State Lottery

Establishes state lottery; HI gaming control commission/lottery
director.  Reserves at least 45% for winnings; not more than 15%
for operations;      % for programs and services for problem
gamblers; remainder goes to general fund.  Takes effect only if
electorate approves state lottery in an advisory referendum.

THE SENATE                              S.B. NO.           2198
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The Hawaii Revised Statutes is amended by adding
 2 a new chapter to be appropriately designated and to read as
 3 follows:
 4                             "CHAPTER
 5                           STATE LOTTERY
 6         -1 Title of chapter.  This chapter may be cited as the
 7 "State Lottery Law".
 8         -2  Hawaii gaming control commission; members,
 9 appointment, compensation.(a)  There is established the Hawaii
10 gaming control commission which shall be a body corporate and a
11 public instrumentality of the State, for the purpose of
12 implementing this chapter.  The commission shall be placed within
13 the department and for administrative purposes.
14      (b)  The commission shall consist of five members to be
15 appointed by the governor with the advice and consent of the
16 senate under section 26-34.  Of the five members, two shall be
17 appointed from a list of nominees submitted by the president of
18 the senate, and two shall be appointed from a list of nominees
19 submitted by the speaker of the house of representatives.  All

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 1 appointments to the commission shall be made within sixty days of
 2 the effective date of this Act.  The members shall elect one from
 3 among them to be the chairperson.  Each member shall have
 4 reasonable knowledge of the practice, procedure, and principles
 5 of lottery operations.  Each member shall either be a resident of
 6 Hawaii or shall certify that the member will become a resident of
 7 Hawaii before taking office.  At least one member shall be
 8 experienced in law enforcement and criminal investigation, at
 9 least one member shall be a certified public accountant
10 experienced in accounting and auditing, and at least one member
11 shall be an attorney licensed to practice law in Hawaii.
12      (c)  No person shall be appointed a member or continue to be
13 a member of the commission if:
14      (1)  The person is an elected state official or a public
15           employee;
16      (2)  The person or the person's spouse, child, or parent is,
17           a member of the board of directors of, or a person
18           financially interested in, any lottery operation
19           subject to the jurisdiction of this commission; or
20      (3)  The person is related to any other person within the
21           second degree of consanguinity or affinity who is
22           licensed by the commission pursuant to this chapter; or
23      (4)  The person is not of good moral character or has been

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 1           convicted of, or is under indictment for, a felony
 2           under the laws of Hawaii, or any other state, or the
 3           United States.
 4      (d)  The term of office of a commission member shall be
 5 three years, except that the terms of office of the initial
 6 members appointed shall be staggered, with one member serving one
 7 year, two members serving two years, and two members serving
 8 three years.  No member shall serve more than two consecutive
 9 three-year terms.  Vacancies in the commission shall be filled
10 for the unexpired term in like manner as the original
11 appointments.
12      (e)  The governor may remove or suspend any member of the
13 commission after due notice and public hearing.  The president of
14 the senate or the speaker of the house of representatives may
15 request that the governor remove or suspend a member of the
16 commission nominated by either the president of the senate or
17 speaker of the house of representatives.
18      (f)  Members shall:
19      (1)  Serve part-time;
20      (2)  Be paid compensation of $300 for each day in the
21           performance of official duties; and
22      (3)  Be reimbursed for expenses, including travel expenses,
23           incurred in the performance of official duties.

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 1      (g)  Officers of the commission, including the chairperson,
 2 shall be selected by the members.  The commission, subject to
 3 chapter 92, shall hold at least one meeting in each quarter of
 4 the State's fiscal year.  Special meetings may be called by the
 5 chairperson or any three members upon seventy-two hours written
 6 notice to each member.  Three members shall constitute a quorum,
 7 and a majority vote of the members present shall be required for
 8 any final determination by the commission.  The commission shall
 9 keep a complete and accurate record of all its meetings.
10      (h)  Before assuming the duties of office, each member of
11 the commission shall take an oath that the member shall
12 faithfully execute the duties of office according to the laws of
13 the State and shall file and maintain with the director of
14 business, economic development, and tourism, a bond in the sum of
15 $25,000 with good and sufficient sureties.  The cost of any bond
16 for any member of the commission under this section shall be
17 considered a part of the necessary expenses of the commission.
18       -3  Powers and duties of commission.(a)  The
19 commission shall operate a state lottery and in doing so shall
20 determine:
21      (1)  The types of lottery or lotteries to be conducted;
22      (2)  The price or prices of tickets or shares in the
23           lottery;

