This is a status update of ongoing and special projects in Administration, Finance and Operations.

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1 MARYLAND LOTTERY Montgomery Park Business Center 1800 Washington Boulevard, Suite 330 Baltimore, Maryland Phone: TTY users call Maryland Relay Martin O Malley, Governor Stephen Martino, Director TO: FROM: DIVISION: Maryland Lottery Commission Stephen Martino, Director Gina M. Smith, Deputy Director/CFO Administration, Finance and Operations DATE: February 16, 2012 SUBJECT: Report for the February Commission Meeting I. Customer Resource Center This is a status update of ongoing and special projects in Administration, Finance and Operations. The Customer Resource Center is responsible for processing winner claims. The Lottery has two claim centers, one in Baltimore at the headquarters location and one in Lanham. In addition to processing winner claims, the claim centers are responsible for processing the W-2G paperwork for claims that were cashed by the agent plus locations. The Lottery has approximately 173 agent plus locations that are authorized to cash up to $5,000 in winnings. These locations, in turn submit completed claim forms to the Lottery so that the related W-2G can be processed. Data concerning the number of winners claims processed by the Lottery and the number of agent plus claim forms processed by the Lottery is noted below: Location YTD 7/1/11 to 12/31/11 YTD 7/1/11 to 12/31/11 Amount JANUARY JANUARY Amount YTD 7/1/11 to 01/31/12 YTD 7/1/11 to 01/31/12 $$$ Amount Baltimore 3,262 $ 5,350, $ 1,014, ,879 $ 6,364, Lanham 1,010 $ 4,279, $ 910, ,220 $ 5,189, Agent Plus 21,499 $45,323, ,444 $ 8,012, ,943 $ 53,335, SUBSCRIPTIONS PROCESSED: The Lottery s Customer Resource Center is also responsible for processing subscriptions for Multi-Match and Mega Millions. Multi-Match subscriptions can be purchased for 26, 52 or 104 weeks for one to 3 games. Mega Millions subscriptions can be purchased for 26, 52 or 104 weeks for $1 or $2 per game. Data concerning subscriptions processed is noted below: 1

2 Multi-Match As of 07/1/11 10,488 As of 01/31/ ,206 YTD 7/1/11 to 12/31/11 JANUARY 2012 YTD 7/1/11 to 01/31/12 New Applications ,030 Internet Renewal 5,561 2,146 7,707 Mega Millions As of 07/1/11 25,438 As of 01/31/12 24,628 07/1/11 to 11/30/11 JANUARY 2012 YTD 7/1/11 to 01/31/12 New Applications 2, ,287 Internet 1, ,228 Renewal 9,942 1,717 11,659 07/1/11 to 11/30/11 JANUARY 2012 YTD 7/1/11 to 12/31/11 Child Support $ 141, $ 27, $ 168, Restitution $ 699, $ 110, $ 809, Agent Resource 07/01/ /31/2012 # OF AGENTS # OF AGENT TERMINALS # AGENT PLUS LOCATIONS

3 II. BUDGET FISCAL YEAR 2013 The Department of Budget and Management completed the budget allowance is as follows: Lottery Program: $ 54,341,759 VLT Program: Special Funds $ 184,745,750 General Funds $ 72,856,632 Total Budget $ 311,944,141 The Legislative Analyst reviewed our budget and did not recommend any cuts. Budget hearings were held as follows: Senate January 31, 1:00 PM House February 8, 1:00 PM The Lottery was requested to give a status update on the Lottery, the VLT program and Ecommerce. FISCAL YEAR 2012 Lottery Program: $ 53,909,306 VLT Program: Special Funds $ 139,400,338 General Funds $ 29,296,288 FISCAL YEAR 2011 Total Budget $ 222,605,932 Monitoring the liquidation of encumbrances. III. ACCOUNTING/FINANCE All W2G s and 1099 s were sent out by the required due date. IV. PROCUREMENT During January a total of 61 new small procurements (up to $25k) were initiated. Procurement works closely with all Divisions to support the Lottery s daily operations to include, but not limited to, procurement of printing of newsletters and POS materials and various information 3

