Arkansas Scholarship Lottery tops $91M for state students; year’s revenue at record $500M

Posted: July 11, 2018 at 4:30 a.m.
Updated: July 11, 2018 at 11:30 a.m.

Office of of the Arkansas Lottery director Bishop Woosley is shown in this file photo.

The Arkansas Scholarship Lottery raised $91.9 million for college scholarships in the fiscal year that ended June 30 -- the third-largest amount that it's raised in nine years of operation.

And the lottery collected a record $500.4 million of revenue in fiscal 2018, exceeding the previous peak of $473.6 million in fiscal 2012.

The only other fiscal years that the lottery raised more than $90 million for college scholarships were fiscal 2011 and 2012. Net proceeds totaled $94.2 million and $97.5 million, respectively.

The lottery has been selling tickets since Sept. 28, 2009, a few months into fiscal 2010.

It's helped finance more than 30,000 Arkansas Academic Challenge Scholarships during each of the first eight fiscal years. These scholarships also are financed by $20 million a year in state general revenue and a $20 million reserve fund that covers temporary cash shortages.

Net proceeds didn't set a record in fiscal 2018 because lottery players prefer higher-priced scratch-off tickets that have a lower profit margin, according to an agency official.

Lottery Director Bishop Woosley said Tuesday the startup of the Arkansas lottery was one of the more accelerated and ambitious ever and scratch-off ticket price points were introduced at a faster rate than they had been elsewhere.

Lottery players "gravitated from $1 and $2 tickets to $5, $10 and $20 tickets faster than they would have had there been normal lottery growth," he said in a written statement. "Over time, that has caused our players to primarily play the higher price point tickets which have a lower margin.

It's "become more and more of a challenge each year to increase our return [for college scholarships] because the players were introduced to higher price point tickets in a shorter timeframe than normal and they continue to gravitate to the higher price points that have a lower margin," Woosley said. "Therefore it will be a continuing challenge ... to find ways to increase our return as players continue to play the higher price point, lower margin tickets."

Rep. Chris Richey, D-West Helena, said "wow" when informed by a reporter of the fiscal 2018 net proceeds.

"That's definitely a lot better shape than it was a few years ago," said Richey, who is a co-chairman of the Legislative Council's lottery oversight subcommittee.

Fiscal 2018 is the third consecutive year that the lottery raised more for college scholarships than in the previous fiscal year.

The lottery's revenue and net proceeds peaked in fiscal 2012 before they dropped for three consecutive fiscal years.

"Since being approved by the voters in 2008, the Arkansas Lottery has had ups and downs," Gov. Asa Hutchinson said Tuesday in a written statement.

"In early 2015, we brought the lottery under the supervision of [the Department of Finance and Administration], and since then the funds for scholarships have increased significantly, going from $72M in the year I became Governor to nearly $92M for scholarships this fiscal year. These results mark a 21% increase in scholarship funds available for Arkansas students [from the lottery]," the Republican governor said.

The Legislature cut the size of future scholarships for some Arkansas Academic Challenge recipients three times because of declining net proceeds in years past.

The total amount of Academic Challenge Scholarships awarded peaked in fiscal 2013 at $132.9 million, according to the state Department of Higher Education. Information about the total Arkansas Academic Challenge scholarships awarded in fiscal 2018 wasn't available Tuesday, though last month it reported the figure at $91.8 million for 34,943 students.

With the lottery's rebound, the Legislature in 2017 created a new scholarship program called the Arkansas Workforce Challenge Scholarship program to be financed with the lottery's excess proceeds. For the first time this fall, the program will provide state aid for students enrolled in higher education programs leading them to being qualified to work in high-demand occupations.

The lottery collected $500.4 million in total revenue in fiscal 2018 -- up from $449.9 million in fiscal 2017 -- the lottery reported to the oversight committee and Hutchinson.

Of that fiscal 2018 total, $407.6 million came from scratch-off tickets, an increase from $368.4 million the previous year.

It also raised $92.1 million from sales of draw game tickets, an increase from $80.6 million in fiscal 2017, the lottery reported. Draw games include Powerball, Mega Millions, Natural State Jackpot, Cash 3 and Cash 4 and Fast Play.

Other revenue included fees paid by retailers that totaled $53,655.

Woosley said scratch-off ticket revenue increased as a result of several successful launches, including the first Willy Wonka game, the first oversized ticket called Big Money Multiplier, a few themed launches, two very successful $20 tickets and the best $5 games in the lottery's history.

Draw-game ticket revenue increased over fiscal 2017 as a result of changes made nationally to the Mega Millions game that increased the price point from $1 to $2. Also, several Powerball and Mega Millions jackpots exceeded $300 million and $400 million, and there were record Cash 3, Cash 4 and Fast Play ticket sales, he said.

The net proceeds of $91.9 million in fiscal 2018 were up from $85.2 million in both fiscal 2016 and 2017.

Woosley said net proceeds went up in the most recent year because the lottery has continued to operate with the minimum number of employees needed and had an incredible year selling tickets.

"With the move to place the agency under Governor Hutchinson and within the Department of Finance and Administration, we have had more time and support to focus on our mission, which is to raise money for scholarships for Arkansas residents," he said.

With the governor overseeing the lottery, state lawmakers have criticized the agency far less than they did when a commission controlled the lottery.

Lawmakers in 2017 passed legislation to give retailers the option of accepting debit cards on ticket purchases, starting last August. Retailers previously were limited to accepting cash only. So far, it's unknown how many of the lottery's more than 1,900 retailers accept debit cards and how much of a financial bump that has created.

Lottery consultant Camelot Global Services was paid $3.56 million in fiscal 2018, Woosley said. The firm has offices in Philadelphia and London.

In November 2015, lottery officials signed a contract with Camelot through June 30, 2020, with options for a two-year extension, to develop and help implement a business plan. In March 2016, the lottery signed off on the consultant's five-year plan that called for the agency to sign up 600 more retailers and make a variety of other changes, such as increasing its marketing budget. Retailers totaled 1,926 on June 30 -- up from 1,910 a year in 2016.*

The agency also reported that in June, the last month of the fiscal year, revenue dropped from $38.5 million a year ago to $37.6 million, while the amount raised for college scholarships increased from $13.1 million to $13.3 million.

Lottery revenue tops $500 million

A Section on 07/11/2018

*CORRECTION: The Arkansas Scholarship Lottery had 1,910 retailers on June 30, 2016. The date was misstated in a previous version of this article.