BILL REQ. #:  H-3682.1 

Read first time 01/25/12.   Referred to Committee on State Government & Tribal Affairs.

     AN ACT Relating to structure and duties of the gambling commission, horse racing commission, lottery commission, and liquor control board; amending RCW 9.46.040, 9.46.050, 9.46.080, 9.46.085, 9.46.360, 67.70.050, 42.17A.705, 67.70.010, 67.70.050, 67.70.180, 67.70.240, and 67.70.260; adding new sections to chapter 67.70 RCW; adding a new chapter to Title 43 RCW; recodifying RCW 9.46.040, 9.46.050, 9.46.060, 9.46.070, 9.46.080, and 9.46.085; repealing RCW 66.08.012, 66.08.014, 66.08.016, 66.08.080, 67.16.012, 67.16.014, 67.16.015, 67.16.017, 67.16.140, 67.16.150, 67.16.160, 67.70.030, 67.70.055, and 67.70.270; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature recognizes the need to increase government efficiency and that greater government efficiency may be achieved by consolidating agencies, merging similar and duplicative functions, and privatizing state functions when possible. Recently, citizens passed Initiative Measure No. 1183, which will soon significantly reduce the functions of the liquor control board. Privatizing lottery functions may generate savings and new revenue for the state. This act, which consolidates the horse racing commission, gambling commission, state lottery commission, and liquor control board into a single agency, and seeks revenue opportunities through private management of the state lottery, is intended to increase efficiency by streamlining government.

NEW SECTION.  Sec. 101   There is created a gaming and liquor control commission that is vested with all powers and duties transferred to it under this chapter and such other powers and duties as may be authorized by law.

NEW SECTION.  Sec. 102   As used in this chapter, unless the context clearly requires otherwise, "commission" means the gaming and liquor control commission.

Sec. 103   RCW 9.46.040 and 1974 ex.s. c 155 s 12 are each amended to read as follows:
     There shall be a commission, known as the (("Washington state gambling commission")) gaming and liquor control commission, consisting of five members appointed by the governor with the consent of the senate. The members of the commission shall be appointed ((within thirty days of July 16, 1973)) for terms beginning ((July 1, 1973)) October 1, 2012, and expiring as follows: One member of the commission for a term expiring July 1, ((1975)) 2014; one member of the commission for a term expiring July 1, ((1976)) 2015; one member of the commission for a term expiring July 1, ((1977)) 2016; one member of the commission for a term expiring July 1, ((1978)) 2017; and one member of the commission for a term expiring July 1, ((1979)) 2018; each as the governor so determines. Their successors, all of whom shall be citizen members appointed by the governor with the consent of the senate, upon being appointed and qualified, shall serve six year terms: PROVIDED, That no member of the commission who has served a full six year term shall be eligible for reappointment. In case of a vacancy, it shall be filled by appointment by the governor for the unexpired portion of the term in which said vacancy occurs. No vacancy in the membership of the commission shall impair the right of the remaining member or members to act, except as provided in RCW 9.46.050(2) ((provided)) (as recodified by this act).
     In addition to the members of the commission there shall be four ex officio members without vote from the legislature consisting of: (1) Two members of the senate, one from the majority political party and one from the minority political party, both to be appointed by the president of the senate; (2) two members of the house of representatives, one from the majority political party and one from the minority political party, both to be appointed by the speaker of the house of representatives; such appointments shall be for the term of two years or for the period in which the appointee serves as a legislator, whichever expires first; members may be reappointed; vacancies shall be filled in the same manner as original appointments are made. Such ex officio members who shall collect data deemed essential to future legislative proposals and exchange information with the ((board)) commission shall be deemed engaged in legislative business while in attendance upon the business of the ((board)) commission and shall be limited to such allowances therefor as otherwise provided in RCW 44.04.120, the same to be paid from the (("))gambling revolving fund((")) as being expenses relative to commission business.

