Hill sends some warning signals to the Georgia Lottery

[private]State Sen. Jack Hill (R-Reidsville) is one of those legislators to whom attention must be paid when he makes public statements.

Hill is the most senior member of the Georgia Senate (he was first elected in 1990) and also one of the most influential senators because of his longstanding position as chairman of the Appropriations Committee.

If the Senate’s top budget writer speaks, then state government agencies would be wise to listen to what he’s saying.

Hill sends some strongly worded messages to the Georgia Lottery in his weekly email newsletter – including suggestions that the Lottery Commission needs to start controlling salaries and trimming administrative expenses so that more money will flow to the HOPE scholarship coffers.

“I have been reluctant to join efforts to ‘force’ through legislation goals for the Lottery and I have consistently supported any legislation asked for by the Commission,” Hill wrote in his Aug. 31 email.

After looking at the performance of lotteries in other states, Hill said, he has concluded that “while it is certainly successful in some ways, and not the worst on any listing of lotteries in the country, Georgia’s Lottery is also certainly not at the top of the list in almost any category.”

The Georgia Lottery reported gross ticket sales of $4.02 billion in fiscal year 2014, with $945.1 million in net proceeds going to the scholarship account. Gross ticket sales were $3.91 billion for fiscal year 2013 with net proceeds of $927.5 million to the scholarship find.

The state’s lottery law says 35 percent of total lottery sales should be transferred to the HOPE scholarship fund, although that amount has actually been less than 25 percent in recent years. The law provides that 45 percent of sales should be devoted to prize expenses, with the remaining 20 percent used for administrative expenses.

“The Georgia Lottery is currently under that recommended [administrative] cap at about 16.49 percent,” Hill said. On the other hand, he noted, New York and California have administrative caps that are lower than Georgia’s, so they are able to “devote surpluses to their respective state treasuries.”

Hill proposed several ways for the Georgia Lottery to cut administrative costs, including:

Slightly reducing the commissions and “cashing bonuses” paid to retail outlets that sell lottery tickets and validate winning tickets.

Consolidating the contracts the Lottery currently has with two companies to provide ticket terminals, software, and the printing and distribution of instant win games.

“Reevaluating contracts with outside vendors to consolidate services could avoid multiple fees,” Hill said. “The savings in the area of gaming contracts could be directly moved to education.”

Putting tighter controls on the salaries of Lottery employees.

“The Lottery for Education Act limits the amount of bonuses that lottery employees can receive, but it does not impose any restrictions on the amount that employees’ base salaries can increase or decrease,” Hill said.

He said amending the lottery law “to include a percentage that overall expenses cannot rise above in a single year would allow salary expenses to be kept at a reasonable rate. Limits on pay increases could also decrease the large gap between top-earning individuals at the management level and general staff members.”

Requiring for-profit colleges that have low graduation rates to improve their performance.

“There has been negative publicity concerning higher student loans and low graduation rates at proprietary institutions,” Hill said. “Some of these institutions receive HOPE funds . . . there is an argument that could be made that schools with poor graduation rates should be influenced to improve in order to continue to receive HOPE funds. Probably a ‘sticky wicket’ but an area that deserves attention.”

© 2015 by The Georgia Report

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Tags: administrative expenses , Georgia Lottery , HOPE scholarship fund , Jack Hill , salaries