Second Regular Session Sixty-seventh General Assembly STATE OF COLORADO INTRODUCED LLS NO. 10-1131.01 Sharon Eubanks SENATE BILL 10-215 SENATE SPONSORSHIP Romer and Tapia, HOUSE SPONSORSHIP May and McFadyen, Senate Committees House Committees Education A BILL FOR AN ACT Concerning the state-supervised lottery. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The Colorado lottery commission (commission) is directed to promulgate rules to conduct new lotteries that are anticipated to result in an increase in the amount of net lottery proceeds generated during the first 12 months of operation so at least $100 million of additional net lottery proceeds would be allocated to the general fund of the state pursuant to the state constitution. However, the commission is not required to conduct such new lotteries if, prior to the commencement of the new lotteries, any asset of the state is sold for at least $500 million and the sale proceeds are credited to the Colorado scholars cash fund. The commission is authorized to: Enter into contracts to sell future net proceeds of the lottery generated by the new lotteries and is directed to transmit the proceeds from such contracts to the state treasurer to be credited to the Colorado scholars cash fund; and Issue financial instruments, the principal of and interest thereon to be paid from future lottery revenues generated by the new lotteries. The Colorado scholars cash fund is created in the state treasury, which is to consist of certain moneys including most of the net lottery proceeds that would otherwise be transferred to the general fund pursuant to the state constitution. Moneys in the cash fund are to be annually appropriated to provide postsecondary education financial assistance. The state treasurer is authorized to use moneys in the cash fund to make payments pursuant to property sale contracts entered into by the commission. 10% of the net lottery proceeds that would otherwise be transferred to the general fund pursuant to the state constitution shall be credited to the public school capital construction assistance fund, but the aggregate amount annually transferred to this fund is limited to $8 million. 5% of the net lottery proceeds that would otherwise be transferred to the general fund pursuant to the state constitution shall be transferred to the Colorado state veterans trust fund, but the aggregate amount annually transferred to this fund is limited to $3 million. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. 24-35-208 (1) (h) and (2) (a), Colorado Revised Statutes, are amended, and the said 24-35-208 (1) is further amended BY THE ADDITION OF THE FOLLOWING NEW PARAGRAPHS, to read: 24-35-208. Commission - powers and duties - rules. (1) In addition to any other powers and duties set forth in this part 2, the commission shall have the following powers and duties: (h) To annually set the amount of the performance bond required of persons entering into contracts to provide materials, equipment, or supplies used in the operation of the lottery or to design or install games or lotteries; and (j) To enter into contracts to sell future net proceeds of the lottery pursuant to section 24-35-223; and (k) To authorize and issue financial instruments pursuant to section 24-35-224. (2) Except as provided in subsection (3) of this section, rules promulgated pursuant to subsection (1) of this section shall include, but shall not be limited to, the following: (a) The types of lotteries to be conducted: (I) But no lottery conducted under this part 2 other than instant scratch games shall be based upon the game of chance commonly known as bingo, nor shall any lottery be conducted that depends upon the outcome of any athletic contest except races at state-licensed dog or horse tracks if approved by the Colorado racing commission; and (II) (A) Except as otherwise provided in sub-subparagraph (B) of this subparagraph (II), including new types of lotteries to be conducted commencing no later than six months after the effective date of this subparagraph (II) that are anticipated to result in an increase in the amount of net lottery proceeds generated during the first twelve months of operation so that at least one hundred million dollars of additional net lottery proceeds would be allocated to the general fund in accordance with section 3 (1) (b) (III) of article XXVII of the state constitution. (B) The provisions of sub-subparagraph (A) of this subparagraph (II) shall not be applicable if, prior to the commencement of such new lotteries, any asset of the state is sold for at least five hundred million dollars and said sale proceeds are credited to the Colorado scholars cash fund created in section 23-5-140 (1) (a), C.R.S. SECTION 2. Part 2 of article 35 of title 24, Colorado Revised Statutes, is amended BY THE ADDITION OF THE FOLLOWING NEW SECTIONS to read: 24-35-223. Sale of future net proceeds from lottery games created pursuant to commission rules - distribution of sale proceeds. (1) The commission may enter into contracts to sell to private or public entities one or more portions of future net proceeds of the lottery to be allocated to the Colorado scholars cash fund created pursuant to section 23-5-140 (1) (a), C.R.S., after distributions are made pursuant to section 3 of article XXVII of the state constitution and sections 22-43.7-104 (2) (b) (III) and 28-5-709 (2) (c), C.R.S. (2) Any sale of future net proceeds of the lottery as authorized by subsection (1) of this section shall constitute a property sale, and the proceeds from such sale shall be excluded from fiscal year spending in accordance with section 20 (2) (e) of article X of the state constitution. (3) Any proceeds resulting from the sale of future net proceeds of the lottery pursuant to this section shall be transmitted by the commission to the state treasurer and credited to the Colorado scholars cash fund created pursuant to section 23-5-140 (1) (a), C.R.S. 24-35-224. Financial instruments - securitization of certain lottery revenues - authorization - issuance - requirements. (1) The commission may, by resolution, authorize and issue financial instruments in such form as the