Senate Engrossed

State of Arizona Senate Forty-ninth Legislature Sixth Special Session 2010

SENATE BILL 1004

 

AN ACT

 

Changing the designation of title 5, chapter 5.1, Arizona Revised Statutes, to "state lottery"; amending Title 5, chapter 5.1, Arizona Revised Statutes, by adding article 2; amending Title 41, chapter 27, article 2, Arizona Revised Statutes, by adding section 41-3035.01; relating to the state lottery; providing for conditional enactment.

 

 

(TEXT OF BILL BEGINS ON NEXT PAGE)

 

Be it enacted by the Legislature of the State of Arizona:

Section 1.  Heading change

The chapter heading of title 5, chapter 5.1, Arizona Revised Statutes, is changed from "STATE LOTTERY REVENUE BONDS" to "STATE LOTTERY".

Sec. 2.  Title 5, chapter 5.1, Arizona Revised Statutes, is amended by adding article 2, to read:

ARTICLE 2.  GENERAL PROVISIONS

START_STATUTE5-551.  Definitions

In this chapter, unless the context otherwise requires:

1.  "Commission" means the Arizona state lottery commission.

2.  "Director" means the executive director of the Arizona state lottery commission.

3.  "Lottery" or "state lottery" means the lottery created and operated pursuant to this chapter. END_STATUTE

START_STATUTE5-552.  Arizona state lottery commission; membership; appointment; term; chairman; removal; reimbursement of expenses

A.  There is established the Arizona state lottery commission consisting of five members who shall be citizens and residents of this state and appointed by the governor pursuant to section 38‑211.  No more than three members may be from the same political party.  The term of members appointed to the commission is five years.  The commission members shall annually elect one of the members to serve as chairman of the commission.

B.  At least one member of the commission shall have a minimum of five years' experience in law enforcement.

C.  At least one member of the commission shall have a minimum of five years' experience as a certified public accountant.

D.  At least one member of the commission shall have a minimum of five years' experience in marketing or advertising, or both.

E.  At least one member of the commission shall have a minimum of five years' experience in convenience store, minimart or grocery retailing.

F.  Any member of the commission may be removed from office by the governor for cause upon notice and opportunity to be heard at a public hearing.

G.  Members of the commission are eligible to receive compensation pursuant to section 38‑611.

H.  The commission shall hold at least one meeting each quarter.

I.  No commission member may have a pecuniary interest in any contract or agreement to which the commission is a party.

J.  No action of the commission is binding unless taken at a meeting with at least three members present voting in favor of the action in question.END_STATUTE

START_STATUTE5-553.  Executive director; appointment

A.  An executive director appointed by the governor pursuant to section 38‑211 shall exercise immediate supervision over the lottery.  The director shall be a person qualified by training and experience to administer the state lottery.  The director shall be appointed by the governor and shall serve at the pleasure of the governor.

B.  The director shall devote his entire time and attention to the administration of the state lottery and shall not be engaged in any other profession or occupation.  The director is eligible to receive compensation pursuant to section 38‑611. END_STATUTE

START_STATUTE5-554.  Commission; director; powers and duties; definitions

A.  The commission shall meet with the director not less than once each quarter to make recommendations and set policy, receive reports from the director and transact other business properly brought before the commission.

B.  The commission shall oversee a state lottery to produce the maximum amount of net revenue consonant with the dignity of the state.  To achieve these ends, the commission shall authorize the director to adopt rules in accordance with title 41, chapter 6.  Rules adopted by the director may include provisions relating to the following:

1.  Subject to the approval of the commission, the types of lottery games and the types of game play‑styles to be conducted.

2.  The method of selecting the winning tickets or shares for noncomputerized online games, except that no method may be used which, in whole or in part, depends on the results of a dog race, a horse race or any sporting event.

3.  The manner of payment of prizes to the holders of winning tickets or shares, including providing for payment by the purchase of annuities in the case of prizes payable in installments, except that the commission staff shall examine claims and may not pay any prize based on altered, stolen or counterfeit tickets or based on any tickets which fail to meet established validation requirements, including rules stated on the ticket or in the published game rules, and confidential validation tests applied consistently by the commission staff.  No particular prize in a lottery game may be paid more than once, and in the event of a binding determination that more than one person is entitled to a particular prize, the sole remedy of the claimants is the award to each of them of an equal portion of the single prize.

4.  The method to be used in selling tickets or shares, except that no elected official's name may be printed on such tickets or shares.  The overall estimated odds of winning some prize or some cash prize, as appropriate, in a given game shall be printed on each ticket or share.

5.  The licensing of agents to sell tickets or shares, except that a person who is under eighteen years of age shall not be licensed as an agent.

