Lottery has too many games, isn’t trusted, consultant says
The Arkansas Scholarship Lottery has too many scratchoff and draw games, lags behind its peers in per capita sales and profits, pays more than its peers do to its vendors, and isn’t perceived as trusted, a lottery consultant said in a wide-ranging report of the 5-year-old state lottery.
“The overriding strategy must be to move the lottery away from a gambling organization to a consumer goods sales and marketing organization,” Philadelphia-based Camelot Global Services Inc. said in a report that it is to give to the Legislature’s lottery oversight committee this morning and was given to the lottery by the Bureau of Legislative Research on Thursday.
The consultant said the lottery’s ticket sales could grow from roughly $400 million a year to $565 million annually by 2019, and that net proceeds for college scholarships could increase from roughly $76 million a year to $122 million by 2019 under what it described as “the potential upside scenario.”
But “negative PR and a lack of trust in the lottery is hindering expansion of the lottery’s player base and overall brand appeal,” the consultant said.
The report played a role Thursday afternoon in the cancellation of a special Lottery Commission meeting that had been scheduled to consider a contract extension for a Greek lottery game vendor. A legislator who has been critical of the lottery suggested to the lottery director that approval of the contract extension could be problematic if the consultant took issue with the cost.
The lottery’s ticket sales and net proceeds raised for college scholarships have declined each of the past
two fiscal years, and lottery officials have cited various reasons for the dip.
The lottery, which began selling tickets Sept. 28, 2009, provides most of the money for the Arkansas Academic Challenge Scholarship.
More than 30,000 students have received the scholarships during each of the past four fiscal years. But the Legislature has twice cut the size of the scholarship amounts for future recipients during that period, citing net proceeds lagging behind initial projections and more students than forecast receiving the scholarships.
Camelot Global Services’ report calls for overhauling the lottery’s structure, saying the lottery is an important state asset that needs “political and public protection.”
The lottery is treated like a state agency, though it’s set up as an independent one, and it needs to have more commercial personnel policies, incentives and procurement practices, the consultant said.
“A private manager could be considered in the future, which could provide professional management and more financial security for the scholarship fund,” the consultant said.
The nine-member lottery commission consists of three appointees apiece from the governor, Senate president pro tempore and the speaker of the House under the state’s lottery law enacted in 2009.
But Camelot Global Services said the majority of the commissioners, including the chairman, “should be selected by the governor’s office” with commissioners appointed based on their expertise in areas such as finance, human relations, marketing and sales.
Lottery Director Bishop Woosley declined late Thursday to comment on the details of the consultant’s report.
“These are two sizable documents with many conclusions, and I need to see the data that they relied on in reaching those conclusions,” Woosley said in a written statement. “I will wait to hear the testimony of Camelot [today] and work with our staff and vendors to formulate an extensive and complete response.”
Woosley, who is paid $165,000 a year, has been the lottery’s director since February 2012 and previously was the lottery’s chief legal counsel and procurement director.
His predecessor, Ernie Passailaigue, resigned in September 2011 after guiding the development of the lottery and drawing criticism for a series of problems. Passaillaigue was South Carolina’s lottery director when the Arkansas lottery hired him in June 2009 at a starting salary of $324,000 a year, compensation that ranked third-largest among the nation’s lottery directors, behind only the directors in Georgia and Tennessee.
In an apparent reference to Passailaigue’s tenure at the lottery, Camelot said “the launch of the lottery did not follow best practice, and issues such as inflated management salaries and mistakes still taint the lottery’s image.”
In September, at the request of lottery critic state Sen. Jimmy Hickey, R-Texarkana, the Legislative Council voted to hire, without taking bids, Camelot Global Services and pay a consulting fee of $149,500, plus reimbursement for travel expenses up to $20,000.
That decision came after Hickey won legislative approval in a special session in July to bar the lottery from deploying electronic monitor games until mid-March to allow the Legislature to decide the future of the games next year.
Hickey told lawmakers in September that the study “will help us help turn the lottery around.”
The Arkansas Lottery Commission canceled a special meeting Thursday to consider a proposed three-year contract extension with Athens, Greece-based lottery vendor Intralot Inc., after Hickey said he told Woosley in a telephone conversation that it’s “fine” if Woosley thought the contract extension was the best thing for the lottery.
But Hickey said he also advised Woosley that there would be “a problem” if the consultant’s report showed that the contract extension was costing the lottery millions of dollars more than another option.
He said he made no threats and didn’t tell Woosley what to do during their telephone conservation.
Woosley said in a written statement that “I would say that is an accurate recitation of the conversation.”
He said he visited with commission Chairman John C. “Smokey” Campbell of Hot Springs and “determined it may be good if we waited to hear the Camelot report.”
Lottery officials and Intralot officials have said they’ve had a few misunderstandings about their contract extension offers during the past few weeks that are aimed at reducing the lottery’s vendor costs.
Woosley said he also met with Gov.-elect Asa Hutchinson’s transition team Thursday as other state agency heads have done, but that had nothing to do with the commission canceling its special meeting Thursday.