Legislative Budget and Finance Committee
Total Page：16
File Type：pdf, Size：1020Kb
Legislative Budget and Finance Committee A JOINT COMMITTEE OF THE PENNSYLVANIA GENERAL ASSEMBLY Offices: Room 400 • Finance Building • Harrisburg • Tel: (717) 783-1600 Mailing Address: P.O. Box 8737 • Harrisburg, PA 17105-8737 Facsimile (717) 787-5487 SENATORS JOHN R. PIPPY Chairman VACANT Vice Chairman JAMES R. BREWSTER ROBERT B. MENSCH DOMINIC PILEGGI CHRISTINE TARTAGLIONE JOHN N. WOZNIAK Pennsylvania Lottery Funding of Programs and Services for Older Pennsylvanians REPRESENTATIVES ROBERT W. GODSHALL Secretary VACANT Treasurer STEPHEN E. BARRAR JIM CHRISTIANA H. SCOTT CONKLIN PHYLLIS MUNDY EDWARD G. STABACK A Report in Response to House Resolution 2011-106 EXECUTIVE DIRECTOR PHILIP R. DURGIN February 2012 Table of Contents Page Report Summary ............................................................................... S-1 I. Introduction ....................................................................................... 1 II. Overview of the Pennsylvania Lottery ............................................ 3 III. Pennsylvania Lottery Sales and Net Revenue ............................... 8 IV. Lottery Fund Program Expenditures ............................................... 23 V. Lottery Fund Financial Condition .................................................... 59 VI. Appendices ........................................................................................ 71 A. House Resolution 2011-106 ........................................................... 72 B. Pennsylvania Lottery Organization Chart ........................................ 74 C. Description of Organizational Structure of the Pennsylvania Lottery ............................................................................................. 75 D. Pennsylvania Lottery Staff Complement ......................................... 79 E. Description of Lottery Games Mix ................................................... 80 F. Lottery Games and Sales in Selected Other States ........................ 83 G. Lottery Update to 1994 LB&FC Report Recommendations ............ 87 H. Senior Care and Services Study Commission’s Policy Recommendations .......................................................................... 90 I. Pending Bills Relating to the Pennsylvania Lottery and Related Programs ......................................................................................... 91 J. Responses to This Report ............................................................... 93 i Report Summary The State Lottery Law, Act 1971-91, as amended, 72 P.S. §3761-101 et seq., created the State Lottery Fund, into which all monies received from the op- eration of the State Lottery are deposited. A specific portion of the revenues ac- cruing from the sale of lottery tickets, currently 27 percent, is required to be used to provide services for seniors in the Commonwealth. Services currently provided through those funds include free and shared ride transit, property tax and rent rebates, prescription drugs, long-term care, family caregiver support services, and PennCARE services, among others. The LB&FC was directed by House Resolution 2011-106 to study the Pennsylvania Lottery relating to its ability to continue to support programs and services for older Pennsylvanians. We conducted a similar analysis in 1994.1 Findings and Conclusions Pennsylvania has one of the “oldest” populations in the United States. As shown on the graph below, the age 65 to 84 and age 85 and older populations are expected to rise through 2030, with the Pennsylvania State Data Center projecting a 51 percent increase in the age 65 and older population. By 2030, this population is projected to represent approximately 22.5 percent of the total population in Penn- sylvania. Population Projections Age 85+ The growth in the age 65 and over population in Pennsylvania, however, does not directly correlate to the use of all services for older Pennsylvanians funded by the Lottery Fund. For example, free transit and shared ride trips have declined at 1 State Lottery Funding of Programs and Services for Older Pennsylvanians, a report in response to Act 1992- 128, LB&FC, June 1994. Available at http://lbfc.legis.state.pa.us. S-1 the same time both the 65 and older and 85 and older age categories have increased. The need for and use of other services, however, is increasing, particularly those re- lated to allowing individuals to remain in their homes, such as the Family Caregiv- er Support Program. Lottery Sales Increased by Almost 5 Percent in FY 2010-11 Driven by Significant Growth in Instant Ticket Sales The Pennsylvania Lottery remains the only lottery in the nation that exclu- sively directs all of its proceeds to programs for older residents. In