Officials closely watching Lottery Scholarship revenue

While the Arkansas Lottery Scholarship Program posted record earnings of more than $474 million for the fiscal year ended June 30 – $10 million more than the previous year – earnings the past few months have been below previous month-to-month totals.

That decrease has created discussion about the future scholarship levels for the program. Scholarship levels the first year of the program were $5,000 for four-year schools and $2,500 for two-year schools. The second year scholarship levels were reduced to $4,500 for four-year students and $2,250 for two-year students.

Arkansas Department of Higher Education Interim Director Shane Broadway has said the lottery program deficit can be avoided if scholarship amounts are reduced to $3,300 and $1,650 for four- and two-years schools, respectively.

Rep. Mark Perry, D-Little Rock, co-chairman of the Arkansas Lottery Commission Legislative Oversight Committee, said last week the decrease in lottery spending is cause for concern but not alarm. Decreasing gas prices and a burgeoning Powerball should be positives for sales, he said. As of Wednesday (Nov. 28), the Powerball Jackpot was raised to $550 million.

“I firmly believe it will be back up,” Perry said. “It’s not cause for panic yet. If the numbers stay this way through February, then I’ll be worried.”

The $10 million increase in lottery sales for the last fiscal year resulted in a $2 million increase in revenue, all of which goes to the scholarship fund. But if current trends continue, revenue could be down $7 million from last year, putting it $5 million below the 2011 total.

“I’m making this projection seven months out,” state Lottery Director Bishop Woosley said. “Falls and late summers are typically slow sales in the lottery business.”

Lottery officials had hoped for $98 million in net proceeds – $1 million more than last year – but is on trend to reach only $89 million or $90 million if lottery purchases continue as they have been.

Woosley said his projections are similar to the report the committee received last year at this time from Julie Baldridge, who was interim director.

“They (legislators) want the latest update we can give them. Last year, she lowered the projection as well to $89 million,” Woosley said.

Woosley said the lottery is affected by gas prices, other economic factors, possibly even political concerns during the recent elections. The downward trend could also be that the newness of a state lottery is wearing off and it may be settling into a slower pattern.

“We’re down. We want to give the most accurate projection, but things can change very quickly in the lottery. It’s very unpredictable,” he said. “We’re just like any other business. There are ups and downs.”

If lottery proceeds continue the downward trend, scholarship levels are likely to fall for the 2013-2014 freshman class.

“Lottery proceeds are down, and we’ve had an increase in the number of traditional students who’ve applied and accepted the award,” Broadway said. “We’re OK right now, but when you commit to a class, you have to make sure you see it all the way through.”

The Academic Challenge Scholarships gave funding to 1,218 more students this year than last.

“It is fruitless to analyze month by month when the annual outcome, as of June 30, 2013, is the only number that matters,” said Julie Baldridge, director of public affairs and legislative relations for the Arkansas Scholarship Lottery and liaison to the Arkansas Lottery Commission.

She said the lottery ticket sales will go up if the Powerball amount moves higher – which it has. Woosley said ticket sales on the big Powerball amount could boost those slagging scholarship projections.

Perry said he expects the legislature when it reconvenes to run various scenarios based on the data collected in the last two years.

Changes discussed at the recent Oversight meeting included a tiered funding option, by which students would get more money each year that they stayed in school and maintained their grades, and changing criteria for the scholarship.

Perry said continuing to collect data of student performance will allow them to maximize lottery monies to benefit the most students. Legislators will use the data to see if trends are developing in terms of which students are likely to keep or lose their scholarships, and evaluate scholarship criteria to see if adjustments need to be made.

Perry said he doesn’t think enough data has been compiled from the young lottery program to necessitate drastic changes, but careful study is important as more statistics are gained each year.

“The more data the better,” he said.