GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

H	1 

HOUSE BILL 1113

Short Title:  Lottery for Capital Projects.	(Public)
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Sponsors: Representatives H. Hunter, Mavretic; Fitch and McLawhorn.
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Referred to:  Courts, Justice, Constitutional Amendments and Referenda.
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April 24, 1991

A BILL TO BE ENTITLED
AN ACT TO ESTABLISH A STATE LOTTERY, TO DEDICATE THE PROCEEDS OF THE LOTTERY TO CAPITAL PROJECTS, AND TO LET THE PEOPLE DECIDE WHETHER TO CONTINUE THE LOTTERY AFTER IT HAS OPERATED FOR FIVE YEARS.
The General Assembly of North Carolina enacts:
Section 1.  The General Statutes are amended by adding a new Chapter to read:
"Chapter 105C.
"State Lottery.
"ARTICLE 1.
"General Provisions.
"§ 105C-1.  Purpose.
This Chapter establishes a lottery to be operated by the State for the benefit of various public purposes.  The lottery proceeds are to be used for capital projects in accordance with Article 5 of this Chapter, thereby enabling the State to provide for infrastructure needs that it might not otherwise be able to address.
"§ 105C-2.  Definitions.
The following definitions apply in this Chapter:
(1)	Commission.  The State Lottery Commission.
(2)	Commissioner.  A member of the State Lottery Commission.
(3)	Director.  The Director of the State lottery.
(4)	Lottery game. A procedure authorized by the Commission whereby prizes are distributed among persons who have bought tickets or shares that provide the opportunity to win these prizes.
(5)	Lottery game retailer.  The holder of a lottery game retailer permit issued by the Commission.
(6)	Person.   An individual, a firm, a partnership, an association, a corporation, or another organization or combination of individuals acting as a unit.
"§ 105C-3.  Lawful activity; no local regulation.
Any State or local law that prohibits the sale, possession, or operation of a lottery does not apply to this Chapter.  No local law may do any of the following:
(1)	Regulate the operation of the lottery conducted under this Chapter.
(2)	Impose a tax on the sale of lottery game tickets or shares.
(3)	Impose a tax on the gross receipts of a lottery game retailer from sales of lottery game tickets or shares.
"§ 105C-4.  Misdemeanor violations of lottery laws.
Violation of each of the following lottery laws is a misdemeanor and is punishable as provided in G.S. 14-3:
(1)	Knowingly selling a lottery game ticket or share to a person who is less than 18 years old, in violation of G.S. 105C-21.
(2)	Selling a lottery game ticket or share for a price other than the retail price set by the Commission, in violation of G.S. 105C-21.
(3)	Selling a lottery game ticket or share without a lottery game retailer permit or authorization, in violation of G.S. 105C-35.
(4)	Knowingly giving false information on an application for a lottery game retailer permit, in violation of G.S. 105C-37.
"ARTICLE 2.
"Commission, Director, and Staff.
"§ 105C-10.  Creation, membership, and organization of Commission.
(a)	Creation. – The State Lottery Commission is established.  The Commission is located for administrative purposes in the Department of Economic and Community Development but shall exercise its powers independently of that Department.
(b)	Membership. – The Commission consists of five members appointed by the Governor, subject to confirmation by the General Assembly by joint resolution.  Each Commissioner shall be a resident of a different State region, as set out in subsection (i).  At least one Commissioner shall have a minimum of five years' experience in law enforcement, and at least one of the other Commissioners shall be a certified public accountant.  A person who has been convicted of a felony may not serve as a Commissioner and no more than three members of the same political party may serve as Commissioners at the same time.
The Governor shall submit the name of an appointee to the General Assembly by May 1 of the year in which the term of the appointee is to begin.  If the Governor does not submit a name by May 1, then the Lieutenant Governor and the Speaker of the House shall submit a name jointly to the General Assembly by May 15.
(c)	Terms. – Except for the terms of the initial Commissioners, the term of a Commissioner is for five years and begins on July 1.  The term of one of the initial Commissioners ends June 30, 1993; the term of another ends June 30, 1994; the term of another ends June 30, 1995; the term of another ends June 30, 1996; and the term of another ends June 30, 1997.  When submitting the names of the initial appointees, the Governor shall state when each appointee's term ends.  A Commissioner continues to serve until the Commissioner's successor takes office as a Commissioner, but the continuation does not change the date when the term of the Commissioner's successor ends.
(d)	Vacancies. – When a vacancy occurs on the Commission and the General Assembly is in session, the Governor must submit to the General Assembly the name of an appointee to fill the vacancy.  The Governor shall submit a name as soon as possible but no later than three weeks after the vacancy occurs.  If the Governor does not submit a name within three weeks, then the Lieutenant Governor and the Speaker of the House shall submit a name jointly to the General Assembly.
When a vacancy occurs on the Commission and the General Assembly is not in session, the vacated position shall remain vacant until the General Assembly convenes unless the Governor considers filling the vacancy urgent.  If the Governor finds it urgent to fill the vacancy, the Governor may appoint a person to serve as a Commissioner on an interim basis pending confirmation by the General Assembly.  When the General Assembly convenes, it shall consider the confirmation of an interim appointment.
A Commissioner appointed to fill a vacancy serves for the unexpired portion of the term vacated.
(e)	Chair. – When the initial Commissioners are confirmed by the General Assembly, the Governor shall designate one of the Commissioners as Chair of the Commission.  The initial Chair shall serve as Chair until June 30, 1995.  Succeeding Chairs shall serve three-year terms as Chair that end on June 30 in each year that is divisible by three.  If a Chair leaves the Commission before completing a three-year term as Chair, the Governor shall designate another Commissioner as Chair to serve for the remainder of the unexpired term as Chair.
