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State audit questions Georgia Lottery business practices despite record profits to education

Georgia LotteryGeorgia Lottery: State audit questions Georgia Lottery business practices despite record profits to education
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Georgia sells more lottery tickets per capita than all but one other state lottery, according to a state audit of the Georgia Lottery Corporation, the quasi-governmental agency that runs it.

But a steadily declining portion of lottery revenues flow back to the education programs the lottery is required by law to fund, and the corporation that runs the lottery needs to reform its business practices, according to auditors in the Performance Audit Division of the Georgia Department of Audits and Accounts.

The state Senate Appropriations Committee requested the study, called a "special examination," now posted on the audit department's website.

Georgia voters approved the lottery in a 1992 state constitutional referendum. Under the new law, the lottery was supposed to return "as nearly as practical" 35 percent of proceeds to education, but the figure hasn't been that high since 1997, auditors found.

In the 2016 fiscal year, 25.5 percent of lottery proceeds went back to the state for education programs — $1.1 billion.

Almost all the money the state gets goes to fund two programs that benefit both public and private schools — the HOPE college scholarship program and the statewide voluntary pre-kindergarten program.

As lottery growth slowed and more and more students qualified for HOPE, and colleges steadily raised tuition rates, legislators have periodically cut the value of the scholarship and tightened eligibility.

As a result, the HOPE covers an ever-declining part of college costs for most recipients of the lottery-funded scholarships.

A new "Zell Miller" HOPE scholarship pays students more than the regular HOPE, although even that pays less than the original HOPE scholarship.

Since legislators created the Miller scholarship in 2011, the high-scoring Miller Scholars are claiming a higher and higher percentage of HOPE dollars, at the expense of those whose grades and test scores only qualify them for the lesser HOPE, according to the audit report.

The downward trend of money going back to education reversed, at least temporarily, in the past two years, however, according to the just-released audit.

The amount of money the GLC transferred back to the state jumped from $945 million in the 2014 fiscal year to $981 million in 2015 and $1.1 billion in 2016, according to auditors in the department's Performance Audit Division.

The lottery sold $1.1 billion in tickets the year after the first tickets went on sale June 29, 1993 and have nearly quadrupled since. Net ticket sales reached $4.3 billion in the 2016 fiscal year.

Of that $4.3 billion, $2.75 billion went back out as prizes. Operating expenses accounted for $456 million, including $271 million in commissions to retailers. About $1.1 billion went back to the state's education fund.

GLS's second-largest expense administrative expense was about $100 million paid to contractors, primarily to two corporations, Scientific Games and International Game Technology, to design and run the lottery and its ever-changing dozens of games.

GLC's contracts with those companies are the longest in the nation — 22 years.

Since the contracts were first awarded in 2002, GLC has renegotiated contracts with each of the two companies three times, and each time, got a lower base rate — from about 1.3 percent of sales down to about .8 percent beginning in 2018.

In fiscal year 2016, International Games Technology's base compensation was $48.4 million, and Scientific Games' base pay was $32.2 million. Each could get more than the base rate — .999 percent of the net ticket sales for International Games, and a slightly lower .99 percent for Scientific Games — if revenues went over a certain level.

GLC should periodically put those two huge contracts out for bid instead of periodically renegotiating contracts, the auditors said.

The GLC has no policies for how it handles large purchases of $75,000 or more, according to the audit report.

The GLC also paid out $30 million for advertising and $32 million for personnel — salaries and benefits.

GLC also paid out $712,344 in employee bonuses in 2016, compared to $1.9 million in 2010, before state lawmakers enacted limits on lottery employee bonuses.

The state auditors questioned the lottery corporation's research in determining optimal prize payouts, and said GLC should also analyze how it's spending advertising money.

Georgia spends more money on lottery advertising than any other state, they found.

Auditors also took a look a the lottery's "free ticket" policies, but said they couldn't determine whether the program helped or hurt.

The GLC needs a do-over on a 2013 study that said each 1 percent increase in payout rates would mean $13.5 million more in ticket sales. Most of the factors used in weighing the options weren't statistically significant, they said.

