Columns » Ernest Dumas

Understanding the lottery



The director of the Arkansas lottery soothed legislators who were beset with complaints about the high salaries given to lottery executives last week by advising them to ignore the fuss because ordinary people just don't understand lotteries.

Clearly, lots of people don't grasp the essential nature of state-sponsored gambling. Money raised from the thriftless habits of the poor and the leisured is ordained to be spent by the government in the same easy-come, easy-go manner.

Unlike tax dollars, the cash from lottery tickets is regarded as free money so there is no need to be frugal or to be constrained by the usual precautions that dog bureaucrats, such as personnel ladders and compensation schedules. The constitutional amendment authorizing a lottery actually specifies that the receipts are not to be subject to the limitations of either appropriation laws or the state treasury, which regulate the spending of every tax dollar. The lottery people have carte blanche, literally.

So who can complain when the head of the South Carolina lottery says he will take the Arkansas job for $324,000, a raise of roughly a hundred grand for himself, as long as he can bring along two friends from the Palmetto State at $225,000 each to help him, or when the state Lottery Commission and the lawmakers who are supposed to watch over the lottery say, “are you sure that's all you want?” He declined when they tried to get him to take an $11,000 housing subsidy, too.

The state's chief fiscal officer, who is in charge of collecting and spending some $6 billion a year of your taxes, is limited by appropriation to a salary of $141,000, the governor to $87,352. Obviously, running a numbers game takes a lot more knowhow.

They should have saved us from the justifications for the big pay.

Running a lottery requires specialized knowledge, the commissioners said, and we will need to pay a premium to get a skilled person. Ernie Passailaigue, the South Carolina director, was a state senator when he landed the job there. He boned up on lotteries when he sponsored legislation creating the lottery. House Speaker Robbie Wills, D-Conway, the chief sponsor of the Arkansas lottery law, has identical credentials. The big lottery operation, with its open-ended pay, is already a political employment agency. Passailaigue's legislative background helps with that.

State lottery officials don't devise the games. For that, the state will contract with Scientific Games Corp., the world leader in lottery and pari-mutuel systems, although there is a chance that GTech Corp. could horn in on one of the contracts. Money is thrown around lavishly on these things as on everything else connected with lotteries so predictions are not safe.

When the South Carolina lottery was about to award contracts for scratch-off and on-line games, which Scientific Games and GTech often split, a lobbyist sent an e-mail to the CEO of Scientific Games, according to court documents.

“We have both sides of the business in South Carolina at our feet,” he wrote. “We must continue to be covertly aggressive in our approach.”

To cinch things, he suggested sending a nice check to South Carolinians for an Effective Lottery and throwing a campaign fund-raiser in New York for Gov. Jim Hodges, the father of the South Carolina lottery. Forty-eight hours after getting the scratch-off contract from Passailaigue's office, Scientific Games sent a check for $35,000 to the private group and then threw a fund-raiser for the governor in New York, which raised $50,000, mostly from company executives. Scientific Games then got the online contract as well.

The other argument for the big salaries was that Arkansas needs a seasoned team of lottery experts at the outset so that tickets can be sold as soon as possible. Passailaigue, who promises to sell the first tickets by the end of October, said the state would be missing $1 million every day that the lottery is delayed, much of which would be used to help kids go to college.

If Arkansans are not buying lottery tickets by the end of October or even by the end of the year, no youngster will have to stay at home because the state doesn't have scholarship money for her. Even if lottery money is being collected, they won't be passing out scholarships in midterm.

The state already has exactly $53,718,253 in unclaimed scholarship funds left from past years on top of $47 million that the state appropriated for the school year that starts next month. That $100 million will far exceed the demands of students for scholarships next year. It will be 2016 or later before the surplus scholarships are gone.

Whoever is hired to run them, lotteries tend to be up and running in no time. It's not brain surgery. You sign contracts with the gaming companies to supply the products, line up the vendors who will sell them, decide how aggressive you will be in marketing the games and, like other revenue agencies, establish the accounting system for collecting and distributing the revenues. In North Carolina, which started a lottery in late 2005, it took the lottery director only three months and two days to bring in the first bucks.

Ernie Passailaigue may be exactly the man for the job. But could they have got him for less than $324,000 or his friends for less than $225,000? He first sought and failed to get the North Carolina job, which paid $235,000. Should it take that much more to get somebody to come to Arkansas?

But who cares? There's plenty more where that money came from.

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