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N.C. lottery expenses may top $96 million

May 15, 2006, 8:39 am

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North Carolina Lottery

In its first few months of operation, the N.C. Education Lottery is spending most of its money on staff salaries, contracted services and new vehicles.

The lottery could spend as much as $96 million on operations over the course of a year, assuming it meets its projected $1.2 billion annually in ticket sales. Under state law, the lottery can spend up to 8 percent of its sales on operations, which includes advertising, staff salaries, equipment and other costs.

Tom Shaheen, the lottery's executive director, said his job is to keep costs under control while also still maximizing ticket sales, with the ultimate goal being to bring in as much revenue as possible for education spending. State law says the lottery will aim to return 35 percent of its sales to the state for education spending.

"My mode of thinking is to streamline our expenses as best as we can without sacrificing the business side of running the lottery," he said. "You have to reach out to the players."

The lottery started March 30, four months after the N.C. Education Lottery Commission hired 18-year lottery veteran Shaheen to run it.

The lottery doesn't have a formal budget yet, Shaheen said, but it will have one by the time it begins its first full fiscal year July 1.

"We're probably going to go ahead and budget the full 8 percent and then take a look at the first six months and see how much of it we're actually using," he said. "If we're not using that full 8 percent, we would take some of that and put it into prize payout for players."

As of May 6, the lottery had sold $128 million worth of tickets. From last October through the end of April, the agency had spent $7.4 million.

Most of that money, $2.8 million, went to staff salaries and benefits. Another $1.7 million went into services the lottery purchases, from hiring security guards to watch over the lottery's offices around the state to paying equipment vendor Gtech.

The agency has also spent a lot of money, $1.5 million, with the state motor pool to buy vehicles, mostly for the 60-plus person sales force.

Though the advertising spending through April had been relatively small — $123,611 — the lottery can spend up to 1 percent of its sales on advertising, or about $12 million a year if it meets projections.

John Siddall, chairman and CEO of Richmond, Va.,-based advertising agency Siddall Inc., said lottery administrators have to balance their marketing dollars between promoting the games to players and promoting the value of the lottery to the citizenry more broadly.

"In (Virginia) we went to all of the universities and we began to do kind of public underwriting of sports programming," said Siddall, whose agency handled some marketing duties for the Virginia Lottery in the late 1990s. "Our purpose was to become a legitimate part of the fabric of society."

As for the N.C. Education Lottery? Shaheen says underwriting events, including sporting events, is something the lottery will probably do.

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