4 sheets/brochures to support all games; promotional items, sponsorship agreements for events; and supplies/equipment for the Lottery s internal use, as well as the processing of all payments under $5, using the State P-Card and monthly reconciliation of bank statement. Regulations: Status of Regulations approved by the Commission at its meeting on: 1) September 22, 2011: Qualification by the Commission & Violations: Emergency approved and published in Register December 2 with term 11/14/2011 5/11/2012. Final Action for permanent published January 13, with Final Action effective January 23, Predatory Marketing; Final Action for permanent published January 13, with Final Action effective January 23, Signs; and Voluntary Exclusion and Responsible Gaming: Permanent published in Register on November 4. Due to public comments received, the Commission at its December 15 meeting approved the withdrawal of these amendments and approved new substitute amendments for submission. Voluntary Withdrawal was published in Register January 13, ) December 15, 2011: Definitions: Amendments submitted to AELR as permanent regulations on December 29, with an effective date of June 30, Approved by AELR and submitted to DSD January 20, anticipate publication in early February Promotional Play: Amendments submitted to AELR as both emergency (requested effective dates 1/20/12 7/12/12) and permanent regulations on January 4. Due to questions from AELR regarding the method of calculation of the promotional play, these amendments were withdrawn and will be revised and resubmitted Facility Design Standards; and Access to Central System: Both amendments submitted to AELR as permanent regulations on January 4. Approved by AELR and submitted to DSD January 20, anticipate publication in early February Signs; and Voluntary Exclusion and Responsible Gaming: Both amendments (Revised 12/15/2011) submitted to AELR as permanent regulations on January 4. Approved by AELR and submitted to DSD January 20, anticipate publication in early February. 3) January 26, 2012: Vendor Registration; and Promotional Play (Revised): Amendments submitted to AELR as both emergency and permanent regulations on February 7. Pending 15 day approval period by AELR and then will be submitted to DSD for publication. VLT Program 1) RFP for "Video Lottery Operation License in Baltimore City # ": The Proposal submitted by CBAC Gaming continues under evaluation by the Location Commission and Background Investigations continue by the Lottery Commission. A decision on the License award to CBAC is expected to be made by the Location Commission in late April-early May. 2) RFP for "Video Lottery Operation License in Allegany y # ": The Proposal submitted by Landow Partners, LLC was rejected by the Location Commission at its January 13 th meeting and the Background Investigation by the Lottery Commission has been terminated. The Proposal submitted by Evitts Resort, LLC continues under evaluation by the Location 4

5 Commission and the Background Investigation continues by the Lottery Commission. A decision on the License award to Evitts is expected to be made by the Location Commission in late March. 3) Order for 4,750 VLTs for the Anne Arundel y Facility - Maryland Live! Casino: Delivery of VLTs from the manufacturers to the PPE warehouse is anticipated to begin February 13, 2012, and the Maryland Live! Casino is presently scheduled to open in June ) Investigative Services for Video Lottery Terminal Licensing Contract (# ) with Spectrum Gaming Group (Primary Contract) and MDB International (Secondary Contract) for the term 5/7/2009 5/6/2011 in the total amount of $5millon: Three 1-year renewal options were available on the Contracts. The first renewal option was previously exercised for both Contracts in the total amount of $1 million for the term 5/7/2011 5/6/2012. The second renewal option for both Contracts in the total amount of $1 million for the term 5/7/2012 5/6/2013 is in preparation for submission to DBM to appear on the April 4, 2012 BPW Agenda. MBE/SBR Activities: I. Events scheduled by the Procurement and MBE/SBR staff in accordance with the Lottery's Annual MBE/SBR Strategic Plan as required by GOMA: 1) Radio One Baltimore Minority Business Networking Series to be held February 29 & May 30. II. A summary of the Lottery's MBE participation to date including both Lottery and VLT operations will be provided at the Commission meeting on February 23. (MBE reports are not yet available from the Contractors at the time of preparation of this report) V. HUMAN RESOURCES - Recruitment Report The following activity occurred regarding personnel: Lottery Internal Auditor II One interview was held on February 16, Lottery Security Specialist Position filled. Candidate started 2/8/12. Lottery Sales Representative (Contractual) Position filled. Candidate to start 2/22/12. VLT Internal Auditor Lead Recruitment underway. Close date is 2/22/12. VLT Compliance Officers Three candidates will start on 2/27/12. These candidates will assist with the fingerprinting of applicants for Maryland Live! Additional compliance officers will be hired as the opening date gets closer. 5

6 VI. WAREHOUSE The instant ticket warehouse is responsible for packing all of the instant tickets that are shipped to lottery retailers. Orders are placed through our Tel Sell operation which is run by our on-line vendor. Once the order is placed, it is sent to the warehouse for fulfillment. Once fulfilled, the orders are shipped out through UPS for overnight delivery to the agent locations. In addition to fulfilling the orders, the warehouse is responsible for monitoring UPS to ensure proper billing and delivery. Instant ticket shipping activity is as follows: # of orders January 2012 # of packs January 2012 YTD orders /31/12 YTD packs /31/12 14, , , ,993 VII. FACILITIES Daily departmental support.. VIII Summary of Bills Introduced in the Legislature Please see attached report. GMS/dmg Rptdir

