BILL ANALYSIS Ó
AB 1332
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CONCURRENCE IN SENATE AMENDMENTS
AB 1332 (Hagman)
As Amended August 14, 2013
2/3 vote. Urgency
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|ASSEMBLY: |70-0 |(May 16, 2013) |SENATE: |39-0 |(August 26, |
| | | | | |2013) |
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Original Committee Reference: G.O.
SUMMARY : Allows California State Lottery prize winners to
assign any portion of their last three years of prize winnings
to another person or entity.
The Senate amendments :
1)Provide that the assignment of the final three annual prize
payments is prohibited unless the contract assigning all or
any part of the final three annual prize payments is entered
into on or after the effective date of this act.
2)Added an urgency clause allowing the bill to take effect
immediately upon enactment.
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,
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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.
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
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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.
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
FN: 0001697