Can the Oregon State Lottery use its constitutionally dedicated administrative funds to address problem gambling, fund treatment programs, or pay for related research and reports?
Subject
Oregon State Lottery
Plain-English summary
The State Lottery asked the AG seven questions about how it could (and could not) address problem gambling. The questions ranged across spending administrative funds on responsible-gambling programs, employing an addiction adviser, adopting policy directives from the legislature, jointly reporting with the Oregon Health Authority, and restructuring the lottery's revenue mandate.
The legal anchor for everything was the Oregon Supreme Court's 1994 decision in Ecumenical Ministries v. Oregon State Lottery Comm. That case held that "costs of administration" for the lottery (the funds constitutionally appropriated under Article XV, sections 4(3) and 4(4)(d)) cover only "the 'expenses' or 'costs' of the internal implementation and management of the lottery." The court struck down a state law that diverted lottery administrative funds to pay for community mental health treatment programs for gambling addiction, even though the court acknowledged that "the need for [such programs] may result in part from the operation of the lottery." Spending lottery administrative funds on harm mitigation was outside the constitutional appropriation.
The AG took that holding and worked through the questions:
(1) Lottery administrative funds can pay for "responsible gambling" expenditures that count as internal lottery management (such as marketing strategies that avoid exploiting vulnerable groups, or consumer-facing communications about responsible play), but not for "problem gambling" treatment or harm-mitigation programs.
(2) Lottery staff and resources funded by gross lottery proceeds are subject to the same constraint, because using staff funded by those proceeds is the same as using the proceeds themselves.
(3) The legislature can require the Lottery Director to employ a mental-health-and-addiction adviser, but the adviser's compensation can come from lottery administrative funds only for internal lottery work.
(4) The legislature can require the Commission to adopt problem-gambling policies, but it must specify a non-lottery funding source for any policies that go beyond internal lottery operation.
(5) Joint reports to legislative committees on problem gambling generally are permissible, but again must be funded with non-lottery money. (Demographic studies of lottery players are different and can be funded with lottery administrative funds.)
(6) The legislature can change the Lottery's operational goal (for example, to target the revenue raised in the 2011-2013 biennium and divert any excess to a rainy day fund), as long as the constitutional 18%-to-Education-Stability-Fund and 15%-to-Parks-and-Natural-Resources allocations are preserved, the rainy day fund is used for constitutional purposes, and the Lottery's constitutional duties to operate as a self-supporting revenue raiser within the 16% expense cap are not impaired.
(7) The legislature can define "commensurate with the public good" in ORS 461.200, subject to the same limits.
Currency note
This opinion was issued in 2013. 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 is the difference between "responsible gambling" and "problem gambling" in this opinion?
The AG used the State Lottery's working definitions. "Problem gambling" is gambling behavior that has a negative effect on the gambler or those close to them (missing work, falling behind in school, arguments, money worries). "Responsible gambling" is the gambler's own approach: viewing gambling as entertainment with associated costs, setting time and money limits, recognizing risks. The legal distinction matters because the AG concluded the Lottery can spend administrative funds on encouraging responsible use of its own products (operations) but not on treating people who develop problems (harm mitigation).
Why is this distinction so strict?
Because the Oregon Supreme Court drew the line in Ecumenical Ministries. Lottery administrative funds are constitutionally appropriated for "administering and operating" the Lottery, which the court read to mean "internal implementation and management." Funding mental health programs, even for problems the Lottery contributed to, was found to fall outside that appropriation. The AG could not read that hole shut, even where the connection between lottery operation and the harm was direct.
Could the legislature just appropriate other money for problem gambling treatment?
Yes. Nothing in the AG's analysis stops the legislature from funding problem gambling treatment, research, or reports out of general fund or other non-lottery dollars. The constraint is only on using the constitutionally dedicated lottery administrative pot.
What is "commensurate with the public good"?
ORS 461.200 directs the Lottery to operate "to produce the maximum amount of net revenues to benefit the public purpose described in section 4, Article XV * * *, commensurate with the public good." The phrase is undefined. The AG read it as moderating the revenue-maximization mandate with consideration of community welfare. For example, a marketing campaign targeting adults with developmental disabilities or early-stage dementia might maximize revenue but would not be commensurate with the public good. The AG concluded the legislature could define this phrase by statute.
Can the legislature freeze lottery revenue at 2011-2013 levels?
