Lottery sales remain robust

N.C. lottery is not hurting overall sales here, but warning signs emerging

By JOHN O’CONNOR

johnoconnor@thestate.com

South Carolina lottery sales have increased 5.5 percent over last year since North Carolina started its lottery March 30, defying projections of a double-digit loss in sales.

However, S.C. officials say it is too early to tell whether the state will approach last year’s record lottery revenues of $1.14 billion. Those sales were aided, in part, by huge jackpots — one $365 million — in a multistate game that pumped up sales.

Led by surging scratch-off ticket sales, the stronger-than-expected lottery revenues could mean more money for college scholarships, computers and technology, K-12 education and other programs. State economists had projected a 12 percent drop in lottery revenue.

Those economists expect the lottery to transfer about $250 million in profits to the state for education next year. But S.C. lottery executive director Ernie Passailaigue said he expects more. The lottery transferred $287 million to the state last year.

“I think we’ll meet that goal ($250 million) and — hopefully, like every other year— exceed it,” Passailaigue said, noting the lottery has doubled its projected annual sales — $500 million — since starting.

REASONS FOR CONCERN REMAIN

While the state projected a drop in sales when North Carolina started its lottery, other states have been unaffected by startup lotteries in neighboring states.

Georgia had record lottery sales in 2002, when South Carolina started its lottery. Kentucky’s lottery sales were flat when neighboring Tennessee started its lottery in 2004 but, now, are growing again.

S.C. lottery sales surged in February and April due to large jackpots in Powerball, the multistate lottery.

Still, Passailaigue said there are some reasons for concern in the S.C. numbers. Sales of Powerball tickets, which yield the highest profit margins for the state, dropped about 15 percent after North Carolina introduced Powerball in May.

“Until we’ve been through a few jackpot runs, I don’t think these numbers are going to settle down,” said Tim Madden, chairman of the state lottery commission, charged with overseeing the lottery.

More important, Madden and Passailaigue said, rising gas prices mean players may be less willing to spend their change on the lottery at the convenience store.

North Carolina also will continue to roll out more games, including $10 scratch-off tickets and, in October and November, Pick 3 and Pick 5 lotto games. Similar games are available in South Carolina.

But South Carolina may be able to handle the competition.

Lottery officials thought South Carolina’s higher prize payout — North Carolina requires a higher percentage of sales be returned to the state to help pay for education — would mean lottery players would keep coming back to the Palmetto State.

So far, they are.

In April, the lottery sold nearly $10 million more scratch-off tickets than it did in April 2005. In May, sales were up $5.5 million over the previous year; June sales were up $4.3 million. Instant tickets account for more than 60 percent of lottery sales.

“The health of the lottery is really in the instant tickets,” Passailaigue said, “because that’s where the growth is.”

STAYING AFLOAT

Prior to March, some S.C. lawmakers had talked of changing the state’s lottery law, saying that was needed so the state could remain competitive with its neighbors.

North Carolina and Georgia, for instance, allow video lottery games, such as the bingolike Keno. South Carolina does not.

Gov. Mark Sanford has argued reducing the sales commissions paid to lottery ticket retailers — to 6 percent from 7 percent — and trimming lottery staffer salaries would mean more money for education. Spokesman Joel Sawyer said Sanford would need to see any legislative proposals to add new games before making up his mind.

Lawmakers were encouraged by the sales figures but said it was too early to say if any changes were needed.

One factor, said state Sen. John Courson, R-Richland and chairman of the Education Committee, is what — if any — changes the General Assembly makes to kindergarten-through-12th grade school funding next year. A special Senate committee is studying the issue this summer.

Courson said a fight could be brewing to spend more lottery profits on K-12. Currently, the majority of lottery profits go to pay for college scholarships and other higher education programs.

“There are all kinds of questions that go beyond lottery sales,” Courson said.

Reach O’Connor at (803) 771-8358.