April 24, 2010
By Jerry Kopel
Do you really believe your future lottery "luck" is just a matter of
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
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 ticket 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.)