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Powerball's "Lower than Normal" Jackpots

Topic closed. 5 replies. Last post 11 years ago by ryanm.

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Morrison, IL
United States
Member #4657
May 13, 2004
1884 Posts
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Posted: December 27, 2005, 11:57 pm - IP Logged

As some LP members and I have noticed, Powerball's estimated and actual cash jackpots have been below its 30.28855% of sales. I have suspected the MUSL draws down PB's jackpot pool to fund PB's set prize reserve, and I have e-mailed them about that. Here's their response:

__________________________________________________________________________________

From : letters
Sent : Tuesday, December 27, 2005 12:57 PM
To : "Ryan M"
Subject : RE: The current Powerball jackpots


No, we are not seriously (or even moderately) underestimating Powerball
cash jackpots paid out. You've read part of the rules, but perhaps not
all of them.

You have pretty much answered your own question. You are quite correct
that the cash jackpots (paid, not advertised) do not always come out to
be exactly 30.2885% of the sales dollar. Some of the money is drawn
down, under the operation of the published rules, to pay for set prizes.
As you know, we do START with 30.28855% of the dollar going to the cash
jackpot. But there are two exceptions. One is the rule [PB Rule 28.2]
that permits an amount equal to up to 2% of sales to be deducted from
the jackpot prize pool to go into reserve funds which are used to pay
guaranteed jackpot amounts and to pay the set prizes. In some cases,
the cash jackpot pool may be equal to as low as 28.28855% under this
rule. Those funds are generally at their cap, but money does move in
and out on a fairly regular basis. Since the Powerball set prizes are,
by definition, not pari-mutuel, there is always some movement there.

Another exception [PB Rule 30.8] is for the Match 5 Bonus Prize. Though
rare, you may have noticed a big difference in the jackpot cash amount
last October, when large amounts of the jackpot cash pool were moved to
the Match 5 prizes.

On your question about ADVERTISED jackpots, it is true that we would
rather underestimate the amounts that we ADVERTISE. We don't like to be
in the situation where our advertised numbers turn out to be higher than
actual. It does happen, but we prefer to advertise lower than the final
number, under the theory that most people will not complain about
getting more than we said they were playing for. But the cash jackpots
paid out have to follow the rules exactly - there can be no underpayment
there.



-----Original Message-----
From: Ryan M [mailto:cyberryan26@hotmail.com]
Sent: Monday, December 26, 2005 11:50 PM
To: letters
Subject: The current Powerball jackpots

I've noticed that the MUSL seems to be seriously underestimating
Powerball's cash jackpots lately, and the last jackpot won was lower
than it
should have been based on sales, assuming that the jackpot winner
receives
60.5771% of the prize pool (30.28855% of sales), according to
http://www.ialottery.com/Games/Online/Powerball_Rules.pdf . The last
winner
will receive a cash jackpot of $54.8 million (if he or she chooses
cash).
However, according to Powerball's sales figures (which do not include
PowerPlay) on http://www.lottoreport.com/salescomparison.htm , if you do
the
math, you will find that the cash jackpot should have been $56.4
million.

As for the current run, I believe that is being underestimated as
well.
The jackpot for the last drawing, had there been a winner, would have
been
$12.5 million based on sales and Powerball rules. The MUSL currently
predicts the next PB jackpot to have a cash value of $14.6 million,
which
would suggest estimated sales of only $6.9 million. However, a more
reasonable estimate should be $13 million for sales, which would support
a
cash jackpot of $16.4 million.

Something is definitely up with the way the MUSL is estimating its
jackpots. Could it be possible that the MUSL funds Powerball's set
prize
reserve by drawing down its jackpots?

__________________________________________________________________________

So, it appears my theory that the MUSL takes money out of the jackpot pool to fund the set prize reserve is correct. That explains the lower than normal Powerball jackpots -- considering that on two different occasions this year Powerball paid out extremely abnormal total match 5+0 prizes, the MUSL probably will be paying less than 30.28855% of sales toward the PB jackpots for quite a while.


I'll bet Mega Millions has some rule like this as well, although the MM group probably has not had to draw down its jackpot as well because its fixed prize payouts have been approximately statistically expected all year.
    Avatar
    New Jersey
    United States
    Member #21206
    September 4, 2005
    949 Posts
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    Posted: December 28, 2005, 10:40 am - IP Logged

    Thanks for taking the time to obtain and post this useful information.  Hopefully you will not mind if I cut and paste this information into the Powerball probability thread I maintain.  Although my calculations are just approximate, having this reference will help me to refine them more than they otherwise would be.

    Thanks again. 

     


      United States
      Member #16612
      June 2, 2005
      3493 Posts
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      Posted: December 28, 2005, 1:38 pm - IP Logged

      I think PB is trying to save up the Match 5 Bonus Prize pool. When players win PB Jackpots, fewer people tend to buy PB tickets.

        TheGameGrl's avatar - character catafly.jpg
        A long and winding road
        United States
        Member #17084
        June 10, 2005
        4525 Posts
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        Posted: December 28, 2005, 6:22 pm - IP Logged

        Interesting thread and even more interesting that the response wasnt your average Cookie Cutter response. Any time I write my lottery commission, I get a very impersonal,vague, and ambiguous response.

        So Im intrigued that the response given seemed so detailed and direct. Its disappointing to read that they slice off extra revenue for funds that should be part of there overall percent they  receive. Somehow it seems they are dipping into a persons/groups winnings part. The powerball may grow but its not growing on the receivers end....

        ~~Is it true, Is it kind,Is it necessary. ~~~

         Thanks be to the giving numbers: 1621,912,119 02014

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          Morrison, IL
          United States
          Member #4657
          May 13, 2004
          1884 Posts
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          Posted: December 28, 2005, 6:52 pm - IP Logged

          That's just reality for a game that pay set prizes - when they have to pay more than expected, the money has to come from somewhere.

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            Morrison, IL
            United States
            Member #4657
            May 13, 2004
            1884 Posts
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            Posted: December 29, 2005, 1:03 am - IP Logged

            Well, how about that? Powerball's estimated jackpot for New Year's Eve 2005 anticipates sales of $12.5 million, which is actually a realistic figure.