1Amending the act of April 9, 1929 (P.L.343, No.176), entitled,
2as amended, "An act relating to the finances of the State
3government; providing for the settlement, assessment,
4collection, and lien of taxes, bonus, and all other accounts
5due the Commonwealth, the collection and recovery of fees and
6other money or property due or belonging to the Commonwealth,
7or any agency thereof, including escheated property and the
8proceeds of its sale, the custody and disbursement or other
9disposition of funds and securities belonging to or in the
10possession of the Commonwealth, and the settlement of claims
11against the Commonwealth, the resettlement of accounts and
12appeals to the courts, refunds of moneys erroneously paid to
13the Commonwealth, auditing the accounts of the Commonwealth
14and all agencies thereof, of all public officers collecting
15moneys payable to the Commonwealth, or any agency thereof,
16and all receipts of appropriations from the Commonwealth,
17authorizing the Commonwealth to issue tax anticipation notes
18to defray current expenses, implementing the provisions of
19section 7(a) of Article VIII of the Constitution of
20Pennsylvania authorizing and restricting the incurring of
21certain debt and imposing penalties; affecting every
22department, board, commission, and officer of the State
23government, every political subdivision of the State, and
24certain officers of such subdivisions, every person,
25association, and corporation required to pay, assess, or
26collect taxes, or to make returns or reports under the laws
27imposing taxes for State purposes, or to pay license fees or
28other moneys to the Commonwealth, or any agency thereof,
29every State depository and every debtor or creditor of the
30Commonwealth," providing for private management agreements.

31The General Assembly of the Commonwealth of Pennsylvania

1hereby enacts as follows:

2Section 1. The act of April 9, 1929 (P.L.343, No.176), known
3as The Fiscal Code, is amended by adding a section to read:

4Section 215. State Lottery.

5(a) Private management agreements.--

6(1) Notwithstanding any other law, the Secretary of
7Revenue shall be prohibited from entering into any agreement
8or contract for the administration, management or operation
9of the State Lottery by a private entity unless the agreement
10or contract for the private administration, management or
11operation conforms to the requirements of this subsection.

12(2) On or after July 1, 2013, the Secretary of Revenue
13may select a private manager for the total management of the
14State Lottery with integrated functions and advertising and
15as specified under this subsection.

16(3) The department shall expeditiously, as provided by
17law or the contract, terminate any current contract necessary
18to fulfill the private management agreement. As part of its
19obligation to terminate the contracts and select the private
20manager, the department shall establish a mutually agreeable
21timetable to transfer the functions of existing contractors
22to the private manager so that existing State Lottery
23operations are not materially diminished or impaired during
24the transition. The department shall do the following:

25(i) if a current contract contains a provision
26authorizing termination upon notice, the department shall
27provide notice of termination to occur upon the mutually
28agreed timetable for transfer of functions;

29(ii) upon the expiration of any initial term or
30renewal term of a current contract, the department may

1not renew the current contract for a term extending
2beyond the mutually agreed timetable for transfer of
3functions; or

4(iii) if a current contract provides for termination
5of the current contract upon the implementation of a
6contract with the private manager, the department shall
7perform all necessary actions to terminate the current
8contract on the date that coincides with the mutually
9agreed timetable for transfer of functions. If a current
10contract is not subject to termination under this
11section, the department may include a provision in the
12current contract with the private manager specifying a
13mutually agreeable methodology for incorporation.

14(4) The department shall include provisions in the
15private management agreement requiring the private manager,
16for a fee and pursuant to a contract negotiated with the
17department, to utilize the services of current department
18employees to assist in the administration and operation of
19the State Lottery. The department shall be the employer of
20all bargaining unit employees assigned to perform the work
21for the private manager and the employees shall be
22Commonwealth employees. Department employees shall operate
23under the same employment policies, rules, regulations and
24procedures as other employees of the department; and neither
25historical representation rights under any law, nor existing
26collective bargaining agreements shall be disturbed by the
27private management agreement with the private manager for the
28management of the State Lottery.

29(5) The private management agreement with the private
30manager shall include all of the following:

1(i) A term not to exceed five years, including any
2renewals.

3(ii) A provision specifying that the department:

4(A) exercise actual control over all significant
5business decisions;

6(B) have the authority to direct or countermand
7operating decisions by the private manager at any
8time;

9(C) have ready access at any time to information
10regarding State Lottery operations;

11(D) have the right to demand and receive
12information from the private manager concerning any
13aspect of the State Lottery operations at any time;
14and

15(E) retain ownership of all trade names,
16trademarks and intellectual property associated with
17the State Lottery.

