Feeling Lucky, California Joins 11-State Mega Millions Lottery

By Nancy Vogel

Feb. 9, 2005 12 AM PT

Times Staff Writer

SACRAMENTO —

In pursuit of ever-bigger jackpots and higher ticket sales, the California Lottery Commission voted Tuesday to join Mega Millions, an 11-state game whose record prize was almost twice as big as that generated by the California lottery.

The move is expected to boost lottery sales by half a billion dollars a year, of which at least 34% must by law go to schools.

But consumers who play the new game instead of SuperLotto Plus -- which will continue to exist -- face much steeper odds. The chance of winning a SuperLotto Plus jackpot is 1 in 41 million. The chance of hitting a Mega Millions jackpot is now 1 in 135 million -- and it will probably rise once California, the nation’s most populous state, joins the game sometime this year.

The push for California to select either Mega Millions or the 30-state Powerball game came quickly and with little public scrutiny after Gov. Arnold Schwarzenegger appointed Chon Gutierrez interim lottery director in December. Gutierrez had headed the lottery from 1986 through 1991. More recently, he had overseen Schwarzenegger’s extensive proposal to overhaul state government, called the California Performance Review. That review, published in August, included the recommendation that California join a multi-state lottery to increase sales.

The unanimous vote was cast by three Schwarzenegger-appointed commissioners so new that none has yet been confirmed by the state Senate. Two other board seats are vacant.

The action caught gambling opponents by surprise.

“There hasn’t been any formal discussion over this issue until today,” said Fred Jones, an Auburn lawyer and member of the California Coalition Against Gambling Expansion.

He attended the commission hearing after learning about the possible vote from a reporter Monday. Jones questioned the commission’s authority to sign lottery agreements with other states without approval from the Legislature, though lottery attorneys said they were confident that the 1984 initiative that created the lottery allowed such an expansion.

Another critic, Keith Whyte, executive director of the National Council on Problem Gambling, based in Washington, said there was an inherent conflict in government’s role as protector of the public well-being when it also promoted gambling.

“Governments nowadays are very reluctant to raise taxes,” said Whyte, who did not attend the hearing. “They’ve increasingly turned to gambling. It’s sort of seen as voluntary -- a tax on the willing. But it’s also a tax on the unwell.”

Comparing the lottery to consumer products such as soft drinks and cereal, commission officials said the state lottery hadn’t introduced a brand-new game since 1998 and needed a fresh product to counteract “jackpot fatigue” -- the tendency for players to wait until a jackpot gets to a certain size before they are willing to buy a ticket.

That tipping point -- when sales shoot up -- rose from $60 million in 2002 to $100 million last summer.

Californians voted to create a lottery in November 1984 with an initiative largely drafted and financed by a lottery ticket supplier. By law, at least 34% of lottery revenue must be used to supplement public school spending and one-half must be returned to players as prizes. Lottery administration can cost no more than 16%.

The California Lottery reached record sales of nearly $3 billion last year. But its overall sales rank only fifth in the country. New York lottery sales, for example, are nearly $6 billion.

“We can do better,” said Lottery Director Jim Hasegawa.

Though agreements must still be negotiated and software updated, lottery officials said they expected to launch Mega Millions in the state before the end of the year. Its addition will not change existing lottery games. The vote leaves Florida as the only state with a lottery that has not joined a multi-state game.

Roughly half of each dollar California players spend on the Mega Millions lottery will stay in the state and go toward public schools or lottery administration, officials said. The rest of the money will be used to pay the multi-state jackpot.

Last year, the California Lottery transferred more than $1 billion to public schools, or $131 per pupil. But lottery funds account for less than 2% of total public school spending.

If lottery officials hit their target of $500 million in increased sales, an additional $170 million will flow to schools.

“This is good,” said California Lottery Commissioner Loretta Doon, controller for the California Teachers Assn. “But it is in no way ... a solution to funding for education in California.”

In voting to allow Gutierrez to begin negotiating game rules with Mega Millions, the Lottery Commission rejected Powerball, whose 27 states, plus the District of Columbia and Virgin Islands, tend to be less urban and smaller than those hosting Mega Millions. Lottery staff said Mega Millions offered more frequent big jackpots. Based on average expectations, said Hasegawa, Powerball would generate a jackpot of $200 million or more three times a year compared with 4.6 times a year with Mega Millions.

“That would be dramatic,” Gutierrez said. “It would be exciting. It would be what the people of California ask for.”

Mega Millions jackpots average roughly $70 million, said Penelope Kyle, president of the Virginia lottery. In 2002, the jackpot hit a record $363 million.

In comparison, California’s home-grown SuperLotto Plus reached a record $193 million jackpot in 2002.

Lottery officials said they expected SuperLotto Plus sales to slide once Californians can also put a dollar down on Mega Millions. But the loss is expected to be more than made up by higher Mega Millions sales, Hasegawa said.

“You need to have a lot of players, even more than the entire state of California can provide, to create these giant prizes,” said I. Nelson Rose, a Whittier Law School professor and gambling expert. He predicted that eventually state lotteries would link to lotteries in other countries.

Mega Millions jackpot odds will most likely increase to roughly 170 million to 1 once California joins, said Buddy Roogow, executive director of the Maryland State Lottery and president of the Mega Millions Assn.

“If you don’t change the odds, more people will win sooner, and that means the jackpots won’t have a chance to grow,” Roogow said. “Then it becomes a vicious cycle because people lose interest.”

Mega Millions must make another adjustment for California because state law prohibits lottery games in which the prize amount is fixed and doesn’t grow as ticket sales increase. The top Mega Millions prize would be legal in California, but the game’s eight lower-tier prizes are fixed. The second-place prize, for example, is $175,000.

The 11 state lottery directors who manage Mega Millions have already agreed to allow California to arrange its own lower-tier prizes.

California lottery officials estimate that Mega Millions will cost the state roughly $20,000 a year to administer. There is no separate Mega Millions headquarters; the states involved split duties. The Georgia lottery, for example, hosts the drawing of numbers every Tuesday and Friday at 11 p.m. Eastern time at a television studio in Atlanta. Other states contribute public relations, marketing and financial help.

Gutierrez suggested that drawings be moved to the “tremendous media market” of Los Angeles.

“We would be thrilled to hold a drawing in Los Angeles,” Roogow said, “if the lottery and a station and folks there wanted us to.”

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By the numbers

Here’s a look at how the California SuperLotto Plus game stands now, in comparison with Mega Millions, which the state expects to join by the end of the year.

Super Lotto Plus

Where the game is now played: California

Minimum jackpot: $7 million

Drawings: Wednesdays and Saturdays

Where drawings occur: Sacramento

Chances for jackpot: 1 in 41,416,353

Mega Millions

Where the game is now played: Georgia, Illinois, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Texas, Virginia and Washington

Minimum jackpot: $10 million

Drawings: Tuesdays and Fridays

Where drawings occur: Atlanta

Chances for jackpot: 1 in 135,145,920