With lottery players and others facing rising gas prices, the Arkansas Scholarship Lottery revenue in May totaled $48.1 million, dropping by about $9.5 million compared to a year ago.
But the amount raised for college scholarships in the month increased by about $400,000 compared with a year ago, reaching $7.9 million in May, the lottery reported in its latest monthly report to Gov. Asa Hutchinson and the Legislative Council's lottery oversight subcommittee.
Over the past five months, lottery revenue has declined compared with figures during four of these months a year ago. In January, lottery Director Eric Hagler told lawmakers that the next few months will be challenging for the lottery and "we do believe that we will see some cooling."
Tony Zimmerman, owner of Zimmerman's Exxon in southwest Little Rock, said Tuesday that his store's lottery ticket sales have dropped dramatically during the past several months.
"A lot of it has to do with fuel [prices]," he said Tuesday.
Since July, the Zimmerman's Exxon monthly lottery ticket sales peaked at $78,561 in October and then dropped to $54,934 in November and later fell to $47,376 in May, according to figures provided by the lottery.
About 70%, or 1,350, of the lottery's 1,955 retailers are gas stations, said Scott Hardin, a spokesman for the state Department of Finance and Administration.
The average price of regular unleaded gas in Arkansas reached $4.54 a gallon on Tuesday -- up from $4.03 a month ago and from $2.76 a year ago -- the AAA reported. That's the highest record for the average price of regular unleaded gas in Arkansas.
"There is absolutely no doubt that record gas prices and rising grocery costs are weighing on lottery performance," Hagler said Tuesday in a written statement.
"If consumers are forced to spend more on necessities, then there is certainly less discretionary income for items of pleasure and leisure," he said.
The lottery's year-over-year sales are below last fiscal year's pandemic-assisted record setting performance, Hagler said.
He noted that the lottery forecast $44.1 million in total revenue in May, which it beat by $4 million for the month. The figure was still nearly $10 million less than the same month a year ago.
The lottery's scratch-off ticket revenues dropped from $48.7 million a year ago to $40.4 million in May, and the lottery's draw-game revenues dipped from $8.8 million a year ago to $7.6 million in May, the lottery reported.
Hagler said the scratch-off ticket revenues beat the forecast for May by $3.5 million, "despite a recessionary economy," and the draw-game revenues in May exceeded the forecast by nearly $520,000.
The lottery's draw games include Powerball, Mega Millions, Natural State Jackpot, Fast Play, Lucky for Life, Cash 3, and Cash 4.
Draw-game revenue is greatly dependent on jackpot size for the popular multi-state games Powerball and Mega Millions, and May 2021 saw sizable jackpots for the multi-state games, whereas this year has not produced a high-roll sequence, Hagler said.
Despite the higher gas prices, not all lottery players are trimming their lottery ticket purchases.
Walter Carrigan of Little Rock said the increased cost of gasoline hasn't caused him to cut back on his occasional purchases of lottery tickets.
"It is like anything else, you adapt," the retired carpenter said after he purchased $22 in lottery tickets at Zimmerman's Exxon. "If I see a number I want to play, I play it. I'm retired. I got a pension."
The lottery raised slightly more for college scholarships in May than a year ago because the inter-year accrual-to-cash accounting adjustment swung in favor of net proceeds for college scholarships, Hagler said. The amount raised for college scholarships is a product of sales, although it is not directly correlated on a dollar-for-dollar basis, he said.
SLOWING SALES
May is the 11th month of the state's 2022 fiscal year, which ends June 30.
During the first 11 months of fiscal 2022, the lottery's scratch-off ticket revenues declined to $442.9 million from $483.4 million in the same period in fiscal 2021, and the lottery's draw game ticket revenues slipped to $91 million from $95.1 million in the same period in fiscal 2021, according to the lottery's reports.
So far in fiscal 2022, the lottery's revenues totalled $534.6 million -- a drop from $579.2 million in the same period in fiscal 2021.
During the first 11 months of fiscal 2022, the lottery raised $85.3 million for college scholarships -- down from $91.5 million in the same period in fiscal 2021.
At the end of the fiscal year, the lottery transfers the balance of its unpaid prize reserve fund minus $1 million to college scholarships under state law.
The lottery's unpaid prize reserve fund totaled $8.4 million at the end of May, after receiving $100,892 in unpaid prizes in May.
For fiscal year 2022, Hagler projected total revenue of $509.2 million, which would be a drop compared to the record of $632.5 million raised in fiscal 2021. The lower figure will result in $88.6 million being set aside for college scholarships, a decline from the record $106.6 million used for scholarships in fiscal 2021.
Lottery officials attributed the records set in fiscal 2021 in part to factors brought on by the covid-19 pandemic, such as people spending more time at home.
On Tuesday, Hagler said that the lottery is performing about 14% above its budget for fiscal 2022 thus far.
"While only a fool would offer guaranteed results in the throes of a recession, I do expect to finish the year at or near $100 [million] in net proceeds, which is 14% above forecast," he said. "If we come up a bit short, then so be it -- we will still have beat budget by double-digits."
SCHOLARSHIP MONEY
The lottery started selling tickets on Sept. 28, 2009.
It has helped finance Arkansas Academic Challenge Scholarships for more than 30,000 students during each of the past 11 fiscal years.
So far in fiscal 2022, the state Division of Higher Education has awarded Arkansas Academic Challenge Scholarships to 28,698 students and disbursed $75 million, division spokeswoman Alisha Lewis said Monday.
The division forecast that it would hand out $90 million in scholarships to 31,200 students in fiscal 2022, after awarding about $86 million a year ago.
For fiscal 2023, Lewis said the division's assistant director of finance, Nick Fuller, conservatively estimates the division will hand out about $90 million in Arkansas Academic Challenge Scholarships.
The Arkansas Academic Challenge Scholarships are financed with the lottery's net proceeds plus $20 million a year in state general revenue.
The amount handed out for the Academic Challenge Scholarship peaked at $132.9 million in fiscal 2013, with awards going to 33,353 students. Scholarship totals have dropped largely because the Legislature cut the amount of initial scholarships several times.
The 2017 Legislature 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.
So far in fiscal 2022, the division has awarded these scholarships to 2,781 students and disbursed $461,994, Lewis said.
The division has forecast it would distribute $450,000 for these scholarships in fiscal 2022, compared with $487,865 a year ago.
For fiscal 2023, Fuller estimates the division will distribute about $700,000 in Workforce Challenge Scholarships, Lewis said.
The 2019 Legislature created the 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 the Concurrent Challenge program, the division has awarded scholarships to 15,001 students and disbursed $2.5 million so far in fiscal 2022, Lewis said. For fiscal 2022, the division projects distributing $2.7 million in these scholarships to 13,000 students, compared with $2.4 million to 14,091 students in fiscal 2021.
For fiscal 2023 Fuller estimates the division will distribute $3 million in Concurrent Challenge Scholarships, Lewis said.