The City Sentinel

Lottery officials lobby to eliminate 35 percent education mandate

Staff Report Story by on October 27, 2010 . Click on author name to view all articles by this author. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

Oklahoma Lottery Commission executive director Jim Scroggins may not be feeling so lucky these days.

Ticket sales are down due to a two-year recession and a downward trend in jackpots. And recent efforts to more dramatically expand the retailer pool – including larger corporate retailers – have been frustrating so far.

Also frustrating have been recent, efforts to increase the number pool of minority retailers that haven’t been fruitful. Smaller retailers come and go frequently, but the lottery has managed to maintain a steady pool of about 2,100 retailers.

For several years, the Lottery Commission has advocated forcefully with legislators to amend the lottery statutes to reduce the mandated 35 percent allocation to education (now at a fixed minimum of 35 percent). Legislators have not acted to do so yet.

“The information has been shared for four years,” said Rollo Redburn, director of administration, who noted lawmakers have amended the statute nine times in recent years without a vote of the people – and none of them related to lifting the education requirement.

“Individually (legislative) members appear to clearly understand the concept. However, to date, legislative leadership has not been interested in changing it.”

There’s really nowhere else to turn for a solution to the lottery’s finances. Upon closer inspection, Scroggins said the lottery’s profit margins are thin – 94 cents of every dollar taken in goes back to Oklahomans in some form or another. That includes items such as winnings/jackpots, commission jobs, retailer shares of winnings, vendors and of course, significant education contributions,

Commission officials say this change would create bigger jackpots, which they believe will boost lottery sales and net profits, actually creating bigger education contributions.

In fact, lottery leadership point to what they consider proof the approach works – successful implementation of lifting statutorily-mandated, minimum education contributions in several states.

“You have a two-year downturn in the economy and in the last six or seven months, jackpots have been down,” said Scroggins. “You don’t have to be a Rhodes Scholar to figure it out.

“(A big jackpot) could happen at any time, but you can’t count on it until it does.”

The lottery employs 35 full time employees and 7 part-timers.

Some observers are wondering why the lottery wasn’t the panacea that the education supporters and the teachers union painted it as six years ago. At that time, supporters estimated the lottery would generate up to $150 to $200 million annually for education.

It’s arguable whether those were overly optimistic projections or simply a carrot to attract votes. Nevertheless, those hopes have not materialized.

Since the first games began in October 2005, they have generated $357.8 million for education from slightly more than $1 billion in ticket sales, according to the commission’s data.

Lottery sales during the first nine weeks of this fiscal year, which began July 1, were down about 3 percent, or about $5.7 million.

A check of the lottery’s financial statement shows that gross revenues have hovered in a stable, $190 to $200 million range annually.

A lot of the individual game sales declined ever-so-slightly in recent years, although there were a few upward spikes along the way.

The lottery’s education contributions have fluctuated moderately. If fiscal year 2011 projections come to pass, $66 million would be the lowest education contribution in the lottery’s existence. FY 2008’s $71 million education contributions have been the highest so far.

The Oklahoma Lottery Commission has extensively studied lotteries in other states, which have increased prizes amounts.

According to their conclusion:

“The Oklahoma Lottery Act currently mandates that a minimum of 35 percent of sales are to be paid to the State. What this amounts to is a restriction on the amount of funding that can be put into prizes paid to lottery winners. Our proposal to remove this restriction is designed to increase the money we provide to Oklahoma education and is based on the following reasoning:

1. Removing the 35 percent profit restriction will enable the Lottery to increase prizes in instant (Scratchers) games.

2. Research shows that higher prize payouts result in increased sales and profits a.

3. Increased sales and profits means more real, spendable dollars for Oklahoma education. This

may result in a smaller percentage of sales, but will result in more real dollars.

There is overwhelming evidence dating to 1984—and continuing to date—showing a direct correlation between higher instant prize payouts and increased sales and net profits for a lottery’s beneficiary programs.”

The commission says this process has been successful in every U.S. Lottery that has initiated the concept including Maine, Texas, Georgia, Kentucky, Missouri, California, New York, Florida and North Carolina. To view their detailed case studies, visit www.lottery.ok.gov.

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