0001 1 2 3 4 5 6 * * * * * * * * * * * * * * * * * 7 8 TEXAS LOTTERY COMMISSION MEETING 9 10 MAY 29, 2003 11 12 * * * * * * * * * * * * * * * * * 13 14 15 16 17 18 BE IT REMEMBERED that the TEXAS LOTTERY 19 COMMISSION meeting was held on the 29th day of May, 20 2003, from 8:30 a.m. to 12:26 p.m., before 21 Kimberlye A. Furr, RPR, CSR in and for the State of 22 Texas, reported by machine shorthand, at the 23 offices of the Texas Lottery Commission, 611 East 24 Sixth Street, Austin, Texas, whereupon the 25 following proceedings were had: 0002 1 APPEARANCES 2 Chairman: 3 C. Tom Clowe, Jr. 4 Commissioners: 5 Elizabeth D. Whitaker James A. Cox, Jr. 6 7 General Counsel: 8 Kimberly Kiplin 9 Executive Director: 10 Reagan A. Greer 11 Deputy Executive Director: 12 Gary Grief 13 Charitable Bingo Operations director: 14 Billy Atkins 15 16 17 18 19 20 21 22 23 24 25 0003 1 INDEX 2 Appearances.................................. 2 3 AGENDA ITEMS 4 Item Number 1................................ 4 Item Number 2................................ 4 5 Item Number 3................................ 14 Item Number 4................................ 21 6 Item Number 5................................ 23 Item Number 6................................ 27 7 Item Number 7................................ 34 Item Number 8................................ 34 8 Item Number 9................................ 54 Item Number 10............................... 58 9 Item Number 11............................... 59 Item Number 12............................... 61 10 Item Number 13............................... 62 Item Number 14............................... 63 11 Item Number 15............................... 85 Item Number 16............................... 87 12 Item Number 17............................... 66 Item Number 18............................... 73 13 Item Number 19............................... 82 Item Number 20............................... 85 14 Item Number 21............................... 88 15 Reporter's Certificate....................... 89 16 17 18 19 20 21 22 23 24 25 0004 1 CHAIRMAN CLOWE: The date is May 29, 2 2003. The time is 8:30. The Texas Lottery 3 Commission meeting is called to order. My name is 4 Tom Clowe. Commissioner Cox is here. We have a 5 forum. 6 Commissioner Whitaker is in the 7 building, but unable to be here at this moment, so 8 I will announce for the record when she arrives. 9 We will go right on to the Number 2 10 item on the agenda reported by the Bingo Advisory 11 Commission Chair, Virginia Brackett. 12 Good morning, Virginia. 13 MS. BRACKETT: Good morning. 14 I'm Virginia Brackett, Chair of the 15 Bingo Advisory Committee. The Bingo Advisory 16 Committee met on April 24th here in Austin, and 17 among the items of business, we adopted the Texas 18 Bingo Player's Survey, which was by Bingo Advisory 19 Committee member Jack Dodry and Bingo and Lottery 20 staff. And we're excited about this questionnaire 21 because it is a scientific instrument which will 22 provide valuable information to everyone in the 23 industry. 24 130 halls administered the survey 25 beginning on May 9th and concluding on May 23rd. 0005 1 It is designed to take five minutes of the Bingo 2 player's time to complete. The analyses and 3 responses are scheduled from June 19th to the 30th. 4 The gathered data will be valuable 5 to all in the industry. It will provide 6 information which includes ages of player, genders, 7 employment status, income levels, number of weekly 8 visits to the halls and amounts spent, and reasons 9 that they play bingo. Action taken was that the 10 Committe authorized the implementation of the 11 survey and continuation of the subcommittee through 12 the completion of the project. 13 The License Fee Subcommittee 14 reported on the work of three meetings regarding 15 Administrative Rule 402.544, and this was chaired 16 by Mario Manio. Briefly they combined some items, 17 deleted some redundant language, and added some 18 language. The action taken was that the Bingo 19 Advisory Committe recommends to the Lottery 20 Commission it propose the Administrative Rule 21 402.544 regarding license fees be published in the 22 Texas Register for public comment. 23 Regarding electronic card-minding 24 devices -- Danny Moore chaired this committee. The 25 Rule 402.555 has undergone major revision by adding 0006 1 and deleting sections in order to make it clear and 2 concise for licensees to understand. For example, 3 a definition section was added to define the 4 terminology that is common to electronic 5 card-minding devices. Action taken was that the 6 Bingo Advisory Committee recommends to the Texas 7 Lottery Commission it propose the Administrative 8 Rule 402.555 electronic card-minding devices be 9 published in the Texas Register for formal comment. 10 Distribution of Proceeds for 11 Charitable Purposes, this is a subcommitte headed 12 by Larry Williamson. And this rule had also 13 undergone revision by adding and deleting for 14 clarity and conciseness. Action taken was the 15 Bingo Advisory Committee recommends to the Texas 16 Lottery Commission that it propose the 17 Administrative Rule 402.568 Distribution Proceeds 18 for Charitable Purposes be published in the Texas 19 Register for a formal comment. 20 Also, the Committee heard the first 21 reading of the new rule relating to the transfer of 22 funds. The nine areas of needed review and comment 23 were discussed, work groups were formed, and the 24 work groups are composed of no more than two Bingo 25 Advisory Committe members and then public members. 0007 1 The number of public members serving on the 2 Committee are determined by the size and the scope 3 of the job. 4 And these work areas include that 5 the Bingo Advisory Committee will comment on 6 improvement and status of the bingo industry. 7 Bingo gross rates, charitable distributions, 8 expenses, attendance, and other areas will be 9 requested by the Commission -- other areas 10 requested by the commission will be reviewed and 11 comments made and quarterly reports will be the 12 major source of information for this. 13 The Bingo Advisory Committee will 14 comment on proposed rules. The Bingo Advisory 15 Committee will review draft rules and offer 16 comments prior to the presentation to the 17 Commission unless an emergency requires otherwise. 18 And this will include new rules relating to general 19 audits, tax reviews, and location verification. 20 The Bingo Advisory Committee will 21 review and comment on the content and requirements 22 by the operator training program and offer any 23 suggestions for improvement. The Bingo Advisory 24 Committee will review and comment on the bingo 25 bulletin, including its form and content, and 0008 1 consider information which would benefit licensees. 2 The Bingo Advisory Committee will review and 3 comment on alternative styles of Bingo games 4 currently not available in Texas. The Bingo 5 Advisory Committee will review and comment on bingo 6 forms, including audit forms, application forms, 7 and quarterly reports. The Bingo Advisory 8 Committee will review and comment on the usability 9 of the charitable bingo web site and offer its 10 comments for improvement. The Bingo Advisory 11 Committee will comment on the bingo operations 12 manual. Consideration will be given to development 13 or revision of an operations manual to be used as a 14 tool for licensed organizations to stay in 15 compliance with the act and rules and an 16 informational tool for exempt organizations 17 considering applying for a Bingo license. 18 And the Bingo Advisory Committe will 19 be on June 19th here in Austin at 10:00. And the 20 proposed agenda items right now are, election of a 21 vice-chair; Internet Bingo and impact on Charitable 22 Bingo; smoking, the local jurisdictions regarding 23 smoking ordinances, results in effect on 24 attendance, and several of us have suffered through 25 this, and we probably do have some good information 0009 1 on that. And then we will have comments reports on 2 items named in this report and any items requested 3 by the Lottery Commission. 4 CHAIRMAN CLOWE: Any questions? 5 Billy, do you have any comments on 6 Virginia's report? 7 MR. ATKINS: I do, Mr. Chairman. 8 I wanted to, first of all, thank 9 Virginia and the members of the Advisory Commission 10 as well as the members of the Charitable Bingo 11 Division staff for all of the work that they have 12 done since we've put the work plan into place and 13 it was adopted by both the Commission and the 14 Advisory Committee. I think it has really helped 15 all of us to focus our efforts on bringing about 16 some very meaningful information and will result in 17 some specific and tangible benefits. 18 We, for the most part, have been 19 receiving meaningful comment in the subcommittees 20 regarding proposed rules. Additionally, the other 21 subcommittees have provided us with some really 22 important industry insight on other topics that are 23 being considered under the work plan, and I wanted 24 to, very briefly, follow up on Virginia's update 25 and just inform you about some of the activities of 0010 1 the subcommittees. 2 She mentioned the subcommittees on 3 the Bingo bulletin and the Bingo Division website. 4 Those committees have been meeting and are 5 scheduled to make their recommendations at the 6 June 19th meeting that Virginia mentioned. 7 Of particular note, the subcommittee 8 on the Bingo website has made some suggestions, 9 some very good suggestions, that we've actually 10 been considering about changing kind of the 11 direction of our website, which is now currently 12 geared towards our licensees, and they've made some 13 suggestions that would broaden the website and make 14 it more interesting to members of the general 15 public as well as Bingo players. They've also 16 provided us some good information -- the 17 subcommittee working on the bulletin has provided 18 us some good information in regards to what bingo 19 licensees find beneficial and useful in that 20 publication. 21 Virginia mentioned the subcommittee 22 that's reviewing the three draft audit rules. They 23 have met and have been reviewing the rules. And in 24 order to make sure that we're making use of all of 25 the resources available to us, I have talked to the 0011 1 agency's new internal auditor Katherine Melton and 2 told her about this process and these specific 3 rules that we're undergoing and asked her if she 4 would mind sitting in on some of those meetings, 5 reviewing those rules, and offering any comments 6 that she may have, and she has responded very 7 enthusiastically to that request, and I appreciate 8 that. 9 Also, this is still kind of a new 10 process that we're going through with these 11 subcommittees, et cetera, and I've talked to 12 Ms. Kiplin about, when we form a subcommitte, 13 particularly to work on a rule, I'm going to ask 14 Ms. Kiplin to also assign an attorney to work with 15 that subcommittee so the rule can actually be 16 developed and written as it's going through the 17 process with the subcommittee. And I think it 18 will, you know, be dumping a lot of work on 19 legal -- for lack of a better word -- at the very 20 end and having them put something together, but I 21 think they can also provide a lot of insight to the 22 work -- to the subcommittees as they're developing 23 the rules and help expedite that process. 