(f)	Compensation. – Each Commissioner, other than the Chair,  shall receive the same salary as a member of the Utilities Commission.  The Chair of the Commission shall receive the same salary as the Chair of the Utilities Commission.  Each Commissioner shall be reimbursed for travel expenses in accordance with G.S. 138-6.
(g)	Organization. – The Commission shall meet at the call of the Chair and at the call of a majority of the Commissioners.  A majority of the Commissioners is a quorum.  The Commission shall make all its decisions by a majority vote.
(h)	Oath. – As an officer of the State, each Commissioner shall take the oath required by Article VI, § 7 of the North Carolina Constitution.
(i)	Regions. – To obtain statewide representation among the membership of the Commission, the State is divided into the following five regions:
Region		Counties in Region
  1		Avery, Buncombe, Cherokee, Clay, Cleveland, Gaston, Graham, Haywood, Henderson, Jackson, Lincoln, Macon, Madison, McDowell, Mecklenburg, Mitchell, Polk, Rutherford, Swain, Transylvania, and Yancey
  2		Alexander, Alleghany, Ashe, Burke, Cabarrus, Caldwell, Catawba, Davidson, Davie, Forsyth, Guilford, Iredell, Randolph, Rockingham, Rowan, Stanly, Stokes, Surry, Yadkin, Watauga, and Wilkes
  3		Alamance, Anson, Caswell, Chatham, Durham, Hoke, Lee, Montgomery, Moore, Orange, Person, Richmond, Scotland, and Union
  4		Beaufort, Bertie, Camden, Chowan, Currituck, Dare, Edgecombe, Franklin, Gates, Granville, Halifax, Harnett, Hertford, Hyde, Martin, Nash, Northampton, Pasquotank, Perquimans, Pitt, Tyrrell, Vance, Wake, Warren, Washington, and Wilson
  5		Bladen, Brunswick, Carteret, Columbus, Craven, Cumberland, Duplin, Greene, Johnston, Jones, Lenoir, New Hanover, Onslow, Pamlico, Pender, Robeson, Sampson, and Wayne.
"§ 105C-11.  General laws apply to Commission; exception for certain purchases and contracts.
(a)	Laws. – As a State agency, the general laws that apply to State agencies apply to the Commission.  These laws include the following:
(1)	Chapter 132 of the General Statutes, which governs public access to records of a State agency.
(2)	Article 33C of Chapter 143 of the General Statutes, which governs meetings of a State agency.
(3)	Chapter 150B of the General Statutes, which  governs the adoption of rules and other administrative procedures by a State agency.
(4)	Except as modified by subsection (b), Article 3 of Chapter 143, which governs purchases and contracts of a State agency.
(b)	Purchases and Contracts. – The Secretary of Administration shall consult with the Commission in preparing the specifications for goods or services for the Commission when the competitive bidding procedure must be used in obtaining the goods or services.  In evaluating a bid for goods or services to be provided to the Commission, the Secretary of Administration shall consider the extent to which the proposal maximizes net lottery revenue to the State in addition to the criteria contained in G.S. 143-52.  When the competitive bidding procedure is used to obtain goods or services for the Commission, the Secretary of Administration shall review the submitted bids with the Commission and consult with the Commission in deciding which bid to accept.
"§ 105C-12.  Powers and duties of Commission.
(a)	Powers. – The Commission has all powers necessary to perform its duties under this Chapter.  The Commission may adopt rules to implement this Chapter.
(b)	Duties. – The Commission shall:
(1)	Establish and operate a lottery.
(2)	Ensure that the lottery is operated efficiently and honestly.
(3)	Meet with the Director at least monthly to set policy, approve or reject reports of the Director, and transact any other business of the Commission.
(4)	Make quarterly and annual reports to the Governor, the Attorney General, the State Treasurer, and the General Assembly on the operation of the lottery, including full and complete statements of lottery revenues, prize disbursements, expenses, net income, and all other financial transactions involving lottery funds.
"§ 105C-13.  Appointment, removal, and compensation of Director.
(a)	Appointment. – The office of Director of the Commission is established.  The Director shall be appointed by the Governor, subject to confirmation by the General Assembly by joint resolution.  The Director shall be qualified by training and experience to direct the operations of a State lottery.  A person who has been convicted of a felony may not serve as Director.
The Director shall be appointed and confirmed in accordance with the procedure for appointing and confirming a Commissioner.  A vacancy in the office of Director shall be filled in accordance with the procedure for filling a vacancy in the membership of the Commission.  The term of the Director shall be the same as the term of the Chair of the Commission.
As an officer of the State, the Director shall take the oath required by Article VI, § 7 of the North Carolina Constitution.
(b)	Removal. – The Governor may remove the Director upon the Director's incapacity to serve.  The Governor shall remove the Director when a majority of the Commissioners ask the Governor to do so by voting in favor of removal.
(c)	Compensation. – The Director shall receive the same salary as a member of the Commission.  The Director shall be reimbursed for travel expenses in accordance with G.S. 136-8.
"§ 105C-14.  Duties and powers of Director.
(a)	General. – The Director is the secretary and executive officer of the Commission.  The Director's position is a full-time position; the Director may not engage in any other occupation or profession while serving as Director.  All actions of the Director are subject to the approval of the Commission.
(b)	Specific. – The Director shall:
(1)	Supervise and administer the operation of the lottery in accordance with this Chapter.
(2)	Study the following:
a.	Lotteries operated by another state or a foreign country.
b.	Available literature on the subject of lotteries.
c.	Existing or proposed federal laws that may affect the operation of the lottery.
d.	The reaction of the citizens of the State to existing or proposed features in a lottery game.
e.	The demographic characteristics of the players of lottery games.
f.	The effectiveness of the marketing used on sales of lottery game tickets and shares.
