State Lottery

Establishes a state lottery.  Provides for establishment of a
lottery commission and appointment of a director of the state
lottery. Adds language for an advisory referendum.

THE SENATE                              S.B. NO.           475
TWENTIETH LEGISLATURE, 1999                                
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  Lottery commission; members, appointment,
 9 compensation.  There shall be in the department of budget and
10 finance for administrative purposes, a state lottery commission,
11 hereafter called the commission, consisting of the director of
12 finance or the director's designee, the director of commerce and
13 consumer affairs or the director's designee, the comptroller or
14 the comptroller's designee, and two persons to be appointed by
15 the governor as provided in section 26-34.  Not more than four
16 members of the commission shall be of the same political party.
17       -3  Powers and duties of commission.(a)  The
18 commission shall operate a state lottery and in doing so shall
19 determine:

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

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

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 1 investigation of the lottery throughout the State in order to:
 2      (1)  Ascertain any defects in this chapter or in the rules
 3           thereto whereby any abuse in the administration and
 4           operation of the lottery or any evasion of this chapter
 5           or rules may arise;
 6      (2)  Formulate recommendations for changes in this chapter
 7           and the rules to prevent such abuses and evasions; and
 8      (3)  Guard against the use of this chapter and rules as a
 9           cloak for carrying on organized gambling and criminal
10           activities.
11      (e)  The commission shall make a continuous study and
12 investigation of the operation and administration of similar laws
13 in other states or countries, of any literature on the subject
14 which from time to time may be published or available, of any
15 federal laws which may affect the operation of the lottery, and
16 of the reaction of citizens of the State to existing and
17 potential features of the lottery with a view toward recommending
18 or effecting changes that will better serve and implement the
19 purposes of this chapter.
20      (f)  The concurrence of the chairperson and of not less than
21 two other members of the commission shall be required for all
22 official actions of the commission.  A copy of the minutes of
23 each meeting of the commission shall be transmitted, by and under

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 1 the certification of the secretary thereof to the governor.
 2      (g)  The commission may issue subpoenas to compel the
 3 attendance of witnesses and the production of documents, papers,
 4 books, records, and other evidence before it in any matter over
 5 which it has jurisdiction, control, or supervision.  The
 6 commission may administer oaths and affirmations to persons whose
 7 testimony is required.
 8       -4  State lottery fund established; authorized
 9 disbursements.(a)  There is established a special fund to be
10 known as the state lottery fund into which shall be deposited all
11 revenues received from the sale of lottery tickets or shares and
12 all other moneys credited or transferred thereto from any other
13 fund or source pursuant to law.  Revenues from the state lottery
14 fund shall be expended only for the following purposes:
15      (1)  For the payment of prizes to the holders of winning
16           lottery tickets or shares which in any case shall be no
17           less than forty-five per cent of the total revenues
18           accruing from the sale of lottery tickets; and
19      (2)  For the expenses of the commission in administering and
20           operating the lottery, including the costs resulting
21           from any contract or contracts entered into for
22           promotional, advertising, or operational services, or
23           for the purchase or lease of lottery equipment and

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 1           materials, which in no case shall exceed fifteen per
 2           cent of the total revenues accruing from the sale of
 3           lottery tickets, as determined by the comptroller and
 4           subject to appropriation.
 5      The balance of the fund, as determined by the comptroller,
 6 on December 1 of each year, shall be paid into the general fund
 7 of the State.
 8       -5  Director; duties.(a)  The commission, subject to
 9 the approval of the governor, shall appoint without regard to
10 chapters 76 and 77 a director of the state lottery, hereinafter
11 called the director, who shall serve at the pleasure of the
12 commission and shall receive a salary determined by the
13 commission.  The director shall supervise and administer the
14 operation of the lottery under this chapter and rules adopted
15 thereto.
16      (b)  The director, subject to the approval of the
17 commission, shall appoint such deputy directors and such other
18 professional, technical, and clerical assistants, and employees
19 as may be necessary; provided that such deputies, assistants, and
20 employees shall not be subject to chapters 76 and 77.  The
21 director, so far as practicable in making appointments to such
22 positions, shall employ employees of the State serving in
23 positions which are classified under chapter 76 and 77; provided

