Inside the numbers: the Virginia Lottery

I spoke with the Executive Director of the Virginia Lottery to get a better understanding of the lottery’s past, present, and future, and to discover the just how much money the Lottery takes in and gives out.

March 16, 2012; 6:00 AM • by Nathan Cushing

Paula Otto, Executive Director of the Virginia Lottery, works on the thirteenth floor in an office building downtown for an employer with whom she’s been for thirteen years–she embraces the number thirteen. “There are no unlucky numbers at the lottery,” says Otto.

She’s been with the Virginia Lottery as Executive Director since 2008, when she was appointed by then-Governor Tim Kaine, but her connection with the lottery extends further back. Before the first lotto ticket was issued in 1988, she was a part of the group of people tasked with bringing the lottery into existence. And before that, she was a reporter for CBS 6 who covered, as luck would have it, the General Assembly deliberations about establishing the lottery nearly twenty-five years ago. If there is a person to ask about the Virginia Lottery’s past, present, and future, there’s likely no one better than Paula Otto.

History of the Lottery

She said that Virginia was the twenty-ninth of the forty-three states that have established a state lottery and only the second southern state–after Florida–to do so. She recalls covering the General Assembly those years ago, saying that the legislative body “debated the lottery for a long, long time.” As to the reasons why, Otto said that there were three.

“Many people worry about lower-income people,” said Otto, just as they did those years ago when the lottery was first considered. “There is no question that $1 from a lower-income individual is more important to that individual,” said Otto, compared with someone wealthier. The Virginia Lottery has studied this, however, and found that lower-income individuals “don’t play disproportionally to their income.”

The second reason detractors had against the creation of Virginia’s Lottery was that it “could lead to organized crime.” Otto said that “many, many controls” are involved to prevent that from happening, including a Security Department at the Virginia Lottery made up of sworn officers with the ability to arrest.

The third principal objection against the lottery came from those with specific moral and religious beliefs against any form of gambling. “I will always respect those people who refuse to participate,” said Otto. “It’s a choice that people make,” and it should not be foisted upon them. She said that the Virginia Lottery estimates that roughly 15% – 20% of the population demur the lottery on principle.

Lottery Misconceptions

“People will ask me, ‘What are the winning numbers?'” Of all the false impressions that people have, Otto says that the public belief that at least some of the 250 full-time and 50 part-time employees of the Virginia Lottery are privy to the winning numbers is the most prevalent.

Another misconception is that profits of the Virginia Lottery have always benefitted public schools. It hasn’t. Otto said that when the lottery was established, the General Assembly decided that “lotto money would to go the general fund,” which includes education but also safety, transportation, and other state expenditures. In 1999, voters went to the polls to decide whether lottery profits would go directly to education disbursements. Otto said there was an “overwhelming yes” for the measure.

In 2011, the Virginia Lottery generated $444 million in profits. Despite that large figure, Otto said it only amounts to 8% of the state’s total education expenditures. Since voters approved Virginia Lottery profits to be exclusive education money, Otto said that those yearly profits “have always been less than 10% of what the state spends on education,” which she said surprises many and provides perspective as to the size of the state’s education budget.

Lottery in the digital age?

Amid a growing number of consumer owned smartphones and tablets, state lotteries around the country are debating how to step into the digital age. In 2011, the US Department of Justice ruled that lotteries can offer products online. But just because the federal government has sanctioned online lotto sales, doesn’t mean that individual states have as well.

Otto said that there is a Virginia statute that prevents the lottery from selling tickets online (although customers can buy into drawings in advance). “We won’t be able to sell online unless there is a decision by policy makers,” said Otto. That doesn’t mean that the Virginia Lottery waits in antiquity. They offer a mobile-friendly website, text and email alerts, and a Facebook page. The Virginia Lottery offered the country’s first ever scratch game (Diamond Doubler) that featured the Facebook logo to coincide with the launch of their Facebook page.

Otto also pointed out that studies commissioned by the Virginia Lottery show that people in their 20’s will shop at convenient stores for drinks and snacks, yet largely remain unaware that lottery tickets are sold in those various convenient stores (there are roughly 5,200 lottery retailers in the Commonwealth). Otto thinks that reaching this young demographic digitally may prove to be a boon for the lottery business. “We know that 30% of Virginians play on a regular basis,” she said. The lottery wants to see this percentage rise.

“We are very proud of what we do and the money we generate for education,” said Otto. The state agency is rare in Virginia: “We develop, market, and distribute” a product, something that no other agency does exclusively. It also doesn’t receive any funding: instead the agency relies on their profits to pay their way. Their operating costs constitute roughly 10% of their profits, and in recent years they have been closer to 5%. “We try to be very efficient,” said Otto.

Otto said that perhaps the biggest detriment to working at the Virginia Lottery is that employees are forbidden from purchasing any tickets. Because she began working at the Virginia Lottery before it sold its first ticket, she went nine years without being able to purchase the very thing that she helped make possible. The only lotto tickets she and other Virginia Lottery employees can buy are those they purchases while traveling out of state. “We consider it market research,” she said, chuckling.

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