18(iii) A provision imposing an affirmative duty on
19the private manager to provide the department with
20material information and with any information the private
21manager reasonably believes the department would want to
22know to enable the department to conduct the State
23Lottery.

24(iv) A provision requiring the private manager to
25provide the department with advance notice of any
26operating decision that bears significantly on the public
27interest, including decisions on the kinds of games to be
28offered to the public and decisions affecting the
29relative risk and reward of the games being offered, to
30allow the department a reasonable opportunity to evaluate

1and countermand the decision.

2(v) A provision providing for compensation of the
3private manager that may consist of a fee for services
4and a performance-based bonus as consideration for
5managing the State Lottery, including terms that may
6provide the private manager with an increase in
7compensation if State Lottery revenues grow by a
8specified percentage in a given year.

9(vi) A provision requiring the deposit of all
10lottery proceeds to be deposited into the State Lottery
11Fund.

12(vii) A provision requiring the private manager to
13locate its principal office within this Commonwealth.

14(viii) A provision encouraging that at least 20% of
15the cost of contracts entered into for goods and services
16by the private manager in connection with its management
17of the State Lottery, other than contracts with sales
18agents or technical advisors, be awarded to businesses
19that are a minority-owned business, a woman-owned
20business or a business owned by a person with a
21disability.

22(ix) A requirement that if the private manager
23complies with all the conditions of the private
24management agreement under the oversight of the
25department, the private manager shall have the following
26duties and obligations with respect to the management of
27the State Lottery:

28(A) The right to use equipment and other assets
29used in the operation of the State Lottery.

30(B) The rights and obligations under contracts

1with retailers and vendors.

2(C) The implementation of a comprehensive
3security program by the private manager.

4(D) The implementation of a comprehensive system
5of internal audits.

6(E) The implementation of a program by the
7private manager to curb compulsive gambling by
8persons playing the State Lottery.

9(F) A system for determining or verifying:

10(I) the type of State Lottery games;

11(II) the method of selecting winning
12tickets;

13(III) the manner of payment of prizes to
14holders of winning tickets;

15(IV) the frequency of drawings of winning
16tickets;

17(V) the method to be used in selling
18tickets;

19(VI) the validity of tickets claimed to be
20winning tickets;

21(VII) the basis upon which retailer
22commissions are established by the manager; and

23(VIII) minimum payouts.

24(x) A requirement that advertising and promotion
25must be consistent with this subsection and the State
26Lottery Law.

27(xi) A requirement that the private manager market
28the State Lottery to those residents who are new,
29infrequent or lapsed players of the State Lottery,
30especially those who are most likely to make regular

1purchases on the Internet if permitted by law.

2(xii) A code of ethics for the private manager's
3officers and employees that is approved by the department
4and published annually in the Pennsylvania Bulletin.

5(xiii) A requirement that the department monitor and
6oversee the private manager's practices and take action
7that the department considers appropriate to ensure that
8the private manager is in compliance with the terms of
9the private management agreement, while allowing the
10manager, unless specifically prohibited by law or the
11private management agreement, to negotiate and sign its
12own contracts with vendors.

13(xiv) A provision requiring the private manager to
14periodically file, at least on an annual basis,
15appropriate financial statements in a form and manner
16acceptable to the department.

17(xv) Cash reserves requirements.

18(xvi) Procedural requirements for obtaining the
19prior approval of the department when a private
20management agreement or an interest in a private
21management agreement is sold, assigned, transferred or
22pledged as collateral to secure financing.

23(xvii) Grounds for the termination of the private
24management agreement by the department or the private
25manager.

26(xviii) Procedures for amendment of the private
27management agreement.

28(xix) A provision requiring the private manager to
29engage in an open and competitive bidding process in
30accordance with 62 Pa.C.S. Pt. I (relating to

1Commonwealth Procurement Code) and any other applicable
2law. The process shall favor the selection of a vendor
3deemed to have submitted a proposal that provides the
4State Lottery with the best overall value.

5(xx) The transition of rights and obligations,
6including any associated equipment or other assets used
7in the operation of the State Lottery, from the manager
8to any successor manager of the State Lottery, including
9the department, following the termination of or
10foreclosure upon the private management agreement.

11(xxi) Right of use of copyrights, trademarks and
12service marks held by the department in the name of the
13Commonwealth. The private management agreement must
14provide that any use of the copyrights, trademarks and
15service marks by the manager may only be for the purpose
16of fulfilling its obligations under the private
17management agreement during the term of the private
18management agreement.

19(xxii) The disclosure of any information requested
20by the department to enable it to comply with the
21reporting requirements and information requests provided
22for under this subsection.