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 1 that:
 2      (1)  If an employee so hired has tenure under chapter 76,
 3           upon termination of the employee's service in an
 4           unclassified position with the lottery, the employee,
 5           if the employee so requests, shall be entitled to
 6           return to the civil service position from which the
 7           employee was hired or, if the position is unavailable,
 8           to a position equivalent thereto in salary grade
 9           without impairment of the employee's civil service
10           status or tenure under chapters 76 and 77, and without
11           loss of the seniority, retirement, and other rights to
12           which uninterrupted service in the position would have
13           entitled the employee;
14      (2)  If the employee in the unclassified lottery position is
15           terminated for cause, the employee's civil service
16           return rights shall be determined by the civil service
17           commission in accordance with the standards applied by
18           the commission in administering chapter 76; and
19      (3)  The director shall have the same return rights as are
20           accorded in this section to other employees of the
21           lottery.
22      (c)  The director shall:
23      (1)  Act as secretary and executive officer of the

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 1           commission;
 2      (2)  Confer regularly as necessary or desirable and not less
 3           than once every month with the commission on the
 4           operation and administration of the lottery;
 5      (3)  Make available for inspection by the commission, upon
 6           request, all books, records, files, and other
 7           information, and documents of the commission;
 8      (4)  Advise the commission and recommend matters as the
 9           director deems necessary and advisable to improve the
10           operation and administration of the lottery;
11      (5)  License, as agents to sell lottery tickets, persons
12           who, in the director's opinion, will best serve the
13           public convenience and promote the sale of tickets or
14           shares.  Every licensed agent shall prominently display
15           the license, or a copy thereof;
16      (6)  Require a bond from every licensed agent in an amount
17           as may be provided in the rules of the commission;
18      (7)  Suspend or revoke any license for violation of this
19           chapter or of the rules adopted hereunder;
20      (8)  Subject to the approval of the commission and the
21           applicable laws relating to public contracts, enter
22           into contracts for the operation of the lottery, or any
23           part thereof, and into contracts for the promotion of

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 1           the lottery; provided that no contract awarded or
 2           entered into shall be assigned by the holder thereof
 3           except with the specific approval of the commission;
 4           and
 5      (9)  Certify to the commission each month a full and
 6           complete statement of lottery revenues, prize
 7           disbursements, and other expenses for the preceding
 8           month.
 9        -6  Contractual arrangements.  The director may:
10      (1)  Make contractual arrangements with any person,
11           including a bank, to perform functions, activities, or
12           services in connection with the operation of the
13           lottery as the director deems advisable pursuant to the
14           rules of the commission for the deposit, handling, and
15           disbursements of lottery funds, tickets, and materials;
16           and
17      (2)  Permit agents to deduct from the proceeds of sales of
18           lottery tickets the agreed amount of reimbursement and
19           compensation for services rendered.
20 For purposes of this section, the term "bank" includes all banks,
21 banking associations, savings banks, cooperative banks, credit
22 unions, trust companies, financial services loan companies, and
23 any other type or form of banking institution organized under the

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 1 authority of the State or of the United States whose principal
 2 place of business is within the State.  All contracts and any
 3 negotiations thereto shall be open records.
 4        -7  Agents; license required; direct sales by state
 5 lottery commission to public.(a)  No person, other than
 6 fraternal, veterans', or charitable organizations, shall be
 7 licensed as an agent to sell lottery tickets or shares if the
 8 person engages in business exclusively as a lottery sales agent.
 9 Before issuing a license, the director shall consider:
10      (1)  The financial responsibility and security of each
11           applicant for a license;
12      (2)  The applicant's business or activity;
13      (3)  The accessibility of the applicant's place of business
14           or activity to the public;
15      (4)  The sufficiency of existing licenses to serve the
16           public convenience; and
17      (5)  The volume of expected sales.
18      (b)  No person licensed by the director to deal in,
19 purchase, or promote lottery tickets pursuant to this chapter or
20 rules thereunder shall be subject to prosecution under chapter
21 712 for setting up and promoting a lottery or for any other crime
22 incidental thereto, or for selling or possessing lottery tickets,
23 shares, or materials for the lottery.

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 1      (c)  Any three persons objecting to the issuance of a
 2 license, or any person applying for and being denied such a
 3 license, may request and be granted a public hearing by the
 4 commission under chapter 91.  No license shall be issued except
 5 after a hearing under chapter 91 and unless four members of the
 6 commission approve the issue of the license.
 7      (d)  No federal, state, or county employee, or member of
 8 their immediate family shall sell or be issued a license to sell
 9 lottery tickets.  No person shall use a position in public
10 service or a position of private employment in any manner so as
11 to encourage the sale of tickets.  No employer shall set up a
12 payroll deduction plan for the purchase of lottery tickets by the
13 employer's employees.
14      (e)  Nothing in this section or any other section of this
15 chapter shall be construed to prohibit the commission from
16 designating certain of its agents and employees to sell lottery
17 tickets directly to the public; provided that none of those
18 employees shall receive any remuneration or commission for such
19 sale; and provided further that no lottery ticket shall be sold
20 to persons committed to any state correctional facility or state
21 hospital.
22        -8  Assignment of right to prize prohibited; exceptions;
23 liability of commission and director.  No right of any person to

