State Sens. Mike Brubaker, R-Lancaster County, and John Blake, D-Lackawanna County, announced a plan Wednesday that could help the Pennsylvania Lottery with game management and marketing while generating more revenue for the commonwealth.
The proposal from the majority and minority chairmen of the Senate Finance Committee would lower the mandated margin rate to 25 percent from 27 percent in the 2014-15 fiscal year.
The mandated margin rate determines the percentage of gaming proceeds going into the Lottery Fund to pay for programs benefiting older Pennsylvanians.
That rate had been at least 30 percent of revenue from ticket sales but was lowered to 27 percent in 2008.
"As this commonwealth's population of older citizens continues to grow and demand for Lottery-funded programs increases, this industry must grow profits to satisfy that demand," Brubaker said in a statement. "By reducing the artificial margin mandate, the Lottery will have greater ability to fully meet this demand and maximize sales and profits at a time when additional revenues are needed to also meet the demand on our vital senior services and programs."
Over the last five years, consumer demand has continued to shift from high-margin terminal-based games to lower-margin instant lottery games, or scratch-off tickets. These games — specifically higher-price-point instant games — demand a much higher payout percentage, and therefore, deliver a lower profit margin for the Lottery.
The proposal, which has not been formally introduced, could drive up to $200 million in additional revenue over the next five years, Blake said. Pennsylvania is one of four states that have a minimal margin mandate.
In the last year, the lottery generated more than $1.1 billion in profit at a 27 percent margin.