Sec. 104   RCW 9.46.050 and 2011 c 336 s 302 are each amended to read as follows:
     (1) Upon appointment of the initial membership the commission shall meet at a time and place designated by the governor and proceed to organize, electing one of such members as chair of the commission who shall serve until July 1, ((1974)) 2014; thereafter a chair shall be elected annually.
     (2) A majority of the members shall constitute a quorum of the commission: PROVIDED, That all actions of the commission ((relating to the regulation of licensing under this chapter shall)) require an affirmative vote by three or more members of the commission.
     (3) The principal office of the commission shall be at the state capitol, and meetings shall be held at least ((quarterly)) monthly and at such other times as may be called by the chair or upon written request to the chair of a majority of the commission.
     (4) Members shall be compensated in accordance with RCW 43.03.250 and shall receive reimbursement for travel expenses incurred in the performance of their duties as provided in RCW 43.03.050 and 43.03.060.
     (5) Before entering upon the duties of his or her office, each of the members of the commission shall enter into a surety bond executed by a surety company authorized to do business in this state, payable to the state of Washington, to be approved by the governor, in the penal sum of fifty thousand dollars, conditioned upon the faithful performance of his or her duties, and shall take and subscribe to the oath of office prescribed for elective state officers, which oath and bond shall be filed with the secretary of state. The premium for said bond shall be paid by the commission.
     (6) Any member of the commission may be removed ((for inefficiency, malfeasance, or misfeasance in office, upon specific written charges filed by the governor, who shall transmit such written charges to the member accused and to the chief justice of the supreme court. The chief justice shall thereupon designate a tribunal composed of three judges of the superior court to hear and adjudicate the charges. Such tribunal shall fix the time of the hearing, which shall be public, and the procedure for the hearing, and the decision of such tribunal shall be final. Removal of any member of the commission by the tribunal shall disqualify such member for reappointment)) at any time at the pleasure of the governor.

Sec. 105   RCW 9.46.080 and 1994 c 218 s 14 are each amended to read as follows:
     The governor shall recommend and the commission shall employ a full time director, who shall be the administrator for the commission in carrying out its powers and duties and who shall issue rules ((and regulations)) adopted by the commission governing the activities authorized ((hereunder)) under this chapter and shall supervise commission employees in carrying out the purposes and provisions of this chapter. In addition, the director shall employ ((a deputy director, not more than three assistant directors, together with such investigators and enforcement officers and)) such staff as the commission determines is necessary to carry out the purposes and provisions of this chapter. The director((, the)) and any deputy directors((, the)) and assistant directors, and personnel occupying positions requiring the performing of undercover investigative work shall be exempt from the provisions of chapter 41.06 RCW, as now law or hereafter amended. ((Neither the director nor any commission employee working therefor shall be an officer or manager of any bona fide charitable or bona fide nonprofit organization, or of any organization which conducts gambling activity in this state.))
     The director, subject to the approval of the commission, is authorized to enter into agreements on behalf of the commission for mutual assistance and services, based upon actual costs, with any state or federal agency or with any city, town, or county, and such state or local agency is authorized to enter into such an agreement with the commission. If a needed service is not available from another agency of state government within a reasonable time, the director may obtain that service from private industry.

Sec. 106   RCW 9.46.085 and 1986 c 4 s 1 are each amended to read as follows:
     A member or employee of the ((gambling)) commission shall not:
     (1) Serve as an officer or manager of any corporation or organization which conducts a lottery or gambling activity;
     (2) Receive or share in, directly or indirectly, the gross profits of any gambling activity regulated by the commission;
     (3) Be beneficially interested in any contract for the manufacture or sale of gambling devices, the conduct of (([a])) a gambling activity, or the provision of independent consultant services in connection with a gambling activity.

Sec. 107   RCW 9.46.360 and 1992 c 172 s 2 are each amended to read as follows:
     (1) The negotiation process for compacts with federally recognized Indian tribes for conducting class III gaming, as defined in the Indian Gaming Regulatory Act, 25 U.S.C. Sec. 2701 et seq., on federal Indian lands is governed by this section.
     (2) The ((gambling)) commission through the director or the director's designee shall negotiate compacts for class III gaming on behalf of the state with federally recognized Indian tribes in the state of Washington.
     (3) When a tentative agreement with an Indian tribe on a proposed compact is reached, the director shall immediately transmit a copy of the proposed compact to all voting and ex officio members of the ((gambling)) commission and to the standing committees designated pursuant to subsection (5) of this section.
     (4) Notwithstanding RCW 9.46.040 (as recodified by this act), the four ex officio members of the ((gambling)) commission shall be deemed voting members of the ((gambling)) commission for the sole purpose of voting on proposed compacts submitted under this section.
     (5) Within thirty days after receiving a proposed compact from the director, one standing committee from each house of the legislature shall hold a public hearing on the proposed compact and forward its respective comments to the ((gambling)) commission. The president of the senate shall designate the senate standing committee that is to carry out the duties of this section, and the speaker of the house of representatives shall designate the house standing committee that is to carry out the duties of this section. The designated committees shall continue to perform under this section until the president of the senate or the speaker of the house of representatives, as the case may be, designates a different standing committee.
     (6) The ((gambling)) commission may hold public hearings on the proposed compact any time after receiving a copy of the compact from the director. Within forty-five days after receiving the proposed compact from the director, the ((gambling)) commission, including the four ex officio members, shall vote on whether to return the proposed compact to the director with instructions for further negotiation or to forward the proposed compact to the governor for review and final execution.
     (7) Notwithstanding provisions in this section to the contrary, if the director forwards a proposed compact to the ((gambling)) commission and the designated standing committees within ten days before the beginning of a regular session of the legislature, or during a regular or special session of the legislature, the thirty-day time limit set forth in subsection (5) of this section and the forty-five day limit set forth in subsection (6) of this section are each forty-five days and sixty days, respectively.
     (8) Funding for the negotiation process under this section must come from the gambling revolving fund.
     (9) In addition to the powers granted under this chapter, the commission, consistent with the terms of any compact, is authorized and empowered to enforce the provisions of any compact between a federally recognized Indian tribe and the state of Washington.

