to revisit this rule and simply do bet- ter on behalf of the American people. ment H.R H.R. Ms. SLAUGHTER and Mr. ADER-. models for psychoneuroimmunology (Ader et al., ; Feder opment, the field of contemplative science may help to bet-. , 12frfr Ader, Semipostals (, BB). Very Fine. , 20cfr Postal Issues (Bet. a). Collection of 9 diff. COINYE WEST CRYPTO CURRENCY NEWS
The report on the trials was not publicized until , as they had been a military secret. In November Ader claimed to have made a successful flight on 14 October , achieving an 'uninterupted flight' of around metres ft. Although widely believed at the time, these claims were later discredited. However, the most widely accepted date is December 17, by the Wright brothers.
The Wright brothers were the first to fly in a powered and controlled aircraft. Previous flights were gliders control but no power or free flight power but no control , but the Wright brothers combined both, setting the new standard in aviation records. Chapters 3 and 4 present recommendations for action by the Lottery, and Chapter 5 offers recommendations to the Legislature and Governor. An appendix provides more detailed information on the sales revenues, expenses, and operating profits of all state lotteries operating in the United States.
Lottery Ticket sales increased slightly in the early s but fell by 17 percent in inflation-adjusted dollars between and Lottery operating expenses kept pace with inflation during this period. As a result, Lottery proceeds transferred to the state declined 22 percent in inflation-adjusted dollars between and The percentage of sales transferred to the state fell from an average of 24 percent from through to 22 percent from through The Lottery is not required to have its budget approved by the Governor or the Legislature.
In addition, the lottery is not subject to all of the accounting and contracting requirements that apply to most state agencies, although statutes require lottery procurement contracts to be determined through an open bidding process. In response to concerns that the Lottery's administrative expenses were too high, the Legislature placed a limit on Lottery spending for the biennium. This amounted to about a 7 percent reduction from spending.
In response, the Lottery laid off 34 permanent employees and 10 student workers and reduced its planned spending on promotions, advertising, and other Lottery operations. In November , Minnesota voters approved a constitutional amendment to authorize a lottery. Like most of those states, the Minnesota State Lottery offers a combination of "instant" or "scratch" games, where purchasers can scratch off the coating on a Ticket to reveal whether or not they win a prize, and "online" games, where Tickets contain several numbers and a drawing is held at a scheduled time to determine the winning numbers.
Minnesota began selling lottery Tickets in XIII, sec. In this chapter, we provide a general overview of the Lottery and the legal and social context in which it operates. We address the following questions: How is the Lottery organized, and what are the legal requirements governing its operation? What provisions exist in the law to oversee Lottery actions? How much money does the Lottery receive and what does it do with the money?
How have revenues and expenses changed since the Lottery's inception? What other forms of legal gambling are available to Minnesotans? To answer these questions, we reviewed state laws relating to the Lottery and other legal forms of gambling, interviewed numerous officials from the Lottery and other state agencies, examined Minnesota State Lottery annual financial reports, and reviewed reports about other forms of legal gambling.
The director heads the Executive Division while each of the other divisions is headed by an assistant director. A fourth assistant director serves as the Lottery's legal counsel. The Executive Division includes several small units responsible for legal issues, research and planning, public relations, security, and graphic arts.
The Operations Division oversees Ticket procurement and distribution and develops and maintains information systems to keep track of sales and ensure the integrity of the games. The Marketing Division is responsible for advertising, promotions, and sales, and it includes 30 sales representatives who provide the primary contact with retail establishments that sell Lottery Tickets.
About one-third of the Lottery employees, including all of the home-based sales representatives, are assigned to regional offices located in Eagan, Owatonna, Marshall, Brainerd, Detroit Lakes, and Virginia. These offices serve as supply centers and meeting places for Lottery sales representatives and places where customers can redeem winning Tickets.
Unlike other department heads appointed by the Governor, the Lottery director may only be removed for cause. Laws of Minnesota , ch. The board functioned in an advisory capacity and had no authority over the running of the Lottery. It was abolished in At the end of fiscal year , the Lottery employed full-time staff, 2 part-time workers, and 11 part-time student workers. In October , in response to a legislative requirement to reduce operating expenses, the Lottery laid off 33 permanent and 1 temporary full-time employees, 1 part-time worker, and 10 part-time student workers, leaving it with full-time workers, 1 part-time worker, and 1 part-time student worker.
Overall, the Lottery reduced the number of full-time equivalent staff by 20 percent. Table 1. Two-thirds of the reductions were made in the Marketing Division. They included the entire telemarketing unit, five regular employees and two student workers in the Roseville office, nine lottery sales representatives, and five customer service representatives in the regional offices who validated winning Tickets. The only reduction in the Executive Division was the elimination of one student worker position.
Excludes four vacant positions. In response to legislative budget cuts, the Lottery reduced its staff by about 20 percent. We also examine the distribution of Lottery profits. Revenues Over 99 percent of Lottery revenue comes from Ticket sales, with less than 1 percent coming from interest, retailer fees, and a variety of other sources. It began participation in the multi-state Powerball game in April Figure 1. Overall: Revenue from Lottery Ticket sales fell 20 percent between and after adjusting for inflation.
