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LEAGUE OF WOMEN VOTERS OF CALIFORNIA EDUCATION FUND Nonpartisan In Depth Analysis of PROPOSITION 17 LOTTERIES. CHARITABLE RAFFLES

Legislative Constitutional Amendment

THE QUESTION

Should the California Constitution be amended to permit legislative authorization of raffles conducted by private nonprofit organizations for beneficial and charitable purposes?

PROVISIONS

Proposition 17 would amend Section 19 of Article IV of the state Constitution to allow raffles to be conducted by nonprofit organizations to raise funds for charitable purposes. This amendment, placed on the ballot by a two-thirds vote of each house (Senate and Assembly), would be enacted by a simple majority of those casting ballots in this election.

Specific provisions are as follows:

• The Legislature may authorize private, nonprofit, eligible organizations to conduct raffles to fund beneficial or charitable works.

• At least 90% of the gross receipts from the raffle must go directly to beneficial or charitable purposes in California.

• Any person who receives compensation in connection with the operation of a raffle must be an employee of the private nonprofit organization that is conducting the raffle.

• A 2/3 super-majority vote of each house may amend, by a statute signed by the Governor, the percentage of gross receipts that must go to beneficial or charitable purposes.

BACKGROUND

The California Constitution now authorizes the establishment of the State Lottery. Also, the legislature may authorize cities and counties to allow bingo games, in keeping with state and local laws, as a legal activity to raise funds for charitable purposes. However, the Constitution states that the legislature may not authorize any other lotteries.

Existing law defines a lottery as any scheme among persons who pay a consideration for a chance to win a prize. In addition, the law says that anyone who assists in printing or advertising, sets up, manages, draws, or in any way sells or gives away a lottery ticket is guilty of a misdemeanor, punishable with up to six months in jail.

Existing law could force law enforcement to ignore illegal raffles, or to shut down a raffle even if it is conducted for a charitable cause. Under present practices, charitable raffles are deemed legal as long as raffle tickets are given away for a donation rather than being sold. Some charitable organizations, however, are not aware that only a donation for tickets is legal; therefore, some may conduct illegal raffles.

The measure placing Proposition 17 on the ballot further states that state policy encourages beneficial and charitable works by private nonprofit organizations and that raffles conducted by these organizations are a reasonable fundraising method. Two points which could be included in a law authorizing raffles are 1) the definition of eligible organizations, and 2) reasonable regulation of these raffles, including regulatory fees.

FISCAL EFFECT

The Legislative Analyst says that if Proposition 17 passes there could be some--mainly indirect-- effects on state and local revenues. Other types of gambling might be reduced if there were a significant increase of gambling on raffles. For example, the State Lottery and horse racing are taxed by the state and revenues from these activities might decline. The state might levy regulatory fees on raffles; these fees could cover the cost of regulation of raffles. According to the Legislative Analyst, there would probably be no significant impact on state or local governmental revenues.

IMPACT OF YES OR NO VOTE

A YES vote means the legislature could authorize private nonprofit organizations to conduct raffles for charitable, beneficial works in California, subject to reasonable legislative regulation.

A NO vote means raffles requiring payment for a chance to win would remain illegal. Raffle tickets could be given away for a donation, but could not be sold.

SUPPORTERS SAY

• For over 100 years, traditional raffles have been illegal in California; conducting a raffle is illegal and punishable by up to six months in jail.

• Proposition 17 would legalize legitimate raffles as fundraising mechanisms for charitable purposes. Combined with implementing measure SB 639, the amendment would permit charitable raffles while requiring oversight and regulation to prohibit abuse.

• Proposition 17 states that at least 90% of a raffle's gross receipts must go directly to beneficial or charitable purposes in California. Any person receiving compensation for operating a raffle must be an employee of the organization conducting the raffle.

• Police or prosecutors are placed in an unfair position when they have knowledge of a charitable raffle which is conducted illegally because the raffle requires payment for a chance to win. They must either shut down such a fundraiser, or look the other way and not enforce the law. Passage of Proposition 17 would correct this situation.

• Legislation to change the Penal Code to allow charitable nonprofit organizations to legally conduct a raffle (Senate Bill 639) has been introduced and will remove the charitable raffle ban when Proposition 17 is passed.

• If Proposition 17 passes, only charitable organizations will be authorized to use raffles as fundraisers.

• Proposition 17 is supported by public education leaders.

OPPONENTS SAY

• Proposition 17 is not needed since existing charitable raffles are legal as long as tickets are not sold, but are given away with a request for a donation.

• Under existing law, raffles associated with phony charities could be run out of business once people demand free tickets.

• This measure would greatly expand the number of raffles and lotteries, not all of which would be harmless. When bingo was legalized, many more bingo parlors than were anticipated were opened. Some operators actually created dummy charities for the sole purpose of staging bingo games.

• No limit on the number of lotteries in a given period, or on prize value, is established by Proposition 17. Thousands of lotteries that might be conducted under this law could weaken the State Lottery and its support for education.

• According to the Committee on Moral Concerns, Proposition 17 would permit Indian tribes to offer unlimited lotteries on reservations, or sell tickets over the internet. Once a state has legalized a form of gambling, the restrictions it imposes are invalid on Indian reservations. States have no authority to regulate gambling activity on reservations once a game has been legalized.

• The existing law is over 100 years old, but no one has been prosecuted for using this method of raising funds to help legitimate charities.

• Proposition 17 does not regulate buying and selling of tickets by minors, require criminal background checks on professional raffle operators, or require audits to ensure that funds go to charities. The measure offers no promise for meaningful regulation in the future. Protections and controls are not included in Proposition 17.

SUPPORTERS AND OPPONENTS

The official ballot arguments in support are signed by Bruce McPherson, State Senator; Dean D. Flippo, District Attorney, County of Monterey; Florence L. Green, Executive Director, California Association of Nonprofits; Jackie Speier, State Senator; and Curtis J. Hill, Sheriff, County of San Benito.

Other supporters mentioned in the ballot arguments include the California Broadcasters Association, the California District Attorneys Association, California Literacy, the California State Sheriffs Association, the John XXIII AIDS Ministry, and the State Humane Association of California.

The official ballot arguments in opposition are signed by Dick Mountjoy, State Senator; Art Croney, Executive Director, Committee on Moral Concerns; and Melanie Morgan, Recovering Compulsive Gambler.

For more information:

Supporters: Kelly Norton, McNally Temple Associates, Inc., 916-447-8186, email mta@mcnallytemple.com

Opponents: Art Croney, Committee on Moral Concerns, 916-446-5131, www.moralconcerns.org

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Last updated: January 24, 2000
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