7 Summary of Bills Introduced in Legislature Below is a cumulative listing of bills as of February 13, 2012, that either were pre-filed prior to the start of 2012 Regular Session of the Maryland General Assembly, or introduced after the Maryland General Assembly convened on January 11, To date, forty-nine (49) bills have been filed that may affect the Lottery. HB7 seeks to exempt certain fantasy competitions from the criminal gaming prohibitions based upon a player s skill. My initial assessment of this proposed legislation is that there may be a fiscal impact on the Lottery, but more research needs to take place as fantasy competitions are generally Internet based competitions. HB133 seeks to authorize specified organizations in Carroll y to conduct a card game, card tournament, or casino night; require an organization to obtain a permit from the Board of License Commissioners of Carroll y before conducting a card game, card tournament, or casino night; require an organization that seeks a permit to meet specified requirements; and specify that a card game, card tournament, or casino night may be managed and organized by specified organizations. My initial assessment of this proposed legislation is that there may be a fiscal impact on the Lottery because the bill would create a new statute in Criminal Law Article that allow eligible organizations in Carroll y to conduct casino night with card games, dice games, and roulette. HB151 seeks to add Frederick y to the list of counties in which specified nonprofit fraternal, religious, and war veterans' organizations may own and operate not more than five slot machines under specified circumstances. My initial assessment of this proposed legislation is that there may be a fiscal impact on the Lottery because the bill would add Frederick y to the list of eligible jurisdictions under Criminal Law Article and allow eligible organizations to own or operate not more than five (5) slot machines. HB219 seeks to require that specified regulations of the State Lottery Agency include measures intended to reduce or mitigate the effects of problem gambling. My initial assessment of this bill is that there is a fiscal impact, and possibly an operational impact, on the Lottery because the bill would amend State Government Article and require the Lottery to adopt regulations that provide for measures that are intended to reduce or mitigate the effects of problem gambling. HB235 seeks to prohibit the dissemination of criminal history record information to a person other than a criminal justice unit if the information relates to a charge or conviction for a nonviolent crime that was allegedly committed more than 10 years previously; and provide that this prohibition may not be abrogated by waiver or consent. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would limit the Lottery s Security and VLT Compliance Sections from ascertaining relevant criminal history record information on applicants for licenses, if the applicant committed a nonviolent offense more than ten (10) years prior to the application date. In addition, the bill would create a new statute in Criminal Procedure Article (Note, crimes of moral turpitude and gaming type offenses are not listed in Criminal Law Article HB257 seeks to expand the definition of "computer" to clarify that the criminal law provisions which relate to the unauthorized access to computers and related devices and systems also applies to video lottery terminals and associated equipment owned by the State Lottery Commission. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would add VLTs and the associated equipment owned by the Lottery to the list of critical computers and networks under Criminal Law Article 7-302, and make it a criminal offense if a person intentionally, willfully, and 7

8 without authorization accesses, interrupts, or impairs the functionality of a computer system. [Note, the bill does not address leased computers and associated equipment.] HB260 seeks to require the State Lottery Agency to conduct a certain annual lottery for the benefit of the Maryland Veterans Trust Fund; require the Agency to deposit into the Fund a percentage of the proceeds, after certain expenses of the veterans lottery; require the Agency to meet certain advertising criteria in conducting the veterans lottery; and generally relating to lotteries conducted by the State Lottery Agency. My initial assessment of this proposed legislation is that there is a fiscal and operation impact on the Lottery because this bill would add a new statute to State Government Article , and require that any ticket whether online or instant -- sold on November 11 th of each year be advertised for veterans and the sales proceeds be earmarked for the exclusive benefit of the Maryland Veterans Trust Fund. HB320 seeks to repeal the prohibition in Baltimore y against the offering or awarding of a money prize to a player by a person who holds a casino event that includes a card game or roulette. My initial assessment of this proposed legislation is that there may be a fiscal and operational impact on the Lottery s VLT Program and traditional lottery products because the bill would repeal the current prohibition of offering or awarding money prizes to players. If table game legislation were passed by the Legislature and a referendum were approved by the Maryland voters, eligible nonprofit organizations in Baltimore y would compete directly with VLT casinos for players and dollars because the bill would allow these organizations to conduct similar casino style games and offer or award money prizes to players. Because there is a limited number of entertainment dollars available for gaming activities, this repeal could switch the spending habits of lottery players away from traditional lottery type gaming. HB329 seeks to alter the hours for selling and consuming alcoholic beverages at a video lottery facility in Anne Arundel y so that the hours match the hours of operation for a video lottery facility. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would allow a holder of an Entertainment Facility License or an Entertainment Concessionaire License at only the Maryland Live VLT Casino to align its hours of operation for selling alcoholic beverages to patrons and allow these same patrons to consume these drinks on the premises. HB376 seeks to alter and repeal specified requirements of law relating to the use of proceeds from video lottery terminals; establish a School Construction Account under the authority of the Interagency Committee on School Construction; repeal the Racetrack Facility Renewal Account; provide for the purpose of the Account; require the Comptroller to pay money from the Account; and require that funding from the Account be used to service debt for school construction. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would repeal the current State Government Article 9-1A-09 and reenacts it with certain amendments. Specifically, the bill would delete the current 7% and the $100,000,000 not to exceed amount to the Purse Dedication Account, as well as the 2.5% and the $40,000,000 not to exceed amount to the Racetrack Facility Renewal Account. This bill would replace these amounts with a 9.5% and a $140,000,000 not to exceed amount to the School Construction Account, and the remainder would go to the Education Trust Fund Account so that an Interagency Committee on School Construction can allocate funds in the Capital Budget. HB385 seeks to require that regulations adopted by the State Lottery Commission include provisions that require video lottery terminal payouts above specified amounts be reported to the State Lottery Agency in a report that contains specified information; and require the State Lottery Agency to modify the report in a specified manner and forward the modified report to the Department of Human Resources' Child Support Enforcement Administration for the purpose of enforcing specified child support orders. My initial assessment of this proposed legislation is that there may be an operational and fiscal impact on the Lottery because the bill would amend the current State Government Article 9-1A-24, and require VLT operation licensees to report to the Lottery payouts made by check to players above a certain dollar amount. The bill then would require the Lottery to modify this report and send it to the Child Support Enforcement Administration of the Department of Human Resources to enforce child support orders. 8

