FISCAL NOTE



FUND(S):

State Teachers Retirement 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.


This bill directs the Lottery to establish and offer a scratch off ticket for the benefit of retired teachers and transfer the net profits from the game to a newly created State Teachers Retirement Lottery Fund. Upon request of the Executive Director of the Consolidated Public Retirement Board, money in that fund will later be transferred to the State Teachers Retirement System. While this ticket may generate dollars to benefit the retired teachers, it will not generate revenue in addition to that which the Lottery already generates. Instead, monies that would have been deposited to the State Lottery Fund will be diverted to this purpose. More significantly, a reduction in funds that would normally be deposited to the State Lottery Fund will ultimately impact the debt service coverage ratio and secondary bond tests that rely upon deposits from traditional games.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2014
Increase/Decrease
(use"-")
2015
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 2,837,520 2,837,520
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 0 522,480 522,480


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


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 Retired Teachers Benefit Game lottery tickets, materials and games are deposited with the State Treasurer into the State Teachers Retirement Lottery Fund." The Legislature would therefore have less net revenue to appropriate. The first year of expenses would be fiscal year 2015 because of the lead time necessary to design and print a new ticket. The first full year would be fiscal year 2016 because of the mandated 9-1-2014 [FY 2015] start date for 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 Fee of 7.95% of sales, which includes advertising cost. Sales calculations for the first full fiscal year are based on an average of 3.5, $1 versions of the dedicated game with order quantities of 960,000 tickets each. After implementation, order quantities would be monitored to maximize sales with fresh game(s) each year (estimated at 3.5 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 Teachers Retirement Lottery 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 presented for the first partial and subsequent year.



    Person submitting Fiscal Note: Kathy Lawson
    Email Address: klawson@wvlottery.com