With inflation continuing to influence lottery players' pocketbooks, the Arkansas Scholarship Lottery's revenue in September slipped from $46.8 million a year ago to $43 million as the amount raised for college scholarships dropped from $9.1 million a year ago to $7.9 million.
The downturn came in a month in which the lottery started selling a new draw game called the Arkansas LOTTO on Sept. 18.
Lottery Director Eric Hagler said Tuesday that the lottery's total revenue declined by about 8% amid raging inflation, increasing interest rates and rising consumer costs.
"Our products are discretionary in nature and not a necessity," he said in a written statement. "When factoring in inflation and its impact on consumer budgets, we are very pleased with the current level of sales."
Gas prices also can influence lottery ticket sales. About 1,350 of the lottery's nearly 2,000 retailers are convenience stores that sell gas, said Scott Hardin, a spokesman for the state Department of Finance and Administration.
AAA reported Tuesday that the average price of regular unleaded gasoline in Arkansas is $3.40 a gallon -- up from $3.21 a week ago, $3.16 a month ago and $2.92 a year ago. That's down from the highest recorded price of regular unleaded gas in Arkansas, $4.54 a gallon on June 14.
The lottery's scratch-off ticket revenue in September declined from $37.1 million a year ago to $35.8 million, while draw-game ticket revenue slipped from $9.6 million a year ago to $7.9 million, the lottery reported Monday in its monthly report to Gov. Asa Hutchinson and the Legislative Council's lottery oversight subcommittee.
The lottery's draw games include Powerball, Mega Millions, Fast Play, Natural State Jackpot, LOTTO, Lucky for Life, Cash 3 and Cash 4.
The lottery's gaming director, Mike Smith, said the lottery's revenue in September 2021 was driven partially by a Powerball jackpot in excess of $650 million.
While scratch-off ticket revenue in September was slightly down versus last year, it was still $1.3 million ahead of the projected budget, he said.
The lottery reported $320,110 in LOTTO ticket revenue in September after sales of the $2 tickets started Sept. 18 and the first drawing was held Sept.21 The game has a starting jackpot of $250,000. Drawings are held every Wednesday and Saturday night.
Smith said lottery officials are pleased with early results of LOTTO sales, but it will take some time to establish expectations for LOTTO sales as trendlines are established.
"LOTTO is a jackpot-driven game and some players will only play when the jackpot reaches a certain level," he said.
While the amount raised by the lottery for college scholarhips in September dropped from a year ago, Hagler said measuring net proceeds on a monthly basis proves to be a bit of a moving target.
"There is a monthly cash-to-accrual [accounting] adjustment that can swing either positive or negative," he said. "... The best measure of net proceeds is year-end totals. "
The Arkansas Scholarship Lottery has been selling tickets since Sept. 28, 2009. It's helped finance Arkansas Academic Challenge Scholarships for more than 30,000 students for 11 consecutive fiscal years until fiscal 2022, which ended June 30, when 28,716 students were awarded scholarships amid declining higher-education enrollments.
September is the third month of fiscal 2023.
Through the first three months of fiscal 2023, the lottery's revenue reached $144.6 million -- just short of the $144.7 million collected in the same period in fiscal 2022. Thus far in fiscal 2023, the lottery has sold $112.8 million in scratch-off tickets, down from $119.2 in the same period in fiscal 2022, but has sold $31.6 million in draw-game tickets so far in fiscal 2023, ahead of the $25.2 million in the same period in fiscal 2022. Draw-game ticket sales are more profitable to the lottery than scratch-off ticket sales.
So far in fiscal 2023, the lottery reported raising $26.4 million for college scholarships, slightly ahead of the $24.2 million raised in the same period in fiscal 2022.
At the end of each fiscal year, the lottery transfers the unclaimed prize reserve fund balance minus $1 million to college scholarships.
The unclaimed prize reserve fund totaled $3.6 million at the end of September, after receiving $817,396 in unclaimed prizes in September.
The lottery's chief fiscal officer, Jerry Fetzer, said the lottery's revenue for fiscal 2023 is $15.4 million above the lottery's projected budget and the lottery's net proceeds for college scholarships so far in fiscal 2023 are $6.8 million above the lottery's projected budget.
For fiscal 2023, the lottery is projecting total revenue of $535.9 million and raising $91.4 million for college scholarships.
In fiscal 2022, the lottery collected revenue of $580.2 million and raised $99.7 million for college scholarships. They were the second-largest amounts the lottery has reported in any fiscal year, trailing only fiscal 2021, when the lottery collected revenue of $632.5 million and raised $106.6 million for college scholarships.
Last year, lottery officials attributed fiscal 2021's record numbers in part to factors brought on by the covid-19 pandemic.
SCHOLARSHIPS
Information about the number of lottery-financed scholarships awarded and total dollars distributed in fiscal 2023 isn't available yet through the Division of Higher Education.
Division spokesman Alisha Lewis said Monday that "we are undergoing a data migration to a new software system for processing our financial aid and scholarships.
"We are not able to see that data until the module is finished (hopefully by the end of the week or the first of next week)," she said in a written statement. "However, we have been unable to pay institutions on behalf of students for the last almost three weeks. It is fairly accurate to say we haven't paid many if any since this academic year began."
"That is the not-so-great news," Lewis said. "The great news is that we will also have a public-facing portal where you can see the numbers in real time! We are so excited!"
In fiscal 2022 that ended June 30, the division awarded a total of $75.1 million in Arkansas Academic Challenge Scholarships to 28,716 students. The division had forecast that it would hand out $90 million in scholarships to 31,200 students in fiscal 2022.
Fiscal 2022 is the first fiscal year in the past 12 fiscal years that Arkansas Academic Challenge Scholarships were awarded to fewer than 30,000 students. The division's assistant director of finance, Nick Fuller, has said that's because of the continued trend of overall enrollment decline in higher education and the total number of high school students continuing to get smaller, leading to a smaller pool from which scholarships are awarded.
For fiscal 2023, the division projects awarding a total of $78 million in Arkansas Academic Challenge Scholarships to 27,250 students, according to Lewis.
The Arkansas Academic Challenge Scholarships are financed with the lottery's net proceeds plus $20 million a year in state general revenue.
The amount handed out for the Academic Challenge Scholarships peaked at $132.9 million in fiscal 2013, with awards going to 33,353 students. Scholarship totals have dropped largely because the Legislature cut the amount of initial scholarships several times.
The 2017 Legislature created the Workforce Challenge Scholarship to use excess proceeds to provide up to $800 per year for students enrolled in programs that lead to qualifications in high-demand occupations.
In fiscal 2022, the division awarded these scholarships to 690 students and disbursed $605,694. In fiscal 2023, the division projects it will distribute Workforce Challenge Scholarships to 1,000 students and disburse $1 million.
The 2019 Legislature created the Concurrent Challenge program that allows high school juniors and seniors to receive the scholarships for a semester or an academic year in which they are enrolled in an endorsed concurrent course or certain programs.
For the Concurrent Challenge program, the division awarded scholarships to 16,432 students and disbursed $2.7 million in fiscal 2022. In fiscal 2023, the division projects awarding Concurrent Challenge Scholarships to 13,750 students and disbursing $2.75 million.