9 HB407 seeks to repeal a restriction that limits specified gaming licensees in Dorchester y from holding gaming events or carnivals on a Sunday. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would allow a game or carnival to be played on Sunday. HB413 seeks to provide that public officials may not request the Department of State Police to provide chauffeured transportation services for them for any purpose; provide that public officials may not request the Department to provide an officer or employee of the Department to provide chauffeured transportation services for them for any purpose; and provide that public officials may not require employees under their control to provide chauffeured transportation services for them using specified vehicles. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery. HB416 seeks to add Allegany y and Garrett y to the list of counties in which specified nonprofit fraternal, religious, and war veterans' organizations may own and operate not more than five slot machines. My initial assessment of this proposed legislation is that there may be a fiscal impact on the Lottery because the bill would amend Criminal Law Article and add Allegany and Garrett ies to the list of jurisdictions that could authorize eligible nonprofit organizations to own and operate up to five slot machines. HB418 seeks to authorize the Allegany y Board of y Commissioners to impose paper gaming taxes based on a specified range of gross profits minus the costs of paper gaming products instead of set percentage. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would allow Allegany y to impose taxes on qualified nonprofit organizations up to a certain percentage of the gross profits minus costs. HB461 seeks to alter the definition of "amusement device" as it relates to the operation and regulation of amusement devices in Washington y to include a game activated by an object or other consideration of value; and alter the definition of "gross profits" as it relates to the operation of tip jars in Washington y to require the deduction of the cost of a gaming sticker. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill merely would clarify existing statutory language. HB502 seeks to prohibit a member of the Senate of Maryland or the House of Delegates from holding a license issued in connection with the operation of video lottery terminals; and prohibit a member from performing work or services as an independent contractor for the holder of any license issued under the laws relating to video lottery terminals. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would amend State Government Article 9-1A- 05(d)(3) and clarify that members of the Maryland General Assembly may not hold a license or perform work or services for a person that holds any VLT type license. HB603 seeks to authorize in Baltimore City a for-profit organization s ability to hold a charitable gaming event with a specified nonprofit organization; authorize a charitable gaming event to include card games, dice games, and roulette; require that a for-profit organization and nonprofit organization be issued a permit before conducting a charitable event; and allow permit holders to pay for specified goods and services. My initial assessment of this proposed legislation is that there may be a fiscal impact on the Lottery because the bill would authorize charitable gaming events to be operated within the City of Baltimore with card games, dice, and roulette and allow a for-profit organization and partner organization (nonprofit) to hold this gaming event in such a manner that the partner organization would receive all of the net proceeds from the event. In addition, this bill would allow the organizations to hire someone to manage the gaming event and have up to three (3) events in a calendar year. HB643 seeks to amends the Maryland Constitution to authorize video lottery terminal gaming at Baltimore- Washington International Thurgood Marshall Airport; alter the number of licenses that the State may issue to operate video lottery terminals; alter the number of video lottery terminals that may be authorized in the 9

