1 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 6 7 REGULAR MEETING OF THE § 8 TEXAS LOTTERY COMMISSION § THURSDAY, JUNE 7, 2012 § 9 10 11 12 COMMISSION MEETING 13 THURSDAY, JUNE 7, 2012 14 15 16 17 BE IT REMEMBERED THAT on Thursday, the 7th 18 day of June 2012, the Texas Lottery Commission 19 meeting was held from 1:32 p.m. until 3:25 p.m., at 20 the Offices of the Texas Lottery Commission, 611 East 21 6th Street, Austin, Texas 78701, before CHAIRMAN MARY 22 ANN WILLIAMSON and COMMISSIONERS J. WINSTON KRAUSE and 23 CYNTHIA TAUSS DELGADO. The following proceedings 24 were reported via machine shorthand by Aloma J. Kennedy, 25 a Certified Shorthand Reporter. 2 1 APPEARANCES 2 CHAIRMAN: Ms. Mary Ann Williamson 3 COMMISSIONERS: 4 Mr. J. Winston Krause Ms. Cynthia Tauss Delgado 5 GENERAL COUNSEL: 6 Ms. Kimberly L. Kiplin 7 EXECUTIVE DIRECTOR: Mr. Gary Grief 8 DIRECTOR, CHARITABLE BINGO OPERATIONS: 9 Mr. Philip D. Sanderson 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 TABLE OF CONTENTS 2 PAGE 3 PROCEEDINGS - THURSDAY, JUNE 7, 2012 ............... 9 4 AGENDA ITEM NO. I - Meeting Called to Order ........ 9 5 AGENDA ITEM NO. II - Report, possible discussion and/or action on the agency’s 6 survey of employee engagement ...................... 9 7 AGENDA ITEM NO. III - Report, possible discussion and/or action on lottery sales 8 and revenue, game performance, new game opportunities, advertising, market 9 research, trends, and game contracts, agreements, and procedures ......................... 19 10 AGENDA ITEM NO. IV - Report, possible 11 discussion and/or action on transfers to the State ....................................... 23 12 AGENDA ITEM NO. V - Consideration of and 13 possible discussion and/or action on the agency's Strategic Plan for FY 2013-2017 ........... 24 14 AGENDA ITEM NO. VI - Consideration of and 15 possible discussion and/or action, including adoption, on amendments to 16 TAC §401.355 16 relating to Restricted Sales ....................... 26 17 AGENDA ITEM NO. VII - Consideration of and possible discussion and/or action, including 18 proposal, on amendments to 16 TAC §401.152 Application for License ............................ 28 19 AGENDA ITEM NO. VIII - Report, possible 20 discussion and/or action on the 82nd Legislature ........................................ 30 21 AGENDA ITEM NO. IX - Report, possible 22 discussion and/or action on the Sunset review process involving the agency ................ 31 23 24 25 4 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 AGENDA ITEM NO. X - Consideration of and possible discussion and/or action on 4 external and internal audits and/or reviews relating to the Texas Lottery Commission, 5 and/or on the Internal Audit Department’s activities, including internal audit on 6 the Retailer Sales Incentive Program ............... 34 7 AGENDA ITEM NO. XI - Report, possible discussion and/or action, including 8 amendments, on the agency’s advertising services contract .................................. 41 9 AGENDA ITEM NO. XII - Report, possible 10 discussion and/or action on the agency’s instant ticket and manufacturing 11 services procurement ............................... 42 12 AGENDA ITEM NO. XIII - Report, possible discussion and/or action on GTECH 13 Corporation ........................................ 52 14 AGENDA ITEM NO. XIV - Report by the Executive Director and/or possible 15 discussion and/or action on the agency’s operational status, agency procedures, 16 awards, and FTE status ............................. 53 17 18 19 20 21 22 23 24 25 5 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 AGENDA ITEM NO. XV - Consideration of and possible discussion and/or action, 4 including adoption of repeal, of 16 TAC §402.302 relating to Card-Minding Systems, 5 and adoption, of new rules 16 TAC §402.321 relating to Card-Minding Systems-Definitions, 6 16 TAC §402.322 relating to Card-Minding Systems-Site System Standards, 16 TAC 7 §402.323 relating to Card-Minding Device Standards, 16 TAC §402.324 relating to 8 Card-Minding Systems-Approval of Card-Minding Systems, 16 TAC §402.325 relating to 9 Card-Minding Systems-Organization Requirements, 16 TAC §402.326 relating to Card-Minding 10 Systems-Distributor Requirements, 16 TAC §402.327 relating to Card-Minding 11 Systems-Security Standards, and/or 16 TAC §402.328 relating to Card-Minding Systems- 12 Inspections and Restrictions ....................... 53 13 AGENDA ITEM NO. XVI - Consideration of and possible discussion and/or action, including 14 proposal, of amendments to 16 TAC §402.100 relating to Definitions ............................ 59 15 AGENDA ITEM NO. XVII - Consideration of and 16 possible discussion and/or action, including proposal, of amendments to 16 TAC §402.103 17 relating to Training Program ....................... 59 18 AGENDA ITEM NO. XVIII - Consideration of and possible discussion and/or action, including 19 proposal, of amendments to 16 TAC §402.200 relating to General Restrictions on the 20 Conduct of Bingo ................................... 59 21 AGENDA ITEM NO. XIX - Consideration of and possible discussion and/or action, including 22 proposal, of amendments to 16 TAC §402.202 relating to Transfer Funds ......................... 59 23 AGENDA ITEM NO. XX - Consideration of and 24 possible discussion and/or action, including proposal, of amendments to 16 TAC 25 §402.203 relating to Unit Accounting ............... 59 6 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 AGENDA ITEM NO. XXI - Consideration of and possible discussion and/or action, 4 including proposal, of amendments to 16 TAC §402.204 relating to Prohibited Price Fixing ....... 59 5 AGENDA ITEM NO. XXII - Consideration of and 6 possible discussion and/or action, including proposal, of amendments to 16 TAC §402.205 7 relating to Unit Agreements ........................ 59 8 AGENDA ITEM NO. XXIII - Consideration of and possible discussion and/or action, including 9 proposal, of amendments to 16 TAC §402.600 relating to Bingo Report ........................... 59 10 AGENDA ITEM NO. XXIV - Report by the 11 Charitable Bingo Operations Director and possible discussion and/or action 12 on the Charitable Bingo Operations Division’s activities, including updates 13 on licensing, accounting and audit activities, pull-tab review, special 14 projects, and upcoming operator training ........... 64 15 AGENDA ITEM NO. XXV - Consideration of the status and possible entry of orders in: 16 A. Docket No. 362-12-4815 – 786 Pearland Express 17 B. Docket No. 362-12-4813 – Roadrunner Mart 18 C. Docket No. 362-12-4584 – Madisonville Corner Store ................... 65 19 AGENDA ITEM NO. XXVI - Public comment .............. 66 20 21 22 23 24 25 7 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 AGENDA ITEM NO. XXVII - Commission may meet in Executive Session: 4 A. To deliberate the duties and evaluation of the Executive Director pursuant to 5 Section 551.074 of the Texas Government Code. 6 B. To deliberate the duties and evaluation of the Internal Audit Director pursuant 7 to Section 551.074 of the Texas Government Code. 8 C. To deliberate the duties and evaluation of the Charitable Bingo Operations 9 Director pursuant to Section 551.074 of the Texas Government Code. 10 D. To deliberate the duties of the General Counsel pursuant to Section 551.074 of 11 the Texas Government Code. E. To deliberate the duties of the Human 12 Resources Director pursuant to Section 551.074 of the Texas Government Code. 13 F. To receive legal advice regarding pending or contemplated litigation 14 pursuant to Section 551.071(1)(A) and/or to receive legal advice regarding 15 settlement offers pursuant to Section 551.071(1)(B) of the Texas Government 16 Code and/or to receive legal advice pursuant to Section 551.071 (2) of the 17 Texas Government Code, including but not limited to: 18 Department of Texas, Veterans of Foreign Wars et al. v. Texas 19 Lottery Commission et al. Willis Willis v. Texas Lottery Commission, 20 GTECH Corporation, BJN Sons Corporation d/b/a Lucky Food Store 21 #2, Barkat N. Jiwani and Pankaj Joshi 22 Employment law, personnel law, procurement and contract law, 23 evidentiary and procedural law, and general government law .............. 71 24 25 8 1 TABLE OF CONTENTS (CONTINUED) 2 PAGE 3 AGENDA ITEM NO. XXVIII - Return to open session for further deliberation and possible action on 4 any matter discussed in Executive Session .......... 72 5 AGENDA ITEM NO. XXIX - Adjournment ................. 72 6 REPORTER'S CERTIFICATE ............................. 74 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 9 1 P R O C E E D I N G S 2 THURSDAY, JUNE 7, 2012 3 (1:32 a.m.) 4 AGENDA ITEM NO. I 5 CHAIRMAN WILLIAMSON: Good afternoon. I 6 would like to call the meeting of the Texas Lottery 7 Commission to order. Today is June 7, 2012. The time 8 is 1:32. Commissioners Krause and Delgado are present. 9 We do have a quorum. 10 AGENDA ITEM NO. II 11 CHAIRMAN WILLIAMSON: And let's start with 12 Item No. II. It's report, possible discussion and/or 13 action on the agency's survey of employee engagement. 14 John Shaw is going to present this item. And I 15 understand that we have some folks from the University 16 of Texas Institute for Organizational Excellence. 17 Welcome. 18 MR. SHAW: Good afternoon, Commissioners. 19 My name is John Shaw. I'm the Employee Relations 20 Specialist in the Lottery Commission Human Resources 21 Division. 22 In February 2012, employees of the Texas 23 Lottery Commission participated in the Survey of 24 Employee Engagement, conducted by the Institute for 25 Organizational Excellence, University of Texas at 10 1 Austin. 2 The Lottery Commission has participated in 3 this or a similar survey for many years. This survey, 4 formerly known as the Survey of Organizational 5 Excellence, or SOE, has been revised in recent years and 6 is now known as the Survey of Employee Engagement, or 7 SEE. The 2012 employee survey is our first in the newer 8 survey format. 9 It's my pleasure to introduce to you 10 Dr. Noel Landuyt from The University of Texas Institute 11 for Organizational Excellence. Dr. Landuyt will provide 12 an overview for you of our recent employee survey. 13 DR. LANDUYT: Good afternoon. My name is 14 Noel Landuyt, and I work over at UT Austin for the 15 Institute for Organizational Excellence. And we're a 16 group at UT that has been working with state government 17 since '79. 