24 And, finally, I just want to concur 25 with Virginia's comments regarding the subcommitte 0012 1 that's conducting the survey. I think, so far, we 2 have a response rate of about 20 percent from the 3 halls that we sent surveys to, which is an 4 excellent response rate. That information is being 5 data entered at this time, and we -- even though 6 the survey period is over, we still expect to 7 receive some surveys in. And like Virginia said, 8 this is -- this is a seminal piece of information 9 that's being put together. Again, we're not aware 10 of any other jurisdiction that's compiled this type 11 of information, and we think, once we get this 12 snapshot of the Texas Bingo players together, it 13 will provide valuable information to you and the 14 industry in knowing who that Bingo player is. And 15 we want to continue this process in the future so 16 that we can look and see if there are any changes 17 to those demographics for the Bingo players. 18 So, again, a lot of work has been 19 done; a lot of work is being done. And, again, I 20 appreciate Virginia and the Advisory Committee 21 members for their help as we're doing this. 22 CHAIRMAN CLOWE: Virginia, I want to 23 thank you for making a special effort to be here 24 this morning. I know that you had not planned to 25 come and you changed your plans, and we appreciate 0013 1 you being here to make this report. 2 I also want to congratulate what the 3 committee has done under your leadership. I've 4 attended, now, half of the last meeting where you 5 covered many of the items on your agenda, and 6 Commissioner Cox, I think, attended the second half 7 of the meeting. And I'm seeing the kind of 8 progress, the kind of involvement and tangible 9 results, that I think we heard from the Sunset 10 Committee report that they would like to see 11 forthcoming from the Bingo Advisory Committee, and 12 it's very encouraging to me to see the kinds of 13 things that you're doing now as opposed to the 14 kinds of things that were done prior to when I came 15 on this Commission, for example. 16 I also want to thank Commissioner 17 Cox who has taken a real deep and serious interest 18 in Bingo and has attended a number of meetings in 19 addition to BAC meetings regarding Bingo 20 activities, and it's very helpful to have his 21 involvement and his knowledge brought to bear. And 22 I think we're really now doing the kinds of things 23 we need to in this Bingo operation from the 24 division's standpoint and from the Commission level 25 to help the industry and regulate properly. 0014 1 So, keep up the good work, Virginia. 2 MS. BRACKETT: Okay. Well, thank 3 you for your comments. 4 I do want to say, though, we do have 5 a very good committee that came to work, that 6 didn't come to complain or to fight their little 7 battle; they came to work and make the industry 8 better, and it's turned into a pleasant experience 9 too. 10 CHAIRMAN CLOWE: Great. Great. 11 MS. BRACKETT: Thank you. 12 CHAIRMAN CLOWE: Thank you, again. 13 Billy, the next two items are yours 14 in regard to rule making. 15 MR. ATKINS: Yes, sir. 16 Item 3. Commissioners, the staff 17 first presented the draft of new Rule 402.544, 18 relating to licensing fees, to the Advisory 19 Committee of their meeting on February 27th, 2003. 20 A subcommittee was appointed to consider the draft, 21 and the activities of that subcommittee are 22 identified in the attached time line in your 23 notebook. The draft rule was considered by the 24 Advisory Committee a second time on April 24th 25 where they voted to recommend the Lottery 0015 1 Commission publish the attached rule in the Texas 2 Register for public comment. 3 A rule that set out information 4 regarding license fees, specifically the 5 requirements for a license fee for an original 6 license to conduct Charitable Bingo or to lease 7 Bingo premises and the amount of license fee 8 required to be submitted during the first six 9 months of a license term or upon license renewal. 10 The rule identifies the requirements 11 for a license fee when a license is in 12 administrative hold; it identifies how a license 13 fee is recalculated at renewal time; it addresses 14 an organization's responsibilities when a license 15 no longer exists; and it provides licensees with 16 important information regarding an overpayment of a 17 license fee and how the organization can obtain a 18 refund. 19 I'd be happy to answer any questions 20 that you may have about the rule. It is the 21 staff's recommendation that the Commission vote to 22 propose new Rule 402.544 relating to licensing fees 23 in the Texas Register for public comment for a 24 period of 30 days. 25 CHAIRMAN CLOWE: Ms. Kiplin, do you 0016 1 have any comments? 2 MS. KIPLIN: No. Billy and I spoke 3 about this item, and what he said is part of what I 4 would have recommended, which is that you make a 5 motion to -- and second it and adopt it to take 6 action to propose this new rule for public comment 7 in the Texas Registry. 8 CHAIRMAN CLOWE: Any questions? 9 I move the adoption of the motion to 10 publish. 11 COMMISSIONER COX: Second. 12 CHAIRMAN CLOWE: All in favor, 13 please say aye. 14 THE COMMISSIONERS: Aye. 15 CHAIRMAN CLOWE: Opposed? No. 16 The vote is two, zero in favor. 17 Billy, you have the next item. 18 MR. ATKINS: Yes, sir. 19 Commissioners, the following rule is 20 one that's been available for public comment and 21 input for quite some time, so if you would, please, 22 bear with me as I go through a little of the 23 history. 24 The staff first presented the draft 25 of Rule 402.5555 relating to card-minding devices 0017 1 to the Advisory Committee at their meeting on 2 August 23rd, 2002. This rule was included on the 3 following BAC agendas: Their meeting for 4 November 21st, 2002 and December 12th, 2002. 5 At their meeting on February 27th, 6 2003, the Advisory Committee appointed a 7 subcommittee, and the activities of that 8 subcommittee are attached in the time line included 9 in your notebook. The Advisory Committee voted at 10 their April 24th, 2002 meeting directing that the 11 Lottery Commission publish the attached rule in the 12 Texas Register for public comments. 13 Additionally, the Advisory Committee 14 directed the subcommittee to further consider the 15 following sections, that being, F-2 and I-6. 16 Additionally, a public member of the subcommittee 17 noted another correction that needed to be included 18 in Subsection D, and that is included in that 19 draft, Commissioners. And it's my understanding 20 that that is actually more of just a technical 21 correction. 22 Jamie McNallie is here, and I 23 believe he is the one that brought that to our 24 attention. And if he has further comments, he can 25 provide you with information on that. 0018 1 COMMISSIONER COX: Billy, where is 2 it specifically in this section? 3 MS. KIPLIN: Are you talking about 4 subsection D -- 5 MR. ATKINS: Yes. 6 MS. KIPLIN: -- where it says 7 card-minding devices -- 8 MR. ATKINS: Yes. 9 MS. KIPLIN: -- card-minding system? 10 MR. ATKINS: Yes. 11 MS. KIPLIN: It's Subsection D, and 12 there was a phrase under D. It was one, two, 13 three, five, six, eight, nine, ten and 12, those 14 paragraphs of Subsection D. And the word was 15 system, and it should have been device. And so -- 16 CHAIRMAN CLOWE: Okay. All those 17 changes are just changing the word system to the 18 word device? 19 MS. KIPLIN: Correct. That's the 20 change. 21 MR. ATKINS: Originally, 22 Commissioners, Rule 402.555 was presented to the 23 Advisory Committee as amendments to the existing 24 rule. Based on the amount of amendments to 25 402.555, the legal staff recommended that, in order 0019 1 to reduce confusion, the existing rule 402.555 be 2 repealed and a new 402.555 be presented for 3 publication as a new rule. 4 The attached rule, as Virginia 5 mentioned earlier, provides for definitions of 6 words and phrases, process to obtain commission 7 approval for use of a card-minding system and 8 components, the manufacturing requirements for a 9 card-minding system to obtain approval in Texas, 10 distributor requirements, license authorized, 11 organization requirements, inspections by the 12 Commission, record requirements, and restrictions 13 on the use of card-minding systems in Texas. 14 Now, Commissioners, I do want to 15 point out that there is some pending legislation 16 that, I think, Ms. Trevino will talk about in a 17 little more detail under her report, but there is 18 some legislation that, if adopted and enacted, 19 could affect this rule. 20 The two specific areas that I'm 21 aware of is the potential repeal of the 40 percent 22 limit on the use of card-minding devices and the 23 requirement relating to the inclusion of language 24 relating to the posting of the compulsive gambling 25 number. If those -- if that legislation does pass 0020 1 and become effective, we would fully expect to 2 receive comment from the public to that effect that 3 those sections are, you know, in effect, no longer 4 pertinent to this rule, and we would -- we would 5 make the appropriate changes to the rule at that 6 time. 7 CHAIRMAN CLOWE: And the timing is 8 good on that? 9 MR. ATKINS: That's right. This 10 public comment period will cover -- will cover the 11 period in question, yes, sir . 12 CHAIRMAN CLOWE: You think? 13 MR. ATKINS: Yes, sir. 14 MS. KIPLIN: And Mr. Atkins and I 15 have also spoken about this particular issue, and 16 there is a -- when there's a need to republish, and 17 it would be if we were making a change that, the 18 original proposal, those persons would not have 19 otherwise known or would have -- it would have 20 invoked a whole 'nother group of people who would 21 not have had notice of the change. 22 I don't see that with this because 23 it's going to be going out to, obviously, all the 24 bingo folks to comment on, so, I don't anticipate 25 that there would be any need to republish. Of 0021 1 course, I'm saying that because I don't know what 2 kind of comments we're going to receive. 3 CHAIRMAN CLOWE: For the record, I'd 4 like to note that Commissioner Whitaker has joined 5 us. The time is 9:52. 6 Welcome. 7 COMMISSIONER WHITAKER: Thank you. 8 CHAIRMAN CLOWE: Commissioners, 9 we're on Agenda Item Number 4, which is discussion 10 for publishing for public comment on repeal of 11 existing TAC 402.555 and adopting a new 16 TAC 12 402.555. 13 MS. KIPLIN: Mr. Chairman, I think I 14 heard you say 9:52, and the time is -- 15 CHAIRMAN CLOWE: 8:52. I beg your 16 pardon. 17 And the Bing Advisory Committee has 18 recommended the adoption of this rule for 19 publication, and Billy Atkins had just commented on 20 it. 21 Anything further, Counsel? 22 MS. KIPLIN: No. I think the motion 23 would be that you would move to propose these -- 24 the repeal of the existing card-minding device rule 25 and the proposal of the new card-minding system 0022 1 rule for public comment in the Texas Registry. 2 CHAIRMAN CLOWE: Any questions? 3 I move the adoption. 4 Is there a second? 5 COMMISSIONER WHITAKER: Second. 6 CHAIRMAN CLOWE: All in favor, 7 please say aye. 8 THE COMMISSIONERS: Aye. 9 CHAIRMAN CLOWE: The vote is three, 10 zero in favor. 11 Billy, the next item is yours. 12 COMMISSIONER COX: Could I say 13 something? 14 CHAIRMAN CLOWE: Yes, sir. 15 COMMISSIONER COX: Billy, I want to 16 thank you for this memo that sets out the time 17 line, that really helps. 18 MR. ATKINS: Yes, sir. 19 MS. KIPLIN: Mr. Chairman, you used 20 the word adoption, and I'm thinking that you meant 21 the adoption of the staff's recommendation of the 22 motion -- 23 CHAIRMAN CLOWE: That is correct. 24 MS. KIPLIN: -- not the adoption of 25 the rule -- 0023 1 CHAIRMAN CLOWE: That's correct. 2 MS. KIPLIN: -- to propose the rule. 3 CHAIRMAN CLOWE: Adoption of request 4 for publication. 5 MR. ATKINS: Agenda Item Number 5, 6 Commissioners, is our quarterly report on fiscal 7 and financial information. The first quarter of 8 2003 ended on March 31st, and reports from 9 conductors and lessors were due on April 15th. 10 Traditionally, as you're looking at 11 the report, you'll see that the fourth quarter of 12 2002 -- I'm sorry -- the first quarter of 2003 13 figures are higher than the fourth quarter of 2002. 14 That is the tradition that we have been noting for 15 quite some time, the first quarter is higher than 16 the -- than the fourth quarter. 