1 1 2 3 * * * * * * * * * * * * * * * * * 4 5 TEXAS LOTTERY COMMISSION 6 MEETING 7 8 JUNE 10, 2002 9 10 * * * * * * * * * * * * * * * * * 11 12 13 14 15 16 17 18 19 BE IT REMEMBERED that the TEXAS LOTTERY 20 COMMISSION meeting was held on the 10TH of JUNE, 2002, 21 from 8:30 a.m. to 6:35 p.m., before Brenda J. Wright, 22 RPR, CSR in and for the State of Texas, reported by 23 machine shorthand, at the Offices of the Texas Lottery 24 Commission, 611 East Sixth Street, Austin, Texas, 25 whereupon the following proceedings were had: 2 1 APPEARANCES 2 3 Chairman: Mr. C. Tom Clowe, Jr. 4 Commissioners: 5 Ms. Elizabeth D. Whitaker Mr. James A. Cox, Jr. 6 General Counsel: 7 Ms. Kimberly L. Kiplin 8 Executive Director: Ms. Linda Cloud 9 Charitable Bingo Operations Director: 10 Mr. Billy Atkins 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 INDEX 2 3 Appearances...................................... 2 4 AGENDA ITEMS 5 Item Number 1.................................... 4 6 Item Number 2.................................... 4 Item Number 3.................................... 6 7 Item Number 4.................................... 18 Item Number 5.................................... // 8 Item Number 6.................................... // Item Number 7.................................... // 9 Item Number 8.................................... 38 Item Number 9.................................... 41 10 Item Number 10................................... 57 Item Number 11................................... 59 11 Item Number 12................................... 63 Item Number 13................................... 73 12 Item Number 14................................... 99 Item Number 15................................... 100 13 Item Number 16................................... 94 Item Number 17................................... 74 14 Item Number 18................................... 92 Item Number 19................................... 100 15 Item Number 20................................... 101 16 Reporter's Certificate........................... 102 17 18 19 20 21 22 23 24 25 4 1 JUNE 10, 2002 2 CHAIRMAN CLOWE: Good morning. It is 08:28 3 8:30 a.m., June the 10th of 2002. I would like to 08:28 4 call this meeting of the Texas Lottery Commission to 08:28 5 order. 08:28 6 Commissioner Whitaker is here. My name 08:28 7 is Tom Clowe. Commissioner Jim Cox is appointed and 08:28 8 sworn and is a Texas Lottery Commissioner. He is 08:28 9 absent today. We have a quorum present, so we'll go 08:28 10 forward with conducting the business of the 08:28 11 Commission. 08:28 12 We have the agenda laid out. Are there 08:28 13 any individuals who are here who want to speak on 08:28 14 behalf of any issue to the Commission or any item on 08:28 15 the agenda? 08:28 16 Seeing no one, we'll go forward with 08:29 17 item two, report, possible discussion and/or action on 08:29 18 lottery sales and trends. Linda Cloud and Toni Smith. 08:29 19 Good morning. 08:29 20 MS. SMITH: Good morning, 08:29 21 Commissioners. For the record, my name is Toni Smith, 08:29 22 and I'm the marketing director of the Texas Lottery 08:29 23 Commission. To give you a brief review of sales, 08:29 24 year-to-date sales for week ending June the 8th, 2002, 08:29 25 are $2,254,321,579. This is down only .11 percent 08:29 5 1 from fiscal year '01 total sales to date of 08:29 2 $2,256,886,053. 08:29 3 To just take a brief look at sales by 08:29 4 product, to look at instant tickets compared to fiscal 08:29 5 year '02 to '01, we are 60 -- representing 66 percent 08:29 6 of sales and have a ten percent increase over last 08:29 7 year. 08:30 8 Lotto Texas currently represents 18.9 08:30 9 percent of sales and is down 27.59 percent. Whereas, 08:30 10 we do have a jackpot, we're at 32 million, so 08:30 11 hopefully this is our roll and we're going to make 08:30 12 up -- Linda doesn't want me to jinx it. 08:30 13 MS. CLOUD: Don't jinx it. 08:30 14 MS. SMITH: And just to look, comparing 08:30 15 last week to the previous week, weekly sales for week 08:30 16 ending June 8th, 2002, were $61,288,895. This is up 08:30 17 15.17 percent from the previous week. So last week 08:30 18 was a really good week. The two biggest increases 08:30 19 were in instant tickets; instants were up 12 percent, 08:30 20 which was like 4.1 million; and Lotto Texas was up 08:30 21 34.73 million at -- I'm sorry. 34.73 percent, up 3.6 08:30 22 million. So we had a really good week last week, both 08:30 23 on on-line and instant. 08:31 24 CHAIRMAN CLOWE: You're going to have a 08:31 25 good week this week, too. 08:31 6 1 MS. SMITH: Yes, we are, sir. 08:31 2 CHAIRMAN CLOWE: Anything further, 08:31 3 Linda? 08:31 4 MS. CLOUD: No, sir, I have nothing to 08:31 5 add. 08:31 6 CHAIRMAN CLOWE: Thank you, Toni. Do 08:31 7 you have anything further to add on the next item, the 08:31 8 Lottery advertising and promotions and advertising 08:31 9 procurement? 08:31 10 MS. SMITH: Well, we had mentioned in 08:31 11 the last meeting to try to do some more support for 08:31 12 our Texas Two Step game, and today we start some TV 08:31 13 and radio advertising. And then also in your binders 08:31 14 is some information relative to how our advertising 08:31 15 agencies gauge the effectiveness of our advertising, 08:31 16 and in the last meeting, Chair Clowe, you had asked 08:31 17 for some information, and I have shared that same 08:31 18 information with the Sunset Commission. But it sort 08:31 19 of gives you a picture of the type of reporting that 08:31 20 we receive from both agencies with regard to 08:31 21 advertising. 08:31 22 CHAIRMAN CLOWE: I really appreciated 08:31 23 that. And is Robert prepared to talk to us about that 08:31 24 or is that your subject? 08:32 25 MS. SMITH: Actually, that's Brenda 08:32 7 1 Flores, our advertising manager. And then we also 08:32 2 have with us two representatives from Fogarty Klein 08:32 3 who can maybe explain the reports even better than we 08:32 4 can. 08:32 5 CHAIRMAN CLOWE: I have some questions. 08:32 6 MS. SMITH: Kyle, would you join me? 08:32 7 MR. ALLEN: Good morning. For the 08:32 8 record, my name is Kyle Allen. I'm vice-president and 08:32 9 group media director of Fogarty Klein Monroe. 08:32 10 CHAIRMAN CLOWE: Good morning. Thank 08:32 11 you for being here. Do you have anything further that 08:32 12 you would like to tell us in addition to this material 08:32 13 that came in our book? 08:32 14 Would you like to see the material that 08:32 15 came in our book? 08:32 16 MR. ALLEN: That will help. 08:32 17 I guess the only thing I would add here 08:32 18 is that this is a pretty standard way in terms of 08:33 19 measuring how advertising is distributed across 08:33 20 different markets and as it relates to sales. So 08:33 21 looking at which markets are perhaps more or under 08:33 22 developed than others here. 08:33 23 CHAIRMAN CLOWE: The question that came 08:33 24 to my mind in reviewing this material is, how can you 08:33 25 predict the results that will occur from increases or 08:33 8 1 decreases of the media expenditures, if at all? 08:33 2 MR. ALLEN: Right. It's very difficult 08:33 3 to predict that. We say that this is an ROI report 08:33 4 and that may be somewhat of a misnomer, because 08:33 5 advertising is not directly linked to all of the 08:33 6 sales. I mean, there are other in-store promotions, 08:33 7 introduction of new games that would influence sales. 08:33 8 There are many variables in the marketing mix that 08:33 9 will impact sales. So in terms of establishing a 08:33 10 causal relationship between advertising and sales, 08:34 11 that's difficult to do. And that's not necessarily 08:34 12 unique to the Texas lottery, that's pervasive among 08:34 13 most businesses that do advertise. 08:34 14 CHAIRMAN CLOWE: Well, the question 08:34 15 that often comes to the Commission at various levels 08:34 16 from the leadership in the legislature is, why do you 08:34 17 advertise, and what is the benefit of your advertising 08:34 18 dollar? And if you were asked that question, how 08:34 19 would you respond to that? 08:34 20 MR. ALLEN: There are many benefits and 08:34 21 reasons why advertisers would advertise. Not all of 08:34 22 these would be endemic to the Texas Lottery, but some 08:34 23 specific reasons would be to maintain sales, to 08:34 24 maintain an awareness within the general population. 08:34 25 There are certainly well-known advertisers -- to give 08:34 9 1 you a good example would be Coca-Cola. Well known, 08:34 2 high penetration, why would they continue to 08:34 3 advertise? Well, it's to continue to maintain their 08:35 4 market share. So there are reasons why you want to 08:35 5 continue to advertise, to maintain what you've got, in 08:35 6 addition to launching and introducing new games and 08:35 7 new products is important as well. 08:35 8 CHAIRMAN CLOWE: I agree with that, and 08:35 9 it's my personal opinion that advertising increases 08:35 10 sales. I wish there were some way to be more 08:35 11 definitive because the advertising budget of this 08:35 12 agency is under constant scrutiny. 08:35 13 MR. ALLEN: Right. 08:35 14 CHAIRMAN CLOWE: And I wish you would 08:35 15 keep in mind that particular need that this agency 08:35 16 has, during the time that you're our vendor, and help 08:35 17 us to do the best job we can in answering that 08:35 18 question. I think it's going to come up in our Sunset 08:35 19 review and probably in the next session of the 08:35 20 legislature as well. 08:35 21 MR. ALLEN: There are other measures 08:35 22 such as awareness of the advertising that I believe is 08:35 23 a continuous tracking study that happens over time. 08:35 24 So there are other means to identify the value of the 08:36 25 advertising. 08:36 10 1 CHAIRMAN CLOWE: Okay. Then, as I 08:36 2 looked through this, I came to the section on minority 08:36 3 markets only section. And since you, I guess, are 08:36 4 seeing this for the first time, Toni, you may need to 08:36 5 help him a little bit. Help me understand how you 08:36 6 identify those as minority markets only and what that 08:36 7 definition is. 08:36 8 MS. SMITH: Well, I can answer that 08:36 9 one, Commissioner. The contract that we have with The 08:36 10 King Group requires that they have the expertise in 08:36 11 Hispanic, Asian-American and African-American markets. 08:36 12 So their sole focus is to reach those three markets. 08:36 13 So the stations that they advertise with, whether it's 08:36 14 TV or radio or print in the newspapers, are all geared 08:36 15 to publications or stations whose formats are geared 08:37 16 to the listeners or readership of those particular 08:37 17 markets. So that they give us the same reports 08:37 18 that -- both agencies, Fogarty and The King Group, are 08:37 19 required by contract to supply these reports, and they 08:37 20 are specific to the markets, where the Fogarty gears 08:37 21 towards the general market. 08:37 22 MS. CLOUD: But Fogarty also has a 08:37 23 good-faith effort to reach minority markets in their 08:37 24 contract. 08:37 25 CHAIRMAN CLOWE: And what do we think 08:37 11 1 is the validity of this analysis? What percentage or 08:37 2 feeling of accuracy do we have about this? 08:37 3 MR. ALLEN: Is it -- can you be 08:37 4 specific as to which page and I can address it? 08:37 5 CHAIRMAN CLOWE: No. Just overall. 08:37 6 MS. SMITH: Just overall. 08:37 7 MR. ALLEN: I guess, overall, there are 08:38 8 various reports in here. One report that you may be 08:38 9 referencing would be the post-buy analysis report. 08:38 10 CHAIRMAN CLOWE: Yeah. 08:38 11 MR. ALLEN: Okay. Basically, the 08:38 12 post-buy analysis relates to television advertising. 08:38 13 And it is an estimate of the amount of communication 08:38 14 which is planned and purchased, and then evaluation on 08:38 15 a post basis of how much was actually received. And 08:38 16 in terms of the accuracy of -- it's very accurate. 08:38 17 Without getting into too much detail, Nielsen, which 08:38 18 you've probably heard of, which is the ratings 08:38 19 provider, provides the agencies and the buyers with 08:38 20 the estimated amount of communication, and then once a 08:38 21 schedule is run, they provide us with the 08:38 22 post-analysis on how much communication was delivered. 08:38 23 CHAIRMAN CLOWE: And on the indexing -- 08:38 24 these pages aren't numbered, so I'm sorry, I can't 08:38 25 refer you to it. 08:38 12 1 MR. ALLEN: That's okay. 08:38 2 CHAIRMAN CLOWE: But under the page 08:39 3 titled, Texas Lottery, general media, then it's 08:39 4 Fogarty Monroe across the top, the average index on a 08:39 5 statewide average is 98. And I believe between 90 and 08:39 6 110 is where you want to be. 08:39 7 MR. ALLEN: Correct. 08:39 8 CHAIRMAN CLOWE: That's a good return. 08:39 9 Is that right? 08:39 10 MR. ALLEN: Yes, sir. That is correct. 08:39 11 CHAIRMAN CLOWE: So we're pretty close 08:39 12 to the midpoint on a good return for our advertising 08:39 13 dollar. 08:39 14 MR. ALLEN: That's correct. 08:39 15 CHAIRMAN CLOWE: According to industry 08:39 16 standards, the way you're currently measuring our 08:39 17 results. 08:39 18 MR. ALLEN: You are correct, yes. 08:39 19 Yeah. Generally, the acceptable range is between 90 08:39 20 to 110. 08:39 21 CHAIRMAN CLOWE: How can we get up to 08:39 22 110. 08:39 23 MR. ALLEN: Well, actually, you really 08:39 24 don't want a 110. And the reason why is that those 08:39 25 are dollars that could be used more effectively 08:39 13 1 elsewhere, if you're necessarily over delivering. So 08:39 2 our absolute goal would be 100 percent, and since 08:39 3 we're two basis points off, that's pretty good. 08:39 4 CHAIRMAN CLOWE: That's pretty good. 08:40 5 Well, I think the two things that we want to focus on 08:40 6 here are designing the games that are attractive to 08:40 7 players, having a good product. If Coca-Cola didn't 08:40 8 taste good, people wouldn't buy it, no matter how much 08:40 9 they advertised. 08:40 10 MR. ALLEN: Absolutely. 11 CHAIRMAN CLOWE: And Linda and Robert, 08:40 12 the staff, and our vendors with working constantly on 08:40 13 that. Then assuming we have a good product, we want 08:40 14 to advertise it in an even-handed, judicious manner 08:40 15 and let the players know that it's out there. And 08:40 16 that way we'll give the State what I think our mandate 08:40 17 is, insofar as player interest. But I think it's 08:40 18 incumbent on us to see how we're doing and I like this 08:40 19 kind of analysis. And I appreciate, Toni, it being 08:40 20 brought to the Commissioners' attention. I would like 08:40 21 for us to look at this from time to time so we can 08:40 22 judge our results. 08:41 23 MS. SMITH: We'll do that. 08:41 24 MR. ALLEN: These are ongoing analyses 08:41 25 that we do on behalf of the State, across all markets 08:41 14 1 and several times throughout the year. So we'll 08:41 2 continue to keep the reporting coming. 08:41 3 CHAIRMAN CLOWE: Okay. Good. 08:41 4 COMMISSIONER WHITAKER: Have you done a 08:41 5 time line analysis, a statistical analysis where, as 08:41 6 the advertising dollars rise or rise or fall, can you 08:41 7 correlate it to these measures? 08:41 8 MS. SMITH: Liz Jambor in the marketing 08:41 9 department, she's our marketing resources manager, has 08:41 10 done a paper like that. And if we -- she's going 08:41 11 to -- she's on the agenda. We can ask her that 08:41 12 question, and if it's not current, we can update it 08:41 13 for you. 08:41 14 COMMISSIONER WHITAKER: How often does 08:41 15 she try to do that? 08:41 16 MS. SMITH: We would have to ask her. 08:41 17 COMMISSIONER WHITAKER: Do you know, 08:41 18 Mr. Fogarty & Klein? 08:41 19 MS. SMITH: Once a year. 08:41 20 COMMISSIONER WHITAKER: Is that 08:41 21 standard to do that? 08:41 22 MS. SMITH: That's an in-house report 08:41 23 that we -- for the same reasons you would want to 08:41 24 know, to see if there is any correlation. And then 08:41 25 also, as Kyle mentioned, in our other tracking 08:42 15 1 studying we've done, winner awareness, focus groups, 08:42 2 where we bring players in and ask them questions about 08:42 3 their recall of different spots that they've seen to 08:42 4 see what sticks in the minds of our players. 08:42 5 COMMISSIONER WHITAKER: I mean, I guess 08:42 6 the question is, how much advertising is enough, too 08:42 7 much, not enough. I mean, how do you in the field 08:42 8 answer those questions? 