Reselling Controls, proposed
The issue of restricting the act of reselling of tickets to others, found in Section 12, is not easily quantified. However, there is anecdotal information that indicates many lottery players engage in some form of `buy-tickets-for-friends' behavior. For example, husbands buy for wives and vice versa when they go fill up the car with gas, co-workers buy for each other when they stop at a store for a soda, and neighbors pick up an extra ticket for the neighbor that mowed their lawn when they were on vacation. Sometimes these purchases are gifts, and other times the buyer is doing the other person a favor to save time, and is reimbursed for the ticket.
To determine the extent of public awareness of this practice, the lottery gathered data on a Likert scale rating question as part of a recent market segmentation study. The question asked respondents if they strongly agree, somewhat agree, slightly agree, have no opinion, slightly disagree, somewhat disagree, or strongly disagree with this statement: “I sometimes buy scratch games as gifts for friends or family." Respondents were asked pick the answer that best matched their behavior.
Public perception: Of 327 valid respondents, the top three “boxes" (responses ranging from slightly agree to strongly agree) show that 63.9% of respondents do in fact feel that they buy a lottery ticket for someone else at least sometimes, while only 21% responded that they have virtually no propensity to buy tickets as gifts. The question was not researched particularly in support of this rule order, but rather was part of a much larger market segmentation study which is refreshed every two years by an independent, contracted research firm. The data was collected during the month of June, 2006, in a state-wide survey process. While not strongly quantitative, the result does reinforce the notion that a lottery ticket is viewed by the majority as a potential gift or favor to someone else. Implementing a ban on this would not only prove effectively impossible to enforce, but also appears contrary to lottery culture as viewed by player citizens.
Illicit behaviors noted: In contrast to the positive perceptions noted above, it has unfortunately come to the attention of the lottery industry that there are `subscription services' forming via telephone, postal mail and on the Internet. These services offer to wager on behalf of a player, usually at the price of a ticket plus a service charge, and send him or her tickets either via some electronic means or through the mail. Depending on circumstances, mailing lottery tickets ordered by telephone or via the Internet may violate federal laws. Worse, the services are often structured so as to act as an “agent" or “retailer" of lottery products without actually holding a valid lottery retailer license in the state in question. Further, the industry occasionally uncovers unscrupulous practices, wherein players do not receive the promised ticket or instead receive a `ticket' that somehow violates one or more of the fair lottery concepts of random chance, consideration or prize.
Impact on small business: It is difficult to identify the number or range of impact these self-styled `retailers' have upon lottery retailers or players, but some loss of retail sales opportunity is occurring. The Wisconsin Lottery has proposed language that permits `friend and family' purchasing but bans subscription services, and has also adopted language from the adjacent states to address issues of “service fees" and “charging to validate", found under Sections 3, 4 and 5.
Conclusion: The impact upon lottery retailers of this language change should be negligible to slightly positive. The language does not ban `friend or family' purchases as gifts (which would be sold by retailers), but does clarify that it is illegal for unscrupulous parties to pretend to be a legitimate retailer when they are not or to apply service fees or validation charges to players.
Billing Terms Authority, proposed
The remaining issue of billing terms as proposed under Sections 1 and 8 to 10 has been analyzed at several levels. The lottery is clarifying authority with respect to being able to offer new, more retailer-friendly billing terms, consistent with changes to s.565.10(15), made as part of
2005 Wis. Act 25, s.
2427b. Language is proposed in this rule order that mirrors statutory authority, and requires the lottery to create and maintain a new policy document, called the “Billing Terms Policy and Procedure" document, which will outline billing terms in concise and retailer-friendly terminology. This document will be maintained similar to lottery's current product “Features and Procedures" documents, under s.565.27 (1), Stats. The document will draw its authority from the language in this rule order.
