHT EIGHT EIGHT ZERO
POINT ONE. THE LOTTERY QUOTE
SHALL NOT BE USED AS SUBSTITUTE
FUNDS. BUT RATHER SHALL
SUPPLEMENT THE TOTAL AMOUNT OF
MONEY ALLOCATED TO PUBLIC
EDUCATION IN CALIFORNIA.
FURTHER GOVERNMENT CODE SECTION
EIGHT EIGHT EIGHT ZERO POINT
FOUR READS QUOTE REVENUES OF
THE STATE LOTTERY SHALL BE
ALLOCATED SO AS TO MAXIMIZE THE
AMOUNT OF FUNDING ALLOCATED TO
PUBLIC EDUCATION. WE SEE THAT
AS OUR PRIMARY MISSION. IN
OTHER WORDS THE MAIN PURPOSE OF
THE LOTTERY IS TO GROW THE
AMOUNT OF ABSOLUTE DOLLARS TO
EDUCATION. I EMPHASIZE THE
WORDS MAXIMIZE AND FUNDING
BECAUSE THOSE TWO FACTORS HAVE
OCCURRED WITH CHANGES THE
LEGISLATURE AUTHORIZED IN TWO
THOUSAND TEN. THAT PROVIDED
PRIZE PAYOUT FLEXIBILITY. AS A
RESULT THE LOTTERIES FUNDING
DOLLARS TO PUBLIC EDUCATION
HAVE GROWN. WE'VE PROVIDED TO
HAND OUT TO THE COMMITTEE
COUPLE OF PAGES ONE IS A CHARGE
AND ONE IS A GRAPH THAT
ILLUSTRATE THIS. THESE USE THE
SAME FIGURES DESCRIBED BY THE
ANALYST'S OFFICE AND YOU CAN
SEE THE CHANGES IN THE LAST TEN
YEARS. THE LOTTERY'S ANNUAL
CONTRIBUTION TO PUBLIC
EDUCATION IS DETERMINED BY THE
TOTAL SALES REVENUE. LESS PRICE
EXPENSES LESS ADMINISTRATIVE
EXPENSES. PLUS INTEREST
EARNINGS AND ON QUITE PRICES.
NOW REGARDING THE TYPES OF
GAMES AS HAS BEEN EXPLAINED WE
OFFER TWO TYPES PARA MUTUAL
GAMES KNOWN AS DRAW AND LOTTO
GAMES WERE ALL WINNERS GET AN
EQUAL SHARE OF THE COMMON PRICE
POOL AT DIFFERENT LEVELS. THE
LOTTERY NEWS BEFORE YOU
STRUGGLE WITH THE TOTAL PRIZE
LIABILITY WILL BE. SECONDLY WE
ALSO HAVE INSTANT GAMES KNOWN
AS SCRATCHERS THESE HAVE A
PREDETERMINED FIXED NUMBER OF
PRIZES SO THE LOTTERY KNOWS
BEFORE THE GAME STARTS THE
TOTAL MAXIMUM PRIZE AMOUNT TO
BE AWARDED. IN EACH GAME.
REGARDING SALES THE CALIFORNIA
LOTTERY IS THE SECOND LARGEST
LOTTERY IN THE COUNTRY. IN
TERMS OF. OVERALL SALES. IN THE
SEVENTEEN EIGHTEEN FISCAL YEAR
SALES REVENUE TOTALED SIX POINT
NINE SEVEN BILLION. AND WEEP
AND THE LOTTERY PROVIDED OVER
ONE POINT SEVEN BILLION FOR
PUBLIC EDUCATION. THESE ARE
RECORD FIGURES WHICH ARE. AS
INDICATED PREVIOUSLY ARE
REFERENCED IN THE HANDOUTS THAT
WE HAVE PROVIDED TO THIS TO
THIS BODY. OVER THE PAST
SEVERAL YEARS OUR GROWTH IN
SALES HAS BEEN PRIMARILY DRIVEN
BY INCREASES IN SCRATCHERS.
HOWEVER CERTAIN YEARS
EXPERIENCED A SIGNIFICANT GAIN
DO TWO BILLION DOLLAR MEGA
MILLIONS OR POWERBALL JACKPOTS.
ESSENTIALLY A KEY PARTOF OUR
CELL STRATEGIES WHEN THERE'S A
LOT OF LOTTO FEVER BUZZ WHEN
THERE'S A LARGE JACKPOT AMOUNT
MORE PEOPLE BUY MORE TICKETS
AND SO YOU'LL SEE A
CORRESPONDING INCREASE IN SALES.
MORE THAN NINETY FIVE CENTS OF
EVERY DOLLAR SPNT ON THE
LOTTERY GOES BACK TO THE PUBLIC
IN THE FORM OF PRIZES RETAILER
COMPENSATION AND SUPPLEMENTAL
FUNDING FOR PUBLIC EDUCATION.
IN THE SEVENTEEN EIGHTEEN
FISCAL YEAR THE LOTTERY CREATED
NINETY THREE MILLION SHARES AND
PROVIDED MORE THAN FOUR HUNDRED
AND EIGHTY MILLION DOLLARS TO
BUSINESSES IN CALIFORNIA WHO
SELL LOTTERY PRODUCTS. THE
LOTTERY EMPLOYEES APPROXIMATELY
EIGHT HUNDRED AND FORTY FIVE
CIVIL SERVICE EMPLOYEES WHO
SUPPORT THE OPERATIONS OF THE
LOTTERY AND ITS MISSION. THE
LOTTERY IS HEADQUARTERED IN
SACRAMENTO AND HAS NINE
DISTRICT OFFICES THROUGHOUT THE
STATE AS WELL AS TWO
DISTRIBUTION CENTERS LOCATED IN
NORTHERN AND SOUTHERN
CALIFORNIA. THE LOTTERY'S
RETAILER NETWORK CONSISTS OF
APPROXIMATELY TWENTY THREE
THOUSAND RETAILERS STATEWIDE.
WITH A VARIETY OF DIFFERENT
TRADE STYLES INCLUDING
SUPERMARKETS CONVENIENCE STORES
GAS STATIONS AND OTHER
BUSINESSES. RETAILERS ARE ****
FOR THE LOTTERIES BRAND. UPHOLD
THE INTEGRITY AND FAIRNESS OF
ITS OPERATIONS IN PRODUCTS AND
PLAY AN INTEGRAL PART OF THE
PLAYER EXPERIENCE. THIS IS WHY
THE LOTTERIES RETAILER
SELECTION CRITERIA IS ROBUST.
REGARDING LOTTERY PLAYERS ABOUT
NINETEEN MILLION CALIFORNIANS
OUR LOTTERY PLAYERS. THAT WAS%
ABOUT 63% OF ALL CALIFORNIANS
ADULTS IN THE LAST FISCAL YEAR.
WE FOUND THE LOTTERY PLAYER
DEMOGRAPHICS ARE SIMILAR TO
CALIFORNIA'S ADULT POPULATION.
FOR THE LAST FISCAL YEAR TWO
THOUSAND SEVENTEEN AND EIGHTEEN
THE PER CAPITA EXPENDITURE
AMONGST CALIFORNIA ADULTS ON
LOTTERY PRODUCTS WAS A LITTLE
OVER A HUNDRED AND SEVENTY SIX
DOLLARS OUR FIGURES MATCH WHAT
THE ANALYST'S OFFICE IS FOUND.
THIS AVERAGES ABOUT THREE
DOLLARS AND FORTY CENTS PER
WEEK WHICH IS CONSIDERABLY LESS
THAN A LOT OF PEOPLE SPENT ON
COFFEE. I WANT TO SPEND A FEW
MOMENTS IF YOU'LL INDULGE ME
TALKING ABOUT THE CHANGES MADE
BY AB ONE FORTY TO ABOUT TEN
YEARS AGO THIS BILL BY. THEN
ASSEMBLY MEMBER HI ARCHIE WAS
IMPORTANT BECAUSE IT ALLOWED
THE LOTTERY COMMISSION TO
CHANGE. THE DISTRIBUTION OF
REVENUE SO AS TO INCREASE
PRICES AND INCREASED SALES.
PRIOR TO THE PASSAGE OF THAT
BILL IN TWO THOUSAND TEN PRICES
WERE FIXED AT 50% OF REVENUES.
AT THE TIME CALIFORNIA WAS
AMONG A SMALL NUMBER OF STATES
WHOSE PRIZE EXPENSES WERE
RESTRICTED IN THIS MANNER.
ANNUAL CONTRIBUTIONS TO
EDUCATION. AVERAGED OVER ONE
POINT ZERO EIGHT BILLION
DOLLARS OVER THE EIGHT YEARS
PRIOR TO THE FULL
IMPLEMENTATION OF AB ONE FORTY
TWO. WHAT THAT BILL ACTUALLY
DID WERE THREE MAIN THINGS. IT
REDUCE THE LOTTERIES
ADMINISTRATIVE EXPENSE CAP FROM
16% 213% OF REVENUES. IT STRUCK
THE 50% CAP ON PRICES. AND
FINALLY TO REMOVE THE SPECIFIED
PERCENTAGE OFF ALLOCATED TO
PUBLIC EDUCATION. THE AMENDED
LANGUAGE A LOTTERY ACT IN STATE
SPECIFIED THAT NOT LESS THAN
87% OF THE TOTAL ANNUAL
REVENUES FROM THE SALE OF STATE
LOTTERY TICKETS OR SHARE SHALL
BE RETURNED TO THE PUBLIC IN
THE FORM OF PRIZES AND NET
REVENUES TO. BENEFIT PUBLIC
EDUCATION. AB ONE FORTY TO
ENABLE THE LOTTERY TO INCREASE
ITS CONTRIBUTION TO PUBLIC
EDUCATION AND GROW SALES. BY
PROVIDING HIGHER PRICES TO
ATTRACT PLAYERS. WITH THE PRICE
FLEXIBILITY GRANTED BY THIS
BILL THE LOTTERIES ABLE TO
INCENTIVIZE PLAYERS TO BUY MORE
TICKETS WHICH INCREASES SALES
AND RESULT IN INCREASED DOLLARS
TO EDUCATION. SCHOOLS ARE
GETTING MORE MONEY EVERY YEAR
BECAUSE OF THIS BILL. THE
IMPLEMENTATION OF AB ONE FORTY
TWO HAS GROWN THE LOTTERY'S
CONTRIBUTION THE CALIFORNIA
SCHOOLS BY MORE THAN SIX
HUNDRED DOLLARS IN FISCAL YEAR
SEVENTEEN EIGHTEEN COMPARED TO
FISCAL YEAR TWO THOUSAND NINE
TWO THOUSAND TEN. THIS
REPRESENTS A BOOST OF ABOUT 56%
IN EIGHT YEARS. WE BELIEVE IT'S
A STRAIGHTFORWARD ONE TWO THREE
FORMULA MORE PRIZES MORE SALES
MEANS MORE MONEY TO SCHOOLS. I
WANT TO TALK BRIEFLY IF I MAY
ABOUT THE ADMINISTRATIVE
EXPENSES IN THE LOTTERY. ABOUT
13% OF REVENUES ARE ALLOCATED
FOR THIS PURPOSE AND IS BROKEN
DOWN IN THREE WAYS. 7% IS FOR
RETAILER COMPENSATION. THIS
REPRESENTS THE TOTAL AMOUNT
PAID TO THE LOTTERY RETAILERS
FOR SELLING LOTTERY PRODUCTS
AND CASH AND PRIZES UNDER FIVE
HUNDRED NINETY NINE DOLLARS.
THIS COST DIRECTLY CORRELATES
WITH LOTTERY SALES. ABOUT 2% OF
THAT PORTION IS FOR GAMING
COSTS THIS REPRESENTS THE COST
TO PURCHASE AND DISTRIBUTE
LOTTERY SCRATCHERS TICKETS TO
ARE APPROXIMATELY TWENTY THREE
THOUSAND LOTTERY RETAILERS IT
ALSO INCLUDES CONTRACT COSTS
FOR THE LOTTERIES GAMING SYSTEM
PROVIDER. IGT THIS ALSO
CORRELATES WITH LOTTERY SALES.
THE REMAINING 4% IS FOR
OPERATIONAL EXPENSES THESE ARE
COMPRISED OF THE TYPICAL
OVERHEAD EXPENSES NEEDED TO RUN
A DEPARTMENT AND ARE GENERALLY
INDEPENDENT OF SALES. I WANNA
KNOW THAT THE LOTTERY TYPICALLY
ONLY SPENDS AROUND 3% OF ANNUAL
SALES REVENUE FOR OPERATING
EXPENSES IN THE LAST FIVE YEARS
ALONE THE LOTTERY HAS BEEN ABLE
TO SEND NEARLY TWO HUNDRED AND
FIFTY FIVE MILLION MORE TO
EDUCATION BY MAINTAINING OUR
ADMINISTRATIVE EXPENSES. BELOW
THE 13% CAP. FINALLY I WANT TO
NOTE. I'M IN A LITTLE BIT ABOUT
THE ON AT SET HAVE BEEN
DISCUSSED A LOT. RECENTLY IN
THE PRESS AND OTHER PLACES. IT
IS IMPORTANT TO NOTE THAT THE
LOTTERY ACT GOVERNMENT CODE
SPECIFICALLY EIGHT EIGHT EIGHT
ZERO POINT FOUR SIX POINT SIX
AUTHORIZES THE STATE
COMPTROLLER'S OFFICE TO CONDUCT
QUARTERLY AND ANNUAL AUDITS OF
ALL ACCOUNTS. AND TRANSACTIONS
AS IT DEEMS NECESSARY. THIS
INCLUDES EXAMINATION OF ANY ALL
RECORDS OF THE COMMISSION
LOTTERY CONTRACTORS AND LOTTERY
GAME RETAILERS. LOTTERY AUDIT
AND FINANCIAL REPORTING ARE
MANDATED BY LAW OR REGULATION
AND OTHERS ARE CONDUCTED AT THE
DISCRETION OF THE STATE
COMPTROLLER'S OFFICE. LOTTERY
AUDITS OCCUR EVERY MONTH OF THE
YEAR. OVER THE LAST THREE
FISCAL YEARS ENDING IN THE
FISCAL YEAR EIGHTEEN NINETEEN
THE LOTTERY HAS UNDERGONE FIFTY
TWO AUDITS OR ON THE AVERAGE
ABOUT SEVENTEEN ON ITS PER YEAR.
