ALC-Lottery Oversight Subcommittee
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0:00
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Senator Ricky Hill
Unverified
6:00
Let's call the meeting in order. Have a great crowd today, so hopefully we'll get some good information have some good questions and get everyone's questions answered. So we'll move forward with this
Mr. Co-chair, is there anything that you'd like to add to it? Thank you. Well, first off we're gonna Review the intralot and scientific games contracts Director strong And mr. Mr. Secretary Hudson is going to come up and join us. Please introduce yourself for the records
Senator Ricky Hill
Unverified
6:58
Do we have a motion to review? Have a motion and a second.
All those in favor say aye. Opposed, same sign. Go ahead.
Speaker 11
7:15
All right, good afternoon, Mr. Chairman. Jim Hudson, Secretary of DFA. I'm not in your committee that often, so it's good to be here today. Thank
Speaker 13
7:23
you for having me. Sharon. Sharon Strong, Executive Director of the Lottery. Thank you for having
Speaker 15
7:30
us. please proceed. Yeah, Mr. Chairman, if I can just go ahead and open up, I'll let Sharon kind of get into the details
Speaker 16
7:35
of the contract. She did, you know, all the heavy lifting on the negotiations
on this. I kind of want to give you a little bit of the backstory in terms of how we kind of got to where we are today. Sharon joined the team a little over a year ago last summer, a year ago summer, and one of the first things that I asked her to take a look at was the lottery contracts. I knew they were coming up for renewal in the summer of 2026. And to be honest with you, I felt like we weren't quite getting all the value we could get out of those contracts. I felt like there was certain parts that we were probably overpaying on. And I also had a concern, you know, particularly on our central gaming system,
which is, you know, the system that issues the tickets for like Powerball and Mega Millions. It's a little long in the tooth. And I want to make sure that we're not working off of a 10-, 15-year-old technology and really having some assurances about forward-looking capital investment to make sure we're refreshing the technology on a regular basis. And so as we began to talk about a process for procurement, one of the things that I felt like, just in terms of negotiating, that I wanted to maximize the opportunity for leverage that we had with the vendors.
And is there an opportunity to kind of start talking to the existing vendors about, you know, renewing the contracts, albeit on more favorable terms? So we examined our authorities that we have under statute and under the lottery's rules about procurement. And we believe that we have the opportunity, if the quality of the deal came back such that it was a much better deal, that we can enter some direct negotiations. And if that didn't prove out, then we would just kind of do a more traditional procurement and, you know, do a conventional sort of bid process.
So we started the conversations with the vendors. And really, there are two vendors here, two contracts you'll be looking at. One is the central gaming system with Intralot. And, again, that not only issues the tickets, but it's kind of our backbone, our back office for all the accounting as it relates to sales of the lottery tickets, both the instant tickets in terms of scratch-off and the draw tickets, the Powerball, Mega Millions, things like that. And so the initial responses back from the vendors were encouraging,
but they weren't quite what we wanted them to be yet. And so Sharon and her team went through a series of negotiations back and forth, asking for more, getting some responses, asking for more. And it's a process that really has gone on for the past several months. I will tell you, just in terms of Secretary DFA, being a part of the Arkansas Forward Project, where we're looking at procurement very, very closely, I think we have a tendency in state government to be very process-oriented,
and process is important, I believe it's important, but we don't score value. We think if we follow a process to the T, irrespective of the business deal, the quality of the terms, that we've actually accomplished something. And I've seen way too many contracts come through, and you've seen way too many contracts come through, where we spend a lot of time and effort just to agree we're going to pay a whole lot more money next time. That's not how you run your businesses. That's not how I ran business when I was in the private sector.
You know, we are a big purchaser. The lottery is a large enterprise. We need to leverage our buying power to get the best deal possible. And whatever money we can save with the lottery drops 100% to the bottom line. And that is 100% going towards scholarships. She gets no cut off that. She's already fully paid. So any savings that we get goes toward scholarships.
And I'll later unpack the details, but here's the headline on it. Through the negotiations that we went through with both Intralot and with Scientific Games, the value of the contracts going forward, the improvements, the economic concessions coming back to the state, about $50 million. About $10 million of that is actual cash, right? And this is not funny, you know, government accounting. This is we're paying actually that much less over the life of the contract.
Back to that CapEx I was talking about earlier. We're doubling the number of vending machines that we have available. I don't know about you. Right now, if you want to be able to buy a lottery ticket, and full disclosure, I don't buy a lottery ticket, just a personal deal with me. I'm not going to do that. But for those who want to do that, you have to use cash. Who carries cash? Nobody carries cash. And if you're like me, you know, sometimes you just don't want to go in and talk to a human being. You want to be able to do self-service. When I go to Circle K, you know, I'm at the pump, I pay at the pump, and I leave.
I don't go inside to talk to somebody to do business. It's even self-checkout if I'm getting a Diet Coke as well. So we're upgrading the technology with those machines as well where you use debit cards. You don't use credit cards, but you use debit cards, and you'll be able to buy your lottery tickets through a vending machine, doubling the number of vending machines not on our nickel, that's on the vendor's nickel. They're paying for it, okay? And we're getting some upgrades to the terminals as well. So really great value.
I'm excited about this because, again, we spend a lot of money in the state of Arkansas. I don't see enough deals come across my desk where I'm like, wow, that's actually a good deal. This is a good deal, and I'm very excited about it. I'll just turn it over to Sharon now to kind of unpack the details and then happy to answer any questions that the committee has. I want to ask you one quick.
Senator Ricky Hill
Unverified
13:29
You mentioned $50 million just then over the life of the contract. Are you figuring the extension on the contract? Have you already done it? Or how many years do you actually figure it out? I think that's the
Speaker 11
13:36
10- and 8-year contract term. So 10-year would be $5 million a year roughly.
I'm not sure if it breaks down evenly per year, but I think over the life it's that. For intralot, I think it's about $1 million. for interlot um we
Speaker 27
13:48
had about three and a half million over the
Speaker 28
13:52
contract term and then um side games we had about 11 million 11 million you see where i'm going i'm just trying to break it down into a
Senator Ricky Hill
Unverified
13:59
per year basis because you can throw a number out there it looks really big yep but if you divide it it's not near as big so i just want to kind of
Speaker 34
14:08
well and there's some there's some um it's difficult do you mind
Speaker 35
14:12
pulling that mic a little closer i think some
Speaker 36
14:15
people are having a hard time so these these contracts are based on sales and so you know If we do well and we sell a lot, then the payment that we make to the vendor, of course, will be more or less if we don't do as well each year. So it's hard to determine, you know, on a per-year basis. But we do a decent job forecasting and budgeting, and we can get into that. We'll get into that agenda item C, I believe, when we get to this report.
Representative John P. Carr
Unverified
14:44
So it's percentage of sales, so it's paying for performance.
Yeah, we built the pro formas, you know, for those numbers based off actual fiscal year 2025 numbers. We had to have some baseline to be able to use. Let's just use the last year. You know, if we do better this year and we're trending better so far, then we may end up paying more in fees. But the savings then would be more compared to what we'd otherwise pay in the existing contracts. Thank you. Good question. So thank you, Secretary Hudson.
