Rep. John D. Cavaletto

Filed: 3/19/2014





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2    AMENDMENT NO. ______. Amend House Bill 4627 by replacing
3everything after the enacting clause with the following:
4    "Section 5. The Illinois Lottery Law is amended by changing
5Sections 2, 9.1, and 20 and by adding Section 21.9 as follows:
6    (20 ILCS 1605/2)  (from Ch. 120, par. 1152)
7    Sec. 2. This Act is enacted to implement and establish
8within the State a lottery to be conducted by the State through
9the Department. The entire net proceeds of the Lottery are to
10be used for the support of the State's Common School Fund,
11except as provided in subsection (o) of Section 9.1 and
12Sections 21.2, 21.5, 21.6, 21.7, and 21.8, and 21.9. The
13General Assembly finds that it is in the public interest for
14the Department to conduct the functions of the Lottery with the
15assistance of a private manager under a management agreement
16overseen by the Department. The Department shall be accountable



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1to the General Assembly and the people of the State through a
2comprehensive system of regulation, audits, reports, and
3enduring operational oversight. The Department's ongoing
4conduct of the Lottery through a management agreement with a
5private manager shall act to promote and ensure the integrity,
6security, honesty, and fairness of the Lottery's operation and
7administration. It is the intent of the General Assembly that
8the Department shall conduct the Lottery with the assistance of
9a private manager under a management agreement at all times in
10a manner consistent with 18 U.S.C. 1307(a)(1), 1307(b)(1),
12(Source: P.A. 95-331, eff. 8-21-07; 95-673, eff. 10-11-07;
1395-674, eff. 10-11-07; 95-876, eff. 8-21-08; 96-34, eff.
15    (20 ILCS 1605/9.1)
16    Sec. 9.1. Private manager and management agreement.
17    (a) As used in this Section:
18    "Offeror" means a person or group of persons that responds
19to a request for qualifications under this Section.
20    "Request for qualifications" means all materials and
21documents prepared by the Department to solicit the following
22from offerors:
23        (1) Statements of qualifications.
24        (2) Proposals to enter into a management agreement,
25    including the identity of any prospective vendor or vendors



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1    that the offeror intends to initially engage to assist the
2    offeror in performing its obligations under the management
3    agreement.
4    "Final offer" means the last proposal submitted by an
5offeror in response to the request for qualifications,
6including the identity of any prospective vendor or vendors
7that the offeror intends to initially engage to assist the
8offeror in performing its obligations under the management
10    "Final offeror" means the offeror ultimately selected by
11the Governor to be the private manager for the Lottery under
12subsection (h) of this Section.
13    (b) By September 15, 2010, the Governor shall select a
14private manager for the total management of the Lottery with
15integrated functions, such as lottery game design, supply of
16goods and services, and advertising and as specified in this
18    (c) Pursuant to the terms of this subsection, the
19Department shall endeavor to expeditiously terminate the
20existing contracts in support of the Lottery in effect on the
21effective date of this amendatory Act of the 96th General
22Assembly in connection with the selection of the private
23manager. As part of its obligation to terminate these contracts
24and select the private manager, the Department shall establish
25a mutually agreeable timetable to transfer the functions of
26existing contractors to the private manager so that existing



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1Lottery operations are not materially diminished or impaired
2during the transition. To that end, the Department shall do the
4        (1) where such contracts contain a provision
5    authorizing termination upon notice, the Department shall
6    provide notice of termination to occur upon the mutually
7    agreed timetable for transfer of functions;
8        (2) upon the expiration of any initial term or renewal
9    term of the current Lottery contracts, the Department shall
10    not renew such contract for a term extending beyond the
11    mutually agreed timetable for transfer of functions; or
12        (3) in the event any current contract provides for
13    termination of that contract upon the implementation of a
14    contract with the private manager, the Department shall
15    perform all necessary actions to terminate the contract on
16    the date that coincides with the mutually agreed timetable
17    for transfer of functions.
18    If the contracts to support the current operation of the
19Lottery in effect on the effective date of this amendatory Act
20of the 96th General Assembly are not subject to termination as
21provided for in this subsection (c), then the Department may
22include a provision in the contract with the private manager
23specifying a mutually agreeable methodology for incorporation.
24    (c-5) The Department shall include provisions in the
25management agreement whereby the private manager shall, for a
26fee, and pursuant to a contract negotiated with the Department



