The Missouri Lottery posted record high sales of nearly .16 billion in fiscal 2014 which ended June 30—the fourth year in a row for new highs in revenues and the fifth consecutive year of growth. But proceeds transferred to education fell from 9 million in 2013 to 7 million– the third highest annual amount in Lottery history, but far short of the nearly 6 million legislators had appropriated for 2014 and also below the budgeted amount in five of the six previous years.
Governor Jay Nixon wants to know what’s going on and he’s asked the state Office of Administration to conduct a comprehensive review of Lottery operations to find out why it can’t provide a steady funding source for state education. “We have a responsibility to make sure the lottery keeps its promise to our public schools in an efficient and effective manner,” Nixon said in a written statement.
The same thing happened in Missouri in 2007 and 2010, when Lottery sales grew but education transfers declined. However, the gap wasn’t as large in those years as it was in 2014. The legislature had appropriated nearly $316 million
The Lottery contributes about 4 percent of Missouri’s public education funding. Over time, as sales have grown, the percentage of prize payouts also has increased, meaning the share of Lottery sales that help fund education programs has gradually declined. Last year, roughly 23.4 percent of sales went toward education funding and more than 70 percent went toward prizes.
Missouri Lottery Chief Operations Officer Gary Gonder said the gap between increasing sales and decreasing education funding partly is due to differing profit margins and prize payouts in Lottery games. For example, scratch-off games, which make up about two-thirds of Lottery sales, have a higher percentage payout in prizes and therefore transfer a lower percentage to education than Powerball and other more profitable games.
But, Gonder said, despite the overall increase in Lottery sales, Powerball sales actually dropped in 2014. That accounted for half of the reduced transfer amount to education. Gonder added there were fewer large Powerball jackpots in 2014 than 2013. “Fewer big jackpot runs tend to negatively impact sales of all lottery products,” Gonder said.
Linda Luebbering, director of budget and planning in the Missouri Office of Administration, will lead the Lottery review for Nixon. She said she’ll compare how much of Missouri Lottery proceeds go toward prizes and administration compared with other state lotteries.
The Missouri Lottery was created in 1986. In 1992, voters approved a constitutional amendment to direct profits only toward education.
