FISCAL NOTE

Date Requested: April 03, 2017
Time Requested: 04:02 PM
Agency: Lottery Commission, WV
CBD Number: Version: Bill Number: Resolution Number:
2090 Comm. Sub. HB2930
CBD Subject: Legal Gaming


FUND(S):

Lottery Administrative Funds and the Lottery Fund

Sources of Revenue:

Special Fund,Other Fund Lottery Administrative

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


HB2930 mirrors the bill introduced last year by Delegate Skinner at the request of an unnamed constituent that was eventually vetoed by the Governor. The Lottery opposes this bill because of the potential revenue impact- decline in sales [lost revenue] and additional administrative costs- in addition to a number of policy concerns. While fraud and security concerns are primary factors, this fiscal note will focus on the potential impact on sales and costs to the state that may result from HB2930. HB2930 is expected to have a negative impact on sales which would decrease deposits to the Lottery Fund. Approximately 30-40% of traditional sales are at the borders and media attention on winners in West Virginia drive sales. Players see the game operating as advertised and they believe that they can play and win in WV. Example: Several past winners from OH all claimed to regularly buy tickets at stores in WV, because they believe they are more likely to win here because WV is “luckier” than Ohio. Therefore, we believe the potential for a decrease in sales is likely from this bill. If sales decrease then that results in reduced deposits to the Lottery Fund which could impact the debt service coverage on bonds supported by the Lottery Fund revenues. The debt service coverage ratio must be 4.0 or above to maintain bond ratings- it is currently 4.0. Dropping below 4.0 could have a negative impact on Lottery Fund bond ratings. Therefore, we cannot risk reducing deposits to the Lottery Fund. There is also an estimated Administrative Cost to the state for reprinting brochures, claim forms, and other materials associated with Powerball, MegaMillions and Hot Lotto.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 35,000 35,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


While the potential decrease in sales revenue on traditional lottery games depends on too many variables to measure, the following represents the cost to the agency to administer HB2930 changes. These costs do not include additional personnel costs if additional staff must be hired to manage winners who wish to claim anonymously. Administrative Costs: *Under contract means that no additional cost will be incurred by the Lottery as it currently covered under the central management contract with IGT. Materials: Cost Est. Time(in Weeks) Powerball Brochure $10,000 7 Powerball Playslip Under contract 16 Mega Millions Brochure $10,000 7 Mega Millions Playslip Under contract 16 Hot Lotto Brochure $10,000 7 Hot lotto Playslip Under contract 16 Numbered Claim Forms $5,000 7 Printed Ticket Stock Under contract 16



Memorandum


While this bill may seem benign on a prima facie level, the modifications eliminate security safeguards and diminish government transparency on matters with large amounts of public money involved. Industry Position: There are 43 State Lottery Commissions; only 6 allow players to claim anonymously [OH, DE, MD, KS, ND, and SC]. The majority of state lotteries and the Multi-State Lottery Association consider it bad public policy to allow anonymous prize claims. The Idaho legislature recently took up a similar measure that was voted down in early March due to the public interest in disclosing the names of recipients receiving large amounts of public dollars. Specific issues are highlighted below. ►Publishing the names of winners provides additional security and is a theft deterrent. ►Public disclosure makes individuals less likely to attempt fraud. Recently, a major security breach was discovered when a former Multi-State Lottery Association employee attempted to redeem a fraudulent Hot Lotto top prize winning ticket in Iowa that was only identified and prosecuted because of Iowa’s public disclosure requirements. Investigations revealed he had fraudulently claimed additional prize winnings in states that do not require public disclosure in prior years. ►Claiming anonymously eliminates the Lottery’s ability to protect players by controlling media coverage- all three games are multistate games with heavy media coverage that is managed and controlled by the Lottery.



    Person submitting Fiscal Note: Danielle Boyd, Managing General Counsel
    Email Address: dboyd@wvlottery.com