ALC-Lottery Oversight Subcommittee

You must Walters said and will call me in order. I does the board because you're talking Senator Hickey to add to be aboard. I called this meeting to order of the Ilsley lottery oversight subcommittee. I'll ask if my culture has any comments to make. No comments thank you okay. All right we're going to review the Arkansas lottery directors report exhibit be. We take a few would introduce yourself for the record Sir you're recognized could see again. Thank you Mr at the pleasure to be here we thank everybody for their time here today we haven't been before you for some period in there some new faces I'd like to just very briefly introduce some senior members of my staff that I have present here today these are names that you'll hear over time these are key up senior managers at the lottery so I have with me today mark Kern who is our director of sales. Stand up please stand up or thank you. Mark has been with the lottery since its inception Mike Smith is our director of gaming. Chad Miller is our internal auditor. And Jerry Fetzer is our chief fiscal officer. Turning to the reported hand. We're reporting on the month of may twenty twenty three and I'll call moved through the the power point presentation and then address any questions that you may have but I'm willing to address questions along the way as well so feel free to fire away. To begin looking at the comparative income statements for may of twenty three verses may of twenty two so this is a year over year measure of performance. Total revenues were up four point five percent in may of twenty twenty three was booked fifty million three hundred nineteen thousand two hundred thirty seven dollars compared to forty eight million and change the previous year for the month of may you'll also noted on net proceeds that was an increase of fourteen point eight percent in the month of may versus the previous may so there can we have a very nice performing may and and we contributed quite a bit to our net proceeds fund in the lottery Trust Fund. If we look at may twenty three were actual versus budget I'm not gonna spend any real time on this unless you have specific questions I can just assure you that that that we have the budget and all categories this year up substantially and I explained to this subcommittee last year of our process behind establishing the FY twenty three budget and how we came to those numbers we used a very similar approach setting our budget for FY twenty four however I believe going through FY twenty four you will see budget more closely aligned with actual performance we believe we've had enough time now post pandemic to to have a reset if you will of where the trend lines are so we're more comfortable now forecasting whereas before we were we were is uncertain as the rest of the world as to how how the retail environment was going to look after the pandemic and I think now we see that and and and we're we're moving accordingly so it's there if you have questions on the budget when I I'm happy to answer otherwise I'd I'd rather move forward so that I have time to entertain any questions that you may have. My next flight is comparative income statements year to date may thirty first twenty twenty three verses may thirty first twenty twenty two so again we're looking at a a year to date snapshot comparing last year to this year. You'll notice that total revenues are up five percent. And that proceeds are up fourteen point six percent so there again that's a positive trends and in both lines and that's that's what we're looking for our goal is to maximize net proceeds obviously we'd like to have healthy and robust sales but more important to us as the amount of money raised for scholarships so that's that's the key metric for us going forward and one that will always report and give you collar around. The next what is the year to date may thirty one twenty twenty three actual versus budget again I won't spend any time on this other than to tell you that were well above budget thirteen point six percent total revenues twenty six point one percent and net proceeds. Eighty H. transfer announces. If you look at twenty twenty three net proceeds through the month of may twenty twenty three the total is ninety seven million eight hundred and seventy eight thousand six hundred and fifty six. That that's that's a key number because if you look at that ninety seven point eight that's with. A month left to go and and so you know ninety seven point eight in previous years would have been a number we would have happily up signed off on is a total figures so the fact that we're now starting to see and expect to see net proceeds at the hundred million mark is a significant advancement for the lottery and and should give you some comfort. Lottery scholarship trust account as you see there. The beginning balance of a hundred fifty two million and change versus fiscal year June thirtieth twenty twenty three no that's with the year to date may twenty twenty three so this number will actually change the one ninety two million but if you look at that that's a forty million dollar uplift. and that's a net proceeds so there again it's something that we keep a close eye on we want to make sure that we always have sufficient funds available to fund the scholarships. The unclaimed prizes we described before Helen claim prizes work unclaimed prizes or prizes that were not wanting games that have been closed out we reserve those throughout the year and then at the end of the year any amount remaining in that unclaimed prize fund is transferred over the net proceeds so if you see there the reserve balance as of may thirty first twenty twenty three nine million eight hundred and sixty two thousand five hundred twenty six dollars and eighty four cents that will transfer over to net proceeds at the end of the year. A retailer lost that set off an income tax I have I get asked periodically is to you know how do you handle the taxes of the lottery and how do you handle the situation if somebody goes taxes and that's exactly why we do the DFA scrub and so this report in this slide tells you exactly what we've done in may of twenty three and then there's also a total since inception so if you look at the top center numbers you're looking at Arkansas that set off department of finance and administration you've got the monthly number of eleven thousand six fifty eight twenty six and then the total since inception is one point seven million and change the office of child support enforcement which we also do a scrub against one thousand nine hundred and thirty four dollars in the month of may twenty three but I think the total since inception is really the key figure there that six hundred eighty two thousand dollars nine hundred twenty eight that that would not have been collected in back child support had we not done the script so we're pretty satisfied that describe that we're doing is working in achieving its intended purpose you look at income taxes withheld those are actual taxes that we withhold that there may be more taxes paid on those winnings away from us but that's the amount that we withhold. We had no request from the Arkansas department of higher education for the month of may twenty twenty three regarding any transfers. This is retail sales by counting. This is an interesting. This is a this is a set of metrics that I look at because this this number is consistent but it changes so we we always try to track I do a look at the top five counties by sales and and you can going quite a bit from that when you look at it but you have to look at it over a continuum of time and you'll see how these counties will actually rotate around you it's interesting to go and find out what's actually happening in those areas or an economic driver that's causing that is there a new industry that's moved into the area is housing increasing its debt it it's interesting but if you look at