Welcome Guest
Log In | Register )
You last visited December 7, 2016, 8:59 pm
All times shown are
Eastern Time (GMT-5:00)

Kentucky Lottery and legislature tussle over cash reserves

Kentucky LotteryKentucky Lottery: Kentucky Lottery and legislature tussle over cash reserves
4.73
Rating:

FRANKFORT, Ky. — Straining to find hidden money within state government's bureaucracy to balance a tight state budget two years ago, the Kentucky Senate discovered about $16.9 million in "unrestricted" reserves held by the Kentucky Lottery Corp.

Senators concluded the lottery didn't need that much in reserve and put into the budget bill a directive that — in addition to the normal flow of dividends the lottery sends to the state — the lottery transfer $11 million to the general fund by June 30.

But, in a rare defiance of a budget directive, the lottery transferred only $5 million by the deadline and has no plans to transfer the rest.

The lottery's move rekindled a debate about how much money the lottery needs to hold in reserve and soured its relationship with the Republican-controlled state Senate.

"You've got a board that has basically thumbed its nose at the General Assembly. That's a real issue," said Chris McDaniel, a Taylor Mill Republican who chairs the Senate budget committee. "We don't pass these budget bills as an exercise."

But Lottery President Arch Gleason told the budget committee last week, "We don't feel it is a circumvention of the budget direction. It's a fiduciary responsibility of the management and board to assure that we have sufficient cash on hand ... to protect the players and to protect the commonwealth."

Numbers sometimes go against the lottery, Gleason said, using the Pick 3 game as an example. "In Kentucky, our players have a propensity to play what are called trips or triples,  '333' is a triple, or '666,' or three 1's."

When such numbers are drawn, the lottery must be prepared to pay out much more in winnings than expected. Howard Kline, the lottery's chief financial officer, said triples were drawn frequently in 2005. That year the lottery had to pay out about 10 percent more in prizes for the Pick 3 — about $12 million more than normal.

Kline said the $16.9 million identified as unrestricted reserves is not all cash and is "what is called retained earnings in the private sector ... used to pay obligations, provide working capital and to grow one's business."

He said the lottery's board and management examined all options as the June 30 deadline approached and changed policies on how much it must hold in reserve, but those changes produced only the $5 million.

And Kline said that as of June 30, the lottery's unrestricted reserves — which stood at $16.9 million two years before, were at $11.2 million and its cash-on-hand stood at $3,775,000 — as low as the lottery board and management felt it could safely go.

As it turned out, the lottery's failure to turn over the additional $6 million didn't throw the 2014-15 budget out of whack. State tax revenues exceeded budgeted estimates for last fiscal year and created a surplus that allowed state government to deposit $82.5 million in its own budget reserve.

The House and the Beshear administration are not complaining, but the Senate is.

McDaniel said he's still not convinced. He noted lottery officials reported they've had a successful start to the fiscal year that began July 1 and said the lottery can get itself right by belatedly transferring the $6 million during the current fiscal year.

"I don't know that we can do much about this," McDaniel said. "... At the very least, we'll address this in the 2016 legislative session when we take up the next budget."

But Gleason said the budget already sets a high goal for the lottery to turn over $251.5 million to the state in the current fiscal year. Turning over an additional $6 million, he said, "is not impossible, but it's highly unlikely."

Courier-Journal

We'd love to see your comments here!  Register for a FREE membership — it takes just a few moments — and you'll be able to post comments here and on any of our forums. If you're already a member, you can Log In to post a comment.

14 comments. Last comment 1 year ago by Stack47.
Page 1 of 1
mypiemaster's avatar - 2015021003pileofcash
JACKPOT HUNTER

United States
Member #141034
April 2, 2013
1408 Posts
Offline
Posted: September 2, 2015, 7:54 am - IP Logged

Whatever happened to all that money going to "education"? Smoke and mirrors!!!.

Seek and ye shall find -Matt. 7:7 ...Ask and ye shall receive -John 16:24 ...Give and it shall be given unto you -Luke 6:38 ...Be careful what you ask for!!! -Mypiemaster 1:1

Having Money Solves Problems That Not Having Money Creates Yes Nod ****John Carlton****

    KY Lottery's avatar - KLC 20logo%204c%20v.jpg
    New Member
    Louisville, KY
    United States
    Member #167795
    July 31, 2015
    8 Posts
    Offline
    Posted: September 2, 2015, 8:35 am - IP Logged

    Whatever happened to all that money going to "education"? Smoke and mirrors!!!.

    Not so. KY Lottery proceeds have provided $2.4 BILLION to fund college scholarships and grants for more than 660,000 Kentucky students since 1999. In fact, 95 cents of every dollar of non-loan student aid awarded by the Commonwealth comes straight from the sale of KY Lottery tickets.

      maximumfun's avatar - Lottery-030.jpg
      Lavender Rocket

      United States
      Member #124616
      March 16, 2012
      2642 Posts
      Offline
      Posted: September 2, 2015, 8:37 am - IP Logged

      These different stories about the states not keeping appropriate reserves to pay lottery winners sure makes a person leaning toward the 'annuity' win ... lean t'other direction to 'lump sum'.

