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Lottery Oversight Presentation
October 2017
Alice Garland,Executive DirectorNC Education Lottery
Courtney Crowder,Chairman
NC Education Lottery Commission
Lottery Led by Professional Staff and Nine-Member Commission
Courtney A. CrowderCommission Chairman
Appointed by Gov. Bev Perdue and named Commission Chairman by
Gov. Roy Cooper
Douglas BakerAppointed by
Speaker Thom Tills
Morgan BeamAppointed by
Gov. Pat McCrory
Richard E. BengelAppointed by
Gov. Pat McCrory
Amy EllisAudit and Finance Chair
Appointed by Senate President Pro Tem Phil Berger
Jody TysonOperations and Personnel
ChairAppointed by Senate
President Pro Tem Phil Berger
Randy JonesAppointed by
House Speaker Tim Moore
Tony RandRevenue Generating Chair
Appointed by Gov. Roy Cooper
Chris ShewAppointed by
Gov. Pat McCrory
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States with Lotteries (44)
3
Lottery Timeline
4
Lottery Timeline
5
Lottery Timeline
6
Lottery Timeline
7
Conversion to a New Operating System- Upgraded Lottery Operations Across the State -
768 meetings, 1134 hours from 9/8/2014 to 6/30/2017
• Completed 15 Functional Requirement Documents with over 1,800 pages with multiple revisions.
• Converted and migrated over 1 TB of data from the ES System to the new Aurora System.
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August 5, 2014 March 26, 2017
New Operating System Saves Money
Old Rates $ 21,545,897.00
New Rates $ 19,517,696.00
Difference $ 2,028,201.00
Savings 9.41%
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From 3/25/2017 to 10/07/2017
New Jersey Indiana California North Carolina
Inception 1969 Inception 1989 Inception 1984
Inception 2006
Currently Level 3
Level 4 Submission: Oct. 2017
States with World Lottery Association’sResponsible Gaming Level 4 Certification
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Draw Game Promotions
May 2017The Works
July 2017Cash 5 $100k Days
September 2017Pick 3 Prize Doubler
FY17
FY18
March 2017Pick 3 Double Draw
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Net Proceeds:
$5,227,624,234To The State of North Carolina
March 30, 2006 – June 30, 2017
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History of Lottery Sales
$229.5
$885.6
$1078.2
$1293.1$1421.3 $1461.1
$1596.7$1689.8
$1839.3$1972.2
$2383.6 $2428.0
$0.0
$500.0
$1000.0
$1500.0
$2000.0
$2500.0
$3000.0
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
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Sales in Millions
History of Lottery Earnings
Earnings for Education in Millions
$62.3
$315.6$348.3
$413.9$432.2 $436.2
$459.5$478.5
$503.1$521.2
$634.3 $622.5
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
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Earnings:
$622,505,029for Education in FY 2017
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FY 2017 Budgeted Proceeds
FY 2017 Proceeds $ 622,505,029
FY 2017 Budget Funding Required for Education 591,713,703
FY 2017 Surplus Proceeds Available for FY 2018 Budget $ 30,791,326
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"§ 18C-164. Transfer of net revenues. 2017(b1) Net revenues credited to the Education Lottery Fund shall be appropriated in an amount equal to the amount appropriated from the Education Lottery Fund in the Current Operations and Capital Improvements Appropriations Act of 2017.
(b2) The Office of State Budget and Management shall transfer any net revenues remaining in the Education Lottery Fund after the appropriations made pursuant to subsection (b1) of this section to the Education Lottery Reserve Fund, a special revenue fund, necessary to maintain a minimum balance of twenty-five million dollars ($25,000,000).
(b3) Any net revenues remaining after appropriation pursuant to subsection (b1) of this section and transfer pursuant to subsection (b2) of this section are hereby appropriated to the Needs-Based Public School Capital Fund.