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1(the "Employee Use Contract"), utilize the services of current
2Department employees to assist in the administration and
3operation of the Lottery. The Department shall be the employer
4of all such bargaining unit employees assigned to perform such
5work for the private manager, and such employees shall be State
6employees, as defined by the Personnel Code. Department
7employees shall operate under the same employment policies,
8rules, regulations, and procedures, as other employees of the
9Department. In addition, neither historical representation
10rights under the Illinois Public Labor Relations Act, nor
11existing collective bargaining agreements, shall be disturbed
12by the management agreement with the private manager for the
13management of the Lottery.
14    (d) The management agreement with the private manager shall
15include all of the following:
16        (1) A term not to exceed 10 years, including any
17    renewals.
18        (2) A provision specifying that the Department:
19            (A) shall exercise actual control over all
20        significant business decisions;
21            (A-5) has the authority to direct or countermand
22        operating decisions by the private manager at any time;
23            (B) has ready access at any time to information
24        regarding Lottery operations;
25            (C) has the right to demand and receive information
26        from the private manager concerning any aspect of the



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1        Lottery operations at any time; and
2            (D) retains ownership of all trade names,
3        trademarks, and intellectual property associated with
4        the Lottery.
5        (3) A provision imposing an affirmative duty on the
6    private manager to provide the Department with material
7    information and with any information the private manager
8    reasonably believes the Department would want to know to
9    enable the Department to conduct the Lottery.
10        (4) A provision requiring the private manager to
11    provide the Department with advance notice of any operating
12    decision that bears significantly on the public interest,
13    including, but not limited to, decisions on the kinds of
14    games to be offered to the public and decisions affecting
15    the relative risk and reward of the games being offered, so
16    the Department has a reasonable opportunity to evaluate and
17    countermand that decision.
18        (5) A provision providing for compensation of the
19    private manager that may consist of, among other things, a
20    fee for services and a performance based bonus as
21    consideration for managing the Lottery, including terms
22    that may provide the private manager with an increase in
23    compensation if Lottery revenues grow by a specified
24    percentage in a given year.
25        (6) (Blank).
26        (7) A provision requiring the deposit of all Lottery



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1    proceeds to be deposited into the State Lottery Fund except
2    as otherwise provided in Section 20 of this Act.
3        (8) A provision requiring the private manager to locate
4    its principal office within the State.
5        (8-5) A provision encouraging that at least 20% of the
6    cost of contracts entered into for goods and services by
7    the private manager in connection with its management of
8    the Lottery, other than contracts with sales agents or
9    technical advisors, be awarded to businesses that are a
10    minority owned business, a female owned business, or a
11    business owned by a person with disability, as those terms
12    are defined in the Business Enterprise for Minorities,
13    Females, and Persons with Disabilities Act.
14        (9) A requirement that so long as the private manager
15    complies with all the conditions of the agreement under the
16    oversight of the Department, the private manager shall have
17    the following duties and obligations with respect to the
18    management of the Lottery:
19            (A) The right to use equipment and other assets
20        used in the operation of the Lottery.
21            (B) The rights and obligations under contracts
22        with retailers and vendors.
23            (C) The implementation of a comprehensive security
24        program by the private manager.
25            (D) The implementation of a comprehensive system
26        of internal audits.



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1            (E) The implementation of a program by the private
2        manager to curb compulsive gambling by persons playing
3        the Lottery.
4            (F) A system for determining (i) the type of
5        Lottery games, (ii) the method of selecting winning
6        tickets, (iii) the manner of payment of prizes to
7        holders of winning tickets, (iv) the frequency of
8        drawings of winning tickets, (v) the method to be used
9        in selling tickets, (vi) a system for verifying the
10        validity of tickets claimed to be winning tickets,
11        (vii) the basis upon which retailer commissions are
12        established by the manager, and (viii) minimum
13        payouts.
14        (10) A requirement that advertising and promotion must
15    be consistent with Section 7.8a of this Act.
16        (11) A requirement that the private manager market the
17    Lottery to those residents who are new, infrequent, or
18    lapsed players of the Lottery, especially those who are
19    most likely to make regular purchases on the Internet as
20    permitted by law.
21        (12) A code of ethics for the private manager's
22    officers and employees.
23        (13) A requirement that the Department monitor and
24    oversee the private manager's practices and take action
25    that the Department considers appropriate to ensure that
26    the private manager is in compliance with the terms of the



