Welcome Guest
Log In | Register )
You last visited July 27, 2017, 6:52 pm
All times shown are
Eastern Time (GMT-5:00)

California lottery struggles with tepid sales

California LotteryCalifornia Lottery: California lottery struggles with tepid sales

Though California and its schools are begging for cash, one of the state's supposed gold mines produces roughly half of what it should for education, analysts say.

But officials at the languishing state-run lottery say there's hope the operation will be shipping nearly another $1 billion annually to schools.

It first, however, must succeed in throwing off woes such as legal restrictions on games, which some say are outdated in this age of widespread Indian gambling, and then generate an excitement level that comes anywhere near most other states' lotteries.

New York, with roughly half California's population, achieved about $5.4 billion in 2003 lottery sales -- about twice that of the Golden State. New York Lottery Director Nancy Palumbo has attributed the "incredible business" to the "creativity that we have here with our games."

California voters, when they authorized a lottery in 1984, embraced politically palatable limits of that era that were never imposed on the lottery's newer counterparts in other states. Then a legal ruling nearly a decade ago on gambling technicalities further restricted the operation like no other lottery in the nation.

Critics said governors historically also have distanced themselves from the state gambling operation, leaving the politically orphaned lottery to make poor decisions, including falling short on innovation, competitive bidding and promotions - assertions largely discounted by lottery officials.

Then, atop it all, the gambling operation itself, ironically, has suffered bad luck, with too many winners and too few jackpot rollovers lately to foster sales-generating "lotto mania."

Even so, the lottery's attempt to take its biggest step toward improvement is generating about as much interest in general as the lottery itself is these days with players. In other words, not much.

Lawmakers supporting the cause are battling a skeptical and powerful teachers' union in a bid to convince two-thirds of the Legislature to approve an overhaul before their adjournment for the year in August.

And even if signed into law, it would only be the first step on likely a long road toward matching the vigor of other states' games, California lottery officials say.

"I think in California, we should be at about a $5 billion lottery in sales," said Dennis Sequeira, the lottery's interim director.

Sequeira is running the games because, as part of new Gov. Arnold Schwarzenegger's executive-branch makeover, former director Anthony Molica left in April. The administration is searching for a replacement.

Sequeira, who has worked up through the ranks since the lottery's launch in 1985, said the lottery - based on the fact that California is the most populous state in the nation - should rank about No. 2 in total state sales after perhaps New York or Massachusetts.

In 2003, California's lottery, with nearly $2.8 billion in sales, ranked No. 5, said representatives of the National Association of State and Provincial Lotteries. That's in a state with more than 35 million residents. (Adjusted for its official fiscal year, mid-year to mid-year, the lottery expects slightly higher sales.)

New York was No. 1, in calendar-year 2003, according to the association, hitting nearly $5.4 billion in sales with a population of only about 19 million. Massachusetts, with little more than 6 million residents, came in at No. 2, with sales of nearly $4.2 billion. Texas was No. 3, with a population of about 22 million and $3.1 billion in sales. Florida, with just over 17 million residents, was No. 4 at more than $2.8 billion in sales.

NASPL says the California lottery's sales appear even more sluggish, adjusted for population, on the per-capita sales charts.

In 2003, California ranked 30th out of 40 lotteries with sales of $78.40 for every resident. The average for all U.S. lotteries was $174.74 - about the sales pace achieved by South Carolina.

Though smaller lotteries, such as Rhode Island, South Dakota and Delaware, ranked at the top of the per-capita sales list, New York also did well by that measure, coming in at No. 8.

Palumbo of the New York lottery said in a Public Gaming Research Institute report that her lottery achieved huge, attention-grabbing jackpots and strived largely for "diversity in our product mix because people like to think that there's something new out there."

Jackpot sizes and game diversity are both sore points in California, lottery officials here said.

The lottery-authorizing initiative restricted prizes to 50 percent of sales, a limit that minimizes jackpots and dampens interest. The less the interest, the less the sales and, therefore, the less the flow of dollars to education, Sequeira said.

Increasing the percentage of prize money - and trimming the mandatory one-third allotment of sales to education - would actually lead to giving schools more money through increased sales, he said.

"They (other states' lottery directors) are going, 'Why don't they get it (in California)? Look at what it's done in our state,' " Sequeira said.

But the constitutional-amending action would take a two-thirds vote of the Legislature. And, most significantly among the supporters and foes, the proposal has divided the education community and drawn the opposition of the powerful California Teachers Association.

Assemblyman George Plescia, R-San Diego, has taken on the task of trying to convince opponents there's little to lose and everything to gain. But it's an uphill battle in deficit-plagued California.

"It's not for the faint of heart," Plescia said.

Despite amendments to his bill that include a graduated phase-in and bottom-line funding guarantees, the CTA fears a lag - if only a temporary one - in the flow of education funds from the lottery.

"Schools are counting every penny they have and, while the lottery does not give schools a lot of money, we jut can't risk anything that would take any money away from education at this time," said CTA spokeswoman Becky Zoglman.

Another factor - the diversity of games touted by New York and others - is hindered in California by the lottery-authorizing initiative, which banned use of Nevada-style themes on scratch-off tickets and other offerings.

Plescia briefly added an amendment to his bill that would have allowed themes such as roulette, dice, baccarat, blackjack, Lucky 7s, draw poker and slot machines. But public opposition, in the wake of ANG Newspaper reports on the development, prompted the lawmaker to drop the amendment.

An even bigger impediment, again not suffered by other lotteries, is limitation to parimutuel games that produce smaller jackpots than games that use banked offerings. The restriction came in the wake of a lawsuit that went all the way to the state Supreme Court in 1996.

