Arkansas Scratch-offs fuel growth in state's lottery income

in Lottery

Buoyed largely by rising scratch-off ticket sales amid the pandemic, the Arkansas Scholarship Lottery's revenue in November increased by $7 million over the same month a year ago to $43.1 million.

In addition, the amount raised for college scholarships last month increased by about $2.2 million over the same month a year ago to $8.2 million, the lottery reported Thursday in its monthly report to Gov. Asa Hutchinson and the Legislative Council's lottery oversight subcommittee co-chairs, Sen. Joyce Elliott, D-Little Rock, and Rep. Laurie Rushing, R-Hot Springs.

Lottery Director Eric Hagler said Thursday that increased sales is the most obvious driver for increasing the amount raised for scholarships in November.

"But the story is much more complicated and many things factor into the amount dropping down to the bottom line," he said in a written statement. "Simply increasing sales does not always increase available net proceeds. The timing regarding jackpot exposure, expenses, and bonus payments to vendors also serve to impact net proceeds for any given period."

The lottery's financial fortunes have been bolstered for most of the pandemic that started in March in Arkansas.

The lottery has been selling tickets since Sept. 28, 2009. It has helped finance Arkansas Academic Challenge Scholarships for more than 30,000 students during each of the past 10 fiscal years.

November was the fifth month of fiscal 2021, which started July 1.

During the first five months of the fiscal year, the lottery's revenue totaled $232.6 million -- up from $193.3 million in the same period in fiscal 2020.

So far in fiscal 2021, the lottery has raised $40.8 million for college scholarships, compared with $28.3 million at the same point in fiscal 2020.

At the end of the fiscal year, the lottery will transfer the balance in its unclaimed prize fund, minus $1 million, to scholarships. At the end of November, the unclaimed prize fund totaled $2.1 million, after receiving $143,919 in unclaimed prize money last month.

For fiscal 2021, the previous lottery director, Bishop Woosley, projected revenue would total $465.8 million and the amount raised for scholarships would be $78.2 million.

In May, Woosley noted, however, "There is a great deal of uncertainty in the lottery world and the world in general right now."

Hagler, who started as lottery director on Aug. 6, said, "We are living in historic times and the future for retail sales is relatively uncertain, which renders forecasting to be extremely difficult."

The lottery's revenue in fiscal 2020 totaled $532 million, beating the previous record of $516.2 million in fiscal 2019. The amount raised for college scholarships hit $89.4 million in fiscal 2020, which was the sixth-largest amount in the lottery's history. The record amount raised for scholarships was $98.6 million in fiscal 2019.

Woosley attributed the drop in the amount raised for scholarships in fiscal 2020 to poor sales for Mega Millions and Powerball jackpot tickets, which are more profitable for the lottery than scratch-off tickets.

NOVEMBER REVENUE

Scratch-off ticket revenue increased from $30 million a year ago to $36.5 million in November, while draw-game revenue increased from $6 million a year ago to $6.5 million, the lottery reported Thursday. Other revenue includes retailer fees that totaled $55,911 last month. The lottery has 1,962 retailers.

Hagler said Thursday that low jackpots have hurt sales of the multistate draw games Powerball and Mega Millions nationwide.

"Powerball is switching to a 3-day draw game and it remains to be seen how an additional weekly draw will affect sales," he said. "Sales have been strong for in-state draw games."

The lottery's other draw games are Natural State Jackpot, Cash 3, Cash 4, Fast Play and Lucky for Life.

Scratch-off sales continue to be driven by limited entertainment options because of the pandemic, Hagler said. They do not require a substantial investment of time or money, and they offer an immediate win proposition, he said.

"We are constantly reviewing the game portfolio and we strive to keep our game offerings fresh and compelling," he said.

Asked about the possibility of the lottery developing an iLottery digital channel, Hagler said, "We are open to exploring the universe of possibilities regarding the development of additional channels for players of our games."

The lottery's team has witnessed the success of iLotteries across the nation, he said.

"We see the sales uplift that lotteries with digital channels have experienced and we believe that Arkansas students could also ultimately benefit from a digital distribution channel," he said.

There is no question that the proliferation of broadband has driven consumers toward the e-commerce model across the retail landscape, Hagler said.

"The pandemic has simply accelerated consumer adaptation of e-commerce channels and, for certain consumers, it has served to change their buying preferences," he said. "To be certain, E-commerce is already part of the general business landscape and the digital channel is viewed by many as absolutely necessary for any business to effectively compete in the marketplace. We understand the shift in consumer purchasing behavior and we would like to be positioned for the future."

SCHOLARSHIP MONEY

The Arkansas Division of Higher Education distributed $90.6 million in Arkansas Academic Challenge Scholarships to 31,649 students in fiscal 2020, according to the division. The scholarships also are financed with $20 million a year in state general revenue.

The division forecasts it will distribute $91 million in scholarships to 31,000 students in fiscal 2021.

The total amount of the scholarships peaked at $132.9 million in fiscal 2013, going to 33,353 students. That's dropped since then largely because of the Legislature cutting the amount of the initial scholarships.

The lottery also helps finance the Workforce Challenge Scholarship and the Concurrent Challenge Scholarship.

The 2017 Legislature created the Workforce Challenge program to use excess lottery proceeds to provide up to $800 a year for students enrolled in programs that lead them to being qualified for high-demand occupations.

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 enrollment course or certificate program under certain conditions.

https://www.nwaonline.com/news/2020/dec/11/scratch-offs-fuel-growth-in-lottery-income/