Speaker 28
15:14
And so, you know, I think I say this all the time, the lottery is a square peg in a round hole because
Speaker 40
15:20
we are a business and we're very focused and concerned about that bottom line.
Speaker 36
15:27
And the mission is to maximize revenue for scholarships. So all of our revenue goes directly to that pot of money for the scholarships. And what we learned early on in the process was that the states that were going out to a, you know, sort of a strict RFP process, their costs were being driven up versus the states that were renegotiating their current contracts with their vendors. They were able to leverage and negotiate a better rate.
And we got some data from various states on that, and then we utilized an industry expert to confirm that data for us and help us to craft a counterproposal to the one that we had gotten from our current vendor. And so through that process, we ended up, like Secretary Hudson said, with a much better rate and also the vendor providing a very significant amount of capital expenditure investment on the front end of the contract.
So just to give some details, some numbers, on the interlock contract, the current rate that we have is 2.11% of our sales. And then on the proposed contract, the rate will be reduced to 2.05%, which is about a $3.5 million savings if you use our fiscal year 25.
sales numbers. Additionally, they are going to set aside $2 million in investment for what we mutually determine as something that will be beneficial, you know, whether that is new equipment, whether that's research, whether that's if we obtain a new partner, a new retailer partner, we have $2 million that we can use for whatever comes along the way and over the over the lifetime of the contract. In addition to that, they will provide complete upgrades to
our system software and technology, as well as fully updated hardware and equipment upgrades throughout the state at both our headquarters and all of our retail partners. So that's all new terminals, all new ticket checkers, all new signs, some monitors, and then the software, back office system software will be completely updated
Speaker 26
18:04
and upgraded so that's I don't have a figure of what that
Speaker 36
18:09
is but it's very significant capital
investment that they'll have to make on the front end which is why the term of the contract is what it is so that over the lifetime of the contract they'll be able to recoup that investment and moving on to the side games numbers we We restructured that so we had a base rate with them, and then when they hit a certain number, they received a bonus payout. So we restructured all of that completely. The point at which they received the bonus is much higher than it was before. It went from $360 million to $480 million.
And then also they run our loyalty program, which we've had for years, and the rate that we pay them on that was reduced as well. Can we stop there and just make
Speaker 42
18:56
sure the committee understands the significance of the restructuring of the bonus? You know, most years we're going to hit that 360,
Speaker 43
19:02
right, just based on our history of sales. So when I was in the private sector, you know, to get a bonus in government work,
Speaker 44
19:10
shouldn't get a bonus in government work. But when in our private sector, you get paid a bonus for stretching.
Speaker 16
19:18
You get paid a bonus for overachieving. And, you know, I think the current reality was we were bonusing before we really overachieved. So we're pushing that number up to that 480 before we start paying a bonus. And I'm good with that. I mean, if they help us actually do better and increase our sales, that's worthy of a bonus. You know,
Speaker 15
19:37
I think the previous, you know, the current contract did not really incentivize enough growth in the business. The new contract incentivizes growth in the business, and I think that's very important.
Senator Ricky Hill
Unverified
19:48
Sorry to interrupt. Would you kind of elaborate just a little
Speaker 46
19:53
bit on the bonus? What is the bonus? The percentage
Speaker 26
19:57
that's paid out increases, and she asked the numbers. How
Speaker 36
20:02
much did that increase? So it was an additional 4.5% on top of the base rate. Now, in the new proposed contract, it's going to be an additional, it's a tiered system based on our sales. So it'll range from .615 to 2.365 based on the sales.
So just to give you sort of an apples-to-apples comparison, under the current contract, if we sell $520 million one year versus under the new contract, if we sell $520 million, we will save $3 million under the new proposed terms versus the current terms. Thank you. And
Speaker 19
20:42
so you're really self-funding the bonus through the incremental in the sales, and we're only paying the bonus on
Speaker 42
20:48
the increment, not on the whole sales volume.
Speaker 28
20:52
so um what questions do you all have i guess okay so you're ready for questions well i feel like i've i feel like i've covered um kind of the the basics and i'm happy to take questions.
Senator Ricky Hill
Unverified
21:17
Okay. Senator Hammer, we'll start with you. No, sir, because you'll
Representative Andrew Collins
Unverified
21:23
think of more questions if you go ahead and go now. Representative Collins. Thank you, Mr. Chair. So I think before you even get into the contract, my first question for you is how is it that you
can do these these are not competitively bid right I mean that's accurate to say that well
Representative John P. Carr
Unverified
21:52
no I think it is competitively bid in the sense that we
received a competitive bid if you're asking the question did multiple people submit proposals for the
Speaker 44
22:00
services no multiple people did we did direct negotiation with the incumbent vendors well you'd agree I
Representative Andrew Collins
Unverified
22:07
think that a bid is a little bit different in the procuring context than a proposal right
I I mean, we're not talking about competitive
Speaker 44
22:15
bids in a negotiated agreement, right? State procurement law actually can use bids and proposals somewhat interchangeably, particularly when you're talking about the MAP process. A proposal essentially is a bid.
Speaker 42
22:27
Typically in state procurement law, a bid is like a sealed bid, and that's certainly not
Representative Andrew Collins
Unverified
22:32
what we did here. Well, let me get to my point, and then you can tell me if you think that this means bid in this way. So I'm looking at the statute because I was interested in doing and how y'all did this. And I recognize that you have your own rules here. But you also have some statutory requirements that you have to comply with. And I'm looking at 23-115-701, which is, you know, your procurement statute. And in C2, it says the office, meaning you guys,
shall arrange for the solicitation and receipt of competitive bids for major procurement contracts. So I understand you have your own rules and those govern, but those rules are subject to statute. And that, I don't really understand how you get around that part of statute to do a non-competitively bid contract for a major procurement contract. So maybe just tell me why you think we can
Representative John P. Carr
Unverified
23:26
do that. Sure. So if you look at that statutory language, it's very, very brief.
Speaker 44
23:33
You compare that language to state procurement law, where the statutes themselves have very detailed procedures that the agencies must follow in the procurement process, not so in the lotteries. The lottery, for reasons that I wasn't here for, wasn't a part of that process, the General Assembly chose to write that language in a very brief fashion, and then simultaneously conferred rulemaking authority upon the lottery to essentially fill in the gaps on that which is
what they did they went through the administrative procedures process they wrote the rules public comment they brought them here and they went through the alc review process these are not new rules these rules have been in place for many years and have been used in previous procurements as
Representative John P. Carr
Unverified
24:22
well all we're doing is following the path that's been followed
Representative Andrew Collins
Unverified
24:25
before i understand that you have the rules to flesh out the details
I totally get that and I understand those rules predate all this however there's only three things that C says one is that y'all shall adopt rules
two is that it shall be competitively bid so I mean I just don't see the rules are subject again to the law and the law says that the office shall arrange for the solicitation and receipt of Competitive bids for major procurement contracts, so I'm just not I'm just not seeing how you don't have to have
Speaker 34
25:00
competitive bids so The Exception to comply with state procurement law
Speaker 36
25:07
is as you stated in section C and D
C1 says the the office shall adopt rules Concerning procurement for major procurement contracts and major procurement contracts is defined in our roles as A contract that is $75,000 or more and is specific to lottery, and it lists a few things, including a central gaming system and a ticket printing service. So these would fall under what's defined as major procurement contracts. And then if you go to C2, the office shall arrange for the solicitation and receipt of competitive bids for major procurement contracts.
