Published: April 05, 2008 11:16 pm         

State’s leaders decide to fold

Staff and wire reports



Oklahoma Lottery Com-mission officials think it’s a cinch more cash could be raised for education by increasing the amount of money available for lottery prizes.

It’s a business model that has worked everywhere else it has been tried, they say. But House and Senate Republi-cans, who never liked the idea of a state lottery, have rejected the idea so far.

One Dem-ocratic senator charges the GOP op-position is based on a desire to kill the state-run games.

“They didn’t want the lottery to succeed in the first place and therefore they are going to do whatever they can to make sure it doesn’t succeed and they can say, ‘I told you so,”’ said Sen. Richard Lerblance, D-Hartshorne.

Senate Co-President Pro Tem Glenn Coffee, R-Okla-homa City, denies that accusation, while saying some GOP lawmakers are concerned in-creasing payouts will lead to “an expansion of gambling.”

Lerblance was sponsor of a bill to remove a requirement in law that increases the percentage of money going to education from 30 percent to 35 percent beginning July 1. His bill did not receive a hearing by last week’s deadline for considering Senate measures in committee.



Stating their side



While having a higher percentage earmarked for education sounds good, lottery experts say the requirement inhibits the growth of lottery sales and therefore ultimately reduces the amount of money that goes to schools, colleges and career tech centers.

At its last meeting, lottery board of trustees member Jim Orbison of Tulsa warned the lottery is facing a financial crisis unless lawmakers remove the requirement.

The commission heard from lottery officials in other states who dropped their profit guarantee and saw lottery sales soar and record amounts of money go to education.

In Florida, a mandated profit of 38 percent was removed and sales, which had stagnated at $600 million at the start of the decade, climbed to $2.3 billion a year ago, said Leo DiBenigno, secretary of the Florida lottery.

“It was not only dramatic but immediate,” DiBenigno said. He said the profit margin gradually was lowered to 19 percent, but the amount of money sent to education jumped from $200 million in 2002 to $490 million in 2007.

He said he had no reservations schools in Oklahoma would get more money by removing the restriction.

“It’s as close to one of those fundamental business truths as you can get,” DiBenigno said.

Tom Shaheen, director of North Carolina’s lottery, said a 35 percent profit requirement hurt sales when his state started a lottery in 2006 because other states had larger prize payout percentages. He said sales picked up when the requirement was removed.

“Every state that has done this, without exception, has dramatically increased the net dollars flowing to education,” said William Paul, chairman of the board that oversees Oklahoma Lottery.



Taking it to the bank



Paul, a former president of American Bar Association, has had extensive business experience, including being a director of the state’s largest bank for 25 years. To him, reducing the profit percentage is a business no-brainer.

“The lower percentage of a whole lot of money is more dollars than a higher percentage of not very much money,” he said.

If the change is not made, Paul said, the lottery will have to cut its advertising, causing a further reduction in sales. Based on other states’ experience, that will lead to even lower sales and less money for education.

“We think it is a situation that is just not going to be manageable,” he said.



This is no joke



Rep. John Enns, R-Enid, said he thought the proposal to lower education’s share was a joke.

“The lottery hasn’t performed the way they said it would perform,” he said, adding he didn’t believe increasing the payout would entice bigger sales and profits.

Lottery officials say Oklahoma Lottery has been hurt because it has the lowest payout of any state — 54 percent for instant games and 52 percent for online games — and could lose $10 million if Arkansas voters approve a proposed lottery this year, which could drain sales away from eastern Oklahoma.

Oklahoma Lottery was approved by 64 percent of voters in 2005, but critics say it has failed to live up to expectations. It has a projected shortfall of $4.6 million for the current fiscal year.

Rep. Mike Jackson, R-Enid, said the state’s Board of Equalization has improved attempts to estimate lottery revenue but still is missing the mark. Jackson said lawmakers are looking at a number of proposals that would try to stimulate bigger profits — including privatization — to help better fund education. He said any effort to stabilize the fund itself would provide lawmakers with a clearer view of what they can work with when funding education.



Get it on the table



Supporters of the lottery, including Gov. Brad Henry, say education has received tens of millions of dollars more than it would have gotten because of the games.

Henry said he is open to any proposal to make the lottery more successful and is “a bit surprised there is not a higher level of discussion” about the plan to change the payout percentage.

“That’s particularly in light of the evidence the Lottery Commission has presented that they can actually raise significantly more dollars for education by doing this,” said the Democratic governor, who successfully pushed to get the lottery on the ballot.



‘The way the people voted’



Sen. Patrick Anderson, R-Enid, said he opposes decreasing the percentage that would go to education.

“The people passed the lottery,” Ander-son said, adding voters approved earmarking 35 percent to education. A reduction would be going against the vote of the people. Anderson said the lottery has failed to bring in the anticipated revenue Henry promised.

House Speaker Chris Benge, R-Tulsa, agrees.

“That’s the way the people voted it,” he said.

Benge said he is not convinced Oklahoma would have the same result as other states by lowering its profit percentage and increasing payouts because of the presence of so many casinos that compete for the state’s gambling dollars. Oklahoma has more than 80 Indian casinos.

“Well, we are a bit different because we have more casinos than any other state,” Paul conceded. “But there are other states that have a lot of casinos, and this principle still holds true — that increasing levels of prizes results in increased sales.”



It’s a private matter



While Senate Republicans oppose the change in the payout percentage, many of them supported a proposal by Sen. John Ford, R-Bartlesville, to create a commission composed of elected officials to study the possibility of turning the lottery over to a private company to run.

If a private company took over the lottery, they could use any percentage they wanted for payouts, Ford said, because it would be guaranteeing the state so-many millions of dollars a year in a multi-year contract.

The senator, who personally opposes the concept of a state lottery, said his goal is to get more money for education. He said his bill had nothing to do with the plan put forth by lottery commissioners.



‘Hard to believe’



Oklahoma Lottery Director Jim Scroggins said he is confident any commission will find the state lottery has a lean operation.

Scroggins said he knew the state faced a hurdle because of its payout requirement when he left as lottery director in Missouri to come to Oklahoma.

He said he is convinced, like his board of trustees, Oklahoma will join other states that have raised their lottery profits by increasing the percentage of prizes paid to lottery customers.

“There has never been a state who has gone to this that has not been successful,” he said. “To think that Oklahoma would be the first not to be successful, I find that hard to believe.”

Lerblance said there is a possibility he will try to revive his plan by amending another bill. But he is concerned Republicans won’t budge from their position.

“They don’t want to give it a shot,” he said.



News & Eagle Staff Writer Tippi Rasp contributed to this Associated Press story.