LTR-06-10-00005-E Multi-Jurisdictional Lottery Games and Payment of Prizes
2/10/10 N.Y. St. Reg. LTR-06-10-00005-E
NEW YORK STATE REGISTER
VOLUME XXXII, ISSUE 6
February 10, 2010
RULE MAKING ACTIVITIES
DIVISION OF THE LOTTERY
EMERGENCY RULE MAKING
I.D No. LTR-06-10-00005-E
Filing No. 42
Filing Date. Jan. 26, 2010
Effective Date. Jan. 26, 2010
Multi-Jurisdictional Lottery Games and Payment of Prizes
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
Amendment of sections 2803.12, 2806.2, 2806.7 and 2806.11 and addition of section 2806.13 to Title 21 NYCRR.
Statutory authority:
Tax Law, sections 1601, 1604, 1612 and 1617
Finding of necessity for emergency rule:
Preservation of general welfare.
Specific reasons underlying the finding of necessity:
Emergency adoption of regulations that will allow the introduction of the Powerball game is necessary to counteract the budgetary crisis currently facing the State of New York. Governor Paterson discussed the severity of this crisis in his January 7, 2009 State of the State address:
New York faces an historic economic challenge, the gravest in nearly a century. For several months, events have shaken us to the core. Bank closures, job losses and stock market meltdowns have destabilized the foundations of our economy. Since January 2008, two million Americans have lost their jobs. During this recession, an estimated 225,000 New Yorkers will be laid off. Many others have lost their homes. The pillars of Wall Street have crumbled. The global economy is reeling. Trillions of dollars of wealth have vanished.
We still do not know the extent of the economic chaos that awaits us. We do know that this may be the worst economic contraction since the Great Depression. New York entered recession in August. Wall Street was hit the hardest. At least 60,000 jobs will be lost in the financial services sector, which is devastating to our state budget. Financial services provide 20% of state government revenues, so this year's budget will be exceptionally difficult.
Let me be clear - our state faces historic challenges. Our economy is damaged, our confidence is shaken, and the economic obstacles we face seem overwhelming. . . These problems may last for many more months or even years.
The Governor again underscored the importance of reversing New York State's ominous fiscal situation in his January 6, 2010 State of the State Address:
We come here to build. To build New York's economy to a national model of ingenuity and strength. To build our people's trust in the fiscal stability of our State. . . The last two budget battles have left its toll on all of us in this Chamber, and there are more deficits up ahead that will require an even greater sacrifice.
The New York Lottery (the "Lottery") has the unique ability to generate revenue for the State quickly and at a critical time when additional revenue is essential. The new regulations allow the Lottery to participate in Powerball, and the Lottery hopes to increase revenue earned for education in New York State through Powerball sales.
The new regulations allowing for the introduction of Powerball are expected to result in increased earnings for aid to education because Powerball will likely supplement existing sales of the Mega Millions multi-jurisdictional lottery game. Mega Millions currently averages annual sales of approximately $465 million, generating $163 million for education per year. With the addition of Powerball, the Lottery expects more frequent high jackpots resulting in a thirty percent (30%) overall increase in sales over current Mega Millions sales. Sales for each game will vary depending on jackpot rolls, but we anticipate combined annual sales from Mega Millions and Powerball to be approximately $605 million, generating $212 million for education. Therefore, the introduction of Powerball is estimated to result in an additional $50 million per year in earnings for aid to education.
Due to the unprecedented need for revenue at this time, the Lottery and the State cannot afford to delay participation in Powerball until completion of the Notice of Proposed Rulemaking process under the State Administrative Procedure Act. Therefore, the new multi-jurisdictional lottery game regulations must first be implemented through Emergency Adoption.
Subject:
Multi-jurisdictional lottery games and payment of prizes.
Purpose:
To allow the sale of Powerball tickets and to codify an existing requirement regarding verification of prize winner identities.
Substance of emergency rule:
This amendment of Sections 2803.12, 2806.2, 2806.7 and 2806.11 and this addition of Section 2806.13 revises the New York Lottery's (the "Lottery's") regulations governing identification of persons entitled to a prize award and multi-jurisdictional lottery games to permit the introduction of the Powerball game in New York State.
The amendment of Section 2803.12 of the prize payment provisions of the Lottery's regulations codifies a long-standing condition of a Lottery prize award that each prize claimant must cooperate with the Lottery in the release of a public announcement regarding the prize and by participating in a news conference if required by the Lottery. The Lottery requires certain information from prize winners to operate and administer the Lottery, which includes the marketing and advertising of the Lottery and the identification of the person entitled to a prize award. Public identification of Lottery winners is a standard part of the Lottery's process to verify the identity of prize claimants and to verify the proper ownership of prizes.