Solicitation is defined as basically putting something out there, asking for a response. And then major procurement contracts, as I stated, is also defined in our rules. But the word competitive bid is not defined. And so that needs to be read not in terms of the definition, I think, that you're thinking of as a competitive bid. So in state procurement law, competitive bid is something that is $20,000 to $75,000 or from $20,000 to $75,000, and you get three quotes.
And then, but major procurement contract in lottery world is $75,000 or more and is a specific thing to lottery. So those two things are conflicting in that one sentence. So that can't, when it says receipt of competitive bids, basically the way that I think what that means is the office shall arrange for putting something out there saying we want an offer and then we receive that offer for this major procurement contract, which is $75,000 or more and specific to lottery.
Representative Andrew Collins
Unverified
27:02
And I'll stop and let other people come in. I have no issue with the threshold. I understand that's different, you know, and you can define that how you want. But you can't define competitive bidding in rules in a way that's inconsistent with what competitive bidding means. Well, it's not defined in the statute, sir. But it doesn't have to be. I mean, it means something. I mean, if you guys are saying competitive bidding means a negotiated contract, okay, I mean, I guess that's the position. But I just find that hard. I can't get there because competitive bidding, why even have this language in there?
Speaker 43
27:35
if it means it could be a negotiated contract. But again, I would argue that if
Speaker 16
27:43
you compare it to state procurement law, there are numerous sections that elaborate on all the processes, including a direct negotiation process allowed under state procurement law. This is just a very short, succinct statement in code coupled with a grant of rulemaking authority. The agency is entitled to rely upon rules that are validly promulgated that have been reviewed by this body and set on the books today.
And so to say, and have been followed, and we have precedent for it, we've followed previously in other procurements as well. And so I just find it curious that, you know, now we're saying that maybe we shouldn't rely on rules that have already been approved. They're there. They're on the books. If we don't like those rules, then there are processes for changing them. But as long as they're there, the agency
Speaker 44
28:30
is entitled to rely upon them to the benefit of the taxpayers, which is what we're doing here. unless they're inconsistent with statute. Thank you. That's for a court to determine, but these rules are presumed to be valid unless found otherwise,
Representative RJ Hawk
Unverified
28:43
and they have not been found to be otherwise. Representative Halt. Thank you, Mr. Chair. Thank you, Secretary Hudson. I've got some of the same questions kind of along the line. You know, you said earlier that you're doing what's best for
the kids and the scholarships, and I agree with that. I'm not discounting that, but what I would also say, though, is wouldn't you agree that we would competitively bid this out to other vendors across the country that might do this to say, let's figure out what we've got
to figure out what the best deal is rather than just going with the same two that we've been using for however long now?
Representative John P. Carr
Unverified
29:25
I can answer that. Well, let me take a crack at it, then you go next. We're not buying reams of
Speaker 44
29:31
paper. Yeah. We're not buying paper clips. There may be one vendor in the country that can do this other than the two that are currently doing the services. So it's a very thin market to begin with, and that honestly was the principle that we kind of focused on. If we could somehow catalyze competition and we
Speaker 16
29:50
had multiple vendors out there, absolutely do that. It gives as many people to the table as possible.
But if there are only three in the country and two of them you currently have contracts with, what are you really going to accomplish with that particularly with the intelligence that we have on the third vendor in terms of they're probably not going to come back with something that's going to be cheaper anyway so the ability to say we're going to talk to you directly you have an opportunity to convince us that the business case is better to directly negotiate with you versus going out to an rfp you show us that it's a better deal for us and if it is then we'll do the negotiations if it's not then we'll do the other thing and then simultaneously have a third party
expert who's not beholden to us who doesn't work for any of the vendors go out and do the data you know research on this and tell us what are other states paying you know are we at least getting something as
Speaker 27
30:41
good at as if not better and I think the data came back that we got a good
Speaker 40
30:47
deal on this and I would add that um but like I was saying before that how a lottery lottery is a square peg in a round hole so in normal state government world you know we rely on this RFP process to get us the best deal you know put it all out there free market economy competition
Speaker 36
31:06
drives costs down all of that it's counterintuitive but that's not really how it works in the lottery because this industry is so small and there are only three companies in the entire world not just the nation but the world that can provide these specialized services and so putting it out to rfp does drive up costs and that's exactly what the data showed the states that did go out to rfp recently their costs were driven up anywhere from 13 to 38 percent whereas ours went down and so
it it might seem counterintuitive but that isn't the best way to get to um and and back to the to the law and the statute where it talks about I am required to make sure that any contract that I sign must provide the greatest long-term benefit to the state, the greatest integrity for the office, and the best service and products for the public, and have the objective of raising net proceeds
for the benefits of scholarships and grants. So I don't want to lose the force for the trees here because overall I am
Speaker 82
32:15
statutorily required to achieve this end goal. here represent hawk also i think
Representative John P. Carr
Unverified
32:22
you know i'd say that we've we've all you know been around the block here a few times
Speaker 44
32:27
we know how this this works in terms of procurement if a particular vendor felt like something was kind of sketchy that was going on they're getting boxed out of the process in unfair fashion we all know what happens you know my phone rings your phone rings this is not
fair we need to kind of get let us get a chance to bet on this nobody's you know saying hey i want to get in on this process because again it's such a thin market and keep in mind too these are all proprietary systems so it's not like you know we bring in a new vendor and they would run intralot system with intralots boxes they're going to rip all those out and they're going to put their boxes in and so the cost of conversion on that and the loss of sales falls to the arkansas taxpayers so we're taking risk off
Speaker 16
33:12
the table by doing it this way and i think for the from the vendor's perspective
This is a good part of the negotiation. They get, you know, some assurances. They've got that revenue stream in the future. We're
Speaker 10
33:25
making them pay for that. So you get the revenue stream, we're going to pay less. So there's market dynamics that are
Representative RJ Hawk
Unverified
33:31
occurring here as well. And I think you kind of led me into my next question. And it's my understanding, and you guys are the experts in this, and I'm just asking questions here,
but that one or either both of these can handle both these two contracts, right?
Have we ever looked at even, and going kind of back to that competitive bid, and I don't know how, I guess it was 10 years ago when this was done
or so, have we ever even looked at saying Intralot or Scientific Games or a third-person company, could you give us more of a cost savings if you handled both things rather than having two separate contracts? That's a good question. It's a
Speaker 89
34:09
fair question. You know, I think back to the point, it's a thin market. So we
Speaker 44
34:14
don't have a lot of alternative vendors out there.
So I want you to think about concentrating all your eggs in one basket. And companies fail all the time. And right now we have diversification of our revenue stream. So if for whatever reason Intralot is struggling in its performance, particularly on the draw games, you know, we've got the scratch-off tickets there that are compensating for it. If you have that with one vendor and they're just going through a rough patch and they're failing to execute, all revenue lines are affected by that. So I think from us, from our standpoint, irrespective of who the vendor is, we want to have multiple vendors in place there just to hedge our risk a little bit.