Most of the decline in Ticket sales has occurred since Inflation-adjusted Ticket sales fell 3 percent between and , but sales declined by 17 percent from to Lottery officials attribute some of this decline to economic conditions and other factors that are outside the Lottery's control.
They cite the Lottery's reliance on convenience stores that also sell gasoline. Sales at convenience stores have fallen in recent years due, in part, to the conversion to pay-at-the-pump gasoline sales. Scratch games accounted for 74 percent of Ticket revenues in but only 60 percent in Preliminary figures from the first half of fiscal year suggest that the shift towards online games is continuing. From July through December , scratch Tickets made up 52 percent of sales and online games accounted for 48 percent.
Preliminary sales figures also indicate that: Lottery sales are up for the first half of fiscal year , primarily due to an increase in Powerball sales. During this period, online game sales were 19 percent higher and scratch game sales 3 percent lower than the first half of fiscal year Lottery officials believe that the increase in online game sales is primarily due to a change in the prize structure of Powerball that has made it more difficult to win the jackpot.
This has led to larger jackpots, attracting more players. Sales of other existing online games increased 4 percent. Powerball was responsible for 78 percent of the increase in sales during the first half of fiscal year It was too early to know if this increase in online sales is the beginning of an upward trend in sales.
As shown in Figure 1. The money left over after paying prizes, commissions, and operating expenses is transferred to several different funds in the State Treasury. Lottery sales were higher during the first half of fiscal year , due to changes in Powerball that have resulted in larger jackpots. State lotteries have to carefully consider the percentage of sales to return as prizes.
Higher prize levels probably result in increased Ticket sales, but lower profit margins. Finding the optimum prize level to provide the best possible return to the state is a challenge that all lotteries face. Minnesota law requires that scratch game prizes are at least 60 percent of gross receipts and that online games pay at least 45 percent. Since then, total Minnesota Lottery prizes have varied within a narrow range of 58 to 61 percent of sales.
Retailer Commissions The Lottery uses 6 percent of its revenues to pay commissions to retail establishments that sell Lottery Tickets. Minnesota has about 3, Lottery retailers. About two-thirds of them are convenience stores, with the remaining third divided among grocery stores, liquor stores, restaurants, bars, and other retail establishments. Retailers may only accept cash for Tickets, and they must sell both scratch and online Tickets. Retailers receive a 5.
The Legislature directed the Lottery to increase retailer commissions by 0. Since , commissions have declined but are still above the commissions of the early s. A vendor under contract with the Lottery furnishes the online terminals and pays for telecommunication charges. Retail establishments receive a 5. About 6 percent of revenues are used to pay commissions to Lottery retailers.
Rules , ch. Operating Expenses In addition to paying game prizes and retailer commissions, the Lottery incurs several operating expenses. Online Ticket processing is primarily a contract with a vendor to provide the communications network to run the online games. Likewise, the Lottery contracts with vendors to produce scratch Tickets and deliver them to retailers.
Together, the costs of printing and delivering scratch Tickets and processing online Tickets made up about one-third of operating costs in Together, advertising and promotions made up nearly one-fourth of operations spending. Other costs included rental of office and warehouse space, depreciation of assets such as motor vehicles and office furniture, travel expenses including those incurred by sales representatives, communications, data processing, and supplies. We discuss operating expenses in greater detail in forthcoming chapters.
The Lottery's largest operating expenses are for Ticket costs, employee compensation, and advertising and promotions. In fiscal year , operational expenses rose to Although the Lottery reduced operational expenses in , they remained above 13 percent of sales because Lottery sales also fell.
State law requires that the Lottery's total operating expenses not exceed 15 percent of gross revenues, and that the portion of operating expenses devoted to advertising not exceed 2. We discuss advertising expenses in Chapter 3.
Proceeds to the State After paying prizes and commissions and operating costs, the Lottery transfers the remaining revenues to several funds in the State Treasury. Percentage Figure 1. Some of the decline in Lottery proceeds to the State Treasury is the result of declining sales, as discussed above. The decline in sales, however, has not been met by a proportionate decline in expenses, particularly operating expenses.
As a result, as Figure 1. From through , for example, the Lottery transferred, on average, Several state laws and constitutional provisions determine how Lottery funds are distributed to other state funds. First, since Ticket purchasers do not pay state sales tax, 6. State law determines how the in lieu of sales tax proceeds are distributed. During the Lottery's history, the Legislature has changed the distribution formula several times.
Beginning in fiscal year , Until fiscal year , the Lottery retained the unclaimed prizes and used them to enhance the prize level of subsequent games. From through June , state law required the Lottery to retain 30 percent of unclaimed prizes to enhance prizes. Of the remaining 70 percent, 60 percent or 42 percent of total unclaimed prizes went to the General Fund and 40 percent 28 percent of the total went to the Environment and Natural Resources Trust Fund for environmental projects.