INTERNAL AND EXTERNAL AUDITS OF
THE LOTTERY PROVIDE ASSURANCES
TO THE COMMISSION THE GOVERNOR
THE LEGISLATURE AND THE PUBLIC
THE GAMING OPERATIONS ARE LEGAL
AND SECURE. AND THAT
ADMINISTRATIVE PRACTICES ARE
CONSISTENT WITH THE RELEVANT
STATUTES REGULATIONS AND OTHER
APPLICABLES STANDARDS. WE ARE
COMMITTED TO BOTH OUR MISSION
OF PROVIDING SUPPLEMENTAL
FUNDING TO EDUCATION AND
CONTINUING A CULTURE OF
TRANSPARENCY THAT ALL AGENCIES
MUST OBSERVE. THANK YOU FOR
THIS OPPORTUNITY TODAY AND WITH
THAT I'D BE HAPPY TO ANSWER ANY
QUESTIONS. THANK YOU WE CAN GO
TO MR FITZ PATRICK NOW WITH
FINANCE. GOOD AFTERNOON JUMPED
PATRICK DEPARTMENT OF FINANCE
WOULD LIKE TO NOTE THAT THE
STATUTORY SUPREME WORK FOR THE
LOTTERY COMMISSION
SIGNIFICANTLY MODIFIES THE RULE
THAT FINANCE TYPICALLY PAY
PLAYS FOR AN ENTITY. BUT WE
HAVE A COUPLE REPRESENTATIVES
HERE IF THERE ARE ANY QUESTIONS
FOR OUR AREA. THANK YOU ARE
JUST GOING TO GO NOW TO THE-
PANELS IF WE HAVE QUESTIONS.
I'M SORRY MISS WALDRON. THANK
YOU MISTER CHAIR I HAD A COUPLE
QUESTIONS KIND OF RELATING TO
THE CORE TOPIC THAT I'M
CONCERNED ABOUT WHICH IS THAT
WHEN THE VOTERS OF CALIFORNIA
APPROVED THE CREATION OF A
STATE LOTTERY IT WAS WITH THE
UNDERSTANDING THAT THAT THE
PROCEEDS FROM THE LOTTERY WOULD
GO TO EDUCATION AND I THINK
WE'RE ALL. INTERESTED IN MAKING
SURE THAT WERE FOR FILLING THAT
PROMISE AND I'M SURE THAT YOU
ARE TO. THE THING THAT'S
SUPPOSED TO CONSTRUED TO ME IS
WHAT THE LA RAISED IN THEIR
ANALYSIS WHICH IS THAT. IN THE
LAST TEN YEARS WE'VE SEEN.
REVENUE FROM THE LOTTERY MORE
THAN DOUBLE. AND YET THE
REVENUE THAT WE ARE
CONTRIBUTING TO EDUCATION IS A
PORTION OF LOTTERY SALES HAS
DECLINED FROM 34% TO LESS THAN
24% SO WHY IS THAT. THANK YOU
FOR YOUR QUESTION. IT'S A BIT
OF A. A TRICKY PICTURE WHEN YOU
LOOK AT JUST THE PERCENTAGES
AND WHAT WE FOUND HELPFUL IN
THIS ANALYSIS OR IS TO LOOK AT
THE ABSOLUTE DOLLARS ARE DRIVEN
TO EDUCATION BECAUSE OUR
MISSION AS LAID OUT IN STATUTE
IS TO MAXIMIZE SUPPLEMENTAL
FUNDING FOR EDUCATION. THE
CHANGES MADE LEGISLATURE TEN
YEARS AGO IN AB ONE FORTY TO
ALLOW FLEXIBILITY TO INCREASE
THE PRIZE. AND THERE'S A TIGHT
RELATIONSHIP BETWEEN PRICES AND
SALES. SO IN EFFECT BY MAKING
MORE ATTRACTIVE PRIZES. THE
LOTTERY'S BEEN ABLE TO INCREASE
THE WHOLE PIE. AND BY DOING SO
MORE DOLLARS HAVE BEEN DRIVEN
EDUCATION OKAY I WAS INTERESTED
THAT PARTY OR TESTIMONY BECAUSE
I HEARD YOU SAY THAT. ABSENT
THE DROPPING OF THAT CAPTAIN AB
ONE FORTY TWO YOU BELIEVE THAT
OVERALL LOTTERY REVENUE WILL BE
LOWER BUT. LET ME ASK YOU THIS
SAME QUESTION A DIFFERENT WAY
DO YOU BELIEVE THAT THE NUMBER
OF DOLLARS OF PHYSICAL DOLLARS
THAT WE HAND OVER TO EDUCATION.
ARE HIGHER NOW THAN IF WE HAD
RETAINED THAT 34% MINIMUM IN AB
ONE FORTY TWO THE SHORT ANSWER
IS YES. MOST OF THE SALES ARE
DRIVEN BY SCRATCHERS AND WE
WILL OFFER A VARIETY OF
DIFFERENT SCRATCHER PRODUCTS
AND PRICE LEVELS BUT IN
ADDITION AS I MENTIONED IN MY
TESTIMONY EARLIER SIR. WE'VE
SEEN THAT IN WHAT WE CALL THE
PARA MUTUAL GAMES THE DRAW
GAMES MAKE UP MEGA MILLIONS OR
POWERBALL THAT WHEN THERE ARE.
JACKPOTS THAT ARE VERY LARGE
WHICH WE CAN'T NECESSARILY
PREDICT THAN THAT ATTRACTS MORE
PLAYERS IN THAT DRIVE SALES SO
THAT'S WHY YOU SEE FROM YEAR TO
YEAR INDIVIDUAL VARIATION TO
SOME DEGREE BECAUSE WILL HAVE A
JACKPOT OF SAY A BILLION
DOLLARS PEOPLE ARE EXCITED BY
THAT AND THEY WANT TO PLAY WE
HAVE THUS MORE SALES. SO WHAT
WE'VE BEEN ABLE TO DO WITH THE
FLEXIBILITY THE LEGISLATURE
GRANTED TEN YEARS AGO IS. OFFER
MORE ATTRACTIVE PRIZES
ESPECIALLY SCRATCHERS. AND
THAT'LL LABELS US TO HAVE MORE
SALES AND MORE REVENUE. OKAY
WELL I CONSIDER ME EXTREMELY
SKEPTICAL ON THAT CLAIM AND IF
YOU HAVE SOME SOME DATA THAT
BACKS IT UP I WOULD BE VERY
INTERESTED IN READING IT. I
WOULD CERTAINLY AGREE THAT
HAVING A LARGER. GRAND PRIZE.
IS SOMETHING THAT YOU CAN
MARKET AROUND IT THAT WILL
DRIVE SALES REVENUE TO THE
LOTTERY BUT- IF YOU'RE TALKING
ABOUT THE PERCENTAGE OF THE
REVENUE THAT GOES TO THE PRIZE
POOL. I DON'T THINK THE PEOPLE
PLAYING LOTTERY ARE PAYING
ATTENTION TO THE MATH BECAUSE
OF THEIR WORK HONESTLY IF
THAT'S WHAT WAS DRIVING THEIR
PURCHASE DECISION THEY WOULDN'T
BE PLAYING THE LOTTERY. SO I
QUESTION WHETHER OR NOT WE
WOULDN'T BE BETTER OFF FROM AN
EDUCATIONAL STANDPOINT
REINSTITUTING THAT THIRTY FOUR
PERCENT. A CAP THAT YOU BE. THE
ONE. FORTY ONE FORTY TWO WAS I
WAS JUST INSTITUTED AN I. ONE
LAST QUESTION AND IT'S IT GOES
TO ANOTHER CONCERN THAT I HAVE
ABOUT WHAT HAS BEEN TRENDING
RECENTLY AND WITHIN THE LOTTERY
AND THAT'S THAT IF YOU LOOK AT
ADMINISTRATIVE COSTS AS A
PERCENTAGE OF OVERALL LOTTERY
REVENUE ONE WOULD EXPECT OUT AS
REVENUE ROSE ADMINISTRATIVE
COSTS WILL ALSO GROW BUT AS A
PERCENTAGE OF OVERALL SALES IT
WILL DECLINE BECAUSE YOU'RE
AMORTIZING YOUR ADMINISTRATIVE
EXPENSES. A LARGE NUMBER OF
TICKETS SOLD BUT THAT IN FACT
IS NOT WHAT BEEN WHAT HAS
HAPPENED A WITH JENNER'S IN
FACT ADMINISTRATIVE COSTS HAVE
BEEN VERY STEADY AT AROUND 12%
OF. THE NEW AND I JUST WONDERED
WHY THAT IS BECAUSE IT'S NOT
WHAT I WOULD EXPECT. WELL
YOU'RE RIGHT ADMINISTRATIVE
COSTS HAVE REMAINED MOSTLY FLAT
AROUND 12% AS YOU INDICATE.
THOSE COSTS AS I INDICATED IN
MY TESTIMONY ARE DIVIDED
AMONGST WHAT WE PAY OUR TWENTY
THREE THOUSAND RETAILERS WHAT
WE PAY OUR VENDORS AND ALSO
OVERHEAD AND AS I INDICATED
ALSO DURING MY TESTIMONY ARE
ADMINISTRATIVE COSTS FOR
RUNNING THE DEPARTMENT OF
ACTUALLY BEEN BELOW WHAT'S BEEN
THAT THE EFFECTIVE CAP. AND WE
SAID THE DIFFERENCE BACK TO
SCHOOLS IN. IN TERMS OF
EDUCATION FUNDING I WOULD SAY
THAT. WHAT YOU'RE SEEING IN THE
DATA REFLECTS THE FACT THAT WE
HAVE TO PAY THE RETAILERS WE
HAVE TO BE THE VENDORS AND- TO
A LARGE DEGREE THAT'S BASED ON
A PERCENTAGE OF WHAT WE SELL.
SURE I UNDERSTAND THAT BUT
THERE'S ALSO A LARGE NO.
EXPENSES THAT ARE DRIVEN BY THE
VOLUME OF SALES. AND THOSE ARE
THE ONES THAT I WOULD EXPECT TO
DECLINE WE HAVEN'T BEEN ABLE TO
SEE THAT THE CLIENT AND- YOU
KNOW AS A LEGISLATOR WHEN YOU
SAY. WHAT WE'RE STILL UNDER THE
CAP THAT MEANS TO ME WILL ME WE
LOOK AT LOWERING THE CAP
BECAUSE YOU KNOW MAYBE MAYBE
SEVEN CENTER POSITION NEEDS
THAT TO OCCUR THERE. BUT I MEAN
AT THE END OF THE DAY WE'RE ON
THE SAME TEAM HERE WANT TO MAKE
SURE THAT WE- WE FOR. OUR
PROBLEM TO THE VOTERS OF
CALIFORNIA WE MAXIMIZE THE
NUMBER OF DOLLARS WE'RE GETTING
TO EDUCATION I JUST HAVE GRAVE
CONCERNS. THAT THERE ISN'T A
BETTER WAY OF GOING ABOUT THIS.
MCCARTY. THANK YOU I JUST SOME
FOLLOW UP QUESTIONS FROM MISTER
OBERNOLTE BUT FIRST WANT TO
CONGRATULATE THAT MISTER
JOHNSON ON THE APPOINTMENT OF
RUNNING THE LOTTERY I KNOW YOUR
EXPERIENCE AS A PRIOR LA
REPRESENTATIVE KEEP CHIEF
COMMITTEE CONSULTANT FOR HIGHER
EDUCATION THE GEO COMMITTEES
AND THEN AMONG RECENTLY LEADING
GOVERNMENT AFFAIRS. FOR A LARGE
TRIBE CALIFORNIA WILL SERVE YOU
WELL. TO HELP OUR LOTTERY AND
THINK FRANKLY GET TO THE ISSUE
THAT WE ALL KNOW ABOUT IT IF
ALL OF US LEGISLATORS COULD
GET. TEN DOLLARS FOR EVERY
CONSTITUENT THAT SAID HEY WHY
YOU WANT TO TAX MORE WHAT ABOUT
THAT LOTTERY. WE WOULD HAVE A
LOT OF MONEY FOR OUR OUR PUBLIC
EDUCATION AND- YOU KNOW. A LOT
OF PEOPLE REALLYDO THINK THAT.
INCLUDING VERY WELL VERY.
