BILL ANALYSIS                                                                                                                                                                                                    Ó



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          ASSEMBLY THIRD READING
          AB 1332 (Hagman)
          As Amended  March 21, 2013
          2/3 vote 

           GOVERNMENTAL ORGANIZATION   16-0                                
           
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          |Ayes:|Hall, Nestande, Bigelow,  |     |                          |
          |     |Chesbro, Cooley, Gray,    |     |                          |
          |     |Hagman,                   |     |                          |
          |     |Roger Hernández, Jones,   |     |                          |
          |     |Jones-Sawyer, Levine,     |     |                          |
          |     |Medina, Perea, V. Manuel  |     |                          |
          |     |Pérez, Salas, Torres      |     |                          |
          |     |                          |     |                          |
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           SUMMARY  :  Allows California State Lottery prize winners to  
          assign any portion of their last three years of prize winnings  
          to another person or entity. 

           EXISTING LAW  : 

          1)Authorizes, pursuant to the California State Lottery Act of  
            1994 (Act), the California State Lottery and provides for its  
            operation and administration by the California State Lottery  
            Commission and the Director of the California State Lottery,  
            with certain limitations.

          2)Prohibits the assignment of the right of any person to a  
            prize, except that the payment of any lottery prize may be  
            assigned under specified circumstances, including as  
            collateral to secure certain loans and for future payments to  
            another person designated pursuant to an appropriate judicial  
            order of a California superior court, or a federal court  
            having jurisdiction over properly located in California, if  
            the court makes a specified determination.

          3)Provides that a prize winner, by entering into an agreement to  
            assign prize payments, as specified, is deemed to have waived  
            any statutory period of limitation as to the State of  
            California enforcing any rights against annual prize payments  
            due after the last assigned payment is paid or released, if  
            assigned as collateral, from the lien granted the secured  








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            creditor.

          4)Provides that these assignments of prize payments as  
            collateral to secure loans or for future payments to another  
            person designated pursuant to a judicial order, as described  
            above, are not valid or allowed for the final three annual  
            prize payments from the lottery to the prize winner.

           FISCAL EFFECT  :  None.  This bill is keyed non-fiscal by the  
          Legislative Counsel.

           COMMENTS  :   

           Purpose of the bill  :  According to the author, approximately 87%  
          of prize winners now select the "Cash Value" option when they  
          win.  For those who choose the 26-year or other long-term  
          payment option, there really is not a compelling reason to  
          withhold the right to assign prize winnings. 

          Companies that specialize in purchasing lottery payments streams  
          desire certainty in their dealings.  As a result, their  
          pre-contract searches are quite comprehensive, because of the  
          implications of purchasing a future payment stream in exchange  
          for a cash payment, only to have that future prize be contested  
          due to some sort of unanticipated legal bind. 

           Background  :  Consistent with other states that have a lottery,  
          prize winners, since 1995, of the California State Lottery, may  
          assign parts or all of their winnings in exchange for a lump sum  
          payment, with the exception of the last three years. 

          Before such assignment occurs, a court approval is required and  
          must meet the following standards:

          1)Prize winners seeking and assignment agreement must have  
            independent legal representation. 

          2)The assignment must be executed on a form approved by the  
            Lottery Commission and made pursuant to a court order.

          3)Marital status must be verified by the court.

          4)Any other financial/legal obligations, such as child support  
            payments, may not be evaded through assignment.








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          However, the last three years were withheld from the  
          authorization for assignment at the time. This was due in large  
          part to the more limited capacity of government agencies, law  
          firms and lottery purchasing businesses in tracking down tax  
          liens and other legal obligations, such as child support  
          payments.  This has changed dramatically as technological  
          advances have made information more readily available. 

           Arguments in support  :  According to Stone Street Capital, LLC,  
          Stone Street is the oldest company in the nation in the business  
          of buying installment lottery prize payments from lottery  
          winners.  They have done business in California and have many  
          California customers.  Many of these customers have expressed  
          frustration over the restriction currently in the California  
          lottery law that does not permit winners receiving their prize  
          in installments to sell the last three years of payments.

          Supporters further argue that this bill is necessary to correct  
          an out-of-date statute, and one that discriminates against those  
          lottery winners (roughly 10% of winners) who elect to receive  
          their winnings in installment payments rather than as a lump  
          sum.

          Almost 20 years ago, when the California State Lottery Act first  
          allowed for the assignability of payments, the state Legislature  
          included a ban on the assignability of the last three years in  
          large part because of the limited search capabilities that  
          government agencies and other entities had at the time, which  
          made it difficult to track down tax liens and other legal  
          obligations (e.g., child support payments).  

          But today the California State Controller's Office, other  
          government agencies and originators like Seneca One can find  
          this information in mere seconds.  Seneca One and other  
          originators will not purchase payments unless these obligations  
          are satisfied.  Unfortunately, only those who elect to receive  
          their prize winnings as installments payments are impacted by  
          this three-year carve-out.  All winners who elect to receive  
          their winnings as a lump sum (roughly 90% of winners) do not  
          have any restrictions on the timing of their payout.  This does  
          not make sense and seems to penalize those winners who select  
          the long-term payout.









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          Supporters also believe this bill is good for both consumers and  
          the State of California for several reasons.  First, the lottery  
          consumer benefits because he or she is able to receive his or  
          her money in today's dollars to satisfy immediate and urgent  
          needs.  Indeed, as a matter of individual property rights, the  
          current restrictions make no sense.  Second, the State of  
          California benefits because the lottery winner must satisfy all  
          outstanding liens and judgments before assigning any portion of  
          their remaining winnings.  This means that the state will be  
          paid much sooner than if the winner had to wait several years  
          before receiving his or her final three annual payments. 

           
          Analysis Prepared by  :    Felipe Lopez / G. O. / (916) 319-2531 


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