08:42 9 MR. ALLEN: Well, we go through a 08:42 10 different analysis when we begin our planning each 08:42 11 year, and we work very closely with both the on-line 08:42 12 and the instant group to understand the marketing 08:42 13 objectives, and really work out from there. I will 08:42 14 give you an example. There are different analyses 08:42 15 that we'll do in terms of setting communication goals, 08:42 16 so we want to understand how much communication do we 08:42 17 think is needed to deliver the message that needs to 08:42 18 be in the field. And I don't have that with me today, 08:42 19 but I can give you an example of that, of how we set 08:42 20 those. And, basically, what we'll do is look at about 08:42 21 three different broad factors: Marketing factors, is 08:42 22 this a new product, and existing product, is it a new 08:42 23 campaign, an existing campaign. We look at different 08:42 24 creative issues. Are we looking at 30-second, 08:43 25 15-second units, and again, is it a new campaign. 08:43 16 1 We'll also look at media factors as well. The 08:43 2 relative benefits and disadvantages of different 08:43 3 media, whether it's radio or TV, and we come out with 08:43 4 a grid that we -- and it's somewhat subjective, but it 08:43 5 gives you a framework to work from in terms of setting 08:43 6 how much communication is necessary over what period 08:43 7 of time. 08:43 8 COMMISSIONER WHITAKER: So you will 08:43 9 then go to the marketing department and say, okay, 08:43 10 ideally, we really want five million dollars more of 08:43 11 advertising. 08:43 12 MR. ALLEN: It may cost this to 13 accomplish our objectives. 08:43 14 COMMISSIONER WHITAKER: And this is how 08:43 15 much we want you to have, or allocate to advertising. 08:43 16 MR. ALLEN: Right. Or if budget is 17 supplied to us, then we'll work within that framework 08:43 18 to understand what is the best plan to fulfill the 08:43 19 objectives. 08:43 20 MS. SMITH: Which is more the case. 08:43 21 You know, we know what our advertising budget -- or we 08:43 22 propose the budget to be, and then we meet with the 08:43 23 agencies, and then Kyle's group helps determine how 08:43 24 those dollars are spent on media. And then we also 08:43 25 have to allocate dollars for the production of those 08:44 17 1 spots, too. 08:44 2 COMMISSIONER WHITAKER: So you never go 08:44 3 to Toni and say, you know, I know you've budgeted X, 08:44 4 but, boy, if we could get X plus, we could really -- 08:44 5 MR. ALLEN: Well, there are a couple of 08:44 6 ways to go. That's the task-based method. Sometimes 08:44 7 we can do that, times we can't. Other times, and in 08:44 8 most cases, it's, here is the advertising budget. 08:44 9 Here is the working media budget in terms of planning. 08:44 10 And then we look at various factors. Geography is 08:44 11 obviously a very important factor across the state. 08:44 12 The seasonality of the business is an important 08:44 13 consideration. Again, the communication goals that 08:44 14 we've set. Are we launching a new campaign, is this 08:44 15 an existing campaign, is the campaign detailed in 08:44 16 nature. Does it need more repetition, or is it a very 08:44 17 simple message. So all of these different factors 08:44 18 come into play when setting the communication goals, 08:44 19 and that obviously will impact what amount of budget 08:44 20 is needed to fulfill that. 08:44 21 CHAIRMAN CLOWE: I'm hearing a number 08:44 22 of nice, positive comments about our advertising. And 08:45 23 I want you to know that the reaction that I get from 08:45 24 players and people I contact is very positive. And I 08:45 25 think your work, particularly in the last six to nine 08:45 18 1 months, has been outstanding and -- 08:45 2 MR. ALLEN: Thank you. 08:45 3 CHAIRMAN CLOWE: -- the use of winners 08:45 4 has been a good subject. Texans like to look at 08:45 5 Texans. Great. Thank you very much. 08:45 6 Anything further, Toni? 08:45 7 MS. SMITH: No, sir. 08:45 8 CHAIRMAN CLOWE: We're ready to move on 08:45 9 to item number five, report, possible discussion -- 08:45 10 well, let's see. Toni, do you have anything on the 08:45 11 Lottery marketing research? Anything further? 08:45 12 MS. SMITH: Actually, Liz Jambor is 08:45 13 going to do a presentation. 08:46 14 CHAIRMAN CLOWE: Great. I'm sorry, I 08:46 15 almost skipped over that. Let's ask her to come up. 08:46 16 MS. JAMBOR: Good morning. I guess 08:46 17 that's a good way to start. For the record, my name 08:46 18 is Liz Jambor. I'm the marketing resources manager 08:46 19 for the Texas Lottery. 08:46 20 CHAIRMAN CLOWE: Could you get that 08:46 21 microphone a little closer to you? You have a very 08:46 22 soft voice. Thank you. 08:46 23 MS. JAMBOR: That's not the way my 08:46 24 child puts it. 08:46 25 This morning, I would like to provide a 08:46 19 1 report on the market research update, covering various 08:46 2 topics of the data that we collect within marketing. 08:46 3 I would like to start with some basic demographics of 08:46 4 the players. Over the past year, we have not seen a 08:46 5 dramatic shift in the percentage of males and females 08:46 6 that participate in lottery games. Early in the 08:47 7 history of the lottery, we had a significantly higher 08:47 8 number of males playing. However, over the past few 08:47 9 years, we've seen that that gender gap, as it was 08:47 10 called back then, has decreased, and basically we have 08:47 11 a 50/50 split between males and females when it comes 08:47 12 to lottery players. 08:47 13 The age group of lottery players, 08:47 14 again, has not shifted dramatically in the past year. 08:47 15 The majority of our players come from the 25 to 44 08:47 16 year age brackets. And this, like I said, we've seen 08:47 17 consistently throughout the history of the Lottery. 08:47 18 Household income levels also have not 08:47 19 shifted dramatically over the past year. Commissioner 08:47 20 Cox did comment on this particular slide, noting that 08:47 21 there was a change between the less than 25,000 dollar 08:47 22 income bracket from a 21 percent in '01 to a 24 08:48 23 percent in '02, and his comment was related in that 08:48 24 that was a 15 percent increase. However, when you 08:48 25 look at the actual raw data, the numbers are fairly 08:48 20 1 similar. In the number of respondents out of 08:48 2 12,000 -- I'm sorry -- 1200 that are asked for each 08:48 3 year. Each year has a sample size of 1200, and when 08:48 4 you look at the numbers that responded in the 25,000 08:48 5 and below income bracket, they're relatively the same 08:48 6 in both years. 08:48 7 Another point to make in this is, any 08:48 8 time you do survey data that requires some type of 08:48 9 statistical analysis, you're going to have some type 08:48 10 of error variance, and for our population size, that's 08:48 11 about a 2.5 to 2.8 percent error variance. Meaning 08:48 12 that a 21 percent could be anywhere from 17 to 24. So 08:49 13 essentially, they could be the exact same numbers. So 08:49 14 although there is a change in the numbers overall, the 08:49 15 income levels are fairly stable over these two years 08:49 16 and have not changed in a way that we would feel we 08:49 17 need to change our strategy towards our lottery 08:49 18 players. 08:49 19 Also, education has remained fairly 08:49 20 stable over the past two years. We have our greatest 08:49 21 participation from those players that have some 08:49 22 college, followed by a college degree. Again, 08:49 23 Commissioner Cox had a question related to this, 08:49 24 because of the increases and decreases that he saw 08:49 25 going across the percentages. But, again, this is 08:49 21 1 related to statistical variance, and if you looked at 08:49 2 the raw data, the numbers, the actual numbers of 08:49 3 respondents by education level have not changed that 08:50 4 dramatically. 08:50 5 The ethnicity of our players is very 08:50 6 reflective of our state ethnicity in that we don't 08:50 7 have a disproportionate play from any ethnic group. 08:50 8 For instance, if our player base was 50 percent 08:50 9 Hispanic, we would know that we had a disproportionate 08:50 10 play from Hispanics, because we know that our 08:50 11 population, our state population is not 50 percent 08:50 12 Hispanic. Again, the increase from '01 to '02 in 08:50 13 Hispanics, Commissioner Cox had noted that when you 08:50 14 look at those two percentages, that's about a 15 08:50 15 percent increase. And his question was related to, 08:50 16 have we seen a 15 percent increase in the Hispanic 08:50 17 population for the state of Texas. Well, as with 08:50 18 education and income, because the raw numbers, when 08:51 19 you compare them, show a little bit different picture 08:51 20 than the averages, the increase is actually in the raw 08:51 21 data, three percent, which does match the 08:51 22 Comptroller's estimate for Hispanic population for the 08:51 23 state of Texas. So again, it is fairly reflective of 08:51 24 the ethnic makeup of the state of Texas, showing we 08:51 25 don't have a disproportionate play from any one 08:51 22 1 particular group. 08:51 2 Now I would like to cover sales in 08:51 3 relation to game changes. Over the past couple of 08:51 4 years, we've made some different changes to our game 08:51 5 matrix, notably, Lotto Texas, and then also to the 08:51 6 game plan strategy for instant tickets. This slide 08:51 7 shows the sales over the three years of FY '00 through 08:51 8 FY '02. A lot of times line graphs aren't -- you 08:52 9 don't get to see the end product. However, you can 08:52 10 see that this -- oh, that's great. Thank you. 08:52 11 In the 39th full week of sales, which 08:52 12 ended 6-1-02, we're ahead of the past two previous 08:52 13 years. You can see that by the final red triangle on 08:52 14 the far right of the graph. The spikes in the green, 08:52 15 that one was our very high 85 million-dollar Lotto 08:52 16 Texas jackpot. But we have seen our sales for this 08:52 17 year slowly increasing over last year and definitely 08:52 18 up above '00. 08:52 19 This slide shows a comparison of Lotto 08:52 20 Texas sales with and without the matrix change. This 08:52 21 slide has the 52 weeks prior to the matrix change 08:52 22 superimposed over 52 weeks after the matrix change. 08:53 23 And, overall, you can see that with the matrix change, 08:53 24 which is the blue line, we've had several higher-level 08:53 25 jackpots in that 52-week period than we have had in 08:53 23 1 the 52-week period prior to the matrix change. That 08:53 2 52-week period post the matrix change, brought in 08:53 3 almost 150 million dollars more over that 52-week 08:53 4 period than the 52 weeks prior to that. So the -- in 08:53 5 simpler terms, the matrix change has increased Lotto 08:53 6 Texas sales, which it was designed to do. 08:53 7 Another way to look at it is to look at 08:53 8 the average jackpots and the average number of hits 08:53 9 for a fiscal year. The matrix change happened in July 08:53 10 of 2000, so that would be FY '00. Prior to that, 08:54 11 earlier in that year, and FY '99, we had several more 08:54 12 hits on our Lotto Texas jackpot, and our average 08:54 13 jackpots were much lower. In '01 and '02 we've had 08:54 14 fewer hits on the jackpot, it's been able to roll 08:54 15 more, and we've been able to have higher-level 08:54 16 jackpots through the 78th draw. I'm hoping that by 08:54 17 the end of August that changes and we have a higher 08:54 18 average jackpot for this year. 08:54 19 Another change that was made was on the 08:54 20 instant ticket game plan, providing more tickets to 08:54 21 retailers, which then in a sense provides more tickets 08:54 22 to players. This graph shows at the point -- and I'm 08:54 23 sorry that that's not as clear on the screen as it 08:54 24 needs to be. But at the point where -- if I had a 08:54 25 pointer -- at the point where the two lines start to 08:55 24 1 diverge is when the instant ticket game plan changed 08:55 2 and when the new changes went into effect. The yellow 08:55 3 line, as it slopes downward, is a trend analysis that 4 shows, had we not made these changes, instant tickets 08:55 5 would be closer to 30 million dollars a week, rather 08:55 6 than reaching the 35, 38 and 40 million dollars a week 08:55 7 that we've seen this year. 08:55 8 Also, one of the things that we 08:55 9 typically experience with instant games is a decline 08:55 10 as we're approaching summer. This year, we were able 08:55 11 to postpone that decline by about four weeks. So it 08:55 12 meant that our sales were up for -- at least four 08:55 13 weeks longer than our typical, what we call our summer 08:55 14 decline. Even with the decline, and you can -- and 08:55 15 had we had this week on here, you would see that spike 08:55 16 back up nicely, but even though we have seen a little 08:55 17 bit of a decline in these first few weeks of late 08:56 18 spring, early summer here, our weekly sales are still 08:56 19 higher than they were last year. So, again, evidence 08:56 20 that this game plan change is working. 08:56 21 Next I would like to share with you 08:56 22 some of the players' reported spending and some of 08:56 23 their -- what they see as reasons for their spending. 08:56 24 I want to emphasize reported spending. One of the 08:56 25 things we do is ask people to remember what their 08:56 25 1 spending was a month ago, a year ago, and so it's not 08:56 2 as -- it's not as accurate as sales tracking, but it 08:56 3 does give us an indication of what players are 08:56 4 thinking. 08:56 5 One of the two ways that we look at 08:56 6 players is as core players and as past year players. 08:56 7 Core players are those players that have played in the 08:56 8 past four weeks. These are our very consistent, very 08:56 9 loyal players. You won't see their numbers changing 08:57 10 that much. They're not as dramatically affected by a 08:57 11 Lotto Texas jackpot as a past-year player. They may 08:57 12 put down a little bit more money as the jackpot grows, 08:57 13 but they don't leave the game once it gets hit. 08:57 14 Past year players are those that have 08:57 15 played at least once in the past year. This group, 08:57 16 you are going to see affected by Lotto Texas jackpots. 08:57 17 Had we asked this -- and we did. I just wanted to 08:57 18 give you '02 so I don't give you too much data here. 08:57 19 But had we asked this question of past year players 08:57 20 last April, April 2001 or May 2001, we would have seen 08:57 21 past year players in the 70 to 80 percent playing in 08:57 22 the past year, because they played at that high-level 08:57 23 Lotto Texas jackpot last year. But overall, what we 08:57 24 see, regardless of whether they're a core player or a 08:57 25 past year player, is that Lotto Texas and scratch-offs 08:57 26 1 are the most popular games. That's supported by the 08:58 2 sales, since the majority of our sales come from those 08:58 3 two games, and it's supported by the players in 08:58 4 reporting that that's what they're playing. 08:58 5 We've asked -- we asked past-year 08:58 6 players, since their play fluctuates more, are they 08:58 7 spending less, more, or the same on Lotto Texas. And 08:58 8 we see in -- again, this slide would demonstrate the 08:58 9 impact of that Lotto Texas jackpot of last year, that 08:58 10 we have -- we have more of them saying, I'm playing 08:58 11 less in this year, and fewer of them saying, I'm 08:58 12 playing more in this year. But again, the numbers are 08:58 13 fairly similar. The group is fairly stable over the 08:58 14 past few years -- I'm sorry -- over the past two 08:58 15 years. 08:58 16 For those that reported that they were 08:58 17 spending less on Lotto Texas, we asked them the 08:58 18 reasons why. And, basically, we -- when asking these, 08:58 19 we don't give them the responses and let them pick 08:59 20 which one; we take whatever their response is. Last 08:59 21 year, the top answer was, poor odds, was the number 08:59 22 one reason for spending less. More than likely this 08:59 23 was a reflection of some of the feelings of the matrix 08:59 24 change, because we -- we've noticed in '02 a 08:59 25 significant decline in the percentage that's now 08:59 27 1 reporting poor odds. Nobody winning, not winning, 08:59 2 that's a fairly stable percentage across the two 08:59 3 years. Interestingly enough, in '02, lack of money 08:59 4 and financial reasons has crept up into the top four, 08:59 5 probably a reflection of some of the events that have 08:59 6 happened in the past 12 months. 