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1    management agreement, while allowing the manager, unless
2    specifically prohibited by law or the management
3    agreement, to negotiate and sign its own contracts with
4    vendors.
5        (14) A provision requiring the private manager to
6    periodically file, at least on an annual basis, appropriate
7    financial statements in a form and manner acceptable to the
8    Department.
9        (15) Cash reserves requirements.
10        (16) Procedural requirements for obtaining the prior
11    approval of the Department when a management agreement or
12    an interest in a management agreement is sold, assigned,
13    transferred, or pledged as collateral to secure financing.
14        (17) Grounds for the termination of the management
15    agreement by the Department or the private manager.
16        (18) Procedures for amendment of the agreement.
17        (19) A provision requiring the private manager to
18    engage in an open and competitive bidding process for any
19    procurement having a cost in excess of $50,000 that is not
20    a part of the private manager's final offer. The process
21    shall favor the selection of a vendor deemed to have
22    submitted a proposal that provides the Lottery with the
23    best overall value. The process shall not be subject to the
24    provisions of the Illinois Procurement Code, unless
25    specifically required by the management agreement.
26        (20) The transition of rights and obligations,



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1    including any associated equipment or other assets used in
2    the operation of the Lottery, from the manager to any
3    successor manager of the lottery, including the
4    Department, following the termination of or foreclosure
5    upon the management agreement.
6        (21) Right of use of copyrights, trademarks, and
7    service marks held by the Department in the name of the
8    State. The agreement must provide that any use of them by
9    the manager shall only be for the purpose of fulfilling its
10    obligations under the management agreement during the term
11    of the agreement.
12        (22) The disclosure of any information requested by the
13    Department to enable it to comply with the reporting
14    requirements and information requests provided for under
15    subsection (p) of this Section.
16    (e) Notwithstanding any other law to the contrary, the
17Department shall select a private manager through a competitive
18request for qualifications process consistent with Section
1920-35 of the Illinois Procurement Code, which shall take into
21        (1) the offeror's ability to market the Lottery to
22    those residents who are new, infrequent, or lapsed players
23    of the Lottery, especially those who are most likely to
24    make regular purchases on the Internet;
25        (2) the offeror's ability to address the State's
26    concern with the social effects of gambling on those who



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1    can least afford to do so;
2        (3) the offeror's ability to provide the most
3    successful management of the Lottery for the benefit of the
4    people of the State based on current and past business
5    practices or plans of the offeror; and
6        (4) the offeror's poor or inadequate past performance
7    in servicing, equipping, operating or managing a lottery on
8    behalf of Illinois, another State or foreign government and
9    attracting persons who are not currently regular players of
10    a lottery.
11    (f) The Department may retain the services of an advisor or
12advisors with significant experience in financial services or
13the management, operation, and procurement of goods, services,
14and equipment for a government-run lottery to assist in the
15preparation of the terms of the request for qualifications and
16selection of the private manager. Any prospective advisor
17seeking to provide services under this subsection (f) shall
18disclose any material business or financial relationship
19during the past 3 years with any potential offeror, or with a
20contractor or subcontractor presently providing goods,
21services, or equipment to the Department to support the
22Lottery. The Department shall evaluate the material business or
23financial relationship of each prospective advisor. The
24Department shall not select any prospective advisor with a
25substantial business or financial relationship that the
26Department deems to impair the objectivity of the services to



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1be provided by the prospective advisor. During the course of
2the advisor's engagement by the Department, and for a period of
3one year thereafter, the advisor shall not enter into any
4business or financial relationship with any offeror or any
5vendor identified to assist an offeror in performing its
6obligations under the management agreement. Any advisor
7retained by the Department shall be disqualified from being an
8offeror. The Department shall not include terms in the request
9for qualifications that provide a material advantage whether
10directly or indirectly to any potential offeror, or any
11contractor or subcontractor presently providing goods,
12services, or equipment to the Department to support the
13Lottery, including terms contained in previous responses to
14requests for proposals or qualifications submitted to
15Illinois, another State or foreign government when those terms
16are uniquely associated with a particular potential offeror,
17contractor, or subcontractor. The request for proposals
18offered by the Department on December 22, 2008 as
19"LOT08GAMESYS" and reference number "22016176" is declared
21    (g) The Department shall select at least 2 offerors as
22finalists to potentially serve as the private manager no later
23than August 9, 2010. Upon making preliminary selections, the
24Department shall schedule a public hearing on the finalists'
25proposals and provide public notice of the hearing at least 7
26calendar days before the hearing. The notice must include all



