Friday, December 09, 2011

EDITORIAL >> Our lottery falls short

The Arkansas Scholarship Lottery matured more quickly than anyone imagined. In only its second year it has reached the point that all lotteries reach, when they must find ways to make more people gamble and gambling people gamble even more.

It was a hostile bunch of state legislators that the acting lottery director, Julie Baldridge, appeared before this week. They wanted her to do something, and fast, to make the lottery produce more revenue. Last year, the lottery’s first, it produced only about $93 million for scholarships, some $10 million below the forecast. The state is doling out tuition aid to students based on the expectations. Baldridge told the Lottery Commission Legislative Oversight Commission that this fiscal year the lottery probably would produce only $89 million, although her predecessor, Ernie Passailaigue, had told legislators to expect $103 million. She said she just could not promise any more than $89 million.

State Rep. Barry Hyde of North Little Rock was a little impatient with the lady.

“We want to know what your plan is, and what you are going to do to right the ship and improve the profit a little bit,” he said. “* * *I want to know what your plan is to get back over $100 million. I want to know when we are gong to get there.”

And she had no answer for him. If she did, it would not be what good people want to hear. The lottery—that is, the state government—must promote gambling far more aggressively to get poor people and youngsters to participate more in the state numbers game. Kids’ education depends upon it, you see.

This is the history of lotteries. After a period, many players tire of the lottery when they don’t strike it rich or else realize that the occasional return on scratch-off tickets don’t come close to paying off. The state has quickly come to depend on the revenue, usually for the public schools but in Arkansas’s case, colleges and students.

So states—again, your government—must promote the lottery much more aggressively and perversely, such as with billboards in poor neighborhoods that encourage people to dream of fabulous riches. Or, like South Carolina, they appeal to people to gamble to be good citizens by helping kids. “Big Fun, Bright Futures,” the South Carolina billboards say.

Or else the state introduces games that offer instant gratification and more addictive forms of gambling, such as video lottery terminals where players bet against a computer, Keno and electronic gambling machines. Some people have called these games “video crack” because people quickly get addicted to them. Arkansas was moving into this realm before Passailaigue left this fall.

Otherwise, the options for increasing revenues are limited. The first tack that most states use is to raise the payoff from games, which theoretically encourages people to play more. If enough people play more then the gross take may more than offset the reduced share of the handle that is going to scholarships. But it is a treacherous game. If the increased payout doesn’t lure more gamblers then the state’s take for scholarship goes down even more, and Ms. Baldridge or her successor will face even harsher rebukes from the boss, the legislature.

Most people do not realize that only a small part of the money people wager on the lottery games actually goes to scholarships or the schools—nationally, about 30 percent. The rest goes to prizes for lottery winners, commissions to lottery vendors, franchise payments to the big gaming companies that contract to supply the games and administration of the program.

The state can reap a little more money for students by changing the contract with gaming companies, which now get a flat percentage of gross sales, otherwise known as obscene profits, but that will not solve the problem. Passailaigue said he negotiated those generous contracts in order to get the companies to speed the development of the games so that people could start playing fast and generate money for scholarships a few weeks earlier. And administration costs are going down sharply this year with the departure of the three South Carolinians who were knocking down close to $1 million a year in pay for work that Ms. Baldridge now is performing very well for $105,000.

We hope Ms. Baldridge and whoever succeeds her on a permanent basis deflect the pressures from legislators and the other powers and simply run the most efficient and considerate gambling operation they can, if that is not an oxymoron. The lottery is insidious enough as it is. The state can adjust the scholarship grants to fit the available revenue or supplement it from general funds, which is what it did before the lottery came along.