The AG read the constitution to require: (1) operation as a "self-supporting revenue-raising agency," (2) using lottery proceeds alone to operate, and (3) returning at least 84% of revenues to the public as prizes and net revenues. The legislature can specify additional duties under Article XV, section 4(4)(a). The AG concluded the legislature could change the operational goal to a fixed amount and route excess revenues to a rainy day fund usable only for constitutional purposes, as long as those three requirements were preserved.
What about the existing 18% Education Stability Fund and 15% Parks allocations?
Those constitutional allocations stayed intact. The AG noted the legislative proposal in question (changing the goal of operations and routing excess to a rainy day fund) preserved the Education Stability and Parks allocations, then directed the remainder either to the Administrative Services Economic Development Fund (capped at the 2011-2013 amount) or to the rainy day fund.
Background and statutory framework
The Oregon State Lottery was created by 1984 Ballot Measure 4, which amended Article XV, section 4 of the Oregon Constitution. Article XV, section 4(3) provides that all lottery proceeds, "including interest, but excluding costs of administration and payment of prizes," go to creating jobs, furthering economic development, financing public education, and restoring/protecting parks, beaches, watersheds, and habitats. Article XV, section 4(4)(d) creates the Oregon State Lottery Fund, makes the Lottery a "self-supporting revenue-raising agency," and requires at least 84% of revenues to be returned to the public.
Article XV, section 4(5) and 4(8) further allocate net proceeds to the Education Stability Fund (18%), Parks and Natural Resources Fund (15%), and other constitutional uses.
Companion statutes from 1984 Ballot Measure 5 sit in ORS 461. ORS 461.020 declares the purpose to provide additional public moneys without new taxes. ORS 461.510(2) and (4) describe permissible disbursements from the Lottery Fund and define "expenses." ORS 461.200 sets the revenue-maximization goal moderated by "commensurate with the public good."
The interpretive anchor is Ecumenical Ministries v. Oregon State Lottery Comm., 318 Or 551 (1994). The court there read "costs of administration" and "administering and operating" the Lottery to mean "expenses or costs of the internal implementation and management of the lottery," and held that statutorily required lottery administrative spending on community mental health treatment for gambling addiction violated Article XV, sections 4(3) and 4(4)(e) (now 4(4)(d)).
Earlier AG opinions (44 Op Atty Gen 431 (1985); 46 Op Atty Gen 61 (1988); 1996 Letter of Advice OP-1996-5; 50 Op Atty Gen ___ (2007)) had developed the same framework: lottery administrative funds may pay for things "reasonably necessary or required" to internally implement the Lottery, but not for "government programs or operations that do not directly contribute to the internal implementation or management of the Lottery."
Citations
- Oregon Constitution, Article XV, section 4 (subsections 3, 4(a), 4(d), 5, 8)
- ORS 461.020; 461.110; 461.180; 461.200; 461.510
- Ecumenical Ministries v. Oregon State Lottery Comm., 318 Or 551, 871 P2d 106 (1994)
- 44 Op Atty Gen 431 (1985); 46 Op Atty Gen 61 (1988); 50 Op Atty Gen ___ (2007)
Source
- Landing page: https://www.doj.state.or.us/oregon-department-of-justice/office-of-the-attorney-general/attorney-general-opinions/
- Original PDF: https://www.doj.state.or.us/wp-content/uploads/2013/03/op2013-2.pdf
Original opinion text
ELLEN F. ROSENBLUM
MARY H. WILLIAMS
Attorney General
Deputy Attorney General
DEPARTMENT OF JUSTICE
GENERAL COUNSEL DIVISION
March 18, 2013
Larry Niswender, Director
Oregon State Lottery
500 Airport Road SE
Salem, OR 97301
Re: Opinion Request OP-2013-2
Dear Mr. Niswender:
You have asked us to answer seven questions about the authority of the Legislative Assembly to require or the Lottery Commission (Commission) to undertake various actions to address responsible gambling and problem gambling. For purposes of this opinion, we use the definitions for those terms provided by the State Lottery. "Problem gambling" means any gambling behavior that has a negative effect on the gambler or the lives of people close to the gambler. "Responsible gambling" means behavior whereby the gambler views gambling as entertainment with associated costs; sets a limit for the time and money spent and sticks to it; and recognizes that uncontrolled gambling can create problems for the gambler, for others in the gambler's social network, and for the community.
FIRST QUESTION PRESENTED
May the State Lottery expend constitutionally appropriated lottery administrative funds to implement and carry out responsible gambling and problem gambling policies, procedures and programs?
