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Audit: Lottery sales not boosted by switch to college funding

Post by Jordan Schrader / The News Tribune on Jan. 3, 2012 at 12:07 pm |
January 3, 2012 12:19 pm

A switch in where lottery money goes has not exactly sent tickets flying off the shelves, legislative auditors say.

Ticket sales increased 4 percent last year — to more than $510 million, still shy of a 2008 peak. The increase is due to changes in jackpots and economic conditions, says a report in draft form from the Joint Legislative Audit and Review Committee.

JLARC gives no credit to lawmakers’ decision in 2010 to spend the biggest chunk of lottery proceeds on higher education scholarships and grants, followed by preschool programs for the poor. Previously, that money was spent on school construction.

Sen. Jim Kastama, D-Puyallup, sponsored the measure making the change and said it would help sell more tickets. He and lottery officials said the lottery would be able to advertise its mission to fund college education much more than the aid to school construction, which school districts worried would make voters think they didn’t need the money from local property-tax levies.

Auditors said:

Lottery ticket sales increased by over $19 million in FY 2011 compared to the previous year.  However, it does not appear that the change in beneficiary was responsible for this increase.  JLARC found this increase is consistent with what sales would have been without the beneficiary change.  This finding is based on statistical models that reliably predict sales using jackpot amounts and economic conditions.

Nor has advertising boosted sales, according to auditors. The lottery spent $12.1 million last year on an advertising contract with Cole & Weber United, including $2.3 million to get the word out about the new benefits for college students and preschoolers.

JLARC found almost no statistically significant relationships between advertising expenditures and ticket sales.  The only exception was a slightly positive impact on Powerball ticket sales from a targeted ad campaign during that game’s introduction in 2010.  However, the analysis indicates that the return for each dollar spent on this Powerball advertising was likely less than one dollar in ticket sales.

The Lottery hasn’t yet put out an official response, but spokesman Arlen Harris said word of the year-and-a-half-old change might just need more time to circulate. As for advertising, he said:

Coming up in six weeks we have the Super Bowl. And Pepsi and Coke and Budweiser and Doritos are all going to be spending millions and millions of dollars on advertising. They don’t know that the purchase of those ads drive sales of their products or not. I think that’s a big question mark for anybody in sales.

Here’s the annual report by Washington’s Lottery for last year, with revenue information on page 37.

And here are a couple of the ads about the funding change:

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