Bill to Ease Tax Rules in Lottery Bids Gains

Officials of companies bidding on potentially lucrative state lottery contracts would not necessarily have to disclose personal income tax data under a bill that sailed out of a Senate committee Tuesday.

The long bill, which would make numerous changes in the lottery initiative approved by voters last November, is intended to increase the number of bidders on lottery supplies and save the state money, according to its author, Sen. Ralph C. Dills (D-Gardena).

The measure was approved on an 8-0 vote by the Senate Governmental Organization Committee, which Dills chairs.

Under Proposition 37, the lottery initiative, officers and principal stockholders of ticket suppliers and their parent companies would have to produce their income tax records before bidding. However, the initiative says that the lottery act can be changed by a two-thirds vote of the Legislature, but only to further the purposes of the act.

Commission Prerogative

Dills’ measure would leave it to the state Lottery Commission to decide if the tax data was needed. Under the changes, tax disclosure could be required only after the bidding.

Some lottery ticket suppliers have said they will not bid for a share of California’s lottery business if they must meet the original disclosure requirements.

During the initiative campaign, critics claimed that the disclosure rules were intended to ensure that the ballot measure’s financial backer, Scientific Games Inc., would get the ticket supply business. Because the firm’s parent company, Bally Manufacturing Corp., already makes detailed financial disclosures to qualify for its Atlantic City casino license, the Georgia-based ticket supplier should have no difficulty complying.

In Colorado and Oregon, which have similar disclosure requirements, Scientific Games has been the only company to bid on ticket supply contracts.

Lottery Commissioner John M. Price, who attended the committee session, said that the commission is likely to support some changes in the lottery law.

“I think we’d be in favor of loosening up (the income tax disclosure requirement),” he said. But he pointed out that the commissioners, appointed only two weeks ago, have not yet discussed any of the bills before the Legislature. Since the current legislative session began in December, at least 16 measures have been introduced to change the lottery act.

Dills’ bill would require the Lottery Commission to follow standard rule-making and purchasing procedures, make it a misdemeanor to sell lottery tickets to anyone under 18 and give the Legislature and the governor final say over the commission’s operating budget.

Required Shape, Size

In addition, the bill includes several provisions requested by the California Grocers Assn., whose members would like to sell lottery tickets. Under the bill, for example, ticket sellers would be able to keep any unclaimed lottery prizes of $20 or less. That has become standard practice in several states, because it simplifies accounting requirements.

The bill also includes a provision requiring lottery tickets to be a shape and size that would fit into a grocery cash register.

Sen. Robert G. Beverly (R-Manhattan Beach) questioned whether lifting the income tax filing requirement would be consistent with the voter-approved initiative. “It’s amazing to me that we can tamper with it to this extent,” Beverly said after learning that the legislative counsel had issued a legal opinion indicating that the disclosure provisions could be changed without putting the changes on a statewide ballot.