Lottery revenue decreases sharply

The Arkansas Scholarship Lottery’s revenue and amount raised for college scholarships fell sharply in October from the same month a year ago, when the lottery’s finances were bolstered by a $1.5 billion Mega Millions jackpot and $700 million Powerball jackpot.

For a variety of reasons, those jackpots haven’t been nearly as big in the last four months.

The lottery’s revenue fell from $57.5 million a year ago to $38.9 million in October, while net proceeds for college scholarships slipped from $11.2 million a year ago to $6.3 million, the lottery reported this week to Gov. Asa Hutchinson and the Legislative Council’s lottery oversight subcommittee. October is the fourth month of fiscal 2020, which started July 1.

Lottery Director Bishop Woosley said Wednesday the large jackpots in October 2018 led to “one of our best months ever” and “it would be impossible to compete with those numbers.

“When jackpots reach those levels, the amount we raise for proceeds increases dramatically because those [draw] games have a lower payout,” he said. Lower prizes mean a larger profit margin for the lottery.

Draw game revenue dropped from $24.2 million in October last year to $6.5 million last month, while scratch-off ticket revenue slipped from $33.2 million a year ago to $32.3 million last

month, the lottery reported. Last month’s revenue also includes $65,732 in fees paid by 1,965 retailers.

The Arkansas Scholarship Lottery started selling tickets more than 10 years ago, and has helped finance more than 30,000 scholarships during the past nine years.

The amount awarded for the scholarships has dropped largely as a result of the Legislature cutting the amount three times in 10 years.

Thus far in fiscal 2020, the Powerball jackpot hasn’t been higher than $198 million and the Mega Millions jackpot hasn’t been more than $227 million, Woosley said.

Woosley said the last time either jackpot exceeded $400 million, Mega Millions reached $530 million in June and Powerball reached $768 million in March.

As for why it’s been that long since either jackpot reached above $400 million, Woosley said, “Interest rates [paid on money in the jackpots] have dropped over the past few months, which dramatically impacts the rate that the jackpots grow.

“In addition, when the jackpots grow slowly, the players are a bit slower in getting interested, which also makes the jackpot grow more slowly due to lower sales,” he said. “Another issue that can impact jackpot growth arises when jackpots get hit at lower levels several times in a row. The effect is that the lower level jackpot funding is impacted which also makes the jackpots grow more slowly.

“Also, after a large jackpot we general experience what is described as jackpot fatigue. That has certainly impacted the interest level here and nationally over the past year. It is the perfect storm of issues that are impacting jackpot growth and sales right now, ” Woosley said.

In the first four months of 2020, revenue reached $157.2 million, compared to $175.5 million in 2019, according to the lottery’s latest report.

So far in 2020, scratch-off ticket revenue totals $132.3 million, outdistancing the $129.6 million in 2019, while draw game revenue totals $24.7 million, compared to $45.5 million in 2019.

Besides Powerball and Mega Millions, the lottery’s draw games also include Natural State Jackpot, Cash 3, Cash 4, Lucky for Life and Fast Play.

During the first four months of 2020, the lottery raised $22.3 million for scholarships compared to $30.2 million in 2019.

At the end of each fiscal year, the balance of the lottery’s unclaimed prize reserve fund, minus $1 million, is transferred to scholarships. On Oct. 30, the unclaimed prize reserve fund totaled $5 million, after accumulating $780,460 in October.

For 2020, Woosley projected revenue of $497 million and net proceeds for college scholarships at $89.3 million in what he has described as a conservative forecast.

Revenue totaled $516.2 million in 2019, exceeding the record of $500.4 million in 2018; the amount raised for scholarships reached $98.4 million in 2019, beating the previous record of $97.5 million in 2012.

Woosley said the lottery is performing quite well in 2020, considering the issues with the multi-state jackpot games, because scratch-off revenue is exceeding the projected budget by almost $3 million so far.

“If the national jackpot games would cooperate, we would be in great shape,” he said. “We are down $1.9 million in proceeds versus [the projected] budget. The majority of that [$1.6 million] was due to our cash versus accrual accounting method. I am confident we will catch up soon. Overall, we are having a good year and are on course to meet or exceed our projection.”

Asked about the effect of new casinos on lottery ticket sales, Woosley said scratchoff revenue in Crittenden County has dropped 2.55% in 2020 compared to 2019, while they have increased 2.69% in Garland County and 8.57% in Jefferson County. Southland Casino Racing is in Crittenden County, Oaklawn Racing Casino Resort is in Garland County, and the Saracen Casino opened its gambling annex several weeks ago in Jefferson County.

That information “shows that we are competing strongly in counties where casinos are currently operating,” he said.

“We will see if that holds

“If the national jackpot games would cooperate, we would be in great shape.” — Lottery Director Bishop Woosley

once they are up and fully operational. Whatever the case, with the casinos and new lottery in Mississippi [selling scratch-off tickets starting Nov. 25], we are going to have to find ways to compete and remain relevant,” Woosley said.

The Arkansas Academic Challenge Scholarship is paid for with the lottery’s net proceeds, plus $20 million a year in state general revenue and $20 million in the lottery reserve fund, which is used to cover temporary cash shortfalls to pay scholarships before it is replenished.

In 2019, 32,486 students received $91.2 million in these scholarships, according to the state Division of Higher Education. In 2020, the division projects 33,315 students will receive scholarships totaling $94.6 million, said division spokeswoman Alisha Lewis.

The Division of Higher Education projects awarding 1,698 Workforce Challenge Scholarships in 2020 totaling $1.3 million — up from 214 students who received a total of about $170,000 through the program in 2019.

The 2017 Legislature created the Workforce Challenge Scholarship to use excess lottery proceeds to provide up to $800 a year for students enrolled in higher education programs leading to being qualified to work in high-demand occupations.