For and , 87 percent of the funds collected in lieu of taxes were distributed in this manner. Legislature required that percent of the unclaimed prizes be deposited in the General Fund, beginning with unclaimed prizes in fiscal year State law requires transfer of the other 60 percent of net proceeds to the General Fund. XI, sec Minnesota voters created this fund in November in the same election that they approved an amendment to allow creation of a lottery.
The Legislature may annually appropriate up to 5. For example, the Lottery is not subject to all of the budgeting and contracting requirements that apply to most state agencies, although Lottery procurement contracts must be determined through an open bidding process. It also is required to make an annual appearance before the House and Senate committees having jurisdiction over gaming policy to explain its spending plans for the next fiscal year.
But the Lottery is not required to have its budget approved either by the Department of Finance, the Governor, or the Legislature. As noted earlier, for example, advertising expenses must not exceed 2. The budget reduction resulted in the staff layoffs described above as well as cuts in advertising and promotions, communications, depreciation by not replacing vehicles and equipment as often as before , and other areas.
The two largest types of legal gambling in Minnesota are charitable gambling and Indian casinos. In addition, Minnesota has a horse track with pari-mutuel betting and a card club. The Indian tribes do not reveal much about casino revenues. Casinos are not unique to Minnesota. Minnesota is among 23 states with Indian casinos including Arizona and Wisconsin with 22 and Washington with Charitable gambling is another big industry in Minnesota.
Organizations conducting charitable gambling in Minnesota must be licensed by the Minnesota Gambling Control Board. The Lottery faces competition from other types of legal gambling in Minnesota, including the nation's largest charitable gambling industry. Net revenues are revenues remaining after prizes are paid. The Minnesota Gambling Control Board has seven members. The Governor appoints five members, and the Commissioner of Public Safety and the Attorney General each appoint one member.
The board is responsible for regulating charitable gambling and has no authority over the Lottery. Paul, August , In fiscal year , over 1, nonprofit organizations had licenses to conduct charitable gambling in Minnesota. This was almost four times as much as the Lottery's sales in Between and , charitable gambling gross receipts fell by about 18 percent after adjusting for inflation, a decline similar to the 20 percent decline in sales experienced by the Lottery over that period.
The vast majority of charitable gambling receipts 93 percent came from pull-tab sales, 5 percent came from bingo sales, and the remaining 2 percent came from paddlewheels, raffles, and tipboards. Data from 34 states surveyed by the National Association of Fundraising Ticket Managers in found that Minnesota far eclipsed other states in the amount of gross receipts received from charitable gambling, primarily due to pull-tab sales.
Minnesota's gross receipts from charitable gambling were almost one-sixth of the national total. It is difficult to assess the impact of Indian casinos and charitable gambling on Lottery sales in Minnesota. While they may sometimes attract similar clientele, they serve different market niches. Casino gambling, for example, requires individuals to set aside a block of time and probably a greater outlay of cash to get to and participate in what usually amounts to an afternoon or evening of entertainment.
The Lottery and charitable gambling have similar products, but they have carved out different territories to sell their products. Pull-tabs tend to be sold at bars and restaurants and at social events put on by sponsoring organizations. Lottery Tickets are sold in convenience stores and other retail establishments. The customer looking for a chance at a larger prize would have to buy a Lottery Ticket. Greater participation by Minnesotans in charitable and casino gambling may simply signal a greater proclivity towards gambling in general than people in other states.
If this is the case, one might expect greater participation by Minnesotans in lottery games as well. Still, the extensiveness of Indian casinos and charitable gambling in Minnesota suggests that they do have the potential to draw sales away from the Lottery. The effect of competition on Lottery sales is unclear. Paul, , 9. The remaining 16 states either did not permit charitable gambling, did not regulate it, or did not respond to the survey. Finally, we note that a portion of the population opposes gambling in any form, even one that generates revenue for the state.
Lotteries may be opposed because they proliferate and legitimize gambling, are viewed as a regressive tax, or can contribute to compulsive gambling and other social and personal problems. Lotteries exist in a world of mixed messages, where too much success may raise concerns.
Thus, Minnesota and several other states impose restrictions on Lottery advertising, and most states have programs to prevent and treat compulsive gambling. In , Minnesota's operating expenses were more than 13 percent of sales compared with an average of 8 percent for similar lotteries. Minnesota's operating profits available for environmental and other state programs were 21 percent of sales, while similar lotteries had a 27 percent return.
The Minnesota Lottery spent more than similar lotteries in most spending categories, including advertising and promotions, personnel, Tickets, rent, depreciation, and miscellaneous expenses. Minnesota's higher spending could be due to the Minnesota Lottery's greater autonomy and the absence of budgetary oversight. Differences in the cost of living and the type of games played explain only about one-fourth of the overall spending differences between Minnesota's Lottery and similar state lotteries.
