Session of 1999
         
SENATE BILL No. 329
         
By Committee on Federal and State Affairs
          
2-22
          
  9             AN  ACT authorizing electronic gaming machines; relating to the regu-
10             lation thereof; creating the Kansas education technology enhancement
11             fund; amending K.S.A. 74-8701, 74-8702, 74-8704 and 74-8711 and
12             K.S.A. 1998 Supp. 74-8710, 74-8718, 74-8719, 74-8723 and 74-8804
13             and repealing the existing sections.
14      
15       Be it enacted by the Legislature of the State of Kansas:
16             Section  1. K.S.A. 74-8701 is hereby amended to read as follows: 74-
17       8701. (a) K.S.A. 74-8701 through 74-8721 74-8723 and sections 8 through
18       19, and amendments thereto, shall be known as and may be cited as the
19       Kansas lottery act.
20             (b) If any provision of this act or the application thereof to any person
21       or circumstance is held invalid, the invalidity shall not affect other pro-
22       visions or application of the act which can be given effect without the
23       invalid provision or application, and to this end the provisions of this act
24       are severable.
25             Sec.  2. K.S.A. 74-8702 is hereby amended to read as follows: 74-
26       8702. As used in this act, unless the context otherwise requires:
27             (a) "Commission" means the Kansas lottery commission.
28             (b) "Electronic card" means a card purchased from a lottery gaming
29       machine operator for use on an electronic gaming machine.
30             (c) "Electronic gaming machine" means any electromechanical, elec-
31       trical, electronic, video or computerized device, contrivance or machine
32       authorized by the commission which, upon the insertion of cash, tokens
33       or electronic cards, is available to play, be operated or simulate the play
34       of, a game authorized by the commission, including but not limited to,
35       bingo, poker, black jack and keno and which may deliver or entitle the
36       player operating the machine to receive cash, tokens, merchandise or
37       credits that may be redeemed for cash. Electronic gaming machines may
38       use bill validators and may be single position reel-type, single position
39       single game video and single position multigame video electronic gaming,
40       including but not limited to, poker, black jack and slot machines. An elec-
41       tronic gaming machine shall not include casino table games, such as craps,
42       poker, black jack, roulette, keno, layout, numbers tickets, baccarat, klon-
43       dike table, punchboard, punch cards, faro layout, ticket or pull tab.

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  1             (b) (d) "Executive director" means the executive director of the Kan-
  2       sas lottery.
  3             (c) (e) "Gaming equipment" means any electric, electronic or me-
  4       chanical device computerized or electromechanical machine, mechanisms,
  5       supply or device or other equipment unique to the Kansas lottery used
  6       directly in the operation of any lottery and in the determination of winners
  7       pursuant to this act or integral to the operation of electronic gaming ma-
  8       chines or which affects the results of an electronic gaming machine by
  9       determining win or loss.
10             (f) "Kansas education enhancement technology fund" means the fund
11       established by section 16, and amendments thereto.
12             (d) (g) "Kansas lottery" means the state agency created by this act to
13       operate a lottery or lotteries pursuant to this act.
14             (h) "Lottery" or "state lottery" means the lottery or lotteries operated
15       pursuant to this act.
16             (i) "Lottery gaming machine operator" means any parimutuel li-
17       censee with which the executive director has contracted for the placement
18       of electronic gaming machines pursuant to this act.
19             (e) (j) "Lottery retailer" means any person with whom the Kansas
20       lottery has contracted to sell lottery tickets or shares, or both, to the
21       public.
22             (f) "Lottery" or "state lottery" means the lottery or lotteries operated
23       pursuant to this act.
24             (g) (k) "Major procurement" means any gaming product or service,
25       including but not limited to facilities, advertising and promotional serv-
26       ices, annuity contracts, prize payment agreements, consulting services,
27       equipment, tickets and other products and services unique to the Kansas
28       lottery, but not including.
29             "Major procurement" shall not include materials, supplies, equipment
30       and services common to the ordinary operations of state agencies.
31             (l) "Net machine income" means the total of all cash and the face value
32       of all tokens placed in an electronic gaming machine less cash, merchan-
33       dise or tokens paid to players as winnings.
34             (m) "Parimutuel licensee" means a person holding a license issued by
35       the Kansas racing and gaming commission to:
36             (1) A facility owner licensee or a facility manager licensee, as defined
37       by K.S.A. 74-8802, and amendments thereto;
38             (2) an organization licensee, as defined by K.S.A. 74-8802, and
39       amendments thereto, which has been authorized by the Kansas racing
40       and gaming commission to construct or own a racetrack facility; or
41             (3) an organization licensee, as defined by K.S.A. 74-8802, and
42       amendments thereto, which is specified in subsection (a)(2) of K.S.A. 74-
43       8814, and amendments thereto but not an organization license specified