Representative RJ Hawk
Unverified
34:54
So to that point then, why would we do a 10-year contract instead of, let's say, a seven- or eight-year
contract? Because if they're failing and we're stuck with them for 10 years, I mean. We're not stuck with anybody. Okay. So we've got
Speaker 44
35:10
outs in this thing. So we have SLAs in place so that if they fail to perform on the contract, they're gone. Okay. So that's not the issue. Having a longer tail on the contract gives them, again, that revenue assurance over a period of time so they can recoup their capital investment.
Speaker 16
35:26
So, you know, we could say, you know, shorter contract, they take off the table them paying for the equipment. So we've got to take our cash to pay for the equipment. Well, now what we're saying is we'll give you a
Speaker 10
35:38
little bit longer in the contract, but we're going to make you pay for it. Pay for it by giving us equipment on your nickel, not on our nickel. Thank you. Sandra
Senator Kim Hammer
Unverified
35:49
Hammer, we're back to you. Thank you, Mr. Chair. To that question right there, so who's paying for the equipment now? Are we paying for the equipment under the current contract?
Well, I'd say that it's fairly stale equipment. But we're paying for it.
Yes. We're paying for it. Correct. And when you talk about the savings, define the source of the savings. Is it through the extended contract? Is it through increased sales? Because something that was said, it puts more incentive on them because they're going to be putting more machines in, which that
Speaker 44
36:26
either means that no way. The savings are really just kind of projected based on last year's sales.
I believe that the quality of the contract, we're going to see an increase in sales. So we're going to get more savings. We didn't want to kind of gild the lily in the presentation, so we left that out. We're just strictly comparing to last year. If we did no more than last year, that's the amount of savings that we're going to have. And that's a savings that is calculated by how much we're paying the vendor to do the work. We're going to pay them less. Their commission is less than what it is right now. But the
Senator Kim Hammer
Unverified
37:02
tradeoff for that is they get a longer contract, which secures them as long as they perform and we don't have to get rid of them.
Speaker 28
37:09
They've had the contract since 2009, so it's not any longer than it was previously. Right. So,
Senator Kim Hammer
Unverified
37:15
well, that was one of my – the current contract – what's the length of the current contract you're under right now? Is it eight or ten
Speaker 101
37:25
years? Seven years, I believe. It's been extended multiple times. So the current one,
Speaker 36
37:30
I don't – I honestly don't even know. It was implemented in 2009, and then it was extended multiple times.
But it expires in August of 2026, and there are no other extensions for that one. So
Senator Kim Hammer
Unverified
37:51
is the intent of doing it now instead of 10 months from now to give them greater lead time to get the transition of the
Speaker 36
38:00
equipment in place? The conversion time takes about a year to build and upgrade all of the software and all of the equipment. We are already a little bit behind because we're at about the 10-month mark.
So that's why we need it to be reviewed now because the company is not going to start investing these capital expenditures until they know
Speaker 26
38:25
that this has been reviewed and we're set to go.
Representative John P. Carr
Unverified
38:28
That's a really good – it's a good point. I wouldn't blow past that. To the extent
Speaker 44
38:34
that we don't move forward in the new contract, we'll have to find some mechanism to extend
Representative John P. Carr
Unverified
38:40
the current contract, which means we'll overpay for a while longer, which will mean less, you know, money going into scholarship.
Senator Kim Hammer
Unverified
38:48
Okay, and so I guess then the question is we're now up against the law. And if we've known that this has been coming for a while, how long has this been in negotiation from the beginning of the negotiations to where we are sitting here today? Well, it's been
a back and forth process over several months. Okay. And
was there a reason not to start sooner than later given the fact that we knew that we're out of extensions, right? On the original contract, are we out of extensions?
Speaker 44
39:20
You know, I'd argue that we shouldn't be extending the original contract at this point. It's a bad business decision, and I'm not sure it's even an appropriate decision at this
Senator Kim Hammer
Unverified
39:29
point. But we're out of that option of extension without
Speaker 16
39:32
paying a price. Well, I mean, no. Again, if we're not able to move forward under the new contract, we have to have a contract in place because we can't turn the lottery off. Right. So we'll have to have a mechanism for continuing to pay these people under their existing terms and conditions, and I'd argue overpaying these folks. Senator, I'm very happy with the pace that the team went through in terms of negotiation.
It just takes what it takes. You know, we're nine months away roughly from it. You know, we need to move fast, but I do think we have enough time to get
Senator Kim Hammer
Unverified
40:04
it done. The – and I think you hit this issue, but let me emphasize it again or give a chance to emphasize it again. There were no – the other company – how many other companies could actually perform this work? one other one which has been the debate for a long time because i remember in a committee meeting like four or five years ago where the issue is not everybody in the world does this kind of
business you're very thin on who you can pick from right so the other company when when they it became apparent that y'all were coming for us today for you know approval to award this contract there was no formal uh notification in writing anything from them uh saying that we've been unfairly eliminated from the competition it's a small community and
Speaker 44
40:51
if somebody interested in pursuing this business we would have heard from them we have not heard from them right but but on
Senator Kim Hammer
Unverified
41:00
the record there's been no complaint from them because what i'd hate to see is us award this out of here today and then they come up later and say well hey we were unfairly excluded from the process we've been in that situation before and to this date
Representative John P. Carr
Unverified
41:16
they haven't done that yeah again nobody's unfairly excluded you know and understand take note of representative collins exception to you know our approach on it but we believe that the approach that we're doing is we're not pushing the envelope black letter
Speaker 27
41:30
it's in the rules it's part of what the law that we operate under and we
think it's a valid process and a fair process too
Senator Kim Hammer
Unverified
41:39
all right two other quick questions if there is is
another vendor out there that is capable of doing the work did you afford them the opportunity to bid on it were they officially notified in any capacity that this is coming up and they were officially notified that they could enter into negotiations to try to get this contract again
Representative John P. Carr
Unverified
42:03
I think our approach was the best way to achieve the savings that we wanted to achieve on this was direct
Speaker 44
42:09
negotiation with the incumbent vendors because to switch out vendors you know creates risk and operational cost for us that would be a concern so you know no we did did we go out and put an
Representative John P. Carr
Unverified
42:21
ad in the paper saying that you know please send us a bid on this no because it's just one
Speaker 44
42:26
other company that could potentially do that and we don't believe they would provide a cheaper bid
Senator Kim Hammer
Unverified
42:33
on this okay and how can you classify it as a competitive bid if they weren't allowed to enter into the arena to bid if you if you did not do anything official other than it was your
personal decision and i'm not saying i necessarily disagree i'm just trying to think through the process if you're going to say it's a competitive bid there was somebody else out there that could have competed for it but they were not officially notified weren't invited you you guys just said hey you know what we think we get a better deal with where we are how can you classify it as a competitive bid then because we follow the rules which would be the debate from the other side
Representative John P. Carr
Unverified
43:12
over there it's it's not a debate though sir it's it's just not a debate i mean the rules are approved
and the agency is entitled to rely on rules that have been validly promulgated and we should all be very concerned if an agency can't do that all right that's fine
Senator Kim Hammer
Unverified
43:28
then our then our view would be or potential view would be we need to go back and look at the rule so down the road there would be a clear understanding or clear understanding of that which that'll be a future debate won't be settled in here today but that'd be a session
Representative John P. Carr
Unverified
43:44
conversation right that's how you that's how the general assembly expresses its view on things is through legislation all right last question who
Senator Kim Hammer
Unverified
43:53
determined the length of the contract you or the vendor or what was the negotiations for the length of the contract who who said it was
Speaker 24
44:00
a negotiated point it's part of negotiations okay
Speaker 50
44:04
thank you are you sure senator hammer okay senator love thank
Senator Fredrick J. Love
Unverified
44:13
you mr chair so secretary hudson i'm going to say this because i i hear what you're saying but i'm not buying that
The competitive bid process is a competitive bid process. The direct negotiation is direct negotiation. It's not immense of the two. And so if the agency chose to do a direct negotiation, that's what you chose to do. I don't think you can call it a competitive bid. Now, I would like to know, I mean, I think Senator Hammer already kind of asked a question.