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 1      (3)  The number and sizes of the prizes on the winning
 2           tickets or shares;
 3      (4)  The design of the tickets or shares to be used in the
 4           lottery; provided that each state lottery ticket or
 5           share shall have imprinted thereon the state seal and a
 6           serial number;
 7      (5)  The manner of selecting the winning tickets or shares;
 8      (6)  The manner of payment of prizes to the holders of
 9           winning tickets or shares;
10      (7)  The frequency of the drawings or selections of winning
11           tickets or shares;
12      (8)  The type or types of locations at which tickets or
13           shares may be sold;
14      (9)  The method to be used in selling tickets or shares;
15     (10)  The licensing agents to sell tickets or shares;
16           provided that no person under the age of eighteen shall
17           be licensed as an agent;
18     (11)  The manner and amount of compensation, if any, to be
19           paid licensed sales agents; and
20     (12)  Any other matter necessary or desirable for the
21           efficient and economical operation and administration
22           of the lottery and for the convenience of the
23           purchasers of tickets or shares and the holders of

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 1           winning tickets or shares.
 2      (b)  The commission may adopt, and from time to time amend,
 3 rules under chapter 91 it deems necessary or desirable.  The
 4 commission shall advise and make recommendations to the lottery
 5 director regarding the operation and administration of the
 6 lottery.
 7      (c)  The commission shall report monthly to the governor,
 8 the attorney general, and the legislature the total lottery
 9 revenues, prize disbursements, and other expenses for the
10 preceding month, and shall make an annual report on them that
11 shall include a full and complete statement of lottery revenues,
12 prize disbursements, and other expenses, including
13 recommendations as it may deem necessary or advisable.  The
14 commission shall report immediately to the governor and the
15 legislature any matters that require changes in the laws of the
16 State in order to prevent abuse and evasion of this chapter or
17 rules of the commission, or to rectify undesirable conditions in
18 connection with the administration or operation of the state
19 lottery.
20      (d)  The commission shall carry on a continuous study and
21 investigation of the lottery throughout the State in order to:
22      (1)  Ascertain any defects in this chapter or in the rules
23           thereto whereby any abuse in the administration and

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 1           operation of the lottery or any evasion of this chapter
 2           or rules may arise;
 3      (2)  Formulate recommendations for changes in this chapter
 4           and the rules to prevent such abuses and evasions; and
 5      (3)  Guard against the use of this chapter and rules as a
 6           cloak for carrying on organized gambling and criminal
 7           activities.
 8      (e)  The commission shall make a continuous study and
 9 investigation of the operation and administration of similar laws
10 in other states or countries, of any literature on the subject
11 which from time to time may be published or available, of any
12 federal laws which may affect the operation of the lottery, and
13 of the reaction of citizens of the State to existing and
14 potential features of the lottery with a view toward recommending
15 or effecting changes that will better serve and implement the
16 purposes of this chapter.
17      (f)  The commission may issue subpoenas to compel the
18 attendance of witnesses and the production of documents, papers,
19 books, records, and other evidence before it in any matter over
20 which it has jurisdiction, control, or supervision.  The
21 commission may administer oaths and affirmations to persons whose
22 testimony is required.
23         -4  State lottery fund established; authorized



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 1 disbursements.  There is established the state lottery fund
 2 within the state treasury into which shall be deposited all
 3 revenues received from the sale of lottery tickets or shares and
 4 all other moneys credited or transferred thereto from any other
 5 fund or source pursuant to law.  Revenues from the state lottery
 6 fund shall be expended only for the following purposes:
 7      (1)  For the payment of prizes to the holders of winning
 8           lottery tickets or shares which in any case shall be no
 9           less than forty-five per cent of the total revenues
10           accruing from the sale of lottery tickets;
11      (2)  For the expenses of the commission in administering and
12           operating the lottery, including the costs resulting
13           from any contract or contracts entered into for
14           promotional, advertising, or operational services, or
15           for the purchase or lease of lottery equipment and
16           materials, which in no case shall exceed fifteen per
17           cent of the total revenues accruing from the sale of
18           lottery tickets, as subject to appropriation; and
19      (3)  For services and programs for problem gamblers to be
20           administered by the commission, which shall not exceed
21                per cent of the total revenues per year.
22 The balance of the fund shall be paid quarterly into the state
23 general fund.

