Reset for lottery gets green light in Senate panel
Bill aims to ax commission
A bill that would abolish the Arkansas Lottery Commission and require the governor to appoint the lottery director sailed Tuesday through a state Senate committee.
Senate Bill 7— sponsored by Jimmy Hickey, R-Texarkana — also would transfer the commission’s duties to a new Office of Arkansas Lottery in the state Department of Finance and Administration’s Management Services Division.
The bill cleared the eight-member Senate Agen-
cies and Governmental Affairs Committee in a voice vote with no senators dissenting; no one asked to testify for or against the bill. Hickey said he’ll ask the Senate to approve the bill today.
“It is not my intention to show disrespect to the commission,” said Hickey, who successfully sponsored legislation in July to bar the lottery from installing electronic monitor games.
Although Hickey has been critical of the commission, he told the committee that “This is about business management, analysis of trends and financial data and the need to change the direction and correct the situation to continue to provide scholarships to students.”
“If we act now, there is still time that we could turn this around and not have to lose more scholarship money.”
Hickey said that “we can possibly achieve significant efficiencies by not duplicating certain services” by having the lottery placed under the finance department.
Afterward, Sen. Linda Chesterfield, D-Little Rock, said she voted for SB7 Tuesday but “I still walk in trepidation around the idea of taking it away from a citizen-led or a citizen-driven group and putting it [in the finance department].
“But we are not doing well fiscally, so we have to do something and [Hickey] brought the most sensible thing that we have in order to try to get to fiscal soundness,” she said.
Republican Gov. Asa Hutchinson supports Hickey’s efforts with SB7, said Hutchinson spokesman J.R. Davis.
The lottery started selling tickets Sept. 28, 2009, but revenue and the amount raised for college scholarships have dipped in each of the past two fiscal years.
Lottery revenue has helped finance more than 30,000 scholarships during each of the past five fiscal years. The Legislature has twice trimmed the scholarships for future recipients in recent years, partly because net proceeds have fallen short of initial projections.
The games raised $94.2 million for scholarships during the first full fiscal year, 2011. Proceeds for scholarships climbed to $97.5 million in fiscal 2012 but dropped to $90.3 million in fiscal 2013. In fiscal 2014, they fell to $81.4 million.
In August, lottery Director Bishop Woosley projected $78.2 million will be raised for scholarships in fiscal 2015, which ends June 30. But the former director of the state Department of Higher Education, Shane Broadway, told lawmakers last Wednesday that he expects the lottery to raise between $72 million and $74 million for scholarships in fiscal 2015.
Woosley told reporters Tuesday that he he wants to wait until the end of the latest Powerball jackpot run before deciding whether to change his fiscal 2015 projection, saying the lottery could raise $72 million, $78 million or even $80 million for scholarships
“We are really at the mercy of the jackpot gods,” he said.
During the first seven months of fiscal 2015, ticket sales totaled $225.8 million, compared with $230.1 million during the same period in fiscal 2014, after sales increased in January compared with a year ago, said lottery spokesman Patrick Ralston.
So far in fiscal 2015, the lottery has raised $42.6 million for scholarships, compared with $44.9 million during the same period in fiscal 2014, he said. Last month, $7.2 million was raised, compared with $5.6 million in January 2014.
The Arkansas Academic Challenge Scholarship is financed through lottery net proceeds and $20 million a year in state general revenue, as well as a $20 million lottery reserve fund.
Hickey told the Senate committee he had estimated that the lottery will raise about $72.9 million for the scholarships in this fiscal year based on sales through the end of November, “so this year we are going to have an estimated total of somewhere around $93 million” after adding in the $20 million from the state.
The Higher Education Department projects the scholarship payments will be about $102 million this fiscal year, he said, and the scholarships will be funded with the help of the $20 million lottery reserve.
“At our current rate, we’ll totally use [the $20 million reserve] up by February 2016 and we will not have enough to pay all the scholarship at that time,” Hickey said. “Unfortunately, we are somewhat in a crisis-management position.”
The department is projecting scholarship payments of $99.8 million in fiscal 2016, and that figure will be revised in March and June, department deputy director Harold Criswell said after the committee’s meeting.
Hickey noted that the Legislative Council hired lottery consultant Camelot Global Services and that the company has compiled its recommendations.
“I am not going to tell you that everything that is in this report … we need to use. Yet what I am telling you is we’ll have a very detailed blueprint to help with the transition,” he told the committee.
Woosley has said the commission has discussed or implemented many of the recommendations of Camelot Global Services.
A finance department document — obtained by the Arkansas Democrat-Gazette last month — shows that eight employees at the lottery could have their positions eliminated, reducing salaries by more than $400,000 a year, if the lottery becomes part of the finance department. The employees range from the department’s spokesman to a postal courier.
Paul Louthian, the state’s accounting administrator, told lawmakers Tuesday that finance department officials “have had a very preliminary look at this” and “we have not made a determination on exactly what we would do.”
“Until this [bill] is passed and we can look at their daily operations and talk to those people one on one, I can’t make a determination at this point exactly who would be eliminated,” he said.
If any lottery employees lose their jobs, the state would look to the finance department and other agencies to possibly place these people into other jobs, he said.
Afterward, Woosley told the reporters that the nine-member lottery commission doesn’t have a position on SB7 because the structure and governance of the lottery is solely at the discretion of the Legislature.
The commission is made up of Chairman John “Smokey” Campbell of Hot Springs, Vice Chairman Julie Baldridge of Little Rock, Bruce Engstrom of North Little Rock, Dianne Lamberth of Batesville, Raymond Frazier of Little Rock, Doug Pierce of Jonesboro, Mark Scott of Conway, George Hammons of Pine Bluff, and Alex Streett of Russellville.
Woosley, the director since February 2012, said he has not had any discussions with Hutchinson’s office about remaining at the lottery if SB7 is enacted into law.
“I’ve visited with the governor …. prior to the election and I have visited with some of his staff since then and I assume we may wait until the structure is changed,” he said.
“Someone will make a decision about what structure there is, who is the director and who still works there and what jobs change and what jobs are eliminated,” said Woosley.