but if you could do a direct negotiation with the two that you already have, why could you not do a direct negotiation with
the third company? Why could you not contact
Speaker 15
45:12
them? Again, I would say that I would refer you to our rules, and I appreciate that we can just make statements that it's this or it's
Senator Fredrick J. Love
Unverified
45:25
not making a statement. That's what it is.
So you would not call it a direct negotiation if it was a competitive bid. You would have just called it a competitive bid. So that's just a fact. I'm happy to listen
Speaker 15
45:42
or I can answer the questions. You can answer it. That's what I'm trying to do, sir. And so the process that we followed is the process that's authorized by the rules. And so that's what I would refer you to. if you think anyone any member thinks that we did not follow the rules I'm happy to receive that
correction I don't think anybody can say that we follow the rules we cannot like the rules we can like it to be we would want it to be something else that's that's fine it's a policy making body but we have to deal with what is and this is what is and again my point earlier and I'm about to my voice is about to give out I'm sorry we felt like direct negotiations with the incumbent vendors would yield more savings to the state versus talking to a third party who had no experience
with the state at all and would potentially you know give them reasons to you know hedge their offers that they're making to us not knowing what another third party might be coming in to offer on something so we felt like the great negotiation was a better route to go
Senator Fredrick J. Love
Unverified
46:59
we think the facts prove that out the results prove it out how can we ensure that the end result would be better
Speaker 42
47:09
through direct negotiation i think the actual offers themselves show us that what's in
the contract shows us that. Senator, thank you so much. Sorry, I'm getting over a cold right
Speaker 27
47:22
now. The final offer that we brought for you today, it's less. It is remarkably less than what we're currently paying. A third-party
Speaker 15
47:31
consultant that we retained has no affiliation with us, doesn't work for anybody in the industry other than doing this work, did the comparison from market basis.
We're getting a good market deal on
Speaker 135
47:48
this. So it's not just take my word, look
Senator Fredrick J. Love
Unverified
47:52
at the data. The data shows that. Now, but the contract that we're renegotiating, the vendor, that's our current
vendor, correct? Yes, sir. Okay, so I guess I'm still stuck
on the fact that how are we going to compare to the third vendor if the third vendor wasn't given the opportunity to be it?
Speaker 36
48:15
We looked at other state lotteries that were similarly sized to us
and similar revenue on an annual basis and compared what the kind of proposals and deals they were getting. Like we've said, this is a very small industry. Vendors know when states are going to be up for, you know, when their contracts are going to be up, and everybody kind of talks to everybody, and they know, like, okay, well, if I'm going to try to bid on that, I'm going to probably have to, you know, outbid this company.
There are certain companies that are known to be more expensive than others, and when we compared to other state lotteries that are similarly sized and generate revenue similar to us, the rates that they were getting were higher. than what this is and that is what our our industry expert helped us compile that data and that is why he could say he um there should be a letter in your packet um that's why he could say from from his expert opinion we achieved
Speaker 26
49:30
a better agreement under the proposed contract
than we would have gotten had we gone out
Senator Ricky Hill
Unverified
49:39
to rfp okay all right thank you representative hawk i'll
Representative RJ Hawk
Unverified
49:43
be brief um i think wouldn't you agree that we probably need to go in the rulemaking process and define what competitive bid is can can i just point
Speaker 36
49:53
out one thing i'm not sure if you um read the letter that i included but we keep talking about this competitive bid thing and i think that's well i think it's just because
Representative RJ Hawk
Unverified
50:05
in statute that's the competitive bid word the two words competitive bid is in statute and so i'm just saying that word isn't in our rules in any that's why i said do you think i wasn't here when the rules were made right we have a whole lot of people here that weren't here when that was done wouldn't you agree that maybe we should think about going back and read maybe looking maybe now it's not the right time i'm just asking your opinion do you think that we should go back and review those and also define what competitive bid is?
Representative John P. Carr
Unverified
50:37
You know, I think in terms of the rules, the agency believes the rules are working. You know, we've lived with them for a long time. You know, the statute is
Speaker 89
50:46
brief. You know, if there is a desire to do some fine-tuning in the statutory language, we'd be happy to kind of work
Speaker 44
50:54
with the General Assembly during session to talk about that. But, again, all that we're doing
Speaker 132
51:01
here in the lottery, Same stuff's available in general procurement law. Same stuff's available. We're not doing anything here that is unique that's not available under state procurement law.
Representative Howard M. Beaty, Jr.
Unverified
51:10
It's all there, too. Thank you. Representative Beatty. Thank you, Mr. Chair. My question, both of these vendors have been vendors with the state. You referenced 2009 for one. When did the other vendor contract with the state? 2009, at the inception of the lottery. So both of them have been vendors with the state and established track records since 2009. Had there been any major problems with either of the vendors during that period?
No. So they've been good partners with the state since 2009, taking care of the lottery for us. This review process leads to a lower rate for the state to pay, correct? Correct. and then you're following the rules that the legislature approved for you, correct? Correct. And then we've got a third-party letter at the back of your packet that states, in the professional opinion of Herb Delahanty,
that it is his professional opinion that the contract and proposal that you have right now that this body's looking at is superior to what the lottery could reasonably expect to obtain through a new competitive procurement process at this time is that correct that's correct all right I was just seeing
Speaker 150
52:36
if I was missing something thank you thank you
Senator Ricky Hill
Unverified
52:40
thank you representative Beatty very well put representative Crawford
Representative Cindy Crawford
Unverified
52:46
thank you mr. chair I'd like to make a motion
Senator Ricky Hill
Unverified
52:49
please I'm not ready for that yet I'll come back to you I want to make sure everyone's
finished asking questions first so just
Speaker 93
53:08
hold that thought okay do we have any other questions
Senator Jim Petty
Unverified
53:11
from the committee Sandra pay senator pay thank you mr. chair so I understand I've been over here reading and I understand the conversation around bidding. But if the statute, I mean, if the intention was for the lottery to follow statute,
why would they have had the exception in there? If the way I read it, it would say the lottery will follow the state statute, but there's exceptions are in there. Maybe they're not clearly or as clearly as some would like to have, but I see what you're talking about on the procurement versus RFP versus, you know, straight bid. So any thoughts or maybe any other legislators that have been around longer might have an idea why we would have said it the way we did.
Speaker 101
54:02
I think the intention was what you just said.