10 State; and submit the amendment to the qualified voters of the State for their adoption or rejection. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would authorize, by constitutional amendment, the Video Lottery Facility Location Commission to award a sixth video lottery operation license at BWI Thurgood Marshall Airport at the terminal building and surrounding security perimeter of BWI Airport. In addition, the Commission could award 2,500 video lottery terminals (VLTs) to this proposed site and exceed the 15,000 VLT cap. The authorization for a sixth VLT site and for exceeding the VLT cap would be subject to a referendum. HB684 seeks to require the State Lottery Agency to verify the lawful presence in the United States of a lottery winner before paying a cash game prize greater than $5,000 to the holder of a winning lottery ticket. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would require the agency to verify that the holder of a winning ticket greater than $5,000 is allowed lawfully to be in the U.S.A. HB711 seeks to alter the number of video lottery operation licenses and number of video lottery terminals that may be awarded for a video lottery facility operation license at Baltimore-Washington International Thurgood Marshall Airport; and provide that a specified restriction on the number of video lottery operation licenses is not applicable. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would authorize the Video Lottery Facility Location Commission to award a sixth video lottery operation license at BWI Thurgood Marshall Airport at a location at the terminal building and surrounding security perimeter of BWI Airport. In addition, the Commission could award 2,500 video lottery terminals (VLTs) to this proposed site and exceed the 15,000 VLT cap. This bill is the enabling legislation to HB643 and is contingent on the passage of HB643 through the referendum process. In addition to what has already been identified in HB643, this bill would allow the remainder of the proceeds collected from this proposed VLT site to go to the Transportation Trust Fund. The applications for this proposed site would be due by April 15, As noted above, the authorization for a sixth VLT site and for exceeding the VLTs cap would be subject to a referendum. HB786 seeks to repeal a contingency on provisions of law that authorize specified depository institutions and credit unions to conduct savings promotion raffles; and alter the circumstances under which depository institutions may conduct savings promotion raffles. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would remove the contingency provisions imposed in 2010 and allow credit unions and depository institutions to conduct savings promotion raffles for eligible customers. HB810 seeks to authorize specified volunteer fire departments in Prince George's y to hold poker events in which the public may play poker card games; limit the number of poker events that a volunteer fire department may hold to one per month; require that a volunteer fire department obtain a permit from the Prince George's y Department of Environmental Resources before holding a poker event; and specify the conditions under which a permit for a poker event shall be issued. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery s VLT Program and traditional lottery products because the bill would allow volunteer fire departments to conduct one (1) poker event per month, on either a Friday or Saturday, in which poker card games are the only authorized games to be played. If table game legislation were passed by the Legislature and a referendum were approved by the Maryland voters, eligible volunteer fire departments in Prince George's y would compete directly with this sixth VLT casino for players and dollars because this bill would allow these departments to conduct a similar casino style game and offer or award money prizes to players. Because there is a limited number of entertainment dollars available for gaming activities, this additional form of gambling could switch the spending habits of lottery players away from traditional lottery type gaming. HB811 seeks to authorize in Prince George's y specified volunteer fire departments and organizations that promote the arts and preserve the culture to hold events in which the public may play poker card games; limit the number of poker events that may be held to one a month; require that a permit be obtained from the Prince George's y Department of Environmental Resources before a poker event may be 10

11 held; specify requirements to qualify for a permit; and specify the contents of an application for a permit. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery s VLT Program and traditional lottery products because the bill would allow volunteer fire departments and organizations that promote the arts and preserve the culture to conduct one (1) poker event per month on either a Friday or Saturday in which poker card games are the only authorized games to be played. If table game legislation were passed by the Legislature and a referendum were approved by the Maryland voters, eligible volunteer fire departments and organizations that promote the arts and preserve the culture in Prince George's y would compete directly with this sixth VLT casino for players and dollars because this bill would allow these entities to conduct a similar casino style game and offer or award money prizes to players. Because there is a limited number of entertainment dollars available for gaming activities, this additional form of gambling could switch the spending habits of lottery players away from traditional lottery type gaming. [Basically, this bill is the same as HB810, except it has more statutory eligibility and enforcement provisions.] HB816 seeks to authorize the Director of the State Lottery Agency to issue specified Prince George's y veterans' organizations a license for up to five instant ticket lottery machines to each veterans' organization. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would attempt to place instant ticket lottery machines at an eligible veteran organization's place of business. The Lottery would then give 10% of the sales proceeds collected by these entities to the Maryland Veterans Trust Fund. [This bill is similar to SB11 in which the Lottery and DBM sent Letters of Concern to the Senate's Budget and Taxation Committee.] HB855 seeks to require the State Lottery Agency to conduct a specified monthly lottery for the benefit of the public school systems in the State; require the Comptroller to pay to the public school systems in the State a specified percentage of the money that remains in the State Lottery Fund from the proceeds of a certain lottery after a specified distribution; and require the Agency to meet specified advertising criteria in conducting the lottery. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would require the Lottery to conduct an education lottery on the first day of each month and identify in all advertising and on all tickets that any lottery conducted would be for the benefit of the public school systems in the State. Twenty percent of the proceeds collected from this monthly lottery would be paid directly to the respective school system based upon the proportionate amount of lottery tickets sold from that jurisdiction. [It appears that (E) mentions "proceed paid into the General Fund" but the 20% would not go into the General Fund - perhaps it could mean that the other 80% which would go into the General Fund now would go to the Bridge to Excellence in Public Schools Program.] HB925 seeks to amend the Maryland Constitution to authorize the State to issue video lottery operation licenses to holders of alcoholic beverages licenses and to nonprofit fraternal organizations; alter the number of video lottery terminals that may be authorized in the State; and submit the amendment to the qualified voters of the State of Maryland for their adoption or rejection. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would authorize the Lottery to grant a video lottery terminal license to holders of Class B and Class D alcoholic beverage licenses if they have Keno-type gaming machines or amusement only devices in their business establishments. The bill would grant this same license to nonprofit fraternal organizations if they hold an alcoholic beverage license. In addition, the bill would allow the Lottery to issue 5,000 video lottery terminals (VLTs) for these new proposed sites, exceeding the 15,000 VLT cap and establishing a new cap of 20,000 VLTs. The authorization for exceeding the VLTs cap would be subject to a referendum. [It is unclear if these Class B & D alcoholic beverage license are issued mainly to bar and tavern operators.] HB927 seeks to allow an entity in Calvert y licensed to offer electronic or instant bingo under a commercial bingo license on December 31, 2008, or a specified qualified organization to continue to operate a game of electronic or instant bingo; require the State Lottery Commission to establish procedures and regulations relating to electronic bingo machines in Calvert y; impose tax rates on specified net proceeds; and terminate the Act at the end of June 30, My initial assessment of this proposed 11

