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Increased California Lottery payouts spur sales

California LotteryCalifornia Lottery: Increased California Lottery payouts spur sales

SACRAMENTO, Calif. — Californians who play lottery Scratcher games have apparently noticed a new and not unwelcome change in the way some of the games are structured: They win more.

As a result, they're playing more.

Scratcher sales leaped by $55 million in June, the first month that a new law allowed lottery officials to increase the percentage of revenues returned in prize money.

Officials are confident that trend will continue. In its budget for the fiscal year that began July 1, the Lottery Commission projects total annual revenues, including all games, will climb from $3 billion to $3.5 billion, a 16 percent increase. All of that increase is fueled by expectations of robust Scratcher sales, which are projected to jump 33 percent, to $2.2 billion.

"We're on a pretty good path," Lottery Director Joan Borucki said. "We're able to put a lot more prizes into the game."

The change, long sought by lottery officials, removes the requirement of the voter-approved 1984 Lottery Act that revenues be distributed through a rigid formula: 50 percent for prizes, 34 percent to schools and 16 percent for administrative and marketing costs.

Under AB 142, signed by Gov. Arnold Schwarzenegger in early April, administrative costs must be reduced to 13 percent and lottery officials are given flexibility in determining what percentage can go to winnings — as long as the dollar amount that goes to schools meets or exceeds the $1 billion they received for the fiscal year that ended June 30.

If that goal isn't met, the law will automatically be revoked.

For the fiscal year that just began, Borucki is projecting that payments to schools will rise to $1.1 billion.

Although school officials caution lottery revenues are only a tiny fraction of education funding, most will welcome the change, said Bob Wells, executive director of the Association of California School Administrators.

"The percentage of revenues coming to us isn't as important as the amount of money. We believe we're likely to come out dollars ahead," he said. "The lottery will never fund us at a high level, and it will never replace all the cuts we've taken from the state. But every little bit helps."

For example, the Conejo Unified School District just adopted a 2010-11 budget that relies upon $147.7 million in income. Of that, $2.8 million, or 1.9 percent, is anticipated from lottery distributions. If the Lottery Commission's projected increase in school distributions is realized, it would mean about $280,000 extra for the district.

The factor that will drive increased sales is that players will win more money and win more often, Borucki said.

She said the lottery will switch out about four existing Scratcher games per month through the end of September, at which point all games will have higher odds of winning. Spread across all games, more than 60 percent of revenues will be returned in winnings.

As an example, Borucki said the existing $2-per-ticket Lucky Tripler game now returns 55.5 percent in winnings and the odds of a player winning a cash prize on a given ticket are 1 in 9.3. It will be replaced by a $2 Red, White and Blue 7's game in which 60.5 percent will be devoted to winnings and the odds of winning a cash prize are lowered to 1 in 5.75.

As a general rule, the odds improve and the percentage of revenues devoted to winning goes up on higher-priced tickets. Three separate $5 games in which 66 percent of revenues go to winnings are in the works. The biggest promotion at the moment is a $5 Millions in Cash game in which 64 percent of revenues are paid back in prizes and in which 25 prizes of $1 million will be awarded.

Because California is perhaps the last of all state lotteries to increase prize percentages, Borucki said she has learned from the experiences of other states. Some immediately increased prize payouts to 70 percent or higher, which produced an initial spike in sales that proved unsustainable.

"We're trying for steady, sustainable growth," she said. "In other states, they'd get a huge blip and then it would fall off because the players start waiting for the next big thing. You really need to manage the expectations of players."

Paul Jason of the Public Gaming Research Institute called Borucki's strategy "very, very smart."

"It's like dieting," he said. "If you go about it in the wrong way, the net result isn't very positive. The manner and method in which this change is implemented will very much influence long-term profitability."

Jason said the California Lottery's historical practice of capping winnings at 50 percent of revenues "was just not an adequate value proposition" to attract players. Indeed, per-capita lottery sales in California have long been well below the national average.

"Giving more flexibility to the lottery operators to manage payouts will help the lottery create a better product," he said.

The idea of increasing winnings to drive higher sales had been kicked around in Sacramento for a number of years before the legislation was finally adopted this spring.

Initially, Schwarzenegger had proposed changing the rules — "modernizing" the lottery, he called it — as part of a plan to borrow against future increased lottery sales to help balance the current budget.

That idea was put before voters in the May 2009 special election, but was overwhelmingly rejected, 34 percent to 66 percent.

But because the idea of increasing payout percentages to yield a higher amount of money for education fit into the stated intent of the 1984 lottery initiative — which was to use revenues to benefit schools — officials determined they could take this singular step without voter authorization.