18 The survey is an effort in the state, 19 listed both in the statewide strategic planning 20 instructions issued by the LBB and the Governor's 21 office, to allow for employees to provide input back to 22 the agency and back to the Legislature as to what they 23 think about the work environment. And so we are right 24 now completing our cycle of surveying the state of about 25 200,000 employees in just about every state agency and 11 1 asking what employees think and providing that data 2 back. 3 It is part of the strategic planning 4 instructions, the data goes back again as part of the 5 strategic plan, back to the LBB and the Governor's 6 office. The Auditor's office also uses the data, both 7 for retention issues but also as part of your workforce 8 summary sheet which gets reported back to the 9 Legislature next session. 10 Sunset also gets that information, and so 11 it's used by various entities. And if any legislator 12 has a request, we provide that information both back to 13 the agency and back to the Legislature directly. It has 14 been a good fixture of Texas state government, and most 15 of it is done electronically now with this agency all 16 on-line. We ask all employees -- as I've said, we did 17 that in February. We had some additional items added, 18 and we coded out multiple areas. 19 I am very pleased to say that the agency 20 had a very high response rate of about 83 percent. That 21 is exceptional. This type of survey -- job 22 satisfaction, organizational climate, organizational 23 health -- typically has response rates in the industry 24 of around 40 percent. In the State of Texas, though, we 25 have double that. And this agency performs a little bit 12 1 higher than that level as well. And as you can see 2 overall, they have had a fairly strong response rate. 3 And I've also put some benchmarks here, if 4 you will. Agencies of similar size have about a 77 5 percent response rate, of a similar mission, which is 6 the general government regulatory mission that's 69, and 7 statewide has an 80. What that really says is that 8 employees are open to tell you what they think, and they 9 sure do. And that's very positive from our standpoint, 10 because it really expresses the ability and openness of 11 the agency to accept and work with employees. 12 We provide an overall score, which is on 13 five -- it's based on about 500 points or on a five- 14 point scale -- as to how the agency is performing. You 15 can see from this last go-around with that little gauge 16 of 3.78. That's a very strong rate. You want scores 17 above a 3.50. You get very excited if they're above 18 4.00. But anything above 3.75 is really strong. It 19 really says again employees feel as though the 20 environment is such that they can provide feedback and 21 work. 22 The blue graphic next to the gauge is not 23 mine. That actually comes from the workforce summary 24 sheet provided by the auditor. And you can see on that 25 both the agency scores over time by article, which we 13 1 call mission, and also statewide. And you can see that 2 the agency, based on those performances, held pretty 3 steady. You don't often see scores go a whole lot 4 higher than that. You can see them up closer to 4.00. 5 But here again, anything above that 3.75 mark is really 6 a golden area to be in. So next year when the Auditor's 7 office -- and they've already requested the data -- for 8 the fall produces, there will be another bar with the 9 2012 data on it. 10 The survey is designed to capture various 11 things within the organization, its framework, looks at 12 everything from supervision to pay to training to 13 communication and what have you. And then what we do 14 is, we rank those scores by those various construct 15 areas, and we simply put -- the logic here is the three 16 lowest in red and the three highest in blue. And you 17 can see that the three -- the three lower ones surround 18 the issues of pay. Maybe not surprisingly, that is one 19 of the lower ones for the state, and it has been 20 consistent that way. 21 The idea of diversity, diversity is not 22 defined, though, as race or ethnic or even gender. It's 23 defined as the ability of the agency to work with a 24 variety of aspects within the agency to problem-solve 25 and internal communication. Those three low scores 14 1 typically are those that are the lowest for most state 2 agencies but not exclusively. 3 On the flip side, on the high side, the 4 agency does have a very strong drive towards strategic 5 orientation. They seem to understand their mission and 6 they understand what they're doing and how they're 7 serving the state. They feel as though the organization 8 does a good job externally communicating with its 9 constituencies. And, quite frankly, they like the 10 physical environment, they like the physical plant of 11 the organization. 12 We also look at a climate or a framework 13 within the things like atmosphere, ethics, management, 14 fairness and feedback. We also look at that as well. 15 And what we find -- and again, it's good climate. 16 Atmosphere is seen as very positive, you know, both an 17 ethically performing agency. It's on the lower side for 18 this agency which actually -- for fairness and 19 feedback -- actually, those are the high scores for some 20 agencies, but they're lower ones for this one. 21 And climate management, responsiveness of 22 management is a 3.81, again on a five-point scale. It's 23 a fairly strong performing scale. I did pull out some 24 of the lower scoring items, just kind of a drill-down, 25 to see if you get a sense as to what we asked and what 15 1 employees are concerned about. On the lower scoring 2 side, we do ask three items about pay. The emphasis 3 here on pay and benefits is that those are two things 4 that the auditor asked us to specifically report back to 5 Senate Finance and House Appropriations, so we provide 6 a -- not on agency-specific but overall statewide. So 7 we don't -- if they would ask us, we would tell them the 8 Lottery score, but they want to know how the state is 9 performing on pay and benefit, so we do provide that 10 information back. 11 Pay was really the low one to the agency. 12 The right information gets to the right people at the 13 right time. There is an issue of basic trust amongst 14 employees and supervisors, which scores a little bit 15 lower. That theme carries out for a couple of items. 16 Those are fairly common within there. And also 17 workgroups are trained to incorporate the opinions of 18 each member, and every employee is valued. Those are 19 all on the lower side. 20 On the flip side of it, though -- and this 21 is kind of one of our red flag areas that is not a red 22 flag for your agency -- is, "Harassment is not tolerated 23 in my workplace." That was high scoring. People feel 24 as though it's a safe and harassment-free type of 25 environment. That's excellent. They feel as though 16 1 they have a good understanding of the issues impacting 2 the agency. It's well maintained. They do feel as 3 though they have the resources to do their job. They 4 have access to training opportunities. They have a good 5 understanding of the mission and vision that's very 6 strong. They feel as though, again, the physical plant 7 meets their needs. They feel safe in the work 8 environment. They know how it impacts on others, and 9 they like their benefits plan. That's a fairly common 10 one amongst the state. 11 The surveys that continue a cycle, again, 12 it runs on every two-year cycle that the state has for 13 funding, to where agencies decide to participate and the 14 Lottery has been a long-time participant. And you could 15 see, you know, if we went back a couple of slides, it 16 certainly has gone from a lower level at 2002 to 2004, 17 and has really steadily increased, and I think it has 18 leveled off quite nicely. 19 And so the Lottery has been a long-time 20 participant in the survey. The survey -- and again, you 21 know, we ask that once it goes back to the agency, that 22 they do something with the data, report the data back. 23 I do a lot of these presentations this time of year to 24 commissions and to executive boards and what have you. 25 And then the survey starts again, over and over. 17 1 So that has been the continuous work that 2 we do. Again, from our perspective, the agency is 3 performing strongly and has done consistently over the 4 last couple of years, which is excellent. It doesn't 5 mean there's not always work to do or there's not room 6 for improvement, but it certainly is something that 7 doesn't raise any red flags for me. 8 CHAIRMAN WILLIAMSON: Thank you. 9 Commissioners, do you have any questions 10 or comment? 11 COMMISSIONER KRAUSE: Well, I have a 12 couple of questions. How does our agency compare to 13 private employees? I'm assuming you run these kinds of 14 tests, had the same constructs and things like that for 15 profit-oriented businesses? 16 DR. LANDUYT: We do have some basemarks 17 for profit one. But another basemark that we do have 18 that we don't necessarily -- we don't report that to the 19 state, but we do hold that, is we do have county and 20 city municipalities, which also is a really good 21 comparison, as well as we have regional benchmarks. The 22 state responds differently in different parts of the 23 region. You all are mostly in Austin, a larger city, 24 and it makes a difference if it's in The Valley or the 25 Panhandle. 18 1 The concerns are very much the same. 2 Typically, even in the profit and the non-profit pay and 3 internal communication come off as some of the highest 4 ones. The state scores better on the benefits side. I 5 think it's because the state has still -- knock on wood 6 -- we still maintain that. 7 COMMISSIONER KRAUSE: Well, I was thinking 8 more along the line of I get the right information at 9 the right time in the right way, that kind of thing. 10 DR. LANDUYT: That's a pretty common theme 11 that you find in all organizations. 12 COMMISSIONER KRAUSE: Okay. How do we 13 stack up against private? 14 DR. LANDUYT: Typically, the right 15 information at the right time and the internal 16 communication issues are very similar from private to 17 public, very similar. 18 COMMISSIONER KRAUSE: I guess that's good, 19 isn't it? 20 DR. LANDUYT: It's consistent, you know. 21 COMMISSIONER KRAUSE: Or better than that. 22 I don't know. 23 Thank you. 24 CHAIRMAN WILLIAMSON: Thank you very much. 25 DR. LANDUYT: Oh, you're welcome. 