Lottery has no strategy to reap extra money

JEFFERSON CITY, Mo. -- The Missouri Lottery has no strategy to generate an additional $35 million that legislative leaders and Gov. Jay Nixon's administration had hoped would help balance the budget and avoid cuts to government services, a lottery official said Tuesday.

The Lottery, which transferred a record $280 million to public schools during the recently concluded fiscal year, has a goal of generating nearly $289 million for education during the fiscal year that began July 1, Lottery spokesman Gary Gonder said.

That would be an increase of a little more than 3 percent. But it would fall far short of the $324 million in Lottery proceeds that had been projected by budget analysts for the legislature and governor.

Republican legislative leaders and the Democratic governor's administration had hoped an extra $35 million in lottery proceeds could supplant general revenue budgeted for education, freeing up money that could avoid cuts in other areas. But lawmakers left it to the Lottery to determine how to generate that additional money.

A nearly $289 million target "is an aggressive goal, to be honest with you," said Gonder, the chief operating officer for sales, marketing and communications at the Missouri Lottery. "We're going to do everything we can to reach that goal and to surpass it."

He acknowledged that the Lottery has no particular strategy for hitting the higher mark of $324 million, though he said the agency has plans to increase marketing and expects more money from new ticket vending machines.

Senate Appropriations Committee chairman Kurt Schaefer said Tuesday that legislators had received assurances earlier this year that the Lottery would be able to reach the higher figure.

"I'm still under the belief that they're going to deliver on those numbers," said Schaefer, R-Columbia. "Obviously if they don't, we'll have to re-evaluate some funding issues."

During their session that ended in mid-May, lawmakers embraced a rosier-than -usual projection for Lottery revenue as part of a complicated money transfer benefiting the state's veterans nursing homes. That plan, signed into law by Nixon, redirects casino fees that had gone to early childhood programs to veterans homes. Early childhood programs now are to get $35 million annually from the state's share of a settlement with tobacco companies.

Lawmakers hoped the Lottery could generate an extra $35 million for education, thus freeing up general revenue that had been allotted for schools to be diverted to programs that previously received tobacco funds and to plug holes elsewhere in the budget.

Nixon's budget director, Linda Luebbering, said Tuesday that she had explained the need for the extra $35 million to Lottery officials, but Luebbering also has acknowledged previously that the target would be challenging to hit. When he signed the budget last month, Nixon cited uncertainty over Lottery funding as one of the reasons he believed the budget was unbalanced and that some spending restrictions were necessary.

Lottery revenue came in better than expected during the 2012 fiscal year. The state carried over $8.6 million of extra Lottery funds into the current fiscal year, Luebbering said.

But that still means the Lottery would have to generate more than $26 million on top of its $289 million goal for education.

During this year's legislative session, some lawmakers proposed that the Lottery could transfer more money to public schools by decreasing the amount it paid in prizes, but others feared that could backfire since reduced prizes could lead to a decline in Lottery ticket sales. Other lawmakers suggested that the Lottery could give a greater percentage away in prizes, thus driving up sales and the overall amount of Lottery revenue.

But ultimately, the legislature decided not to dictate to the Lottery how it should come up with the extra money.

Gonder said the Lottery is doing several things that it hopes will help meet its target of $289 million of revenue for education. Among them are new Powerball and Mega Millions promotions and new vending machines that can sell a greater number of Lottery games.

The Lottery also is encouraging retailers to display more Lottery games on their counter space and to start selling new games as soon as they become available. Gonder said the Lottery also plans to devote a greater percentage of revenue to prizes -- 79 percent instead of 76 percent -- on a new Scratchers game that will debut in August, hopefully helping to increase sales.