Lottery panel OKs fiscal 2015 budget

$12 million in new-game sales forecast

Thursday, May 22, 2014

The Arkansas Lottery Commission on Wednesday signed off on a fiscal 2015 budget projecting ticket sales of $428 million with $81.2 million collected for college scholarships.

The figures include about $12.5 million in ticket sales revenue and about $3.5 million in college scholarships generated by a quick-draw game, which lottery officials plan to introduce in September, despite objections from some lawmakers.

Some call the quick-draw game keno. The game is similar to Powerball and Mega Millions, except drawings will be held every 4 minutes and results would be shown on monitors similar to television screens set up in some participating locations.

Lottery ticket sales and net proceeds dipped in fiscal 2013, the first year since the lottery's September 2009 launch. The lottery sold $439 million in tickets and raised $90.2 million for college scholarships in fiscal 2013, which ended June 30 last year.

For fiscal 2014, which ends June 30, the lottery expects to sell $417 million in tickets and raise $82.7 million for scholarships. Lottery Director Bishop Woosley initially estimated $459 million in ticket sales and $89.5 million for scholarships, but later revised his projections.

The lottery has helped fund more than 30,000 Arkansas Academic Challenge Scholarships a year for the past four years.

Woosley said he proposed a conservative fiscal 2015 budget, which he expects the lottery to exceed, though it's been difficult to project how the lottery will perform because there is some uncertainty ahead.

That's partly because lottery officials plan to start selling tickets for the quick-draw games Sept. 29, Woosley said. Some lawmakers are unhappy about the Lottery Commission's decision last month to implement these types of games, and during next year's legislative session, lawmakers could bar the lottery from offering them, he said.

The lottery plans to begin selling a few other new games during fiscal 2015 as well, which further complicates projections, he said. The fiscal 2015 budget includes a $500,000 increase in the $4.5 million a year that the lottery spends on advertising, which Woosley has said is aimed at boosting sales and scholarship funds.

Woosley said he hopes to initially have about 250 retailers selling the quick-draw tickets. The drawings will be held roughly every 4 minutes and results will be broadcast on 40-inch monitors in those stores. By June 30, 2015, Woosley hopes to have 400 lottery retailers showing the drawings. Players would purchase quick-draw tickets from clerks as they do for other draw games such as Powerball and Mega Millions.

"If [lawmakers] outlaw them, are they going to outlaw them at the racetracks, too?" asked Lottery Commissioner Bruce Engstrom of North Little Rock, referring to Oaklawn Park in Hot Springs and Southland Park in West Memphis.

In 2005, the Legislature opened the door on "electronic games of skill" at the two racetracks.

In 2013, the Legislature cleared the way for introduction of what Oaklawn Park calls "Oaklawn Anywhere," an advance deposit wagering website that allows participants to bet on races via their computers and smartphones.

Woosley said he doesn't know whether the Legislature will rein in betting at Oaklawn and Southland parks.

He said his goal is to have half of the retailers that sell quick-draw tickets and have monitors to be new lottery retailers and the other half to be longtime lottery retailers. He added that for the Kentucky lottery, convenience stores account for more than half of the lottery retailers that sell quick-draw games. Quick-draw monitors also could be installed in places like bars and restaurants, he said.

He said each of the lottery's nearly 1,900 retailers will decide whether to sell quick-draw game tickets, even if they don't install monitors to show the draws' winning numbers.

Commissioner Julie Baldridge of Little Rock wondered whether the lottery could live-stream the quick-draw games' winning numbers to allow players to watch them on cellphones.

Woosley said doing that would overload the lottery's website. Players will be able to check the website for the quick-draws' winning numbers.

Sen. Jimmy Hickey, R-Texarkana, asked the commission in a recent email to reconsider its decision to implement the quick-draw games.

On April 16, the commission authorized its staff to proceed with the games -- a day after a majority of the Legislature's lottery oversight committee supported a motion by Hickey to oppose them.

Hickey urged the commission "at a minimum" to defer its decision until the Legislature can take up the matter in its regular session next year, adding that he wants the Legislature to prohibit the lottery from offering quick-draw games.

Commissioner Mark Scott of Bentonville said Hickey told him Monday that he's worried about the lottery spending "a lot of money" on quick-draw games that the Legislature could ban next year.

Woosley has said he's had discussions with Athens, Greece-based lottery vendor Intralot about providing the quick-draw monitors and reducing its rates as part of a contract extension.

The current contract provides for Intralot to be paid 2.45 percent of the lottery's net sales in exchange for providing "online game services and lottery gaming systems and services," which include 2,500 retailer terminals for the lottery and draw games.

Scott said most lottery commissioners support moving ahead as quickly as possible with quick-draw games, hoping they will revive lagging sales.

Commissioners and Hickey "just have a philosophical disagreement about how to proceed," Scott said.

After Wednesday's meeting, Hickey said he still plans to propose legislation to bar the lottery from offering quick-draw games, and he has no plans to restrict gambling at Oaklawn Park and Southland Park.

"My focus is on the macroevent that would affect every segment in every city in the state," he said, adding that he's worried about the possibility of increased law enforcement costs and about players' possible bankruptcies resulting from the quick-draw games.

In other business Wednesday, commission members discussed authorizing a performance audit. On June 25, they'll decide whether to solicit bids for such an audit.

Scott said some states use performance audits to figure out how to increase sales and net proceeds. "Hopefully, this would be a road map to increase revenue without guessing on ways to increase revenue," he said.

The lottery has budgeted $50,000 for a performance audit in fiscal 2015, said the lottery's chief fiscal officer Jerry Fetzer. Woosley said a performance audit could cost the lottery more than that.

The Lottery Commission also authorized its employees to receive one-time merit bonuses of up to 3 percent in fiscal 2014 depending on their evaluations, after the state's chief fiscal officer, Richard Weiss, authorized them in March for most state employees.

A section on 05/22/2014