19 1 CHAIRMAN WILLIAMSON: And thank you staff, 2 employees, supervisors, for that upward trend. I think 3 that says a lot. 4 AGENDA ITEM NO. III 5 CHAIRMAN WILLIAMSON: And going to the 6 next item is report, possible discussion and/or action 7 on lottery sales and revenue, game performance, new game 8 opportunities, advertising, market research, trends, 9 game contracts, agreements and procedures. 10 Kathy and Robert, please. 11 MS. PYKA: Good afternoon, Commissioners. 12 My name is Kathy Pyka. I'm the Controller for the 13 Commission. And with me to my right is Robert Tirloni, 14 our Products Manager. 15 Commissioners, the first chart that we 16 have for you this afternoon reflects comparative sales 17 through the week ending June the 2nd of 2012. Total 18 Fiscal Year 2012 sales for this 40-week period are now 19 at $3.21 billion, which is an increase of $268 million, 20 as compared to the value there shown for Fiscal Year 21 2011. 22 Our Fiscal Year 2012 instant ticket sales 23 reflected on the second blue bar are now at 24 $2.35 billion, which is a $161 million increase over the 25 sales figure of $2.2 billion for the previous fiscal 20 1 year. 2 Our draw sales are reflected on the second 3 red bar for this fiscal year now are at $852 million, 4 which is $106 million increase over the $746 million 5 figure for Fiscal Year 2011. 6 Moving to the next slide, this includes 7 our cumulative average daily sales comparison in 8 comparing Fiscal Year 2012 sales to the previous two 9 fiscal years. As we look at the bottom line total on 10 the slide, our fiscal year cumulative average for '12 is 11 now at $11.612 million, which is just over a million 12 dollar increase over the prior fiscal year. 13 And moving to the game category, if we 14 look at the jackpot game subtotal, we're now at 15 $1.9 million. And as we look at that $1.9 million, we 16 can see that we've got increases on every single jackpot 17 game category for Fiscal Year 2012, as compared to the 18 previous fiscal year. 19 Our daily games are included on the chart 20 in the green font. We're now at just over 21 $1.143 million as a daily average. It's a slight 22 increase over Fiscal Year 2011, about a three and a half 23 percent increase over Fiscal Year 2010. But as we look 24 at the highlight there, our Daily 4 sales are at 25 $182,000 as a daily average this fiscal year, which is a 21 1 13.7 percent increase over last fiscal year and a 2 25 percent increase over the previous fiscal year. 3 Moving down to the bottom of the page, our 4 instant ticket sales are at $8.5 million, which is a 5 $613,000 increase over the previous fiscal year and an 6 $825,000 increase over Fiscal Year 2010. So again, 7 bottom line total is at $11.6 million, just over a 8 million dollar increase over the prior fiscal year. 9 So with that, Robert will now give an 10 overview of actual sales. 11 MR. TIRLONI: Good afternoon, 12 Commissioners. For the record, I am Robert Tirloni, 13 Products Manager for the Commission. 14 So this is our fiscal year sales 15 comparison through last Saturday, June 2nd, all good 16 news to report to you today. This slide has got the 17 same layout as the previous slide. Our jackpot games 18 are up at the top in white, and you see Fiscal Year '12 19 is realizing a $103 million increase over Fiscal Year 20 '11, and all of the games are showing an increase. 21 The green in the middle of the slide are 22 our daily products, our daily draw games. A slight 23 decrease on the Pick 3 game. We're down three and a 24 half million in Fiscal '12. Pick 3 Sum It Up is even. 25 And we are seeing very good growth on Daily 4. We're 22 1 seeing a $6 million increase on Daily 4 this fiscal 2 year. All told for the daily draw games, we are up 3 slightly over $3 million. 4 And going to the instant product category, 5 again, we're experiencing very strong instant ticket 6 sales. All of our price points are up for this fiscal 7 year compared to last fiscal year, except for the seven, 8 but that's because we've discontinued the $7.00 price 9 point. 10 So we're seeing good growth across the 11 board. And that is realizing a $161 million sales 12 increase in instants. And so all told, we are up 200 -- 13 or just under $268 million for the fiscal year. 14 MS. PYKA: So we would be happy to answer 15 any questions that you might have. 16 CHAIRMAN WILLIAMSON: Thank you. 17 Commissioners, do you have any questions 18 or comment? 19 COMMISSIONER DELGADO: No. 20 COMMISSIONER KRAUSE: We're craze about 21 these numbers. 22 MS. PYKA: Yes, sir. 23 CHAIRMAN WILLIAMSON: Okay. Thank you. 24 25 23 1 AGENDA ITEM NO. IV 2 CHAIRMAN WILLIAMSON: On to the next item, 3 report, discussion and/or action on transfers to the 4 state. 5 Kathy. 6 MS. PYKA: Thank you. Again for the 7 record, Kathy Pyka, Controller for the commission. 8 Commissioners, the first item in your 9 notebook includes the report of transfers and 10 allocations to the Foundation School Fund, the Texas 11 Veterans Commission and the allocation of unclaimed 12 prizes at the end of April 30th of 2012. 13 Our total cash transfers to the state 14 amounted to $733.8 million through the 8th month of the 15 fiscal year. And as you look at the second page of your 16 notebook tab, of the $733.8 million transfer to the 17 state, $705.7 million was transferred to the Foundation 18 School Fund. Three and a half million dollars was 19 transferred to the Texas Veterans Commission, with a 20 balance of $24.6 million transferred from unclaimed 21 lottery prizes. 22 Commissioners, this represents a 16.16 23 percent increase, or $98.2 million above and beyond what 24 we transferred to the Foundation School Fund last year 25 at this point in time. 24 1 And, Commissioners, the last item in your 2 notebook under this tab includes our cumulative 3 transfers to the Foundation School Fund through April of 4 this fiscal year, which we're now at $14.3 billion. 5 I would be happy to answer any questions. 6 CHAIRMAN WILLIAMSON: Thank you. 7 Commissioners, do you have any questions 8 or comment? 9 COMMISSIONER DELGADO: No, ma'am. 10 COMMISSIONER KRAUSE: No, ma'am. 11 MS. PYKA: Thank you, Commissioners. 12 CHAIRMAN WILLIAMSON: Thank you. 13 AGENDA ITEM NO. V 14 CHAIRMAN WILLIAMSON: The next item is 15 consideration of and possible discussion and/or action 16 on the agency's Strategic Plan for the Years 2013 17 through 2017. 18 Gary. 19 MR. GRIEF: Commissioners, the agency's 20 Strategic Plan covering those Fiscal Years 2013 through 21 '17 is due to the Governor's Office of Budget Planning 22 and Policy and to the Legislative Budget Board on June 23 the 22nd. 24 I provided each of the Commissioners with 25 a draft of our plan a few weeks ago, for your review. 25 1 And I would note that Kathy Pyka, our Controller, 2 presented to you in a previous Commission meeting our 3 agency's proposed goals, objectives and measures related 4 to the Strategic Plan, along with our performance 5 measure definitions. And those are items that will 6 eventually be incorporated into the Strategic Plan, but 7 we're waiting on approval from the LBB and the 8 Governor's office on those items. This is an action 9 item for you today. And I would recommend that you vote 10 to approve the plan as drafted. 11 That concludes my comments, be happy to 12 answer any questions. 13 CHAIRMAN WILLIAMSON: Thank you. 14 Commissioners, any questions or comments 15 before we make a motion? 16 COMMISSIONER KRAUSE: No, ma'am. 17 COMMISSIONER DELGADO: No, ma'am. 18 CHAIRMAN WILLIAMSON: Then someone make a 19 motion. 20 COMMISSIONER KRAUSE: I make a motion that 21 we adopt the Strategic Plan that we've been looking at 22 for a long time. Let's give approval today. 23 CHAIRMAN WILLIAMSON: Do I hear a second? 24 COMMISSIONER DELGADO: Second. 25 CHAIRMAN WILLIAMSON: All in favor? 26 1 COMMISSIONER DELGADO: Aye. 2 CHAIRMAN WILLIAMSON: Aye. 3 COMMISSIONER KRAUSE: Aye. 4 CHAIRMAN WILLIAMSON: Motion passes 3-0. 5 Thank you. 6 AGENDA ITEM NO. VI 7 CHAIRMAN WILLIAMSON: The next item is 8 consideration of and possible discussion and/or action, 9 including adoption, on amendments to 16 TAC 401.355 10 relating to restricted sales. 11 Pete, this is your item. 12 And before we continue, this is Pete's 13 last meeting. He is retiring -- effective when? 14 MR. WASSDORF: The end of this month. 15 CHAIRMAN WILLIAMSON: The end of this 16 month. We will miss you. 17 MR. WASSDORF: Thank you very much. 18 Good afternoon, Commissioners. For the 19 record, my name is Pete Wassdorf. I'm an attorney in 20 the Legal Services Division, and I have an amendment to 21 16 TAC 401.355 relating to restricted sales for your 22 consideration for adoption. 23 You authorized the proposed amendment to 24 be published for public comment in the Texas Register, 25 and it was published in the April 13th edition as well 27 1 as on the Texas Lottery Commission's website. The 2 amendment will add Subparagraph (d) to this rule to 3 provide that retailers shall not sell tickets from a 4 game after the game's closing date. 5 This amendment was initiated at the 6 suggestion of the Commission's internal auditor, and 7 Lottery Operations agreed to the amendment. The purpose 8 of the amendment to is reinforce the prohibition that 9 licensed retailers cannot sell instant tickets after the 10 closing date of the game. 11 The Commission received no written 12 comments from individuals, groups or associations during 13 our public comment period. Staff recommends that you 14 adopt this proposed amendment at this time. 15 CHAIRMAN WILLIAMSON: Okay. Thank you. 16 We already do this in practice anyway, don't we? 17 MR. WASSDORF: Oh, yes. It's -- 18 CHAIRMAN WILLIAMSON: Okay. I thought we 19 did. 20 MR. WASSDORF: It's been part of the rules 21 for a long time, but it was in a different section of 22 the rules than the retailers might have been familiar 23 with. And so in order to bring it to the retailers' 24 attention, it was put over in the restricted sales 25 section. 28 1 CHAIRMAN WILLIAMSON: Okay. So we're just 2 making it easier for them to find it? 3 MR. WASSDORF: Yes. 4 CHAIRMAN WILLIAMSON: Okay. All right. 5 Thank you. 6 Any other questions or comments? 7 COMMISSIONER DELGADO: No, ma'am. 8 CHAIRMAN WILLIAMSON: Is there a motion? 9 COMMISSIONER KRAUSE: I make a motion that 10 we adopt the amendment to 16 TAC, Section 401.355. 11 COMMISSIONER DELGADO: Second. 12 CHAIRMAN WILLIAMSON: All in favor? 13 COMMISSIONER DELGADO: Aye. 14 COMMISSIONER KRAUSE: Aye. 15 CHAIRMAN WILLIAMSON: Aye. 16 Motions passes 3-0. 