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N.C. lottery director says lower payouts could hurt sales

Mar 9, 2006, 7:18 am

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North Carolina Lottery

The law requiring the North Carolina lottery to return at least 35 percent of all ticket sales to state education programs could inhibit sales and ultimately cost the state money, according to the lottery's executive director and other experts.

To meet the requirement, North Carolina will pay out less to winners than neighboring states offer. Tom Shaheen, director of the state lottery and a past president of the North American lottery trade association, said that could mean fewer tickets are sold. Dedicating more money to prizes encourages more people to buy tickets and leads to more money for the state, experts say.

"I wouldn't say it's scientifically an absolute, but I believe it personally from my experience in the lottery," Shaheen said.

South Carolina's lottery director, Ernie Passailaigue, said he likes that his state doesn't dictate how much the lottery must give to education programs.

"Politicians don't understand this," said Passailaigue, a former state senator. "But the players understand this very much. If they buy the games and do not have very pleasant experiences - either through the dollars won or the repetitiveness of the wins - they are either not going to play or else go somewhere where they have a better chance."

South Carolina will pay out 61 percent of its sales revenue in prizes this year, he said. Virginia and Georgia are paying about 58 percent and Tennessee paid about 54 percent last year.

North Carolina's first batch of scratch-off lottery tickets will offer about $79.5 million in prizes. That's at least $10 million less than what Virginia and Georgia would pay and at least $14 million less than what winners would get in South Carolina.

Several states have seen success by increasing their payout percentages, while Texas saw a steady decline in business when it reduced its payouts from 60 percent of sales to 50 percent in 1997. Lawmakers reversed their decision two years later.

California, Ohio, Colorado, Connecticut, Washington and other states saw significant increases in sales and profits after increasing the percentages paid in prizes in recent years.

"What they understand is that it's a volume business and that more sales is the way to bring in more actual dollars," Shaheen said. "We like to say that you don't pay for scholarships with a percentage. You pay for them with real dollars."

State Sen. Tony Rand, D-Cumberland, said he doesn't recall how the 35 percent requirement made its way into law, but says he wouldn't object to a revision if it would mean more money for schools.

"If there's a better way to skin the cat," he said, "then the cat better look out."

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