Hawaii-2019-HB936-Introduced

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

STATE LOTTERY

§ -1 Definitions. As used in this chapter, unless the context otherwise requires:

"Charitable organization" means any nonprofit organization, including not more than one auxiliary of that organization, that has operated for charitable purposes in this State for at least two years before submitting a license application under this chapter.

"Commission" or "lottery commission" means the Hawaii state lottery commission.

"Executive director" means the executive director of the Hawaii state lottery commission.

"Game play-style" means the process or procedure that a player shall follow to determine if a lottery ticket or share is a winning ticket or share.

"Lottery" or "state lottery" means the lottery created and operated pursuant to this chapter.

"Matrix" means the odds of winning a prize and the prize payout amounts in a given game.

"Person" means an individual, association, corporation, club, trust, estate, society, company, joint stock company, receiver, trustee or referee, any other person acting in a fiduciary or representative capacity who is appointed by a court, or any combination of individuals. "Person" includes any department, commission, agency, or instrumentality of the State or its political subdivisions.

"Premises" means the physical location and address listed on the license of the licensed agent where lottery tickets or shares may be sold.

§ -2 Hawaii state lottery commission; membership, appointment; chairperson; reimbursement of expenses. (a) There is established within the department of accounting and general services for administrative purposes only a Hawaii state lottery commission consisting of five members who shall be residents of this State and appointed by the governor pursuant to section 26-34. No more than three members of the commission may be from the same political party. The commission members shall annually elect one of the members to serve as chairperson of the commission.

(b) The commission shall comprise the following members:

(1) At least one member of the commission shall have a minimum of five years' experience in law enforcement;

(2) At least one member of the commission shall have a minimum of five years' experience as a certified public accountant;

(3) At least one member of the commission shall have a minimum of five years' experience in marketing or advertising, or both; and

(4) At least one member of the commission shall have a minimum of five years' experience in convenience store, minimart, or grocery retailing.

(c) The members of the commission shall serve without compensation but shall be reimbursed for expenses, including travel expenses, necessary for the performance of their duties.

(d) No commission member shall have a pecuniary interest in any contract or agreement to which the commission is a party.

(e) No action of the commission shall be binding unless taken at a meeting with at least three members present who vote in favor of the action in question.

§ -3 Executive director; appointment. (a) The governor shall appoint an executive director who shall be a person qualified by training and experience to administer the state lottery.

(b) Effective July 1, 2019, the executive director shall be paid a salary set at eighty-seven per cent of the salary of the director of human resources development. The executive director shall be exempt from chapters 76 and 89 but shall be a member of the state employees' retirement system and shall be eligible to receive benefits of any state or federal employee benefits program generally applicable to officers and employees of the State, including those under chapter 87A.

(c) The executive director shall devote the executive director's entire time and attention to the administration of the state lottery and shall not be engaged in any other profession or occupation.

(d) The executive director may employ persons not subject to chapters 76 and 78 to perform and execute the functions of the commission.

§ -4 Commission; executive director; powers and duties. (a) The commission shall meet with the executive director not less than once each quarter to make recommendations and set policy, receive reports from the executive director, and transact other business properly brought before the commission.

(b) The commission shall oversee a state lottery to produce the maximum amount of net revenue consistent with the dignity of the State. To achieve these ends, the commission shall authorize the executive director to adopt rules in accordance with chapter 91. Rules adopted by the executive director may include provisions relating to:

(1) Subject to the approval of the commission, the types of lottery games and the types of game play-styles to be conducted;

(2) The method of selecting the winning tickets or shares for noncomputerized online games; provided that no method may be used that, in whole or in part, depends on the results of a dog race or a horse race;

