Lottery Not Blaming Slots for Flat Sales
Pennsylvania's lottery sales stumbled in the just-ended fiscal year — as slot machines came on line — finishing flat after a half-decade of huge gains spurred by bigger games, more retailers and glitzier advertising.
After subtracting expenses, commissions and prize money, the lottery contributed less money to state coffers than the prior year for the first time since 2001.
State lottery officials insisted the arrival of slot-machine gambling in Pennsylvania had nothing to do with the slowdown. They said the year's results were strong and would continue to generate ample revenue to finance the state's considerable programs for senior citizens.
In many other states from Delaware to Iowa, lottery sales stagnated as casino-style gambling expanded over the past decade or so. Some state lotteries rebounded quickly, while others struggled for years.
Ed Trees, the Pennsylvania Lottery's executive director, said the bottom line was hurt mostly by Powerball ticket sales that slackened without a giant jackpot to drive interest.
"If you look at our numbers this year and the fact that Powerball was off, if that doesn't happen, we're pretty much on projection for the year," Trees said.
Trees also said it was inevitable that sales would slow after five years of gains as high as 16 percent.
Overall, sales rose $6 million, or one-fifth of a percentage point, to almost $3.1 billion in the 12 months that ended June 30. State officials had projected a 5 percent sales bump and now expect sales to rise a more modest 2.6 percent in the coming 12 months.
The Pennsylvania Lottery contributed $949.1 million to pay for state programs for the elderly, including prescription drug subsidies, down from $965.2 million in the fiscal year that ended June 30, 2006.
Powerball sales recorded $273.8 million in sales, down from $385.2 million in fiscal 2006, but still higher than any other year since 2003, when the Pennsylvania Lottery introduced the multistate jackpot game.
Increasing sales of instant tickets — the lottery's biggest product — also slowed significantly to 7 percent, the smallest step since 1999. Sales of instant tickets are moderating after an outsized boost in sales was fueled by an expansion in the ranks of lottery retailers, Trees said.
In November, Pennsylvania's first slot machines opened for business at the Pocono Downs at Mohegan Sun, near Wilkes-Barre. Since then, four other racetracks have opened slots casinos.
Through July 1, gamblers bet $5.1 billion on slot machines in Pennsylvania, losing $458.5 million, according to state figures.
"There certainly is a possibility that it would hold down growth in lottery sales," said Bennett Liebman, who coordinated the Albany Law School's racing and wagering law program before becoming acting director of the school's government law center.
A 2004 study by the University of Massachusetts at Dartmouth said state lotteries can perform well alongside casinos if they add higher-priced instant tickets and join multistate games — offerings that Pennsylvania has rolled out in recent years.
Pennsylvania officials insist that lottery games and slot machines target two different types of gamblers, but not everyone agrees with that, including Liebman and some lottery officials in other states.
If anything, Liebman said, slot machines present a more powerful attraction: The odds are better, and casinos create more of an experience than scratching a lottery ticket in a convenience store. However, lottery outlets are more available, with 8,500 in Pennsylvania.
Pennsylvania's 2007 results also trailed some of its neighbors. In New York, sales rose 3.3 percent, not counting revenue from state-owned slot machines, and Ohio reported a sales increase of 1.7 percent. Many other states have not finished the fiscal year or produced an annual report.