Bill to End California State Lottery Concerns Advances

As more states around the US move towards the legalization of different forms of gambling, California state’s lawmakers have taken up concerns they have with existing gambling laws. Earlier this month, California’s Senate voted unanimously to pass a bill, called the Napa bill, that will ensure that the state lottery will use the largest chunk of its revenue available to fund educational programs in the jurisdiction. There has been significant back and forth regarding the percentages that are given to education, which was a core reason that the lottery was legalized in the first place.

The Napa Bill

The Napa bill, sponsored by Senator Bill Dodd, is aimed at resolving the difference of opinion between lawmakers and the California State Lottery regarding the interpretation of an amendment that was made to the State Lottery Act in 2010. This difference in opinion has become a bone of contention between lottery officials and lawmakers and was likely to remain as such if it was not for the Napa Bill.

The amendment has allowed lottery officials a modicum of discretion when doling out a percentage of their revenues to be shared with public schools in the state. Naturally, this led to controversy and speculation in the state. In February 2020, Elain Howle, a state auditor, revealed her suspicions that the California State Lottery had pocketed around $36 million that was meant to go to public schools. The audit was necessary after whistle-blowers came forward to share their experiences of misspending and mismanagement at the Lottery’s headquarters.
The bill introduced by Dodd will require the Lottery’s Director to look into and reoptimize the payout rate for prizes a minimum of once every five years. This will allow for education in the state to see the maximum contribution. This will also prevent the lottery from awarding lottery winners too much in prize money. This new rate would then be used to build an annual budget for the state lottery and avoid any suspicion. The bill will be heard by the Assembly committees before the end of May.

Increase in Sales

The California Lottery’s establishment was a result of a vote that took place in 1984. Residents who voted in favour of this were under the impression that 34% of the CSL’s revenues would be going towards education in the state. However, 2010 brought a Great Recession and the Governor at the time, Arnold Schwarzenegger, signed an amendment that has caused complications for the last 11 years. This amendment allows the commission to establish and set the percentage of revenue that would be allocated to public education in a way that ensures that the public-school sector gets the maximum revenue. However, the state lottery’s revenues and sales have grown significantly since it was first launched. Senator Dodd believes that the percentages that are given today do not factor in the growth of the lottery and should be recalibrated to reflect the larger revenues accrued.

The state law currently mandates that a total of 87% of the revenue generated by lottery sales go back to the citizens of California. This is either through public schools or winning. The remaining 13% is kept by the CSL to pay for operational costs.

CSL Accused of Wastefulness

When the CSL was established, and even up until 2010, 13% for operational costs was not a questionable percentage. However, as sales continue to grow, so too does the value of this percentage and critics have shared that they believe this 13% to be more than enough to keep the CSL operating optimally. In last year’s audit, Howle accused the California State Lottery of wastefulness after she discovered that the commission had entered into non-competitive contracts with some suppliers. This means that the CSL is essentially missing out on savings and makes no effort to cut costs.

Just last month, another state review found that the CSL had mishandled a promotion event that took place on The Ellen DeGeneres Show in 2019. The entire promotion cost the CSL almost $450,000 in on-stage props, gift boxes and the $138,000 that was spent on 30,000 scratch card lottery tickets. The idea behind this was to give each member of the audience a box containing scratch tickets to the value of $500. This was done as a means to promote the idea of giving scratch cards to loved ones as a Christmas gift that year. However, whistle-blowers later shared that not all of the tickets were handed to audience members. Some of the scratch cards were given to the production staff to share with friends. The CSL has yet to confirm or deny these accusations at this time.