State lottery profits fall 17.5 percent as economy, jackpot decline

Hoosiers are spending less on gaming in Indiana, and the economic recession might be to blame.  

The Hoosier Lottery proceeds were down 17.5 percent this year, and consumer spending habits will ultimately determine the lottery revenue for the next fiscal year.
Andrew Reed, director of public relations for Hoosier Lottery, said although 17.5 percent is the number broadcast to the public, the actual loss of revenue is less severe.

“The economy has certainly played a factor in those numbers, and people’s buying habits changed,” Reed said. “Hoosiers are conservative in their patterns, and people are holding on to their entertainment money.”

Reed said for the 2008 fiscal year, the Hoosier Lottery went 11 months without being hit, and consequently there was a yearlong jackpot. State lottery revenue was $217 million that year.

For the 2009 fiscal year, things were different. There was a winner once a month, so a large jackpot wasn’t generated, Reed said. Taking into consideration the higher number of winners and the reduced jackpot, the revenue loss for 2009 was only down 7.4 percent, he said. State lottery revenue was only $178 million in fiscal year 2009.

He said the loss of lottery revenue would not cause cuts in Indiana’s General Fund, and $30 million of the revenue is put into retirement funds for teachers, police and firefighters. The remaining funds go into the Build Indiana Fund, Reed said. He said the change in consumption has also called for a new marketing plan for the lottery – they are offering things to consumers that they can’t buy on their own.

“We’re doing research,” Reed said. “We’re asking players what they want, and
players are looking for value in the game.”

For example, a promotion that started a few weeks ago will allow players to win Indianapolis Colts season tickets, which there is a wait list for. In addition, the NFL just formed a better marketing partnership with the lottery, Reed said.

“We think it’s a win-win situation for both organizations,” he said.

Rep. Trent Van Haaften, D-Mt. Vernon, a member of the House-Senate Gaming Study Committee, said the group has met twice so far to discuss the gaming issues that surround areas such as casinos and river boating, but they have yet to talk about the lottery.   

“Dollars are limited in people’s pockets, and they start having priorities on what they spend money on,” Van Haaften said. “It depends also on the amount offered in the lottery, the play involved goes up. I can’t remember the last time there was a big jackpot for people to win.”

Van Haaften’s statement is in accordance with Reed’s explanation of smaller jackpots in the past fiscal year. Van Haaften expressed concern that when the economy bounces back, people may still turn to other expenses like restaurant and vacation, rather than gambling.   

Business economics professor Bruce Jaffee said there are more factors than the recession that change lottery revenue.

“There is an increase and expansion of gambling opportunities throughout the state and region,” Jaffee said. He added it would be imperative to look into the issues of lost revenue and to look for any fundamental flaws in the industry.

“I think as the economy goes up, the lottery revenue will increase,” Jaffee said. “It’s not going to have that kind of growth that we have seen in the last 10 years. It’s a mature industry. It’s one that’s facing increasing competition.”