Tuesday, February 27, 2001

Ohio ponders incentives for lottery sellers

Sagging sales mean less cash for schools

By Spencer Hunt
Enquirer Columbus Bureau

        COLUMBUS — The Ohio Lottery wants to dangle bigger commissions before store owners and offer free merchandise to clerks to boost sagging ticket sales.

        Lottery Director Dennis Kennedy thinks the 9,500 gas stations, convenience stores and other businesses that sell Ohio Lottery games would try to get more people to play if they know they'd be more amply rewarded. Though details of his incentive idea must still be worked out, he thinks it could cost up to $20 million a year.

        “If we can get the businesses and clerks more involved, it's a natural extension to expect sales will go up,” Mr. Kennedy said.

        Kentucky and Indiana lottery officials say their incentive programs work.

        “We're always looking for ways to expand our number of players,” said Jack Ross, director of Indiana's Hoosier Lottery.

        “We want that clerk to be asking that customer who's buying a gallon of milk, "Hey! Did you know Powerball is at $25 million?'”

        One of Ohio lottery's top ticket sellers says she'd be glad to take more money, but doubted incentives would boost sales. While some lawmakers express their own misgivings, religious groups predict incentives will worsen problem gamblers' addictions.

        Lottery officials, led by Gov. Bob Taft, insist some thing must be done to reverse four straight years of falling revenues. State records show school lottery funds dropped from $748.5 million in the 1997 fiscal year to $686 million in 2000.

        The governor thinks the lottery can generate an extra $55 million for schools over the next two years if the state joins a multistate lottery such as Powerball or the lesser-known Big Game.

        While lawmakers ponder that proposal, Mr. Taft also wants them to eliminate a state law that guarantees at least 30 cents of every dollar in lottery proceedsgoes to help pay for education.

        Mr. Kennedy says the state can generate another $15 million in overall profits if it can offer customers bigger cash prizes in scratch-off games that exceed the 30-cent limit.

        He said bigger cash prizes would turn in more money for schools overall because more people would buy more tickets.

        The incentives idea also would eat away at the 30 percent guarantee, requiring another 1 percent to 2 percent of lottery revenues.

        Again, Mr. Kennedy thinks the increase in sales inspired by the incentives would far exceed their cost.

        “We can't do this unless the 30 percent cap is taken off,” Mr. Kennedy said.

        The Ohio Lottery already gives business a 5.5 percent commission for all sales. Businesses took a total $135 million in commissions and bonuses during the 2000 fiscal year.

        Mr. Kennedy would increase commissions to 7 percent and maybe 7.5 percent, if businesses sell more than a certain level of lotto tickets and games.

        Store clerks also would benefit from a program that gives them points for every lottery ticket they sell. Those points could later be redeemed for merchandise, including such things as shirts, backpacks - even portable stereos.

        Mr. Kennedy was unable to say exactly how the incentives would work, including how much businesses would have to sell before they'd get more money. He estimates the program would cost the state about $20 million a year.

        Records kept by the North American Association of State and Provincial Lotteries show 20 states, including Kentucky and Indiana, offer store owners some kind of encouragement to boost sales.

Others value incentives

               Kentucky offers its 3,170 member businesses an extra 2 cents on the dollar for every scratch-off game sold above a weekly sales target. The normal commission for businesses is 5 percent.

        “It's to encourage people who might not play or who have not played before to buy a lottery ticket,” said Kentucky Lottery spokesman Rick Redman. “We've found it to be very effective.”

        Indiana's 4,802 member businesses can win cash prizes if they put scratch-off games up for sale the first day they are available. Mr. Ross said the program increases participation among retailers.

        New Mexico gives clerks prizes. A state lottery catalog offers shirts, hats, golf equipment, televisions and cameras to clerks who collect enough points.

        But would incentives work in Ohio?

        Hong Ku, manager of McHahn's Fashion Co. in Walnut Hills, said she happily would take a higher commission, but she doubts it would spike sales. With $1.7 million in total lottery sales last year, McHahn's ranks eighth on the Lottery's chart of its most successful agents.

        “We have pretty much the same people playing every week,” Ms. Ku said. “We know who they are. We usually know what games they want to play.”

        Ms. Ku said the state would do more to pump up business if it was able to join Powerball.

        “My customers would love to have Powerball,” she said.

        Though Mr. Taft supports the lottery's plan, some of his fellow Republican lawmakers aren't as thrilled with the idea.

        State Rep. Gary Cates, R-West Chester, the No. 2 ranking Republican in the House, is afraid of the message the General Assembly would send if it eliminates the 30 percent guarantee for school funding. Voters might see lawmakers reneging on a promise to send lottery funds to schools.

        “How can they take us at our word if we take that off?” he asked.

        Rep. Bryan Flannery, a Lakewood Democrat, wondered during a recent committee hearing why the lottery would not increase its school funding commitment.

        “Let's make it 35 percent,” Mr. Flannery said.

Religious opposition
               Religious groups opposed to gambling condemned the idea.

        “The lottery commission is too aggressive,” said the Rev. John Edgar, leader of a United Methodist anti-gambling task force lobbying against the multistate lottery proposal.

        The Rev. Mr. Edgar said the program would spur store owners and clerks to persuade problem gamblers to buy more tickets and play more games.

        “It will encourage those who already play to play to a degree that is self-destructive,” the Rev. Mr. Edgar said. “There will now be cheerleaders there encouraging them with their own addictions.”

        Mr. Kennedy disagreed, saying the point of the program is to encourage more people to play. He says it makes sense to reward businesses and clerks who do that.

        “These businesses are the soldiers in our organization,” he said. “We should be supporting these people more and more and more.”


               Here is a look at the number of businesses that sell lottery tickets in Ohio, Kentucky and Indiana.

        • Ohio: 9,500

        • Kentucky: 3,170

        • Indiana: 4,802

        Source: North American Association of State and Provincial Lotteries



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