- Associated Press - Saturday, July 19, 2014

RALEIGH, N.C. (AP) - It may have taken more than two decades for the North Carolina General Assembly to enact a lottery, but it is now an attractive moneymaker in the eyes of state lawmakers.

It saw 67 percent increase in per capita sales in its first six years, while sales hit $1.8 billion in the 2014 fiscal year ending in June. North Carolina was the last state to get a lottery on the East Coast, but has grown faster and more consistently than other lotteries introduced around the same time.

It is also one of the most restrictive in the country, especially when it comes to advertising. An attempt by the House to double advertising spending was scuttled by opposition from the Senate.

Despite the restrictions, there is still room to grow, says lottery Executive Director Alice Garland.

“One of the things I’m anxious to do is to grow our player base,” she said. Her goal is for a lot of people playing a little, she said.

Now that the lottery is nearly a decade old, sustained sales growth will be a challenge, said Herb Delehanty, owner of Delehanty Consulting who has reviewed North Carolina’s lottery growth and does audits on state lotteries across the country.

“I think they’re kind of catching up to everyone else,” Delehanty said. “North Carolina is now facing the same issues that other lotteries are facing.”

The lottery was an embattled feature of legislative sessions for more than 20 years before it finally passed in 2005. Ironically, Republicans were some of its staunchest opponents, arguing that legalized gambling was bad public policy and that its moneymaking potential was questionable.

How things have changed. Last month, House Republicans sought to double the advertising budget for the lottery to 2 percent of sales, which analysts projected would generate $29 million more for public education. But the Senate balked at the idea because it also would have placed new restrictions on lottery ad content and placement. The House has since retreated from the idea.

But the fact that the request for more lottery dollars made it to the table is telling.

“I never thought the legislature might be interested in letting us spend more on advertising,” Garland said. “It says to me that we’re now at a point in our lifespan where they do consider us a stable source of funding that and they’ve learned that they can count on us.”

Early on, the state’s commitment to only spend lottery money on education was firm. That loosened a bit as the lottery grew. In 2009, Gov. Beverly Perdue used lottery reserves to help the state pay its bills in a budget emergency. In the 2010, 6 percent of that year’s lottery money, $26 million, paid for a Medicaid shortfall.

The percentages of lottery revenues that go to education have decreased from 35 percent in 2007 to 28 percent today. But more dollars overall have been transferred to the state.

John Rustin, director of the North Carolina Family Policy Council, says the lottery is a gateway to gambling addiction and opposes more money for advertising.

“It’s an unreliable source of revenue, the amount that actually ends up going to education as a percentage continues to decline,” Rustin said.

Even without the increased ad spending, the lottery expects to generate more revenue next year. It moved up the release of a new scratch-off product in hopes of attracting new players and will introduce a new game the following year. The lottery has also increased the number of retailers that sell its products and is working on a phone app to help players find those sellers. There are now 1,000 more retailers selling lottery games than in 2007, the same year a cap on prize money was lifted, allowing the lottery to put more money into prizes. Sales immediately increased after the prize increase, Garland said.

The political future of the lottery may depend on whether it can continue to bring in stable streams of money to the state. Lotteries across the country are concerned with how to get 24-35 year-olds to play, to keep sales revenue growing as the lottery’s player base ages.

“The whole industry’s worried about that,” Garland says. Other state lotteries have been able to up the ante with video lottery games that simulate a slot machine or virtual scratch-off tickets that can be bought and played online. But going digital with the lottery isn’t nearing the negotiating table any time soon.

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