1 1 ****************************************************** 2 BEFORE THE 3 4 TEXAS LOTTERY COMMISSION 5 6 AUSTIN, TEXAS 7 8 JANUARY 28, 2000 9 ****************************************************** 10 11 BE IT REMEMBERED that the above-entitled matter 12 came on for hearing on the 28TH day of January, 2000, 13 beginning at 8:29 a.m., and ending at 1:08 p.m., at 14 the TEXAS LOTTERY COMMISSION, 611 East Sixth Street, 15 Austin, Texas, and the following proceedings were 16 stenographically reported by MARY SCOPAS, RPR, CSR for 17 the State of Texas. 18 19 APPEARANCES 20 CHAIR HARRIET E. MIERS 21 COMMISSIONER C. TOM CLOWE, JR. 22 COMMISSIONER ANTHONY J. SADBERRY 23 MS. KIMBERLY L. KIPLIN, GENERAL COUNSEL 24 MS. LINDA CLOUD, EXECUTIVE DIRECTOR 25 MR. BILLY ATKINS, CHARITABLE BINGO OPERATIONS DIRECTOR WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 2 1 CHAIR MIERS: I would like to call our 2 meeting to order. It is January 28, 2000. All of our 3 commissioners are here, and we are prepared to begin. 4 For everyone's planing purposes, I will advise you 5 that the commission plans to conduct its executive 6 session scheduled for 11:00 today and to accommodate 7 some scheduling issues that we have for some of those 8 individuals who have to participate in that session. 9 So we will plan to go into executive session 10 approximately at that time. 11 I know we have some people here and -- 12 visiting with us. And so I would like, again, to take 13 Item Number X out of order. I'll call on Bart Sanchez 14 for a report, possible discussion and/or action on the 15 Lottery Independent Financial Audit. Mr. Sanchez. 16 MR. SANCHEZ: Good morning, chair and 17 commissioners. My name is Bart Sanchez. I'm the 18 financial administration director. To my right is 19 George Scott, partner of Deloitte & Touche, financial 20 auditors for the Texas Lottery. We'd like to present 21 to you the 1999 financial audit of the Texas Lottery 22 Commission. And I'll let Mr. George Scott just kind 23 of do a brief overview. 24 MR. SCOTT: Good morning. Thank you, 25 Bart. I'm George Scott. I'm a partner with Deloitte WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 3 1 & Touche, which is responsible for the audit, the 2 financial audit of the lottery this year. In your 3 package you will find the financial statements for the 4 lottery for the year ended August 31st, 1999. We did 5 perform the financial audit for that year. And our 6 audit was performed in accordance with general 7 accepted audit standards and government audit 8 standards. And those standards require that we plan 9 and perform an audit to reach a conclusion as to the 10 fair presentation of the financial statements of the 11 lottery. And in our opinion, the financial statements 12 do present fairly the financial position of the 13 lottery as of August 31st, 1999. 14 In order to reach that conclusion, we 15 test a variety of records, we interview individuals, 16 and discuss accounting procedures and policies with 17 individuals throughout the organization. During the 18 course of the audit, there was no restrictions placed 19 on our access to information, the record, and 20 individuals. And we certainly appreciate everyone's 21 cooperation and courtesies extended to our staff in 22 the course of an audit. An audit is not an easy 23 process to go through, and the courtesies extended to 24 us are certainly appreciated in the course of the 25 audit. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 4 1 Because the audit was also performed in 2 accordance with generally -- our generally accepted 3 government auditing standards, we also have issued a 4 report addressing the internal control structure of 5 the organization as well as compliance with 6 significant federal and state laws. 7 In that regard, as far as the internal 8 control area is concerned, we had no situation that is 9 material weakness in the control environment, and we 10 identified no situation that needed to be reported as 11 far as compliance with federal laws or regulations or 12 noncompliance thereto. 13 During the course of the audit, there 14 were no disagreements with management as to the proper 15 application of accounting principles and presentation. 16 And, again, we received outstanding cooperation 17 throughout the process. 18 As a part of the audit, we also -- as I 19 said, we do look at the control environment. During 20 the course of the audit, items, enhancements come to 21 our attention that we proposed. Specifically, you 22 have gone through several system changes during the 23 year, and we encourage you to look at updating some of 24 your documentation and policies and procedures in that 25 regard. Look at the -- the situations where there WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 5 1 have been some turnover in staff in the information 2 systems area as far as looking at the areas of cross 3 training of that issue. 4 And you also are getting what is called 5 service organization reports about controls of some of 6 your outside contractors. And we encourage you to 7 re-look at what the objectives there are. Make sure 8 that you're getting the type of reports and the 9 objectives that you need are being met. 10 And with that, I'd be happy to answer 11 any questions that you might have. 12 MS. CLOUD: Commissioners, you don't 13 have a copy of your financial audit, but we did send 14 it to you overnight, and we noticed getting you 15 another copy. 16 COMMISSIONER CLOWE: I received it, and 17 I read -- I have a couple of questions. Beyond those 18 areas where you've mentioned we need to take some 19 action, did you identify any other areas of 20 abnormality or weakness that are of concern to you? 21 MR. SCOTT: No, sir, we did not. We 22 will -- we would put any of those in writing in 23 recommendations to you. 24 COMMISSIONER CLOWE: So we can assume 25 there are none? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 6 1 MR. SCOTT: Yes, sir. 2 COMMISSIONER CLOWE: Is it within the 3 scope of the audit to make a judgment on the rate of 4 return and the placement of funds in securities that 5 the Lottery Commission has made insofar as funds that 6 we have? 7 MR. SCOTT: As far as the rate of 8 return and the types of investments, the only concern 9 that we would have -- that we can do in the financial 10 audit is that if the investments meet the other 11 requirements of State law. Other than that, that is 12 strictly at the management's discretion. 13 COMMISSIONER CLOWE: And we're in 14 compliance with State law? 15 MR. SCOTT: Yes, sir. 16 COMMISSIONER CLOWE: Good. It's a good 17 audit, and I think it reflects well on, Bart, you and 18 your staff, and I was very pleased to receive it. 19 Thank you. 20 COMMISSIONER SADBERRY: Yes. I did 21 receive mine as well and I did have a chance to read 22 it. I intend to dwell a little more thoroughly on it, 23 but from what I have read, I concur. And I am very 24 pleased that we are in this position, that you can 25 present this report to us with such positive findings WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 7 1 and made in accordance with the appropriate 2 authorities. I appreciate that. 3 MR. SANCHEZ: Thank you. 4 MS. CLOUD: He made reference to the 5 lottery operators outside audit on controls, and Debra 6 will respond to that in her report a little more 7 thoroughly. That is, we have worked -- we have a 8 deluxe recommendation. And at our own initiation, we 9 have been working with the auditors that GTECH has to 10 do their SAS 70 audit which is on the system. 11 CHAIR MIERS: And as I understand it, 12 the system changes require some update and procedures 13 manuals, in essence. And those are underway, Bart, 14 or -- 15 MR. SANCHEZ: Mr. Bell -- yes, ma'am. 16 In the financial audit, we are certainly -- that's 17 underway and we are actually doing that. We've just 18 got to follow up in the documentation process. And I 19 think Robert Bell under Information Technology can 20 speak for himself, but I talked to him. He is already 21 underway. I think he might be even ahead of myself. 22 CHAIR MIERS: All right. Well, we 23 appreciate the results of the audit, certainly, the 24 work that went into it. And I'm sure if the 25 commissioners have further questions, we'll be in WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 8 1 contact. 2 We'll go back now to Item Number II and 3 call on Linda Cloud and Toni Smith for our routine 4 report on lottery sales and trends, including new game 5 concepts. 6 Toni, would it be a fair 7 characterization, where we are on sales, that we have 8 seen a stabilization in the sales for instant tickets 9 in a consistent improvement there, but a different 10 result with respect to the online games? 11 MS. SMITH: Yes, ma'am. And I think on 12 instants, although we did see a slight decline the 13 first couple of weeks of January and even the week 14 before last, that's sort of a seasonal trend that we 15 experience. But we do feel like there is a leveling 16 off, and hopefully we won't drop any further. 17 MS. CLOUD: We don't want this to be 18 our -- our low -- we want to go higher than this on 19 the instant tickets. We do feel like that this is 20 the -- probably the lowest that we can experience now. 21 We've had about 11 weeks of over $30 million sales in 22 instant games, so -- with the exception of two weeks. 23 It fell just below the $30 million mark. So we think 24 that's a real good accomplishment. And as we put out 25 more new games and take the -- get the old games off WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 9 1 the street when we have an opportunity to close them, 2 then that will help us with our sales across the 3 board. 4 CHAIR MIERS: Right. And as -- I think 5 all of the commissioners saw the historic experience 6 in the first two weeks of January, and there is always 7 a, I guess, expected dip after the holidays. But 8 other than that, we have seen a routine improvement, 9 if I'm understanding the numbers correctly. 10 MS. CLOUD: Yes, we have. 11 CHAIR MIERS: And we still have -- now, 12 I do not see necessarily -- I'm not a very good test, 13 but I don't see the advertisements on television that 14 we were seeing for a while, at least in numbers in the 15 Dallas market. In fact, I'm not sure I've seen any 16 for the last several weeks. What are we doing on 17 advertising right now? 18 MS. SMITH: I believe the instant spots 19 are still running on radio. But we recently 20 completed, actually this week, TV production and radio 21 production for a new lotto don't forget campaign that 22 basically reminds players to play on Wednesdays and 23 Saturdays. And we hope that that day will stay in 24 their mind both days to go out and play. And they 25 start airing next Monday, January 31st. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 10 1 And then we're also in production on 2 the third of the coins campaign, the scratch-off 3 campaign, TV and radio, that will begin a three-week 4 run on air starting March 6th. So -- and that's a 5 continuation of the instant campaign that has been out 6 there. 