Background: The lottery currently bills a retailer this week for a pack of tickets delivered last week. Most retailers' accounts are then swept by banking electronic file transfer (EFT) within 5 days of the day the liability is recognized. To help offset the amount of cash the retailer must keep on hand to pay for the packs, the lottery discounts from the price the full value of the retailer's commission, and also discounts an estimate of the amount of guaranteed low-end prizes (or GLEPS), those prizes which are worth $49 or less and randomly enclosed the pack.
For example, a pack of 400 tickets is priced at $400, but the retailer is first credited $25 (equal to the 6.25% commission) and then an additional credit estimated at roughly $162.50 when the pack is billed, to cover the GLEPS prizes of that game which the retailer will likely pay out in the future. The retailer then owes $212.50 the week after the pack is delivered for sale, calculated as $400 – ($25 + $162.50). While the GLEPS value is a necessity of product design, it varies by game and can cause confusion for retailers.
This GLEPS Discount process was once considered industry-standard, but is now significantly outdated. Several industry developments have occurred since 1989, including cross-validation, the ability of one retailer to redeem winning tickets sold by another retailer. These developments have caused GLEPS Discount billing to be difficult to learn and sometimes confusing. Further, the current billing practices do not lend themselves to cash accounting, and do not align well with incentive promotions and other business practices of Lottery retailers.
New billing terms considered: The lottery is moving forward with new billing terms, and has researched and discussed terms including “net 45 days, 75% validation", “net 30 days, 75% validation" and “net 30 days", among other options. The concept of terms of net X days is well known to retailers, as many of their wholesale suppliers offer very similar terms. Under this concept, a retailer has x days from delivery to sell a unit of product, before being asked to pay the wholesaler for it. The concept of “75% validated" is a similar process unique to the lottery industry, wherein a pack is billed when the lottery identifies that 75% of the tickets in the pack have been computer-scanned for validation. Therefore terms of “net X days or 75% validated" would mean that a retailer is billed for the pack when X days have passed or when the pack is 75% validated, whichever comes first.
Consistent with s.
227.114 (4) (b), Stats., the lottery has contacted representative trade associations as well as corporate and independent retailers, to receive feedback about the billing terms options. The intent to change the terms has been discussed, both regarding changes to the time between delivery and billing, as well as regarding the types of mathematic terms the retailer might experience. The agency also reviewed the impact upon its revenue stream, by considering a range of alternative billing terms.
Feedback: The responses from lottery retailers thus far have been generally very positive, with few negative comments focused primarily in one area. In particular, retailers with headquarters or outlets in adjacent states have experience with net X days and 75% validation tracking. From their feedback, retailers prefer by a wide margin the net X days, with no validation percentage tracking. Their reasoning is that the validation percentage causes confusion, as retailers don't know and can only guess when the pack will come due for payment. It may come due earlier than expected if a large number of validations occur, thereby making planning for the payment and related cash handling more difficult. Ideally, billing terms that are purely net 30 days allow retailers to plan that in the fourth week, the payment of a pack will be due, regardless. This style of billing is consistent with many of the other wholesaler/ distributor relationships that retailers maintain. It also allows the retailer significantly more time to sell the product and retain the cash necessary to meet the future obligation of the pack cost.
Impact on small business: While retailers receive more time, under new terms, to sell through a pack of tickets, they could in theory be responsible for a somewhat larger sticker price for each pack. This is because lottery intends to greatly simplify the accounting of lottery packs by eliminating the discounting of GLEPS that normally occurs when the pack is billed. This, and its related cross-redeem calculations, are the source of much confusion among retailers accountants. The lottery intends to keep the commission discounting on the pack price, but not GLEPS discounting. Therefore, instead of a pack of 400 tickets that costs $212.50 the week after it is shipped, the retailer will be billed for a pack of 400 tickets that costs $375.00 the fourth week after it is shipped, allowing more time for the retailer to sell the product. Also, the retailer will still be receiving credits each week for winners actually scan-validated, consistent with how the current system provides credits. The combination of more time to sell the product and the continuation of currently-offered credits for validations will help ease the financial impact of the perceived sticker price of a pack.
