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Article published Jan 16, 2005
Playing catch-up
ALEXANDER MORRISON
Staff Writer
South Carolina celebrated its education lottery's
third anniversary just over a week ago.Its birthday wish?A $16 million scratch
ticket.That's how far lottery sales from July through December, the first half
of the state government's fiscal year, trailed sales from the same period from
2003. Lottery sales brought in $451 million for the six-month period.Thus far,
the S.C. Education Lottery has generated $142 million in income, after cash
awards and administrative expenses are subtracted, and that figure is down $9
million from the same period in 2003.But there is still time for lottery income
to catch up.The lottery is still on pace to generate $287 million by the end of
the fiscal year ending in June. That would beat estimates by $41 million.That
would be just short of the $290 million in income the lottery generated from
July 2003 through June 2004. The lottery beat estimates last year by $37
million.Prices at pump a factorThe decline in lottery income has not affected
state budget plans so far because of conservative budget estimates.The state
appears, however, to be making a habit of spending any surplus from the
lottery.And these surpluses might be in danger because of fluctuating gasoline
prices and higher budgetary expectations.The decline in 2004, according to the
state Board of Economic Advisors and lottery officials, is at least partially
due to higher gasoline prices that cut into the money consumers would otherwise
spend on lottery tickets.In fact, in the nine months over the past year in which
gasoline prices went up or down by more than 1 percent, lottery sales responded
by going in the opposite direction seven times.Last June, for example, when
gasoline prices jumped from $1.68 to $1.88 per gallon, lottery sales dropped 19
percent from the previous month. In December, gasoline prices fell 10 cents per
gallon to $1.81, and lottery sales jumped 18 percent."We know there is an
impact," said BEA Director Bill Gillespie, who said the BEA deferred to lottery
officials to make budget estimates.But Ernie Passailaigue, director of the S.C.
Education Lottery, said it's out of officials' hands."We cannot control gas
prices," Passailaigue said.High gasoline prices seem to affect lottery sales
indirectly."It's very rare that anyone who gets gasoline comes in and gets
lottery tickets," said Stephanie Dawkins, who works at the Spinx station on the
corner of East Blackstock Road and W.O. Ezell Boulevard.Cynthia Jackson, an
occasional lottery player, agreed."In my world, it doesn't (work like that),"
she said.Instead, higher gasoline prices force lottery players to buy less of
everything -- including lottery tickets."When a consumer goes in to buy our
tickets, they have less disposable income," Passailaigue said.Though the
government expects only $243 million from lottery sales in the current budget
year, it has allocated $341 million in lottery funds for education spending.The
difference comes primarily from surpluses the lottery generated the past few
years.Such surpluses are potentially threatened on one side by the possibility
of high gasoline prices. And they likely also will be slashed by increased
estimates for lottery income from the BEA.Next year, the BEA expects the lottery
to raise $265 million. That is more than ever counted on before, but less than
the game has made the past two years.But Passailaigue isn't concerned about
meeting those goals."We are going to meet the expectations the state expects,"
he said.He did, however, caution against expecting the lottery to consistently
beat BEA estimates by $40 million."They have to come to grips with the fact that
the lottery can't produce these huge surpluses every year," Passailaigue
said.Passailaigue also warned that South Carolina could expect to see a
significant dip in lottery sales if North Carolina adopts a lottery. Twelve
percent of South Carolina lottery revenue comes from North Carolina
players.Passailaigue also explained that an extremely high Powerball jackpot
could spur more lottery play."You can get healthy in a hurry," Passailaigue
said.If lottery income declines over the long term, however, programs will have
to be cut or funded from other sources.Gov. Mark Sanford proposes lottery
revenues be moved from core, reoccurring educational K-12 programs in his
executive budget for the next fiscal year. In his budget, he proposes even more
lottery funds go toward college scholarships -- which he would like to spend
half of the lottery proceeds on.But some worry about counting on a stable stream
of lottery revenue."It is ultimately an unstable revenue source. You can't
predict it," said Ashley Landess, vice president for public affairs for the S.C.
Policy Council."We have to always be sure that we are careful with what we fund
with lottery," Landess said. "If the revenue declines, that money is going to
have to be cut."Alexander Morrison can be reached at (864) 562-7215 or
alex.morrison@shj.com.