0001 1 TRANSCRIPT OF PROCEEDINGS 2 BEFORE THE 3 TEXAS LOTTERY COMMISSION 4 AUSTIN, TEXAS 5 COMMISSION MEETING ) 6 FOR THE TEXAS ) LOTTERY COMMISSION ) 7 8 9 10 COMMISSION MEETING 11 FEBRUARY 8, 2018 12 9:00 a.m. 13 AT 14 TEXAS LOTTERY COMMISSION 15 611 East 6th Street Austin, Texas 78701 16 17 18 19 20 21 22 23 24 25 0002 1 APPEARANCES 2 CHAIRMAN: J. Winston Krause 3 COMMISSIONERS: Doug Lowe Carmen Arrieta-Candelaria 4 Robert Rivera 5 GENERAL COUNSEL: Robert F. Biard 6 EXECUTIVE DIRECTOR: Gary Grief 7 CHARITABLE BINGO OPERATIONS DIVISION DIRECTOR: Alfonso D. Royal III 8 MANAGING ATTORNEY: Ryan S. Mindell 9 CONTROLLER: Katheryn J. Pyka 10 PRODUCTS MANAGER: Robert Tirloni 11 McCONNELL JONES 12 LANIER & MURPHY, LLP: Darlene Brown 13 PRODUCTS & DRAWINGS MANAGER, LOTTERY OPERATIONS DIVISION: Robert Tirloni 14 15 16 17 18 19 20 21 22 23 24 25 0003 1 TABLE OF CONTENTS PAGE 2 I The Texas Lottery Commission will call the 3 meeting to order Pledge of Allegiance to the U.S. and Texas 4 flags . . . . . . . . . . . . . . . . . . . 7 5 II Report, possible discussion and/or action on agency major contracts, including approval to 6 execute contract for drawing studio and production services (RFP No. 362-18-0001) 17 7 III Consideration of and possible discussion 8 and/or action, including adoption, on amendments to 16 TAC §401.317 (“Powerball®” 9 On-Line Game Rule) . . . . . . . . . . . XX 10 IV Consideration of and possible discussion and/or action, including adoption, on 11 amendments to 16 TAC §401.305 (“Lotto Texas” On-Line Game Rule). . . . . . . . . . . . XX 12 V Consideration of and possible discussion 13 and/or action, including proposal, on new 16 TAC §403.800 (Savings Incentive 14 Program) . . . . . . . . . . . . . . . . 17 15 VI Report, possible discussion and/or action on lottery sales and revenue, game performance, 16 new game opportunities, advertising, promotional activities, market research, 17 trends, and game contracts, agreements, and procedures . . . . . . . . . . . . . . . 21 18 VII Report, possible discussion and/or action on 19 transfers to the State and the agency’s budget status . . . . . . . . . . . . . . 24 20 VIII Report, possible discussion and/or action on 21 external and internal audits and/or reviews relating to the Texas Lottery Commission, 22 and/or on Internal Audit activities . . . 26 23 IX Report by the Charitable Bingo Operations Director and possible discussion and/or 24 action on the Charitable Bingo Operations Division’s activities, including licensing, 25 accounting and audit activities, pull-tab 0004 1 review, and special projects . . . . . . XX 2 X Report by the Executive Director and possible discussion and/or action on the agency’s 3 operational status, major contracts, agency procedures, awards, and FTE status . . . 27 4 XI Consideration of the status and possible 5 approval of orders in enforcement cases and other matters: . . . . . . . . . . . . . XX 6 Lottery NSF License Revocation Cases (Default) A. Docket No. 362-18-0962 – Southmost Stop 7 B. Docket No. 362-18-0963 – Jag’s #1 C. Docket No. 362-18-0965 – On Point 8 D. Docket No. 362-18-1156 – Sambih’s Food Mart 9 Lottery Agreed Orders E. Case No. 2017-1471 – Imperial Food Mart 10 F. Case No. 2018-177 – Star Stop 50 Lottery License Revocation and/or Denial Cases 11 G. Docket No. 362-17-5926 – Tulson Corner Mart (Default) 12 Bingo Agreed Orders H. Case No. 2017-720 – All Star Leasing, Inc. 13 (Lessor) I. Case No. 2017-772 – Dallas Rocky Top 14 Enterprises, Inc. (Lessor) J. Case No. 2017-1475 – Paul Hassell (Bingo 15 Worker) K. Case No. 2017-1521 – Rachel Hill (Bingo 16 Worker) L. Case No. 2018-157 – American Gi Forum 17 Miguel Hernandez Memorial 2 Bingo License Revocation and/or Denial Cases 18 M. Docket No. 362-17-5424.B – Amvets Post 52, Inc. 19 N. Docket No. 362-18-0243.B – Pharr Crime Stoppers, Inc. 20 O. Docket No. 362-18-0728.B – Dallas County REACT, Inc. (Default) 21 Other P. Nunc Pro Tunc Order – Regarding December 22 7, 2017 adoption of amendments to 16 TAC §401.160 (Standard Penalty Chart) 23 XII Public comment . . . . . . . . . . . . . 