17 Again, we see some substantial 18 increases in Pull Tab or Instant Bingo sales, some 19 20 percent increase in the first quarter of 2003. 20 The one anomaly in comparing the first quarter of 21 2003 to the first quarter of 2002 that I want to 22 point out to you is the total bingo gross receipts, 23 in that, there's an increase, although a small 24 increase, of $1.8 million. This is the first time 25 that we have seen an increase from first quarter to 0024 1 first quarter since 1999. Again, we attribute that 2 primarily to the increase in the Pull Tab sales. 3 As you know, I have spoken to some 4 conductors, and the paper that -- the new paper 5 that the Commission approved at the latter part of 6 last year, I think, is starting to get into use, 7 and there are some organizations that have 8 indicated that they will begin using that paper, so 9 we're going to continue to monitor paper sales to 10 see if we see any increases there. 11 Because we have started to follow 12 the Pull Tab sales so closely and are looking -- 13 are going to be looking at the paper sales closely 14 also, we have included in your notebook for the 15 first time information relating to statistical data 16 that's found by manufacturers and distributors. 17 As you'll recall, they don't pay any 18 taxes or anything, but they do report on a 19 quarterly basis statistical information to us, and 20 we do want to start following that information in 21 order to see if we see any changes in paper sales 22 that we attribute -- that we can attribute to the 23 new paper that the Commission has introduced. 24 The one anomaly that would show up 25 on that report -- and it's probably what you're 0025 1 looking at right now, Commissioner Cox -- is, 2 you'll notice a decline in equipment lease of about 3 28 percent, $1.2 million. What that is, is there 4 was one manufacture that gave a $1.2 million credit 5 to one distributor, so that's -- that's the reason 6 for that variation. 7 Again, we're gong to be providing a 8 lot of this information to the Advisory Committee 9 at their next meeting -- again, as part of one of 10 the charges that Virginia noted earlier -- and be 11 asking them to look at all of this information and 12 provide their comments on it, also. 13 CHAIRMAN CLOWE: Any comments? 14 Anything further, Billy? 15 MR. ATKINS: No, sir. 16 CHAIRMAN CLOWE: I want to apologize 17 to Mr. James McNallie. I've overlooked his witness 18 affirmation form. He wished to testify in regard 19 to Item 4, 402.555. 20 Would you like to come forward and 21 make your comments now, please, sir? I'm sorry for 22 that oversight. 23 MR. McNallie: No need to apologize 24 at all, Mr. Chairman. 25 Good morning, Commissioners. My 0026 1 name is Jamie McNallie. I'm from the law firm of 2 Clark, Thomas & Winters here in town and I 3 represent Game Tech International, a licensed 4 manufacture of bingo equipment in the state. 5 I just wanted to come today to tell 6 you that we supported publication of the rule. The 7 subcommittee of the Bingo Advisory Committee worked 8 long and hard for a number of months on the rule. 9 It very much is a product of compromise; it was a 10 spirited debate, not always agreement on every 11 point, but the process was good, and Game Tech 12 appreciates the opportunity to be a part of that 13 process, and we hope that process is adopted for 14 the future. 15 Bill and his staff worked extremely 16 hard on the rule, as did other members of the 17 subcommitte. And, as Billy mentioned, I think 18 there is a recognition that, if pending legislation 19 is enacted, it will probably need to be changed in 20 some manner, but we're hopeful that we can do that 21 within the comment period. 22 So, again, I just wanted to come 23 today to express my support for the process and for 24 publication of the rule. I thank you. 25 CHAIRMAN CLOWE: We thank you for 0027 1 being here and for your prior involvement. This is 2 the way that we'd like to see this go, and your 3 participation is very helpful, and you will be 4 making comments, I'm sure, during the comment 5 period. That's great. Thank you for being here. 6 MR. McNallie: Thank you, 7 Commissioners. I appreciate it. 8 CHAIRMAN CLOWE: I think that 9 concludes all of the items to this point on the 10 bingo operations. We're ready now to take up Item 11 No. 6, report, possible discussion and/or action on 12 lottery sales and trends. Toni Smith. 13 Toni, I guess you are going to 14 comment on this, being the 11th anniversary of the 15 lottery, are you not? 16 MS. SMITH: Well, it is, and I think 17 that Mr. Greer may have had some comments they he 18 wants to make. 19 CHAIRMAN CLOWE: Oh, you're going to 20 be the commenter? 21 MR. GREER: I'm the commenter. 22 CHAIRMAN CLOWE: All right. Great. 23 MR. GREER: Yeah, we have some 24 comments. 25 MS. SMITH: Good morning 0028 1 Commissioners. For the record, my name is Toni 2 Smith, and I'm marketing director of the Texas 3 Lottery. 4 Commissioners, I have distributed to 5 you this morning a memo that reflects sales for 6 fiscal year that week ending May 24th, 2003. Total 7 sales to date for fiscal year 2003 are $2.3 8 billion. This is up 7.7 percent for fiscal year 9 2002 total sales to date of $2.1 billion. This 10 memo gives you some other detailed information and 11 breakdown of the sales of the same time frame. 12 I'd be happy to discuss any of this 13 information with you. 14 CHAIRMAN CLOWE: Any questions? 15 Toni, we're into the first jackpot 16 of the new Lotto Texas Game form. I think the 17 current jackpot is $29 million? 18 MS. SMITH: Yes, sir. 19 CHAIRMAN CLOWE: We began with a 20 rollover from the prior game form of less than 21 $10 million. I can't remember whether it was seven 22 or nine. Can you help us understand how sales are 23 going and what the reception by the public has been 24 to this point? 25 MS. SMITH: Actually, sales are down 0029 1 a little. Some of that is contributed to the 2 interest rate when we do the jackpot estimations, 3 so the rolls have not been as large as some of our 4 players have seen in the past. I think the goods 5 news there is that we are rolling. So, when you 6 take into consideration the interest rate when we 7 do the estimation and the lack of players' sales 8 themselves, it's given us a slower start, but we've 9 continued to roll now to this $29 million. 10 And, as we've mentioned in the past, 11 and I've also put at the end of your packet I gave 12 you, a chart that shows that players really aren't 13 coming into the game and having that impact on 14 sales until we get to $30 million, so I think that 15 the proof in where we're going with this matrix 16 change will be seen as we continue these rolls. 17 The game, as far as the matrix 18 change, has done what we've designed it to do. 19 We're rolling; the jackpot is rolling like it 20 should and we have more winners. 21 For this -- for last night's draw, 22 we had over 80,000 winners in that game, and so 23 it's doing what we designed the game to do. I 24 think it's a little early to make any negative 25 comments about the success of that because we have 0030 1 not yet reached the higher levels of jackpots that 2 we know bring players in. I think when we get to 3 that point, then that will help increase the sales 4 per draw. And we'll still be at the mercy of the 5 interest rate, but I think that would not at the 6 levels -- you have to bring players in to really 7 see that substantial positive increase in sales. 8 COMMISSIONER COX: Toni, my 9 expectation was that, at the same jackpot level, we 10 should see lower sales under the new matrix as 11 compared with the old because the expected value of 12 the ticket is lower. 13 MS. SMITH: Yes. 14 COMMISSIONER COX: And only when the 15 jackpots get higher do the expected values increase 16 to a point where sales would merit being higher. 17 MS. SMITH: And our history, even 18 with the old matrix, was that we've got to get over 19 $30 million to see that kind of a change, so we're 20 excited and anxious to get to that point. 21 MR. GREER: Commissioner? 22 CHAIRMAN CLOWE: Yeah. 23 MR. GREER: I'd like to just throw a 24 few comments in on this. I'm -- I am deeply 25 involved in monitoring the game. You know we have 0031 1 had, obviously, a change that people are adjusting 2 to. One of the things that Toni mentioned a moment 3 ago is the fact that we are having more winners, 4 which is one of the things we had discussed early 5 on in the process. 6 In the jackpot we had over the 7 weekend, we had almost 91,000 winners; this jackpot 8 last night, we had 87,958. And what players are 9 discovering, which is one of the things that we 10 touched on, is that they have an opportunity to 11 have more chances to win, specifically at those 12 higher levels, they are getting a much higher 13 jackpot. Last night, five numbers without the 14 bonus ball, there were three winners, and the 15 jackpot share for that was $14,974, which is much 16 higher than it had been in the past. 17 So as retailers -- I've been out, 18 which I'll make in my report a moment ago -- but 19 I've been out visiting with retailers, and they're 20 beginning to get it, you know, the fact that these 21 things we've talked about are actually happening. 22 We're seeing attitudes change. 23 And we've touched on the jackpot 24 levels, which obviously work, but I think, 25 moreover, it's a whole different game. I mean, 0032 1 that's what people are beginning to understand; it 2 is a whole new ball game. And the fact that we now 3 produce more winners, the enthusiasm level is 4 continuing to grow. 5 But I wanted you to be aware, each 6 of you, that I'm personally involved in this on a 7 daily basis, as Toni will attest. I am monitoring 8 sales readily with GTECH and feel confident that 9 we're moving in the right direction. 10 CHAIRMAN CLOWE: I think that's one 11 of things that we wanted to hear. And I heard you 12 give testimony a couple of weeks ago in a hearing 13 relative to what the success level was in the new 14 game similar to what Toni said and what you've 15 reiterated. It is a change, and the Commission has 16 made the change. 17 We received input from a number of 18 interested parties about the change, and we 19 continue to be sensitive to that, and we're 20 watching the game, as you are, and we're hoping for 21 its success. We're expecting its success, but we 22 want to be mindful of the fact that we have 23 projections which we think will be achieved as a 24 result of this change and continue to monitor it as 25 time passes. 0033 1 And like any other change, in the 2 beginning you don't see, in many cases, what will 3 be the trend developed until some time has passed, 4 but we want to be mindful. And I want it on the 5 record that we are watching this and we are 6 respectful of the input we've had, and we intend to 7 continue to monitor this game and see to it that it 8 is successful in this state. 9 MR. GREER: And I will also mention 10 that we are tracking what other states have done 11 when they have made changes on matrix. In 12 California specifically, we've looked at some 13 numbers there, and what they're telling me -- which 14 I agree and I'm having a hard time agreeing 15 sometimes; like everyone, you want -- you know, you 16 want it now -- but, we're really looking at a 17 scenario where we have to be able to compare apples 18 to apples and that won't happen until about a year 19 into the game, so we're going to continue to 20 monitor that, and I'm confident within the year 21 that we will see, you know, the things that we've 22 discussed will come to pass. 23 CHAIRMAN CLOWE: Very good. All 24 right. Thank you. 25 Toni, I believe you have the next 0034 1 agenda item which deals with advertising and 2 promotions. 3 MS. SMITH: I have nothing new to 4 report. I'd be happy to answer any questions that 5 you have about our advertising entries, but I have 6 nothing new to report at this time. 7 CHAIRMAN CLOWE: Any questions? 