Governor Nixon announces plan for lottery education funding
JEFFERSON CITY - Governor Jay Nixon announced the Missouri Lottery's operations need to focus more funding toward education. This comes after a review from the Office of Adminstration. Nixon also wants to see improvements in several other areas to help fund public education.
Over the past 10 years, the total operating revenue for the Missouri Lottery has increased by approximately $300 million from almost $786 million in FY 2005 to more than $1 billion in FY 2014. Over the same period of time, the Missouri Lottery operation costs rose by about $260 million.
According to Article III of the Missouri Constitution, money left over after prizes and administrative costs are paid goes toward public institutions of elementary, secondary, and higher education.
While the payments toward education have increased over the past decade by an average of 2.5% per year, the funds transferred in FY 2014 are expected to drop by almost $21 million even though revenue is predicted to continue increasing.
"Two decades ago, Missouri voters spoke loud and clear that the proceeds from the Missouri Lottery should benefit our public schools and it's clear that the lottery has some work to do if it's going to keep delivering on that promise," Gov. Nixon said. "This review has identified several areas where the lottery needs to do better, and I look forward to seeing the lottery implement these solid recommendations to improve its operations and maximize its benefit to public education."
The Office of Administration found that larger payouts, higher operation costs, and poor investing have limited the Missouri Lottery's funding of education.
The Missouri Lottery was established in 1985 and sales began in 1986. In 1988, voters approved Amendment 3, which lifted several Lottery restrictions that:
• Capped prize payouts at 45%
• Capped lottery expenses at 10%
• Required 45% of sales to go to General Revenue
• Restricted advertising to objective information such as sale locations, prices and times, as well as prohibiting advertising in a "manner designed to induce persons to participate in the Missouri State Lottery."
Missouri had the 4th highest payout in the country at 66% in FY 2013 and the 4th highest payout in the country over the past decade at 63.94%. A minimum of 45% of all lottery revenue is required to be paid out.
Along with having one of the highest payouts in the country, the operating costs for the Missouri Lottery has risen 22% over the past 10 years. Changes in the costs of promotions and vending machine leases and maintenance are the primary causes for the operating expenses. From FY 2010 to FY 2014 the Missouri Lottery created new sports and festivals sponsorships including the Kansas City Chiefs and Royals, and the St. Louis Cardinals, Rams, and Blues. The leasing contract for vending machines and maintenance changed payments from dollars per month to a percentage of weekly sales and 450 new machines were added. From FY 2012 to the predicted FY 2014 the advertising budget nearly doubled from $7,261,102 to $16 million. Additionally 10 out of the 16 local events the lottery sponsored did not provide a positive return on investment and they sponsored events in FY 2011 that resulted in negative returns in 2010.
"The Lottery Commission agrees with the recommendation and will continue to use the PINPOINT Sponsorship Evaluation System (implemented in July2011) to systematically organize, measure and evaluate applications submitted to the Lottery for community and other sponsorships."
The recommendations made by the Office of Administration intended to increase funding for public educations included:
• Aligning incentives for contractors with the goal of increased funds for education.
• Integration of contracting procedures to align with the Office of Administration's established regulations for vendor contracts.
• Carefully scrutinizing administrative expenses to determine how consolidated services could be utilized to reduce those costs.
• Conducting an analysis to more comprehensively review the importance of prize payout percentages relative to other factors in maximizing funds for education.
• Implementing a more systematic review of projected versus actual return-on-investment on advertising and promotional expenses and suspending activities without a positive return.
Governor Nixon named four new members to the State Lottery Commission with educational backgrounds. The governor's office sent out of brief profile of each member.
Dr. Terry R. Adams (D), of Lake St. Louis, is a retired school district superintendent who served as the superintendent of the Rockwood School District (2013-2014) in Eureka, the Wentzville R-IV School District (2006-2013), Rolla Public School District #31 (2002-2006), Central R-III School District in Park Hills (1997-2002), and the Arcadia Valley R-II School District in Ironton (1987-1997). He was named Missouri superintendent of the year in 2012. The Governor has appointed him for a term ending Sept. 7, 2015.
Dr. Phyllis A. Chase (D), of Kansas City, is director of the Charter School Center at the University of Missouri-Kansas City and has held positions in public education since 1971. She was superintendent of Columbia Public Schools from 2003 to 2008, chief of staff of Springfield Public Schools from 2000 to 2003, and acting superintendent of the Kansas City, Missouri School District from 1998 to 2000. The Governor has appointed her for a term ending Sept. 7, 2016.
Paul Kincaid (I), of Springfield, will retire in October after 28 years with Missouri State University, most recently as chief of staff and assistant to the president for university relations. He has been active in the Council for Advancement and Support of Education and the American Association of State Colleges and Universities. Kincaid is a graduate of Phillips University. The Governor has appointed him for a term ending Sept. 7, 2016.
John Twitty (R), of Springfield, spent almost three decades in management of municipal utilities in Rolla and Springfield, including service as general manager and chief executive officer of City Utilities of Springfield from 2002 to 2011. He serves on the Board of Trustees of Drury University, and on the boards of directors for Jordan Valley Community Health Center, Mercy Health Springfield Communities and Empire Bank. He obtained his undergraduate degree from the University of Missouri and his post-graduate degree from the University of Missouri-Rolla. The Governor has appointed Twitty for a term ending Sept. 7, 2016.