Governor to Fire Lottery Chief in Bid to Stem Slide : Gambling: Chon Gutierrez has been criticized for poor management and changes in the Lotto game.

As California Lottery sales continue to plummet, Gov. Pete Wilson is preparing to fire Chon Gutierrez as lottery director and pick a successor whose first task will be to revitalize the games of chance, The Times has learned.

The decision to remove Gutierrez, a carry-over from former Gov. George Deukmejian’s Administration, comes as earnings figures for July, the first month of the new fiscal year, show that the lottery is $48 million below its conservative goals.

The falloff continues the slump in sales that plagued the lottery throughout the 1990-91 fiscal year when revenues dropped $400 million, or about 14%, below the previous year, making the lottery’s contribution to education the lowest since 1987.

Aides for the governor declined to say who would be named to replace Gutierrez or when his successor will be announced, but confirmed that a new director would be named soon.

Spokesman Dan Schnur would say only: “The governor has the luxury of being able to choose between several qualified candidates for the position. However, we’re not prepared to make an announcement at this time.”

Gutierrez, 46, has held the $95,000-a-year post since 1987 and is only the second director since the games started in California in October, 1985. The first director was M. Mark Michalko, who resigned.

Gutierrez, one of the highest-ranking Latinos in state government, is a veteran state administrator. He was undersecretary of the Youth and Adult Correctional Agency before being named to head the lottery. Earlier, he had virtually run the fledgling state agency before the first director was named and then stayed on briefly as a deputy director.

He is expected to be named by Wilson to another high-level position.

Among those who were interviewed for the job in the last few months have been Sharon Sharp, former director of the Illinois State Lottery, and Lou Totino, marketing director for the Massachusetts Lottery. Gutierrez was vacationing in Hawaii and could not be reached for comment.

The news that Gutierrez would be replaced produced a mixed reaction, with some longtime legislative critics expressing approval and some lottery commission members voicing disappointment. The lottery is governed by a five-member commission.

“It’s about a year late,” said Assemblyman Richard E. Floyd (D-Carson), chairman of the Committee on Governmental Organization, which monitors lottery activities.

Describing Gutierrez as a poor manager, Floyd said that under his leadership the lottery failed to produce new games that caught players’ imagination and then compounded the problem with an advertising and promotion program that was uninspiring. He said Gutierrez made a fatal error when he proposed--and the commission approved--changes in the Lotto game that made winning twice as unlikely as it had been.

Although the change in the odds was designed to draw more players by producing larger, rollover jackpots, Floyd said it had the effect of driving players away. While a few big jackpots did draw record numbers of players, he said sales quickly dropped off as soon as the jackpots had winners.

“First off, there must be a change. Secondly, somebody has to admit that they screwed up drastically when they changed the Lotto game, doubling the odds,” he said. “Even people who play the lottery are not so stupid to play into that kind of doubling.”

Floyd acknowledged that the Lottery Commission also bears some responsibility for the decision and said for that reason all five members “should resign en masse and let the governor pick people who might have some knowledge of marketing.”

Commissioner John Price responded by suggesting that “the greater need is for a new assemblyman from” Carson.

Price, a former Sacramento district attorney who has been a commission member since the lottery was established, said Gutierrez was not only being unfairly criticized but was being made the scapegoat for a faltering economy over which he has no control. To replace him now, he said, “will be a big mistake.”

“He’s not only smart and articulate, he’s a real hands-on manager,” Price said. “I’ve had some 20 years’ experience dealing with state, county and city government and I’ve never seen a better operation.”

Joanne McNabb, spokeswoman for the lottery, said the first month of sales is too short a period to use as a barometer of the agency’s yearly performance. She said although sales have continued to drop, lottery officials hope some changes they plan to make later in the year will boost revenues.

She said they plan in October to begin offering multiple Scratcher games that they hope will draw more players. Scratcher has been one of the poorest-performing games in recent weeks. A new game called California Classic opened to the poorest first-week performance of any Scratcher game in more than a year.