Lottery Board Accepts Optimistic Forecast on Sales : Gaming: Director predicts a 40% increase but says administrative costs will exceed limits. Some officials call the projections too rosy.
The California Lottery Commission gave Director Sharon Sharp a vote of confidence Wednesday by unanimously endorsing new revenue projections that call for a 40% increase in ticket sales in the fiscal year beginning July 1.
Although the lottery is expected to post sales of $1.35 billion for the 12 months ending June 30, commission members said they had no hesitation in approving Sharp’s projections of $1.9 billion in revenues for the 1992-93 fiscal year.
“I have a pretty high degree of confidence in the figures,” commission member Ed Lammerding of Sacramento said.
The vote came despite Sharp’s admission that plummeting sales this year would cause the lottery to overspend its administrative budget for the first time since its debut in October, 1985. She said the lottery would tap into other funds to ensure that schools would get the 34% of lottery revenue mandated by law, but she acknowledged that administrative spending would go over its limit of 16%.
She said that with a $750-million drop in ticket sales from last year, she could not cut deep enough or fast enough during the last year to keep spending in bounds. She said some of the $75 million in cuts she was forced to make--advertising and promotion, in particular--actually contributed to the plunge in ticket sales. As a result, she said, the lottery will end the year with administrative expenditures of about 17.5%.
By projecting higher sales in the new fiscal year beginning July 1, the lottery will be able to spend more money on the advertising that Sharp says is essential to reignite players’ interest. She promised that spending will be cut back if sales do not meet the projections.
But she said she felt confident in making the new projections--despite three years of rapidly declining sales--because she believes her efforts to overhaul the lottery would begin to pay off by next year. Since becoming director in October, Sharp has added Fantasy Five, a daily numbers contest and multiple Scratchers to the lottery’s offering of games. At the same time, she revised the Lotto game to give players better odds of winning big jackpots.
Although sales for most of the games have been down, Sharp said she sees signs of a rebound in the performance of the Scratcher games. A year ago a Scratcher game was drawing $3.4 million a week in sales but the multiple games are now returning about $8.1 million a week, she said. “And that’s without any advertising,” she said. “We simply relied on word of mouth.”
There are other reasons for optimism, as well, Sharp said. Besides the improved prospects growing out of wider advertising, she said, the lottery will introduce a new Keno-type game around January and at the same time will vastly expand its ticket distribution system.
“I would not make the projection of $1.9 billion (in revenues) unless I thought we would make it,” she said. “I’m hoping deep down inside that it is a conservative estimate.”
Her optimism is not shared by everyone. State Sen. Tim Leslie (R-Auburn) and Controller Gray Davis both say the new sales projections are “too rosy” and warned that the lottery is in danger of exceeding the 16% spending cap again next year.
Sharp’s appointment as lottery director was scheduled to be considered by the Senate Rules Committee at a confirmation hearing Wednesday. It was postponed after a similar hearing on James Strock, secretary of the environmental protection agency, stretched into the evening. Both Sharp and Strock were appointed by Gov. Pete Wilson.