23(6) Notwithstanding any other law, the department shall
24select a private manager through a competitive request for
25qualifications process consistent with 62 Pa.C.S. Pt. I,
26which shall take into account:

27(i) the offeror's ability to market the State
28Lottery to those residents who are new, infrequent or
29lapsed players of the State Lottery, especially those who
30are most likely to make regular purchases on the Internet

1if permitted by law;

2(ii) the offeror's ability to address the
3Commonwealth's concern with the social effects of
4gambling on those who can least afford to gamble;

5(iii) the offeror's ability to provide the most
6successful management of the State Lottery for the
7benefit of the people of this Commonwealth based on
8current and past business practices or plans of the
9offeror; and

10(iv) the offeror's poor or inadequate past
11performance in servicing, equipping, operating or
12managing a lottery on behalf of another state or foreign
13government and attracting persons who are not currently
14regular players of a lottery.

15(7) The following shall apply:

16(i) The department may retain the services of an
17advisor with significant experience in financial services
18or the management, operation and procurement of goods,
19services and equipment for a government-run lottery to
20assist in the preparation of the terms of the request for
21qualifications and selection of the private manager.

22(ii) Any prospective advisor seeking to provide
23services under this paragraph must disclose any material
24business or financial relationship during the past three
25years with any potential offeror, or with a contractor or
26subcontractor presently providing goods, services or
27equipment to the department to support the State Lottery.

28(iii) The department shall evaluate the material
29business or financial relationship of each prospective
30advisor. The department may not select any prospective

1advisor with a substantial business or financial
2relationship that the department deems to impair the
3objectivity of the services to be provided by the
4prospective advisor.

5(iv) During the course of the advisor's engagement
6by the department, and for a period of one year
7thereafter, the advisor may not enter into any business
8or financial relationship with any offeror or any vendor
9identified to assist an offeror in performing its
10obligations under the private management agreement.

11(v) Any advisor retained by the department shall be
12disqualified from being an offeror.

13(vi) The department may not include terms in the
14request for qualifications that provide a material
15advantage whether directly or indirectly to any potential
16offeror, or any contractor or subcontractor presently
17providing goods, services or equipment to the department
18to support the State Lottery, including terms contained
19in previous responses to requests for proposals or
20qualifications submitted to the Commonwealth, another
21state or foreign government when those terms are uniquely
22associated with a particular potential offeror,
23contractor or subcontractor.

24(vii) The request for proposals offered by the
25department on April 2, 2013, as Request for
26Qualifications Pennsylvania Lottery Private Management
27Agreement is void if it is inconsistent with the
28provisions of this act.

29(8) The department shall select at least two offerors as
30finalists to potentially serve as the private manager no

1later than September 1, 2013. Upon making preliminary
2selections, the department shall schedule a public hearing on
3the finalists' proposals and provide public notice of the
4hearing at least seven calendar days before the hearing. In
5addition to any other requirements under 65 Pa.C.S. Ch. 7
6(relating to open meetings), the notice must include all of
7the following:

8(i) The date, time and place of the hearing.

9(ii) The subject matter of the hearing.

10(iii) A brief description of the private management
11agreement to be awarded.

12(iv) The identity of the offerors that have been
13selected as finalists to serve as the private manager.

14(v) The address and telephone number of the
15department.

16(9) At the public hearing, the department shall:

17(i) provide sufficient time for each finalist to
18present and explain its proposal to the department and
19the Secretary of Revenue or his designee, including an
20opportunity to respond to questions posed by the
21department, the Secretary of Revenue or his designee; and

22(ii) allow the public and nonselected offerors to
23comment on the presentations. The Governor or his
24designee shall attend the public hearing. After the
25public hearing, the department shall have 14 calendar
26days to recommend to the Governor whether a private
27management agreement should be entered into with a
28particular finalist. After reviewing the department's
29recommendation, the Governor may accept or reject the
30department's recommendation and shall select a final

1offeror as the private manager by publication of a notice
2in the Pennsylvania Bulletin on or before November 1,
32012. The Secretary of Revenue shall include in the
4notice a detailed explanation and the reasons why the
5final offeror is superior to other offerors and will
6provide management services in a manner that best
7achieves the objectives of this subsection. The Governor
8shall sign the private management agreement with the
9private manager.

10(10) Any action to contest the private manager selected
11by the Secretary of Revenue under this subsection must be
12brought within seven calendar days after the publication of
13the notice of the designation of the private manager as
14provided under this subsection.

15(11) The State Lottery shall remain, for the period
16during which a private manager manages the State Lottery in
17accordance with this subsection and any private management
18agreement entered into with the department, a State Lottery
19conducted by the Commonwealth, and the Commonwealth may not
20sell or transfer the State Lottery to a third party.