The amendment of provisions in Part 2806 and the addition of Section 2806.13 to the multi-jurisdictional game regulations will allow the Lottery to offer the Powerball game. The amendments to Sections 2806.2, 2806.7 and 2806.11 implement technical modifications and other revisions necessary to finalize the agreement between the New York Lottery, other Mega Millions state lotteries, and the Multi-State Lottery Association ("MUSL") that will permit the sale of Powerball tickets in New York State and the sale of Mega Millions tickets in MUSL states. The definition of "Quick Pick" in Section 2806.2 is revised to more accurately describe how a Quick Pick is determined and to coincide with the definition of a Powerball Quick Pick included in the new Section 2806.13. Section 2806.7 is amended to revise the manner in which Mega Millions jackpot prizes are determined and advertised in accordance with the cross-selling arrangement between state lotteries. Also consistent with the cross-selling arrangement, Section 2806.7 is amended to address the payment of lower level prizes as pari-mutuel prizes when deemed necessary following consultation with other state lotteries selling Mega Millions tickets. Section 2806.11 is amended to coincide with the unclaimed prize money provision of the new Section 2806.13 to accommodate the cross-selling arrangement.
The new Section 2806.13 of the Lottery's regulations describes Powerball as a multi-jurisdictional lottery game similar to the Mega Millions game that has been offered in New York and in other states since 2002. For every Powerball drawing, five numbers, from one (1) through fifty-nine (59), and one additional number, from one (1) through thirty-nine (39), are selected as the winning numbers. A player who matches all numbers is eligible for a jackpot prize. If no ticket is sold that matches all winning numbers, the jackpot prize is rolled over to the next drawing.
Additionally, the new Powerball section addresses ticket sales and ticket prices. For example, a Powerball ticket may be purchased for $1.00 per play. The new section also describes Powerball play characteristics, time and place of drawings, prize structure, probability of winning, prize payment, and ticket validation requirements.
This notice is intended
to serve only as a notice of emergency adoption. This agency intends to adopt this emergency rule as a permanent rule and will publish a notice of proposed rule making in the State Register at some future date. The emergency rule will expire April 25, 2010.
Text of rule and any required statements and analyses may be obtained from:
Julie B. Silverstein Barker, Associate Attorney, New York State Division of Lottery, One Broadway Center, PO Box 7500, Schenectady, New York 12301, (518) 388-3408, email: nylrules@lottery.state.ny.us
Regulatory Impact Statement
1. Statutory authority: This rulemaking, which includes the amendment of four sections and the addition of a new section to the New York Lottery's (the "Lottery's") regulations, is proposed pursuant to Tax Law Sections 1601, 1604, 1612 and 1617.
Tax Law Section 1601 describes the purpose of the New York State Lottery for Education Law (Tax Law Article 34) as being to establish a lottery operated by the State, the net proceeds of which are applied exclusively for aid to education. Tax Law Section 1604 authorizes the Lottery to operate and administer the Lottery and "to promulgate rules and regulations governing the establishment and operation thereof." Tax Law Section 1612(a)(3)(D) describes the distribution of revenues for any joint, multi-jurisdiction, and out-of-state lottery.
Tax Law Section 1617 authorizes the Lottery Director to "enter into an agreement with a government-authorized group of one or more other jurisdictions providing for the operation and administration of a joint, multi-jurisdiction, and out-of-state lottery." Chapter 57 of the Laws of 2009 removed the restriction in Tax Law Section 1617 that "the director may not agree to participate in the games of more than one such group at any single time." This amendment to Section 1617 was made so that the Lottery could offer Powerball in an effort to generate revenue for education in New York.
2. Legislative objectives: The purpose of operating Lottery games is to generate earnings for the support of education in the State. This rulemaking is expected to advance the Lottery's ability to generate earnings for education through the introduction of Powerball. This rulemaking will also formally adopt existing requirements that allow for effective public announcement of Lottery prize awards.
3. Needs and benefits: The amendment of § 2803.12 of the prize payment provisions of the Lottery's regulations codifies a long-standing condition of a Lottery prize award that each prize claimant must cooperate with the Lottery in the release of a public announcement regarding the prize and by participating in a news conference if required by the Lottery. To effectively operate and administer the Lottery, the Lottery must accurately identify the person entitled to a prize award, as well as market and advertise the Lottery, which results in more ticket sales that ultimately generate aid to education. An effective way to verify the identity of a claimant, as well as ownership of a winning ticket, is to publicly announce and identify the claimant through participation in a news event. The Lottery has long required each prize claimant to cooperate with the Lottery in the release of a public announcement and by participating in a news event. Public identification of Lottery winners is a standard part of the Lottery's process to verify the identity of prize claimants and to verify the proper ownership of prizes.