7 MS. CLOUD: You were overnighted the 8 new commercials in your packet last night, so you'll 9 be able to see for yourself what they appear to be. 10 But they're out there. I'm seeing them on our TV 11 here. But I don't know the time frames. If we could 12 get that for you -- 13 MS. SMITH: If you'd like to see dates 14 and runs, in particular the Dallas area, I'm sure we 15 could get that together for you. 16 CHAIR MIERS: Not necessarily. I just 17 knew I had not seen it for the last several weeks the 18 same frequency that I had been seeing in the market. 19 And I guess we crossed on the highway as I was coming 20 down here yesterday. But I look forward to seeing 21 those when I get back to Dallas. 22 Okay. Could -- are there any reports 23 in connection with the new game concepts that you -- 24 MS. CLOUD: We -- commissioners, we 25 have been looking at our options. Of course, we need WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 11 1 to try to pull up the slack a little bit in our online 2 game sales figures. Lotto Texas continues to get hit 3 at the lower levels. And last week we had four 4 winners on a $10 million jackpot, which is kind of an 5 unusual situation. But the Lotto game is much easier 6 to win now based on the number of players that are in 7 the game in the matrix that it's set at. So we have 8 to look at other options for what we can do to try to 9 make up the difference in the sales on the online 10 site, and we are looking at various concepts. We have 11 not made any decisions. I'm not ready to present you 12 with any numbers. I'm meeting with statisticians, but 13 we're not -- we're looking at different options. So 14 hopefully within the next couple of weeks, we'll be 15 ready to share with you where we're going and where 16 we're proposing to go and for your approval. 17 CHAIR MIERS: Well, it's interesting 18 when we were at the legislature on Tuesday that we got 19 the question, how come there was so much excitement 20 about the million dollar game shows, and we can't get 21 people excited about four million? So there is some 22 psychology there somewhere, and we just have to find 23 it. So hopefully, we can look at the online games and 24 increase our sales there. 25 Questions for Toni or Linda? Okay. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 12 1 Thank you very much. 2 MS. SMITH: Thank you. 3 CHAIR MIERS: And we'll move to item 4 number IV, having, I think, covered item number III 5 concerning lottery advertising and promotions with 6 Toni. Item number IV, status report, possible 7 discussion and/or action on the lottery operator audit 8 procurement. 9 MR. BENNETT: Good morning, 10 commissioners. For the record, my name is Ridgely 11 Bennett. I'm the deputy general counsel. 12 Commissioners, we are still awaiting the comments from 13 the State auditor's office regarding the RFP that we 14 would like to reissue. My conversations with them, we 15 expect them to be in very short-term. 16 CHAIR MIERS: Okay. And am I 17 understanding we have a draft RFP which they are 18 reviewing and you are happy with? 19 MR. BENNETT: We have an RFP that we 20 issued previously. We don't have a current new draft 21 of a new RFP. They're reviewing the most recent RFP 22 that we put on the street to see what we could 23 possibly do to possibly get some type of interest in 24 the people proposing on it. 25 CHAIR MIERS: Okay. And I'm sure I WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 13 1 have seen the RFP, Ridgely. It might be helpful to me 2 to have an additional copy of that. It is before the 3 State auditor. 4 MR. BENNETT: I will be happy to 5 provide that to all the commissioners. 6 CHAIR MIERS: Okay. Questions for 7 Ridgely? Okay. Thank you, Ridgely. 8 You have the next item, also, which is 9 the status report, possible discussion and/or action 10 on minority market advertising services procurement. 11 MR. BENNETT: I am pleased to announce 12 that the commission has entered into a contract with 13 the King Group out of Dallas, Texas to provide those 14 services to us. 15 COMMISSIONER CLOWE: What's the name, 16 again? 17 MR. BENNETT: The King Group. 18 COMMISSIONER SADBERRY: Ridgely, just 19 for my information, is there a backup -- is there any 20 provision for a backup contract on that particular 21 contract? 22 MR. BENNETT: There is not, not in this 23 circumstance. We do have a general market advertising 24 services company, and we have the minority market 25 advertising services. So we have two vendors that WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 14 1 provide advertising services, but there's not a 2 backup. 3 COMMISSIONER SADBERRY: And what's the 4 term of the contract? 5 MR. BENNETT: I don't recall. Do you 6 have the term of the advertising contract? I'll have 7 to get back with you on that. I can't recall off the 8 top of my head, but I'll be happy to get that 9 information for you. 10 CHAIR MIERS: Okay. If there is 11 nothing else on that item, thank you, Ridgely. 12 And we'll move to item VI, which -- is 13 Debra in the room -- consideration of and possible 14 discussion and/or action on the state audit report(s) 15 relating to the Texas Lottery Commission. Debra 16 McLeod, we were pleased with the report of the State 17 auditor's office to the legislative committee on 18 Tuesday. And Debra, where do we stand on all these 19 issues? 20 MS. McLEOD: Commissioners, we're very 21 close to completing half of the findings on the recent 22 procurement practices audit. The last open finding on 23 the management control side will be completed here 24 very shortly with implementation of a new computer 25 system. So in a very short period of time, we'll be WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 15 1 through with just about all the audit comments from 2 the State auditor's office. And I believe even the 3 rules are being presented today for the first finding 4 for the State auditor's report on the procurement 5 practices. 6 CHAIR MIERS: Is -- is it contemplated 7 that we would have further audits, Debra, to your 8 knowledge? 9 MS. McLEOD: To my knowledge, no, they 10 have not scheduled us. I've asked repeatedly for 11 copies of the work plan for this fiscal year. They 12 have not completed it to -- as of the last 13 communication I had with them. And they did not have 14 us scheduled for any in-depth audit here. We may be a 15 part of some agency-wide survey or scoping from that 16 perspective, but nothing on-site that relate to me. 17 CHAIR MIERS: Okay. Questions for 18 Debra? Okay. Thank you very much. 19 Gary Grief, report, possible discussion 20 and/or action on the agency Year 2000 compliance. And 21 Robert Bell, of course. 22 MR. GRIEF: Good morning, 23 commissioners. And for the record, my name is Gary 24 Grief. I'm the director of Lottery Operations. And 25 to my left is Robert Bell, the director of Information WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 16 1 Technology. I'm happy to report that the Lottery 2 Commission and GTECH, our lottery operator, made it 3 through the new year, the year 2000 problem, with no 4 significant problems. We're continuing to keep a very 5 close eye on all of our systems, in particular paying 6 attention to the February 29th upcoming date. There 7 are some experts in the industry who are telling us 8 that unprepared organizations may have problems with 9 that particular date. But we feel very confident, 10 both on the GTECH side and the lottery side, that we 11 won't experience those types of problems. We had 12 staff both at GTECH and here on-site New Year's Eve, 13 and the evening came and went very quietly, I'm very 14 happy to report. 15 CHAIR MIERS: Your commissioners were 16 very grateful. I think our worst fear was our phone 17 ringing in connection with some computer issue. But 18 it -- we are grateful it went so smoothly and 19 appreciate it. And we know it didn't happen without a 20 lot of focus and effort and good thoughts. So you 21 know, we appreciate all of that. We would have 22 appreciated it even greater if you could have kept our 23 lights from going off in Dallas at 12:06. But we were 24 assured that was not a Y2K problem. Questions for 25 Gary or Robert? Anything further? WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 17 1 Robert, I take it while you were there, 2 you are working on the updates of these manuals to 3 bring our policies and procedures into where we are on 4 our progress? 5 MR. BELL: I'm happy to report that 6 we've addressed all three of those issues. One, we've 7 already updated our policies and procedures to reflect 8 the PRO:SYS system, the new system. 9 CHAIR MIERS: Great. 10 MR. BELL: And we're fully staffed at 11 this point. Keep our fingers crossed. And we're 12 cross-training our people as well because we do have a 13 relatively small staff. And so we feel like we've 14 addressed all of the issues that were implicit in 15 the -- in the report. 16 CHAIR MIERS: Great. Okay. Thank you 17 very much. 18 Okay. Item number VIII. Jim 19 Richardson, our Human Resources director, report, 20 possible discussion and/or action on the recent survey 21 of organizational excellence concerning the Texas 22 Lottery Commission. 23 MR. RICHARDSON: For the record, my 24 name is Jim Richardson. I'm the Human Resources 25 director for the Texas Lottery Commission. The WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 18 1 presentation today involves a survey of organizational 2 excellence administered by The University of Texas. 3 This will be -- in keeping with political compliance, 4 this is my state of the survey address. 5 The historical overview is that the 6 survey began in 1979 as a Texas employee attitude 7 assessment. As an attitude assessment tool, the 8 instrument measured how employees felt about wages, 9 working conditions, supervision, and opportunities for 10 advancement. It grew into what we have today as a 11 survey of organizational excellence in 1993 as a means 12 to assess organizational strengths and increase 13 employee involvement and agency change processes. 14 Doctor Michael Lauderdale has written 15 an excellent book called Reinventing Texas Government 16 that talks all about the survey, the history of the 17 survey, how to interpret data, how to use the data and 18 create change in organizations through employee 19 involvement. It's an excellent resource for us to use 20 as we move through these change processes. 21 Doctor Lauderdale suggests the overall 22 survey can guide an organization through continuous -- 23 to continuously promote openness, improve employee 24 accountability, enhance agency and employee commitment 25 and dedication towards improvement. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 19 1 The survey measures five major 2 workplace dimensions: General organizational 3 features, personal demands, physical work setting and 4 accommodations, team perceptions, and communication 5 patterns. 6 What we see here are the numbers or how 7 we scored for the 1999 survey. Any number that falls 8 below 300 is something that agency should be concerned 9 with. And certainly, any number that drops below 250, 10 we really need to be concerned with. Flip to the next 11 one. 12 COMMISSIONER CLOWE: Well, wait a 13 minute. Wait a minute. Go back. 14 MR. RICHARDSON: Well, I'm going to 15 flip back and forth. 16 COMMISSIONER CLOWE: Okay. 17 MR. RICHARDSON: Then go ahead. 18 COMMISSIONER CLOWE: Okay. 19 MR. RICHARDSON: The strengths that 20 we've identified for the TLC are in strategic 21 orientation, benefits, external communications, 22 quality, and physical environment. You see with the 23 asterisks, we actually improved in external 24 communication and physical environment. 25 Okay. Flip to improvement. Where we WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 20 1 need to improve is in fairness, supervisor 2 effectiveness, empowerment, team effectiveness, and 3 internal communications. So in this area here in team 4 perception, we lack in three of the categories. 5 I also have not mentioned, because it's 6 not either in the top five or the bottom five, is 7 something I really think we need to look at is time 8 and stress management and burnout. These numbers are 9 below 300. They're not in the bottom, but I think 10 it's still something we need to look at, because the 11 reality is, all three of these categories actually 12 fell below 300. 13 Another thing that was an initial 14 concern, but not so much now since I've talked to The 15 University of Texas' Noel Landuyt there, who is the 16 survey coordinator, was our response rate. In '99, we 17 have 40 percent response rate, essentially pretty 18 consistent -- '96, '98, and '99, we've been pretty 19 consistent around the 40 percent range. This 23 20 percent you see in 1994 and '95 is below 25 percent 21 and considered a poor response. But for a first-time 22 survey, anything around 25 percent is considered okay. 23 So we didn't do well there, but it's okay for a 24 first-time survey. State averages, of course, are 52 25 percent across the board. We don't have the '99 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 21 1 surveys yet. They'll come out somewhere mid-February. 2 CHAIR MIERS: Well, let me stop you 3 there, Jim. Is there some way that's recommended to 4 increase the participation in the survey, why people 5 don't participate? 6 MR. RICHARDSON: Well, there's a couple 7 of things that are identified. Some people are very 8 concerned about confidentiality. They're afraid if 9 they speak out, that somehow it's going to -- we'll be 10 able to somehow identify that person and get at 11 their -- or back to them. That's something that we 12 can work on in assuring people that, no, we're not -- 13 number one, we don't even seek out who filled out the 14 survey, but we're not going to find out about who did 15 that. 16 The other issues Michael Lauderdale 17 outlines in his book many different ways that the 18 agencies can improve not only response rates, but how 19 we can implement programs. Identifies supervisory 20 styles that may need training, all types of 21 suggestions. His book is just going to be a great 22 tool for us or a great guide, if you will, for us to 23 be able to implement change in the agency. 24 CHAIR MIERS: And the surveys provide 25 reasons why people are responding in a particular way WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 22 1 so that we have some guidance as to what the concerns 2 are? 3 MR. RICHARDSON: Well, not necessarily. 4 That will be one of the challenges of what -- if 5 you'll flip to the next slide -- we'll talk about in 6 the focus groups, is that we're going to have to come 7 back and ask -- do an independent survey here and say, 8 if you did respond to the survey or if you didn't, 9 tell us why you didn't or why you answered in a 10 certain way. We'll have to try to get that 11 information through whatever focus groups we put 12 together here. 13 CHAIR MIERS: Well, if the concern is 14 anonymity, wouldn't that speak to only at least 15 getting a skewed view in a focus group because these 16 are going to be the people who are willing to come 17 forward, more likely that have something good to say? 18 MR. RICHARDSON: It does. And the same 19 thing with any low response rate, is just you get a 20 skewed view. So what we will have to try to do in our 21 focus group is, you know, assure people that, you 22 know, that the information will be kept confidential. 23 Maybe we can do it through suggestion boxes that they 24 can just drop into, no names attached, you know, 25 whatever. There would be no correspondence. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 23 1 CHAIR MIERS: Is it ever done through 2 independent entities so that the -- 3 MR. RICHARDSON: It could be. 4 CHAIR MIERS: -- identities -- 5 MR. RICHARDSON: Sure. 6 CHAIR MIERS: -- are not even known to 7 the lottery? 8 MR. RICHARDSON: Could be. The 9 University of Texas actually administers and runs this 10 survey. So we really have no way of knowing who did 11 what, you know, who answered what on a particular 12 survey. So it's already -- it's already kind of been 13 run from the independent side of the house, but I'm 14 not sure that that helps us at all, either. 15 Okay. One of our challenges now is to 16 create focus groups with team members from executive, 17 Human Resources, and other employees. The focus group 18 needs to evaluate and identify those results that 19 should be immediately released to staff. 20 That brings you back to one of your 21 other questions about response rate. I think in the 22 past that maybe the results weren't shared as readily 23 as they should have. And that is something that 24 Doctor Lauderdale identifies as one way to improve 25 your response rate, is make sure that when you ask WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 24 1 somebody something, that you share the results with 2 them. So that's going to be our immediate challenge. 3 But we don't recommend -- he doesn't recommend that 4 you necessarily throw out all the information out 5 there at once. You have to be able to talk about 6 strengths that the agency has, categories where 7 immediate improvements can be expected, and categories 8 where extreme concerns can be addressed, but only 9 after we've developed improvement plans. 10 And then lastly, the focus group needs 11 to seek agency improvement through a partnering 12 process that involves all employees. And we're a team 13 here. We all have to be involved in this issue if 14 we're going to have change. Questions? 15 CHAIR MIERS: I wish I were that thin. 16 MR. RICHARDSON: Here's the most 17 important slide. 18 CHAIR MIERS: Okay. Questions for Jim? 19 COMMISSIONER CLOWE: I have a comment, 20 I guess. It's not a question. 21 CHAIR MIERS: Okay. Comments. Thank 22 you, Jim. Appreciate your presentation. 23 COMMISSIONER CLOWE: I think this is a 24 very important report to the agency. I've been asking 25 employees how they felt about their working situation WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 25 1 for 40 years, plus. And I think that's an important 2 function of any manager. 3 I've looked at this survey extensively, 4 and I think it's a good one. I think it's well done. 5 It meets all of the criteria of honesty and candor and 6 objectiveness that you want. I think that it's so 7 important that I've asked Jim, in a visit that we had, 8 to play a bigger role in developing the needs that 9 this survey indicates we have at this agency in 10 supporting Linda and helping her in her leadership 11 role to improve the attitudes of our employees. And 12 I've visited at length with Linda about this need as 13 well. 14 My view of this agency is, it stacks up 15 very favorably as a good place to work compared to a 16 number of other State agencies. The hard benefits -- 17 and I would say those are compensation, benefits, 18 facilities. Having been a State employee at another 19 agency, and some of you have, too, I'd say this agency 20 is at the top of the list. Those things are often 21 overlooked by employees. And in their minds, they go 22 to the intangibles, the psychic compensation of, well, 23 how do I like my job, and how do I feel my boss is 24 treating me, and do I get information, and do people 25 listen to me. Those are areas that most leaders, not WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 26 1 bosses or managers, need to improve in. And we have 2 some areas that we need to improve in in this agency. 3 Linda is getting started and is developing, I think, 4 programs that will help us improve and make this a 5 better place for the employees to feel good about 6 their work. That doesn't mean that it's a club where 7 everybody is happy and everybody gets what they want 8 every day. It means that you understand what your job 9 is, you do a good job, and you get rewarded when you 10 perform, and you get disciplined when you don't 11 perform, and you're listened to when you have views 12 that you want to express in an open, candid, positive 13 way. You can express negative thoughts in a positive 14 way. 15 That's very important to me as one 16 commissioner in this agency. We serve the public in a 17 unique way, different than any other agency that I've 18 seen. We have customers who are players, that how we 19 feel about this agency and our roles is reflected in 20 many ways every day. So I was delighted to see this 21 report. And I am urging Linda and Jim to take a very 22 proactive way of developing more positive attitudes on 23 behalf of all employees here, team building, and doing 24 a better job internally that will result in a superior 25 product externally to the public. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 27 1 I call here frequently into the call 2 center to see how quickly my telephone call is 3 answered and what the attitude of the employee is over 4 the phone. I roam the halls here and say hello to 5 people. And frankly, I'm feeling their pulse to see 6 how they feel about their jobs, because if people are 7 positive when they say hello to you, that tells you 8 one thing. And if they growl when they say hello, 9 that tells you something else. 10 Many of you in this meeting today are 11 leaders or managers. And I would urge you to do the 12 same thing, manage by walking around. And I like this 13 message on behalf of myself and the other 14 commissioners, if they care to endorse it, to urge 15 every employee in this agency to fill out this 16 questionnaire the next time it comes around. I think 17 a 40 percent response for an important item like this 18 is not acceptable. I want the employees of this 19 agency to know we're going to look at this and we care 20 about it and we want the feedback through proper 21 channels so that it's effectively managed from all 22 employees here. 23 So I want to endorse this, and I want 24 to urge Linda and Jim to continue to do the jobs that 25 they have. This is an important part of the work that WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 28 1 this commission does with its employees in dealing 2 with our customers, the players. 