8 Thank you very much. 9 MS. SMITH: Thank you. 10 CHAIRMAN CLOWE: Next Item, 11 Number 8, is the report on an action on the 78th 12 Legislature, including the House General 13 Investigating Committee review of activities 14 relating to the recent change in the Lotto Texas 15 game by Nelda Trevino. 16 Good morning. 17 MS. TREVINO: Good morning, 18 Commissioners. For the record, I'm Nelda Trevino, 19 the director of governmental affairs. 20 Commissioners, we have provided you 21 with an updated copy of the legislative tracking 22 report, and I wanted to highlight for you this 23 morning several bills that directly impact either 24 the Lottery or Charitable Bingo. 25 First of all, in regards to the 0035 1 agency's Sunset Bill, Senate Bill T-70, by Senator 2 Mike Jackson and Representative Ron Wilson, this 3 bill was voted out of the Senate on May the 7th. 4 The Senate voted the bill out on May the 7th, and 5 the House just voted the bill out yesterday, May 6 the 28th. 7 A different version was voted out of 8 the House, and so the bill will now go back to the 9 Senate, and the Senate basically has two choices, 10 to either concur with the House version or to 11 request a conference committee to iron out the 12 differences between the Senate version and the 13 House version. 14 Some of the -- some of the 15 differences that are in the House version authorize 16 the agency to enter into a multijurisdictional 17 lottery game, and some of the provisions relating 18 to the regulation of enforcement of bingo are also 19 different between the two versions of the Bill. 20 And, also, just for the record, the 21 media has reported greatly in regards to the 22 multijurisdiction, multistate game authorization, 23 and it's been referenced to Power Ball, and I just 24 wanted to, again, put on the record that the bill 25 does not specifically direct the agency to enter 0036 1 into the Power Ball game. That's the most popular 2 multistate game out there, but there are other 3 existing games out there, like the big games -- 4 excuse me -- Mega Millions. 5 CHAIRMAN CLOWE: Would you just 6 expand on that a little bit, because I think it's a 7 very important point. I heard in the legislative 8 session that I attended earlier this week 9 references to Power Ball, and I think it could be 10 confusing that the legislation directed the 11 Commission to enter into that game, and you're 12 saying that's not the fact? 13 MS. TREVINO: That's not the fact. 14 CHAIRMAN CLOWE: And in addition to 15 Power Ball, there's Multi -- 16 MS. TREVINO: Mega Million. 17 CHAIRMAN CLOWE: Mega Million, which 18 is a group of different states drawing different 19 nights. And as the legislation exists today, that 20 decision, if it's passed, would be left up to this 21 Commission -- 22 MS. TREVINO: That's correct. 23 CHAIRMAN CLOWE: -- and the 24 executive director, I think, would be the decision 25 maker. Is that not correct? 0037 1 MR. GREER: Yes, sir. 2 COMMISSIONER WHITAKER: Nelda, 3 what's the likelihood that that will occur? 4 MS. TREVINO: I think that won't 5 happen. I think they're more than likely to go a 6 conference committee. 7 COMMISSIONER WHITAKER: So what do 8 you see happening from here on out? 9 MS. TREVINO: And this will probably 10 happen today, the bill going back to the Senate 11 today, and so, again, assuming that they do not 12 concur with the House version, then they will 13 appoint Senate conferees. It will go back to the 14 House for the House to appoint House conferees, and 15 then those conferees, five members from each 16 chamber, will get together to work out the 17 differences. 18 And there are some deadlines that 19 are coming up in regard -- first of all, the 20 session ends on June the 2nd, so we're down to just 21 a few more days. But based on the deadlines that 22 are imposed under the House and Senate rules, the 23 House and the Senate need to adopt conference 24 committee reports by Sunday, June the 1st, so 25 there's a very short window of time here between 0038 1 today -- really, more on Saturday because there's a 2 printing requirement also in the rules -- 3 So, again, a very short period of 4 where those conferees -- assuming a conference 5 committee is appointed to work out the differences. 6 CHAIRMAN CLOWE: That was not a 7 position; that was simply being responsive to a 8 Commissioner's question. 9 MS. TREVINO: And just an 10 observation. 11 CHAIRMAN CLOWE: Then I have a 12 question about shoes. I'll ask that later. 13 MS. TREVINO: I have a lot of 14 opinions about shoes. 15 MS. KIPLIN: Can I just go back to 16 the question that -- Mr. Chairman, you asked a 17 question about the multijurisdiction game, and, I 18 guess, who's decision it would be in terms of what 19 game to -- 20 CHAIRMAN CLOWE: I was asking who is 21 the decision-maker in the Commission. 22 MS. KIPLIN: Well, what -- what I 23 envision is that there would be a rule that would 24 need to be adopted, just like the opinion rule on 25 games. So the Commission promulgates the rules and 0039 1 the executive director has the contracting 2 authority, so there would need to be, I'm thinking, 3 in an open meeting, a dialogue regarding meshing 4 those two together. 5 CHAIRMAN CLOWE: So you would have a 6 rule calling for comment -- and I heard debate on 7 that earlier in the legislative session this week; 8 there was a major point, I think, that was under 9 discussion -- and then the Commission would offer 10 up a rule for public comment, but you don't see 11 that authority as automatically resting with the 12 executive director? 13 MS. KIPLIN: Not on the rule making, 14 no, sir, I don't. And we'll take a closer look, 15 obviously, at the end of the day in terms of the 16 bill that's enacted -- enacted, if one is, in fact 17 enacted. 18 CHAIRMAN CLOWE: Okay. I'd like 19 some clarification on that. Because my impression 20 was that the executive director had the authority 21 to make the contract as a result of the 22 legislation. If that's incorrect, I'd like to -- 23 MS. KIPLIN: No, I think that's 24 correct. I think the contracting authority, 25 consistent with provisions of the State Lottery 0040 1 Act, lies with the executive director, but the rule 2 and the rule making lies with the Commission. 3 CHAIRMAN CLOWE: I understand that. 4 MS. KIPLIN: And so there's an 5 agreement that -- 6 CHAIRMAN CLOWE: The rule wasn't 7 my -- the subject of my question. 8 MR. GREER: I'd like to go a little 9 further with that, that I plan to be very proactive 10 in getting the word out after we get the directive 11 and see how the legislation goes, obviously, to be 12 sure the people are aware of, you know, what the 13 decision process will be like, compare the games, 14 you know, bring all this information to you from a 15 cost analysis perspective. I look forward to 16 being, you know, very public minded when we get 17 into this process. 18 I'm very conscious of that 19 perception that is out there right now, and I look 20 forward to having an opportunity to bring 21 information to people and letting them know what 22 the process is like and what the game comparisons 23 will be. 24 CHAIRMAN CLOWE: And I think I heard 25 you give those assurances to Representative 0041 1 Solomons and to the General Investigating Committee 2 of the House, so we want to be very mindful of that 3 and follow the proper procedure if this legislation 4 is adopted so that we do this in the right steps 5 and at the right time. 6 MR. GREER: Yes, sir. 7 CHAIRMAN CLOWE: But I'm glad you'll 8 be doing that. 9 MR. GREER: Yes, sir. 10 CHAIRMAN CLOWE: Go ahead, Nelda. 11 MS. TREVINO: Okay. In regards to 12 other bills, again, either impacting the lottery -- 13 CHAIRMAN CLOWE: Just a minute I'm 14 sorry. 15 Commissioner Cox. 16 COMMISSIONER COX: On the Sunset 17 Bill, are there significant provisions that are 18 different from the bill that was initially 19 presented by Solomons and Jackson? 20 MS. TREVINO: I would say there's 21 significant differences, changes. 22 COMMISSIONER COX: Are there two or 23 three that you could tell us about, or are there 30 24 that we don't want to all get into? 25 MS. TREVINO: Well, again, the 0042 1 multijurisdictional language is a major one. And 2 then in regards to bingo regulations, again, there 3 being different language that exists in the Senate 4 version and in the House version, but there's 5 authority to summarily suspend bingo licenses on 6 the House version. 7 There's authority for subpoenaing 8 records from bingo licensees. There's language in 9 the House version that allows the agency -- or, the 10 Bingo Division to license bingo workers. In the 11 Senate version, there's language that allows the 12 agency -- or, authorizes the agency to register 13 bingo workers. 14 And I'll -- I look to Billy so see 15 if there's other provisions that are significant in 16 regards to what might be different from the 17 original filed version. 18 MR. ATKINS: From the original filed 19 version -- from the original filed version, there 20 are provisions in there authorizing the agency to 21 issue advisory opinions; there are provisions for 22 two-year licenses. 23 MS. TREVINO: Unit accounting, 24 Billy, there's -- 25 MR. ATKINS: Unit accounting -- 0043 1 MS. TREVINO: Unit accounting was 2 added. 3 MR. ATKINS: -- was added in, which 4 was an item that was discussed by Sunset. 5 Additionally, there was an amendment adopted on the 6 Floor Tuesday that would -- in the House that would 7 authorize E-Tabs, which are electronic 8 representations of Pull Tabs, on a card-minding 9 device. 10 MS. TREVINO: There's also -- and 11 still in regards to bingo -- a repealer that 12 repeals the provision on the 40 percent limitation 13 on card-minding devices. 14 One item that I didn't mention that 15 was a Sunset recommendation, and there are -- there 16 is a difference between the House version and the 17 Senate version, and that's the makeup of the 18 Commission. In the Senate version, the Sunset 19 recommendation of increasing the Commission's size 20 to five is in the Senate version. And then in the 21 House version, it leaves the Commission size to 22 what it currently is, at three. 23 COMMISSIONER COX: So what I think I 24 heard you say is, there are a number of changes in 25 the House and a number of changes in the Senate, 0044 1 but none of them match up, so who really knows 2 what's going to happen? 3 MS. TREVINO: Yes, sir. 4 CHAIRMAN CLOWE: In line with 5 Commissioner Cox's question, where did we end up on 6 the minimum distribution of proceeds by the bingo 7 operation relative to the charities in the House 8 and Senate as of now? 9 MR. ATKINS: The changes to the 10 distribution formula I believe are the same, and 11 they are the Sunset recommendations. 12 CHAIRMAN CLOWE: They stayed with 13 the Sunset recommendation? 14 MR. ATKINS: Yes, sir. Now, there 15 are differences between the House and the Senate 16 version as it relates to the Sunset recommendation 17 relating to grandfathered lessors, or tiered 18 lessors. 19 The Senate version has language that 20 would eliminate the tiered lessor. The language in 21 the House version is the original Sunset language 22 which addresses the grandfathered lessors. Both 23 sets of language have the same net effect to the 24 Bingo Division. 25 CHAIRMAN CLOWE: And in furtherance 0045 1 to Commissioner Cox' question, when you said 2 anything could happen, that would mean it would go 3 to conference committee and the details could be 4 ironed out and changed in a conference committee? 5 MS. TREVINO: That's correct. 6 CHAIRMAN CLOWE: That's very 7 helpful. Thank you very much. 8 MS. TREVINO: Just in regards to 9 other bills that still have some life out there 10 based on where we are in the legislative session. 