(3) The manner of payment of prizes to the holders of winning tickets or shares, including providing for payment by the purchase of annuities in the case of prizes payable in installments; provided that the commission staff shall examine claims and shall not pay any prize based on altered, stolen, or counterfeit tickets or based on any tickets that fail to meet established validation requirements, including rules stated on the ticket or in the published game rules, and confidential validation tests applied consistently by the commission staff. No particular prize in a lottery game may be paid more than once, and if a binding determination occurs in which more than one person is entitled to a particular prize, the sole remedy of the claimants is the award to each of them of an equal portion of the single prize;

(4) The method to be used in selling tickets or shares; provided that no elected official's name may be printed on the tickets or shares. The overall estimated odds of winning some prize or some cash prize, as appropriate, in a given game shall be printed on each ticket or share;

(5) The licensing of agents to sell tickets or shares; provided that no person who is under eighteen years of age shall be licensed as an agent;

(6) The manner and amount of compensation to be paid licensed sales agents necessary to provide for the adequate availability of tickets or shares to prospective buyers and for the convenience of the public, including provision for variable compensation based on sales volume; and

(7) Matters necessary or desirable for the efficient and economical operation and administration of the lottery and for the convenience of the purchasers of tickets or shares and the holders of winning tickets or shares.

(c) The commission shall authorize the executive director to issue orders and shall approve orders issued by the executive director for the necessary operation of the lottery. Orders issued under this subsection may include provisions relating to:

(1) The prices of tickets or shares in lottery games;

(2) The themes, game play-styles, and names of lottery games and definitions of symbols and other characters used in lottery games; provided that each ticket or share in a lottery game shall bear a unique and distinguishable serial number;

(3) The sale of tickets or shares at a discount for promotional purposes;

(4) The prize structure of lottery games, including the number and size of prizes available. Available prizes may include free tickets in lottery games and merchandise prizes;

(5) The frequency of drawings, if any, or other selections of winning tickets or shares; provided that:

(A) All drawings shall be open to the public;

(B) The actual selection of winning tickets or shares shall not be performed by an employee or member of the commission; and

(6) Requirements for eligibility for participation in grand drawings or other runoff drawings, including requirements for the submission of evidence of eligibility within a shorter period than that provided for claims by section -21; and

(7) Incentive and bonus programs designed to increase sales of lottery tickets or shares and to produce the maximum amount of net revenue for the State.

(d) Notwithstanding chapter 91 and subsection (b), the executive director, subject to the approval of the commission, may establish a policy, procedure, or practice that relates to an existing online game or a new online game that is the same type and has the same type of game play-style as an online game currently being conducted by the lottery or may modify an existing rule for an existing online game or a new online game that is the same type and has the same type of game play-style as an online game currently being conducted by the lottery, including establishing or modifying the matrix for an online game by giving notice of the establishment or modification at least thirty days before the effective date of the establishment or modification.

(e) The commission shall maintain and make the following information available for public inspection at its offices during regular business hours:

(1) A detailed listing of the estimated number of prizes of each particular denomination expected to be awarded in any instant game currently on sale;

(2) After the end of the claim period prescribed by section -21, a listing of the total number of tickets or shares sold and the number of prizes of each particular denomination awarded in each lottery game; and

(3) Definitions of all play symbols and other characters used in each lottery game and instructions on how to play and how to win each lottery game.

(f) Any information that is maintained by the commission that would assist a person in locating or identifying a winning ticket or share or that would otherwise compromise the integrity of any lottery game shall be deemed confidential and shall not be subject to public inspection.

(g) The commission, in addition to other games authorized by this chapter, shall establish two special games for each year to be conducted concurrently with other lottery games authorized under subsection (b). The moneys for prizes, for operating expenses, and for payment to the department of education, as provided in section -25(b), shall be accounted for separately as nearly as practicable in the commission's general accounting system. The moneys shall be derived from the revenues of the special games, and moneys for prizes shall not be expended from the commission's annual appropriation, except as otherwise provided in section -5(d) and section -25. Moneys saved from the revenues of the special games, by reason of operating efficiencies, shall become other revenue of the commission and revert to the state general fund.

