Lottery Delay Is Drawing Some Grumbling

Californians voted last fall to begin the sale of state lottery tickets on March 21, the first full day of spring.

But spring will come and probably go in California with no state lottery in operation. Summer, too, could come and go without a lottery, as well as fall.

Howard Varner, chairman of the state Lottery Commission, will say only that tickets will go on sale “before the end of the year.”

Muted and not-so-muted grumblings over the delay have begun to be heard. Some critics are pointing north to the much more rapid progress being made in Oregon, where voters passed a lottery initiative on the same day California’s was approved and where an April 25 starting deadline is expected to be met.

“In 135 days after passage (of the initiative) the lottery was supposed to be on line,” complained Assemblyman Richard Floyd (D-Hawthorne). “Now I can understand if they missed it by a week or missed it by 30 days. . . . But are we going to be able to buy tickets at Thanksgiving time? Who knows?”

Questions also are being raised about the contents of a “briefing book” on how to set up the California Lottery that was put together by state officials before passage of the initiative last November. The detailed report, prepared by a task force spearheaded by Department of Finance officials, was kept under lock and key by order of Gov. George Deukmejian until about Feb. 1, when it was turned over to the newly formed state Lottery Commission, which also refuses to make it public.

At the same time, a California Poll indicates that public support for a state lottery has grown from the 58% majority that approved the lottery initiative last Nov. 6. The February poll showed a 67% rate of approval.

Proposition 37, California’s state lottery initiative, stipulates that at least 34% of the money from lottery ticket sales is to go toward supplementing the budget for public education, with 50% awarded as prizes to lottery players and a maximum of 16% for operating costs, which would include lucrative contracts to lottery suppliers, consultants and promoters.

The initiative gave Deukmejian 30 days to appoint a lottery commission and a lottery director and stipulated that tickets go on sale within 135 days of passage.

But the initiative set no penalties for failing to meet the deadlines, and Deukmejian made it clear early on that he was not going to be rushed. The five members of the Lottery Commission were appointed Jan. 29, more than 1 1/2 months beyond the deadline. The director has yet to be named.

Most observers seem inclined to support the Deukmejian Administration’s go-slow policy as a prudent approach to what amounts to setting up a state-run, billion-dollar gambling operation fraught with the potential for corruption.

But as it became obvious that state officials will not even come close to the lottery start-up deadline and have set no alternative target date, questions have arisen about the will of the Deukmejian Administration to comply with the initiative.

Some critics are asking whether the governor, who opposed Proposition 37, is trying so hard to keep the lottery at arms-length that he is digging in his heels.

Most of the criticism has been muted, vague or off the record.

But Assemblyman Floyd has been outspoken.

“This governor opposed the thing,” Floyd said, “and, under the guise of ‘We can’t be too careful,’ is dragging this thing out terribly. . . . I find it interesting that here is a governor of 23 million people in California and it took him three months to find out if he knew five honest people (to appoint to the Lottery Commission).”

Public education, Floyd complained, will lose millions of dollars because of the delay.

More tempered questions were raised by attorney Barry Fadem, who drew up the lottery initiatives for both California and Oregon.

Fadem represents Scientific Games Inc., the firm that financially backed the initiative campaigns in both states and subsequently gained Oregon’s first ticket supply contract. Scientific Games also is expected to seek the multimillion-dollar contract to supply lottery tickets in California.

States Compared

Fadem gingerly approached the subject of California’s efforts to set up a lottery:

“My first reaction is California is obviously moving a little bit slower than Oregon,” he said and added, “I have no problems with the governor’s slow but steady approach. . . . It reflects a different style and a different approach to implementation. That doesn’t mean either approach is right or wrong.”

Still, Fadem said, some sort of deadline should be set for California’s lottery.

“The concern I have,” he said, “is how long will be reasonable? At some point the commission is going to have to bite the bullet and say what a reasonable amount of time is.”

And, he insisted, the original deadlines set in the California initiative could have been met.

“We’re not talking about re-creating the wheel,” he said. “As of Election Day, California (government officials) knew pretty well what needed to be done. And basically the brakes were put on from Election Day until the commission was appointed. No work was forthcoming for getting ready for the lottery. . . .