11 House Bill 1241 by Representative Mark Homer, this 12 relates to the use of the lottery pool bond fund to 13 cover possible losses of the retailer due to a 14 bankruptcy, theft, or loss of lottery tickets, 15 supplies, or equipment. And this bill has passed 16 both the House and the Senate. 17 House Bill 1401 by Representative 18 Tony Goolsby, this relates to disseminating Amber 19 Alert information through our lottery retailer 20 network. This bill has also passed both the House 21 and the Senate. 22 House 2292 by Representative Arlene 23 Wohlgemuth. This relates -- it's a big an omnibus 24 bill related to the Health and Human Services 25 Program, and there's two different versions that 0046 1 are out there right now. The senate just acted on 2 this bill last night, and so this bill is also 3 likely to go to a conference committee, but there 4 are provisions in the bill that relate to the 5 agency, particularly in regards to the allocation 6 of unclaimed lottery prizes. 7 And what the Senate did yesterday, 8 they added an amendment that would direct that 9 unclaimed prizes -- that ten million each year 10 would go to the -- would still go to the Texas 11 Department of Health's multicategorical 12 teaching/hospital account, that's basically the 13 UTMB. They are currently transferring the money in 14 the amount of $40 million to this account. So, 15 again, the changes, $10 million to this account, 16 and anything in excess of $10 million would go to 17 the General Revenue Fund. 18 What's in the House version related 19 to unclaimed prizes is a little different. There's 20 a priority that's set out on the way those 21 unclaimed prizes would be distributed, so, again, 22 that would certainly be an issue that the 23 conference committee would have to iron out. 24 Another provision contained in House 25 Bill 2292 includes a provision appealing sections 0047 1 of both the Lottery Act and the Bingo Enabling Act 2 requiring the 1-800 compulsive gambling number to 3 be printed on the back of lottery ticket and also 4 to be posted in bingo halls. 5 House Bill 2519 by Representative 6 Kino Flores, this relates to bingo regulations, and 7 this Bill has passed both the House and the Senate. 8 And there is two different versions that were voted 9 out of each chamber, and so the Bill will now go 10 back to the House, and the House can either concur 11 with what the -- with the Senate version or else 12 request a conference committee on that Bill. 13 Senate Bill 6 by Senator Leticia Van 14 de Putte, this relates to extending the time to 15 claim a lottery prize for certain military 16 personnel. This bill has passed both the House and 17 the Senate. 18 House Bill 1819 also by Senator 19 Leticia Vand de Putte, this is the bill that 20 related to the Commission considering economic 21 impact in our procurements, and while this bill, as 22 a stand-alone bill, has basically died, there are 23 three bills that are still out there that contain 24 some provision of that economic impact language. 25 So we -- there is a provision that was added into 0048 1 the agency's Sunset Bill on the House Floor. 2 There is also some language related 3 to the economic impact provision included in the 4 Senate version of Senate Bill 1952. And yesterday 5 late afternoon, an amendment was also added on the 6 Senate Floor to House Bill 3042 that includes some 7 of this language in regards to the economic impact 8 consideration and our procurements, so that's 9 something that we obviously continue to monitor. 10 Just also in regards to Senate Bill 11 1952, this is a Bill by Senator Ellis, and this 12 relates to state government reform measures. And 13 there are provisions included in the Senate version 14 that contain some of the provisions -- or, I 15 believe, all of the provisions of House Bill 2519 16 related to bingo regulations. 17 The House voted out a different 18 version of that bill yesterday, so that's another 19 bill that will be going to conference committee, 20 and we will be watching that to see if any 21 provisions impacted the agency stating the bill. 22 In regards to the appropriations for 23 the agency, for the first year of biennium, we will 24 be appropriated $167.2 million for the 25 administration of the lottery and $12.4 million to 0049 1 regulate charitable bingo, for a total of $179.6 2 million. During the second year of the biennium, 3 we will be appropriated 165.3 million for the 4 administration of the lottery and 12.3 million to 5 regulate charitable bingo, for a total of $177.6 6 million. 7 This total appropriation for the 8 agency for the '04, '05 biennium will be $357.2 9 million. Included in the lottery appropriation are 10 funds from a new rider, which would make $18.2 11 million of the appropriation contingent upon a 12 controller finding of fact. The finding of fact is 13 to be based on the agency taking the necessary 14 action to increase net revenues by 125 million more 15 than the controller's original estimate. 16 Also, in the Appropriations Bill, 17 our FTE account was reduced from 335 FTE's to 325 18 FTE's, and funding for the compulsive gambling 19 hotline number was eliminated. 20 In regards to recent Committee 21 hearing, agency staff was requested to appear 22 before the House General Investigating Committee 23 on -- 24 CHAIRMAN CLOWE: Just a minute. 25 Commissioner Cox. 0050 1 COMMISSIONER COX: How do those 2 appropriations numbers compare with our actual 3 spending in the last year? 4 MS. TREVINO: Commissioner Cox, I 5 think I would like to, maybe, defer to T.C. Mollett 6 or Lee Deviney on that, and I'm not sure we have 7 that information with us right now. We don't have 8 that with us right now, but we can get it to you. 9 COMMISSIONER COX: More or less -- 10 MS. TREVINO: From what we actually 11 operate on? 12 COMMISSIONER COX: Do these mean 13 serious constraints or do these mean we're going to 14 be able to operate about the same way we've been 15 able to operate? 16 MS. TREVINO: I believe we're very 17 comfortable that we're going to be able to operate. 18 COMMISSIONER COX: That's all. 19 MS. TREVINO: Okay. 20 Again, the agency was requested to 21 appear before the House General Investigating 22 Committee on May the 15th to discuss the recent 23 rule change to the Lotto Texas Game and 24 procurements and expenditures associated with the 25 Lotto game. We've provided requested information 0051 1 to the Committee, and as of this date we have not 2 been requested any further information. 3 As I mentioned, Monday, June 2nd, is 4 the last day of the break of the legislative 5 session and June 22nd is the last date for the 6 governor to take any action on legislation where he 7 can either veto a Bill, sign a Bill, or let a Bill 8 become law without his signature. 9 With that in mind, we are in the 10 process of preparing an action plan to track and 11 manage the implementation of Sunset management 12 recommendations and the implementation of Bills 13 that will be enacted this session, and we will 14 certainly keep you posted as we move forward on 15 implementation process. 16 And that concludes my report, and 17 I'll be happy to answer any other questions you 18 might have. 19 CHAIRMAN CLOWE: I'd like to amplify 20 on your comment about the House General 21 Investigating Committee. At that hearing, Reagan 22 Greer and Gary Grief gave testimony and Kim Kiplin 23 was responsive to that. 24 MS. TREVINO: And Ridgely Bennett 25 was also -- 0052 1 CHAIRMAN CLOWE: I beg your pardon? 2 MS. TREVINO: Ridgely Bennett was -- 3 CHAIRMAN CLOWE: Ridgely Bennett 4 also was there as our chief contract attorney and 5 answered questions and participated in that 6 discussion. The inquiry was relative to the 7 purchasing of equipment and material prior to the 8 Commission's vote on the implementation of the 9 change in Lotto Texas. 10 And I'd like to say that I think it 11 was an excellent hearing. I attended, but neither 12 of the other two Commissioners could attend because 13 of the rules that apply to us, but I thought it was 14 an excellent hearing and the testimony was 15 forthcoming, and we have yet to hear anything 16 further from that committee. 17 MS. TREVINO: That's correct. 18 CHAIRMAN CLOWE: Do you have any 19 comment on that, Reagan? 20 MR. GREER: No, sir. I'll make it 21 brief, but I would like to make a comment to Nelda 22 in general. 23 Obviously, when I came in to this 24 position from the beginning stages of the 25 legislative session, as we got into it, I was 0053 1 somewhat overwhelmed by the number of Bills and 2 tracking and all the things that were going on. 3 I publicly want to thank Nelda and 4 Cullen and Melissa for their work, incredibly long 5 hours, weekends, late nights. I get pages at all 6 hours of the day and night about things that are 7 going on. They have been very aggressive in 8 keeping the executive management staff apprised of 9 situations, have done an excellent job of 10 representing us on the Hill, and I am publicly, you 11 know, stating how much I appreciate what you've 12 done and how proud I am of the work that they've 13 done in that area. 14 MS. TREVINO: Thank you very much. 15 And that's -- I know you mentioned Cullen and 16 Melissa. It's very much a team effort, and it 17 extends out to the other staff in the agency, the 18 financial division, T.C. Mollett and Lee Devinney, 19 and I could go on. There's just a lot of people 20 that really make it all happen, so thank you for 21 those comments, but it does take a big team effort 22 to make it -- to make it work. 23 CHAIRMAN CLOWE: Anything further? 24 MS. TREVINO: No, sir. 25 CHAIRMAN CLOWE: Any questions? 0054 1 Thank you very much. 2 MS. TREVINO: Thank you. 3 CHAIRMAN CLOWE: We'll now move to 4 the next item, Number 9, report, possible 5 discussion and/or action on HUB and/or minority 6 business participation. Robert Hall. 7 Good morning, Robert. 8 MR. HALL: Good morning, 9 Mr. Chairman, Commissioners. For the record, my 10 name is Robert Hall. I'm the director of Business 11 Development & Compliance. 12 Commissioners, we have several items 13 relating to our HUB and on minority participation 14 to report to you today. The first item in your 15 notebook is the TLC's monthly HUB, slash, minority 16 contracting activity report, which includes all of 17 the expenditures from September 1, 2002 through 18 April 30th, 2003. 19 Our total expenditures to date 20 exceed $77.9 million and our total HUB intervention 21 exceeds $15.3 million, which equates roughly to 22 around 18.64 percent. 23 The second item in your notebook is 24 an update on the TLC Mentor Program, and we are 25 happy to report our news relationship has been 0055 1 reported to the Texas Building Procurement 2 Commission, and we have extended three other 3 relationships for an additional year. We have no 4 further updates at this time. We just wanted to 5 make you aware that we have six total mentor 6 projects at this time. 7 The last item as it relates to 8 minority, slash HUB participation as related to the 9 Texas Building Procurement Commission's semiannual 10 HUB report for FY 2003, which was released on 11 April 15th. We are pleased to announce that the 12 HUB utilization for the first six months of FY 2003 13 is 17.21 percent. This is a -- this is a 14 significant increase from fiscal year 2002 of the 15 semiannual report, when the HUB utilization, again, 16 was 11.62 percent. And we have included several 17 summary reports and I would will be happy to cover 18 those for you now. 19 The first report shows -- Report 1, 20 rather, show a total TLC expenditure for HUB 21 expenditures by procurement category. The 22 Commission exceeds the goal for both professional 23 services and commodities. 24 Report 2 shows a breakdown of the 25 payments made to HUB and minorities both directly 0056 1 and indirectly and also through subcontracting. 2 Report 3 shows how I directed 3 expenditures made to HUB by ethnicity and also the 4 procurement category. This report does not include 5 subcontracting pages. 