6.  The manner and amount of compensation to be paid licensed sales agents necessary to provide for the adequate availability of tickets or shares to prospective buyers and for the convenience of the public, including provision for variable compensation based on sales volume.

7.  Matters necessary or desirable for the efficient and economical operation and administration of the lottery and for the convenience of the purchasers of tickets or shares and the holders of winning tickets or shares.

C.  The commission shall authorize the director to issue orders and shall approve orders issued by the director for the necessary operation of the lottery.  Orders issued under this subsection may include provisions relating to the following:

1.  The prices of tickets or shares in lottery games.

2.  The themes, game play‑styles, and names of lottery games and definitions of symbols and other characters used in lottery games, except that each ticket or share in a lottery game shall bear a unique distinguishable serial number.

3.  The sale of tickets or shares at a discount for promotional purposes.

4.  The prize structure of lottery games, including the number and size of prizes available.  Available prizes may include free tickets in lottery games and merchandise prizes.

5.  The frequency of drawings, if any, or other selections of winning tickets or shares, except that:

(a)  All drawings shall be open to the public.

(b)  The actual selection of winning tickets or shares may not be performed by an employee or member of the commission.

(c)  Noncomputerized online game drawings shall be witnessed by an independent observer.

6.  Requirements for eligibility for participation in grand drawings or other runoff drawings, including requirements for the submission of evidence of eligibility within a shorter period than that provided for claims by section 5-568.

7.  Incentive and bonus programs designed to increase sales of lottery tickets or shares and to produce the maximum amount of net revenue for this state.

D.  Notwithstanding title 41, chapter 6 and subsection B of this section, the director, subject to the approval of the commission, may establish a policy, procedure or practice that relates to an existing online game or a new online game which is the same type and has the same type of game play‑style as an online game currently being conducted by the lottery or may modify an existing rule for an existing online game or a new online game which is the same type and has the same type of game play‑style as an online game currently being conducted by the lottery, including establishing or modifying the matrix for an online game by giving notice of the establishment or modification at least thirty days before the effective date of the establishment or modification.

E.  The commission shall maintain and make the following information available for public inspection at its offices during regular business hours:

1.  A detailed listing of the estimated number of prizes of each particular denomination expected to be awarded in any instant game currently on sale.

2.  After the end of the claim period prescribed by section 5-568, a listing of the total number of tickets or shares sold and the number of prizes of each particular denomination awarded in each lottery game.

3.  Definitions of all play symbols and other characters used in each lottery game and instructions on how to play and how to win each lottery game.

F.  Any information that is maintained by the commission and that would assist a person in locating or identifying a winning ticket or share or that would otherwise compromise the integrity of any lottery game is deemed confidential and is not subject to public inspection.

G.  The commission, in addition to other games authorized by this article, shall establish two special games for each year to be conducted concurrently with other lottery games authorized under subsection B of this section.  The monies for prizes, for operating expenses and for payment to the commerce and economic development commission fund, as provided in section 5-572, subsection A, paragraph 2, shall be accounted for separately as nearly as practicable in the lottery commission's general accounting system. The monies shall be derived from the revenues of the special games, and monies for prizes do not become an expense to the lottery commission's annual appropriation as provided in section 5-555, subsection D and section 5-572, subsection J.  Monies saved from the revenues of the special games, by reason of operating efficiencies, shall become other revenue of the lottery commission and revert to the state general fund.

H.  The commission, in addition to other games authorized by this article, may establish multistate lottery games to be conducted concurrently with other lottery games authorized under subsections B and G of this section.  The monies for prizes, for operating expenses and for payment to the local transportation assistance fund, as provided in section 28‑8101, and the state general fund shall be accounted for separately as nearly as practicable in the lottery commission's general accounting system.  The monies shall be derived from the revenues of multistate lottery games.

I.  The commission or director shall not establish or operate any online or electronic keno game or any game played on the internet.

J.  The commission or director shall not establish or operate any lottery game or any type of game play‑style, either individually or in combination, that uses gaming devices or video lottery terminals as those terms are used in section 5‑601.02, including monitor games that produce or display outcomes or results more than once per hour.

K.  The director shall print, in a prominent location on each lottery ticket or share, a statement that help is available if a person has a problem with gambling and a toll-free telephone number where problem gambling assistance is available.  The director shall require all licensed agents to post a sign with the statement that help is available if a person has a problem with gambling and the toll-free telephone number at the point of sale as prescribed and supplied by the director.  The requirements of this subsection apply to tickets and shares printed after July 18, 2000.

L.  For the purposes of this section:

1.  "Game play‑style" means the process or procedure that a player must follow to determine if a lottery ticket or share is a winning ticket or share.