08:59 7 Again, as with Lotto Texas, we asked 08:59 8 the same type of spending on instant games. We see 08:59 9 that there is a -- a slight increase on those spending 08:59 10 less and a slight decrease on those saying that 08:59 11 they're spending the same. Again, these are past year 09:00 12 players. They're not the consistent core players, and 09:00 13 that's why this would not match up with what instant 09:00 14 ticket sales are doing right now. But when we asked 09:00 15 these players that are spending less, why are they 09:00 16 spending less on instant games, the top reason, and 09:00 17 this is consistent since we've been asking this 09:00 18 question, is that they're not winning and nobody wins. 09:00 19 The -- the point to make about this is that because 09:00 20 they're so infrequent in their play, they don't -- 09:00 21 they don't spend enough time in the game to experience 09:00 22 that win. A lot of -- a lot of players in this group 09:00 23 that are the type that, for every dollar they spend 09:00 24 they want to win a dollar back, or I didn't win. Or 09:00 25 for every dollar they spend, they want to win two 09:00 28 1 dollars back or I didn't win. So that's -- not 09:00 2 winning and nobody wins is not a really surprising 09:00 3 answer. However, the lack of money and financial 09:00 4 reasons has crept up into the top four again, most 09:01 5 likely a reflection of current events, and matches 09:01 6 with what is going on with Lotto Texas. 09:01 7 Another question that we ask players 09:01 8 is, do they know where the money goes. Do they know 09:01 9 where Texas Lottery revenues go. When we asked them, 09:01 10 can you recall hearing, seeing, or reading anything 09:01 11 about how revenues from the Texas Lottery are used, 09:01 12 the majority of people have not heard, seen, or read 09:01 13 anything about how the revenues are used. And this is 09:01 14 a fairly consistent response since we've been asking 09:01 15 this question. 09:01 16 When we asked them, where do they think 09:01 17 the money does go, the top answer is education. 09:01 18 However, it's less than one-third of the people 09:01 19 responding do know that the money goes to education. 09:01 20 We still see general fund in there, politicians and 09:01 21 lottery pockets, road repair, and then -- I don't have 09:01 22 those pockets. But there would be things like 09:02 23 prisons, libraries, any type of governmental agency 09:02 24 they might think of that the money might be used for. 09:02 25 And then you've got, last year, a quarter, and this 09:02 29 1 year, about one-fifth of the people don't know. They 09:02 2 have no response for where the money goes. 09:02 3 In the process of the survey, we do 09:02 4 tell them where the money goes. It's important to us 09:02 5 to never let a player leave miseducated about the 09:02 6 Lottery. And so we let them know that as of September 09:02 7 of '97, the legislature dedicated the funds to the 09:02 8 Foundation School Fund, and then ask them how do they 09:02 9 feel about it. Knowing that the Lottery revenues go 09:02 10 toward education, how does this make you feel about 09:02 11 the Texas Lottery Commission. It's nice to see that 09:02 12 positive number of 43 percent and 44 percent across 09:02 13 the two years. Although we've got it almost 50 09:03 14 percent in this year that are saying it's no change, 09:03 15 at least they're not moving into the negative column 09:03 16 there. 09:03 17 We also asked them, knowing that the 09:03 18 Texas lottery revenues go toward education, how does 09:03 19 that make you feel about spending money on lottery 09:03 20 games. And, again, we've got a good number that feel 09:03 21 positive and a very small number that feel negative 09:03 22 about this. And this is also supported in focus 09:03 23 groups when players don't know where the money goes 09:03 24 and we tell them, they feel better about the dollar 09:03 25 that they just spent. 09:03 30 1 Financially, we asked players about a 09:03 2 corporate image. Regardless of how they feel about 09:03 3 winning or not winning, how they feel about the -- 09:03 4 where the revenues go, whether they're a past-year 09:03 5 player or a core player, we want to know overall what 09:03 6 type of image does the Texas Lottery bring to them. 09:03 7 When we ask them, the Texas lottery is operated fairly 09:03 8 and honestly, do they agree or disagree, we have the 09:04 9 majority, in this year hitting 80 percent, which is a 09:04 10 significant change over last year's 73 percent, that 09:04 11 agree that the Texas Lottery is operated fairly and 09:04 12 honestly. And this is a number that's been consistent 09:04 13 over the past four years, or it's been -- rather, it's 09:04 14 been on the increase over the past four years. So 09:04 15 regardless of whether they feel like they're winning 09:04 16 enough, they at least feel that the Lottery is being 09:04 17 operated fairly and honestly. 09:04 18 Do you have any questions for me? 09:04 19 COMMISSIONER WHITAKER: Just if you 09:04 20 could respond to the question that was raised before, 09:04 21 about advertising. 09:04 22 MS. JAMBOR: The -- I do a report about 09:04 23 once a year on the correlation between advertising and 09:04 24 sales, basically, adding the current year into that. 09:04 25 And it's -- it's an analysis that takes from the 09:04 31 1 beginning of the Lottery to present. Right now, that 09:05 2 correlation, it's a positive one in that, as 09:05 3 advertising increases, we see an increase in sales. 09:05 4 It's also significant. It's -- I don't really want to 09:05 5 quote a number. It's approximately 80 percent. It's 09:05 6 a .8 percent correlation, which when -- one is a 09:05 7 perfect correlation, and we're close to a .8 09:05 8 correlation, which is a positive one, and in most 09:05 9 analysis is a significant one. 09:05 10 Does that answer -- 09:05 11 COMMISSIONER WHITAKER: I have to think 09:05 12 hard about statistics every time I think about it. 09:05 13 MS. SMITH: And we can share the most 09:05 14 recent report with you and -- or if you want us to go 09:05 15 ahead and update it, we can do that, too. 09:05 16 COMMISSIONER WHITAKER: So it's 09:05 17 significant to what confidence level? 09:05 18 MS. JAMBOR: Well, all -- it's a 95 09:05 19 percent confidence level. 09:05 20 COMMISSIONER WHITAKER: Okay. 09:06 21 MS. JAMBOR: I would -- my analysis 09:06 22 wouldn't show it as significant if it didn't hit that 09:06 23 95. 09:06 24 CHAIRMAN CLOWE: Liz, how was this 09:06 25 group selected for the survey? 09:06 32 1 MS. JAMBOR: It's a random digit 09:06 2 dialing phone system selection. It -- basically, the 09:06 3 surveyors have the area code and the first three 09:06 4 digits of an area and will random digit dial until 09:06 5 they have someone answering the phone. The person 09:06 6 answering has to be at least 18 years old. If not, 09:06 7 they ask to speak to someone in the household who is 09:06 8 at least 18 years old. We feel pretty confident about 09:06 9 this type of system. The one down side is that we 09:06 10 don't reach people that don't have telephones. But we 09:06 11 do reach about -- I think the latest estimate was 92 09:06 12 percent of households have phones in the state of 09:07 13 Texas. 09:07 14 CHAIRMAN CLOWE: So this is a statewide 09:07 15 calling -- 09:07 16 MS. JAMBOR: Yes, it is. It's 09:07 17 statewide. 09:07 18 CHAIRMAN CLOWE: It is random 09:07 19 selection? 09:07 20 MS. JAMBOR: Yes, it is. 21 CHAIRMAN CLOWE: And how many people 09:07 22 were in this? 09:07 23 MS. JAMBOR: In this particular study, 09:07 24 for each of the years, there were 1200 responses. 09:07 25 CHAIRMAN CLOWE: And that's the reason 09:07 33 1 why some of the percentages didn't total? 09:07 2 MS. JAMBOR: Yeah, there is rounding 09:07 3 errors and on -- on a couple of the slides, I don't 09:07 4 think I put all of the responses, so there wouldn't 09:07 5 be -- it wouldn't reach a hundred percent. But there 09:07 6 are some rounding issues in some of that, but -- 09:07 7 uh-huh. 09:07 8 CHAIRMAN CLOWE: Have you always worked 09:07 9 at the Texas Lottery or have you had business 09:07 10 experience in this field in the private sector? 09:07 11 MS. JAMBOR: No, sir. Before coming to 09:07 12 the Texas Lottery, I worked for Texas Tech University. 09:07 13 I taught there. 09:07 14 CHAIRMAN CLOWE: My business experience 09:07 15 in surveying and trying to get customer results for 09:08 16 product leads me to believe these are excellent 09:08 17 results. Can you comment on that? 09:08 18 MS. JAMBOR: Can you define "excellent 09:08 19 results"? I mean, I'm happy with a response, you 09:08 20 know, so... 09:08 21 CHAIRMAN CLOWE: Well, that's right. 09:08 22 If you don't get a response, you can't evaluate -- 09:08 23 MS. JAMBOR: Exactly. 09:08 24 CHAIRMAN CLOWE: If you don't get a 09:08 25 valid result -- response, you can't get a valid 09:08 34 1 result. You know, to have the percentage of people 09:08 2 say they believe that the Lottery is fair and honest 09:08 3 and to have the results that you have shown us here 09:08 4 this morning, for a private sector company with a 09:08 5 product, a retail product, which this is, these 09:08 6 results, I never got anything like this when I was in 09:08 7 business. And I'm very pleased to see the support 09:08 8 that people who responded to this survey gave as a 09:08 9 result of their views about the operation of the 09:09 10 agency. Is this excellent result, in my mind, typical 09:09 11 of a governmental agency in your experience? Have you 09:09 12 run this kind of survey for other governmental 09:09 13 agencies? 09:09 14 MS. JAMBOR: No, I haven't. But I do 09:09 15 know in -- in the focus groups that I coordinate and 09:09 16 in this, people are very positive about the Lottery. 09:09 17 Sure, they would like to win more. We all would. But 09:09 18 they're very positive about what the Lottery does. 09:09 19 Once they learn about the money going towards 09:09 20 education, they're very positive about that. They're 09:09 21 glad that that's where the money is going and not 09:09 22 someplace else. When I first started with the 09:09 23 lottery, four years ago, we didn't have these numbers 09:09 24 really. We were in a time period when people were a 09:10 25 little leery of the Lottery. There were changes going 09:10 35 1 on they were unsure of. But over these past few 09:10 2 years, the Lottery really has worked to regain the 09:10 3 trust of Texas and to show itself to be a really 09:10 4 quality agency. And I think that's what is reflected 09:10 5 in the numbers. 09:10 6 And just to make the point, when we do 09:10 7 contact the household, they're not required to play 09:10 8 the Lottery to answer the questions. So that we do 09:10 9 get that response of people that are unfamiliar with 09:10 10 the games or are not in favor of the games or not in 09:10 11 favor of the agency. So this is a very random sample 09:10 12 of Texans, not a random sample of lottery players. 09:10 13 CHAIRMAN CLOWE: And what I have seen 09:10 14 leads me to believe that there are about a third of 09:10 15 people in the state who are not in favor of legalized 09:10 16 gambling who would go to the other side on the issue 09:11 17 of doing away with the Lottery. It's about 66, 34 09:11 18 percent. Is that a fair estimate? 09:11 19 MS. JAMBOR: I would agree with the -- 09:11 20 with your numbers, in saying that that 66 percent is 09:11 21 in favor of the Lottery through their participation. 09:11 22 I'm not sure that -- 09:11 23 CHAIRMAN CLOWE: They're the ones who 09:11 24 play. 09:11 25 MS. JAMBOR: They're the ones who play 36 1 and so, yes, they're showing a -- a definite support 09:11 2 of the Lottery because they do play. 09:11 3 CHAIRMAN CLOWE: That's a different 09:11 4 survey, I think, than yours. 09:11 5 MS. JAMBOR: I'm not sure if that 34 09:11 6 percent would want to do away with it or if they're 09:11 7 simply just not a participant. 09:11 8 MS. CLOUD: That's right. It's a 09:11 9 breakout of those that aren't playing. Based on our 09:11 10 studies on our paternalistic players, and we have them 09:11 11 categorized. They play when the jackpot gets high and 09:11 12 then you have some that don't play at all that are 09:11 13 totally against the Lottery, so you have a different 09:12 14 mix. 09:12 15 CHAIRMAN CLOWE: Maybe I 09:12 16 misinterpreted, but I seem to remember reading that 09:12 17 there was the question asked, are you in favor of the 09:12 18 Lottery or not, and there were about 34 percent who 09:12 19 said they were not. Is that an incorrect 09:12 20 interpretation? 09:12 21 MS. CLOUD: Commissioner, I don't 09:12 22 remember seeing that. That's not something I -- 09:12 23 CHAIRMAN CLOWE: That may have been an 09:12 24 assumption on my part that they were nonplayers, but 09:12 25 they were not against organized gambling or legalized 09:12 37 1 gambling in the state. 09:12 2 Liz, in your opinion from this work 09:12 3 that you've done for the Commission, and we thank you 09:12 4 for this excellent report, what can we do to make this 09:12 5 lottery better? 09:12 6 MS. JAMBOR: Wow. 09:12 7 CHAIRMAN CLOWE: Here is your chance. 09:12 8 MS. JAMBOR: Here is my chance. 09:12 9 Director for a day, huh? 09:12 10 In my humble opinion, I think if people 09:12 11 knew what we supported through the revenues, they 09:13 12 would -- they would feel a lot more positive about the 09:13 13 Lottery, whether they played or not. I don't know -- 09:13 14 I don't know if it would increase sales dramatically, 09:13 15 but I think, overall, Texas would be more proud of 09:13 16 having a lottery for what it does for this state. 09:13 17 CHAIRMAN CLOWE: That is the one 09:13 18 question that I get asked most frequently when people 09:13 19 know I serve the Lottery Commission. Where does the 09:13 20 money go. Very good. 09:13 21 MS. CLOUD: Commissioners, I would like 09:13 22 to remind you that we're very fortunate to have Liz. 09:13 23 She does have a Ph.D. in statistics. Isn't that 09:13 24 right, Liz? 25 Or she has a Ph.D., and she came from a 09:13 38 1 university where she was teaching statistics, and so 09:13 2 we feel like she's well qualified. In the past, we've 09:13 3 had a research contract. We still do have a research 09:14 4 contract we with Dixon Reed (phonetic). They used to 09:14 5 bring the reports to us on a quarterly basis and put 09:14 6 on a presentation. We took that part of their 09:14 7 contract away from them and gave them to Liz for her 09:14 8 to break out the reports and give us the information 09:14 9 versus having a vendor do that. And I'm very pleased 09:14 10 with the fact that we've been able to do that and 09:14 11 reduce the cost of the contract for research. 09:14 12 CHAIRMAN CLOWE: Doctor Jambor, we 09:14 13 thank you for your report. 09:14 14 MS. JAMBOR: You're welcome. 09:14 15 CHAIRMAN CLOWE: And we would like for 09:14 16 you to continue to keep the Commission up to date as 09:14 17 you updated us this morning. 09:14 18 MS. JAMBOR: Thank you. I will. 09:14 19 CHAIRMAN CLOWE: Thank you. 09:14 20 Thank you, Toni. I believe we do want 09:14 21 to pass over and not take up items five, six, and 09:14 22 seven. 09:14 23 MS. KIPLIN: That's correct. 09:14 24 CHAIRMAN CLOWE: And then go to item 09:14 25 eight, consideration of and possible discussion and/or 09:14 39 1 action, including adoption, on amendments, repeals, 09:15 2 and/or new rules and 16 TAC Chapter 401, Subchapter B, 09:15 3 licensing of sales agents. Gary Grief and Kim Kiplin. 09:15 4 MR. GRIEF: Good morning. 