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1of the following:
2        (1) The date, time, and place of the hearing.
3        (2) The subject matter of the hearing.
4        (3) A brief description of the management agreement to
5    be awarded.
6        (4) The identity of the offerors that have been
7    selected as finalists to serve as the private manager.
8        (5) The address and telephone number of the Department.
9    (h) At the public hearing, the Department shall (i) provide
10sufficient time for each finalist to present and explain its
11proposal to the Department and the Governor or the Governor's
12designee, including an opportunity to respond to questions
13posed by the Department, Governor, or designee and (ii) allow
14the public and non-selected offerors to comment on the
15presentations. The Governor or a designee shall attend the
16public hearing. After the public hearing, the Department shall
17have 14 calendar days to recommend to the Governor whether a
18management agreement should be entered into with a particular
19finalist. After reviewing the Department's recommendation, the
20Governor may accept or reject the Department's recommendation,
21and shall select a final offeror as the private manager by
22publication of a notice in the Illinois Procurement Bulletin on
23or before September 15, 2010. The Governor shall include in the
24notice a detailed explanation and the reasons why the final
25offeror is superior to other offerors and will provide
26management services in a manner that best achieves the



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1objectives of this Section. The Governor shall also sign the
2management agreement with the private manager.
3    (i) Any action to contest the private manager selected by
4the Governor under this Section must be brought within 7
5calendar days after the publication of the notice of the
6designation of the private manager as provided in subsection
7(h) of this Section.
8    (j) The Lottery shall remain, for so long as a private
9manager manages the Lottery in accordance with provisions of
10this Act, a Lottery conducted by the State, and the State shall
11not be authorized to sell or transfer the Lottery to a third
13    (k) Any tangible personal property used exclusively in
14connection with the lottery that is owned by the Department and
15leased to the private manager shall be owned by the Department
16in the name of the State and shall be considered to be public
17property devoted to an essential public and governmental
19    (l) The Department may exercise any of its powers under
20this Section or any other law as necessary or desirable for the
21execution of the Department's powers under this Section.
22    (m) Neither this Section nor any management agreement
23entered into under this Section prohibits the General Assembly
24from authorizing forms of gambling that are not in direct
25competition with the Lottery.
26    (n) The private manager shall be subject to a complete



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1investigation in the third, seventh, and tenth years of the
2agreement (if the agreement is for a 10-year term) by the
3Department in cooperation with the Auditor General to determine
4whether the private manager has complied with this Section and
5the management agreement. The private manager shall bear the
6cost of an investigation or reinvestigation of the private
7manager under this subsection.
8    (o) The powers conferred by this Section are in addition
9and supplemental to the powers conferred by any other law. If
10any other law or rule is inconsistent with this Section,
11including, but not limited to, provisions of the Illinois
12Procurement Code, then this Section controls as to any
13management agreement entered into under this Section. This
14Section and any rules adopted under this Section contain full
15and complete authority for a management agreement between the
16Department and a private manager. No law, procedure,
17proceeding, publication, notice, consent, approval, order, or
18act by the Department or any other officer, Department, agency,
19or instrumentality of the State or any political subdivision is
20required for the Department to enter into a management
21agreement under this Section. This Section contains full and
22complete authority for the Department to approve any contracts
23entered into by a private manager with a vendor providing
24goods, services, or both goods and services to the private
25manager under the terms of the management agreement, including
26subcontractors of such vendors.



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1    Upon receipt of a written request from the Chief
2Procurement Officer, the Department shall provide to the Chief
3Procurement Officer a complete and un-redacted copy of the
4management agreement or any contract that is subject to the
5Department's approval authority under this subsection (o). The
6Department shall provide a copy of the agreement or contract to
7the Chief Procurement Officer in the time specified by the
8Chief Procurement Officer in his or her written request, but no
9later than 5 business days after the request is received by the
10Department. The Chief Procurement Officer must retain any
11portions of the management agreement or of any contract
12designated by the Department as confidential, proprietary, or
13trade secret information in complete confidence pursuant to
14subsection (g) of Section 7 of the Freedom of Information Act.
15The Department shall also provide the Chief Procurement Officer
16with reasonable advance written notice of any contract that is
17pending Department approval.
18    Notwithstanding any other provision of this Section to the
19contrary, the Chief Procurement Officer shall adopt
20administrative rules, including emergency rules, to establish
21a procurement process to select a successor private manager if
22a private management agreement has been terminated. The
23selection process shall at a minimum take into account the
24criteria set forth in items (1) through (4) of subsection (e)
25of this Section and may include provisions consistent with
26subsections (f), (g), (h), and (i) of this Section. The Chief



