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Senate Notes

NOTES FROM THE SENATE

BY SENATOR JACK HILL,

4th DISTRICT

 

August 24, 2015

CAN MORE REVENUE FOR HOPE BE SQUEEZED OUT OF THE LOTTERY?  Part IV
 
FIVE THINGS WE LEARNED ABOUT GEORGIA'S LOTTERY
 

1.      Georgia's Lottery is one of the largest in the nation, 5th in terms of sales. The other states that are in the top ten for largest in terms of total sales include states such as New York, California and Texas, as well as smaller states such as Massachusetts and New Jersey.  Of the top ten most populous states, all ten have a lottery operating in their state.  Eight of these lottery systems are included in the top ten for total sales.  For FY2014, the New York lottery took the top spot at $9.23 billion in total sales followed by the Florida lottery in second with $5.37 billion in sales.  Florida and New York are the third and fourth most populous states, respectively, while Georgia ranks eighth in overall population.  Total lottery sales of $4.02 billion place Georgia ahead of more populous states such as Pennsylvania, Ohio, Illinois and Texas in terms of total lottery sales.

 

2.      Of the largest ten lotteries in the U.S., Georgia's lottery transferred the 2nd lowest percentage of funds to state use like education in Georgia, a figure more than 3.46% less than the worst of the other 8 lotteries.  The lottery with the highest percentage transferred to state funds was 10.89% higher than the Georgia lottery's transfer. The state with the lowest transfer to state funds was at 20.07%, meaning Georgia was only 3.43% points ahead of the lowest slot.  When looking at the amount transferred per capita, Georgia is the fourth highest spot with $93.60 transferred per capita.  In per capita transfers, New York has the highest with $160.69 per capita. Massachusetts and New Jersey round out the top four with $143.95 and $107.96, respectively.

 

3.      While there's no hard evidence that lottery sales follow population growth, of the top lottery states, Georgia is the third fastest growing state population-wise: and proceeds growth has not followed in step, trailing even states with negative or flat population growth. During the recession and recovery period of 2010-2014, Georgia grew by approximately 382,879 people, while New York, California, Texas, Massachusetts and New Jersey grew 345,360, 1.5 million, 1.7 million, 181,335 and 134,595, respectively. Georgia has grown faster than states such as New York and Massachusetts, but both states have surpassed Georgia in terms of total sales.  Logically higher growth in population numbers could lead to higher sales due to the availability of more potential customers, but this has not necessarily been the case in Georgia.  In FY14, states with similar population growth to Georgia, such as California and North Carolina, who are seeing 4% to 5% growth in their lottery transfers, compared to Georgia's lottery growth of just under 2%.

 

4.      Of top lotteries such as New York, Florida, California, Massachusetts, Pennsylvania and New Jersey, Georgia had the second highest percentage of operating expenses. Of the top ten lottery systems, Georgia is the only one that is operated as a corporation rather than a state agency. Corporations run differently than state agencies, so the fact that Georgia's lottery is run by a corporation could be a factor in why its operating expenses are higher than other states being compared.  Tennessee is a neighboring state that also runs its lottery as a corporation, so Georgia's structure is not unique.  When comparing the Georgia Lottery to the Tennessee Lottery, expense percentages between the two have a much lower variation (about 4.5% difference) despite the Tennessee lottery having $2.6 billion less in total ticket sales.  In addition to operating expenses, Georgia's lottery pays out 60% of its total sales in prizes.

 

5.      Georgia's lottery pays an average $86,123 salary, but a median salary of $58,300.  Over 100 employees are classified as supervisory or management staff out of the 300 or so total employees during FY2014.  Some operations are not done by employees, however.  The Georgia Lottery Commission holds contracts with various private firms for ticket terminals, software, and printing and distribution of instant win games.  Since a fair amount of the actual production of lottery needs is outsourced, it could be expected that a large portion of the lottery staff would be administrative in nature, to manage the contracts.  The number of higher paid administrative employees skews the average salary numbers and may explain higher salary expenses.  Legislation does not explicitly limit the salaries of lottery employees, but reforms were enacted by the General Assembly in 2011 to cap the amount of bonuses employees can receive, including a provision that says no bonuses can be paid out in years that the lottery transfers less to education than in the previous year.

 
The Lottery, like all state entities, has enabling legislation that establishes its operations and legislative oversight, OCGA 50-27-2.  Over the past four weeks, we've been looking at components of GLC's operations to better understand the complexities as well as its context as a Lottery in comparison to other states and accounting for economic factors.  Next, we'll look at possible recommendations or ideas for generating the most funds for education from lottery earnings.

 

 

 

I may be reached at
234 State Capitol, Atlanta , GA 30334
(404) 656-5038 (phone)
(404) 657-7094 (fax)
E-mail at Jack.Hill@senate.ga.gov
Or Call Toll-Free at
1-800-367-3334 Day or Night
Reidsville office: (912) 557-3811

 

 

Visit the Legislature Home Page at www.legis.state.ga.us


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