A proposed contract for a consultant to review the Arkansas Scholarship Lottery sailed through a legislative panel Thursday after state Sen. Jimmy Hickey, R-Texarkana, said the study "will help us help turn the lottery around."
An official for the consultant, Camelot Global Services, said the company's recommendations helped the California lottery become the fastest-growing lottery in the nation after a period of declining ticket sales.
The Legislative Council's Policy-Making Subcommittee recommended Thursday that the council approve the proposed contract today without seeking bids, although state Rep. Mark Perry, D-Jacksonville, said there's still time for the council to seek bids in an attempt to save taxpayers money before awarding the contract.
Camelot Global Services would be paid a $149,500 consulting fee, plus up to $20,000 in travel expenses, under the proposed contract. If approved, the contract would begin today and end Dec. 31.
Earlier, Hickey told lottery Director Bishop Woosley that the lottery's employees don't have to be granted 1 percent cost-of-living raises and merit bonuses of up to 3 percent during fiscal 2015, even if the governor authorizes such action for state employees.
Hickey's suggestion came after he and Woosley disagreed about whether the lottery provided detailed information about its travel expenses that Hickey said he requested.
The lottery's ticket sales revenue and net proceeds for college scholarships have declined during each of the past two years.
The lottery has helped fund Academic Challenge scholarships for more than 30,000 college students during each of the past five school years. The Legislature has cut the size of scholarships for new recipients twice during the past few years, partly due to lottery proceeds falling short of initial projections.
Camelot of Philadelphia asked the lottery on Aug. 13 to extend an Aug. 18 deadline by three weeks so it could submit a bid for a separate performance audit of the lottery, but the lottery declined to do so, according to lottery records.
About two weeks later, Hickey told the Lottery Oversight Committee that he wanted to hire Camelot Global Services for a legislative study of the lottery without seeking bids.
"To me, that doesn't raise a red flag," state Sen. Jonathan Dismang, R-Searcy, said in an interview.
"I am glad that we [are] able to do something that has some independence from the commission and has some independence from the fact that they don't have a relationship with the lottery currently," Dismang said.
Capitol Advisor Group lobbyists Bill Vickery and Mitchell Lowe represent Camelot. Hickey said he's been talking with Vickery about the possibility of such a study since mid-July.
Richard Wheeler, senior vice president of Camelot's North American operations, said the firm didn't submit a bid to the lottery to conduct a performance audit because "we felt there were things [in the lottery's request for proposal] that would not enable us to take the objective, broad-based review that we normally would."
Delehanty Consulting of Wisconsin submitted a proposal for the lottery's own performance audit costing $170,000, and Rhode Island-based Gtech Corp. submitted a proposal costing $30,000, lottery officials said.
Arkansas Lottery Commission Chairman John C. "Smokey" Campbell of Hot Springs said he's not sure whether the commission will award a contract to one of the firms to proceed with a lottery performance audit.
During the Policy-Making Subcommittee meeting, Hickey said he's proposing hiring Camelot Global Services without seeking bids because the firm has run the United Kingdom's lottery since 1994 and also worked as a consultant for several state lotteries. Camelot is owned solely by the Ontario Teachers Pension Plan.
Wheeler said Camelot has supplier relationships with lottery vendors Gtech Corp., Scientific Games International and Intralot. Scientific Games and Intralot are the major vendors for the Arkansas lottery.
Camelot has been consulting with state lotteries since 2009, and California's lottery "went from being in decline from around 2005 to 2009 ... to being the fastest growing lottery in the United States," largely as a result of the company's work with the lottery, Wheeler said.
Wheeler said Camelot would look for ways to boost the Arkansas lottery's draw games, such as Mega Millions and Powerball, and increase the profitability of the lottery's scratch-off tickets.
"Our objective ... is to think about how we can get as many people to play the lottery as possible and spending really small amounts of money," he said. "We believe there is an opportunity for strong long-term sustainable, responsible growth."
During a meeting of the Legislature's Lottery Oversight Committee, Hickey said he's requested detailed information from the lottery about its travel and conference expenses since July 3, and "we have yet to get what we are asking for."
But Woosley said that "I believe we have provided that. ... We will give you anything you need."
Hickey said the lottery's travel and conference expenses totaled $196,148 in fiscal 2013. But Woosley said that's how much the lottery paid in mileage reimbursement payments to its marketing and sales representatives for driving their own cars to check in with the lottery's nearly 1,900 retailers.
Woosley said the lottery's travel expenses to conferences were $22,798 and $48,397 in the past two fiscal years.
Asked by Hickey about plans in the lottery's budget for 1 percent cost-of-living raises and 3 percent merit bonuses for the lottery's employees in fiscal 2015, Woosley said the Lottery Commission generally has granted cost-of-living raises and merit bonuses to its employees if the governor authorizes them for state employees in the spring. The commission decides on cost-of-living raises and merit bonuses for the director and internal auditor.
Hickey told Woosley that in light of the lottery's declining ticket sales, he doesn't have to follow the governor's lead and provide the raises and bonuses.
During the first two months of fiscal 2015, the lottery sold $62.4 million in tickets, a $5 million dip from the first two months of fiscal 2014, largely as a result of a $4.6 million drop in draw game ticket sales, Woosley reported. During the first two months of fiscal 2015, the lottery raised $11.2 million for college scholarships -- $67,787 less than the same period in fiscal 2014.
In a special session in July, the Legislature approved a bill by Hickey to ban the lottery from deploying electronic-monitor games until mid-March.
The Lottery Oversight Committee signed off on the commission's revised budget for fiscal 2015, which trims projected ticket sales from $429.2 million to $416.7 million and net proceeds for college scholarships from $81.2 million to $78.1 million. It also deleted references to electronic-monitor games.
The amount raised for scholarships by the lottery peaked in fiscal 2012 at $97.5 million. It dropped to $90.2 million in fiscal 2013 and to $81.4 million in fiscal 2014.
Metro on 09/19/2014