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1Procurement Officer shall also implement and administer the
2adopted selection process upon the termination of a private
3management agreement. The Department, after the Chief
4Procurement Officer certifies that the procurement process has
5been followed in accordance with the rules adopted under this
6subsection (o), shall select a final offeror as the private
7manager and sign the management agreement with the private
9    Except as provided in Sections 21.2, 21.5, 21.6, 21.7, and
1021.8, and 21.9, the Department shall distribute all proceeds of
11lottery tickets and shares sold in the following priority and
13        (1) The payment of prizes and retailer bonuses.
14        (2) The payment of costs incurred in the operation and
15    administration of the Lottery, including the payment of
16    sums due to the private manager under the management
17    agreement with the Department.
18        (3) On the last day of each month or as soon thereafter
19    as possible, the State Comptroller shall direct and the
20    State Treasurer shall transfer from the State Lottery Fund
21    to the Common School Fund an amount that is equal to the
22    proceeds transferred in the corresponding month of fiscal
23    year 2009, as adjusted for inflation, to the Common School
24    Fund.
25        (4) On or before the last day of each fiscal year,
26    deposit any remaining proceeds, subject to payments under



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1    items (1), (2), and (3) into the Capital Projects Fund each
2    fiscal year.
3    (p) The Department shall be subject to the following
4reporting and information request requirements:
5        (1) the Department shall submit written quarterly
6    reports to the Governor and the General Assembly on the
7    activities and actions of the private manager selected
8    under this Section;
9        (2) upon request of the Chief Procurement Officer, the
10    Department shall promptly produce information related to
11    the procurement activities of the Department and the
12    private manager requested by the Chief Procurement
13    Officer; the Chief Procurement Officer must retain
14    confidential, proprietary, or trade secret information
15    designated by the Department in complete confidence
16    pursuant to subsection (g) of Section 7 of the Freedom of
17    Information Act; and
18        (3) at least 30 days prior to the beginning of the
19    Department's fiscal year, the Department shall prepare an
20    annual written report on the activities of the private
21    manager selected under this Section and deliver that report
22    to the Governor and General Assembly.
23(Source: P.A. 97-464, eff. 8-19-11; 98-463, eff. 8-16-13.)
24    (20 ILCS 1605/20)  (from Ch. 120, par. 1170)
25    Sec. 20. State Lottery Fund.



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1    (a) There is created in the State Treasury a special fund
2to be known as the "State Lottery Fund". Such fund shall
3consist of all revenues received from (1) the sale of lottery
4tickets or shares, (net of commissions, fees representing those
5expenses that are directly proportionate to the sale of tickets
6or shares at the agent location, and prizes of less than $600
7which have been validly paid at the agent level), (2)
8application fees, and (3) all other sources including moneys
9credited or transferred thereto from any other fund or source
10pursuant to law. Interest earnings of the State Lottery Fund
11shall be credited to the Common School Fund.
12    (b) The receipt and distribution of moneys under Section
1321.5 of this Act shall be in accordance with Section 21.5.
14    (c) The receipt and distribution of moneys under Section
1521.6 of this Act shall be in accordance with Section 21.6.
16    (d) The receipt and distribution of moneys under Section
1721.7 of this Act shall be in accordance with Section 21.7.
18    (e) The receipt and distribution of moneys under Section
1921.8 of this Act shall be in accordance with Section 21.8.
20    (f) The receipt and distribution of moneys under Section
2121.9 of this Act shall be in accordance with Section 21.9.
22(Source: P.A. 94-120, eff. 7-6-05; 94-585, eff. 8-15-05;
2395-331, eff. 8-21-07; 95-673, eff. 10-11-07; 95-674, eff.
2410-11-07; 95-876, eff. 8-21-08.)
25    (20 ILCS 1605/21.9 new)



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1    Sec. 21.9. Historic preservation scratch-off game.
2    (a) The Department shall offer a special historic
3preservation instant scratch-off game, which shall commence on
4January 1, 2015, or as soon thereafter as is, in the view of
5the Director, reasonably practical. The operation of the game
6shall be governed by this Act and any rules adopted by the
7Department. If any provision of this Section is inconsistent
8with any other provision of this Act, then this Section
10    (b) The net revenue from the historic preservation
11scratch-off game established under this Section shall be
12deposited into the Illinois Historic Sites Fund. Moneys
13received under this Section and deposited into the Illinois
14Historic Sites Fund shall be used by the Historic Preservation
15Agency to make grants for the purposes of maintaining and
16preserving the State historic sites listed in Section 6 of the
17Historic Preservation Agency Act.
18    For purposes of this subsection, "net revenue" means the
19total amount for which tickets have been sold less the sum of
20the amount paid out in the prizes and the actual administrative
21expenses of the Department solely related to the scratch-off
22game under this Section.
23    (c) During the time that tickets are sold for the historic
24preservation scratch-off game, the Department shall not
25unreasonably diminish the efforts devoted to marketing any
26other instant scratch-off lottery game.



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1    (d) The Department may adopt any rules necessary to
2implement and administer the provisions of this Section.
3    Section 99. Effective date. This Act takes effect upon
4becoming law.".