The Missouri Lottery posted a record $230.3 million in profits for the 2004 fiscal year, well above state projections and the previous year's results.
A year ago, state lottery director Jim Scroggins predicted a sharp downturn in sales, and thus lottery profits for education, following a second consecutive year of advertising budget cuts by state lawmakers. Despite record sales the past year, Scroggins said he was sticking by his story that the ad cuts dventually would take their toll.
Up to now, we've been lucky, he said. Without the advertising cuts, he said, we would have been up even more. We're leaving money on the table.
Last year at this time Scroggins estimated that the $3 million cut from the fiscal 2004 advertising budget would lower the lottery's public profile and could slash annual sales by as much as $30 million. That, he said, would produce around $183.6 million, down from $193.9 million in fiscal 2003.
Strong sales earlier this year prompted lottery officials to increase their profit projection to $205 million. That prediction still missed by $25 million. Though annual sales are reported for each fiscal year ending June 30, the lottery's annual tally of profits for education is based on 12-month sales ending each May 31.
Missouri Rep. Bradley G. Roark, a Springfield Republican and appropriations subcommittee chairman, has been at the forefront of the effort to eliminate lottery advertising. He also was sticking by his story Tuesday.
I don't think advertising has any big effect in driving up their numbers, and the lottery's announcement this week of record profits supports that, Roark said. The lottery is almost like a monopoly, and we're spending these millions of dollars on advertising. It's a little ridiculous.
I thought it was well worth the effort to drop advertising for a few years to see what the numbers are. I'll be the first to say I was wrong, if I'm wrong.
Roark's no-advertising theory may not be tested.
State lawmakers cut the lottery's advertising budget from $8.2 million in 2002 to $6.3 million last year and to $3.05 million this year.
Starting July 1, the agency loses that sum too, and under a House-approved spending plan is to operate with just $50,000 for advertising.
However, Scroggins told Missouri Lottery Commission members Wednesday that the final version of the state budget cut $3 million for the commission but did not earmark it as advertising dollars.
Is it or isn't it? Scroggins said. The conference committee didn't define it.
Scroggins said the budget issue is still being studied, leaving a door open to at least some advertising spending in the 2005 fiscal year.
Decisions have to be made soon, he said, because a contract with an Kansas City advertising agency expires in August, and contracts for Powerball billboards around the state begin to expire July 1.
Those are critical, he said of the electric billboards that publicize the latest Powerball jackpot amount and hype sales for the twice-a-week drawings.
Roark said the final budget document gives Scroggins the flexibility to advertise in the coming fiscal year.
The $3 million was cut from a broad line item for expenses and equipment and does not bar advertising, as Roark's committee had recommended.
I wish the conference committee would have done its job and made it clear, Roark said. The lottery commissioners, he said, can spend however much they want on advertising.
If Scroggins and the agency restore some of the lost advertising funds, Roark said, it will become an issue next year if he returns as committee chairman. It wouldn't go unnoticed and, yes, we would ask questions, he said. To suggest that there would be any hand-slapping would be premature.
Scroggins said there are good reasons why lottery sales are up in the midst of declining advertising.
He has argued for years that a steady flow of new lottery games and products, such as Club Keno and $10 scratch-off cards, keeps players interested and boosts sales.
This year's sales were aided by the popular multistate Powerball game, which saw jackpots leap beyond the sales-hyping $100 million mark an unusual five times.
But Scroggins said big Powerball jackpots can't be counted on and the new-game well has run dry.
Only one new game is planned for the 2005 fiscal year. Starting in July, Scroggins said, the daily Missouri Pick 3, Pick 4 and Show Me 5 games each will add a televised midday drawing, doubling the action in those games.
For fiscal 2004, overall lottery sales through Tuesday were up 9.1 percent from fiscal 2003 which was up 20.9 percent from fiscal 2002.
Scroggins said those figures could signal the beginning of a worrisome trend. It's still a large number, he said, but the percentage of growth is smaller.
However, growth has been picking up again. January 2004 sales were up just 1.1 percent from January 2003. But for the rest of this year, lottery officials said, the monthly comparison shows sales up 10.1 percent in February, 11 percent in March, 12.4 percent in April and 15.4 percent in May.
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