Georgia lottery chief keeps education in the forefront

Dec 20, 2004, 8:37 am (Post a comment)

Georgia Lottery

Margaret DeFrancisco's mind, like that of many corporate chieftains, is always in marketing mode.  Focus groups, retail outlets, promotional buzz and creating new products occupy her thoughts.

But DeFrancisco shoulders a responsibility that transcends that of the typical CEO.  How she performs as president and CEO of the Georgia Lottery Corp. impacts how many college-bound teens will be able to afford higher learning and how many kids have access to pre-kindergarten.

Parents, students and lawmakers are betting on her ability to keep raking in the profits.

"We've had a wonderfully successful year, and there may have been a few folks out there who were worried about that," DeFrancisco said recently from her office in downtown Atlanta.

A year ago, the state picked the former director of New York's lottery to take over the highly touted Georgia program.

Months before, Rebecca Paul, who had served as head of Georgia's lottery since it was launched in 1993, announced she was leaving to direct the newly formed program in Tennessee.

Under Paul, the lottery transformed from the brainchild of then-Gov. Zell Miller as a way to fund education initiatives to a sales juggernaut that exceeded early expectations and became a model for other states to adopt.

Except for a dip in 2001, lottery sales in the state steadily climbed during the program's 11-year history.

DeFrancisco said she was drawn to the Georgia job in part because the lottery organization was structured like a private corporation rather than a government agency.

"You sell products and turn a profit and are much more like a private company," she said.

DeFrancisco's annual base salary is $225,000 to run the Lottery Corp., which has 260 employees. She also is eligible to receive a performance-based bonus on top of that, but the group's board of directors has not yet determined how much that will be this year.

So far under DeFrancisco's watch, ticket sales have continued their upward climb.

At the close of the 2004 fiscal year, which ended in June, the lottery pulled in more than $2.7 billion, a 4 percent increase over the prior year.

And the money transferred to education funding also has been increasing, reaching a record level of nearly $783 million during the past year.

The proceeds are earmarked primarily for voluntary enrollment in pre-kindergarten programs and the HOPE scholarship for college students.

For every dollar spent on lottery tickets, about 33 cents goes toward education programs, 53 cents goes toward paying prizes and the remaining 13 cents is used for operating expenses, including salaries.

But the 33 cents for education isn't stretching as far as it used to.

With more students enrolling in the state's public universities and qualifying for tuition coverage under the HOPE requirements as well as rising tuition prices, the pressure is on to continue the growth in lottery sales.

"At some point, the demand on HOPE and the demand on the pre-K program will far outstrip any supply of money that we can bring to it. It's a given," DeFrancisco said. "But that being said, those aren't things that we have any control over. Our sole and only job is to offer games that people will buy so that we can raise revenue. We are not the people in charge of the policy at all."

Lawmakers began debating the dilemma in recent years after being faced with the prospect that the system soon could reach a breaking point unless they made changes in the funding equation.

They decided last year to change the HOPE qualifications standards in three years and placed triggers that could decrease coverage of fees and purchasing books if funds start dropping.

While students now earning a "B" average can receive tuition coverage, in the future, they will have to have at least a 3.0 grade point average.

The early success of lottery sales in Georgia is part of the reason why officials are in their current fix, said a Tennessee lawmaker who was instrumental in bringing the games to his state this year.

Steve Cohen, a Democratic Senator from Memphis, said that as officials in his state began crafting their lottery proposal, the mantra was always "WWGD" - "What would Georgia do?"

Tennessee adopted the same merit-based HOPE scholarship. But one area where Cohen said he does not want to follow Georgia is the state's history of tacking on additional costs from the funding pool.

When Georgia's lottery program first started, the scholarship covered just tuition for low- to middle-income students going to state public universities. But a number of politically backed changes, including lifting income restrictions, extending assistance to private university students and adding book and fee allowances, were tacked onto the program.

"Georgia started off with a limited scholarship program. It started outstripping the resources even though the resources continually grew," Cohen said. "That's something we need to be careful of."

Georgia Lt. Gov. Mark Taylor said the discussion about HOPE's future isn't over, adding that he wants to revive the issue in the upcoming legislative session.

"Tuition is the great unknown cost factor in the lottery and the HOPE scholarship, but tuition increases have been very, very consistent; they've been very, very high," Taylor said. "So absolutely lottery sales need to continue to grow."

He points to the lottery's strong track record in projecting a 4 percent growth annually in sales.

But he also says that he wishes the lottery corporation would focus more on marketing efforts to ensure that expected growth.

"They don't need to cut back on advertising," Taylor said. "I personally think they are doing less advertising."

An area Georgia should be concerned about is the growing competition from new lotteries in neighboring states and other forms of gambling, such as Internet games, said David Mustard, an associate professor of economics at the University of Georgia's Terry College of Business.

"Over the long run, there are a lot of things that make our expected growth in the future to be pretty modest especially compared to what it's been historically," said Mustard, who has done research into the state's lottery and HOPE scholarship system. "All these factors point me to: We're not going to grow very fast."

DeFrancisco, who in New York saw competition from lotteries on all sides of neighboring states, said she is not worried about the new programs bordering Georgia.

"When there's a big Mega Millions jackpot, you can bet your boots that folks come across from South Carolina to Augusta or anywhere close to buy a ticket," she said. "But over time, every lottery does well whether they have someone next to them or not."

Banner-Herald

Tags for this story

Other popular tags

Comments

Nobody has commented on this story yet.

Subscribe to this news story
Guest