HBA-MPA, TYH H.B. 844 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 844 By: Wilson Licensing & Administrative Procedures 6/25/1999 Enrolled BACKGROUND AND PURPOSE In 1997, the 75th Legislature passed legislation to place a limit on the total amount of lottery prizes that may be awarded in a fiscal year. Prior to the reduction in prize payout percentage, the Texas Lottery experienced five years of sales growth from its inception in 1992 through fiscal year 1997. According to analyses provided to the legislature, the reduction in prize payout should have increased the revenue to the state by approximately $300,000,000 for the 1998-1999 biennium. Instead, after enactment of the legislation to reduce the payout, total sales for the fiscal year 1998 decreased by 17 and one-half percent. Gtech, the Rhode Island company that operates the lottery and whose fee is based on ticket sales, has reported in a Securities and Exchange Commission filing last November that it received lower service revenue from the company's Texas lottery contract primarily because of the lower sales generated by the Texas Lottery. Gtech believes that the ticket sales slump correlates with the reduction in prize payout. However, Gtech also reported in its federal filings that lotteries nationwide are experiencing a slowing in sales or, at best, modest growth rates. H.B. 844 removes the current limit on the amount of lottery awards and adds a restriction on the amount the Texas Lottery Commission may spend on advertising based on increases in gross ticket sale receipts. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority previously delegated to the Texas Lottery Commission is modified in SECTION 1 (Section 466.015, Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 466.015(c), Government Code, to delete the exception that the total amount of prizes awarded for the state lottery may not exceed the amount described in Subsection (d) from the list of provisions for which the Texas Lottery Commission (commission) is authorized to adopt rules. SECTION 2. Amends Section 466.015, Government Code, by amending Subsection (d) and adding Subsection (e), to prohibit the commission's advertising budget from exceeding $40 million for each fiscal year, less $1 million for each one percent increase over the total amount of lottery prizes awarded in the preceding fiscal year over 52 percent of gross ticket sale revenue, if such award exceeds 52 percent in fiscal year 2000, and by $1 million for each one percent increase over 57 percent, if such revenue exceeds 57 percent in fiscal year 2000. Deletes language concerning the limitation on the total amount of lottery awards exceeding a certain amount. SECTION 3.Emergency clause. Effective date: upon passage.