6 Report 4 is a comparison of the 7 largest agencies -- spending agencies by HUB by 8 percent. Please note that we have included the top 9 50 spending agencies in this report. The 10 Commission ranked number one by a percent on 11 adjusted and also unadjusted. 12 Commissioners, I'd be happy to 13 answer any questions you may have regarding any of 14 those reports. 15 CHAIRMAN CLOWE: Robert, are you 16 aware that, on the floor of the House, this agency 17 was complimented highly last Tuesday by some 18 members of the House, and particularly our 19 achievement in regard to HUB and minority business 20 development? Has that been reported to you? 21 MR. HALL: No, sir, I'm not aware of 22 that. 23 CHAIRMAN CLOWE: Well, I'm glad I 24 mentioned it. Those compliments were forthcoming. 25 I was a little bit glazed over at that time. Did 0057 1 they come from Representative Heflin or from 2 Representative Wilson? 3 They were very complimentary towards 4 the accomplishments of this agency in that field, 5 and those comments I think reflect on the work you 6 and others in this agency are doing in that area. 7 And it pleased me very much to hear that because so 8 many agencies are lacking in this area. And the 9 work you've done and others has put us where I 10 think we're third in all of the agencies in the 11 state in the development of those areas, and I was 12 gratified, and I want you to hear that from the 13 Commission -- 14 MR. HALL: Thank you. 15 CHAIRMAN CLOWE: -- that those 16 comments and compliments were made on the Floor of 17 the House. 18 MR. HALL: Thank you very much. I 19 want to echo what Nelda Trevino said. It is a team 20 effort on behalf of everybody within the agency. I 21 don't manage any contracts. I work with the 22 administrative divisions to do that, and they've 23 allowed my to interact with their prior contactors 24 to get what we need to do, and I'm just pleased 25 that we have to good team to do that. 0058 1 CHAIRMAN CLOWE: Great. Then, I 2 think, Robert, the next item is yours as well, 3 Number. 10, report, possible discussion and/or 4 action on the agency's contracts. 5 MR. HALL: Yes, sir. There are two 6 items in your notebook I'd like to report to you 7 on. The first is the monthly report on the 8 commissioners' contract that's for $25,000 or more, 9 and I'll be happy to answer to answer any questions 10 you may have on that. 11 And the second item relates to the 12 commissioners' contract planning meetings. The BBC 13 is still currently developing this final report and 14 recommendation for your consideration, but 15 hopefully in, June 2003, we will be able to provide 16 you with updates regarding those reports and 17 recommendations. 18 In addition to that, the Commission 19 has also planned its contract -- the long-range 20 contract planning meetings will take place on July 21 23rd and 24th, which we will -- which we will be 22 submitting the division's records. 23 And, again, I'll be happy to answer 24 any questions that you may have regarding these 25 reports. 0059 1 CHAIRMAN CLOWE: Any questions? 2 Thank you, Robert. 3 MR. HALL: Thank you, sir. 4 CHAIRMAN CLOWE: The next item, 5 Number 11, consideration of and possible discussion 6 on the agency's business plan. Mr. Anger. 7 Good morning, Michael. 8 MR. ANGER: Good morning, Chairman. 9 Good morning, Commissioners. For the record, my 10 name is Michael Anger, and I'm the Lottery 11 Operations Director. I'm here this morning to give 12 you a brief update on the Commission's business 13 plan. 14 I'm pleased to report that the task 15 force has completed our work on agency's vision, 16 mission, and values. The executive director Reagan 17 Greer and Charitable Bingo Operations director 18 Billy Atkins have approved the final versions. 19 Work is continuing on the agency 20 history section and the management and 21 organizational structure section of the business 22 plan. The marketing division and Jim Richardson of 23 Human Resources Division will have submitted drafts 24 for both sections by the end of this month. I hope 25 that we will finalize our work on these sections by 0060 1 the end of June. 2 I have recently been asked to 3 arrange our long-range planning activities at the 4 agency. I've begun researching facilitation 5 alternatives in the conclusion of the legislative 6 session. I will begin efforts to schedule our 7 long-range planning activities. 8 As we define our long-range agency 9 objectives, goals, and strategies, I anticipate 10 that they will become the core of the business 11 plan. I will be focusing my efforts in this area 12 in the coming months and I will be continuing to 13 monitor the Commission's Sunset legislation as we 14 wrap up the legislative session with regard to the 15 business plan. 16 This concludes my report, and I'd be 17 glad to answer any questions that you have. 18 CHAIRMAN CLOWE: Thank you very 19 much. 20 MR. GREER: Mr. Chairman, I'd like 21 to touch on one thing that Mike said in his report. 22 We've been focused this month on goal setting, and 23 goal setting is very important to me personally and 24 I think certainly to the agency as we get into the 25 remainder of the fiscal year as to the focus of 0061 1 where we're heading, so I'll be bringing a report 2 back next month. We're in the process of planning 3 goals for the rest of this fiscal year and then for 4 next year that we will be implementing as a part of 5 that plan. 6 And I just want to thank Mike for 7 his work on that and the other directors who have 8 been very responsive to my request to be a more 9 goal-oriented organization, and it's been very 10 proactive and I'm real excited about the enthusiasm 11 it's created. 12 Thank you. 13 CHAIRMAN CLOWE: Great. Thank you 14 both. 15 Next item, Number 12, report, 16 possible discussion and/or action on the annual 17 audit services procurement. 18 Mr. Bennett. 19 MR. BENNETT: Good morning, 20 Commissioners. For the record, my name is Ridgely 21 Bennett, and I'm the Executive General Counsel. 22 I'm going to be provide a status report for the 23 annual auditing financial services RFP, which 24 encompasses the agency's financial audit as well as 25 other audit services. 0062 1 The deadline to submit proposals for 2 the RFP was yesterday, May 28th, 2003. The next 3 significant event on the schedule of events is 4 June 16th, 2003, when the apparent successful 5 proposal is scheduled to be announced. 6 I'd be happy to answer any questions 7 you may have. 8 COMMISSIONER COX: Ridgely, one of 9 the things that the Commission have talked about as 10 we engaged our new auditor was our desire that the 11 auditor would be involved in both the procurement 12 process for auditing services and in the oversight 13 of services as they occur, so we hope that you'll 14 involve Katherine on those matters. 15 MR. BENNETT: I most certainly will. 16 CHAIRMAN CLOWE: Thank you. 17 The next item, 13, report, possible 18 discuss and/or action on the drawings and audit 19 services procurement. 20 Mr. Marker. 21 MR. MARKER: Good morning, 22 Commissioners. For the record, my name is Andy 23 Marker. I'm assistant general counsel. I'm here 24 to provide a brief update and answer any questions 25 you may have regarding the request for proposals 0063 1 for both the drawing audit services and also for 2 instant ticket vending machines. 3 Proposals for the drawing audit 4 services RP were received on May 27th. The 5 announcement of the apparent successful proposer is 6 scheduled for July 15th. 7 I'd be happy to answer any questions 8 regarding that RP procurement process. If not, I 9 will give you an undate on the ticket vending 10 machines. 11 CHAIRMAN CLOWE: No questions. Go 12 right ahead. 13 MR. MARKER: Proposals for the 14 instant ticket vending machines RP were received on 15 April 25th; field tests are underway. The 16 announcement of the apparent successful proposer is 17 scheduled for July 15th. 18 I'd be happy to answer any questions 19 regarding that process. 20 COMMISSIONER COX: Andy, are these 21 machines like I see at Randall's that sell instant 22 tickets, instant lottery tickets? 23 MR. MARKER: Yes, sir, that is 24 correct. 25 COMMISSIONER COX: And are the ones 0064 1 that we are looking at now more or less the same as 2 ones we've had in the past? 3 MR. MARKER: That is correct. I 4 believe they are considering increasing the number 5 of vens. I believe we currently have 12 ven 6 machines, and there is some consideration of 7 increasing them to 16 or 24 vens. 8 COMMISSIONER COX: And I don't know 9 whether we have much choice about this, but they're 10 awfully generic. 11 MR. MARKER: I believe we have some 12 input with regard to the graphics, and the 13 Committee is looking into that and proposers were 14 asked to submit information regarding that. 15 CHAIRMAN CLOWE: And just for my 16 clarification, when you're talking about instant 17 tickets, you're talking about the scratch-off 18 tickets? 19 MR. MARKER: Yes, that is correct. 20 CHAIRMAN CLOWE: Those tickets can 21 be purchased unattended from a machine. The 22 one-line games must be attended and sold by a 23 representative of the retailer? 24 MR. MARKER: Yes, sir, that is my 25 understanding. 0065 1 CHAIRMAN CLOWE: I just wanted to 2 make sure I had that clear. 3 Any questions? 4 You're the veteran now, and there's 5 a new guy. Would you like to introduce the new 6 guy, Kim? 7 MS. KIPLIN: Yes, I'd be happy to. 8 Commissioners, Mr. Kevin Oldham -- 9 and he's in the back -- we're real pleased to have 10 him come on board and help us, and I know that he's 11 going to do just a fine job. He's now the new guy, 12 and he'll probably be the new guy until -- I don't 13 know. Mr. Marker was the new guy for, I guess, six 14 months. 15 CHAIRMAN CLOWE: Now he's a veteran. 16 MS. KIPLIN: Now he's a veteran. 17 I'm just real pleased -- I'm real pleased with 18 Mr. Oldham joining us and also Mr. Marker. 19 CHAIRMAN CLOWE: Great. 20 MS. KIPLIN: It's been a tremendous 21 asset for us to have Mr. Marker come on and help 22 us. 23 CHAIRMAN CLOWE: Very good. Thank 24 you. 25 Commissioners, with your approval, 0066 1 I'd like to continue on the public docket and ask 2 that we take up Item 17, and I will, with your 3 permission, go right on through Item 20 before I 4 ask for moving into executive session, just to give 5 you a heads up. 6 Kim, will you help us with Item 17, 7 please? 8 MS. KIPLIN: Yes, I'd be happy to. 9 Commissioners, what you have in your 10 notebooks are proposals for a decision of proposed 11 orders that were issued in contested case 12 proceedings that were conducted at the State Office 13 of Administrative Hearings. 14 Each of those items, letters A 15 through M, are lottery cases, and each of them are 16 as a result of insufficient funds at the time that 17 the lottery swept the retailer's account for moneys 18 that were owed to the State. 19 Each of the proposed orders is 20 designed to revoke these licenses. Proposals for 21 decisions, findings of fact, and conclusions of law 22 support those proposed orders. The staff does 23 recommend that the Commission vote to adopt the 24 proposed order in each of those contested case 25 proceedings. 0067 1 CHAIRMAN CLOWE: Any questions? 2 I had a question in regard to Super 3 Stop and Super Stop Number 2; I think it's Super 4 Stop Market. It seemed -- and help me with this -- 5 there was common ownership? 6 MS. KIPLIN: Correct. It's a 7 business affiliate, and we have the authority to 8 move forward on the business affiliate because of a 9 risk to the state in terms of the common ownership. 10 Ms. Wilcox is here and can answer any questions 11 that you have. 12 What we find are a couple of things: 13 We license persons at locations, and so what you 14 have, of course, are two locations, but the risk to 15 the state is because of the moneys that are 16 insufficient. 