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  1       in subsection (a)(1) of K.S.A. 74-8814, and amendments thereto.
  2             (n) "Parimutuel licensee location" means a facility located on or im-
  3       mediately adjacent to the real estate of a parimutuel licensee where live
  4       horse racing or live greyhound racing has been authorized to be con-
  5       ducted pursuant to the Kansas parimutuel racing act prior to July 1, 1999.
  6       A parimutuel licensee location may include any of the existing structures
  7       located on the real estate where the live horse racing or live greyhound
  8       racing is authorized to be conducted on July 1, 1999, or any other struc-
  9       tures that may be constructed on or immediately adjacent to such real
10       estate. In order to qualify as a parimutuel licensee location, a facility
11       where live greyhound racing is conducted shall be approved for at least
12       150 days each year on which greyhound racing shall be conducted, and
13       a facility where live horse racing is conducted shall be approved for at
14       least 21 days each year on which live horse racing shall be conducted.
15             (h) (o) "Person" means any natural person, association, corporation
16       or partnership.
17             (i) (p) "Prize" means any prize paid directly by the Kansas lottery
18       pursuant to its rules and regulations.
19             (q) "Returned ticket" means any ticket which was transferred to a
20       lottery retailer, which was not sold by the lottery retailer and which was
21       returned to the Kansas lottery for refund by issuance of a credit or
22       otherwise.
23             (j) (r) "Share" means any intangible manifestation authorized by the
24       Kansas lottery to prove participation in a lottery game.
25             (s) "Technology provider" means any person or entity other than a
26       lottery gaming machine operator that designs, manufactures, installs, op-
27       erates, distributes or supplies an electronic gaming machine for sale, lease
28       or use in accordance with this act.
29             (k) (t) "Ticket" means any tangible evidence issued by the Kansas
30       lottery to prove participation in a lottery game.
31             (u) "Token" means a metal representative of value, which is not legal
32       tender, redeemable for cash only by the issuing lottery gaming machine
33       operator at its parimutuel licensee location and issued and sold by a lot-
34       tery gaming machine operator for the sole purpose of playing an electronic
35       gaming machine.
36             (l) (v) "Vendor" means any person who has entered into a major
37       procurement contract with the Kansas lottery.
38             (m) "Returned ticket" means any ticket which was transferred to a
39       lottery retailer, which was not sold by the lottery retailer and which was
40       returned to the Kansas lottery for refund by issuance of a credit or
41       otherwise.
42             (n) (w) "Video lottery machine" means any electronic video game
43       machine that, upon insertion of cash, is available to play or simulate the

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  1       play of a video game authorized by the commission, including but not
  2       limited to bingo, poker, black jack and keno, and which uses a video
  3       display and microprocessors and in which, by chance, the player may
  4       receive free games or credits that can be redeemed for cash.
  5             Sec.  3. K.S.A. 74-8704 is hereby amended to read as follows: 74-
  6       8704. (a) The executive director shall have the power to:
  7             (1) Supervise and administer the operation of the state lottery in ac-
  8       cordance with the provisions of this act and such rules and regulations as
  9       adopted hereunder.
10             (2) Appoint, subject to the Kansas civil service act and within the
11       limitations of appropriations therefor, all other employees of the Kansas
12       lottery, which employees shall be in the classified service unless otherwise
13       specifically provided by this act.
14             (3) Enter into contracts for: (A) Advertising and promotional services,
15       subject to the provisions of subsection (b); (B) annuities or other methods
16       deemed appropriate for the payment of prizes; (C) data processing and
17       other technical products, equipment and services; and (D) facilities as
18       needed to operate the Kansas lottery, including. Such contracts may in-
19       clude, but not be limited to, gaming equipment, tickets and other services
20       involved in major procurement contracts, in accordance with K.S.A. 74-
21       8705, and amendments thereto.
22             (4) Enter into contracts with: (A) Persons for the sale of lottery tickets
23       or shares to the public, as provided by this act and; and (B) parimutuel
24       licensees for placement and operation of electronic gaming machines at
25       parimutuel licensee locations. Such contracts shall be subject to rules and
26       regulations adopted pursuant to this act, which contracts but shall not be
27       subject to the provisions of K.S.A. 75-3738 through 75-3744, and amend-
28       ments thereto.
29             (5) Require lottery retailers to furnish proof of financial stability or
30       furnish surety in an amount based upon the expected volume of sales of
31       lottery tickets or shares.
32             (6) Examine, or cause to be examined by any agent or representative
33       designated by the executive director, any books, papers, records or mem-
34       oranda of any lottery retailer or lottery gaming machine operator for the
35       purpose of ascertaining compliance with the provisions of this act or rules
36       and regulations adopted hereunder.
37             (7) Issue subpoenas to compel access to or for the production of any
38       books, papers, records or memoranda in the custody or control of any
39       lottery retailer or lottery gaming machine operator, or to compel the
40       appearance of any lottery retailer or lottery gaming machine operator or
41       employee of any lottery retailer or lottery gaming machine operator, for
42       the purpose of ascertaining compliance with the provisions of this act or
43       rules and regulations adopted hereunder. Subpoenas issued under the