commission determines, the principal of and interest on such financial instruments to be paid from future lottery revenues generated by lottery games conducted pursuant to rules adopted in accordance with section 24-35-208 (2) (a) (II) and deposited in the lottery fund for the expenses of the division pursuant to section 24-35-210. For purposes of this part 2, the principal of and interest due and payable on any financial instruments issued pursuant to this subsection (1) shall be deemed to be an expense of the division. (2) All financial instruments issued by the commission shall provide that: (I) No holder of any such financial instrument may compel the state or any subdivision thereof to exercise its appropriation or taxing power; and (II) The financial instrument does not constitute a debt of the state and is payable only from the net revenues allocated to the division for expenses as designated by the financial instrument. (3) (a) Any resolution authorizing the issuance of financial instruments under the terms of this section shall state: (I) The date of issuance of the financial instruments; (II) A maturity date or dates during a period not to exceed thirty years from the date of issuance of the financial instruments; (III) The interest rate or rates on, and the denomination or denominations of, the financial instruments; (IV) The medium of payment of the financial instruments and the place where the instruments will be paid. (b) Any resolution authorizing the issuance of financial instruments under this section may: (I) State that the financial instruments are to be issued in one or more series; (II) State a rank or priority of the financial instruments; (III) Provide for redemption of the financial instruments prior to maturity, with or without premium. (4) Any financial instruments issued pursuant to this section may be sold at public or private sale. If financial instruments are to be sold at a public sale, the commission shall advertise the sale in such manner as the commission deems appropriate. All financial instruments issued pursuant to the terms of this section shall be sold at a price not less than the par value thereof, together with all accrued interest to the date of delivery. (5) Notwithstanding any provision of the law to the contrary, all financial instruments issued pursuant to this section are negotiable. (6) Any proceeds resulting from the issuance of financial instruments issued pursuant to this section shall be transmitted by the commission to the state treasurer and credited to the Colorado scholars cash fund created pursuant to section 23-5-140 (1) (a), C.R.S. SECTION 3. Article 5 of title 23, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 23-5-140. Colorado scholars cash fund - creation. (1) (a) There is hereby created in the state treasury the Colorado scholars cash fund, referred to in this section as the "fund". The fund shall consist of such moneys transferred to the fund pursuant to subsection (2) of this section, any proceeds resulting from the sale of future net proceeds of the lottery in accordance with section 24-35-223, C.R.S., and any proceeds resulting from the issuance of financial instruments pursuant to section 24-35-224, C.R.S. (b) Except as otherwise provided in paragraph (c) of this subsection (1), the moneys in the fund shall be subject to annual appropriation by the general assembly to provide postsecondary education financial assistance. Any moneys in the fund not expended or otherwise encumbered may be invested by the state treasurer as provided by law. All interest and income derived from the investment and deposit of moneys in the fund shall be credited to the fund. Any unexpended and unencumbered moneys remaining in the fund at the end of a fiscal year shall remain in the fund and shall not be credited or transferred to the general fund or another fund. (c) The state treasurer shall use moneys in the fund at such times and in such amounts as is required to pay public and private entities pursuant to property sale contracts entered into by the Colorado lottery commission pursuant to section 24-35-223, C.R.S. (2) All revenues that would otherwise be transferred to the general fund pursuant to section 3 (1) (b) (III) of article XXVII of the state constitution except for the portion of such revenues required to be transferred to the public school capital construction assistance fund pursuant to section 22-43.7-104 (2) (b) (III), C.R.S., and to the Colorado state veterans trust fund pursuant to section 28-5-709 (2) (c), C.R.S., shall be transferred to the fund. SECTION 4. 22-43.7-104 (2) (b) (III), Colorado Revised Statutes, is amended to read: 22-43.7-104. Public school capital construction assistance fund - creation - crediting of moneys to fund - use of fund - emergency reserve - creation. (2) (b) For each fiscal year commencing on or after July 1, 2008, the following moneys shall be credited to the assistance fund: (III) Ten percent of all moneys that would otherwise be transferred to the general fund pursuant to section 3 (1) (b) (III) of article XXVII of the state constitution; except that the aggregate amount so transferred to the assistance fund in any fiscal year shall not exceed eight million dollars. The moneys credited to the assistance fund pursuant to this subparagraph (III) and any income and interest derived from the deposit and investment of such moneys shall be exempt from any restriction on spending, revenue, or appropriations, including, without limitation, the restrictions of section 20 of article X of the state constitution. SECTION 5. 28-5-709 (2), Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW PARAGRAPH to read: 28-5-709. Colorado state veterans trust fund - created - report. (2) (c) The state treasurer shall quarterly transfer to the trust fund five percent of all revenues that would otherwise be transferred to the general fund pursuant to section 3 (1) (b) (III) of article XXVII of the state constitution; except that the aggregate amount so transferred to the trust fund in any fiscal year shall not exceed three million dollars. SECTION 6. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.