Looking For Change In Tornado Alley
Today, 44 U.S. states, the District of Columbia, and the U.S. Virgin Islands support lotteries as a means by which the government can raise money for the public benefit. Billions of dollars have been funnelled into education programs, support for senior citizens, and General Funds across the nation since the first modern lottery opened in New Hampshire in 1964.
In the conservative stronghold of Oklahoma, voters approved a state-run Lottery in 2004, yet heated debate over the Lottery’s place in Oklahoma continues even today. Criticisms of the Lottery have for years focused on its underperformance, yet legislators have continually enacted restrictions on the Lottery’s operations, refusing to consider less legislative regulation as a solution.
Rollo Redburn, executive director of the Oklahoma Lottery, was genuinely friendly when I spoke with him in October. The onset of a head cold was stealing some of the volume from his voice, but none of its warmth. I hardly expected the man to be so upbeat, even funny as we discussed political attitudes towards the Oklahoma Lottery and legal gambling in the state.
After years of raising well-reasoned arguments for reform, all of which have failed to gain traction in Oklahoma’s capitol, Redburn continues steadfastly on his mission to maximize revenues for education despite a restrictive political atmosphere.
Perhaps now more than ever, the reform Redburn and his colleagues have been asking for could help schools get extra funding they desperately need.
In Harm’s Way
Oklahoma lies in one of the nation’s most tornado-prone areas, “Tornado Alley,” and can experience dozens of tornadoes in a single month. More than 50 tornadoes touched down in Oklahoma in May 2013, and the highest windspeed ever recorded on earth – 301 mph – was generated by a 1999 tornado in the state.
In May, national media attention centered on Moore, Okla., just outside Oklahoma City. An EF-5 – the strongest classification of tornado with windspeeds over 200 mph – ripped through the town, damaging two elementary schools and killing 23, including 10 children.
Since then, tornadoes have damaged or destroyed 56 schools in the state, and legislators and the public have begun questioning the safety of schools. Proposals to fortify schools with safe rooms or storm shelters, however, have estimated such a project could cost as much as $2 billion.
Resistance in the Capital
To Redburn and other Lottery supporters, the storm shelter project is a perfect destination for “additional Lottery funds” that could be generated if specific changes were made to the law governing the Lottery’s operations.
However, it was clear early in our conversation that despite voters’ approval, many politicians in the state remain wary or even wholly opposed to the now nine-year-old Lottery. Even before it was created, opposition to the idea of a state lottery in Oklahoma had kept it from the ballot for decades.
Redburn gave me the background on the political changes that allowed for the Lottery’s approval in the first place. Voters approved the Lottery’s creation shortly after they elected Democratic Sen. Brad Henry, the Lottery’s champion, as Governor.
That election set the stage for legalized gambling and the Oklahoma Lottery; the Democratic House and Senate passed legislation referring the Lottery issue to the people in the form of two state questions in 2003. The Lottery was approved by nearly two-thirds of the voting public in Nov. 2004, nearly halfway through Henry’s first term as governor in 2002.
However, the 2004 election turned control in the House of Representatives back to Republicans, and by 2008 they held the majority of seats in the Senate as well, the first time in state history the GOP controlled both legislative chambers.
In 2010, Republican Mary Fallin won the gubernatorial race, beating Democratic nominee Jari Askins in all but four of Oklahoma’s 77 counties. That election completed a 180 degree shift in political control to the GOP, which has traditionally been unsupportive of Oklahoma’s Lottery.
“The Governor and the leaders at the capital have made it clear to us that they do not support gambling,” Redburn said. “They don’t want to be seen as… expanding gambling in Oklahoma by doing anything that loosens it up or makes conditions more favorable.”
“That makes it difficult for us to get a hearing in the legislature, much less get any kind of favorable action on anything that comes up,” he said.
“[The] Lottery Act has been amended seven of the nine years we’ve been in existence,” he told me. “[Legislators have] either added or amended eleven different laws in that act, and every time they did it, it was adding some requirement or enacting some restriction on the Lottery.”
None of those changes have been anything Redburn and his colleagues have asked lawmakers to consider.
In fact, the proposal that Redburn, his predecessor Jim Scroggins, and other members of the Oklahoma Lottery Commission (OLC) see as the key to unlocking a major increase in revenue has repeatedly drawn criticism from Oklahoma’s leaders, despite strong evidence that the proposed reforms could be a boon for the now-underperforming Lottery.
A Game of Chance
That proposal asks for a change to the requirement that 35 cents on every dollar taken in by the Oklahoma Lottery be earmarked for education funding.
In theory, this requirement is a smart plan: 35 percent of every dollar spent on lottery games is caught in a safety net of sorts – a sneeze guard protecting education’s buffet of Lottery dollars.
In practice however, Redburn says that requirement on the distribution of Lottery dollars effectively limits the amount of profit the Lottery can generate for the state.
The way Redburn and his colleagues see it, “it boils down to a question of: ‘would you like to have $70 million from the Lottery at 35 percent, or would you like to have $80 [million] at 30 percent?’ You know, are you wanting a percentage or are you wanting more money?”
The idea behind the proposal is simple: the Lottery wants the ability to offer players larger prize payouts and better odds on some games. “The less interested [players] are in buying the tickets, the less you’re gonna sell and the less profit you’re gonna make,” Redburn said.
