1.1                          A bill for an act 
  1.2             relating to lotteries; authorizing the state lottery 
  1.3             to operate video lottery terminals; creating an 
  1.4             education trust fund; prescribing penalties; amending 
  1.5             Minnesota Statutes 1994, sections 245.98, by adding a 
  1.6             subdivision; 297A.259; 297E.02, subdivision 1; 349.12, 
  1.7             subdivision 21; 349.15, subdivision 1; 349A.01, 
  1.8             subdivisions 10, 11, 12, and by adding subdivisions; 
  1.9             349A.06, subdivisions 1, 5, 8, 10, and by adding 
  1.10            subdivisions; 349A.07, subdivision 1; 349A.08, 
  1.11            subdivisions 1, 5, and 8; 349A.09, subdivision 1; 
  1.12            349A.10, subdivisions 2, 3, 4, and 5; 349A.11; 
  1.13            349A.12, subdivisions 1 and 2; 349A.13; 609.651, 
  1.14            subdivision 1; 609.75, subdivision 4; and 609.761, 
  1.15            subdivision 2; proposing coding for new law in 
  1.16            Minnesota Statutes, chapters 124; and 349A; repealing 
  1.17            Minnesota Statutes 1994, sections 297E.01, subdivision 
  1.18            9; and 297E.02, subdivision 4. 
  1.19  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.20                             ARTICLE 1 
  1.21                           VIDEO LOTTERY 
  1.22     Section 1.  Minnesota Statutes 1994, section 245.98, is 
  1.23  amended by adding a subdivision to read: 
  1.24     Subd. 5.  [COMPULSIVE GAMBLING PROGRAM ACCOUNT.] A 
  1.25  compulsive gambling program account is created in the state 
  1.26  treasury.  Money in the account consists of deposits made under 
  1.27  section 349A.10, subdivision 5, and interest thereon.  Money in 
  1.28  the account may be appropriated by law only for the program 
  1.29  established in subdivision 2. 
  1.30     Sec. 2.  Minnesota Statutes 1994, section 297A.259, is 
  1.31  amended to read: 
  1.32     297A.259 [LOTTERY TICKETS; IN LIEU TAX.] 
  2.1      Sales of state lottery tickets are exempt from the tax 
  2.2   imposed under section 297A.02.  The state lottery must on or 
  2.3   before the 20th day of each month transmit to the commissioner 
  2.4   of revenue an amount equal to the gross receipts from the sale 
  2.5   of lottery tickets for the previous month, excluding gross 
  2.6   receipts from the operation of video lottery terminals, 
  2.7   multiplied by the combined tax rate under sections 297A.02, 
  2.8   subdivision 1, and 297A.021, subdivision 1.  The resulting 
  2.9   payment is in lieu of the sales tax that otherwise would be 
  2.10  imposed by this chapter.  The commissioner shall deposit the 
  2.11  money transmitted as provided by section 297A.44 and the money 
  2.12  must be treated as other proceeds of the sales tax.  Gross 
  2.13  receipts for purposes of this section mean the proceeds of the 
  2.14  sale of tickets before deduction of a commission or other 
  2.15  compensation paid to the vendor or retailer for selling tickets. 
  2.16     Sec. 3.  Minnesota Statutes 1994, section 297E.02, 
  2.17  subdivision 1, is amended to read: 
  2.18     Subdivision 1.  [IMPOSITION.] A tax is imposed on all 
  2.19  lawful gambling other than (1) pull-tabs purchased and placed 
  2.20  into inventory after January 1, 1987, and (2) tipboards 
  2.21  purchased and placed into inventory after June 30, 1988, at the 
  2.22  rate of ten percent on the gross receipts as defined in section 
  2.23  349.12, subdivision 21, less prizes actually paid.  The tax 
  2.24  imposed by this subdivision is in lieu of the tax imposed by 
  2.25  section 297A.02 and all local taxes and license fees except a 
  2.26  fee authorized under section 349.16, subdivision 8, or a tax 
  2.27  authorized under subdivision 5.  
  2.28     The tax imposed under this subdivision is payable by the 
  2.29  organization or party conducting, directly or indirectly, the 
  2.30  gambling.  
  2.31     Sec. 4.  Minnesota Statutes 1994, section 349.12, 
  2.32  subdivision 21, is amended to read: 
  2.33     Subd. 21.  [GROSS RECEIPTS.] "Gross receipts" means all 
  2.34  receipts derived from lawful gambling activity including, but 
  2.35  not limited to, the following items: 
  2.36     (1) gross sales of bingo hard cards and paper sheets before 
  3.1   reduction for prizes, expenses, shortages, free plays, or any 
  3.2   other charges or offsets; 
  3.3      (2) the ideal gross of pull-tab and tipboard deals or games 
  3.4   less the value of unsold and defective tickets and before 
  3.5   reduction for prizes, expenses, shortages, free plays, or any 
  3.6   other charges or offsets; 
  3.7      (3) gross sales of raffle tickets and paddletickets before 
  3.8   reduction for prizes, expenses, shortages, free plays, or any 
  3.9   other charges or offsets; 
  3.10     (4) admission, commission, cover, or other charges imposed 
  3.11  on participants in lawful gambling activity as a condition for 
  3.12  or cost of participation; and 
  3.13     (5) interest, dividends, annuities, profit from 
  3.14  transactions, or other income derived from the accumulation or 
  3.15  use of gambling proceeds. 