(h) The commission, in addition to other games authorized by this chapter, may establish multistate lottery games with the lottery commissions of other states to be conducted concurrently with other lottery games authorized under subsections (b) and (g). The moneys for prizes, for operating expenses, and for payment to the state general fund shall be accounted for separately as nearly as practicable in the commission's general accounting system. The moneys shall be derived from the revenues of multistate lottery games.

(i) The commission, in addition to other games authorized by this chapter, shall establish special instant ticket games with play areas protected by paper tabs designated for use by charitable organizations. The moneys for prizes and for operating expenses shall be accounted for separately as nearly as practicable in the commission's general accounting system. Moneys saved from the revenues of the special instant ticket games, by reason of operating efficiencies, shall become other revenue of the commission and shall revert to the state general fund.

(j) Except as provided in subsection (d), the commission or executive director shall not establish or operate any online or electronic keno game or any game played on the Internet.

(k) The executive director shall print, in a prominent location on each lottery ticket or share, a statement that help is available if a person has a problem with gambling and a toll-free telephone number where problem gambling assistance is available.

The executive director shall require all licensed agents to post a sign with the statement that help is available if a person has a problem with gambling and the toll-free telephone number at the point of sale as prescribed and supplied by the executive director.

§ -5 Disposition of revenue. (a) Not more than eighteen and one-half per cent of the total annual revenues accruing from the sale of lottery tickets or shares and from all other sources, unless otherwise specified, and not more than thirty-five per cent of the total annual revenues from the sale of special instant ticket games authorized under section ‑4(i) shall be deposited in the state lottery revolving fund established by section -24 to be expended for:

(1) The payment of costs incurred in the operation and administration of the lottery, including the expenses of the commission and the costs resulting from any contract or contracts entered into for consulting or operational services;

(2) Independent audits, which shall be performed annually in addition to the audits required by section -27;

(3) Incentive programs for lottery sales agents and lottery employees;

(4) Payment of compensation to licensed sales agents necessary to provide for the adequate availability of lottery tickets or services to prospective buyers and for the convenience of the public. Except as otherwise provided in this subsection, compensation of licensed sales agents shall be at least five and one-half per cent but not more than eight per cent of the price of each lottery ticket or share that a retail sales agent sells in instant games and online games, less the price of any lottery tickets or shares that are voided;

(5) The payment of reasonable fees to redemption agents as authorized by section -22;

(6) The purchase or lease of lottery equipment, lottery tickets, and materials; and

(7) Compensation of a licensed sales agent who is designated as a charitable organization shall be twenty per cent of the price of each lottery ticket from a special instant ticket game authorized under section -4(i) and shall be an offset against the sale of the lottery ticket.

(b) Not less than fifty per cent of the total annual revenues accruing from the sale of lottery tickets or shares shall be deposited in the state lottery prize revolving fund established by section -26 for payment of prizes to the holders of winning lottery tickets or shares or for the purposes provided for in section -21.

(c) All other revenues accruing from the sale of lottery tickets or shares in online games or instant games shall be deposited in the state lottery revolving fund established by section -24 to be used as specified by section -25.

(d) Except for moneys for prizes expended as provided in section -4(g), revenues expended under subsection (a) shall be subject to legislative appropriation.

§ -6 Powers and duties of the executive director. In addition to any other powers and duties authorized in this chapter, the executive director shall:

(1) Supervise and administer the operation of the lottery in accordance with this chapter and the rules adopted under this chapter, subject to the continuous duty to take into account the particularly sensitive and responsible nature of the commission's functions;

(2) Enforce this chapter and the rules adopted under this chapter. The executive director shall receive allegations of any violations of the laws of this State or rules pertaining to the conduct of the lottery;

(3) Pursuant to this chapter and the rules adopted by the commission, license as agents to sell lottery tickets persons that shall best serve the public convenience and promote the sale of lottery tickets or shares;

