Lottery Commission Workshop Lays Out 2009 Plan

Special Report - October 16, 2008
The North Carolina “Education Lottery” Commission held a strategic planning workshop Wednesday, October 15 to discuss proposed legislation for the 2009 legislative session, advertising, and minority participation, among other topics. Thomas Shaheen, executive director of the North Carolina lottery, presented a strategic plan for the next two years, which will be finalized and released before the end of the year. The Commission hopes to promote “public confidence and trust” in the lottery, implement “aggressive diversity initiatives,” reach $1.26 billion in sales, and grow instant scratch-off games’ revenues to over 60 percent of total sales.

Alice Garland presented the suggested proposals for legislative action in the 2009 session. The majority of the suggestions were taken from last year’s SB 518—Lottery Act Changes, which failed to reach the Senate floor. Many of the proposed changes are technical in nature, including clarifications of terminology or privacy policies relating to winners, vendors, and retailers. However, substantive changes include a proposal to modify the process for debt setoff, exemption of the lottery from the authority of the State Chief Information Officer (CIO), and changing audit schedules. The lottery does not currently follow the process for debt setoff as it is written in the statute and will seek to change the statute to provide for the process the lottery has chosen to follow instead.

Additionally, the Commission will seek to exempt the lottery from a provision of the state information technology services statute so as “to insure that future powers given to the State Chief Information Officer do not apply to the lottery.” While the motivation is based on specific IT needs of the lottery that seemingly cannot be met by the system utilized by the State CIO, the wording of the provision is broad enough so as to potentially raise concerns about oversight and transparency in lottery affairs. The Commission also wants to stagger the frequency of performance and security audits. They proposed performance audits every 3 to 5 years as opposed to the current biannual schedule, and security audits every other year instead of the current annual schedule. Financial audits will continue to be held annually.

Some commissioners expressed concern over a perceived lack of advertising capitalization to certain populations, especially Hispanics. By statute, the lottery is not permitted to target advertising to specific groups. The Commission has yet to decide whether it considers Spanish language advertising to be targeting. Regardless, the lottery’s goal of increased minority participation has already led to policy and practical changes. When considering bids by vendors seeking to provide products and services to the lottery, the commission has formalized a policy that prefers firms owned by minorities. If a minority firm’s bid comes within 10 percent of the overall lowest bid, that minority firm will automatically receive the contract.

Finally, the Commission engaged in a lengthy discussion about current and future advertising. Because of last year’s net revenues, the 1 percent advertising budget equates to a larger cash pool for fiscal year 2009. Specifically, the lottery will sponsor traffic reports in major North Carolina cities and use a more targeted strategy for cable advertising. Because scratch-off ticket purchases are considered to be primarily impulse buys and because the Commission hopes to increase those purchases to over 60 percent of revenues in fiscal year 2009, marketing for scratch-off games will focus on providing more and changeable point of sale materials with bright colors and loud "call outs" to catch consumers’ attention and 9 media campaigns with a consistent scratch-off message. Promotions with Lowe’s Motor Speedway, the Charlotte Bobcats, Ford, Harley-Davidson, and Deal or No Deal are expected to continue.

Based on a study of other lotteries, the Commission hopes that an objective performance audit will find reason to encourage the General Assembly to reconsider the statutory limits on payouts, retailer commissions, and advertising.

Copyright © 2008. North Carolina Family Policy Council. All rights reserved.