Jerry Kopel

KOPEL: WHAT ARE THE ODDS?

Lady Luck plays her hand with the lottery

Do you really believe your future lottery “luck” is just a matter of chance?

Read page 17 of the lottery report by auditor company Clifton Gunderson LLP. As example: “At the close of fiscal year 2008 the number of active scratch games being offered for sale was 51 versus 60 at the close of fiscal year 2009.”

“The decrease in game-related expenses, including prize expense, commission expense and bonus expense (fiscal year 2008 to fiscal year 2009) is reflective in the decrease in product sales and a drop in commissions and bonuses of $2 million from fiscal year 2008.”

Market bonus expenses for retailers for seeking and promoting products dropped in round numbers from $2 million in fiscal year 2008 to $1.2 million in fiscal 2009. “In addition the prize expense percentage decreased in fiscal year 2009 from the prize expense percent in fiscal year 2008.”

The drop was “a result of the conscious effort to slightly lower the prize percentage payouts on all scratch games and as a result of the difference in the number of lotto jackpots won (five compared to eight) the previous year as mentioned on page 14 of the lottery audit.”

Is there any legitimate way to reduce the number of lotto jackpots cashed in each year? I don’t believe so. It had to be a coincidence.

The scratch prize percentage in fiscal 2009 was 67.51 percent of tickets sold, a 2.3 percent drop (according to the auditor’s math) from the 2008 scratch prize payments. I believe pressure on the lottery commission from both independent and state auditors to further reduce scratch game percentage prizes will happen in fiscal 2010 to provide surplus funds directly to general revenue as directed by the state constitution.

However, the cost of marketing and communication rose in round numbers from $8.9 million to $11.9 in fiscal 2009. In studying lottery reports for 27 years, I cannot recall any such cost ever being more that $10 million and that number appeared early when the “adv push” was on to get people to play the Colorado lottery.

The $3 million increase in promotions and institutional and product advertising from fiscal 2008 to fiscal 2009 was the result of an increase in appropriated funds approved by the Joint Budget Committee to support an effort to increase overall sales of lottery products.

The lottery budget for fiscal 2009 BEGAN as $429.6 million. Total expenditures for fiscal 2009 came to $393.2 million compared to a final excess appropriation (or savings) of more than $114.2 million.

Under Lottery Commission rules (5.10 and 10.10) as amended in fiscal 2008 “the director may provide such additional compensation to licensees as deemed appropriate by the director to further the sale of lottery tickets.” A portion shall be used to pay each licensee a cashing bonus equal to one percent of each prize paid up to and including $599.99.” So a one percent bonus on a dollar prize becomes twenty cents on a $20 lottery prize based on handing someone a ticket or getting it out of the lottery machine.

Retailers have no control over whether the purchaser got a $20 or $2 ticket prize. The regular commission to retailers should reflect the number of tickets sold and not the value. Retailers commissions and bonuses should be reduced several millions from $36.5 million. Retailers need the lottery, not the opposite. Many non-lottery retailers would like a shot on some of the money retailers receive from the lottery.

A drop either this fiscal year or next of scratch prize payment to 65 percent would still be higher than the percent payout in scratch prizes in fiscal 2004 ($64.48 million). Gross profits on all sale of tickets went (in round numbers) to $144.7 million in fiscal 2009 from $142.5 million in fiscal 2008.

Great Outdoors Colorado (GOCO) is limited by language in the state constitution as to how much GOCO can receive each year. For fiscal 2009 it was $54.3 million compared to $53.2 million in fiscal 2008. For fiscal 2010 GOCO will likely get just over or under $56 million.

For fiscal 2009 the Conservation Trust Fund received $47.8 million and the Division of Parks and Recreation received $12 million.

April is the birthday of the sale of lottery tickets 28 years ago in Colorado. Will the Legislature celebrate the occasion?

Jerry Kopel served 22 years in the Colorado House paying attention to the Colorado lottery.