BILL ANALYSIS Ó
AB 2215
Page 1
Date of Hearing: April 6, 2016
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
AB 2215
(Medina) - As Introduced February 18, 2016
SUBJECT: California State Lottery Act: California State
University Lottery Education Fund: California State University
Trust Fund
SUMMARY: Would require the Board of Trustees of the California
State University to deposit funds received from the California
State Lottery Education Fund in the California State University
Trust Fund instead of the California State University Lottery
Education Fund.
EXISTING LAW:
1)The California State Lottery Act (Lottery Act or Act) of 1984,
enacted by initiative, authorizes a California State Lottery
and provides for its operation and administration by the
California State Lottery Commission (Commission) and the
Director of the California State Lottery, with certain
limitations.
2)Requires the Commission to establish the percentage of total
annual revenues of the state lottery to be allocated to the
AB 2215
Page 2
benefit of public education at a level that maximizes the
total net revenues allocated for the benefit of public
education.
3)Requires that no more than 13 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.
4)Establishes the California State Lottery Education Fund and
provides for direct payments from the fund to various
entities, including the Board of Trustees of the California
State University (trustees).
5)Requires funds received by the trustees to be deposited in,
and expended from, the California State University Lottery
Education Fund or, at the discretion of the trustees,
deposited in local trust accounts.
6)Establishes the California State University Trust Fund and
specifies its sources of revenue.
7)Provides that all money received by the Fund shall augment the
support appropriation to the California State University for
the fiscal year to which the collections apply.
FISCAL EFFECT: Unknown
COMMENTS:
AB 2215
Page 3
Purpose of the bill : According to the author, this bill will
allow the State Controller's Office (SCO) to directly deposit
lottery funds into the California State University Trust Fund.
This will eliminate unnecessary administrative processes and
streamline the accounting processes associated with utilizing
the funds from the California State University Lottery Education
Fund.
Background : State Lottery Act of 1984 (Act) was created by a
ballot measure, Proposition 37, which was approved by 58 percent
of voters on November 6, 1984. The Act gave the Lottery a clear
mission: to provide supplemental funding for public schools and
colleges. The Act specifies that the Lottery be operated and
administered by a Commission appointed by the Governor. The
Legislature has the authority to amend the Act if, by doing so,
it furthers the purposes of the Act.
In April 2010, the Legislature passed Assembly Bill 142, which
changed the Lottery's funding formula to follow best practices.
Those practices have helped lotteries throughout the nation
increase sales and earn more money for their beneficiary. AB
142 limits administrative expenses to 13 percent of sales, while
requiring that 87 percent of sales go back to the public in the
form of prizes and contributions to education. The law gives
the Lottery the flexibility to pay out a higher percentage of
its revenues in prizes than it has in the past, but only if it
does so in a way that increases the total amount of money that
goes to public schools and colleges.
In fiscal year 2014/2015, the State Lottery contributed
$1,391,101,826 to K-12, Community Colleges, CSU and UC campuses
and several specialized schools. The funds were divided up by
AB 2215
Page 4
following percentages: K-12: 80% ($1,113,267,781); Community
Colleges: 14.10% ($196,204,535); CSU: 3.54% ($49,308,817); UC
System: 2.28% ($31,768,586); Public Colleges and Miscellaneous
Educational Institutions: .04% ($552,107). Additionally, below
is a breakdown of how every lottery dollar was spent for the
2014/2015 fiscal year:
63.4[ prizes
24.6[ operating income to education
6.9[ retailer compensation
2.0[ overhead
1.8[ direct gaming costs
1.3[ marketing costs
California State University Lottery Education Fund : Under
current law, funds from the California State Lottery Education
Fund are distributed quarterly by the State Controller's Office
into the California State University Lottery Education Fund,
which serves as the depository account for CSU lottery funds.
CSU accounting staff then must submit quarterly transfer
requests to move these funds into the California State
AB 2215
Page 5
University Trust Fund. They must also submit similar quarterly
forms to move the associated interest accrued from lottery
revenues. From their funds are distributed to various State
Universities for programs and uses that are consistent with the
Lottery Act.
According to the CSU Chancellor's Office, in recent years,
annual CSU Lottery Fund receipts have averaged around $45
million per year. Approximately 80% of funds are allocated
directly to campuses for instructionally related programs and
activities. The remaining funds are allocated for CSU programs
that assist student education, such as the Summer Arts,
Pre-Doctoral, and Doctoral Incentive programs. Approximately
1.2 percent of lottery resources are used by the CSU
Chancellor's Office to administer lottery fund operations and
reporting requirements. The CSU sets aside $5 million for
reserves, to prepare for cash-flow variations and other
year-to-year economic uncertainties that could impact future
fund receipts.
The 2016-17 lottery budget for CSU is estimated to be $49.2
million; the allocation would be as follows:
------------------------------------------------------------
|$5 |Set aside for cash-flow variation and |
|million |fluctuations |
| | |
AB 2215
Page 6
| | |
|---------+--------------------------------------------------|
|$39.5 |$31.5 million for campus-based programs |
|million | |
| | |
| |$8 million for increased financial aid for the |
| |Early Start program (in the form of fee waivers) |
| | |
| | |
|---------+--------------------------------------------------|
|$4 |System-designated programs, including: |
|million | |
| | |
| | $2 million for the Chancellor's Doctoral |
| | Incentive program |
| | $1.2 million for the CSU Summer Arts |
| | program |
| | |
| | |
| | $814,000 for the California Pre-Doctoral |
| | program |
| | |
| | |
|---------+--------------------------------------------------|
|$607,000 |Administrative costs associated with the fund and |
| |system programs |
| | |
| | |
------------------------------------------------------------
Double referral : Should AB 2215 pass the Assembly Committee on
Governmental Organization on Wednesday, April 6, 2016, this bill
will be referred to the Assembly Committee on Higher Education
for further consideration.
AB 2215
Page 7
Prior/Related Legislation : AB 142 (Hayashi), Chapter 13,
Statutes of 2010. Modified the allocation formula of the Act of
1984, also known as Proposition 37. Repeals the modifications
to the allocation formula if it is determined by the Controller
that the amount of revenues allocated to the benefit of public
education by the Lottery is less than what would have been
allocated if the law were not changed, as specified.
AB 1654 (Budget Committee), Chapter 764, Statutes of 2008.
Would have implemented a number of changes to the Lottery Act to
"modernize" the Lottery if the voters would have approved
Proposition 1C (which was placed on the ballot by SCA 12
(Perata), Resolution Chapter 143, Statutes of 2008, in May 2009.
(The voters did not approve Proposition 1C.)
SB 1679 (Florez), 2007-2008 Legislative Session. Would have
made a number of changes to enhance the performance of the
Lottery. (Never heard in the Senate.)
SB 1011 (Florez), 2005-2006 Legislative Session. Would have
required, among other things that at least 50% of multistate
lottery revenues to be allocated to the public in the form of
prizes, at least 42% must benefit public education, and no more
than 8% to be allocated for Lottery expenses. (Died on the
Assembly Floor).
AB 2215
Page 8
REGISTERED SUPPORT / OPPOSITION:
Support
California State University, Board of Trustees (Sponsor)
Betty T. Yee, California State Controller
Opposition
None on file
Analysis Prepared by:Kenton Stanhope / G.O. / (916) 319-2531
AB 2215
Page 9