  3.16     Gross receipts does not include proceeds from rental under 
  3.17  section 349.164 or 349.18, subdivision 3, or amounts received 
  3.18  from net video lottery terminal income under section 349A.06, 
  3.19  subdivision 5a. 
  3.20     Sec. 5.  Minnesota Statutes 1994, section 349.15, 
  3.21  subdivision 1, is amended to read: 
  3.22     Subdivision 1.  [EXPENDITURE RESTRICTIONS.] (a) Gross 
  3.23  profits from lawful gambling may be expended only for lawful 
  3.24  purposes or allowable expenses as authorized by the membership 
  3.25  of the conducting organization at a monthly meeting of the 
  3.26  organization's membership.  
  3.27     Provided that (b) Except as provided in paragraph (c), no 
  3.28  more than 60 percent of the gross profit less the tax imposed 
  3.29  under section 297E.02, subdivision 1, from bingo, and no more 
  3.30  than 50 percent of the gross profit from other forms of lawful 
  3.31  gambling, may be expended for allowable expenses related to 
  3.32  lawful gambling.  
  3.33     (c) Money received by an organization from net video 
  3.34  lottery terminal income under section 349A.06, subdivision 6a, 
  3.35  may be expended only for lawful purposes. 
  3.36     Sec. 6.  Minnesota Statutes 1994, section 349A.01, is 
  4.1   amended by adding a subdivision to read: 
  4.2      Subd. 9a.  [LOTTERY GAME.] "Lottery game" means any game 
  4.3   operated by the lottery where the prize is determined primarily 
  4.4   by chance. 
  4.5      Sec. 7.  Minnesota Statutes 1994, section 349A.01, 
  4.6   subdivision 10, is amended to read: 
  4.7      Subd. 10.  [LOTTERY PROCUREMENT CONTRACT.] "Lottery 
  4.8   procurement contract" means a contract to provide lottery 
  4.9   products, computer hardware and software used to monitor sales 
  4.10  of lottery tickets and sales on a video lottery terminal, and 
  4.11  lottery tickets, video lottery terminals, and maintenance of 
  4.12  video lottery terminals.  "Lottery procurement contract" does 
  4.13  not include a contract to provide an annuity or prize payment 
  4.14  agreement or materials, supplies, equipment, or services common 
  4.15  to the ordinary operation of a state agency. 
  4.16     Sec. 8.  Minnesota Statutes 1994, section 349A.01, 
  4.17  subdivision 11, is amended to read: 
  4.18     Subd. 11.  [LOTTERY RETAILER.] "Lottery retailer" means a 
  4.19  person with whom the director has contracted to sell lottery 
  4.20  tickets to the public.  A lottery retailer includes a person 
  4.21  with whom the director has contracted to place a video lottery 
  4.22  terminal within its premises where video lottery terminal plays 
  4.23  are sold.  
  4.24     Sec. 9.  Minnesota Statutes 1994, section 349A.01, 
  4.25  subdivision 12, is amended to read: 
  4.26     Subd. 12.  [LOTTERY TICKET OR TICKET.] "Lottery ticket" or 
  4.27  "ticket" means any tangible evidence issued by the lottery to 
  4.28  prove participation in a lottery game other than a video lottery 
  4.29  game.  
  4.30     Sec. 10.  Minnesota Statutes 1994, section 349A.01, is 
  4.31  amended by adding a subdivision to read: 
  4.32     Subd. 14.  [NET TERMINAL INCOME.] "Net terminal income" 
  4.33  means the sum of all money spent for video lottery terminal 
  4.34  plays less the amount paid out to winning players. 
  4.35     Sec. 11.  Minnesota Statutes 1994, section 349A.01, is 
  4.36  amended by adding a subdivision to read: 
  5.1      Subd. 15.  [VIDEO LOTTERY CREDIT.] "Video lottery credit" 
  5.2   means the basic unit of play for a video lottery terminal which 
  5.3   has a value of 25 cents. 
  5.4      Sec. 12.  Minnesota Statutes 1994, section 349A.01, is 
  5.5   amended by adding a subdivision to read: 
  5.6      Subd. 16.  [VIDEO LOTTERY CREDIT RECEIPT.] "Video lottery 
  5.7   credit receipt" means a receipt generated by a video lottery 
  5.8   terminal that provides evidence of cash payment due a player 
  5.9   from play on a video lottery terminal. 
  5.10     Sec. 13.  Minnesota Statutes 1994, section 349A.01, is 
  5.11  amended by adding a subdivision to read: 
  5.12     Subd. 17.  [VIDEO LOTTERY GAME.] "Video lottery game" means 
  5.13  an electronically simulated game authorized by the director that 
  5.14  is displayed and played on a video lottery terminal for 
  5.15  consideration and with prizes awarded for designated results. 