(4) Hire professional, clerical, technical, and administrative personnel as may be necessary to carry out this chapter. The executive director shall conduct background checks of prospective employees and, in all employment decisions, shall take into account the particularly sensitive and responsible nature of the operation of the state lottery;

(5) Act as secretary and executive officer of the commission;

(6) Confer regularly as necessary or desirable and not less than once each quarter with the commission on the operation and administration of the lottery;

(7) Make available for inspection by the commission, upon request, all books, records, files, and other information and documents of the commission;

(8) Advise the commission and recommend matters as are necessary and advisable to improve the operation and administration of the lottery;

(9) Suspend or revoke any license issued pursuant to this chapter or the rules adopted pursuant to this chapter, subject to appeal to the commission; and

(10) Within thirty days after receiving an allegation of a violation of the laws of this State or rules pertaining to the conduct of the lottery by a licensed agent and evidence substantiating the allegation, determine whether the agent has violated the rules and if a criminal investigation is warranted.

§ -7 Monthly reports; annual reports. (a) The executive director shall submit a monthly report to the commission, the governor, and the legislature. The monthly report shall include the total lottery revenue, prize disbursements, and other expenses for the preceding month.

(b) The commission shall submit an annual report to the governor and the legislature not less than twenty days prior to the convening of each regular session. The annual report shall include a full and complete statement of lottery revenues, prize disbursements, and other expenses for the preceding years, and recommendations, including any proposed legislation, that the commission deems necessary or desirable.

§ -8 Studies and investigations. (a) The executive director shall conduct an ongoing study and investigation of the lottery to:

(1) Ascertain any provisions in this chapter or in its rules through which any abuses in the administration and operation of the lottery or any evasion of this chapter or its rules may arise or be practiced;

(2) Formulate recommendations for changes to this chapter;

(3) Guard against the use of this chapter and the rules as a pretext for organized gambling and crime; and

(4) Ensure that this chapter and its rules are in a form and are administered to serve the true purposes of this chapter.

(b) The executive director shall conduct an ongoing study and investigation of the operation and the administration of lottery laws in effect in other states or countries, any literature on the subject that may be published or available, any federal laws that may affect the operation of the lottery, and the reaction of residents to existing and potential features of the lottery in order to recommend or effect changes that serve the purposes of this chapter.

§ -9 Contracts; limitation; restrictions. (a) Notwithstanding any law to the contrary, the executive director may:

(1) Directly solicit bids and contract for the design and operation of the lottery or the purchase of lottery equipment, lottery tickets, and related materials;

(2) Contract to effectuate the purposes of this chapter and the rules adopted pursuant to this chapter; and

(3) Acquire administrative office facilities and related facilities and equipment for the use of the commission by lease, purchase, or lease-purchase.

(b) The commission shall be exempt from chapter 103D for procurement relating to the design and operation of the lottery or purchase of lottery equipment, lottery tickets, and related materials. The executive director shall adopt rules substantially equivalent to the policies and procedures in this chapter for procurement relating to the design and operation of the lottery or purchases of lottery equipment, lottery tickets, or related materials. All other procurement shall be as specified by chapter 103D. Bids received under this section may be deemed confidential in whole or in part by the executive director if required to protect the sensitive and responsible nature of the commission's functions and the paramount considerations of security and integrity.

(c) Any award made by the executive director pursuant to this section becomes effective and binding on the commission unless it is rejected by the commission at a meeting held within fourteen calendar days after the award is communicated to the members of the commission.

(d) A contract awarded or entered into by the executive director pursuant to this section shall not be assigned by the recipient of the award without specific approval by the executive director. In all awards of contracts pursuant to this section, the executive director shall take particular account of the sensitive and responsible nature of the commission's functions and the paramount considerations of security and integrity.

§ -10 Security operations; powers; peace officer status. (a) The commission shall maintain operations responsible for security. The executive director shall appoint a security officer to supervise the security operations of the commission.