2.  "Matrix" means the odds of winning a prize and the prize payout amounts in a given game. END_STATUTE

START_STATUTE5-555.  Apportionment of revenue

A.  Not more than eighteen and one‑half per cent of the total annual revenues accruing from the sale of lottery tickets or shares and from all other sources shall be deposited in the state lottery fund established by section 5-571 to be expended for the following:

1.  The payment of costs incurred in the operation and administration of the lottery, including the expenses of the commission and the costs resulting from any contract or contracts entered into for consulting or operational services.

2.  Independent audits, which shall be performed annually in addition to the audits required by section 5-574.

3.  Incentive programs for lottery sales agents and lottery employees.

4.  Payment of compensation to licensed sales agents necessary to provide for the adequate availability of tickets or services to prospective buyers and for the convenience of the public.  Compensation of licensed sales agents shall be at least five and one‑half per cent but not more than eight per cent of the price of each ticket or share that a retail sales agent sells in instant games and online games, less the price of any tickets or shares that are voided.

5.  The payment of reasonable fees to redemption agents as authorized by section 5-569.

6.  The purchase or lease of lottery equipment, tickets and materials.

B.  Not less than fifty per cent of the total annual revenues accruing from the sale of lottery tickets or shares shall be deposited in the state lottery prize fund established by section 5-573 for payment of prizes to the holders of winning tickets or shares or for other purposes provided for in section 5-568.

C.  All other revenues accruing from the sale of lottery tickets or shares in online games or instant games shall be deposited in the state lottery fund established by section 5-571 to be used as prescribed by section 5-572.

D.  Except for monies for prizes expended as provided in section 5-554, subsection G and section 41‑1505.10, monies expended under subsection A of this section shall be subject to legislative appropriation. END_STATUTE

START_STATUTE5-556.  Powers and duties of director

In addition to other powers and duties prescribed in this chapter, the director shall:

1.  Supervise and administer the operation of the lottery in accordance with this chapter and the rules adopted under this chapter, subject to the continuous duty to take into account the particularly sensitive and responsible nature of the commission's functions.

2.  Enforce this chapter and the rules adopted under this chapter.  The director shall accept allegations of any violations of the laws of this state or rules pertaining to the conduct of the lottery.

3.  Pursuant to this chapter and the rules adopted by the commission, license as agents to sell lottery tickets such persons as will best serve the public convenience and promote the sale of tickets or shares.

4.  Hire such professional, clerical, technical and administrative personnel as may be necessary to carry out this chapter.  The director shall conduct background checks of prospective employees, and, in all employment decisions, shall take into account the particularly sensitive and responsible nature of the operation of the state lottery.

5.  Act as secretary and executive officer of the commission.

6.  Confer regularly as necessary or desirable and not less than once every quarter with the commission on the operation and administration of the lottery.

7.  Make available for inspection by the commission, upon request, all books, records, files and other information and documents of the commission.

8.  Advise the commission and recommend matters as are necessary and advisable to improve the operation and administration of the lottery.

9.  Suspend or revoke any license issued pursuant to this chapter or the rules adopted pursuant to this chapter, subject to appeal to the commission.

10.  Within thirty days after receiving an allegation of a violation of the laws of this state or rules pertaining to the conduct of the lottery by a licensed agent and evidence substantiating the allegation, determine whether the agent has violated the rules or if a criminal investigation is warranted. END_STATUTE

START_STATUTE5-557.  Monthly reports; annual reports

A.  The director shall make a monthly report to the commission, the governor, the speaker of the house of representatives and the president of the senate.  The monthly report shall include the total lottery revenue, prize disbursements and other expenses for the preceding month.

B.  The director shall make a report on or before August 15 of each year to the director of the joint legislative budget committee and the director of the governor's office of strategic planning and budgeting containing:

1.  A summary of the criteria used to evaluate employee performance and distribution of any appropriation for the preceding fiscal year as performance pay.

2.  An accounting of total distributions of that appropriation.

3.  The percentages of that distribution that were based on individual employee performance and on lottery sales goals.

C.  The commission shall make an annual report to the governor, the speaker of the house of representatives and the president of the senate.  The annual report shall include a full and complete statement of lottery revenues, prize disbursements and other expenses for the preceding years, and recommendations for amendments to this chapter as the commission deems necessary or desirable. END_STATUTE

START_STATUTE5-558.  Studies and investigations

A.  The director shall conduct an ongoing study and investigation of the lottery for the following purposes:

1.  To ascertain any defects in this chapter or in the rules through which any abuses in the administration and operation of the lottery or any evasion of this chapter or the rules may arise or be practiced.

2.  To formulate recommendations for changes in this chapter.

3.  To guard against the use of this chapter and the rules as a cloak for organized gambling and crime.

4.  To insure that this chapter and the rules are in a form and are administered to serve the true purposes of this chapter.