fiscal year 2009- 10, the Lottery had sales of more than $3.06 billion, and contributions to programs for older Pennsylvanians totaled more than $915 million. Pennsylvania Lottery gross ticket sales grew by double-digits annually from FY 2001-02 through FY 2005-06, but by less than 1 percent each year between FY 2005-06 and FY 2007-08. From FY 2007-08 through FY 2009-10, sales decreased by less than 1 percent each year, and then rebounded for an almost 5 percent increase in sales in FY 2010-11. Although the weakening economy may have been a factor in the sales decline, Lottery officials indicated that a slowing of the growth of the retail network may have been the primary cause for the flattening of gross sales as trend lines of these two factors very closely mirror each other. Gross ticket sales for terminal-based games increased modestly each year from FY 2001-02 through FY 2005-06, and then declined each year through FY 2010-11, growing at an average of 0.8 percent annually. Sales of instant game tick- ets, on the other hand, have increased by an average of 12 percent annually since FY 2001-02. Instant tickets were 37 percent of total sales in FY 2001-02 and 60 percent of sales in FY 2010-11. Unfortunately, instant tickets have a much lower profit margin than terminal sales, generating only about half the profit as terminal- based games. The Lottery Is Projecting Little Annual Growth Through FY 2016-17 The Lottery’s sales projections for FY 2011-12 and the five-year period ending FY 2016-17 are shown below. The current projection has total sales in FY 2011-12 increasing to $3.3 billion or almost 3 percent more than actual FY 2010-11 sales. At the end of the first quarter of the fiscal year, Lottery sales appeared to be on track to reach the estimate, totaling $794.5 million, or 24 percent, of estimated sales for the year. S-2 Lottery Sales Estimates Through FY 2016-17 ($000) Terminal - Percent Instant Based Increase Games Games Total Sales (Decrease) FY 2011-12 Est. ...... $1,992,970 $1,307,039 $3,300,009 2.87% FY 2012-13 Est. ...... 2,032,829 1,315,565 3,348,395 1.47 FY 2013-14 Est. ...... 2,063,322 1,321,637 3,384,959 1.09 FY 2014-15 Est. ...... 2,083,955 1,326,378 3,410,333 0.75 FY 2015-16 Est. ...... 2,094,375 1,328,454 3,422,828 0.37 FY 2016-17 Est. ...... 2,104,847 1,330,550 3,435,397 0.37 Source: Developed by LB&FC staff using PA Lottery’s 5 year sales projections. Lottery officials expect instant game sales to continue to grow slightly each year, but sales for terminal-based games are projected to stay fairly flat. We com- pared the Lottery’s sales estimates for seven previous years against actual sales and determined that the projections were generally within 4 percent of actual sales. When totaled, actual sales were 0.2 percent greater than total estimated sales. Status of the Lottery Fund The Lottery Fund’s budgetary fund balance (modified cash basis) for FY 2010-11 was $158.9 million, a notable decline from the FY 2006-07 balance of $576.5 million. For FY 2009-10, the GAAP fund balance (accrual) was reported as a negative $166.2 million in the Commonwealth’s CAFR. As of June 30, 2010, a $267.6 million difference, therefore, existed between these balances. See the graph below. Lottery Fund Balances* *FY 2010-11 GAAP balance not yet available. Source: Developed by LB&FC staff using data obtained from the Governor’s Executive Budgets. S-3 The two balances can be reconciled through revenue and expenditure adjust- ments. The two adjustments that account for the majority of the difference are lia- bility for unclaimed prizes ($83.3 million in 2010) and $299.1 million in accrued ex- penditures, which are primarily monies to be paid for the Property Tax and Rent Rebate (PTRR) program (92 percent of this adjustment). Services Funded by the Lottery Fund for Older Pennsylvanians Department of Aging Programs and Services The Department of Aging receives lottery funds for PACE/PACENET, PennCARE, Pre-Admission Assessment, the Family Caregiver Support Program, Alzheimer’s Outreach, and General Government Operations. PACE enrollment has declined since FY 2001-02. The Pharmaceutical Con- tract for the Elderly (PACE) provides prescription medication assistance to Penn- sylvania residents2 who are age 65 years or older and whose total income is $14,500 or less for a single person or $17,700 or less for a married couple. In FY 2010-11, 145,000 individuals were enrolled in the PACE program, and 4.4 million prescrip- tions were paid for through the program. This is a decline of 88,000 individuals and 4.7 million prescriptions since FY 2001-02, and is attributed to individuals migrat- ing to the PACENET program as their income has increased. Over this same time period the average cost of a prescription paid for by PACE has declined approximately $17, or about 42