Just read a story in today's Wilson (NC) Times about a NC House Bill to place greater limits on NC Lottery advertising. You'll note the story references the sponsorship of the Rockingham NASCAR Truck Series race:
Wednesday, March 27, 2013 11:40 PM
Fewer lottery ads, fewer tickets sold?
Stores: Plan could hurt their bottom line
By Corey Friedman | Times Online Editor
As this weeks Powerball jackpot topped $40 million, state lawmakers are proposing lottery advertising limits that retailers fear will mean fewer players and smaller prizes.
State Reps. Sarah Stevens and Pat McElraft introduced House Bill 339 last week. If it becomes law, the North Carolina Education Lottery would see its advertising budget cut from 1 percent to one-half percent of revenues.
"The lottery is a monopoly, so how much advertising does it really need? said Stevens, a Republican from Mount Airy. "I see the advertising everywhere I go. Clearly, they have a very large advertising budget.
The bills backers say they want to make sure more lottery proceeds go toward public education. But a trade group representing North Carolina convenience stores predicts that less advertising will mean lower revenues and ultimately, less money for both retailers and schools.
"Trying to starve it out of business by cutting advertising only hurts small-business people, said Gary Harris, executive director of the North Carolina Petroleum and Convenience Marketers.
McElraft, an Emerald Isle Republican, said those fears are unfounded.
"I really dont think limiting advertising is really going to reduce their revenue, McElraft said. "I think that they can do a better job of spending their advertising dollars and we can use those dollars for information technology for our students.
House Bill 339 would reduce the amount of revenue available to pay lottery expenses from 8 percent to 4 percent. The 1 percent now earmarked for advertising is a part of those lottery expenses.
The bill would redistribute the 4 percent cut from the lotterys expense budget to public school boards and charter schools to buy books, information technology and school supplies.
But N.C. Education Lottery figures show that the lottery only uses about 4 percent of total revenues for expenses under its current 8 percent allocation. The impact of that cut may be minimal, but the bill would limit advertising to a half-percent of revenues even if lottery officials could maintain 1 percent spending from the reduced expenses budget.
Lawmakers say wasteful spending on advertising and marketing campaigns led them to question the need for the current budget to promote the games.
"All of our education dollars are not getting to our students, McElraft said. "Im all for getting the most revenue we can out of it, but quite frankly, I think a lot of these advertising campaigns are ridiculous, and I dont believe theyre bringing anyone to the lottery who isnt playing already.
The lottery is sponsoring the NASCAR truck series race in Rockingham next month.
Lottery retailers say advertising cuts would lead to a drop in ticket sales, and that could hurt the convenience stores that count on lottery sales as a major source of revenue. Harris said lottery is in the top five moneymakers for North Carolina stores.
Some convenience stores might have to lay off workers if lottery sales see a steep decline, Harris warned. Current Lottery Commission Chairman Robert Farris Jr., a prominent Wilson attorney, agrees.
"We have over 6,800 retailers across North Carolina, Farris said. "They are making 7 percent on these sales. Its a pretty dramatic amount of people being impacted.
North Carolina statutes currently dictate that advertising expenses may not exceed 1 percent of the lotterys total annual revenues.
The N.C. Education Lotterys 2012 performance audit, which was released last week, notes a correlation between advertising and sales.
"Legal restrictions regarding lottery advertising may decrease the lotterys ability to generate sales, thus weakening its per capita sales and profits compared to other lotteries, states the audit Wisconsin-based Delehanty Consulting completed for the NCEL.
The audit compares North Carolinas lottery to those in similarly sized states, including Georgia, Tennessee and Virginia, and it praises lottery officials for containing costs and boosting profits.
"When the NCEL began in 2006, environmental factors such as restrictions on prize payouts contributed to sales and profitability that were significantly below that of its peers, the audit states. "However, the NCELs ongoing performance has been exceptional. Of the six U.S. lotteries started since 2002, only the NCEL managed to increase profits every year. In fact, the NCEL is one of only three U.S lotteries to achieve profit growth every year from 2007 through 2012.
The lottery bills sponsors dismiss concerns about reduced sales due to the advertising cut as unrealistic. They said the advertising cap could be raised if sales took a nosedive.
"If it truly has that negative impact, then we can go back and revisit it, Stevens said.
HB 339 has yet to make it out of the House Appropriations Committee, but backers are confident about its chances of becoming law. Gov. Pat McCrory incorporated the half-percent advertising cut in the budget plan he released last week.
"I think its certainly something everyone will give some real serious consideration to, Stevens said.
The current 1 percent statutory limit translates to a projected $15.5 million for advertising this year, state lottery officials have said.
Sales are projected to reach the $1.6 billion level this year.
The lotterys spending formula gives 60 percent of earnings to those who win. Twenty-nine percent goes to the state for education. Seven percent goes to the stores that sell the tickets. Beyond advertising, the other 3 percent includes 1.59 percent to GTECH, which is the states centralized gaming system that runs the lottery, and to pay state lottery officials salaries.
While $15 million might seem like a lot of money, its less than other states such as Georgia spend, lottery officials said.
"Its a statewide yearlong campaign, Van Denton, N.C. Education Lottery communications director, previously said.
For fiscal year 2011, North Carolina ticket sales reached more than $1.4 billion, representing a $39.8 million increase over fiscal year 2010. The transfers to education totaled $446.9 million.
The lotterys given nearly $2.7 billion to public education in North Carolina since its introduction in March 2006. About $19.4 million has benefited Wilson County, with $7 million helping to pay 139 teachers salaries, $7.7 million earmarked for school construction, $2.8 million spent on pre-K programs and nearly $1.5 million funding college scholarships, according to lottery figures.
corey@wilsontimes.com | 265-7821
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