My guess is they took it off the top. I think they lowered the percentage of daily sales that's allocated to be paid back to players. The current pay back allocation is 50%. I think they lowered it to 50% from a higher number/percentage.
If, during any given day, they sold one million lines (therefore they took in one million dollars) the state keeps half ($500,000), and the other half (the prize pool) is used to pay all of the winning lines sold that day.
The split of the prize pool among winners is 20% to a jackpot winner(s), 30% to pay second place winners, and 50% to pay third place winners. On a million lines sold, the above split would give $100,000 to a jackpot winner. If there was more than one jackpot winner, then the $100,000 top prize would be divided equally among them.
Day in and day out, they sell a total of 600,000 to 700,000 lines. That information can be seen right on The NY Lottery's website. (well, you have to do the math yourself, but it's there) Back in the days when Friday's ticket sales produced a $100,000 jackpot, using the current allocation of 50%, they'd have to have sold a million lines per day. I just don't see their daily ticket sales plunging by 40% to 600,000 lines, but that's what they claim happened. Sure, there probably has been a decline in ticket sales since the days of Friday night jackpots of $100,000, but I doubt it's as drastic as 40%. I think what probably has happened is they reduced the prize pool allocation to 50%, and there has been a drop off in the number of players. It's a combination of both of those factors, but they don't want say anything about them reducing the size of the prize pool. G5