09:15 5 MS. KIPLIN: Commissioners, if you'll 09:15 6 recall, at an earlier commission meeting, you voted to 09:15 7 propose a rulemaking on subchapter B, licensing of 09:15 8 sales agents, for public comment. The adoption of 09:15 9 what was proposed is ripe for adoption today. And 09:15 10 what you had in your notebooks was that adoption of 09:15 11 the proposal. There are a couple of changes, and I 09:15 12 should say that the text was published in the May 09:15 13 10th, 2002 issue of the Register. We received no 09:15 14 public comment. The changes are actually the correct 09:15 15 and incorrect references to a rule provision in the 09:15 16 rule 401.160, and that's reflected in the preamble of 09:15 17 the rule. 09:16 18 I do have an order prepared for your 09:16 19 signature today if you do vote to adopt. I'll be glad 09:16 20 to answer any questions and I'm sure Mr. Grief would 09:16 21 also. 09:16 22 COMMISSIONER WHITAKER: I would just 09:16 23 like to have recommendation from staff on this. 09:16 24 MS. KIPLIN: The staff recommends that 09:16 25 you adopt the amendments, the repeals, and also the 09:16 40 1 new rules. A good bit of this, Commissioner Whitaker, 09:16 2 is a part of a required statutory rule review. But 09:16 3 there are also new policy, I guess, new initiatives 09:16 4 that are part of this rulemaking package, and one in 09:16 5 particular is a standard penalty charge, which the 09:16 6 staff believes will provide good guidance to its 09:16 7 licensees as well as to the staff that's administering 09:16 8 the penalty charge. And, frankly, it's my 09:16 9 understanding that it really just is putting in a rule 09:16 10 form the practice that the agency has utilized in the 09:16 11 past in dealing with violations of the State Lottery 09:16 12 Act and the State lottery rules in connection with the 09:16 13 licensees and retailers. 09:17 14 COMMISSIONER WHITAKER: Mr. Grief, do 09:17 15 you want to add anything? 09:17 16 MR. GRIEF: I would concur with 09:17 17 everything that Ms. Kiplin has to say. We're very 09:17 18 excited about this change to our rules. We feel like 09:17 19 it will better inform our licensees of the potential 09:17 20 violations that are out there and penalties that would 09:17 21 come with those violations. We have been working with 09:17 22 legal staff over the past 18 months to put this 09:17 23 document together, and I would heartily recommend that 09:17 24 the Commission see fit to pass it through. 09:17 25 COMMISSIONER WHITAKER: Then I'll so 09:17 41 1 move. 09:17 2 CHAIRMAN CLOWE: Second. All in favor 09:17 3 please say aye. Opposed, no. 09:17 4 The vote is approved, two zero. Thank 09:17 5 you, sir. 09:17 6 We are now ready to go to item number 09:17 7 nine, consideration of and possible discussion and/or 09:17 8 action, including adoption, of repeal of 16 TAC 09:17 9 402.544, relating to instant bingo, and/or new rule 09:17 10 16 TAC 402.544, relating to pull-tab bingo. 09:18 11 Billy Atkins, do you want to make 09:18 12 comments on this? We have individuals who wish to 09:18 13 make comments to the Commission, and before I call on 09:18 14 them. 09:18 15 MR. ATKINS: If I could, Commissioners, 09:18 16 briefly make some comments, and then I believe 09:18 17 Ms. Kiplin has some comments, also. 09:18 18 Staff would recommend that the 09:18 19 Commission vote to repeal 16 TAC 402.554, relating to 09:18 20 instant bingo, and adopt new rule 16 TAC 402.554, 09:18 21 relating to pull-tab bingo. This rule was published 09:18 22 in the Texas Register on May 10th of this year. There 09:18 23 was a public hearing as well as written comment that 09:18 24 was received by the agency. That information -- those 09:18 25 comments were analyzed by staff, and they are 09:18 42 1 summarized and in the preamble in the draft you have. 09:18 2 One thing I would like to note. The 09:19 3 staff would intend to, in a manner similar to when 09:19 4 symbols were first authorized in pull-tab games, 09:19 5 contact manufacturers and establish a sort of schedule 09:19 6 for them to submit their -- these new type games for 09:19 7 review and approval, so that no one manufacturer, I 09:19 8 guess, would get a jump start on others, but to ensure 09:19 9 that all of the tickets were reviewed and at least the 09:19 10 initial batch was -- are authorized at the same time. 09:19 11 Additionally, I would like to point out 09:19 12 that there were a number of areas in which the staff 09:19 13 agreed with commenters on either their written or oral 09:19 14 comments. As a matter of fact, pages -- I think it's 09:19 15 11 through 16 -- contain alone some 59 items where the 09:19 16 two parties were able to come into an agreement. 09:20 17 I think the two areas where the staff 09:20 18 did not agree deal with comments received relating to 09:20 19 subsection (b)(3)(A), relating to the requirement that 09:20 20 the State seal be placed on instant bingo tickets, 09:20 21 pull-tab tickets. The staff believes that this is a 09:20 22 good regulatory tool for our staff in the field, also 09:20 23 a good indicator to our licensees and the public 09:20 24 itself that those tickets that they have have been 09:20 25 inspected and approved by the Commission. 09:20 43 1 Another area of disagreement deals with 09:20 2 subsection (b)(3)(G) and the type of art work that the 09:20 3 staff does not feel should be approved on pull-tab 09:20 4 tickets, specifically those such as giving the 09:20 5 appearances of alcoholic beverages, guns, obscene 09:20 6 language, et cetera. Again, by having the seal on the 09:21 7 ticket, it is a representation to the public that 09:21 8 those tickets have been inspected and meet a certain 09:21 9 minimum standard in terms of construction, packaging, 09:21 10 randomization, et cetera, and it could be seen as an 09:21 11 endorsement of that art work to have the seal on 09:21 12 there. 09:21 13 I would like to thank the members of 09:21 14 the public that we had the opportunity to work with 09:21 15 who commented both in writing and at the public 09:21 16 hearing, as well as the members of the Bingo Advisory 09:21 17 Committee, who also have had the opportunity to 09:21 18 comment on this rule. So having said that, unless you 09:21 19 have any questions for me, I would like to ask 09:21 20 Ms. Kiplin to note some additional minor corrections 09:21 21 that have been caught just this day. 09:21 22 MS. KIPLIN: The staff is recommending 09:22 23 that you do adopt the rule, and I'm talking about the 09:22 24 new rule, with changes, from that text which was 09:22 25 published for public comment, and we did receive 09:22 44 1 comment on. And those changes are in response to the 09:22 2 comment and they're throughout the rule. 09:22 3 In my opinion, the changes are not 09:22 4 the -- and the nature of the changes are not of the 09:22 5 nature of the changes that would, under the only 09:22 6 reported decision of which I'm aware, would require 09:22 7 republication for public comment. So I don't believe 09:22 8 that you need to republish to be able to incorporate 09:22 9 those changes. 09:22 10 I had an opportunity to talk with 09:22 11 Mr. Fenoglio, who I know is in the audience this 09:22 12 morning. And I appreciate him calling me to let me 09:22 13 know that there were some errors in what had been 09:22 14 provided to you all in terms of -- I think it's, you 09:22 15 know, just five or six of those. And I would like to 09:22 16 go ahead and put those on the record because it's 09:22 17 different from what had been provided to you. 09:22 18 The first change is on page 29 of the 09:22 19 order. And I'll be glad to give this to you because 09:23 20 I'm not sure -- I'm not sure that the text is the same 09:23 21 in terms of it, so -- 09:23 22 CHAIRMAN CLOWE: I don't need it. 09:23 23 MS. KIPLIN: You don't need it? Okay. 24 Commissioner Whitaker, would you like 09:23 25 it? 09:23 45 1 The first change is on page 29 of the 09:23 2 order. And it's the agency response portion where it 09:23 3 says, "staff of the Commission." It should say, "the 09:23 4 Commission disagrees," on page 29 of the order. And 09:23 5 the reason for that is that this is actually the 09:23 6 Commission's rule. While staff has obviously played 09:23 7 an integral role, as well as the bingo industry, when 09:23 8 you vote to adopt this, if you vote to adopt it, it's 09:23 9 your rule. And so the reasons that are set out herein 09:23 10 for disagreement or agreement, for that matter, or 09:23 11 just the reason for justification is actually the 09:23 12 Commission's. So that word "staff" has been changed 09:23 13 to "Commission." 09:23 14 The next changes is on page 40 of the 09:24 15 order. Page 40 of the order, and it's on number 09:24 16 eight, the definition of merchandise. The definition 09:24 17 of merchandise. There is a phrase there, "by a 09:24 18 licensed distributor" that is being deleted. It's 09:24 19 being deleted. And the purpose of that is that there 09:24 20 was comment that was provided during the time in which 09:24 21 we received comment that objected to the limitation 09:24 22 that had been written into the proposed text of 09:24 23 limiting where -- or the source from whom a licensed 09:24 24 authorized organization can get a noncash item to be 09:24 25 able to use as a prize. And the staff did agree with 09:24 46 1 the change to open that up a bit to where a licensed 09:24 2 authorized organization can get the noncash item from 09:24 3 a licensed distributor or other. And so that was just 09:24 4 a -- a change we didn't get picked up from what was 09:25 5 proposed in the text. 09:25 6 Now, I've also talked to Mr. Fenoglio 09:25 7 just very, very briefly this morning, because I read 09:25 8 this and I was concerned that it might be a bit broad 09:25 9 in terms of the type of noncash items. And I know 09:25 10 there has been an issue with regard to eight liners 09:25 11 and coupons, and it's my understanding that this 09:25 12 language is not intended by the industry to include 09:25 13 coupons that would be obtained as a result of playing 09:25 14 an eight liner in one of these locations. So that's 09:25 15 not part of it. 09:25 16 Page 43 is the next change. Page 43, 09:25 17 under (E). That would be (3)(E) on 43. The second 09:25 18 line, at the end, where it begins "that must not 09:25 19 exceed a dollar." That phrase is being removed 09:25 20 because the comment was to not limit the price of a 09:25 21 pull tab to a dollar. The reference, as I understand 09:25 22 it from the comment, is that that has to do with a 09:26 23 pull tab that is being dispensed by the pull-tab 09:26 24 dispenser where there is that limitation, and pull 09:26 25 tabs that are sold without the use of a pull-tab 09:26 47 1 dispenser, the comment we received indicated it ought 09:26 2 not to be capped at a dollar and let the market handle 09:26 3 that. And the staff did agree with that, and this was 09:26 4 just a phrase that did not get picked out during 09:26 5 the -- putting together this rule. 09:26 6 Page 47, (13)(A). Page 47, (13)(A). 09:26 7 Where it begins, "wheels must be able to spin four 09:26 8 times with reasonable effort." Comment was received 09:26 9 that, you know, four times is pretty precise. What if 09:26 10 it goes five times? Does that mean that that wheel is 09:26 11 not capable of being used? And so the phrase "at 09:26 12 least" has been included. So it would be, "wheels 09:26 13 must be able to spin at least four times." So if they 09:26 14 go an additional revolution, they won't cause the 09:27 15 device to be not used. 09:27 16 The next change is on page 48, (3). 09:27 17 Page 48, (3), where it reads, "licensed authorized 09:27 18 organization." Organization should be plural. So 09:27 19 it's just an S we missed. 09:27 20 And finally, the last change is page 09:27 21 49, (4). Page 49, (4). And that's -- yeah. Where it 09:27 22 reads "five dollars," it's a five comma zero zero, and 09:27 23 it should be a five decimal point zero zero. 09:27 24 And I appreciate Mr. Fenoglio calling 09:27 25 me and pointing those errors out. 09:27 48 1 So with that, I believe staff does 09:27 2 recommend adoption of this new rule with the changes 09:27 3 to the proposed text. This rule is ripe for your 09:27 4 consideration today for adoption. At least 30 days 09:27 5 has passed as of yesterday. I know that we'll be glad 09:28 6 to answer any comments and I know that there may be 09:28 7 people that wish to talk on this rule, so I would like 09:28 8 to add my standard admonishment, which is that if 09:28 9 people come before you today, Commissioners, and they 09:28 10 comment in a substantive way, then it will require us 09:28 11 to evaluate whether that's repetitive comment or new 09:28 12 comment, and then we actually would have to summarize 09:28 13 that and then respond to that comment. So it would 09:28 14 make it difficult for the staff to be in a position of 09:28 15 then recommending adoption today. 09:28 16 COMMISSIONER WHITAKER: Just one small 09:28 17 point on page nine. 09:28 18 MS. KIPLIN: Okay. 09:28 19 COMMISSIONER WHITAKER: "Without any 09:28 20 negative affect." It should be "effect on the 09:28 21 product." 09:28 22 MS. KIPLIN: Okay. Thank you. Page 09:28 23 nine. 09:28 24 COMMISSIONER WHITAKER: Shrink wrap... 09:28 25 It might be ten. 09:29 49 1 MS. KIPLIN: Agency response on 09:29 2 (d)(10)? 09:29 3 COMMISSIONER WHITAKER: It's on my 9, 09:29 4 but it might be on your 10. Let's see. 09:29 5 MS. KIPLIN: It has to do with -- 09:29 6 COMMISSION WHITAKER: It's the comment 09:29 7 part. I'll show it to you. 09:29 8 MS. KIPLIN: Okay. We'll make that 09:30 9 change on the order -- the order that you have is the 09:30 10 original order and we'll make that change. It's on 09:30 11 page eight, and the word ought to be e-f-f-e-c-t 09:30 12 instead of a-f-f-e-c-t. And that won't cause a 09:30 13 repagination issue on your order, so if you all are 09:30 14 okay with that, you can -- you know, if you vote to 09:30 15 adopt. It's obviously your decision. We can have you 09:30 16 sign it and we'll swap that page out with just that 09:30 17 change. 09:30 18 CHAIRMAN CLOWE: There are four 09:30 19 individuals who have indicated they want to address 09:30 20 the Commission on this item agenda. I'm going to call 09:30 21 on those individuals in the order that these 09:30 22 appearance forms were given to me. 09:30 23 The first is Mr. Steve Bresnen. 09:30 24 MR. BRESNEN: Thank you, Commissioners. 09:30 25 My name is Steve Bresnen. I'm here on behalf of the 09:30 50 1 Bingo Interest Group and I'm here to support the 09:30 2 adoption of this rule. Any comments that I might make 09:31 3 are intended to be repetitive. 09:31 4 I really, really appreciate the work 09:31 5 that Billy Atkins, Kim Kiplin, Terry Shankle, Phil 09:31 6 Sanderson, and the rest of the staff have done to get 09:31 7 this done. They've really done a lot of heavy lifting 09:31 8 in a very short time and we really appreciate it. A 09:31 9 lot of people participated in this: Manufacturers, 09:31 10 distributors, charities, lessors. To me it's a 09:31 11 perfect example of how we ought to be working 09:31 12 together, and I know we've got other issues to address 09:31 13 going forward and I hope that we'll engage the BAC in 09:31 14 doing that, all members of the industry. 09:31 15 I was concerned when we started that 09:31 16 some people might try to take advantage of the process 09:31 17 and get a leg up. I think this rule represents nobody 09:31 18 doing that. The one issue that we had great concern 09:31 19 about in that was whether you had to obtain the 09:31 20 merchandise from a licensed distributor. That's 09:32 21 been -- we commented, the staff was responsive to that 09:32 22 and I think you have a workable rule as a result of 09:32 23 that. 09:32 24 So the only other issue I would like to 09:32 25 address, tracking the things that we raised and the 09:32 51 1 changes that I am aware of, I see no Deffenbaugh issue 09:32 2 or nothing that would invoke the rule in Deffenbaugh 09:32 3 that this would need to be republished. I think 09:32 4 you're well within the parameters of the original rule 09:32 5 in terms of substance, and so I would like to see you 09:32 6 go forward and I think probably in another few months 09:32 7 we'll see some good, new and interesting products that 09:32 8 people in the industry can come and take advantage of 09:32 9 and their players will enjoy seeing them, I think. So 09:32 10 thank you very much for the opportunity to 09:32 11 participate. 