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By design, changes generate record Powerball jackpot

Published November 27, 2012 6:27 pm

Lottery • Raising ticket price to $2 boosts revenue, sales.
This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Des Moines, Iowa • The historic $500 million Powerball jackpot is all part of a plan lottery officials put in place early this year to build jackpots faster, drive sales and generate more money for states that run the game.

Their plan appears to be working.

Powerball tickets doubled in price in January to $2, and although the number of tickets sold initially dropped, sales revenue has increased by about 35 percent over 2011.

Sales for Powerball reached a record $3.96 billion in fiscal 2012 and are expected to reach $5 billion this year, said Chuck Strutt, executive director of the Des Moines, Iowa-based Multi-State Lottery Association, the group that runs the Powerball game.

There has been no Powerball winner since Oct. 6, and the jackpot already has reached a record level for the game. It's the second-highest jackpot in lottery history, behind only the $656 million Mega Millions prize in March.

It took nine weeks for the Mega Millions jackpot to get that high, before three winners — from Kansas, Illinois and Maryland — hit the right numbers, each collecting $218.6 million for their share of the split.

With soaring jackpots come soaring sales, and for the states playing the game, that means higher revenue.

"The purpose for the lottery is to generate revenue for the respective states and their beneficiary programs," said Norm Lingle, chairman of the Powerball Game Group. "High jackpots certainly help the lottery achieve those goals."

Of the $2 cost of a Powerball ticket, $1 goes to the prizes and the other dollar is kept by the state lottery organization, said Lingle, who also is executive director of the South Dakota Lottery. After administrative overhead is paid, the remaining amount goes to that state's beneficiary programs.

Some states designate specific expenditures such as education, while others deposit the money in their general fund to help supplement tax revenue.

The federal government keeps 25 percent of the jackpot for federal taxes.

Most states withhold 5 percent to 7 percent. There's no withholding in states without a state income tax such as Delaware, Pennsylvania, South Dakota, and Texas. A New York City winner would pay more than 12 percent because the state takes 8.97 percent and the city keeps 3.6 percent.

A single winner Wednesday choosing the cash option would take home nearly $300 million before taxes.

Powerball and Mega Millions games are seeing jackpots grow faster and higher in part because the states that play both games agreed in 2010 to sell to one another.

Both games are played in 42 states, Washington, D.C., and the Virgin Islands. The larger pool of players means jackpots roll over to higher numbers faster, which tends to increase the buzz about the jackpots, which increases sales. It all can result in higher jackpots sooner.

Still, just seven of the top 25 jackpots occurred after January 2010 when the cross-selling began. That points to the unpredictability of games of chance such as lotteries. It still comes down to the luck of the numbers.

It has been proved that once the jackpot reaches a certain threshold more players buy.

Nearly $30 million in tickets were sold between the Wednesday and Saturday drawings for most of October. Once the jackpot hit $100 million on Oct. 27, $38 million worth of tickets were sold by Oct. 31. As the jackpot grew to more than $200 million on Nov. 17, sales surged by nearly $70 million by the next Wednesday. Then the jackpot reached more than $300 million on Nov. 24, and ticket sales over the next four days surpassed $140 million.

Lottery official Strutt said the chance of getting a winner this Wednesday is approaching 60 percent. —

Working as planned

Gathering steam • There has been no Powerball winner since Oct. 6, and the jackpot already has reached a record.

Revenue boost • The potential for a big win means higher revenue for states, because once the jackpot reaches a certain threshold, more players buy. Of the $2 cost of a Powerball ticket, half is kept by the state lottery organization.

Sales spike • It's possible more than $1 billion in tickets will be sold by the time the drawing is held Wednesday.