There are no industry standards for lottery expenses or profit margins. In evaluating the Minnesota State Lottery, therefore, we think it is reasonable to compare Minnesota's Lottery with other state lotteries that are similar in size and product mix. This chapter poses the following research questions: How does the Minnesota State Lottery's spending on prizes, retailer commissions, and operations compare with the spending of similar state lotteries?
How does the Minnesota State Lottery compare with other state lotteries in the percentage of proceeds from Lottery Ticket sales that is available for public programs? To what extent do differences in product mix and cost of living account for differences in spending patterns between the Minnesota Lottery and other state lotteries?
To select a group of comparable states, we relied primarily on data that state lotteries submitted to the North American Association of State and Provincial Lotteries NASPL for fiscal year , the most recent year available. To compare Minnesota's spending with other states, we reviewed fiscal year comprehensive annual financial reports for the eight states that we selected as comparison states.
We also spoke with financial officials from Minnesota and each of the eight states to clarify accounting practices and collect additional information. Lotteries may differ in their organization, their degree of autonomy, the games they offer, the prizes they award, the commissions they pay, the socioeconomic backgrounds and game preferences of players, and the competition they face from alternative forms of gambling.
For example, lottery players in some states purchase more online than scratch Tickets, whereas in other states, including Minnesota, players play more scratch games. Since online games tend to pay out less in prizes than scratch games, state lotteries with a higher proportion of online sales, all other things being equal, will be somewhat more profitable.
Some states attract lottery players from surrounding states that do not have the same online games, especially when jackpots are high. In selecting comparison states, we did not attempt to match states with Minnesota on every possible factor that might affect lottery sales and expenses. Rather, we focused on states with populations and annual lottery sales similar to Minnesota. States with more people and annual sales may be able to take advantage of economies of scale to reduce costs.
For example, lotteries with higher sales generally receive lower rates for Ticket printing or processing services. We also excluded a state if more than 10 percent of its sales came from video lottery terminals or k eno, which Minnesota does not offer.
We excluded South Carolina, because it only began operating during the second half of fiscal year Table 2. While the states fall within the population and lottery sales ranges in our selection criteria, they are not perfect matches. On average, the states had larger populations and higher lottery sales than Minnesota in They are smaller in area than Minnesota, on average, but have about the same percentage of their population living in urban areas.
All of the states derived a greater percentage of revenues from online games than Minnesota. Appendix A contains data on lottery sales, expenses, and profits for all 38 state lotteries operating in fiscal year We compared Minnesota's Lottery with eight other state lotteries with similar sales. Keno combines elements of online and instant games. A player selects several numbers out of a larger set of numbers for example, 1 through A computer randomly draws 20 numbers.
If enough of the drawn numbers match the player's choices, the player wins. Games usually start every four or five minutes throughout the day. Both video lottery terminals and Keno allow players to play multiple games in succession as opposed to other online games that have drawings at most once per day.
METHODS As noted above, we relied primarily on the audited financial statements from the comprehensive annual financial reports or equivalent documents of the eight comparison states listed in Table 2. We used each state's statement of revenues, expenses, and changes in net assets for fiscal year We based these adjustments on the notes that accompany financial statements and telephone interviews with f inancial officers of the eight state lotteries.
The adjustments primarily shifted items from one expense category to another. For example, some states combined several types of operating expenses into a miscellaneous expenses category. We separated some types of expenses such as office rent and travel from miscellaneous expenses into their own expense category.
In no case did we change the total amount of lottery sales or expenses. We interviewed officials from comparison state lotteries and adjusted financial statements to make expense categories comparable. Despite complying with GASB statements, lotteries exercised considerable discretion in their treatment of specific expense items. States accounted for supplies given to retailers such as Ticket dispensers or signs in a variety of ways.
We treated those items as a Ticket production cost and made adjustments accordingly. Some states included the prizes associated with free promotional Tickets as a prize expense, but we felt it was more accurate to treat them as a promotions expense.
These adjustments were necessary to present a fair and accurate comparison among the states. States reported an assortment of non-operating revenues that made direct comparison with Minnesota difficult. Washington and some other states carried cash balances in their operating funds, allowing them to retain some of their earnings in some years, and to draw on their retained earnings to increase transfers to other state funds in other years.
Also, some states had significant non-cash items, such as changes in the value of investments, in non-operating revenues. Rather than attempting to deal with each non-operating item separately, we excluded all non-operating income and focused on Ticket sales revenues. We use the term "operating profits" to mean Ticket sales less direct costs and operating expenses. We believe that this is an appropriate bottom line by which to compare a Lottery's financial performance.
Appendix A provides the underlying data for Minnesota and the eight comparison states, as well as the other states with lotteries. The table is important because it reveals how much of the proceeds from lottery Ticket sales go to run the lottery and how much is left over to be used for public purposes.