Related improvements to aid retailers: To further alleviate the financial impact on retailers, the lottery has changed the base ticket count of all $1 dollar scratch ticket packs. The lottery identified 300 count packs as a better fit with the product life cycle of $1 games, rather than the 400 ticket packs currently used. This change will help retailers sell through the pack faster, thereby avoiding having too many tickets unsold when the billing comes due. As of Game #711 Moola Tripler, launched in June of 2007, the count of tickets dropped from 400 tickets to 300 tickets per pack, for $1 game titles.
Continuing the comparison above, a 300-count pack of $300 under the current billing method would cost an estimated $162 instead of $212.50. Further, a pack valued at $300 and offered at net 28 days (possible new terms) would cost $281.25 the fourth week after it is shipped. When a 400 count pack and a 300 count pack are compared, using net 28 days, the difference is $93.75 less in cost to the retailer ($375.00 vs. $281.25), for the same price point and same amount of time to sell. Ultimately, for a 300-count pack with net 28 days terms, a retailer would have an additional three weeks in which to sell the pack and will still be receiving the validation credits as noted above. Given current selling behaviors, the lottery anticipates that an average retailer will sell through the pack mid-week 3, well before the expense comes due, and therefore have the cash already on hand to pay the bill. Overall, the potential change in billing terms to a 28-day cycle will not have a negative effect on the winning credits the retailer receives, nor will it have a negative effect on the retailer's commissions.
Intended implementation: The agency has considered the positive retailer feedback regarding retailer accounting and cash handling, as well as the impact that net X days terms has on the cash handling of retailers, and has committed to drafting the first Billing Terms Policy and Procedure document in such manner as to offer net 28 day terms without validation tracking as the new retailer billing terms, consistent with retailer feedback. Net 28 days is easier to understand and is as close as the lottery can match to the “net 30 days" terms of similar retail wholesalers. This will allow retailers at least 28 days to sell through a pack before it is billed, and will result in simpler accounting methods. This change also allows the lottery to consider shorter terms for retailers who may be at financial risk or who fail to maintain good payment history, which in turn will reduce the lottery's exposure to the financial risk that less well organized or less responsible retailers may pose. The document will also address relevant issues such as electronic funds transfer (EFT) banking options, and the rights of retailers with respect to ticket inventory returns. Other subject matter will be added as necessary. A first draft of the document will be available for public review the week before the public hearing for this rule order, and can be requested via the contact information that follows.
Conclusion: Ultimately, the combination of new billing terms, reinforced by new pack size, should help ease the financial and labor burdens that lottery billing currently places upon retailers. The impact will ultimately be a reduction in expense per pack, once all the aspects of net 28 days billing terms are in place. Therefore, the impact on lottery retailers will be slightly to significantly positive, depending on each retailer's sales history.
Fiscal Estimate
1. Billing Terms. The rule increases from 1 week to up to 60 days the length of time for retailers to pay the department for lottery tickets received in the prior 60 days.
2005 Act 25, providing for the change in the length of the billing period, first affected renewals of contracts over two years ago. The law change may reduce lottery interest earnings depending on the new billing terms of the new contracts, the timing and volume of sales by retailers, and the interest rate earned by the department. The potential decrease may be illustrated by an example. Assuming statewide daily ticket sales are $1 million and the lottery earns 4% annual interest, if retailers transfer sales proceeds of $7 million to the department each week, annual interest earnings would be $7.1 million; if sales proceeds of $30 million are transferred each month, annual interest earnings would be $6.6 million, a decrease of $0.5 million.
