INDIANAPOLIS – The Hoosier Lottery is turning over more money than ever before to state coffers, an estimated $224 million after a blitzkrieg year of sales ending in June.
But the new private operator of the lottery must meet that amount and add millions more under its first full contract year with the State Lottery Commission.
That has led to some immediate changes, including adding new retailers, ramping up advertising in an effort to transform the brand, highlighting new games and even bringing back the ping pong ball drawings.
Its an evolutionary process, said Connie Laverty-OConnor, CEO of GTECH Indiana.
GTECH was tapped last October to take over a large portion of operations of the Hoosier Lottery.
It handles day-to-day management over marketing, sales and distribution. For instance, GTECH handles retailer recruitment, game development, advertising and supply issues.
The State Lottery Commission through its state employees still handles security, prize payments and accounting. The five-member board also approves GTECHs annual business plan.
GTECH had a transition and ramp-up period but starting July 1 began implementing its full business plan.
That also began the first fiscal year the company will be held to its promised revenue.
Its target for the current fiscal year is $256 million in surplus revenue to the state; the number rises to $410 million in 2018.
In comparison, that number was $210 million in fiscal year 2012, and the unaudited projection for the recently-ended fiscal year 2013 is $224 million.
If GTECH doesnt meet its goal it will have to pay the difference to the state. Or they can earn a bonus for going over.
Separate from that, GTECH earns an annual management fee – which this year is about $15.7 million.
All the while, the five-member commission oversees compliance with the contract.
Chairman William Zielke said the commission has the right to veto something if it is uncomfortable – for instance if GTECH proposes a new game or strategy that goes too far. But the company could then argue to lower its revenue projections.
Mostly, the panel, which is short two members right now awaiting Gov. Mike Pence to appoint replacements, receives information from its state staff and GTECH about how progress toward the monthly and annual goals is going.
Zielke said the commission approves the overall budget, annual business plan, annual fiscal reviews and internal audit plans.
Our statutory responsibility is to maximize revenues to the state, in a socially responsible way, he said. So they just cant do whatever they want.
Indeed, Laverty-OConnor noted GTECH works for the commission.
Still, Sen. Mike Delph, R-Carmel, is uncomfortable with a private company having such control over the states premiere gambling operation.
He filed a bill earlier this year – and plans to again next year – to move the security division of the Hoosier Lottery out of the lotterys jurisdiction altogether. Instead it would be run by the Indiana Gaming Commission, which regulates the states casinos and charity gaming.
I think we need complete independence regarding the security of the lottery and those that operate the lottery, and the gaming commission could do that, he said, noting a constituent approached him with the concern.
He said the previous administration decided to privatize the lottery without getting input from the legislature.
Now that its happened its important for us to make sure everything is done above board, Delph said.
He acknowledges he isnt a fan of the lottery – what he calls a regressive tax on the working poor.
It sends a message you can get rich quick, and thats a lie, Delph said. Never the less, its here and a large portion of the public enjoys it.
We need to make sure the operations are working the way they are supposed to.
Lawmakers generally have had a hands-off approach to the lottery but pass bills every year affecting casinos and horse racing.
Rep. Bill Davis, R-Portland, chairman of the House Public Policy Committee which handles gaming issues, said he has informal talks occasionally with lottery officials but there hasnt been need for legislation.
Its working the way we thought, he said. We are getting money for pensions. I dont recall any scandals or anything that would have required us to get involved.
Carrie Stroud, executive director of the Hoosier Lottery, also noted that the lottery was set up as a quasi-governmental agency meant to run as an independent business whose whole goal is to return money to the state.
Stroud is the interim director. Sarah Taylor will take over Tuesday.
The cash is used to support pension funds for retired Indiana firefighters, police and teachers. And Hoosiers pay about 50 percent less in vehicle excise taxes every year due to the revenue.
One key way GTECH is using to meet its goals is reaching out to new players rather than focusing on getting existing players to spend more.
We want to be cautious that were not targeting people who may be at risk, Stroud said.
To get to a new base of players, GTECH is trying to diversify retailers by focusing less on convenience stores and gas stations and more on grocery and liquor stores, for instance.
The baseline for the contract showed the Hoosier Lottery had 3,974 retailers. Already that number is up to 4,297.
GTECH made some behind-the-scenes changes for retailers that make it more attractive for them to participate.
Some questioned whether the retailers would increase in poorer areas of the state. So GTECH instituted protected zip codes where the median household income is less than 60 percent of the state median.
Retailers in those zip codes can still apply but GTECH representatives are not allowed to recruit there. And employees do not receive a recruiting bonus for those applications.
As a result only 9 new retailers have been added in those zip code areas.
Also, while GTECH recruits retailers it is state commission staff that make final approval decisions after conducting background security checks, including making sure the retailers dont owe back taxes.