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 1         -5  Lottery director; duties.(a)  The commission,
 2 subject to the approval of the governor, shall appoint without
 3 regard to chapters 76 and 77 a lottery director of the state
 4 lottery who shall serve at the pleasure of the commission and
 5 shall receive a salary determined by the commission.  The lottery
 6 director shall supervise and administer the operation of the
 7 lottery under this chapter and rules adopted thereto.
 8      (b)  The lottery director, subject to the approval of the
 9 commission, shall appoint deputy lottery directors and any other
10 professional, technical, and clerical assistants, and employees
11 that may be necessary; provided that the deputies, assistants,
12 and employees shall not be subject to chapters 76 and 77.  The
13 lottery director, so far as practicable in making appointments to
14 these positions, shall employ employees of the State serving in
15 positions which are classified under chapter 76 and 77; provided
16 that:
17      (1)  If an employee so hired has tenure under chapter 76,
18           upon termination of the employee's service in an
19           unclassified position with the lottery, the employee,
20           if the employee so requests, shall be entitled to
21           return to the civil service position from which the
22           employee was hired or, if the position is unavailable,
23           to a position equivalent thereto in salary grade

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 1           without impairment of the employee's civil service
 2           status or tenure under chapters 76 and 77, and without
 3           loss of the seniority, retirement, and other rights to
 4           which uninterrupted service in the position would have
 5           entitled the employee;
 6      (2)  If the employee in the unclassified lottery position is
 7           terminated for cause, the employee's civil service
 8           return rights shall be determined by the civil service
 9           commission in accordance with the standards applied by
10           the commission in administering chapter 76; and
11      (3)  The lottery director shall have the same return rights
12           as are accorded in this section to other employees of
13           the lottery.
14      (c)  The lottery director shall:
15      (1)  Act as secretary and executive officer of the
16           commission;
17      (2)  Confer regularly as necessary or desirable and not less
18           than once every month with the commission on the
19           operation and administration of the lottery;
20      (3)  Make available for inspection by the commission, upon
21           request, all books, records, files, and other
22           information, and documents of the commission;
23      (4)  Advise the commission and recommend matters as the

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 1           lottery director deems necessary and advisable to
 2           improve the operation and administration of the
 3           lottery;
 4      (5)  License, as agents to sell lottery tickets, persons
 5           who, in the lottery director's opinion, will best serve
 6           the public convenience and promote the sale of tickets
 7           or shares.  Every licensed agent shall prominently
 8           display the license, or a copy thereof;
 9      (6)  Require a bond from every licensed agent in an amount
10           as may be provided in the rules of the commission;
11      (7)  Suspend or revoke any license for violation of this
12           chapter or of the rules adopted hereunder;
13      (8)  Subject to the approval of the commission and the
14           applicable laws relating to public contracts, enter
15           into contracts for the operation of the lottery, or any
16           part thereof, and into contracts for the promotion of
17           the lottery; provided that no contract awarded or
18           entered into shall be assigned by the holder thereof
19           except with the specific approval of the commission;
20           and
21      (9)  Certify to the commission each month a full and
22           complete statement of lottery revenues, prize
23           disbursements, and other expenses for the preceding

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 1           month.
 2         -6  Contractual arrangements.  The lottery director may:
 3      (1)  Make contractual arrangements with any person,
 4           including a bank, to perform functions, activities, or
 5           services in connection with the operation of the
 6           lottery as the lottery director deems advisable
 7           pursuant to the rules of the commission for the
 8           deposit, handling, and disbursements of lottery funds,
 9           tickets, and materials; and
10      (2)  Permit agents to deduct from the proceeds of sales of
11           lottery tickets the agreed amount of reimbursement and
12           compensation for services rendered.
13 For purposes of this section, the term "bank" includes all banks,
14 banking associations, savings banks, cooperative banks, credit
15 unions, trust companies, financial services loan companies, and
16 any other type or form of banking institution organized under the
17 authority of the State or of the United States whose principal
18 place of business is within the State.  All contracts and any
19 negotiations thereto shall be open records.
20         -7 Agents; license required; direct sales by commission
21 to public.(a)  No person, other than fraternal, veterans', or
22 charitable organizations, shall be licensed as an agent to sell
23 lottery tickets or shares if the person engages in business

