PRINT THIS PAGE | E-MAIL THIS PAGE

Friday, October 31, 1997

Lottery at crossroads

By JUAN B. ELIZONDO Jr. / Associated Press Writer

AUSTIN (AP) -- The Texas Lottery, dealing with a year of controversy, a decline of enthusiasm for its numbers games and orders to increase the state's share of profits is suffering its first real slump in sales.

The head of the lottery's three-member governing commission says a look at the five-year-old agency's successful past could point the way for its future.

But a lottery industry analyst said Thursday that Texas is risking "the wrath of players."

And the latest causality of the agency's internal turmoil, former executive director Lawrence Littwin, says Texans are being ripped off.

Littwin was fired Wednesday, less than six months after being hired. Members of the Lottery Commission, Chairman Harriet Miers, John Hill and Anthony Sadberry, wouldn't talk about Littwin's dismissal. Gov. George W. Bush said he believes the commission realized it made a mistake hiring Littwin.

"I trust the judgment of Harriet Miers and John Hill and the other commissioner named by my predecessor," Bush said.

But an anticipated cut in prizes -- to increase the state's take as ordered by the Legislature -- and a year of questions about top lottery officials and lottery contractor GTECH have added up to lower sales.

James Rinn, financial director for the agency, says sales could end up slightly below projections for $4 billion this year. GTECH officials say sales could fall as much as $1 billion short.

Ms. Miers says none of the controversies have related to the integrity of the games themselves.

And lottery prize cuts, from an average of 57 cents per $1 to roughly 53 cents per $1, won't be as drastic as many players think, other lottery officials say.

But Barry Miller, lottery columnist for the (New York) Daily News, says a combination of less advertising and lower prizes could hurt the state.

"There is no question that Texas risks the wrath of players by cutting advertising and cutting into the players' prize pool," he said.

Cuts in advertising came after questions by a lawmaker who thought the games' mascot, Scratchman, may have been too influential on children.

Rep. Rob Junnell, D-San Angelo, made those comments. On Thursday, he said he never put any pressure to dump the advertising and doesn't know that anyone else did.

Lawmakers also cut some of the lottery's advertising budget, but only by about $4 million from $80 million for a 24-month period, Junnell said.

Prize cuts also came from the Legislature, but Junnell said current sales drops can't be blamed on new laws that only took effect on Sept. 1.

Renn said that while those prize cuts have not fully taken effect, players believe they have. He said the year of controversy also hasn't helped.

Questions began swirling last November, when newspaper reports first revealed that GTECH had employed a close friend of Littwin's predecessor, Nora Linares. Ms. Linares said she knew nothing about it, went through weeks of questioning and then was fired. She sued the lottery, dropped that lawsuit and now is suing GTECH.

Questions also were raised about GTECH's business practices -- including paying a percentage of GTECH profits to a Texas lobbyist -- that led to an effort to get new bids for the services GTECH performs, such as running the on-line lotto games.

"The reality is, a constant repetition of issues has a negative impact," Ms. Miers said in an interview with The Associated Press.

"Do problems exist (in the agency)? Absolutely," she said. "The commission can just deal with those as they are presented to the best of our ability."

One problem the commission may not be able to control is the historic decline in lottery-player interest. Few established state lotteries have not suffered a leveling and slight downturn in sales.

Miller said the state's reaction will be key in determining what happens.

"Let's compare it to the baseball situation," he said. "Owners are still feeling the affects of the baseball strike of a couple years ago."

"The state lottery is in a very difficult position," Miller added. "On the one hand, it has to earn revenue for the state. On the other hand, it must not take advantage of people playing the lottery."