State lottery sets scholarship record

The front entrance of the Arkansas Scholarship Lottery office is shown in this Jan. 30, 2019 file photo.
The front entrance of the Arkansas Scholarship Lottery office is shown in this Jan. 30, 2019 file photo.

The Arkansas Scholarship Lottery in September raised $9.1 million for college scholarships, an increase of $1.5 million from the same month a year ago and an amount that eclipsed the record set in September 2018.

But the lottery's revenue last month slipped to $46.8 million from the $47.5 million record for the month set a year ago.

The lottery's draw-game revenue -- including sales of the Powerball and Mega Millions games with jackpots reaching above and below $500 million, respectively -- surged in September compared with the same month a year ago, but scratch-off ticket revenue dropped.

The lottery reported its performance for September on Monday in its monthly report to Gov. Asa Hutchinson and the Legislative Council's lottery oversight subcommittee.

"The wider economy is now open with a wider competition for consumer discretionary spending," lottery director Eric Hagler said when asked about total revenue slipping slightly in September.

Inflation also is creeping into consumers' budgets, as evidenced by rising fuel and grocery prices, he said Monday in a written statement. Higher gas prices typically cut into lottery ticket sales and lower gas prices help lottery ticket sales, with many lottery retailers at gas stations adjoining convenience stores.

"Overall, we believe that the lottery sector is reflecting a return to pre-pandemic numbers," Hagler said. "We anticipated a market down-draft in our [fiscal 2022] budget, but we are extremely pleased to be performing above our targeted numbers."

September is the third month of fiscal 2022, in which Hagler has conservatively forecast a drop in total revenue from a record $632.5 million in fiscal 2021 to $509.2 million, and a reduction in the amount raised for scholarships from a record $106.6 million in fiscal 2021 to $88.6 million.

Fiscal 2021 ended June 30.

The Arkansas Scholarship Lottery has been selling tickets since Sept. 28, 2009, and has helped finance Arkansas Academic Scholarships for more than 30,000 college students during each fiscal year since then.

SEPTEMBER DETAILS

Scratch-off ticket revenue dropped in September from $40.6 million a year ago to $37.1 million, but draw-game revenue for the month increased from $6.7 million a year ago to $9.6 million, according to the lottery's reports.

Other revenue includes retailer application, fidelity, bond and service fees that totaled $83,507 last month.

Draw-game revenue always benefits from large jackpots, and "during the previous month we saw considerable consumer appetite for Powerball and Mega Millions, which were both rolling at healthy nine figures," Hagler said.

In September, Powerball ticket revenue increased from $1.3 million a year ago to $3.9 million and Mega Millions revenue increased from $1 million a year ago to $1.7 million, according to the lottery's reports.

Powerball had a $699.8 million jackpot on Oct. 4, and a single winner purchased the winning ticket in Morro Bay, Calif.

Mega Millions had a $432 million jackpot on Sept. 21, and a single winner purchased the winning ticket in New York, Hagler said.

"Importantly, so far during October 2021, we have seen a $100,000 Powerball winner in Arkansas, as well as three $50,000 Powerball winners," Hagler said.

Draw-game ticket sales are more profitable to the lottery than scratch-off ticket sales.

NET PROCEEDS

Asked why the amount raised for college scholarships last month was so much higher than a year ago and whether increased draw-game sales played a role, Hagler said that "net proceeds is correlated to gross sales, but not in a linear manner."

A month ago, he cited a cash-to-accrual accounting adjustment for the amount raised for scholarships dropping from $7.8 million in August 2020 to $6.7 million in August 2021 and said he expected "the next accounting adjustment in September" to swing in favor of net proceeds.

"The real measure of net proceeds cannot completely be measured until fiscal year end," Hagler said Monday. "[W]e are trending above budget and are comfortable that we are maximizing net proceeds in a responsible manner -- which is our statutory mission."

During the first three months of fiscal 2022, revenue was $144.7 million, a slight slip from $146.9 million in the same period in fiscal 2021.

So far in fiscal 2022, scratch-off ticket revenue totals $119.2 million -- a decline from $126.7 million in the same three-month period in fiscal 2021.

By contrast, draw-game revenue totals $25.2 million so far in fiscal 2022, compared with $20.3 million in the same period in fiscal 2021.

During the first three months of fiscal 2022, the amount raised for scholarships is $24.2 million, about $140,000 more than in the same period in fiscal 2021.

At the end of each fiscal year on June 30, the lottery transfers its unclaimed-prize reserve fund balance, minus $1 million, to college scholarships under state law.

The unclaimed-prize reserve fund totaled $2.6 million Sept. 30, after adding $126,066 in unclaimed prizes last month.

SCHOLARSHIPS

The Arkansas Academic Challenge Scholarships are financed with lottery proceeds, plus $20 million a year in state general revenue.

The state Division of Higher Education forecasts that it will hand out $90 million in scholarships to 31,000 students in fiscal 2022, after awarding about $86 million in fiscal 2021.

So far in fiscal 2022, the division has awarded scholarships to 27,581 students and disbursed $32.5 million, said Alisha Lewis, a spokesperson for the Division of Higher Education.

"The projections for this academic year are lagging a bit, but we haven't processed all of the students as they are coming off probation," she said in a written statement. "They had until October 1 to submit documentation. I expect the number to be closer to 29,000."

The amount handed out for Academic Challenge Scholarships peaked at $132.9 million in fiscal 2013, going to 33,353 students. Scholarship totals have dropped largely because the Legislature has cut the amount of the initial awards several times.

The 2017 Legislature also created the Workforce Challenge Scholarship to use excess proceeds to provide up to $800 a year for students enrolled in programs that lead to qualifications in high-demand occupations.

The division said it expects to distribute $450,000 for these scholarships in fiscal 2022. In fiscal 2021, the division reported it distributed $487,865 in Workforce Challenge Scholarships.

So far in fiscal 2022, the division has awarded Workforce Challenge Scholarships to 1,187 students and disbursed $140,783 , Lewis said.

The 2019 Legislature also created the lottery-financed Concurrent Challenge program. High school juniors and seniors are eligible to receive the scholarships for a semester or an academic year in which they are enrolled in an endorsed concurrent course or certain programs.

For fiscal 2022, the division projects distributing $2.7 million for these scholarships to 13,000 students. For fiscal 2021, the division reported that it handed out $2.42 million in Concurrent Challenge scholarships to 14,091 students.

So far in fiscal 2022, the division has awarded Concurrent Challenge scholarships to 1,978 students and disbursed $513,360, Lewis said.

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