Convincing state representatives is decidedly more difficult. In the capital, changing the formula by which Lottery funds are distributed is interpreted as working against the wishes of voters. In 2009, Rep. Randy Terrill, R, gave the Associated Press his reaction to the proposed change to the distribution format: “It will take a lot more than the word of a bureaucrat to overturn the will of the people and slash education’s share even further.”
But “slashing education’s share” is not what Redburn and his colleagues have in mind. In fact, it is contrary to the very nature of their work: maximizing revenues for education.
Knowing the Odds
Rather than taking something away from education, the OLC simply wants the legislature to do what the players do: make a little bet.
A safe bet, almost a sure thing according to case studies cited by the OLC. Redburn’s example was a 5 percent decrease in the safety net under education’s share, leaving 30 percent of net revenues earmarked for schools. All of the states which serve as example for the OLC’s claims that more prize money could generate higher revenues actually reserve less than that percentage.
In Kentucky, the most closely related to Oklahoma in terms of population (a difference of about 750,000 people), the Lottery reserves about 27 percent of its revenues for education, and returns more than 60 percent to players as prizes.
Last year, the Kentucky Lottery generated more than $500 million for education, grossing nearly $850 million in total sales. By comparison, Oklahoma’s Lottery deposited $70 million into the Oklahoma Education Lottery Trust Fund last year, with total sales just over $200 million.
In North Carolina, lawmakers recently decided to “clean up the language” of the Lottery’s distribution formula and did away with the same 35 percent requirement that remains in place in Oklahoma. They’ve seen six years of record returns.
The Florida Lottery, too, lifted its profit restriction years ago. According to a NewsOK.com report from 2010, when Sen. Richard Lerblance, D, proposed a bill to lift the 35 percent requirement, “Lottery directors from Florida and North Carolina told Oklahoma Lottery officials in 2008 that sales skyrocketed in their states when legislators there removed similar mandates.”
“In both cases,” the report said, “the sales increase was significant enough to produce far more money for education, though the state got fewer cents per dollar.”
Oklahoma Lottery players now only receive about 52 percent of the money they spend on games as prizes, one of the lowest payout percentages in the country. Unfortunately, the trend in Oklahoma continues towards restriction, rather than progressive reform, and legislative restrictions are making it more difficult to entice players.
Most recently, the Oklahoma Lottery has seen the online arm of its player loyalty program gutted. Discussions between the Attorney General and the Lottery ended in the decision that second-chance promotions – which allow players to enter non-winning lottery tickets into special drawings for another prize – could not accept online submissions under the state’s laws, which do not specifically allow for online gambling.
That opinion effectively added an extra step for players hoping to get lucky on a ticket that didn’t beat the nation’s worst lottery odds the first time around. That extra step for players to enter special contests makes it more difficult to market games, which leads to slower sales, which ultimately results in lower returns to education.
Playing and Paying for Safer Schools
Not only does the Lottery support classroom technology and school construction, it also supports teachers salaries, benefits, and pensions. Scholarships, career training programs, and support for special education programs all come out of the Education Lottery Trust Fund.
The list of benefits continues, but advertising the many destinations for Lottery dollars is difficult. Once, children made an appearance in a Lottery advertisement. The ad created an uproar, according to Redburn, and subsequently, no child will ever appear in a Lottery ad again.
While Redburn was quick to acknowledge that marketing to minors is not the goal, it’s clear that advertising what the Lottery can do for education is made more difficult by the absence of its primary benefactors.
Restrictions and limitations on the Lottery’s ability to market games and advertise the benefits of playing, coupled with a very narrow operating budget, have left them with few ways to entice players. In fact, the Lottery’s current ad campaign consists of “14 or 15 electronic billboards around the state,” radio advertisements in Tulsa and Oklahoma City and “some web advertising.”
Because of this, garnering support for the easement of the 35 percent distribution requirement is difficult, but Redburn hopes that need can affect change, even if it comes from the last place lawmakers want to look.
Redburn thinks the Lottery could significantly lower the burden of the proposed storm shelter project – estimated at $2 billion – for taxpayers.
Currently, Rep. Joe Dorman, D., and a group called “Take Shelter Oklahoma” are collecting signatures to bring a bond issue to the public for a vote. At stake is a $500 million bond that “Take Shelter” says would be paid back by a state franchise tax.
Gov. Fallin, however, has said that plan is less feasible than it may appear, saying that “things” would have to be cut in order to pay for a half-billion in bonds.
With less than six weeks left in the petition drive, Dorman and “Take Shelter” had not collected half of the 160,000 signatures needed to land the bond issue on a ballot.
Redburn said that if the bond issue fails to gather enough support, “[that may mean that] perhaps we’ve got the only offer in the state of coming up with money to assist school districts with putting in storm shelters.”
If the legislature were to amend the requirement that 35 percent of Lottery revenue be earmarked for education, Redburn estimates the Lottery could generate an additional $42 million over the next five years, which could be matched with funding from the Federal Emergency Management Agency (FEMA) to support school fortifications.
Along with FEMA’s contribution, Redburn said, conservative estimates of additional funds the Lottery could generate are “something like $168 million available to put in storm shelters in schools over the next five or six years.” And as the money would be going towards school infrastructure, it “would still be within the legal, allowed purposes of the lottery money.”
That proposal has yet to be brought up with the legislature, Redburn said, but should the bond issue fail to appear on a ballot for the public, the hope is that the people and legislators alike will remember that the Lottery is there for education.
“We certainly would like them to understand that we can do more than we’re doing now if some of the restrictions were lifted.” Redburn told me. “That’s why we’re here – we’re here to provide for education and that’s what we wanna be able to do.”