“The approach adopted in Oregon is certainly quite different than here in California. If the same approach had been followed in California, the 135-day timetable was reasonable.”

Fadem maintained that information in the task force’s book could have enabled state officials to begin setting up the machinery for a state lottery as soon as the initiative passed.

Instead, he said, the report was ordered locked up by the governor’s office until it was finally turned over to the new Lottery Commission nearly three months later.

Sent to Deukmejian

Terry Frost, senior consultant to the Senate Committee on Governmental Organization, said he worked on the lottery briefing book along with officials from the state Finance, Justice and Personnel departments and that the report was presented to the governor on Election Day.

“I’ve never seen a copy of it,” he said. “They wouldn’t even give me a copy of it after I worked on it.”

Both the Lottery Commission and the governor’s office refuse to make the briefing book public.

“It went to the governor and it’s privileged,” insisted Bob Taylor, Deukmejian’s deputy press secretary.

Taylor defended Deukmejian’s go-slow approach in naming the lottery commissioners and director.

“The background checks,” he said, “are the most extensive that have ever been done so far on a governor’s appointee. He moved as fast as possible to assure at the same time that he had people who are absolutely open and above-board to run a multimillion-dollar operation. And the governor always said he’s not going to sacrifice quality . . . for an arbitrary deadline.”

Won’t Promote It

Deukmejian has stated that he will not promote California’s lottery and Taylor emphasized that the lottery will be set up and run by the commission, not by the governor’s office:

“It’s not the governor’s responsibility to get a lottery in place,” he said. “All he has to do is appoint the commission and the executive director.”

Taylor scoffed at comparing the pace of setting up Oregon’s lottery with the progress in California:

“The state’s maybe about a third of the size of California. (Actually, Oregon’s population is only about 10% of California’s.) You’re dealing with the largest state and we’ll be by far the largest lottery operation in the United States.”

Nonetheless, a comparison of the processes used to set up the lottery in each state is interesting.

The initiative language creating the office of lottery director is identical in California and Oregon:

“The director shall be qualified by training and experience to direct the operation of a state-operated lottery.”

In California, the clause is interpreted to mean the lottery director must have direct experience in running a state lottery. In Oregon, it is interpreted to mean the director must have broad executive experience.

Names Submitted

The California Lottery Commission submitted the names of five candidates with state lottery experience to Deukmejian after its Feb. 13 meeting. At the end of the month Deukmejian had not completed interviews with the candidates, according to a spokesman.

In Oregon, Gov. Victor G. Atiyeh, who, as Deukmejian did, opposed the lottery initiative, appointed Robert W. Smith, the director of the Oregon State Executive Department--one of the state government’s top administrative and fiscal posts--to the job of lottery director on Dec. 14.

Smith, a veteran government executive, actually began setting up the lottery the day after the initiative passed by a 66% margin. As director, he simply continued that work.

Atiyeh also appointed the five lottery commissioners on Dec. 14.

Took It Seriously

Although opposed to the lottery, Atiyeh took the initiative deadlines seriously, according to T. L. Fuller, Oregon lottery public information officer.

“Atiyeh said, ‘That is what the people want,’ ” Fuller said.

In California, background checks of commissioners took about three weeks each, while in Oregon they took about two weeks.

Although California has been moving slower, the procedures of its Lottery Commission have been less open to public scrutiny than those in Oregon.

The California Lottery Commission has established two-member committees that bar the public and reporters from study sessions and fact-finding trips.

In Oregon, virtually all Lottery Commission activity is conducted openly and there has been no conflict with the press over access to procedures or information, according to Robert Caldwell, regional editor of the Portland Oregonian, the state’s largest newspaper.

“They’ve been quite the opposite of tight-lipped,” Caldwell said of the state lottery officials.

California Lottery Commission’s Varner, retired chairman of Host International Inc., a large restaurant chain, defended his close-to-the-vest procedures:

“It’s not uncommon in business,” Varner said of excluding the press from committee sessions. “This is a business. . . . I think it’s a more efficient use of time.”

But Oregon lottery director Smith argued that lottery business should be conducted in public.

“It’s more difficult,” he said, “but because we are doing the public’s business, that’s where it should be done.”