  5.16     Sec. 14.  Minnesota Statutes 1994, section 349A.01, is 
  5.17  amended by adding a subdivision to read: 
  5.18     Subd. 18.  [VIDEO LOTTERY TERMINAL.] "Video lottery 
  5.19  terminal" means an electronic machine that, upon the insertion 
  5.20  of a coin, token, or currency, is available to play or simulate 
  5.21  the play of a game using a video display and microprocessors in 
  5.22  which, primarily by chance, the player may receive free plays or 
  5.23  video lottery credits that can be redeemed for cash. 
  5.24     Sec. 15.  Minnesota Statutes 1994, section 349A.01, is 
  5.25  amended by adding a subdivision to read: 
  5.26     Subd. 19.  [VIDEO LOTTERY TERMINAL PLAY.] "Video lottery 
  5.27  terminal play" means an electronic record that proves 
  5.28  participation in a video lottery game. 
  5.29     Sec. 16.  Minnesota Statutes 1994, section 349A.01, is 
  5.30  amended by adding a subdivision to read: 
  5.31     Subd. 20.  [WIN PERCENTAGE.] "Win percentage" means the 
  5.32  portion of the money wagered by players on a video lottery 
  5.33  terminal that is available for the payment of prizes to winning 
  5.34  players. 
  5.35     Sec. 17.  Minnesota Statutes 1994, section 349A.06, 
  5.36  subdivision 1, is amended to read: 
  6.1      Subdivision 1.  [CONTRACTS.] The director shall sell 
  6.2   tickets and operate video lottery terminals for the lottery 
  6.3   through lottery retailers with whom the director contracts.  
  6.4   Contracts under this section are not subject to the provisions 
  6.5   of sections 16B.06 to 16B.102, and 16B.17, and are valid for a 
  6.6   period of one year. 
  6.7      Sec. 18.  Minnesota Statutes 1994, section 349A.06, 
  6.8   subdivision 5, is amended to read: 
  6.9      Subd. 5.  [RESTRICTIONS ON LOTTERY RETAILERS.] (a) A 
  6.10  lottery retailer may sell lottery tickets or have a video 
  6.11  lottery terminal placed only on the premises described in the 
  6.12  contract. 
  6.13     (b) A lottery retailer must prominently display a 
  6.14  certificate issued by the director on the premises where lottery 
  6.15  tickets will be sold or where video lottery terminals are 
  6.16  operated. 
  6.17     (c) A lottery retailer must keep a complete set of books of 
  6.18  account, correspondence, and all other records necessary to show 
  6.19  fully the retailer's lottery transactions, and make them 
  6.20  available for inspection by employees of the lottery at all 
  6.21  times during business hours.  The director may require a lottery 
  6.22  retailer to furnish information as the director deems necessary 
  6.23  to carry out the purposes of this chapter, and may require an 
  6.24  audit to be made of the books of account and records.  The 
  6.25  director may select an auditor to perform the audit and may 
  6.26  require the retailer to pay the cost of the audit.  The auditor 
  6.27  has the same right of access to the books of account, 
  6.28  correspondence, and other records as is given to employees of 
  6.29  the lottery. 
  6.30     (d) A contract issued under this section may not be 
  6.31  transferred or assigned. 
  6.32     (e) The director shall require that lottery tickets may be 
  6.33  sold by retailers only for cash.  
  6.34     (f) A lottery retailer must prominently post at the point 
  6.35  of sale of lottery tickets and the area where video lottery 
  6.36  terminals are located, in a manner approved by the commissioner 
  7.1   of human services, the toll-free telephone number established by 
  7.2   the commissioner of human services in connection with the 
  7.3   compulsive gambling program established under section 245.98. 
  7.4      Sec. 19.  Minnesota Statutes 1994, section 349A.06, is 
  7.5   amended by adding a subdivision to read: 
  7.6      Subd. 5a.  [RESTRICTIONS ON LOTTERY RETAILERS; VIDEO 
  7.7   LOTTERY TERMINALS.] (a) The director may only enter into a 
  7.8   lottery retailer contract for games operated by a video lottery 
  7.9   terminal with a retailer that has a license to sell alcoholic 
  7.10  beverages for consumption on the premises where sold, other than 
  7.11  (1) a retailer who has only a temporary on-sale license, or (2) 
  7.12  a retailer of 3.2 percent malt liquor whose total gross receipts 
  7.13  from the premises were less than 50 percent attributable to the 
  7.14  sale of 3.2 percent malt liquor.  For purposes of this section, 
  7.15  a "retailer that has a license to sell alcoholic beverages for 
  7.16  consumption on the premises where sold" includes a municipal 
  7.17  liquor store that sells alcoholic beverages at on-sale. 
  7.18     (b) A lottery retailer may have up to ten video lottery 
  7.19  terminals on the retailer's premises, as determined by the 
  7.20  director. 
  7.21     (c) A lottery retailer who has a contract for placement of 
  7.22  video lottery terminals may not make reference to the 
  7.23  establishment being a "casino" or use the word "casino" in its 
  7.24  name or in any of its advertisements. 
  7.25     (d) The director, or any employee of the director, may 
  7.26  inspect a video lottery terminal at any time during the hours 
  7.27  when alcoholic beverages may be sold at on-sale under section 
  7.28  340A.504, subdivisions 1 to 3, without notice, to ensure 
  7.29  compliance with this chapter and any rules adopted by the 
  7.30  director. 