Speaker 36
54:06
Because this industry is so unique and these contracts are expensive and lengthy, that's why there is an exception. And that was absolutely the intent of the statute, was to create an exception for that, for us to use an alternative procurement method, which is set out in our rules under 4.5 alternative methods. And you can use that alternative method under three circumstances.
One, if it will maximize net revenue. two, if it will achieve a specific business objective, or three, if it will aid the director in fulfilling the statutory mandate to operate and administer the lottery. I would argue that this alternative procurement method that we use achieves all three of those requirements. As you can
Speaker 89
54:51
under state procurement law. Same sort of approach you can do under state procurement
Speaker 9
54:57
law. This is just a different way of getting there. Representative Collins.
Representative Andrew Collins
Unverified
55:03
Just on that point about the exceptions, I just want to point out that those are exceptions where you don't have to accept the lowest bid. But you do have to bid these major procurement contracts. So that's the exception. It's not that you don't have to have a competitive bidding process. It's just that you
have the flexibility or they have the flexibility to take a
Speaker 26
55:27
higher bid unless it's printing stationery or supplies. No, actually, I'm sorry, just to correct. Under alternative methods B, alternative methods may
Speaker 36
55:36
include but are not limited to multi-step bids or proposals, single proposer negotiations, competitive negotiations between two or more, brand name solicitations, and cooperative procurements.
So in this – What's the cite
Representative Andrew Collins
Unverified
55:48
on that? I'm sorry. What are you citing? It's our rule. 4.5. 4.5 of – B. The rule. Okay. This is statute I'm reading, though. Statute trumps rule. So, that's fine that it's in the rule. It may need to be changed, but it can be inconsistent with statute. And so, unless he's talking about exceptions in the rule, if he's talking about what I think is, which is C3 in statute, that says printing, stationery, and supplies. And it does contemplate competitively bid, because that's what it says in two.
Speaker 131
56:20
Again, I think you're defining that to
Speaker 15
56:23
mean a certain thing, and I appreciate that perspective. but you're grafting into this language a statutory understanding from state procurement law that's not explicitly in this text. It's just not. The text is
Speaker 44
56:35
very brief and contemporaneous with this. That language, the General Assembly also said, lottery, we want you to go make rules on that, which they did, which were validly promulgated, came before this body, and were approved. And
Speaker 132
56:50
so the rules are a part of the governing ball for the lottery until they're changed, and they have not been changed.
Representative Andrew Collins
Unverified
56:58
I understand that. What I was saying was in reference to the question about construction from Senator Petty, and so I think
as far as the construction of the statute, it doesn't negate the requirement to have competitive
Speaker 164
57:09
bidding. That was my point there. Thanks. Thank you, Representative
Speaker 118
57:14
Collins. Senator Hammer, 15 seconds. Thank you. It won't take long. Hey, y'all probably have the benefits of it without
Senator Kim Hammer
Unverified
57:20
me looking it up. The rule, when was it promulgated, when the lottery was originally set up and it hasn't been changed since then?
Speaker 89
57:28
Is that what you show? It hasn't been changed since then. I think it was promulgated when there was a lottery commission, an independent
Speaker 132
57:35
body, and so it's just been carried forward now into the years as they've been part of the DFA
Senator Ricky Hill
Unverified
57:44
as well. Right. And the lottery's been around how long? Since 2009. Right. Okay. Thank you. Representative Collins, if you'll
Speaker 5
57:54
get back in the queue. Crawford, I said Collins, sorry. Representative Crawford.
Representative Cindy Crawford
Unverified
57:59
I would like to propose a motion to hold the contract until next month. There are some colleagues that are not here that would like to be in on this. Secretary Henson you did say that we have enough time to get in there so I'm just thinking holding up one more month will not hurt the process that would be my motion okay you heard you
Senator Ricky Hill
Unverified
58:28
heard the motion do we have a second we do have a
Speaker 89
58:33
second discussion mr. chairman I know this is your time you know in terms of debating motions, and I don't proceed to debate, but I do think it's a matter of personal privilege. I appear before this body on a regular basis and I don't think my remarks were accurately depicted.
Speaker 42
58:51
I did not say, nor do I agree with the proposition that a month's delay won't be a problem. I think it will be a problem, and the department does not support that.
Senator Ricky Hill
Unverified
58:58
And I want to get you to elaborate a little bit more. As
chairman, I'm going to ask you to answer specifically
what Representative Crawford brought up about the time frame and everything. I want you to go through that again and how that will affect this if this motion passes
Speaker 40
59:14
i want everyone to understand that we would likely have to do
Speaker 36
59:18
is make an emergency extension to our current contract in order to get us through the conversion process in the timely manner and what that's going to do is that's going to cost us more money which means less money to scholarships it's also going to create a pretty significant disruption in in sales and so ultimately what would waiting a month toward toward what end because nothing's
change on our end and in a month except that it's going to prolong the conversion process it's going to cost us more money and it's going to reduce the number
Senator Ricky Hill
Unverified
59:52
thank you for that explanation senator hammer thank
Senator Kim Hammer
Unverified
59:59
you mr. and I want to give the want to give the director a chance to have what he just said as far as a response to what was said at least one
grant you kind of common courtesy to be able to give you that opportunity but you said that but and mr. chair maybe this is a little bit outside the realm of discussion but is any are there any representatives from the company in the room or they're here today for this discussion I would
Speaker 118
1:00:25
have to go to the director for that I don't see
Senator Kim Hammer
Unverified
1:00:38
any staff from the from the companies here okay all right my discussion along the motion is this mr. chairman if I had this many
dollars on the line I think I'd be in the room and I don't think that settles well on the other side of the coin outside the ticket is that I really would like to hear the delay by one month uh I heard the explanation a while ago but I'm I'm a little bit leery that delaying it one month might put us in a difficult position but I don't think there's been enough discussion on that uh maybe to reach that level of of comfort other than what's
been said here I wish I wish the company was here that we could ask them personally not to discredit you. I'm not saying that to either one of y'all, but I wish the company was here to be able to answer for
Senator Ricky Hill
Unverified
1:01:29
themselves. Thank you. Senator Hammer, I think the company is here through them because of the negotiation. They have been negotiating on behalf of the state of Arkansas, and I feel like they've negotiated and that they are here on behalf of those companies as well as themselves for that. I guess the next point of discussion we need
to look at, too, is what are we going to accomplish by waiting one month? What questions do y'all want answered that they cannot answer today that that's my if we're just delaying a month to come back here and hear the same testimony again there is no need in delaying so let's keep that in mind as we are discussing this representative Richmond thank you
Representative Marcus E. Richmond
Unverified
1:02:10
mr. chair I would encourage colleagues to vote against this motion I mean the people that aren't here it's their
choice we are here. I see no reason to rehash this a month from now because the argument is process over results. We're far more worried about the process in that for whatever reason that they've been doing it this way since the beginning of time suddenly there's an issue and we're picking process over success. Now unless I misunderstood them I understand we're getting more services for less money to me that's a win and why if we're going to deal with
how they do this then everybody here can write a bill except me I'm not going to come back everybody here can write a bill submit a bill during the next General Assembly session and fix this terrible terrible problem which seems to be working out to the state's benefit. Thank you, Mr. Chair. Thank you for those comments. Representative Hawke. Thank you, Mr. Chairman.