(b) The security operations of the commission shall be deemed a law enforcement agency and the supervising security officer shall be designated a peace officer. The status as a law enforcement agency or as a peace officer shall be for the limited purpose of receiving investigative information from law enforcement agencies pertaining to investigations of lottery activities.

§ -11 Department of the attorney general; investigation; authority; payment. The department of the attorney general shall order an investigation into any violation of a state law that pertains to the conduct of the state lottery. The executive director of the commission shall include in the commission's overhead expenses and pay, upon certified invoice submitted by the attorney general, any charges for actual expenses as a result of investigations and related law enforcement activities, or for any activity directly or indirectly related to the lottery operation. The charges may include costs for personnel, supplies, materials, equipment, and travel within or out of the State.

§ -12 Licenses to sell tickets or shares; fee; conditions; definitions. (a) The executive director shall not issue a license as a lottery sales agent to any person who engages exclusively in the business of selling lottery tickets or shares. Before issuing a license as a lottery sales agent to any person, the executive director shall consider factors including:

(1) The financial responsibility and security of the person and the nature of the person's business activity;

(2) The person's background and reputation in the community;

(3) The accessibility of the person's place of business or activity to the public;

(4) The accessibility of existing licensees to serve the public convenience; and

(5) The volume of expected sales.

(b) A person lawfully engaged in nongovernmental business on state property may be licensed as a lottery sales agent.

(d) No license shall be assignable or transferable.

(e) A licensed agent or licensed agent's employee may sell lottery tickets or shares only on the premises stated in the license of the agent.

(f) The executive director may purchase a blanket bond covering the activities of licensed agents.

(g) A licensed agent shall display the licensed agent's license or a copy of the license conspicuously in accordance with the rules adopted by the executive director.

(h) If a licensed agent sells lottery tickets or shares on leased premises and all or part of the agent's rental payments are based on the total volume of sales made at the premises, the compensation paid by the commission to the agent for the sale of lottery tickets and shares shall be the amount of the sale for the purposes of determining the agent's rental payments. This subsection shall not apply if the lease agreement expressly provides that the total volume of sales made at the premises includes sales of lottery tickets or shares.

(i) The commission shall adopt rules to establish penalties for a licensed agent who violates section -16 or

-17; provided that the penalties for a subsequent violation within any twelve-month period shall be more severe than the penalty for a prior violation.

(j) The executive director shall not require a licensed agent, as a condition of securing or continuing to hold a license, to sell lottery tickets or shares to the public or to sell lottery tickets or shares through or by the use of a self-service vending machine at the licensed agent's premises.

(k) For the purposes of this section, acts or omissions of an employee at the premises of a licensed agent or sales of tickets or shares by vending machine in violation of section -16 or -17 shall be deemed acts or omissions of the licensed agent only at the premises where the acts, omissions, or sales occurred.

§ -13 Prosecution; payment of costs. (a) The attorney general and the prosecuting attorneys of the affected counties shall have concurrent jurisdiction over any offenses arising out of or in connection with the formation, management, operation, or conduct of the state lottery.

(b) The executive director shall include, as an expense of the commission, all costs incurred by the attorney general or a prosecuting attorney as a result of prosecution of a person for a violation of this chapter or for any violation directly or indirectly related to the state lottery operation. The executive director shall authorize reimbursement of prosecution costs on presentation of a certified invoice signed by the attorney general or a prosecuting attorney.

(c) As used in this section, "prosecution costs" may include but are not limited to costs for personnel, expenses, fees, and other costs necessary in the preparation and prosecution of a person charged with a violation of this chapter.