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 1 exclusively as a lottery sales agent.  Before issuing a license,
 2 the lottery director shall consider:
 3      (1)  The financial responsibility and security of each
 4           applicant for a license;
 5      (2)  The applicant's business or activity;
 6      (3)  The accessibility of the applicant's place of business
 7           or activity to the public;
 8      (4)  The sufficiency of existing licenses to serve the
 9           public convenience; and
10      (5)  The volume of expected sales.
11      (b)  No person licensed by the lottery director to deal in,
12 purchase, or promote lottery tickets pursuant to this chapter or
13 rules thereunder shall be subject to prosecution under part III
14 of chapter 712 for setting up and promoting a lottery or for any
15 other crime incidental thereto, or for selling or possessing
16 lottery tickets, shares, or materials for the lottery.
17      (c)  Any three persons objecting to the issuance of a
18 license, or any person applying for and being denied such a
19 license, may request and be granted a public hearing by the
20 commission under chapter 91.  No license shall be issued except
21 after a hearing under chapter 91 and unless four members of the
22 commission approve the issue of the license.
23      (d)  No federal, state, or county employee, or member of

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 1 their immediate family shall sell or be issued a license to sell
 2 lottery tickets.  No person shall use a position in public
 3 service or a position of private employment in any manner so as
 4 to encourage the sale of tickets.  No employer shall set up a
 5 payroll deduction plan for the purchase of lottery tickets by the
 6 employer's employees.
 7      (e)  Nothing in this section or any other section of this
 8 chapter shall be construed to prohibit the commission from
 9 designating certain of its agents and employees to sell lottery
10 tickets directly to the public; provided that none of those
11 employees shall receive any remuneration or commission for such
12 sale; and provided further that no lottery ticket shall be sold
13 to persons committed to any state correctional facility or state
14 hospital.
15         -8  Assignment of right to prize prohibited; exceptions;
16 liability of commission and lottery director.  No right of any
17 person to a prize shall be assignable, except that:
18      (1)  Payment of any prize may be made to the estate of a
19           deceased prize winner;
20      (2)  Any person pursuant to an appropriate judicial order
21           may be paid the prize to which the winner is entitled;
22           and
23      (3)  The commission by rules adopted pursuant to section

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                                     S.B. NO.           2198

 1              -3 may permit assignment or prizes for purposes of
 2           paying estate and transfer taxes, or to a trust the
 3           beneficiaries of which are the prize winner's mother,
 4           father, children, grandchildren, brothers, sisters, or
 5           spouse.
 6 Neither the commission nor the lottery director shall be liable
 7 for the payment of a prize pursuant to this section.
 8         -9  Certain persons ineligible to participate in
 9 lottery.  No ticket or share shall be purchased by, and no prize
10 shall be paid to:
11      (1)  Any member or employee of the commission; or
12      (2)  Any spouse, child, brother, sister, or parent residing
13           as a member of the same household in the principal
14           place of abode of any member or employee of the
15           commission.
16         -10  Disposition of unclaimed prize money.  Unclaimed
17 prize money for the prize on a winning ticket or share shall be
18 retained by the lottery director for the person entitled thereto
19 for one year after the drawing in which the prize was won.  If no
20 claim is made for the money within that year, the prize money
21 shall be allocated in the same manner as lottery revenues are
22 allocated.
23         -11  Payment of prize to minor; lottery director