B.  The director shall conduct an ongoing study and investigation of the operation and the administration of lottery laws in effect in other states or countries, any literature on the subject that may be published or available, any federal laws that may affect the operation of the lottery and the reaction of citizens to existing and potential features of the lottery with a view to recommending or effecting changes that will tend to serve the purposes of this chapter. END_STATUTE

START_STATUTE5-559.  Contracts; limitation; restrictions

A.  Notwithstanding any other statute, the director may:

1.  Directly solicit bids and contract for the design and operation of the lottery or the purchase of lottery equipment, tickets and related materials.

2.  Contract to effectuate the purposes of this chapter and the rules promulgated pursuant to this chapter.

3.  Subject to joint legislative budget committee approval acquire administrative office facilities and related facilities and equipment for the use of the commission by lease, purchase or lease‑purchase.

B.  Procurement pursuant to this section shall be performed as prescribed in section 41‑2501, subsection F.  Bids received under this section may be deemed confidential in whole or in part by the director if required on account of the sensitive and responsible nature of the commission's functions and the paramount considerations of security and integrity.

C.  Any award made by the director pursuant to this section becomes effective and binding on the commission unless it is rejected by the commission at a meeting held within fourteen calendar days after the award is communicated to the members of the commission.

D.  A contract awarded or entered into by the director pursuant to this section shall not be assigned by the holder except by specific approval of the director.  In all awards of contracts pursuant to this section, the director shall take particular account of the sensitive and responsible nature of the commission's functions and the paramount considerations of security and integrity. END_STATUTE

START_STATUTE5-560.  Security operations; powers; peace officer status

A.  The state lottery commission shall maintain operations responsible for security.  The director shall appoint a security officer to supervise the security operations of the commission.

B.  The security operations of the state lottery commission shall be a law enforcement agency and the supervising security officer is designated a peace officer.  Such law enforcement agency and peace officer status shall be for the limited purpose of receiving investigative information from law enforcement agencies pertaining to investigations of lottery activities.

C.  No employee of the lottery commission is eligible for participation in the public safety personnel retirement system. END_STATUTE

START_STATUTE5-561.  Department of public safety; investigation; authority; payment

The director of the department of public safety shall order an investigation into any violation of a statute of this state which pertains to the conduct of the state lottery.  The director shall include in the commission's overhead expenses and pay, upon certified invoice submitted by the director of the department of public safety, any charges for actual expenses as a result of investigations and related law enforcement activities, or for any activity directly or indirectly related to the lottery operation.  The charges may include costs for personnel, supplies, materials, equipment and travel within or without the state. END_STATUTE

START_STATUTE5-562.  Licenses to sell tickets or shares; fee; conditions; definitions

A.  A license as an agent to sell lottery tickets or shares shall not be issued to any person to engage in business exclusively as a lottery sales agent.  Before issuing a license as a lottery sales agent to any person the director shall consider factors such as the financial responsibility and security of the person and the nature of the person's business activity, the person's background and reputation in the community, the accessibility of the person's place of business or activity to the public, the accessibility of existing licensees to serve the public convenience and the volume of expected sales.

B.  A person lawfully engaged in nongovernmental business on state property may be licensed as a lottery sales agent.

C.  The director may establish by rule and collect a fee for a license issued pursuant to this section.

D.  A license is not assignable or transferrable.

E.  A licensed agent or licensed agent's employee may sell lottery tickets or shares only on the premises stated in the license of the agent.

F.  The director may purchase a blanket bond covering the activities of licensed agents.

G.  A licensed agent shall display the licensed agent's license or a copy of the license conspicuously in accordance with the rules prescribed by the director.

H.  If a licensed agent sells lottery tickets or shares on leased premises and all or part of the agent's rental payments are based on the total volume of sales made at the premises, the compensation paid by the state lottery commission to the agent for the sale of tickets and shares is the amount of the sale for the purposes of determining the agent's rental payments.  This subsection does not apply if the lease agreement expressly provides that the total volume of sales made at the premises includes sales of lottery tickets or shares.

I.  The commission shall adopt rules to establish penalties for a licensed agent who violates section 5-565 or 5-565.01.  The penalty for a subsequent violation within any twelve month period shall be more severe than the penalty for a prior violation.

J.  The director shall not require a licensed agent, as a condition of securing or continuing to hold a license to sell lottery tickets or shares to the public, to sell such tickets or shares through or by the use of a self‑service vending machine at the licensed agent's premises.

K.  For the purposes of this section, acts or omissions of an employee at the premises of a licensed agent or sales of tickets or shares by a self‑service vending machine in violation of section 5-565 or 5-565.01 shall be deemed acts or omissions of the licensed agent only at the premises where the acts, omissions or sales occurred.