§ -14 Right to prize not assignable; exceptions. (a) The right of any person to a prize shall not be assignable; provided that:

(1) Payment of any prize drawn or the remainder of any annuity purchased may be paid to any of the following:

(A) The estate of a deceased prize winner;

(B) The beneficiary of a deceased prize winner; or

(2) Payments to winners in an amount of $600 or more are subject to setoff pursuant to section -28;

(3) If a voluntary assignment occurs, the remainder of any annuity, or a portion of the remainder of the annuity, may be assigned by a prize winner pursuant to an appropriate judicial order if all of the following conditions are met:

(A) The prize winner provides an affidavit to the court to the effect that the affiant is of sound mind, not acting under duress, and has received independent financial and tax advice concerning the assignment;

(B) The assignee pays the prize winner a lump sum under the assignment agreement for all amounts that are due to the prize winner on or before the date that the assignment takes effect; and

(C) The parties to the assignment pay a fee to the commission to defray the expenses incurred by the commission in processing the assignment. The commission shall determine the amount of the fee. Moneys collected by the commission pursuant to this subparagraph shall be deposited in the state lottery revolving fund established by section -24.

(b) On receipt of a court order that meets the requirements of subsection (a)(3), the executive director shall make the voluntary assignment.

(c) The commission and executive director shall be discharged of all further liability upon payment of a prize pursuant to this section.

§ -15 Sale at unauthorized price or by unauthorized persons; violation; classification. (a) No person shall sell a ticket or share at a price greater than that fixed by rule. No person other than a licensed lottery sales agent or any employee of a licensed lottery sales agent acting within the scope of the employee's employment shall sell lottery tickets or shares. This section shall not prohibit a person from giving lottery tickets or shares to another person as a gift; provided that the person receiving the lottery tickets meets the eligibility requirements of section -23.

(b) Any person who violates this section shall be guilty of a petty misdemeanor.

§ -16 Sale of tickets or shares to underage persons; violation; classification. (a) No person shall sell or offer to sell a lottery ticket or share to any person who is under the age of twenty-one.

(b) Any person who violates this section shall be guilty of a misdemeanor.

§ -17 Sale to persons using public assistance vouchers or state-issued electronic benefits transfer cards; violation; classification. (a) No licensed lottery sales agent shall sell a lottery ticket or share to a person who uses either a public assistance voucher issued by any public entity or an electronic benefits transfer card issued by the department of human services to purchase the lottery ticket or share.

(b) No licensed lottery sales agent shall sell a lottery ticket or share during the same transaction in which a person uses either a public assistance voucher issued by any public entity or an electronic benefits transfer card issued by the department of human services.

§ -18 Purchase of lottery tickets or shares persons under twenty-one years of age; penalty. (a) No person under twenty-one years of age shall purchase a lottery ticket or share.

(b) A violation of this section shall be subject to a fine of not more than $100.

§ -19 Alteration of lottery tickets; violation; classification. Any person who, with intent to defraud, falsely makes, alters, forges, passes, or counterfeits a state lottery ticket or share shall be guilty of a class C felony.

§ -20 Purchase of tickets and receipt of prizes by certain persons prohibited. (a) A lottery ticket or share shall not be purchased by and a prize shall not be paid to an officer or employee of the commission or to any spouse, child, brother, sister, or parent residing as a member of the same household in the principal place of residence of the officer or employee.

(b) A lottery ticket or share shall not be purchased by and a prize shall not be paid to any of the following persons:

(1) An officer or employee of any person contracting with the commission to supply gaming equipment or lottery tickets, provide advertising or consulting services, or to draw or otherwise select winning tickets or shares if the officer or employee is involved in the direct provision of goods or services to the commission or has access to information made confidential by the commission;

(2) A spouse, child, brother, sister, or parent residing as a member of the same household in the principal place of residence of a person described in paragraph (1); or

(3) The immediate supervisor of a person described in paragraph (1).

§ -21 Disposition of unclaimed prize money. Unclaimed prize money for the prize on a winning lottery ticket or share shall be retained for the person entitled to the prize for one hundred eighty days after the drawing in which the prize was won in the case of a drawing prize and for one hundred eighty days after the announced end of the game in question in the case of a prize determined in any manner other than by means of a drawing. If a claim is not made for the money within the applicable period, seventy per cent of the prize money shall be held in the state lottery prize revolving fund for use as additional prizes in future games and thirty per cent shall be transferred to the education special fund established by section 302A- .