  7.31     (e) A lottery retailer with a contract for video lottery 
  7.32  terminal placement who, at the time of first making the 
  7.33  contract, leases space to an organization under section 349.18 
  7.34  for the conduct of lawful gambling, may not at any time within 
  7.35  three years of first making the contract cancel or refuse to 
  7.36  renew the lease unless the organization fails to comply with the 
  8.1   terms of the lease. 
  8.2      Sec. 20.  Minnesota Statutes 1994, section 349A.06, is 
  8.3   amended by adding a subdivision to read: 
  8.4      Subd. 6a.  [RETENTION BY RETAILERS; VIDEO LOTTERY 
  8.5   TERMINAL.] (a) A lottery retailer who has a contract for 
  8.6   placement of video lottery terminals shall retain a percentage 
  8.7   of the net terminal income from all terminals on the retailer's 
  8.8   premises as provided in this subdivision. 
  8.9      (b) A lottery retailer who does not lease space to a 
  8.10  licensed organization for the conduct of lawful gambling on the 
  8.11  retailer's premises shall retain 25 percent of the net terminal 
  8.12  income. 
  8.13     (c) A lottery retailer who leases space to a licensed 
  8.14  organization for the conduct of lawful gambling on the premises 
  8.15  where the video lottery machines are located shall retain 35 
  8.16  percent of net terminal income.  The retailer shall pay to the 
  8.17  licensed organization, at a time and in a manner that the 
  8.18  director shall prescribe in the contract, 29 percent of the 
  8.19  amount so retained.  If the retailer leases space to more than 
  8.20  one licensed organization on the premises where the video 
  8.21  lottery machines are located, the retailer must allocate the 
  8.22  payment among those organizations in proportion to their gross 
  8.23  receipts, as defined in section 349.12, subdivision 21, on those 
  8.24  premises. 
  8.25     Sec. 21.  Minnesota Statutes 1994, section 349A.06, 
  8.26  subdivision 8, is amended to read: 
  8.27     Subd. 8.  [PROCEEDS OF SALES.] All proceeds from the sale 
  8.28  of lottery tickets or proceeds from the sale of video lottery 
  8.29  terminal plays received by a lottery retailer constitute a trust 
  8.30  fund until paid to the director.  The lottery retailer is 
  8.31  personally liable for all proceeds. 
  8.32     Sec. 22.  Minnesota Statutes 1994, section 349A.06, 
  8.33  subdivision 10, is amended to read: 
  8.34     Subd. 10.  [LOCAL LICENSES.] No political subdivision may 
  8.35  require a local license to operate as a lottery retailer, 
  8.36  restrict or regulate the placement of a video lottery terminal, 
  9.1   or impose a tax or fee on the business of operating as a lottery 
  9.2   retailer. 
  9.3      Sec. 23.  Minnesota Statutes 1994, section 349A.07, 
  9.4   subdivision 1, is amended to read: 
  9.5      Subdivision 1.  [CONTRACTS AUTHORIZED.] The director may 
  9.6   enter into lottery procurement contracts for the purchase, 
  9.7   lease, or lease-purchase of the goods or services.  The director 
  9.8   shall enter into contracts for the maintenance of video lottery 
  9.9   terminals.  In entering into a lottery procurement contract, the 
  9.10  director shall utilize an open bid process and shall take into 
  9.11  account the particularly sensitive nature of the state lottery 
  9.12  and shall consider the competence, quality of product, 
  9.13  experience, and timely performance of each potential vendor in 
  9.14  order to promote and ensure security, honesty, fairness, and 
  9.15  integrity in the operation and administration of the lottery.  
  9.16  The director shall also consider the extent to which a bidder 
  9.17  for a contract for printing preprinted lottery tickets would 
  9.18  utilize employees and facilities within Minnesota in fulfilling 
  9.19  the contract.  In entering into contracts for the maintenance of 
  9.20  video lottery terminals, the director may only contract with a 
  9.21  person that is a Minnesota resident that uses employees and 
  9.22  facilities within Minnesota to fulfill the contract.  Except for 
  9.23  repairs made under any applicable warranty, the director may not 
  9.24  enter into a contract with a manufacturer of video lottery 
  9.25  terminals or an agent or associate of a manufacturer of video 
  9.26  lottery terminals for the maintenance of video lottery 
  9.27  terminals.  A person contracting with the director for the 
  9.28  maintenance of video lottery terminals may not employ for the 
  9.29  performance of such maintenance a person who would be ineligible 
  9.30  for a contract under subdivision 3, paragraph (a).  The director 
  9.31  shall require all lottery retailers who have contracts with the 
  9.32  director for the placement of video lottery terminals to obtain 
  9.33  maintenance services for those terminals only with a person with 
  9.34  whom the director has entered into a contract under this 
  9.35  subdivision, but the retailer shall determine which of these 
  9.36  contractors shall provide those maintenance services in the 
 10.1   retailer's establishment. 
 10.2      Sec. 24.  [349A.071] [VIDEO LOTTERY TERMINALS.] 
 10.3      Subdivision 1.  [SPECIFICATION.] Each video lottery 
 10.4   terminal must: 
 10.5      (1) maintain on nonresettable meters, which are capable of 
 10.6   printing out, a permanent record of all transactions by the 
 10.7   terminal and all entries into the terminal; and 
 10.8      (2) be capable of being linked electronically to a central 
 10.9   communication system to provide auditing program information as 
 10.10  required by the director. 
