(a) Expenses of the lottery shall include all costs incurred in the operation and administration of the lottery and all costs resulting from any contracts entered into for the purchase or lease of goods and services required by the lottery, including, but not limited to, the costs of supplies, materials, tickets, independent audit services, independent studies, data transmission, advertising, promotion, incentives, public relations, communications, compensation paid to the lottery game retailers, bonding for lottery game retailers, printing, distribution of tickets or shares, reimbursement of costs of services provided to the lottery by other governmental entities, and for the costs of any other goods and services necessary for effectuating the purposes of this chapter. As a promotional expense, the commission may supplement the prize pool of a game or games upon its determination that a supplement will benefit the public purpose of this chapter.

(b) (1) Not more than 16 percent of the total annual revenues accruing from the sale of all lottery tickets and shares from all lottery games shall be expended for the payment of the expenses of the lottery.

(2) Expenses recorded as a result of a nonmonetary exchange shall not be considered an expense for the purposes of Section 8880.4 and this section. “Nonmonetary exchange” means a reciprocal transfer, in compliance with generally accepted accounting principles, between the lottery and another entity that results in the lottery acquiring assets or services and the lottery providing assets or services.

(c) This section shall become operative on April 1 of the year following notification from the Controller to the Legislature and the Governor that the events described in paragraphs (1) and (2) of subdivision (c) of Section 8880.4.5 have occurred.

(Amended (as added by Stats. 2010, Ch. 13, Sec. 7) by Stats. 2011, Ch. 56, Sec. 7. (AB 363) Effective January 1, 2012. Section is conditionally operative, on date prescribed in subd. (c). Note: Before the repeal and addition by Stats. 2010, Ch. 13, Section 8880.64 originally was added on Nov. 6, 1984, by initiative Prop. 37.)