        Avatar
        Simpsonville
        United States
        Member #163189
        January 22, 2015
        674 Posts
        Offline
        Posted: September 2, 2015, 10:07 am - IP Logged

        Not so. KY Lottery proceeds have provided $2.4 BILLION to fund college scholarships and grants for more than 660,000 Kentucky students since 1999. In fact, 95 cents of every dollar of non-loan student aid awarded by the Commonwealth comes straight from the sale of KY Lottery tickets.

        As a Simpsonville, KY avid lottery player so proud of the KLC in their handling of the mess in Frankfort!  With that Rowan County clerk Davis making $80K/year and not doing her job after the SCOTUS specifically told her to, we don't need any more negativity in this state.  Grateful KLC is headquartered in Louisville, not Frankfort.

          Avatar
          Simpsonville
          United States
          Member #163189
          January 22, 2015
          674 Posts
          Offline
          Posted: September 2, 2015, 10:28 am - IP Logged

          Not so. KY Lottery proceeds have provided $2.4 BILLION to fund college scholarships and grants for more than 660,000 Kentucky students since 1999. In fact, 95 cents of every dollar of non-loan student aid awarded by the Commonwealth comes straight from the sale of KY Lottery tickets.

          A nurse @ work was telling me how the scholarships work and how wonderful it is.  No smoke and mirrors here, she was extremely happy about it for her daughter.

            KY Lottery's avatar - KLC 20logo%204c%20v.jpg
            New Member
            Louisville, KY
            United States
            Member #167795
            July 31, 2015
            8 Posts
            Offline
            Posted: September 2, 2015, 10:48 am - IP Logged

            A nurse @ work was telling me how the scholarships work and how wonderful it is.  No smoke and mirrors here, she was extremely happy about it for her daughter.

            Thanks Bluedog101! We're really proud of our scholarship and grant programs. In Shelby County there just last year we provided 1039 kids a little more than $2,000,000 to attend college. When you build this out to when the program started in 1999, there have been 12,309 kids right there in Shelby County who have received more than $18,200,000 in scholarships and grants - all paid for by Kentucky Lottery proceeds. I'm glad your friend's daughter is able to use some of these dollars!

              Avatar

              United States
              Member #152892
              February 28, 2014
              28 Posts
              Offline
              Posted: September 2, 2015, 11:00 am - IP Logged

              Thanks Bluedog101! We're really proud of our scholarship and grant programs. In Shelby County there just last year we provided 1039 kids a little more than $2,000,000 to attend college. When you build this out to when the program started in 1999, there have been 12,309 kids right there in Shelby County who have received more than $18,200,000 in scholarships and grants - all paid for by Kentucky Lottery proceeds. I'm glad your friend's daughter is able to use some of these dollars!

              Please bring back a pick 6 game for the state...

                Coin Toss's avatar - shape barbed.jpg
                Zeta Reticuli Star System
                United States
                Member #30470
                January 17, 2006
                10351 Posts
                Offline
                Posted: September 2, 2015, 5:28 pm - IP Logged

                Sounds like Kentucky is trying to copy Illinois.

                Lottery money should be lottery money and that is that.

                Here's an article from WNDU.com, pertains to Indiana, not Kentucky, but worth reading:

                Does lottery revenue actually help education?

                Updated: Wed 10:31 AM, Sep 29, 2010

                By: Nick McGurk Email

                The Hoosier Lottery revenues are not spent like many people believe.

                Play the Hoosier Lottery, and your money will be part of the some $800 million spent just last year on those trying to win big. A lot of people think that the profits from the Indiana State Lottery benefit education.

                In fact, many people asked on our Facebook page why schools are so strapped for cash if the lottery brings in millions of dollars. As it turns out, the money doesn't go where you might think.

                Patrick Pierce, a Political Science Professor at St. Mary's College and lottery expert, has researched educational lotteries around the country.

                "You really, in Indiana, shouldn't expect the lottery to provide the slightest benefit for education," said Pierce.

                Here is where the Indiana Lottery revenues go. Last year, more than $30 million went to pension funds for police and firefighters, $30 million in lottery revenue went to a teacher retirement fund, and about $120 million went to the Build Indiana Fund.

                "Put bluntly, the build Indiana Fund is pork barrel project for folks in the state legislature," said Pierce.

                The reality is for every dollar spent on education, only about a quarter goes to state programs.

                That is true in Indiana as well as Michigan. Michigan, at least, targets lottery revenue toward education. The question, though, is whether that money actually benefit schools.

                Last year, Michigan Lottery brought in nearly $725 million in revenue, which goes directly toward the School Aid Fund, a giant pot that includes revenue from cigarette, income, and property sales taxes, to name a few. The money then gets dispersed to schools.

