Rising draw-game ticket sales fueled by high jackpots in August boosted the Arkansas Scholarship Lottery's total revenue to $50.2 million to narrowly beat year-ago revenue of $49.6 million.
But the $6.7 million raised for scholarships in August fell short of the net proceeds of $7.8 million in the same month a year ago.
August is the second month of fiscal 2022, in which lottery Director Eric Hagler has conservatively forecast a drop in total revenue from a record $632.5 million in fiscal 2021 to $509.2 million and a reduction in the amount raised for scholarships from $106.6 million in fiscal 2021, to $88.6 million. Fiscal 2021 ended June 30.
The lottery has sold tickets since Sept. 28, 2009, and has helped finance Arkansas Academic Challenge Scholarships for more than 30,000 students during each of the past 11 fiscal years.
In August, scratch-off revenue slipped slightly from $43.1 million a year ago to $42.2 million, while draw-game revenue increased from $6.4 million to $7.9 million, the lottery reported Friday in its monthly report to Gov. Asa Hutchinson and the Legislative Council's lottery oversight subcommittee.
Hagler -- a former financial services lawyer who took over the helm of the lottery in August 2020 -- said scratch-off revenue dipped in August by $900,000 from a year ago partly because consumers have, for the first time in more than a year, had the opportunity to travel and enjoy other activities that were unavailable during the height of the coronavirus pandemic.
"Another competing force weighing on scratch tickets in August has been the sizeable jackpots currently rolling in the Powerball and Mega Millions draw games," he said. "When draw game jackpots rise, some players will shift their purchasing preferences and focus on the larger jackpot games."
In August, Powerball ticket revenue increased to $2.2 million from $1.5 million a year ago and Mega Millions ticket revenue increased to $1.5 million from $982,914, according to lottery records.
Hagler said net proceeds for college scholarships dropped compared with a year ago because while they are a function of sales, they also are subject to a cash-to-accrual accounting adjustment.
"During August 2021, this adjustment weighed on the net tally for net proceeds," he said. "During the next accounting adjustment in September 2021, we fully expect to see the pendulum swing in favor of net proceeds."
During the first two months of fiscal 2022, revenue totaled $97.8 million, a drop from $99.4 million a year ago.
So far in fiscal 2022, the amount raised for scholarships totaled $15.1 million, a decline from $16.4 million a year ago.
Hagler said, "Currently, the lottery is trending at $2.5 million over-budget which is an early-year indicator that we are currently navigating on the proper course."
The unclaimed prize reserve fund balance totaled $2.5 million on Aug. 31. The fund tallied $913,988 in July.
At the end of the fiscal year on June 30, the unclaimed prize reserve fund, minus $1 million, is transferred to college scholarships under state law.
Sen. Ron Caldwell, R-Wynne, said Friday that he expects to see lottery revenue decline this fiscal year with the state's elimination of $300 a week supplemental federal unemployment payments in late June and last spring's federal stimulus payments no longer fueling consumer spending.
But "I think we are in pretty good shape," said Caldwell, who is a co-chairman of the lottery oversight subcommittee.
He said he plans to call on Hagler to present his projections for the next six to 12 months to the committee.
Hagler said that in order to keep pace in a retail sales world that is being driven by e-commerce, the lottery "is absolutely considering an omni-distribution channel for offering games."
"It would be imprudent to ignore the possibilities and explore how the future could look with a digital distribution channel," he said. "There is no time-frame, since the concept has to work for the Legislature, the lottery and our retail partners. We believe success for all parties through digital is absolutely achievable, but we only get one chance to get it right -- so we are approaching the possibilities with deep deliberation and will include our retail partners at the discussion table."
The Arkansas Academic Challenge Scholarships are financed with lottery proceeds, plus $20 million a year in state general revenue.
The state Division of Higher Education forecasts that it will hand out $90 million in Academic Challenge Scholarships to 31,000 students in fiscal 2022, after handing out about $86 million in fiscal 2021.
So far in fiscal 2022, the division has awarded 26,881 students with the scholarships, said Nick Fuller, assistant director of finance at the Division of Higher Education.
"As far as funding distributed, most funds have not been disbursed yet as the roster submissions from institutions are still in process," he said.
The amount handed out for Academic Challenge Scholarships peaked at $132.9 million in fiscal 2013, going to 33,353 students. Scholarship totals have dropped largely because the Legislature has cut the amount of the initial awards several times.
The 2017 Legislature created the Workforce Challenge Scholarship to use excess proceeds to provide up to $800 a year for students enrolled in programs that lead to qualifications in high-demand occupations.
The division said that it expects to distribute $450,000 for these scholarships in fiscal 2022. In fiscal 2021, the division reported it distributed $487,865 in Workforce Challenge Scholarships.
So far in fiscal 2022, the division has awarded those scholarships to 811 students, Fuller said.
The 2019 Legislature created the lottery-financed Concurrent Challenge program. High school juniors and seniors are eligible to receive the scholarships for a semester or an academic year in which they are enrolled in an endorsed concurrent course or certain programs.
For fiscal 2022, the division projects distributing $2.7 million for these scholarships to 13,000 students. For fiscal 2021, the division reported that it handed out $2.42 million in Concurrent Challenge scholarships to 14,091 students.
So far in fiscal 2022, the division has awarded Concurrent Challenge scholarships to 208 students, Fuller said.