 10.11     Subd. 2.  [LIMIT ON AMOUNT PLAYED.] A video lottery 
 10.12  terminal may not allow less than 25 cents and not more than $2 
 10.13  to be played on a single game. 
 10.14     Subd. 3.  [MAXIMUM PRIZE.] The maximum prize on any single 
 10.15  game played on a video lottery terminal may not exceed $1,000. 
 10.16     Subd. 4.  [TESTING AND EXAMINATION OF TERMINALS.] The 
 10.17  director may require working models of a video lottery terminal 
 10.18  transported to the location the director designates for testing, 
 10.19  examination, and analysis.  The manufacturer shall pay all costs 
 10.20  of any testing, examination, analysis, and transportation of the 
 10.21  terminal model. 
 10.22     Subd. 5.  [DEACTIVATION OF TERMINAL.] The director may 
 10.23  deactivate a video lottery terminal without notice if the 
 10.24  lottery retailer has violated any provision of this chapter, or 
 10.25  a rule adopted under it, or provision of its contract with the 
 10.26  director. 
 10.27     Sec. 25.  Minnesota Statutes 1994, section 349A.08, 
 10.28  subdivision 1, is amended to read: 
 10.29     Subdivision 1.  [AGREEMENT BY PLAYERS.] A person who buys a 
 10.30  lottery ticket or plays a video lottery game agrees to be bound 
 10.31  by the rules and game procedures applicable to the that 
 10.32  particular lottery game for which the ticket is purchased.  The 
 10.33  player acknowledges that the determination of whether a 
 10.34  ticket or video lottery credit receipt is a valid winning ticket 
 10.35  is subject to under the rules of and game procedures adopted by 
 10.36  the director, claims procedures established by the director for 
 11.1   that game, and any confidential or public validation tests 
 11.2   established by the director for that game. 
 11.3      Sec. 26.  Minnesota Statutes 1994, section 349A.08, 
 11.4   subdivision 5, is amended to read: 
 11.5      Subd. 5.  [PAYMENT; UNCLAIMED PRIZES.] (a) Except as 
 11.6   provided in this subdivision, a prize in the state lottery must 
 11.7   be claimed by the winner within one year of the date of the 
 11.8   drawing at which the prize was awarded or the last day sales 
 11.9   were authorized for a game where a prize was determined in a 
 11.10  manner other than by means of a drawing.  If a valid claim is 
 11.11  not made for a prize payable directly by the lottery by the end 
 11.12  of this period, the unclaimed prize money must be added by the 
 11.13  director to prize pools of subsequent lottery games and the 
 11.14  winner of the prize shall have no further claim to the prize. 
 11.15     (b) A video lottery credit receipt from a video lottery 
 11.16  terminal must be presented for payment before the close of the 
 11.17  business day on the date the video lottery credit receipt was 
 11.18  printed.  If a valid claim is not made for a prize from a video 
 11.19  lottery terminal by the end of this period, the unclaimed prize 
 11.20  must be paid by the lottery retailer to the lottery. 
 11.21     (c) A prize won by a person who purchased the winning 
 11.22  ticket or played a video lottery game in violation of section 
 11.23  349A.12, subdivision 1, or won by a person ineligible to be 
 11.24  awarded a prize under subdivision 7 must be treated as an 
 11.25  unclaimed prize under this section. 
 11.26     Sec. 27.  Minnesota Statutes 1994, section 349A.08, 
 11.27  subdivision 8, is amended to read: 
 11.28     Subd. 8.  [WITHHOLDING OF DELINQUENT STATE TAXES OR OTHER 
 11.29  DEBTS.] The director shall report the name, address, and social 
 11.30  security number of each winner of a lottery prize of $600 or 
 11.31  more, excluding any winner of a prize from a video lottery game, 
 11.32  to the department of revenue to determine whether the person who 
 11.33  has won the prize is delinquent in payment of state taxes or 
 11.34  owes a debt as defined in section 270A.03, subdivision 5.  If 
 11.35  the person is delinquent in payment of state taxes or owes a 
 11.36  debt as defined in section 270A.03, subdivision 5, the director 
 12.1   shall withhold the delinquent amount from the person's prize for 
 12.2   remittance to the department of revenue for payment of the 
 12.3   delinquent taxes or distribution to a claimant agency in 
 12.4   accordance with chapter 270A.  Section 270A.10 applies to the 
 12.5   priority of claims. 
 12.6      Sec. 28.  Minnesota Statutes 1994, section 349A.09, 
 12.7   subdivision 1, is amended to read: 
 12.8      Subdivision 1.  [ODDS; REQUIRED INFORMATION.] (a) The 
 12.9   director shall include on each brochure, pamphlet, booklet, or 
 12.10  other similar material the director publishes to promote or 
 12.11  explain any lottery game, a prominent and clear statement of the 
 12.12  approximate odds of winning each prize offered in that lottery 
 12.13  game. 