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  1       provisions of this subsection may be served upon natural persons and
  2       corporations in the manner provided in K.S.A. 60-304, and amendments
  3       thereto, for the service of process by any officer authorized to serve sub-
  4       poenas in civil actions or by the executive director or an agent or repre-
  5       sentative designated by the executive director. In the case of the refusal
  6       of any person to comply with any such subpoena, the executive director
  7       may make application to the district court of any county where such
  8       books, papers, records, memoranda or person is located for an order to
  9       comply.
10             (8) Administer oaths and take depositions to the same extent and
11       subject to the same limitations as would apply if the deposition were in
12       aid of a civil action in the district court.
13             (9) Require fingerprinting of employees and such other persons who
14       work in sensitive areas within the lottery as deemed appropriate by the
15       director. The director may submit such fingerprints to the Kansas bureau
16       of investigation and to the federal bureau of investigation for the purposes
17       of verifying the identity of such employees and persons and obtaining
18       records of their criminal arrests and convictions.
19             (b) The Kansas lottery shall not engage in on-site display advertising
20       or promotion of the lottery at any amateur athletic or sporting event
21       including, but not limited to, amateur athletic sporting events at institu-
22       tions under the jurisdiction and control of the state board of regents.
23             Sec.  4. K.S.A. 1998 Supp. 74-8710 is hereby amended to read as
24       follows: 74-8710. (a) The commission, upon the recommendation of the
25       executive director, shall adopt rules and regulations governing the estab-
26       lishment and operation of a state lottery and electronic gaming machines
27       operated at parimutuel licensee locations as necessary to carry out the
28       purposes of this act. Temporary rules and regulations may be adopted by
29       the commission without being subject to the provisions and requirements
30       of K.S.A. 77-415 through 77-438, and amendments thereto, but shall be
31       subject to approval by the attorney general as to legality and shall be filed
32       with the secretary of state and published in the Kansas register. Tem-
33       porary and permanent rules and regulations may include but shall not be
34       limited to:
35             (1) Subject to the provisions of subsection (b), the types of lottery
36       games to be conducted, including but not limited to instant lottery, on-
37       line and traditional games, but not including games on video lottery
38       machines.
39             (2) The manner of selecting the winning tickets or shares, except that,
40       if a lottery game utilizes a drawing of winning numbers, a drawing among
41       entries or a drawing among finalists, such drawings shall always be open
42       to the public and shall be recorded on both video and audio tape.
43             (3) The manner of payment of prizes to the holders of winning tickets

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  1       or shares.
  2             (4) The frequency of the drawings or selections of winning tickets or
  3       shares.
  4             (5) The type or types of locations at which tickets or shares may be
  5       sold.
  6             (6) The method or methods to be used in selling tickets or shares.
  7             (7) Additional qualifications for the selection of lottery retailers and
  8       the amount of application fees to be paid by each.
  9             (8) The amount and method of compensation to be paid to lottery
10       retailers, including special bonuses and incentives.
11             (9) Deadlines for claims for prizes by winners of each lottery game.
12             (10) Provisions for confidentiality of information submitted by ven-
13       dors pursuant to K.S.A. 74-8705, and amendments thereto.
14             (11) Information required to be submitted by vendors, in addition to
15       that required by K.S.A. 74-8705, and amendments thereto.
16             (12) The major procurement contracts or portions thereof to be
17       awarded to minority business enterprises pursuant to subsection (a) of
18       K.S.A. 74-8705, and amendments thereto, and procedures for the award
19       thereof.
20             (b) No new lottery game shall commence operation after the effective
21       date of this act unless first approved by the governor or, in the governor's
22       absence or disability, the lieutenant governor.
23             (c)  (1) Any electronic gaming machines except electronic gaming ma-
24       chines operated at parimutuel licensee locations pursuant to this act; or
25             (2) any game other than an electronic gaming machine in which any
26       ticket or share is sold by means of a machine, contrivance or device which
27       is operated by insertion of cash.
28             Sec.  5. K.S.A. 1998 Supp. 74-8711 is hereby amended to read as
29       follows: 74-8711. (a) There is hereby established in the state treasury the
30       lottery operating fund and the electronic gaming fund.
31             (b) The executive director shall remit at least weekly to the state
32       treasurer all moneys collected from the sale of lottery tickets and shares
33       and any other moneys received by or on behalf of the Kansas lottery other
34       than funds to be deposited into the electronic gaming fund pursuant to
35       subsection (e). Upon receipt of any such remittance, the state treasurer
36       shall deposit the entire amount thereof in the state treasury and credit it
37       to the lottery operating fund. Moneys credited to the fund shall be ex-
38       pended or transferred only as provided by this act. Expenditures from
39       such fund shall be made in accordance with appropriations acts upon
40       warrants of the director of accounts and reports issued pursuant to vouch-
41       ers approved by the executive director or by a person designated by the
42       executive director.
43             (c) Moneys in the lottery operating fund shall be used for:

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  1             (1) The payment of expenses of the lottery, which shall include all
  2       costs incurred in the operation and administration of the Kansas lottery;
  3       all costs resulting from contracts entered into for the purchase or lease
  4       of goods and services needed for operation of the lottery, including but
  5       not limited to supplies, materials, tickets, independent studies and sur-
  6       veys, data transmission, advertising, printing, promotion, incentives, pub-
  7       lic relations, communications, and distribution of tickets and shares; and
  8       reimbursement of costs of facilities and services provided by other state
  9       agencies;
10             (2) the payment of compensation to lottery retailers;
11             (3) transfers of moneys to the lottery prize payment fund pursuant to
12       K.S.A. 74-8712, and amendments thereto;
13             (4) transfers to the state general fund pursuant to K.S.A. 74-8713,
14       and amendments thereto;
15             (5) transfers to the state gaming revenues fund pursuant to subsection
16       (d) of this section and as otherwise provided by law; and
17             (6) the transfers to the county reappraisal fund as prescribed by law.
18             (d) The director of accounts and reports shall transfer moneys in the
19       lottery operating fund to the state gaming revenues fund created by
20       K.S.A. 79-4801, and amendments thereto, on or before the 15th day of
21       each month, for fiscal years commencing on or after July 1, 1988 in an
22       amount certified monthly by the executive director and determined as
23       follows, whichever is greater:
24             (1) In an amount equal to the moneys in the lottery operating fund
25       in excess of those needed for the purposes described in subsections (c)(1)
26       through (c)(4); or
27             (2) an amount equal to not less than 30% of total monthly revenues
28       from the sales of lottery tickets and shares less estimated returned tickets.
29             (e) The executive director shall remit to the state treasurer on each
30       business day all net machine income received from lottery gaming ma-
31       chine operators to be deposited into the electronic gaming machine fund.
32       Of the funds transferred to the electronic gaming machine fund, separate
33       accounts shall be maintained for funds received from each lottery gaming
34       machine operator and the funds in each such separate account shall be
35       distributed as follows:
36             (1) Forty-five percent shall be paid to such lottery gaming machine
37       operator to be deposited by the operator in a segregated operating account
38       which shall be available exclusively to the operator for payment of all
39       operating expenses attributable to being a lottery gaming machine oper-
40       ator. Such expenses shall include, but not be limited to, salaries, wages
41       and benefit programs for employees, merchandise, additional purses paid
42       as a result of supplemental contracts, materials and supplies, utilities,
43       repairs and maintenance, background investigations and licensing costs,