ANSWER GIVEN
Yes, if the expenditure is reasonably necessary or required to internally implement and manage the State Lottery and not if the expenditure is for a program or operation that does not contribute to the internal implementation or management of the State Lottery. For example, expenditures for communications that encourage the responsible use of lottery products might be reasonably necessary or required to internally implement the lottery, but expenditures to fund programs to treat "problem gambling" behavior or to fund programs to mitigate harms caused or exacerbated by operation of the lottery would not.
SECOND QUESTION PRESENTED
To what extent may staff and other resources of the State Lottery be used to implement and carry out responsible gambling and problem gambling policies, procedures and programs?
ANSWER GIVEN
Staff and resources funded by gross state lottery proceeds may be used to implement and carry out "responsible gambling" and "problem gambling" policies, procedures and programs to the same extent that gross state lottery proceeds may be used to fund those policies, procedures and programs.
THIRD QUESTION PRESENTED
May the Legislative Assembly require the Director of the State Lottery to employ an individual to advise the Director and the Commission on mental health and addiction issues associated with the State Lottery?
ANSWER GIVEN
Yes, but state lottery administrative funds may be expended to employ such an individual only to work on internal implementation and management activities of the State Lottery, as discussed further in the answers to the first and second questions.
FOURTH QUESTION PRESENTED
May the Legislative Assembly require the Commission to adopt a policy to minimize "problem gambling" risks and mitigate "problem gambling" harms associated with lottery games?
ANSWER GIVEN
Yes, but, as discussed in the answer to the first question, state lottery administrative funds may be used to develop and implement policies only to the extent that those policies implement the State Lottery and may not be expended to mitigate harmful effects that may be caused in part or exacerbated by State Lottery operations.
FIFTH QUESTION PRESENTED
May the Legislative Assembly require the Oregon Health Authority and the Commission to jointly report annually to an appropriate legislative committee specified data regarding "problem gambling," "problem gambling" awareness campaigns, progress made in reducing "problem gambling," and similar metrics?
ANSWER GIVEN
Yes, if the Legislative Assembly appropriates sufficient non-lottery funds to the Commission to pay the expenses of preparing the legislatively-required report.
SIXTH QUESTION PRESENTED
May the Legislative Assembly reduce the pressure on the State Lottery to generate additional income by making the goal of lottery operations to generate the amount of revenue currently generated, freezing the amount that may be transferred to the Administrative Services Economic Development Fund if that goal is exceeded, and specifying that any additional revenue generated would go into a rainy day fund to be used for Article XV, section 4, purposes?
ANSWER GIVEN
Yes, if the proportional amounts specified by the constitution to be allocated to particular funds are allocated to those funds, moneys in the rainy day fund are used only for constitutionally specified purposes, and doing so does not conflict with the State Lottery's constitutional duties to operate as a revenue-raising state agency and to spend no more than 16 percent of gross lottery proceeds to operate the lottery.
SEVENTH QUESTION PRESENTED
May the Legislative Assembly define "commensurate with the public good" for purposes of ORS 461.200?
ANSWER GIVEN
Yes, as long as it does so in a way that does not inherently conflict with the State Lottery's constitutional duties to operate as a revenue-raising agency and to spend no more than 16 percent of gross lottery proceeds to operate the lottery and does not unduly burden the Commission's duty to operate the State Lottery.
DISCUSSION
I. Pertinent text of Article XV, section 4
In 1984, Oregon voters, acting through the initiative process, approved Ballot Measure 4, which amended Article XV, section 4, of the Oregon Constitution to provide for the establishment and operation of a state-run lottery. As pertinent, Article XV, section 4, now provides:
(3) There is hereby created a State Lottery Commission which shall establish and operate a State Lottery. All proceeds from the State Lottery, including interest, but excluding costs of administration and payment of prizes, shall be used for any of the following purposes: creating jobs, furthering economic development, financing public education in Oregon or restoring and protecting Oregon's parks, beaches, watersheds and critical fish and wildlife habitats.
(4)(a) * * * The Commission is empowered to promulgate rules related to the procedures of the Commission and the operation of the State Lottery. * * * The Commission shall have such additional powers and duties as may be provided by law.