Sec. 108   RCW 67.70.050 and 2012 c --- s 205 (section 205 of this act) are each amended to read as follows:
     ((There is created the office of director of the state lottery. The director shall be appointed by the governor with the consent of the senate. The director shall serve at the pleasure of the governor and shall receive such salary as is determined by the governor, but in no case may the director's salary be more than ninety percent of the salary of the governor.)) The director shall:
     (1) Supervise and administer the operation of the lottery in accordance with the provisions of this chapter and with the rules of the commission.
     (2) ((Appoint such deputy and assistant directors as may be required to carry out the functions and duties of his or her office. The provisions of the state civil service law, chapter 41.06 RCW, shall not apply to such deputy and assistant directors.
     (3) Appoint such professional, technical, and clerical assistants and employees as may be necessary to perform the duties imposed by this chapter. The provisions of the state civil service law, chapter 41.06 RCW, shall not apply to such employees as are engaged in undercover audit or investigative work or security operations but shall apply to other employees appointed by the director, except as provided for in subsection (2) of this section.
     (4))) In accordance with the provisions of this chapter and the rules of the commission, license as agents to sell or distribute lottery tickets such persons as in ((his)) the director's opinion will best serve the public convenience and promote the sale of tickets or shares. The director may require a bond from any licensed agent, in such amount as provided in the rules of the commission. Every licensed agent shall prominently display ((his)) the agent's license, or a copy thereof, as provided in the rules of the commission. License fees may be established by the commission, and, if established, shall be deposited in the state lottery account created by RCW 67.70.230.
     (((5))) (3) Confer regularly as necessary or desirable with the commission on the operation and administration of the lottery; make available for inspection by the commission, upon request, all books, records, files, and other information and documents of the lottery; and advise the commission and recommend such matters as the director deems necessary and advisable to improve the operation and administration of the lottery.
     (((6))) (4) Subject to the applicable laws relating to public contracts, enter into contracts for the operation of the lottery, or any part thereof, and into contracts for the promotion of the lottery. No contract awarded or entered into by the director may be assigned by the holder thereof except by specific approval of the commission.
     (((7))) (5) Certify quarterly to the state treasurer and the commission a full and complete statement of lottery revenues, prize disbursements, and other expenses for the preceding quarter.
     (((8))) (6) Carry on a continuous study and investigation of the lottery throughout the state: (a) For the purpose of ascertaining any defects in this chapter or in the rules issued thereunder by reason whereof any abuses in the administration and operation of the lottery or any evasion of this chapter or the rules may arise or be practiced, (b) for the purpose of formulating recommendations for changes in this chapter and the rules ((promulgated)) adopted thereunder to prevent such abuses and evasions, (c) to guard against the use of this chapter and the rules ((issued)) adopted thereunder as a cloak for the carrying on of professional gambling and crime, and (d) to ensure that this chapter and rules shall be in such form and be so administered as to serve the true purposes of this chapter.
     (((9))) (7) Make a continuous study and investigation of: (a) The operation and the administration of similar laws which may be in effect in other states or countries, (b) the operation of an additional game or games for the benefit of a particular program or purpose, (c) any literature on the subject which from time to time may be published or available, (d) any federal laws which may affect the operation of the lottery, and (e) the reaction of the citizens of this state to existing and potential features of the lottery with a view to recommending or effecting changes that will tend to serve the purposes of this chapter.
     (((10))) (8) Have all enforcement powers granted in chapter 9.46 RCW.
     (((11))) (9) Perform all other matters and things necessary to carry out the purposes and provisions of this chapter.