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  1       data processing, management fees, insurance and bonding, advertising
  2       and marketing, professional fees, security and surveillance costs, travel,
  3       education, trash removal, recruiting, training and such other expenses as
  4       are incurred in normal business operations;
  5             (2) twenty-five percent shall be paid to such lottery gaming machine
  6       operator to be deposited by the operator in a segregated equipment ac-
  7       count which shall be available exclusively to such operator for purchasing
  8       or leasing electronic gaming machines and other equipment used by the
  9       operator to operate as a lottery gaming machine operator, funding de-
10       preciation or amortization of any such equipment and repaying any debt
11       incurred by such operator in acquiring any such equipment;
12             (3) fourteen percent shall be paid to such lottery gaming machine
13       operator to be deposited by the operator in a segregated facilities account
14       which shall be available exclusively to such operator for rental, leasehold
15       improvements, property taxes, insurance, assessments, maintenance, fur-
16       nishings, debt service and other expenses attributable to the entire facility
17       utilized by such operator to operate electronic gaming machines; and
18             (4) Sixteen percent shall be transferred to the state treasury. Of such
19       amount:
20             (A) One percent shall be distributed to the most populous city in the
21       county in which the operator is located;
22             (B) one percent shall be paid to the holder of the organization license
23       at the parimutuel licensee location, which shall not be in addition to but
24       in fulfillment of any contractual obligation owed by the parimutuel li-
25       censee to the holder of the organization license;
26             (C) one percent shall be paid to such service organizations and non-
27       profit bingo licensees located in the county as shall be determined by the
28       Kansas lottery pursuant to rules and regulations adopted by the Kansas
29       lottery;
30             (D) an amount equal to $40 per point for each point awarded at the
31       greyhound racing facility operated by such operator during the preceding
32       week. Such amount shall be used solely to make supplemental payments
33       to the winners of such points;
34             (E) on or before September 1 of each year, an aggregate, from all such
35       separate accounts and not from each separate account, of $1,500,000 shall
36       be paid to the operators of live horse racing. Such amount shall be used
37       by them solely to supplement purses;
38             (F) an amount sufficient to reimburse the lottery commission for all
39       expenses incurred in connection with operating electronic gaming ma-
40       chines; and
41             (G) the balance shall be paid to the Kansas education technology en-
42       hancement fund.
43             (f) Each lottery gaming machine operator shall maintain separate op-

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  1       erating facilities and equipment accounts and shall use the amounts de-
  2       posited in each such account pursuant to subsection (e) solely for the
  3       purposes described in subsection (e). At the end of each calendar quarter,
  4       the operator may withdraw from such accounts the amount, if any, by
  5       which the balance therein exceeds the average monthly amount of total
  6       expenses charged to such account during the immediately preceding cal-
  7       endar quarter. The excess funds from any one of the accounts may be used
  8       to pay a deficit in any other account. The commission shall have the right
  9       to examine and audit such accounts for the purpose of verifying that the
10       lottery gaming machine operator has been paying all such expenses from
11       such funds.
12             Sec.  6. K.S.A. 1998 Supp. 74-8718 is hereby amended to read as
13       follows: 74-8718. (a) It is unlawful for:
14             (1) Any person to sell a lottery ticket or share at a price other than
15       that fixed by rules and regulations adopted pursuant to this act;
16             (2) any person other than a lottery retailer authorized by the Kansas
17       lottery to sell or resell any lottery ticket or share; or
18             (3) any person to sell a lottery ticket or share to any person, knowing
19       such person to be under 18 years of age; or
20             (4) any parimutuel licensee to allow any person to play electronic
21       gaming machines knowing such person to be under 18 years of age.
22             (b)  (1) Violation of this section is a class A nonperson misdemeanor
23       upon conviction for a first offense; and
24             (2) violation of this section is a severity level 9, nonperson felony upon
25       conviction for a second or subsequent offense.
26             Sec.  7. K.S.A. 1998 Supp. 74-8719 is hereby amended to read as
27       follows: 74-8719. (a) Except as provided by subsection (c), it is unlawful
28       for any person to purchase a lottery ticket or share, to play an electronic
29       gaming machine or to share in the lottery winnings of a person, knowing
30       that such person is:
31             (1) The executive director, a member of the commission or an em-
32       ployee of the Kansas lottery;
33             (2) an officer or employee of a vendor contracting with the Kansas
34       lottery to supply gaming equipment or tickets to the Kansas lottery for
35       use in the operation of any lottery conducted pursuant to this act;
36             (3) a spouse, child, stepchild, brother, stepbrother, sister, stepsister,
37       parent or stepparent of a person described by subsection (a)(1) or (2); or
38             (4) a person who resides in the same household as any person de-
39       scribed by subsection (a)(1) or (2).
40             (b)  (1) Violation of subsection (a) is a class A nonperson misde-
41       meanor upon conviction for a first offense.
42             (2) Violation of subsection (a) is a severity level 9, nonperson felony
43       upon conviction for a second or subsequent offense.

