Revenue is slightly lower than expected this fiscal year for the Hoosier Lottery, and the state’s private operator could have to pay a penalty for missing its sales target.
According to a financial report presented to the Hoosier Lottery Commission on Tuesday morning, lottery sales are expected to hit $1.3 billion in fiscal year 2020, which is 1.1% less than budgeted and nearly 3% lower than in fiscal year 2019. The lottery’s fiscal year runs through the end of June.
That would mean about $295 million in surplus revenue that would be returned to the state—down from $312 million last year.
The sales would generate a “provider net income”—defined as total revenue minus prizes paid out and game and provider expenses—of $296.4 million. That’s $3.6 million below the minimum threshold IGT Indiana, formerly Gtech Indiana, needs to meet in order to avoid paying a penalty.
The 15-year contract between the Hoosier Lottery and IGT Indiana outlines minimum net income amounts IGT Indiana must reach in order to avoid paying a penalty and net income amounts that would trigger an incentive payment.
For fiscal year 2020, the minimum net income requirement is $300 million, and the incentive income requirement is $310 million.
The company has avoided the penalty payment since 2015.
IGT Indiana missed the minimum income targets in 2014 and 2015, prompting the state to revise the contract in 2015 and lower the income requirements. The company then avoided penalties in 2016 and 2017 by hitting the minimum net income requirements, but it did not hit the incentive income targets, so it did not receive a bonus.
In 2018 and 2019, IGT Indiana hit the incentive income requirements and received bonuses of $9.1 million and $11.2 million, respectively.
The fiscal year 2020 budget estimated that the provider net income would reach $312 million, which again would have allowed IGT Indiana to claim a bonus.
According to the financial report shared Tuesday, lottery revenue was $1.08 billion through the end of April, which is about 2.7% lower than estimated and 3.8% lower than the previous year at this time.
Hoosier Lottery Commission member David Redden said he was surprised sales have continued to do well during the pandemic.
“That’s certainly encouraging, even though it’s a shortfall, it could be a lot worse,” Redden said.
Scratch-off ticket sales have continued to do well, with revenue actually 1% higher than expected and 4.4% higher than the previous year, but sales for the jackpot draw games such as Powerball, Hoosier Lotto and Mega Millions are all down.
Those jackpot draw games have only generated $119 million in sales as of April 30, compared to $200.8 million at the same time last year.
Carrie Stroud, chief of staff for the Hoosier Lottery, said the problem has been that none of the jackpot draw games have reached the $400 million mark this year, which has slowed interest in buying tickets.
The lottery is still exploring the possibility of launching online games, but IGT Indiana isn’t expecting to provide an update on that effort until closer to the end of the year.
The Hoosier Lottery will present unaudited year-end figures to the commission at its meeting in August.