(3)	Recommend to the Commission improvements in the lottery based on studies made.
(4)	Make and keep books and records that accurately and fairly reflect each day's lottery transactions, including the distribution of lottery game tickets or shares to lottery game retailers, the receipt of funds and prize claims, the amount of prizes paid directly by the Commission, and all other financial transactions involving lottery funds necessary to maintain daily accountability of lottery funds.
(5)	Report monthly to the Commission on the amount of revenue generated by the lottery during the preceding month and the amount of expenses incurred by the lottery during the preceding month.
(6)	Perform other duties assigned by the Commission.
"§ 105C-15.  Staff.
The Director may hire professional, clerical, technical, and administrative personnel needed to operate a lottery.  The Director may not hire a person who has been convicted of a felony.  Before hiring a person, the Director, with the assistance of the State Bureau of Investigation, shall investigate the person's background.  As a condition of employment, each applicant for employment with the Commission shall sign an authorization allowing the Director to investigate the applicant's background.  Employees of the Commission are subject to Chapter 126 of the General Statutes, the State Personnel Act.
"§ 105C-16.  Assistant directors.
The Director may appoint and establish the duties for up to four assistant directors.  The Commission shall set the compensation of the assistant directors.  The Director may designate one of the assistant directors as the deputy director.
"§ 105C-17.  Assistant director for security.
(a)	Selection. – One of the assistant directors shall be responsible for a security division.  The assistant director for security shall have at least five years' experience in law enforcement, shall have knowledge and experience in computer security, and shall otherwise be qualified by training and experience for the position.
(b)	Duties. – The assistant director for security shall:
(1)	With the assistance of the State Bureau of Investigation, investigate the background of all prospective employees, lottery game retailers, and lottery contractors who propose to contract to provide goods or services concerning the printing of tickets or shares for use in a lottery game, the receipt or recording of number selections in a lottery game, or the determination or generation of winners in a lottery game.
(2)	Recommend procedures to the Director that ensure the security, honesty, fairness, and integrity of the lottery.
(3)	Report any alleged violation of law to the appropriate law enforcement authority for further investigation and action.
(4)	Perform other duties assigned by the Director.
"ARTICLE 3.
"Operation of the Lottery.
"§ 105C-20.  Types of lottery games.
Upon the recommendation of the Director, the Commission shall determine the types of lottery games offered by the lottery.  A lottery game, however, may not do any of the following:
(1)	Use the theme of bingo, dog racing, or horse racing.
(2)	Be based on the outcome of a particular sporting event, including a dog race or a horse race, or on the results of a series of sporting events.
(3)	Use tickets or shares that do not have unique numbers distinguishing them from every other ticket or share in that lottery game.
(4)	Use tickets or shares that include the name or photograph of an elected official.
(5)	If the game uses a computer terminal or other electronic device, dispense coins or currency from the device.
"§ 105C-21.  Sales price and distribution of tickets and shares.
(a)	Price. – Upon the recommendation of the Director, the Commission shall set the retail sales price for each ticket or share for each lottery game.  The Commission may not set the retail sales price of a lottery game ticket or share at less than fifty cents (50¢).  The Commission may, however, authorize a discount for purchases of multiple tickets or shares.
(b)	Distribution. – Upon the recommendation of the Director, the Commission shall specify the manner of distributing lottery game tickets.  The Commission may distribute the tickets or shares directly to the public or to lottery game retailers for distribution to the public.
(c)	Restrictions. – Distribution of a lottery game ticket or share is subject to all of the following restrictions:
(1)	It may not be sold or given to any of the following:
a.	A person who is less than 18 years old.
b.	A Commissioner, the Director, or an employee of the Commission.
c.	A lottery game retailer or an officer or employee of a lottery game retailer.
d.	A lottery game contractor or an officer or employee of a lottery game contractor whose contract concerns the printing of tickets or shares for use in a lottery game, the receipt or recording of number selections in a lottery game, or the determination or generation of winners in a lottery game.
e.	A spouse, parent, or child living in the same household as a person disqualified by subparts b, c, or d of this subdivision.
(2)	It may not be sold for a price that is higher or lower than the retail price set by the Commission.
(3)	It may not be given as a premium or an enticement to promote the sale of any item or product.
"§ 105C-22.  Number and value of prizes.
(a)	Type. – Upon the recommendation of the Director, the Commission shall determine the number and value of prizes for winning tickets or shares in each lottery game.  A prize may be a cash prize paid in a lump sum, in deferred payments, or by an annuity, a merchandise prize, or a prize of a ticket or share in the same lottery game or another lottery game.
(b)	Prize Percentage. – The Commission shall allocate at least fifty percent (50%) of the total projected annual revenue from the sale of lottery tickets or shares for each particular lottery game for the payment of prizes for that lottery game.  The Commission may allocate a larger percentage of the total projected annual revenue from a lottery game to prizes if it concludes that the total annual net revenue from the lottery game will be enhanced by that higher prize percentage.
(c)	Odds. – When the Commission decides to offer a lottery game, it shall prepare a statement of the estimated number of prizes of each particular denomination expected to be awarded in that lottery game and of the estimated odds of winning each prize.  The statement shall be available at the Commission's office and from each lottery game retailer who sells tickets or shares for that lottery game.  If a lottery game uses tickets or shares with preprinted winners, each ticket or share shall state the odds of winning a prize.
"§ 105C-23.  Method of determining winners.
(a)	Method. – Upon the recommendation of the Director, the Commission shall specify the method for determining winners in each lottery game.  If more than one person is entitled to the same prize, each person shall receive an equal share of the prize.