Sec. 109   RCW 42.17A.705 and 2011 1st sp.s. c 43 s 109 are each amended to read as follows:
     For the purposes of RCW 42.17A.700, "executive state officer" includes:
     (1) The chief administrative law judge, the director of agriculture, the director of the department of services for the blind, the chief information officer of the office of chief information officer, the director of the state system of community and technical colleges, the director of commerce, the director of the consolidated technology services agency, the secretary of corrections, the director of early learning, the director of ecology, the commissioner of employment security, the chair of the energy facility site evaluation council, the director of enterprise services, the secretary of the state finance committee, the director of financial management, the director of fish and wildlife, the executive secretary of the forest practices appeals board, the director of the ((gambling)) gaming and liquor control commission, the secretary of health, the administrator of the Washington state health care authority, the executive secretary of the health care facilities authority, the executive secretary of the higher education facilities authority, ((the executive secretary of the horse racing commission,)) the human resources director, the executive secretary of the human rights commission, the executive secretary of the indeterminate sentence review board, the executive director of the state investment board, the director of labor and industries, the director of licensing, ((the director of the lottery commission,)) the director of the office of minority and women's business enterprises, the director of parks and recreation, the executive director of the public disclosure commission, the executive director of the Puget Sound partnership, the director of the recreation and conservation office, the director of retirement systems, the director of revenue, the secretary of social and health services, the chief of the Washington state patrol, the executive secretary of the board of tax appeals, the secretary of transportation, the secretary of the utilities and transportation commission, the director of veterans affairs, the president of each of the regional and state universities and the president of The Evergreen State College, and each district and each campus president of each state community college;
     (2) Each professional staff member of the office of the governor;
     (3) Each professional staff member of the legislature; and
     (4) Central Washington University board of trustees, the boards of trustees of each community college and each technical college, each member of the state board for community and technical colleges, state convention and trade center board of directors, Eastern Washington University board of trustees, Washington economic development finance authority, Washington energy northwest executive board, The Evergreen State College board of trustees, executive ethics board, fish and wildlife commission, forest practices appeals board, forest practices board, ((gambling)) gaming and liquor control commission, Washington health care facilities authority, higher education coordinating board, higher education facilities authority, ((horse racing commission,)) state housing finance commission, human rights commission, indeterminate sentence review board, board of industrial insurance appeals, state investment board, commission on judicial conduct, legislative ethics board, life sciences discovery fund authority board of trustees, ((liquor control board, lottery commission,)) Pacific Northwest electric power and conservation planning council, parks and recreation commission, Washington personnel resources board, board of pilotage commissioners, pollution control hearings board, public disclosure commission, public employees' benefits board, recreation and conservation funding board, salmon recovery funding board, shorelines hearings board, board of tax appeals, transportation commission, University of Washington board of regents, utilities and transportation commission, Washington State University board of regents, and Western Washington University board of trustees.

NEW SECTION.  Sec. 110   The following acts or parts of acts are each repealed:
     (1) RCW 66.08.012 (Creation of board -- Chairman -- Quorum -- Salary) and 1961 c 307 s 7, 1949 c 5 s 8, 1945 c 208 s 1, 1937 c 225 s 1, & 1933 ex.s. c 62 s 63;
     (2) RCW 66.08.014 (Terms of members -- Vacancies -- Principal office-- Removal -- Devotion of time to duties -- Bond -- Oath) and 1986 c 105 s 1, 1949 c 5 s 9, 1947 c 113 s 1, 1945 c 208 s 2, & 1933 ex.s. c 62 s 64;
     (3) RCW 66.08.016 (Employees of the board) and 1961 c 1 s 30, 1947 c 113 s 2, & 1933 ex.s. c 62 s 65;
     (4) RCW 66.08.080 (Interest in manufacture or sale of liquor prohibited) and 1994 c 154 s 313, 1981 1st ex.s. c 5 s 3, & 1933 ex.s. c 62 s 68;
     (5) RCW 67.16.012 (Washington horse racing commission -- Creation--Terms -- Vacancies -- Bonds -- Oaths) and 2011 1st sp.s. c 21 s 13, 1998 c 345 s 4, 1987 c 453 s 2, 1973 1st ex.s. c 216 s 1, 1969 ex.s. c 233 s 1, & 1933 c 55 s 2;
     (6) RCW 67.16.014 (Washington horse racing commission -- Ex officio nonvoting members) and 1991 c 270 s 2 & 1987 c 453 s 3;
     (7) RCW 67.16.015 (Washington horse racing commission--Organization -- Secretary -- Records -- Annual reports) and 1977 c 75 s 80 & 1933 c 55 s 3;
     (8) RCW 67.16.017 (Washington horse racing commission -- Compensation and travel expenses) and 1984 c 287 s 100, 1975-'76 2nd ex.s. c 34 s 155, & 1969 ex.s. c 233 s 2;
     (9) RCW 67.16.140 (Employees of commission -- Employment restriction) and 1973 1st ex.s. c 216 s 3;
     (10) RCW 67.16.150 (Employees of commission -- Commissioners--Financial interest restrictions) and 1973 1st ex.s. c 216 s 4;
     (11) RCW 67.16.160 (Rules implementing conflict of interest laws--Wagers by commissioner) and 2004 c 274 s 3, 1994 c 154 s 314, & 1973 1st ex.s. c 216 s 5;
     (12) RCW 67.70.030 (State lottery commission created -- Membership--Terms -- Vacancies -- Chairman -- Quorum) and 1982 2nd ex.s. c 7 s 3;
     (13) RCW 67.70.055 (Activities prohibited to officers, employees, and members) and 1987 c 511 s 4 & 1986 c 4 s 2; and
     (14) RCW 67.70.270 (Members of commission -- Compensation -- Travel expenses) and 1984 c 287 s 101 & 1982 2nd ex.s. c 7 s 27.