L.  For the purposes of this section:

1.  "Person" means an individual, association, corporation, club, trust, estate, society, company, joint stock company, receiver, trustee or referee, any other person acting in a fiduciary or representative capacity who is appointed by a court, or any combination of individuals.  Person includes any department, commission, agency or instrumentality of this state, including any county, city or town and any agency or instrumentality of this state or of a county, city or town.

2.  "Premises" means the physical location and address listed on the license of the licensed agent where lottery tickets or shares may be sold. END_STATUTE

START_STATUTE5-562.01.  Prosecution; payment of costs

A.  The attorney general and county attorneys have concurrent prosecution authority for any offense arising out of or in connection with the formation, management, operation or conduct of the state lottery.

B.  The director shall include, as an expense of the commission, all costs incurred by the attorney general or a county attorney as a result of prosecution of a person for a violation of the provisions of this article or for any violation directly or indirectly related to the state lottery operation.  The director shall authorize reimbursement of prosecution costs on presentation of a certified invoice signed by the attorney general or a county attorney.

C.  As used in this section prosecution costs may include but are not limited to costs for personnel, expenses, fees and other costs necessary in the preparation and prosecution of a person charged with a violation of the provisions of this article. END_STATUTE

START_STATUTE5-563.  Right to prize not assignable; exceptions

A.  The right of any person to a prize is not assignable, except that:

1.  Payment of any prize drawn or the remainder of any annuity purchased may be paid to any of the following:

(a)  The estate of a deceased prize winner.

(b)  The beneficiary of a deceased prize winner.

(c)  A person pursuant to an appropriate judicial order.

2.  Payments to winners in an amount of six hundred dollars or more are subject to setoff pursuant to section 5-575.

3.  In the event of a voluntary assignment, the remainder of any annuity, or a portion of the remainder of the annuity, may be assigned by a prize winner pursuant to an appropriate judicial order if all of the following conditions are met:

(a)  The prize winner provides an affidavit to the court to the effect that the affiant is of sound mind is, not acting under duress and has received independent financial and tax advice concerning the assignment.

(b)  The assignee pays the prize winner a lump sum for all amounts that are due to the prize winner under the assignment agreement on or before the date that the assignment takes effect.

(c)  The parties to the assignment pay a fee to the commission to defray the expenses incurred by the commission in processing the assignment. The commission shall determine the amount of the fee.  Monies collected by the commission pursuant to this subdivision shall be deposited in the state lottery fund established by section 5-571.

B.  On receipt of a court order that meets the requirements of subsection A, paragraph 3 of this section, the director shall make the voluntary assignment.

C.  The commission and director shall be discharged of all further liability upon payment of a prize pursuant to this section. END_STATUTE

START_STATUTE5-564.  Sale at unauthorized price or by unauthorized persons; violation; classification

A.  A person shall not sell a ticket or share at a price greater than that fixed by rule.  A person other than a licensed lottery sales agent or any employee of an agent acting within the scope of his employment shall not sell lottery tickets or shares.  This section does not prohibit a person from giving lottery tickets or shares to another person as a gift.

B.  A person who violates this section is guilty of a class 1 misdemeanor. END_STATUTE

START_STATUTE5-565.  Sale of tickets or shares to underage persons; violation; classification

A.  It is unlawful for a person to sell or offer to sell a lottery ticket or share to any person who is under the age of twenty‑one years.

B.  A person who violates this section is guilty of a class 3 misdemeanor. END_STATUTE

START_STATUTE5-565.01.  Sale to persons using state issued electronic benefits transfer cards; violation; classification

A.  It is unlawful for a licensed agent to sell a lottery ticket or share to a person who uses either a public assistance voucher issued by any public entity or an electronic benefits transfer card issued by the department of economic security to purchase the ticket or share.

B.  It is unlawful for a licensed agent to sell a lottery ticket or share during the same transaction in which a person uses either a public assistance voucher issued by any public entity or an electronic benefits transfer card issued by the department of economic security.

C.  A person who violates this section is guilty of a class 3 misdemeanor. END_STATUTE

START_STATUTE5-565.02.  Purchase of lottery tickets or shares by minors

It is unlawful for a person under twenty‑one years of age to purchase a lottery ticket or share. END_STATUTE

START_STATUTE5-566.  Alteration of lottery tickets; violation; classification

Any person who, with intent to defraud, falsely makes, alters, forges, utters, passes or counterfeits a state lottery ticket or share is guilty of a class 3 felony. END_STATUTE

START_STATUTE5-567.  Purchase of tickets and receipt of prizes by certain persons prohibited

A.  A lottery ticket or share may not be purchased by and a prize may not be paid to an officer or employee of the commission or to any spouse, child, brother, sister or parent residing as a member of the same household in the principal place of residence of such officer or employee.