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  1             (c) Notwithstanding subsection (a), The executive director may au-
  2       thorize in writing any employee of the Kansas lottery and any employee
  3       of a lottery vendor to: (1) Purchase a lottery ticket for the purposes of
  4       verifying the proper operation of the state lottery with respect to security,
  5       systems operation and lottery retailer contract compliance; or (2) play an
  6       electronic gaming machine to verify the proper operation thereof with
  7       respect to security and contract compliance. Any prize awarded as a result
  8       of such ticket purchase shall become the property of the Kansas lottery
  9       and be added to the prize pools of subsequent lottery games. No money
10       or merchandise shall be awarded to any employee playing an electronic
11       gaming machine pursuant to this subsection.
12             (d) Certain classes of persons who, because of the unique nature of
13       the supplies or services they provide for use directly in the operation of
14       a lottery pursuant to this act, may be prohibited, in accordance with rules
15       and regulations adopted by the commission, from participating in any
16       lottery in which such supplies or services are used.
17             (e) Nothing in this section shall prohibit lottery retailers or their em-
18       ployees from purchasing lottery tickets and shares or from being paid a
19       prize of a winning ticket or share.
20             (f) Each person who purchases a lottery ticket or share thereby agrees
21       to be bound by rules and regulations adopted by the commission and by
22       the provisions of this act.
23             New Sec.  8. (a) The executive director shall contract with all pari-
24       mutuel licensees who so desire to install, operate and manage electronic
25       gaming machines at parimutuel licensee locations on behalf of the state
26       of Kansas, subject to the provisions of this act. The Kansas lottery shall
27       be the owner or licensee of all software programs used by such parimutuel
28       licensees to operate electronic gaming machines and shall sublicense such
29       software programs to each parimutuel licensee. The use of progressive
30       electronic gaming machines is permitted. The executive director only
31       shall contract with parimutuel licensees in counties in which a proposition
32       submitted pursuant to section 17, and amendments thereto, of this act
33       has been approved by the voters of such county.
34             (b) Electronic gaming machines may be installed, operated, man-
35       aged, owned or leased by parimutuel licensees or by a technology provider
36       under contract with the parimutuel licensee but subject to the ultimate
37       control and operation of the Kansas lottery in accordance with this act.
38       Each specific type of electronic gaming machine shall be approved by the
39       Kansas lottery in accordance with rules and regulations adopted by the
40       commission.
41             (c) Each contract between the executive director and a lottery gaming
42       machine operator shall provide for the Kansas lottery to receive all of the
43       net machine income derived from the operation of electronic gaming

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  1       machines at the parimutuel licensee location, shall be for an initial term
  2       of not less than seven years and shall be renewable for like periods.
  3             (d) The contracts authorized by this section may include the
  4       following:
  5             (1) Accounting procedures to determine the net machine income,
  6       unclaimed merchandise and credits.
  7             (2) The location of electronic gaming machines within the parimutuel
  8       licensee location and other matters relating to the operation of electronic
  9       gaming machines. The days and hours of operation of such electronic
10       gaming machines shall not be restricted.
11             (3) Minimum requirements for an electronic gaming machine oper-
12       ator to provide qualified oversight, security and supervision of the oper-
13       ation of electronic gaming machines at the parimutuel licensee location,
14       including the use of qualified personnel with experience in applicable
15       technology.
16             (e) No electronic gaming machine shall be operated pursuant to this
17       act unless the executive director of the Kansas racing and gaming com-
18       mission first issues a certificate for such machine authorizing its use at a
19       specified parimutuel licensee facility. Each machine shall have the cer-
20       tificate prominently displayed thereon. Any machine which does not dis-
21       play the certificate required by this section is contraband and a public
22       nuisance subject to confiscation by any law enforcement officer. A vio-
23       lation of this subsection is a severity level 8, nonperson felony.
24             (f) The Kansas lottery shall examine prototypes of electronic gaming
25       machines prior to certification pursuant to this section and shall notify
26       the Kansas racing and gaming commission which such types of electronic
27       gaming machines are approved for use by the Kansas lottery.
28             (g) Electronic gaming machines operated pursuant to this act shall:
29             (1) Pay out an average of not less than 80% of the amount wagered;
30             (2) be linked under a central communications system to provide au-
31       diting program information as approved by the commission. The com-
32       munications systems approved by the commission may not limit partici-
33       pation to only one electronic gaming machines manufacturer by either
34       the cost of implementing the necessary program modifications to com-
35       municate or the inability to communicate with the central communica-
36       tions system;
37             (3) be on-line and in constant communication with a central com-
38       puter located at the commission. The Kansas lottery shall obtain title to,
39       or a license for, the operation of, such gaming equipment as is necessary
40       to implement such central communications and auditing functions.
41             New Sec.  9. Except for persons acting in accordance with the rules
42       and regulations of the Kansas lottery and the Kansas racing and gaming
43       commission in performing installation, maintenance and repair services,

