Hereís a question Iím asked regularly: "What happened to the money from the lottery that was supposed to pay for the schools?"
And my answer is always the same: "Since the lottery came into existence in the 1960s, all the net revenue has been transferred to the state for education."
That was on my mind as the Senate Ways and Means Committee kicked off hearings last week that will go on through the month of April. The hearings help the committee prepare to predict how much money will come to the state from our various revenue sources in the next biennium.
While the Lottery Commission and the Liquor Commission together provide less than 10 percent of the money the state raises each year for our general and education trust funds, they are good agencies to start the revenue predicting process.
Each agency is overseen by a three person commission. At the lottery, the day-to-day management is in the hands of its executive director, Charles McIntire. The Liquor Commission is different. There are three full time commissioners who handle different aspects of the operations but act as a commission in setting policy for the agency. Joe Mollica of Sunapee is the current commission chair.
If the Senateís education funding bill is passed, the state will spend over $900 million in each of the next two years on public education. About $578 million will go directly from the state and $363 million will come from the statewide property tax raised locally and spent locally. Executive Director McIntire predicted the lottery will net $77 million in fiscal year 2012 which ends on June 30, 2012 and $85 million in the second year of the biennium with all the net money going to the education trust fund.
Today, the lottery is far different from when it was created nearly 50 years ago. Instant games, or scratch cards, represent 69 percent of sales. Sales of scratch cards are impacted by gas prices. Customers are less likely to gamble when they are paying higher prices for their gas.
Powerball, Tri-State Megabucks and other lotto games are struggling. Their popularity and resulting sales are highly dependent on the big $200 million and above jackpots. Without those big jackpots, the attractiveness of these games to players is diminished.
The result is that Lottery Commission sales have slipped from a high of $265 million in 2007 to just over $230 million in the fiscal year that ended last June. The net, too, which is the amount transferred to the education trust fund has also slipped from a top of over $80 million in 2006 to $66 million in the last fiscal year.
Joe Mollica runs a much different business. The Liquor Commission with annual sales of half a billion dollars annually gets 86 percent of its revenue from wine and spirits sales. Of those sales, 72 percent comes from sales at the commissionís stores, 18 percent from off premise sales (grocery or convenience locations) and 10 percent from sales to restaurants. The Liquor Commission also collects the stateís 30 cents per gallon beer tax.
Total sales are up 4.7 percent over last year and the net profit is up 4.3 percent. Since the first of the year, however, Chairman Molllica noted that sales growth has slipped. Cross border sales represent about 50 percent of sales and anything that discourages shoppers and visitors from coming into New Hampshire, especially from Massachusetts, impacts sales.
The commission faces challenges. While snow storms are great for the ski resorts, they hurt liquor and wine sales. The same is true for rising gas prices. Massachusetts recently repealed their sales tax on liquor and wine products. The state promoted the repeal and that has pushed Bay Staters to buy their alcohol at home. Plus, the overall perception of New Hampshire always having lower pricing has been challenged.
On the good side, Chairman Mollica cited renovations and store relocations as very positive. Sales at the Merrimack store are up 77 percent and the West Lebanon store is up 15.8 percent following renovations. A new store is being built in Nashua and an outlet is planned for the Manchester airport. There is an ad campaign highlighting our low prices in the wings.
With that background, the chairman projected liquor profits of $131.4 million in the next fiscal year and $137.7 million in the following year. Beer tax revenue will be flat over the next two years at $13.3 million..
At the end of our session with Director McIntire and Chairman Mollica, the Ways and Means Committee members could fill in their revenue spread sheet with $457.7 million of projected revenue for the next two years.
Special thanks to Claremont Mayor Deborah Cutts, City Manager Guy Santagate and Council members for hosting a workshop last Tuesday on the expected impacts on the city from cuts in the House passed budget. Representatives Lovett, Osgood, Gagnon, Cloutier and LaCasse joined me for the public meeting and discussion. Meetings of this kind are very helpful in gaining insight to the possible results of our actions in Concord.
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