First Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 11-0977.01 Sharon Eubanks SENATE BILL 11-233 SENATE SPONSORSHIP Hodge and Tochtrop, HOUSE SPONSORSHIP (None), Senate Committees House Committees Business, Labor and Technology A BILL FOR AN ACT Concerning regulation of the state lottery by the state lottery division in the department of revenue, and, in connection therewith, authorizing the installation of video lottery terminals under the control of the division. 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 given discretionary authority to license no more than 2 lottery retailers to install and operate video lottery terminals (VLTs). Qualifications to be a lottery retailer are established in the bill. A lottery retailer is prohibited from installing or operating a VLT unless certain conditions are satisfied. VLTs may be installed and operated by a single lottery retailer at a limited number of sites within Colorado. The bill specifies that VLTs shall not be installed or operated at more than 2 sites within Colorado. The commission is given rule-making authority to implement the bill and to monitor and regulate the operation of VLTs. Each VLT is subject to approval by the commission in accordance with its rules and must meet certain requirements. Lottery retailers are required to be responsible for all expenses necessary to purchase or lease, install, maintain, and operate VLTs. Lottery retailers are entitled to receive a specified percentage of net machine income from VLTs. The remainder of the proceeds from the operation of VLTs, net of expenses and prizes, is required to be distributed in accordance with section 3 (1) (b) (III) of article XXVII of the state constitution. The Colorado lottery higher education fund (fund) is established by the bill. Moneys in the fund are to be used to provide postsecondary education financial assistance. All revenues that would otherwise be allocated to the general fund pursuant to section 3 (1) (b) (III) of article XXVII of the state constitution are to be credited to the fund except for a portion of the moneys to be credited to the public school capital construction assistance fund up to a specified amount and a portion of the moneys to be allocated to Colorado community colleges in certain circumstances. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. 24-35-201, Colorado Revised Statutes, is amended BY THE ADDITION OF THE FOLLOWING NEW SUBSECTIONS to read: 24-35-201. Definitions. As used in this part 2, unless the context otherwise requires: (1.3) "Cash value" means the value of all currency plus the value of all printed pay vouchers redeemable for currency. (4.5) "Licensed track" means a class B track, as defined in section 12-60-102 (4) (a) (I), C.R.S., at which a race meet of horses, consisting of thirty or more race days, was conducted during the previous calendar year and is scheduled to conduct a race meet of horses, consisting of thirty or more race days, in the current calendar year. (5.5) "Lottery retailer" means a lottery sales agent licensed pursuant to sections 24-35-206 and 24-35-208.5. (6.5) "Net machine income" means the cash value placed into a video lottery terminal minus the value of all free games awarded and all pay vouchers issued by such terminal. (7.5) "Pari-mutuel licensee" means a licensee, as defined in section 12-60-102 (17), C.R.S., that owns or controls a licensed track and that is in compliance with all statutes and rules regarding the conduct of a race meet of horses at, and the operation of, the licensed track. (9) (a) "Video lottery terminal" means an electronic computerized game machine that: (I) Is networked and can be monitored and audited by a central technology system; (II) Upon insertion of cash value, is available to play a video game of chance authorized by the division; and (III) Uses microprocessors to award to a player, on the basis of chance, free games or credits evidenced by a printed pay voucher redeemable for currency. (b) "Video lottery terminal" does not include: (I) A machine or device that directly disburses coins, cash, tokens, or any item of value other than a printed pay voucher; or (II) A machine or device defined as a slot machine in section 9 of article XVIII of the state constitution. SECTION 2. Part 2 of article 35 of title 24, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 24-35-208.5. Commission - video lottery terminals - authorization - requirements - rules. (1) The commission may authorize the installation and operation of video lottery terminals by no more than two lottery retailers who meet all qualifications set forth in this section and section 24-35-206. Such authorization shall be evidenced by an additional license issued by the commission. (2) (a) A lottery retailer shall not install or operate a video lottery terminal unless the lottery retailer is a pari-mutuel licensee and the video lottery terminal is to be located in an age-controlled area, as defined by rule of the commission, on premises that are owned or controlled by the lottery retailer. (b) A lottery retailer may install or operate video lottery terminals on