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Connecticut Gov. considers dumping Powerball

Jul 17, 2005, 1:30 pm

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Powerball

Connecticut Governor M. Jodi Rell thinks Powerball, the multi-state lottery game that offers huge potential payoffs, is about to become a lousy bet.

The agency that runs the game announced the odds of winning will be a lot higher starting next month, and winners who opt for multi-year payouts will wait longer for the big money.

Rell asked state officials to review the new lottery rules and decide if it is still a good deal for Connecticut lottery players.

"If we don't approve of the rules, in essence we are withdrawing from Powerball," said Paul Bernstein, legislative liaison for the state Division of Special Revenue, the agency charged with approving games for the Connecticut Lottery Corporation. "Games of chance in Connecticut must offer players a fair and reasonable shake. We want to make sure that's the case" with Powerball.

Powerball announced changes that increase the minimum jackpot from $10 million to $15 million, but reduce the odds of winning. Further, annual payments will now start lower and increase over the years; currently the annuity is paid evenly over 30 years.

The new rules take effect for the Aug. 31 drawing. The Special Revenue division is expected to make a decision within two weeks.

When Rell ordered the investigation into the Powerball changes, she wrote a letter to Paul Young, special revenue executive director.

"While I realize that risk is an essential aspect to all games of chance," Rell said, "I do not think that risk should be so high as to be patently unfair to the purchaser of the ticket."

Rell also said the new annuity payment schedule is "unfair and makes a winner a loser."

The number of white balls to draw from will go from 53 to 55, which will drive the odds of winning the jackpot from 1 in 120 million to 1 in 146 million. The number of red powerballs will remain at 42. The average winning payout would be $84.1 million. If taken in a lump sum, the jackpot would amount to $46.9 million after taxes.

But the annuity payments will start lower than they do now and increase by 4 percent each year, so the largest payments would be in last few years of the payout.

Under the new schedule, it would take 14 years for the annual payment to reach the same level as the first payment under the current method.

By year 15, the payment would be higher, and ultimately, the jackpot at the end of the 30-year period would be more, because it will be adjusted for inflation.

The changes could end up being bad for the lottery's business, Danbury resident Patricia Pelletier said.

"I used to play regularly, but it's always getting more complicated," Pelletier said. "You hear about people who can't even get their lump sum because of problems. The lotto is just not a big thing. People want to put their money in other things like real estate or casinos."

The changes in odds of winning and the payouts would discourage Jenny Morelle of Danbury from playing even if the jackpots are higher.

"If I'm older, I would not appreciate that. I would just take the lump sum," Morelle said. "It's hard enough to win as it is now. The chances are so few and far between."

Most players take the lump sum, but two or three per year take the annuity payment, said Charles Strutt, executive director of the Multi-State Lottery Association, the Urbandale, Iowa group that runs Powerball.

Strutt declined to comment on Rell's concerns, but said the new payment system will not hurt winners.

"That's designed to run consistent with the rate of inflation," Strutt said. "It allows a player to maintain a lifestyle. I'm not saying it's a good deal or a bad deal. It's a matter of managing your money."

Strutt said the total dollar amount is higher under the graduated annuity. With equal payments, inflation actually means a winner gets less each year, he said.

Bob Williams, a financial planner and owner of Money Concepts in Danbury, said the new payout could be a good deal depending on how soon someone wants their money.

"If it's a no-lose situation and the graduated payments get higher, and you have a beneficiary and you don't need it all tomorrow, it's clearly smart thinking," Williams said.

The odds were changed, Strutt said, because there were just too many winners last year.

"We had a run of a lot of winners," Strutt said. "We just want to add more to the population."

Last year the Powerball — which operates in 27 states, the Virgin Islands and Washington, D.C. — had 17 winners, the most since 2002 when it had 12 winners. More winners keep the jackpots lower, and when the jackpot is lower, fewer people buy tickets.

Rell, in her letter, said larger prizes aren't necessarily a good thing.

"I am equally concerned that the lure of the mega-jackpot will entice more people to bet beyond their means," Rell said.

According to Rell's office, she has not sought the help of other Powerball state governors in opposing the rule changes.

Lottery officials in other Powerball states like New Hampshire, Vermont, Rhode Island, Pennsylvania and Arizona had no objections to the rules changes.

Since Connecticut adopted the Powerball in November of 1995, it has brought $323 million to the state's general fund. In the last fiscal year, it contributed $42 million into the general fund. Combined, all of the Connecticut lottery games produced $280 million in state revenue last year. The odds of winning the Connecticut Classic Lotto jackpot are 1 in 7 million.

Diane Patterson, spokeswoman for the Connecticut Lottery Corporation, would not comment on the matter.

Bernstein, of special revenue, said he doesn't know what Connecticut will do if it dumps Powerball. He said MegaMillions, the multi-state lottery in New York, California and other states, is usually offered only to states larger than Connecticut.

Last month, Seymour resident Christopher Ewen hit a $59 million Powerball jackpot, the largest jackpot in the 33 years of the Connecticut state lottery. He took the lump sum payment. The winning ticket was drawn eight years to the day from the last time a Connecticut resident won an $8 million Powerball jackpot.

New powerball rules

The folks that run Powerball are changing the way they pay off jackpots for winners choosing a 30-year-annuity.

  • The estimated average jackpot under the new rules will be $84.1 million.
  • If it was paid off in equal amounts, as it is now, winners would get $2.8 million a year, before taxes.
  • Starting Aug. 31, payments will be backloaded, meaning winners will get far less in the early years. The winner of an $84.1 million jackpot will get $1.72 million in year one.
  • The winner won't reach $2.8 million until year 14.
  • The winner will get $5.36 million in year 30. Nearly one-third of the total will come in the last five years.

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