 12.14     (b) Except for the operation of a video lottery terminal, 
 12.15  each lottery retailer must post prominently at or near the point 
 12.16  of ticket sale a notice or notices printed and provided by the 
 12.17  director of the approximate odds of winning each prize in each 
 12.18  game for which the lottery retailer sells tickets. 
 12.19     (c) The approximate odds of winning a prize from a video 
 12.20  lottery terminal must be displayed on the face or screen of the 
 12.21  video lottery terminal. 
 12.22     Sec. 29.  Minnesota Statutes 1994, section 349A.10, 
 12.23  subdivision 2, is amended to read: 
 12.24     Subd. 2.  [DEPOSIT IN PRIZE FUND.] (a) The director shall 
 12.25  establish a lottery prize fund outside the state treasury.  The 
 12.26  fund consists of all money deposited in it under this 
 12.27  subdivision and all interest earned thereon.  
 12.28     (b) The director shall deposit in the lottery prize fund, 
 12.29  from gross receipts from the sale of lottery tickets, an amount 
 12.30  sufficient to pay lottery prizes from the lottery prize fund 
 12.31  according to the following provisions: 
 12.32     (1) for games which require on-line terminal connections, 
 12.33  the prizes paid in any fiscal year must be at least 45 percent 
 12.34  of gross receipts from those games in that fiscal year; 
 12.35     (2) for games which do not require on-line terminal 
 12.36  connections, the prizes paid in any fiscal year must be at least 
 13.1   the following percentages of gross receipts from those games:  
 13.2      (i) 50 percent through fiscal year 1991; 
 13.3      (ii) 55 percent from July 1, 1991, to June 30, 1992; and 
 13.4      (iii) 60 percent thereafter of gross receipts from those 
 13.5   games in that fiscal year. 
 13.6      (c) For lottery games played on a video lottery terminal, 
 13.7   the win percentage in any fiscal year must be the win percentage 
 13.8   established by the game procedures adopted for the game and must 
 13.9   be at least 80 percent but not more than 95 percent.  
 13.10     Sec. 30.  Minnesota Statutes 1994, section 349A.10, 
 13.11  subdivision 3, is amended to read: 
 13.12     Subd. 3.  [LOTTERY OPERATIONS.] (a) The director shall 
 13.13  establish a lottery operations account in the lottery fund.  The 
 13.14  director shall pay all costs of operating the lottery, including 
 13.15  payroll costs or amounts transferred to the state treasury for 
 13.16  payroll costs, but not including lottery prizes, from the 
 13.17  lottery operating account.  The director shall credit to the 
 13.18  lottery operations account amounts sufficient to pay the 
 13.19  operating costs of the lottery. 
 13.20     (b) The director may not credit in any fiscal year 1993 
 13.21  amounts to the lottery operations account which when totaled 
 13.22  exceed 14.5 percent of gross revenue to the lottery fund.  The 
 13.23  director may not credit in any fiscal year thereafter amounts to 
 13.24  the lottery operations account which when totaled exceed 15 
 13.25  percent of gross revenue, not including net terminal income, to 
 13.26  the lottery fund in that fiscal year.  In computing total 
 13.27  amounts credited to the lottery operations account under this 
 13.28  paragraph the director shall disregard amounts transferred to or 
 13.29  retained by lottery retailers as sales commissions or other 
 13.30  compensation. 
 13.31     (c) The director of the lottery may not expend after July 
 13.32  1, 1991, more than 2-3/4 percent of gross revenues, not 
 13.33  including net terminal income, in a fiscal year for contracts 
 13.34  for the preparation, publication, and placement of advertising.  
 13.35     (d) The director may not credit for any fiscal year more 
 13.36  than 30 percent of net terminal income in that fiscal year for 
 14.1   the operation of video lottery terminals.  From the amounts 
 14.2   credited to the operations account for contracts associated with 
 14.3   the maintenance of video lottery terminals, the director shall 
 14.4   expend at least three-tenths of one cent but not more than 
 14.5   seven-tenths of one cent for each video lottery credit played on 
 14.6   each video lottery terminal. 
 14.7      (e) Except as the director determines, the lottery is not 
 14.8   subject to chapter 16A relating to budgeting, payroll, and the 
 14.9   purchase of goods and services. 
 14.10     Sec. 31.  Minnesota Statutes 1994, section 349A.10, 
 14.11  subdivision 4, is amended to read: 
 14.12     Subd. 4.  [DEPOSIT OF RECEIPTS.] (a) The director may 
 14.13  require lottery retailers to: 
 14.14     (1) deposit in a separate account to the credit of the 
 14.15  lottery fund, in banks designated by the director, all money 
 14.16  received by the lottery retailer from the sale of lottery 
 14.17  tickets and video lottery terminal plays, less money retained as 
 14.18  the lottery retailer's commission and for payment of prizes; 
 14.19     (2) file with the director reports of the lottery 
 14.20  retailer's receipts and transactions in ticket sales and video 
 14.21  lottery terminal plays in a form that the director prescribes; 
 14.22  and 
 14.23     (3) allow money deposited by the lottery retailer from the 
 14.24  sale of lottery tickets and video lottery terminal plays to be 
 14.25  transferred to the lottery through electronic fund transfer. 