17 Thank you, Pete. 18 MS. KIPLIN: Commissioners, I have an 19 order adopting this amendment. 20 AGENDA ITEM NO. VII 21 CHAIRMAN WILLIAMSON: All right. While 22 we're doing that, the next item is consideration of and 23 possible discussion and/or action, including proposal, 24 on amendments to 16 TAC 401.152, application for 25 license. 29 1 Kim, this is your item. 2 MS. KIPLIN: Thank you. Commissioners, 3 for your consideration today are proposed amendments to 4 the rule relating to application for license. The 5 purpose of the proposed amendments is to specify that 6 the Commission's Lottery Operations Division Director 7 may cancel an application for a sales agent's license if 8 the applicant fails to provide all the required 9 information. That's required as part of the application 10 and shall not refund the application fee. We're 11 requesting that you initiate the rulemaking today to 12 receive public comment. This proposed rulemaking is an 13 outcome of the Internal Audit review. 14 I would be happy to answer any questions 15 that you have. 16 CHAIRMAN WILLIAMSON: All right. 17 Commissioners, any questions? 18 COMMISSIONER DELGADO: No. 19 COMMISSIONER KRAUSE: No. 20 CHAIRMAN WILLIAMSON: Any comments? 21 Is there a motion? 22 COMMISSIONER KRAUSE: I make a motion that 23 we initiate the rulemaking process for making amendments 24 to 16 TAC, Section 401.152. 25 CHAIRMAN WILLIAMSON: Is there a second? 30 1 COMMISSIONER DELGADO: Second. 2 CHAIRMAN WILLIAMSON: All in favor? 3 COMMISSIONER DELGADO: Aye. 4 CHAIRMAN WILLIAMSON: Aye. 5 COMMISSIONER KRAUSE: Aye. 6 CHAIRMAN WILLIAMSON: The motion passes 7 3-0. 8 MS. KIPLIN: Commissioners, I have a T-bar 9 memo reflecting your vote today. 10 CHAIRMAN WILLIAMSON: All right. Thank 11 you. 12 AGENDA ITEM NO. VIII 13 CHAIRMAN WILLIAMSON: The next item is 14 report, possible discussion and/or action on the 82nd 15 Legislature. Nelda. 16 MS. TREVINO: Good afternoon, 17 Commissioners. For the record, I'm Nelda Trevino, the 18 Director of Governmental Affairs. 19 I have no updates to this particular 20 agenda item, but I'll be glad to answer any questions. 21 CHAIRMAN WILLIAMSON: Commissioners, do 22 you have any questions? 23 COMMISSIONER DELGADO: No, ma'am. 24 COMMISSIONER KRAUSE: No. 25 CHAIRMAN WILLIAMSON: Okay. 31 1 AGENDA ITEM NO. IX 2 CHAIRMAN WILLIAMSON: Then we will 3 continue on to report, possible discussion and/or action 4 on the Sunset review process involving the agency. 5 MS. TREVINO: Commissioners, again for the 6 record, I'm Nelda Trevino, Director of Governmental 7 Affairs. 8 As you are aware, the Sunset Commission 9 met earlier this week, on June the 5th, and the 10 Commission voted unanimously to adopt all the 11 recommendations related to the Lottery Commission 12 contained in the Sunset staff report that was issued in 13 March. Additionally, no new issues were considered or 14 adopted by the Commission. 15 At this time for the record, I would like 16 to note the recommendations that were adopted, and these 17 include the following: Increase the Texas Lottery 18 Commission from three to five public members, require 19 the Lottery Commission to approve major contracts, 20 direct the Commission to approve collection and 21 dissemination of information about contract sanctions, 22 outcome of negotiations and close-out results, require 23 the Lottery Commission to develop a comprehensive 24 business plan, including specifical evaluations of and 25 goals tied to efficiency and performance. 32 1 The House Appropriations and Senate 2 Finance Committee should consider removing bingo prize 3 fees from the agency's bill pattern, remove the fixed 4 bingo license amendment fee from statute and require the 5 Commission to adjust the fee by rule, authorize the 6 agency to charge a fee to cover the cost of adding bingo 7 hall workers to the registry of approved bingo workers, 8 require the agency to use risk analysis to select 9 licensees for bingo inspections and put its inspection 10 policies in rule, require the Commission to develop a 11 goal to audit all highest risk bingo licensees within a 12 certain time frame and put its audit policies in rule. 13 The Commission should re-assess the full 14 cost of bingo regulation and seek to adjust license fees 15 in its legislative appropriations request accordingly, 16 require the Commission to address felony and misdemeanor 17 convictions according to established standards in the 18 Occupations Code, require the agency to create a 19 standard bingo license renewal process and remove the 20 non-standard provision for two-year bingo license fees, 21 remove the statutory fee levels for bingo manufacture 22 and distributor licenses, require the Commission to 23 develop complaint procedures, track, analyze and report 24 complaints and provide more information to bingo 25 licensees, conform the Bingo Act to the Commission's 33 1 current practice of conducting hearings through the 2 State Office of Administrative Hearings, authorize the 3 Commission to place suspended bingo licensees and 4 registered workers on probation, require the Commission 5 to amend its current bingo penalty schedule to include a 6 full range of sanctions, expand the Lottery Commission's 7 authority to temporarily suspend bingo licenses to 8 prevent financial loss to the state, require the 9 Commission to develop complaint procedures, track and 10 analyze complaints and provide better information about 11 what to expect once a complaint is filed, conform the 12 Lottery Act to the Commission's current practice of 13 conducting hearings through the State Office of 14 Administrative Hearings, update and apply standard 15 across-the-board recommendations to the Lottery 16 Commission, abolish the Commission's report on lottery 17 tickets sold and prizes awarded and continue the 18 Commission's other reports and, lastly, and certainly 19 not least, to continue the Lottery Commission for 12 20 years. 21 The next step in the process is, the 22 Sunset bill will be filed that will include these 23 recommendations that were adopted by the Sunset 24 Commission for the full Legislature to consider when 25 they convene in January of 2013. At that point, the 34 1 Agency's Sunset bill will go through the regular 2 standard legislative process. 3 And that basically will conclude the 4 Sunset review for this agency. And this concludes my 5 report, and I will be glad to answer any questions. 6 CHAIRMAN WILLIAMSON: Thank you. 7 Commissioners, do you have any questions 8 or comments? 9 COMMISSIONER DELGADO: No. 10 COMMISSIONER KRAUSE: No. 11 CHAIRMAN WILLIAMSON: Thank you. 12 AGENDA ITEM NO. X 13 CHAIRMAN WILLIAMSON: The next item is 14 consideration of and possible discussion and/or action 15 on external and internal audits and/or reviews relating 16 to the Texas Lottery Commission and/or on the Internal 17 Audit Department's activities, including internal audit 18 on the Retailer Sales Incentive Program. 19 Catherine, this is your item. 20 MS. MELVIN: Yes, ma'am. Thank you, 21 Chairman. Thank you, Commissioner. For the record, 22 Cathy Melvin, Internal Audit Director. 23 This afternoon I've asked Nancy Walden 24 from our office to present our recently completed audit 25 on the Retailer Sales Incentive Program. So if I may, I 35 1 would like to turn that over to Nancy and have her lay 2 out the report. 3 CHAIRMAN WILLIAMSON: Okay. So she's 4 going to do this for you today, huh? 5 MS. MELVIN: Yes, ma'am. 6 CHAIRMAN WILLIAMSON: All right. 7 MS. WALDEN: Good afternoon, Chairman 8 Williamson and Commissioners. My name is Nancy Walden. 9 I am from the Internal Audit Division. 10 Internal Audit has completed a review of 11 the Retailer Sales Incentive Program. During the 81st 12 Legislative session, the agency sought authority to 13 incentivize sales growth in retailer sales performance. 14 And different from other state lottery incentive 15 programs, Texas Lottery Commission felt that it was 16 important to develop a program which tied incentives 17 directly to increasing sales at retailer locations. 18 Authority was granted in Rider 10(b) of 19 the General Appropriations Act for an amount not to 20 exceed an additional one-half of one percent of gross 21 sales. In addition, the agency was required to submit a 22 report outlining the agency's plans for implementing the 23 program, including the projected benefits to lottery 24 sales and state revenues. 25 Internal Audit's review process was 36 1 designed to verify compliance with the Rider 10 -- the 2 requirements outlined in Rider 10, review controls 3 surrounding the implementation of the Retailer Sales 4 Incentive Program to determine whether it met 5 management's overall stated goals and objectives, and to 6 determine whether incentive goals were accurately 7 calculated and program payments were accurately 8 processed. 9 In compliance with the rider, the agency 10 submitted a report to the Governor and to the 11 Legislative Budget Board outlining the agency's plan and 12 the projected benefits. The agency also complied with 13 the appropriation limitation established in Rider 10 in 14 Fiscal Year 2010, as all funds were not expended. Of 15 the $18,350,000 which was budgeted, over $12 million was 16 returned to the Foundation School Fund. 17 However, as Fiscal Year 2011 progressed, 18 management forecasted in the last program run that it 19 would exceed the established appropriation limit in 20 Rider 10. The budgeted amount at the beginning of 21 Fiscal Year 2011 was $18,750,000. In April of 2011, the 22 agency's Controller sought clarification and guidance 23 from the Texas Comptroller of Public Accounts, the 24 Comptroller's office. And based on an interpretation of 25 a transfer mechanism found in Article IX, Section 14.01 37 1 of the Appropriations Act, the agency's Controller 2 transferred funds to cover the over-expenditure. 3 During the course of the audit, 4 Comptroller's Office management confirmed that 5 Rider 10(b) expenditures cannot exceed the additional 6 one-half of one percent of gross ticket sales for each 7 fiscal year. Further, other transfer mechanisms found 8 in the agency's bill pattern or in Article IX of the 9 Appropriations Act do not provide appropriate authority 10 to exceed the established limit in Rider 10. Thus, the 11 agency did exceed its appropriation authority granted in 12 Rider 10(b) in the second year of the biennium by 13 $281,850. 