Sources of Revenue:

Special Fund

Legislation creates:

A New Program

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

The bill would require the creation of a scratch-off lottery game designated as the State Road Benefit Game, beginning September 1, 2010. All net profits received from the sale of State Road Benefit Game lottery tickets, materials and games would be deposited with the State Treasurer into the State Road Fund.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2009 Increase/Decrease (use"-")	2010 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	2,066,000	2,746,204
Personal Services	0	0	0
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	0	0
2. Estimated Total Revenues	0	0	853,796

Explanation of above estimates (including long-range effect):

This bill would likely not create new revenue but rather would redirect revenues from the State Lottery Fund to the State Road Fund. Keep in mind that if printing a new game created new and additional revenue for the state, the West Virginia Lottery would print hundreds of different games each year. But public demand for scratch-off lottery tickets has leveled in recent years. In addition, the State Lottery Fund would bear the expense of printing, distributing and marketing the game since the bill uses the phrase, “Notwithstanding section eighteen of this article, all net profits received from the sale of State Road Benefit Game lottery tickets, materials and games are deposited with the State Treasurer into the State Road Fund.” The Legislature would therefore have less net revenue to appropriate. The first year of expenses would be fiscal year 2010 because of the lead time necessary to design and print a new ticket. The first full year would be fiscal year 2012 because of the mandated 9-1-2010 [FY 2011] start date for the game. Estimated Costs include: 5.25% Sales Commissions, 2% Bonuses, Base Printing Cost of $19.32/1000, Vendor Fees of 4.277% of sales and $15,000/annually, 63% of Sales in Prizes Paid, and Advertising. Sales calculations for the first fiscal year are based on two (2), $1 versions of the dedicated game with order quantities of 1.35 million tickets each. After implementation, order quantities would be monitored to maximize sales with fresh game(s) each year (estimated at 3.8 million or less.) Estimated Total Revenues is determined by the sales estimate minus Estimated Total Cost.

Memorandum

Estimated Total Revenues show monies diverted to State Road Fund from other Lottery proceeds. Each individual instant game is part of a mixture of games with a finite player base and total revenue. For each specialized ticket with dedicated funds, there will be less money used to fund other legislative-mandated funds (Veterans Cash) and proceeds areas (including Seniors, Education and Tourism) based on estimated sales. Though the Lottery tests and maximizes game appeal as much as possible, please note that each game is significantly impacted by players’ changing taste and game fatigue. There is not a defined end to this legislation. It becomes very difficult to refresh the game for players after several years (approximately 4-5 years based on performance of the Veterans’ Cash Ticket), resulting in diminishing revenues. Fiscal Note is a “best case” scenario for the first partial and subsequent year.

Person submitting Fiscal Note: John Melton
Email Address: jmelton@wvlottery.com