 14.26     (b) The director may make arrangements for any person, 
 14.27  including a financial institution, to perform functions, 
 14.28  activities, or services in connection with the receipt and 
 14.29  distribution of lottery revenues. 
 14.30     (c) A lottery retailer who fails to pay any money due to 
 14.31  the director within the time prescribed by the director shall 
 14.32  pay interest on the amount owed at the rate determined by rule. 
 14.33     Sec. 32.  Minnesota Statutes 1994, section 349A.10, 
 14.34  subdivision 5, is amended to read: 
 14.35     Subd. 5.  [DEPOSIT OF NET PROCEEDS.] Within 30 days after 
 14.36  the end of each month, the director shall deposit in the state 
 15.1   treasury the net proceeds of the lottery, which is the balance 
 15.2   in the lottery fund after transfers to the lottery prize fund 
 15.3   and credits to the lottery operations account.  Of the net 
 15.4   proceeds, excluding the net proceeds from the operation of video 
 15.5   lottery terminals, 40 percent must be credited to the Minnesota 
 15.6   environment and natural resources trust fund, and the remainder 
 15.7   must be credited to the general fund.  Of the net proceeds from 
 15.8   the operation of video lottery terminals, 40 percent must be 
 15.9   credited to the Minnesota environment and natural resources 
 15.10  trust fund, an amount equivalent to one percent of net terminal 
 15.11  income must be credited to the compulsive gambling program fund, 
 15.12  and the remainder for fiscal years 1996 and 1997 are credited to 
 15.13  the general fund to be used for general education enhancement 
 15.14  purposes, and for fiscal years 1998 and thereafter to the 
 15.15  Minnesota education trust fund established under section 124.131.
 15.16     Sec. 33.  Minnesota Statutes 1994, section 349A.11, is 
 15.17  amended to read: 
 15.18     349A.11 [CONFLICT OF INTEREST.] 
 15.19     (a) The director, a board member, an employee of the 
 15.20  lottery, a member of the immediate family of the director, board 
 15.21  member, or employee residing in the same household may not: 
 15.22     (1) purchase a lottery ticket or play a game on a video 
 15.23  lottery terminal; 
 15.24     (2) have any personal pecuniary interest in any vendor 
 15.25  holding a lottery procurement contract, or in any lottery 
 15.26  retailer; or 
 15.27     (3) receive any gift, gratuity, or other thing of value, 
 15.28  excluding food or beverage, from any lottery vendor or lottery 
 15.29  retailer, or person applying to be a retailer or vendor, in 
 15.30  excess of $100 in any calendar year.  
 15.31     (b) A violation of paragraph (a), clause (1), is a 
 15.32  misdemeanor.  A violation of paragraph (a), clause (2), is a 
 15.33  gross misdemeanor.  A violation of paragraph (a), clause (3), is 
 15.34  a misdemeanor unless the gift, gratuity, or other item of value 
 15.35  received has a value in excess of $500, in which case a 
 15.36  violation is a gross misdemeanor.  
 16.1      (c) The director or an unclassified employee of the lottery 
 16.2   may not, within one year of terminating employment with the 
 16.3   lottery, accept employment with, act as an agent or attorney 
 16.4   for, or otherwise represent any person, corporation, or entity 
 16.5   that had any lottery procurement contract or bid for a lottery 
 16.6   procurement contract with the lottery within a period of two 
 16.7   years prior to the termination of their employment.  A violation 
 16.8   of this paragraph is a misdemeanor.  
 16.9      Sec. 34.  Minnesota Statutes 1994, section 349A.12, 
 16.10  subdivision 1, is amended to read: 
 16.11     Subdivision 1.  [PURCHASE BY MINORS.] A person under the 
 16.12  age of 18 years may not buy or redeem for a prize a ticket in 
 16.13  the state lottery, and a person under the age of 21 years may 
 16.14  not play a game on a video lottery terminal. 
 16.15     Sec. 35.  Minnesota Statutes 1994, section 349A.12, 
 16.16  subdivision 2, is amended to read: 
 16.17     Subd. 2.  [SALE TO MINORS.] A lottery retailer may not sell 
 16.18  and a lottery retailer or other person may not furnish or redeem 
 16.19  for a prize a ticket in the state lottery to any person under 
 16.20  the age of 18 years or allow a person under the age of 21 years 
 16.21  to play a game on a video lottery terminal.  It is an 
 16.22  affirmative defense to a charge under this subdivision for the 
 16.23  lottery retailer or other person to prove by a preponderance of 
 16.24  the evidence that the lottery retailer or other person 
 16.25  reasonably and in good faith relied upon representation of proof 
 16.26  of age described in section 340A.503, subdivision 6, in 
 16.27  making or allowing the sale or play or furnishing or redeeming 
 16.28  the ticket. 
 16.29     Sec. 36.  Minnesota Statutes 1994, section 349A.13, is 
 16.30  amended to read: 
 16.31     349A.13 [RESTRICTIONS.] 