27 24 XIII Commission may meet in Executive Session: 14 25 A. To deliberate personnel matters, including 0005 1 the appointment, employment, evaluation, reassignment, duties, discipline, or 2 dismissal of the Executive Director and/or the Charitable Bingo Operations Director 3 pursuant to §551.074 of the Texas Government Code. 4 B. To deliberate the duties of the General 5 Counsel and/or the Human Resources Director pursuant to §551.074 of the Texas Government 6 Code. 7 C. To receive legal advice regarding pending or contemplated litigation or settlement 8 offers, or other legal advice, pursuant to §§551.071(1) and (2) of the Texas Government 9 Code, including but not limited to legal advice regarding the following items: 10 Pending and potential litigation regarding Fun 5’s Scratch Ticket Game #1592, including 11 Travis Co. District Court Cause No. D-1-GN-14-005114, Third District 12 Court of Appeals Cause No. 03-16-00172-CV (Steele, et al. v. GTECH Corp.); and Dallas 13 Co. District Court Cause No. DC-14-14838, Fifth District Court of Appeals 14 Cause No. 05-15-01559-CV (Nettles v. GTECH Corp. and Texas Lottery Commission). 15 Julam Investments, Inc. v. Texas Lottery Commission (Travis Co. District Court Cause 16 No. D-1-GN-16-006124) State of Texas v. Equal Employment 17 Opportunity Commission et al. Legal advice regarding Texas Government Code 18 Chapters 466 (State Lottery Act) and 467, the Bingo Enabling Act, the Open Meetings Act, 19 the Public Information Act, the Administrative Procedure Act, employment and 20 personnel law, procurement and contract law, evidentiary and procedural law, ethics laws, 21 and general government law. Legal advice regarding any item on this open 22 meeting agenda. 23 XIV Return to open session for further deliberation and possible action on any 24 matter posted for discussion in Executive Session. Any matter posted for Executive 25 Session also may be the subject of discussion 0006 1 and/or action in open session prior to Executive Session . . . . . . . . . . . . 28 2 XV Adjournment . . . . . . . . . . . . . . . 28 3 Reporter's Certificate . . . . . . . . . . . . . . 30 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0007 1 P R O C E E D I N G S 2 AGENDA ITEM I 3 CHAIRMAN KRAUSE: Good morning. I'm 4 calling this meeting of the Texas Lottery Commission to 5 order; February the 8th. The clock says it's 9:01, my 6 watch says it is one minute 'til 9:00. So anyway, 7 we're going to split the difference and start. 8 We have all of our Commissioners here. 9 Of course, we have one vacancy, but we still have a 10 quorum. We start off by honoring the flags that we 11 represent. 12 (Pledges recited) 13 CHAIRMAN KRAUSE: We're going to start 14 off this fine morning by hearing from our Executive 15 Director Gary Grief. 16 MR. GRIEF: Thank you, Mr. Chairman and 17 good morning, Commissioners. Other than what's in your 18 notebooks this morning, I only have one additional item 19 to report on. I'm going to need the help of Michael 20 Anger, our Lottery Operations Director, so I'd ask him 21 to come to the front. 22 So Commissioners, it's with great pride, 23 but also a deep sense of personal and professional 24 loss, that I want to announce that Michael, our 25 Director of Lottery Operations, has decided to retire 0008 1 from the Texas Lottery effective at the end of March. 2 Almost 23 years ago, it was the summer of 1995, I was 3 working here at the Agency in the position of statewide 4 claim center manager and the Texas Lottery, we were 5 still in our infancy. We were only three years into 6 the birth of the lottery. And there was an opening in 7 our Austin claim center for a claims specialist. And 8 we were conducting interviews for that position and 9 into our office strode a young man who was named 10 Michael Anger, who I immediately could tell was very 11 bright and extremely well-spoken. 