BILL ANALYSIS
AB 662
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Date of Hearing: April 30, 2009
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Curren D. Price, Chairman
AB 662 (Hagman) - As Amended: April 2, 2009
SUBJECT : California State Lottery: construction: salary
reductions
SUMMARY : This bill would prohibit the California State Lottery
Commission from continuing the process to build a new California
State Lottery headquarters. Also, this bill would require that
a portion of those unused funds be applied toward renovating the
existing headquarters, public education, services for employees
whose salaries have been reduced, and advertising or other
marketing activities. Specifically, this bill :
1) Requires the California State Lottery Commission
(Commission) to no longer proceed with the construction of
the California State Lottery Complex project addressed in
the Mitigated Negative Declaration, Findings, and Mitigated
Monitoring and Reporting Program that was approved on
January 28, 2009, or any similar project [Government Code
Section 8880.64.1 (b)].
2) Authorizes the Commission to use up to $40 million for
the renovation of any existing building used by the
Commission for lottery operations [Government Code Section
8880.64.1 (c)].
3) Requires the Commission to allocate the difference
between $185 million and the amount used for renovation
toward public education and this amount would be applied in
addition to what is already being allocated toward public
education pursuant to Proposition 37 [Government Code
Section 8880.64.1 (d)].
4) Requires that any administrative funds saved by the
imposition of any salary reductions on lottery employees
shall be used for either providing services or benefits for
employees whose salaries have been reduced; or,
advertising or other marketing activities; or both
[Government Code Section 8880.64.1 (e) ].
5) Makes legislative findings and declarations.
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6) Takes effect immediately as an urgency statute.
EXISTING LAW
1) Existing law, the California State Lottery Act of 1984,
enacted by Proposition 37 in the November 1984 general
election, authorizes a California State Lottery (Lottery)
and provides for its operation and administration by the
California State Lottery Commission (Commission) and the
Director of the California State Lottery (Director).
2) Existing law requires that no less than 84 percent of
the total annual revenues from the sale of state lottery
tickets be returned to the public as prizes and net
revenues benefiting public education. From this portion,
existing law provides that 34 percent goes toward public
education.
3) Existing law requires that no more than 16 percent of
the total annual revenues be used to pay Lottery expenses
and that those expenses include all costs incurred in the
operation and administration of the Lottery and all costs
resulting from any contracts entered into for the purchase
or lease of goods and services required by the Lottery.
FISCAL EFFECT : Unknown
COMMENTS : According to the author, the Commission approved a
$185 million design contract for a new building that would serve
as the new headquarters for the Lottery. The author questions
the use of the funds when the state's education system is
experiencing the effects of cutbacks. The author goes on to say
that, "This bill ensures that the Lottery Commission continues
to have an adequate home for its operations, while also making
sure we use our revenues responsibly, for the public good."
In January, the Commission approved a $4.3 million design
contract for the construction of a new building complex in
Sacramento that would serve as the new home for the California
State Lottery. Construction of the proposed Lottery
headquarters is expected to begin later this year. Lottery
officials say the time to build the new complex now is great
because the construction costs are low, the area is being
redeveloped, and, it would generate approximately 900 new jobs.
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In a March editorial, the Director of the California State
Lottery said the following as a reply to the author's position:
"While the new headquarters and campus would take an initial
investment of about $185 million, it will repay that money and
earn a net profit of $91 million over the life of the project,
largely in rents from other agencies (San Gabriel Valley
Tribune, March 24, 2009)." The $91 million in net profits
would be made in the form of rent and operational savings. This
figure is based on the assumption that the state will continue
to have a significant shortage of office space for workers in
future years.
Lottery officials say that renovating the existing building that
is home to the Lottery would cost them $136 million over a
40-year span. In contrast, construction of a new complex would
cost $45 million within the same time frame.
Financing for the proposed Lottery headquarters project comes
from the Lottery's operating budget and it is being built on
land that is owned by the Lottery. The proposed Lottery
headquarters is not being funded by the state's General Fund.
Policy concern. This bill could, potentially, undermine
California's securitization efforts. Californians put the
budget of the Lottery outside of the State budget process when
they passed Proposition 37 in 1984. This was done to protect
the Lottery and the proceeds generated by its activities from
Legislative whim. The strength of the Lottery as a potential
source for revenue securitization lies in the fact that the
budget is outside of Legislative budget processes. This bill
may send a clear message to interested parties-both players and
investors, alike-that the Lottery Fund is not secure and may be
redirected at any time, thereby making it a less attractive
investment.
Green Building Initiative/Modernization . Development of the
proposed Lottery headquarters building accomplishes several
goals, including providing a new, modern, building for lottery
operations that will incorporate environmentally sustainable
design features consistent with the Governor's Green Building
Initiative, i.e., the project would be a LEED-GOLD certified
project. Additionally, the project makes the Lottery an active
community participant in the redevelopment area in which the
Lottery property is located and providing an economic stimulus
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to the local community.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
California State Association of Electrical Workers
California State Pipe Trades Council
Western States Council of Sheet Metal Workers
Analysis Prepared by : Rod Brewer / G. O. / (916) 319-2531