 16.32     Nothing in this chapter: 
 16.33     (1) authorizes the director to conduct a lottery game or 
 16.34  contest the winner or winners of which are determined by the 
 16.35  result of a sporting event other than a horse race conducted 
 16.36  under chapter 240; or 
 17.1      (2) authorizes the director to install or operate a lottery 
 17.2   device operated by coin or currency which when operated 
 17.3   determines the winner of a game; and 
 17.4      (3) authorizes the director to sell pull-tabs as defined 
 17.5   under section 349.12, subdivision 32. 
 17.6      Sec. 37.  Minnesota Statutes 1994, section 609.651, 
 17.7   subdivision 1, is amended to read: 
 17.8      Subdivision 1.  [FELONY FRAUD.] A person is guilty of a 
 17.9   felony and may be sentenced under subdivision 4 if the person 
 17.10  does any of the following with intent to defraud the state 
 17.11  lottery: 
 17.12     (1) alters or counterfeits a state lottery ticket or a 
 17.13  video lottery credit receipt from a state lottery video lottery 
 17.14  terminal; 
 17.15     (2) knowingly presents an altered or counterfeited state 
 17.16  lottery ticket or video lottery credit receipt from a state 
 17.17  lottery video lottery terminal for payment; 
 17.18     (3) knowingly transfers an altered or counterfeited state 
 17.19  lottery ticket or video lottery credit receipt from a state 
 17.20  lottery video lottery terminal to another person; or 
 17.21     (4) tampers with or manipulates the outcome, prize payable, 
 17.22  or operation of a state lottery video lottery terminal; or 
 17.23     (5) otherwise claims a lottery prize by means of fraud, 
 17.24  deceit, or misrepresentation. 
 17.25     Sec. 38.  Minnesota Statutes 1994, section 609.75, 
 17.26  subdivision 4, is amended to read: 
 17.27     Subd. 4.  [GAMBLING DEVICE.] A gambling device is a 
 17.28  contrivance which for a consideration affords the player an 
 17.29  opportunity to obtain something of value, other than free plays, 
 17.30  automatically from the machine or otherwise, the award of which 
 17.31  is determined principally by chance.  "Gambling device" also 
 17.32  includes a video game of chance, as defined in subdivision 8 but 
 17.33  does not include a video lottery terminal operated by the state 
 17.34  lottery under chapter 349A. 
 17.35     Sec. 39.  Minnesota Statutes 1994, section 609.761, 
 17.36  subdivision 2, is amended to read: 
 18.1      Subd. 2.  [STATE LOTTERY.] Sections 609.755 and 609.76 do 
 18.2   not prohibit the operation of the state lottery or; the sale, 
 18.3   possession, or purchase of tickets for the state lottery; or the 
 18.4   manufacture, possession, or operation of a video lottery 
 18.5   terminal for the state lottery under chapter 349A.  
 18.6      Sec. 40.  [REPEALER.] 
 18.7      Minnesota Statutes 1994, sections 297E.01, subdivision 9; 
 18.8   and 297E.02, subdivision 4, are repealed. 
 18.9      Sec. 41.  [EFFECTIVE DATE.] 
 18.10     Sections 1, 2, and 4 to 39 are effective the day following 
 18.11  final enactment.  Sections 3 and 40 are effective July 1, 1995. 
 18.12                             ARTICLE 2
 18.13                        EDUCATION TRUST FUND
 18.14     Section 1.  [124.131] [TRUST FUND.] 
 18.15     Subdivision 1.  [TRUST FUND ESTABLISHED.] A Minnesota 
 18.16  education trust fund is established as an account in the state 
 18.17  treasury.  The commissioner of finance shall credit to the trust 
 18.18  fund the amounts authorized under this section.  The state board 
 18.19  of investment shall ensure that trust fund money is invested 
 18.20  under section 11A.24.  The principal of the trust fund and any 
 18.21  unexpended earnings must be invested and reinvested by the state 
 18.22  board of investment. 
 18.23     Subd. 2.  [DEPOSITS TO TRUST FUND.] Money in the education 
 18.24  trust fund consists of: 
 18.25     (1) money credited to the trust fund under section 349A.10, 
 18.26  subdivision 5; 
 18.27     (2) other money credited to the trust fund by law; 
 18.28     (3) gifts and donations made to the trust fund; and 
 18.29     (4) all money earned by the trust fund. 
 18.30     Subd. 3.  [GIFTS AND DONATIONS.] Gifts and donations may be 
 18.31  made to the education trust fund.  Noncash gifts and donations 
 18.32  must be disposed of for cash as soon as the state board of 
 18.33  investment prudently can maximize the value of the gift or 
 18.34  donation.  Gifts and donations of marketable securities may be 
 18.35  held or be disposed of for cash at the option of the board.  The 
 18.36  cash receipts of gifts and donations of cash or capital assets 
 19.1   and marketable securities disposed of for cash must be credited 
 19.2   immediately to the principal of the trust fund.  The value of 
 19.3   marketable securities at the time the gift or donation is made 
 19.4   must be credited to the principal of the trust fund and any 
 19.5   earnings from the marketable securities are earnings of the 
 19.6   trust fund. 
 19.7      Subd. 4.  [APPROPRIATIONS.] Money in the education trust 
 19.8   fund may be appropriated by law only for education.  The trust 
 19.9   fund may not be used as a substitute for traditional sources of 
 19.10  funding for education but only for supplementing those 
 19.11  traditional sources.