12 Michael had graduated from the 13 University of Texas just four years prior to 14 interviewing for the job here at the Lottery and he 15 indicated on his application and we talked about this 16 in the interview, that he had spent those four years 17 since he got out of college, thinking about being an 18 entrepreneur and starting up his own business here in 19 Austin. But he explained to me during that interview 20 that the right opportunity, the right business, had 21 really not come along, and so he was now ready -- and 22 when Michael makes a decision he makes a firm one -- he 23 was now ready to seek steady employment. 24 So I hired Michael for that position and 25 he immediately went about impressing his supervisor and 0009 1 his coworkers, not only with his very strong work ethic 2 and his ability to handle any task that he was given, 3 but also with his general approach to life. 4 Michael's always been kind and friendly 5 to everyone that he met, but at the same time, it was 6 clear to see that he was focused and he was ambitious. 7 And after working in the Austin claim 8 center for about two years, Michael was promoted; this 9 time to a different type of position within the Lottery 10 organization, a very challenging position, one that 11 dealt with our more than 17,000 retailers, ensuring 12 that all of our retailers were in compliance with the 13 Americans With Disabilities Act. That's a requirement 14 in our statute and the politics of the day placed a 15 remarkable amount of attention and scrutiny on that 16 particular part of our business. 17 Michael, along with Robert Tirloni at 18 the time, they were the two key staff members who were 19 involved in that important initiative. And Michael 20 once again excelled and he exceeded all of our 21 expectations. 22 About two years later, Michael was 23 promoted again. This time back into the claim center 24 supervisor position. And he had great success in that 25 role. He honed his management skills, he developed an 0010 1 amazing sense of detail, and when you are responsible 2 for handling the payout of millions of dollars in 3 prizes to players at 24 different locations across the 4 state, there is no room for error. And Michael became 5 a star in that role. 6 He also became a troubleshooter of sorts 7 for us, helping us to reorganize the Lottery Operations 8 Division and it significantly helped improve our 9 efficiency in that Division. 10 About three years later, we're in 2002 11 now, the Agency was in the midst of some turmoil and I 12 was unexpectedly put into the role of Acting Executive 13 Director, moving up from the Lottery Operations 14 Director Role. We had to move quickly to fill my 15 position, and I needed someone I could absolutely count 16 on, someone who could perform that role with integrity, 17 would keep the State of Texas foremost in our interest, 18 and also operate with a great deal of independence. 19 Michael was and he is, that person. 20 Since that day in September of 2002, when Michael was 21 promoted to Lottery Operations Director, we've managed 22 to put together a senior management team that I would 23 be very comfortable managing any Fortune 500 company 24 with. 25 I look around the room, Nelda Trevino, 0011 1 Kathy Pyka, Mike Fernandez, Mario Valdez, Bob, Kelly 2 Cripe, Jan Thomas our HR Director, these are 3 experienced, savvy, professionals who not only have the 4 expertise and the skills necessary to perform their 5 jobs, but they've also got that "it" factor. It's an 6 attribute that's hard to describe, but it's that 7 ability to effectively deal with anyone, from customers 8 to frontline staff, to colleagues, to Commissioners, to 9 Legislators. It also gives them the ability to 