It also shows how the Minnesota State Lottery differs from comparison state lotteries for different categories of expense. In general, Table 2. Direct Costs Lottery expenses include both direct costs and operating expenses. Direct costs consist of lottery prizes and retailer commissions. As shown in Table 2. Minnesota's Lottery spends slightly more on direct costs than similar state lotteries. This is primarily because scratch Tickets, which return more in prizes than online Tickets, make up a higher proportion of sales in Minnesota than in the comparison group of similar state lotteries.
There is less than one percentage point difference between Minnesota and the comparison states in the percentage of lottery sales used to pay direct costs. Figure 2. Our analysis also revealed that Minnesota's Lottery paid out more for scratch game prizes but less for online game prizes than the comparison state lotteries. In , scratch game prizes were Online game prizes were Total prizes were proportionally higher in Minnesota because scratch Tickets, which return more in prizes than online Tickets, made up a higher proportion of sales in Minnesota 64 percent than in the comparison group 53 percent.
Among the eight state lotteries, commissions ranged from 5. Four of the comparison state lotteries paid more than Minnesota for retailer commissions and four paid less. Operating profits are Ticket sales less expenses. Totals do not always add up due to rounding.
SOURCE: Office of the Legislative Auditor analysis of lottery financial statements and interviews with lottery financial officials from Minnesota and the eight comparison states. The share of revenues that pays for prizes and retailer commissions is slightly higher in Minnesota than in other states with similar lotteries. Operating Expenses As indicated earlier, operating expenses were substantially higher in Minnesota than in the comparison states during fiscal year Furthermore, Minnesota's Lottery spends more than similar state lotteries on most operating expense categories, including Tickets, personnel, advertising and promotions, rent, depreciation, and miscellaneous expenses.
Minnesota spent more than the comparison states in all categories except travel. Minnesota's Lottery spent over six times as much as the other states on promotions, and 80 percent more on the combined category of advertising and promotions. Personnel spending as a percentage of sales was 77 percent higher in Minnesota than in the comparison states. Spending on office rent appears to be over three times higher in Minnesota, but this is misleading because three of the comparison states owned their headquarters building in Total lottery operating expenses as a percentage of sales was 63 percent higher in Minnesota than the average for the comparison states.
As shown in Figure 2. Nationally, only five state lotteries spent more on operating expenses as a percentage of sales than Minnesota. The median for all lotteries in the United States was 7. In Chapters 3 and 4, we examine the Minnesota Lottery's operating expenses in greater detail. The Tickets scratch percentage difference is Tickets based upon costs as a percentage of scratch Tickets sales,and the online percentage difference is based on online costs as a percentage of online sales.
Percentage differences for all other expense categories are based on expenses as a percentage of total sales. A negative number means that Minnesota spent less than the comparable states. We assumed that all of Kentucky 's advertising and promotions expenses were for advertising. In addition, we did not include Kentucky when calculating a comparison state average for promotions spending. Operating Profits Figure 2. Similarly, Figure 2.
These figures demonstrate that: Total lottery spending as a percentage of sales is higher in Minnesota than any other state in the comparison group. As a result, operating profits are lower in Minnesota than all of the other comparison states. Minnesota used Washington's operating expenses were slightly below the eight state average. Per Capita Revenues and Expenses Lotteries of different sizes can also be compared using per capita revenues and expenses.
On a per capita basis, Minnesota's Lottery has slightly lower scratch Ticket sales but much lower online sales than the comparison states. Overall, Minnesota's per capita sales in were 17 percent below the comparison state average. Because prizes and commissions are directly related to sales, Minnesota's per capita prizes and commissions are also lower than the comparison states. However, per capita operating expenses were 38 percent higher in Minnesota than in the comparison states.
In sum, Minnesota spends more per capita to operate a Lottery that brings in less revenue than the average for comparison state lotteries. As a result, per capita operating profits are over one-third lower in Minnesota than the comparison states. The average return for all U. They say that Minnesota's Lottery profits are a lower percentage of sales than other states because of Minnesota's greater reliance on scratch games, higher cost of living, and greater competition from other forms of legal gambling.
In this section, we consider these factors. In addition, we examine the Minnesota State Lottery's autonomy and external budget oversight relative to the eight comparison state lotteries. Sales Mix As noted earlier, Minnesotans have shown a preference for playing scratch games over online games, whereas lottery players in the comparison group of states distributed their purchases more evenly between online and scratch Tickets in fiscal year Since scratch Tickets pay out a higher percentage of sales as prizes, Minnesota's total expenses are slightly higher as a percentage of sales.
To measure the effect of Minnesota's high proportion of scratch Ticket sales, we calculated a hypothetical statement of revenues and expenses for Minnesota. On a per capita basis, Minnesota has lower sales but significantly higher operating expenses than similar lotteries.
The left-hand set of columns in Table 2. On the other hand, it costs more to pay a vendor to process online Tickets than to print and distribute scratch Tickets, so increasing the share of online Tickets would increase total Ticket costs. Finally, retailer commissions would be slightly lower with a shift to more online sales. Selling commissions would not be affected, but there would be a smaller dollar volume of winning Tickets.