14 Although a limitation existed in the 15 rider, agency management did not instate a cap, or other 16 similar control, to ensure that the payments would not 17 exceed the appropriation limitation. 18 In the last program run launched in Fiscal 19 Year 2011, the agency experienced higher than 20 anticipated participation levels resulting in 21 unprecedented incentive payments, as you can see by this 22 chart. With no changes to the implementation between 23 Program Run 4 and Program Run 5, the agency paid over 24 three times the amount of retailer incentive dollars. 25 Our second audit objective was to 38 1 determine whether management met their stated goals and 2 objectives for the overall Retailer Sales Incentive 3 Program. According to the report submitted to the 4 Governor and the LBB prior to the implementation of the 5 program as required, TLC management stated, "The purpose 6 of the Retailer Sales Incentive Program is to generate 7 additional sales, additional revenue for the Foundation 8 School Fund." In interviews, management also stated 9 their overall goals were to increase the sale of lottery 10 products, generate additional revenue for the Foundation 11 School Fund by rewarding retailers who incrementally 12 increase their sales over a given period. 13 Because sales are only one factor of many 14 that contribute to the overall transfers to the 15 Foundation School Fund, Internal Audit is unable to 16 conclusively say that the program itself generated 17 additional revenue to the Foundation School Fund. 18 Commissioners, here is what I can tell 19 you. I have some charts to show you, so please don't 20 hesitate to ask on them. 21 Internal Audit conducted an independent 22 analysis of sales achieved, retailers who received an 23 incentive payment, and incentive payments awarded. 24 In four of the five program runs 25 conducted, total sales over the previous total sales for 39 1 that same time frame increased. 2 Additionally, total annual sales for 3 Fiscal Years 2010 and 2011 increased over the previous 4 year. 5 Generally the number of retailers who 6 received an incentive payment increased between Program 7 Run 1 and Program Run 5, as to the percentage of 8 retailers receiving an incentive payment to the total 9 number of lottery retailers. 10 And you've seen this chart before, but the 11 total amount of incentive payments awarded also 12 increased. 13 While transfers to the Foundation School 14 Fund increased for Fiscal Year 2009 to Fiscal Year 2010, 15 transfers to the Foundation School Fund decreased in 16 Fiscal Year 2011. 17 Intuitively, an increase in ticket sales 18 should translate to an increase in overall transfers to 19 the state. However, many factors influence the 20 transfers to the Foundation School Fund, only one of 21 which is sales. It is not possible to conclusively 22 determine whether transfers to the Foundation School 23 Fund have been directly increased by the Retailer Sales 24 Incentive Program by itself, since it is only one factor 25 contributing to total lottery sales. Other factors 40 1 include prize payout percentage, concurrent promotions, 2 the effectiveness of our advertising, our lottery 3 product mix and retailer commissions paid. 4 Finally, our third objectives was to 5 determine whether incentive goals were accurately 6 calculated and program payments were accurately 7 processed to all and only eligible retailers. 8 Overall, we found the agency did have 9 controls in place to ensure incentive goals, eligible 10 retailers and program payments were accurately 11 calculated. In addition, our testing of Programs 4 and 12 5 disclosed accurate processing of program payments. 13 Our report includes recommendations to 14 assist the agency in its overall processes and controls 15 related to the Retailer Sales Incentive Program. 16 And this concludes my report. I am 17 available to answer any questions that you may have. 18 CHAIRMAN WILLIAMSON: Thank you. 19 Commissioners, do you have any questions? 20 COMMISSIONER DELGADO: No, ma'am. 21 COMMISSIONER KRAUSE: No, ma'am. 22 MS. MELVIN: Okay. Thank you, Nancy. 23 Appreciate that. 24 Commissioners, I just have one other item 25 related to external audits. We received notice from the 41 1 State Auditor's office that they are returning to 2 perform a follow-up audit on a previously conducted 3 audit related to the Charitable Bingo Operations 4 Division. 5 We held -- or they held an entrance 6 conference with us in May. And at that entrance 7 conference, they indicated that their scheduling is such 8 that they anticipate field work through the end of this 9 month, June, and hopefully expect to release the report 10 in July. We'll see if that timeline holds, but I 11 believe that they're here on -- or they've been here 12 on-site and they're working through their previous 13 findings fairly quickly. 14 And that concludes my presentation. 15 CHAIRMAN WILLIAMSON: All right. Thank 16 you. 17 COMMISSIONER DELGADO: Thank you. 18 AGENDA ITEM NO. XI 19 CHAIRMAN WILLIAMSON: Go on to the next 20 item, report, possible discussion and/or action, 21 including amendments on the agency's advertising 22 services contract. 23 Mike, this is your item, please. 24 MR. FERNANDEZ: Good afternoon, Madam 25 Chairman, Commissioners. My name is Mike Fernandez. 42 1 I'm the Director of Administration. 2 Item No. XI in your agenda book has to do 3 with the staff advising the Commission of our intent to 4 extend our current advertising contract for a period of 5 180 days for close-out purposes. 6 If you have any questions, I would be 7 happy to answer them. 8 CHAIRMAN WILLIAMSON: Commissioners, do 9 you have any questions? 10 COMMISSIONER KRAUSE: No, ma'am. 11 COMMISSIONER DELGADO: No, ma'am. 12 CHAIRMAN WILLIAMSON: All right. Thank 13 you. 14 At this time we will take a five-minute 15 break, and we'll be right back. 16 (Recess: 2:11 p.m. to 2:19 p.m.) 17 CHAIRMAN WILLIAMSON: All right. We're 18 back at 2:19. 19 AGENDA ITEM NO. XII 20 CHAIRMAN WILLIAMSON: The next item is 21 report, possible discussion and/or action on the 22 agency's instant ticket and manufacturing services 23 procurement. 24 Gary, this is your item. 25 MR. GRIEF: Yes, ma'am. Commissioners, I 43 1 am pleased to report to you that our negotiations 2 related to the instant ticket and manufacturing 3 procurement RFP have concluded. To recap the events of 4 this procurement, I'll begin by reminding you that our 5 current contracts for the printing of instant tickets 6 and related services are all combined, the third largest 7 contractual dollar amount managed by the Commission, 8 behind only the lottery operator and the advertising 9 contracts. And our instant ticket contracts currently 10 have an annual value of approximately $19 million. 11 The agency currently has contracts with 12 all three vendors in the industry who are capable of 13 providing the necessary goods and services related to 14 instant tickets: GTECH Printing, Pollard Banknote and 15 Scientific Games. The contracts with all three of those 16 vendors are going to expire August 31st of this year. 17 We began the development process for the 18 new request for proposals several months ago. We 19 gathered RFPs that were issued by other states from 20 across the country. We carefully examined the structure 21 and the approach being used to see if there might be 22 some opportunities for us to improve our procurement 23 methodology. We undertook a careful review of our 24 procurement statutes and rules to determine exactly what 25 the parameters would be for any innovative approach that 44 1 we might want to take with this procurement. And we met 2 formally and individually with all three of our current 3 vendors to seek their input as well on current industry 4 best practices and developments. 5 And at the end of the day, our goal was to 6 structure an RFP that would leverage and build on our 7 current record sales momentum and ensure a continued 8 focus -- and I want to emphasize "a continued focus" -- 9 throughout the life of any contracts that are signed on 10 innovation, customer service, quality ticket production 11 and integrity. To that end, our new requests for 12 Proposals was released on November 7, 2011. And in this 13 RFP, we indeed did take a new approach. 14 Our procurement statutes state in part 15 that our procurement procedures must promote competition 16 to the maximum extent possible and that the Executive 17 Director will act to promote security, integrity, 18 honesty and fairness, with the objective of producing 19 revenue for the State of Texas. In addition, the state 20 purchasing guideline, which is issued by the Controller 21 of Public Accounts, states in part that best value 22 should be a consideration in any statement of work and 23 that lowest price is not necessarily the best value for 24 our procurements. 25 That said, the purpose and the goals of 45 1 the agency, as stated in our instant ticket RFP, were as 2 follows -- and I'm going to cite you just some of the 3 language in our RFP. 4 "In working toward its objective to 5 maximize revenue to the State of Texas through the 6 selection of industry best games and those consistent 7 with the Texas Lottery's current product mix and instant 8 ticket strategy, the Texas Lottery believes that 9 utilizing multiple vendors for instant ticket 10 manufacturing and services promotes competition, 11 optimizes vendor performance and enhances business 12 resumption capabilities. 13 "The Texas Lottery desires to select 14 multiple, successful proposers that demonstrates 15 superior technical quality and service and that offer 16 competitive pricing. The Texas Lottery, through 17 negotiations with all apparent successful proposers, 18 desires to establish common pricing for the goods and 19 services included in the base price and certain 20 specified options, as identified in the sealed cost 21 proposal. 22 "As an incentive to accept the common 23 prices established by the Texas Lottery and at the 24 agency's sole discretion, successful proposers may be 25 offered an opportunity to produce a comparable number of 46 1 games for a set period, again as determined at the sole 2 discretion of the agency, following the contract award. 