12 legislation is that there is a fiscal and operational impact on the Lottery because this bill would place electronic bingo machines under the Lottery s authority and require the agency to regulate and provide oversight for this type of commercial gaming activity. This bill would authorize the electronic and instant bingo machines currently in operation in Calvert y to continue to operate for another four-year period. The revenue from the State admissions and amusement tax on electronic and instant bingo machines would continue to be taxed accordingly. This bill is only effective until June 30, HB928 seeks to increase the number of video lottery operation licenses and video lottery terminals that may be awarded by the Video Lottery Facility Location Commission; authorize the awarding of video lottery operation licenses to holders of specified alcoholic beverages licenses in the State; limit the number of video lottery terminals that may be operated in one licensed establishment; and make the Act contingent on the passage and ratification of a constitutional amendment. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery. This bill is the enabling legislation to HB925 and is contingent on the passage of HB925 through the referendum process. In addition to what has already been identified in HB925, this bill would allow the Lottery to replace (swap out) four amusement only gaming machines with VLTs. The amusement only gaming machines would have to be in operation at the Class B and Class D alcoholic beverage license holders business establishments. HB1002 seeks to alter the definition of "slot machine" under the Criminal Law Article to include a machine or an electronic terminal commonly used in conjunction with an electronic sweepstakes. My initial assessment of this proposed legislation is that there is no fiscal and operational impact on the Lottery because the bill would include electronic sweepstakes in the definition of a slot machine and make it a criminal offense for a person to use a machine or an electronic terminal with an electronic sweepstakes. Thus, a person would be unable to receive money, a token, or another object that represents and can be converted into money for entering and playing an electronic sweepstakes. HB1125 seeks to authorize organizations to hold casino events that include a card game or roulette in Howard y; require an organization to obtain a permit from the Howard y Department of Inspections, Licenses, and Permits before operating a casino event; require the county to establish the amount of the permit fee; specify the types of organizations eligible to conduct a casino event; limit the amount of specified money prizes; and require a permit holder to ensure that specified standards are met. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would create a new statute in Criminal Law Article and allow a volunteer fire company or a war veterans organization in Howard y to conduct a casino event using card games and roulette once every month with each gaming device. If table game legislation were passed by the Legislature and a referendum were approved by the Maryland voters, volunteer fire companies and war veterans organizations in Howard y would compete directly with VLT casinos for players and dollars as this bill would allow these organizations to conduct similar casino style games and offer or award money prizes to players. Because there is a limited number of entertainment dollars available for gaming activities, this repeal could switch the spending habits of lottery players away from traditional lottery type gaming. SB10 bill seeks to alter the use of payout proceeds by changing the wording from at least one half of the gross proceeds to net after payout proceeds from its slot machines for the benefit of a charity. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery. SB11 bill seeks to authorize the Director of the State Lottery Agency to issue to certain veterans organizations a license for not more than a certain number of instant ticket lottery machines for the sale of certain lottery machine tickets; exempt certain counties from certain provisions; provide that revenues from certain lottery machine ticket sales by a veterans organization are to be credited to the State Lottery Fund after certain deductions are made; and require the Comptroller to distribute a certain percentage of proceeds deposited in the State Lottery Fund from certain lottery machine ticket sales by veterans organizations to the Maryland Veterans Trust Fund. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would attempt to place several instant ticket lottery 12