(b)	Drawings. – If a lottery game uses a drawing of winning numbers, a drawing among entries, or a drawing among finalists to determine the winner, the drawing shall comply with all the following requirements:
(1)	It shall be open to the public.
(2)	It shall be witnessed by an independent certified public accountant.
(3)	Any equipment used in the drawing shall be inspected, both before and after the drawing, by an independent certified public accountant and an employee of the Commission.
(4)	It and any inspection of equipment used in it shall be recorded on both video and audio tape.
"§ 105C-24.  Payment of prizes.
(a)	Procedures. – Upon the recommendation of the Director, the Commission shall establish procedures for verifying the validity of a lottery game ticket or share presented as the winner of a prize and for paying prizes won in a lottery game.  The Commission may authorize lottery game retailers to pay some prizes at their premises, such as prizes for less than six hundred dollars ($600.00).  The Commission may require prizes to be paid only by the Commission.
(b)	Restrictions. – The right of a person to a prize is not assignable.  A prize may be paid to the estate of a deceased prize winner, however, or to a person designated pursuant to a judicial order.  A lottery game prize may not be paid to a person:
(1)	To whom a lottery game ticket or share cannot be sold or given, as listed in G.S. 105C-21.
(2) 	Who presents a lottery game ticket or share that is stolen, counterfeit, altered, fraudulent, unissued, produced or issued in error, unreadable, not presented by the applicable deadline, lacking in captions that conform with the lottery play symbols for the lottery game involved, or does not otherwise comply with any applicable requirements.
(c)	Time. – The holder of a lottery game ticket or share may claim a prize won by the ticket or share for 180 days after the drawing or the end of the lottery game in which the prize was won.  The Commission may set a shorter time period for eligibility for entry into a drawing for entries or finalists.
(d)	Unclaimed Prizes. – A prize that is not claimed within the time limit is forfeited.  The value of all forfeited prizes shall be credited to the Infrastructure Fund established in Article 5 of this Chapter.
(e)	Information. – At the end of the time period for claiming prizes for each lottery game, the Commission shall prepare a detailed statement of the total number of prizes of each prize denomination that were claimed and were paid directly by the Commission.  The Commission shall make this statement available at its office and from lottery game retailers.
"§ 105C-25.  Player agreement.
By purchasing a ticket or share in a lottery game, a player agrees to be bound by the lottery game's play rules.  In particular,  the purchaser of a ticket or share acknowledges that the determination of whether the purchaser is a winner is subject to the game play rules and the winner validation procedures for the lottery game.
"§ 105C-26.  Audits.
(a)	State Auditor. – The State Auditor shall conduct quarterly and annual audits of all accounts and transactions of the Commission and shall conduct any other special audits considered necessary.  The State Auditor may examine any records of the Commission, a lottery game retailer, or a lottery game contractor whose contract to provide goods or services concerns the printing of tickets or shares for use in a lottery game, the receipt or recording of number selections in a lottery game, or the determination or generation of winners in a lottery game.
(b)	Independent. – Every two years, the Commission shall engage an independent firm experienced in security procedures to study all aspects of security in the operation of the lottery.  As part of the study, the independent firm shall identify any  practices that could be improved and describe how a practice identified as needing improvement should be changed.  The portion of the security audit report containing the overall evaluation of each aspect of security in the operation of the lottery shall be presented to the Commission, to the Governor, and to the General Assembly.  The portion of the security audit report identifying specific practices that need to be changed and describing how they should be changed is confidential and shall be presented only to the assistant director for security, the Director, and the Commission.
"§ 105C-27.  Expense restriction.
The Commission may not spend more than sixteen percent (16%) of the total annual revenues accruing from the sale of all lottery game tickets and shares from all lottery games for expenses of the lottery.
"§ 105C-28.  No financial interest in contractors allowed and no bribes or gifts from contractors allowed.
(a)	Prohibition. – A Commissioner, the Director, or an employee of the Commission may not:
(1)	Have a financial interest in a person that provides goods or services to the Commission.
(2)	Solicit, accept, or agree to accept anything of value from any of the following:
a.	A person who provides goods or services to the Commission.
b.	A person who has submitted a bid to provide goods or services to the Commission.
c.	A person who could reasonably be expected to submit a bid to provide goods or services to the Commission.
(b)	Punishment. – Violation of this section is a Class J felony.  A person convicted of violating this section shall be removed from office or employment with the State.
"ARTICLE 4.
"Lottery Game Retailers.
"§ 105C-35.  Permit required; qualifications for permit.
(a)	Requirement. – To sell lottery game tickets or shares to the public, a person other than a unit of State or local government must obtain a permit from the Commission.  A lottery game retailer permit authorizes the holder to sell lottery game tickets or shares to the public, on behalf of the State, at the retail business named in the permit.  The Commission may authorize units of State or local government to sell lottery tickets or shares to the public at designated locations.  The Commission may not, however, allow an ABC store to sell lottery game tickets or shares.
(b)	Qualifications. – To be eligible for a lottery game retailer permit, a person must meet all the following requirements:
(1)	Be at least 21 years old.
(2)	Be engaged in a retail business at an established location in this State from which the person intends to sell lottery game tickets or shares in addition to conducting the existing retail business.
(3)	Be a resident of North Carolina unless:
a.	The person is an officer, a director, or a stockholder of a corporate applicant and is not a manager or is not otherwise responsible for the day-to-day operation of the business.
b.	The person has executed a power of attorney designating a qualified resident of this State to serve as attorney in fact for the purposes of receiving service of process and managing the business for which the permit is sought.
(4)	Not have been convicted of a felony or a misdemeanor gambling offense within the last 10 years.
(5)	Not have had a permit issued under this section revoked within the last 10 years.