We found no basis to conclude that any other operating costs would be affected by a shift of sales from scratch to online games. But, even if other operating costs were 25 percent higher for scratch Tickets than online Tickets, the impact on Minnesota's operating expenses would be minimal.
Overall: Minnesota's greater reliance on scratch Tickets explains only one-sixth of the Lottery's lower operating profit. The right-hand set of columns estimates what Minnesota's expenses would be if Minnesota's sales mix and cost of living were the same as the average for the comparison states.
Operating profits are ticket sales less expenses. Minnesota's greater reliance on scratch games explains only a small part of the differences in profits between Minnesota and similar lotteries. As Table 2. This is more than the Cost of Living It is possible that differences in the cost of living explain, in part, why the Minnesota State Lottery has higher operating costs than the comparison state lotteries.
Cost-of-living differences are most relevant for personnel costs because lotteries might need to pay more to attract workers in a high cost area. On the other hand, Ticket production and processing is less likely to be affected by cost-of-living differences. Scratch Tickets are printed by a vendor located outside of Minnesota and online Ticket processing is provided through a contract with a company based outside of Minnesota that provides similar services to many state lotteries.
We computed a composite state cost of living score for Minnesota and the eight states in our comparison group by weighting the lottery headquarters city 50 percent and the average of the cities with regional lottery offices 50 percent. In the right-hand set of columns in Table 2. This set of columns thus represents the cumulative effect of Minnesota's greater reliance on scratch sales and its higher cost of living. With both adjustments, the Minnesota Lottery's operating profit would have been In other words: The combined effect of Minnesota's higher cost of living and its greater reliance on scratch Tickets explains about one-fourth of the Lottery's lower operating profit.
Minnesota's higher cost of living explains only a small part of the difference in operating expenses between Minnesota and other lotteries. In Wisconsin, we substituted Milwaukee data for Madison. Although Pueblo is the official headquarters of the Colorado Lottery, most of the operations are based in the Denver office, so we treated Denver as the headquarters city and Pueblo as a regional office.
Border Sales Lottery officials maintain that Minnesota does not benefit as much as other state lotteries from sales to residents of neighboring states. Minnesota has benefited in the past from sales to North Dakota residents, since North Dakota did not have a lottery. But Lottery officials believe that some of the comparison states have benefited more than Minnesota from sales to nonresidents.
For example, Indiana and Wisconsin may experience sales increases to Illinois residents when the Powerball jackpot is high because Powerball is not available in Illinois. Kentucky is expecting fiscal year sales to decline because Tennessee is inaugurating its lottery early in calendar year Kentucky officials estimated that 12 percent of its sales came from Tennessee residents. Furthermore, Wisconsin residents may purchase Tickets in Illinois when the jackpot for Mega-Millions, a multi-state game not available in Wisconsin, is high.
Thus, we could not determine whether Minnesota benefits less from border sales than Wisconsin or other comparison states. Nor can we say what impact, if any , border sales have on a Lottery's profitability. Competition Minnesota Lottery officials have suggested that Minnesota's Lottery has to spend more to generate sales than other state lotteries because of the greater amount of competition in Minnesota from other types of legalized gambling. In particular, they maintain that the Lottery needs to spend more on advertising, promotion, and other marketing efforts.
As discussed in Chapter 1, it is hard to measure the impact of competition on Lottery Ticket sales and expenses. But we address this question indirectly by examining the Lottery's operating expenses in greater detail. In Chapters 3 and 4, we attempt to identify expenses that may be unnecessary or ineffective in increasing sales. Such expenses cannot be justified even in the face of greater competition. Budgetary Oversight As discussed in Chapter 1, the Minnesota State Lottery has greater spending autonomy than most state agencies.
It does not have to have its budget approved by the Department of Finance, the Governor, or the Legislature. The Lottery does not have to achieve a minimum level of operating profits, although it does have to limit operating expenses to 15 percent of gross revenue. Unlike other state agency heads who serve at the pleasure of the Governor, the director of the Minnesota State Lottery may only be removed for cause.
Moreover: The Minnesota State Lottery has a greater degree of autonomy than other state lotteries, including most of the lotteries in our comparison group of states. Most state lotteries are governed by a board or commission, or they are part of another government agency such as a revenue department. According to the North American Association of State and Provincial Lotteries, 22 state lotteries were governed in fiscal year by a commission or board with authority over lottery budgets and operations.
Among the comparison state lotteries, Colorado and Washington are governed by commissions, and Kentucky and Louisiana are governed by boards with authority over lottery budgets and operations. Lotteries in Arizona, Indiana, and Missouri have more autonomy, with commissions that play only an advisory role. One of the remaining two states has its budget approved by a lottery board appointed by the Governor.
The findings presented in this chapter suggest that: In the absence of legislative and executive branch oversight of its budget, Minnesota's Lottery officials have not controlled spending to the same extent as other state lotteries. Chapters 3 and 4 provide more details on how Minnesota's Lottery spends more than comparison state lotteries. They also discuss several instances of questionable spending by Minnesota Lottery officials.
