The Attorney General's Office will examine allegations that the Texas Lottery Commission is inflating the advertised jackpots for its Lotto game because ticket sales are too sluggish to support the high payouts.
Lottery officials rejected the allegations, but acknowledged that because of lagging ticket sales, for the first time in the game's history they would be unable to boost their jackpot estimate for Saturday's drawing if no one wins Wednesday night.
Dawn Nettles, publisher of the online Lotto Report and a persistent critic of lottery commission policies, first raised the red flag that ticket sales were running far behind the estimated jackpot when she sent a letter to Attorney General Greg Abbott on Monday accusing officials of false advertising.
On billboards across Texas and on the lottery's Web site, officials had touted an $8 million jackpot for Wednesday's drawing.
"They only have enough to fund a $6.5 million jackpot at best," Nettles said.
Bobby Heith, spokesman for the lottery, did not dispute that the jackpot would have been less than advertised, but not because anyone was skewing estimates.
But a spokeswoman for Abbott said Nettles' concerns would be addressed.
"We will treat this complaint like we treat all complaints that come into the agency," said Angela Hale, Abbott's communications director. "We'll examine it and determine whether there is something (we need) to do about it."
Lotto jackpots and ticket sales have a relationship akin to that of the chicken and egg. High jackpots are needed to sell tickets, but ticket sales must be robust for jackpots to escalate.
Lottery commission rules set the minimum Lotto jackpot at $4 million. If no one matches all of the numbers needed to win, the jackpot typically rises for the next drawing. Historically, ticket sales remain relatively flat until jackpots roll toward $50 million and higher. Drawings are held each Wednesday and Saturday.
Lottery commission figures show that when the jackpot rolled back to $4 million for the May 25 drawing, ticket sales totaled just over $2 million. Of that, $1.04 million was paid to players who won lower-tier prizes for matching some, but not all, of the numbers drawn.
When the jackpot rolled to $5 million for the May 28 drawing, ticket sales totaled $2.33 million and nearly $1.2 million was paid to lower-tier prize winners. The trend for ticket sales and lower-tier prizes continued for the next two drawings when the jackpot rolled to $6 million and then to $7 million.
Under lottery commission rules, the state guarantees that a winner who takes proceeds under the 25-year annuity option will receive the full advertised amount if someone hits the Lotto jackpot during one of the first four drawings.
If the ticket sales are not strong enough to support the jackpot, officials are authorized to dip into the lottery's reserves to make the payment.
After the first four drawings in a Lotto roll, commission rules state that a jackpot winner with the 25-year option must receive 39.1 percent of all of the ticket sales during that run, regardless of the advertised jackpot.
Nettles said there is no way the lottery commission could invest the proceeds of that 39.1 percent of ticket sales dating back to the May 25 drawing to earn $8 million over 25 years.
"The lottery commission is using false advertising, plain and simple," Nettles said.
Heith said jackpot estimates are based on historical sales trends, the time of year and the health of the state's economy.
"There were some concerns starting about last Friday that we were not seeing the level of ticket sales that we would like to see," Heith said. "There might be a problem (with the $8 million jackpot for Wednesday's drawing), but it is an estimate and the players know that."
Nettles, whose Lotto Report tracks trends for the Texas lottery and those around the nation along with her criticisms of the Texas Lottery Commission's policies, said players might expect the estimate to be off by a few thousand dollars, but not by more than $1 million.
Still, she suggested that there might be little risk in offering optimistic jackpot estimates during the early rounds of Lotto drawings.
Since the current configuration of Lotto went into effect in May 2003, only 14 jackpots have been hit in 218 drawings.
"The odds against hitting the jackpot are 48 million to 1, so there's a real good chance that no one's going to win it, at least for awhile," she said.