V.I. Lottery Scratching a Losing Card

V.I. Lottery revenues were flat this year and, unless the V.I. Legislature eliminates some of its mandates transferring Lottery revenues to various programs, it will "spend its way out of existence," jeopardizing several hundred jobs, Lottery Executive Director Conrad Francois said during budget hearings Friday.

The Lottery projects revenues of $19.9 million for Fiscal Year 2014 with expenses of almost the same amount, once a series of legislatively mandated transfers are done, leaving operating revenues of $19,000, Francois told the Finance Committee.

In FY13, Lottery had $4.5 million in net income before the transfers, while after transfers, it had a loss of $363,000. This year Lottery projects net income of $4.8 million and transfers of nearly the same amount.

Lottery has worked to reduce annual losses and, if nothing is changed, it projects a FY14 surplus of $19,000. "But we have exhausted our cash reserves in the process," Francois said.

Projected transfers for FY14 include:
– Education Initiative Fund $1.6 million;
– Pharmaceutical Asst. Fund $1.6 million;
– V.I. Government Employee Retirement System for annual retiree "bonuses”: $1.1 million;
– Horse Racing $250,000;
– Office of Veteran Affairs $250,000.

"We need immediate relief and I strongly recommend that the Legislature, as a start, consider eliminating the annual GERS Bonus Fund and reduce the percentage requirement for the Education Initiative Fund from 15 percent to 10 percent of online gaming revenues," Francois said.

These changes to the law would reduce mandatory transfers by $1.6 million and result in a contribution to the General Fund of $334,000, he said. "With this minor adjustment the agency will be able to begin to rebuild its cash reserves and ensure its viability into the foreseeable future," Francois said.

He also wants a law repealed that requires the Virgin Islands Lottery to transfer not less than $2.2 million from its net income to GERS for annual cost of living increases.

"There is just no reason for this that I think one can legitimately justify," he said.

Some senators disagreed.

"We have a difference of opinion, you and I and my colleagues, at least some of us," said Sen. Myron Jackson, who was chairing the Finance Committee hearing at the time.

The V.I. Lottery’s projected FY14 revenues of $19.9 million include $11 million from St. Thomas video lottery terminals. VLTs are nearly identical to slot machines but regulated by the Lottery Commission instead of the V.I. Casino Control Commission. The Lottery expects another $8.9 million in traditional lottery ticket sales.

It projects roughly $7.9 million in direct costs for prizes, printing, drawing the lottery, dealer bonuses and incentives. Employee salaries and benefits and all other costs come to $7.1 million, which brings V.I. Lottery’s total operating expenses to $15.1 million, leaving net operating income of $5.4 million.

Lottery generates its own revenue from ticket sales and is not financed by the government.

No votes were taken at the information gathering budget hearing.

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