10 intuitively know when something is not quite right, 11 when more thought or review is needed on a particular 12 matter. That attribute is invaluable and it turns a 13 good organization into a great organization. And the 14 team that we've put here is very strong, but Michael 15 was my very first hire into a Division Director role 16 and that makes him very special to me. 17 He's the best I've ever seen at making 18 sure that every detail and angle of a project are taken 19 care of. He is conscientious beyond compare. He is 20 careful and thoughtful, while at the same time, he is 21 discerning and he is decisive. 22 He handles his Division budget like it 23 was his very own money. There is no one who is a 24 better steward of state funds. 25 He communicates clearly and he 0012 1 communicates in laymen's terms where everyone can 2 understand him, both up and down within his 3 organization, with his colleagues, his fellow 4 directors, and really with everyone that he comes in 5 contact with. 6 He personifies all that it takes to 7 survive and thrive in a legalized gaming environment. 8 I'm very proud to have him as a colleague and a partner 9 for these many years, but I'm even more proud to have 10 him as a friend. 11 We wish Michael the very best in his 12 retirement. He and his lovely wife Melissa are going 13 to start out their new adventure by taking a very short 14 hiking trip on the Pacific Crest Trail; a trip that 15 will take six months and will span 27,000 miles. 16 Michael calls that a vacation, I call it a death 17 sentence. But that demonstrates the level of adventure 18 that Michael and Melissa possess. 19 Commissioners, Michael will forever, and 20 should be linked forever, to the record-breaking 21 success of the Texas Lottery. The State of Texas is in 22 a better place because of him. 23 His positive impact on this Agency is 24 going to be felt for years to come and we will miss him 25 and I will miss him greatly. We wish you the very 0013 1 best, Michael. That concludes my report. 2 CHAIRMAN KRAUSE: All right. 3 (Applause) 4 MR. ANGER: Thank you very much. Thank 5 you. 6 If I could, you know, I want to say that 7 it has been my great honor and privilege to serve the 8 citizens of Texas for nearly 23 years, to work for this 9 fantastic Agency, to work for Gary. 10 Gary took an interest in me and my 11 career very early on in my tenure at this Agency and he 12 took a flyer on me a couple of times along the way and 13 in giving me opportunities in this organization and 14 I've worked hard to hopefully live up to those 15 expectations. But this is a wonderful place. The 16 people here are fantastic and I think that's the most 17 important part. 18 The people that I've had the opportunity 19 to work with everyday and the people that make sure 20 that this Agency does the things that the State wants 21 us to do, both for our customers, for the Legislators, 22 and for you, quite honestly. It's been my honor to 23 serve this Commission and serve you and I'm going to 24 greatly miss everyone here, and I'm really grateful for 25 the opportunities that I've had here. I know there 0014 1 will be tremendous future successes and I will be on 2 the sidelines cheering and looking forward to watching 3 for those. So thank you for everything. 4 CHAIRMAN KRAUSE: Thank you. 5 AGENDA ITEM XIII 6 CHAIRMAN KRAUSE: After that poignant 7 moment, we're going to move on to the next item and we 8 are going to go into Executive Session. So I move the 9 Texas Lottery Commission go into Executive Session and 10 deliberate on personnel matters and receive legal 11 advice as posted in the open meetings notice. Is there 12 a second? 13 COMMISSIONER RIVERA: Second. 14 CHAIRMAN KRAUSE: All right. All in 15 favor say aye. 16 (Chorus of "Ayes") 17 CHAIRMAN KRAUSE: We are at Executive 18 Session, unanimous vote, and we're going in, it looks 19 like, at, according to my watch 9:11. 