EDUCATE INDIVIDUALS. THAT THAT
SEE THE SALES IN THE REVENUES
AND I WANTED TO GET TO WHAT
WITH MISTER ROBLES WAS ASKING
BUT ALSO ASK ABOUT. OTHER
STATES AND PRACTICES BECAUSE-
WE'VE SEEN THAT THE THAT THE
GROWTH SO. THE ACTUAL MONEY. I
THINK IT'S A KIND OF SIMPLE AND
AWAY DON'T NINE THE LA A HAND
OUT HERE. TRANSFER STATE
EDUCATION WAS A LITTLE OVER.
AND NOW IT'S ONE POINT SIX OH
ROUGHLY 60% GROWTH THERE BUT
THE TOTAL LOTTERY SALES. AS OUR
BUDGET VICE CHILDREN HE STATED
HAVE MORE THAN DOUBLED. AND SO
YOU WOULD THINK WOULD HAVE A
LITTLE BIT MORE UPSIDE THERE SO
ON SOME OF THESE OTHER. STATES
THAT HAVE SIMILAR PROGRAMS IN
LOTTERY PROGRAMS THE MONEY'S
GOOD EDUCATION. ANY LESSONS
THAT AND I'M SORRY MISSUS AND
THE EARLIER CONVERSATION. ANY
LESSONS TO BE LEARNED THAT FROM
THE LA L. WERE FROM LOTTERY. AS
FAR AS WHAT WE COULD DO TO.
SQUEEZE MORE RESOURCES TO OUR
PUBLIC SCHOOLS WHICH ARE
STRUGGLING AS WE KNOW. THANK
YOU FOR YOUR QUESTION AND WE
APPRECIATE THIS OPPORTUNITY TO
TALK ABOUT THESE ISSUES TODAY.
THE CHALLENGE OF TELLING THE
LOTTERY STORIES BEEN THERE FROM
THE FROM THE INCEPTION OUR
SCHOOLS WHEN TO IS A COMMON
SLOGAN THAT MANY PEOPLE
REMEMBER FROM. THE CAMPAIGN IN
NINETEEN EIGHTY FOUR TO
ESTABLISH THE LOTTERY ACT. AND
I THINK PART OF THE CHALLENGES
EXPLAINING THE FULL PICTURE OF
EDUCATION FUNDING. I THINK A
LOT OF CALIFORNIANS ARE COULD
BENEFIT FROM KNOWING MORE ABOUT
WERE THE STATE'S DOLLARS GO
WHERE THEY COME FROM. THE
LOTTERY TICKETS OR FROM TAXES
WHEN IT COMES TO EDUCATION
FUNDING AS YOU KNOW SIR THERE
ARE MANY TENS OF BILLIONS
DOLLARS THAT SUPPORT ALL THE
DIFFERENT EDUCATION SEGMENTS.
AND AS THE ELLIE EXPLAINED.
LOTTERY FUNDING AMOUNTS
DEPENDING ON WHICH SIGNAL
YOU'RE TALKING ABOUT BETWEEN
ONE AND A HALF TO TWO PERCENT.
MAYBE A LITTLE BIT MORE
DEPENDING. WE'RE PROUD OF THE
FACT THAT LOTTERY DOLLAR
SUPPORT EDUCATION EVERYWHERE
THERE ARE STUDENTS IN
CALIFORNIA. FROM K. FOURTEEN
TO. UNIVERSITY SEGMENTS EVEN TO
STUDENTS IN THE DEPARTMENT OF
CORRECTIONS. IT DOES AVERAGE
ABOUT TWO HUNDRED ELEVEN
DOLLARS PER STUDENT. AND IT'S
ALWAYS BEEN A FRACTION OF THE
FUNDING THAT SCHOOLS GET FROM
THE STATE. WHAT WE WANT TO DO
AS I INDICATED IN MY OPENING
COMMENTS IN TERMS OF PROGRAMS
THAT CAN ACTUALLY BENEFIT
STUDENTS IS HIGHLIGHT THOSE
PROGRAMS. WE'RE NOT HERE.
DOLLARS TO PROVIDE IMPORTANT
FUNDING FOR SCHOOLS THAT
STUDENTS BENEFIT FROM. AND WE
HAVE WORK TO DO TO TELL THAT
STORY AND THAT'S THAT'S PART OF
THE VISION THAT I HAVE GOING
FORWARD IS WHAT CAN WE DO TO
EDUCATE CALIFORNIA EXCUSE ME
EDUCATE CALIFORNIANS MORE ABOUT
WHAT LOTTERY DOLLARS ARE DOING
IN THEIR SCHOOLS. WE KNOW THAT
THERE'S SOME GOOD STORIES OUT
THERE AND I'VE BEEN A PART OF
ON MYSELF. YOU RAISE A GOOD
POINT AND A VERY GOOD QUESTION
THAT WE HAVE TO GET BACK TO YOU
ONE SIR REGARDING WHAT HAPPENS
OTHER STATES. WE KNOW THAT
OTHER STATES. SOME OTHER STATES
DO NOT HAVE THE SAME CAP ON
PRICES THAT CALIFORNIA HAD WON
THE LOTTERY ACT WAS INSTITUTED
THIRTY YEARS AGO THAT'S THE
THIRTY FOUR PERCENT. OF THE 50%
FIFTY PERCENT. THE 50% CAP ON
PRICES WAS PARTY REGIONAL WATER
REACT. AND CALIFORNIA WAS ONE
OF A SMALL NUMBER STATES IT HAD
SUCH CAP OTHER STATES DID NOT
HAVE THAT CAP. ON PRICES. AND
SO. OUR EXPERIENCE THE TEN
YEARS OF DATA WE HAVE SINCE AB
ONE FORTY TWO WAS PASSED HAVE
SHOWN THAT WHEN YOU. HAVE A
LITTLE MORE FLEXIBILITY JUST A
LITTLE BIT MORE FLEXIBILITY. TO
MAKE THE PRICES MORE ATTRACTIVE
YOU CAN REALLY DRIVE SALES. AND
WE'VE SEEN THAT RESULT IN
INCREASED DOLLARS CHANGE THAT
YOU HAVE TO GO BACK TO THE
VOTERS ARE. BY A STATUE TO THE
LEGISLATURE. IT WILL BE THAT
THE LEGISLATURE OR CAN BE DONE
BY THE VOTERS IT HAS TO FURTHER
ACCORDING TO THE LOTTERY ACCESS
TO FOR THE PURPOSES. OF THE
LOTTERY MAXIMIZING SUPPLEMENTAL
FUNDING FOR PUBLIC EDUCATION.
AND A LEGISLATIVE PROPOSAL
WOULD REQUIRE A TWO THIRDS VOTE
SO THOSE I DON'T DO AS THE
ELLIE ON A SECOND SO THE PRICES
SO. IN PLAIN ENGLISH TO FOLLOW
UP ON ON MISTER OBERNOLTE.
YOU'RE SAYING THAT THE THAT THE
PLAYER. IS MAKING A DECISION
HEY I'M GONNA BUY EXTRA TICKET
CITY XML SCRATCHER OR DO THE-
POWER WHATEVER YOU CALL THE
BALL NUMBERS. BECAUSE THERE
OUGHT. THEY THINK THAT THEY
HAVE THE BETTER CHANCE OF
WINNING BUT- THE ODDS ARE
STILL. STACKED AGAINST YOU
THAT. IF YOU HAD A LITTLE MORE
FAVORABLE TO OUR- OUR PUBLIC
EDUCATION SYSTEM ARE THOSE
PLAYERS REALLY. GOING TO. NOT.
THEY PARTICIPATE. IN THE
EFFORT. WILL FUNDAMENTALLY SIR
WERE A SALES ORGANIZATION AND
THE CHALLENGE IS ALWAYS BEEN
HOW DO YOU FIND A WAY TO. IN A
RESPONSIBLE WAY. DRIVE SALES.
AND THAT'S THAT'S BEEN THE
TRICK IN THE CHALLENGE WE COME
UP WITH. INNOVATIVE PRODUCTS
WITH PRODUCTS USING A LICENSING
FOR INTELLECTUAL PROPERTY SUCH
AS MONOPOLY WHICH IS VERY
POPULAR. WE DO OTHER THINGS TO
FIND WAYS TO MAKE IT MORE
ATTRACTIVE BUT THERE'S- A
RESEARCH AND PLANNING ELEMENT
THAT GOES INTO ALL OF OUR
PRODUCTS TO DETERMINE. WHETHER
THOSE ARE REALLY MAKING MONEY
WHETHER THOSE ARE EFFECTIVE OR
NOT. THE THINGS THAT DON'T WORK
WE RETIRE AND WE'RE ALWAYS
LOOKING FOR NEW OPPORTUNITIES
TO PACKAGE OUR PRODUCTS IN SUCH
A WAY SO THAT. PEOPLE ARE
INCENTIVIZED TO PLAY. IT'S
ENTERTAINMENT AS WE'VE SEEN
WITH THE OTHER GAMING INDUSTRY
SEGMENTS. THE POINT IS TO
PROVIDE AN OPPORTUNITY FOR
PEOPLE TO USE. OF THEIR MONEY
IN WAYS THAT THEY FIND
INTERESTING AND ENTERTAINING.
AND IN OUR CASE IN THE STATE
LOTTERIES CASE WERE ABLE TO.
USE THE PROCEEDS FROM THIS TO
BENEFIT THE KIDS IN SCHOOLS AND
OTHER STUDENTS. AND THEN THE LA
OF ANY INSIGHT FROM OTHER
STATES OTHER COMMUNITIES WE
HAVEN'T DONE A ROBUST ANALYSIS
COMPARING CALIFORNIA TO OTHER
STATES I THINK ON THE FINAL
PAGE OF YOUR HAND OUT WE DO A
LAY OUT SOME COMPARATORS AND IN
TERMS OF SOME OBSERVATIONS.
THAT WE OWE IT. OF A COMPARISON
WITH OTHER STATES ONE OF THINGS
THAT WE DID TALK ABOUT IS THAT
IT IS IMPORTANT TO KIND OF KEEP
INTO KEEPING IN MIND TO SOME OF
THESE OTHER FACTORS. IN THESE
ARE THINGS THAT I THINK THE
LOTTERY IS CLEARLY THINKING
ABOUT AS THEY LOOK AT NEW
PRODUCTS OR HOW THEY OFFER
PRODUCTS. AND SO TO GIVE YOU AN
EXAMPLE THERE ARE THERE ARE
CERTAIN THINGS THAT ARE
INHERENT TO CALIFORNIA. THAT
MAY NOT BE AS A LARGE OF AN
ISSUE FOR OTHER STATES SO FOR
EXAMPLE IT DOES ALSO KICK BACK
TO GENERALLY HOW GAMING. IS
STRUCTURED IN CALIFORNIA SO FOR
EXAMPLE THERE ARE SOME OTHER
LOTTERIES TURN AHLERS THAT
MIGHT OFFER GAMES THAT CAN KIND
OF TOUCH ON THE CASINO SIDE
ESSENTIALLY CASINOS ARE
SOMETIMES INVOLVED IN THAT AND
SO THAT ARE READY PROVIDES A
DIFFERENT FROM WORK BECAUSE WE
HAVE A STRUCTURE THAT THE
VOTERS APPROVED. A LEGISLATURE
WAITED ON EXTRA. THE OTHER
ISSUE. IS A MAJOR NINE
CALIFORNIA AND THE WATER CAN
SPEAK MORE TO IT. IS THAT THERE
HAS BEEN A PRIORITY ON
RESPONSIBLE GAMING. AND SO A
FEW YEARS AGO THE CALIFORNIA
STATE LOTTERY WAS ONE OF THE
FEW LOTTERIES IF NOT THE ONLY
LOTTERY IN THE UNITED STATES
THAT HIT LEVEL FOUR
CERTIFICATION. FOR RESPONSIBLE
GAMING THERE CERTAINLY MORE
QUICK TO TALK ABOUT THAT IN
MORE DEPTH BUT THOSE ARE ALL
THINGS THAT WOULD IMPACTS.
COMPARATORS TO OTHER STATES.
THANK YOU THANK YOU MISTER.
I'VE GOT SEVERAL. QUESTIONS GOV
LISTING TO SOME OF THE
TESTIMONY. I WANT TO BEGIN HE
IS SOMEONE ADDRESSING MY
COLLEGE CONCERNS. ABOUT TO HEAD
OUT AND THE AND THE PERCENTAGES
INTO WHICH IS I DON'T THINK I
SHARE THE SKEPTICISM THAT I
HEAR FROM SOME MIGHT BUDGET
COMMITTEE COLLEAGUES BUT I SU
MY BUDGET COMMITTEE COLLEAGUES
HAVEN'T SPENT AS MUCH TIME
AROUND THE GAMING INDUSTRY HAS
AS THOSE OF US WHO SIT ON GEO
COMMITTEE AND CERTAINLY THE
NOTION OF OPTIMAL TAKE OUT OF
THE CHURN ARE PRETTY. YOU KNOW
WIDELY ACCEPTED THE FINANCIAL
STRATEGIES IN THE GAMING WORLD
SO THAT YOU'RE SIX IT'S WELL
WITH ME WHAT DOESN'T OR WHERE I
TEND TO GO DOWN THE RABBIT HOLE
WITH MR OBERNOLTE IS. ON
ADMINISTRATIVE COSTS THOUGH.
