Audit of North Carolina Education Lottery (NCEL) finds 'exceptional' performance
The NCEL is one of only three nationwide to increase its profits every year since 2007. In spite of that, legislation is being considered that would slash administrative and advertising spending. Auditors said limits on advertising reduces the lottery’s ability to generate money for schools, noting that $1 invested in lottery advertising in North Carolina generates $31.70 in profits for education. “Given the NCEL’s return on advertising investment, the advertising limit of one-percent of sales is likely reducing the profits available for education,” auditors wrote. “Although falling sales would motivate most companies to increase advertising, the NCEL would have to decrease advertising if sales begin to fall. This could exacerbate the decrease in profits available for education.” House Bill 339 would cut advertising to 0.5 percent of revenue and administrative costs from 8 percent to 4 percent.
PGRI Note: The next story about the Oklahoma Lottery is similar to this NCEL story in its depiction of how U.S. legislators focus on costs as the pathway to increasing profits for Good Causes. That's so unfortunate and misguided. You do not need an MBA, and you do not even need to understand the lottery business, to see that focusing so much on expenses in a high-margin business like Lottery is just not smart. As a public trust, Lottery is expected to be conservative and prudent with its resources. That's as it should be. But with an ROI like this (returning $31.70 for every $1 in advertising!), what sense does it make to squeeze advertising expenses? And this same misguided thinking is being faced by lotteries all across the country. And as regards to management and admin expenses, nobody is claiming that Lotteries are not well-run operations, because the fact is that by any measure (like operating expenses as a % of revenue or of profits for instance) operational efficiency of lotteries is as high as private companies could achieve. The disconnect, and the reason legislators perhaps should consider Private Management Agreements, is to create a framework that allows sensible business decision-making to be applied to Lottery. Of course, legislators could also just decide that they, legislators that is, could themselves just apply a more sensible way of thinking about this business. We do want to respect the political process, the role of legislators, and the roles that we all play within this system. But we can also hope that our political leaders might consider these simple facts about the way business in general works, and the way Lottery in particular operates.