Rethinking Ernie P. | Arkansas Blog

Wednesday, July 22, 2009

Rethinking Ernie P.

Posted By on Wed, Jul 22, 2009 at 10:09 AM

A hat tip to Rep. Jon Dismang, who has brought a little broader-based numbers crunching to the raging debate about the expense of the Arkansas lottery.

He asked the Bureau of Legislative Research for a comprehensive set of numbers on lottery revenues and expenses in all the states that have lotteries. He Twittered this morning that the figures were surprising, so I asked for a copy.

Here's the spreadsheet with the data. (And here's the researchers' explanatory memo.) You can sort the data by any of the columns of figures. Arkansas numbers aren't in yet, so we have an accurate comparison in only one category -- director pay.No surprise there. Director Ernie Passailaigue's $324,000 ranks second only to the Tennessee lottery chief's $436,000.

But what about overall lottery expenses? Passailaigue yesterday said he was shooting for a $4.7 million budget. If the lottery hits his $1 million-a-day sales target, that would put expenses on an annual basis, at 1.28 percent of gross revenue, or about 23nd lowest on a ranking of the 43 states and the District Columbia, also comfortably below the national average percentage of 1.52 percent. Arkansas's projected performance would look even better if you remove the six states with video lottery terminals (slot machines effectively) from the comparison -- West Virginia, South Dakota, Delaware, New York, Oregon and Rhode Island. Their overhead cost is much lower because the dollar value of gambling is so high thanks to the jingling slots.

(Also: Dismang, in remarks to Jason Tolbert, gives the Arkansas lottery still more benefit of the doubt by computing sales at the national per capita average. If we hit that fairly lofty number, our expense-to-revenue ration would drop well below 1 percent.)

There are lots of numbers to play with here and sales eventually will be critical in determining what kind of bargain we're getting for the high-end salaries in an operation somewhat leaner overall. But it's a different take on the picture.

Dismang previoulsy had not rushed to join some other Republican anti-lottery drumbeating, preferring to get some solid numbers first. He continues to believe the legislative oversight committee has mostly served to date as a rubberstamp and should take a more active role. But it's been a lucky break that overall numbers may turn out to be acceptable. He comments:

It would seem that Ernie is a believer of the wage efficiency theory (higher wages=higher output because of the employees increased desire to keep his or her job), which I would normally argue would not be applicable to a public entity due to the lack of a private industry performance standard   However, the public outcry and questioning of these salaries has created a public performance standard that will more than likely require these employees to work more efficiently and effectively.

A sea change in the controversy? Maybe not. But a freshening breeze, certainly.

Finally, one more lottery note. Most agree that the $115,000 pay for security director Lance Huey, a former sheriff, expanded the burning controversy. I talked to him about it early this week and came away feeling somewhat sympathetic. What would you do if offered a huge pay increase?

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