LITTLE ROCK — The state lottery is on track to generate about $5 million less for college scholarships this fiscal year than it did in the previous year, based on revenue figures for the past five months, the lottery’s interim director told legislators Tuesday.
Julie Baldridge told the legislative oversight committee on the lottery that if revenue continues at the level it has to date this year, the lottery will raise $89 million for scholarships in the 2011-12 fiscal year. The lottery raised $94 million in the previous year.
But Baldridge said she believes the lottery will perform as well this year as last year, noting that ticket sales typically spike in the early months of the calendar year. She said the projection was conservative.
“I want you all to make your decisions based on what I can promise you we’ll do, and I can promise you $89 million,” she said.
Some legislators expressed disappointment that the lottery has not raised $100 million for scholarships since its first year, the 2009-10 fiscal year, despite the assurances of former Director Ernie Passailaigue that $100 million a year was achievable. Baldridge said lotteries typically see their best sales when they are new.
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Baldridge also told the panel that the lottery’s ticket sales total $187 million for the year to date, up from $176 million at this time a year ago, but profits for scholarships are $37 million, down from $39 million a year ago.
Explaining the disparity, she said the lottery has contracts with vendors that tie payments to sales, so when sales go up, payments go up. Also, the lottery’s Diamond Dazzler scratch-off game, which costs $20 to play and offers five $1 million prizes, has “not been a big money-maker for the lottery,” she said.
Rep. Barry Hyde, D-North Little Rock, said the lottery was set up to operate as closely to a business as possible. He asked Baldridge if she had a plan to “right the ship.”
“We’ve not had a business plan up to this point, and so one of the things that we’re doing is looking into setting plans, what the goal is for the plans, and then once the plans go into effect, analyzing what the outcome is to find out whether it’s working. That’s a normal business activity that hasn’t gone on so far,” Baldridge said.
“You’re running a half-a-billion-dollar-a year retail industry and you don’t have a business plan? That is the most upsetting thing that you could possibly have told me,” Hyde said.
Sen. Jonathan Dismang, R-Beebe, came to Baldridge’s defense, pointing out that she cannot alter the terms of fixed contracts and that she has reduced the lottery’s administrative costs since stepping into the job in October.
“I would like for us not to get short-sighted in this meeting today and be appreciative of the fact that the things you do have control over, you are taking care of,” he said.
Dismang also defended the lottery’s failure to raise $100 million since its first year, suggesting that “perhaps $100 million is an inflated number given by a man with an inflated salary.”
Passailaigue, the former director of South Carolina’s lottery, was hired in 2009 to run Arkansas’ lottery at a annual salary of $324,000. He resigned in October amid questions about the lottery’s management and accounting practices.
His two vice presidents, both hired from the South Carolina Lottery, also left in October, one by resigning and one as a result of being fired.
Dianne Lamberth, chairman of the state Lottery Commission, said after Tuesday’s hearing she believes that changes at the lottery will boost revenue.
“We are going to move the needle and make sure that we have more scholarship money,” she said.
The legislative panel did not discuss whether the $89 million revenue projection signaled a need to lower scholarship amounts during the fiscal session that convenes in February. Hyde said after the hearing he did not think such action would be necessary.
“Partly because our non-renewal or our dropout rate has been a little higher than what we had originally anticipated, it’s provided a little bit more of a cushion,” he said.
Shane Broadway, interim director of the state Department of Higher Education, said agency officials will have to study the projection before making a recommendation about scholarship amounts.
During this year’s regular session, the Legislature lowered scholarships amounts from $5,000 to $4,500 for four-year-schools and from $2,500 to $2,250 for two-year schools to avoid running out of funds.