Amendment to the multi-jurisdictional game regulations will allow the Lottery to offer the Powerball game and continue its effort to keep and enlarge its market share of players (from within New York State and other states) who play lottery games. Powerball is a multi-jurisdictional lottery game similar to the Mega Millions game that has been offered in New York and in other states since 2002. For every Powerball drawing, five numbers, from one (1) through fifty-nine (59), and one additional number, from one (1) through thirty-nine (39), are selected as the winning numbers. A player who matches all numbers is eligible for a jackpot prize. If no ticket is sold that matches all winning numbers, the jackpot prize is rolled over to the next drawing.
Powerball tickets have not yet been sold in New York, and many New Yorkers often travel to adjacent states like Connecticut and Vermont to purchase tickets when the Powerball jackpot is high. Recently, the New York Lottery and other Mega Millions state lotteries began negotiating an agreement with the Multi-State Lottery Association ("MUSL"), the organization composed of state lotteries that have administered Powerball since the inception of the game. This agreement will permit the sale of Powerball tickets in New York State.
The new regulations allowing for the introduction of Powerball are expected to result in increased earnings for aid to education because Powerball will likely supplement existing sales of the Mega Millions multi-jurisdictional lottery game. Mega Millions currently averages annual sales of approximately $465 million, generating $163 million for education per year. With the addition of Powerball, the Lottery expects more frequent high jackpots resulting in a thirty percent (30%) overall increase in sales over current Mega Millions sales. Sales for each game will vary depending on jackpot rolls, but we anticipate combined annual sales from Mega Millions and Powerball to be approximately $605 million, generating $212 million for education. Therefore, the introduction of Powerball is estimated to result in an additional $50 million per year in earnings for aid to education.
4. Costs:
a. Costs to regulated parties for the implementation and continuing compliance with the rule: None.
b. Costs to the agency, the State, and local governments for the implementation and continuation of the rule: No additional operating costs are anticipated, since current funds reserved for administrative expenses of operating lottery games are expected to be sufficient to support the costs of introducing Powerball, including advertising expenses, point of sale material production costs, and the cost of additional play slips for the new game. Powerball will generate more earnings for aid to education, which will far exceed the expenses necessary to operate the game. More aid to education from the Lottery will have a positive effect on the State because fewer funds will then be required from other General Fund resources to aid education. Furthermore, if fewer funds are required from other General Fund resources to aid education, local governments will benefit because increased funding for local schools from Lottery earnings may ease local tax burdens. Local retailers will earn higher commissions as ticket sales increase, which may result in more employment opportunities.
c. Sources of cost evaluations: The foregoing cost evaluations are based on the Lottery's experience in operating State Lottery games for more than 40 years.
5. Local government mandates: None. No local government is authorized or required to do any act, apply any effort, expend any funds, or use any other resources in connection with the operation of the Powerball game. All necessary actions will be carried out by the Lottery or licensed Lottery retailers who will be completely responsible for all aspects of game operations at the local retail level. The Lottery has no authority and no need to impose any mandate on any local government. Consequently, no provision of the rule imposes any burden on any local government in the State.
6. Paperwork: There are no changes in paperwork requirements. Game information will be issued by the New York Lottery for public convenience on the Lottery's website and through point of sale advertising materials at retailer locations.
7. Duplication: None.
8. Alternatives: The alternative to amending the multi-jurisdictional game regulations is to not offer the Powerball game in New York. The failure to proceed will result in lost aid to education that is anticipated to be earned following introduction of Powerball. During the current fiscal crisis, New York State cannot afford to pass on this lucrative opportunity.
9. Federal standards: None.
10. Compliance schedule: None.
Regulatory Flexibility Analysis and Rural Area Flexibility Analysis
The proposed rulemaking does not require a Regulatory Flexibility Analysis or a Rural Area Flexibility Analysis. There will be no adverse impact on rural areas, small business or local governments.
The proposed amendments to the New York Lottery's multi-jurisdictional game regulations will not impose any adverse economic or reporting, recordkeeping or other compliance requirements on small businesses or local governments. Small businesses will not have any additional recordkeeping requirements as a result of the proposed amendments. Additionally, the proposed amendments are anticipated to have a positive affect on the revenue of small businesses that sell lottery tickets as more players will purchase Powerball tickets, which will increase sales commissions paid to retailers. Local governments are not regulated by the New York Lottery or its regulations nor are any economic or recordkeeping requirements imposed on local governments as a result of the proposed amendments to such regulations.
Job Impact Statement
The amendment of 21 NYCRR Sections 2803.12, 2806.2, 2806.7 and 2806.11, as well as the addition of Section 2806.13, does not require a Job Impact Statement because there will be no adverse impact on jobs and employment opportunities in New York State. This rulemaking is sought to allow for the sale of Powerball game tickets to generate more revenue for the State in aid to education.
The proposed revision to the prize payment and multi-jurisdictional game regulations will not have any adverse effect on jobs or employment opportunities.
The proposed revision may have a positive effect on jobs or employment opportunities as a result of an increase in ticket sales, which would increase sales commissions paid to Lottery retailers.