20 (Executive Session begins and 9:10 a.m.; 21 Meeting reconvenes at 10:49 a.m.) 22 CHAIRMAN KRAUSE: All right. The Texas 23 Lottery Commission is out of Executive Session at 10:50 24 a.m. There is no action to be taken as a result of the 25 Executive Session. 0015 1 AGENDA ITEM XI 2 CHAIRMAN KRAUSE: We are going to go out 3 of order on our agenda and we're going to move straight 4 to the enforcement actions because one of our 5 Commissioners has got a timing issue and so we want to 6 get those done before Mr. Rivera has to leave us. And 7 when he does we will still have a quorum. So Bob? 8 MR. BIARD: Thank you, Commissioners. 9 For the record, I'm Bob Biard, General Counsel. 10 Commissioners, first we'll take up Item 11 XI, which contains 15 Lottery and Bingo enforcement 12 matters. And I -- the last tab in this batch today is 13 a rule correction order that's called a nunc pro tunc 14 order, which corrects an administerial error in the 15 December Lottery rules order that you signed. 16 If you've reviewed the matters in your 17 notebook, you're welcome to take these all up in a 18 single vote if you like. They're tabs A through P. 19 CHAIRMAN KRAUSE: Absolutely, please. 20 Okay. Well, move for approval? 21 COMMISSIONER ARRIETA-CANDELARIA: 22 Second. 23 CHAIRMAN KRAUSE: No -- yeah. Do we 24 have a motion? 25 COMMISSIONER RIVERA: I'll move. 0016 1 COMMISSIONER ARRIETA-CANDELARIA: He 2 just moved. 3 CHAIRMAN KRAUSE: All right. Well -- 4 COMMISSIONER ARRIETA-CANDELARIA: 5 Second. Robert moved. 6 CHAIRMAN KRAUSE: All in favor say aye. 7 (Chorus of "Ayes") 8 CHAIRMAN KRAUSE: I like that process. 9 I think we're going to use that more. 10 AGENDA ITEMS III AND IV 11 MR. BIARD: And Commissioners, I have -- 12 there's three rule orders I wanted to bring to your 13 attention. I know that Commissioner Rivera has to 14 leave. And they are Items III, IV and V; III and IV 15 are both rule change -- rule adoptions for the 16 Powerball rule changes and Lotto Texas rule changes 17 which you all considered two meetings ago, and those 18 are ready for adoption as well. 19 COMMISSIONER RIVERA: Move for approval. 20 COMMISSIONER ARRIETA-CANDELARIA: 21 Second. 22 CHAIRMAN KRAUSE: All in favor say aye. 23 (Chorus of "Ayes") 24 CHAIRMAN KRAUSE: Approved. 25 AGENDA ITEM V 0017 1 MR. BIARD: Item V is a new rule 2 proposal that we're having to put forth pursuant to 3 legislation that was passed last session that requires 4 agencies to have a savings incentive program. And 5 we're doing this, even though this Agency does not 6 receive non-dedicated general revenue, we have a 7 direction from the Legislature that we need to adopt 8 this rule anyway. So this is up for proposal. 9 COMMISSIONER RIVERA: Move for approval. 10 COMMISSIONER LOWE: Second. 11 CHAIRMAN KRAUSE: All right. I heard 12 that second. All in favor say aye? 13 (Chorus of "Ayes") 14 AGENDA ITEM II 15 MR. BIARD: And the last action item 16 that you have today is Item Number II, which is the 17 drawing studio production services contract. 18 COMMISSIONER RIVERA: Move for approval. 19 COMMISSIONER LOWE: Second. 20 COMMISSIONER RIVERA: Oh, I'm sorry. 21 I'm sorry. You were going to -- it's the same 22 organization, right? No -- right? I -- have they done 23 a good job? 24 MR. GRIEF: Mr. Chairman, Commissioner, 25 if I could, I think Mike can in 30 seconds give you the 0018 1 gist of this item. I think it's important to get that 2 on the record. 3 COMMISSIONER RIVERA: Yeah, I'm sorry, 4 Mike. I didn't see you coming up, so yeah, we knew it 5 was the same organization. 6 CHAIRMAN KRAUSE: They were on a roll 7 there. 8 COMMISSIONER RIVERA: Yeah. 9 MR. FERNANDEZ: I don't want to slow 10 down progress. Good morning, Commissioners. 