Banked games allow participants to play for prizes against the house, in the style of Nevada casinos, rather than for parimutuel jackpots - or those amassed through the collective bets placed in a particular game.

Lifting the restriction is on the lottery's wish list, but would take more legislation, Sequeira said.

Also on the lottery's wish list is becoming part of one of the lucrative multi-state lotteries. Others that are part of those operations are interested in California but not in complying with the restrictions imposed on the state.

In recent years, the lottery has attempted to make the most of its existing resources by cutting administrative costs through major layoffs, then shifting that money into scratch-off ticket prizes. The move boosted ticket sales but there's little left to trim from administration.

In addition, lawmakers recently granted the lottery permission to use bingo as a theme - a privilege long enjoyed by other states' operations.

The lottery also has revamped its trademark offering as "Super Lotto Plus," which has helped overall sales at times.

Though the odds of hitting the jackpot, 1 in 43 million, mean players are about three times more likely to get hit by lightning, participants have been winning regularly. That has prdvented rollovers, which amass the huge jackpots, that, in turn, foster lotto mania.

Lottery officials acknowledge that with so many unmet goals facing them, they have yet to begin eyeing such state-of-the-art innovations as video lottery terminals, which allow greater interest-building interaction with players.

Another problem faced by the lottery over its two-decade history lies in the fact that governors have generally ignored the state gambling operation, leaving the agency to suffer from what critics in the highly competitive, litigious industry have called - among other things - a lack of innovation, too little competitive bidding, inadequate promotions and other poor decisions.

"Everybody gets that sort of criticisms," said Todd Koeppen, editor of Public Gaming International, an independent magazine that focuses on the industry. "There's lobby groups that put out all sorts of things."

Koeppen, however, remembers when the California lottery revamped its lotto game and odds in 1990 in the face of declining sales figures. The switch from a format of pick 6-of-49 numbers to a pick 6-of-53 was so controversial, the lottery rolled it back in less than a year to a compromise pick 6-of-51.

Unlike popular misconceptions, lottery officials don't think their operation has been adversely affected to any great degree by competition with Nevada gambling and the growth of Indian casinos.

But, with Reno and Las Vegas next door, and tribal casinos expanding their Nevada-style operations, there are some who don't mind that the lottery is having problems.

Anti-gaming groups say too many Californians already are dangerously addicted to gambling, with that number growing every day.

Daily Review

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.

7 comments. Last comment 13 years ago by CASH Only.
Page 1 of 1

United States
Member #3676
February 10, 2004
425 Posts
Posted: July 15, 2004, 10:38 am - IP Logged

Yeah another state like NY that is about making games as unfair as possible.  No figure no one plays.  The derby game and the lotto seem to have horrible payback %.  Again if you raise the payback %'s you will get more sales and probably more revenues for the schools.  But I am sure they will march out some other game with a 45% payback and the sales will be good for 3 months and then drop off.  Unreal.

    liberal47's avatar - Rowlf
    Holt MI
    United States
    Member #2244
    September 4, 2003
    69 Posts
    Posted: July 15, 2004, 11:54 am - IP Logged

    I can't imagine a state like California being so short sighted in their thinking. First they need to amend that law to pay back more to the players, second they need to join the Mega Millions multistate game. Those two moves alone would fire up interest big time, not to mention boost jackpots.

      johnph77's avatar - avatar
      United States
      Member #2987
      December 10, 2003
      832 Posts
      Posted: July 15, 2004, 2:35 pm - IP Logged

      The only valid argument they propound is the pari-mutuel requirement. All the other arguments have seemingly been successfully addressed by other jurisdictions.  New York, cited as one of the more successful lottery operations, consistently returns less than 50% of income as prizes (38% in NY Lotto - see their website) and most other states are near that. Who's BSing who?

      Blessed Saint Leibowitz, keep 'em dreamin' down there..... 

      Next week's convention for Psychics and Prognosticators has been cancelled due to unforeseen circumstances.


        United States
        Member #1928
        July 28, 2003
        52 Posts
        Posted: July 16, 2004, 10:26 am - IP Logged

        Why Biggamelottery is not saling CALottery anymore. I use to play here.

          benir4u's avatar - nw sorc2.jpg
          United States
          Member #1954
          July 31, 2003
          2024 Posts
          Posted: July 16, 2004, 12:57 pm - IP Logged

          The California Lottery needs to be revamped because having a STR number in most would pay $500, STR/BX $250 and so on, that is not the case, it fluctuates which make people not want to play because of fear of having to turn it in for taxes.  The system here gives people no incentive to play.  I for one, spend a lot of money on this system and I am ready to give up because, as someone said earlier, the payback is terrible.  I have personally talk to some of Cal Lottery employees and they have a false sense of security that everything is fine, but it isn't.  The problem started when the state started, as they are now (GOVERNOR S), and previous administrations messed with INDIAN GAMING and that is when their legal battles began.  They refuse to bring in a 4 digit, for fear of great losses in the Cal Lottery revenues.  The system has a lot of flaws and they need to feel the pulse of the people playing.  Sorry this subject leaves a bad taste in my mouth. LOL 

            DoctorEw220's avatar - alien helmet.jpg
            Yinzer Country, PA
            United States
            Member #4067
            March 18, 2004
            2741 Posts
            Posted: July 17, 2004, 11:45 pm - IP Logged

            i do not like pari-mutuel pick 3/pick 4 games.  i think that one gets robbed of their winnings with those.

            I've redone my website.  Go to www.dr-ew.com.  I kept a lot of the old stuff, and I've added some new stuff.  Look for more new stuff in the coming weeks.

              United States
              Member #379
              June 5, 2002
              11296 Posts
              Posted: August 12, 2004, 6:42 pm - IP Logged

              New Jersey had had pari-mutuel payoffs for many years.