Jerry Kopel

April 24, 2007 

by Jerry Kopel

Does the Lottery Need to Spend More On Aggressive Marketing? An Eleven Year History

Information from the annual Financial and Compliance Audit, Colorado Lottery

State Sen. Chris Romer, D-Denver, will have an illustrious career in the state legislature, but as with all new legislators, there are mistakes he will make. And one big mistake deals with the state lottery.

Sen. Romer introduced an amendment to the state budget bill, SB 239, as follows: 

"Department of Revenue, State Lottery Division -- It is the intent of the General Assembly that the state lottery division shall increase net proceeds through more aggressive marketing of lottery games."

It passed the Senate 22 to 11, with only one Democrat, Ron Tupa, voting against it. The budget is on a fiscal year, beginning in July, 2007 and ending in June, 2008.

As the box accompanying this column shows, in he past decade there is no correlation between the money spent on "aggressive marketing" and the lottery gross proceeds.

In 1999, the new governor, Bill Owens, had his director of revenue investigate the "marketing" process of the state lottery. For 17 years, the advertising policy, as evidenced by lottery commission statements, was to maximize revenues through extensive and very focused advertising, such as this television advertisement accompanied by a voice over:

"Strange, but true, in Seattle a man dressed as a duck for a radio station promotion was attacked and beaten for no apparent reason. (TV shows man on back of another man dressed as a duck and beating him with his arms.) Stranger things have happened than you winning Lotto."

On April 13, 1999, Revenue Director Fred Fisher reported to Gov. Owens "I am pleased to report that the Lottery Commission voted today (four to zero) to approve the suggested change in lottery advertising. Beginning July 1, advertising will be focused on the benefits for all Colorado citizens, i.e. parks, trails, recreation, open space..."

A subsequent ad after July 1 showed a beautiful lake framed by water grasses, with real ducks, mountains in the background on the left, evergreens on the right, rock formation in front.

The voice-over comment was "Of all the projects built with more than $750 million the lottery has paid back to Colorado, perhaps the most impressive are those where nothing has been built at all -- open space never to be developed. Purchased with your lottery dollars."

Until the past few months, I never viewed another lottery ad that didn't talk about how the money was spent, and not about, no matter how desperate you are, you might win the lottery.

Review the box: From 1999 through 2006, the gross lottery revenues under Gov. Owens, increased by $100 million, and marketing and communication declined by $1.5 million. This conforms to CRS 24-35-211, where the lottery's director evaluates where expenditures may be reduced with the goal of increasing net proceeds as a percentage of sales paid to the beneficiaries.

Lottery profits will go up and down based on how high the percentage of prize money is given out, or if the potential prize is possibly several hundred million dollars through Powerball, or the increase in the number of compulsive gamblers (the latter a subject for a later column) or the concentration of growing population in the metropolitan area. 

When the House considered the state budget bill, it struck the Romer lottery amendment passed by the Senate. SB 239 then went to the Joint Budget conference committee to consider this and other House amendments. The conference committee agreed with the House decision on the Romer amendment.

At the time this column was written, the legislature had not yet acted on the conference committee report.

So why the need for this column? While the Romer amendment was struck, the issue is still important for future sessions. The "aggressive marketing" approach will be introduced again. Providing the legislature with the statistics shown here should shred future support of the effort.

(Jerry Kopel served 22 years in the Colorado House.)