Law Change Allows More Money To Flow From Lottery To Education

Long-sought changes to Oklahoma's lottery law are paying off, literally.

Lottery officials say that, overall, sales are up about 40 percent, which will result in a higher-than-expected contribution to education. In an interview this week, a lottery executive explained that the improvement is directly attributable to legislation passed last session eliminating a key restriction on the use of lottery proceeds.

"We had to level the playing field a little bit," said Jay Finks, the lottery's Director of Marketing and Administration.

Under rules originally approved by voters in 2004, the Oklahoma Lottery Commission was required to annually contribute a minimum of 35 percent of gross proceeds to the state's Education Trust Fund. Those dollars were then divided up, according to prescribed percentages, between common education, higher education, career tech, the Teachers Retirement System, and a school consolidation fund.

Within a few years of the lottery's start, officials were telling lawmakers the 35 percent requirement was limiting what they could pay out in prizes, which was limiting the public's enthusiasm for the games.

"We had, for 12 years, pretty much the lowest payouts in the country," Finks explained, "and that fuels a loss in sales and a loss in playership and less money to education at the end of the day."

In fact, the lottery's peak contribution to education came in its third year, fiscal year 2008, when almost $72 million went into the trust fund. The amount hovered just below that for several years, before beginning a sharp drop and hitting a low of $53 million last year.

"We projected that if we didn't change the law this year," said Finks, "we wouldn't even achieve $50 million dollars to the state (in fiscal year 2018)."

But legislators did change the law, passing HB 1837 during the 2017 regular session.

Now, instead of depositing precisely 35 percent of gross proceeds into the fund, the amended law calls for the first $50 million of net proceeds to go into the fund, where it's divided up just as in the past. Any net proceeds above $50 million go only to common ed, and specifically to STEM and Pre-K through 3rd grade reading programs.

Lottery officials were able to convince lawmakers that removing the 35 percent mandate would increase their contribution to education, because they could put more money into prizes, which would boost sales.

Finks said, "We always said to legislators, 'Do you want 35 percent of a number that's going to never grow, and ultimately get lower, or do you want a smaller percentage of a much bigger pie?'"

The change in law went into effect July 1, 2017. At the same time, the lottery got rid of the old instant scratch-off games, replacing them with new games with better odds.

Retailers like OnCue, which sells lottery games at all 65 convenience store locations in Oklahoma, say they have seen a change, more winners and more sales. While they don't disclose specific sales numbers, company executives say the growth is significant.

"According to the lottery," said Scott Minton, OnCue's Director of Business Development, "it's been almost a 40 percent increase across the state and I'd say that our numbers would represent a growth in that category."

Lottery officials are now projecting their contribution to education will be back up over $60 million, perhaps as high as $66 million, this year.