                In the roughly four-decade history of the Michigan Lottery, some $15.2 billion has gone to the School Aid Fund.

                Still, says Pierce, "Lottery revenue that is supposedly devoted toward education is not increasing spending on education."

                Professor Pierce is saying even states like Michigan that send lottery funds to education end up spending less on education in the long term.

                "It's exactly the opposite of what you thought was going to occur. We're getting new revenue, it's going toward education, and then you end up spending less on education after this period of time," said Pierce.

                Pierce says at first, education spending gets a significant bump. But after that first year, the rate of increase on education spending actually tends to slows down. After about 7 or 8 years, less money is spent on education than would have been spent if the state didn't have a lottery at all.

                That is because lawmakers tend to use the additional education money as wiggle room, and pass it to the general fund to balance the budget or cut taxes.

                In fact, just this month Governor Granholm approved an act to transfer a $208 million School Aid Fund budget surplus to the general fund in order to create a balanced budget.

                "It's basically a fraud that's perpetrated on citizens and states saying, at least implicitly, education funding is going to go up," said Pierce.

                Professor Pierce said the states that have done the best with lotteries are ones that have funded entirely new programs, like scholarship funds.

                He recommends if you want something to change, push your legislators to make sure lottery money will truly be additional educational funding.

                http://www.wndu.com/home/headlines/103966479.html

                Those who run the lotteries love it when players look for consistency in something that's designed not to have any.

                Lep

                There is one and only one 'proven' system, and that is to book the action. No matter the game, let the players pick their own losers.

                  noise-gate's avatar - images q=tbn:ANd9GcR91HDs4UJhjxO7cmeMQWZ5lB_FOcMLOGicau4V74R45tDgPWrr
                  Bay Area - California
                  United States
                  Member #136477
                  December 12, 2012
                  4108 Posts
                  Offline
                  Posted: September 3, 2015, 12:20 am - IP Logged

                  I wonder what is Stacks take on all of this- his a Kentuckian, right? I thought he would have been first out of the shoot with a response to this debacle. .

                  People who say it cannot be done should not interrupt those who are doing it- George Bernard Shaw.

                    RedStang's avatar - tallman zps6gf4inoc.jpg
                    NY
                    United States
                    Member #121961
                    January 21, 2012
                    3157 Posts
                    Offline
                    Posted: September 3, 2015, 2:35 pm - IP Logged

                    If their going to let the State take the money and waste it because that's what will happen, then they should just make games easier and give it back to KY players.

                      CDanaT's avatar - tiger avatar_04_hd_pictures_169016.jpg
                      TX
                      United States
                      Member #121193
                      January 4, 2012
                      1637 Posts
                      Offline
                      Posted: September 3, 2015, 5:43 pm - IP Logged

                      "Senators concluded the lottery didn't need that much in reserve "


                      Holy crap.....Poor Kentucky Senators....HEY,elected officials...Maybe you useless sacks of crap ought to stick to YOUR BUDGETS and leave your hands out of the places that generate revenue.

                      Stay Positive, Believe and good things will come your way

                        rcbbuckeye's avatar - Lottery-043.jpg
                        Texas
                        United States
                        Member #55889
                        October 23, 2007
                        5600 Posts
                        Offline
                        Posted: September 3, 2015, 5:58 pm - IP Logged

                        According to the story, the lottery wants to keep a reserve for "a rainy day" when triples are drawn so they can pay the winners because the payout would exceed what was brought in. Sounds like a smart thing to do.

                        But then, whoever said politicians are smart. From local,to state, to the federal government, none of them can stick to a budget. So they steal money from where ever they can. That reserve fund was low hanging fruit to them.

                        CAN'T WIN IF YOU'RE NOT IN

                        A DOLLAR AND A DREAM (OR $2)

                          Avatar
                          Simpsonville
                          United States
                          Member #163189
                          January 22, 2015
                          674 Posts
                          Offline
                          Posted: September 3, 2015, 6:32 pm - IP Logged

                          Funny thing about the pick 6 lottery we use to have.  The last winner works @ Citizens Union Bank in Simpsonville.  I think she won $3.4 million (help me out KY lottery on exact amount).  Anyway so badly i want to ask her how did it feel when you won?!  She is very nice and obviously likes to play in money...pardon the pun.

                            Avatar
                            Kentucky
                            United States
                            Member #32652
                            February 14, 2006
                            7310 Posts
                            Offline
                            Posted: September 3, 2015, 8:33 pm - IP Logged

                            I wonder what is Stacks take on all of this- his a Kentuckian, right? I thought he would have been first out of the shoot with a response to this debacle. .

                            Numbers sometimes go against the lottery, Gleason said, using the Pick 3 game as an example.

                            Because this is the only thing in the article I'd comment on. Gleason and his staff are very lottery savvy and understand how KY lottery players wager. I'm betting the reserve is based on the number of multiple wagers on the same numbers in one drawing. The Illinois fiasco is different because it's not based on possible prize winnings, but actual winning that weren't paid because of budget debates.