11 For the record, my name is Mike 12 Fernandez, I'm the Director of Administration. Item II 13 is an action item in your notebook. Staff is seeking 14 Commission approval to execute a contract with the 15 incumbent Elephant Productions for drawing studio and 16 production services to the broadcast or the continued 17 broadcast of all the Texas Lottery draw games. 18 That's all I have, Commissioners. 19 COMMISSIONER RIVERA: Alrighty. 20 MR. FERNANDEZ: And that requires a 21 vote. 22 COMMISSIONER RIVERA: I think -- 23 CHAIRMAN KRAUSE: We already have a 24 motion and a second, so all in favor say aye. 25 (Chorus of "ayes") 0019 1 CHAIRMAN KRAUSE: There you go. 2 MR. GRIEF: They're doing a great job. 3 MR. BIARD: Commissioners, I did want to 4 mention one thing that occurred to me on the 5 enforcement matters; that Mr. Fenoglio did indicate 6 that he wanted -- would like to make comments on Tab M, 7 which is the AmVets Post 52, Inc., if you'd want to 8 consider that. And in which case, you know, you have 9 an opportunity to undo the vote you took on that item 10 if you want to reconsider it. 11 CHAIRMAN KRAUSE: Well, I'll tell you 12 what, why don't we hear from Mr. Fenoglio, and if it 13 makes a difference we will re-vote on that. How about 14 that? 15 COMMISSIONER ARRIETA-CANDELARIA: This 16 is M? 17 MR. FENOGLIO: Thank you, Commissioners. 18 I have been turned on; thank you, Commissioners. 19 I think I see where the head -- the 20 winds are blowing, so I'll be very brief. AmVets, we 21 believe, is entitled to a continuation of its license. 22 By the way, the bingo hall has since shuttered because 23 of some financial issues and they do not have a 24 business plan to reopen yet, but AmVets has had a 25 license for about 25 years and it's kind of important 0020 1 to them to maintain it. 2 We had offered to shutter the license as 3 opposed to having it revoked, so -- but I understand 4 the time is short. 5 CHAIRMAN KRAUSE: All right. 6 COMMISSIONER LOWE: Is that a 7 possibility, Bob? 8 MR. BIARD: Well -- 9 CHAIRMAN KRAUSE: Would it be better if 10 we vote on that next time? 11 MR. BIARD: -- Mr. Fenoglio could file a 12 motion for rehearing if you'd like to. 13 MR. FENOGLIO: I'll do that. 14 CHAIRMAN KRAUSE: All right. 15 MR. FENOGLIO: I understand y'all have 16 got some time constraints. 17 COMMISSIONER RIVERA: I'm okay with it, 18 meaning so you would speak on this now or? 19 MR. FENOGLIO: I can either speak now or 20 we can do a motion for rehearing when you have more 21 time. 22 MR. BIARD: And bring it back to the 23 April meeting. 24 MR. FENOGLIO: Why don't I bring it 25 back? 0021 1 CHAIRMAN KRAUSE: Okay. Bring it back. 2 COMMISSIONER RIVERA: I do appreciate 3 it. 4 MR. FENOGLIO: Thank you. 5 CHAIRMAN KRAUSE: Okay. 6 MR. BIARD: Those are all the action 7 items. 8 CHAIRMAN KRAUSE: All right. Thank you, 9 Commissioner Rivera. 10 (Commissioner Rivera excused from remainder 11 of the meeting at 10:54 a.m.) 12 AGENDA ITEM VI 13 MR. BIARD: Commissioners, I believe the 14 next item would be Tab VI, I believe. 15 COMMISSIONER ARRIETA-CANDELARIA: Yes, 16 sir. 17 CHAIRMAN KRAUSE: Tab VI. All right. 18 Well, we have adoptions of Lottery rule changes. 19 COMMISSIONER ARRIETA-CANDELARIA: No. 20 CHAIRMAN KRAUSE: That's not it? 21 COMMISSIONER ARRIETA-CANDELARIA: Number 22 VI. 23 CHAIRMAN KRAUSE: Report, possible 24 discussion and/or action on Lottery sales and revenue. 25 Kathy Pyka. 0022 1 MS. PYKA: Good morning, Commissioners. 2 My name is Kathy Pyka, Controller for the Commission. 3 With me this morning is the Commission's products 4 manager Robert Tirloni. 5 Commissioners, the first chart that we 6 have for you this morning reflects our comparative 7 sales through the week ending February 3rd of 2018. 8 Total fiscal year 2018 sales through this 23 week 9 period are $2,298,000,000, which is an increase of 10 $246-million over last fiscal year, and that represents 11 a 12 percent growth over last fiscal year's sales. 