Tenn. lottery chief recommends bigger prizes to grow scholarships

Amber McDowell

Wednesday, Sept. 10, 2003 | 9:29 a.m.

NASHVILLE, Tenn. -- Keeping lottery prizes big is the best way to raise more money for Tennessee students, the state's new lottery chief said Tuesday.

Rebecca Paul, speaking to reporters a day after being named CEO of the state's new lottery, said she already has contacted several legislators about changing the lottery statute so that officials have the flexibility to maximize prizes -- and generate the most ticket sales.

Currently, lottery law says 30 percent of net proceeds must go to college scholarships and a minimum of 50 percent to prizes. In year two, the amount dictated for scholarships increases to 35 percent -- which would likely mean less money for prizes.

"You don't educate children with percentages, you educate children with dollars," Paul said. "If you look at the models that raise the most dollars ... they tend to be states with much, much higher prize payouts."

Paul, who is resigning as Georgia lottery director after 10 years to lead startup of the games here, said the Tennessee lottery must put about 54 percent of net proceeds toward prize payouts to be competitive with surrounding states. That's the same amount Georgia averaged last year, she said.

"If what you care about is raising dollars, then that needs to be looked at," she said. "If what you care about is percentages, then you're not going to make as much money."

The chief sponsors of the lottery legislation in the General Assembly, Rep. Chris Newton, R-Benton, and Sen. Steve Cohen, D-Memphis, said they are willing to consider Paul's proposal.

"I'd rather have 30 percent of a larger number than 35 percent of a smaller one," Newton said. "... It makes common business sense to a great degree."

Cohen said because of Paul's "experience in competing with other states, that may be a smart move to increase our sales and increase our scholarships."

Beginning next year, a Tennessee student who graduates from high school with a B average or a 19 ACT college exam score could be eligible for a lottery scholarship. The law spells out a maximum award of $3,000 per year for students at four-year public or private schools in Tennessee and $1,500 at two-year community colleges.

Before meeting with reporters Tuesday, Paul spent the morning developing requests for proposals for major lottery vendors and planned to interview a candidate for the vice president of human resources position in the afternoon -- things she said "needed to be done yesterday."

When Paul officially joins the Tennessee lottery -- which she says will be no later than Oct. 1 -- she will continue as the highest-paid lottery CEO in the country with a compensation package that could reach $752,500. That includes a base salary of $350,000, with hefty incentives based on three conditions: Tennessee's lottery must be up and running by Feb. 17, it must be online 60 days after that and must reach $122 million in net revenues in her first year.