B.  A lottery ticket or share may not be purchased by and a prize may not be paid to any of the following persons:

1.  An officer or employee of any person contracting with the commission to supply gaming equipment or lottery tickets, advertising or consulting services or to draw or otherwise select winning tickets or shares if the officer or employee is involved in the direct provision of goods or services to the commission or has access to information made confidential by the commission.

2.  A spouse, child, brother, sister or parent residing as a member of the same household in the principal place of residence of a person described in paragraph 1.

3.  The immediate supervisor of a person described in paragraph 1. END_STATUTE

START_STATUTE5-568.  Disposition of unclaimed prize money

Unclaimed prize money for the prize on a winning ticket or share shall be retained for the person entitled to the prize for one hundred eighty days after the drawing in which the prize was won in the case of a drawing prize and for one hundred eighty days after the announced end of the game in question in the case of a prize determined in any manner other than by means of a drawing.  If a claim is not made for the money within the applicable period, seventy per cent of the prize money shall be held in the state lottery prize fund for use as additional prizes in future games and thirty per cent shall be transferred monthly to the court appointed special advocate fund established by section 8‑524. END_STATUTE

START_STATUTE5-569.  Lottery redemption agents

The director may make arrangements for redemption agents to perform functions, activities or services in connection with the operation of the lottery, including direct payment of prizes not exceeding five thousand dollars, as he deems advisable pursuant to this chapter and the rules promulgated under this chapter.  The director may make arrangements for payment of reasonable fees for such services.  Notwithstanding any other statute, such functions, activities or services constitute lawful functions, activities and services of banks, savings and loan associations and credit unions. END_STATUTE

START_STATUTE5-570.  Award of prize to certain persons prohibited

No prize may be paid on any winning ticket or share to any person who is under twenty‑one years of age. END_STATUTE

START_STATUTE5-571.  State lottery fund

The state lottery fund is established consisting of all revenues received from the sale of lottery tickets or shares, including revenues from games authorized pursuant to section 5‑554, subsections G and H, the fees, if any, charged pursuant to section 5-554 and all other monies credited or transferred from any other fund or source pursuant to statute, with the exception of those monies apportioned for payment of prizes and deposited as provided in section 5-573. END_STATUTE

START_STATUTE5-572.  Use of monies in state lottery fund; report

A.  If there are any bonds or bond related obligations payable from the state lottery revenue bond debt service fund, the state lottery revenue bond debt service fund shall be secured by a first lien on the monies in the state lottery fund after the payment of operating costs of the lottery, as prescribed in section 5‑555, subsection A, paragraph 1, until the state lottery bond debt SERVICE fund contains sufficient monies to meet all the REQUIREMENTS for the current period as required by the bond documents.  debt service for revenue bonds issued pursuant to this chapter shall be paid first from monies that would have otherwise been deposited pursuant to this section in the state general fund. After the requirements for the current period have been satisfied as required by the bond documents, The monies in the state lottery fund shall be expended only for the following purposes and in the order provided:

1.  For the expenses of the commission incurred in carrying out its powers and duties and in the operation of the lottery.

2.  For payment to the commerce and economic development commission fund established by section 41‑1505.10 of not less than twenty‑one and one‑half per cent of the revenues received from the sale of two special lottery games conducted for the benefit of economic development.

3.  Except as provided in subsection F of this section, for payment to the local transportation assistance fund established by section 28‑8101 of not less than nine million dollars, increasing each year that total revenues to the state lottery fund increase up to a maximum of eighteen million dollars each fiscal year, except that payments pursuant to this paragraph shall not increase by more than ten per cent per year.

B.  Of the monies remaining in the state lottery fund after the appropriations authorized in subsection A of this section, up to a maximum of twenty‑three million dollars each fiscal year shall be deposited in the local transportation assistance fund established by section 28‑8101 and up to a maximum of seven million six hundred fifty thousand dollars each fiscal year shall be deposited in the county assistance fund established by section 41‑175.  Monies distributed pursuant to this subsection shall be in addition to monies distributed pursuant to subsection A, paragraph 3 of this section.

C.  Notwithstanding subsection B of this section, if the state lottery director determines at the beginning of any fiscal year that monies available to cities, towns and counties under this section may not equal thirty million six hundred fifty thousand dollars, the director shall not authorize deposits to the county assistance fund until the deposits to the local transportation assistance fund equal twenty‑three million dollars.

D.  Of the monies remaining in the state lottery fund each fiscal year after appropriations and deposits authorized in subsections A, B and C of this section, ten million dollars shall be deposited in the Arizona state parks board heritage fund established by section 41‑502 and ten million dollars shall be deposited in the Arizona game and fish commission heritage fund established by section 17‑297.