Georgia's prize payout rate of 64.8 percent of proceeds is about average compared to other states, but much higher than in the beginning. Payouts were were 51.6 percent of sales in the lottery's first year. The state lottery law calls for "as near as practical" payouts of "at least" 45 percent.

Online Athens, Lottery Post Staff

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12 comments. Last comment 7 months ago by wonandwon.
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johnnyj1's avatar - shapes swish.jpg
Georgia
United States
Member #111945
June 6, 2011
232 Posts
Online
Posted: January 2, 2017, 7:21 pm - IP Logged

Still hadn't figured out why My Great state of Georgia won't let us play Cash 3 split pair. Only front pair or back pair... I wonder how much money it's saving in payouts not giving us this option... I guess the old saying is true The house always wins..Smash

Who Dat 1Hippy

    Avatar
    South Carolina
    United States
    Member #18322
    July 9, 2005
    1778 Posts
    Offline
    Posted: January 2, 2017, 7:27 pm - IP Logged

    Still hadn't figured out why My Great state of Georgia won't let us play Cash 3 split pair. Only front pair or back pair... I wonder how much money it's saving in payouts not giving us this option... I guess the old saying is true The house always wins..Smash

    You don't have the option to play Split Pair, because you would hit more often playing Split Pair.  It would be easier to win.

      Sherita's avatar - Lottery-043.jpg
      Vtracs is My Game!
      Georgia
      United States
      Member #3617
      February 6, 2004
      7516 Posts
      Offline
      Posted: January 2, 2017, 7:29 pm - IP Logged

      Still hadn't figured out why My Great state of Georgia won't let us play Cash 3 split pair. Only front pair or back pair... I wonder how much money it's saving in payouts not giving us this option... I guess the old saying is true The house always wins..Smash

      What about that bogus Georgia Five? A BIG Rip off! Marge and Rebecca are missed! Debbie needs to exit stage left!

      Congrats To All Winners and Posters!

      LurkingWe are all in it to win!  My Pet numbers 103,724,152,397,189,118,205.

      Ga Lottery Player!

      Hot-Due-Cold. Short Sums/Last Digit Sum. Pairs. Vtracs. Vtrac Pairs. SUM OF VTRACS CHART.

      Don't forget to FLIP 6/9 in all WORKOUTS!  66=99=69. Vtracs Code sheets available....

        Coin Toss's avatar - shape barbed.jpg
        Zeta Reticuli Star System
        United States
        Member #30470
        January 17, 2006
        10506 Posts
        Offline
        Posted: January 2, 2017, 7:44 pm - IP Logged

        Not just Georgia, but states that hype the 'bux for education' program practice voodoo accosting. The lottery pumps a certain amount of money into the education system, yes, or appears to, but takes and equal or greater amount out elsewhere in the system. 

        Follow the money so to speak, track the states saying that they put so much into the state edu. system then follow that same states' teachers layoffs, reductions, etc....

        Does not compute.

        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.

          konane's avatar - wallace
          Atlanta, GA
          United States
          Member #1265
          March 13, 2003
          3678 Posts
          Offline
          Posted: January 2, 2017, 9:55 pm - IP Logged

          There is a Georgia Lottery app for both Andrioid and iPhone.  App includes a ticket scanner with is awesome.

          However that app does not include the ability to play the following:

          Cash 3

          Cash 4

          Georgia Five

          Jumbo Bucks Lotto

          Cash 4Life

          All or Nothing

          5 Card Cash

          They might consider adding the following to their app which seem to be viable games:

          Cash 3 day & evening

          Cash 4 day & evening

          Jumbo Bucks Lotto

          Cash 4 Life

          Since they're worried about revenue, they could try expanding the games we can play so we can use available technology to play them.

          Good luck to everyone!

