FISCAL NOTE
Date Requested: February 12, 2015
Time Requested: 12:43 PM |
| Agency: |
Lottery Commission |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2838 |
Introduced |
HB2711 |
|
|---|
| CBD Subject: |
Actions, Suits and Liens |
|---|
|
FUND(S):
"Say No to Drugs" Lottery Fund
Sources of Revenue:
Other Fund Lottery
Legislation creates:
A New Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
All monies derived from the "Say No to Drugs" Game will reduce, by the same amount, the total amount of monies available for appropriation in the State Lottery Fund. Total available monies for Legislative appropriation from the State Lottery Fund will be reduced by an estimated $385,200 in Fiscal 2016 and an estimated $539,280 in Fiscal 2017 (the "Say No to Drugs" Game amounts).
Revenue from the proposed "Say No to Drugs" Game will not be incremental revenue. This game would be part of a larger product mix with no guarantee of annual revenue as each ticket will be competing for discretionary dollars of Lottery players and other Instant tickets, including the dedicated Veterans’ Cash game.
More importantly, an additional dedicated ticket may also impact the debt service coverage ratio and secondary bond tests that rely upon deposits from traditional Lottery games.
A "Say No to Drugs" Lottery Fund may also reduce funding for existing Lottery beneficiaries as Instant scratch-off revenue has remained relatively stagnant over the last decade. Each instant game produces a portion of the total instant scratch-off revenue. Dedicated instant scratch-off tickets do not increase the total instant scratch-off revenue, but reduces total revenue available for appropriation to beneficiaries including Seniors, Education and Tourism.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2015
Increase/Decrease
(use"-") |
2016
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
2,014,800 |
2,820,720 |
| 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 |
385,200 |
539,280 |
Explanation of above estimates (including long-range effect):
The revenue estimates stated above are projections based on historical game performance and are not a guarantee of revenue. Revenue may be less based on actual performance and is expected to decline over time.
Total available monies for Legislative appropriation from the State Lottery Fund will be reduced by an estimated $385,200 in Fiscal 2016 and an estimated $539,280 in Fiscal 2017 (the "Say No to Drugs" Game amounts). Monies are taken from the State Lottery Fund as the Bill states that “Notwithstanding the provisions of section eighteen of this article, the commission shall transfer all net profits received from the sale of "Say No to Drugs" Game lottery tickets, materials and games to the State Treasurer for deposit into the "Say No to Drugs" Lottery Fund established in this section. The Legislature may make appropriations from this fund for the operational costs of the game."
Estimated Costs include 7% Sales Commissions, Base Printing Cost of 1.72% of sales, Vendor Fees of 4.28% of sales, 63.5% of Sales in Prizes Paid, and Administrative and Advertising cost of 7.95% of sales.
The estimated sales calculation for fiscal year 2016 is based on an average of 2.5 dedicated $1 game orders of 960,000 tickets. The first year will not be a full year of sales due the lead time required to design, print, and bring a new game to market. Fiscal year 2017 estimated sales calculations are based on an average of 3.5 dedicated $1 game orders of 960,000 tickets. There is not a defined end to this legislation, and sales are expected to diminish in subsequent years due to game fatigue.
Estimated Total Revenues are determined by the estimated sales minus Estimated Total Cost.
Below please find a detailed description of how the abovementioned breakdown was generated:
Fiscal Year 2016 2017
Orders 2.5 3.5
Order Quantity 960,000 960,000
Sales $2,400,000 $3,360,000
Commissions 7.00% $168,000 $235,200
Printing Cost 1.72% $41,280 $57,792
Vendor Fees 4.28% $102,720 $143,808
Prizes 63.00% $1,512,000 $2,116,800
Admin&Advertising 7.95% $190,800 $267,120
1. Costs $2,014,800 $2,820,720
2. Estimated Revenue $385,200 $539,280
Memorandum
Fiscal Note is a "best case" scenario presented for the first partial and subsequent year.
The “Say No to Drugs” Game will be part of a larger mix of games, with no guarantee of annual revenue, with each game competing for discretionary income. While the Lottery routinely researches, tests and maximizes game appeal, each game is impacted by players' changing interests, discretionary income and game fatigue over time resulting in diminishing revenues (the Veterans’ Cash Ticket has and continues experience diminishing revenues beginning with the fifth full fiscal year of sales).
“Say No to Drugs” Lottery Fund will reduce revenue for existing Lottery beneficiaries. Dedicated instant scratch-off tickets do not increase the total instant scratch-off revenue, but further reduces total revenue available for funding Lottery beneficiaries including Seniors, Education and Tourism.
Person submitting Fiscal Note: Danielle Boyd
Email Address: dboyd@wvlottery.com