E.  Of the monies remaining in the state lottery fund each fiscal year after appropriations and deposits authorized in subsections A, B, C and D of this section, and appropriations and deposits to the local transportation assistance fund authorized by this section, five million dollars shall be allocated to the department of economic security for the healthy families program established by section 8‑701, four million dollars shall be allocated to the Arizona board of regents for the Arizona area health education system established by section 15‑1643, three million dollars shall be allocated to the department of health services to fund the teenage pregnancy prevention programs established in Laws 1995, chapter 190, sections 2 and 3, two million dollars shall be allocated to the department of health services for the health start program established by section 36‑697, two million dollars shall be deposited in the disease control research fund established by section 36‑274 and one million dollars shall be allocated to the department of health services for the federal women, infants and children food program.  The allocations in this subsection shall be adjusted annually according to changes in the GDP price deflator as defined in section 41‑563 and the allocations are exempt from the provisions of section 35‑190, relating to lapsing of appropriations.  If there are not sufficient monies available pursuant to this subsection, the allocation of monies for each program shall be reduced on a pro rata basis.

F.  Notwithstanding subsection A, paragraph 3 of this section, if the state lottery director determines that monies available to the state general fund may not equal thirty‑one million dollars in a fiscal year, the director shall not authorize deposits to the local transportation assistance fund pursuant to subsection A, paragraph 3 of this section until the deposits to the state general fund equal thirty‑one million dollars in a fiscal year.

G.  Of the monies remaining in the state lottery fund each fiscal year after appropriations and deposits authorized in subsections A through F of this section, one million dollars or the remaining balance in the fund, whichever is less, is appropriated to the department of economic security for grants to nonprofit organizations, including faith based organizations, for homeless emergency and transitional shelters and related support services.  The department of economic security shall submit a report on the amounts, recipients, purposes and results of each grant to the governor, the speaker of the house of representatives and the president of the senate on or before December 31 of each year for the prior fiscal year and shall provide a copy of this report to the secretary of state.

H.  Of the monies remaining in the state lottery fund each fiscal year after appropriations and deposits authorized in subsections A through G of this section, and after a total of at least forty‑six million four hundred ninety thousand dollars has been deposited in the state general fund, the remaining balance in the state lottery fund shall be deposited in the university capital improvement lease‑to-own and bond fund established by section 15‑1682.03, up to a maximum of eighty per cent of the total annual payments of lease-to-own and bond agreements entered into by the Arizona board of regents.

I.  All monies remaining in the state lottery fund after the appropriations and deposits authorized in this section shall be deposited in the state general fund.

J.  Except for monies expended for prizes as provided in section 5-554, subsection G and section 41‑1505.10 and for debt service of revenue bonds as provided in subsection A of this section, monies expended under subsection A of this section are subject to legislative appropriation. END_STATUTE

START_STATUTE5-573.  State lottery prize fund; setoff for state debts; notification to department of economic security

A.  The state lottery prize fund is established.  That portion of the gross proceeds which is apportioned pursuant to section 5-555, subsection B shall be deposited, pursuant to sections 35‑146 and 35‑147, directly in the state lottery prize fund as the commission receives such proceeds and shall be available for payment of prizes to the holders of winning tickets or shares or for the other purposes provided for in section 5-568.  Procedures for payments to winners from this fund shall be established by rule or order of the commission.  Notwithstanding any other statute, transfers or payments to or from the state lottery prize fund are not appropriations by the legislature, and deposits in the state lottery prize fund are not subject to appropriation by the legislature.

B.  Payments to winners which are payable by the commission or lottery redemption agents pursuant to this section in an amount of six hundred dollars or more are subject to setoff under section 5-575.

C.  The commission shall furnish the department of economic security with the names and the social security numbers of persons who are paid lottery prizes or winnings in an amount of six hundred dollars or more pursuant to this section for purposes prescribed by section 41‑1965.  The department of economic security shall pay the commission for the cost of furnishing the information. END_STATUTE

START_STATUTE5-574.  Audit of accounts

The certified public accountant hired to perform the annual audit under section 5-555, subsection A, paragraph 2 shall conduct postaudits of all accounts and transactions of the commission for each lottery game.  The certified public accountant conducting an audit under this chapter shall have access and authority to examine any and all records of the commission, its redemption agents and its licensees. END_STATUTE

START_STATUTE5-575.  Prizes; setoff for debts to state agencies; definitions

A.  The commission shall establish a liability setoff program by which state lottery prize payments pursuant to section 5-573 may be used to satisfy debts which a person owes this state.  The program shall comply with the standards and requirements prescribed by this section.

B.  If a person owes an agency a debt, an agency may notify the commission, furnishing at least the state agency or program identifier, the first name, last name, middle initial and social security number of the debtor, and the amount of the debt.  This information shall be in the form the commission prescribes.  Each agency shall certify the information and update the information monthly.  No information may be transmitted by the department of revenue to the commission if the transmission would violate title 42, chapter 2, article 1.