12 Our scratch ticket sales reflected on 13 the second orange bar are $1,788,000,000, which is a 14 $177-million increase over fiscal year '17, 15 Commissioners, with a growth rate of over 11 percent 16 over last fiscal year. 17 We've reported scratch ticket sales 18 growth in every week of this fiscal year. Scratch 19 ticket sales amount to 78 percent of our total sales 20 for this period. 21 Our draw sales reflected on the second 22 blue bar are $510-million, which is a $68-million gain 23 or 15 percent over last fiscal year. And the draw game 24 sales growth is attributed to both the Powerball and 25 Mega Millions jackpot rolls that we had at the 0023 1 beginning of this calendar year. 2 So with that, Robert will now provide an 3 overview of detailed sales by game. 4 MR. TIRLONI: Thanks, Kathy. Good 5 morning, Commissioners. 6 So this next slide is the one you're 7 used to seeing. We've got the jackpot games at the 8 top. We're seeing a $65-million gain from the jackpot 9 portion of the portfolio. Good healthy gains from Mega 10 Millions and Powerball; $34-million gain from Mega and 11 almost $27-million from Powerball. 12 At the beginning of January, Powerball 13 rolled up to a $570-million jackpot and Mega Millions 14 rolled up to a $450-million. So good news there. 15 It's good to see some of our other 16 smaller in-state games also seeing a lift. 17 The blue in the middle is the daily 18 games. We're seeing a $3.3-million gain year over year 19 from the daily games. Most of that growth is coming 20 from Daily 4, that's the trend that we have been 21 seeing. Again, some good news. We're seeing the add- 22 on games for Pick 3 and Daily 4 showing an increase. 23 All or Nothing is holding its own. Some slight 24 decreases from some of the other products. 25 All told, draw games are up just over 0024 1 $68-million and as Kathy mentioned, we're having a 2 phenomenal scratch ticket year. We're up $177-million 3 on scratch and so all told, the portfolio is up just 4 over $245-million. This is through last Saturday, 5 February 3rd. 6 And that's the presentation and we're 7 happy to answer questions. 8 CHAIRMAN KRAUSE: Any questions? 9 COMMISSIONER ARRIETA-CANDELARIA: No 10 questions. 11 COMMISSIONER LOWE: Thank you for the 12 excellent work. 13 MR. TIRLONI: Thank you. 14 CHAIRMAN KRAUSE: I have spoken to Mr. 15 Grief about this and he wanted to attribute 100 percent 16 of that success to staff. 17 MR. TIRLONI: And we'll take it. 18 (Laughter) 19 MR. TIRLONI: Thank you. 20 CHAIRMAN KRAUSE: Next item. 21 AGENDA ITEM VII 22 MS. PYKA: Certainly. Commissioners, 23 Tab VII includes information on the Agency's transfers 24 to the State and the Agency's budget status. The 25 report in your notebook reflects accrued revenue 0025 1 transfers and allocations to the Foundation School Fund 2 and the Texas Veterans Commission, for the period 3 ending December 31st, 2017. 4 The total accrued revenue transfer to 5 the State amounted to $391-million for the first four 6 months of the fiscal year. Of the $391-million 7 transfer to the State, $373-million was the amount 8 transferred to the Foundation School Fund. 9 We transferred 5.1-million to the Texas 10 Veterans Commission and $13-million was transferred 11 from unclaimed prizes. 12 So Commissioners, in looking at those 13 totals, that provides us an overall gain to the 14 Foundation School Fund this fiscal year of $36-million 15 over last year and a 10 percent growth over fiscal year 16 '17, and we now have cumulative transfers to the 17 Foundation School Fund through December of $21.4- 18 billion. 19 The final item under this tab is our 20 fiscal year '18 method of finance summary for the 21 Agency and we've included data from first quarter 22 ending November 30th of 2017. 23 Our Lottery account budget is $230.8- 24 million. Of this amount, 71.6 percent is encumbered 25 and expended through the first quarter. Our Bingo 0026 1 Operations budget funded at $17-million is expended and 2 encumbered at 13.3 percent through the first quarter. 