BECAUSE IT SEEMS LIKE THERE'S A
STRONG ARGUMENT THAT. THE
APPROACH TAKEN HASHING BILL AND
THE REDUCTION OF MISSION
EXPENSES AND THE SUBSEQUENT
INCREASE IN PRICES WOULD WORK
AGAIN IF WE WENT FROM YOU KNOW.
TWELVE TO TEN. ANOTHER SOME
POINT. WHERE YOUR PRIOR WILLING
TOO MUCH ON THE BALL. WHAT'S
YOUR PERSPECTIVE ON THAT. THANK
YOU FOR YOUR QUESTION. THE
BREAKDOWN AS I EXPLAINED
EARLIER I JUST WANT TO RUN
THROUGH IT AGAIN JUST TO
PROVIDE A FRIENDLY REFRESH.
WE'RE TALKING ABOUT A NUMBER OF
13% 7% IS FOR RETAILER
COMPENSATION AGO STORE TWENTY
THREE THOUSAND RETAILERS ACROSS
THE STATE. ABOUT 2% FOR GAMING
COSTS THOSE ARE. TO ACTUALLY
PURCHASE AND DISTRIBUTE THE
SCRATCHERS TICKETS. AND ALSO
THE CONCEPT WE PROVIDE THAT ARE
FROM OUR GAMING SYSTEM PROVIDER
IGT. MEETING REMAINING 4% FOR
OPERATIONAL EXPENSES. AND
TYPICALLY WE SPEND AROUND 3% OF
THAT 4% OR ABOUT THROUGH 75%
THAT WE SPEND WE TRY TO HOLD
BACK AS MUCH AS WE CAN WE SENT
THE DIFFERENCE TO SCHOOLS. SO
I'M NOT PREPARED TO SAY IN THIS
FORM YOU KNOW WHERE CAN WE CUT
FURTHER I THINK THAT'S
CERTAINLY DECISION THAT YOU
KNOW THE GOVERNOR AND THE
LOTTERY COMMISSION WOULD HAVE
TO FIGURE OUT. BUT I WOULD SAY
BASED ON MY SLIGHTLY LESS THAN
TWO MONTHS EXPERIENCE STUDYING
THIS INFORMATION AND TALKING TO
THE STAFF THAT THEY'RE MAKING
EVERY EFFORT TO BE EFFICIENT.
AND SO WHAT WE'RE TRYING TO DO
IS TAKE A CLOSER LOOK FIND WAYS
WE CAN INSTITUTE POLICY
PROCEDURES ARE EVEN BETTER AT
THAT. WHAT'S PROBABLY IMPORTANT
WHAT YOU JUST SAID IS. FOR THAT
A 1% REDUCTION. IN OVERALL THE
MEASURE OF COSTS WOULD ACTUALLY
BE A 25% REDUCTION. IN THAT
CONTROLLABLE ADMINISTRATIVE
COSTS SO I MEAN THAT'S
CERTAINLY SOMETHING TO WAY FROM
OUR PERSPECTIVE YOU TOUCHED ON
THE COMMISSION THE GOVERNOR.
MAYBE YOU CAN HELP OUR COLLEGE
UNDERSTAND. WHO IS THE ULTIMATE
AUTHORITY IN THE DECISION
MAKING PROCESS ON THE
EXPENDITURES RIGHT HOW DO WE
ARRIVE AT I SAW HERE TWO POINT
7% TO THE UC AND 76% TO K. TO
TWELVE A SATYR WHO SETS THOSE
PERCENTAGES AND AN APPROPRIATE
START THAT MONEY. THANK YOU FOR
THE QUESTION SHERMAN I'M GONNA
START THE ANSWER I'M GONNA ASK
OUR W. DIRECTOR FINANCE NICK
YOU CAN TO FILL IN SOME OF THE
MORE ADDITIONAL DETAILS.
ESSENTIALLY AS I UNDERSTAND IT
THE LOTTERY GENERATES AS MUCH
MONEY AS YOU CAN. AND THEN
QUARTERLY REPORTS THAT FUND OF
THE IN THOSE PROCEEDS DELIVERS
THAT MONEY TO THE STATE
COMPTROLLER'S OFFICE. THAT
MONIES DISTRIBUTED VIA FORMULA
DEPENDING ON THE SEGMENT THAT
IT GOES TO TYPICALLY BASED ON
EIGHTY EIGHT. BUT THERE
ADDITIONAL DETAILS THAT I'M
ASKING THE FOLKS HERE TO HELP
PROVIDE. NICK YOU CAN THE
CALIFORNIA LOTTERY SO AS
DIRECTOR JOHNSON I INDICATED
THE LOTTERY. RUNS FINANCIALS
QUARTERLY THAT THE CONTROLLER
COMES AND AUDITS THE FINANCIALS
IT'S A SIMPLE FORMULA REVENUE
MINUS THE PRICE EXPENSE MINUS
THE MEASURE EXPENSES PLUS THE
UNCLAIMED PRIZES IN INTEREST
EARNINGS THE THOSE GETS SENT IT
BY CONTROLLER I'LL THEIR
TRANSFERRED TO THE EDUCATIONAL
ENTITIES BASED ON AVERAGE DAILY
ATTENDANCE. AT THE EDUCATIONAL
ENTITIES THEN DECIDE HOW THEY
THE MONEY GETS FURTHER
ALLOCATED SO FOR EXAMPLE THE AN
INDIVIDUAL SCHOOL DISTRICTS
HAVE DETERMINATION ON WHICH
INDIVIDUAL SCHOOLS WITHIN THEIR
DISTRICTS GET THE FUNDING I SAW
THOSE PERCENTAGES ARE THEY'RE
NOT FIXED PERCENTAGE IT'S IT IS
BASED ON THE AVERAGE DAILY
ATTENDANCE. IN ALL THOSE
ENTITIES ARE SUBJECT TO
STATUTES WHICH WOULD SUGGEST.
TO ME THAT IF THE LEGISLATURE
WERE TO SAY. THE YOU KNOW
SEVENTY MILLION DOLLARS THAT
YOU RECEIVED. SHOULD BE SPENT
IN THIS PARTICULAR AREA OF THE
CSU UC OR ETCETERA THAT THAT
WOULD BE ABLE WITHIN OUR
AUTHORITY. WOULD YOU AGREE WITH
THAT STATEMENT. ALTHOUGH IT
TIES BACK TO IT HE DID THERE
HAS TO BE A DEMONSTRATION THAT
IT FURTHERS THE PURPOSES ACT SO
AS LONG AS IT'S WITHIN THE
CONFINES OF YOU'LL SUPPLEMENTAL
FUNDING FOR EDUCATION AND- YOU
KNOW IT'S AND IT'S NOT MEANT TO
REPLACE ANY FUNDING THAT THE
STATE PROVIDES. ELSEWHERE AND
THAT'S CORRECT. RIGHT NOT A NOT
NOT DISCUSSION OF. SWAPPING OUT
THE MONEY TO DISCUSSION OF WHAT
WE'RE SPENDING THE MONEY ON.
WHICH WOULD BE. AT LEAST AT
FIRST BLUSH MANY THE RUSSELL
LEDGE COUNCIL I GUESS BUT. AND
FURTHERANCE LET ME. ON THAT
SUBJECT GET INTO ONE MORE IN
THE ORIGINAL INITIATIVE. THE
PRICES ARE NOT SUBJECTED
COVERING TAXES. THERE ARE
SUBJECT TO FEDERAL TAXES NOW I
DON'T KNOW THAT THAT'S A POLICY
THAT'S CONSISTENT THROUGHOUT
THE COUNTRY IT DOES. BEG THE
QUESTION. DEAR WHY AND IT
SHOULD THAT CONTINUE TO BE THE
CASE BOX. THAT'S A GREAT
QUESTION AND I HAVE TO ADMIT I
DON'T KNOW THE ANSWERS TO
GERMAN THAT'S SOMETHING WE CAN
LOOK INTO FURTHER AND FIND IF
THERE'S ANY IN IN FOR
INFORMATION REVEALED IN A
SURVEY OF STATES AS TWO. TRENDS
OR REASONS FOR THAT BUT I DON'T
KNOW WHY THE RICH OWNERSHIP WAS
WRITTEN IN THAT MATTER. I THINK
IT'S IMPORTANT THAT WE DRILL
DOWN A LITTLE BIT OFF FOLLOW UP
WITH YOUR OFFICE YOU KNOW WE'VE
GOT WHAT FOUR POINT FOUR
BILLION OR SOMETHIN PRIZES THIS
PAST YEARS ARE ABOUT RIGHT. AND.
FOUR FOUR SEVEN SIX THAT COULD
JUST OFF TOP MY HEAD GENERATE
ANYWHERE FROM FOUR HUNDRED
MILLION TO ONE POINT FIVE
BILLION IN STATE TAX REVENUE.
SO THAT'S SIGNIFICANT INSIDE
LIKE TO CUT A STEP FURTHER WITH
YOU AND THAT BRINGS ME TO THE
GAMES YOU CAN OFFER NO YOU.
MADE SOME REFERENCE REALLY
SALLY MADE SOME REFERENCE TO
WHAT. THE UNIQUENESS OF
CALIFORNIA. GAMING LAW WHAT THE
LOTTERY IS ALLOWED OR NOT
ALLOWED TO DO WHAT'S DONE OTHER
STATES. WHAT GAMES CAN YOU
OFFER WHAT GAMES CAN'T SHUT OFF.
THE TWO GAMES UNDER THAT WE
OFFER AS I DESCRIBED EARLIER
OUR PARA MUTUAL GAMES THE LOTTO
GAMES AND SCRATCHERS THOSE THE
TWO GAMES AND I'M FAMILIAR WITH
I'D I'M NOT FAMILIAR WITH
SPECIFIC PROHIBITIONS ON OTHER
TYPES OF GAMES AND THAT'S
SOMETHING THAT I HAVE TO
RESEARCH FURTHER. AND ON THAT
NOTE IF IN FACT THE VOTERS IN
THIS STATE SOFFIT TO LEGALIZE
SPORTS WAGERING DO YOU THINK
THE STATE LOTTERY COULD
ADMINISTER SPORTS WAGERING. SO
THE QUESTION IS COULD THE
LOTTERY ADMINISTER SPORTS
GAMING IS THAT CORRECT SIR.
THAT'S THE QUESTION. WELL AGAIN
IN MY LESS THAN TWO MONTHS ON
THE JOB I HAVE TO START WITH I
DON'T KNOW I THINK IT'S
SOMETHING THAT WERE CURIOUS
ABOUT WHAT ARE THE
POSSIBILITIES THERE I THINK
THAT WE CAN GENERALLY HAVE A
MANDATE TO INCREASE SALES IN A
RESPONSIBLE WAY FOR THE PLAYERS
OF THE STATE LOTTERY. AND TO
THE EXTENT THAT SPORTS PRESENTS
AN OPPORTUNITY WE'D WANT TO
INVESTIGATE THAT AND SEE IF
THERE'S A WAY TO DO THAT IN A
RESPONSIBLE WAY BUT I COULDN'T
TODAY IF THAT'S SOMETHING THAT
WE MINISTER WE HAVE IN ORDER
FORTY EIGHT HUNDRED AND FORTY
SEVEN CIVIL SERVICE EMPLOYEES
ROUGHLY HALF OF THOSE FOLKS ARE
HEADQUARTERED HERE IN
SACRAMENTO. WE HAVE ABOUT NINE
OR TEN DISTRICT OFFICES AROUND
THE STATE AND A COUPLE
DISTRIBUTION CENTERS WHERE
OPERATE IN A IN A PRETTY LEAN
MANNER ALREADY AND I THINK THAT
YOU KNOW DEPENDING ON THE
GUIDANCE WE HAVE FROM OUR
LEADERSHIP THAT'S SOMETHING
THAT WE COULD LOOK AT BUT RIGHT
NOW I'M- I'M NOT SURE IF THAT'S
SOMETHING THAT WE CAN IMPLEMENT.
THANK YOU THAT'S ALL THE
QUESTIONS AND- MISS QUIRK SILVA.
YEAH GOOD AFTERNOON AND THANK
YOU FOR YOUR PRESENTATION UP I
COME OUT OF EDUCATION SO IN
NINETEEN EIGHTY FOUR I WAS JUST
STARTING MY TEACHING CAREER AND
I REMEMBER QUITE A BIT OF.
INFORMATION OUT THERE NOT ONLY
TO THE PUBLIC BUT TO EDUCATION
PROFESSIONALS ABOUT HOW THE
LOTTERY WAS GOING TO. REALLY
MAKE A DIFFERENCE FOR SCHOOLS
AND REALLY A HUGE CAMPAIGN AND
IT WAS VOTED IN. MY CONCERN IS
THAT YEARS LATER MANY MANY
YEARS LATER THAT WE HAVE A
WHOLE NEW GENERATION THAT MAY
BE BUYING LOTTERY TICKETS
PARTICIPATING BUT HAVE NO IDEA
OF THE- ORIGINALS OF THE US.
AND EVEN NOW NOW IS MY CALL THE
WAS SAYING I OFTEN DO GET
PEOPLE SAY HEY WHATEVER
HAPPENED OF THAT LOTTERY MONEY.