(b4) Notwithstanding subsection (b2) of this section, the minimum balance of the Education Lottery Reserve Fund may be less than twenty-five million dollars ($25,000,000) if funds are necessary to meet the amount of net revenues appropriated pursuant to subsection (b1) of this section. … (e) If the actual net revenues are less than the appropriation provided in subsection (b1) of this section for that given year, then the Governor may transfer from the Education Lottery Reserve Fund an amount sufficient to equal the appropriation by the General Assembly. Provided by subsection (b1) of this section.
(f) Actual net revenues in excess of the amounts appropriated in a fiscal year shall remain in the Education Lottery Fund."
Lottery Reserve Fund
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Lottery Reserve Fund Balance June 30, 2017: $ 109,440,485
Budget Savings in FY 2017
Administration Budget $ 60,339,000
NCEL Spent $ 53,365,162
Savings to Education $ 6,973,838
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FY 2017 Actual Sales and Contribution to EducationFY17 Sales % of Revenue FY17 Contribution % Return
Instant $ 1,695,232,342 69.82% $325,473,830 19.20%
Pick 3 306,018,460 12.60% 121,961,145 39.85%
Powerball 148,510,627 6.12% 60,729,529 40.89%
Pick 4 135,797,947 5.59% 57,597,737 42.41%
Cash 5 59,812,487 2.46% 23,868,609 39.91%
Mega Millions 54,332,136 2.24% 21,917,180 40.34%
Lucky for Life 19,904,592 0.82% 8,454,414 42.47%
EZ Match 8,462,988 0.35% 2,502,585 29.57%
Ticket Sales $ 2,428,071,579 100.00% $ 622,505,029 25.64%
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FY 2018 Budget of Lottery Revenue
64.0%
25.0%
7.0%
4.0%
Prizes to Winners
Earnings for Education
Retail Commissions
Administration
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How we are growing…
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MU
LTI-S
TATE
DR
AW G
AM
ES
IN-IS
TATE
DR
AW G
AM
ES
INSA
TNT
SCR
ATC
H-O
FF
GA
MES
Lottery Games
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Over $169.4 Millionin Retail Commissions Statewide
in FY 2017
6,919Retailers
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States with Keno (19)
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YEAR 1* YEAR 2
SALES $59,780,160 $135,399,180
RETURN $10,806,933 $30,931,066
Financial Estimates for Keno in North Carolina
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*Eight months of sales
Keno Focus Group Results
Similarly, most respondents didn’t feel that Keno was uniquely designed to appeal to kids under 18.
No one thought Keno promised or guaranteed a win.
If you don’t understand that not everyone who plays this game will win, then you probably shouldn’t be playing the lottery. (Infrequent)
“It is understandable that not everyone wins.” (Light / Lapsed / Millennial)
“It’s not appealing to kids because this game is more for the older crowd.” (Infrequent)
“I can’t see my niece or nephew interested in this because it is not a game on an app.” (Infrequent)
“I don’t see it being a problem with kids.” (Retailers)
I don’t believe with this information here anyone could not understand that wins in Keno aren’t guaranteed.” (Retailer)
“Showing the odds tell players that not everyone is going to win something on this game.” (Light / Lapsed / Millennial)
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How to Play Carolina Keno
1. Select how much you want to play per draw.
2. Choose how many numbers (spots) you want to play.
3. How many draws in a row do you want to play?
4. Pick your own numbers from 1 to 80.
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Carolina Keno Draw ShowGoes live Oct. 29
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Expanding Partnerships- 682 Retailers Go Live -
NewRetailers
Retailers withSocial Environment
New Retailer Applications Pending
132 550 107
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Where we could be…
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Increase to 1.5% $34,410,672
Increase to 2.0% $63,372,524
How Increased Ad Dollars Could Benefit Return to Education
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15.6%
24.3%
31.5%
13.9%
-5.9% -4.8%5.4% 3.2%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
May
-16
Jun-
16
Jul-1
6
Aug-
16
Sep-
16
Oct
-16
Nov
-16
Dec
-16
Advertising Impacts Sales
Media Off-Air due to
Election
Media Back On-Air
32
Overall Monthly Sales Growth (% Change vs. PY)
How Increased Ad Dollars Could Benefit Return to Education
1.5% Increase 2.0% Increase
• 3 new months of Instant Scratch-Off advertised launches
• Powerball (to $0.044/cap above MUSL avg.) and Mega Millions advertising (build to $0.017/cap above avg.)