The table shows that: Operating expenses as a percentage of sales for the Minnesota State Lottery remained higher than the average operating expenses for the comparison states in fiscal year Most of the comparison state lotteries must have their b udgets approved by their state legislature. Colorado also has a lottery commission that adopts rules, approves the budget, and has general authority over lottery operations. For example, we did not present office rent, travel, and depreciation as separate categories in Table 2.
Minnesota reduced operating expenses by 6 percent in , but because sales also declined by 7 percent, operating expenses were In contrast to Minnesota, sales increased in the comparison states in by an average of 6 percent over sales. Operating expenses for the comparison states increased by an average of 2 percent, but because sales increased, operating expenses as a percentage of sales declined slightly from 8.
As a result, operating profits increased to Average operating profits for the comparison states remained at It also shows average spending for the comparison states in It is clear from Table 2. If the Lottery's sales meet projections and the Lottery keeps expenses at budgeted amounts, Lottery operating profits will increase to 25 percent of sales.
That would be an improvement over and profits, but it would still be below the average operating profits of Some data from comparison state lotteries are preliminary and subject to audit. Preliminary figures for fiscal year show that Minnesota continued to use more of its sales revenues to pay operating expenses than the comparison states. Because of Minnesota's higher cost of living and its greater reliance on scratch Ticket sales than the comparison states, it might be unreasonable to expect the Minnesota Lottery to achieve the same level of profitability as the comparison states.
In addition, it might be difficult for Minnesota to reduce spending this much without negatively affecting sales. We think, however, that some further reductions in the Lottery's operating expenses could be made without affecting sales. In Chapters 3 and 4, we discuss a number of areas in which spending could be reduced. Even after recent budget cuts, the Lottery's operating expenses will probably be higher than those of similar lotteries.
However, the lottery's budget projects that scratch Tickets will account for 59 percent of sales, compared with 64 percent in Unless the comparison states show a similar shift from scratch to online lottery Ticket sales, Minnesota's greater reliance on scratch sales will have less effect on sales than discussed earlier in this chapter.
The layoffs took effect the second quarter of fiscal year , and the Lottery had to make severance payments and pay unemployment benefits for laid-off workers. This project was ill conceived and mismanaged, and the Environmental Experience vehicle was only used 33 days during In addition, the Lottery needs to reassess its advertising strategy. Scratch Ticket sales have been declining, and the Lottery has not measured the effectiveness of its advertising campaigns since Despite statutory requirements to receive competitive bids, the Lottery has never competitively bid any of the work done by Media Rare.
In addition, we have significant concerns about the amount of money that the Lottery has paid Media Rare for some of its work. In Chapter 2, we saw that the Minnesota State Lottery spends more than similar lotteries on most types of operating expenses.
This chapter focuses on the Minnesota Lottery's advertising and promotions expenses. In particular, this chapter examines the following questions: To what extent is Minnesota's higher spending on advertising explained by higher media costs? Is advertising generally effective in stimulating sales in the lottery industry?
Has the Lottery attempted to measure the impact of its advertising on Ticket sales? How have the Lottery's Ticket sales changed in recent years? How do Minnesota's sales trends compare with those at similar lotteries? What have been the Minnesota Lottery's major promotional expenses?
Does the Lottery adequately measure and compare the benefits and costs of promotional activities? What organizations and events is the Lottery continuing to sponsor? Why is this sponsorship being continued when others have been terminated? Should the Lottery continue to pay for the production and distribution of the Environmental Journal television program? Do the Lottery's Player Spotlight and Environmental Journal radio programs provide sufficient value to merit continuation? Has the Lottery's traveling exhibit vehicle—called the Environmental Experience—been a worthwhile investment?
Were the acquisition and improvement of the vehicle handled in an appropriate manner? Does the Lottery have good information on whether retail promotions are effective? Does the Lottery use free Tickets and merchandise for appropriate business purposes? Has the Lottery followed state laws governing procurement of services and products, particularly those involving promotional activities? This figure includes advertising by radio, television, newspaper, and signage, as well as advertising at retail locations where lottery Tickets are purchased.
Radio advertising accounted for 43 percent of all advertising, while television advertising was 31 percent of the total. Indoor or outdoor signage represented 17 percent, and newspaper or print media accounted for 6 percent of all advertising expenses. Advertising expenses include the costs of preparation, production, and placement. The Minnesota State Lottery is required by law to limit its advertising expenses to no more than 2. As the Lottery defines advertising, its advertising expenses were about 2.
But, because sales dropped, advertising expenses rose to close to 2. However: Minnesota statutes place a limit on the Lottery's advertising expenses. Minnesota statutes do not clearly define advertising. As a result, the Lottery must decide whether certain expenses qualify as advertising. In addition to standard advertising, the Lottery includes a portion of its sponsorship expenses to the extent that sponsorships involve signage or coverage by radio, television, and print media.