AND IT ISN'T THE IDEA THAT IT'S
NOT GOING WHERE IT WAS STATED
TO GO IT'S THAT THE SCHOOLS IN
FACT I THINK CAB BECOME VERY
COMPLACENT IN THE SENSE OF WELL
THAT'S JUST THIS MONEY WE GET
AND- BUT IN THE EARLY DAYS IT
WAS VERY MUCH SPECIFIED. BY THE
BOARDS TO NOT ONLY THE PARENTS
BUT ALSO TO THE EDUCATORS OF IT
WHAT EXACTLY THIS MONEY WAS
BEING USED FOR I KNOW THAT YOU
CAN GO ON TO A SCHOOL
DISTRICT'S WEBSITE AND SEE OR
THE REQUIRED I HAVEN'T ACTUALLY
LOOKED. BUT THAT YOU CAN SEE
HOW MUCH IS ALLOCATED SO I
GUESS TWO OR THREE THINGS ONE
IS I WOULD SUGGEST THAT WE LIKE
YOU SAY TELL A NEW STORY TO.
YOU KNOW GIVE EXAMPLES. READY
TO RESTART THAT NARRATIVE OF
WHY WE ORIGINATED THAT. BUT
THEN SECONDLY. IS THERE I THINK
SOMEBODY JUST ASK DOES IT GO TO
THE SCHOOL DISTRICT AND THEN
THE SCHOOL DISTRICT ALLOCATES A
DRUG SO WE COULD HAVE SCHOOLS
RECEIVING SOME AND OTHERS NOT
RECEIVING ANY. I THINK THAT
THAT THAT WOULD IS A BIG
SURPRISE FOR ME SITTING HERE
BECAUSE I THOUGHT IN FACT EVERY
SCHOOL GOT SOMETHING SO I THINK
THAT THAT COULD BE ANOTHER
CONVERSATION BECAUSE. YOU KNOW
NOT ALL SCHOOLS ARE THE SAME
SOME MAY NEED MORE OF X. THAN
OTHERS BUT- THAT THAT'S
IMPORTANT TO ME THAT MANY
PEOPLE AT THAT TIME IN NINETEEN
EIGHTY FOUR VOTED FOR THIS
UNDER THE- SUPPORT OF EDUCATION
ANDTHIRTY YEARS LATER ALMOST
OR TWENTY FIVE. I THINK THAT
THE RE STATING THAT AND REALLY
BRINGING THE SCHOOLS BACK INTO
THE DISCUSSION AND STARTED TO
LOOK FOR WAYS THAT THE PUBLIC
CAN UNDERSTAND HOW THOSE
DOLLARS ARE BEING IS BECAUSE I
DO SO I WAS SURPRISED TO SEE
TEACHER SALARIES OF THEIR- SO.
I THINK THERE'S SOME WORK WE
COULD DO NOW TO UPDATE WHAT'S
HAPPENING. WE STRONGLY AGREE WE
THINK THAT WE NEED TO RENEW AN
UPDATE THE STORY ABOUT THE
LOTTERY WHAT THE LOTTERY DOES
AND THE MONEY THAT GOES TO OUR
LOCAL COMMUNITIES. IN A SENSE
YOU KNOW IT IT'S A STORY OF
LOCAL CONTROL WE KNOW THAT
LOCAL SCHOOL DISTRICTS AND
COUNTY BOARD OF EDUCATION MAKE
THOSE SPENDING THIS MAKE THOSE
SPENDING DECISIONS. AND YOU
KNOW. THAT SOMETHING AS YOU
DESCRIBED PEOPLE WERE VERY MUCH
AWARE OF RIGHT AFTER THE
LOTTERY WAS WAS CREATED. SO
FROM WHERE WE SAID WE WANT TO
BE ABLE TO TELL THE STORIES
THAT WE CAN LEARN ABOUT AND
THAT WE KNOW ABOUT ABOUT HOW
LOTTERY MONIES USED. TO SUPPORT
STUDENTS AND IN GOOD WAYS AND
WE'RE GONNA DO SOME WORK ON
THAT. MR SALAS THANK YOU THANK
HER PRESENTATION YOU HEARD SOME
OF MY COLLEAGUES ACTUALLY
TOUCHING ON THIS TO IN THE
ADMINISTRATIVE COSTS AND WHAT
NOT AND I KNOW THE DIRECTOR
RESIGNED EARLIER THIS YEAR AND
WE GOT A TEAM GOING BUT I DID
HEAR WHAT YOU'VE BEEN DOING TO
UPDATE YOU KNOW THE POLICIES
AND PROCEDURES KIND OF WHAT. WE
HAD AN AUDIT AND THE OTHER HAD
A NUMBER OF RECOMMENDATIONS
AND- YOU KNOW WE LOOK AT THE
BAD HEADLINES OF. THAT HAVE
OCCURRED THROUGHOUT THE STATE
IN TERMS OF EXPENSES AND SOME
OF THE THINGS THAT HAPPENED AT
THE LOTTERY WHICH THEN LEADS TO
THE QUESTION OF. SHOULD WE PUT
THE CAP BACK IN AND SHOULD
THERE BE. A CERTAIN PERCENTAGE
GOING BACK TO SCHOOLS. CAN YOU
JUST COMMENT ON. THE AUDIT
WHERE YOU GUYS ARE THE
IMPLEMENTATION OF THOSE.
CONTROL MECHANISMS I'D
APPRECIATE THAT. THANK YOU FOR
YOUR QUESTION WE'RE VERY
CONCERNED ABOUT THE RECENT
THAT. THE MONEY TO ADMINISTER
THE LOTTERY IS DONE SO IN A
RESPONSIBLE AND PROFESSIONAL
WAY. AND YOU KNOW SOME OF THE
VERY PROBLEMATIC INCIDENTS THAT
HAVE BEEN REPORTED. WERE TAKING
ADMINISTRATIVE ACTIONS TO
ADDRESS THOSE THINGS. AS I
INDICATED IN MY TESTIMONY
PREVIOUSLY. WERE ON AVERAGE
SUBJECT TO ABOUT SEVENTEEN ON A
TWO YEAR. THE STATE CONTROLS
OFF OFFICE ACTUALLY HAS AN
OFFICE IN OUR BUILDING YOU'RE
IN SACRAMENTO WHERE THEY
CONDUCT THEIR- REGULAR AUDITS.
AND WE ACTUALLY PER THE JOINT
LEGISLATIVE AUDIT COMMITTEE.
HAVE ARE IN THE PROCESS OF.
BEING SUBJECTED TO AN AUDIT BY
THE BUREAU STATE LAWS BY THE
CALIFORNIA STATE AUDITOR. AND
WE ARE COMMITTED TO BEING AN
OPEN AND TRANSPARENT AGENCY
AND- PROVIDED WHATEVER
INFORMATION THEY HAVE REQUESTED
SO THEY CAN SEE HOW WE DO OUR
BUSINESS. TO ADDRESS THE FIRST
POINT YOU RAISE I THINK THAT
NEW IN MY TEN YEAR WHAT ARE THE
THINGS I'M TRYING TO DO IS MAKE
SURE THAT WE HAVE. CONSISTENT
POLICIES AND PROCEDURES
REGARDING LOTTERY PRACTICES. A
LOT OF THE LOTTERIES BUSINESSES
FUNCTIONS ACTIVITIES ARE BEING
DONE IN THE RIGHT WAY. BUT I'VE
ASKED FOLKS I THAT'S MY TEAM TO
REVIEW AND MAKE SURE THAT OUR
PRACTICES ARE CURRENT. THAT
PEOPLE ARE TRAINED ON THEM SO
THAT THEY'RE FULLY JUSTIFIED IN
THAT THEY'RE SUFFICIENT
OVERSIGHT. WE THINK THAT THE
CONTROLS COULD BE BETTER AND
WE'RE WORKING ON THAT. GOT IT
SEE. I KNOW THERE'S A CHECK IN
WITH THE AUDIT. RIGHT FOR EACH
OF THE RECOMMENDATIONS
IMPLEMENTED SO ARE THOSE THINGS
THAT WE CAN SEE IN YOUR AGENDA
ITEMS. AT THE COMMISSION
MEETINGS OR WE GET THAT I KNOW
YOU SAID THE CONTROLLER AUDITS
AND THE CONTROLLERS THERE BUT I
MEAN HONESTLY THE CONTROLLER
WAS THERE BEFORE AND THEN WE
HAD ALL THESE BAD HEADLINES
AND- WE HAVE THE INCIDENTS AS
WE HAVE I'M JUST TRYING TO
FIGURE OUT. ADMINISTRATIVELY
YOU KNOW ONE ARE YOU COMMITTED
TO ALL OF THOSE RECOMMENDATIONS
ACTUALLY IMPLEMENTING THEM AND
NOT JUST DISCUSSING THEM BUT
SEEING AN ACTUAL IMPLEMENTATION
PLAN IN PLACE CAN THE
LEGISLATURE EXPECT TO SEE THAT
BY THE END OF THE YEAR. OR.
THERE SUIT YOU KNOW. SOON
THEREAFTER. AND THEN I THINK
THAT'S GOING TO LEAD TO SOME OF
THE OTHER QUESTIONS THAT WERE
ASKED AS WELL FOR WHAT WE DO
POLICY WISE PROBABLY NEXT YEAR.
WELL I CAN START THE RESPONSE
TO QUESTION BY EXPLAINING THAT
WE DO HAVE. AN ENGAGEMENT WITH
EACH OF THE AUDITOR'S THAT
COMES THROUGH ALL THAT
INFORMATION IS SUBJECT TO
PUBLIC DISCLOSURE AND WE DO GO
THROUGH THE FINDINGS WE DISCUSS
THE FINDINGS WITH THEM. AND WE
TRY TO FIGURE OUT HOW TO
ADDRESS THEIR FINDINGS IN THERE
SOME BACK AND FORTH THEY
EVALUATE OUR PROGRESS OUR
SUCCESS IN ADDRESSING YOUR
FINDINGS AND- WE YOU KNOW WE GO
THROUGH THIS WITH EACH OF THE
ENTITIES THAT REVIEWS. ARE
ACTIVITIES AND FUNCTIONS AND
SOLVE THAT IS SUBJECT TO PUBLIC
DISCO DISCLOSURE. THESE ARE THE
KIND OF WANT TO. SO THE IN THE
AUDIT REPORT THAT THE
CONTROLLERS LEAST IN APRIL THEY
COMMITTED TO RETURNING IN
OCTOBER TWO. YOU SEE THAT WERE
FOLLOWING UP ON THE ITEMS THAT
WE SAID WE WOULD. SO WE WOULD
EXPECT THE CONTROLLER TO
RELEASE ANOTHER DOCUMENT
OUTLINING OUR SUCCESSES IN IN
IMPLEMENTING THE CHANGES. ALL
RIGHT AND THEN I JUST WANT TO
ASK A CLARIFYING QUESTION
BECAUSE I THINK. SOMEBODY
BROUGHT IT UP EARLIER THE
REASON WHY MORE MONEY IS
CONTACT EDUCATION IS. WOULD YOU
SAY IT'S BECAUSE WE REMOVE THE
PERCENTAGE REQUIRED TO GO TO
EDUCATION. WITH THE HI ASHLEY
BILL I THINK IT WAS IT SOMEBODY
MENTIONED EARLIER. I MEAN IS
THAT THE DIRECT CORRELATION ARE
WE JUST SAY MORE PEOPLE ARE
ACTUALLY JUST PARTICIPATING IN
GAMES. THE REASON GAMES I'M
SORRY I GOT. SURE THE REASON
WHY WE KNOW THAT MORE MONEY IS
BEING DRIVEN EDUCATION NOW
VERSUS TEN YEARS AGO IS BECAUSE
THE HIGH ASHI BILL REMOVE THE
CAP ON PRICES. PREVIOUSLY IN
NINETEEN EIGHTY FOUR WHEN THE
LOTTERY ACT WAS PASSED BY THE
VOTERS 50% OF THE VOTERS. THERE
IS A CAP OF 50% OF WHAT COULD
BE SPENT ON PRICES BY PROVIDING
MORE FLEXIBILITY ON THE PRICES
THAT ALLOWS A LOTTERY TO OFFER
MORE ATTRACTIVE PRODUCTS. AND
THAT DRIVE SALES. SO MORE SALES
MEANS MORE REVENUES MORE
REVENUES MEANS MORE MONEY TO
EDUCATION. GOT IT BUT THE I
THINK MISTRAL NOT TO BROUGHT
THIS POINT UP EVEN THOUGH THE
REVENUES GONE UP THE PERCENTAGE
HAS GONE DOWN. RIGHT SO IF WE
WERE TO IMPLEMENT THE
PERCENTAGE BACK IN. YOU KNOW IT
IS STRAIGHT OF REALLY SOMEBODY
WOULD ARGUE YOU KNOW SOME OF
THAT MONEY'S BEEN MISUSED. I
MEAN WHAT WOULD BE THE RESPONSE
TO THAT WELL SITUATES WOULD ASK
I WOULD SAY FOR EXAMPLE THE
STATE COMPTROLLER'S OFFICE
FOUND THAT IN THE IN THE I
THINK ONE OF THE REPORTS SAY
YOUR ALLUDING TO. A FINDING OF
ABOUT THRE HUNDRED THOUSAND
DOLLARS WHICH IS IMPORTANT WE
TAKE THAT VERY SERIOUSLY WE'RE
VERY CONCERNED ABOUT IT. WE
WOULD SEE THOUGH WE WOULD
COMPARE THAT TO THE FACT THAT
WHILE THERE HAVE BEEN PROBLEMS
WITH. SOME OF THE FINDINGS THAT
HAVE BEEN INDICATED MEASURE THE
HUNDREDS OF THOUSANDS OF
DOLLARS AND WE ARE ADDRESSING
THOSE PROBLEMS.
