Wisconsin Lottery proceeds for property taxes up

Jenny Price

Tuesday, June 13, 2000 | 11:12 a.m.

MADISON, Wis. - Tax credits to homeowners from the state lottery increased by $63 million from fiscal years 1997-1998 to 1998-1999 because of increased lottery sales sparked by high-profile, large jackpots, according to an audit released Monday.

Proceeds from lottery operations must be used to provide local property tax relief. The report from the Legislative Audit Bureau showed that tax credits to homeowners increased to $143 million in 1998-1999 compared to $80 million the previous year.

"I don't believe we've yet achieved the level of property tax relief that was envisioned when (the lottery) was created," said Rep. Carol Kelso, R-Green Bay, co-chairwoman of the Joint Legislative Audit Committee. "Hopefully, the lottery will continue to make gains as Wisconsin taxpayers are desperately in need of relief."

Wisconsin lottery sales were up in fiscal year 1998-1999 for the first time since 1995, an increase auditors attributed to jackpots such as the record $295.7 Powerball jackpot in July 1998. Sales increased from $418 million in fiscal 1997-1998 to $428 million in fiscal 1998-1999, the audit said.

But the audit warned that because lottery staff cannot control jackpot sizes, future sales for games such as Powerball and Wisconsin's Megabucks game may not continue at the same levels.

And sales of instant tickets have continued to decline from $252.9 million in 1997-1998 to $230.8 million in 1998-1999, the audit said.

Monday's audit also reported that state lottery officials agreed to reduced damages against a private company whose system for selling instant tickets and online lottery games failed.

Sen. Gary George, D-Milwaukee, who co-chairs the audit committee, called for a hearing on the settlement reached between the lottery and GTECH Corp., the world's leading lottery company.

GTECH implemented a computer system for the state to record instant ticket and on-line lottery sales, bill retailers, and generate sales reports.

But between June 1997 and January 1998, instant ticket validation did not work, invoices were not available for retailers and the hot line telephone number set up for retailer questions was unavailable.

Auditors said that given the volume of problems, lottery staff have found it difficult to determine the total amount of damages the state would assess, the audit said.

The state initially assessed $2.53 million in damages against GTECH based on the five-year contract the company won in 1996. A tentative settlement between the state and GTECH decreased the damages to $985,213, the audit said.

"I would like more answers than we had in this (audit) to get a better understanding of how they got down to that," amount said Kelso, one of two people who can call for hearings.

Lottery spokesman Andrew Bohage said the damages initially assessed against GTECH, based in West Greenwich, R.I., did not represent what the computer problems cost, rather what the state believed it could charge for its trouble under the contract.

Bohage and Steve White, a GTECH spokesman, said damages assessed were not meant to punish the company, but to compensate the state for problems retailers and consumers were forced to handle.

GTECH already has paid the lottery $235,200. Under the agreement, GTECH will make a $500,000 cash payment to the state when the settlement is completed and will provide the remaining $250,000 in goods and services, rather than cash.

The $250,000 will to benefit retailers, who were most directly affected by GTECH's problems, Bohage said. Lottery officials said they would bring a settlement plan before the audit committee and the Legislature's Joint Finance Committee by Sept. 1.