09:32 12 CHAIRMAN CLOWE: Steve, in your 09:32 13 opinion, what is going to be the impact on the bingo 09:32 14 industry if the Commission adopts this rule? 09:32 15 MR. BRESNEN: I think it has the 09:32 16 potential to increase sales. I think people -- from 09:33 17 what I hear from my clients is that the product 09:33 18 offering out there is kind of stale. It's hard to get 09:33 19 any new, interesting things going. I think it's going 09:33 20 to be incumbent upon people in the industry, 09:33 21 manufacturers and distributors in particular, to get 09:33 22 out into these halls and work with the charities and 09:33 23 help them learn what these options that they're going 09:33 24 to have available are about. They have a financial 09:33 25 interest, the manufacturers and distributors, in doing 09:33 52 1 so, so I assume that -- I think they'll get out there 09:33 2 and want to show people what they can do. I think 09:33 3 that that will help increase sales. I think -- and I 09:33 4 hope I'm not overstating this, but I think you might 09:33 5 have the opportunity to improve your demographics. 09:33 6 Right now, the bingo player tends to be an older 09:33 7 player, and I think we've got to have other 09:33 8 generations of bingo players, and we've got to be able 09:33 9 to get down towards that end of the spectrum that your 09:34 10 marketing research showed that the Lottery Commission 09:34 11 is doing today. So I'm hoping some of these things, 09:34 12 new and innovative, will be able to draw some people 09:34 13 into the hall that may not have otherwise been in 09:34 14 there. But it's incumbent upon us to go use the tools 09:34 15 now that you're about to give us, I hope, and it's 09:34 16 also incumbent upon people at the hall level to demand 09:34 17 that the manufacturers and distributors work closely 09:34 18 with Billy to get this -- follow the schedule that he 09:34 19 is putting in place, which seems very reasonable to 09:34 20 me. And also, for them to get out into the halls and 09:34 21 show people how they can improve their business, and 09:34 22 we've already had some discussions with some 09:34 23 representatives of the industry in that regard, so I'm 09:34 24 very much looking forward to that. 09:34 25 CHAIRMAN CLOWE: Thank you. 53 1 MS. KIPLIN: Mr. Bresnen, do you think 09:34 2 the response that you gave Commissioner Clowe is new 09:34 3 comment or do you think that is already part of what 09:35 4 you or others have provided as comment? 09:35 5 MR. BRESNEN: I think it's -- I think 09:35 6 I'm being repetitive. I think it's consistent with 09:35 7 the purpose of the rule and the things that -- the 09:35 8 benefits that were described, I think, in published 09:35 9 version. So I am intending to be repetitive. 09:35 10 MS. KIPLIN: Great. 09:35 11 CHAIRMAN CLOWE: David Hineline. 09:35 12 MR. HINELINE: I have no comment. 09:35 13 CHAIRMAN CLOWE: Thank you, sir. 09:35 14 Philip Arnold. 09:35 15 MR. ARNOLD: No comment, thank you. 09:35 16 CHAIRMAN CLOWE: Thank you, sir. 17 Steve Fenoglio. Good morning. 09:35 18 MR. FENOGLIO: Good morning, 09:35 19 Commissioners. For the record, my name is Stephen 09:35 20 Fenoglio. I'm an attorney in Austin and represent 09:35 21 over 950 charitable and business organizations in 09:35 22 support of the rule. 09:35 23 We've got a great run going and we hope 09:35 24 to continue it. And by the way, in addition to the 09:35 25 kudos that Steve Bresnen identified, we also ought to 09:35 54 1 include Kim's staff who I understood burned some 09:35 2 midnight oil a couple of nights in processing all of 09:36 3 the comments and putting them in the final format. 09:36 4 I do not intend to offer any 09:36 5 substantive comments to what I've already submitted, 09:36 6 both orally and in writing. And the rule as 09:36 7 published, in my view, is consistent. If the 09:36 8 Commission chooses to adopt the rule, it would be 09:36 9 consistent with the Deffenbaugh case, the Austin Court 09:36 10 of Appeals case, and we look forward to the early 09:36 11 approval and new product for the bingo community. 09:36 12 In responses to one of your comments, 09:36 13 Chairman Clowe, about the impact on charities. 09:36 14 Charities will have to change the way -- and this is 09:36 15 consistent with our earlier testimony -- charities 09:36 16 will have to change the way they market the new 09:36 17 product. But we believe there will overall be a very 09:36 18 favorable economic impact on the charities' bottom 09:36 19 line and also on the State's tax coffers. 09:37 20 So I'll be happy to answer any 09:37 21 questions. We look forward to working with the staff 09:37 22 on other rules. 09:37 23 MS. KIPLIN: Commissioners, we do have 09:37 24 a repeal. It's probably more appropriate, in terms of 09:37 25 order, that you vote to -- 09:37 55 1 CHAIRMAN CLOWE: I'm not finished with 09:37 2 my questions. 09:37 3 MS. KIPLIN: Sorry. 09:37 4 CHAIRMAN CLOWE: I want to ask 09:37 5 Mr. Fenoglio an additional question, but before I do 09:37 6 that, I want to address it to you, Counselor, to see 09:37 7 if we're staying within the record. I don't want to 09:37 8 ask it if it's going to put us outside the record. 09:37 9 My question is, in Mr. Fenoglio's 09:37 10 opinion, what problems may the Commission have with 09:37 11 this rule in the future if it passes today upon 09:37 12 consideration? What is your best judgment on that? 09:37 13 MS. KIPLIN: I don't think we've had 09:37 14 any comment on the issue of, if it's passed, what is 09:37 15 the bad part of it. It may open the door to new 09:37 16 comment. I don't know. Mr. Fenoglio, you may have a 09:37 17 different view of that. But it depends on your 09:38 18 answer, of course. 09:38 19 MR. FENOGLIO: And it won't be. It's 09:38 20 something that we've talked about in public comment 09:38 21 about -- and Mr. Atkins has recognized that his staff, 09:38 22 there will be some additional staff time in processing 09:38 23 the submittals. But other than that -- and we don't 09:38 24 anticipate a legal challenge, which is always a 09:38 25 possibility, I guess. But those are the only two. 09:38 56 1 And that -- those have been the subject of the verbal 09:38 2 comments that I was at the May 31st hearing on. 09:38 3 MS. KIPLIN: And I would also say that 09:38 4 the issue with regard to the additional staff time has 09:38 5 been incorporated in the fiscal note. That was 09:38 6 published for public comment. 09:38 7 CHAIRMAN CLOWE: Now, do you want to 09:38 8 talk to us about the order? 09:38 9 MS. KIPLIN: Sure. I thought maybe you 09:38 10 were going to call for a vote. I apologize for 09:38 11 interrupting you. 09:38 12 It seems to me that you have the 09:39 13 existing rule that there was a proposal for repeal, 09:39 14 and that is also ripe for you to consider to adopt, 09:39 15 the repeal of the existing rule. And that would be 09:39 16 without changes. The only change, I guess, would be 09:39 17 not to repeal. We didn't receive any comment on that. 09:39 18 So I would request that you take that up first and 09:39 19 repeal the old rule, and then take up your 09:39 20 consideration of the new rule. Or you may want to 09:39 21 take them up together because they are hinged 09:39 22 together. And staff does recommend repealing the 09:39 23 existing rule. 09:39 24 COMMISSIONER WHITAKER: Well, I would 09:39 25 move for the repealing of the old rule and the 09:39 57 1 adoption of the new rule. 09:39 2 CHAIRMAN CLOWE: Second. All in favor 09:39 3 please say aye. Opposed, no. 09:39 4 The vote is approved two zero. 09:39 5 The next item is number ten, 09:39 6 consideration of and possible discussion and/or action 09:39 7 on the State Auditor's Office and/or Internal Audit 09:39 8 reports relating to the Texas Lottery Commission 09:39 9 and/or on the Internal Audit Department's activities. 09:40 10 Debra McLeod. Good morning, Debra. 09:40 11 MS. McLEOD: Good morning, 09:40 12 Commissioners. I would like to report that we're 09:40 13 still working with legal on four investigations. I 09:40 14 think we're making very good progress in these 09:40 15 investigations. Since the last commission meeting, 09:40 16 we've been through three interviews for the new audit 09:40 17 position. We have one interview left tomorrow. I 09:40 18 anticipate making a recommendation by the end of the 09:40 19 week. 09:40 20 We're working with both lottery and 09:40 21 bingo management in coming to a conclusion on the 09:40 22 bingo management control follow-up audit. I 09:40 23 anticipate resolution to that item shortly. 09:40 24 With response to the State Auditor's 09:40 25 Office, it's my understanding we've received verbal 09:40 58 1 comments by management on their findings and we 09:40 2 anticipate SAO will schedule an exit conference here 09:40 3 soon. So that's -- should be completed. I'm not 09:41 4 aware of any other audits except for our internal 09:41 5 financial year end audit, which I understand has 09:41 6 begun, and they've already made requests of management 09:41 7 for things. The only other audit that I am aware of 09:41 8 is taking place over at Gtech, with the (inaudible) 09:41 9 audit, and as usual, we receive that report about 09:41 10 August, September time frame. 09:41 11 CHAIRMAN CLOWE: Debra, how many 09:41 12 applicants did you have for the new audit position? 09:41 13 MS. McLEOD: I think about 12 or 13. 09:41 14 CHAIRMAN CLOWE: And was being a 09:41 15 certified CPA one of the requirements for that 09:41 16 position? 09:41 17 MS. McLEOD: No, it was not. It was -- 09:41 18 I don't know what I can say in the public. I guess it 09:41 19 was a preference or points were awarded for having a 09:41 20 CPA certification. 09:41 21 CHAIRMAN CLOWE: Do you feel like you 09:42 22 got a good group of applicants? 09:42 23 MS. McLEOD: Yes, sir, we did. I think 09:42 24 the economy, again, is indicative of what people are 09:42 25 going through in the state. So we had some very good 09:42 59 1 applicants with a lot of experience, which is what 09:42 2 we're looking for in this position. 09:42 3 CHAIRMAN CLOWE: Good. Thank you very 09:42 4 much. 09:42 5 MS. McLEOD: Thank you. 09:42 6 CHAIRMAN CLOWE: The next item, number 09:42 7 11, report, possible discussion and/or action on the 09:42 8 Sunset process involving the agency. Gary Grief. 09:42 9 MR. GRIEF: Good morning. Again, 09:42 10 Commissioners, for the record, my name is Gary Grief 09:42 11 and I'm the director of the Lottery Operations 09:42 12 Division for the Texas Lottery Commission, and I'm 09:42 13 also serving as the project manager for our Sunset 09:42 14 review process. 09:42 15 Other than the normal meetings and the 09:42 16 other types of communication that are occurring on a 09:42 17 regular basis between the Sunset Commission team 09:42 18 members and our agency staff, the only new information 09:42 19 I have to report to you today is that the field visit 09:43 20 for the Sunset staff to go to the Dallas area has been 09:43 21 finalized. 09:43 22 On June 18th, immediately preceding the 09:43 23 Denton retailer town hall meeting, a conference room 09:43 24 has been reserved at the same hotel as the town hall 09:43 25 event for a private meeting to occur between Sunset 09:43 60 1 Commission staff and two retailers from the Dallas 09:43 2 area. Immediately following that meeting, the Sunset 09:43 3 staff will go to and attend the Denton town hall 09:43 4 retailer meeting. 09:43 5 The next morning, on June the 19th, the 09:43 6 Sunset team will be visiting our Dallas regional 09:43 7 office and they are planning on meeting with our 09:43 8 claims center, our security, and our bingo audit field 09:43 9 staff. And then later that morning, the Sunset team 09:43 10 is going to accompany both claims center staff and 09:43 11 security staff to the field as they conduct some 09:43 12 retailer investigations and also do some retailer 09:44 13 research surveys. I feel like our agency has 09:44 14 continued to be responsive to the requests of the 09:44 15 Sunset Commission and I'm going to continue to keep 09:44 16 the Commissioners and the Executive Director informed 09:44 17 as needed. And that concludes my report this morning. 09:44 18 I do know that the Sunset Commission staff members are 09:44 19 in attendance. I'm sure they would be happy to answer 09:44 20 any questions you might have and I would also be happy 09:44 21 to answer any questions. 09:44 22 COMMISSIONER WHITAKER: Do you want to 09:44 23 give us any report at this time? We appreciate you 09:44 24 being here. Do you feel like you've getting the 09:44 25 information you need? 09:44 61 1 MS. LATTA: Yes. 09:44 2 COMMISSIONER WHITAKER: Thanks. 09:44 3 CHAIRMAN CLOWE: When are we going to 09:44 4 begin to get feedback from the committee, Gary? Do 09:44 5 you have any sessions planned? 09:44 6 MR. GRIEF: I would have to defer to 09:44 7 Karen Latta from the Sunset Commission. No, I have 09:44 8 not been given any indication of any dates as to when 09:44 9 we'll be getting feedback. 09:44 10 MS. LATTA: Do you want me to go up 09:44 11 there? 09:44 12 CHAIRMAN CLOWE: Please. 09:44 13 MS. LATTA: Good morning, 09:45 14 Commissioners. I'm Karen Latta. I'm the project 09:45 15 manager for the Sunset review of the Texas Lottery 09:45 16 Commission. 09:45 17 To answer your question, we plan to 09:45 18 issue our report in August to the public. And what we 09:45 19 always do, several -- probably two or three weeks 09:45 20 before that, is we will give you a draft copy of that 09:45 21 report so you can comment. We'll have an exit 09:45 22 conference where you will have a chance to comment on 09:45 23 the report and give us your opinions, and also, if we 09:45 24 have any errors, any factual type errors that you want 09:45 25 to point out. 09:45 62 1 CHAIRMAN CLOWE: And you don't have any 09:45 2 meetings prior to the presentation of the draft 09:45 3 report? 09:45 4 MS. LATTA: I'm not sure what you mean 09:45 5 by meetings. I mean, we are constantly meeting with 09:45 6 the agency staff -- 09:45 7 CHAIRMAN CLOWE: Feedback sessions 09:45 8 or -- you know, like the meeting I had with you and 09:45 9 your staff where you just have an informal discussion. 09:45 10 You were taking in and you have been taking in for 09:45 11 months, and I just wonder if prior to the issuance of 09:46 12 the draft report for our comments there are any of 09:46 13 those kind of meetings prior to that. 09:46 14 MS. LATTA: Yes, we probably -- we have 09:46 15 talked about doing that sometime in the near future, 09:46 16 getting together with Linda and Gary to talk about our 09:46 17 progress and the types of things we're looking at. So 09:46 18 we probably will doing that. 09:46 19 CHAIRMAN CLOWE: Okay. I would like to 09:46 20 be there. I found my meeting with you most helpful, 09:46 21 and when you have those kinds of meetings scheduled, I 09:46 22 would appreciate it if you would let me know. I would 09:46 23 like to be in attendance. 09:46 24 MS. LATTA: I can do that, yes. 09:46 25 CHAIRMAN CLOWE: Thank you. 09:46 63 1 MR. GRIEF: I'll also make sure that 09:46 2 you're aware of those meetings, Mr. Chairman. 09:46 3 CHAIRMAN CLOWE: Thank you. 09:46 4 Thank you, ma'am. Thank you, Gary. 09:46 5 The next item is number 12, 09:46 6 consideration of and possible discussion and/or action 09:46 7 on the agency's Strategic Plan. 09:46 8 Keith Elkins. Good morning. 09:46 9 MR. ELKINS: Good morning, 09:46 10 Mr. Chairman, Mr. Whitaker. What you have before you 09:46 11 is the final version of the Strategic Plan. I believe 09:47 12 you have been presented with the documents and support 09:47 13 material prior to today's meeting and there are no 09:47 14 substantive changes since that material was provided 09:47 15 to you. What we'll be asking for today, after we 09:47 16 address any questions that you might have, is approval 09:47 17 of the Strategic Plan and your signature, Chairman 09:47 18 Clowe, for the transmittal. 09:47 19 One item that has been raised this 09:47 20 morning that I might address for you, on page 56, and 09:47 21 following up on Ms. Jambor's presentation. We do 09:47 22 address the effect that it might have on sales, where 09:47 23 the money goes, and what we plan to do about that in 09:47 24 the future, on page 55 and 56. 09:47 25 COMMISSIONER WHITAKER: And you were 09:47 64 1 able to resolve all the issues with the LBB? 09:47 2 MR. ELKINS? To the best of my 09:47 3 knowledge, everything has been resolved at this point, 09:48 4 yes, ma'am. 09:48 5 COMMISSIONER WHITAKER: And that was 09:48 6 the last thing that we were looking at from last 09:48 7 meeting, so I don't have any more comments at this 09:48 8 time. 09:48 9 CHAIRMAN CLOWE: Keith, on page nine, 09:48 10 there is no comment there about the adoption of the 09:48 11 new rule. Is that intentional? 09:48 12 MR. ELKINS: Let me ask Karen Kalergis, 09:48 13 my media relations manager, to come up, who is 09:48 14 actually the spearhead of most of this project. 