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Mich. lottery seeks further growth of contributions to school aid fund

28 February 2007

A little more than four years ago, Governor Granholm appointed Gary Peters to the position of Lottery Commissioner. At the time, the Detroit casinos were relatively new, and many thought the state lottery could be facing a serious decline in revenue given the new competition. Mr. Peters had just narrowly lost the election to become Michigan's attorney general, and many thought his decision to take the lottery post was akin to a new captain taking control of a sinking ship.

Recently, the Senate Appropriations Committee held a hearing to listen to presentations from various governmental departments with regard to appropriations for the coming year's budget. Lottery Commissioner Peters, together with the Lottery Chief Financial Officer, Margie Reh, gave a detailed presentation to the committee.

They informed the committee that lottery revenues had increased by 38 percent over the last four years, despite increased competition from the casinos. The revenue increase amounted to a $141-million growth in contributions to the state School Aid Fund. Mr. Peters noted that the introduction of "Club Games" (Club Keno and Pull Tabs), offered in bars and restaurants, and the bureau-sponsored "Player's Club" have helped boost revenue.

Committee Chair John PappaGeorge asked Peters about the recent rumors circulating regarding a possible sale of the lottery. Peters said that the rumors have circulated, in part, based on two nearby states, Indiana and Illinois, that have solicited offers. However, Peters suggested this would be a very complex transaction - a type that has never occurred in the United States.

During the presentation, Peters also asked for an increase in funding to hire two more sales representatives. He suggested that the addition of two more full time employees would enable the bureau to generate an additional $15 million in revenue.

When asked about the impact of a 5-10 percent budget cut, Peters said it would have a severe impact on revenue as a result in the decline in service representatives who help promote and sell the lottery. He explained that an effective sales force is critical to sustain and increase revenue, and the lottery's sales representatives truly take a hands-on approach with retailers to ensure that sales are maximized.

Mr. Peters also suggested that the bureau is seeking to further increase revenue by offering Club Games in various fraternal clubs and organizations, such as the VFW and other civic groups. For these new ventures, he would need additional sales support.

Commissioner Peters and the staff of the Michigan Lottery deserve high praise for all they have accomplished over the past four years. In a declining Michigan economy that is struggling to continue to fund critical programs, the Lottery has done a terrific job of increasing funding to the State School Aid Fund. This has been accomplished despite stiff competition from the Detroit and tribal casinos.

David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com
David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com