The Arkansas Scholarship Lottery has come up with a proposed agreement with consultant Camelot Global Services Inc. to develop a business plan for the lottery and provide services to help implement the plan.
The Arkansas Legislature's lottery oversight committee still must sign off on the pact before it goes into effect. A committee co-chairman, Sen. Jimmy Hickey, R-Texarkana, said Thursday that he has numerous questions about the agreement but declined to detail them. The committee is to review the agreement next Thursday.
If approved, it would run through at least June 30, 2020.
Camelot Global Services, which has offices in London and Philadelphia, would be paid base compensation of $650,000 in the fiscal year ending June 30 and up to that amount in subsequent years.
Camelot also would be reimbursed for up to $100,000 in mutually agreed upon expenses each year.
And Camelot would get a percentage of any "adjusted operating income" above $72.28 million in any fiscal year. The company would keep 12.5 percent of that income between $72.28 million and $80 million; 13.75 percent of that income between $80 million and $90 million; and 15 percent of any adjusted operating income above $90 million.
The proposed agreement defines "adjusted operating income" as operating income before charging any expenses relating to services provided by the state Department of Higher Education, Arkansas Legislative Audit (formerly the Legislative Audit Division), legal and professional services and depreciation. Adjusted operating income measures the performance of the lottery without consideration of expenses that are deemed beyond the lottery's control, said Jake Bleed, a spokesman for the state Department of Finance and Administration.
The proposal also would allow for two additional one-year extension periods beyond the June 30, 2020, expiration date.
It says Camelot will help the lottery renegotiate contracts with vendors and the savings will be used to help pay for Camelot's services.
"The bulk of Camelot's compensation will be paid only if their efforts pay off [and] we succeed in our goal of improving the health and performance of the Arkansas Scholarship Lottery," said lottery Director Bishop Woosley.
"If that happens and we have every expectation that it will, we believe the additional cost will be worth paying," Woosley said Thursday in a written statement. "However, if the consultant fails, Arkansas can pull the plug on this contract and be obligated to pay up to $200,000 and no more.
"At the end of the day, we believe this contract will help the Arkansas Scholarship Lottery reach its final goals of creating more scholarships and helping more young Arkansans get a college education," Woosley said.
Hickey said Thursday that the lottery oversight committee "will do their due diligence," he said. "I hate to say more before I give them an opportunity to go through everything."
The committee's other co-chairman, state Rep. Chris Richey, R-Helena-West Helena, said Hickey has privately shared his concerns about the proposed agreement, but Richey hadn't had a chance to read it, he said.
"I don't have any insight," Richey added.
Camelot Global Services and the lottery reached their latest agreement after Hickey asked for more details about the original agreement presented to the committee during its Aug. 20 meeting.
At that time, Woosley told lawmakers that a state evaluation team scored Camelot Global Services higher than the other competitors for consulting services -- Delahanty Consulting LLC based in Verona, Wis., and QLot Consulting, which has offices in Topeka, Kan., and Sweden.
In September 2014, the Legislative Council voted to hire Camelot Global Services to review the lottery's operations and make recommendations without taking bids, at Hickey's request.
Camelot subsequently received $169,500 from the Bureau of Legislative Research for its work. The Capitol Advisory Group lobbying firm of Bill Vickery and Mitchell Lowe has listed Camelot Global Services as a client on the firm's lobbyist registration since Aug. 15, 2014, according to records in the secretary of state's office.
The lottery started selling tickets Sept. 28, 2009.
But lottery revenue and net proceeds raised for scholarships have dipped each of the past three fiscal years. The lottery raised $72.4 million for scholarships in the fiscal year that ended June 30, a drop of $9 million from the previous fiscal year, and its revenue totaled $409.2 million, a dip of $1.4 million.
More than 30,000 college students have received lottery-financed scholarships during each of the past six fiscal years. The Legislature has cut the size of the scholarships three times for some future recipients.
In December, Camelot Global Services said the lottery has too many scratch-off and draw games, lags behind its peers in per-capita sales and profits, pays more to its vendors than its peers pay, and isn't perceived as trusted.
"The overriding strategy must be to move the lottery away from a gambling organization to a consumer goods sales and marketing organization," the consultant's report said.
Woosley said the lottery's latest business plan from May is 72 pages long and it was drafted by him and other managers.
Asked why the lottery needed to bring in outsiders to draft and implement a new plan, Woosley said that "part of the intent behind this contract is to get a new, outside perspective on the operations of the lottery.
"One big benefit of hiring a consultant is the chance to review operations with fresh eyes and look forward to an outsider's view of how things can improve. And frankly Camelot is globally respected on these matters," said Woosley, who has been the lottery director since February 2012, earning $165,000 a year.
"Our lottery has been below the national average in draw game sales since the beginning and has been stagnant in retail network growth over that," he said. The draw games include Powerball, Mega Millions, Cash 3 and Cash 4, Lucky for Life, and the Natural State Jackpot.
Projections for what the lottery would earn for scholarships varied in 2009 before ticket sales began.
Then-Lt. Gov. Bill Halter, who helped persuade voters to approve a lottery, and then-lottery Director Ernie Passailaigue each estimated that the lottery would raise about $100 million a year for scholarships.
The Department of Finance and Administration predicted scholarship proceeds of roughly $55 million per year.
Proceeds have been somewhere in between.
After raising $82.7 million for scholarships in nine months in fiscal 2010, the lottery raised $94.2 million during the first full fiscal year, 2011.
Proceeds for scholarships climbed to $97.5 million in fiscal 2012 but dropped by $7.2 million to $90.3 million in 2013; by $9.1 million to $81.4 million in 2014; and by $9 million to $72.4 million in 2015.
Metro on 10/10/2015