3 COMMISSIONER SADBERRY: Well, I think 4 that's extremely well said, Commissioner Clowe, and 5 it's on point. And I can only say I concur entirely 6 and add my emphasis to it. 7 CHAIR MIERS: Well, and I agree that 40 8 percent is not acceptable. We would -- and I know on 9 surveys that the very high percentage of response, 10 that it would be more effective, better, despite the 11 State saying that it's an acceptable range, if we 12 could get a much greater response to the survey and 13 some feedback on the rationale behind what people are 14 reacting to. 15 I do think Commissioner Clowe's 16 comments are exactly right on in terms of the import 17 of how our employees view the agency and their jobs, 18 and public perception. So I think this is an 19 important effort and something that all government 20 ought to be focused on and interested in. So I 21 appreciate all the work and thought that's going into 22 it and hope we will continue these efforts. 23 Any other comments on this item? If 24 not, we'll move to item number IX, which is the 25 consideration and possible discussion and/or action on WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 29 1 the Minority Participation Report. Loretta Hawkins. 2 MS. CLOUD: Commissioners, we're going 3 to request to pass this item. The annual report was 4 completed last evening, and we are sending it to you 5 in an overnight packet for you to review it. I did 6 not want to report on this annual report until you've 7 had that opportunity. So we'd like to postpone this 8 item until the next meeting. 9 CHAIR MIERS: Okay. 10 MS. CLOUD: We've done a lot more to 11 the annual report, so it took us a little bit longer 12 to get it out this time. 13 COMMISSIONER SADBERRY: When is it due, 14 Linda? 15 MS. CLOUD: Within the year. I mean, 16 we don't have -- it has typically been presented in 17 January. But we're not -- we will be within our 18 schedule as long as we do it within the next 30 days. 19 CHAIR MIERS: Okay. Item number X, 20 report, possible discussion and/or action on the 21 Lottery -- oh, I'm sorry. We've already handled that. 22 Report, possible discussion and/or 23 action on House Appropriations Subcommittee hearing 24 concerning the Texas Lottery Commission. Nelda, thank 25 you and everyone's efforts in connection with this WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 30 1 committee testimony that occurred on Tuesday. It's 2 hard to believe it's all starting. 3 MS. TREVINO: A very brief report, 4 Commissioners. I know, Commissioner Miers, you were 5 there. Just on -- for the benefit of Commissioner 6 Clowe and Sadberry, we did go before the 7 appropriations subcommittee this past Tuesday. 8 Chairman Heflin was present, along with 9 representatives Robert Puente and Dale Tillery and 10 Vilma Luna and Tina Flores. Linda was there to 11 present an update on the items that are noted on the 12 agenda. If you look on page 2 of the agenda on those 13 items, Linda did provide an update. 14 Commissioner Miers, as you mentioned 15 earlier, the State auditor's office did also provide 16 an update on the recent procurement practice audit, 17 and they did indicate that overall, there was a good 18 news report, and I think the committee was happy to 19 get that report. We have ordered an audio tape of the 20 hearing, and we'll have that transcribed and have that 21 forwarded to you-all for your information. 22 And I'm happy to answer any questions. 23 CHAIR MIERS: Okay. Let's ask for 24 questions on that subcommittee hearing. And then I 25 would like to ask just a few other questions about WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 31 1 legislative efforts, but -- Commissioner Sadberry. 2 COMMISSIONER SADBERRY: Well, this 3 question might actually cut across. Let's see how it 4 comes out. I'll add my thanks, even though I wasn't 5 there, and I have been briefed, and I am pleased. I 6 think our relationship in working with the legislature 7 is very important, as you know, and I've been, since 8 my service here, interested in that. And my 9 observation over those years is that the commissioners 10 have actively participated in supporting the efforts 11 of the agency to appear before various bodies when the 12 legislature is in session as well as when it's out of 13 session in their interim. Studies and meetings occur. 14 So what I wanted to ask is if you have 15 a feeling or data that you can provide as to -- I know 16 there have been a couple of times, at least, maybe 17 more, where there have been questions raised as to the 18 commissioners' involvement and participation in those 19 processes. Do you have a feel for the legislature's 20 general posture now as to whether they are satisfied 21 with the involvement and support of the commissioners 22 in these efforts? Is there any actions or reactions 23 to that so that we might be advised? It seems to me, 24 at least of recent, we are represented by a 25 commissioner at least almost every time, with rare WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 32 1 exception. 2 MS. TREVINO: That's correct. And I 3 think that's always very helpful and very beneficial 4 when we do have one of the commissioners present. 5 To answer your question, Commissioner, 6 I cannot say that we've had any negative responses or 7 any sort of feedback that we've gotten back from any 8 of the members. I think they are all, again, always 9 impressed when they -- when they see the presence of a 10 commissioner there. I think it adds value to the 11 importance of the legislative process to have a member 12 of the commission present. So I think they've seen 13 that over the last couple of sessions now. So I think 14 hopefully we're in good shape on that issue. 15 COMMISSIONER SADBERRY: I want to 16 commend that. I hope that is the case. And 17 certainly -- and I know that this time around, I 18 received some mail. I could not have attended. I 19 think when two of us attend, that's always a problem 20 anyway. But let us know, let me know when we are 21 needed to be somewhere. 22 MS. TREVINO: Absolutely. 23 CHAIR MIERS: And I guess, Nelda, the 24 broader question is, this hearing certainly makes 25 clear the process is underway. So we need to be about WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 33 1 developing legislative priorities, concerns of the 2 agency. And I am assuming that that is underway. And 3 we have some holdover issues, I know, that we'll want 4 to continue to -- at least on the horizon and scope. 5 So what's our status? 6 MS. TREVINO: We have been -- I guess a 7 couple of things. One, we have started working on our 8 strategic plan and revising our strategic plan. 9 That's a document that will be submitted to the 10 legislature this coming summer. So we're already in 11 the process of reviewing our current strategic plan 12 and revising and still getting ready to go through 13 that process and present a document to the 14 commissioners. 15 The other thing that we've already 16 begun doing is, we put an action plan together for 17 legislative proposals. The directors are already 18 working on that. Again, we have a timeline set. I 19 don't have it in front of me, so I don't want to cite 20 any exact dates. But we do have, I think, a timeline 21 set that will give us an opportunity to come before 22 the commissioners and present some of the proposals 23 and allow some time to then visit with some members of 24 the legislature on some of the issues that we'd like 25 them to consider next session. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 34 1 CHAIR MIERS: Okay. And I guess part 2 of that will be a report on what was discussed in the 3 last session without success. 4 MS. TREVINO: That's correct. 5 CHAIR MIERS: Okay. Questions for 6 Nelda? Okay. Thank you very much. 7 Item number XII, consideration of and 8 possible action, including proposal, on the agency's 9 rule review of 16 TAC Chapter 402, except 16 TAC 10 402.572, relating to license fee increase. 11 MS. KIPLIN: Commissioners, in keeping 12 with the requirement both in the Appropriations Act 13 and the Administrative Procedure Act for each agency 14 to conduct a rule review, we are bringing before you 15 today a recommendation to propose the beginning stage 16 of the rule review on the bingo rules. 17 The reason that there is one rule that 18 is not going to be considered is because that rule was 19 adopted effective September 1, 1999. It was to 20 implement legislation. And that rule will live out 21 its life and will be repealed prior to the time that 22 we would be required to do a rule review on that 23 particular rule. We have to do a rule review on a 24 rule within four years of the date of its adoption, 25 and that rule will be repealed prior to that time. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 35 1 This is the beginning stage, like I -- 2 like I had previously indicated. And what we're 3 asking for the commission to do today is vote to 4 propose the rule review in the Texas Register by 5 filing a notice of intention to review the 6 commission's bingo rules. 7 In your notebook, there is a single 8 page, copied both sides. On the second side is the 9 filing that would be -- we will file with the Texas 10 Register. There is a comment period for the public to 11 provide comment as to why or why not a particular rule 12 has lived out its life, and that there are no reasons 13 or reasons do exist, continue to exist, but for the 14 adoption of that rule. At a later date, we will come 15 before you on the end part of the rule review, which 16 is the adoption of rules or a recognition of a need to 17 repeal rules. 18 And with that, I'll be happy to answer 19 any questions. 20 CHAIR MIERS: In that process is the 21 contemplation that you could amend rules included? 22 MS. KIPLIN: Yes. The purpose of the 23 rule review is to determine whether the reason that 24 the agency originally adopted the rule continues to 25 exist. As a natural byproduct of that rule review, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 36 1 three things occur. One is the answer to the 2 question, yes, rules do need to continue to exist, and 3 they will be readopted. One is rules that don't need 4 to be exist -- don't need to stay in existence and 5 need to be repealed. And the third is a host of rules 6 that, while there is a continued need for them, do 7 need to be revised. And that will be taken up in a 8 separate process, which is the rule making process. 