            Avatar
            Simpsonville
            United States
            Member #163189
            January 22, 2015
            917 Posts
            Offline
            Posted: January 3, 2017, 9:23 am - IP Logged

            What was the other state lottery GA compared itself to?  I feel it is either New York or Massachusetts?

              spartan1707's avatar - Lottery-050.jpg
              Tucson
              United States
              Member #119762
              December 2, 2011
              84 Posts
              Offline
              Posted: January 3, 2017, 10:05 am - IP Logged

              This proves what we as players already know.

                Groppo's avatar - cat anm.gif

                United States
                Member #162631
                January 7, 2015
                642 Posts
                Offline
                Posted: January 3, 2017, 5:23 pm - IP Logged

                This proves what we as players already know.

                .

                Well, I know a thing or two, for certain (I'm not sure this it what you had in mind, Mr./Ms. Spartan1707),
                but here it is:


                What the heck do incoming lotto tax dollars have to do with the education system?

                Wouldn't the 'extra' incoming lotto dollars be better used to fix our roads?
                EVERY single state I've been in, has
                road problems that need to be ironed out:
                potholes, rain grooves, weather damage, due to the excessive rain and snow.
                Roads that need repairing for the 8 millionth time. 

                How do we get MORE lotto commission $$$$ to that end?

                Since I've seen signs, comments, and other "billboardage", regarding education dollars being helped out by lotto dollars (though this article did mention the decline of such dollars),  it just hasn't sat well with me.  Do the little kiddies get taught in school, OR are there bumper stickers out there I've missed that indicate:

                "If you can read this, thank a state lottery gambler."?  

                I mean in our crumbling society, we educate kids for what?   To hasten the crumbling of our sorry planet?
                At least the school buses will have smoother/safer roads to travel on.

                Not to mention my tiny car, which is not an SUV/minivan. But, when my front end falls off, due to having to drive on the same crappy roads day after day, I don't get on the phone to my state, or make my claim to the county in which I live. I just deal with it and pay for any road damage, myself.

                To heck with education dollars, hosted by the lottery.   I vote for getting roads fixed, everywhere - and not with those cheap repairs, that enable roads to crumble again, after a couple years.

                Tires are not cheap, tire damage? Neither is having someone check out why this or that instrument panel light went out.  Front end squeaks? Mm-hmm.

                In my county, we do have a hotline to report things like potholes, branches in the power lines, etc. 
                BUT every call puts a diesel service truck in traffic.   I don't want that nonsense.  Diesel fumes polluting [my] air. 
                BUT ROAD PROBLEMS ARE EVERYWHERE (even I10 going in to California is rippled, likely due to rich earthquake history it's had). I'm 3000 miles away, but still.

                Mr. Groppo

                • Don't chase the numbers you play.
                • Play only numbers you've already played, plus however many random picks.
                • But, ALWAYS the regular numbers you play.  This will make you a winner, not a chaser.
                          (so far, though, I've yet to win any significant lotto prize)
                  Avatar
                  NY
                  United States
                  Member #23835
                  October 16, 2005
                  3607 Posts
                  Offline
                  Posted: January 3, 2017, 5:27 pm - IP Logged

                  There's a really simple fix if they  want to get the contribution to education up to 35%. Since the current contribution is about 25% and the share of ticket sales that's paid out as prizes is almost 64% all they have to do is reduce the portion that goes to prizes to about 54% and add the extra 10% to the education contribution.

                  It's possible that sales will be lower, but 35% of sales is 35% of sales no matter what the dollar value is.

                    rcbbuckeye's avatar - Lottery-062.jpg
                    Texas
                    United States
                    Member #55889
                    October 23, 2007
                    6472 Posts
                    Offline
                    Posted: January 4, 2017, 8:37 am - IP Logged

                    .

                    Well, I know a thing or two, for certain (I'm not sure this it what you had in mind, Mr./Ms. Spartan1707),
                    but here it is:


                    What the heck do incoming lotto tax dollars have to do with the education system?

                    Wouldn't the 'extra' incoming lotto dollars be better used to fix our roads?
                    EVERY single state I've been in, has
                    road problems that need to be ironed out:
                    potholes, rain grooves, weather damage, due to the excessive rain and snow.
                    Roads that need repairing for the 8 millionth time. 