But, the Lottery did not include its expenses for certain advertisements that it considers promotional in nature. Promotional advertisements may encourage awareness of how lottery proceeds are used or provide other public information. Among the past exclusions were any expenses for advertisements that appeared on the Lottery's Environmental Journal television or radio programs or on its Player Spotlight radio segments.
Also excluded from advertising expenses was an advertising campaign that attempted to increase public awareness of how Lottery proceeds are used. The Lottery also excluded a media campaign that encouraged the public to play Powerball in moderation when the jackpot was high.
Instead, these expenses were classified as promotions expenses in Even if a reasonable share of these expenses had been included as an advertising expense, the Lottery's advertising expenses would have been below the statutory limit. The Lottery may present information on the Lottery, identify state programs supported by the Lottery, and present the Lottery as a form of entertainment. But the Lottery may not present a lottery game as a means of relieving financial difficulties or achieving financial security.
In addition, the Lottery may not use its advertisements to specifically target with the intent to exploit a person, a specific group or economic class of people, or a religious holiday by using a religious theme or symbol. The Lottery has also decided to include the costs of purchasing television air time for its Environmental Journal television programs in the advertising budget. It is unclear that the Lottery would need relief from the statutory cap on advertising expenses to increase spending on advertising by this amount.
The Lottery's advertising expenses, as the Lottery defines them, have been suff iciently below the advertising cap to accommodate even a larger increase. But Lottery officials maintain that their advertising budget must be well below the estimated maximum, since advertising expenses are incurred before final sales are known.
Comparisons with Other States During fiscal year , the Minnesota State Lottery spent about 23 percent more on advertising as a percentage of sales than the average for comparison state lotteries. Figure 3. Arizona and Louisiana spend a greater percentage of sales revenue on advertising than Minnesota.
But: Minnesota's higher spending on advertising can be explained in part by the higher costs that Minnesota faces for radio and television advertisements. Data on rates charged by radio and television stations indicate that it may cost more to place advertisements with Minnesota media than with media in our comparison group states. Rates for Minnesota radio stations average about Even if rates for other types of advertising were the same in Minnesota as the comparison state average, the higher rates for radio and television could explain up to one-half of the difference in advertising expenses.
Close to two-thirds of the difference could be explained by the difference in media costs if the costs for other media are higher in Minnesota like radio and television costs. We assumed all of its combined expenses were for advertising.
Source : Office of the Legislative Auditor analysis of lottery financial statements. This calculation assumes that all of Kentucky's advertising and promotions expenses were for advertising. This appears to be a reasonable assumption, since the other comparison states spend close to 90 percent of their combined advertising and promotions expenses on advertising. It is not clear what explains the rest of Minnesota's higher advertising expenses after higher media costs are considered.
Except for Wisconsin, other states do not face significant statutory restrictions on advertising. Minnesota State Lottery officials believe that advertising is more essential in Minnesota than some of these other states, since the Lottery faces stiffer competition from other forms of gambling.
The reduced advertising budget for fiscal year means that advertising expenses are expected to decline to less than 1. If that occurs, then advertising expenses would be about 15 percent higher than the comparison state average for In that case, differences in media costs could explain much of the difference in spending between Minnesota and the comparison group states.
Effectiveness of Advertising Generally, advertising is thought to be an effective way to improve a product's sales and a company's profits. Many private sector firms selling products to the public use various advertising media to promote their products and improve sales.
Lotteries also market products to the public and find that advertising is helpful in making customers aware of new lottery games and in improving or maintaining sales.
We developed this exhibition with concerted cooperation and curatorial assistance from both the Estate of Tony DeLap and DeLap's longtime friend, the noted art historian Barbara Rose b.
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|Purdue odds to win ncaa tournament||Colorado also has a lottery commission that adopts rules, approves the budget, and link general authority over lottery operations. The Lottery should provide accurate information on the stations airing these items and the annual number of program airings, as well as a detailed methodology of how the value of each airing was estimated. EMBO Ader 1326 betting. Promotion expenses also include the lease and other operating expenses for the Lottery's Environmental Experience vehicle. Finally, we note that a portion of the population opposes gambling in any form, even one that generates revenue for the state. In our view, the Lottery should have sought competitive bids prior to airing the show on commercial television stations. This was almost four times as much as the Lottery's sales in|
|Ader 1326 betting||Paul Saints 53 2. The Lottery has also decided to include the costs of purchasing television air time for its Environmental Journal television programs ader 1326 betting the advertising budget. In response to concerns that the Lottery's administrative expenses were too high, the Legislature placed a https://sbetting.365sportsbetting.online/forexcup-fxopen-review/4595-tadawul-news-trading-in-forex.php on Lottery spending for the biennium. The structure of the Player Spotlight segments was similar except the stories were about lottery players who either have won particular prizes or otherwise enjoy purchasing lottery Tickets. SOURCE: Office of the Legislative Auditor analysis of lottery financial statements and interviews with lottery financial officials from Minnesota and the eight comparison states. The Lottery pays commercial television stations to air the Environmental Journal, including five to six shows per year that focus exclusively on the bass tour. Jul;25 7|
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