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 1 discharged from liability, when.  If the person entitled to a
 2 prize or any winning ticket is under the age of eighteen years,
 3 and the prize is less than $5,000, the lottery director may
 4 direct payment of the prize by delivery to an adult member of the
 5 minor's family or to a guardian of the minor of a check or draft
 6 payable to the order of the minor.  If the person entitled to a
 7 prize or any winning ticket is under the age of eighteen years,
 8 and the prize is $5,000 or more, the lottery director may direct
 9 payment to the minor by depositing the amount of the prize in any
10 bank to the credit of an adult member of the minor's family or to
11 a guardian of the minor as custodian for such minor.  The lottery
12 director shall be discharged of all further liability upon
13 payment of a prize to a minor pursuant to this section.
14         -12  Certain sales prohibited; penalty.  No person shall
15 sell a ticket or share at a price greater than that fixed by the
16 commission.  No person other than a licensed lottery sales agent
17 shall sell lottery tickets or shares, except that nothing in this
18 section shall be construed to prevent any person from giving
19 lottery tickets or shares to another as a gift.  No ticket or
20 share shall be sold to any person under age eighteen; provided
21 that a person eighteen years of age or older may purchase a
22 ticket or share for the purpose of making a gift to a person
23 under age eighteen.  Any person who violates this section shall

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 1 be guilty of a petty misdemeanor.
 2         -13  Alteration, forgery, and counterfeiting of lottery
 3 tickets; penalty.  Any person with intent to defraud, who falsely
 4 makes, alters, forges, utters, passes, or counterfeits a state
 5 lottery ticket or share shall be guilty of a class C felony.
 6         -14  Offenses and penalties.(a)  Any person who
 7 impersonates a member or employee of the state lottery commission
 8 shall be guilty of a misdemeanor.
 9      (b)  Any person who promises or engages another person to
10 secure a license to sell lottery tickets or shares, or to secure
11 employment with the state lottery commission for money, property,
12 or services, shall be guilty of a class C felony; and in event of
13 conviction, shall be incapable of holding any office of honor,
14 trust, or profit for the State."
15      SECTION 2.  Section 712-1220, Hawaii Revised Statutes, is
16 amended by amending the definition of "gambling" to read:
17      "(4)  "Gambling".  A person engages in gambling if he stakes
18 or risks something of value upon the outcome of a contest of
19 chance or a future contingent event not under his control or
20 influence, upon an agreement or understanding that he or someone
21 else will receive something of value in the event of a certain
22 outcome.  Gambling does not include [bona]:
23      (1)  Bona fide business transactions valid under the law of

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 1           contracts, including but not limited to contracts for
 2           the purchase or sale at a future date of securities or
 3           commodities[, and agreements];
 4      (2)  Agreements to compensate for loss caused by the
 5           happening of chance, including but not limited to
 6           contracts of indemnity or guaranty and life, health, or
 7           accident insurance[.]; and
 8      (3)  The state lottery as established by chapter    ."
 9      SECTION 3.  At the 2000 general election there shall be an
10 advisory referendum on the question of Hawaii's need for a legal
11 state lottery.  The chief election officer of the State shall
12 submit the following question to the electorate with instructions
13 as follows:
14      1.   The proposal shall read:  "Shall the State of Hawaii
15           allow a legal state lottery?"
16      The chief election officer shall publish a notice of the
17 referendum proposal and descriptive information concerning a
18 state lottery, in a newspaper of general circulation in the State
19 at least thirty days before the date of the referendum.  The
20 notice of the referendum shall also be available at all public
21 libraries in the State and the office of the county clerk of each
22 county.
23      The ballot shall print the question and the question shall

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 1 have designated spaces to mark YES or NO.  The proposal shall be
 2 considered approved only if approved by a majority of all the
 3 votes tallied upon the question, this majority constituting more
 4 than fifty per cent of the total votes cast at the election.
 5      SECTION 4.  Statutory material to be repealed is bracketed.
 6 New statutory material is underscored.
 7      SECTION 5.  This Act shall take effect upon its approval;
 8 provided that:
 9      (1)  Sections 1 and 2 of this Act shall be inoperative until
10           such time as the chief elections officer of the State
11           certifies that the electorate has approved the proposal
12           in the advisory referendum provided for in section 4 of
13           this Act, at which time, sections 1 and 2 this Act
14           shall become operative; and
15      (2)  This Act shall be repealed on January 1, 2001, if
16           sections 1 and 2 of this Act have not become operative
17           by that date.
19                           INTRODUCED BY:  _______________________