3 I'd be happy to answer any questions. 4 CHAIRMAN KRAUSE: Commissioners? 5 COMMISSIONER ARRIETA-CANDELARIA: No 6 questions. 7 CHAIRMAN KRAUSE: We're very happy. 8 Thank you. 9 MS. PYKA: Thank you, Commissioners. 10 CHAIRMAN KRAUSE: Thank you. 11 AGENDA ITEM VIII 12 CHAIRMAN KRAUSE: Darlene Brown. 13 MS. BROWN: Good morning, it's still 14 morning time, Commissioners. I have a quick status 15 report for you. Since the beginning of the fiscal 16 year, we have worked with the Bingo Division on their 17 education program, seeing how we can revamp that. 18 That's the audit that we will be wrapping up very 19 quickly. And we also started looking at how the Agency 20 is handling the personal identifiable information, that 21 we intend to wrap that up by April. 22 We are at 85 percent of our budget 23 remaining and so, if we keep up this pace, we look to 24 be under budget again this year. That's it. I'll be 25 happy to answer any questions. 0027 1 CHAIRMAN KRAUSE: All right. Thank you, 2 ma'am. 3 MS. BROWN: Thank you. 4 AGENDA ITEM X 5 CHAIRMAN KRAUSE: Alfonso? 6 MR. ROYAL: Mr. Chairman, Commissioners, 7 only what's in your briefing books. 8 CHAIRMAN KRAUSE: Thank you. 9 AGENDA ITEM XII 10 CHAIRMAN KRAUSE: Then I'm going to open 11 up the meeting to public comment. There's only one 12 person that has said that he wanted to visit. He 13 submitted three witness affirmation forms, so if, you 14 know, Mr. Fenoglio would like to have any other 15 opportunity. 16 MR. BIARD: Commissioner, I think those 17 were for the contested cases. 18 CHAIRMAN KRAUSE: They were. They were. 19 MR. BIARD: Yeah. 20 CHAIRMAN KRAUSE: But, you know -- 21 MR. BIARD: You've already voted on 22 them. 23 CHAIRMAN KRAUSE: We had three of them 24 and I just wanted to make sure we're at the end of the 25 meeting. It said public comment and I just wanted to 0028 1 make sure that you had your say. 2 COMMISSIONER LOWE: Unless you don't 3 feel rushed, you've got plenty of time. 4 CHAIRMAN KRAUSE: We're actually waiting 5 to be entertained. 6 MR. FENOGLIO: Well, hmm. You got me 7 speechless. You voted favorably on two and no on one, 8 but I'll file a motion for rehearing, so I'll give back 9 the balance of my time, Mr. Chairman. 10 (Laughter) 11 CHAIRMAN KRAUSE: Outstanding. Well -- 12 MR. FENOGLIO: I would like to say 13 something about the Super Bowl. No, never mind. 14 CHAIRMAN KRAUSE: We're okay with that. 15 (Laughter) 16 AGENDA ITEM XV 17 CHAIRMAN KRAUSE: Commissioners, I 18 believe that concludes the business of the Texas 19 Lottery Commission for today. 20 COMMISSIONER LOWE: Do you want a 21 motion? 22 CHAIRMAN KRAUSE: Yeah. 23 COMMISSIONER ARRIETA-CANDELARIA: Did 24 you want a motion? 25 CHAIRMAN KRAUSE: Yeah. A motion to 0029 1 adjourn. Is there a motion? 2 COMMISSIONER ARRIETA-CANDELARIA: So 3 moved. 4 COMMISSIONER LOWE: Second. 5 CHAIRMAN KRAUSE: All in favor say aye. 6 (Chorus of "ayes") 7 CHAIRMAN KRAUSE: We are adjourned at 8 11:05. 9 (Adjourned and concluded at 11:03 a.m.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0030 1 C E R T I F I C A T E 2 STATE OF TEXAS ) 3 COUNTY OF HARRIS ) 4 5 I, Kimberly C. McCright, Certified Vendor and 6 Notary in and for the State of Texas, do hereby certify 7 that the above-mentioned matter occurred as 8 hereinbefore set out. 9 I FURTHER CERTIFY THAT the proceedings of 10 such were reported by me or under my supervision, later 11 reduced to typewritten form under my supervision and 12 control and that the foregoing pages are a full, true 13 and correct transcription of the original notes. 14 IN WITNESS WHEREOF, I have hereunto set my 15 hand and seal this 18th day of February, 2018. 16 17 /s/ Kimberly C. McCright Kimberly C. McCright 18 Certified Vendor and Notary Public 19 Verbatim Reporting & Transcription, LLC 1322 Space Park Drive, Suite C165 20 Houston, Texas 77058 281.724.8600 21 22 23 24 25