§ -22 Lottery redemption agents. The executive director may retain redemption agents to perform functions, activities, or services in connection with the operation of the lottery, including direct payment of prizes not exceeding $5,000, as the executive director deems advisable pursuant to this chapter and the rules adopted under this chapter. The executive director may make arrangements for payment of reasonable fees for those services. Notwithstanding any other law to the contrary, those functions, activities, or services shall constitute lawful functions, activities, and services of financial institutions licensed under chapter 412.

§ -23 Award of prize to certain persons prohibited. No prize may be paid on any winning ticket or share to any person who is under the age of twenty-one.

§ -24 State lottery revolving fund. There is established in the state treasury the state lottery revolving fund consisting of all revenues received from the sale of lottery tickets or shares, the fees, if any, charged pursuant to section -12 and all other moneys credited or transferred from any other fund or source pursuant to statute, with the exception of those moneys set aside for payment of prizes and deposited as provided in section -26.

§ -25 Use of moneys in state lottery revolving fund. (a) The moneys in the state lottery revolving fund shall be expended by the commission for the expenses of the commission incurred in carrying out its powers and duties and in the operation of the lottery.

(b) Moneys remaining in the state lottery revolving fund each fiscal year after the expenditures made pursuant to subsection (a) shall go to the education special fund established in section 302A- .

§ -26 State lottery prize revolving fund; setoff for state debts; notification to department of human services. (a) There is established in the state treasury the state lottery prize revolving fund. That portion of the gross proceeds that is set aside pursuant to section -5(b) shall be deposited, pursuant to chapter 38, to the credit of the state lottery prize revolving fund as the commission receives those proceeds and shall be available by the commission for payment of prizes to the holders of winning lottery tickets or shares or for the purposes provided for in section -21. Procedures for payments to winners from this revolving fund shall be established by rule or order of the executive director. Notwithstanding any other law to the contrary, transfers or payments to or from the state lottery prize revolving fund, and deposits into the state lottery prize revolving fund, are not subject to appropriation by the legislature.

(b) Payments to winners that are payable by the commission or lottery redemption agents pursuant to this section in an amount of $600 or more shall be subject to setoff under section -28.

(c) The commission shall provide the department of human services with the names and the social security numbers of persons who are paid lottery prizes or winnings in an amount of $600 or more pursuant to this section for purposes described under section 346- . The department of human services shall reimburse the commission for the cost of providing the information.

§ -27 Audit of accounts. The certified public accountant hired to perform the annual audit under section ‑5(a)(2) shall conduct postaudits of all accounts and transactions of the commission for each lottery game. The certified public accountant conducting an audit under this chapter shall have access and authority to examine any and all records of the commission, its lottery redemption agents, and its licensed lottery sales agents.

§ -28 Prizes; setoff for debts to state agencies; definitions. (a) The commission shall establish a liability setoff program by which state lottery prize payments pursuant to section -26 may be used to satisfy debts that a person owes the State. The program shall comply with the standards and requirements described in this section.

(b) If a person owes an agency a debt, an agency may notify the commission, providing at a minimum the state agency or program identifier, the first name, last name, middle initial, and social security number of the debtor, and the amount of the debt. This information shall be in the form the commission prescribes. Each agency shall certify the information and update the information monthly. No information shall be transmitted by the department of taxation to the commission if the transmission would violate section 231-1.5.

(c) The commission shall match the information submitted by the agency with persons who are entitled to a state lottery prize payment in an amount of $600 or more. If there is a match, the commission shall set off the amount of the debt from the prize due and notify the person of the person's right to appeal to the appropriate court, or to request a review by the agency pursuant to agency rule. The person shall make the request or appeal within thirty days after the setoff. If the setoff accounts for only a portion of the prize due, the remainder of the prize shall be paid to the person. The commission shall promptly transfer the setoff, less the amount of the commission's fee, to the agency.

