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Lottery big part of state’s financial plans, but first voters must vote to keep it

While other contributors to state revenues have dropped off severely of late, the Arizona Lottery has been a growing source of tens of millions of dollars per year since its inception in 1980.

The lottery funds a variety of voter-approved state programs in areas such as education, health and transportation and has contributed $2.3 billion in all to its beneficiaries.

Its revenue has been so reliable that one proposal for plugging the gaping hole in the state budget involves borrowing against lottery proceeds. Called lottery securitization, that plan calls for the state to take out a loan and pay it back with annual lottery profits transferred into the state’s general fund.

But while the lottery’s revenue and growth have been certainties, its future isn’t assured. By law, the lottery must be reauthorized periodically, and the current authorization is scheduled to expire July 1, 2012.

Borrowing against the lottery’s anticipated revenues isn’t likely until its future is certain.

While no one is suggesting that the public might vote to get rid of the lottery, supporters aren’t about to make assumptions with so much at stake.

Jeff Hatch-Miller, the lottery’s executive director, expects to see the issue go to voters next November based on a referral from the Legislature.

“Anything could happen, but I trust that we’re doing the kind of job that the voting public will support,” he said. “By talking to a lot of people in the community, I sense that the lottery is very positively received.”

The Arizona Lottery Commission applied to the Auditor General’s Office last December for an early review of operations, which is required before the Legislature can approve an extension for a public vote.

In 2002, nearly three-quarters of voters approved extending the Arizona Lottery Commission until mid-2012.

The possibility of borrowing against lottery proceeds is one reason the commission is taking no chances, Hatch-Miller said.

“Under the best circumstances you would want to have that money coming in every year because it helps support programs in perpetuity,” he said. “But the situation is so dire that it would make a lot of sense to say that, because the lottery is so creditworthy right now, we’re going to use that credit-worthiness to borrow money and plug up the hole in the budget.”

Bruce Merrill, a retired Arizona State University professor who directs the Cronkite/Eight Poll, said he expects the public to approve renewing the lottery because of the programs it supports and because most like playing.

“There is a psychological thing that happens where people think that even if they aren’t playing the lottery, at least they have the ability to buy a ticket and potentially win a lot of money,” he said.

The Center for Arizona Policy, a nonprofit research group committed to upholding what it calls family values in public policy, argued against renewing the lottery in 2002, citing it as a gateway to gambling addiction. Representatives of that organization declined a Cronkite News Service request for comment on the upcoming vote.

Dennis Foster, a senior lecturer on economics at Northern Arizona University’s W.A. Franke College of Business, said borrowing against anticipated lottery revenues would carry some risks for the state.

“If you’re going to take out a loan then you’re obliged to pay it back,” he said. “If the lottery stops doing well, that would mean the state would be on the hook to pay for the difference on the payments.”

If the renewal doesn’t pass, beneficiaries of lottery funds could stand to lose.

The state’s Heritage Fund, which works on restoring historically significant sites and preserving the environment, receives $20 million every year in matching funds from the lottery.

Without the funds, it would mean that many projects wouldn’t be possible, said Elizabeth T. Woodin, the Arizona Heritage Alliance’s president.

“The lottery funding has consistently supported quality-of-life projects that the Legislature has not,” she said. “To me, I consider buying a lottery ticket a sort of voluntary donation.”

Ken Strobeck, the executive director of the League of Arizona Cities and Towns, said the benefits of having a state lottery outweigh the potential negatives.

“If the lottery were to go away, it wouldn’t eliminate gambling in the state because people would still go to casinos and Las Vegas isn’t far away.” he said. “When I buy a lottery ticket and it’s not a big winner, at least I know my money went to a good cause.”

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