Gov. aims to borrow from lottery

California gamblers would win tens of thousands more prizes from the state lottery and potentially bigger jackpots under a measure proposed to go before voters as soon as next year.

The two pieces of legislation, signed by Gov. Arnold Schwarzenegger on Friday, would also allow the state to borrow $5 billion against future sales of lottery tickets to help plug a budget hole that analysts say could total $27.8 billion during the next 20 months.

“Modernizing the California lottery and securitizing its revenues are absolutely critical to solving the state’s ongoing budget crisis,” said Camille Anderson, a spokeswoman for the governor. “These much-needed reforms will allow the state to get more value out of the lottery by boosting its performance and returns -- bringing billions in revenue to the state over time -- all without raising taxes.”

The state Legislature would have to call a special election next year for voters to decide on the proposed lottery changes if they are to help with the budget that takes effect July 1, 2009.

But some said the twin bills are bad public policy.

“It’s very disturbing that it’s going to compel policymakers to be peddlers of gambling,” said Fred Jones, an attorney with the California Coalition Against Gambling Expansion. “It’s a bad idea to make the state budget dependent on people losing their hard-earned money.”

If voters approve the changes, the borrowing measure will require at least 50% of annual lottery revenues to be returned to the public in prizes, repealing the current 50% payout cap.

The measure also would reduce from 16% to 13% the amount of money that can be used for administrative expenses, potentially providing a larger share of funds for jackpots.

Lottery Director Joan Borucki said that if the Lottery Commission follows the lead of other states, it might boost payouts to 65% of revenue.

That would mean about $365 million in additional money for tens of thousands of additional prizes, mostly in the popular scratcher-card games. If such a change were to draw more lottery players, that could drive up the jackpots when there is no winner.

“The lottery is going to be able to make more winners,” she said. “And that should increase lottery revenue.”

In Florida, a similar increase in payouts resulted in a tripling in the sale of scratchers in five years. In New York, sales rose 251%.

Borucki estimates that more payouts will result in a doubling of profits from about $1 billion to $2 billion in five years. That kind of growth is needed if the governor’s plan to borrow against future profits is to generate the $5 billion counted on for next year.

Jones scoffs at the optimistic projections, noting that lottery ticket sales dropped about 15% over the last two years, in part because of the state’s economic slump.

The Legislature agreed to guarantee that education would continue to receive at least as much money as it did this year from the lottery.

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patrick.mcgreevy@latimes.com