A snapshot of the lottery's progress

by Patrick Gannon, The Insider, March 16, 2015.

The N.C. Education Lottery is the only state-run lottery in the country to increase sales and profits each year of its existence, according to a recent audit.

It's also one of the youngest lotteries in the country, so the odds of North Carolina accomplishing that are greater than for older lotteries.

The lottery's mission is to maximize sales to provide as much cash as possible for education. In the 2013-14 fiscal year, it transferred $503 million to the state for educational needs such as teachers' salaries, school construction, pre-K programs and need-based college scholarships. That's up from $479 million the year before and $459 million the year before that.

But looking at other measures, the lottery – which began in March 2006 – has work to do to boost sales and increase player payouts. (Of course, some legislators and others don't want the lottery to succeed, but that's another story).

The recent performance audit by Delehanty Consulting LLC compared the lottery with those in five nearby states – Tennessee, South Carolina, Georgia, Kentucky and Virginia. Of the states, North Carolina, in its ninth year, operates the newest lottery.

North Carolina ranks last among the states in lottery profits per capita, as well as advertising and marketing investment per capita and sales per lottery retailer, the audit showed.

And most importantly to those who buy tickets, it also ranked last – at 60.62 percent – in prize payouts as a percentage of sales during the 2013 fiscal year. The highest was Georgia – at 64.66 percent.

The study's author, Herb Delehanty, noted that North Carolina could increase its prizes and not harm its profitability because more prizes generally equal more sales. "There may be a point at which increases in prize payouts may not result in overall increases in profitability; however, the (lottery) has not reached that point," he wrote in the report.

In an interview, Delehanty said he would recommend slowly increasing payouts over time – which the lottery has been doing – to continue the upward trend in sales and profits.

The audit also found that the lottery's profit per capita in the 2013 fiscal year was $48.59, lowest among the six states. Operating profits per capita equals dollars raised for the beneficiary – education in North Carolina's case – divided by the state population. Georgia's was the highest at $92.80, but that state has a lucrative keno game, with drawings every four minutes. The other four states had profits per capita ranging from $51 to $64.

North Carolina's profit per capita is lower for many reasons. As a young lottery, it is still growing its game offerings, including profitable draw games. Delehanty and lottery officials hope a successful new draw game would boost sales after the bust of the Monopoly Millionaires' Club game. Ticket sales for that game were suspended in December and may not resume.

The propensity of state residents to play the lottery also contributes to profits. In general, Delehanty said, Tar Heel State residents weren't as quick to embrace the lottery as South Carolina residents, for example. Also, by law, the Education Lottery isn't allowed to spend more than 1 percent of its revenue on advertising. With a little more advertising flexibility, the lottery could increase profits, Delehanty said

The General Assembly soon will measure the lottery's success by another metric. Will it bring in $520 million for education by the end of the fiscal year June to meet its state budget target? The failure of Monopoly Millionaires' Club isn't helping this year.

"We're trying to make it, and we think we're going to make it, but it's going to be close," said Van Denton, a lottery spokesman.