17 CHAIRMAN CLOWE: So it was from 18 insufficient funds at one location and we are 19 revoking the license, which is applicable to both 20 locations? 21 MS. KIPLIN: Yes, that's correct. 22 Ms. Wilcox is here nodding her head, and she'll 23 keep them on the straight and narrow, but it's the 24 risk to the state. It's the ownership of the Super 25 Stops. 0068 1 CHAIRMAN CLOWE: And I want to state 2 within the record that these were questions that 3 were asked on the record in the hearing. Is there 4 a common bank account and is there a threat to the 5 second location that we perceive, as a matter of 6 practice, is justification for the revocation of 7 the licenses at both locations? 8 I just want to hear some 9 justification. As I read these records, there was 10 insufficient funds in one location and we're 11 revoking the locations -- two locations. I just 12 want to hear some justification for that and I want 13 to hear if it's been our practice to do that and if 14 we're comfortable. 15 MS. KIPLIN: And, Mr. Chairman, to 16 the extent that the questions are requesting facts 17 not in the record, I would request that Ms. Wilcox' 18 remarks be general in terms of practice and the 19 public policy interests in the legal authority that 20 the lottery does possess. 21 I will tell you that I can answer 22 the question on the practice, it is the practice of 23 this Commission because of the risk to the state. 24 CHAIRMAN CLOWE: Okay. If there 25 were 10 or 12 locations and one was insufficient, 0069 1 we'd move to revoke on all of them? That's been 2 our practice? 3 MS. KIPLIN: Yes, that's been our 4 practice. 5 MS. WILCOX: What they do have in 6 common is, they have the same -- 7 CHAIRMAN CLOWE: Would you identify 8 yourself for the record? 9 MS. WILCOX: Oh, I'm so sorry. 10 My name is Penny Wilcox. I'm the 11 assistant general counsel with the Lottery 12 Commission. 13 What they do have in common is, they 14 all have the same taxpayer identification through 15 the rules that identifies them through the 16 comptroller so we -- when they have a common -- the 17 sales tax ID number is what we use at the 18 affiliate, and we have been doing that since I've 19 been here. It's not very common. It's, I'd say, a 20 couple of times a year or so that we do this. 21 CHAIRMAN CLOWE: Okay. That gives 22 me the comfort I needed. I just have one more 23 question before you take off. 24 In reading these cases, I didn't see 25 where any of these individuals appeared at the 0070 1 hearing. Can you help me understand why they don't 2 come and why they don't appear and make a case? 3 What's your sense of that? And maybe that's a 4 general question not confining you to the record. 5 MS. WILCOX: I think the sales -- 6 the Lottery Commission -- the Lottery Operations 7 Division works very hard with the -- with these 8 retailers to try to get them to come into 9 compliance or to -- you know, if it's insufficient, 10 to make the funds correct and do everything very 11 well, so I think it's a product of the staff 12 working really hard with these retailers and the 13 ones that are left. 14 You can see how many we have that 15 are -- on a common docket, maybe we might have 16 started with 25 cases and we end up with three or 17 four. Those are the ones that just don't -- either 18 they've moved or they just don't want to have any 19 responsibility for what they've done and they just 20 don't show up. I think it's a product of hard 21 work. 22 CHAIRMAN CLOWE: So there's no 23 question about them receiving notification? You 24 know, that's the problem for some of the bingo 25 cases, where individuals leave or the notice, they 0071 1 say, doesn't get to them, that we get into that in 2 revocation proceedings. 3 But do you feel we're on good ground 4 here with these nonappearance situations? 5 MS. WILCOX: Yes. We ask the 6 Lottery Operations Division if there is a green 7 card, which is the return of certified mail. We go 8 ahead and include that as an exhibit; otherwise, we 9 use a mail log or we use -- if they have a returned 10 envelope, we introduce that. But judge does 11 scrutinize these to make sure the notice is 12 correct. That's basically what they're looking 13 for, did they get proper notice. And we do check 14 those over. I check them over; the Lottery 15 Operations Division checks them over, so they go 16 through quite a bit of checking on that. 17 MR. ATKINS: Commissioner Clowe, if 18 I could, I'd like to either hopefully clarify or 19 take exception to your comment. The Bingo Division 20 follows essentially the same procedure that the 21 Lottery Division does in notification of licensees 22 of hearing, and we, in fact, send registered 23 return-receipt mail and regular mail. And what we 24 often find with those organizations who later come 25 up and claim that they never got notice is that the 0072 1 registered return-receipt mail is never claimed, 2 but the regular mail is, in fact, never returned to 3 us, and we send notification to the record that the 4 organization has submitted to us, which we have for 5 them, which they are required to provide to us, as 6 well as, we go an extra step and we'll send 7 notification to an officer of the organization. 8 So I think that Bingo Division has 9 gone beyond the requirements to ensure that 10 organizations get notification whenever we're going 11 into hearing. 12 CHAIRMAN CLOWE: That's a fair 13 comment, Billy, and my reference to the Bingo 14 Division was in no way meant to be a criticism. It 15 was simply that, in my ten years as commissioner, 16 we have had those individuals representing Bingo 17 Operations who have appeared before the Commission 18 and have made that pleading to us, and I will say 19 we haven't had that in some time. I think it 20 reflects on the effort that's being made. 21 But as a person who was regulated in 22 the private sector for a number of years, I am 23 particularly sensitive to those individuals when an 24 agency is taking action on them relative to a 25 license or any authority, or something along those 0073 1 lines, that they be notified. And I want to see 2 those pleadings eliminated as much as possible by 3 the efforts of the agency, and I think we're doing 4 that, certainly, in the Bingo Division and in the 5 Lottery Operations. I just remain sensitive to 6 that and that's the reason I asked that question. 7 I move the adoption of the staff's 8 recommendations following the comments that 9 Ms. Kiplin made covered by the cases letter A 10 through M. All in favor, please say aye. 11 THE COMMISSIONERS: Aye. 12 CHAIRMAN CLOWE: Opposed? No. 13 The vote is three, zero in favor. 14 Next, we'll ask for Mr. Greer to 15 give his report under Item 18, the Executive 16 Director's Report. 17 MR. GREER: Thank you. Chairman and 18 Commissioners, we've had a very busy month -- or, 19 we're having a very busy month in May, and I just 20 wanted to touch on a few high points that we've 21 experienced. 22 First off, I was pleased to be 23 invited and made a speech at a recent GTECH sales 24 meeting conference. I met with Bruce Turner who 25 also made a speech at that event. And I was 0074 1 excited about the opportunity to have, you know, 2 some interaction with that group of individuals to 3 get to know them better -- as I consider myself new 4 in the process -- and gaining a much better 5 overview of the GTECH operations. 6 CHAIRMAN CLOWE: And for those who 7 don't want know, what is the position Mr. turner 8 holds? 9 MR. GREER: He is the CEO of GTECH. 10 CHAIRMAN CLOWE: And where was that 11 meeting? 12 MR. GREER: It was here in Austin at 13 a hotel in North Austin, and it was well-attended. 14 The other thing that we touched on a 15 moment ago that I wanted to reinforces is that I 16 did seek and was granted permission to work with 17 the State Auditor's Office in reference to the 18 Lotto Texas Game purposes. 19 I know there's a number of their 20 staff here today, and I want to thank you for your 21 work on the process. I also want to thank 22 Katherine Melvin, who's been sort of an emissary to 23 work on this project with my office and the 24 auditor's office, and we look toward to receiving 25 that report in the coming weeks. 0075 1 I did appear at the Legislative GIC 2 Hearing that you mentioned a moment ago. I gave 3 testimony in regard to the above Lotto Texas 4 issues. I also had two visits to Houston recently, 5 one for a retailer forum, which I want to thank 6 Toni and Robert and that whole team. It went very 7 well. It was well-attended. It sort of gave me a 8 much clearer perspective of the Houston market. 9 They are 30 percent of our market, and there was 10 some very vocal individuals at that meeting. I was 11 very pleased and happy with the way the staff 12 answered the questions that came up and was proud 13 to be a part of that process as well. 14 Also, I went back the next week and 15 gave a check to a retailer in that area for 16 $350,000. In Spring, Texas, I visited our claims 17 center, enjoyed getting out of the office, had a 18 lot of interaction with the public, which I don't 19 know how much of that I anticipated, but they were 20 ready for me, and I was able to answer a lot of 21 questions personally and enjoyed doing that and 22 will continue to do that. 23 We've begun and E strategy project 24 at IT, and we are working with the Citations 25 Solutions Group to come forward with some E 0076 1 recommendations on how the operations here in the 2 Lottery Commission can work more efficiently in a 3 technological manner, and I look forward to 4 bringing those reports. I'm very pleased with the 5 progress that we made in that area and plan to be 6 personally involved in that as we move forward. 7 I also made a speech in Waco 8 recently, and this is the Waco Claims Center. My 9 goal, just so you know, by the end of my first year 10 is to have visited all of the claim centers 11 offices. I'm on my way; I've hit six now, and I'm 12 getting there. I enjoyed having the opportunity to 13 visit with them in their local areas and look at 14 the issues they might have as well as inform them 15 about things that are going on here at the 16 Commission and continue to be impressed by the 17 caliber of people that we have out in the fields 18 working for our organization. 19 Obviously I've been very involved in 20 this whole Sunset Bill process, monitoring the 21 activity. Once we get direction from the 22 legislature, I just want to reassure you that we'll 23 be having an action plan in place to carry out the 24 recommendations, not only the Sunset Bill, but also 25 any other things such as the multistate and other 0077 1 issues that come forward. 2 We have hired a new media relations 3 director. His name is Bobby Keith. He will start 4 next week on June the 2nd, and I look forward to 5 getting him on board and up to speed in that area. 6 The media relations division has done a fine job of 7 keeping me apprised and helping with talking points 8 and speeches and all kinds of things, and I think 9 that Bobby will be a great addition to our team 10 here at the Lottery Commission. 11 And, lastly -- and you touched on it 12 a moment ago, Chairman -- today is our 11th 13 anniversary, and for the record, I wanted to read 14 into the record a press release that we have sent 15 out in reference to our 11th anniversary. 16 As the Texas Lottery Commission 17 celebrates the 11th anniversary -- which this was 18 sent out yesterday; it's says tomorrow -- sales of 19 the first product it ever sold, instant tickets, 20 climbed to -- continue to climb toward meeting 21 projections for the second best year in scratch-off 22 sales. 