(c)	Conviction Defined. – For purposes of this section, a conviction is a judgment against a person that includes a finding of guilt or an entry of a plea of guilty or nolo contendere.  A felony conviction in another jurisdiction disqualifies a person from being eligible to receive or hold a lottery game retailer permit if the person's conduct would also constitute a felony in North Carolina.  A conviction of a misdemeanor gambling offense in another jurisdiction disqualifies a person from being eligible to receive or hold a lottery game retailer permit if the person's conduct would constitute an offense in North Carolina, unless the Commission determines that under North Carolina procedure judgment would not have been entered under the same circumstances.  Revocation of a similar permit or authority to sell lottery tickets in another jurisdiction disqualifies a person if the person's conduct would be grounds for revocation in North Carolina.
(d)	Who Must Qualify. – For a lottery game retailer permit to be issued to and held by a business, each of the following persons associated with that business must qualify under subsection (b):
(1)	The owner of a sole proprietorship.
(2)	Each member of a firm, an association, or a general partnership.
(3)	Each general partner in a limited partnership.
(4)	Each officer, director, and owner of more than ten percent (10%) of the stock of a corporation, except that the age requirement of subdivision (b)(1) does not apply to a stockholder who is not a manager of or is not otherwise responsible for the day-to-day operation of the applicant's retail business.
(5)	The manager of a retail business operated by a corporation.
(6)	Any manager who has been empowered as attorney-in-fact for a nonresident individual or partnership.
"§ 105C-36.  Issuance of lottery game retailer permit.
(a)	Factors. – Before issuing a lottery game retailer permit, the Commission shall be satisfied that the applicant is a suitable person to hold the permit and that the applicant's retail business is a suitable place to sell lottery game tickets and shares.  The Commission may consider any of the following factors in making its decision:
(1)	The reputation, character, and criminal record of the applicant.
(2)	The number of places already holding lottery game retailer permits in the neighborhood.
(3)	The convenience of the applicant's retail business to the public, including available parking and the traffic conditions in the neighborhood.
(4)	The financial responsibility of the applicant.
(5)	The volume of lottery game tickets and shares the applicant expects to sell.
(6)	Any other information that would tend to show whether the applicant would comply with the lottery laws.
(b)	Commission's Authority. – The Commission has the sole power, in its discretion, to determine the suitability and qualifications of an applicant for a lottery game retailer permit.
"§ 105C-37.  Application for permit; fees.
(a)	Form. – An application for a lottery game retailer permit shall be on a form prescribed by the Commission and shall be notarized.  The application shall be signed and sworn to by each person required to qualify under G.S. 105C-30(d).
(b)	Investigation. – Before issuing a new permit, the Commission, with the assistance of the State Bureau of Investigation, shall investigate the applicant and the applicant's retail business.  An applicant shall cooperate fully with the investigation.
(c)	False Information. – Knowingly making a false statement in an application for a lottery game retailer permit is grounds for denying, suspending, or revoking the permit and is unlawful.
(d)	Fees. – An application for a lottery game retailer permit shall be accompanied by the application fee, if any, set by the Commission.  An application fee is not refundable.
"§ 105C-38.  Compensation for lottery game retailers.
(a)	Amount. – Upon the recommendation of the Director, the Commission shall determine the compensation to be paid to lottery game retailers for their sales of lottery game tickets or shares.  Until the Commission establishes a different amount of compensation, the Commission shall pay each lottery game retailer five percent (5%) of the retail price of the tickets or shares sold by the retailer plus an incentive bonus of one percent (1%) of the amount sold above a specified sales volume or the attainment of another objective specified by the Commission.
(b)	Effect on Lease or Rental Agreement. – If a lease or rental agreement made by a lottery game retailer is based on a percentage of the retailer's retail sales, the retailer's sales of lottery game tickets or shares shall not be counted in computing the amount payable under the agreement unless the agreement explicitly includes these sales.  Conversely, a lease or rental agreement based on a percentage of sales includes the amount of compensation paid to a lottery game retailer under subsection (a) unless the agreement specifically excludes these payments.
"§ 105C-39. Duration of permit; renewal and transfer.
(a)	Duration. – A lottery game retailer permit is valid for a two-year period that begins on July 1 and ends on June 30.
(b)	Renewal. – Application for renewal of a lottery game permit shall be on a form prescribed by the Secretary.  An application for renewal shall be accompanied by the renewal fee, if any, set by the Commission.  A renewal fee is not refundable.
(c)	Change in Ownership. – A lottery game retailer permit for a retail business automatically expires and shall be surrendered to the Commission if any of the following occurs:
(1)	Ownership of the retail business changes.
(2)	There is a change in the membership of the firm, association, or partnership owning the retail business and the change involves the acquisition of a ten percent (10%) or greater share in the firm, association, or partnership by someone who did not previously own a ten percent (10%) or greater share.
(3)	Ten percent (10%) or more of the stock of the corporate permit holder owning the retail business is acquired by someone who did not previously own ten percent (10%) or more of the stock.
(d)	Change in Management. – A corporation holding a lottery game retailer permit for a retail business  for which the manager is required to qualify as an applicant under G.S. 105C-30(d) shall, within 30 days after employing a new manager, submit to the Commission an application for substitution of a manager. The application shall be signed by the new manager, shall be on a form provided by the Commission, and shall be accompanied by a fee of ten dollars ($10.00). The fee is not refundable.
(e)	Transfer. – A lottery game retailer permit may not be transferred from one person to another or from one location to another.
(f)	Lost Permit. – The Commission may issue a duplicate lottery game retailer permit for a retail business when the permit issued has been lost or damaged.  A request for a duplicate permit shall be on a form provided by the Commission, certified by the lottery game retailer whose permit is lost or damaged, and accompanied by a fee of ten dollars ($10.00).
