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Lottery's spending questioned
April 11, 2003

St. Paul, Minn. — (AP) The Minnesota Lottery is defending its operations in the face of an environmental group's report that concludes it costs far more to run the lottery here than in comparable states.

The Minnesota Center for Environmental Advocacy said that if the portion of the lottery's annual gross sales of $382 million returned to the state treasury matched that of other states, it would mean an additional $10 million a year for the Minnesota environment and $15 million more for the general fund.

Sen. Ann Rest, DFL-New Hope, blamed "poor management." On Friday, the Senate State Government Budget Division was to hear her bill to subject the lottery to new oversight and a minimum return of 30 percent of its gross sales by 2005. The current return is 21.9 percent; the average of 39 state lotteries is 34 percent.

"Minnesota is the least efficient lottery in terms of administration," said John Curry, the environmental group's legislative director. The group is interested because 40 percent of the lottery's net income goes into the state's Environment and Natural Resources Trust Fund.

But lottery director George Andersen said state-to-state comparisons aren't valid for a wide range of reasons.

As an example, he said Minnesotans buy more scratch games, which have higher prize payouts, than people in other states. "We don't live on the rare Powerball ticket," he said. "We live on scratch tickets, and they cost a lot more."

The lottery faced similar attacks 10 years ago, and among the defenses raised then was that Minnesota gamblers enjoy some of the nation's highest payouts. That's still true, Andersen said, partly because of state law and partly because of tough competition from charitable pulltab gambling and Indian-run casinos.

State law requires that 60 percent of instant-game sales go back to the bettors, the highest payout in the nation.

Andersen cited other factors: higher advertising costs, especially for new scratch games; a population spread sparsely over a large state, and higher staff salaries because of Minnesota's relatively high cost of living.

The group's report noted that Wisconsin, with 60 percent of its lottery sales in scratch games, spends $14 million a year less than Minnesota to run its lottery, yet returns $40 million more.

Wisconsin's lottery employs barely half of the 197 workers that Minnesota's does, but its sales staff generates three times greater sales per person, the report said.

A number of other states' lotteries are overseen by commissions or revenue departments; Minnesota's is supervised only by the Legislature. Andersen said that is sufficient. A governing board was abolished in the 1990s because "it wasn't necessary," he said.

The analysis looked at lotteries in Arizona, Colorado, Indiana, Kentucky, Louisiana, Minnesota, Missouri, Washington and Wisconsin. Each had lottery income between $200 million and $600 million and population between 3.5 million and 6.5 million.

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