ADMINISTRATIVELY SO THAT THE
HOPEFULLY WILL NOT BE REPEATED.
WE THINK THAT THE OVERALL
STRUCTURAL CHANGES THE PRICE
FLEXIBILITY GRANTED. BY THE
LEGISLATURE TEN YEARS AGO. HAS
RESULTED IN HUNDREDS OF
MILLIONS OF DOLLARS OF
ADDITIONAL FUNDING FOR SCHOOLS.
WE ALSO WANT TO POINT OUT AS WE
WERE TALKING EARLIER WITH THE
COMMITTEES HERE THAT. BY
IDENTIFYING EFFICIENCIES WITHIN
OUR OPERATIONS WE'VE ACTUALLY
BEEN ABLE TO FUNCTION
UNDERNEATH THE EFFECTIVE CAP OF
THIRTEEN PERCENT. AND WE SENT
THAT DIFFERENCE BACK TO
SCHOOLS. OKAY THANK YOU THINK
MISTER. THANK YOU JUST
QUESTIONS ON ON MY AND I'M-
JUST GOING TO. FINANCE A TO
LOGGER PER PER PER SENATORS IN
TERMS OF THE BREAK OUT TO
EDUCATION IN TERMS OF THE-
SEVENTEEN EIGHTEEN FUNDING GOT
ONE POINT THREE FOR K. TWELVE
TWO HUNDRED AND FIFTY ONE. FIVE
MILLION FOR COMMUNITY COLLEGES
CSU SIXTY THREE YOU SEE FORTY
TWO HOW IS THAT ALLOCATION
DETERMINED. LED BY THE CONTROL.
I KNOW YOU ASKED EARLIER I
DIDN'T QUITE UNDERSTAND IT SO
THE STATE COMPTROLLER PERFORMS
A LOT OF OUR FINANCIALS EVERY
QUARTER AND IT THEY THEY
TRANSFER THE MONEY TO THE
EDUCATIONAL ENTITIES BASED
SOLELY ON THE AVERAGE DAILY
ATTENDANCE FORMULAS. SO IT'S
JUST A FUNCTION OF THE AVERAGE
DAILY ATTENDANCE WITHIN ALL
THOSE ENTITIES. THE. I'M NOT
JUST SAYING SO HOW DO YOU SAY
HOW DO YOU DETERMINE ONE POINT
THREE THREE TWO K. TWELVE
VERSUS TWO HUNDRED AND FIFTY
ONE MILLION TWO CAN COLLEGES.
SO IS K. TWELVE HAS THE
MAJORITY OF THE CALIFORNIA
STUDENT ALSO JUST BE IT JUST
BASED ON. SO BODIES ROOF
CORRECT OKAY
. BUT IT DOESN'T.
UC'S IS. IT DOESN'T LOOK QUITE
CORRECT TO MAKE SEE THEY WANT
TO GO BACK AND CHECK IT TO ME
JUST FOR EXAMPLE JUST I DON'T
HAVE THE STUDENTS IN FRONT OF
ME BUT JUST YOU SEE CSU I MEAN.
I THOUGHT CSU HAD MORE THAN.
50% MORE STUDENTS AND YOU SEE
BUT I COULD BE WRONG. BUT YEAH
YES RIGHT YES WHY SEASON WITH
50% MORE. WE HAVE TO LOOK INTO
THAT MISTER SHERMAN AND REPORT
BACK BUT AS HAS BEEN INDICATED
THE FORMULA IS DETERMINED BY
THE SIMPLY AVERAGE DAILY
ATTENDANCE IN THE SEGMENTS SO
THE LOTTERY DOESN'T CONTROL
WHERE THE MONEY GOES OR HOW
MUCH EITHER. EACH OF THE
SEGMENTS GETS. THE AVERAGE
DAILY ATTENDANCE IS SAID IN BY
THE PROPOSITION OR IS THAT A
STATURE. IN THE PROPOSITIONS.
THEN. GOING TO BACK TO YOUR
EXPENDITURES AND JUST TO
REVENUE SO YOU SEE YOU HAVE A
REVENUE CHART I SURE MISTER
OBERNOLTE SKEPTICISM NIGHT
EITHER I DON'T I DON'T KNOW I
DON'T SIT ON GEO SO MAYBE HE
DOES BETTER I STILL SURE THE
SKEPTICISM IN TERMS OF THE
INCREASE OF REVENUE BEING
DRIVEN BY THE PRICES DO YOU
HAVE ANY. DATA OR STUDIES THAT
SORT OF CORROBORATE THAT. THE
CRIME RATE THE RELATIONSHIP
BETWEEN PRICES AND REVENUE YES.
WOMEN'S STUDIES ON THE ICE AS
HE NODDED YES SO THE PART OF
THE WHAT INFLUENCED THE HI
ACTUALLY BILL IN THE FIRST
PLACE WAS WITH THE LOTTERY AT
THAT TIME CONSULTED WITH AN
OUTSIDE ENTITY TO LOOK AT THAT.
RELATIONSHIP AS WAS NOTED.
CALIFORNIA OF WAS. BEHIND SOME
OF THE OTHER NATIONAL LOTTERIES
THAT ALREADY HAVE THE PRICE
LOOKS ABILITY SO THIS
INDEPENDENT FIRM. CONFIRMS THE
CORRELATION OBVIOUSLY THERE
IT'S A BALANCE THERE COMES A
POINT WHERE. I LIKE TO GIVE THE
EXTREME EXAMPLE WE GET OFF A
GAME THAT OFFERS A 100% PRIZE
PAYOUT. PEOPLE LINED UP TO PLAY
THAT GAME BECAUSE EVERY TICKET
WINS. WE'D OBVIOUSLY LOSE MONEY
WE WOULDN'T GENERATE FUNDING TO
EDUCATION SO WE WOULD NEVER DO
SUCH A THING. BUT THAT
ILLUSTRATES THE THERE'S A
BALANCE BETWEEN. YOU KNOW WHAT
YOU. OFFERED TO LET THE PLAYERS
TO INCENTIVIZE THE SALES AND
WHAT WE'RE GIVING TO EDUCATION.
THE TOTAL AGREE I'M NOT ONE
WHICH IS WHAT I LOOK AT YOUR
YOUR HAND OUT THIS IS THE
HANNAH YOU YOU HAD A RIGHT YES
SIR IF I IF I JUST LOOK AT THE-
BLUE LINE OF REVENUE. YOU COULD
YOU COULD COME TO YOUR
CONCLUSION WHICH SAYS THAT YOU
KNOW WE OFFER MORE PRICES SO
WHEN I. DID TO ME THIS LOOKS
LIKE AN ECONOMIC CYCLE. THIS
LOOKS LIKE. AMIR IS THE EXACT.
THE NEAREST ECONOMY. WHAT THE
NEAR STATE REVENUE SO. SO TO ME
THE QUESTION IS IF YOU IF WE
DID NOTHING WOULD WE HAVE
GOTTEN. A SIMILAR INDICATION
JUST BECAUSE- OF ECONOMIC
INDICATORS AND- THIS IS. THIS
IS WHAT NATURALLY WOULD HAVE
JUST OCCURRED REGARDLESS OF.
THE DECREASE IN THE PERCENTAGE
TWENTY TO EDUCATION. AND I
WOULD SAY THAT SO IF YOU IF
EXTENDED THE CHART BEYOND THE
YEARS WERE SHOWING THE SIR
DURING THE .COM BOOM FOR
EXAMPLE THE SALES AND COUNTRIES
IN EDUCATION WE'RE NOWHERE NEAR
IN LINE WITH THE ECONOMY AT
THAT TIME SO. THERE'S NO
QUESTION THAT THE LOTTERY WAS
KIND OF FINDING OUT IN TERMS OF
WHAT ITS CONFUSION EDUCATION
WERE. SO IF WE STAY ON THE PATH
WE WERE ON WE'VE- THE- LOGIC IS
THAT WOULD BE AT THE CLUB.
COMPARED TO WHERE WE WERE AT
THAT TIME WHAT WAS THAT. DID DO
YOU HAVE TO KEEP INTEREST IN
AMONG THE PLAYERS AND WITH THE
CONSTRAINTS THAT WE WERE UNDER
WITH THE PAST TENSE THERE WERE
NOT A LOT OF OPPORTUNITIES FOR
US TO OFFER MORE TYPES OF GAMES
THAT PLAYERS WOULD. I AM
INTERESTING SYSTEM PRE AB
NINETY. ONE ONE FOR YOU LOOKS
LIKE A SPEAK FIVE OH SIX AND
WENT DOWN. IS THAT BECAUSE THEY
LOST INTEREST. OR THAT BECAUSE
THE ECONOMY STARTED GOING DOWN
SO THAT'S ACTUALLY. PRIZE
PAYOUT COMPARED TO SOME OF THE
OTHER GAMES. SO THAT'S THAT'S
FOR SURE EXPLAINS THE SPIKE IN
CONTRITION AD FOR THAT YEAR.
AND WHICH THEN MAKES THE OTHER
STUFF RIGHT YEARS LOOK LIKE IN
A DECLINE. ENERGY YOU CAN SEE
SIMILAR SPIKES IN TWO THOUSAND
LEVIN TWELVE THAT WAS. MEGA
MILLIONS JACKPOT GOT UP TO SIX
HUNDRED FIFTY MILLION THAT WAS
THE RECORD AT THAT TIME.
SIMILARLY AND IN TWO THOUSAND.
FIFTEEN SIXTEEN THAT'S WHEN
POWER BALL GOT TO ADVERTISE ONE
POINT FIVE BILLION DOLLARS AND
THAT WAS A RECORD AT THAT TIME.
YEAH BUT I CRAZY ARE YOU THAT'S
JUSTICE INDICATOR OF THE- TIMES
IF PEOPLE DON'T HAVE ANY MONEY
TO SPEND AT THE CONNECTION
BETWEEN FOOD AND A LOT OF THE
GONNA BUY FOOD RIGHT. SO IN
TERMS OF. SINCEFUNDS IT COULD
JUST BE A FUNCTION OF GOOD
ECONOMIC INDICATORS RATHER THAN
OF. WHAT'S HAPPENING WITH THE
LOTTERY LET ME ASK ANOTHER
QUESTION WHAT'S THE WHAT'S WHAT
WOULD YOU SAY IF I ASK YOU
WHAT'S WHAT'S THE CORE MISSION
OF THE LOTTERY. OF OTHER
DEPARTMENTS THE AGENCY CORE
CORE MISSION THE CORE MISSION
ISTO MAXIMIZE SUPPLEMENTAL
FUNDING FOR EDUCATION THAT'S
RIGHT IN A RESPONSIBLE WAY.
THEN THAT MAKES COMPLETE SENSE
SO I GOT A QUESTION SO IN TERMS
OF PERSONAL COST BASED ON THE
LA CHART. IS IT CORRECT THAT
PERSONNEL COSTS FROM ALWAYS TO
NINE TO SEVENTEEN EIGHTEEN WENT
FROM ABOUT. FORTY NINE MILLION.
TO ONE OH ONE MILLION THIS IS
JUST STRAIGHT ON PAGE TWO OF
THE ATLANTA. THAT WOULD APPEAR
TO BE THE CASE FROM THE NUMBERS
THAT ARE ON THE CHART YES. GOT
SO I GUESS WANT ONE QUESTION
WHY LOOK AT PERSONNEL COSTS AND
THE PERSONAL COST. IN THE BEING
ROUGHLY ABOUT 15% OF OVERALL
EXPENSES. NOT JUST PERSONAL
COST. I JUST DO I JUST DID
DIVISION YOU COULD YOU COULD
TAKE A CALCULATOR WHICH IS
WHICH IS WHAT I DID I DIDN'T.
MR OBERNOLTE DOESN'T IN THIS
HAD I USED TO COME. THANK YOU
MISTER CHAIRMAN. I HAVE NOT HAD
THE OPPORTUNITY TO RUN THE
NUMBERS MYSELF BUT WHAT YOU SAY
SOUNDS REASONABLE AND PROBABLY
CORRECT SIR. I THINK I CAN I
GUESS IT'S A LITTLE BIT.
CONCERNING SOME WONDERING. YOU
HAVE THIS ALMOST AS MANY
EMPLOYEES AS THE LEGISLATURE.
BECAUSE LEGISLATORS ABOUT
THOUSAND SO SIMPLE USING YOUR
ABOUT A HUNDRED I'M JUST KIND
OF CURIOUS. WHAT ON WHAT WHAT
THE HELL EIGHT HUNDRED
INDIVIDUALS DO INJURE YOUR
PERSONAL CASA HUNDRED MILLION
IS MORE IS BASICALLY WHAT YOU
GIVE TO UC AND CSU COMBINED. SO
TO ME MY CONCERN REAP WHAT THE
REASONS WERE HAVING THE HEARING
IS. THE PERCEPTION AND THIS IS.