9 The next item, as a matter of fact, 10 that segues into that, we'll get into the fact that 11 there are rules that do -- we recommend be readopted, 12 but acknowledge a need for an amendment. 13 CHAIR MIERS: And so I am assuming part 14 of this process, in addition to receiving public 15 comment, is a thorough legal accounting and 16 operational review of the rules? 17 MS. KIPLIN: Yes. 18 CHAIR MIERS: I move the approval of 19 the publication as requested. 20 COMMISSIONER SADBERRY: Second. 21 CHAIR MIERS: All those in favor, say 22 aye. 23 COMMISSIONER SADBERRY: Aye. 24 COMMISSIONER CLOWE: Aye. 25 CHAIR MIERS: The vote will be three to WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 37 1 zero on item number XII. 2 Item number XIII, as Ms. Kiplin 3 indicated, is consideration of and possible action, 4 including adoption, on the agency's rule review of 5 16 TAC Chapter 401. 6 MS. KIPLIN: Commissioners, if you'll 7 recall, at a previous meeting you did authorize the 8 notice of intention to begin the process of the rule 9 review on Chapter 401, which are the rules making up 10 the administration of the State Lottery Act. 11 The staff has conducted a review of 12 each of those rules, and we come forward today 13 recommending to you a readoption of a good many of 14 those rules. We also come forward today recommending 15 that there be certain rules that we begin the process 16 to repeal, and also rules that we will begin to come 17 forward and recommend the process to amend. 18 The purpose of the consideration of the 19 action today is simply to readopt those rules that the 20 staff has acknowledged or recognizes that the original 21 reason for the adoption of those rules continues to 22 exist. There were no comments that were received 23 during the rule review process. 24 What I've done is attached a list of 25 the rules that we would like to have readopted or WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 38 1 adopted. And then for your reference, I included the 2 rules that do exist just for convenience. I knew it 3 was quite a bit of material. But when you went 4 through and you saw just a list of a rule or a name of 5 a rule, I thought maybe you'd want to see what that 6 rule is all about. 7 And so with that, I'm asking approval 8 to adopt those rules that are listed in your notebook. 9 And then at a later commission meeting, perhaps the 10 very next meeting, we will begin the rule making 11 process in two ways. One, to propose to repeal rules 12 that were not adopted today, readopted today. And 13 two, to propose amendments to rules that you are 14 readopting today, but that the staff recognizes a need 15 to revise. 16 CHAIR MIERS: And I guess I just have a 17 procedural question as to whether we are best advised 18 to do this in the piecemeal fashion that you are 19 proposing, as opposed to waiting and readopting at a 20 time when you have all of the proposed amendments and 21 deletions in front of us for action also. As I 22 understand it, the rules are continuing in effect at 23 the present time. So you're not really accomplishing 24 anything by acting on them. 25 MS. KIPLIN: What I'm accomplishing WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 39 1 today is the final stage of the rule review process 2 that's required by the government -- by the General 3 Appropriations Act and the government code. That's 4 not to say that this can be delayed. We're not in a 5 time crunch in terms of this final stage, and can 6 begin the rule making process so that you'll see the 7 text of the language of the rules that are being 8 proposed for amendment, and then the rules that are 9 being proposed for repeal. I'm happy to do it either 10 way you want. 11 CHAIR MIERS: I guess the -- what 12 raises the question is whether in the process of 13 looking at particularly, you know, belated rules, you 14 would be adopting at this stage a rule that would 15 necessarily need to be reviewed in connection with 16 others that need to be amended. 17 MS. KIPLIN: I'm sorry. I don't 18 understand. What we -- what we did was, we looked at 19 every single rule under Chapter 401, and the staff 20 made the decision about whether there is a continuing 21 need for that rule or the reasons to continue, and if 22 so, in its current form or in a revised form. And 23 then the rule making will be the next process. Now, 24 that's not to say that the rule making can't occur 25 prior to the readoption of the rules. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 40 1 So getting back to your question, that 2 can occur. It can be a staged process or it can be 3 accumulative at the very end. I think your question 4 had to do with whether looking at one rule necessarily 5 triggered amendment in another rule? 6 CHAIR MIERS: Well, I certainly don't 7 think we do any harm by adopting a continuation of 8 rules that have been identified. I'm not sure what 9 that accomplishes, either. So I'm subject to moving 10 either way, really. 11 COMMISSIONER CLOWE: I have two 12 questions. Did I understand you correctly there was 13 no public comment? 14 MS. KIPLIN: That's right. That's 15 correct. 16 COMMISSIONER CLOWE: And who on the 17 staff led this effort? 18 MS. KIPLIN: Well, legal took the lead, 19 and we included the staff that we saw was most 20 involved in the rules. So on a particular subchapter, 21 you would have marketing staff present, you'd have 22 Lottery operations staff, you'd possibly have 23 security, and possibly financial. It just depended on 24 the rule or the subchapter that was the one that we 25 were meeting on to review that particular subchapter. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 41 1 COMMISSIONER CLOWE: And your office 2 monitored the entire process, and you brought these 3 forward by way of adoption and sponsorship. Right? 4 MS. KIPLIN: Yes. 5 COMMISSIONER CLOWE: I'm ready to move 6 the adoption. 7 COMMISSIONER SADBERRY: If that's a 8 motion, I second it. 9 CHAIR MIERS: Okay. All those in 10 favor, say aye. 11 COMMISSIONER CLOWE: Aye. 12 COMMISSIONER SADBERRY: Aye. 13 CHAIR MIERS: Aye. The vote will be 14 three to zero. And we will look forward to the next 15 meeting where we will receive the proposal for the 16 repeal of rules that need to be repealed and beginning 17 of the process for amendments. 18 MS. KIPLIN: Yes. And that will be a 19 somewhat tedious process, because what will be -- the 20 repeal will not be tedious. But the proposal of the 21 amendments will be somewhat tedious because now we're 22 getting down to exact language that will be the 23 proposed text. 24 Commissioners, I have an order that I'd 25 like to present for each of your consideration today WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 42 1 on this matter. 2 COMMISSIONER SADBERRY: This what we 3 just did? 4 MS. KIPLIN: Yes. 5 CHAIR MIERS: Anything further, Kim, on 6 that topic? 7 MS. KIPLIN: No, not at this time. 8 CHAIR MIERS: All right. We'll move to 9 item XIV, which is the consideration of and possible 10 discussion and/or action on nominations to the Bingo 11 Advisory Committee. Mr. Atkins. 12 MR. ATKINS: Commissioners, we 13 currently have two vacancies on the Bingo Advisory 14 Committee. Jim MacPhearson, the representative in the 15 manufacturer/distributor category, resigned on 16 September 27th, 1999. Subsequent to that resignation, 17 because of the limited number of licensees in those 18 categories, we sent out nomination requests to all 19 manufacturer/distributor nominees. When we got those 20 returned, the agency's general counsel and I met with 21 Commissioner Sadberry to discuss those nominees that 22 we received. 23 Based on those discussions, we 24 recommend in the manufacturer/distributor category 25 Fabian Hoffner. Mr. Hoffner is the executive director WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 43 1 of the North American -- the National Association of 2 Fundraising Ticket Manufacturers. He represents all 3 of the -- most of the licensed manufacturers that we 4 have in Texas. 5 Subsequent to that, on January 2nd of 6 this year, the bingo division was saddened to learn of 7 the death of Pokey Matthies, who was a long time 8 supporter of charitable bingo in the state of Texas. 9 There is a precedence with the vacancy we had when 10 Eddie Garcia, a commercial lessor, passed away. Based 11 on that, we would recommend Mr. Matthies be replaced 12 by his wife, Betty Ann Matthies. 13 CHAIR MIERS: Okay. Commissioner 14 Sadberry, comments. 15 COMMISSIONER SADBERRY: Billy, I 16 understand you have been in contact with 17 Mrs. Matthies -- 18 MR. ATKINS: Yes, sir. 19 COMMISSIONER SADBERRY: -- and she is 20 willing to serve. Now, the process for background 21 check and all that, does that occur before or after 22 appointment? I'm trying to recall. 23 MR. ATKINS: After. 24 COMMISSIONER SADBERRY: After. Okay. 25 She would be subject to that. And you mentioned the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 44 1 precedent with the -- Mr. Garcia, who died in San 2 Antonio, and his wife -- she continues to serve. Is 3 that correct? 4 MR. ATKINS: Yes, sir. 5 COMMISSIONER SADBERRY: And with 6 respect to -- just so the record is complete, you 7 know, we have a gap here. With respect to the 8 completion of the item discussed by the chair of the 9 Bingo Advisory Committee at the December 1999 meeting, 10 we -- your report does not contemplate taking any 11 action with regard to removal of any current members 12 of the Bingo Advisory Committee. Is that correct? 13 MR. ATKINS: That's correct, 14 Commissioner Sadberry. We are coming up on the time 15 we are getting ready to submit or to provide to all 16 licensees new nomination forms for a new committee. 17 COMMISSIONER SADBERRY: And while it 18 does not appear to have been a significant problem on 19 absenteeism and what have you, I take it that the 20 nominations process will do whatever is necessary to 21 emphasize the need to serve, to attend meetings. You 22 know, there are always going to be circumstances where 23 you cannot attend and can't have a full committee 24 meeting or full committee membership present at every 25 meeting, given the size of this advisory committee. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 45 1 But I take it you will emphasize the importance of the 2 service commitment to those who are making -- entering 3 the nomination process? 4 MR. ATKINS: Yes, sir. 5 COMMISSIONER SADBERRY: And I concur in 6 Billy's report, fellow commissioners. And it seemed, 7 given the process of the nominations, that we would 8 best address the third issue that our chair presented 9 to us by taking care of it in the nominations process 10 which we are heading into now, rather than focusing in 11 any other way, and I'm pleased. I'm sorry, of course. 12 If you would express the condolences to -- on our 13 behalf to the Matthies family. I'm pleased that 14 Mrs. Matthies is willing to serve and that we have a 15 replacement. 