09:48 15 MS. KALERGIS: Good morning, 09:48 16 Commissioners. I'm Karen Kalergis. 09:48 17 The new rule in relation to the change 09:48 18 to the matrix or -- 09:48 19 CHAIRMAN CLOWE: No. The adoption of 09:48 20 the rule that we take the higher of the two payouts, 09:48 21 either the actual or the advertised? 09:48 22 MS. KALERGIS: We didn't include that 09:49 23 in this section here. It's kind of how the game has 09:49 24 changed since the beginning of time. If you think 09:49 25 that's an important aspect of the history of the game, 09:49 65 1 we can add it. Hopefully, it won't throw too much 09:49 2 off, but if it's your direction that we add some 09:49 3 reference to that, we can certainly do that. 09:49 4 CHAIRMAN CLOWE: Let's go through other 09:49 5 questions that I have before we approach that 09:49 6 question. 09:49 7 On page 16, tell us about the approach 09:49 8 you took on the Texas Millionaire Family and how you 09:49 9 see our involvement as a commission in that. 09:49 10 MS. KALERGIS: What we wanted to do 09:49 11 with this section, this is the part where we talk 09:49 12 about the key service populations for the Commission. 09:49 13 We thought it was important in this section to mention 09:49 14 those groups, like the Bingo Advisory Committee and 09:49 15 the Texas Millionaire Family and the Council on 09:49 16 Problem and Compulsive Gambling that we work with. 09:49 17 The Texas Millionaire Family provides a 09:50 18 real service, we believe, to our winners in that when 09:50 19 we have a jackpot winner, our winner's liaison 09:50 20 provides them with information about the Texas 09:50 21 Millionaire Family and we, of course, do the education 09:50 22 seminar with them the other year, I believe it is. 09:50 23 And so this is just an opportunity for people to know 09:50 24 that that group exists and the role that they play in 09:50 25 helping us with our mission. 09:50 66 1 CHAIRMAN CLOWE: So you feel that's 09:50 2 informational and that doesn't deal with our 09:50 3 relationship with them in any way? 09:50 4 MS. KALERGIS: We tried to make it be 09:50 5 just objective, that this group is there, here is what 09:50 6 they do, here is how we interact with them. 09:50 7 Is there something more you want to see 09:50 8 in relation to the description or -- 09:50 9 CHAIRMAN CLOWE: No. I'm just asking 09:50 10 if it's clear in your mind, as you present it, what 09:50 11 our relationship is there. 09:50 12 MS. KALERGIS: You know, we really have 09:50 13 a -- there is no monetary relationship between us and 09:50 14 the Texas Millionaire Family. It's just a group that 09:51 15 we work with and that we let our winners know about if 09:51 16 they choose to become a member of that group or work 09:51 17 with that group. They've been very helpful to us in 09:51 18 terms of working on our winning campaign. Several of 09:51 19 those winners appeared without any payment in our 09:51 20 advertising that featured real winners. They've been 09:51 21 very helpful in putting together the educational 09:51 22 seminars. They were big participants in our tenth 09:51 23 anniversary, so they really to do help to forward the 09:51 24 mission of the Commission. 09:51 25 CHAIRMAN CLOWE: How does that group 09:51 67 1 function, if you know, Karen? What is their 09:51 2 organizational setup? 09:51 3 MS. KALERGIS: To the best of my 09:51 4 knowledge, they're a 501(c)(3). They meet -- I don't 09:51 5 think they have real regular meetings. I think when 09:51 6 they have the -- an annual meeting. Kim might be able 09:51 7 to be more -- Kim might have more details on how often 09:51 8 they actually meet. I know they're going to be 09:52 9 meeting here in Austin in a couple of weeks. 09:52 10 MS. CLOUD: Commissioners, I think they 09:52 11 have their own meeting without the Lottery Commission 09:52 12 once a year, and then once every two years, we work 09:52 13 with them on their educational seminar where they 09:52 14 bring in all the winners. I will tell you this. 09:52 15 Initially, a good many of our winners have requested 09:52 16 to talk to a winner, early on, before they come in to 09:52 17 even claim their prize, because they don't know what 09:52 18 to do. We can't advise them except to tell them to go 09:52 19 to a financial person or a legal -- get legal 09:52 20 representation. But a lot of our winners that have 09:52 21 been through this have been a tremendous amount of 09:52 22 help to new winners, and I'm very -- they volunteer to 09:52 23 be that -- that kind of resource. And that -- they're 09:52 24 hoping that that's really the focus of the Millionaire 09:52 25 Family is to help some of the other winners in sharing 09:53 68 1 their experiences going forward. 09:53 2 CHAIRMAN CLOWE: Is it clear to you in 09:53 3 reading this that we have no responsibility for that 09:53 4 group and we have no oversight or control or 09:53 5 relationship? 09:53 6 MS. CLOUD: I think so. Would you like 09:53 7 to see us -- a little bit stronger statement in there 09:53 8 that says that we don't have? We can certainly add 09:53 9 it. 09:53 10 CHAIRMAN CLOWE: Let's go on through 09:53 11 and see what else comes up. 09:53 12 On page 21, Karen, I think we have 09:53 13 changed Cash 5 to be written instead of the number. 09:53 14 MS. KALERGIS: Right. But that change 09:53 15 doesn't take effect until July and this report has to 09:53 16 be submitted by June 17th, so -- 09:53 17 CHAIRMAN CLOWE: So it should be the 09:53 18 number. 09:53 19 MS. KALERGIS: Right. But that's a 09:53 20 good eye. In the section where we do describe Cash 5 09:53 21 and talk about the changes that will take place, we do 09:54 22 go from the numeral to the word. 09:54 23 CHAIRMAN CLOWE: Okay. 09:54 24 MS. KALERGIS: And say that that change 09:54 25 will be taking place. 09:54 69 1 MS. CLOUD: We could add a footnote to 09:54 2 that, too, to say that the name will change effective 09:54 3 July, to that page. 09:54 4 MS. KALERGIS: That's back on the 09:54 5 history section and we have the date on that. 09:54 6 CHAIRMAN CLOWE: And on page 24, on 09:54 7 your bar chart there, I -- it may be there, but I 09:54 8 can't find the key. 09:54 9 MS. KALERGIS: The key was written in 09:54 10 invisible ink. 09:54 11 CHAIRMAN CLOWE: That's why I couldn't 09:54 12 find it. 09:54 13 MS. KALERGIS: And I've already flagged 09:54 14 it on my copy and we'll switch that page out before it 09:54 15 gets printed. It's going to be -- what you have there 09:54 16 will be printed and bound and a nice cover put on it, 09:54 17 and the key will be added to this map -- or graph. 09:54 18 CHAIRMAN CLOWE: Okay. Good. 09:54 19 On page 43, the bottom paragraph, on 09:54 20 the right column, I believe that should read, approved 09:54 21 by the Executive Director and/or Charitable Bingo 09:55 22 Operations Director, should it not? Either/or? 09:55 23 MS. KALERGIS: Yes. Thank you. 09:55 24 CHAIRMAN CLOWE: And on page 46, what 09:55 25 about the proposed rule for the one percent cash-in 09:55 70 1 bonus? 09:55 2 MS. KALERGIS: That is addressed later 09:55 3 on in the document when we talk about areas for 09:55 4 potential improvement. The possibility of having some 09:55 5 type of retailer commission is put underneath -- is in 09:55 6 that section, rather than in the section here of 09:55 7 budgetary limitations. 09:55 8 CHAIRMAN CLOWE: So you feel that's 09:55 9 adequately covered there. 09:55 10 MS. KALERGIS: Right. I mean, if we 09:55 11 were to put in this section, it would be in the 09:55 12 context that we do not have a one percent retailer 09:55 13 bonus because -- or cash-in bonus because of budgetary 09:56 14 limitations. If you want that point made, we can 09:56 15 certainly put it here, but in terms of looking at 09:56 16 other things that we might do to incent our retailers, 09:56 17 that is in a later section of the report. But if you 09:56 18 would like to make that point in this section, we can 09:56 19 certainly add it. 09:56 20 CHAIRMAN CLOWE: Okay. Let's just hold 09:56 21 that for a moment. 09:56 22 Go to page 57. I am unclear about a 09:56 23 legal question in regard to the left-hand column, 09:56 24 comments, the top paragraph in regard to Indian 09:56 25 gaming. Kim, can you help us on that? 09:56 71 1 MS. KIPLIN: Sure. Under illegal 09:56 2 gambling casinos, there is a blurb on the Tigua and 09:56 3 their recent litigation and the status of their 09:56 4 casino. And the last part does indicate the 5th 09:56 5 Circuit had upheld the District Court's ruling and the 09:56 6 casino had been closed. There was a recent 09:56 7 development, I guess within the last two weeks, and 09:56 8 I'll be glad to drop a sentence in. I talked to Karen 09:56 9 and it really goes back to the philosophy of when you 09:57 10 stop updating. But the recent development was that 09:57 11 the judge, the district court judge had amended his 09:57 12 ruling to make it clearer that the Tiguas -- if 09:57 13 they're -- if they can get licensed to conduct bingo 09:57 14 under the Bingo Enabling Act, then that's fine, they 09:57 15 can do that, and also be licensed retailers, and also 09:57 16 use eight liners. So it's a question of just updating 09:57 17 and I'll be glad to do that if you like. But that's 09:57 18 really, I think, the -- the issue in that. The rest 09:57 19 of it is still factually correct. 09:57 20 CHAIRMAN CLOWE: I think that could be 09:57 21 significant in this. 09:57 22 MS. KIPLIN: Okay. 09:57 23 MS. KALERGIS: Okay. 09:57 24 CHAIRMAN CLOWE: Now, those are the 09:57 25 questions I have. My question to you about changing 09:57 72 1 is, where are we on the timing of this and what is our 09:57 2 schedule for submission? 09:57 3 MS. KALERGIS: The report is due to the 09:57 4 LBB next Monday. Our schedule is to go to the printer 09:57 5 this afternoon. The changes that you have raised are 09:58 6 not significant. They could be made. In some cases, 09:58 7 they're just a matter of adding a sentence or two. 09:58 8 And if it's your desire that those points be made or 09:58 9 clarified, we could certainly do that. 09:58 10 CHAIRMAN CLOWE: You could do that and 09:58 11 still go to the printer? 09:58 12 MS. KALERGIS: I'm going to the printer 09:58 13 today, and I think we can do that. 09:58 14 CHAIRMAN CLOWE: Well, I would like to 09:58 15 see those points clarified, then, if that's all right. 09:58 16 And I'll move the adoption of the Strategic Report. 09:58 17 COMMISSIONER WHITAKER: Second. 09:58 18 CHAIRMAN CLOWE: All in favor say aye. 09:58 19 Opposed, no. The vote is two zero in approval. Thank 09:58 20 you both very much. 09:58 21 MR. ELKINS: Thank you. If I might 09:58 22 just ask Kim one question, Mr. Chairman. 09:58 23 Do we need to have the chairman sign 09:58 24 the cover letter at this point? 09:58 25 MS. KIPLIN: Yes. 09:58 73 1 MR. ELKINS? I have a cover sheet that 09:58 2 I can bring up. 09:58 3 MS. KIPLIN: Subject to the fact that 09:58 4 the changes will be as reflected on the -- in the 09:58 5 course of -- 09:59 6 CHAIRMAN CLOWE: Yeah, that's okay. 09:59 7 We're going to defer going into executive session in 09:59 8 order to hear from the Executive Director, who has 09:59 9 some commitments later in the day. Linda, if you 09:59 10 will, will you give us your report, please. 09:59 11 MS. CLOUD: Commissioners, did you want 09:59 12 to take up the LAR, have Bart make that presentation? 09:59 13 CHAIRMAN CLOWE: I didn't mean to miss 09:59 14 Bart, and I certainly did. By all means. Item number 09:59 15 13, consideration, possible discussion and/or action 09:59 16 on the agency's fiscal year 2004-2005 legislative 09:59 17 appropriation request. Very important and thank you, 09:59 18 Bart. 09:59 19 MR. SANCHEZ: Good morning, 09:59 20 Commissioners. I don't have a presentation. I just 09:59 21 wanted to make the Commission aware that we are 09:59 22 working on the LAR, and it's due to the LBB and all of 09:59 23 the oversight agencies by August 31st. Our plan is to 09:59 24 submit to the Commission, hopefully for approval, in 10:00 25 the late July meeting. Hopefully, y'all can schedule 10:00 74 1 a late July, with a backup plan that if I don't get it 10:00 2 approved in July, I will come back in August and get 10:00 3 it approved. And hopefully we can catch all these 10:00 4 reviews and edits. We plan to schedule individual 10:00 5 briefings like as we have done before. Run with the 10:00 6 numbers, answer any questions individually. 10:00 7 CHAIRMAN CLOWE: Bart, how are we doing 10:00 8 on the current fiscal year financial budget? 10:00 9 MR. SANCHEZ: I think the financial 10:00 10 budget is doing quite well. I think the -- the goal 10:00 11 is to exceed our target. That is where the question 10:00 12 is. As you know, we're down to the 40th week. We've 10:00 13 got 12 -- 11 weeks to go, and I think this is going to 10:00 14 be the crucial, can we exceed the expectations. The 10:00 15 bi-annual revenue estimate has been lowered, I don't 10:01 16 know whether you were aware about that, and certainly 10:01 17 Linda wants to push the goal. And I think that's 10:01 18 where the question is. But I think, as far as the 10:01 19 budget for the agency, I think we're doing quite well. 10:01 20 CHAIRMAN CLOWE: Good. Thank you very 10:01 21 much. I didn't mean to pass over you there. I 10:01 22 apologize for that. 10:01 23 Now we are ready to go to item 17, 10:01 24 report by the executive director. 10:01 25 MS. CLOUD: Commissioner, the 10:01 75 1 information in your binders on the transfer to the 10:01 2 State is the same information we discussed in the last 10:01 3 commission meeting. Our transfers are on the 15th of 10:01 4 the month, so the June transfer has not been made yet. 10:01 5 On June 27th, at 10:00 a.m., we plan to 10:01 6 have a legislative briefing. This briefing will be at 10:01 7 the Capitol. Our topics on the agenda will be the 10:01 8 anniversary, overview for Texas Lottery and Charitable 10:02 9 Bingo, Charitable Bingo update, FY 2002 lottery sales 10:02 10 and revenue to the State, players survey results, 10:02 11 recent game modifications, status of Gtech hardware 10:02 12 and software conversion, status of major procurements, 10:02 13 the update on agency review by the Sunset Commission, 10:02 14 Strategic Plan, and licensing issues. And then we'll 10:02 15 have video news releases to share with them. 10:02 16 Also, the information in your notebooks 10:02 17 on the minority HUB program, this is the -- this is 10:02 18 nothing new to add. This was -- am I right, Robert? 10:02 19 MR. HALL: Yeah. 10:02 20 MS. CLOUD: This was in your booklets 10:02 21 and talked about in the last commission meeting. 10:02 22 The FTE status: We have 304 active 10:02 23 FTEs. We have six newly-filled positions. We have 25 10:03 24 vacant FTEs, two of which is in the selection, 10:03 25 acceptance pending, 19 in the recruiting, screening 10:03 76 1 and interviewing, and four positions with no activity 10:03 2 at present. 10:03 3 CHAIRMAN CLOWE: And you've begun to 10:03 4 award positions or select individuals in the reduction 10:03 5 in force action you have going on? 10:03 6 MS. CLOUD: Yes, Commissioners. We 10:03 7 have awarded positions in the management and 10:03 8 supervisory areas. Now we'll be -- and we're still 10:03 9 working on some of that. And then we'll be moving 10:03 10 forward to the other positions. We needed to get the 10:03 11 management in place first in order to do the 10:03 12 interviews on the others. 10:03 13 CHAIRMAN CLOWE: And again, what is the 10:03 14 conclusion date for that action? 10:03 15 MS. CLOUD: July 31st. 10:03 16 CHAIRMAN CLOWE: Good. Thank you. 10:04 17 MS. CLOUD: Commissioners, we have a 10:04 18 town hall meeting scheduled June the 18th at the 10:04 19 Radisson Hotel in Denton. We've heard Gary comment on 10:04 20 this, the Sunset Commission plans to be there. It's 10:04 21 my understanding that representative -- I mean, that 10:04 22 Commissioner Cox as well plans to try to attend this 10:04 23 meeting. 10:04 24 COMMISSIONER WHITAKER: I was just 10:04 25 going to say, I was going to try to attend, except I 10:04 77 1 have jury duty. But let me know if he's not going to 10:04 2 go, because I would like to go if I get out early. 