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Questions arise about funds used for Calif. Lottery party

Jan 25, 2008, 8:24 am

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California Lottery

The California Lottery handed out a Nintendo Wii, several iPods, digital cameras and gift cards as prizes during a $43,629 employee recognition celebration and charged some of the items as "training" expenses.

During a Nov. 8 event commemorating the $20 billion the lottery has provided education since its 1984 inception, state officials used lottery administration funds to host a prime rib dinner for more than 300 employees and their guests at the DoubleTree Hotel in Sacramento.

As part of the evening's entertainment, local celebrity Jack Gallagher held a mock Big Spin game and handed out the prizes to winners in the audience. A spokesman for the lottery said the prizes were considered "training" expenses so that employees — who are not allowed to play the lottery — could familiarize themselves with games.

"Employees are certainly worth the recognition, and it was a milestone for the lottery," said spokesman Al Lundeen.

The state controller is now disputing the dinner and prizes and is asking that most of the money be returned to his office. The controller's auditors expect to review all claims from the past five years.

"We compared those receipts to bills we had paid and determined those events were not in support of the department's mission, nor did it benefit the state," said Hallye Jordan, a spokeswoman for Controller John Chiang. State law requires public money be used to further a department's mission, and "meals are not considered an expenditure that benefits the state," Jordan said.

Lottery ticket sales have declined in fiscal year 2006-07 vs. fiscal year 2005-06, and Gov. Arnold Schwarzenegger has proposed to lease out the entire operation to "turn ticket sales and marketing over to someone who could do it better."

Last week, the lottery commission was told that year-over-year sales were down $266 million, which put education contributions off by $87 million.

Lottery officials said the benefit of boosting employee morale outweighed the event's tab. Funding, they said, came from the lottery's administration account — which is a percentage of ticket sales — and not from taxpayers.

"I thought it was a really good idea," said John Mass, a Schwarzenegger appointee and chairman of the Lottery Commission. "There are different games introduced every month that many of the employees don't know enough about. ... This is a fun and unique way to introduce them to the lottery."

Mass said the lottery often gives excess administration funds to the schools.

As guests dined on $32 prime rib dinners in the hotel's ballroom Nov. 8, Gallagher, who was the original host of "The Big Spin" and has a recurring role on HBO's "Curb Your Enthusiasm," hosted mock lottery games as part of the evening's entertainment. Instead of winning cash, attendees were given Best Buy and Borders gift certificates as prizes, along with digital photo frames, portable DVD players and Nikon digital cameras.

One lottery commissioner said that he wasn't aware the event was held at a hotel or that prizes were given. In the past, employee recognition events have been held at the lottery's headquarters parking lot.

"I thought it was right there on the grounds of the lottery headquarters," said Commissioner Manuel Ortega. Ortega, a former police chief, said the high cost of the party could have been "an aberration" because of the $20 billion celebration.

Since 2003, the cost of the lottery's annual employee recognition event has varied between $6,000 and $18,400.

Lundeen said entertainment and prizes were added this year to celebrate staff contributions. The department employs about 620 people statewide.

The event also raised money for school districts. Lundeen said guests contributed a truck full of school supplies that were distributed to students at the North Sacramento School District. An additional $3,000 in cash and gift certificates were sent to the Poway Unified School District, where 300 students were affected by the Southern California wildfires.

Other state agencies have been known to host employee recognition events but rarely do they involve food and prizes. Each year, the governor recognizes civil servants for extraordinary acts of heroism deserving of the "Medal of Valor." The Department of Corrections and Rehabilitation hosts a similar event recognizing the contributions of its employees.

The latter event held at the Capitol costs about $7,000, according to Margot Bach, director of special projects for the corrections department. Lunch is donated by the California Correctional Supervisors Organization, Bach said.

"We want to honor people appropriately, but we don't want to spend a lot of money," Bach said.

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