(g)	Name Change. – The Commission may issue a new lottery game retailer permit for a retail business when the name of the retail business changes.  A request for a new permit shall be on a form provided by the Commission, certified by the lottery game retailer whose business name has changed, and accompanied by a fee of ten dollars ($10.00).
"§ 105C-40.  Denial, suspension, or revocation of a lottery game retailer permit.
(a)	The Commission may deny, suspend, or revoke a lottery game retailer permit for any of the following reasons:
(1)	Knowingly making a false statement on an application for a lottery game retailer permit.
(2)	Failing to keep records as required by the Commission.
(3)	Failing to account for lottery game tickets or shares received or the proceeds from the sale of the tickets or shares.
(4)	Failing to file a bond required by the Commission.
(5)	Failing to comply with the rules of the Commission concerning the payment of prizes or other matters.
(6)	Conviction of an offense that would make an applicant ineligible to receive a permit.
(7)	Making misrepresentations concerning a lottery game or doing other acts that create a lack of public confidence in the lottery.
(8)	Failing to sell enough lottery game tickets or shares to meet the Commission's projected sales volume.
(9)	A change in circumstances that makes the retail business for which a permit has been issued no longer suitable to hold a permit.
"§ 105C-41. Records, payments, and bonds of lottery game retailers.
(a)	Records. – A lottery game retailer shall keep books and records of lottery game tickets and shares received, lottery game sales, and lottery game prize winners and prize payments as required by the Commission.  The books and records of a lottery game retailer shall be open for inspection by the Commission during business hours of the retail business.
(b)	Bonds. – The Commission may require a lottery game retailer to give a bond in an amount set by the Commission.  The bond shall be in the form specified by the Commission, shall be conditioned on the lottery game retailer's compliance with the lottery laws, and shall be payable to the State.
(c)	Remittance. – A lottery game retailer shall periodically report and send to the Commission the amount of revenue received by the retailer from sales of lottery game tickets or shares, less the amount of prizes paid by the retailer and the retailer's compensation for making the sales.  The Commission shall establish the periods and methods for reporting revenue under this subsection.
"§ 105C-44.  Miscellaneous provisions concerning lottery game retailer permits.
(a)	Posting Permit. – The holder of a lottery game retailer permit shall post the permit in a prominent place at the retail business named in the permit.
(b)	Notice of Issuance. – When the Commission issues a lottery game retailer permit, it shall notify the following people of the issuance and give the name and address of the retail business for which the permit was issued:
(1)	The State Bureau of Investigation.
(2)	The governing body and sheriff of the county in which the retail business is located.
(3)	If the retail business is located inside a city, the governing body and the chief of police of the city.
"ARTICLE 5.
"Lottery Fund and Infrastructure Fund.
"§ 105C-50.  Lottery Fund.
The Lottery Fund is established as a proprietary fund within the State treasury.  The Lottery Fund shall account for all revenues and expenses of the lottery.  Interest and other investment income earned by the Lottery Fund shall accrue to the Lottery Fund.  The Lottery Fund is continuously appropriated to the Commission to provide funds for the Commission and the operation of the lottery.  The State Treasurer shall transfer the net income of the Lottery Fund to the Infrastructure Fund on a monthly basis.
"§ 105C-51.  Creation and uses of Infrastructure Fund.
(a)	Fund. – The Infrastructure Fund is established as a special revenue fund in the State treasury.  The Office of State Budget and Management shall administer the Fund.  The Fund consists of the net income of the State lottery and interest and income earned by the Infrastructure Fund.  Revenue in the Infrastructure Fund may be used only to construct or maintain capital projects, other than secondary road projects or projects in the Transportation Improvement Program.
(b)	Principal. – The principal of the Infrastructure Fund may be used only for one or more of the following purposes:
(1)	To provide revenue, by an appropriation, for a specific capital construction project of the State, including the placement of natural gas distribution lines in utility corridors along highway rights-of-way.
(2)	To provide revenue, by an appropriation, to maintain a State building or other State property.
(3)	To provide revenue, by an appropriation from the Fund, for one or more of the following Funds:
a.	The Clean Water Revolving Loan and Grant Fund, established by G.S. 159G-5.
b.	The Critical School Facility Needs Fund, established by G.S. 115C-489.1.
c.	The Public School Building Capital Fund, established by G.S. 115C-546.1.
d.	The Solid Waste Management Loan Fund, established by G.S. 159I-7.
(c)	Interest. – Interest and other investment income earned by the Infrastructure Fund, but not the principal of the Infrastructure Fund, may be used only for a purpose for which the principal can be used or to make a loan or grant to a unit of local government for a specific capital construction project of the local unit.  A grant or loan may not be made from the Infrastructure Fund, however, for a project that is within the scope of projects that can be funded from a Fund listed in subdivision (b)(3).
"§ 105C-52.  Application procedure for a loan or grant from the Infrastructure Fund.
(a)	OSBM. – The Office of State Budget and Management shall make loans and grants to units of local government from the interest and other investment income earned by the Infrastructure Fund.  The Office shall select the units of local government that are to receive a loan or grant from among the units that apply for a loan or grant.  The Office, with the assistance of the Local Government Commission, shall determine whether a selected unit shall receive a loan as opposed to a grant and the interest rate that applies to any loan made.
(b)	Application. – A unit of local government may apply to the Office of State Budget and Management for a capital project loan or grant from the investment income earned by the principal in the Infrastructure Fund.  An application shall include all of the following:
(1)	A description of the capital project for which the application is submitted.
