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Pa. Lottery blames growth of skill games, lack of big jackpots for drop in profits

Feb 18, 2020, 7:06 pm

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Pennsylvania LotteryPennsylvania Lottery: Pa. Lottery blames growth of skill games, lack of big jackpots for drop in profitsRating:

The growing proliferation of so-called skill games at Pennsylvania Lottery retailers are having an impact on the lottery's ability to generate revenue to pay for programs for senior citizens, a lottery official told state lawmakers on Tuesday.

Lottery executive director Drew Svitko told lawmakers skill games could lead to a $200 million decline in scratch-off ticket sales this year. That is a bigger loss than the $115 million hit last year.

Svitko attributed the higher projection to the rising number of lottery retailers having at least one skill machine on their premises.

"Those skill machines are absolutely having an effect on the lottery," Svitko told the House Appropriations Committee on Tuesday morning.

Svitko also said the lack of huge Powerball and Mega Millions jackpots could make this a less profitable year for the lottery.

Last year, the lottery had its second consecutive record-setting year. Ticket sales generated $1.14 billion for the Lottery Fund, which helps pay for older Pennsylvanians' property tax and rent rebates, transportation, prescription assistance and funding for area agencies on aging.

The impact of skill games on the lottery consumed much of the attention of lawmakers at two separate budget hearings for the state Department of Revenue, which oversees the lottery.

The Pennsylvania State Police consider such skill games to be illegal. Pennsylvania's casino industry is anxious about the growth of the games, fearing they could siphon business from slots parlors.

Svitko shared that two years ago, only 8 percent of lottery retailers had at least one skill machine. Now, he said nearly 25 percent of all lottery retailers have skill games, and it's causing some retailers to take a pass on expanding their lottery offerings to include Keno and Xpress Sports.

"Unless something's done about it, the impact is going to get worse and worse and worse," Svitko said.

But not all lawmakers seemed convinced that skill games are an enemy to the lottery.

During the Senate budget hearing, Sen. Gene Yaw, R-Lycoming County, challenged Svitko about how he arrived at his $200 million estimated loss in ticket sales and got him to point out that the Lottery Fund's share of that potential ticket loss is $50 million.

If skill games were regulated and more fully taxed, Yaw said, "They can generate $200 million in tax revenue or maybe $350 million in a few years depending on how they are put together."

Considering that, Yaw said that "might be a reasonable exchange."

Several lawmakers suggested during the hearings that perhaps it's time for the state to bring the games of skill into the fold of legalized gambling options in the commonwealth.

Svitko, however, urged them to hold off on doing that.

"I think regulating is a risky endeavor because there is a lot of gaming in Pennsylvania and I'm talking about the legal options right now. They haven't all been rolled out yet," he said at the House budget hearing.

"Until we're all able to understand and analytically prove the impact each one of those is having on the other legal forms of gaming, until we're in that position, I think adding more gaming is absolutely risky. It's a risk not only to the lottery but to all of the legal sanctioned, already approved gaming options available."

Mike Barley, a spokesman for Pace-O-Matic of Pennsylvania, a software developer that makes the Pennsylvania Skill games, countered Svitko's argument after the hearing.

He said many small businesses, fire companies, small clubs and fraternal organizations are relying on income from the skill machines to keep their doors open.

"There has been an illegal market, a grey market, in the state for a very long time," Barley said. "Pennsylvania Skill is offering a legal product that is able to be used that can drag this operation that has been in the shadows for a long, long time. Bring it out, tax it, give these small businesses and clubs an opportunity to make additional profit so they can exist and give the commonwealth additional tax dollars."

Sen. Scott Martin, R-Lancaster County, pointed out that the state's senior population is the fastest growing demographic and "that leads to a lot of higher cost in a lot of various programs that we're utilizing the lottery proceeds to fund. And that's not going to change in any of the projections that I've seen."

Martin said that behooves lawmakers to "get a handle on some sort of solution" on the legality, the regulation and the taxation of skill games.

"They are out there. They're competing. They're all over my district and I'm sure they're all over everyone else's," Martin said.

Sen. Bob Mensch, R-Montgomery County, asked if the lottery would be receptive to adding games of skill into their product line-up.

Revenue Secretary C. Daniel Hassell said that is a policy question that would require discussions with Gov. Tom Wolf before he could answer that question. Hassell said it would mean putting commonwealth-sanctioned gambling machines in convenience stores and other locations where young people can visit those machines.

Sen. Maria Collett, D-Montgomery County, suggested that is the reason why she thinks the machines and winnings that they pay out should be regulated.

Senate Appropriations Committee Chairman Pat Browne, R-Lehigh County, offered some closing comments at his budget hearing that hit on that point by looking to the other factor that Svitko cited as contributing to the decline in lottery ticket sales: the lack of big Powerball or Mega Millions jackpots.

"We could have one this year. We could have zero. We could have zero for the next 20 years," Browne said. "Given the significance of the programs that we're [using] it for, I think we have to collectively decide whether that presents way too much risk to the sustainability of those programs."

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10 comments. Last comment 4 months ago by LottoLinds.
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Chris$'s avatar - Sphere animated2.gif
P A
United States
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October 3, 2011
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Posted: February 18, 2020, 7:26 pm - IP Logged

I love the skill games. I profit multiple times a week.. some days I can dump a hundred or two in there and walk away with nothing, but more often than not that $100 investment will net me six or seven hundred dollars on top of it in just a few minutes sometimes. Pa lotto is way too stingy anymore and not nearly as much fun to play either as it was years past.

