Some Florida legislators figure that the way to sell more lottery tickets is to reduce the size or number of prizes the players can win. It's something that will be attempted during the 2004 session that begins in March -- and, given the financial philosophy of this Legislature, it has a good chance of passage.
This is, after all, the same Legislature that set in motion the largest telephone rate hike in state history using the logic that if rates were increased, there would be more competition for residential phone service and rates would go down.
The Public Service Commission approved the rate increase, which will add between $3 and $6 a month to telephone bills, last month. Fortunately, Florida Attorney General Charlie Crist has appealed the PSC's action to the state Supreme Court. "The law says [the PSC] must take into account a benefit for the residential consumer," Crist said at a press conference Tuesday. "If anybody can explain to me how sticking it to them -- $355 million more -- is a benefit, that's a new way of thinking and a new kind of logic that I don't understand."
With brainiacs like the ones Crist refers to in Tallahassee, can smaller lottery prizes be far behind?
One could almost bet on it. Legislators have set their sights on unclaimed prize money, which averages about $4 million a month. Under current rules, the Lottery Department can use the money for promotions and to increase the size or number of lottery prizes. And there's a lot of history, research and auditing that shows that distributing unclaimed money back to the players works to sell more tickets -- and thus increases the lottery profits available for education.
But last year, when an unclaimed Lotto ticket expired, the state was left with a $30 million windfall. So legislators set out to appropriate that money for use by community colleges and state universities which had been hard-hit by budget cuts.
Fine. There's nothing wrong with a one-time shot when a prize that size goes unclaimed. Lottery officials, who otherwise support rolling unclaimed prizes back into more prizes, were generally agreeable to it.
But now there is a flood of legislation prefiled for the session that would permanently siphon unclaimed money to the education pool. It's a bad tactic -- one
that is not advised by state auditors.
"I've heard that pitch before about this being a shortsighted move," Sen. Evelyn Lynn, ROrmond Beach, told the Orlando Sentinel. Lynn is sponsoring three bills to change the unclaimedprize distribution method.
"I just don't buy the lottery's argument."
Before her colleagues vote for those bills, they might want to ask Lynn for supporting documentation assuring lottery sales won't be harmed. There's plenty of evidence to the contrary.
In an annual audit of the Lottery Department released last week, state Auditor General Bill Monroe noted that sales of scratch-off tickets increased 62 percent last year. The reason? In 2002, at the request of lottery officials, the Legislature passed a law giving the lottery more discretion over increasing prizes. Prior to the change, the lottery could offer no more than 50 percent of its revenue as prizes. The change removed the limit, letting the lottery secretary determine prize amounts.
Partly because of that change, the Educational Enhancement Trust Fund received a payment of $109 million late last year -- the highest payment to date.
Monroe's audit noted that Mega Money sales, which started in 1998, dropped to $95.9 million last year -- nearly a 21 percent decrease from its peak year. In response, Lottery Secretary Rebecca Mattingly said plans to revamp the game were already in progress. Beginning with the last Mega Money drawing in January, the top prize will carry a $500,000 minimum guarantee, and the number of prizes are estimated to increase by 50 percent.
Lottery officials say audits and studies show that each $1 added to prize money results in $4.67 in additional ticket sales. In the 20002001 fiscal year, an audit said unclaimed jackpots that were offered as additional prizes brought in an additional $36 million for the education trust fund.
Diverting a $30 million unclaimed prize for education on a one-time basis is far different from permanently diverting money spent by lottery players that could be used to sweeten jackpots and increase sales. Without persuasive evidence to contradict the lottery's studies of extra money increasing sales, the Legislature should move cautiously.