16 Incidentally, one other item. Billy, 17 if I'm correct, the other recommendation of 18 Mr. Hoffner. There is an out-of-state travel 19 reimbursement issue there that you've checked out with 20 LBB that we don't raise any questions as far as a 21 service membership of an out-of-state resident, as 22 well as reimbursement should reimbursement be 23 requested, which may or may not occur with respect to 24 that particular replacement. But we're okay there, 25 and we have the appropriate official approvals that we WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 46 1 need to do that so we're not raising any questions 2 there? 3 MR. ATKINS: Yes, sir. I checked with 4 both LBB and the comptroller's office. 5 COMMISSIONER SADBERRY: Okay. 6 CHAIR MIERS: Okay. This item requires 7 action. So is there a motion approving those members? 8 COMMISSIONER SADBERRY: I would so move 9 to adopt the recommendation of our bingo -- chair of 10 the Bingo Operations division director to appoint 11 Fabian Hoffner in the designated position as indicated 12 in the report, and to appoint Betty Ann Matthies in 13 the designated position as indicated in the report. 14 COMMISSIONER CLOWE: Second. 15 CHAIR MIERS: All those in favor, say 16 aye. 17 COMMISSIONER CLOWE: Aye. 18 COMMISSIONER SADBERRY: Aye. 19 CHAIR MIERS: Aye. The vote will be 20 three to zero approving those nominations. 21 And we'll move to item XV, report, 22 possible discussion and/or action on the recent 23 Charitable Bingo Licensee survey. 24 MR. ATKINS: Commissioners, the 25 Charitable Bingo division is not aware of any customer WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 47 1 satisfaction survey that's ever occurred by any 2 regulatory agency of bingo in the state of Texas. 3 Consequently, we took over -- in October of 1999 over 4 a two-week period, we conducted a survey of our 5 licensees, the purpose of which was to provide 6 information on customer satisfaction, identify areas 7 of bingo operations our licensees perceived as 8 problematic, and to provide other information relating 9 to charitable bingo in Texas. 10 From the population of all of our 1500 11 conductors, we took a 10 percent sample of 155 12 conductors. We did not exclude from the samples any 13 conductors that may also hold a lessor's license. The 14 survey was conducted via telephone by auditors from 15 each of our regions except for region five, which is 16 Austin. That survey was completed by one of our 17 license examiners, specifically Donna Rose. Donna 18 took the lead in putting the survey together, 19 formulating the questions, and ensuring that it was 20 conducted, then compiling the information. Donna also 21 serves, in addition to this, her regular duties as the 22 editor of our Bingo Bulletin. 23 Of the 155 conductors in our random 24 sample, we got responses from 104, or 67 percent 25 response rate. Statistically, a 50 percent response WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 48 1 rate is good. 75 percent response rate is excellent. 2 So based on our 67 percent response rate, we can 3 generalize the results of this survey to the entire 4 population. 5 83 percent of those that we talked to 6 identified themselves as a primary operator of the 7 organization. 96 percent held a -- only a conductor's 8 license. Four percent held a conductor's license and 9 a lessor's license. 10 We then went in and asked the licensees 11 if they've ever had the opportunity to call our 12 charitable bingo 800 number. 64 percent responded 13 that they had. We asked which sections they were most 14 likely to call, with 46 percent reporting that they 15 called licensing, followed by 15 percent who called 16 accounting services, eight percent who called audit 17 services. 18 And these responses would be consistent 19 with the routine transactions that normally occur with 20 bingo operations. For instance, an organization is 21 most likely on a regular basis to have issues dealing 22 with licensing. They have to renew their licenses 23 annually. They may amend their licenses to change 24 their playing days, times, or locations. They may add 25 or delete workers from their records. They could WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 49 1 apply for a temporary license, whereas with accounting 2 services, they are most likely to only have reason to 3 call them in conjunction with the filing of their 4 quarterly report. Just as with audit services, 5 they're only most likely to call if they're actually 6 going through an audit at the time. 7 We then asked them to rate the quality 8 of service that they received from the charitable 9 bingo division when they called in. And 89 percent of 10 those surveyed rated the quality of service as good to 11 excellent. 12 We asked them about their interactions 13 with the staff and whether they were treated 14 courteously. 89 percent responded, always. 15 We then asked them to rate the response 16 time the charitable bingo division gave to their 17 requests. And 87 percent of those surveyed responded 18 that the request time was good to excellent. 19 Personally, I expected these figures to 20 be high. When they came in, we gave some 21 consideration to the fact that these people, you know, 22 were being called specifically by auditors and whether 23 or not that would influence their response in any way. 24 So Donna got with Doctor Liz Jambor in our marketing 25 division, and they reviewed the information in more WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 50 1 detail, and they didn't find any kind of survey bias. 2 There was no great variance from region to region. 3 And in region five, which was conducted by a licensing 4 examiner, there was no significant response or 5 difference from any of the other regions. 6 We asked all of the licensees if they 7 had a current copy of the Bingo Enabling Act. 89 8 percent responded that they did. Of those, 94 percent 9 responded that the copy of the act was available to 10 all of their members that were involved in the bingo 11 operations. 12 We then asked if they had a current 13 copy of the charitable bingo administrative rules. A 14 slightly smaller percentage responded that they did 15 have that copy. When we asked if the administrative 16 rules were available to all the members of their 17 organization, they responded that only 87 percent was. 18 And this is quite a bit smaller than the number that 19 had the act available to their members. So we will 20 emphasize through our seminars, through the bulletin, 21 and through our training program the importance that 22 the members of their organization involved in the 23 bingo operation have access to that information. 24 We asked them about the Bingo Bulletin 25 and whether or not they -- those that were involved WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 51 1 with the operations of their bingo game had access to 2 and read the Bingo Bulletin. 59 responded -- 59 3 percent responded yes. That's a high percentage. 4 It's not as high as we'd like it to be. The -- for 5 instance, the surveys that we've done of the people 6 who read the Bingo Bulletin, they rate quality of the 7 Bingo Bulletin as very high and very useful. So 8 again, we will emphasize in our seminars and in our 9 training programs the importance of making the Bingo 10 Bulletin available to their members, specifically 11 their members involved in bingo operations. 12 This was probably one of the most 13 interesting responses that we got. When we asked what 14 aspects of charitable bingo the organizations found 15 must -- the most frustrating to deal with, at 33 16 percent, the highest response was the operation of the 17 games. That could be anything from just dealing with 18 members of the public to deciding what types of games, 19 what patterns to play, what amounts to award, 20 etcetera. 21 Part of the reason we think for that -- 22 that there is such a high rate, is because the act and 23 the rules themselves don't address a lot of the 24 specifics as it relates to the operation of the games. 25 So an area that we will most likely look to in the WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 52 1 future in conjunction with the bingo advisory 2 committee and among the staff is identifying ways that 3 we could help deal with this frustration for the 4 organizations. 5 The sections that follow licensing, 6 accounting services, and audit, they follow the other 7 pattern that we saw early in which the sections they 8 were most likely to call. Again, since they're having 9 to deal with licensing more often, it stands to reason 10 that that could be one of the more frustrating areas. 11 Again, this is the first time we've gotten this 12 information. This will be information that we'll 13 follow and track as we continue to go through our 14 training program. And also, we've just now completed 15 the revision of all of our licensing forms to include 16 instructions, etcetera. So we'll be very interested 17 in seeing changes in these figures as we move forward 18 with our training program. And hopefully, we'll see a 19 reduction straight across the board, except in the 20 category of none, which we'll see an increase in. 21 As you know, recent changes to the 22 Bingo Enabling Act allow organizations to give away 23 door prizes and conduct raffles, so we wanted to get 24 an idea of how many were. Only 34 percent of those 25 surveyed identified that they were giving away door WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 53 1 prizes. One thing we did notice in the data, that our 2 class J licensees, they're our larger organizations, 3 were more likely to respond yes than our smaller 4 organizations. We then asked the organizations if 5 they were conducting raffles. Only 12 percent 6 responded that they were. 7 Finally, this was another interesting 8 question that we got responses to. We asked 9 organizations how much bingo contributed to their 10 general fund, to their general operation. This isn't 11 how much they're distributing, but it's how much those 12 distributions apply to their organizations. 77 13 percent of the organizations responded that bingo 14 provided up to 60 percent of their operating funds. 15 The remaining 23 cited that 66 percent or more. For 16 that 77 percentage group, I think it shows that they 17 have other funding mechanisms available to them, which 18 we believe is good. The other 23 percent could 19 indicate too high of a reliability on bingo for their 20 fund-raising. Should anything happen to their bingo 21 games, it could put the entire organization and their 22 charitable activities in jeopardy. 23 I think overall, the responses to our 24 first survey were very positive. I think it gives us 25 some areas to concentrate on in the future, and will WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 54 1 also provides us a means of -- by which to judge the 2 successfulness of our upcoming operator training 3 program. 