NEW SECTION.  Sec. 111   (1) The gambling commission, horse racing commission, lottery commission, and liquor control board are hereby abolished and their powers, duties, and functions are hereby transferred to the gaming and liquor control commission. All references to the director of the gambling commission, the executive secretary of the horse racing commission, the director of the lottery commission, or the chairman of the liquor control board or the gambling commission, horse racing commission, lottery commission, or liquor control board in the Revised Code of Washington shall be construed to mean the director or the gaming and liquor control commission.
     (2)(a) All reports, documents, surveys, books, records, files, papers, or written material in the possession of the gambling commission, horse racing commission, lottery commission, or liquor control board shall be delivered to the custody of the gaming and liquor control commission. All cabinets, furniture, office equipment, motor vehicles, and other tangible property employed by the gambling commission, horse racing commission, lottery commission, or liquor control board shall be made available to the gaming and liquor control commission. All funds, credits, or other assets held by the gambling commission, horse racing commission, lottery commission, or liquor control board shall be assigned to the gaming and liquor control commission.
     (b) Any appropriations made to the gambling commission, horse racing commission, lottery commission, or liquor control board shall, on the effective date of this section, be transferred and credited to the gaming and liquor control commission.
     (c) If any question arises as to the transfer of any personnel, funds, books, documents, records, papers, files, equipment, or other tangible property used or held in the exercise of the powers and the performance of the duties and functions transferred, the director of financial management shall make a determination as to the proper allocation and certify the same to the state agencies concerned.
     (3) All employees of the gambling commission, horse racing commission, lottery commission, or liquor control board are transferred to the jurisdiction of the gaming and liquor control commission. All employees classified under chapter 41.06 RCW, the state civil service law, are assigned to the gaming and liquor control commission to perform their usual duties upon the same terms as formerly, without any loss of rights, subject to any action that may be appropriate thereafter in accordance with the laws and rules governing state civil service.
     (4) All rules and all pending business before the gambling commission, horse racing commission, lottery commission, or liquor control board shall be continued and acted upon by the gaming and liquor control commission. All existing contracts and obligations shall remain in full force and shall be performed by the gaming and liquor control commission.
     (5) The transfer of the powers, duties, functions, and personnel of the gambling commission, horse racing commission, lottery commission, or liquor control board shall not affect the validity of any act performed before the effective date of this section.
     (6) If apportionments of budgeted funds are required because of the transfers directed by this section, the director of financial management shall certify the apportionments to the agencies affected, the state auditor, and the state treasurer. Each of these shall make the appropriate transfer and adjustments in funds and appropriation accounts and equipment records in accordance with the certification.

NEW SECTION.  Sec. 112   RCW 9.46.040, 9.46.050, 9.46.060, 9.46.070, 9.46.080, and 9.46.085 are each recodified as sections in chapter 43.--- RCW (the new chapter created in section 301 of this act).

