Published Online: June 9, 2009

Lottery Education Dollars Slipping in Okla.

Just four years after it sold its first lottery ticket, the Oklahoma Lottery's contribution to public education is on the decline as it is burdened by a faltering economy, unfavorable state policies and competition from tribal casinos and an upstart new lottery in neighboring Arkansas.

The Oklahoma Lottery's board of directors Tuesday adopted a $180.9 million budget for the fiscal year that begins July 1 that estimates the lottery will generate $66.7 million in revenue for public education during the upcoming year — a $2.5 million drop from the current year's contribution of $69.2 million.

"Sales are down somewhat," Lottery Commission Executive Director James Scroggins said. "You get into a tough economy and people are trying to figure out how to pay the mortgage."

Lottery sales are expected to nosedive further later this year when a lottery authorized by Arkansas voters last year gets under way. Currently, six of Oklahoma's top lottery retailers are located in eastern Oklahoma along the Arkansas border, Scroggins said.

"Those retailers along the border over there are going to see less Arkansas license plates in their parking lot," he said.

Lottery officials have estimated it could lose $10 million to $12 million in sales when the Arkansas lottery kicks off. And some retailers along the border are worried.

"What I see happening is the players that currently do come into Oklahoma to buy lottery tickets will stay in Arkansas," said Sherry Hanson, district supervisor for the Kum & Go Corp., which operates 58 convenience stores in Oklahoma.

Hanson said the Legislature could enhance ticket sales by relaxing guidelines that require the lottery to send 35 percent of its receipts to education. The formula limits the amount of money that can be spent on prizes that generate lottery sales. They say ticket sales would increase without the rule and more money would be generated for education.

But Scroggins, who previously ran lotteries in Missouri and Pennsylvania, said lawmakers have expressed an unwillingness to make the change.

"With the limit that we have there's only so much in prizes. Arkansas is going to start off with more payouts," Hanson said. "My fear is that Arkansas is going to pay out a whole lot better, so there are people who are going to be jumping ship. Education dollars are going to be smaller."

Other retailers said they were not concerned about the new Arkansas lottery.

"We get a lot of interstate traffic," said Matt Nix of Diamond Express in Sallisaw, located near busy Interstate 40 in eastern Oklahoma. Motorists from states that have their own lotteries will still buy an Oklahoma lottery ticket because they think they have a better chance of winning in the state.

"Even other states that have Powerball, people will stop in," Nix said.

Edna Miller of Freddy's One Stop near Roland, one of the busiest lottery outlets in Oklahoma, said she still thinks Arkansas lottery players will cross the state line to buy a ticket.

"The people that do come from Arkansas, they said they've tried other places. And we've had more winners than anyone," Miller said.

Scroggins said the lottery also faces gaming competition from Oklahoma's more than 100 tribal casinos which raked in $2.5 billion in revenue last year, a 22.5 percent increase from 2007, according to Casino City's Indian Gaming Industry Report.

"There's only so much money out there," Scroggins said.

Authorized by voters in 2004, the Oklahoma Lottery started operating in October 2005 amid predictions that it would generate $150 million a year or more for public education. But in four years, the lottery has generated only about $280 million.

Scroggins characterized the original estimates as "unrealistically high" and said they were based on lottery games that were eventually disallowed in the state, including pull tabs and video lottery games.

Lottery officials said sales of lottery tickets were brisk during the first eight or nine months of operation but have been declining ever since.

"It's not atypical," Scroggins said.

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