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FCBJ: Arkansas Scholarship Lottery and Faulkner County

Posted: June 14, 2013 - 3:33pm

Imagine an operation that produces $1.7 billion in revenue in less than 3 ½ years. Not only is revenue high, but after expenses, the endeavor has 20% ($340 million) to distribute. Does this sound too good to be true? It isn’t; it is real. The operation is the Arkansas Scholarship Lottery.

From the summary information, the future of the lottery certainly appears bright. However, a forecast requires an analysis of trends over time and not just a summary. In recent months the trend for the lottery is downward.

The Arkansas Scholarship Lottery began September 28, 2009. During the first full year of operation (2010), lottery sales were $460 million. They rose to $475 million in 2011. In 2012 sales declined to $452million, a 4.8% decrease from 2011 and an amount that was even below 2010. Sales continued to decline this year with the first five months of 2013 being 4.7% lower than for the same period in 2012. The Lottery Commission has added new games to bolster sales but they have not interrupted the decline in sales.

Approximately 66.3 % of lottery sales are returned to the players through prizes. 5.6% is paid to point-of-sale vendors as a commission and 7.8% is used for administration, advertising and contracted services. This leaves 20.2% for Academic Challenge Scholarships.

Lottery sales in Faulkner County peaked the first year of the lottery. Declines followed. Sales for 2010, 2011, and 2012 were $17.5 million, $16.8 million and $15.5 million. The 2012 figure is 11.4% less than 2010. Faulkner County lottery sales rank sixth among the 75 counties. Rank in sales is related to population and location of the county and Faulkner County is fifth in population among the counties. Intersected by Interstate 40, some of the Faulkner County sales are probably to visitors rather than residents. This conjecture is supported by the fact that the two vendors with the highest sales among the 55 Faulkner County vendors are in Mayflower near interstate 40. Based on the $15.5 million in Faulkner County lottery sales, the players should have received approximately $10.3 million in prizes.

Lottery sales per capita is another way to compare counties. The state average is $158. That is, the average Arkansan spent $158 in 2012 on lottery tickets. In Faulkner County the figure was $144, which ranks 35th. The county with the lowest per capita sales is Montgomery County at $50; the one with the highest is Arkansas County at $330.

The Academic Challenge Scholarships began in 1991 and was funded entirely by appropriations from the state legislature. Yearly awards were in the $2000 - $3000 range during the period the scholarships were funded solely by the legislature. Today the state continues to fund the program at $20 million per year.

In 2010 the Academic Challenge Scholarships began receiving money from the Arkansas Scholarship Lottery. Approximately 12,000 students each year receive Academic Challenge Scholarships. For the 2010-11 school year, scholarship awards were $5,000 for eligible students attending a four-year college and $2,500 for students attending a two-year college. Awards were to remain at that level during the student’s career if academic standards continued to be met. However, declining revenue from lottery sales has caused a restructuring of the awards for 2013-14. Incoming freshmen at either four-year or two-year schools will receive $2,000. The scholarship amount for eligible students at four-year schools increases by $1,000 each of the next three years of the student’s career. Thus, students who make adequate progress toward degrees receive $5,000 their senior year. Continuing students who received scholarships before the 2013-14 school year have their award reduced to $4,500 and $2,250 for four and two year colleges respectively.

Academic Challenge Scholarships valued at $2.7 million were awarded to 748 Faulkner County residents for the 2012 -13 academic year. These students attended 12 Arkansas institutions with the highest number, 331, attending UCA and Morrilton Community College was next with 110.

Students across Arkansas attending an institution of higher learning in Faulkner County received 4,293 Arkansas Challenge Scholarships (UCA 3,833 Hendrix 293, CBC 175). These scholarships were valued at $18.9 million.

There is some overlap in the $2.7 million in scholarships received by Faulkner residents and the $18.9 million in scholarships received by the colleges since many of the Faulkner county residents receiving scholarships are included in the totals for the three local colleges. The total impact of scholarships received by Faulkner County’s residents and the colleges is approximately $20 million when this overlap is factored out. Add $7.7 million in prize money returned to Faulkner County Lottery sales and $.7 in commission for Falkner County Vendors makes the total impact on Faulkner County approximately $28 million. Thus, Faulkner County has a net gain in terms of the return on lottery sales.

I thank my friend Chris Spatz for editing and helping me with this article.

You can obtain more information on the economy of Conway and Faulkner County by going to the Pulse of Conway website (www.pulseofconway.com).

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