NEW SECTION.  Sec. 201   (1) The department of enterprise services, in consultation with the office of financial management and the Washington state lottery, must establish and conduct a competitive process for the selection of a private sector entity to manage the state lottery. The department of enterprise services may enter into a contract if it determines that it is in the best interest of the state following the competitive process. The competitive process must assume that the Washington state lottery or its successor state entity retains its ownership, control over, and the authority to regulate the lottery system in Washington state.
     (2)(a) Pursuant to the required competitive process under subsection (1) of this section, the department of enterprise services must request proposals to establish a contract between the state lottery and a private manager, as an independent contractor, to provide management services to the state lottery for compensation.
     (b) The request for proposals must include without limitation:
     (i) A requirement that proposals demonstrate to the satisfaction of the department of enterprise services relevant previous experience as well as the financial capacity to perform obligations under the contract;
     (ii) A requirement that proposals demonstrate, to the satisfaction of the office of financial management, a net positive financial benefit to the state of Washington over the term of the proposed contract;
     (iii) A requirement that proposals include a commitment to offer employment to the state employees currently in affected positions at the state lottery and to recognize and bargain with any existing bargaining representative of such employees with respect to terms and conditions of employment;
     (iv) Measurable standards for the performance of the contract; and
     (v) A requirement that lottery games may not be marketed to minors or conducted over the internet.
     (c) The office of financial management must publicly disclose an analysis of the fiscal impacts to the state of each of the offers in the procurement process.
     (d) After consultation with the office of financial management and the state lottery, the department of enterprise services is authorized to enter into a contract on behalf of the state with the apparent successful proposer that it determines best meets the criteria required under this subsection (2), in the best interests of the state. If, in the determination of the department of enterprise services, after consultation with the office of financial management and the state lottery, there is no proposal that meets the best interest of the state, no contract may be entered into.
     (3) Any challenge to or protest of the determination of an apparent successful proposer by the department of enterprise services must be filed by a respondent that submitted a proposal with the department of enterprise services within five days after such determination and acceptance. The department of enterprise services may require a bid protest bond in an amount specified in the request for proposals. The grounds for such challenge or protest are limited to claims that the determination and acceptance were arbitrary or capricious. The department of enterprise services must, within five days, render its decision on the protest.
     The respondent that filed the protest may, within five days after such decision, appeal to the superior court of Thurston county by petition setting forth objections to the decision. A copy of the petition on appeal together with a notice that an appeal has been taken must be served upon the secretary of state, the attorney general, the department of enterprise services, and the proposer that submitted the apparently successful proposal. The court must accord first priority to examining the objections, may hear arguments, and must, within ten days, render its decision. The court shall grant relief to the petitioner only if the court determines that the department's decision is arbitrary or capricious. The decision of the superior court is final.

NEW SECTION.  Sec. 202   The department of enterprise services may retain the services of an advisor or advisors, including legal counsel, experienced and qualified in the field of financial services or the management and operation of a government run lottery to assist in the preparation of the terms of the request for proposal and selection of the private manager. Any advisor seeking to provide services under this section shall disclose any relationship during the past three years with any potential responder to the request for proposal or with a contractor or subcontractor presently providing goods, services, or equipment to the department of enterprise services to support the lottery. The department of enterprise services shall not select any advisor with a substantial business or financial relationship that the department of enterprise services deems to impair the objectivity of the services to be provided by the prospective advisor. During the course of the advisor's engagement by the department of enterprise services, and for a period of one year thereafter, the advisor shall not enter into any business or financial relationship with any entity responding to the request for proposal. Any advisor retained by the department of enterprise services is disqualified from responding to the request for proposal.

NEW SECTION.  Sec. 203   (1) After the acceptance of the apparently successful proposal under section 201 of this act, the department of enterprise services shall enter into a contract with that entity for the management of the state lottery. The contract must grant the exclusive right to manage the lottery under supervision of the lottery director for the period of the contract. The contract must include enforceable performance standards and minimum financial returns to the state. The contract must include a provision that allows the state to terminate the contract should specific performance standards or financial returns to the state not be realized. The contract must provide for a reasonable termination notification process as well as financial terms of termination should termination of contract take place.
     (2) The contract must also include provisions specifying that:
     (a) The state lottery shall exercise actual control over all significant business decisions of the lottery;
     (b) The state lottery retains the authority to direct or overrule operating decisions made by the private manager;
     (c) The state lottery has full access to information regarding lottery operations and the right to demand and receive information from the private manager regarding the operation of the lottery;
     (d) The state lottery retains ownership of all trade names, trademarks, and intellectual property associated with the lottery;
     (e) The state lottery shall monitor and oversee the private manager's practices and take action that the commission deems appropriate to ensure that the private manager is complying with its obligations under the contract;
     (f) The private manager shall file, at least annually, financial statements in a form and manner acceptable to the commission;
     (g) The private manager must receive the prior approval of the commission when the contract or an interest in the contract is sold, assigned, transferred, or pledged as collateral to secure financing;
     (h) The private manager has an affirmative duty to timely provide the state lottery with any information the private manager possesses, regardless of form, that the state lottery reasonably needs to enable it to properly perform its duties.
     (i) The use of any copyrights, trademarks, and service marks held by the state lottery shall only be used for the purpose of fulfilling the manager's obligations under the contract;
     (j) The Washington state lottery maintains the exclusive ownership, control over, and authority to regulate the state lottery; and
     (k) Any financial deficiencies or losses of the private entity contracting for the management of the lottery in the state must not be compensated for in any way by the state.

