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story.lead_photo.caption The front entrance of the Arkansas Scholarship Lottery office is shown in this Jan. 30, 2019 file photo. - Photo by Josh Snyder

The Arkansas Scholarship Lottery raised $4.9 million for scholarships in August -- the lowest amount of net proceeds in that month in 10 years of operations, the agency reported Tuesday.

But total revenue for last month reached $40.89 million -- the second-highest collection in the month of August.

A similar event occurred the month before, when the lottery also netted the lowest amount ever for college scholarships in any July while also taking in the second-best-ever amount of total revenue for that month.

Lottery Director Bishop Woosley said Tuesday that "our proceeds were low due to the cash versus accrual accounting issue that occasionally trips us up, and the fact that we had [a] $1 million prize come in in August."

He was referring to two types of accounting methods. Under the cash method, payments aren't counted until the money is taken in. Under the accrual method, sales are counted even if the money hasn't been paid to the lottery yet by retailers. As Woosley explained last month, when retailers activate tickets toward the end of the month, the ticket goes live and counts as a sale, but the lottery may not receive the funds until the following month.

"This year, the cash to accrual issue hit us twice in the first two months of the fiscal year. That's the bad news," he said in a written statement.

"The good news is that it is something that does not happen very often and generally you have good 'catch-up' months following those negative months," Woosley said. "Hopefully, our draw [game] sales will begin to climb and instants will continue to set records. If that happens, we should catch up quickly."

Instant tickets are also called scratch-off tickets. Draw games include Powerball, Mega Millions, Natural State Jackpot, Cash 3, Cash 4, Lucky for Life and Fast Play.

July and August are the first two months of fiscal 2020. In fiscal 2019, the lottery reported collecting more total revenue and raising more money for college scholarships than in any previous fiscal year.

The lottery collected $516.2 million in total revenue in fiscal 2019, beating the previous record of $500.4 million in fiscal 2018. In fiscal 2019, the lottery raised $98.4 million for college scholarships, outdistancing the previous high of $97.5 million in fiscal 2012.

In what he has described as a conservative forecast, Woosley has projected revenue totaling $482.9 million and net proceeds for college scholarships at $89.3 million in fiscal 2020. The lottery expects to be affected by expanded casino gambling in the state and by Mississippi's lottery starting up in December, Woosley has said.

The Arkansas lottery started selling tickets on Sept. 28, 2009, and has helped finance more than 30,000 Arkansas Academic Challenge Scholarships during each of the past nine fiscal years.

The Legislature cut the size of future Arkansas Academic Challenge Scholarships three times over several years, after the lottery's net proceeds fell short of initial projections and more students than initially anticipated were awarded the scholarship. Besides lottery proceeds, the Academic Challenge Scholarship is financed with $20 million a year in general revenue and a $20 million lottery reserve fund that covers temporary cash shortfalls to pay for scholarships before it is replenished.

The total Academic Challenge Scholarships awarded peaked in fiscal 2012 at $132.9 million. In fiscal 2019, 32,486 students received a total of $91.2 million in these scholarships, said Alisha Lewis, a spokeswoman for the state Division of Higher Education.

A rebound in the lottery's revenue and net proceeds led the 2017 Legislature to create a new scholarship program called the Arkansas Workforce Challenge Scholarship program to be financed with the lottery's excess proceeds. The program provides aid of up to $800 a year for students enrolled in higher education programs that lead to them being qualified to work in high-demand occupations. The program awarded a total of about $170,000 to 214 students in fiscal 2019, Lewis said.

In August, scratch-off revenue increased from $33.5 million a year ago to $34.6 million, while draw game revenue dipped from $6.7 million to $6.1 million, the lottery reported Tuesday in its monthly report to Gov. Asa Hutchinson and the Legislative Council's lottery oversight subcommittee.

The lottery's other source of revenue is fees paid by 1,900-plus retailers. These fees totaled $51,916 in August.

Total revenue was $40.3 million in August a year ago, according to the lottery.

Woosley said that last month was the best instant-ticket August in the history of the lottery.

"Our ticket sales continue to be strong, which is good given that instant ticket sales are a show of the health of the lottery in Arkansas," he said.

In the past two years, the lottery "had quite a bit of luck" with the multistate jackpot games and its in-state jackpot game, but not so far this fiscal year, he said. "None of those three games can get on track, which is why our draw games sales are below what they were last year."

In its report to the governor and the lottery oversight subcommittee, the lottery reported starting sales of $5 Razorback-themed scratch-off tickets on Aug. 27 and that no ending date has been determined for the game. There is a $141,000 licensing fee for the game after reaching an agreement with the University of Arkansas, Fayetteville, Woosley said.

Woosley said Tuesday that more than 240,000 Razorback tickets have been sold so far.

"There is a little over 950,000 left at this point," he said.

"We have not had any discussions with other schools at this point" about similar ticket promotions, he said.

Asked if Arkansas State University System officials are interested in a similar arrangement with the lottery for a Red Wolves-themed lottery ticket, system spokesman Jeff Hankins said Tuesday, "We haven't made any decisions on the issue."

In August, the lottery's net proceeds for college scholarships in August declined from $6.1 million a year ago to $4.9 million, according to the lottery.

After the first two months of fiscal 2020, the unclaimed prize reserve fund totaled $4 million -- up from $2.6 million in the same period in fiscal 2019. At the end of each fiscal year, the lottery shifts the balance in the unclaimed prize reserve fund, minus $1 million, to college scholarships.

A graphic showing Arkansas Scholarship Lottery revenue in August

Metro on 09/11/2019

Print Headline: Arkansas Scholarship Lottery net proceeds dip in August, but chief says revenue strong on sales of instant tickets

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