2. Service and handling fees; off-premises and bulk sales of tickets. The rule prohibits a retailer from adding a service or handling fee to the purchase of a lottery ticket or the redemption of a winning ticket, unless authorized by the Lottery Administrator. In addition, the rule prohibits retailers from selling lottery tickets to off-premises customers by telephone, email, or other electronic means, or by mail, parcel, or other delivery service, unless authorized by the Lottery Administrator. The rule also prohibits a retailer from reselling tickets in bulk to another retailer. These prohibitions are consumer protections and are not expected to affect lottery revenues.
3. Shipping charges. The rule would allow the Department to charge a retailer for the actual cost of shipping lottery tickets on a date other than the retailer's scheduled delivery date. To the extent retailers place orders for delivery on dates other than the scheduled deliveries, revenues would increase in the amount of the shipping costs.
4. Outstanding debts. Currently, retailers may not receive additional tickets until prior tickets have been paid for in full. Under the rule, retailers would be allowed to receive additional tickets if they have a payment agreement with the Lottery Administrator to settle debts to the Lottery. By allowing some retailers to continue selling lottery tickets, this provision may prevent decreases in lottery ticket sales. In addition, the rule allows the Department to waive penalties for retailers that voluntarily disclose violations of Lottery rules, guidelines, or contract terms.
5. Point-of-sale materials.
Currently, the Lottery provides retailers with point-of-sale materials including posters, decals, and brochures. Under
2005 Act 25, the Lottery is required to provide retailers with signs indicating the games for which the top prize has already been claimed. Prizes-claimed signs are printed using on-premises Lottery terminals and paper, and the cost is immaterial.
6. Other provisions. The rule makes several technical changes to the Retailer Performance Program to align the rule with the underlying law. In addition, the rule clarifies the grounds for termination of contracts with retailers. These provisions are not expected to have fiscal effects.
Notice of Hearing
Transportation
NOTICE IS HEREBY GIVEN that pursuant to s.
85.30, Stats., and interpreting ss.
85.16 (1),
227.11,
343.06 (1) (c),
343.07 (4) (b) and
343.16 (1) (a), Stats., the Department of Transportation will hold a public hearing in
Room 551 of the Hill Farms State Transportation Building, 4802 Sheboygan Avenue, Madison, Wisconsin on the
30th day of
October,
2007, at
1:00 PM, to consider the amendment of ch.
Trans 129, Wis. Adm. Code, relating to motorcycle courses.
An interpreter for the hearing impaired will be available on request for this hearing. Please make reservations for a hearing interpreter at least 10 days prior to the hearing.
Parking for persons with disabilities and an accessible entrance are available.
Analysis Prepared by the Department of Transportation
Statutes interpreted
Statutory authority
Explanation of agency authority
Under the law, the Department is responsible for the motorcycle safety program. That requirement includes establishment and approval of motorcycle rider courses.
Related statute or rule
Plain language analysis
This rule making will amend ch.
Trans 129, relating to motorcycle courses, by changing the maximum number of motorcycles allowed on the range as prescribed in the Basic Rider Course and Experienced Rider Course curriculums developed by the Motorcycle Safety Foundation (MSF). It will also require a 10-day reporting time frame for site inspection reports. Finally, it will make changes necessary as a result of removing private motorcycle training schools from ch.
Trans 105 including background checks, and insurance and bond requirements.
Comparison with federal regulations
32 CFR 536.28(h) requires persons operating motorcycles on Fort Stewart Georgia to attend an approved motorcycle defensive driving course.
Comparison with adjacent states
Michigan: R257.1701-7727, Michigan Administrative rules. The Michigan motorcycle safety education rules are similar but the course is based upon the Motorcycle Safety Foundation standards entitled, Motorcycle Rider Course," January 1989. Michigan appears to provide more public funding than Wisconsin for students of the course.
Illinois: 92 Ill. Adm. Code 455. The proposed rule of Illinois incorporates by reference the most current editions of the Motorcycle Safety Foundation's Rider Coach Guide and Rider Course Suite. The current Illinois rule is similar to but more detailed than the proposed Wisconsin rule. The rule provides for more state funding than Wisconsin. The proposed Illinois rule has higher insurance limits than the proposed Wisconsin rule but no bonding requirement.