Sec. 204   RCW 67.70.010 and 2002 c 349 s 1 are each amended to read as follows:
     For the purposes of this chapter:
     (1) "Commission" means the state lottery commission established by this chapter;
     (2) "Director" means the director of the state lottery established by this chapter;
     (3) "Lottery" or "state lottery" means the lottery established and operated pursuant to this chapter;
     (4) "Online game" means a lottery game in which a player pays a fee to a lottery retailer and selects a combination of digits, numbers, or symbols, type and amount of play, and receives a computer-generated ticket with those selections, and the lottery separately draws or selects the winning combination or combinations;
     (5) "Private manager" means an entity that provides management services to the state lottery under a contract.
     (6) "Shared game lottery" means any lottery activity in which the commission participates under written agreement between the commission, on behalf of the state, and any other state or states.

Sec. 205   RCW 67.70.050 and 1998 c 245 s 106 are each amended to read as follows:
     There is created the office of director of the state lottery. The director shall be appointed by the governor with the consent of the senate. The director shall serve at the pleasure of the governor and shall receive such salary as is determined by the governor, but in no case may the director's salary be more than ninety percent of the salary of the governor. The director shall:
     (1) Supervise and administer the operation of the lottery in accordance with the provisions of this chapter and with the rules of the commission.
     (2) Appoint such deputy and assistant directors as may be required to carry out the functions and duties of his or her office((: PROVIDED, That)). The provisions of the state civil service law, chapter 41.06 RCW, shall not apply to such deputy and assistant directors.
     (3) Appoint such professional, technical, and clerical assistants and employees as may be necessary to perform the duties imposed by this chapter((: PROVIDED, That)). The provisions of the state civil service law, chapter 41.06 RCW, shall not apply to such employees as are engaged in undercover audit or investigative work or security operations but shall apply to other employees appointed by the director, except as provided for in subsection (2) of this section.
     (4) In accordance with the provisions of this chapter and the rules of the commission, license as agents to sell or distribute lottery tickets such persons as in his opinion will best serve the public convenience and promote the sale of tickets or shares. The director may require a bond from any licensed agent, in such amount as provided in the rules of the commission. Every licensed agent shall prominently display his license, or a copy thereof, as provided in the rules of the commission. License fees may be established by the commission, and, if established, shall be deposited in the state lottery account created by RCW 67.70.230.
     (5) Confer regularly as necessary or desirable with the commission on the operation and administration of the lottery; make available for inspection by the commission, upon request, all books, records, files, and other information and documents of the lottery; and advise the commission and recommend such matters as the director deems necessary and advisable to improve the operation and administration of the lottery.
     (6) Subject to the applicable laws relating to public contracts, enter into contracts for the operation of the lottery, or any part thereof, and into contracts for the promotion of the lottery. No contract awarded or entered into by the director may be assigned by the holder thereof except by specific approval of the commission((: PROVIDED, That nothing in this chapter authorizes the director to enter into public contracts for the regular and permanent administration of the lottery after the initial development and implementation)).
     (7) Certify quarterly to the state treasurer and the commission a full and complete statement of lottery revenues, prize disbursements, and other expenses for the preceding quarter.
     (8) Carry on a continuous study and investigation of the lottery throughout the state: (a) For the purpose of ascertaining any defects in this chapter or in the rules issued thereunder by reason whereof any abuses in the administration and operation of the lottery or any evasion of this chapter or the rules may arise or be practiced, (b) for the purpose of formulating recommendations for changes in this chapter and the rules promulgated thereunder to prevent such abuses and evasions, (c) to guard against the use of this chapter and the rules issued thereunder as a cloak for the carrying on of professional gambling and crime, and (d) to ensure that this chapter and rules shall be in such form and be so administered as to serve the true purposes of this chapter.
     (9) Make a continuous study and investigation of: (a) The operation and the administration of similar laws which may be in effect in other states or countries, (b) the operation of an additional game or games for the benefit of a particular program or purpose, (c) any literature on the subject which from time to time may be published or available, (d) any federal laws which may affect the operation of the lottery, and (e) the reaction of the citizens of this state to existing and potential features of the lottery with a view to recommending or effecting changes that will tend to serve the purposes of this chapter.
     (10) Have all enforcement powers granted in chapter 9.46 RCW.
     (11) Perform all other matters and things necessary to carry out the purposes and provisions of this chapter.