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  1       any person who, with the intent to manipulate the outcome, pay-off or
  2       operation of an electronic gaming machine, manipulates the outcome,
  3       pay-off or operation of an electronic gaming machine by physical, elec-
  4       trical or mechanical means shall be guilty of a severity level 8, nonperson
  5       felony.
  6             New Sec.  10. Each lottery gaming machine operator shall hold the
  7       executive director, the Kansas racing and gaming commission and the
  8       state harmless from and defend and pay for the defense of any and all
  9       claims which may be asserted against the executive director, the Kansas
10       racing and gaming commission, the state or the employees thereof, arising
11       from electronic gaming machines. The provisions of this section shall not
12       apply to any claims arising from the negligence or willful misconduct of
13       the executive director, the Kansas racing and gaming commission, the
14       state or the employees thereof.
15             New Sec.  11. Each lottery gaming machine operator shall provide
16       access to all its records and the physical premises where the electronic
17       gaming machine activities occur for the purpose of monitoring or inspect-
18       ing the electronic gaming machines and gaming equipment. None of the
19       information disclosed pursuant to this subsection shall be subject to dis-
20       closure under the Kansas open records act, K.S.A. 45-216 et seq., and
21       amendments thereto.
22             New Sec.  12. A parimutuel licensee shall post one or more signs on
23       licensed premises at points of entry to the areas where electronic gaming
24       machines are located to inform patrons of the toll-free number available
25       to provide information and referral services regarding compulsive or
26       problem gaming. The text shall be determined by the secretary of the
27       department of health and environment. Failure by the parimutuel li-
28       censee to post and maintain such signs shall be cause for the imposition
29       of a fine not to exceed $500 per day.
30             New Sec.  13. Wagers may be received only from a person at a par-
31       imutuel licensee location. No person present at a parimutuel licensee
32       location shall place or attempt to place a wager on behalf of another
33       person who is not present at a parimutuel licensee location.
34             New Sec.  14. A person under age 21 shall not be permitted in an
35       area of a parimutuel licensee location where gaming is being conducted,
36       except for a person at least 18 years of age who is an employee of the
37       parimutuel licensee. No employee under age 21 shall perform any func-
38       tion involved in gaming by the patrons. No person under age 21 shall be
39       permitted to make a wager on an electronic gaming machine.
40             New Sec.  15. If a disagreement arises between the executive director
41       and the Kansas racing and gaming commission with regard to their re-
42       spective duties or responsibilities in carrying out the purposes of this
43       article, such disagreement shall be resolved by the secretary of revenue

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  1       in a manner not inconsistent with the provisions of this act.
  2             New Sec.  16. There is hereby created in the state treasury the Kansas
  3       education technology enhancement fund. Such fund shall be for the sole
  4       purpose of improving access for Kansans to learning and information
  5       through modern telecommunications and computer technologies. De-
  6       posits to this fund shall derive exclusively from revenues of the Kansas
  7       lottery deposited pursuant to section 5(e)(4)(G) of this act and interest
  8       attributable to such funds. The director of accounts and reports shall
  9       disburse funds in accordance with appropriations made therefor to col-
10       leges and universities under the control of the Kansas board of regents,
11       community colleges under the control of the state board of education,
12       Washburn University, the state library for grants-in-aid to local libraries
13       and the board of education of any school district implementing and main-
14       taining a technology education fund pursuant to K.S.A. 72-3703, and
15       amendments thereto. The legislature may appropriate only those funds
16       in the Kansas education technology enhancement fund as are on hand as
17       of December 31 of each year preceding the legislative session in which
18       such appropriation is to be made. Such funds shall not be used to replace
19       property taxes or general fund support for activities, services, supplies,
20       maintenance, salaries, benefits, equipment, facilities or other purposes
21       existing and funded by federal, state or local moneys as of the effective
22       date of this act.
23             New Sec.  17. Pursuant to section 2 of the federal act entitled "An
24       Act to Prohibit Transportation of Gambling Devices in Interstate and
25       Foreign Commerce," 15 U.S.C. 1171 through 1777, the state of Kansas,
26       acting by and through the duly elected and qualified members of the
27       legislature, does hereby in this section, and in accordance with and in
28       compliance with the provisions of section 2 of such federal act, declare
29       and proclaim that it is exempt from the provision of section 2 of such
30       federal act to the extent that such gambling devices are being transported
31       to or from a parimutuel licensee location within the state of Kansas.
32             New Sec.  18. (a) Electronic gaming machines shall be operated pur-
33       suant to this act only in counties where, in accordance with this section,
34       the qualified voters of the county have voted to permit operation of elec-
35       tronic gaming machines at parimutuel racetracks within the county.
36             (b) The board of county commissioners, by resolution, may submit
37       and upon presentation of a petition filed in accordance with subsection
38       (c), shall submit to the qualified voters of the county a proposition to (1)
39       permit the operation of electronic gaming machines at parimutuel race-
40       tracks within the county; or (2) prohibit the operation of electronic gam-
41       ing machines at parimutuel racetracks within the county. The proposition
42       shall be submitted to the voters either in a countywide special election
43       called by the board of county commissioners for that purpose and held