• Draw Game Promotion advertising for 3 months
• Two (2) $30 tickets on sale at same time and advertised
• 3 new months of Instant Scratch-Off advertised launches
• Powerball (to $0.044/cap above MUSL avg.) and Mega Millions advertising (build to $0.017/cap above avg.)
• Draw Game Promotion advertising for 6 months
• Two (2) $30 tickets on sale at same time and advertised
• Add additional 4th week of media to monthly instant scratch-off campaigns
• $20 large format instant scratch-off game launched and advertised
• Keno to Go at all 7,000 traditional lottery retailers ($0.08 weekly per cap)
• Keno Add-on (multiplier feature) launched with advertising
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1.50% 2.00%
Instant Scratch-Off Initiatives $19,296,172 $29,889,887
Increased Powerball, Mega Millions and Draw Game Promo advertising $15,114,500 $19,805,514.93
Keno to Go and New Add-On $13,677,123
Total Return to Education $34,410,672 $63,372,524
Total Gross Sales $184,967,561 $307,770,574
Incremental Spend $13,000,000 $26,000,000
Ratio 2.65 2.44
How Increased Ad Dollars Could Benefit Return to Education
34
Current Web-Based Offerings
December2013
December2014
December2015
February2016
Subscription Services launches for Powerball, Mega Millions and Carolina Cash 5
Subscription Services launches forLucky For Life
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Evolution of NCEL Web-Based Offerings
Lucke-Zone Players Club
Feb 2011
Lucke-RewardsOct 2012
Subscription ServicesDec 2013
Mastercard Debit
FundingFeb 2014
Visa Debit FundingDec 2014
Lucke-Zone Mobile App
Mar 2015
Lucky for Life Added to
Subscriptions Feb 2016
Single Draw Sales for
SubscriptionsJun 2016
First Promotion for Subscriptions
Jul 2016
New Website with
Integrated Login & Cart
Oct 2017
36
Expanding Web-Based Offerings Increases Sales
37
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Visa Debit added
Record $1.5 million Powerball
Jackpot
Single Draw Sales begin
Mastercard Debit added
Powerball Jackpots from
$432M to $758M
Web-Based Sales
New Website with Integrated Login and Cart
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New Player Dashboard - With Account Status and Quick Links -
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States are Already Adding Digital Instants to Web-Based Offerings
States with Digital Instants
States Preparing to Implement Digital Instants
States Actively Considering Digital Instants
40
Adding Digital Instants to Web-Based Offerings Could Increase Revenue to Education by
$130 MillionOver the First Five Years
41
Digital Instants Benchmarking Study, Prepared by Delehanty Consulting
Low Probable High
Year 1 $ 4,604,969 $ 6,405,297 $ 9,984,438
Year 2 $ 8,477,718 $ 16,460,065 $ 43,396,414
Year 3 $ 13,166,793 $ 26,967,079 $ 80,312,328
Year 4 $ 18,643,407 $ 34,970,294 $ 98,183,394
Year 5 $ 26,333,430 $ 45,237,804 $119,737,647
TOTAL $ 71,226,316 $ 130,040,539 $ 351,524,221
Projected Digital Instants Gaming Revenues for Education
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Digital Instants Provides Additional Opportunities for Responsible Gaming
Current Online Play Responsible Gaming Controls:• Membership Requirement
• Age and Identity Verification
• Geo-fencing for Online Play Purchases
• Wallet Funding/Balance Limits and Winnings Disbursement Controls (including Anti-Money Laundering Safeguards)
• Play Limits
• Player-Enabled Limits and Change Waiting Period
• Self-Exclusion
• PIN Transaction Requirement
• Limited Funding Types
New Digital Instants Responsible Gaming Controls:• Increased Purchase Limit Options
• Play Breaks
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Integrating Retail and Digital Instants Channel
44
Michigan Lottery
45
Georgia Lottery
46
Kentucky Lottery
47
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Questions?
