Rocky or not, launch of lottery on schedule

LITTLE ROCK — Several days after being hired as Arkansas lottery director in June, Ernie Passailaigue warned that "when you turn on the switch" to sell lottery tickets, "it is just going to be mass confusion."

He said the lottery would be receiving telephone calls from upset players and retailers.

"You think my salary is an issue here, wait until launch date," the $324,000-a-year lottery executive said on June 10. "I will be cut for everything it's worth, but it will settle down."

With the lottery set to start in just over a week, what problems lie ahead and how ready is the lottery for the first wave of action?

It is to begin selling tickets one second after midnight on Sept. 28. Four scratch-offs will be available at prices ranging from $1 to $5, with prizes ranging from $1 to $100,000, and the odds of winning anything running about 1 chance in 4. The plan is to start selling multistate Powerball game tickets on Oct. 31.

More than 1,600 retail locations have applied to sell tickets in Arkansas. Nearly 1,100 of them have cleared all the hurdles, said Julie Baldridge, director of commission and legislative affairs for the lottery.

The latest batch of applicants includes 35 Kroger stores in central, east Arkansas and other towns such asCamden, Magnolia and Russellville, she said.

Satellite equipment has been installed at about 820 of the retail locations and lottery terminals and ticket-checker devices have been installed at about 375, said Steve Beck, regional director for lottery vendor Intralot.

Installing terminals and ticket checkers takes much less time than installing the satellites, so the crews installing them will catch up with the number of satellite installations this weekend, Baldridge said.

So far, about 1,000 retailer employees have received training, she said.

Passailaigue said recent heavy rain has slowed the installation of satellite equipment on the roofs of lottery retailers.

STARTUP ISSUES

Asked whether the average person is going to run into problems with the lottery during its startup, "The first few days, there is probably going to be a little frustration," he said.

"We understand that. We are not trying to diminishthat," Passailaigue said. "We hope people are a little bit tolerant of the whole process because you are dealing with the retailer base, you are dealing with the training process and the learning process of just doing all this stuff.

"People like me like no lines and instant no-hassle purchases, so when you get a line, you are frustrated," he said. "We just hope that people are somewhat tolerant of everything until everything settles down, because it will settle down. It has settled down in 43 other lottery jurisdictions in the United States. It will settle down here."

Forty-two states and the District of Columbia sell lottery tickets. Arkansas is to be the 43rd state.

Arkansas last November adopted Amendment 87 to authorize the General Assembly to create state lotteries to pay for college scholarships.

Estimates of how much the lottery will raise annually for scholarships range from $55 million to $120 million. Estimates of its total proceeds range from about $185 million to more than $400 million. What goes to scholarships will be the "net proceeds," which is what's left after the payment of prizes (typically about 60 percent of lottery proceeds) and lottery expenses.

A sponsor of the state's lottery laws, House Speaker Robbie Wills, said he "wouldn't be upset if there were a few snags in the opening days" with "such a fast startup."

"Frankly, legislators thought we'd be doing good to begin sales by the end of the year," he said. "I think the proof will be in the pudding as the retailer merchants begin selling and the public begins buying tickets.

"I expect the Lottery Commission to react nimbly to whatever challenges they face," said Wills, D-Conway.

Lottery foe Jerry Cox, leader of the Arkansas Family Council, declined to comment when asked if he's "hoping for the worst" for the lottery's opening day of ticket sales.

He said he expects more people to purchase lottery tickets Sept. 28 than probably any other day.

"I expect it to encounter a number of glitches," Cox said. "It wouldn't bother me one bit if people got disgusted with the lottery and voted it out of business."

PROBLEMS ELSEWHERE

There's a clear record of some headaches in other lottery startups.

When Passailaigue led the South Carolina lottery through its start in January 2002, a lottery spokesman told The State newspaper in Columbia, S.C., that "apparent malfunctions" temporarily kept some stores from selling tickets. That was blamed on the huge volume of sales on the first day.

"Technology in 2001 and 2002 is not what it is today, so my experience in South Carolina was fairly traumatic," Passailaigue said.

The startup of lotteries in North Carolina, Oklahoma and Tennessee in recent years experienced problems, too.

In Tennessee in 2004, the glitches included clerks scanning winning tickets into a machine that indicated the ticket had already been redeemed for cash when it hadn't, according to the Tennessean newspaper.

First-day Tennessee lottery-ticket sales totaled $10.8 million, according to the Tennessee Education Lottery Corp.'s Web site.

In Oklahoma in 2005, a few hundred retailers waited in frustration for the installation of lottery machines as the lottery began selling tickets, according to the Daily Oklahoman newspaper.

"Certainly if you have more time upfront, you can get more installed prior to day one," said Rollo Redburn, director of administration for the Oklahoma lottery. "It would be nice to have everyone that wanted it up and selling on day one, but you wouldn't choose to delay the start if you didn't. You just keep plugging away and get the rest of them installed and selling."

The Oklahoma lottery sold about $3.7 million in tickets on its first day, he said.