In large part, said lottery spokesman Bill Ainsworth, that was because the notion that the change would result in increased revenues for schools was no longer conjecture. "So many other states had done it that it wasn't speculation any more," he said.

Under the ballot proposal voters rejected, the anticipated extra $100 million that the lottery expects to provide to schools this year would have instead been used to pay off borrowing.

In the end, is this a better deal for the state than borrowing against future revenue increases would have been?

"That's for someone else to answer," Borucki said.

Ventura County Star

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12 comments. Last comment 4 years ago by HaveABall.
Page 1 of 1
dpoly1's avatar - driver
PA
United States
Member #66141
October 16, 2008
1444 Posts
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Posted: July 6, 2010, 10:22 am - IP Logged

I am happy for California .......... but I am hoping for a large payout for me !

US Flag God bless the Citizens of the USA ...... not so much the politicians !!!!!!!!!!!

    liberal47's avatar - Rowlf
    Holt MI
    United States
    Member #2244
    September 4, 2003
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    Posted: July 6, 2010, 1:33 pm - IP Logged

    It's about time these idiots realized that you have to put bait on a hook to have the fish take notice. Being the last state in the country to raise payouts to it's players is one of the reasons Cali is in such dire financial straits. Now maybe they will add Powerball and amend the paramutuel aspect of their Mega Millions game.

      Dollar419's avatar - Lottery-050.jpg
      Santa Ana
      United States
      Member #71159
      February 20, 2009
      651 Posts
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      Posted: July 6, 2010, 1:39 pm - IP Logged

      It's about time these idiots realized that you have to put bait on a hook to have the fish take notice. Being the last state in the country to raise payouts to it's players is one of the reasons Cali is in such dire financial straits. Now maybe they will add Powerball and amend the paramutuel aspect of their Mega Millions game.

      Amen to that!!! It doesn't take a rocket scientist to figure this out!!  Let's hope they will get wise to the lottery game and allow us to play Powerball.

        ressuccess's avatar - WhiteShyGuy

        United States
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        June 23, 2010
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        Posted: July 6, 2010, 2:41 pm - IP Logged

        I don't know why Lottery sales and revenues continue to increase in California.

          Todd's avatar - Cylon 2.gif
          Chief Bottle Washer
          New Jersey
          United States
          Member #1
          May 31, 2000
          21505 Posts
          Online
          Posted: July 6, 2010, 3:20 pm - IP Logged

          It's about time these idiots realized that you have to put bait on a hook to have the fish take notice. Being the last state in the country to raise payouts to it's players is one of the reasons Cali is in such dire financial straits. Now maybe they will add Powerball and amend the paramutuel aspect of their Mega Millions game.

          I believe in order to change to fixed payouts California would have to amend the law legislatively.  The lottery is currently required by law to have all pari-mutuel payouts.  Not that I disagree with what you're saying, but it's something that will require at least as much "courage" as this current legislation.

           

          Check the State Lottery Report Card
          What grade did your lottery earn?

           

          Sign the Petition for True Lottery Drawings
          Help eliminate computerized drawings!


            United States
            Member #68713
            December 28, 2008
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            Posted: July 6, 2010, 3:35 pm - IP Logged

            It's about time these idiots realized that you have to put bait on a hook to have the fish take notice. Being the last state in the country to raise payouts to it's players is one of the reasons Cali is in such dire financial straits. Now maybe they will add Powerball and amend the paramutuel aspect of their Mega Millions game.

            I Agree!I am reluctant  to play any scratch off because it seem to be a waste of your resources.But given the event there is more bait on the hook .I would be more incline to purchase more often.Thumbs Up

              HaveABall's avatar - rocket

              United States
              Member #72448
              March 18, 2009
              959 Posts
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              Posted: July 6, 2010, 5:13 pm - IP Logged

              Why does public schooling need so much money?  It has been a failed system for the past century (except for the rather high earning employees -- that's a great gig if one can hold on; surviving sabotaging co-workers/supervisors).  The concept:  Legally force majority of children to attend school from 5 to 18 years of age, allow the students and teachers to mock majority of students multiple times each day, five days per week.  End result:  Hopelessness without recourse for at least 13 years of a child's life, graduating them in severe ignorance (because too many unuseful and unimportant courses were required in order to stretch legal learning out for another 4 years [high school]), and bad feelings about the whole legally forced, self-losing/injuring, experience for the rest of that person's life!

              Why keep sinking money into school systems; most teacher's don't even care for the kids (listen to them talk to each other, mocking their tax-payer subsidized clients daily)?

