Florida Lottery Overview

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Florida Lottery Overview
Florida Taxation Budget
Reform Commission Government Services
Committee November 1, 2007
Charlie Crist Governor
Leo DiBenigno Secretary
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Florida Lotterys History

• In 1986, Florida voters approved the
  constitutional amendment authorizing the
  lotterys creation (64 support, 36
  against).
• The Department was established as a state agency
  in 1987 with the enactment of the Florida Public
  Education Lottery Act.

The first Florida Lottery ticket went on sale
January 12, 1988. First week sales exceeded 95
million!
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Florida Lotterys Mandate

• . . . to operate the state lottery. . . so as
  to maximize revenues for the Educational
  Enhancement Trust Fund in a manner consonant
  with the dignity of the state and the welfare of
  its citizens.
• (Section 24.104, Florida Statutes)

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Legislative Intent

• That the lottery games be operated by
• a department of state government that functions
  as much as possible in the manner of an
  entrepreneurial business enterprise.
• (Section 24.102, Florida Statutes)

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Statutory Exemptions

• Chapter 24, Florida Statutes, exempts the
  Florida Lottery from the procurement guidelines
  described in Chapter 287 and personnel provisions
  in Chapter 110.

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Entrepreneurial Success
Publix Supermarkets, Inc. JM Family
Enterprises, Inc. Southern Wine Spirits of
America Adventist Health System Florida
Lottery Brightstar Corporation

If the Lottery were a private company, it would
rank 5 in the state of Florida. Statistical
Source Florida Trend
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Americas Top Corporations
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National Ranking
From the New York Times, October 2007 . . .
Florida and California Lotteries have nearly
the same profit, even though California has twice
the population.

• Justification Review
• December 2004 by OPPAGA
• . . Based upon four key performance measures
• 1. Total transfers to the state
• 2. Transfers to the state as a percentage of
  lottery revenue
• 3. Per capita transfers
• 4.Total expenses as a percentage of total
  transfers
• the Florida Lottery ranks first in the nation.

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Two-Fold Strategy

Greater Profits(EETF Transfers)
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Comparison Sales
The Florida Lottery is ranked among the top five
in the domestic industry for total sales and top
15 for weekly per capita sales.

New York Lottery Massachusetts Lottery Florida
Lottery Texas Lottery California Lottery
In Billions
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Total Net Sales
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Net Sales from On-line Products
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Net Sales from Scratch-Off Products
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Larger Retailer Network

• The Lottery continues to increase the number of
  Lottery retailers throughout the state.

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Total Expenses
Operations 2
Prizes 59
EETF 31
Vendors 2
Retailers 6
Operations includes advertising, staff and all
office operations.
Operations includes advertising, staff and all
office operations.
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Measuring Business SuccessThrough Employee
Efficiency
FY 2007 Contributions Per Employee

• 1.26 Billion (EETF)
• 440 Employees
• 2.86 Million

11.3 Billion (Profit) 1.9 Million
Employees 5,947


Source Americas Largest Corporations, Fortune
500 magazine, April 30, 2007
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Measuring Business SuccessThrough Profitability
FY 2007 Profits As a Percentage of Revenue

• Revenue - 4.10 Billion
• Profit - 1.26 Billion
• 31

Revenue - 347.25 Billion Profit - 39.50
Billion 11
Source 20 Most Profitable Companies, Fortune
500 magazine, April 30, 2007
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Lottery Structures
Of the 43 domestic lotteries, 40 are state
agencies and three are publicly-chartered
corporations. There are no U.S. lotteries that
are privately run at this time.
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Looking Forward

• Strengths
• Flexible prize payout authority
• Promotional capabilities thru On-line gaming
  system
• Increased growth potential (up to 20,000 On-line
  terminals)
• Reduction in costs, and possible added revenue,
  thru patent authority and
• New Scratch-Off vendor contract.

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Looking Forward

• Weaknesses
• Slower growth rate
• Low market penetration
• Low advertising budget
• FLORIDA LOTTO slumping sales
• Heavy reliance on jackpot rollovers and
• Inability to replace aging infrastructure without
  legislative authority.

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Looking Forward

• Opportunities
• Increase On-line sales and EETF transfers thru
  flexible prize payouts
• Increase retailer base to improve market
  penetration
• Offer new or enhanced game options
• Maintain a competitive advantage in key areas
  and
• Reintroduce ITVMs to increase Scratch-Off sales
  and market penetration.

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Looking Forward

• Threats
• Insufficient advertising funding
• Competition with expanded gambling in and around
  Florida
• Policy constraints conflict with legislative
  intent, limiting the Lotterys ability to operate
  in the manner of an entrepreneurial business
  enterprise.
• Annual authorization to update aging
  infrastructure
• Inability to reinvest achieved efficiencies for
  future growth
• Inability to support retail-industry
  trends/processes, limiting access to major retail
  chains.

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Thank You
Leo DiBenigno Secretary
Charlie Crist Governor