4 That's all I have to present to you on 5 this matter, and I'm happy to answer any questions. 6 CHAIR MIERS: Well, that's just 7 excellent work, Billy, and an excellent report, and 8 thank you and everyone that was involved in it. And 9 the effort here to actually understand where we are 10 with the organizations and -- is just great. Now, 11 obviously, you were reactive to where you were 12 learning things that indicated some need for 13 attention, and that's great. And so with respect to 14 this report, those are my only comments at this point. 15 COMMISSIONER CLOWE: Billy, I really 16 like this report, and I applaud what you've done. I 17 think it's thorough and complete. And I liked 18 especially the comment that you made that you were 19 going to use it as a guideline for additional training 20 and improvement within the division. 21 The only comment that I'd make to you 22 is, when you do this again, and I would assume you 23 plan to repeat it in a year or whatever period of 24 time, you might consider, and this is just a 25 suggestion for consideration, having an outside WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 55 1 objective, in the eyes of the respondents, a person or 2 a firm conduct the survey. 3 Having been in a regulated industry and 4 had the equivalent of a licensed auditor come around 5 and ask me to say what kind of a job I thought they 6 were doing, knowing it was going to their boss, I'm a 7 little bit of a diplomat, I guess you'd call it, the 8 kindest way, and thought about positive things to say. 9 And I don't mean that to take away anything from the 10 excellent results that you've gotten here. But that 11 factor is there. And to give this perhaps even a 12 higher degree of validity, you might have someone 13 build on what you've gotten here as a good start and 14 try to take it outside the division, and that might 15 help us even more. 16 CHAIR MIERS: And I'm sorry. I should 17 know it, but I missed your name. 18 MS. ROSE: Donna Rose. 19 CHAIR MIERS: Donna, thank you for your 20 effort with the Bingo Bulletin. I know we view that 21 as a very important communication piece, as well as 22 your help with the survey. 23 MS. ROSE: Thank you. 24 CHAIR MIERS: Billy, I guess the -- 25 overall question with respect to our bingo operations WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 56 1 is the benefit that we provide to our charities, as 2 well as the other tangible and intangible benefits we 3 see from the operation of bingo in our state. And I 4 hope in addition to the kinds of issues focused upon 5 here, you will give some thought, and I know you are, 6 to any recommendations that you view appropriate to 7 enhance the ability of the industry to contribute to 8 the charitable organizations. 9 Okay. We'll move to our next item. I 10 think what we'll do is drop down and take the issue of 11 the executive director's report and charitable bingo 12 operations report. First, Linda. 13 MS. CLOUD: Okay. Commissioners, our 14 January transfer to the Foundation School Fund was 15 $54,949,737. That makes our total transfer to the 16 State the 7,082,337,668. 17 The FTE status for the agency. Newly 18 filled positions. Active FTEs are 303. Vacant FTEs 19 are 26. And out of that 26, we have three that are in 20 the selection, acceptance pending. We have 11 21 recruiting, screening, and interviewing. We have 22 three positions being processed for posting. And we 23 have nine vacant positions at this time where HR has 24 no activity at this time. 25 On January 13th, we had a town hall WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 57 1 meeting in Waco. Commissioner Clowe, you were out of 2 town, but that turned out to be a very good meeting 3 for us. 4 COMMISSIONER CLOWE: Waco will never be 5 the same again. 6 MS. CLOUD: No, it won't. We had a -- 7 I don't know if you saw any of the publicity, but we 8 had a lot of media coverage there. We had a check 9 presentation that day. We gave a retailer his one 10 percent bonus for selling a $4 million dollar Lotto 11 Jackpot ticket. And then we had the press at the town 12 hall meeting and they asked retailers questions. And 13 it was our understanding they're doing a -- some type 14 of report they plan to release, I'll give you a 15 forewarning, in February on our relationship with our 16 retailers, so -- 17 COMMISSIONER CLOWE: I think it will be 18 positive. 19 MS. CLOUD: Yeah, I think it was 20 positive, and I was real pleased. We came away from 21 there feeling real good about the meeting. We had 22 some real good suggestions that came out of that 23 meeting, and we're all, you know, reviewing those at 24 this time and looking at what we can do to address 25 some of them. WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 58 1 Our next town hall meeting is -- I 2 believe it's in Longview, if I'm not mistaken, and 3 that's not until the latter part of February. So 4 we'll give you specifics on that as we get closer to 5 that time. 6 One other thing I'd like to mention. 7 The staff has been diligently, as you well know, 8 working on the national conference that's coming up in 9 September of this year that's going to be held in 10 Dallas. And they presented us with some really nice 11 update information yesterday. They've done a 12 wonderful job. We're on track with everything we are 13 supposed to be in the way of supporting the national 14 conference. And the chair was -- is going to make 15 some contacts for us as far as speakers. So we're 16 very much on track with the national conference. 17 David Gayle was here the first week in January to meet 18 with all the committees and get an update on exactly 19 what was going on. So that conference is coming along 20 very well, and we'll be hosting it for the national 21 organization in September. 22 CHAIR MIERS: And I was pleased to hear 23 the questions and comments about industry information 24 and comparisons that we received at the subcommittee 25 hearing, because there did seem to be recognition of WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 59 1 value of that exchange of information and the benefits 2 that can flow from that exchange. Linda, did you have 3 comments on the HUB and the minority participation? 4 MS. CLOUD: That's going to be part of 5 your report that we're going -- the major report that 6 we're going to do for you at the next commission 7 meeting. So I skipped over that because of that 8 reason. 9 CHAIR MIERS: Okay. 10 COMMISSIONER CLOWE: Back to the 11 convention in Dallas. What's the comfort of the 12 general counsel relative to the issue we discussed 13 before about more than one commissioner attending 14 those sessions in light of the current Attorney 15 General's ruling? 16 MS. KIPLIN: The comfort is not great 17 unless we were to -- I mean, I'm going to take the 18 most conservative approach just because I think that's 19 the better place to be, and I would go ahead and 20 notice it up for an open meeting if you're going to 21 attend -- if you're going to attend some conference 22 where there's going to be an exchange of information 23 where you're going to have a forum of commissioners 24 present. 25 COMMISSIONER CLOWE: I'd like to raise WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 60 1 the issue, because it is in our home state, and it may 2 be more than one commissioner's desire to attend some 3 number of sessions. And if that comes about, I'd like 4 to make sure that we are where we ought to be on that 5 issue. 6 MS. KIPLIN: I'll take a look at it 7 again. But the -- and I'm not sure I know what AG 8 opinion you're -- the recent one you're referring to. 9 I'm aware of a couple that have come out, one that had 10 to do with public comment, an issue of public comment, 11 and adequate notice. 12 CHAIR MIERS: Well, I think the -- 13 COMMISSIONER SADBERRY: The briefing 14 exception. 15 MS. KIPLIN: Well, briefing exception 16 is -- has been eliminated. And that would not have 17 applied in any -- in any rate, because what the 18 briefing exception really focused in on is staff 19 employee, an agency employee briefing the commission. 20 Questioning of a commissioner with the staff employee, 21 but not deliberation amongst the commissioners. 22 COMMISSIONER CLOWE: That is really the 23 one I had in mind, but I don't think it's germane to 24 this. And it's just that there are opinions coming 25 out, and I think this commission wants to be WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 61 1 scrupulous about those concerns or those issues. And 2 if more than one commissioner wants to go, let's see 3 what we can do to make it right. We covered that when 4 we had the town hall meetings, and we ought to cover 5 it on this one. 6 MS. KIPLIN: No problem. I will be 7 consistent in taking the most conservative approach, 8 and we'll get that noticed just in anticipation, and 9 we'll carry it forward for the course of the 10 conference. 11 COMMISSIONER CLOWE: Great. 12 CHAIR MIERS: Yes. My only concern 13 would be that in posting, we not mislead anyone to any 14 particular meeting where two or more commissioners are 15 going to show up. So I hope we can in the notice make 16 clear that the posting is being done in the event that 17 the schedules coincide, but not so that people 18 anticipate one or more commissioner at any particular 19 meeting, which I am sure we can add as just general 20 language in the notice. But certainly we do want to 21 be careful, as you always are with us. 22 MS. CLOUD: Well, this conference, too, 23 is not open to the general public. So that would be 24 something else that would have to be considered in the 25 notice. It's open to lottery participants. So if WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 62 1 something happened in the notice where the general 2 public shows up thinking we're having a public 3 meeting, then that might not be a good thing for us. 4 But somehow we need to make that distinction, too. 5 This -- I would say to you that this is an opportunity 6 to view -- this is a wonderful conference, and it is 7 very -- the most informative of any conference that we 8 put on, and it will be attended by every lottery in 9 the industry, including international lotteries. Even 10 though it is the National Association for State and 11 Provincial Lotteries, international lotteries are all 12 coming into this because of the importance of the 13 programs that are going on within this conference, as 14 well as the vendors actually have the displays and the 15 demonstrations of all their equipment. I mean, you 16 have a huge exhibit room where you can see just about 17 everything that goes on and who is in the industry. 18 So it would be a good deference for you to be able to 19 go to and not have to leave the state. 