23 We focussed on that earlier with 24 some of the comments, and one of the things that I 25 really learned is how important scratch-off 0078 1 tickets, instant tickets are here. They're the 2 backbone of our sales since the lottery sold it's 3 first ticket 11 years ago. The total sale for all 4 of games through April 30th have exceeded 5 $31.6 billion to date. In that time, the Texas 6 lottery has generated more than $10.5 billion for 7 the State of Texas, with more than $5.3 billion 8 going into education. 9 Lone Star Million was the first 10 ticket offered by the Texas Lottery on May 29th, 11 1992. Since then, the lottery has issued more than 12 400 instant games, which account for 61 percent of 13 sales since startup. 14 Scratch-off tickets continue to be 15 the most popular lottery game and are now bringing 16 in more than $40 million per week in sales. That 17 scratching has been good for players and it's been 18 good for Texas. And I note in this release that 19 $17.7 billion dollars has been given out to players 20 in prizes and $11.5 billion of that has come out of 21 scratch-off tickets. 22 Besides the instant tickets, we've 23 also added four online games. Pick Three -- which, 24 boy, have I had an awakening on Pick Three -- the 25 numbers on that continue to climb, and those people 0079 1 are avid players and are very upfront about the 2 fact that they really like the game. Cash Five has 3 been successful as well. Texas Two Step, and the 4 fourth we've touched on today, our flagship game, 5 Lotto Texas. Another online game, Texas Million, 6 ran from 1998 to 2001, and I just wanted that to be 7 a part of the release. 8 There's currently, as you're aware, 9 a team effort with our retailers. We have about 10 16,000 retailers around the state that work with us 11 on providing the games of Texas to millions of 12 players. We have created more than 400 13 millionaires and millions of winners who have taken 14 instant prizes through the years to the lottery, 15 and retailers have earned nearly $50 million in 16 retail bonuses over these years. 17 The Texas Lottery in 1992 broke 18 California's earlier track record by almost 19 $2 million for the highest total sales at startup, 20 which was $23.2 million. The Texas Lottery is 21 currently ranked number four among 41 U.S. 22 lotteries and third in the amount of money 23 generated for the state. At the end of the press 24 release, I note the website, which I hope y'all 25 will continue to monitor. We're making some great 0080 1 changes here and continue to be a current and 2 direct source of information for players at the 3 lottery. 4 And, then, the follow-up sheet, 5 which I think is also worth noting, is the funds 6 that have been generated by different cities around 7 the state. I specifically would note some of the 8 larger cities. Dallas, 1.8 billion over that time; 9 Houston, 4.5 billion; San Antonio, 1.9 billion; 10 Austin, $898 million. 11 So, all in all, on our 11th 12 anniversary, I think we have a lot to be proud of. 13 I am certainly proud to be in this position at this 14 point in time because I know that we're on the cusp 15 of great things ahead, and I want to thank each of 16 you for your role in helping with our success. 17 CHAIRMAN CLOWE: Okay. Any comments 18 or questions? 19 Reagan, I want to tell you that your 20 speech in Waco was well-received and I want to 21 thank you for that. I appreciate your comments 22 about the public reaction and those who are not 23 particularly fond of gaming in this state and the 24 way you handled that. I think it's important for 25 us to be mindful and respectful of those 0081 1 individuals in Texas who are opposed to games and 2 respect that in a way that our efforts and the job 3 responsibilities of each of the staff are 4 well-balanced and continue to do the best job 5 possible as the legislature authorizes us in a 6 continuing way to continue activities or maybe in a 7 more expansive role, however they may determine 8 that would be. 9 I am very pleased, as one 10 commissioner, and maybe I can speak for the others, 11 in the outreach that you're involved in as 12 executive director to the public and to the members 13 of the legislature. We're vitally interested in 14 what goes on over here and all the other members of 15 the leadership, and I think that's a very important 16 role for you that you are fulfilling. Clearly, 17 your approach to teamwork and reaching out to 18 everyone in this agency -- and I see signs of that 19 as I come in here. 20 I've noticed in the elevator, for 21 example, there's more information out there that's 22 current that was helpful as an interested person, 23 as a team member, about what's going on in this 24 agency, and I like the idea of opening it up and 25 drawing people in as a team member to what the 0082 1 efforts are and involving people. I think that's 2 very important. You're doing the people's business 3 here. It belongs to the State of Texas, and the 4 kind of leadership style that you're demonstrating 5 is what I think every state agency wants to 6 achieve, and I'm very proud of the things that 7 we're hearing reported to us on a monthly basis 8 from this team of Lottery Commission employees, and 9 we stand ready to help in every way we can. 10 MR. GREER: Thank you. 11 CHAIRMAN CLOWE: Next, we're ready 12 to go to Item Number 19. 13 Billy, you're report, please, sir. 14 MR. ATKINS: Thank you. 15 Commissioners. Since the publication of my memo 16 that's in your notebook relating to the job offers 17 that have been made for the position in the Houston 18 office, we've made two offers, and both have been 19 declined. And I've been working with Mr. Greer and 20 Mr. Grief and decided to hold off on posting that 21 position again until the end of the legislative 22 session and we know where the agency actually lands 23 on our FTE cap in case we have to make some 24 adjustments internally in order to meet that cap. 25 The other thing I'd like to note on 0083 1 my report relating to the new charitable bingo 2 system redesigned -- just to add to what I've 3 included there -- we have completed the unit 4 testing of the individual modules, and we're 5 scheduled today to finish the preliminary testing 6 of the integration of all those modules. And in 7 the preliminary testing, we've covered all daily, 8 weekly, monthly, and quarterly processing 9 transactions, and when we start the implementation 10 that is scheduled for mid to late June, this will 11 include parallel processing for a period of at 12 least 30 days, and during that 30-day period, that 13 means that we will be running both systems and that 14 will -- will ensure us that, should a problem 15 appear on the new system, we will be able to 16 continue our processing on the current system while 17 we rectify that problem on the new one. 18 The only other thing I would mention 19 in my report relates to the allocations. As it 20 indicates in my memo, we are about two weeks ahead 21 of schedule in making our quarterly allocations. I 22 l know our local jurisdiction certainly appreciates 23 that, and I would compliment Terry Shankl, the 24 accounting services manager, as well as the staff 25 of the Financial Administration Division, who have 0084 1 taken a lot of proactive steps to address that 2 allocation process. 3 CHAIRMAN CLOWE: Billy, all of the 4 good stuff I said to Reagan goes to you, too. I 5 especially want to say how much I appreciate the 6 work that you've done and Nelda. I've already 7 commented on the meetings that Commissioner Cox has 8 participated in and you've been there. 9 There's so much in the Sunset Bill 10 to do with bingo, and there's obviously so much 11 attention on the bingo in this legislative session, 12 and your knowledge and background and the time that 13 you put forth and the effort that you put forth has 14 been very helpful, I think, to the legislators 15 since they have cracked the bills that they have 16 been interested in. I think that's an extra burden 17 that you have borne beautifully, in addition to the 18 accounting system, which I am delighted to here is 19 coming up and finally coming to fruition. 20 I think the work you've done with 21 the BAC, and to have a report like we did from 22 Virginia Brackett here this morning, is a big 23 change from what I saw when I first came on this 24 Commission. So I think we're heading in the right 25 direction in the Charitable Bingo Division as well 0085 1 as the lottery, and team building is the way to do 2 it, and I see you doing it. Thank you both very 3 much. 4 MR. ATKINS: Thank you. 5 CHAIRMAN CLOWE: Next item, 20, 6 we'll ask for public comment. 7 Is there anyone wishing to make 8 public comments to the Commission at this time? 9 Commissioners, are you ready for me 10 to move to executive session? 11 At this time, I move that the Texas 12 Lottery Commission go into executive session to 13 deliberate the duties of the Executive Director 14 and/or Deputy Executive Director pursuant to 15 Section 551.074 of the Texas Government Code. 16 To deliberate the duties of the 17 Internal Audit Director pursuant to Section 551.074 18 of the Texas Government Codes. 19 To deliberate the duties of the 20 Charitable Bingo operations Director pursuant to 21 Section 551.074 of the Texas Government Code. 22 To deliberate the duties of the 23 General Counsel pursuant to Section 551.074 of the 24 Texas Government Code. 25 To deliberate the duties of the 0086 1 Security Director pursuant to Section 551.074 of 2 the Texas Government Code. 3 To receive legal advise regarding 4 pending or contemplated litigation and/or to 5 receive legal advice pursuant to Section 551.071, 6 paren, one, close paren, paren A, closed paren, or 7 paren, B, close paren, of the Texas Government Code 8 and/or to receive legal advice pursuant to Section 9 551.071, paren, two, close paren, of the Texas 10 Government Code, including but not limited to: 11 TPFV Group, Inc. versus Texas 12 Lottery Commission; Retired Sergeant Majors' 13 Association, et al. versus Texas Lottery 14 Commission, et al.; Scientific Games and Pollard 15 Banknote versus Texas Lottery Commission and Linda 16 Cloud, Executive Director; Keane versus Texas 17 Lottery Commission; Patsy Henry versus Texas 18 Lottery Commission; and Ieric Rogers versus Doyle 19 Mitchell, et al.; Sandy Suber, et al. versus GTECH 20 Corporation; Linda Cloud versus Mike McKinney, et 21 al. 22 Matter involving the Department of 23 Justice pursuit of a complaint regarding the 24 Americans with Disabilities Act; contract regarding 25 the charitable bingo system employment law, 0087 1 personnel law, procurement and contract law, 2 evidentiary and procedural law, and general 3 government law. 4 Is there a second? 5 MS. KIPLIN: Second. 6 CHAIRMAN CLOWE: All in favor, 7 please say aye. 8 THE COMMISSIONERS: Aye. 9 CHAIRMAN CLOWE: The vote is three, 10 zero. 11 The Texas Lottery Commission will go 12 into executive session. The time is 10:08. Today 13 May th 29th, 2003. 14 (Executive Session.) 15 CHAIRMAN CLOWE: The Texas Lottery 16 Commission is out of executive session. The time 17 is 12:26. 18 Is there any action to be taken as a 19 result of executive session? 20 MS. KIPLIN: Your mic is not on. 21 CHAIRMAN CLOWE: The Texas Lottery 22 Commission is out of executive session. The time 23 is 12:26 p.m. Is there any action to be taken as a 24 result of the executive session? 25 I believe not. 0088 1 We have completed the agenda for 2 this meeting. 3 Are there any other matters to come 4 before the Commission prior to adjournment? 5 I believe not. 6 Thank you all. We're adjourned. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0089 1 REPORTER'S CERTIFICATION 2 3 STATE OF TEXAS ) 4 COUNTY OF TRAVIS ) 5 6 I, KIMBERLYE A. FURR, 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 10 set 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 7th day of 17 June, 2003. 18 19 20 KIMBERLYE A. FURR 21 Texas CSR No. 6997 Expiration Date: 12/31/03 22 1609 Shoal Creek Boulevard Suite 202 23 Austin, Texas 78701 (512) 474-4363 24 25 JOB NO. 030529KAF