♠♣♥♦= $$$$

    Avatar

    United States
    Member #183941
    August 21, 2017
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    Posted: February 18, 2020, 8:17 pm - IP Logged

    I love the skill games. I profit multiple times a week.. some days I can dump a hundred or two in there and walk away with nothing, but more often than not that $100 investment will net me six or seven hundred dollars on top of it in just a few minutes sometimes. Pa lotto is way too stingy anymore and not nearly as much fun to play either as it was years past.

    I Agree!

    Don't ever fall in love with a number it will always break ur heart!

      winsumloosesum's avatar - Lottery-060.jpg

      United States
      Member #2218
      September 1, 2003
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      Posted: February 18, 2020, 9:09 pm - IP Logged

      Maybe if we had a brain we would allow number games online (Pick 3 & Pick 4).  Lottery Games such as Treasure Hunt 5/30, Cash 5/43, Match 6/49.

      Instead we have those silly online casino games.

        Avatar
        Kentucky
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        February 14, 2006
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        Posted: February 18, 2020, 11:15 pm - IP Logged

        I love the skill games. I profit multiple times a week.. some days I can dump a hundred or two in there and walk away with nothing, but more often than not that $100 investment will net me six or seven hundred dollars on top of it in just a few minutes sometimes. Pa lotto is way too stingy anymore and not nearly as much fun to play either as it was years past.

        How are these "skill games" played?

        Mister we could use a man like Herbert Hoover again

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          Billionaires Row 57th street Manhattan
          United States
          Member #197346
          April 9, 2019
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          Posted: February 19, 2020, 1:03 am - IP Logged

          People don’t have money in PA 

          So how can they blow their money on lottery ?

            TheMeatman2005's avatar - lightening
            Brooklyn, NY
            United States
            Member #169719
            October 29, 2015
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            Posted: February 19, 2020, 2:45 am - IP Logged

            How are these "skill games" played?

            The Meatman 🥩🍗🍔🍖🍤🌭

            “The quickest way to double your money is to fold it in half and put it in your back pocket.” Will Rogers

            Winning happens in a flash, Like A Bolt Of Lightning!  Patriot

              Raven62's avatar - binary
              25
              New Jersey
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              Posted: February 19, 2020, 6:33 am - IP Logged

              How are these "skill games" played?

              Skill Games Explained:

              https://en.wikipedia.org/wiki/Online_skill-based_game

              A mind once stretched by a new idea never returns to its original dimensions!

              Catch-22: A dilemma or difficult circumstance from which there is no escape because of mutually conflicting or dependent conditions.

              Corruptissima re publica plurimae leges: When the republic is at its most corrupt the laws are most numerous.

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                Pennsylvania
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                April 9, 2011
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                Posted: February 19, 2020, 5:01 pm - IP Logged

                I love the skill games. I profit multiple times a week.. some days I can dump a hundred or two in there and walk away with nothing, but more often than not that $100 investment will net me six or seven hundred dollars on top of it in just a few minutes sometimes. Pa lotto is way too stingy anymore and not nearly as much fun to play either as it was years past.

                Store owner next to work said people win $2K, $6K etc. I only every tried a few bucks. I am afraid I will select the wrong spot as my WILD and go from winning the jackpot to winning nothing due to human error.  The lottery is def getting worse though. I atleast would hit $1K every other month or so. Last year I got 2 total. Odds are getting worse and worse as well.. Odds on $20's are now 1 in 3.6. I will have to dig out old tickets, but I know it was closer to 1 in 3.1 not that long ago.Packs would always have 9-10 winners and now maybe 8. Makes a huge difference over 100,000 packs.

                  dpoly1's avatar - driver
                  PA
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                  October 16, 2008
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                  Posted: February 19, 2020, 5:58 pm - IP Logged

                  All lottery sales are brisk where I play!

                  They sell a boat load of scratch off tickets!

                  dpoly1 - Playing the lottery to save the jobs of those that build, transport, sell & maintain luxury items! -

                   

                  Eschew Poverty ........... Vote Conservative!

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                    New Member

                    United States
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                    January 1, 2008
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                    Posted: February 27, 2020, 9:02 am - IP Logged

                    I'm not a huge gambler, but I'll play if the draw games get big or if I have a few extra dollars, I'll buy scratch-offs. I've never touched Keno, Xpress Sports, etc. For me, "skill games" are something I have no idea about where/how to play.  I would say I'm probably on the typical spectrum for a casual player.  My lottery activity has dropped off over the years, because of some decisions that PA has made that affect the lottery:

                    1. State and Local taxes - enacting this, (particularly on annuity for prizes won before 2016), made me lose faith in the PA lottery. Prior to this change, I always questioned whether it better to pay the tax or be anonymous. Now that PA no longer has the tax advantage, I might as well buy my tickets for the big games in DE (or now NJ) where at least they make it easy to remain anonymous.

                    2. The odds/prizes. It seems clear that PA has reduced the portion of it's income that they put into the prize pool. I'm more likely to grab scratch-offs in DE, which has smaller prizes, but the ticket runs are ~150,000 tickets, instead of ~1,200,000 tickets. I looked at the new PA scratch-off games that came out last week, and decided not to even bother trying any of them based on the prizes/odds.

                    Before looking for external reasons, maybe PA should look at regaining the attractiveness of their games.