premises located at no more than two different sites within Colorado, one of which may be a licensed track. (3) The commission shall determine the number of video lottery terminals that may be placed on the premises of a lottery retailer at one site; except that the commission shall not approve more than two thousand five hundred video lottery terminals on the premises of a lottery retailer at one site. (4) Video lottery terminals shall not be installed or operated on premises located at more than two different sites within Colorado. (5) The commission is authorized to promulgate rules as necessary to implement this section and to monitor and regulate the operation of video lottery terminals and is specifically authorized to fine, admonish, or suspend or revoke the license of any lottery retailer found by the commission to have allowed an underage person to enter the age-controlled area, as defined by rule of the commission, of any premises for the purpose of using a video lottery terminal. (6) The director and the commission shall manage and regulate the operation of video lottery terminals in accordance with this section and their powers and duties as set forth in sections 24-35-204 and 24-35-208, respectively. (7) Each video lottery terminal is subject to approval by the commission in accordance with rules promulgated by the commission. (8) In addition to any other requirements set forth in this section, each video lottery terminal approved under this section shall: (a) Offer only games licensed and authorized by the commission; and (b) Not have any means of manipulation by a player or other unauthorized person that would affect the probability of winning a game. (9) All expenses necessary to purchase or lease, install, maintain, and operate video lottery terminals shall be borne by lottery retailers. Marketing and advertising related to video lottery terminals are subject to approval by the commission. Nothing in this subsection (9) precludes the commission from advertising or marketing video lottery terminals. (10) Compensation to be paid to lottery retailers shall be seventy percent of net machine income. (11) Of the proceeds received from the operation of video lottery terminals, the division shall first remit to lottery retailers the compensation set forth in subsection (10) of this section. The balance of such proceeds, net of prizes and expenses, shall be distributed in accordance with section 3 (1) (b) of article XXVII of the state constitution. SECTION 3. Article 5 of title 23, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 23-5-141. Colorado lottery higher education fund - creation. (1) There is hereby created in the state treasury the Colorado lottery higher education fund, referred to in this section as the "fund". The fund shall consist of moneys transferred to the fund pursuant to subsection (2) of this section. 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. (2) All revenues that would otherwise be allocated 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 distributed pursuant to section 12-47.1-701.5 (3.5), C.R.S., and 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., shall be transferred to the fund. SECTION 4. 12-47.1-701.5, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SUBSECTION to read: 12-47.1-701.5. Revenues attributable to local revisions to gaming limits - extended limited gaming fund - identification - separate administration - distribution - definitions. (3.5) (a) In each fiscal year that commences on July 1 of a given year and that commences after the end of the first fiscal year during which video lottery terminals were operated in accordance with section 24-35-208.5, C.R.S., during the entire fiscal year, if the aggregate amount of revenue in the extended limited gaming fund to be distributed in that year in accordance with subparagraph (I) of paragraph (c) of subsection (3) of this section is less than six million twenty-nine thousand one hundred dollars, adjusted annually for inflation, the state treasurer shall distribute moneys that would otherwise be allocated to the general fund pursuant to section 3 (1) (b) (III) of article XXVII of the state constitution in the same manner as moneys in the extended limited gaming fund are distributed in accordance with subparagraph (I) of paragraph (c) of subsection (3) of this section so that the aggregate amount to be distributed in any given year in accordance with this paragraph (a) and subparagraph (I) of paragraph (c) of subsection (3) of this section equals six million twenty-nine thousand one hundred dollars, adjusted annually for inflation. (b) For purposes of this subsection (3.5), "inflation" means the percentage change in the United States department of labor, bureau of labor statistics, consumer price index for Denver-Boulder-Greeley, all items, all urban consumers, or its successor index. SECTION 5. 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) 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 five million five hundred thousand 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 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.