Burp! That's the sound of a satisfied Great Outdoors Colorado (GOCO) being fed (for the third fiscal year in a row) as much lottery money as the state constitution would allow. GOCO takes and spends lottery money for preserving open spaces, wildlife, state parks and outdoor recreation and aiding local governments to do the same.
Here is what your lottery money bought, at least for the fiscal year averages between July 1, 2001 to June 30, 2004:
Twenty-seven cents went to lottery beneficiaries (including GOCO) as spelled out in the constitution and statutes.
Fifty-nine cents was paid back to lottery players as "winnings".
Fourteen cents went to overhead.
So it takes 14 cents to make 27 cents.
GOCO doesn't expect to do as well next year as it it did this year when it received $48.7 millon. Since 1992, GOCO's share of lottery money is based on $35 million increased by yearly adjustment in the consumer price index.
For fiscal 2004-2005, GOCO would entitled to $50.2 million under the consumer index cap, but GOCO thinks gross lottery income won't be high enough. GOCO anticipates getting $46 million.
Meanwhile, sales of lotto tickets have declined drastically, from $140 millon in gross sales in fiscal 1996 to $41 million in the fiscal year ending June 30, 2004. A 2001 lottery forecast analysis credits lotto's decline to "jackpot fatigue".
"Over time" declared the report "lotteries have observed that sales decrease for the same size jackpot. Larger and larger jackpots are needed in order to maintain the same level of sales. This is referred to as jackpot fatigue. According to national research, lotto sales nationwide have been on the decline due in part to jackpot fatigue."
One other reason for decline is "cannibalization" which occurs when sales from one game take away sales from another game. That happened in fiscal year 2002 with the entrance of multi-state powerball with large jackpots. Powerball has done well, averaging $80 million gross revenues annually over the past three years.
If you are selling stock, you want to be optimistic about the future so that more investors will buy your stock. But if you are a state lottery manager, you are better off "bad mouthing" about the coming year. If your projection is low and you come in high, you will likely be hugged instead of hanged.
As the lottery projection forecast pointed out "overestimation of revenues create difficulties for beneficiaries that rely on the lottery forecasts to project their own revenues."
For some reason, the lottery economists expect a $4 million plus increase in lotto sales for fiscal 2005 but give no indication as to "why?". And this is $14 million higher for lotto than the long range projections made in 2001.
Accordiing to experts, the only way $45 million for fiscal 2005 could occur is if there are substantially higher jackpots or the use of "greedy ads" presently banned by Gov. Bill Owens' administration are restored.
Scratch games, where the player scratches the covering off the ticket to instantly determine if the ticket is a winner, continues to be the bread and butter of the lottery. It produced $261 million in gross sales for fiscal year 2004 and 54 percent of the gross profits.
What's the best guess for the future? The lottery is not yet "worn out". Gross sales are now so high that even a $15 to $20 millon drop in sales would be a minor percentage drop, ranking that year as having the fourth highest gross in 22 years of lottery ticket sales.
Overhead expenses will likely increase, but beneficiaries of lottery profit won't suffer too much, especially compared to those agencies slashed because of the Taxpayer Bill of Rights (TABOR) spending restrictions on general revenue funds. TABOR cannot touch the lottery.
(Jerry Kopel served 22 years in the Colorado House.)
Copyright 2012 Jerry Kopel & David Kopel