3 The Texas Lottery, in its sole discretion, will 4 determine the quantity and volume of ticket production 5 awarded to each successful proposer and expressly 6 reserves the right to decrease or increase game orders 7 at its sole discretion, together with other factors, 8 including but not limited to technical quality and 9 customer service. Any proposer that rejects the Texas 10 Lottery's common prices may still be awarded a contract 11 in the Texas Lottery's sole discretion, principally to 12 allow the Texas Lottery to use the proposer's licensed 13 properties proprietary printing process if they are not 14 assured a certain numbers of games." 15 Commissioners, that concludes my reading 16 from the RFP. I want to note that prior to the issuance 17 of this RFP, the agency provided a draft of the RFP to 18 the State of Texas Contract Advisory Team. That's 19 composed of representatives from the Office of the 20 Attorney General, the Controller of Public Accounts, the 21 Department of Information Resources and the Office of 22 the Governor, for their review. The Legislative Budget 23 Board and the State Auditor's office also serve as 24 technical advisers to the Contract Advisory Team. This 25 Contract Advisory Team provided comments and questions 47 1 to us on the draft RFP. 2 And our staff considered, responded to and 3 addressed in the RFP all of those comments and 4 questions, as appropriate. The due date for responses 5 to our RFP was January 27, 2012. And as we expected, we 6 received proposals from all three of our current instant 7 Texas vendors. The Evaluation Committee, which was 8 appointed by me and which is made up of five members of 9 either agency management or those staff directly 10 responsible for the goods and services involved in this 11 procurement, evaluated those proposals under the 12 guidelines that were defined in the RFP, and they scored 13 each proposal based on its technical merits. 14 Once that technical scoring was complete, 15 the cost proposals were then opened. And based on a 16 methodology developed by the agency, the cost scores 17 were added to the technical scores to determine a final 18 score for each proposer. 19 On March 12, 2012, the evaluation 20 committee determined that each proposer that proposed 21 demonstrated superior technical quality and service and 22 that each was offering competitive pricing in their bid 23 costs. The Evaluation Committee recommended to me that 24 I name GTECH Planning, Pollard Banknote and Scientific 25 Games all apparent successful proposers and enter into 48 1 contract negotiations with each of them, and I did just 2 that. 3 Since that time in mid-March, Mike 4 Fernandez, our Administration Director, and I have been 5 engaged in individual discussions and negotiations with 6 each of these three vendors, attempting to establish 7 common prices for the numerous different quantities, 8 sizes, and features related to our scratch-off games, 9 all described in the RFP, that comprise the bulk of our 10 instant printing needs. 11 As the prices of ink and paper, along with 12 overhead, have obviously increased since the current 13 contracts were signed back in September of 2004, the 14 base prices for the goods and services to the Texas 15 Lottery will generally increase across the board, and we 16 will address that general price increase as we develop 17 our legislative appropriations request and our agency 18 operating budget. 19 At this point we have concluded the 20 negotiations with each vendor. And while we have not 21 reached common price on all the targeted pricing 22 components and understanding the complexity of the many 23 different and diverse cost components that come into 24 play, I'm satisfied that we've achieved a level of 25 pricing that will allow us to utilize all three vendors 49 1 and reap the primary benefit of the contractual 2 methodology described in the RFP, which is to promote 3 competition, not just at the time an RFP is released, 4 and which may occur only once every few years, but 5 throughout the life of the contracts each and every day 6 that these vendors provide goods and services to us. 7 The pricing difference between the three 8 proposers is about 11 percent compared in gross dollars. 9 But when you calculate that as a comparison to revenue 10 generated by the sale of instant tickets in Texas, the 11 difference is approximately one quarter of one percent. 12 Once contracts are executed with all three 13 vendors, each of them will be asked to print comparable 14 number of games from what we have labeled the common 15 group of tickets. And ongoing allocation of business to 16 each of those three vendors will be determined by how 17 well they perform in every aspect of their work for us. 18 And that determination and the resulting allocation of 19 business between the three will be at our sole 20 discretion. 21 Based on current plans, the licensed 22 property games, the proprietary games and a small subset 23 of our general game printing needs will continue to be 24 printed by either the vendor who controls the licensed 25 property, the vendor who owns the proprietary product 50 1 or, in the case of that small subset of our general 2 printing needs, the lowest priced vendor. 3 New contracts will be signed with all 4 three vendors, and they will have an initial term of six 5 years, with two unilateral renews available, at our sole 6 discretion, of three years each. Using the approach 7 I've outlined today provides the agency with the maximum 8 flexibility and keeps our focus and the focus of our 9 vendors clearly on revenue generation for the Foundation 10 School Fund. 11 Commissioners, this is not an action item 12 for you. As this is one of our major contracts, I'm 13 just providing you an update on these negotiations and 14 I'm making you aware of my intent to sign contracts with 15 GTECH Printing, Pollard Banknote and Scientific Games, 16 over the next few weeks. 17 That concludes my comments. I would be 18 happy to answer any questions. 19 CHAIRMAN WILLIAMSON: Thank you. 20 Commissioners, do you have any questions? 21 COMMISSIONER KRAUSE: Very innovative. 22 Just thinking about that just started, wanting to 23 contract with all three vendors simultaneously? 24 MR. GRIEF: That in and of itself is not a 25 new concept for us. We've had contracts with all three 51 1 for some time now. The innovative part of this -- and, 2 quite frankly, this is something that is used in the 3 video lottery industry is -- and I'll use this analogy. 4 On the floor of a racino, for example, 5 there are different companies who provide machines on 6 the floor of that racino. Whichever machines provide 7 the most revenue to the location are the ones who get 8 more floor space. So what we're looking at is a similar 9 type approach. Whoever can provide to us innovation, 10 customer service, quality printing and revenue are going 11 to get the better piece of our business. 12 COMMISSIONER KRAUSE: How was it received 13 from the three vendors? They like it, they push back 14 or -- 15 MR. GRIEF: I think they are all very 16 competitive. I think they all welcome the opportunity 17 to compete. Obviously, if you have one vendor who has 18 the bulk of the business now -- and that would be 19 Scientific Games -- they look at this as a reduction 20 down to roughly a third of the business, at least 21 initially. But the great thing about this model is if a 22 vendor truly believes that they can provide quality 23 customer service, great results, innovative games, then 24 all three have an opportunity to garner a bigger share 25 of the business going forward. 52 1 COMMISSIONER KRAUSE: Is there any 2 opportunity to apply this elsewhere in our portfolio of 3 vendors? 4 MR. GRIEF: This is a somewhat unique 5 opportunity for us. 6 CHAIRMAN WILLIAMSON: Okay. 7 MR. GRIEF: It wouldn't work in the 8 lottery operator. It wouldn't really work -- it's very 9 unique for us. 10 CHAIRMAN WILLIAMSON: Okay. 11 Cynthia, do you have any questions? 12 COMMISSIONER DELGADO: No, thank you. 13 CHAIRMAN WILLIAMSON: And I have to 14 embarrass somebody who just walked in. This is my 15 youngest daughter Sara. 16 You have to stand up, dear. 17 (Laughter) 18 SARA: I thought I would add a little 19 color. 20 AGENDA ITEM NO. XIII 21 CHAIRMAN WILLIAMSON: The next item is 22 report, possible discussion and/or action on GTECH 23 Corporation. 24 Gary. 25 MR. GRIEF: Commissioners, other than the 53 1 items that are in your notebook today, I have nothing 2 further to comment on. 3 CHAIRMAN WILLIAMSON: All right. Thank 4 you. 5 AGENDA ITEM NO. XIV 6 CHAIRMAN WILLIAMSON: The next item is 7 report by the Executive Director and/or possible 8 discussion or action on the agency's operational status, 9 agency procedures, awards and FTE status. 10 Gary. 11 MR. GRIEF: Likewise, Madam Chair, other 12 than what's in your notebooks today, I have nothing 13 further to report. 14 CHAIRMAN WILLIAMSON: Commissioners, do 15 you have any questions? 16 COMMISSIONER DELGADO: No, ma'am. 17 COMMISSIONER KRAUSE: No, ma'am. 18 AGENDA ITEM NO. XV 19 CHAIRMAN WILLIAMSON: All right. Moving 20 on to Item XV, this is consideration of and possible 21 discussion and/or action on rulemakings relating to 22 card-minding devices, as each item is specifically 23 identified on the June 7, 2012 open meetings notice. 24 Sandy, this is your item. We'll be taking 25 up several at one time, so Sandy. 54 1 MS. JOSEPH: And I will go through those. 2 CHAIRMAN WILLIAMSON: All right. 3 MS. JOSEPH: For the record, my name is 4 Sandra Joseph, Special Counsel, Legal Services Division. 5 Item XV includes nine bingo rulemaking 6 matters to be considered for adoption today. They are 7 first the repeal of 402.302, Card-Minding Systems, and 8 the adoption of new rules, 402.321, Card-Minding 9 Systems-Definitions; 402.322, Card-Minding Systems-Site 10 System Standards; 402.323, Card-Minding Device Standards 11 402.324, Card-Minding Systems-Approval of Card-Minding 12 Systems; 402.325, Card-Minding Systems-Organizational 13 Requirements; 402.326, Card-Minding Systems-Distributor 14 Requirements; 402.327, Card-Minding Systems-Security 15 Standards; and, finally, 402.328, Card-Minding Systems- 16 Inspections and Restrictions. 17 Numerous comments were received on the 18 proposed rules at a public hearing that was held on 19 February 29, 2012. In response to those comments and 20 further staff review, changes have been made to six of 21 the proposed rules. 22 One of those changes was to include a 23 provision added to Rules .322, .323, .324 and .327, 24 which provides that all card-minding system approvals 25 issued prior to the effective date of these rules would 55 1 remain valid, and any subsequent changes to the 2 card-minding systems would require new approval under 3 the new rules. 