Jerry Kopel

KOPEL: COMMISSION RENDERED LESS POWERFUL, BUT...

Lottery ticket commissions hit new highs

There is a lot wrong with the Colorado lottery according to the state auditor’s office, which released its five-year performance report in late September. The audit identified and offered potential fixes for 16 problems — 31 if subsection recommendations are included.

Colorado almost eliminated the required five-year performance audit review of regulated lottery gambling. In 2000, the lottery was included on a list of obsolete reviews in a bill amending the state auditor’s statute. Lottery officials included their agency without giving any reason why its review was “obsolete.”

Then-House Speaker Doug Dean, R-Colorado Springs, was visibly upset when — during a 2002 House committee hearing — lottery spokespersons confessed as to what had been done. The committee hearing was on a lottery bill Dean was carrying to change the Sunset review date.

Thanks to Dean, the five-year performance audit by the state auditor was restored in time for the 2003 audit and preserved for subsequent years, including 2008.

In the 2008 report, the state auditor supports one recommendation I have harped on repeatedly. The report reads:

“Consider cost-saving opportunities related to the lottery’s retailer compensation plan by evaluating the potential effect of lowering commission rates to better align with national averages and determine the impact on the retailer base and on lottery net proceeds, taking action as appropriate.”

My recommendation would be stronger. When the lottery began, it was vital to develop ticket sales in supermarkets, gas stations, convenience stores and liquor stores in order to acquaint the public with the instant games.

Today, the retailers NEED the lottery in their stores because it brings in customers who buy other goods. They’ll keep selling tickets even if the lottery stops overpaying them to do it, and the state will save millions of dollars with virtually no consequences.

The state auditor found 2,900 licensed retailers statewide in fiscal year 2007, including 1,602 convenience stores, 512 liquor stores, 427 grocery stores, 83 tobacco stores, 58 bars and restaurants, and 196 other-type locations.

Since the state auditor’s report was actually published in August 2008, it did not include the separate independent auditor’s annual finance audit presented in September 2008.

In round numbers, commissions in 2008 of $33.7 million and bonuses of $4.7 million tied the previous highest percentage in 2006, of 7.6 percent of gross ticket sales. It was the highest amount of money — $38.4 million — paid to retailers in the 25-year history of lottery sales in Colorado.

The auditor was able to provide national statistics only for fiscal year 2006, when Colorado had the fourth highest percentage of revenue paid to retailers in the nation — 7.4 percent. Assuming no other state in the top five increased its percentage, at 7.6 percent, Colorado would now rank third.

In 2004, under the administration of then-Gov. Bill Owens, the lottery commission was changed from a Type One board — having independent control of policy — to a Type Two — a weakened “advisory board to the lottery director.” Unlike other Type Two boards, the commission still has power to adopt and review rules and hold hearings on violations.

The result? Retailer commissions and bonuses went from $30.3 million in 2004 to $38.4 million in 2008, an increase of $8.1 million.

The lottery response to the state auditor’s recommendation was tepid, pointing out the benefits of high commissions and bonuses and stating, “while the lottery believes its current retailer compensation is fair, it agrees to evaluate the lowering ... and the potential impact of doing so.”

The Chinese civil service outlasted Genghis Kahn. I expect the lottery will evaluate and act on the recommendation only if pressed by the state auditor, and then the lottery will decide not to reconsider.

More on the state auditor’s report in a future column.

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So far this year, we have had four yard signs stolen from our front lawn, two Udalls, one McCann, and one No48.

All thefts, of course, are violations of CRS 1-13-113, which covers the theft of yard signs along with numerous other materials such as printed candidate brochures.

Offenders, if apprehended, face a misdemeanor fine of up to $750. But, to my knowledge, no district attorney has ever filed an action on the statute. At least I have never read of any. That is understandable, since going to trial would cost the district attorney’s office more than $750.

I did not use yard signs in any quantities until 1978. In the 1980s, I attempted to pique interest by just using my name on a long, thin sign, eight and a half inches by two feet, with no explanation of who I was or what I was running for. The sign was attached to a thin wooden stake. It worked.

A candidate should always order at least three times as many signs as he or she thinks are needed, because the signs will be stolen.

Here’s a suggestion for the 2009 legislative session. Along with the present “crime” penalty, provide for a “no less than $1,000” civil damage penalty plus attorney fees to be paid to any yard sign victim (the landowner, not the candidate) who is successful in tracking down the culprit.

After several news stories tell about damages being awarded, the volume of yard sign thefts will diminish.

Jerry Kopel served 22 years in the Colorado House.