Exclusive: Lottery thrives as economy dives

A pleasant puzzle for officials of games: Why are they immune to the nation’s gloom?

By RODDIE BURRIS - rburris@thestate.com

Economic bad times are everywhere in South Carolina, but you wouldn’t know it by soaring lottery-ticket sales. The state-run games have raked in cash over the past six months, up 3 percent statewide from the same period, January to June, one year ago.

That’s a surprising result, given the state’s record-high gas prices, rising food costs, depressed real estate values and shaky job market. Lottery officials had fretted about whether the games would make their goal.

When the lottery closes its books on the year later this month, Ernie Passailaigue, executive director of the South Carolina Education Lottery, said he expects more than $266 million in lottery profits to be transferred to the education account, on preliminary gross sales figures of $992 million.

That will exceed the state’s $252.4 million goal for the year by about $14 million.

Lottery officials announced this week that South Carolina crossed the $2 billion mark in contributions to education funding, highlighting how integral lottery proceeds have become in financing college scholarships.

Since its controversial inception in 2002, the S.C. lottery has raked in more than $6 billion in ticket sales.

“The last six months (have) been a lot more dynamic and positive than the first six months (of the 2007-2008 fiscal year) to help us actually make this (year) the second-highest gross sales ever in South Carolina lottery history,” Passailaigue said. “We’re very happy about that.”

LOTTERY WORRIES

The state lottery’s good fortune was not an automatic, Passailaigue said, especially this year, as consumers’ incomes have been squeezed on nearly every side.

At the end of December 2007, midway through the fiscal year, Passailaigue said lottery coffers were less than $500,000 beyond the break-even point, “treading water.”

He informed state leaders, including the Board of Economic Advisers, which does economic planning and forecasting, along with Senate Finance chairman Hugh Leatherman, House Ways and Means chairman Dan Cooper and other lawmakers “that we were hopeful we’d make our lottery goal this year.”

At that same time, drivers in the Southeast were paying an average of $3.09 a gallon for gasoline, according to industry figures.

By the end of June, the close of the fiscal year, when Southeastern gasoline prices were averaging $4 per gallon, lottery net gains topped $52 million.

“That is odd,” Passailaigue said, searching for an explanation for the games’ good fortunes.

He credited the type of games the lottery offers, which he said gives players alternatives when spending their cash. He mentioned a Harley-Davidson game and a NASCAR game, specifically.

Lottery officials also are offering a new MegaMatch 6 game at $5 a ticket, in which players have won more than $4.8 million.

Passailaigue said lottery sales have slipped in some S.C. counties, particularly border counties next to the North Carolina and Georgia state lines and some of the poorest counties, including Sumter, Marlboro, Allendale and Hampton.

There have been much smaller declines in 2008 in counties such as Berkeley, Dorchester, Chester and Pickens, all considered more affluent.

“I think what has occurred is, because of a variety of factors, you have a higher demographic, in terms of household incomes, playing the lottery now than ever before. What that’s attributed to, I don’t know,” Passailaigue said.

In some cases, he suggests it is simply people deciding to take $5 — and a chance — to hit the jackpot and pay off growing credit-card and other financial obligations.

Recent figures also show gambling proceeds are down in places such as Las Vegas and the Gulf, and Passailaigue said local profits also may be up because of the high cost of travel.

EXPLAINING THE GAINS

S.C. officials are guessing why the state’s lottery is performing better than expected.

“You have had two major winners in South Carolina recently, in Lexington County, and secondly, in a sagging economy people are willing to take higher risks, because of higher needs,” said Rep. John Scott, D-Richland, a member of the Lottery Oversight Committee since its inception.

A West Columbia man won $200,000 in June in the MegaMatch 6 game and a Swansea resident recently won $39 million in the Powerball game.

Passailaigue pointed out that scratch-offs still are the “bread and butter” of the S.C. lottery, because they could mean instant cash.

For some, that indicates desperation, some argue.

“Yes and no,” Scott said. “If someone hits it, it looks like a good opportunity, and it will ease my pain for life, that’s true. In a sagging economy, people also must make adjustments in their fixed versus variable expenses.”

Some lottery critics think poor people, especially during down economic times, are getting a raw deal.

“It’s lousy public policy that preys on the poor,” said lottery opponent John Rainey, chairman of the Board of Economic Advisers, which reviews lottery figures to help the state make accurate economic projections for the budget.

“It’s a dollar for hope,” Rainey said. “It’s trying to buy an escape. It’s a wealth transfer in the wrong direction.”