49
History of Allocation of Lottery Funds
24%
26%
40%
10%
Classroom Teachers
Prekindergarten
School Construction
College Scholarships
2007 Lottery Allocation
50
History of Allocation of Lottery Funds
24%
20%43%
9%
4%
Classroom Teachers
Prekindergarten
School Construction
College Scholarships
UNC Need-Based Aid
2010 Lottery Allocation
51
History of Allocation of Lottery Funds
2011 Lottery Allocation
41%
17%
23%
7%
2%4% 6%
Classroom Teachers
Prekindergarten
School Construction
College Scholarships
UNC Need‐Based Aid
Reserve Restoration
Medicaid Shortfall
52
History of Allocation of Lottery Funds
2015 Lottery Allocation
44%
19%
13%
17%
5%2%
Classroom Teachers
Teacher Assistants
Prekindergarten
School Construction
College Scholarships
UNC Need‐Based Aid
53
History of Allocation of Lottery Funds
2017 Lottery Allocation
63%13%
17%
5%
2%
Non‐Instructional Support Personnel
Prekindergarten
School Construction
College Scholarships
UNC Need‐Based Aid
54
History of Allocation of Lottery Funds
2018 Lottery Allocation
57%
12%
19%
6%
4%2%
Non‐Instructional Support Personnel
Prekindergarten
School Construction
LEA Transportation
College Scholarships
UNC Need‐Based Aid
55
Operating Efficiently and Effectively to Grow Sales- We are a $2.4 billion business spending only 3.91% on administrative costs in FY 2017 -
$-
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
% Total Administration Total Sales
56
Administrative Costs as a Percentage of RevenueLottery has used, on average, about half of what’s allowed for administrative costs.
1.40% 1.30% 1.14% 1.07% 1.08% 1.04% 1.03% 0.98% 0.95% 0.83% 0.88%
0.89% 0.81% 0.86% 0.83% 0.94% 0.92% 0.90% 0.83% 0.97%0.84% 0.83%
0.84%0.57% 0.64% 0.64% 0.66% 0.60% 0.70% 0.65% 0.65%
0.53% 0.49%
1.64%
1.63% 1.59% 1.59% 1.60% 1.69% 1.65% 1.70% 1.51%1.75% 1.71%
3.23% 3.69% 3.76% 3.88% 3.72% 3.75% 3.72% 3.84% 3.93% 4.05% 4.10%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY 15 FY16 FY17
Salaries & Benefits Advertising IT Infrastructure, Regional Offices, Vehicles, Utilities Gaming System Services Balance to Education
8.0% Allowed
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Commitment to Responsible Gaming
The lottery’s goal is to have a lot of people playing a little, not a few people playing a lot. We do not need
sales from problem gamblers to be a successful lottery.
The lottery partners with the National Council on Problem Gambling and provide $1 million a year to the state program, its only source of funding.
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Commitment to Responsible Gaming
Each March, the lottery supports National Problem Gambling Awareness Month with advertising to raise awareness about the signs of problem gambling and available treatment options.
The lottery trains and educates all employees and retailers to recognize the signs of problem gambling and to empower them with knowledge of how to refer anyone to where they can get help.
The phone number for the North Carolina Problem Gambling Helpline, and a Play Responsibly message, is shared in all lottery tickets and advertising.
Estimates are that about 2% -- six to eight million Americans, including somewhere between 195,000 and 340,000 North Carolinians -- will experience an issue with some form of problem gambling during their lifetime.
2%
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