NATIONAL COUNCIL OF LEGISLATORS FROM GAMING STATES
COMMITTEE ON LOTTERIES
ATLANTIC CITY, NEW JERSEY
JUNE 7, 2013
11:00 A.M. – 12:00 P.M.
The Committee on Lotteries of the National Council of Legislators from Gaming States (NCLGS) met at the Water Club at Borgata in Atlantic City, New Jersey, on Friday, June 7, at 11:00 a.m.
Rep. Joe Gibbons of Florida presided in the absence of the committee chair.
Legislators present included:
Rep. Helene Keeley, DE
Rep. John Viola, DE
Rep. Frank Artiles, FL
Sen. Charles Dean, FL
Sen. Gwen Margolis, FL
Rep. Dave Richardson, FL
Sen. Garrett Richter, FL
Sen. Maria Sachs, FL
Rep. David Santiago, FL
Rep. Jim Waldman, FL
Rep. Dennis Keene, KY
Rep. Lois Delmore, ND
Rep. Maria Donatucci, PA
Rep. Nick Kotik, PA
Others present were:
Susan Nolan, Nolan Associates, NCLGS Executive Director
MINUTES
The Committee accepted the minutes of its last meeting on January 4, 2013, in Las Vegas, Nevada.
STATE LOTTERY INITIATIVES
Andrew White, Vice President of Operations for the National Association of State and Provincial Lotteries (NASPL), said that NASPL represents 52 members in North America. He said that Wyoming approved a state lottery during the 2013 legislative session, making Wyoming the 45th lottery jurisdiction in the U.S. He said that Alabama, Alaska, Hawaii, Mississippi, Nevada, and Utah are now the only states without a lottery.
In response to a question from Rep. Waldman, regarding the states without lotteries, Mr. White said that he did not have any information about whether those states were seeking to institute lotteries.
LOTTERY OUTSOURCING – INTEGRATED SERVICES AGREEMENTS AND PRIVATE MANAGEMENT
Mr. White stated that forms of outsourcing and other lottery initiatives have been proposed in several states to deal with budget shortfalls or to start new programs. He said that the programs take three forms, i.e., lottery revenue bonds, selling bonds backed by lottery revenues, and outsourcing. He said the three jurisdictions that currently have some form of holistic outsourcing are Illinois, Indiana, and New Jersey. He stated that federal law does not allow complete privatization of a state lottery and that it requires states to maintain a controlling interest in their lotteries. He said that some state constitutions also require the state to operate the lottery. He stated that most lotteries outsource some portion of their lottery operations.
Rep. Donatucci stated that she was against private management or outsourcing of the Pennsylvania Lottery, which is an ongoing issue in the state. She said she has been following the private management agreement in Illinois and asked Mr. White if he had any information on reports that the Illinois private manager had failed to meet revenue targets. Mr. White said he did not have any comment.
Mr. Chris Shaban of Gtech stated that Gtech is part of the consortium that holds the private management contract for Illinois. He said that the contract for Illinois was signed about two years ago and that under the contract there is a target revenue range. He stated that there is a disagreement over target revenues that is currently being mediated. He said that the contract has been very successful for the state and has increased lottery revenues. He said that it was unfortunate that the disagreement was gathering a lot of attention over the positive revenue gains of the Illinois Lottery.
Mr. Shaban said that in Indiana the private management contract is in the ramp-up phase. He said that prior to the contract being signed, 85 percent of the Hoosier Lottery was already being outsourced. He said that the new contract moved sales and marketing responsibilities to the private manager, meaning that currently there is about 93 percent outsourcing.
Mr. Shaban said that in both the Illinois and Indiana contracts there are revenue guarantees. If the private manager meets or exceeds the revenue targets there are incentives and if the private manager fails to meet the targets there are penalties. He said that about six or seven other states, such as Michigan and Ohio, have looked at private management agreements.
In response to a question from Sen. Sachs, regarding lottery structure, Mr. Shaban said that of the 44 lotteries in the U.S., five are corporations, three are privately managed, and three, Texas, West Virginia, and Nebraska, have partial private management agreements.
In response to a question from Rep. Artiles regarding cost savings to states for marketing, sales, etc. when a lottery is privately managed, Mr. Shaban said for example, that in Indiana the contract moved jobs from state government to the private sector, lowering the state’s overhead. He said that cost savings are material and reflected in the lottery’s budget. He said that the concept behind the private management boils down to the belief that a private company is a more efficient mechanism for selling a product like lottery tickets.
BRANDING, SOCIAL MEDIA, AND PLAYERS CLUBS
Mr. White said that Mega Millions and Powerball have really become the most identifiable brands associated with state lotteries and are sold in every lottery jurisdiction. He said that in each state there are state-level brands, particularly the beneficiary programs which serve as strong marketing tools. He said that in 2012, over 18.7 billion was generated for the beneficiary programs of state lotteries.
Mr. White said that state lotteries are undergoing social media initiatives, highlighting the Iowa Lottery’s successful interactive social media program.. He said that more lotteries are offering players clubs as a natural extension of marketing programs. He said the lottery players clubs are similar to casino players clubs. He referenced the Missouri Lottery players club as a good example.
In response to a question from Rep. Waldman regarding the benefits of players clubs, Mr. White stated that players clubs are fairly new to the lottery and that the benefits vary significantly by jurisdiction.
ONLINE INITIATIVES, MOBILE AND DIGITAL, AND TERMINAL GAMES OF CHANCE
Mr. White said that last year the lottery industry successfully avoided federal legislation that would have restricted the ability of lotteries to offer their products online. He said that NASPL and its member lotteries believe that the right to offer gambling, via the Internet and otherwise, is a states rights issue. He stated that Delaware, Georgia, and Illinois have approved the sale of lottery tickets online.
ADJOURNMENT
There being no further business, the meeting adjourned at 11:50 a.m.
© National Council of Legislators from Gaming States (NCLGS)
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