21(12) Any tangible personal property used exclusively in
22connection with the State Lottery that is owned by the
23department and leased to the private manager shall be owned
24by the department in the name of the Commonwealth and shall
25be considered to be public property devoted to an essential
26public and governmental function.

27(13) The department may exercise any of its powers under
28this subsection or any other law as necessary or desirable
29for the execution of the department's powers under this
30subsection.

1(14) Nothing under this subsection nor any private
2management agreement entered into under this subsection shall
3prohibit the General Assembly from authorizing forms of
4gambling that are not in direct competition with the State
5Lottery.

6(15) The private manager shall be subject to a complete
7investigation in the third and fifth years of the private
8management agreement, if the private management agreement is
9for a five-year term, by the department in cooperation with
10the Auditor General to determine whether the private manager
11has complied with this subsection and the private management
12agreement. The private manager shall bear the cost of an
13investigation or reinvestigation of the private manager under
14this paragraph.

15(16) The following shall apply:

16(i) The powers conferred under this subsection shall
17be in addition to and supplemental to the powers
18conferred by any other law. If any other law or rule is
19inconsistent with this subsection, this subsection shall
20control as to any private management agreement entered
21into under this subsection. This subsection and any rules
22adopted under this subsection contain full and complete
23authority for a private management agreement between the
24department and a private manager. No law, procedure,
25proceeding, publication, notice, consent, approval, order
26or act by the department or any other officer,
27department, agency or instrumentality of the Commonwealth
28or any of its political subdivision shall be required for
29the department to enter into a private management
30agreement under this subsection. This subsection contains

1full and complete authority for the department to approve
2any contracts entered into by a private manager with a
3vendor providing goods, services or both goods and
4services to the private manager under the terms of the
5private management agreement, including subcontractors of
6the vendors.

7(ii) The department shall distribute all proceeds of
8State Lottery tickets and shares sold as provided in the
9State Lottery Law for:

10(A) The payment of prizes and retailer bonuses.

11(B) The payment of costs incurred in the
12operation and administration of the State Lottery,
13including the payment of sums due to the private
14manager under the private management agreement with
15the department.

16(C) The funding of the programs as provided in
17the State Lottery Law.

18(17) The department shall be subject to the following
19reporting and information request requirements:

20(i) the department shall submit written quarterly
21reports to the Governor and the General Assembly on the
22activities and actions of the private manager selected
23under this subsection;

24(ii) upon request of the Chief Procurement Officer,
25the department shall promptly produce information related
26to the procurement activities of the department and the
27private manager requested by the Chief Procurement
28Officer;

29(iii) the Chief Procurement Officer must retain
30confidential, proprietary or trade secret information

1designated by the department under the Right-to-Know Law;
2and

3(iv) at least 60 days prior to the beginning of the
4department's fiscal year, the department shall prepare
5and submit an annual written report on the activities of
6the private manager selected under this subsection to the
7Governor and General Assembly.

8(18) The following words and phrases when used in this
9subsection shall have the meanings given to them in this
10paragraph unless the context clearly indicates otherwise:

11"Current contract." A contract in support of the
12State Lottery that is:

13(A) in effect on the effective date of this
14subsection; and

15(B) is necessary to the performance of the
16agreement for private management of the State Lottery
17in connection with the selection of the private
18manager.

19"Department." The Department of Revenue of the
20Commonwealth.

21"Final offer." The last proposal submitted by an
22offeror in response to the request for qualifications,
23including the identity of any prospective vendor or
24vendors that the offeror intends to initially engage to
25assist the offeror in performing its obligations under
26the private management agreement.

27"Final offeror." The offeror ultimately selected by
28the Secretary of Revenue to be the private manager for
29the State Lottery under this subsection or section 303 of
30the State Lottery Law.

1"Offeror." A person or group of persons that
2responds to a request for qualifications under this
3subsection.

4"Private management agreement." An agreement or
5contract providing for the administration, management or
6operation of the State Lottery by a private entity
7entered into under this section.

8"Request for qualifications." All materials and
9documents prepared by the department to solicit the
10following from offerors:

11(A) Statements of qualifications.

12(B) Proposals to enter into a private management
13agreement, including the identity of any prospective
14vendor or vendors that the offeror intends to
15initially engage to assist the offeror in performing
16its obligations under the private management
17agreement.

18"State Lottery Law." The act of August 26, 1971
19(P.L.351, No.91), known as the State Lottery Law.

20(b) (Reserved).

21Section 2. This act shall take effect July 1, 2013, or
22immediately, whichever is later.