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

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 1 prize money for the prize on a winning ticket or share shall be
 2 retained by the director for the person entitled thereto for one
 3 year after the drawing in which the prize was won.  If no claim
 4 is made for the money within that year, the prize money shall be
 5 allocated in the same manner as lottery revenues are allocated.
 6        -11  Payment of prize to minor; director discharged from
 7 liability, when.  If the person entitled to a prize or any
 8 winning ticket is under the age of eighteen years, and the prize
 9 is less than $5,000, the director may direct payment of the prize
10 by delivery to an adult member of the minor's family or to a
11 guardian of the minor of a check or draft payable to the order of
12 the minor.  If the person entitled to a prize or any winning
13 ticket is under the age of eighteen years, and the prize is
14 $5,000 or more, the director may direct payment to the minor by
15 depositing the amount of the prize in any bank to the credit of
16 an adult member of the minor's family or to a guardian of the
17 minor as custodian for such minor.  The director shall be
18 discharged of all further liability upon payment of a prize to a
19 minor pursuant to this section.
20        -12  Certain sales prohibited; penalty.  No person shall
21 sell a ticket or share at a price greater than that fixed by the
22 commission.  No person other than a licensed lottery sales agent
23 shall sell lottery tickets or shares, except that nothing in this

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 1 section shall be construed to prevent any person from giving
 2 lottery tickets or shares to another as a gift.  No ticket or
 3 share shall be sold to any person under age eighteen; provided
 4 that a person eighteen years of age or older may purchase a
 5 ticket or share for the purpose of making a gift to a person
 6 under age eighteen.  Any person who violates this section shall
 7 be guilty of a petty misdemeanor.
 8        -13  Alteration, forgery, and counterfeiting of lottery
 9 tickets; penalty.  Any person with intent to defraud, who falsely
10 makes, alters, forges, utters, passes, or counterfeits a state
11 lottery ticket or share shall be guilty of a class C felony.
12        -14  Offenses and penalties.  Any person who
13 impersonates a member or employee of the state lottery commission
14 shall be guilty of a misdemeanor.
15      Any person who promises or engages another person to secure
16 a license to sell lottery tickets or shares, or to secure
17 employment with the state lottery commission for money, property,
18 or services, shall be guilty of a class C felony; and in event of
19 conviction, shall be incapable of holding any office of honor,
20 trust, or profit for the State."
21      SECTION 2.  Section 712-1220, Hawaii Revised Statutes, is
22 amended by amending the definition of "gambling" to read:
23      "(4)  "Gambling".  A person engages in gambling if he stakes

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 1 or risks something of value upon the outcome of a contest of
 2 chance or a future contingent event not under his control or
 3 influence, upon an agreement or understanding that he or someone
 4 else will receive something of value in the event of a certain
 5 outcome.  Gambling does not include [bona]:
 6      (1)  Bona fide business transactions valid under the law of
 7           contracts, including but not limited to contracts for
 8           the purchase or sale at a future date of securities or
 9           commodities[, and agreements];
10      (2)  Agreements to compensate for loss caused by the
11           happening of chance, including but not limited to
12           contracts of indemnity or guaranty and life, health, or
13           accident insurance[.]; and
14      (3)  The state lottery as established by chapter    ."
15      SECTION 3.  At the 2000 general election there shall be an
16 advisory referendum on the question of Hawaii's need for
17 legalized gambling and if so, what form of legalized gambling is
18 preferred.  The chief election officer of the State shall submit
19 two separate questions to the electorate with instructions as
20 follows:
21      1.  The first proposal shall read:  "Shall the State of
22 Hawaii allow some form of legalized gambling?"
23      2.  The second proposal shall be submitted in the form of a

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 1 question and shall read: "Do you support the form of legalized
 2 gambling known as the State Lottery?"
 3      The chief election officer shall publish a notice of the
 4 referendum proposals and descriptive information of the type of
 5 gambling, in a newspaper of general circulation in the State at
 6 least thirty days before the date of the referendum.  The notice
 7 of the referendum shall also be available at all public libraries
 8 in the State and the office of the county clerk of each county.
 9      The ballot shall print the questions and each question shall
10 have designated spaces to mark YES or NO.  The first proposal
11 shall be considered approved only if approved by a majority of
12 all the votes tallied upon the question, this majority
13 constituting more than fifty per cent of the total votes cast at
14 the election.
15      SECTION 4.  Statutory material to be repealed is bracketed.
16 New statutory material is underscored.
17      SECTION 5.  This Act shall take effect upon its approval.
19                           INTRODUCED BY:_________________________