13 machines at a veteran organization s place of business, i.e., VFWs, American Legions, etc., and then in 2013, the Lottery would give 10% of the sales proceeds collected by these entities to the Maryland Veterans Trust Fund. The instant ticket lottery machine referenced in SB11 is not a machine that has been procured or endorsed by the Lottery in the past. [Note, the Lottery believes that these machines are either slot machines or pull-tab machines with all the bells and whistles to simulate slot machines.] SB26 bill seeks to authorize the holder of a VLT operation license the opportunity to offer table games; specify the type of table games that may be authorized in the State; authorize the State Lottery Commission to determine the suitability of certain table games under certain circumstances; and submit this Act to a referendum of the qualified voters of Maryland for their adoption or rejection. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would require the Lottery to hire additional staff to regulate table games at VLT casinos. SB31 bill seeks to authorize eligible nonprofit organizations the opportunity to own or operate applicable slot machines on a statewide basis; and alter the definition of eligible organization to make it applicable to a nonprofit organization that has been located in the State for a certain number of years before the organization applies for a license for a slot machine. My initial assessment of this proposed legislation is that there is fiscal and operational impact on the Lottery because the bill would make it more difficult for the Lottery to reach its budget revenue estimates if eligible organizations were allowed to own or operate a slot machine at their place of business. This bill would remove the limitation that only eligible organizations listed in nine Eastern Shore counties can own or operate no more than five slot machines. SB152 seeks to alter or repeal specified required appropriations; alter the distribution of specified revenues; alter or repeal specified funding requirements; alter the authorized use of specified funds; authorize the transfer of specified funds. My initial assessment of this proposed legislation is that there is no fiscal impact on the Lottery. The bill would create a permanent reduction of retailer commissions to 5%, and specify that a general fund appropriation be reduced by $1,867,000 contingent upon the enactment of legislation transferring Video Lottery Terminal revenue from Small, Minority, and Women-owned Business Investment Account to the Education Trust Fund. SB155 seeks to require the Video Lottery Facility Location Commission to conduct a study to assess the financial impact of offering table games, including card games, dice games, roulette, and other forms of gaming in Maryland video lottery facilities; and require the Commission to report to the General Assembly on or before January 1, My initial assessment of this proposed legislation is that there may be a fiscal impact on the Lottery because the agency would have to assist the Video Lottery Facility Location Commission in drafting the report as this Commission does not have a staff to conduct the research and analysis, even though it would be the Commission s responsibility for submitting the report to the Maryland General Assembly. SB158 seeks to amend the Maryland Constitution to authorize a person that holds a video lottery operation license to offer table games, including poker, blackjack, craps, and roulette, to the public; and submit the amendment to the qualified voters of the State for their adoption or rejection. My initial assessment of this proposed legislation is that there is a fiscal impact on the Lottery because the bill would require the Lottery to hire additional staff to regulate table games at VLT casinos. SB166 seeks to create in Harford y a permit to be issued by the Sheriff of Harford y that authorizes specified nonprofit organizations to conduct a gaming contest; specify requirements that organizations must meet to be issued a permit; limit to four the number of gaming contests an organization may hold in a year; state the location and hours for conducting a gaming contest; and specify that the maximum bet a single individual may place on a game is $10. My initial assessment of this proposed legislation is that there may be a fiscal impact on the Lottery because this bill would allow qualified organizations in Harford y to hold casino style events using gaming devices such as card games, dice games, roulette, bingo and raffles, just to name a few. Under this bill, any qualified organization would be allowed to obtain four (4) gaming contest permits per year. 13

14 SB264 seeks to repeal in Frederick y a specified limitation on the number of specified raffles that may be held on a single day; and authorize the Board of y Commissioners of Frederick y to determine the number of permits to conduct a raffle that specified organizations in the county may receive in a calendar year. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because this bill would amend Criminal Law Article and authorize the y Commissioners to decide the number of raffle permits that an eligible organization could have in a calendar year. SB319 seeks to add Frederick y to the list of counties in which specified nonprofit fraternal, religious, and war veterans' organizations may own and operate not more than five slot machines under specified circumstances. My initial assessment of this proposed legislation is that there may be a fiscal impact on the Lottery because this bill would amend Criminal Law Article and add Frederick y to the list of jurisdictions that can authorize eligible nonprofit organizations to own or operate up to five slot machines. SB670 seeks to authorize the y Commissioners of Washington y to require that the Washington y Volunteer Fire and Rescue Association submit financial reports; authorize the county commissioners to adopt specified regulations; authorize the county commissioners to withhold funds under specified circumstances; require the Association to submit its budget to the county commissioners annually by a specified date; and prohibit specified funds from being used for specified fire and rescue services. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would establish, by statute, the y Commissioners authority for accountability and oversight of the Washington y s Gaming Fund and the Volunteer Fire and Rescue Associations responsibility for submitting the gross proceeds for operating tip jars and for submitting financial reports to the Washington y Gaming Fund. SB794 seeks to repeal a restriction that limits to calendar year 2012 the use of certain Purse Dedication Account funds by Ocean Downs Race Course and Rosecroft Raceway for operating assistance to support a minimum of 40 live racing days at each of these racecourses; and place restrictions on the receipt of specified Purse Dedication Account grants. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would clarify that the money allocated from the Purse Dedication Account to racecourses is on an annual basis based upon the minimum of 40 annual live racing days. SB864 seeks to authorize the operation of specified instant bingo machines; clarify that a specified handheld device is not considered a slot machine; authorize the State Lottery Commission to make specified determinations regarding gaming devices and requiring the Commission to issue specified regulations; and amend specified admissions and amusement tax rates on electronic bingo in Calvert y. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would require the agency to make final administrative decisions regarding the legality of "all" gaming device operated in the State and, if a local law enforcement agency fails to enforce the agency's determination, the Lottery would refer the matter to the Maryland State Police for enforcement. However, the Lottery's authority would not extend to the ownership and operation of slot machine under the Comptroller's authority pursuant to Criminal Law Article In addition, it appears that the Commission would decide if a gaming device is an illegal gaming device that may not legally operate in the State. The Commission would be required to adopt regulations defining devices, approving and licensing devices, approving and licensing owners, operators, and manufactures, and establishing fees. In addition, this bill would allow instant bingo operated under a commercial bingo license to continue as long as they operate consistent with State laws and regulations. Revenue from State admissions and amusement tax on bingo and electronic tip jars would continue to be taxed accordingly. However, if the machines are located in Calvert y, the revenue would be split among various entities in that county at different years. The tax rate for State admissions and amusement tax on bingo and electronic tip jars in Calvert y would be 33%. 14

