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Kentucky Lottery works to counter revenue loss

Apr 20, 2004, 7:14 am

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Kentucky Lottery

Even as they celebrated the 15th anniversary of the start-up of the Kentucky Lottery and predicted a strong finish to the fiscal year lottery officials acknowledged an uncertain future yesterday.

That's due in large part to new competition from a neighbor. Tennessee, whose residents once were responsible for 12 percent to 15 percent of the Kentucky Lottery's sales, started its own lottery this year.

Yesterday, Tennessee added the Powerball to its lineup.

Kentucky Lottery spokesman Chip Polston said officials expect that when Tennessee offers a full range of games in two or three years, the loss in ticket sales in Kentucky may surpass $70 million a year.

Even so, officials were upbeat during a press conference yesterday to tout the lottery's 15th anniversary, announcing that it has pumped more than $2 billion into the state treasury and about $4.6 billion in prize money to players since its start in April 1989.

"We've been able to achieve great heights. ... We look forward to continued success, despite an increasingly competitive marketplace and challenging atmosphere," lottery president Arch Gleason said from lottery headquarters on West Main Street in Louisville.

In an interview, Gleason said Kentucky officials will "continue to refine the games" they offer in an effort to keep sales high despite the increased competition.

But he said it doesn't appear that state officials, including legislative leaders, have any interest in adding keno, slots, video poker or other casino-style gambling games to the lottery's offerings.

The lottery board won't pursue those options without "a strong indication from policymakers that it would be the right thing to do," Gleason said.

In its last full fiscal year, 2002-03, the Kentucky Lottery posted record ticket sales of $673.5 million and returned a record $180.1 million to the state. Polston said the corporation has delayed making firm projections for this fiscal year, primarily because of the unknown impact of the Tennessee lottery, but he said ticket sales of $700 million "are what we're shooting for" in 2003-04.

Scratch-off ticket sales in Kentucky have remained strong, a fact that lottery officials credit to increases in prize awards. Now 66 percent of scratch-off ticket sales is returned to players in prizes, up from 62 percent five years ago, officials said.

The Kentucky legislature decides how the state lottery dividend is spent. In 1998, the General Assembly enacted a seven-year plan to shift lottery proceeds to scholarship programs to benefit high schools.

In the last five years, more than $400 million has gone for needs-based and merit-based scholarships, assisting about 365,000 high-schoolers.

The Kentucky Lottery has sold more than $7.8 billion in tickets, with about 60 percent, or $4.6 billion, returned to players in prizes. About 3,000 lottery retailers statewide have shared about $475 million in commissions for selling and cashing tickets.

The lottery, which has about 200 employees, uses less than 8 percent of revenues for marketing and operations.

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