Representative RJ Hawk
Unverified
1:03:27
You know, colleagues, I came into this meeting, spoke with many of you that I had concerns about this item
and how it was gone. I think that Secretary Hudson has been a man of his word since many of us have talked to him, and he's pretty honest about everything that goes on i would say that because the fact that you know it's going to cost us more money it's it's going to reduce the number of scholarships potentially by delaying it 30 days all to come back and rediscuss and really not have any different of an outcome because if we
if we move the kick the can down the road again after that 30 days then we're delaying it even more all to hear about that one bit. I think the bigger issue in
this are the rules and the processes in play when it comes to that. And so I would vote no against the motion on this just to get this thing done. But I would ask that we review the
rules and the procurement process because I think what some people want to know is that third, they just want to see what the numbers are
for that third vendor i understand you guys are the the experts in this and you guys you guys know it but they just people in this body want to see what that looks like um i think you said it was a pretty substantial savings that we're going to be making on this and that that's why i'm confident in this that with the current vendors that that have been working we're saving money
Representative Cindy Crawford
Unverified
1:05:06
we move forward and so i'll be voting no on the motion thank you representative crawford Thank you. Once again, I'm speaking for my colleagues that aren't here today. So some of the things that they are concerned about is the competitive bid, which you guys have talked about.
Senator Ricky Hill
Unverified
1:05:22
If they would have wanted to express their opinion, they would have been here. Okay. They are not here, so
Representative Cindy Crawford
Unverified
1:05:29
they have no say-so today. All right. I will stand by my motion for my colleagues and leave it at
Senator Ricky Hill
Unverified
1:05:35
that. okay thank you ma'am we have a motion to to hold for a month this review all those in favor say aye aye opposed say no no no's have it this is reviewed
Speaker 89
1:05:53
thank you mr chairman i won't go ahead and step out let uh sharing finish her presentation just real
Speaker 188
1:05:58
quick point of personal privilege i want to thank
Senator Ricky Hill
Unverified
1:06:01
this committee i'd like for you to stay there there with us in case we
Speaker 15
1:06:04
need you on this next one too. I'm happy to do that but I do want you to
Speaker 44
1:06:08
know I don't take lightly this committee's trust in the information we provide to you and I always want to make sure we're serving all of you very
Senator Ricky Hill
Unverified
1:06:16
well so thank you. Okay let me back up on that I've got to ask we actually voted on the motion that she that representative Crawford had we did
vote on that. Yes, we voted on her motion. Yes. Now we have to have a motion to review
the contract. I've got that from Representative Gonzalez and second by Senator English. All those in favor say aye. Opposed, same sign. Now it is officially reviewed. Thank you. And you do want me to stay? Do you think you might have any more questions? I'll stay.
I like y'all. Well, the director may not want you there. Director Strong, please go ahead. Okay, so the next.
We need a motion first to, we need a motion to review the
lottery directors. We're not reviewing that one?
Speaker 36
1:07:15
Okay, we're just hearing testimony. There we go. The next item is just for me to present our normal monthly report. And so that is for the month of September 2025. So September of 2025 was an excellent month.
It was actually the largest month of net proceeds in the history of the lottery. We transferred $10,566,671 to the net proceeds account, and that's up by 58.5% year over year. If you look at where we are versus our budget, we're 30.7% better than our budget.
um this is basically what I've already said it well actually let me go back so for the month of September 25 our instant games were 8.8 percent up and 62 percent up on the draw games we've benefited from a large Powerball jackpot of 1.8 billion I believe it was so that helped us with our sales. $10.5 million to net proceeds in the month of September. And for the current
fiscal year that ends June 30th of 2026, we have $322 million in the trust account. For the total debt set off, which is when someone comes to claim their winning lottery ticket if they owe child support or taxes we we take that you know out before we pay out their winnings there isn't any on taxes there was three thousand five hundred and fifty four dollars for child support but because the tax um deadline has been pushed out uh we're that's why that
number is zero we're expecting more over the next few months as that deadline approaches We had no requests from ADHE during the month of September 25. We have several new games that were launched, including new scratch-off games and fast-play games. And that's
Speaker 118
1:09:59
Happy to take questions on any of that. Do we have any questions? Senator hammer, thank you. Mine's not a question, but before
Senator Kim Hammer
Unverified
1:10:15
the get away from the table, I've got a request at the appropriate time, please Please go ahead with it The unless I'm missing it and maybe you could just direct me to where it is because I haven't found it yet may have been just overlooking it. The arguments that y'all used for the previous contract as far
as the savings and the timeline in order for them to get the equipment, do you have any specific document that you could share just so we could see those projected savings and the basis upon which you arrived at there are going to be projected savings? Or could you at least provide that so we could be educated and
Speaker 36
1:10:50
see how that plays out over the next year? So it's a percentage based on sales so if we use the amount of revenue that we made in fiscal 25 just as the the comparison I think we're at 580 million in fiscal 25 so we're paid
we paid 2.11% currently okay in the new contract it's going to be 2.05% so if we are if we're comparing apples to apples we're going to pay less on 580 million than we would if we made the same senator if you'll just refer
Representative John P. Carr
Unverified
1:11:25
to the letter that sharon sent to the chairs that lays it out the second page of that letter shows what the
Speaker 188
1:11:32
pricing savings are and how he arrived at that money it's there in the letter on the second page what letter is
that it's the cover letter it's in it's in the docket that's on the blr website it's
Senator Ricky Hill
Unverified
1:11:48
her letter to the chairs it's in there okay all right thank you senator love
Senator Fredrick J. Love
Unverified
1:11:55
make it fast thank you um i just want to add this is
a real this is the question i really want to ask now why does it seem like arkansas does not have any powerball or mega million winners all the other states have them and we don't seem to be getting hit so can anyone answer that question for me
We're 3 million people out of 300 million. I know it's 3 million. I'm just saying it seems like there's other states that keep getting those winners and then we
Speaker 26
1:12:27
get nothing. We actually had a $50,000 Powerball winner yesterday,
Senator Fredrick J. Love
Unverified
1:12:32
I believe. Well, $50,000, I mean, I know Secretary Hudson got that in his pocket, but I'm just saying, you know, I'm talking about some big winners. Senator, if I knew the
Speaker 42
1:12:43
answer to that question, you and I would be out buying Powerball tickets right now.