10:04 3 MS. CLOUD: He was going to -- this is 10:04 4 going to be one of our largest, I think, town hall 10:04 5 meetings that we've ever had. From what we 10:04 6 understand, people have already been making their 10:04 7 reservations way ahead of this meeting, before we even 10:04 8 sent the invitations out. So we don't know quite what 10:04 9 to expect on the attendance yet, but we're told that 10:04 10 we're getting a lot of response on that. And 10:04 11 Commissioners, that is my report. 10:04 12 CHAIRMAN CLOWE: Any questions? 10:05 13 Linda, what happens when a retailer 10:05 14 runs out of instant tickets? I was in a retailer's 10:05 15 place of business last Friday, and they told me they 10:05 16 had run out of the Harley instant ticket. How do they 10:05 17 deal with that? 10:05 18 MS. CLOUD: Well, Gtech actually, their 10:05 19 instant ticket specialist is probably tracking the 10:05 20 retailers that have the Harley Davidson game, but if 10:05 21 they run out, and I would -- they need to be calling 10:05 22 the hotline, the retailer services hotline and putting 10:05 23 an order in so that we can get the game to them. Some 10:05 24 of them do have to make those kind of calls once in a 10:05 25 while, in between the LSR actually visiting the store. 10:05 78 1 And I imagine they're carrying them in their cars as 10:05 2 well so that they can deliver if they get to the store 10:05 3 and they're out of the tickets. The Harley game is 10:05 4 selling very well. 10:06 5 CHAIRMAN CLOWE: Okay. That's exactly 10:06 6 what I told her, so -- 10:06 7 COMMISSIONER WHITAKER: Is that because 10:06 8 you rode one, Linda? 10:06 9 MS. CLOUD: Yes. Because I broke 10:06 10 Bobby's bike in coming from down the street. But we 10:06 11 had -- that's another thing I would like to report. 10:06 12 We did have our anniversary celebration on Sixth 10:06 13 Street and Red River. A group of us rode Harleys in 10:06 14 on -- to the event. Mike was on his Harley. I was 10:06 15 on -- with Bobby, and then our new -- one of our 10:06 16 newest millionaires from Wichita Falls joined us with 10:06 17 their friends. They -- when they came to collect 10:06 18 their money, they shut down the town and brought 10:06 19 everybody with them. They were all business people. 10:07 20 And they had about five of those same people that had 10:07 21 ridden their Harleys from Wichita Falls to join the 10:07 22 weekend of events for the Harley Davidson bike riders 10:07 23 that had come in to Austin. But Representative Ron 10:07 24 Wilson was here with us, and he played his band, 10:07 25 played for us for the last hour. And we had a lot of 10:07 79 1 attendance. We had a lot of people buying tickets. 10:07 2 We had Fiesta stores selling tickets and they sold 10:07 3 5,000 dollars worth of tickets from about 4:00 in the 10:07 4 afternoon to 10:00 at night. So it was a lot of fun, 10:07 5 and I think it showed we're very successful. I even 10:07 6 got my picture taken with Johnny King and Delva with 10:07 7 the motorcycle, so Heaven forbid these pictures get 10:07 8 out. I don't know what will happen then. 10:07 9 COMMISSIONER WHITAKER: Are we -- are 10:07 10 tickets still being sold during the drawing times by 10:07 11 the studio? 10:08 12 MS. CLOUD: There is a draw break. At 10:08 13 10:00 o'clock, the terminals shut down, and our draw 10:08 14 break is from 10:00 to 10:12. And during that time, 10:08 15 the tickets cannot be purchased, on-line tickets. 10:08 16 Instant tickets can be, but not on-line. 10:08 17 COMMISSIONER WHITAKER: How many folks 10:08 18 are we getting out there at the drawings just to 10:08 19 observe? 10:08 20 MS. CLOUD: Oh, there was a whole line, 10:08 21 just before -- Tony Martinez, one of our employees 10:08 22 that works in marketing, was on a bull horn and he 10:08 23 was -- you have got two more minutes, two more 10:08 24 minutes. They had people lined up and, of course, we 10:08 25 had the draw and they were able to just walk around to 10:08 80 1 the front of the studio and watch the draw. 10:08 2 COMMISSIONER WHITAKER: What about on a 10:08 3 regular draw night, not a special night like that? 10:08 4 Any big crowds? 10:08 5 MS. CLOUD: Regularly, they can buy -- 10:08 6 there is only a couple of retailers on Sixth Street. 10:08 7 So they can buy their tickets and they usually come up 10:08 8 to the window, some of them do, to watch the draw. 10:08 9 COMMISSIONER WHITAKER: A few do. 10:09 10 MS. CLOUD: A few. I think anywhere 10:09 11 from maybe 20 to 30 people might watch the draw. 10:09 12 COMMISSIONER WHITAKER: What about the 10:09 13 strikes or the hits on the Web site? How is that 10:09 14 going? 10:09 15 MS. CLOUD: Let Keith come up and he's 10:09 16 the expert in that department. 10:09 17 MR. ELKINS: Hello again. The Web site 10:09 18 usage is actually up from the last time. I think when 10:09 19 we had our meeting in the last -- in May, we did not 10:09 20 have a full month's data. It appeared that the 10:09 21 website hits were coming down. But the latest results 10:09 22 that I just received indicate that that is trending 10:09 23 back up now, from -- if I can just find the right 10:09 24 report. And I also have some data on TV stations that 10:09 25 I can share with you. 10:09 81 1 The statistics for May, for the whole 10:10 2 month, the total views, 8,229. That's people coming 10:10 3 to look at it live and on demand. For the on -- the 10:10 4 total views are up 23 percent from the previous month, 10:10 5 in April. On demand views are up 25 percent, live 10:10 6 views were up 17 percent. And that's pretty 10:10 7 consistent with the higher jackpots for that same time 10:10 8 period. Usually when we have the four, six, nine 10:10 9 million dollar jackpots, we see that the views for the 10:10 10 live is going down. When the jackpots are higher than 10:10 11 that, they start coming back up. So that tends to be 10:10 12 pretty consistent, and it's line with what it has been 10:10 13 before this. When we had the results presented at the 10:10 14 last commission meeting, we did not have a full month. 10:10 15 Now that we have that data, it's not nearly as big a 10:10 16 decline as it appeared to be. 10:10 17 I might also tell you that as far as 10:11 18 the live TV stations carrying the drawings, we have 10:11 19 done some additional research and I can share that 10:11 20 information with you if you would like. 10:11 21 COMMISSIONER WHITAKER: Very briefly. 10:11 22 MR. ELKINS: We surveyed 104 TV 10:11 23 stations over the past week. Back in November, you 10:11 24 might remember at that time we had about 35 stations 10:11 25 that indicated to us that they were carrying the 10:11 82 1 drawings live. Since then, that number has declined 10:11 2 to 25, since we changed to the 10:12. There is a 10:11 3 couple of reasons for that. Five of the stations in 10:11 4 the survey said that they were still working out some 10:11 5 procedural changes in their newscast, so they'll pick 10:11 6 it back up at a later date. Once they do that, that 10:11 7 would increase the number back to 30. Some of the 10:11 8 stations that were Fox stations do not have newscasts 10:11 9 at 10:12. Their news break is from 9:00 to 10:00, so 10:11 10 they couldn't carry us. The benefit to us, however, 10:11 11 is that the market's shift has actually provided the 10:11 12 potential for more viewers. We now, for example, have 10:12 13 a station in Dallas that is carrying our drawings live 10:12 14 that we did not have before, and Dallas, of course, is 10:12 15 a very large market. We now have a station in Dallas 10:12 16 that is the Telemundo station, KFWD is carrying all of 10:12 17 our drawings live. And in Houston, where we also had 10:12 18 weak coverage, we now have the Univision stations that 10:12 19 carrying us. 10:12 20 All in all, we are currently in about 10:12 21 66 percent of all TV available markets in Texas with 10:12 22 at least one station carrying our drawings live. If 10:12 23 you -- we have 12 stations that are also taping our 10:12 24 drawing at 10:12 and replaying the entire drawing 10:12 25 later in the newscast. So if you take that figure, 10:12 83 1 the 25 that are carrying it live, the 12 that are 10:12 2 carrying it on a tape-delayed basis, we have 37 TV 10:12 3 stations actually that are showing the drawing in its 10:12 4 entirety, either live or on a tape-delayed basis. So 10:12 5 we think that the exposure to the public is actually 10:13 6 on the increase. We are still working with the TV 10:13 7 stations to try to get them to realize the benefit to 10:13 8 their viewers and to our players by carrying it live 10:13 9 and see if we can work through some issues there. 10:13 10 As far as stations that are carrying 10:13 11 our drawings live at the Pick 3 midday draw, we 10:13 12 currently have 18 stations that are carrying that, so 10:13 13 it's gradually coming on. That number is pretty 10:13 14 significant for us, because not all TV stations have 10:13 15 noon coverage, so they wouldn't normally cover it. 10:13 16 But it's pretty good news. We're still working with 10:13 17 the stations. We're going to continue working with 10:13 18 them to try to increase coverage. 10:13 19 One other thing that I might add in 10:13 20 following up on some comments you made at the last 10:13 21 meeting, Commissioner Clowe. One of the things that 10:13 22 we have done here in Austin to try to increase 10:13 23 attention of the live drawings at our drawings 10:13 24 facility, we have a -- a contract with a local company 10:14 25 called Video Concierge, that in all of the hotels in 10:14 84 1 the Austin area, about 60 hotels, they have 10:14 2 information kiosks that you may be familiar with that 10:14 3 you can go to and push a button for restaurants or 10:14 4 things to do in the local area. In Austin, if you do 10:14 5 that and you go to things to do, you will see the 10:14 6 Texas Lottery logo. You can click on that and it'll 10:14 7 be an information sheet that will tell you about our 10:14 8 live drawings, what time they're held, where they're 10:14 9 located, and we also have a 30-second video tape about 10:14 10 that process that you can watch to hopefully increase 10:14 11 some attention, especially from our out-of-town guests 10:14 12 that might want to come down to the Sixth Street 10:14 13 location and see a live drawings for themselves. So 10:14 14 hopefully we're getting the word out a little bit 10:14 15 better that way as well. 10:14 16 COMMISSIONER WHITAKER: Thanks. 10:14 17 CHAIRMAN CLOWE: Keith, when the 10:14 18 jackpot, Texas Lotto jackpot gets up to the level it's 10:14 19 at now, does that increase the TV coverage at all or 10:15 20 is that a preset policy on the part of the stations? 10:15 21 MR. ELKINS: It's just a case-by-case 10:15 22 basis. We do know that as we got closer to our 60 10:15 23 million or 85 million dollar record jackpot, a lot of 10:15 24 TV stations that did not carry us live, did. They see 10:15 25 the benefit in carrying the live drawing as well as 10:15 85 1 exposure about that particular jackpot. So I think 10:15 2 that that trend will continue from a newsworthy 10:15 3 standpoint as we raise to a higher jackpot. At this 10:15 4 level, they're still pretty iffy. It really depends 10:15 5 on the news du jour and what else is going on. I know 10:15 6 that during the tenth anniversary celebration, we got 10:15 7 quite a bit of coverage, including some of the 10:15 8 activities that we did here, as well as an interview 10:15 9 that we conducted with Representative Ron Wilson, who 10:15 10 sponsored the Lottery legislation. We provided that 10:15 11 out via satellite to our stations prior to the 10:15 12 anniversary, and several of the stations aired 10:16 13 portions of that, so... 10:16 14 CHAIRMAN CLOWE: Very good. Thank you. 10:16 15 MS. CLOUD: That's my report. 10:16 16 CHAIRMAN CLOWE: Linda, I wanted to ask 10:16 17 you about the Powerball border analysis that we 10:16 18 received that was prepared by Gtech lottery marketing. 10:16 19 Can you comment on that? 10:16 20 MS. CLOUD: Commissioners, some 10:16 21 meetings ago, Commissioner Whitaker asked the impact 10:16 22 of the border sales when Powerball jackpots were high. 10:16 23 And Gtech has -- had at that time completed this 10:16 24 survey and this is the information in response to 10:16 25 Commissioner Whitaker's request. We have also asked 10:16 86 1 Gtech to go back now and tell us what the impact of 10:16 2 our retailer base is in loss of sales, and this is 10:16 3 from a request that is being made by the Sunset 10:16 4 Commission. And we have provided that, I think, in 10:17 5 the last couple of days. Is that right, Toni? 10:17 6 MS. SMITH: I think it's in your 10:17 7 office. 10:17 8 MS. CLOUD: It's in my office. Okay. 10:17 9 Well, I haven't released it yet, and I'll do that so 10:17 10 that that report can be released. But that 10:17 11 information -- this information provided here will 10:17 12 show the counties along the state line and the impact 10:17 13 that the Powerball jackpot has on those counties. 10:17 14 Ramon, have you got -- would you like 10:17 15 to add anything to that? 10:17 16 MR. RIVERA: Good morning, 10:17 17 Commissioners. For the record, my name is Ramon 10:17 18 Rivera. I'm the assistant general manager for Gtech 10:17 19 Texas. 10:17 20 I believe the report you have in front 10:17 21 of you reports the effect of sales in bordering 10:17 22 counties -- excuse me -- in bordering states that have 10:17 23 Powerball. And it shows a significant increase in 10:18 24 sales among either New Mexico or Louisiana retailers 10:18 25 when the Powerball jackpot gets high. The analysis 10:18 87 1 that -- additional analysis that has been prepared is, 10:18 2 what is the actual impact of sales on Texas when you 10:18 3 have a -- a high Powerball jackpot. That is the 10:18 4 analysis that has been presented to Linda Cloud, which 10:18 5 she is reviewing now. And that should be -- as soon 10:18 6 as we get that -- as soon as Linda has a chance to 10:18 7 review that, you should have that before you. 10:18 8 MS. CLOUD: I think, if I'm remembering 10:18 9 what I -- and I have studied that. I think you had a 10:18 10 12 percent decline in sales along our border counties, 10:18 11 retailers, border retailers. 10:18 12 MR. RIVERA: Yeah, that's correct. 10:18 13 What we did is, we looked at weeks in which the 10:18 14 jackpot in Texas was similar and compared it with 10:19 15 weeks where the Powerball jackpot was high, and then 10:19 16 weeks when the Powerball jackpot was low. And what we 10:19 17 noticed was, and interestingly, the Powerball jackpot 10:19 18 was not that high, it was at 40 million. And the 10:19 19 limitation there was that we had to have the -- the 10:19 20 Texas jackpot be about equivalent. But what we 10:19 21 noticed was that among the bordering counties, that 10:19 22 is, counties bordering the Powerball states, we 10:19 23 noticed a 12 percent decline in Lotto Texas sales 10:19 24 during that period, during those periods. So we -- 10:19 25 you know, and the conclusion there could be that as 10:19 88 1 the Powerball jackpot gets higher, can you estimate 10:19 2 that the impact on Texas retailers would be higher as 10:19 3 well. 10:19 4 COMMISSIONER WHITAKER: Go ahead and 10:19 5 comment on that if you want because I was going to ask 10:19 6 some clarifying questions. 10:19 7 CHAIRMAN CLOWE: Well, I think that 10:20 8 this is a good report and I appreciate Commissioner 10:20 9 Whitaker bringing it to the Commission's attention. 10:20 10 And what it says, Ramon, and you correct me if I'm 10:20 11 wrong, we have told the legislature, in our opinion, 10:20 12 we don't have the authority to enter into a 10:20 13 multi-state game, and we await their direction on 10:20 14 that. But clearly, where there are large jackpots 10:20 15 generated, you're seeing on the border locations, 10:20 16 particularly Louisiana and New Mexico, substantial 10:20 17 gravitation of sales to those retailers from Texas, 10:20 18 and it's significant. It ranges from 1,000 to 5,000 10:20 19 percent, which is substantial. And that is an impact 10:20 20 on gaming in this state, whether or not we are 10:20 21 competitive, so to speak, with people who want to play 10:21 22 a multi-state big jackpot game. Am I correct or 10:21 23 incorrect? 10:21 24 MR. RIVERA: That's very correct. 