                    How do we get MORE lotto commission $$$$ to that end?

                    Since I've seen signs, comments, and other "billboardage", regarding education dollars being helped out by lotto dollars (though this article did mention the decline of such dollars),  it just hasn't sat well with me.  Do the little kiddies get taught in school, OR are there bumper stickers out there I've missed that indicate:

                    "If you can read this, thank a state lottery gambler."?  

                    I mean in our crumbling society, we educate kids for what?   To hasten the crumbling of our sorry planet?
                    At least the school buses will have smoother/safer roads to travel on.

                    Not to mention my tiny car, which is not an SUV/minivan. But, when my front end falls off, due to having to drive on the same crappy roads day after day, I don't get on the phone to my state, or make my claim to the county in which I live. I just deal with it and pay for any road damage, myself.

                    To heck with education dollars, hosted by the lottery.   I vote for getting roads fixed, everywhere - and not with those cheap repairs, that enable roads to crumble again, after a couple years.

                    Tires are not cheap, tire damage? Neither is having someone check out why this or that instrument panel light went out.  Front end squeaks? Mm-hmm.

                    In my county, we do have a hotline to report things like potholes, branches in the power lines, etc. 
                    BUT every call puts a diesel service truck in traffic.   I don't want that nonsense.  Diesel fumes polluting [my] air. 
                    BUT ROAD PROBLEMS ARE EVERYWHERE (even I10 going in to California is rippled, likely due to rich earthquake history it's had). I'm 3000 miles away, but still.

                    Mr. Groppo

                    So, if you put in a call to fix a pothole, but you DON'T want a truck to go to the pothole to fix it, do you expect them to push a wheelbarrow full of asphalt to fix it?

                    Fact is, it's not only weather that damages roads. It's trucks (which carry goods to help keep the economy going), and cars (people going to and from work, or shopping, making and spending money to help keep the economy going). Things that get used, (roads) will wear out. By the way, the guys that fix the potholes are making a living also.

                    So, yes, roads need fixing all across the country. That will never go away. Unless everybody just stops driving and stays home.

                    CAN'T WIN IF YOU'RE NOT IN

                    A DOLLAR AND A DREAM (OR $2)

                      Groppo's avatar - cat anm.gif

                      United States
                      Member #162631
                      January 7, 2015
                      642 Posts
                      Offline
                      Posted: January 4, 2017, 1:55 pm - IP Logged

                      So, if you put in a call to fix a pothole, but you DON'T want a truck to go to the pothole to fix it, do you expect them to push a wheelbarrow full of asphalt to fix it?

                      Fact is, it's not only weather that damages roads. It's trucks (which carry goods to help keep the economy going), and cars (people going to and from work, or shopping, making and spending money to help keep the economy going). Things that get used, (roads) will wear out. By the way, the guys that fix the potholes are making a living also.

                      So, yes, roads need fixing all across the country. That will never go away. Unless everybody just stops driving and stays home.

                      .

                      I don't know.  But I do think the wheelbarrow full of asphalt would get tiresome,
                      BUT they'd (the county) would soon get my point:

                      To fix the roads right the first time.

                      • Don't chase the numbers you play.
                      • Play only numbers you've already played, plus however many random picks.
                      • But, ALWAYS the regular numbers you play.  This will make you a winner, not a chaser.
                                (so far, though, I've yet to win any significant lotto prize)
                        Avatar
                        New Member
                        rome,ga
                        United States
                        Member #44278
                        August 2, 2006
                        2 Posts
                        Offline
                        Posted: January 8, 2017, 8:23 pm - IP Logged

                        Georgia sells more lottery tickets per capita than all but one other state lottery, according to a state audit of the Georgia Lottery Corporation, the quasi-governmental agency that runs it.

                        But a steadily declining portion of lottery revenues flow back to the education programs the lottery is required by law to fund, and the corporation that runs the lottery needs to reform its business practices, according to auditors in the Performance Audit Division of the Georgia Department of Audits and Accounts.