(d) If a person requests a review by the agency or provides the agency with proof that an appeal has been taken to the appropriate court within thirty days after the setoff and it is determined that the setoff was made in error under this section, the agency shall reimburse the person with interest as determined pursuant to section 478-2.

(e) The basis for a request for review shall not include the validity of the claim if its validity has been established at an agency hearing, by judicial review in a court of competent jurisdiction in this or any other state, or by final administrative decision, and shall state with specificity why the person claims the debt does not exist or why the amount of the debt is incorrect.

(f) The commission may prescribe a fee to be collected from each agency utilizing the setoff procedure. The amount of the fee shall reasonably reflect the actual cost of the service provided.

(g) A setoff to the child support enforcement agency for overdue support shall have priority over all other setoffs. If more than one agency has one or more delinquent accounts for the same person, the refund may be apportioned among them according to rules adopted by the executive director.

(h) If the prize is insufficient to satisfy the entire debt, the remainder of the debt may be collected by an agency as provided by law or resubmitted for setoff against any other prize awarded.

(i) An agency shall not enter into an agreement with a debtor for the assignment of any prospective prize to the agency in satisfaction of the debt.

(j) As used in this section, the following terms are defined:

"Agency" means a department, agency, board, commission, or institution of this State. "Agency" also means a corporation under contract with this State that provides a service that would otherwise be provided by a department, agency, board, commission, or institution of this State if:

(1) The contract specifically authorizes participation in the liability setoff program;

(2) The attorney general has reviewed the contract and approved the authorization; and

(3) The participation in the liability setoff program is limited to debts related to the services the corporation provides for or on behalf of this State.

"Debt" means an amount of over $100 owed to an agency by a person and may include interest, penalties, charges, costs, fees, or any other amount. "Debt" also includes moneys owed by a person for overdue support and referred to the child support enforcement agency for collection.

"Overdue support" means a delinquency in court-ordered payments for support or maintenance of a child or for spousal maintenance to the parent with whom the child is living if child support is also being enforced pursuant to an assignment or application filed under title 42 United States Code section 654(6)."

SECTION 2. Chapter 302A, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§302A- Education special fund. There is established an education special fund within the state treasury to be administered by the superintendent into which shall be deposited funds pursuant to sections -21 and -25. Moneys may be appropriated from the education special fund to support public education."

SECTION 3. Chapter 346, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follow:

"§346- Eligibility of lottery prize winner to receive assistance; determination. On receipt of the information provided by the Hawaii state lottery commission pursuant to section -26(c), the director shall determine if the person is receiving assistance from any financial assistance program administered by the department of human services. If the person is receiving assistance, the director shall promptly evaluate the eligibility of that person to receive the assistance."

SECTION 4. Section 712-1220, Hawaii Revised Statutes, is amended by amending the definition of "gambling" to read as follows:

"Gambling". A person engages in gambling if [he] the person stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under [~~his~~] the person's control or influence, upon an agreement or understanding that [he] the person or someone else will receive something of value in the event of a certain outcome. Gambling does not include: lottery tickets and other items used in the playing phases of lottery schemes overseen by the Hawaii state lottery commission; bona fide business transactions valid under the law of contracts, including [~~but not limited to~~] contracts for the purchase or sale at a future date of securities or commodities[,]; and agreements to compensate for loss caused by the happening of chance, including [~~but not limited to~~] contracts of indemnity or guaranty and life, health, or accident insurance."

SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2019-2020 and the same sum or so much thereof as may be necessary for fiscal year 2020-2021 for the operations of the Hawaii state lottery commission.

The sum appropriated shall be expended by the department of accounting and general services for the purposes of this Act.

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval; provided that section 5 shall take effect on July 1, 2019.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	936
THIRTIETH LEGISLATURE, 2019
STATE OF HAWAII