1. WELCOME TO THE OKLAHOMA PUBLIC HUMAN RESOURCES ASSOCIATION SUMMER QUARTERLY TRAINING CONFERENCE FRIDAY, JUNE 28, 2013 FRANCIS TUTTLE TECHNOLOGY CENTER

2. The “Oklahoma Education Lottery Act” HB1278 passed the State Legislature on March 26, 2003, as State Question 705. State Question 705 passed in all counties at the general election on November 2, 2004. 928,442 (64.68%) for the proposal 507,077 (35.32%) against the proposal.

3. State Question 706, SJR 22 amended the Oklahoma Constitution to create the Oklahoma Education Lottery Trust Fund (OELTF passed in all counties on November 2, 2004, 970,987 (67.94%) for the proposal; 458,122 (32.06%) against the proposal.

4. Title 21: Section 1051 A. - Lottery Defined A lottery is any scheme for the disposal or distribution of property by chance among persons who have paid, or promised, or agreed to pay any valuable consideration for the chance of obtaining such property, or a portion of it, or for any share of or interest in such property, upon any agreement, understanding or expectation that it is to be distributed or disposed of by a lot or chance, whether called a lottery, a raffle, or a gift enterprise, or by whatever name the same may be known. "Valuable consideration" shall be construed to mean money or goods of actual pecuniary value.

5. Current Lottery 11/2/2004State Questions Passed 1/23/20051 st Bd. of Trustees Meeting 6/5/2005Director Appointed 8/9/2005Gaming Vendor Selected 10/12/20051 st Lottery ticket sale 11/10/2005Pick 3; 1 st online game 1/12/2005Powerball sales started

6. Some of the Attempts to pass a Lottery Bill 2/23/1982House Rules Committee passed HB1790 by Nelson “Freckles” Little. Speaker had assigned to 3 committees. -To benefit state police (25%) and fire (25%) retm’t funds; the elderly thru the Special Unit on Aging (50%) of proceeds after prizes and expenses. -House killed the bill, 72-21. 8/1/1983Lottery petition filed by Dorothy Miller. Editorial says it’s a “loser”; 7 member commission; 10% tax on tickets paid to city in which lottery is located; if not in a city, then to the county; Not enough signatures to get on the ballot 11/8/1983Sen. Dawson-D Seminole, filed SB344 to create a state lottery; could net $57 million to the state; 30% to general revenue. Senate amended it to provide 50% to the State, then killed it 3/1/1984, 27-14. A group of six House members Monday offered a lottery plan (Rep. Bill Lancaster, D-Wagoner, is principal author). Defeated in House, 63-33, 2/29/1984 12/20/1984Gov. Nigh proposes lottery in budget; Speaker Barker supports it; $70 million to State; Senate leader opposes it. House passed it; 1/23/1985. Governor dropped it in face of Senate opposition.

7. Attempts (cont.) 2/5/1986Sen. Lee Cate will try to revive lottery bill; $57 million for state programs; multiple beneficiaries. Rejected 2/11/86 by Senate Finance,7-5; 6/18/1986“Lottery is OK” Committee and COOL turn in petitions with more than 150,000 signatures (50k more than needed). 9/30/86, Lottery petition failed legal tests; not on Nov. ballot. 3/15/1993Gov. Walters says boosters of a state lottery hope to raise $1 million for the initiative petition process; Supreme Court okays petition, 2/25/94.

8. Various Opposition to Lottery 5/16/1986Julian Fite, candidate for AG is 1 st major candidate for state wide office to announce opposition to lottery proposal 6/19/1986Coalition on Moral Concerns says they will challenge the petitions. Horsemen challenge lottery. 7/19/1986Group called “Alert”, made up of business & professional people formed to protest the lottery proposal 9/4/1986OSBI Director thinks petition would open up OSBI files to Lottery Commissioners; Central Services Director says Lottery should have to use Central Purchasing. Gov. Nigh said he will wait until he talks to OSBI. 7/27/1993Forrest Claunch; Wes Watkins; and Neva Hill announce “Oklahomans Against the Lottery” 8/10/1993State horsemen and racetracks challenge the lottery proposal. 8/12/1993Oklahoma Christian Coalition challenges the lottery proposal 1/25/1994Lawmakers concerned that approval of a lottery could open door to casino-type games in tribal locations. 3/13/94HALT PAC, a group of horsemen claim lottery will cut racing revenues by 18% (and claim studies show TX, Trinity Meadows Raceway lost 20% of attendance and handle after lottery started up)

9. Various Opposition to Lottery (cont.) 4/14/1994All eight candidates for governor of Oklahoma said Wednesday they are opposed to or have major concerns about the lottery proposal facing Oklahoma voters May 10. 4/21/1994An anti-lottery leader called Gov. David Walters' lottery proposal an "invitation to corruption" Wednesday. 4/24/1994David McCullough of Freedom of Information Oklahoma, Inc., said he's concerned that records kept by the president of the proposed Lottery Authority could be confidential because the president will not be a state employee. 5/8/1994Gambling with a lottery is essentially throwing your money away. The lottery is a game for chumps. 5/8/1994A VOTE for State Question 658 next Tuesday is almost certainly a vote for casino gambling on Indian lands – and tribal lotteries as well, if the tribes want them. 5/11/1994With all 2,207 precincts reporting, voters defeated State Question 658 by a 417,532 to 280,152 margin. The lottery was defeated in 74 of the state's 77 counties.