(d) There is hereby created within the General Fund the Oregon State Lottery Fund which is continuously appropriated for the purpose of administering and operating the Commission and the State Lottery. The State Lottery shall operate as a self-supporting revenue-raising agency of state government * * . The State Lottery shall pay all prizes and all of its expenses out of the revenues it receives from the sale of tickets or shares to the public and turnover the net proceeds therefrom to a fund to be established by the Legislative Assembly * * . At least 84% of the total annual revenues from the sale of all lottery tickets or shares shall be returned to the public in the form of prizes and net revenues benefiting the public purpose.
II. Ecumenical Ministries
In Ecumenical Ministries, the Oregon Supreme Court applied its current method to determine the meaning of "costs of administration" as used in Article XV, section 4(3), and the costs of "administering and operating the Commission and State Lottery" as used in Article XV, section 4(4)(d), which makes those costs payable with constitutionally appropriated funds. The court concluded that the voters intended "costs of administration" and the costs of "administering and operating" the Commission and State Lottery to mean "the 'expenses' or 'costs' of the internal implementation and management of the lottery." 318 Or at 567.
As pertinent to our present analysis, the issue before the court in Ecumenical Ministries was the constitutionality of a statute enacted by the legislature after 1984 that required lottery administrative funds to be spent on community mental health treatment programs for gambling addiction. While the court acknowledged "that the need for [such programs] may result in part from the operation of the lottery," expenditures for such programs "are not expenses or costs of the internal implementation or management of the lottery." Id. at 568-569. Therefore, the court held that the statute that authorized those expenditures violated Article XV, sections 4(3) and 4(4)(e), of the Oregon Constitution.
III. Context provided by pertinent provisions of Ballot Measure 5
Three statutes contained in 1984 Ballot Measure 5 provide context pertinent to the constitutional issues your questions raise: ORS 461.020 (purpose and intent); ORS 461.510(2) and (4) (permissible disbursements and definition of "expenses"); and ORS 461.200 (directing the State Lottery to maximize net revenues "commensurate with the public good").
IV. Prior Attorney General Opinions
This office has issued four previous opinions addressing questions about the proper use of State Lottery administrative funds and the extent of the legislature's authority over the State Lottery: 44 Op Atty Gen 431 (1985); 46 Op Atty Gen 61 (1988); March 26, 1996, Letter of Advice OP-1996-5; and 50 Op Atty Gen ___ (2007). The pertinent conclusions:
- The mere fact that the Lottery Commission enjoys constitutional status does not insulate the commission or its area of responsibility from all legislative control. Legislative action may not unduly burden or interfere with the duty and power of the Lottery Commission to establish and operate a lottery.
- The legislature may safely legislate in the areas addressed in Ballot Measure 5 as they concern the operation of the lottery, without concern that such legislation would impinge on any area of exclusive authority given to the commission by the constitution.
- Even when legislating as to matters covered in Ballot Measure 5, the Legislative Assembly may not enact laws that run counter to specific provisions in the constitution.
- Expenditures to administer the lottery are restricted to "purposes that are reasonably necessary or required" to internally implement and manage the lottery and "must not [be used to] pay for government programs or operations that do not directly contribute to the internal implementation or management of the Lottery."
V. Answers to questions
A. Expenditure of lottery administrative funds on "responsible gambling" and "problem gambling" policies, procedures and programs
The court in Ecumenical Ministries held that the constitution permits administrative expenditures only for internal implementation or management of the State Lottery, and therefore that a statute requiring the expenditure of state lottery administrative funds on community mental health treatment programs for gambling addiction violated Article XV, sections 4(3) and 4(4)(e), of the Oregon Constitution. Under that holding, permissible costs of lottery administration do not include expenditures to fund mental health treatment programs for gambling addiction. Problem gambling treatment programs are not distinguishable from gambling addiction treatment programs.
The court appears to draw a distinction between operation of the lottery and programs that address harms that might result in part from operation. Expenditures on the former may be paid for with state lottery administrative funds and expenditures for the latter may not. But the court did not address whether acting to minimize the potential abuse of lottery products is part of operating the State Lottery. We turn to that question.
The State Lottery's fundamental constitutional purpose is to operate a lottery to raise revenue to fund the identified public purposes. Article XV, section 4, also directs that the lottery be implemented in a way that "insure[s its] * * * integrity, security, honesty, and fairness[.]" Or Const, Art XV, § 4(4)(a).
Article XV, section 4, however, provides that the "Commission shall have such additional powers and duties as may be provided by law." Or Const, Art XV, § 4(4)(a). Ballot Measure 5, section 4(1) (codified as ORS 461.200) is such a law. It directs that the State Lottery "shall continue to be operated so as to produce the maximum amount of net revenues to benefit the public purpose described in section 4, Article XV * * *, commensurate with the public good." ORS 461.200.
