Lottery’s Explanation of December Scholarship Funding Doesn’t Make Sense

Arkansas Lottery

Recently we wrote about how the Arkansas Lottery paid very little to scholarships in December despite taking in more than $46 million.

The Arkansas Lottery notoriously budgets very little of its revenue for college scholarships, but December was particularly dismal, with students receiving only 13.8 cents out of every dollar the lottery made.

This week KNWA asked lottery officials why so little money went to scholarships last month.

KNWA writes,

They [Arkansas Lottery officials] say the lottery actually makes more money from its draw games such as Powerball and Mega Millions, but also local draws like the Natural State Jackpot and the Cash 3.

Officials say the lottery makes about 43 cents on the dollar for those, but the instant ticket games that had record sales in December don’t make as much. It varies depending on which ticket amounts are being sold. That then affects the profits, and, in turn the amount going to scholarships.

In other words, lottery officials blame the poor scholarship funding on the fact that the Lottery sold a lot of instant (i.e. scratch-off) tickets in December as opposed to Powerball tickets.

If it’s true that scratch-off tickets aren’t as profitable for the Arkansas Lottery, then why does the Lottery work so hard to promote them?

Why would they keep rolling out scratch-off tickets like the $20 ticket we wrote about in December?

If these instant tickets are actually hurting the Arkansas Lottery’s bottom line, then why does the state lottery offer more than 50 different scratch-off tickets at stores and gas stations all over Arkansas?

It simply doesn’t make sense.

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Lottery Gives Students Less Than 14 Cents of Every Dollar Despite Good December

Arkansas Lottery

Today the Arkansas Lottery released its financial report for the month of December.

The report shows that the Arkansas Lottery took in more than $46.1 million last month, but paid less than $6.4 million to college scholarships — 13.8% of the Arkansas Lottery’s total revenue.

The Arkansas Lottery actually made nearly $275,000 more in December of 2019 than it did in December of 2018, but it still paid nearly $279,000 less to college scholarships.

In other words, the Arkansas Lottery made more money last December than the December before, but gave less money to students.

In fact, December of 2019 appears to have been one of the the best Decembers in the Arkansas Lottery’s history, in terms of revenue, but scholarship funding remained low.

This tracks with what we have said before: The Arkansas Lottery appears to be budgeting less money for college scholarships this year, but there isn’t a clear reason why.

So far this fiscal year the Arkansas Lottery has spent only 14.5% of its gross revenue on scholarships. For perspective, the average state lottery spends 30%.

Below is a breakdown of lottery revenue and scholarship funding so far in Fiscal Year 2020.

Month Gross Lottery Revenue Paid to Scholarships % Gross Revenue
July $41,239,173.79 $4,523,930.75 11.0%
August 40,899,086.75 4,942,736.97 12.1%
September 36,202,677.79 6,565,973.32 18.1%
October 38,932,640.23 6,318,099.21 16.2%
November 36,118,641.12 5,947,177.45 16.5%
December 46,134,469.21 6,371,983.49 13.8%
Total $239,526,688.89 $34,669,901.19 14.5%

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Five Facts About the Arkansas Lottery

Arkansas Lottery

Ten years running, the Arkansas Lottery has been a dismal failure.

Not only has the Lottery pulled billions of dollars out of the economy, but it has failed to deliver on its promise of providing $100 million per year for college scholarships as well.

Here are five facts to know about Arkansas’ state-run lottery.

#1. Only A Fraction of the Money Goes to Students

In a good year, the Lottery gives college students about 18-19 cents out of every dollar it makes.

So far this fiscal year the Lottery is giving students about 14-15 cents out of every dollar.

For perspective, the average state lottery budgets about 30% of its revenue for education.

This puts the Arkansas Lottery’s scholarship budget well below the national average.

#2. Most Lottery Revenue Goes to Prizes

The Arkansas Lottery spent 68% of its revenue in Fiscal Year 2019 on prizes for lottery players — nearly $350 million.

The same was true in 2018, when the Lottery spent more than $340 million on prizes.

The percentage of revenue the Arkansas Lottery spends on lottery prizes is one of the highest of any lottery in the nation. This means the Arkansas Lottery arguably is focusing too much on prizes.

The millions of dollars the Arkansas Lottery has over-spent on prizes could have been spent on scholarships instead.

#3. Most Lottery Tickets Sold in Arkansas are Instant Tickets

In fiscal year 2019, 79% of the Arkansas Lottery’s ticket sales came from instant tickets like scratch-off tickets.

Instant tickets are controversial, because people who buy them may be more susceptible to problem gambling and gambling addiction.

Because players win or lose instantly, scratch-off tickets affect people in much the same way that casino-style games do.

For this reason, some experts refer to scratch-off tickets as “paper slot machines.“

#4. Lottery Ticket Sales are High in Counties Suffering From Poverty

Last year some of Arkansas’ poorest counties were among the top ten with the highest lottery ticket sales, per capita.

The counties and per capita ticket sales are:

  1. Arkansas County ($347.82 per person)
  2. Chicot County ($329.22 per person)
  3. Nevada County ($310.31 per person)
  4. Prairie County ($293.47 per person)
  5. Monroe County ($290.49 per person)
  6. Union County ($288.77 per person)
  7. Ouachita County ($286.32 per person)
  8. Jefferson County ($284.79 per person)
  9. Dallas County ($269.88 per person)
  10. Conway County ($268.04 per person)

In Chicot County, more than 31% of the population lives in poverty, according to the U.S. Census Bureau.

More than a quarter of Monroe County’s population lives in poverty.

And more than one in five people in Jefferson, Nevada, Ouachita, and Dallas counties lives in poverty.

The average county in Arkansas spent $176.58, per capita, on lottery tickets in fiscal year 2019 — meaning these counties were well above average.

#5. Other State Lotteries Have Spent More on Education Despite Making Less Money

From 2010 – 2012 the Arkansas Lottery made millions of dollars more than the Louisiana Lottery.

However, the Louisiana Lottery gave millions of dollars more to education than the Arkansas Lottery did to college scholarships.

How was this possible?

The Louisiana Lottery earmarked 35% of its gross lottery revenue for education.

By budgeting a larger percentage of its revenue for education than the Arkansas Lottery did, the Louisiana Lottery was able to give more money to students despite making less money from lottery ticket sales.

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