15 SB878 seeks to establish specified funding for prekindergarten students by altering a specified definition to include prekindergarten students in the number of students enrolled; alter a specified funding calculation to phase in a reduction of specified funding; and alter a specified definition to make specified children eligible for prekindergarten. My initial assessment of this proposed legislation is that there is a fiscal and operational impact on the Lottery because the bill would authorize VLT operation licensee to offer table games. The bill would create funding for the Preschool for All Program under the Education Article. If table games were approved, the VLT operation licensee would not be charged a license fee for this type of gambling, and the VLT operation licensee would be allowed to keep 65% of the proceeds from table games. The remainder would go to the Education Trust Fund. Only the authorization for table game would be subject to a referendum. SB883 seeks to create in Baltimore City a Class BWL-VLF (video lottery facility) license and a Class BWL-VLC (concessionaire) license; specify requirements for license applicants; authorize the licensees to sell beer, wine and liquor by the drink and by the bottle, for consumption on the premises of a video lottery facility or on grounds controlled by the video lottery facility licensee; and specify license fees. My initial assessment of this proposed legislation is that there is no fiscal or operational impact on the Lottery because the bill would authorize the sale of beer, wine, and liquor by the drink and by the bottle on the premises of a Baltimore City VLT operation licensee and establish an annual fee of $15,000 for this alcoholic beverage license. A separate fee of $5,000 would be imposed on a VLT concessionaire if it would want to sell alcoholic beverages on the premises or on the grounds controlled by the VLT operation licensee. In addition, the bill would authorize the playing of music and dancing on the premises or on the grounds controlled by the VLT operation licensee. SB892 seeks to authorize the awarding of an additional video lottery operation license and 4,750 additional video lottery terminals for a video lottery facility in a specified location in Prince George's y; alter the amount paid to a video lottery operation licensee from the proceeds of video lottery terminals; create a State Capital Account for a specified purpose; authorize the holder of a video lottery operation license to offer table games in the State; and submit the Act to a referendum. My initial assessment of this proposed legislation is that there is fiscal and operational impact on the Lottery because the bill would authorize the Video Lottery Facility Location Commission to award a sixth video lottery operation license in Prince George s y within a certain geographical area, the ability to award 4,750 video lottery terminals (VLTs) to this proposed site, exceeding the 15,000 VLT cap, and the ability to allow VLT operation licensee to offer table games. The bill would create a State Capital Account for the development and construction of a hospital in Prince George s y, and the account would consist of the initial license fees that are submitted with applications, 2.5% of the proceeds from VLT terminals, investment earnings, and any other fund sources. In addition, the bill would allow an individual or business entity to own and have an interest in more than one VLT facility. The bill would remove the restrictions under State Government Article 9-1A-24 concerning providing food and alcoholic beverages to individuals at no cost, or price limitation imposed by the alcoholic beverage licensing authority. The VLT operation licensee would receive 40% of the VLT proceeds. In addition, the bill would remove the restrictions on the Ocean Downs VLT operations licensee to build a conference center, amusement park, etc. as well as the restriction on live entertainment and fireworks. If table games were approved, the VLT operation licensee would not be charged a license fee for this type of gambling, and the VLT operation licensee would be allowed to keep 100% of the proceeds from table games. Only the authorization for awarding a sixth VLT site, for exceeding the VLTs cap, and for allowing table games would be subject to a referendum. [Note, there appears to be an inconsistency with the deposit of the initial license fee. On page 9, it mentions the State Capital Account and on page 13, it notes the Education Trust Fund]. SB896 seeks to authorize a specified qualified organization to operate an electronic bingo machine or an electronic tip jar or paper pull tab machine in Baltimore City; authorize the Baltimore City Police Commissioner to issue specified licenses; apply a specified State tax rate and the payment of a specified State tax to specified machines; and require the Commissioner to adopt specified regulations. My initial assessment of this proposed legislation is that there may be a fiscal impact on the Lottery because the bill 15