Lottery Advertising: You Be the Judge. Or the Statistician.

Wisconsin state budget bills are usually 1,000 or more pages in length and contain many small items that receive little or no attention.  That is not to say, however, that serious questions cannot arise from the minutiae.

One example from the new 2017-19 budget makes the point.  In the Department of Revenue section of the 632-page “Executive Budget” book is this request:

“The Governor recommends increasing the lottery general program operations appropriation by $3 million in each year to be spent on current and additional informational activities to maintain and increase overall ticket sales.  This will ensure continued property tax relief for Wisconsin homeowners through the lottery and gaming credit.”

At the same time, the Wisconsin state constitution, Art. IV, Sec. 24 (6)(a) reads:

“The expenditure of public funds or of revenues derived from lottery operations to engage in promotional advertising of the Wisconsin state lottery is prohibited.  Any advertising of the state lottery shall indicate the odds of a specific lottery ticket to be selected as the winning ticket for each prize amount offered.”

According to Merriam-Webster, advertising is “the action of calling something to the attention of the public especially by paid announcements”; the definition of promotion is “the act of furthering the growth or development of something.”

How do you reconcile the budget’s $6 million biennial spending request and Article IV, Section 24?

If you’re not legally inclined, consider some statistics.  According to a mid-2016 report from the Legislative Audit Bureau, the Wisconsin lottery spent about $7.5 million on “product information” in each of the prior three fiscal years.  During this same period, growth in lottery sales averaged 0.7%.

In 2003, the lottery spent $4.5 million on product information and generated $96.68 in sales per dollar spent.  In 2008, it increased informational spending to $7.5 million and sales per dollar were $65.96.  Since then, informational spending has remained unchanged and sales per dollar averaged about $70.

Given this abbreviated history, how do you evaluate the relationship between informational expenditures and lottery sales?

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More questions as state budget nears

New figures from the Department of Revenue (D0R) may raise more questions about the upcoming 2017-19 state budget.
Tax collections from July to November 2016 grew just 1.2% over the same period in 2015. That figure is lower than the 2.3% growth recently projected for the entire fiscal year. If the trend continues with no offsetting actions, the state would risk running a budget deficit for the current fiscal year, which ends in July.
Estimates of state revenues have been moving steadily downward. Initially, the state budget called for collections of $15.21 billion in fiscal 2016 and $15.79 billion in 2017.
In January 2016, the nonpartisan Legislative Fiscal Bureau lowered those estimates to $15.17 billion and $15.65 billion, respectively. DOR reported in November that collections for fiscal 2016 were actually $15.09 billion. Revenues of $15.44 billion were projected for fiscal 2017.
Wisconsin isn’t the only state facing potential budget strains. The National Association of State Budget Officers (NASBO) reported in December that revenues came in under-budget in 25 states in fiscal 2016 – the most since the Great Recession – and many expect the declines to continue into fiscal 2017.
As of December, 24 states reported that general fund revenues were coming in below forecast for 2017, the highest number since fiscal 2010.
Unlike Wisconsin, however, 29 other states reported continuing contributions to their “rainy day” funds. Wisconsin has made no contribution to its Budget Stabilization Fund since 2013. The state is projecting to end the 2017 fiscal year with a balance of about $104 million – or roughly enough funds to operate for two days.

Gov. Scott Walker (R) is expected to release his budget in February, setting the stage for nearly four months of budget deliberations by the Legislature.


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Clouds on the state budget horizon?

A recent report from Wisconsin’s Department of Administration highlights the major challenges Gov. Scott Walker (R) and state legislators face as they begin work on the 2017-19 state budget.

The so-called “November 20 report,” which summarizes the state’s financial conditions as the governor begins work on the biennial state budget, shows the following potential trouble spots:

  • Projections for general fund tax collections continue to lag. Revenue growth for 2016-17 was initially projected at 3.8%, but has now been reduced to 2.3%. The 2017-19 forecast projects growth of at most 3% annually.
  • The ending balance for fiscal year (FY) 2017 is $104.8 million, or just 0.6% of net appropriations. This is equivalent to roughly two days’ worth of state spending.
  • Although the report notes that the $330 million opening balance (or surplus) this year was “the fourth-largest opening balance in 16 years,” a better measure would be to compare surpluses to spending. As a share of total expenditures, the projected ending balance is the smallest in seven years.
  • FY 2017 expenditures are projected to outpace ongoing revenues by $226 million. The gap does not include an accounting “trick” that pushes funding of about $100 million in school levy credits into the next fiscal year.
  • As for the pending 2017-19 budget, two agencies account for nearly all of the new spending requests: $447 million, mostly school aids, from the Department of Public Instruction and $336 million from the Department of Health Services.
  • The November 20 reports also touts the status of the state’s Budget Stabilization (“or rainy day’) fund, which should be viewed with caution. The fund has $280 million in it, but no new deposits have been made in the past three years.

A new report from the National Association of State Budget Officers also points to more clouds on the horizon for state budget-makers nationally. Revenue growth slowed in 2016, and half of the states have suffered revenue shortfalls since the start of the fiscal year. Nineteen states have already enacted mid-year budget cuts in response.

The NASBO report adds that, unlike Wisconsin, even in the face of increased budget pressures for health care education, and infrastructure, “most states continue to strengthen their rainy-day funds, with 29 states making deposits into these funds in fiscal 2016 and 26 states projecting increases for the current fiscal year.”

Click here for a free copy of full WISTAX analysis of the upcoming budget challenges.

Click here to read a summary of the NASBO report.


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