4 Because the changes provide clarification 5 and do not impose any additional requirements or 6 restrictions, they do not necessitate re-publication in 7 the Texas Register. 8 The staff recommends adoption of the rules 9 that I've identified and as shown in your notebooks. 10 Staff would be happy to respond to any questions. 11 CHAIRMAN WILLIAMSON: All right. Thank 12 you, Sandy. 13 Now, we do have two witness forms, 14 Mr. Fenoglio and Mr. Anderson. I believe you both were 15 on this item. 16 MS. KIPLIN: And, Commissioners, just -- 17 I'll put this on the record. We've had a comment 18 period, and the comment period has expired. If you 19 receive comment today from anyone that is outside the 20 scope of the comment that we have received under the 21 Administrative Procedure Act, we would be required to 22 summarize that new comment and provide an agency 23 response as part of the preamble of the order y'all 24 would adopt if you actually adopted the order. 25 I have confirmed with Mr. Fenoglio that 56 1 his comment that he wants to provide is within the scope 2 of the comment that has been previously provided. I 3 think the other gentleman -- he can confirm. 4 MR. ANDERSON: I am withdrawing mine. 5 CHAIRMAN WILLIAMSON: Okay; okay. 6 MS. KIPLIN: And so it's your prerogative 7 if you want to receive comment. 8 CHAIRMAN WILLIAMSON: I mean, Steve, 9 you're welcome to make a comment if you like, if we're 10 within the... 11 MR. FENOGLIO: Thank you, Madam Chairman 12 and Commissioners. For the record, my name is Stephen 13 Fenoglio. And my comments will be strictly limited to 14 the comments I made on the record -- they were fairly 15 lengthy -- on February 29, 2012. 16 Assuming adoption -- and I represent, as 17 YOU know, the state VFW members, or the posts, as well 18 as River City Bingo. Assuming adoption of the 19 card-minding rules, I would request on behalf of my 20 clients clarification of Section 402.325, Subparagraph 21 (d). Again, comments were made extensively on this 22 provision. And my comment here, request for 23 clarification is limited to that. 24 The clarification -- and it concerns a 25 cash refund in the way sales of card-minding products 57 1 occur in a bingo hall where there is either (A), a 2 malfunction or (B), a modification. So my question 3 really to Phil, who is going to be enforcing this in 4 audits, if you will, is this provision, 16 TAC 5 402.325(d) would not apply to a card-minding malfunction 6 on a previous sale of the card-minder, No. 1; and then 7 No. 2, would not apply to when a cashier modifies a 8 previous transaction that has been recorded on the point 9 of sale. 10 And so those are my only clarifications. 11 CHAIRMAN WILLIAMSON: So you're just 12 stating again what you had already stated previously? 13 MR. FENOGLIO: Well -- and Mr. Sanderson 14 and his staff did modify the rule in part. But on a 15 go-forward basis, how will the Commission enforce that? 16 And again, we're looking at an audit that might be two 17 or three years after the fact. And it's my belief that 18 the staff would say that that cash refund provision in 19 .325(d) would not apply to, No. 1, a malfunction, the 20 card-minder just stops, and so they have to -- they take 21 the card-minder back and they issue, quote, a credit, 22 but it's not a cash refund; and then, two, if a cashier 23 modifies a previous transaction that he or she recorded. 24 CHAIRMAN WILLIAMSON: Okay. 25 MR. SANDERSON: And I can confirm that 58 1 that's the plan for enforcement of that provision, that 2 the void transactions do not pertain to reloads or 3 malfunctions or for modifications of a previous 4 transaction. 5 One thing we can look at as we move 6 forward, if there appears to be any other confusion in 7 that area, we can look at a petition for rulemaking and 8 make some clarifying language. 9 CHAIRMAN WILLIAMSON: Okay. 10 MR. SANDERSON: I would just ask that in 11 the meantime that, you know, the organizations' key is 12 to document any abnormalities so that they have at least 13 written documentation. 14 CHAIRMAN WILLIAMSON: All right. 15 MR. FENOGLIO: Thank you. And that word 16 will go out. Thank you. 17 CHAIRMAN WILLIAMSON: All right. 18 MS. KIPLIN: I think, just to follow up on 19 Mr. Sanderson, there are a couple of ways that it -- if 20 it turns out on a rulemaking, if there is an ambiguity 21 or some issue with interpretation, one can file petition 22 for rulemaking, but staff can also request that the 23 Commission initiate a rulemaking. 24 CHAIRMAN WILLIAMSON: Okay. All right. 25 Thank you. 59 1 So at this time, is there a motion for 2 each rulemaking? 3 COMMISSIONER KRAUSE: I'm going to make 4 one motion, that we adopt all the staff recommendations 5 for rulemaking, whether it's for repeal or modification 6 or amendment or adoption, that are listed in Item XV of 7 our agenda. 8 CHAIRMAN WILLIAMSON: All right. Is there 9 a second? 10 COMMISSIONER DELGADO: Second. 11 CHAIRMAN WILLIAMSON: All in favor? 12 COMMISSIONER KRAUSE: Aye. 13 CHAIRMAN WILLIAMSON: Aye. 14 COMMISSIONER DELGADO: Aye. 15 CHAIRMAN WILLIAMSON: Motion passes 3-0. 16 MS. KIPLIN: And, Commissioners, I have 17 orders for each of those rulemaking and offer them. 18 AGENDA ITEM NOS. XVI THROUGH XXIII 19 CHAIRMAN WILLIAMSON: The next items, we 20 are going to include XVI through XXIII, and we'll take 21 those up together. These items are consideration of and 22 possible discussion and/or action, including proposal, 23 of amendments to bingo rules as specifically identified 24 in Items XVI through XXIII on the June 7, 2012 open 25 meetings notice. 60 1 Sandy, if you'll continue. 2 MS. JOSEPH: Again for the record, my name 3 is Sandra Joseph, Special Counsel with the Legal 4 Services Divisions. 5 Items XVI through XXIII are bingo 6 rulemaking draft proposals. These proposals result 7 primarily from staff's rule review identifying needed 8 changes for clarification and accurate reflection of 9 current procedure. 10 I will summarize each item and then, in 11 conclusion, offer staff's recommendation to approve 12 initiation of the formal rulemaking process for all of 13 the proposals. If you have any questions during my 14 summarization, please feel free to interject. 15 First of all, Item XVI concerns proposed 16 amendments to Rule 402.100, definitions. The purpose of 17 the proposed amendments in this draft rule is to define 18 the term "state law" and to remove terms that are either 19 defined in the Bingo Enabling Act or in the bingo rules 20 already. 21 Going on Item No. XVII, Item XVII is 22 proposed amendments to Rule 402.103, training program. 23 And the purpose of the amendments is to no longer allow 24 licensed organizations to request the Bingo Division to 25 conduct on-site training at a specific time and 61 1 location. 2 Item -- 3 CHAIRMAN WILLIAMSON: We'll interject if 4 we have questions each time. 5 MS. JOSEPH: All right; all right. Item 6 XVIII is proposed amendments to Rule 402.200, general 7 restrictions on the conduct of bingo. The main purpose 8 of the proposed amendments is to clarify to licensed 9 authorized organizations the written record required if 10 a bingo game continues past the licensed times and that 11 prior to the sale of the pull-tab bingo event ticket 12 game, the licensed authorized organization must specify 13 if the prize to be awarded is not cash. 14 Item XIX, amendments to rule 402.202, 15 transfer of funds. The purpose of these amendments is 16 to specify to licensed authorized organizations when 17 they must inform the Commission of a transfer of funds 18 into the bingo bank account and also to delete the 19 section regarding transferred money being used as net 20 proceeds. 21 Item XX, proposed amendments to Rule 22 402.203, unit accounting. The purpose here is to 23 clarify the requirements, process and timelines a 24 licensed authorized organization must follow related to 25 expending net proceeds in their bingo bank account when 62 1 joining an accounting unit. 2 Item XXI, amendments to Rule 402.204, 3 prohibited price-fixing. The purpose of these 4 amendments is to make the records retention period for 5 documents related to pricing consistent with the 6 retention period required by other bingo administrative 7 rules. 8 Item XXII, proposed amendments to 402.205, 9 unit agreements. The purpose is to provide clear and 10 specific requirements of forming, amending or dissolving 11 an accounting unit. 12 Finally, Item XXIII, amendments to 13 402.600, bingo reports. The purpose is to clarify who 14 may sign a quarterly report, to address penalties for 15 failure to timely file and penalties for insufficient 16 checks for prize fees or rental fees and to provide a 17 timeline for correcting quarterly report exceptions. 18 The submissions that have been prepared 19 for the Texas Register do include notice of public 20 hearing to be held at 10:00 a.m., on Wednesday, July 11, 21 2012. Staff recommends that the Commission initiate the 22 rulemaking process by directing staff to publish the 23 rules in the Texas Register in order to receive public 24 comments for a period of 30 days. 25 We'll be happy to answer any questions. 63 1 CHAIRMAN WILLIAMSON: Thank you. 2 Commissioners, do you have any questions? 3 COMMISSIONER DELGADO: No. 4 COMMISSIONER KRAUSE: No. 5 MR. SANDERSON: Commissioners, I would 6 just like to add that the initial draft of these rules 7 was placed on our website on March the 29th, with an 8 email notification sent to the subscribers of our email 9 list. I did receive two comments. Most of the comments 10 resulted in some changes to those rules. So with that, 11 I feel that we're ready to move forward. 12 CHAIRMAN WILLIAMSON: And I guess my 13 question, as always is, is this going to make y'all's 14 job a little easier and will it save us any time or 15 money in terms of performing our job? 16 MR. SANDERSON: These rules I believe 17 will, because they set out specific timelines for 18 notifications for the majority of those. And with those 19 timelines, it helps reduce some of the programming 20 expenses as long as they comply with those timelines. 21 CHAIRMAN WILLIAMSON: All right. Good. 22 All right. Do I hear a motion? 23 COMMISSIONER KRAUSE: I make a motion that 24 we adopt staff's recommendation to initiate the 25 rulemaking process for those rules that are identified 64 1 in Agenda Items XVI through XXIII, inclusive. 2 CHAIRMAN WILLIAMSON: Second? 3 COMMISSIONER DELGADO: Second. 