INDIANAPOLIS | The State Lottery Commission is not panicking despite learning Tuesday the Hoosier Lottery's private operator expects to miss its contracted annual income by $31 million, or 9.7 percent.
GTECH Indiana has agreed to produce $320 million in lottery income for the state during the July 2014-June 2015 period. The latest lottery forecast projects the operator only will bring in $289 million.
William Zielke, chairman of the governor-appointed lottery commission, said that still would be more money than Indiana ever has received from the lottery in any year. It's also 41 percent more than the lottery earned in its final year under state management.
"This is a difficult business to drive revenues in because it is a chance business," Zielke said.
The lottery income shortfall primarily is due to lackluster ticket sales for Powerball and other big money draw games.
Powerball sales totaled $25.6 million in the first third of the budget year, compared to expected sales of $43.5 million and sales of $46.7 million during the same four-month period last year.
Hoosier Lotto ticket sales also are down year-over-year and the new multi-state Monopoly Millionaires Club $5 draw game sold just $234,000 in tickets in its first month versus expectations of $1.6 million.
Colin Hadden, chief operating officer for GTECH Indiana, said Powerball sales tend to get caught in a negative self-reinforcing loop.
He said if there isn't a super-large jackpot fewer people play Powerball, which prevents the top prize from growing to a level that attracts additional players. The largest Powerball jackpot of the year — $225 million — was hit in September.
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"It's an industry issue," Hadden said. "It makes it very volatile."
Meanwhile, Hoosier Lottery scratch ticket sales are up $16.6 million since July compared to the same period last year.
While that's still $10 million below forecast, Hadden is optimistic holiday sales and new scratch games launching in 2015 will help make up for draw game weakness.
The parent company of GTECH Indiana, which inked a 15-year contract in 2012 to manage Hoosier Lottery marketing, operations and sales, already has told investors it expects to incur the maximum $16 million penalty for failing to meet its annual lottery income goal.
The lottery commission can cancel GTECH Indiana's contract to operate the Hoosier Lottery if the company misses its income target by at least 10 percent two years in a row, or three years during any five-year period.
Zielke said he's taking a long-term perspective on GTECH Indiana's operation of the Hoosier Lottery, and there's no need to start thinking about cancelling the deal.
"This is a very aggressive contract," Zielke said. "We went into it because we thought it was the best thing for the citizens of the state of Indiana."
Next year, GTECH Indiana is required to produce $365 million in lottery income and $410 million during the 2017 budget year.
Indiana uses Hoosier Lottery profits to reduce vehicle excise taxes, support state and local construction projects and fund pensions for police, firefighters and teachers.