(2)	A detailed statement of the projected costs of the capital project, including the cost to plan, design, and construct the project and acquire any interest in real property needed for the project.
(3)	An explanation of why the capital project is needed and the benefits the unit expects to derive from the project.
(4)	The unit's ability to pay for the capital project.
(5)	Any other information needed by the Office of State Budget and Management to enable the Office to make a decision on the application.
(c)	Procedure. – To process the applications received from units of local government for a loan or grant from the investment income of the Infrastructure Fund, the Office of State Budget and Management shall divide the year into two periods.  The Office shall consider together all complete applications first received in a period and all applications first considered in the previous period but not selected.  A unit of local government whose application is not selected after it is considered for two successive periods must submit a new application to receive further consideration.
"§ 105C-53. Selection for loan or grant from Infrastructure Fund.
(a)	Priorities. – The Office of State Budget and Management shall select the applications that are to receive loans or grants from the investment income of the Infrastructure Fund based on the capital needs of the local units of government that submitted the applications and their ability to finance these needs without a loan or grant from the State.  The Office shall give first priority to capital projects that both promote the economic development of the unit and enable the unit to take better advantage of the improvements to the Intrastate System listed in G.S. 136-179.  The Office shall give second priority to capital projects that promote the economic development of the unit but are not related to improvements in the Intrastate System.
(b)	Ability To Pay. – The Office shall determine the ability of a unit of local government to finance its capital needs on the basis of the per capita property tax value in the unit and the property tax burden in the unit.  The property tax burden is the percentage of per capita income in the unit that is consumed by the payment of property taxes.  A unit with a high property tax burden is considered to have less ability to finance its needs than a unit with a low property tax burden.  Conversely, a unit with a low per capita property tax value is considered to have less ability to finance its needs than a unit with a high per capita property tax value.
(c)	Ranking. – The Office of State Budget and Management shall rank each application considered in a period and shall send each unit of local government a statement of the ranking of the unit's application.  The Office shall select applications beginning with the application with the highest ranking and shall select as many applications as can be funded for a period, taking into consideration the interest rate, if any, set for loans for applications selected and whether the applications selected are to receive grants rather than loans.
"§ 105C-54. Decision on financial terms for selected applications.
(a)	Grant. – The Office of State Budget and Management shall make a grant rather than a loan to a unit of local government whose application is selected when, with the assistance of the Local Government Commission, it determines that the unit of local government has no resources to repay a loan.  A unit is considered to have no resources to repay a loan only if a five percent (5%) increase in the property tax rate of the unit of local government would not produce the amount of the proposed loan.
(b)	Loan. – The Office of State Budget and Management shall make a loan to a unit of local government rather than a grant when the unit does not qualify for a grant under subsection (a).  The Office, with the approval of the Local Government Commission, shall set the terms and conditions for repayment of a loan.  The Local Government Commission shall review and approve a proposed loan to a unit of local government under this Article under the provisions of Articles 4 and 5, Chapter 159 of the General Statutes, as if the unit proposed to issue bonds rather than obtain a loan.
The Office of State Budget and Management may make an interest-free loan or set an interest rate at any amount that is not more than the prevailing national market rate for general obligation bonds having the same maturity as the term of the loan.  With the approval of the Local Government Commission, the Office shall decide the interest rate that applies to a particular loan based on the borrowing unit's resources to repay the loan and the effect of repaying the loan with interest on the property tax burden in the unit.
A unit of local government that receives a loan shall sign a debt instrument evidencing the loan and the terms of the loan.  The Office of State Budget and Management and the State Treasurer, with the assistance of the Local Government Commission, shall develop appropriate debt instruments for use under this Article.  The Local Government Commission shall establish procedures for the delivery of debt instruments to the State without any public bidding.
(c)	Payment. – When the Office of State Budget and Management makes a grant or a loan, it shall determine whether to pay the grant or loan in a lump sum or to make installment payments of the grant or loan as the capital project funded by the grant or loan progresses.
"§ 105C-55. Local government borrowing authority.
(a)	Authority. – A unit of local government may execute a debt instrument payable to the State in order to obtain a revolving loan under this Article.  A unit of local government shall pledge as security for the debt the user fee revenues derived from operating the facilities or systems benefited by the loan, the unit's faith and credit, or both user fee revenues and the unit's faith and credit.  The faith and credit of a unit of local government shall not be pledged or be considered to be pledged unless the requirements of Article 4 of Chapter 159 of the General Statutes have been met.
(b)	Nature. – A revolving loan under this Article is considered  outstanding debt under Article 10 of Chapter 159 of the General Statutes."
Sec. 2.  Studies.  (a)	Demographics. –  After the first 12 months of sales of lottery game tickets or shares to the public, the Commission shall engage an independent firm experienced in demographic analysis to conduct a special study to determine the demographic characteristics of the players of each lottery game, including their income, age, sex, education, and frequency of participation.  The study shall be completed by November 1, 1992, and presented to the Governor, the Lieutenant Governor, the President Pro Tempore of the Senate, and the Speaker of the House of Representatives.
(b) Effectiveness. – After the first 12 months of sales of lottery game tickets or shares to the public, the Commission shall engage an independent firm experienced in the analysis of advertising, promotion, public relations, and other aspects of communications to conduct a special study of the effectiveness of the communications activities undertaken by the Commission and to make recommendations to the Commission on the future conduct of and the future rate of expenditures for these activities.  The study shall be completed by November 1, 1992, and presented to the Governor, the Lieutenant Governor, the President Pro Tempore of the Senate, and the Speaker of the House of Representatives.
Sec. 3.  There is appropriated from the General Fund to the Lottery Commission the sum of $15,000,000 for the 1991-92 fiscal year for start-up costs of the State lottery.  This amount shall be repaid to the General Fund from the revenue of the State lottery within the first 12 months after lottery game tickets or shares are sold.
