Legislators Look at Lottery Models

(To see a pie chart depicting the national average in lottery proceeds, click .)

Arkansas lawmakers are studying other states' practices as they seek to write legislation establishing the lottery approved by voters last month.

The purpose of the lottery is simple: raise scholarship money for Arkansas students attending Arkansas colleges. But how to create the most effective lottery is complex.

The 87th General Assembly, which will convene Jan. 12, must establish the mechanisms by which the lottery operates as well as determine how the money it raises is distributed to students.

Perhaps the biggest issue is whether the lottery will be administered by an existing state organization or by a state-owned lottery corporation.

On Nov. 17, state Rep. Robbie Wills, D-Conway and Speaker of the House, filed a "shell" bill with the working title of "Arkansas Scholarship Lottery Act," followed soon after by a similar bill filed in the Senate by Terry Smith, D-Hot Springs. Wills and Smith will be the point men for crafting the lottery, which is legal in Arkansas for the first time thanks to a constitutional amendment approved by voters in the Nov. 4 general election.

Both men are looking to existing lotteries – in 42 states and the District of Columbia – for guidance. Smith points to the Georgia Lottery Corp. as a model. Wills, in a five-page memo sent last week to his House colleagues, outlined his office's research on options for structuring the lottery.

"That's the benefit of being the 43rd state to do this: There is a body of work to draw on," Wills said.

Private vs. Public-Private

The enabling legislation is the single most important piece of the lottery puzzle, said Rebecca Paul Hargrove, president of the Tennessee Education Lottery Corp. Hargrove has run four lotteries and started three from scratch, including Georgia's in 1993 and Tennessee's in 2003.

Legislation written correctly allows a lottery to act nimbly, said Hargrove, who believes lotteries that can act like private companies allow for the greatest returns.

The Tennessee lottery operates "as any company would, but we have to respond to open records and open meetings," Hargrove said. "Obviously I am prejudiced, having run Georgia and Tennessee. But certainly if you run the Tennessee and Georgia model, you optimize your chance for success."

Tennessee based its lottery legislation almost "word for word" on Georgia's legislation, Hargrove said. Both the Tennessee and Georgia lotteries fund scholarships as well as pre-kindergarten programs. Tennessee's lottery also funds after-school programs.

Lotteries that operate as part of state government can still be successful, but the majority of lotteries worldwide producing high returns and steadily growing revenue follow the corporate structure, said Hargrove, a past president of the North American Association of State & Provincial Lotteries.

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