Despite bringing in $99 million dollars more in sales than last year, the PA Lottery is seeking to lower the percentage of revenue it is legally required to give to programs for seniors.
For the third year in a row, the lottery has given more than one billion dollars to programs that help the elderly with transportation, prescription costs and even tax rebates. This year, $3.8 billion dollars in sales revenue were generated, with $1.8 billion going towards seniors, the largest dollar amount in PA Lottery history.
When the lottery began in 1972, it was required by law to give 30 percent of its revenue to senior programs. In in 2010, the amount was temporarily reduced to 27 percent, but is scheduled to return to 30 percent in 2015-2016. This year’s $1.8 billion reflects 28.5 percent of the FY 13-14 revenues.
PA Lottery spokeswoman Elizabeth Brassell says that while the lottery was able to meet the requirement this year, it might not in the future without hurting sales, especially if the allotment returns to 30 percent. Brassell says this is because instant games, such as scratch-offs, are growing in sales as traditional terminal-based games, including the Mega Millions, are declining. According to Brassell, this means that while sales revenues might be higher than ever, so are the prize costs.
“Instant games demand a higher payout percentage and have a lower rate of return as a percentage of the sales price than our terminal-based games,” Brassell explained. “So as more and more sales shift towards the product that has a lower return, we’re getting closer and closer to that minimum percent that is in lottery law.”
There are currently legislative proposals in the House and Senate to decrease the minimum rate of return to 25 percent. Brassell says the goal is not to give less to the elderly, but to allow room for the lottery to grow. Without lowering the minimum, Brassell say the lottery would be forced to sell fewer instant games, because of their low return, which would mean less revenue and less money for programs.
“What the lottery wants is it wants the flexibility to sell more product, so to create a bigger ‘pie,’ a bigger pizza pie,” Brassell said. “And what we’re talking about is delivering a smaller slice of a bigger pie, which ends up resulting in more pizza than you would have had with a smaller pie, or more dollars than we would have had with a higher margin.”
This year, the lottery paid out 62 percent of its sales revenue in prizes. It is only required to pay out 40 percent, but Brussell says the lottery is trying to keep returns high to encourage more ticket sales.
The lottery is reducing costs in their overhead, which dropped from 2.07 percent of gross revenue to 2.04 percent last year. Brassell says this is not enough.
“Lowering the mandated rate of return to 25% will give the lottery the flexibility to meet consumer demands and deliver even more dollars for senior programs,” Brassell said. According to her, failure to do so will mean a change in marketing for the lottery and diminished payouts, which could harm sales and revenue. Brassell expects the legislature to address the proposals in the fall.