FISCAL NOTE

House Bill 502 as amended and reported by the Committee on Economic Development and Tourism would implement the provisions of the constitutional amendment proposed by House Bill 501 of the 2022 Regular Session by establishing the Alabama Education Lottery Gambling Commission as the state agency responsible for regulation of the Alabama Education Lottery. This bill provides that the Board of Directors would receive compensation, including per diem and travel allowances, equal to that of members of the legislature, at an estimated cost for salaries of $486,000 annually. This bill would require the Commission to provide an annual report to the Governor and Legislative Council, adopt a system of internal audits and audits of licensed operators, and contract with an external firm to provide an annual financial audit.

This bill provides for the appointment of an executive director by the Board, whose salary shall be set by the Board and who may employ personnel, acquire real property, enter into contracts, and provide for general administration of the Commission. Further, this bill also establishes an Enforcement Division within the Commission to investigate and enforce the laws and rules of the commission and provides for the appointment of the director of the division, whose salary shall be set by the commission and who may employ personnel and employ consultants.

This bill further states that any lottery proceeds will be applied first to the payment of (1) operating expenses of the commission, including costs associated with administration, regulation, and operation of the lottery; (2) all prizes; and (3) any scholarship program created by this bill. The amount of net revenue generated from the operation of the lottery to be deposited into the Alabama Education Lottery Trust Fund (AELTF) is estimated to be between $198 million to $285 million annually. This bill also prohibits the use of the AELTF to supplant current or future education revenues.

In addition, this bill establishes the following Alabama Graduate Retention and Development (GRADs) scholarship and student loan repayment programs to be administered by the Alabama Commission on Higher Education (ACHE) and funded annually through an independent supplemental appropriation bill from the net proceeds of the Alabama Education Lottery, using the apportionments shown below. However, no awards shall be made by ACHE until the balance in the AELTF reaches $250 million as established by House Bill 501:

(1) The Two-year College and Workforce Development Scholarship Program: which provides that an eligible recipient receives the lesser of $2,500, or the cost of tuition and mandatory fees at the eligible institution less all other gift aid, with gift aid credited first, not to exceed 90% of the cost of tuition and mandatory fees.

(2) The Four-year College Student Loan Repayment Program: which provides that the benefit provided shall be equal to the total amount appropriated by the Legislature divided by the total number of eligible recipients, with certain conditions. 

(3) the Four-year College Scholarship Program: which provides that the scholarships provided be equal to the regional average tuition and fees as calculated by the South Regional Educational Board, which in 2018 was $13,830, and the benefit provided shall be equal to the total amount appropriated by the Legislature divided by the total number of eligible recipients, with certain conditions.  

After payment of the above, the remaining funds deposited into the AELTF will be appropriated through an independent appropriation bill as follows:

1) $500,000 for problem gambling treatment centers;

2) 7.5% to the Education Retiree’ Trust Fund;

3) Up to $500,000 for dues for school-aged children to participate in agricultural education programs; and

4) All remaining proceeds shall be used for the educational scholarship program created in this bill.

In addition, this bill authorizes a lottery retailer license fee to be determined by the commission also to be deposited in the AELTF. Further, lottery retailers ae provided 97% commission on the gross sales of lottery tickets which would increase the financial obligations of the commission by a undetermined amount dependent upon retailer's gross sales of lottery tickets.

In addition, this bill would increase the administrative obligations of ACHE by requiring ACHE to: (1) administer the programs created by this bill; and (2) provide an annual report to the Governor, the Lieutenant Governor, the Speaker of the House of Representatives, the President Pro Tempore of the Senate, and the chairs of the education budget and policy committees. 

This bill would authorize the Department of Examiners of Public Accounts to audit or examine the Alabama Education Lottery Commission, which could increase administrative obligations of the Department by an undetermined amount dependent upon the number of audits performed.

This bill could increase the administrative obligations of the Attorney General by requiring the Attorney General to assist in any action for injunction or prosecution based on the request from the Gaming Enforcement Unit on a violation of a law or rule of the Commission.

Finally, this bill establishes allows the commission to assess civil penalties, up to $100,000 each, for violating provisions of this bill or rules adopted by the commission, which would be deposited into the AELTF. This bill would also establish new crimes and criminal penalties, ranging from $50 to $50,000 in fines, related to unlawful lottery activity which could increase receipts to the State General Fund and municipal general funds from fines; increase receipts to the State General Fund, county general funds, municipal general funds, and other funds to which court costs are deposited; and could increase the obligations of the State General Fund, local jails, the district attorneys, the Department of Corrections, the Bureau of Pardons and Paroles, and community corrections programs by an undetermined amount dependent upon the number of persons charged with and convicted of the offenses provided by this bill and the penalties imposed.