WHY YOU'RE HERE MISTER JOHNSON
BECAUSE YOU'RE KIND OF RIGHT
THE SHIP. THE PERCEPTION ISN'T
THAT. THE MISSION OF THE
ORGANIZATION IS. TO FUND
EDUCATION THE MISSION SEEMS
LIKE THEY'RE IN THE GAMING
BUSINESS AND. PART OF THE PRIZE
MONEY GOES TO EDUCATION LIKE
EDUCATION YOU WANT RIGHT. SO I
THINK THE QUESTION IS HERE WE
WERE YOU HEARING A SIGNIFICANT
AMOUNT OF CONCERN IS WHEN YOU
LOOK AT ADMINISTRATIVE COSTS
YOU LOOK AT ALL THE DIFFERENT.
COSTS OF THE SEVEN BILLION
DOLLARS APPROXIMATELY SEVEN
BILLION DOLLARS IN SALES ONLY
ONE POINT SIX COAST EDUCATION.
WELL I'D LIKE TO START MISTER
CHAIRMAN BY ADDRESSING THE
POINT YOU RAISED EARLIER IN
YOUR COMMENTS ARE EIGHT HUNDRED
AND FORTY SEVEN EMPLOYEES CIVIL
SERVICE EMPLOYEES WORK HARD TO
SERVE THE MISSION OF A LOTTERY
TO SUPPLEMENT EDUCATION FUNDING
AND THEY SERVICE TWENTY THREE
THOUSAND RETAILERS ACROSS THE
FOUR CORNERS OF THE STATE AND-
A LOT OF WHAT WE HAVE TO DO IS
BASED ON ATTRACTING AND WORKING
WITH AND SERVICING. THOSE
TWENTY THREE THOUSAND RETAILERS.
WE OPERATE NINE DISTRICT
OFFICES ACROSS THE STATE WITH
TWO DISTRIBUTION CENTERS ONE IN
NORTHERN AND SOUTHERN
CALIFORNIA. AND I THINK THAT
THE OVERALL GOALS OF OUR
LEADERSHIP AS EMBODIED IN THE
COMMISSION AND THE
ADMINISTRATION AND EVEN PRIOR
ADMINISTRATIONS HAS BEEN WHAT'S
THE MOST EFFICIENT WAY TO SELL
THIS PRODUCT. MAXIMIZE THOSE
SALES WITH THE HARDWORKING
STAFF THAT WE HAVE I'M PLEASED
TO SAY THAT YOU KNOW I'VE I'VE
MET QUITE A FEW OF THE FOLKS
HEADQUARTERED IN SACRAMENTO
AND- MISTER CHAIRMAN I CAN TELL
YOU A LOT OF THOSE FOLKS HAVE
BEEN THERE FOR MANY MANY YEARS.
AND THEY TAKE THEIR JOBS VERY
SERIOUSLY. AND SO YOU KNOW I
THINK THAT WE'RE ALWAYS TRYING
TO FIND WAYS TO DO OUR JOB
BETTER THAT'S WHY I'VE ORDERED
A TOP TO BOTTOM REVIEW OUR
POLICIES PROCEDURES. TO MAKE
SURE THAT THEY'RE CONSISTENTLY
FOLLOWED SO WE DON'T HAVE THE
KINDS OF INCIDENTS THAT HAVE
BEEN REPORTED IN THE PRESS. I
WANT TO FIND EFFICIENCIES SO
THAT WE CAN REDUCE OUR MINISTRY
FOR PRETTY EVEN MORE IF THAT'S
POSSIBLE. BUT I THINK THAT THE
MISSION IS ALWAYS BEEN HOW DO
WE DO IT IN THE MOST EFFICIENT
WAY POSSIBLE. OKAY SO. I DON'T.
I DON'T KNOW THE ANSWER
QUESTIONS THAT'S OKAY. SO ONE
ONE IN. FOR EVERY SEVEN DOLLARS
ONE DOLLAR GOES INTO RETAIL
COST CAME COST PERSONAL COSTS.
AND MARKETING COSTS. SORRY I
DON'T KNOW THAT THAT'S THE.
MODEL OF EFFICIENCY. IN
ADDITION THE AS THE LA NOTED
REVENUES HAVE GONE UP A HUNDRED
AND 34% BUT. MONEY TO EDUCATION
ONLY WENT UP 60% SO THAT THAT
TO ME STRIKES ME AS AN
IMBALANCE BETWEEN YOUR MISSION
AND YOUR. A AND YOUR YOUR YOUR-
YOUR BUSINESS MODEL. WELL THE
BUSINESS MODEL SIR IS BASED ON
THE FACT THAT. THERE'S AS WE'VE
JUST AS WELL AS WE HAVE
DISCUSSED AND TALK ABOUT THIS
HEARING THERE'S A TIGHT
CORRELATION BETWEEN. THE PRICES
THAT THE LOTTERY CAN OFFER THE
EXPENSE TO OFFER THOSE PRICES
AND- THE RELATED OVERHEAD AND
SO WE KNOW THAT IF WE CHANGE
THE PRICE STRUCTURE IF WE
REDUCE THE AMOUNT ALLOCATED TO
PRICES THERE WOULD BE LESS
SALES. WE THINK THAT THE BEST
METRIC FOR DETERMINING THE
LOTTERY SUCCESS IN MEETING ITS
MISSION IS THE AMOUNT OF
DOLLARS DRIVEN EDUCATION OKAY
LET'S GO DON'T AYE AYE AYE FALL
THE METRIC SO. USING THAT SAME
MINDSET FROM EIGHT TOLD NOW.
THE REVENUES IN TERMS OF MONEY
TOWARDS EDUCATION IS SIX
HUNDRED MILLION DOLLARS RIGHT.
THE INCREASE IS ABOUT THAT
RANGE YES I. BUT THE REVENUES
WENT UP FOR BILLION DOLLARS. SO
ONLY 15% OF YOUR REVENUES WENT
TO YOUR CORE MISSION. WELL THAT
IS SEEM TO GET WE ALL ESTABLISH
WILL AGREE THERE'S NO ARGUMENT
WITH WITH THE MISSION. WE'RE
JUST WONDERING WHY THERE'S NO
MORE MONEY GOING TO EDUCATION.
SO YOU HAD THREE POINT SIX
BILLION DOLLARS THAT WENT
ELSEWHERE. IT GOES SURPRISES IT
GOES TO OUR RETAILERS IT GOES
TO OUR VENDORS THE COST OF IN.
QUESTION WE'RE WENT IT'S RIGHT
HERE IN FRONT OF US THIS IS ALL
CONTROL WE'RE WE'RE NOT WE'RE
NOT WE'RE NOT THE AUDITOR'S
WE'RE NOT ARGUING OVER WHERE
THE MONEY'S GOING YES OR
WHETHER IT WAS MISAPPROPRIATED
WAIT WAIT WHAT WE'RE ASKING
THIS IN TERMS OF THE MISSION.
RIGHT THE OVERALL MISSION OF
THE ORGANIZATION IS MORE MONEY
FOR SCHOOLS SIDE A TIME WHEN
REVENUES WENT UP A HUNDRED AND
34% HOW IS IT THAT ONLY.
FINDING YOUR MAIN CORE MISSION
ONLY WENT UP 60% AND HOW WAS IT
THAT WHILE YOU INCREASED. FOUR
BILLION DOLLARS ONLY SIX
HUNDRED MILLION OF THE WINTER
EDUCATION WHICH IS ONLY A 15%
ALLOCATION. EVEN A LOWER
PERCENTAGE RIGHT ME. IT'S A
IT'S A LOWER PERCENTAGE THE
WHERE YOU START. SO TO ME THAT
THAT'S WHAT THAT'S WHAT IT
SEEMS LIKE YOU YOUR MISSION HAS
BEEN ERODED. WELL I KNOW I KNOW
FROM MY OWN REVIEW THE FIGURE
SIR THAT. ESSENTIALLY A LOT OF
THE DIFFERENCES IN MORE PRICES.
IN TERMS OF WHERE THE MONEY HAS
BEEN SHIFTED. AND WHEN WE'RE
ABLE TO OFFER MORE ATTRACTIVE
PRIZES THAT'S WHAT DRIVES THE
SALES. OKAY SURPRISES WHEN UP
THREE BILLION DURING THE SAME
TIME. SIX HUNDRED WENT TO
EDUCATION SO FOUR HUNDRED. INTO
EVERYTHING ELSE. I'M SORRY SIR
I WAS IT WAS CONFIRMD AFTER
WHAT WAS YOUR QUESTION SIR
NOTED NO I I'M JUST I'M JUST A.
MAKING STATE SO AGAIN YOU. YOUR
SAYS SO YOU'RE SAYING WHERE THE
MONEY WENT RIGHT SO THREE
BILLION WENT TO PRICES. SIX
HUNDRED MILLION WENT EDUCATION
FOUR HUNDRED MILLION WENT TO
EXPENSES. OTHER EXPENSES ALL
THE DIFFERENT EXPENSES HERE. SO
I THINK THE QUESTION IS. COULD
THERE BE OTHER LESS PRIZE MONEY
OR LESS EXPENSES AND MORE MONEY
GOING TO EDUCATION. WELL WE
THINK THAT IF THERE WAS A BIT
BECAUSE THE WHOLE REASON YOU'RE
A STATE EMPLOYEE DURING
EXISTENCE IS TO FUND EDUCATION.
BUT IT'S IT SEEMS LIKE THE WITH
THE ONE THING THAT'S HAPPENED
IS. YOU'RE THE SCHOOLS ARE
GETTING A LITTLE BIT MORE MONEY
THAT REALLY WHAT YOU'VE MANAGES
TO REALLY INCREASE. THIS
LOTTERY ENTERPRISE. I MEAN
THAT. THE ADMINISTRATIVE
EXPENSES LET'S JUST TALK ABOUT
THAT HAVE GROWN FROM ALMOST
FOUR HUNDRED. MILLION HAS MORE
THAN DOUBLED TO EIGHT HUNDRED
AND THIRTY THREE MILLION. SO
THAT'S DOUBLE BUT THE EDUCATION
FUNDING HAS DOUBLED. SO THAT
SEEMS LIKE THE ONLY SUCCESS HAS
BEEN THAT THE ORGANIZATIONS.
GROWN WHAT THE TIME THE
PERCENTAGE OF THE MONEY TO
EDUCATION HAS GROWN. IN A
SIMILAR MANNER. WELL. I KNOW
THAT IF WE REDUCE THE MONEY FOR
PRICES WOULD REDUCE SALES AND
ALL THE MONEY. WOULD BE
DIMINISH THE PIE WOULD BE SMALL.
I KNOW THAT IF WE CHANGE WHAT
WE PAY THE TWENTY THREE
THOUSAND RETAILERS ACROSS THE
STATE OF CALIFORNIA THAT WOULD
IMPACT OUR ABILITY FOR SALES AS
WELL. I KNOW THAT. A LOT OF THE
TERMS AND CONDITIONS RELATIVE
TO WHAT WE PAY OUR VENDORS ARE
CONTRACTUAL AND THAT. THOSE ARE
MULTI YEAR CONTRACTS THAT THE
STATE HAS COMMITMENTS AND- ONE
OF THE THINGS I'VE ASKED TO
HAVE TO DO IS THESE CONTRACTS
COME UP FOR RENEWAL IS TO MAKE
SURE THAT WE CAN GET THE BEST
DEAL FOR THE STATE OF
CALIFORNIA. I CAN'T TELL YOU
TODAY WHETHER THAT WOULD RESULT
IN COST SAVINGS BUT I'VE BEEN
PUSHING FOLKS TO MAKE SURE THAT
WE OFFER TERMS THAT ARE BETTER
FOR THE CALIFORNIANS THAT WE
SERVE INSTEAD OF. BETTER SUITED
TO THE VENDORS INTERESTS. WE
ARE TRYING TO FIGURE OUT WAYS
WE CAN DO OUR JOBS BETTER. WITH
LESS THAN TWO MONTHS ON THE JOB
I CAN'T GIVE YOU A FIRM
SOLUTION FOR. US ON THE
QUESTIONS YOU ASK SUCH AS THE
ADMINISTRATIVE COSTS BUT THE
NUMBERS THAT HAVE BEEN MADE
PLAIN ME INDICATE THAT THERE
HAVE BEEN SUBSTANTIAL EFFORTS
IN THAT REGARD. AND I KNOW THAT
WE HAVE MORE WORK TO DO. BUT
AGAIN HAVE AND JUST JUST TAKING
A- LOOK IT SEEMS LIKE. AGAIN I
THINK THE LOTTERY HAS SORT OF
LOSSES WHERE. YOU HAVE AN
ORGANIZATION. THAT HAS GROWN
ITS OPERATION. THAT REALLY
ALMOST AT THE EXPENSE OF
EDUCATION NOT FOR EDUCATION.
AND THAT IS WHERE I THINK WE'RE
CONCERNED. EVERY EVERYTHING
ELSE HAS COMMENSAL
COMMENSURATELY GROW. WHICH IS
REVENUES HAVE DOUBLED THE
ADMINISTRATIVE EXPENSES HAS
DOUBLED. BUT THE MISSION THE
SUPPORTING UP THE MISSION TO
EDUCATION HASN'T. SO IT DOESN'T
THINK AGAIN IT LOOKS LIKE THE
ORGANIZATION HAS SUCCESSFULLY
INCREASED THEIR ENTERPRISE
WITHOUT REALLY FOR FILLING
THEIR CORE MISSION TO THE
EXTENT THAT THE SHOT. SO I
THINK THAT THAT'S GOING TO BE
THAT THAT IS A MAJOR. A MAJOR
MAJOR ISSUE. GERMAN YOUR POINT
IS WELL TAKEN IT'S SOMETHING
THAT WE CONSIDER VERY SERIOUSLY
I CAN TELL YOU LOOKING AT THE
NUMBERS OVER THE YEARS THAT.