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  1       not less than 90 days after the resolution is adopted or the petition is filed
  2       or in the next general election as shall be specified by the board of county
  3       commissioners or in the petition, as the case may be.
  4             (c) A petition to submit a proposition to the qualified voters of a
  5       county pursuant to this section shall be filed with the county election
  6       officer. The petition shall be signed by qualified voters of the county equal
  7       in number to not less than 10% of the voters of the county who voted for
  8       the office of secretary of state at the last preceding general election at
  9       which such office was elected. The appropriate version of the following
10       shall appear on the petition:
11       "We request an election to determine whether the operation of electronic gaming machines
12       by the Kansas lottery shall be permitted at parimutuel racetracks in ________ county."
13             (d) Upon the adoption of a resolution or the submission of a valid
14       petition calling for an election pursuant to this section, the county election
15       officer shall cause the appropriate version of the following proposition to
16       be placed on the ballot at the election called for that purpose:
17             "Shall the operation of electronic gaming machines by the Kansas lottery be permitted
18       at parimutuel racetracks in ________ county?"
19             (e) If a majority of the votes cast and counted at such election is in
20       favor of permitting the operation of such games at such racetracks, the
21       Kansas lottery shall be authorized to enter into contracts with parimutuel
22       licensees to operate such games at parimutuel racetracks in the county.
23       If a majority of the votes cast and counted at an election under this section
24       is against permitting the operation of electronic gaming machines at par-
25       imutuel racetracks in the county, the Kansas lottery shall not be author-
26       ized to operate such games at parimutuel racetracks in the county. The
27       county election officer shall transmit a copy of the election results to the
28       executive director.
29             (f) The election provided for by this section shall be conducted, and
30       the votes counted and canvassed, in the manner provided by law for
31       question submitted elections of the county.
32             (g) If in any election provided for by this section a majority of the
33       votes cast and counted is against permitting the operation of electronic
34       gaming machines in the county, another election submitting the issue of
35       the operation of electronic gaming machines in the county shall not be
36       held for at least two years from the date of such election.
37             New Sec.  19. Nothing in this act shall restrict the jurisdiction of the
38       Kansas racing and gaming commission to regulate activities conducted at
39       parimutuel licensee facilities including the premises on which electronic
40       gaming machines are operated.
41             Sec.  20. K.S.A. 1998 Supp. 74-8723 is hereby amended to read as
42       follows: 74-8723. (a) The Kansas lottery and the office of executive di-
43       rector of the Kansas lottery, established by K.S.A. 74-8703, and amend-

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  1       ments thereto, and the Kansas lottery commission, created by K.S.A. 74-
  2       8709, and amendments thereto, shall be and hereby are abolished on July
  3       1, 2002 2007.
  4             (b) This section shall be part of and supplemental to the Kansas lot-
  5       tery act.
  6             Sec.  21. K.S.A. 1998 Supp. 74-8804 is hereby amended to read as
  7       follows: 74-8804. (a) During race meetings, the commission and its des-
  8       ignated employees may observe and inspect all racetrack facilities oper-
  9       ated by licensees and all racetracks simulcasting races to racetrack facil-
10       ities in Kansas, including but not limited to all machines, equipment and
11       facilities used for parimutuel wagering.
12             (b) Commission members and hearing officers designated by the
13       commission may administer oaths and take depositions to the same extent
14       and subject to the same limitations as would apply if the deposition was
15       in aid of a civil action in the district court.
16             (c) The commission may examine, or cause to be examined by any
17       agent or representative designated by the commission, any books, papers,
18       records or memoranda of any licensee, or of any racetrack or business
19       involved in simulcasting races to racetrack facilities in Kansas, for the
20       purpose of ascertaining compliance with any provision of this act or any
21       rule and regulation adopted hereunder.
22             (d) The commission may issue subpoenas to compel access to or for
23       the production of any books, papers, records or memoranda in the cus-
24       tody or control of any licensee or officer, member, employee or agent of
25       any licensee, or to compel the appearance of any licensee or officer, mem-
26       ber, employee or agent of any licensee, or of any racetrack or business
27       involved in simulcasting races to racetrack facilities in this state, for the
28       purpose of ascertaining compliance with any of the provisions of this act
29       or any rule and regulation adopted hereunder. Subpoenas issued pursuant
30       to this subsection may be served upon individuals and corporations in the
31       same manner provided in K.S.A. 60-304, and amendments thereto, for
32       the service of process by any officer authorized to serve subpoenas in civil
33       actions or by the commission or an agent or representative designated by
34       the commission. In the case of the refusal of any person to comply with
35       any such subpoena, the executive director may make application to the
36       district court of any county where such books, papers, records, memo-
37       randa or person is located for an order to comply.
38             (e) The commission shall allocate equitably race meeting dates, rac-
39       ing days and hours to all organization licensees and assign such dates and
40       hours so as to minimize conflicting dates and hours within the same ge-
41       ographic market area.
42             (f) The commission shall have the authority, after notice and an op-
43       portunity for hearing in accordance with rules and regulations adopted