              If school isn't going to be turned into an enjoyable place for the majority of students to attend, many hours and most days of the week, for years, why force U.S.A. tax payers (and lottery players) to pay for it?  Let's instead focus on getting our America and it's united states of America out of debt with these lottery monies (and monies received from tax payers ... the tax that is collected when we buy a ticket and a second tax when our winning ticket is claimed) -- that's actually a healthy and exciting lesson for children and adults to learn!  The California Governor's bill shouldn't have been beaten down, he's right, debt should be paid off BEFORE extravagant and unhelpful purchases are made by any country/state.  A country's tax paying citizens paying 36% towards poorly conducted and received EDUCATION is ridiculous.  Even if it was good, only apx. 15% should be required!

              In retrospect of your own legally forced "schooling" experiences,what do you think?

              Rant

              Having millions of dollars in my financial accounts means more, consistent fun for me.Lovies

                dpoly1's avatar - driver
                PA
                United States
                Member #66141
                October 16, 2008
                1444 Posts
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                Posted: July 6, 2010, 7:12 pm - IP Logged

                Why does public schooling need so much money?  It has been a failed system for the past century (except for the rather high earning employees -- that's a great gig if one can hold on; surviving sabotaging co-workers/supervisors).  The concept:  Legally force majority of children to attend school from 5 to 18 years of age, allow the students and teachers to mock majority of students multiple times each day, five days per week.  End result:  Hopelessness without recourse for at least 13 years of a child's life, graduating them in severe ignorance (because too many unuseful and unimportant courses were required in order to stretch legal learning out for another 4 years [high school]), and bad feelings about the whole legally forced, self-losing/injuring, experience for the rest of that person's life!

                Why keep sinking money into school systems; most teacher's don't even care for the kids (listen to them talk to each other, mocking their tax-payer subsidized clients daily)?

                If school isn't going to be turned into an enjoyable place for the majority of students to attend, many hours and most days of the week, for years, why force U.S.A. tax payers (and lottery players) to pay for it?  Let's instead focus on getting our America and it's united states of America out of debt with these lottery monies (and monies received from tax payers ... the tax that is collected when we buy a ticket and a second tax when our winning ticket is claimed) -- that's actually a healthy and exciting lesson for children and adults to learn!  The California Governor's bill shouldn't have been beaten down, he's right, debt should be paid off BEFORE extravagant and unhelpful purchases are made by any country/state.  A country's tax paying citizens paying 36% towards poorly conducted and received EDUCATION is ridiculous.  Even if it was good, only apx. 15% should be required!

                In retrospect of your own legally forced "schooling" experiences,what do you think?

                Rant

                Because of non-academic spending !

                $1,000,000 Football Fields  ................  etc !

                  Nino224's avatar - Lottery-013.jpg
                  Miami
                  United States
                  Member #62793
                  July 9, 2008
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                  Posted: July 7, 2010, 3:35 am - IP Logged

                  Hear that, Florida???

                  INCREASE PAYOUTS!!!!

                  "...a chance to push everything aside, the circumstances that've controlled our lives, and do it our way now. Good, bad or otherwise. You'll maybe get lost in it, tied up in it a little bit, but if you work your way through that the real you shows up, I think. Maybe what's at your core deep down, maybe that comes out. Maybe that's what it's about." Mike Pace 

                    victorl3ichiban's avatar - georgemichael
                    san jose
                    United States
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                    July 20, 2007
                    277 Posts
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                    Posted: July 7, 2010, 7:28 am - IP Logged

                    I bought $60 worth of scractcher on the new game and didn't even win a dollar. I guess CA is getting rid of smaller prizes.

                      mjwinsmith's avatar - moon

                      United States
                      Member #391
                      June 8, 2002
                      13780 Posts
                      Online
                      Posted: July 7, 2010, 7:35 am - IP Logged

                      Dah! People win more, so they play more, this ain't Rocket science here but pure human nature.

                      Give me a break, buddy can you spare a dime, LOL.

                       >Michael

                        HaveABall's avatar - rocket

                        United States
                        Member #72448
                        March 18, 2009
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                        Posted: July 7, 2010, 4:31 pm - IP Logged

                        Because of non-academic spending !

                        $1,000,000 Football Fields  ................  etc !

                        Yep, that falls under the unnecessary "extravagant" category of spending, written of, which some country's state and federal government's undertake -- frittering away difficult to obtain tax payers monies for things that aren't used by the MAJORITY of citizens!

                        No Pity!

                        Having millions of dollars in my financial accounts means more, consistent fun for me.Lovies