Senator Ricky Hill
Unverified
1:12:49
That's a very good answer. You all have a good one. Okay, committee, we have received this report, and thank you very much, Director, for that. Up next, we have Dr. Warden and Mr. Fuller from ADHE. Thank you, committee. Thank you, Mr. Secretary. please introduce yourself
Speaker 207
1:13:20
for the record and looks like you got it by yourself today
Nick Fuller
Unverified
1:13:23
so unfortunately dr orton is out of state so you hate just having me today i'm nick fuller i'm the assistant commissioner for finance for the division of higher ed and i will bring you a few lighter notes on how we've spent the lottery money for over the past year please proceed tell you these first two reports these are going to be the first one is preliminary reports on the first run of this data students have until october 1st to send in any hours over the summer that they made up if they were put on probation for not getting enough hours or gpa in the last year so we'll bring final
numbers for this to you at a later meeting it's usually december when we bring those numbers but the first item for for your review is the number of students that we awarded the academic Challenge Scholarship II for fiscal 25. If you'll see there are 27,186 students who were awarded these scholarships, the total of $99 million. In the first year, first-time students, there were 11,836 of those, the first time they've
received the scholarship for a total of $35 million. Also, this was the first year for the Academic Challenge Plus Awards for students that are lower income they're able to get up to the full senior level award beginning start with their freshman year rather than the tiered levels of those 27,000 total students 10,313 of them received those additional awards with a total of 19.7 million of that 99 was for this academic challenge plus that you all passed and was first year in 25 so we've seen quite a large increase
over the year of spending that funds. And then also with the Access Act that was passed this last year, we'll see a bigger increase. You know, we increased the freshman award for everyone from $1,000 to $2,000 beginning this current year that started this fall. So we should be more than likely topping $100 million on the academic challenge for sure in this coming year. And we'll come back next year for you. And I'm opening up to any questions you may have on
Senator Ricky Hill
Unverified
1:15:32
the academic challenge report in the first one. Do we have any questions? Yeah. representative gonzalez thank you
Speaker 214
1:15:39
mr. chair so um what does the student have to do to qualify for
Nick Fuller
Unverified
1:15:43
this these scholarships you to apply you have to fill out the fafsa the federal student application and then on the academic challenge in the past you had to have a 19 on the act with access we've changed that admission eligibility requirement where you have to have a 3.0 gpa in high school or a 19 so we've kind of broadened the eligibility as well but in the in the past you if you had a 19 act and you completed the fafsa then you were eligible for that how many are applying for that aren't getting it um i'd have to look but it may there's not not a whole lot there's probably
three four thousand you can get this yes sir and we have other scholarships that don't even have that that 19 requirement you know the arkansas future scholarship if you want to go to get your associate degree to begin with we'll cover tuition fees everything for you go to a two-year college basically as much free as we can if you can't qualify for that you can apply for we're spending around five million dollars a year on that program okay and that'll be presented later in this report as well okay thank you we
Senator Ricky Hill
Unverified
1:16:51
have any other questions seeing none we have received that report and let's
Nick Fuller
Unverified
1:17:00
second item is the report for the workforce challenge scholarship this is the one that's $800 per program it will cover both credit and non-credit workforce training programs this also was amended through the access act this will be increasing to up to $3,000 per year and we're also including private career workforce training programs in this moving forward so the rules are being promulgated on that should be implemented probably this probably won't be implemented until fiscal 27 but you'll see there were 2,704 students that received this award this
year at uh 2.2 million dollars which is about a million dollar increase over the last year on the usage of this one any
Senator Ricky Hill
Unverified
1:17:42
questions on we do have a question senator love since you have seemed to replace senator hammer on the questions we'll
Senator Fredrick J. Love
Unverified
1:17:54
go to you that was wrong um nick good to see you hey i just i wanted to touch base on the the fact you said it's open to private yes sir okay so is this does this cover
apprenticeship programs any any any apprenticeship I
Speaker 218
1:18:10
think if they are on the eligible training partner provider list that is that is the the list we're using
Nick Fuller
Unverified
1:18:17
for eligible entities to be able to provide these services that's like the office of skills development and the Department of Commerce administer that list mr. chair can i get that can i
Nick Fuller
Unverified
1:18:33
we're still working through the official promulgation of the rules and we'll have that of everyone that will be included on
Senator Fredrick J. Love
Unverified
1:18:40
that okay so you but you do have a list you do have a current list right now okay all right
Senator Ricky Hill
Unverified
1:18:53
i'd like to get that current list please yes thank you thank you for that mr fuller okay committee We have received this report from the Arkansas Division of Higher Education. Let's move
Nick Fuller
Unverified
1:19:06
on to Exhibits E1 and E2. Exhibit E1 is the report of the expenditures of the Higher Education Grants Fund
as well as the Net Proceeds Fund. The Net Proceeds are the lottery funds which do the Academy Challenge, Workforce Challenge, and the Concurrent Challenge, which has now been rebranded to the Access to Acceleration Program through Access. The Higher Education Grants Fund funds every other scholarship that we administer through the Division of Higher Education. And you will see on page three of the report the list of those scholarships. The first item is the $20 million in general revenue that we are required by statute to support academic challenge.
The lottery funds supplement and do not supplant state revenue, so that $20 million is what was in place for Academic Challenge in 2009 when the lottery started. So we've continued that funding at the $20 million level since then, and you'll see all of the other programs and what we spent in 25 from the Higher Education Grants Fund, which includes both general revenue and educational excellence trust funds, and where the revenues come from for
Senator Ricky Hill
Unverified
1:20:15
those. Any questions? Do we have any questions?
Seeing none, moving on to Exhibit E2. E2
Nick Fuller
Unverified
1:20:24
is going to be the presentation of the expenses related to administration of the lottery programs. These are what our office, the expenses our office have incurred, which include payroll for our staff, as well as the maintenance and operation of our scholarship application management system, the web-based portal where you apply for the scholarships. This year, the reimbursement request is for $730,000.
That is about $35,000 more than it was last year. All of that increase is due to merit raises or career service payments for the staff. If you can look back at last year's report, our operating expense has actually dropped by almost $15,000 from what we spent. So every bit of the increase is due to payroll obligations. I'm open for any questions you may have on that.
Senator Ricky Hill
Unverified
1:21:15
Any questions for Mr. Fuller? Seeing none, thank you, Mr. Fuller, for all the reports.
And the committee, that will be Exhibits E1 and 2. The reports have been given. Seeing no other business,
Speaker 195
1:21:35
this meeting is adjourned. Thank you.
Agenda
A. Call to Order
B. Review of Intralot and Scientific Games Contracts [Exhibit B]
C. Arkansas Lottery Director Report [Exhibit C]
D. Update of Arkansas Division of Higher Education (ADHE) Academic Challenge and Workforce Challenge Scholarship Award Data & Student Status Report (A.C.A § 6-85-219(c)) [Exhibits D1-D2]
E. Reports from the Arkansas Division of Higher Education (ADHE) [Exhibits E1-E2]
F. Other Business
G. Adjournment
Documents
Speakers
Senator Ricky Hill
Unverified
Speaker 6
Speaker 11
Speaker 13
Speaker 15
Speaker 16
Speaker 27
Speaker 28
Speaker 34
Speaker 35
Speaker 36
Representative John P. Carr
Unverified
Speaker 40
Speaker 26
Speaker 42
Speaker 43
Speaker 44
Speaker 46
Speaker 19
Representative Andrew Collins
Unverified
Representative RJ Hawk
Unverified
Speaker 82
Speaker 10
Speaker 89
Senator Kim Hammer
Unverified
Speaker 101
Speaker 24
Speaker 50
Senator Fredrick J. Love
Unverified
Speaker 128
Speaker 135
Speaker 132
Representative Howard M. Beaty, Jr.
Unverified
Speaker 150
Representative Cindy Crawford
Unverified
Speaker 93
Senator Jim Petty
Unverified
Speaker 9
Speaker 131
Speaker 164
Speaker 118
Speaker 5
Representative Marcus E. Richmond
Unverified
Speaker 188
Speaker 207
Nick Fuller
Unverified
Speaker 214
Speaker 211
Speaker 218
Speaker 203
Speaker 195