Sec. 4.  G.S. 114-15 reads as rewritten:
"§ 114-15. Investigations of lynchings, election frauds, etc.; services subject to call of Governor; witness fees and mileage for Director and assistants.
The Bureau shall, through its Director and upon request of the Governor, investigate and prepare evidence in the event of any lynching or mob violence in the State.  With the approval of the Governor, the Bureau shall investigate all cases arising from frauds in connection with elections when requested to do so by the Board of Elections, and shall investigate all cases arising from violations of the lottery laws when requested to do so by the Lottery Commission. Such investigation, however, shall in nowise interfere with the power of the Attorney General to make such investigation as he is authorized to make under the laws of the State. The Bureau is authorized further, at the request of the Governor, to investigate cases of frauds arising under the Social Security Laws of the State, of violations of the gaming laws, and lottery laws, and matters of similar kind when called upon by the Governor so to do. In all such cases it shall be the duty of the Department to keep such records as may be necessary and to prepare evidence in the cases investigated, for the use of enforcement officers and for the trial of causes. The services of the Director of the Bureau, and of his assistants, may be required by the Governor in connection with the investigation of any crime committed anywhere in the State when called upon by the enforcement officers of the State, and when, in the judgment of the Governor, such services may be rendered with advantage to the enforcement of the criminal law. The State Bureau of Investigation is hereby authorized to investigate without request the attempted arson of, or arson of, damage of, theft from, or theft of, or misuse of, any State-owned personal property, buildings, or other real property or any assault upon or threats against any legislative officer named in G.S. 147-2(1), (2), or (3) or any executive officer named in G.S. 147-3(c).  
Upon the request of the Lottery Commission and the approval of the Governor, the State Bureau of Investigation is authorized to investigate the background of an applicant for employment with the Lottery Commission, the background of an applicant for a lottery game retailer permit, and the background of a prospective contractor with the Lottery Commission for goods or services concerning the printing of tickets or shares for use in a lottery game, the receipt or recording of number selections in a lottery game, or the determination or generation of winners in a lottery game.  The Bureau also is authorized at the request of the Governor to conduct a background investigation on a person that the Governor plans to nominate for a position that must be confirmed by the General Assembly, the Senate, or the House of Representatives.  The background investigation of the proposed nominee shall be limited to an investigation of the person's criminal record, educational background, employment record, records concerning the listing and payment of taxes, and credit record, and to a requirement that the person provide the information contained in the statements of Executive Order Number 1, filed on January 31, 1985, as contained on pages 1405 through 1419 of the 1985 Session Laws (First Session, 1985).  The Governor must give the person being investigated written notice that he intends to request a background investigation at least 10 days prior to the date that he requests the State Bureau of Investigation to conduct the background investigation.  The written notice shall be sent by regular mail, and there is created a rebuttable presumption that the person received the notice if the Governor has a copy of the notice.
The State Bureau of Investigation is further authorized, upon request of the Governor or the Attorney General, to investigate the commission or attempted commission of the crimes defined in the following statutes:
(1)	All sections of Article 4A of Chapter 14 of the General Statutes;
(2)	G.S. 14-277.1;
(3)	G.S. 14-277.2;
(4)	G.S. 14-283;
(5)	G.S. 14-284;
(6)	G.S. 14-284.1;
(7)	G.S. 14-288.2;
(8)	G.S. 14-288.7;
(9)	G.S. 14-288.8; and
(10)	G.S. 14-288.20.
All records and evidence collected and compiled by the Director of  the Bureau and his assistants shall not be considered public records within the meaning of G.S. 132-1, and following, of the General Statutes of North Carolina and may be made available to the public only upon an order of a court of competent jurisdiction. Provided that all records and evidence collected and compiled by the Director of the Bureau and his assistants shall, upon request, be made available to the district attorney of any district if the same concerns persons or investigations in his district.
In all cases where the cost is assessed against the defendant and paid by him, there shall be assessed in the bill of cost, mileage and witness fees to the Director and any of his assistants who are witnesses in cases arising in courts of this State. The fees so assessed, charged and collected shall be forwarded by the clerks of the court to the Treasurer of the State of North Carolina, and there credited to the Bureau of Identification and Investigation Fund."
Sec. 5.  G.S. 120-123 is amended by adding a new subdivision to read:
"(59)	The State Lottery Commission, established by G.S. 105C-2."
Sec. 6.  Temporary Rules.  Notwithstanding Chapter 150B of the General Statutes, until September 30, 1992, the Commission may adopt temporary rules to implement this Chapter subject to approval by the Governor.  A temporary rule approved by the Governor becomes effective on the date stated in the rule or the date it is approved by the Governor, whichever comes first.  A temporary rule adopted under this section expires October 1, 1992.
Sec. 7.  This act is effective upon ratification.  This act expires July 1, 1997, if the majority of votes cast in a referendum held at the November 1996 general election are not in favor of the continued operation of the State lottery.  At the November 1996 general election, the question of the continued operation of the State lottery shall be submitted to the qualified voters of the State.  The referendum shall be held in accordance with Chapter 163 of the General Statutes.  The form of the ballot for the referendum shall be:
"[ ]	FOR continued operation of the State lottery.
[ ]	AGAINST continued operation of the State lottery."
If the voters do not approve the continued operation of the State lottery in the referendum, the Commission shall stop selling lottery game tickets or shares effective January 1, 1997, and shall proceed to end all lottery operations.  The holder of a winning lottery game ticket or share who has not claimed the prize won by January 1, 1997, may claim the prize until June 30, 1997.  After July 1, 1997, no claims for a lottery prize shall be accepted.