In North Carolina in 2006, some retailers were forced to delay scratch-off ticket sales because of glitches with machines that validate tickets, and the check-writing machine in the Asheville office wasn't working, according to the Charlotte Observer newspaper.

Less than 200 of more than 5,000 lottery retailers didn't leave their lottery terminals on the night before ticket sales began so they didn't receive "the game downloads" and couldn't sell tickets starting at 5 a.m. on the first day of sales, said North Carolina lottery director Tom Shaheen. These retailers were selling tickets by 10 a.m. after they turned on their terminals and received the downloads, he said.

The problems could "not really" have been avoided, he said.

The first-day North Carolina ticket sales totaled more than $8 million, Shaheen said.

Passailaigue guided the South Carolina lottery through the installation of a new computer system and change of lottery vendors in 2008.

According to The State newspaper, some players and retailers reported thatsome winning tickets being counted as losers and some losing tickets counted as winners. They also reported that some winning Powerball tickets and other cash-drawing tickets purchased before the new system was installed could not be read and could not be cashed in.

At that time, Passailaigue said one problem was that some tickets made by Scientific Games International hadn't matched up perfectly with new scanning software produced by lottery vendor Intralot. Another was high employee turnover among the lottery-retailer employees who had been trained on the new system.

It's possible a similar problem could arise in Arkansas with some winning tickets being counted as losers and some losing tickets counted as winners "just because you have human beings doing it," he said.

'AN EDUCATION PROCESS'

Passailaigue said the fact that Arkansas' lottery has "a fast startup" probably means most of the retailer employees trained on the lottery terminals will still be working for the retailers when the lottery begins.

He said the lottery's information-technology officials and WhiteSand Consulting are conducting tests of the lottery's tickets and equipment "to make sure there are no bugs in the system.

"In theory, you get all the bugs out of the system, and that's the theory," Passailaigue said. "You can sit down in a testing environment and go through all those tests you want to and there is going to be something pop up. Now, if something pops up, I don't think it will be central to the security of the system in terms of making sure the tickets validate and making sure it is a proper win and that kind of thing, but you just never know."

Passailaigue is confident the lottery's launch will be on schedule.

"Everything that has gone on so far [shows] there are no showstoppers with the gaming system," Passailaigue said. "The only reason I'd stop the deployment of the launch of the lottery from Sept. 28 is if we have a showstopper with the gaming system or the tickets, and that's not occurred. I'd say it's 99.9 percent sure we are going to launch a lottery one second after midnight [on Sept. 28]."

Passailaigue wasn't sure how much in ticket sales to expect Sept. 28, because five of Arkansas' neighboring states have lotteries and Mississippi, the only neighboring state without a lottery, has casinos.

He said each retailer location will be sent an allocation of $9,300 worth of tickets Thursday.

Passailaigue said the South Carolina lottery might get 100 calls a day from retailers on its help line and the Arkansas lottery might receive 100 calls in the first few minuteson Sept. 28.

But, he said, "For everybody that calls in, there are thousands of tickets being sold and the transactions are gong to be fine."

"This is just an education process. The retailers will understand very quickly, most of them will get the procedures, but some of them will find out the hard way, maybe interaction with our help line," Passailaigue said.

"It will be an education process because the players, probably a lot of them, haven't played lottery. They are not sure whether they have a winner or not, so they are going to ask the retailers. You are going to have procedures not being followed, which are designed for security purposes, and because of that you are going to have people just frustrated."

Passailaigue said problems with lottery security and people stealing tickets will happen no matter whether it's the first day or last.

"People are trying to scam the system," he said.

Retailers also have been instructed not to sell tickets before a second after midnight on Sept. 28, but he knows from experience that some "wildcatters" will do it.

"All you can do is to make a strong suggestion, 'Don't sell the tickets,'" he said.

But he said lottery players will be allowed to collect a prize on a ticket sold earlier than a second after midnight on Sept. 28 if it's a winning ticket.

"We don't refuse to pay any winning ticket," Passailaigue said.

There could be problems with lottery terminals not working, he said.

"Each retailer will have a log-on number, so if they lost their number or forgot it or log on improperly or whatever, it might present a problem," Passailaigue said.

People with winning tickets should be able to collect prizes from retailers on winning lottery tickets with prizes up to $500, he said.

The lottery may have prize-payment centers open in Springdale, Jonesboro and Camden on the first day of ticket sales to pay prizes up to $100,000. A prize-payment center will be open in Little Rock on Sept. 28 - and its check-writing machine works, he said.

The Oklahoma lottery experienced problems with some retailers being unfamiliar with the procedures to validate tickets to pay prizes and taking longer than normal to sell some tickets, Redburn said.

A small number of retailers said they wouldn't cash winning tickets larger than a certain dollar amount and they had to be reminded that they were obligated to cash winning tickets up to $600 he said.

"Everything went pretty smooth," Redburn said. "If we had more time, we might have avoided some of the problems with individual retailers."