Iowa: 76 Iowa Adm. Code 635. The Iowa Motorcycle Rider Education rules are similar to the proposed Wisconsin rules but classroom size has not been reduced, insurance requirements are higher, they do not refer specifically to the Motorcycle Safety Foundation courses and there is not a bonding requirement.
Minnesota: Ch. 7411, Minn. Adm. Code. The Minnesota motorcycle rider training rules are similar to the proposed Wisconsin rules. They do incorporate the Motorcycle Safety foundation Basic Rider Course Manual, 2001.
Summary of factual data and analytical methodologies
This proposed rule does not change the regulatory approach chosen. It continues to follow the procedures and curriculum proscribed by the Motorcycle Safety Foundation as they have been updated. It also includes some regulations previously applicable but removed from ch.
Trans 105 as a result as the change in the definition of driver schools.
Analysis and supporting documentation used to determine effect on small businesses
There were approximately 10,000 Motorcycle Safety students in public school courses and 3,000 students in commercial rider education schools each year. The vast majority of the schools comply with current Motorcycle Safety Foundations requirements, and proposed rule change, as to class size and number of motorcycles allowed on the range. Some of the commercial schools may not currently have bonding. Bond costs for entities with good credit are minimal.
Small Business Analysis
These proposed changes will have minimal effect upon small businesses. The Department's Regulatory Review Coordinator may be contacted by e-mail at
ralph.sanders@dot.state.wi.us, or by calling (414) 438-4585.
Fiscal Estimate
The Department estimates that there will be no fiscal impact on the liabilities or revenues of any county, city, village, town, school district, vocational, technical and adult education district, sewerage district, or federally-recognized tribes or bands.
Anticipated Costs Incurred by Private Sector
The Department estimates that there will be no fiscal impact on state or private sector revenues or liabilities.
Contact Person and Submission of Written Comments
The public record on this proposed rule making will be held open until close of business
November 6, 2007, to permit the submission of comments in lieu of public hearing testimony or comments supplementing testimony offered at the hearing. Any such comments should be submitted to Ron Thompson, Department of Transportation, Division of State Patrol, Transportation Safety Programs, Room 551, P. O. Box 7936, Madison, WI 53707-7936. You may also contact Mr. Thompson by phone at (608) 266-7855 or via e-mail:
ron.thompson@dot.state.wi.us.
Copy of Rule
Notice of Hearing
Veterans Affairs
NOTICE IS HEREBY GIVEN that the Department of Veterans Affairs will hold a public hearing on the 19
th day of October, 2007 at 9:30 a.m., in the Wisconsin Army National Guard Armory, 475 Water Street, at Platteville, Wisconsin.
Analysis Prepared by the Department of Veterans Affairs
Statutory authority
Statute interpreted
The amending of s.
VA 2.02 (3) (b) will allow the department to address pre-application issues for veterans who are returning from deployment and are unable to submit pre-applications within the current 30-day period allotted by the rule. The rule language will extend the period for submitting a pre-application to 180 days following the commencement of a semester or course.
There is no current or pending federal regulation that addresses this initiative. There are no similar rules in adjacent states. This rule has no regulatory aspect to it, has no effect upon small businesses, nor any significant fiscal impact upon the private sector.
Initial Regulatory Flexibility Analysis
This rule is not expected to have any adverse impact upon small business.
Fiscal Estimate
The implementation of this rule is expected to result in an increase in expenditures in FY08 of $122,600 and $132,400 in FY09.
Copy of Rule
A copy of the proposed rule and the full fiscal estimate may be obtained by contacting:
James A. Stewart
Wisconsin Department of Veterans Affairs
P.O. Box 7843
Madison, WI 53707-7843
Contact Person
James A. Stewart (608) 266-3733
