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Arizona Lottery sales holding up even with economy in dire straits

Even as residents cut back on spending due to the uncertainties of sagging economy, the Arizona Lottery’s sales are holding up, the latest figures show.

Sales rose 2.4 percent in the fiscal year that ended in June and were up 17.9 percent in the first quarter of this fiscal year as whopping Powerball jackpots helped drive sales.

Two economists said they found those results surprising given the deep recession, but Jeff Hatch-Miller, the lottery’s executive director, pointed to new games and increased advertising that the Legislature made possible by providing more funding flexibility starting in 2008.

“We’re just a leaner, meaner machine than we have been,” he said. “It was a major change in the business strategy that created the change in revenues.”

Sales for the 2009 fiscal year reached $484.5 million, up from $472.9 million the previous year. Lottery sales have increased every fiscal year since 2000 except for a slight dip in 2007.

First-quarter sales for this fiscal year were $126.4 million, up from $107.2 million in the same quarter of last fiscal year.

Tim James, a professor of economics at Arizona State University’s W.P. Carey School of Business, pointed to big Powerball jackpots, including a $217.6 million prize in August. But he said there’s more involved than that.

“There’s a bit of escapism in the idea that you might win a fortune when you’re in absolute dire straits,” James said. “It gives people the chance to get out of their horrible circumstances overnight.”

Dennis Foster, a senior lecturer on economics at Northern Arizona University’s W.A. Franke College of Business, said people could be seeing lottery tickets as a cheaper alternatives to casinos, though he added that wouldn’t be the only reason for the increase.

“For example, people might buy more chicken instead of steak,” he said. “And if people have a routine of gambling at the casino, the lottery would be a cheaper substitute.”

During the fiscal year that ended in June, tribal contributions of gaming revenues to the state dropped 9.9 percent and were down 14.1 percent for the first quarter of this fiscal year, according to the Arizona Department of Gaming.

Foster said he was surprised to see lottery sales rise in a poor economy, with people cutting back on buying cars, refrigerators, home and luxury items.

“It seems to me like it would be one of the easier things to cut back on,” he said.

Hatch-Miller, however, said declining casino revenue disproves the notion that people are buying lottery tickets out of desperation.

“That’s kind of a face-of-it explanation: people needing more hope and needing something to help them out of the bad times,” he said. “That would be generic _ they would be going to the casinos more too, but they’re not.”

He said the recent success has a lot to do with the Legislature’s 2008 decision to repeal a cap that set the lottery’s advertising budget at no more than $11 million. Instead, lawmakers set the advertising budget at $20 million fiscal 2009 and $16 million for this fiscal year.

Hatch-Miller said that increase enhanced the lottery’s marketing efforts, which he said in turn enabled officials to add to the vending machines in stores and double the number of games to 50.

“It was kind of like them taking the shackles off and saying, ‘Run this like a business. You guys got the money, you got the budget, now just show us the results,’” he said.

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