10:21 25 MS. CLOUD: Commissioners, one other 10:21 89 1 comment I would like to make is the latest projections 10:21 2 that I've been given on -- on moving forward, with 10:21 3 these multi-state games going to a much higher matrix 10:21 4 and having the potential of a much higher jackpot, in 10:21 5 the half billion jackpot range, that it's going to 10:21 6 have an even greater impact on us when that happens. 10:21 7 CHAIRMAN CLOWE: I think that this 10:21 8 Commission has the role of serving as a resource on 10:21 9 issues such as this, and it may be, Linda, that you 10:21 10 want to include this type of thing in your legislative 10:21 11 briefing. 10:21 12 MS. CLOUD: We can do that. 10:21 13 CHAIRMAN CLOWE: So the legislature can 10:21 14 have these kinds of facts as they view the Lottery in 10:21 15 Sunset and in the determination of how they want this 10:22 16 lottery to be in the future. 10:22 17 MS. CLOUD: Okay. 10:22 18 COMMISSIONER WHITAKER: Ramon, any 10:22 19 progress on Internet gaming and could you give us a 10:22 20 study on that? 10:22 21 MR. RIVERA: Where is Larry King when 10:22 22 you need him? 10:22 23 Yes, Commissioner, I am pleased to 10:22 24 report that we do have -- we have completed an 10:22 25 Internet report. In fact, I just saw it this weekend, 10:22 90 1 which I think is more responsive to your question than 10:22 2 what we've provided to you previously. And we can 10:22 3 provide that this week. 10:22 4 COMMISSIONER WHITAKER: And what does 10:22 5 it purport to study? 10:22 6 MR. RIVERA: It doesn't purport to 10:22 7 represent the impact of Internet gaming just in Texas, 10:22 8 but it does represent what we estimate the impact of 10:22 9 Internet gaming on the lottery industry in general, 10:22 10 domestically in the United States, and it does show a 10:23 11 significant shift of spending from lottery to Internet 10:23 12 gaming. 10:23 13 COMMISSIONER WHITAKER: And 10:23 14 significant, can you ballpark it for me? I know you 10:23 15 haven't looked at it, and I won't hold you to the 10:23 16 numbers, but... 10:23 17 MR. RIVERA: Well, I can't -- I don't 10:23 18 recall the exact number with respect to how much we 10:23 19 think is going. But there is -- because that's very 10:23 20 difficult to track since the Internet side, the 10:23 21 Internet gaming side is not reported in any -- in any 10:23 22 publication or any kind of study, and it represents an 10:23 23 estimate. I couldn't tell you today what that number 10:23 24 represents, but it is a shift in spending. 10:23 25 COMMISSIONER WHITAKER: I'll look 10:23 91 1 forward to seeing it. Thank you. 10:23 2 MS. CLOUD: Commissioners, Gtech is 10:23 3 making a presentation at the next commission meeting 10:23 4 on the questions that you asked last week. We didn't 10:23 5 do it this time because we thought we had other topics 10:23 6 of discussion that were going to extend the meeting, 10:24 7 and we postponed it a meeting so that they would be 10:24 8 prepared at the next meeting to respond to these 10:24 9 questions. 10:24 10 CHAIRMAN CLOWE: Also, Linda, under 11 your report, we have received the post-payment audit 10:24 12 of the Texas Lottery Commission from the State 10:24 13 Auditor's -- or State Comptroller's Office. Can you 10:24 14 comment on that or should that be Debra? 10:24 15 MS. CLOUD: Well, Bart actually. Is he 10:24 16 in the room? I think he has left us. 10:24 17 Debra, do you want to respond to that? 10:24 18 Oh, there he is. 10:24 19 CHAIRMAN CLOWE: Bart, we're asking 10:24 20 about the post-payment audit of the Commission in the 10:24 21 Comptroller's report. 10:24 22 MR. SANCHEZ: Yes. 10:24 23 CHAIRMAN CLOWE: Can you comment on 10:24 24 that to us? 10:24 25 MR. SANCHEZ: That's already been 10:24 92 1 responded and we're at the phase right now of 10:24 2 correcting some of the actions which June 15th was 10:24 3 the -- was the time frame. And, basically, we're 10:24 4 talking about procedures just being formalized, 10:24 5 procedures already in place. The practice is already 10:25 6 taking place, it's just that procedures need to be 10:25 7 formalized. 10:25 8 MS. CLOUD: Commissioners, one -- on 10:25 9 the post-payment audit, there was -- one of the 10:25 10 findings was where a purchase order got changed after 10:25 11 I signed it, and that procedure has been changed for 10:25 12 over a year. I mean, we have been -- that's what Bart 10:25 13 is talking about, the practice that that does not 10:25 14 happen anymore. 10:25 15 CHAIRMAN CLOWE: Okay. Very good. 10:25 16 Thank you. 10:25 17 Billy, are you prepared to give us your 10:25 18 report now, please? 10:25 19 MR. ATKINS: I am, Commissioners. All 10:25 20 of the positions in the special projects section in 10:25 21 the division have been filled. There are two 10:25 22 vacancies in the licensing services section. Those 10:25 23 closed on June 6th. As of the 7th, there were a total 10:25 24 of seven applicants, five of which were affected by 10:25 25 the RIF, and those applications are being screened at 10:25 93 1 this time. 10:25 2 In regards to the Charitable Bingo 10:26 3 System redesign. The Lottery Commission and Keane 10:26 4 have apparently reached an impasse on the negotiation 10:26 5 of the disputed items that remain in the contract. 10:26 6 Keane, to our knowledge, has not been on-site or 10:26 7 working on the contract since Monday, June the 3rd. 10:26 8 While we're still hopeful that a resolution can be 10:26 9 reached -- as a matter of fact, we were on a 10:26 10 conference call as late as 4:30 last Friday -- the 10:26 11 Lottery Commission will, if necessary, make a 10:26 12 determination that Keane has abandoned the project and 10:26 13 seek available remedies for completion of the CBS, 10:26 14 such as substitute performance. There is a 700,000 10:26 15 dollar performance bond in place, and there is an 10:26 16 estimated 240,000 dollars remaining on the contract 10:26 17 that has not been paid to Keane. 10:26 18 There is tentatively scheduled a Bingo 10:26 19 Advisory Committee meeting for Friday, June 28th. We 10:26 20 sent out letters to the members of the advisory 10:27 21 committee that were appointed at your last meeting 10:27 22 asking them to confirm their service. To date, we've 10:27 23 only heard from, I believe, about four of them. If we 10:27 24 don't hear anything this week, we will start 10:27 25 contacting them so that we can confirm the meeting 10:27 94 1 date and start working on an agenda. 10:27 2 Allocations for the first quarter -- 10:27 3 CHAIRMAN CLOWE: Would that meeting 10:27 4 begin at 10:00 a.m. if you go forward? 10:27 5 MR. ATKINS: Yes, sir. 10:27 6 CHAIRMAN CLOWE: Thank you. 7 MR. ATKINS: Allocations for the first 10:27 8 quarter of 2002 remain on May 30th, and a memo 10:27 9 outlining those allocations is included in your 10:27 10 notebook. 10:27 11 And finally, I think my last report to 10:27 12 you under conferences and seminars slash lottery 10:27 13 operator training program might have left you with the 10:27 14 indication that there was nothing scheduled at this 10:27 15 time. What we don't have scheduled at this time are 10:27 16 any conferences or seminars to licensees. We, of 10:27 17 course, do have operator training programs scheduled, 10:27 18 and I have included a printout of those scheduled 10:28 19 dates from the Web site in the notebook for your 10:28 20 review. And that, Mr. Chairman, is my report. 10:28 21 CHAIRMAN CLOWE: Thank you, Billy. 10:28 22 We would like to go now to item number 10:28 23 16, consideration of two cases: Dockets number 10:28 24 362-01-3964 and 362-01-3965, and docket number 10:28 25 362-02-0471.B. 10:28 95 1 Kim, will you handle these, please. 10:28 2 MS. KIPLIN: Commissioners, both of 10:28 3 these documents, and one is a contested case 10:28 4 proceeding that went all the way through SOAH, and 10:28 5 there was a proposal for decision and a recommended -- 10:28 6 no. Just a proposal for decision, pardon me, that was 10:28 7 prepared by the SOAH ALJ, State Office of 10:28 8 Administrative Hearings Administrative Law Judge. 10:28 9 That's the GameTech Trend Gaming matter. 10:29 10 The other matter is the VFW matter. 10:29 11 That was also a contested case docket notice, but what 10:29 12 you have is a resolution and agreement by the parties. 10:29 13 I would like to take up the GameTech 10:29 14 matter first. There are parties that are in the 10:29 15 auditorium and are present in the event that you have 10:29 16 any questions or if they have indicated a desire to 10:29 17 speak. This was a -- an outcome of a complaint filed 10:29 18 regarding a provision in the Bingo Enabling Act 10:29 19 referencing price fixing. There were several -- as I 10:29 20 recall, several Attorney General opinion requests that 10:29 21 were made to try to get interpretation of the statute. 10:29 22 Specifically, one interpretation had to do with -- a 10:30 23 request for an interpretation had to do with whether 10:30 24 the statute was applicable to vertical price fixing in 10:30 25 addition to horizontal price fixing, and the opinion 10:30 96 1 didn't indicate such. The complaint had to do with 10:30 2 allegations of price fixing between the distributor 10:30 3 and the manufacturer. The case went forward in a 10:30 4 contested case proceeding and the outcome by the 10:30 5 Administrative Law Judge is that the agency's staff 10:30 6 did not prove its case. It didn't really reach the 10:30 7 issue of whether the AG's opinion interpreting the 10:30 8 statute to be as broad as including vertical price 10:30 9 fixing was correct or not. In my view, in reading it, 10:30 10 it seems as though the administrative law judge 10:30 11 accepted that interpretation, and then applying the 10:30 12 facts that were developed at the contested case 10:30 13 proceeding, concluded that we had not proven our case. 10:30 14 And the case -- the case was there for you to read on 10:30 15 the back of the report in terms of witness testimony 10:30 16 and the credibility or lack of credibility that was 10:30 17 placed on that testimony by the administrative law 10:31 18 judge. The staff does recommend that you do -- you do 10:31 19 approve the administrative law judge's proposal for 10:31 20 decision and the order that would clearly indicate 10:31 21 that the Commission shall not suspend or revoke the 10:31 22 licenses of GameTech or Trend Gaming System, based on 10:31 23 the allegations that were contained in this docket. 10:31 24 I'll stop if you would like and see if 10:31 25 there is people who want to present information to you 10:31 97 1 if that's -- if that's your desire. 10:31 2 CHAIRMAN CLOWE: Are there any 10:31 3 questions at this point? 10:31 4 Is there anyone wishing to address the 10:31 5 Commission on this issue? 10:31 6 Seeing no one, we have no further 10:31 7 questions. Is there a motion? 10:31 8 COMMISSIONER WHITAKER: So moved. 10:31 9 CHAIRMAN CLOWE: Second. All in favor, 10:31 10 please say aye. Opposed, no. The vote is two zero in 10:31 11 favor of dismissal. 10:31 12 MS. KIPLIN: Commissioners, the other 10:31 13 matter that's before you is the VFW Post 10457, Winnie 10:31 14 Memorial Conductor matter. This is an agreed order. 10:32 15 There were several allegations that were included in 10:32 16 this matter. And the staff has reached an agreement 10:32 17 whereby the organization will agree to accept a 10:32 18 consecutive 32-occasion suspension and not to amend 10:32 19 their license occasions after the agreement is signed 10:32 20 and until the suspension is complete. They're also 10:32 21 agreeing to ensure that those that are responsible for 10:32 22 the conduct of bingo attend the bingo training and 10:32 23 provide proof of that. And then in the matter of the 10:32 24 charitable contributions, they're agreeing to ensure 10:32 25 that all future charitable contributions go directly 10:32 98 1 to the bingo account without any of the funds going to 10:32 2 the general fund. And that's really as far as I can 10:32 3 tell, in reading this, the heart of the matter was 10:32 4 their use of bingo funds for purposes other than what 10:32 5 is allowed by the Bingo Enabling Act. And staff is in 10:33 6 agreement and would recommend that you sign the agreed 10:33 7 order. 10:33 8 COMMISSIONER WHITAKER: So moved. 10:33 9 CHAIRMAN CLOWE: Second. All in favor, 10:33 10 please say aye. Opposed, no. The vote is two zero in 10:33 11 favor. 10:33 12 MS. KIPLIN: Just a little housekeeping 10:33 13 matter. Commissioner Whitaker, I gave you that order 10:33 14 on the pull-tab rule, and that was the original order. 10:33 15 I need to get that. 10:33 16 COMMISSIONER WHITAKER: This one here? 10:33 17 Sorry. 10:33 18 CHAIRMAN CLOWE: Is there anyone 10:33 19 wishing to address the Commission before we go into 10:34 20 executive session? 10:34 21 Is there any other business to come 10:34 22 before the Commission at this time before we go into 10:34 23 executive session? 10:34 24 We will return from executive session 10:34 25 and have public conference, so that I want to make it 10:34 99 1 clear that we'll come back. 10:34 2 At this time I move the Texas Lottery 10:34 3 Commission go into executive session to deliberate the 10:34 4 duties and evaluation of the Executive Director, 10:34 5 Internal Auditor, and Charitable Bingo Operations 10:34 6 Director pursuant to Section 551.074 of the Texas 10:34 7 Government Code. 10:34 8 To deliberate the duties of the General 10:34 9 Counsel and Security Director pursuant to Section 10:34 10 551.074 of the Texas Government Code. 10:34 11 To receive legal advice regarding 10:34 12 pending or contemplated litigation and/or to receive 10:34 13 legal advice pursuant to Section 551.071(1)(A) or (B) 10:34 14 of the Texas Government Code and/or to receive legal 10:35 15 advice pursuant to Section 551.071(2)of the Texas 10:35 16 Government Code, including but not limited to: 10:35 17 TPFV Group, Inc. versus Texas Lottery 10:35 18 Commission; Retired Sergeant Majors' Association et 10:35 19 al. versus Texas Lottery Commission, et al.; Loretta 10:35 20 Hawkins versus Texas Lottery Commission; AT&T versus 10:35 21 Couer D'Alene Tribe; Scientific Games and Pollard 10:35 22 Banknote versus Texas Lottery Commission and Linda 10:35 23 Cloud, Executive Director; Ideas, Inc. and Associates 10:35 24 in Implants versus Texas Lottery Commission and Linda 10:35 25 Cloud; Contract regarding the charitable bingo system; 10:35 100 1 employment law, personnel law, procurement and 10:35 2 contract law, and general government law. 10:35 3 Is there a second? 10:35 4 COMMISSIONER WHITAKER: Second. 5 CHAIRMAN CLOWE: All in favor, please 10:35 6 say aye. The vote is two zero in favor. The Texas 10:36 7 Lottery Commission will go into executive session. 10:36 8 The time is 10:39 a.m. The date is June 10th, 2002. 10:36 9 (EXECUTIVE SESSION.) 10 CHAIRMAN CLOWE: The Texas Lottery 13:56 11 Commission is out of executive session. The time is 13:56 12 1:59 p.m. Is there any action to be taken as a result 13:56 13 of executive session? If not, let's move on the next 13:56 14 item on the agenda. Is there anyone here wishing to 13:56 15 make a comment to the Commission? 13:56 16 There does not appear to be anyone. 13:56 17 The Commission is attempting to set its 13:56 18 next month's meeting at each meeting, and Commissioner 13:56 19 Whitaker has suggested Tuesday, July 23rd, as our next 13:56 20 meeting. Is there any problem that anyone has with 13:56 21 that date? 13:56 22 Hearing none, we will set that as our 13:56 23 tentative meeting, Tuesday, the 23rd of July, at 13:56 24 ten -- I'm sorry, 8:30 a.m. 13:56 25 Is there any other business to come 13:57 101 1 before this meeting of the Commission? This meeting 13:57 2 is adjourned at 2:00 p.m. Thank you all very much. 13:57 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 102 1 REPORTER'S CERTIFICATION 2 3 STATE OF TEXAS ) 4 COUNTY OF TRAVIS ) 5 6 I, BRENDA J. WRIGHT, Certified Shorthand 7 Reporter for the State of Texas, do hereby certify 8 that the above-captioned matter came on for hearing 9 before the TEXAS LOTTERY COMMISSION as hereinafter set 10 out, that I did, in shorthand, report said 11 proceedings, and that the above and foregoing 12 typewritten pages contain a full, true, and correct 13 computer-aided transcription of my shorthand notes 14 taken on said occasion. 15 16 Witness my hand on this the 23RD day of 17 JUNE, 2002. 18 19 20 21 BRENDA J. WRIGHT, RPR, 22 Texas CSR No. 1780 Expiration Date: 12-31-02 23 1609 Shoal Creek Boulevard, Suite 202 Austin, Texas 78701 24 (512) 474-4363 25 JOB NO. 020610BJW