Sec. 206   RCW 67.70.180 and 1987 c 511 s 7 are each amended to read as follows:
     (1) A ticket or share shall not be purchased by, and a prize shall not be paid to any member of the commission, the director, or an employee of the lottery or to any spouse, child, brother, sister, or parent residing as a member of the same household in the principal place of abode of any member of the commission, the director or an employee of the lottery.
     (2) A ticket or share shall not be purchased by, and a prize shall not be paid to any officer or employee of a private manager or to any spouse, child, brother, sister, or parent residing as a member of the same household in the principal place of abode of any officer or employee of a private manager.
     A violation of this section is a misdemeanor.

Sec. 207   RCW 67.70.240 and 2011 c 352 s 3 are each amended to read as follows:
     The moneys in the state lottery account shall be used only:
     (1) For the payment of prizes to the holders of winning lottery tickets or shares;
     (2) For purposes of making deposits into the reserve account created by RCW 67.70.250 and into the lottery administrative account created by RCW 67.70.260;
     (3) For purposes of making deposits into the education construction fund created in RCW 43.135.045 and the Washington opportunity pathways account created in RCW 28B.76.526. On and after July 1, 2010, all deposits not otherwise obligated under this section shall be placed in the Washington opportunity pathways account. Moneys in the state lottery account deposited in the Washington opportunity pathways account are included in "general state revenues" under RCW 39.42.070;
     (4) For distribution to a county for the purpose of paying the principal and interest payments on bonds issued by the county to construct a baseball stadium, as defined in RCW 82.14.0485, including reasonably necessary preconstruction costs. Three million dollars shall be distributed under this subsection during calendar year 1996. During subsequent years, such distributions shall equal the prior year's distributions increased by four percent. Distributions under this subsection shall cease when the bonds issued for the construction of the baseball stadium are retired, but not more than twenty years after the tax under RCW 82.14.0485 is first imposed;
     (5) For distribution to the stadium and exhibition center account, created in RCW 43.99N.060. Subject to the conditions of RCW 43.99N.070, six million dollars shall be distributed under this subsection during the calendar year 1998. During subsequent years, such distribution shall equal the prior year's distributions increased by four percent. No distribution may be made under this subsection after December 31, 1999, unless the conditions for issuance of the bonds under RCW 43.99N.020(2) are met. Distributions under this subsection shall cease when the bonds are retired, but not later than December 31, 2020;
     (6) For transfer to the veterans innovations program account. The net revenues received from the sale of the annual Veteran's Day lottery raffle conducted under RCW 67.70.500 must be deposited into the veterans innovations program account created in RCW 43.60A.185 for purposes of serving veterans and their families. For purposes under this subsection, "net revenues" means all revenues received from the sale of veteran lottery raffle tickets less the sum of the amount paid out in prizes and the actual administration expenses of the lottery solely related to the veteran lottery raffle;
     (7) For the purchase and promotion of lottery games and game-related services; ((and))
     (8) For the payment of agent compensation; and
     (9) For the payment of private manager compensation.
     The office of financial management shall require the allotment of all expenses paid from the account and shall report to the ways and means committees of the senate and house of representatives any changes in the allotments.

Sec. 208   RCW 67.70.260 and 2011 1st sp.s. c 50 s 962 are each amended to read as follows:
     There is hereby created the lottery administrative account in the state treasury. The account shall be managed, controlled, and maintained by the director. The legislature may appropriate from the account for the payment of costs incurred in the operation and administration of the lottery. During the 2001-2003 fiscal biennium, the legislature may transfer from the lottery administrative account to the state general fund such amounts as reflect the appropriations reductions made by the 2002 supplemental appropriations act for administrative efficiencies and savings. During the 2011-2013 fiscal biennium, the lottery administrative account may also be used to fund an independent forecast of the lottery revenues conducted by the economic and revenue forecast council. The lottery administrative account may also be used to fund the competitive process and contract award activities under this act conducted by the department of enterprise services.

NEW SECTION.  Sec. 209   Contracting for services under this chapter is not subject to the processes of RCW 41.06.142 (1), (4), and (5).

NEW SECTION.  Sec. 301   Sections 1, 101, 102, and 111 of this act constitute a new chapter in Title 43 RCW.

NEW SECTION.  Sec. 302   Sections 201 through 203 and 209 of this act are each added to chapter 67.70 RCW.

NEW SECTION.  Sec. 303   Sections 1 and 101 through 111 of this act take effect October 1, 2012.