In sum, from Ecumenical Ministries, our earlier opinions, and the preceding analysis of ORS 461.200, we distill three major principles that bear on your question. First, permissible costs of administration are limited to expenses that are reasonably necessary or required to internally operate or manage the lottery. Second, permissible costs do not include expenses to pay for government programs or operations that do not contribute to the internal implementation and management of the lottery, even where those programs or operations might otherwise be related to Lottery operations. Third, in its own operations, the Lottery must comply with the statutory mandate to maximize revenue commensurate with the public good.
Applying these principles, we conclude that permissible administrative costs of the Lottery might include, for example, expenditures reasonably necessary to develop marketing strategies to avoid the exploitation of vulnerable persons, to communicate with the public about and promote the responsible use of lottery products, and to evaluate the potential for abuse in deciding what lottery games to offer or whether to offer a particular product. But, in accordance with Ecumenical Ministries, the constitution does not permit "costs of administration" in the form of expenditures to address the mental health needs of problem gamblers, even those caused or exacerbated by operation of the lottery, or to fund programs to otherwise mitigate harms such as "problem gambling" to which operation of the State Lottery might contribute.
B. Use of staff and lottery resources
The same analysis that applies to the expenditure of administrative funds from gross lottery proceeds applies to the use of lottery staff and resources that are funded by gross lottery proceeds. If State Lottery staff and resources are to be used for purposes other than to implement the State Lottery, there must be statutory authority for that use (as the constitution does not provide it) and the use must be funded by moneys other than state lottery administrative funds.
C. Mental health and addiction adviser
The Legislative Assembly may require the Director of the State Lottery to employ an individual to advise the Director and the Commission on mental health and addiction issues associated with the state lottery. To be paid for with state lottery administrative funds, the activities of such an employee must qualify as "costs of administration." Any duties related to such tasks as addressing "problem gambling" generally or mitigating the harms associated with playing lottery games must be funded with proceeds other than lottery administrative funds.
D. Legislative mandate to adopt "problem gambling" policies
State lottery administrative funds may be expended on State Lottery operations, but not to mitigate harms caused by those operations. State Lottery operations may include activities that address and encourage the responsible use of lottery products as discussed above, but do not include the mitigation of harms caused by those operations.
E. Joint report by Oregon Health Authority and Commission
As discussed, the "costs of administration" do not include expenditures to address "problem gambling" generally; therefore, reports concerning "problem gambling" generally may not be paid for with lottery administrative funds. The Legislative Assembly may, however, require such reports if it appropriates non-lottery funds to the Commission to pay for the costs to prepare such a report.
State lottery administrative funds may be used, however, to study the demographics of players of each lottery game. ORS 461.180(4).
F. Statutes directing the amount of gross revenue to be raised and directing use of net proceeds
Article XV, section 4(4)(d), requires 18 percent of the net proceeds of the lottery to be deposited in the Educational Stability Fund and section 4(8) requires 15 percent of the net proceeds to be deposited in the Parks and Natural Resources Fund. The proposal complies with those provisions by allocating the requisite percentages to those funds. Moreover, the proposal specifies that the moneys in the Rainy Day Fund may be spent only for purposes specified in the constitution.
The remaining question is whether a statutory mandate to operate the State Lottery with the goal of raising net revenues in the amounts raised in the 2011-2013 biennium violates Article XV, section 4. Article XV, section 4(4)(d) requires the State Lottery to operate: (1) "as a self-supporting revenue-raising agency of state government"; (2) to use lottery proceeds alone to operate the lottery; and (3) to return "[a]t least 84% of the total annual revenues from the sale of all lottery tickets or shares * * * to the public in the form of prizes and net revenues benefitting the public purposes."
The legislature may not define the operational goal of the State Lottery in a way that would preclude the lottery from carrying out its constitutional duties. We do not believe that the proposal to make the goal of lottery operations to generate the same amount of net proceeds generated in the 2011-2013 biennium conflicts with those duties.
G. Defining "commensurate with the public good"
The Legislative Assembly may define "commensurate with the public good" for purposes of ORS 461.200 for the same reasons and subject to the same limitations discussed in the answer to question six.
Sincerely,
[Steven A. Wolf]
Steven A. Wolf
Chief Counsel
General Counsel Division
SAW:nog/clr:DM4062258
c: Sarah Castner, DOJ