ADMINISTRATIVE EXPENSES HAVE
REMAINED ABOUT 12% SO I THINK
THAT. I THINK YOU BETTER DO
ENOUGH AGAIN DOES NOT IN TERMS
OF WHEN YOU GET THAT 12% IT'S
NOT LOOKING TO FACTORY. THIS IN
TERMS OF WHAT YOU CALL A
MINISTRY OF EXPENSES TOTAL
ADMINISTRATIVE EXPENSES. IT'S
ABOUT TWELVE AND A FEW POINTS.
ANY TO THE LAST FISCAL YEAR
BECAUSE THAT'S WHEN YOU EXCLUDE
PRICES AND THAT YOU GET LIKE
PRICES IN THAT MANY DEDICATION
OF THE YES FOR CLARIFICATION
PRIZE EXPENSES NOT MENTION
EXPENSE THAT'S A COST OF DOING
BUSINESS. SO IF THE INITIAL
EXPENSES ARE WHAT WE CARE
RETAILERS WHAT WE PAY OUR ARE
GAINING PROVIDERS AND THEY'RE
AND THEY'RE 12% OF ONE NUMBER.
THAT TOTAL REVENUES DAHLE SALES
REVENUE. TOTAL PERCEPTUAL CELLS
REVIEW WHEN SHE TOOK OUT THE
PRIZE MONEY. THE BOSS SAYS IN
THE PRESS MOODY'S CELLS REVENUE
IS JUST PURELY WHAT WE TAKE IN
ON THE SALE OF THE PRODUCTS SO
THAT'S BEFORE WE PAY OFF PRICES.
MAYBE I CAN HELP ON ON THAT ONE.
MR MAYBE I CAN HELP ON THAT ONE
SO IF YOU'RE LOOKING AT THE
SEVENTEEN EIGHTEEN NUMBERS FOR
EXAMPLE AM I THINK THE WAY THAT
IT BREAKS DOWN IS SIXTY FOUR
POINT ABOUT 64% WENT TO PRIZES
ABOUT 24% WENT TO EDUCATION AND
THEN ABOUT 12% WENT TO
EXPENSES. SO THAT COMES OFF OF
THE TOTAL SALE NUMBER. OKAY
DOES THAT HELP YES. I SEE YOUR
PIERCING SO TOTAL PERCENT.
RIGHT AND MISTER SHERMAN WE
BELIEVE THAT NUMBER HAS BEEN.
ROUGHLY FLAT IN THE LAST DECADE
TWELVE POINT SOMETHING PERCENT
IN EACH OF THE LAST ROUGHLY TEN
TO TWELVE FISCAL YEARS. AND
AGAIN I'M NOT GOING TO SAY THAT
THERE ISN'T ROOM FOR
IMPROVEMENT WE WANT TO ACHIEVE
OUR MISSION WHICH IS TO
MAXIMIZE SUPPLEMENTAL FUNDING
IF THERE'S A WAY WE CAN SAVE
SOME MONEY DOING IT. BY DOING
THINGS BETTER EITHER
HEADQUARTERS AROUND THE STATE
WE WANT TO DO THAT YEAH BUT
YOU'RE SAYING IT'S A IT'S UP.
12% WHEN REVENUES HAVE MORE
THAN DOUBLED SO IN ESSENCE WHAT
IS 12% YOUR EXPENSES HAVE MORE
THAN DOUBLED. AND THERE'S A
QUESTION IF THE BULK OF YOUR
REVENUE IS REALLY GOING TO
PRICES IS FROM AN
ORGANIZATIONAL EFFICIENCY POINT
OF VIEW IS A REALLY
ORGANIZATION FISH. BECAUSE
AGAIN IT'S JUST THE
ADMINISTRATION THE ADDITIONAL
PRICE MONEY WELL IT DOES COST A
LOTTERY MORE TO SELL MORE
PRIZES AND BIGGER PRICES THE
TRUTH YES SO DO I AM SAMPLE OF
THAT IS IT'S ESSENTIALLY WITHIN
OUR GAMING OUR PRIMARY GAMING%
SYSTEM UNDER WITHIN THE
CONTRACT ITSELF IS SPECIFIES A
FIXED PERCENTAGE OF SALES THAT
GO TOWARD THE VENDOR. SIMILARLY
AS DOCTOR JOHNSON EXPLAINS THE
RETAILERS ESSENTIALLY GET A
FIXED PERCENTAGE PURSUANT TO
WATER REGULATIONS OF EVERY
TICKET THEY SELL AND SOME OF
THE EVERY EVERY TICKET THAT
THEY CASH EVERY WINNING TICKET
FOR THE CASH SO THOSE ARE KIND
OF FIXED PERCENTAGES OF OUR
SALES. RIGHT OFF THE TOP WITHIN
ADMINISTRATION. I JUST TO GO
OVER PHYSICIAN I THINK YOU'RE
AFTER COME BACK AND I THINK
TAKE I THOUGHT YOU HAD TAKEN A
CHANCE TO TAKE A- LITTLE
LONGER. CLOSER LOOK AT ALL YOUR
DIFFERENT EXPENSES COULD DOES.
DOES BEG THE QUESTION AS TO
WHETHER OR NOT ORGANIZATION IS
REALLY SERVING IT'S REAL
MISSION. RATHER THAN IT'S JUST
BECOME A GAMING OPERATIONS THAT
DONATES ONE POINT SIX BILLION
DOLLARS TO EDUCATION. BECAUSE
THAT'S WHAT FEELS MORE TO ME.
BUT IT'S A GAMING OPERATION
THAT MAKES A DONATION. NOT
THINK A GAMING OPERATION THAT'S
REALLY FOCUSED ON. GENERATING
MORE MONEY FOR SCHOOLS WHICH IS
WHICH IS REALLY. THE PURPOSE.
YEAH THE SCRIPTS OF THIS ON
THAT SAME LINE OF QUESTIONING I
GUESS ONE OF THE THINGS AS FAR
AS YOUR EMPLOYEE COST I WOULD
ASSUME THAT IF YOU'VE HAD A
LONG TERM EMPLOYEES THAT THOSE
COSTS HAVE GONE UP JUST. YOU
KNOW WHETHER IT BE BENEFITS
WHETHER IT BE. SO AS WE LOOK AT
THAT. WITH HOW MANY EMPLOYEES
DO YOU HAVE ABOUT A HUNDRED AND
FORTY FIVE CIVIL SERVICE
EMPLOYEES SO THAT ALSO IS
PROBABLY GOING TO BE ADDING
INTO THAT COST EVERY YEAR. THAT
THE AGENCY IS OPERATING AS THE
COSTS OF HAVING SUBSTANTIAL
NUMBER OF EMPLOYEES IS THAT
ADDED IN THERE MISTER KING. ARE
SITTING ON THE WAIST COSTS AS
FAR AS. OPERATING THE WHAT'S
OUR EMPLOYEES CALL. AND ALL
THAT. YES IT WOULD INCLUDE TO
THE PERSONAL LINE ITEM IS
BASICALLY ALL STAFF COSTS
THAT'S OUR UNDERSTANDING. AND
NOW IT'S GONE UP EVERY YEAR OR
PROBABLY WOULD BE EXPECTED TO.
IT HAS GONE UP OVER THE TEN
YEARS AND YOU CAN IF YOU WOULD
LIKE TO REFERENCE ON PAGE TWO
OF THE HAND OUT. THERE IS A
BREAK OUT OF THAT FOR YOU.
THANK YOU. SO WHAT QUESTION
WOULD WHICH IS JUST GENES
CONFERRING WITH STAFF SO HìNH
SEVENTEEN EIGHTEEN YOU OFFER
FOUR POINT FOUR BILLION IN
PRICES. HOW DO YOU DETERMINE
THAT PRIZE ALLOCATION DO YOU
SEE DO YOU HAVE A- SET AMOUNT
OF CORAL COMPRISES JERKING OFF
FOR. GOING INTO THE YEAR. I
MEAN I KNOW THAT'S SEPARATE
FROM SAY MEGA MILLIONS OF
SEPARATE FROM WHEN YOU BUY YOUR
LOTTERY TICKETS BECAUSE THAT'S
JUST BASED ON. WHO'S BUYING.
RIGHT NOW IT IT REALLY IS A
FUNCTION OF THAT THAT DRUG
INJURIES OR TO EXPLAIN THEY
HAVE A OF. A FIXED PRIZE PAYOUT
PERCENTAGE AND THAT'S IN THE
RULES OF THE GAME THEMSELVES.
SCRATCHERS WE HAVE MORE
FLEXIBILITY WE HAVE DIFFERENT
PRICE POINTS WE CALL THEM SO WE
HAVE. OUR CHEAPEST TICKET IS A
ONE DOLLAR AND OUR MOST
EXPENSIVE IS THIRTY DOLLARS.
OBVIOUSLY TO INCENTIVIZE PEOPLE
TO MOVE UP THAT'S THE PURCHASE
CHAIN. WE OFFER MORE PRIZES
MORE WINNING EXPERIENCES OF THE
MORE. DOES MORE COSTLY THE
TICKET. SO IT THE THAT FOUR
POINT. FOUR SEVEN BILLION IS A
FUNCTION OF. THIS ALSO TO JUST
GONE DESCRIBES AS YOU'RE MAKING
THE SCRATCHERS TRIED TO COULD
YOU GET OR SO IS MAKING YOUR
BUYING SCRATCHER WRITTEN. BY X.
X. AMOUNT OF. SCRATCHERS SO
YOU'RE SAYING IF YOU'RE BUYING.
LET'S SAY AT TWO BILLION
DOLLARS WORTH OF SCRATCHERS.
YOU KNOW HOW DO YOU THIS IS A
SET FORMULA BASED ON THAT PRICE
OR- IT'S NOT A IT'S NOT SET
THEIR AVERAGES FOR THE PRICES
JUST A- THAT POINT SO FOR
EXAMPLE THE ONE DOLLAR GAMES
AVERAGE OUT ABOUT 55% THAT WE
PAID OUT IN PRIZES THE MOST
EXTREME THE THIRTY DOLLAR GAME
IS CLOSE AT ABOUT EIGHTY
PERCENT. OKAY SO I SHOULD I
SHOULD BE PLAYING THIRTY
DOLLARS. IF YOU'RE A HIGH
ROLLER. OKAY BUT HOW DO HOW DO
YOU DETERMINE. I MEAN WHEN YOU
WHEN YOU'RE BUYING THE
SCRATCHES YOU HAVE A CERTAIN
AMOUNT OF BUDGET AND- ASSUME
THE AVERAGE PAYOUT. RE SO THE
FOUR ONE FOUR SEVEN SIX IS
BASED ON WHAT WE ACTUALLY PAID
OUT THOUGH SO IT'S- UNDERSTOOD
YEAH THEN THEN YOU TO BREAK IT
OUT BECAUSE WE DON'T KNOW WHAT
THE SCRIPTURE VERSES WITH A
LOTTERY CRACKED BUT I CAN TELL
YOU ROUGHLY PERCENTAGE WISE THE
DRAW GAMES WOULD BE ABOUT FIFTY
PERCENT. OF THE SALES OKAY FOR
DRAW AND SCRATCHERS ARE
AVERAGING ABOUT 64% OKAY. SO
THE GOAL GOING INTO THE YEAR
YOU'LL SEE. WE'RE GONNA BUDGET
ABOUT. TWO AND A HALF BILLION
FOR SCRATCHERS. IN THE BASED ON
THAT YOU'RE GONNA KNOW ROUGHLY
WHAT THE PALE IT'S GOING TO BE
BY THE NUMBER OF THIRTY DOLLARS
SCRATCHERS VERSUS THE NUMBER
ONE DOLLAR SCRATCHERS AND- I
ASSUME YOU'VE BEEN DOING THIS
FOR AWHILE STIFF PRETTY. PRESET
NUMBERS ABOUT WE ARE WHAT
WHAT'S WHAT'S. THANK YOU ANY
OTHER ADDITIONAL QUESTIONS.
COMMENTS THOUGHTS OF. ANY
PUBLIC COMMENT I DON'T SEE MUCH
PUBLIC HERE. NO NO TO REDEEM A
LOTTERY TICKET. OKAY GREAT WELL
THAT YEAH THANK YOU MISTER
JOHNSON WELCOME TRANSLATIONS ON
YOUR NEW JOB VERY MUCH
APPRECIATE ALLEY TO PUBLIC
FINANCE FOR COMING TODAY I
THINK WE HAVE A VERY VERY
INFORMATIVE HEARING. WE REALLY
WISH YOU BEST OF LUCK IN YOUR
NEW JOB REALLY HOPE YOU. HAVE
AN OPPORTUNITY TO KIND OF
REALLY HELP HELP LEAD THIS
ORGANIZATION AND WE HOPE TO BE
A SENIOR NEXT NEXT WINTER WILL
BE KIND OF REVISIT. BUDGET
OVERALL AGAIN AFTER OUR SESSION.
FINISHES THIS YEAR. THANK YOU
VERY MUCH. THANK YOU VERY MUCH.
THIS IS. FOR MORE INFORMATION