Lottery sales down sharply State is depending on revenue for budget, to build NFL stadium; $24.4 million drop since July 1; Officials attribute decline to rainy days, deliberate cuts in ads

THE BALTIMORE SUN

Maryland Lottery sales have dropped $24.4 million -- or 9 percent -- since July 1, a decline that could pose budget problems for the state next year if it persists.

The drop comes at a time when the state is counting on lottery revenues to balance its budget and provide funds to build a National Football League stadium in Baltimore.

Lottery officials are concerned but "somewhat" optimistic they can halt the current sales trend. "We have great concern, but it is not totally impossible to turn it around," said lottery spokesman Carroll H. Hynson Jr.

Hynson attributed the sales decline to rainy weather, lower game jackpots and a deliberate slowdown in advertising and promotions over the summer while the state switched to a new lottery computer system and contractor.

The lottery is the state government's third largest source of general fund revenues. It is expected to contribute $461 million to the $14.8 billion budget for the fiscal year that began July 1 and ends June 30.

Interest in some games remained fairly steady, but sales fell sharply -- by 25 percent -- for instant scratch-off games, some of which provide funds for Baltimore's professional sports stadiums.

Hynson said the lottery still expects to generate enough funds for the NFL stadium because it can use proceeds from the Big Game, a multistate lottery launched in late August, in addition to instant game revenues.

The 9 percent decline is compared to the same period last year.

Sales of all games have dropped almost 7 percent since a new contractor began running the state's lottery business Aug. 19. However, the decline started before the contractor, Automated Wagering International in Atlanta, arrived.

Officials from AWI could not be reached. They have called their work in Maryland a success.

Del. Sheila E. Hixson, chairwoman of the House of Delegates committee that oversees lottery revenues, said she believes the switch to AWI contributed to "shaky" sales.

"The lottery is one of the top three moneymakers for the state of Maryland, and it's very important that we keep it on an even keel," said Hixson, a Montgomery County Democrat. "But I think [sales] will be back, and it won't be a real problem for us."

Hynson said several factors explain the decline in sales. For one, the lottery held off advertising and promoting its games for weeks before and after the switch to AWI in an effort to simplify the transition.

Promotions can involve, for example, giving a free instant ticket with the purchase of another game. They can require software changes that could complicate life for a contractor trying to get a new system running properly, Hynson said.

The weather also played a role, he said. "We had a heck of a lot of rain, and people will not go out and buy lottery tickets when it rains," he said.

Another factor is jackpots. The higher the jackpots for games like Lotto -- and now the Big Game -- the greater the sales.

"This time last year we had a lot of big Lotto jackpots," Hynson said, but jackpots have been small in recent months. Lotto sales are down 12 percent since AWI took over, about a week before Maryland began selling Big Game tickets.

The Big Game offers significantly larger jackpots than Lotto and much longer odds. Although sales are growing weekly, the Big Game is still doing only about half the business of Lotto.

Hynson said the two games are co-existing, and he has "no way of knowing" the Big Game's effect on Lotto.

The lottery has made a few changes in Lotto recently. Jackpots used to grow by $500,000 when there was no big winner, regardless of whether sales justified it. However, officials stopped that practice after launching the Big Game because the newer game should attract the players who crave high jackpots.

To improve sales, the lottery also changed the twice-weekly Lotto drawings from 7: 55 p.m. to 11: 07 p.m. last month to give players three more hours to buy tickets.

Hynson said he could not determine the effect of glitches in AWI's takeover of the lottery. He also declined to comment on whether the lottery would seek reimbursement from the contractor for those times when its computers could not sell tickets.

Some stores that sell lottery tickets have complained that their AWI-supplied computers malfunctioned, particularly in AWI's first few weeks. After the debut Big Game drawing in September, many computers printed incorrect winning numbers.

Although many problems have been fixed, some have persisted. On Friday morning, for example, a computer glitch shut down keno games across Maryland for about three hours.

"We have people waiting because the machine is down half the time, and they get disgusted and walk out," Sterling Bollinger, co-owner of the Gateway Market in Thurmont, said this week.

Hynson said he was not sure whether the lottery would meet its annual revenue projections because it would depend in part on how lucky players will be this year.

"A great deal of it is dependent on the luck of draw. If people win a lot, we have less to give to the [state] general fund," he said.

Without a dramatic turnaround in sales, it may be hard for the lottery to provide the $461 million in revenues included in the state budget.

Even staff members to the state Board of Revenue Estimates are more conservative in their projections. They expect a little less than $400 million in lottery revenues this budget year.

In the past decade, the lottery has seen two other instances when first-quarter sales dropped significantly.

In the first three months of the 1989 budget year, sales dropped by $16 million, a harbinger of an overall 8 percent decline for the entire year. However, an $11 million decline in the first quarter of 1993 was not a predictor for the year, when total sales rose almost 9 percent.

Pub Date: 10/08/96

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