4 CHAIRMAN WILLIAMSON: All in favor? 5 COMMISSIONER KRAUSE: Aye. 6 CHAIRMAN WILLIAMSON: Aye. 7 Motion passes 3-0. 8 Thank you, Sandra. 9 MS. JOSEPH: Thank you. 10 MS. KIPLIN: Commissioners, I have an 11 order. 12 AGENDA ITEM NO. XXIV 13 CHAIRMAN WILLIAMSON: The next item is the 14 report by the Charitable Bingo Operations Director and 15 possible discussion and/or action on the Charitable 16 Bingo Operations Division's activities, including 17 updates on licensing, accounting and audit activities, 18 pull-tab review, special projects and upcoming operator 19 training. 20 Phil, please. 21 MR. SANDERSON: Commissioners, I have 22 provided previously to you an electronic version of the 23 monthly report for May and also provided you a hard copy 24 for your review. 25 Outside of that, the only thing that I may 65 1 want to add or would like to add is that the North 2 American Gaming Regulators Association will be having 3 their annual conference here in Austin the week of June 4 the 25th through the 29th, at the AT&T Conference 5 Center. 6 Also, along with that, the International 7 Gaming Regulators Associations will have their 8 semi-annual board meeting at the conference as well, so 9 there will be gaming regulators from around the world at 10 this conference. 11 CHAIRMAN WILLIAMSON: That's good. And 12 you are a past officer in that organization. Right? 13 MR. SANDERSON: I currently serve as past 14 president, and I'll leave the board on July the 1st. 15 CHAIRMAN WILLIAMSON: Okay. Well, we look 16 forward to having them here, and we're proud that they 17 came to Austin. I think that's great. 18 MR. SANDERSON: Thank you. 19 CHAIRMAN WILLIAMSON: All right. Thank 20 you. 21 AGENDA ITEM NO. XXV 22 CHAIRMAN WILLIAMSON: Our next item is 23 consideration of the status and possible entry of orders 24 in cases posted on the meeting agenda. 25 MS. KIPLIN: Commissioners, for your 66 1 consideration today are three cases, Letters A, B, C. 2 These are all revocation, recommended revocation of 3 lottery sales agents' licenses for insufficient funds 4 being available at the time that the Lottery swept their 5 accounts for monies owed. Staff recommends that you 6 adopt the order that would revoke their license in each 7 of these cases. 8 CHAIRMAN WILLIAMSON: All right. Are 9 there any questions? 10 Is there a motion? 11 COMMISSIONER KRAUSE: I make a motion that 12 we adopt staff's recommendation on these licensees and 13 go forward that way. 14 CHAIRMAN WILLIAMSON: All right. Is there 15 a second? 16 COMMISSIONER DELGADO: Second. 17 CHAIRMAN WILLIAMSON: All in favor? 18 COMMISSIONER KRAUSE: Aye. 19 CHAIRMAN WILLIAMSON: Aye. 20 Motion passes 3-0. 21 MS. KIPLIN: Commissioners, I have an 22 order. 23 AGENDA ITEM NO. XXVI 24 CHAIRMAN WILLIAMSON: All right. The next 25 item is public comment. And we do have one person 67 1 signed up for that, Dawn Nettles. 2 MS. KIPLIN: And, Commissioners, if I may 3 on the public comment, just as a reminder, your 4 deliberations, if you choose to have any once you 5 receive public comments, since it's not on a 6 specifically noticed item, are really limited to whether 7 you want to post an item for a future agenda Commission 8 meeting. And it has to do with the provisions of the 9 Open Meetings Act and access to the public of your 10 deliberations and the subject matter on those. 11 CHAIRMAN WILLIAMSON: All right. Thank 12 you so much. 13 Dawn. 14 MS. NETTLES: Good afternoon. My name is 15 Dawn Nettles. I'm with the Lotto Report, and I'm from 16 Dallas. 17 And I want to -- since I don't really know 18 you-all very well, I want to explain who I am. In 1993, 19 I began publishing the Lotto Report. And in 1998, I 20 began my website lottoreport.com. And I have been 21 working with this Commission since March of 1993. I 22 worked with both Customer Service, Ron Wilcox, and 23 Steve Levine in Communications. 24 At any rate, this Commission has always 25 bent over backwards to provide me with information for 68 1 my publication and/or my website. And I have -- we've 2 had some changes of the way that I've obtained my 3 information. 4 In 2000, I started tracking sales. And 5 every morning I would call Customer Service, and they 6 would provide me with sales. And then after the Big 3 7 draw during the day, I would call at 12:30 and obtain 8 the sales for the day draw, and I could post the 9 information. I do disseminate this information to the 10 public. 11 And somewhere between 2002-2004, 12 Commissioners Clowe and Cox revised the way I was to 13 obtain my information. And at that time, they issued an 14 order that I was not to call, I did not ever have to 15 call again, that the information -- sales would be sent 16 to me every morning as I called -- had been calling -- 17 and it would be sent to me after the Pick 3 draws during 18 the day by only communications. 19 So we rocked along. I was kind of 20 forward, but they told me, "Do not talk to Customer 21 Service," it would not be a need. I was to only go to 22 Communications. So this has gone real well. 23 Communications has provided me with this information all 24 this time without any problems. We've had a few forgot 25 times or something like that. But overall, I've had an 69 1 excellent rapport on obtaining sales. And then in 2003, 2 when we joined Mega Millions, and I started covering the 3 Mega Millions game, I posted the information for the 4 draw, which included, if the pot was not won, what it 5 would roll to and the cash value option amount. So 6 Communications has provided that information to me all 7 these years without any problem. 8 And several months ago, for some reason, I 9 have been cut off, and I cannot get the information out 10 of the Texas Lottery through the Communications 11 Department. If I call Customer Service, they can't 12 answer my questions. They say they have strict orders 13 that I am to be sent up to Communications or Media 14 Relations now, and then no one in Media Relations will 15 take my phone calls. I do not get a call back. There's 16 four people up there. If I send an email, a third of 17 the time, I get an answer. 18 Last week -- last Tuesday and Wednesday -- 19 or Texas Lottery has now put sales up, so that's not an 20 issue, other than I would like to have the day sales, 21 but I'm waiting until the next morning, and that is 22 fine. 23 But last Tuesday and Wednesday, I did send 24 my typical request for the Mega Millions roll amount and 25 the cash value option amount. I did get an answer, but 70 1 the answer that I got was incorrect. And not that -- it 2 was the cash value option that was not exactly accurate. 3 But I made the same request on Friday, I made it Tuesday 4 of this week, and Wednesday, and I got no response. If 5 I call, I cannot get an answer. 6 So I was forced to come here and to ask 7 you-all. I am a member of the press, recognized by the 8 Attorney General of Texas, and Gary is aware of it. I 9 think everybody is aware of it. I just need my 10 information, and I don't understand why this Commission 11 will not tell me what the roll amounts are or the cash 12 value option. So I'm asking you-all for your assistance 13 or to tell me what it is that I need to do so I can 14 obtain this information and pass it to the public. 15 And that's my comments. 16 CHAIRMAN WILLIAMSON: Okay. 17 Commissioners, do you have any questions? 18 COMMISSIONER KRAUSE: No, ma'am. 19 CHAIRMAN WILLIAMSON: I just have one. 20 MS. NETTLES: Okay. 21 CHAIRMAN WILLIAMSON: Do you charge for 22 that Lotto Report? 23 MS. NETTLES: Yes. 24 CHAIRMAN WILLIAMSON: Okay. So people pay 25 to access that information? 71 1 MS. NETTLES: They would pay for this 2 (indicating hard copy of Lotto Report). 3 CHAIRMAN WILLIAMSON: Right. Okay. 4 But -- 5 MS. NETTLES: My website, of course, is 6 free. 7 CHAIRMAN WILLIAMSON: Okay. All right. 8 We'll look into this. 9 MS. NETTLES: I would appreciate it. 10 CHAIRMAN WILLIAMSON: All right. 11 MS. NETTLES: Thank you. 12 CHAIRMAN WILLIAMSON: Thank you. 13 AGENDA ITEM NO. XXVII 14 CHAIRMAN WILLIAMSON: At this time I move 15 the Texas Lottery Commission go into executive session 16 to deliberate the duties and evaluation of the Executive 17 Director, Internal Audit Director and Charitable Bingo 18 Operations Director, and to deliberate the duties of the 19 General Counsel and Human Resources Director, pursuant 20 to Section 551.074 of the Texas Government Code and to 21 receive any legal advice regarding pending or 22 contemplated litigation pursuant to the appropriate 23 sections in the Texas Government Code. 24 Is there a second? 25 COMMISSIONER DELGADO: Second. 72 1 CHAIRMAN WILLIAMSON: All in favor? 2 COMMISSIONER KRAUSE: Aye. 3 CHAIRMAN WILLIAMSON: Aye. 4 COMMISSIONER DELGADO: Aye. 5 CHAIRMAN WILLIAMSON: The vote is 3-0. 6 The Texas Lottery Commission will go into executive 7 session. The time is 2:55 p.m. Today is June 7, 2012. 8 (Off the record for executive session: 9 2:55 p.m. to 3:25 p.m.) 10 AGENDA ITEM NO. XXVIII 11 CHAIRMAN WILLIAMSON: The Texas Lottery 12 Commission is out of executive session. The time is 13 3:25 p.m. 14 There is no action as a result of the 15 executive session. 16 AGENDA ITEM NO. XXIX 17 CHAIRMAN WILLIAMSON: So is there a motion 18 to adjourn? 19 COMMISSIONER DELGADO: I move that we 20 adjourn. 21 CHAIRMAN WILLIAMSON: Is there a second? 22 COMMISSIONER KRAUSE: Second. 23 CHAIRMAN WILLIAMSON: All in favor? 24 Aye. 25 COMMISSIONER DELGADO: Aye. 73 1 COMMISSIONER KRAUSE: Aye. 2 CHAIRMAN WILLIAMSON: Motion passes 3-0. 3 (Commission meeting adjourned: 12:36 p.m.) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 74 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF TRAVIS ) 4 I, Aloma J. Kennedy, a Certified Shorthand 5 Reporter in and for the State of Texas, do hereby 6 certify that the above-mentioned matter occurred as 7 hereinbefore set out. 8 I FURTHER CERTIFY THAT the proceedings of 9 such were reported by me or under my supervision, later 10 reduced to typewritten form under my supervision and 11 control and that the foregoing pages are a full, true 12 and correct transcription of the original notes. 13 IN WITNESS WHEREOF, I have hereunto set my 14 hand and seal this 18th day of June 2012. 15 16 17 ________________________________ 18 Aloma J. Kennedy Certified Shorthand Reporter 19 CSR No. 494 - Expires 12/31/12 20 Firm Registration No. 276 Kennedy Reporting Service, Inc. 21 1016 La Posada Drive, Suite 294 Austin, TX 78752 22 512.474.2233 23 24 Job No. 101430 25