Oklahoma lottery officials voted Tuesday to reduce the amount of money paid to nearly 2,000 retailers that sell lottery tickets to increase prizes in "almost a last resort" to boost sales.
The Lottery Commission has reduced its operating costs to less than 2.5 percent of its $192 million in revenue by reducing office space and cutting the number of staff from 40 to 26, said Rollo Redburn, the agency's executive director.
Operating expenses were cut from $9.7 million in 2008 to $4.8 million this fiscal year, he said.
Money saved from the cuts went into prize money.
The proposed rule change to reduce the rate that retailers receive from 6 percent to 5.5 percent for each dollar of ticket sales now goes to Gov. Mary Fallin. The rule also eliminates paying a fee of 0.75 percent for each dollar of prizes $600 or less paid out by most retailers.
If the governor approves the rule change, the proposal then goes to the Legislature. The rule would go into effect if lawmakers don't disapprove it before they adjourn in late May.
Lottery Trustee William Paul, in making the motion to accept the proposed rule change, said it is "almost a last resort" for the lottery.
Trustees have said for years that the lottery is handicapped by a requirement that 35 percent of its profits go to education. That has resulted in lower prizes, which have hurt sales, they say.
Redburn said reducing the commission to retailers is necessary to make up for an anticipated increase in gaming vendor contracts. The contract has been in place since 2005 and expires in August.
It's expected the contract will increase by $2 million a year, Redburn said. The vendor currently receives 2.84 percent of sales for running the gaming system terminals, computers, hookups, as well as providing backup, repairs and sales staff, Redburn said.
Trustees met in closed, executive session to award a new vendor contract, but the winning bid won't be released until the contract is reviewed by the state's chief information officer, Redburn said. The contract is for one year, and can be renewed annually for the next nine years.
Lottery trustees have asked lawmakers for years to remove the 35 percent cap, saying it would allow the lottery to offer larger prizes on its various games. The larger prizes would increase ticket sales, which would result in more money going to education.
Republicans mostly opposed the lottery and were in the minority in both the House of Representatives and the Senate when voters approved a constitutional change in 2004 allowing the lottery in Oklahoma. Republicans now have a 2-1 advantage in both chambers. Legislative leaders have said they don't want to approve legislation that would increase gambling in the state.
Trustee James Orbison said he is aggravated that lawmakers are unwilling to improve lottery sales, which would mean more money for education. The lottery in the 2012 fiscal year earned $70 million for the state out of total sales of $200 million; that contrasts with the $123.9 million paid to the state that same year by the 33 tribes that have 116 gaming venues — 114 casinos and two racinos — out of gross gaming revenue of an estimated $3.2 billion.
"When the state's receiving less than 7 percent under the compacts ... from gaming and we're responsible for paying 35 percent by contract, which limits us from making more money for everybody, just doesn't seem fair," he said. "The two don't jive."
Orbison said he believes the 65 percent of Oklahomans who voted for the lottery in 2004 want the games to be successful.
"Why would anybody who voted yes for the lottery not want a law changed that increases the payouts on their lottery tickets and increases revenue to education when it's run by a lottery commission with an incredible low overhead?" he asked. "You know they would say yes. Why doesn't our Legislature reflect that?"