                        The state Senate Appropriations Committee requested the study, called a "special examination," now posted on the audit department's website.

                        Georgia voters approved the lottery in a 1992 state constitutional referendum. Under the new law, the lottery was supposed to return "as nearly as practical" 35 percent of proceeds to education, but the figure hasn't been that high since 1997, auditors found.

                        In the 2016 fiscal year, 25.5 percent of lottery proceeds went back to the state for education programs — $1.1 billion.

                        Almost all the money the state gets goes to fund two programs that benefit both public and private schools — the HOPE college scholarship program and the statewide voluntary pre-kindergarten program.

                        As lottery growth slowed and more and more students qualified for HOPE, and colleges steadily raised tuition rates, legislators have periodically cut the value of the scholarship and tightened eligibility.

                        As a result, the HOPE covers an ever-declining part of college costs for most recipients of the lottery-funded scholarships.

                        A new "Zell Miller" HOPE scholarship pays students more than the regular HOPE, although even that pays less than the original HOPE scholarship.

                        Since legislators created the Miller scholarship in 2011, the high-scoring Miller Scholars are claiming a higher and higher percentage of HOPE dollars, at the expense of those whose grades and test scores only qualify them for the lesser HOPE, according to the audit report.

                        The downward trend of money going back to education reversed, at least temporarily, in the past two years, however, according to the just-released audit.

                        The amount of money the GLC transferred back to the state jumped from $945 million in the 2014 fiscal year to $981 million in 2015 and $1.1 billion in 2016, according to auditors in the department's Performance Audit Division.

                        The lottery sold $1.1 billion in tickets the year after the first tickets went on sale June 29, 1993 and have nearly quadrupled since. Net ticket sales reached $4.3 billion in the 2016 fiscal year.

                        Of that $4.3 billion, $2.75 billion went back out as prizes. Operating expenses accounted for $456 million, including $271 million in commissions to retailers. About $1.1 billion went back to the state's education fund.

                        GLS's second-largest expense administrative expense was about $100 million paid to contractors, primarily to two corporations, Scientific Games and International Game Technology, to design and run the lottery and its ever-changing dozens of games.

                        GLC's contracts with those companies are the longest in the nation — 22 years.

                        Since the contracts were first awarded in 2002, GLC has renegotiated contracts with each of the two companies three times, and each time, got a lower base rate — from about 1.3 percent of sales down to about .8 percent beginning in 2018.

                        In fiscal year 2016, International Games Technology's base compensation was $48.4 million, and Scientific Games' base pay was $32.2 million. Each could get more than the base rate — .999 percent of the net ticket sales for International Games, and a slightly lower .99 percent for Scientific Games — if revenues went over a certain level.

                        GLC should periodically put those two huge contracts out for bid instead of periodically renegotiating contracts, the auditors said.

                        The GLC has no policies for how it handles large purchases of $75,000 or more, according to the audit report.

                        The GLC also paid out $30 million for advertising and $32 million for personnel — salaries and benefits.

                        GLC also paid out $712,344 in employee bonuses in 2016, compared to $1.9 million in 2010, before state lawmakers enacted limits on lottery employee bonuses.

                        The state auditors questioned the lottery corporation's research in determining optimal prize payouts, and said GLC should also analyze how it's spending advertising money.

                        Georgia spends more money on lottery advertising than any other state, they found.

                        Auditors also took a look a the lottery's "free ticket" policies, but said they couldn't determine whether the program helped or hurt.

                        The GLC needs a do-over on a 2013 study that said each 1 percent increase in payout rates would mean $13.5 million more in ticket sales. Most of the factors used in weighing the options weren't statistically significant, they said.

                        Georgia's prize payout rate of 64.8 percent of proceeds is about average compared to other states, but much higher than in the beginning. Payouts were were 51.6 percent of sales in the lottery's first year. The state lottery law calls for "as near as practical" payouts of "at least" 45 percent.

                        glad to know there is some one paying attention to the Georgia lottery. The lottery officals salaries are too high and I do not feel as if the Governor should have so much power over the lottery program.