Does the Arkansas Scholarship Lottery Act's ban on the lottery 'issuing bonds' stop the lottery office from running a self-bonding pool for retailers?
Plain-English summary
The Arkansas Scholarship Lottery Act tells the Office of Arkansas Lottery that it "shall not issue bonds for any purpose." The lottery office wanted to amend its retailer rules so that retailers, instead of buying a surety bond from a third party, would pay an annual fee into a pool that the lottery would draw on if a retailer failed to deliver money owed. The Department of Finance and Administration asked whether the "no bonds" language blocked that pooled-fee idea.
The Attorney General said it did not. Two reasons. First, the word "bonds" in the lottery act covered both debt instruments (money borrowed by the issuer) and performance or surety bonds (guarantees of someone's contract performance), and the statutory context showed which kind any given section was talking about. The "shall not issue bonds" provision sat inside a section about how the lottery finances its operations, which made clear it was barring debt issuance, not surety arrangements. Second, even if surety bonds were in play, the proposed rule did not have the lottery issuing one. A surety bond is issued by a third party in favor of the person owed performance. Here the lottery was the one owed performance, and the pool replaced any third-party surety; the lottery was not "issuing" anything.
Currency note
This opinion was issued in 2015. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Common questions
What does it mean for a lottery agency to "issue bonds"?
In 2015 the AG read the lottery act's prohibition as targeting debt instruments, meaning bonds that the lottery itself would float to raise money it would later have to repay. The same word elsewhere in the same act referred to surety or performance bonds, which secure someone's promise rather than create debt. Context, not a single dictionary entry, told the reader which sense applied in each section.
What was the proposed self-bond program?
Retailers selling lottery tickets typically have to post a surety bond to protect the lottery against retailer defaults. The lottery wanted to replace that with an annual fee paid into a shared pool. If a retailer failed to remit money owed, the pool would cure the default. The retailer would still owe money to the lottery, but no third-party surety would stand behind the obligation.
Did the opinion authorize the self-bond program itself, or just say the statute did not block it?
It addressed the statutory question only. The opinion concluded the "issue bonds" prohibition was not an obstacle and that adopting the rule would not amount to the lottery issuing a surety or performance bond. The AG did not pass on whether the pooled-fee design was sound policy, sufficient to cover defaults, or compliant with other laws or contract requirements.
Why did the AG distinguish debt bonds from performance bonds?
Because the same word "bonds" appeared in different sections of the lottery act with different functions. At least two sections referred to both kinds. Reading "bonds" as covering only debt instruments in the financing-and-operations section was consistent with how the act used the word elsewhere when it described retailer and vendor security arrangements.
Background and statutory framework
The opinion construed the Arkansas Scholarship Lottery Act as amended and reenacted by Act 218 of 2015. The operative bar was Ark. Code Ann. § 23-115-803(a)(3): the Office of Arkansas Lottery "shall not issue bonds for any purpose." Other sections of the act, including § 23-115-302(b)(7) (vendor bonds) and § 23-115-603(c) (retailer bonds), used the word "bonds" in its surety or performance sense. Ark. Code Ann. § 23-115-502(a) gave a contractor the option of providing a performance bond or instead depositing investment securities, including certain debt-instrument bonds, illustrating that the act used the word in both senses.
The opinion relied on statutory context rather than a definition section, since the act did not define "bonds." It cited Black's Law Dictionary for the dual meaning of the word.
Citations
- Ark. Code Ann. § 23-115-803(a)(3)
- Ark. Code Ann. § 23-115-302(b)(7)
- Ark. Code Ann. § 23-115-502(a)
- Ark. Code Ann. § 23-115-603(c), (d)
- Acts 2015, No. 218 (amending and reenacting the Arkansas Scholarship Lottery Act)
- Black's Law Dictionary 211, 214 (10th ed. 2014)
Source
Original opinion text
Opinion No. 2015-103
August 19, 2015
Bishop Woosley, Director
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE
DF&A Office of Arkansas Lottery
Post Office Box 3238
Little Rock, AR 72203-3238
Dear Mr. Woosley:
In response to your request on behalf of Larry Walther, Director, Department of Finance and Administration ("DF&A"), this is my opinion on the meaning of the word "bonds," as used in one part of the Arkansas Scholarship Lottery Act (the "Act").
The Act provides that the Office of Arkansas Lottery within DF&A ("OAL") "shall not issue bonds for any purpose." The Act also provides for "bonds" from retailers and vendors.
You state that OAL proposes to amend an OAL rule to provide for a self-bonding program whereby retailers will not be required to obtain a surety bond but instead will pay an annual fee to OAL, which will pool the fees and use them to cure retailer defaults (the "Proposed Rule").
You ask whether the Act's prohibition on OAL bond issuance prohibits OAL from adopting the Proposed Rule.
RESPONSE
In my opinion, the answer to your question is "no."
DISCUSSION
The Act uses the word "bonds" — without definition — to refer both to instruments evidencing indebtedness for money borrowed, and to instruments securing a contract's performance or an employee's fidelity. At least two sections refer to both kinds. In my view, the statutory context makes clear in each instance the sort of bond referenced.
The prohibition on OAL bond issuance is in a section generally providing for financing of OAL's operations. The section provides that OAL may borrow or otherwise accept money from the State to effectuate its purposes, but "shall not issue bonds for any purpose."
In my view, the statutory context makes clear that the reference is to debt instruments, not performance or surety bonds. Thus this section does not, in my opinion, constrain OAL with respect to performance or surety bonds, the subject of the Proposed Rule.
In any event, it is also my opinion that OAL's implementation of the Proposed Rule in the form submitted will not involve its issuance of a performance or surety bond. Such a bond is issued by a third party in favor of the person to whom performance is owed. Here, OAL is the person to whom performance is owed. The Proposed Rule is OAL's proposal to secure retailers' obligations to OAL without the issuance of third-party surety bonds. It will not, in my opinion, involve OAL's issuance of any such bond.
Assistant Attorney General J.M. Barker prepared this opinion, which I approve.
Sincerely,
LESLIE RUTLEDGE
Attorney General
LR/JMB:cyh