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  1       by the commission, to exclude, or cause to be expelled, from any race
  2       meeting or racetrack facility, or to prohibit a licensee from conducting
  3       business with any person:
  4             (1) Who has violated the provisions of this act or any rule and regu-
  5       lation or order of the commission;
  6             (2) who has been convicted of a violation of the racing or gambling
  7       laws of this or any other state or of the United States or has been adju-
  8       dicated of committing as a juvenile an act which, if committed by an adult,
  9       would constitute such a violation; or
10             (3) whose presence, in the opinion of the commission, reflects ad-
11       versely on the honesty and integrity of horse or greyhound racing or
12       interferes with the orderly conduct of a race meeting.
13             (g) The commission shall review and approve all proposed construc-
14       tion and major renovations to racetrack facilities owned or leased by
15       licensees.
16             (h) The commission shall review and approve all proposed contracts
17       with racetracks or businesses involved in simulcasting races to racetrack
18       facilities in Kansas.
19             (i) The commission may suspend a horse or greyhound from partic-
20       ipation in races if such horse or greyhound has been involved in any
21       violation of the provisions of this act or any rule and regulation or order
22       of the commission.
23             (j) The commission, within 72 hours after any action taken by a stew-
24       ard or racing judge and upon appeal by any interested party or upon its
25       own initiative, may overrule any decision of a steward or racing judge,
26       other than a decision regarding disqualifications for interference during
27       the running of a race, if the preponderance of evidence indicates that:
28             (1) The steward or racing judge mistakenly interpreted the law;
29             (2) new evidence of a convincing nature is produced; or
30             (3) the best interests of racing and the state may be better served.
31             A decision of the commission to overrule any decision of a steward or
32       racing judge shall not change the distribution of parimutuel pools to the
33       holders of winning tickets. A decision of the commission which would
34       affect the distribution of purses in any race shall not result in a change
35       in that distribution unless a written claim is submitted to the commission
36       within 48 hours after completion of the contested race by one of the
37       owners or trainers of a horse or greyhound which participated in such
38       race and a preponderance of evidence clearly indicates to the commission
39       that one or more of the grounds for protest, as provided for in rules and
40       regulations of the commission, has been substantiated.
41             (k) The commission, after notice and a hearing in accordance with
42       rules and regulations adopted by the commission, may impose a civil fine
43       not exceeding $5,000 for each violation of any provision of this act, or any

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  1       rule and regulation of the commission, for which no other penalty is
  2       provided.
  3             (l) The commission shall adopt rules and regulations specifying and
  4       regulating:
  5             (1) Those drugs and medications which may be administered, and
  6       possessed for administration, to a horse or greyhound within the confines
  7       of a racetrack facility; and
  8             (2) that equipment for administering drugs or medications to horses
  9       or greyhounds which may be possessed within the confines of a racetrack
10       facility.
11             (m) The commission may adopt rules and regulations providing for
12       the testing of any licensees of the commission, and any officers, directors
13       and employees thereof, to determine whether they are users of any con-
14       trolled substances.
15             (n) The commission shall require fingerprinting of all persons nec-
16       essary to verify qualification for employment by the commission or to
17       verify qualification for any license, including a simulcasting license, issued
18       pursuant to this act. The commission shall submit such fingerprints to the
19       Kansas bureau of investigation and to the federal bureau of investigation
20       for the purposes of verifying the identity of such persons and obtaining
21       records of criminal arrests and convictions.
22             (o) The commission may receive from commission security person-
23       nel, the Kansas bureau of investigation or other criminal justice agencies,
24       including but not limited to the federal bureau of investigation and the
25       federal internal revenue service, such criminal history record information
26       (including arrest and nonconviction data), criminal intelligence informa-
27       tion and information relating to criminal and background investigations
28       as necessary for the purpose of determining qualifications of licensees of
29       the commission, employees of the commission, applicants for employ-
30       ment by the commission, and applicants for licensure by the commission,
31       including applicants for simulcasting licenses. Upon the written request
32       of the chairperson of the commission, the commission may receive from
33       the district courts such information relating to juvenile proceedings as
34       necessary for the purpose of determining qualifications of employees of
35       and applicants for employment by the commission and determining qual-
36       ifications of licensees of and applicants for licensure by the commission.
37       Such information, other than conviction data, shall be confidential and
38       shall not be disclosed except to members and employees of the commis-
39       sion as necessary to determine qualifications of such licensees, employees
40       and applicants. Any other disclosure of such confidential information is a
41       class A misdemeanor and shall constitute grounds for removal from office,
42       termination of employment or denial, revocation or suspension of any
43       license issued under this act.

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  1             (p) The commission, in accordance with K.S.A. 75-4319, and amend-
  2       ments thereto, may recess for a closed or executive meeting to receive
  3       and discuss information received by the commission pursuant to subsec-
  4       tion (o) and to negotiate with licensees of or applicants for licensure by
  5       the commission regarding any such information.
  6             (q) The commission may enter into agreements with the federal bu-
  7       reau of investigation, the federal internal revenue service, the Kansas
  8       attorney general or any state, federal or local agency as necessary to carry
  9       out the duties of the commission under this act.
10             (r) The commission shall adopt such rules and regulations as neces-
11       sary to implement and enforce the provisions of this act.
12             (s) The commission shall inspect and certify individual electronic
13       gaming machines operated by lottery gaming machine operators. The
14       commission shall require the person seeking the examination and certifi-
15       cation of electronic gaming machines to pay the anticipated actual costs
16       of the examination in advance. After the completion of the examination,
17       the commission shall refund overpayments or charge and collect amounts
18       sufficient to reimburse the commission for under payments of actual costs.
19       The commission may contract for the examination of electronic gaming
20       machines as required by this subsection, and may rely upon testing done
21       by or for other states regulating electronic gaming machines, if the com-
22       mission deems such testing to be reliable and in the best interest of Kansas.
23             (t) The commission may adopt rules and regulations with respect to
24       security, safety and honest conduct at all parimutuel licensee locations as
25       defined by this act. 
26       Sec.  22. K.S.A. 74-8701, 74-8702, 74-8704 and 74-8711 and K.S.A.
27       1998 Supp. 74-8710, 74-8718, 74-8719, 74-8723 and 74-8804 are hereby
28       repealed.
29         Sec.  23. This act shall take effect and be in force from and after its
30       publication in the statute book.