20 COMMISSIONER SADBERRY: I don't want to 21 raise a sleeping issue here, but in an abundance of 22 caution, I also don't want to fail to raise it. I 23 know in one or more of our interim oversight 24 legislative committee meetings and hearings, this 25 particular conference and conferences in general and WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 63 1 other type of meetings of this nature have been 2 raised. And I only presume that we have the approval 3 and the appropriate communication with the legislature 4 or the oversight committees or whomever should be 5 noticed and coordinated with that this is going 6 forward, and that it's an appropriate thing, and that 7 we make the proper reporting and contacts and other 8 things, other actions are being taken to make certain 9 that after the fact, we don't have questions that we 10 didn't do it the right way. 11 MS. CLOUD: We have discussed this 12 extensively with some of the members, but we also have 13 kept it on the agenda item for our status report with 14 our legislative briefing, and it will stay on there. 15 We will continue to make up dates on that. I think 16 the important thing here is that this is not an 17 expense to the Texas Lottery Commission or the State 18 of Texas. This is supported by the National 19 Association of State and Provincial Lotteries. We are 20 the host lottery, so we are doing the legwork in this 21 state for the conference. Labor is basically all 22 we're providing, and they are absorbing the expense. 23 So I think that was the important part of this issue. 24 It is a big conference. It's supposed to bring in 25 estimated around $8 million to the City of Dallas WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 64 1 during the term of the conference. So it's something 2 that is a benefit to the State, you know, because it 3 is a big conference. We know those planning jobs are 4 not easy so there has been a lot of effort and time 5 spent on it and I'm sure the industry will benefit for 6 that. 7 CHAIR MIERS: Further questions? Let's 8 move to Billy Atkins. 9 MR. ATKINS: Commissioners, I'd like 10 to -- in addition to my -- the regular information 11 that's contained in my report, I wanted to draw your 12 attention to three things. One, at least Commissioner 13 Sadberry, I think you'll appreciate -- you'll 14 remember -- you'll painfully remember that when bingo 15 came over in '94, there were over 800 pending license 16 applications that we were working on. Since that 17 time, I have included a graph in my report that shows 18 the average yearly pending count and its steady 19 decrease. And we now only have a pending count 20 ranging anywhere from 150 to 200 applications. In 21 fact, we hit our all-time low in December at 118 22 pending applications. 23 COMMISSIONER SADBERRY: That's correct. 24 And I appreciate you mentioning that, because I think 25 at some point I asked that you begin including that WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 65 1 data in your report. Yes, you're correct. As early 2 as my confirmation hearing and continually, we have 3 had issues of that nature raised. And I think we've 4 come a long way in many aspects. And I didn't see 5 anything in connection with your survey, but I'll take 6 this opportunity to say and acknowledge that time goes 7 by fast, but we can recall times when we had issues of 8 pending licensure applications, confusion, lack of 9 support in that regard, at least from the perception 10 of participants, as well as the functioning of the 11 bingo advisory committee. So while I'm speaking, I'll 12 just say I want to note in your presence and in the 13 presence of your staff and the public the positive 14 forward moving progress that we've made in these 15 issues which track into the public perception and gets 16 the legislature's attention, and that gets our 17 attention. And so I am pleased you can make that 18 report in that aspect, and in general the forward 19 progress we're making in administering bingo in our 20 agency. Thank you. 21 MR. ATKINS: Thank you. Also, 22 Commissioners, on Monday I signed a contract for the 23 development of a new charitable bingo system. 24 Contract is with Keane, Incorporated. We met with 25 them yesterday, and the project will officially kick WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 66 1 off on Monday. And finally -- 2 COMMISSIONER CLOWE: What's the 3 completion of that, Billy? 4 MR. ATKINS: We're estimating anywhere 5 from 13 to 18 months. They're going to try and hit 6 the 13-month mark if they can. They expressed 7 yesterday a willingness to supply whatever resources 8 necessary to do that. 9 Finally, we are -- as you know, we've 10 been in the process of moving our testing facility for 11 our card minding devices and pull-tab dispensers to 12 this building. And I've been told by our facilities 13 division that they have a date of March 27th set for 14 the completion of that move. So we will have all of 15 our testing facilities here so that in the event if we 16 need to supply additional personnel to help out with 17 the testing, we'll have them readily -- they'll be one 18 room away instead of having to travel across town. 19 COMMISSIONER CLOWE: What will happen 20 to the space that's being vacated by that operation in 21 the warehouse? 22 MS. CLOUD: Basically, part of that 23 space is our -- is our backup data center and our area 24 for readiness for disaster recovery. And security is 25 also planning, when we move the studio -- if we do WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 67 1 move the studio out there, that security will be in 2 the offices there that -- and that whole area will be 3 full. I mean, we'll be using it. But right now, 4 where the bingo testing area is being -- is taking 5 place will be -- and I think part of that is in the 6 studio area -- will be the backup for the disaster 7 recovery readiness. 8 COMMISSIONER CLOWE: But you're not 9 going to put IT operations in there, are you? You 10 don't mean that? 11 MS. CLOUD: We do have an IT backup 12 data center there. 13 COMMISSIONER CLOWE: But you don't need 14 that space? 15 MS. CLOUD: No. He's not putting 16 anybody out there. 17 COMMISSIONER CLOWE: So what it's 18 really being used for is the emergency operations and 19 for offices -- 20 MS. CLOUD: Right. 21 COMMISSIONER CLOWE: -- for other 22 purposes. But you don't have anybody moving in there 23 right now? 24 MS. CLOUD: No. 25 CHAIR MIERS: Okay. Does that complete WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 68 1 your report, Billy? 2 MR. ATKINS: Yes, ma'am. 3 CHAIR MIERS: Thank you very much. Why 4 don't we move to the item number XIX, which is the 5 consideration of the status and possible entry of 6 orders in three consecutive matters. Who will handle 7 these? 8 MS. SCHULTZ: Good morning, 9 Commissioners. I'm Kay Schultz, assistant general 10 counsel. There are three cases. The first one, Texas 11 Bingo Licenses, was an original application denial on 12 the basis that the applicant had stated that the 13 purpose for use of the proceeds from bingo, the 14 proposed purpose, was to advertise and promote bingo, 15 which is not the -- among the charitable, benevolent, 16 or patriotic purposes allowed under the act. The 17 other two, 5 Star Discount Liquors and Chevron Food 18 Mart, are NSF, insufficient funds. 19 COMMISSIONER SADBERRY: I just have a 20 general question. Maybe, Kim, you should field this. 21 Am I correct this is the first administrative action 22 we've had on the -- in denial of a license? 23 MS. KIPLIN: Of this type. 24 COMMISSIONER SADBERRY: Of this type? 25 MS. KIPLIN: We have had bingo WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 69 1 applications denied for other reasons. But this is 2 the first one where we've had -- to my recollection 3 where, on the face of the application and the 4 accompanying documents, it just didn't -- it wasn't 5 within the four corners of the Bingo Enabling Act for 6 charitable purposes. 7 COMMISSIONER SADBERRY: That answers 8 it. 9 CHAIR MIERS: Okay. Is there a motion 10 in connection with the proposals for a decision? 11 COMMISSIONER SADBERRY: I move adoption 12 of the proposals. 13 COMMISSIONER CLOWE: Second. 14 CHAIR MIERS: All those in favor, say 15 aye. 16 COMMISSIONER CLOWE: Aye. 17 COMMISSIONER SADBERRY: Aye. 18 CHAIR MIERS: Aye. Thank you, Kaye. 19 I would at this time move that we go 20 into executive session after a five-minute break, and 21 move that we go into that session pursuant to Section 22 551.074 to deliberate the duties and evaluation of the 23 executive director, internal auditor, charitable bingo 24 operations director, and general counsel and security 25 director of the Texas Lottery Commission, to receive WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 70 1 legal advice regarding pending or contemplated 2 litigation, and/or to receive legal advice pursuant to 3 Section 551.071 (1) (A) or (B) of the Texas Government 4 Code, and/or to receive legal advice pursuant to 5 Section 551.071 (2) of the Texas Government Code, 6 including but not limited to the items specified in 7 our agenda under XVI F. There are a number of items 8 specified there, including employment law, personnel 9 law, and general government law. 10 COMMISSIONER CLOWE: Second. 11 CHAIR MIERS: Okay. All those in 12 favor, say aye. 13 COMMISSIONER CLOWE: Aye. 14 COMMISSIONER SADBERRY: Aye. 15 CHAIR MIERS: Aye. The vote will be 16 three to zero. And we'll commence in executive 17 session in approximately five minutes. 18 MS. KIPLIN: And the time now is -- on 19 my watch is 10:07. Today is January 28th, the year 20 2000. 21 CHAIR MIERS: I will note for the 22 record that we're coming out of the executive session 23 at 1:08. Once again, our estimate of the time in 24 executive session was right on target. It is said 25 facetiously. And we can return to our agenda, WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 TEXAS LOTTERY COMMISSION MEETING, 1-28-00 71 1 although we have no other matters to consider on the 2 agenda, to my knowledge, and I would consider a motion 3 to adjourn. 4 COMMISSIONER CLOWE: Second. 5 COMMISSIONER SADBERRY: Second. 6 CHAIR MIERS: And I will stand 7 adjourned until next meeting. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363 72 1 REPORTER'S CERTIFICATION 2 3 STATE OF TEXAS ) 4 COUNTY OF TRAVIS ) 5 6 I, MARY SCOPAS, Certified Shorthand 7 Reporter for the State of Texas, do hereby certify 8 that the above-captioned matter came on for hearing 9 before the TEXAS LOTTERY COMMISSION as hereinafter set 10 out, that I did, in shorthand, report said 11 proceedings, and that the above and foregoing 12 typewritten pages contain a full, true, and correct 13 computer-aided transcription of my shorthand notes 14 taken on said occasion. 15 16 Witness my hand on this the 3RD day of 17 February, 2000. 18 19 20 21 MARY SCOPAS, RPR, Texas CSR No. 5313 22 Expiration Date: 12-31-00 1609 Shoal Creek Boulevard, Suite 202 23 Austin, Texas 78701 (512) 474-4363 24 25 JOB NO. 000128MSH WRIGHT WATSON STEN-TEL (800) 375-4363 (512) 474-4363