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The high price of a ‘free’ Georgia lottery ticket

Lines formed outside a Georgia Lottery kiosk. JOHN SPINK /JSPINK@AJC.COM

Lines formed outside a Georgia Lottery kiosk. JOHN SPINK /JSPINK@AJC.COM

The “free” lottery tickets awarded as prizes in Georgia Lottery games aren’t exactly free – at least for the state of Georgia.

A state audit released last month recommends that the Georgia Lottery Corporation review its use of free lottery tickets, though it did not suggest they be eliminated.

Here’s why they can be costly:  Retailers who sell lottery tickets are paid on gross sales, so 6 percent of the face value of free tickets is paid as sales commission to retailers. And the lottery’s vendors are paid another 1 percent on free tickets. That adds up.

The audit’s review found the use of free tickets would need to generate about $82 million to cover those costs. And there’s no way to tell if the lottery is recouping those costs, it found, because that kind of data isn’t being collected.

“There is a cost to offering free tickets, and this cost must be offset by additional sales,” the auditors wrote. “Otherwise, the higher expenses from offering free tickets reduce returns to the state.”

Free ticket prizes are certainly popular, in part because they provide players with a “winning experience,” lottery officials told the auditors.

About one in 10 instant tickets are free ticket prize winners. And the Fantasy 5 draw game offers free tickets as prizes. Overall, the Georgia Lottery gave away about $292 million in free ticket prizes the last fiscal year.

The audit was requested by a Georgia Senate budget-writing committee reviewing the effectiveness of the lottery’s push to increase sales from existing games.

Lottery officials said in a response to the audit that prize payouts would have to be increased by at least 5 percent for every game to keep the overall odds constant and provide the same winning experience to players if free tickets were replaced with cash prizes.

The auditors, though, said there’s no recommendation to eliminate free tickets but just to conduct more research on the impact of offering the prizes to help define an “optimal rate” – the right mix of free tickets to offer as prizes.

Download the audit here.

 


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