10. History of the Modern U.S. Lottery 19641 st modern lottery; NH 1967NY lottery (in FY’11, $6.8 Billion in sales plus $1.1 Billion from VLT; $3.1 Billion to beneficiaries) 1970’s12 additional state lotteries 1980’s18 additional state lotteries 1990’s & 2000’s13 additional state lotteries (plus Wyoming soon; Gov signed 3/13) 45 (incl. D.C. and U.S. Virgin Islands) WY

11. LOTTERY MACHINES / JACKPOTS 1981NY launched first computerized game 6/49 with a $5 million JP. 1982Video Lottery Terminals (lottery version of slot machines; mostly for bars) 1980’sNY introduces KENO Player Activated Terminals to sell instant and online 1991CA had $118 million JP

12. LARGEST U.S. JACKPOTS 3/30/2012MM: $656 Million; Cash $471 Million 3 tickets sold in MD, IL and KS 11/28/2012PB: $587.5 Million; Cash $384.7 Million 2 tickets sold in MO and AZ 3/6/2007MM: $390 Million; Cash $233.1 Million 2 tickets sold in GA and NJ 1/4/2011MM: $380 Million; Cash $240 Million 2 tickets sold in ID and WA 2/18/2006PB: $365 Million; Cash 177.3 Million Single winning ticket sold in NE 5/9/2000Big Game: $363 Million; Cash $180 Million 2 tickets sold in IL and MI Out of top 16 annuitized jackpots: MM = 6 PB = 8 Big Game = 2

13. Today, there are 45 U.S. Lotteries including D.C. & the U.S. Virgin Islands, with Wyoming to become the 46 th. The Oklahoma Lottery is one of the last modern day lotteries to be created. States that have not created or authorized a lottery yet are: Alabama Alaska Hawaii Mississippi Nevada Utah

14. The Oklahoma Lottery sells the following Lottery products: Scratchers (Instant win Lottery tickets) ($1, $2, $3, $5; 1:4.81 to 1:3.46; $777 - $40,000) Numbers games: - Pick 3 ($1) - Pick 4 ($1) Lotto: - Cash 5 ($1; 5/36) Multi-state Jackpot Games: -Hot Lotto ($1; $1 multiplier; 5/47 & 1/19) - Powerball ($2; $1 multiplier; 5/59 & 1/35) - Mega Millions ($1; $1 multiplier; 5/56 & 1/46)

15. Sales estimates for FY’2013, the current fiscal year, are:

16. Operating expenses have been reduced from $9.77 million in FY’2008 to $4.88 million budgeted for FY’2014. From the end of FY’2012, to the FY’2014 budget, payroll has been reduced more than $300,000 and FTE reduced from 34 to 26. If the board approves a couple of new initiatives, we will add 2 more employees in FY’2014, paid for by additional savings.

18. According to the Oklahoma Constitution, the Oklahoma Lottery beneficiaries are: 1. Kindergarten through twelfth grade public education, including but not limited to compensation and benefits for public school teachers and support employees; 2. Early childhood development programs; 3. Tuition grants, loans and scholarships to citizens of this state to enable such citizens to attend colleges and universities located within this state which are accredited by the Oklahoma State Regents for Higher Education or to attend institutions operated under the authority of the Oklahoma Department of Career and Technology Education; 4. Construction of educational facilities for elementary school districts, independent school districts, the Oklahoma State System of Higher Education, and career and technology education; 5. Capital outlay projects for elementary school districts, independent school districts, the Oklahoma State System of Higher Education, and career and technology education; 6. Technology for public elementary school district, independent school district, state higher education, and career and technology education facilities; 7. Endowed chairs for professors at institutions of higher education operated by the Oklahoma State System of Higher Education; 8. Programs and personnel of the Oklahoma School for the Deaf and the Oklahoma School for the Blind; 9. The School Consolidation and Assistance Fund; and 10. The Teachers’ Retirement System Dedicated Revenue Revolving Fund. State Statutes set additional parameters: Items 1 and 2 = 45% Items 3 through 8 = 45% Items 9 and 10 = 5% each

19. Issues facing the Lottery No support from legislative leadership or Governor to change restrictive laws Periodic attacks on the Lottery by politicians, the press, or anti-gambling interests Maintaining credibility despite the politics Maximizing our profit for our beneficiaries Legal restrictions that limit profitability Minimum 35% profit requirement Limits on locations where lottery products can be sold Limits on types of games that can be offered (video, Keno) Limits on other aspects of conducting business Employee pay Advertising restrictions Prohibition on some use of the Internet Restriction to “cash only” for purchase of tickets

20. Largest issue facing the Lottery is one of profitability The Lottery exists to provide funding for Oklahoma education programs. The Lottery Act indicates that all profits go to the State to benefit Oklahoma Education. The Act also says the Lottery is to “Maximize” profits for education. The main restriction on Lottery profitability is the minimum 35% profit requirement. By requiring a set % as a profit, the amount of funding that can be put into prizes is restricted. This limits the acceptance of the products by the players, limiting both sales and profits. Every state lottery that has improved payouts has dramatically improved sales and increased profits for their beneficiary.