A legislative panel on Wednesday endorsed the Arkansas Scholarship Lottery's proposed one-year contract for up to $1.5 million with lottery consultant Camelot Global Services that has worked with the lottery since 2015.
Lottery Director Eric Hagler told state lawmakers that Chicago-based Camelot will assist the lottery in launching an in-state draw game called Arkansas Lotto starting this fall, analyze the game's performance and the lottery's total game portfolio and provide advice under the proposed one-year contract
About 82 % of the lottery's sales are scratch-off tickets, and "we need more balance" in the lottery's portfolio of games, Hagler said.
Sales of draw-game tickets are more profitable, with a margin of about 45 % to the lottery, than the sales of scratch-off tickets, which have a margin of about 12 % to the lottery, he said. The lottery's draw games include Powerball, Mega Millions, Fast Play, the Natural State Jackpot, Lucky for Life, Cash 3 and Cash 4.
"It's not the perfect time to launch the game," Hagler acknowledged. Record high gasoline prices have been a factor in declining lottery ticket sales in recent months.
But potential lottery players are more apt to take a look at a new lottery game even with declining lottery ticket sales, he said.
Hagler said the Arkansas Lotto draw game will be launched in September and tickets for the draw game will cost $2 each. The minimum jackpot for the Arkansas Lotto game will be $250,000 and the jackpot will increase based on increased sales, he said.
However, the lottery doesn't want to cannibalize sales of the lottery's other in-state jackpot game called Natural State Jackpot that was launched in 2012, he said. The tickets for the Natural State Jackpot cost $1 apiece and the minimum jackpot is $50,000, he said. The Natural State Jackpot has hit a record jackpot of nearly $500,000 this week.
The lottery has been selling tickets since Sept. 28, 2009, and has helped finance Arkansas Academic Challenge Scholarships for more than 30,000 college students during each of the past 11 fiscal years.
The lottery's proposed contract with Camelot Global Services would begin July 1 and expire June 30, 2023.
Camelot would be paid base compensation of $500,000 by the lottery in fiscal 2023 under the proposed contract that cleared the Legislative Council's Lottery Oversight subcommittee on Wednesday with no audible dissenters.
The contract still must be approved by the Legislative Council, which meets Friday.
Under the proposed contract, Camelot has the potential to receive up to $1 million more from the lottery in fiscal 2023 based on a formula under which Camelot would receive 5 % of the "total operating income before transfers" to college scholarships that exceed $90 million in fiscal 2023. Under the formula, Camelot also would receive a $500,000 achievement bonus if the combined sales of the Natural State Jackpot and Arkansas Lotto tickets reach $18.2 million in fiscal 2023. However, if the launch of the Arkansas Lotto draw game extends beyond the week starting Oct. 3, this target would be reduced by $312,820 per week under the proposed contract.
The lottery has sold about $8.5 million in Natural State Jackpot tickets so far in fiscal 2022, which ends June 30, said Mike Smith, the lottery's gaming director.
In a letter dated May 24 to Hagler, Mitch Rouse, director of the state's procurement office, said he granted the lottery's special procurement request to enter into a one-year contract with Camelot.
"Given Lottery's assessment of its needs in the performance in its statutory mission of 'maximizing net proceeds in a responsible manner,' I am determining that the request is an unusual or unique situation that makes the application of all requirements of competitive bidding, competitive sealed bidding or competitive sealed proposals contrary to the public interest," Rouse wrote in his letter.
But Rouse denied the lottery's request to include an option to renew the contract for an additional term of one year.
Hagler told lawmakers that he never talked with lottery officials about including an option for a one-year contract extension in the proposed one-year contract.
He said the lottery's procurement coordinator, Eric Brown, made a mistake including that option in the proposed one-year contract.
Hagler said he signed a letter dated May 5 to Rouse requesting that option in the proposed one-year contract .
"I apologize," he said. "It was simply a miscommuncation within my own department."
From fiscal 2016, which started July 1, 2015, through fiscal 2022, Camelot has been paid $20.69 million by the lottery, including $17.5 million in incentive compensation, $2.9 million in base compensation, $142,302.75 in travel expenses and $9,950 in other expenses, according to the state Department of Finance and Administration.
In June 2020, the Legislative Council signed off on a contract extension for Camelot Global Services that started July 1, 2020 and runs through June 30 this year. At that time, then-lottery Director Bishop Woosley told lawmakers that Camelot "has been a good partner," though some lottery officials raised questions to Woosley earlier in the year about the agency extending its contract with Camelot.
In November 2015, state officials initially signed a contract with Camelot through June 30, 2020, with options for two one-year extensions, to help develop and implement a business plan for the lottery. The initial contract was signed several months after Republican Gov. Asa Hutchinson and the Republican-controlled Legislature put the lottery under the control of the state Finance Department and eliminated the nine-member Arkansas Lottery Commission.
In September 2014, the Legislative Council voted to hire Camelot Global Services to review the lottery's operations and make recommendations to improve it, without taking bids, at the request of Sen. Jimmy Hickey, R-Texarkana. Camelot subsequently received $169,500 from the Bureau of Legislative Services for its work.
According to lobbyist registration records at the secretary of state's office, Camelot is represented by the Capitol Advisors Group, which includes Bill Vickery, Mitchell Lowe, former Rep. John Burris, R-Harrison, and Nicole Gillum.
Eric Hagler, director of the Arkansas Scholarship Lottery, discusses a proposal for the creation of a new draw game during a meeting of the legislative lottery oversight committee at the state Capitol in Little Rock on Wednesday. (Arkansas Democrat-Gazette/Stephen Swofford)