C.  The commission shall match the information submitted by the agency with persons who are entitled to a state lottery prize payment in an amount of six hundred dollars or more.  If there is a match, the commission shall set off the amount of the debt from the prize due and notify the person of the person's right to appeal to the appropriate court, or to request a review by the agency pursuant to agency rule.  The person shall make such a request or appeal within thirty days after the setoff. If the setoff accounts for only a portion of the prize due, the remainder of the prize shall be paid to the person.  The commission shall promptly transfer the setoff, less the amount of the commission's fee, to the agency.

D.  If a person requests a review by the agency or provides the agency with proof that an appeal has been taken to the appropriate court within thirty days after the setoff and it is determined that the setoff was made in error under this section, the agency shall reimburse the person with interest as determined pursuant to section 42‑1123.

E.  The basis for a request for review shall not include the validity of the claim if its validity has been established at an agency hearing, by judicial review in a court of competent jurisdiction in this or any other state or by final administrative decision and shall state with specificity why the person claims the obligation does not exist or why the amount of the obligation is incorrect.

F.  The commission may prescribe a fee to be collected from each agency utilizing the setoff procedure.  The amount of the fee shall reasonably reflect the actual cost of the service provided.

G.  If agencies have two or more delinquent accounts for the same person, the commission shall apportion the prize equally among them, except that a setoff to the department of economic security for overdue support has priority over all other setoffs.

H.  If the prize is insufficient to satisfy the entire debt, the remainder of the debt may be collected by the agency as provided by law or resubmitted for setoff against any other prize awarded.

I.  An agency shall not enter into an agreement with a debtor for the assignment of any prospective prize to the agency in satisfaction of the debt.

J.  In this section:

1.  "Agency" means a department, agency, board, commission or institution of this state.  Agency also means a corporation under contract with this state that provides a service that would otherwise be provided by a department, agency, board, commission or institution of this state if the contract specifically authorizes participation in the liability setoff program and the attorney general's office has reviewed the contract and approves of such authorization.  The participation in the liability setoff program is limited to debts related to the services the corporation provides for or on behalf of this state.

2.  "Debt" means an amount over one hundred dollars owed to an agency by a person and may include interest, penalties, charges, costs, fees or any other amount.  Debt also includes monies owed by a person for overdue support and referred to the department of economic security for collection.

3.  "Overdue support" means a delinquency in court ordered payments for support or maintenance of a child or for spousal maintenance to the parent with whom the child is living if child support is also being enforced pursuant to an assignment or application filed under 42 United States Code section 654 (6). END_STATUTE

Sec. 3.  Title 41, chapter 27, article 2, Arizona Revised Statutes, is amended by adding section 41-3035.01, to read:

START_STATUTE41-3035.01.  Arizona state lottery commission; termination July 1, 2035

A.  Notwithstanding the ten‑year limitation prescribed in section 41‑2955, subsection B, The arizona state lottery commission terminates on July 1, 2035.

B.  Title 5, chapter 5.1 is repealed on January 1, 2036. END_STATUTE

Sec. 4.  Purpose

Pursuant to section 41‑2955, subsection E, Arizona Revised Statutes, the Arizona state lottery commission is established to oversee a state lottery to produce the maximum amount of net revenue for the state consonant with the dignity of the state.

Sec. 5.  Initial terms of members of the Arizona state lottery commission

A.  Notwithstanding section 5-552, Arizona Revised Statutes, as added by this act, the initial terms of the members of the Arizona state lottery commission are:

1.  One term ending on the third Monday in January, 2013.

2.  One term ending on the third Monday in January, 2014.

3.  One term ending on the third Monday in January, 2015.

4.  One term ending on the third Monday in January, 2016.

5.  One term ending on the third Monday in January, 2017.

B.  The governor shall make all subsequent appointments as prescribed by statute.

Sec. 6.  Exemption from the procurement code

For the purposes of this act, the Arizona state lottery commission is exempt from the procurement code requirements of title 41, chapter 23, Arizona Revised Statutes, for six months after the effective date of this act.

Sec. 7.  Exemption from rule making

For the purposes of this act, the Arizona state lottery commission is exempt from the rule making requirements of title 41, chapter 6, Arizona Revised Statutes, for six months after the effective date of this act.

Sec.  8.  Conforming legislation

The legislative council staff shall prepare proposed legislation conforming the Arizona Revised Statutes to the provisions of this act for consideration in the fiftieth legislature.

Sec. 9.  Effective date; condition

This act is effective from and after June 30, 2012 only if Senate Bill 1003, forty‑ninth legislature, sixth special session, relating to revenue bonds and lease‑purchase finance, becomes law.