this month ranked by county Pulaski County as usual top the sales list and their percentage of total sales was twenty point two percent. Craighead county was second four point three percent Washington County third four point two percent Benton County fourth three point eight percent in Faulkner County rounds out the top five with three point five percent of total sales. To give you an idea of how those sales break down across the across the state. The instant and fast play games. Report here sets out the games that that we launched in may of twenty twenty three. We had a really good sell through on the on these games we we we launch virtually every month and it's always interesting to see when you see excellent traction verses less than excellent traction and and what's going on in in in the in the retail market we had a good month and we're seeing good sell through an as those games season and market we think that will continue to see good sell through throughout the summer. The minority report is included herein as well these are our vendors that we do business with that are minority owned. We executed to contracts during the month of may that we are seeking approval one was just an extension so I don't know the approvals needed but I did want to alert you to it none the less and that is our our contract with the bank because the K. they are the lotteries bank of record and have been for some time we did open that up to other vendors two years ago and Bancos de que was the prevailing institution we have two extensions were executing one of those extensions now that's a no cost contract by the way so they're at it's absolutely revenue neutral. The second contract was the advertising and marketing contract though we did a and R. F. P. for this contract as opposed to an or if Q. my understanding although I'm no expert the R. if Q. does not consider pricing is a consideration when you're selecting a vendor but in our if he does a previously it I wasn't I wasn't in my position so I can't speak to the granular but previously the advertising and marketing contract was bid out as an or if Q. with price not a consideration. From my and my executive teams evaluation we came to believe that when you have multiple vendors that are equally qualified or or closing qualification price should be a consideration and and we're price perhaps shouldn't be a consideration would be or someone has some unique software or service or hardware minutes exclusive the lottery and and they're the only vendor or maybe there's two vendors things of that nature but we believe that we should open that up more broadly and we launched that as an R. F. P. we had More responses to that or if P. then the lottery is had in years past in that process was completed through the office of state procurement C. J. R. W. was the the the winning applicant and that is a three year contract that we are seeking permission to sign with two one year extensions. the total contract value. The initial contract of three years total value of the contract is twenty million one hundred seventy one thousand six hundred and twenty five dollars if the two year extensions were. Were were triggered the total value of the contract will be thirty three million six hundred nineteen thousand three hundred and seventy five dollars One thing that I think it's important to point out is when you look at that number you it's it's a spend but it's a necessary spend so we're in the retail environment we compete so advertising is important by the same token internally the executive management committee at the lottery you know we always want to see because some proof of the results so we're always looking for what did it do to move the needle. So in FY twenty one bag sample the lottery had an advertising marketing budget of eight million dollars in FY twenty one that was a pandemic year but that was also a hot water year for the lottery six hundred and thirty one point seven million dollars in revenue and a hundred and six point I believe four million and net proceeds so that was a high water mark so the eight million dollar advertising spend obviously. You know was not is highlighted but the next year in FY twenty two we were faced with uncertainty and I came before the subcommittee and stated then that we believe that the world could go either way and that as such we wanted to move very cautiously and we believe that it will perhaps a bit of a retrace it was merited as opposed to leaning into the win with the uncertainty that was prevalent so in FY twenty two we reduce the advertising and marketing budget to seven point two million. So we cut it from eight million seven point two and we wanted to see what would that do to our sales. And and and we did see some downdraft in sales and we saw slight downdraft in the proceeds but it wasn't as manageable as what we had expected to state so then that drew into question more broadly What where is the value around the advertising spend we started to rethink the way we were looking at things so in FY twenty three we had two new initiatives we have the Arkansas and state draw game Lotto which is the Arkansas lottery games that we launched and it's been very successful and we also had our enhanced mobile lap coming and so when we looked at that we thought well let's cut the spend down again and let's just see because when you're when you're trending well and you're and you've got numbers that are on the uptick that's when you can move some of the levers and and take some chances so we thought let's reduce the advertising budget slightly and see what that does to sales and net proceeds and see if we found a new normal so we reduced the amount to six point seven million in FY twenty three. That's our current fiscal year. When we will be booking record net proceeds we expect never speak absolute still to done but we expect we expected book record net proceeds in FY twenty three our revenue should come in as the second highest revenue in lottery history so you look at this and you're starting to see there is value in advertising but you want to make sure that your spend is the correct you're not overspending you're not understand so we think we're right at that point where we've got a nice balance right now we're trending very nicely on total sales were trending very nicely and net proceeds and we've slightly down drafted on our marquee expense any expense that we encourage the lottery because we're self funded service to impact net proceeds negatively so anywhere we can save money that's a direct benefit to scholarships so there are for FY twenty four. You know there are are to two significant reductions that you would see in our budget that will a nor positively net proceeds and one is the contract with the commercial consultant Camelot has expired that contract over the last two years has been carried at one point five million dollars annually so that is a savings that will go to net proceeds and then also any reduction these reductions in the advertising and marketing budget also wondered the benefit of net proceeds as well That being said I will tell you that we are a we were we were thankful for the the work offered and the guidance provided by Camelot we appreciate their service over the eight years that they served as consultants with the Arkansas lottery we're eager to see what our performance looks like going forward and and we believe that that we've learned our a we've learned our lessons well and that we can do this on our own we're gonna try. I also want to thank CJ R. W. for their past performance I intend to do that whether they were the successful that are not in the subsequent contract we feel like they've done an excellent job as well and they've been a good partner to us. I would entertain any questions on those contracts and Mr perhaps it's appropriate for me to offer that now or if you'd rather I wait I'll do that as well I've got one the. Fits requested the. Recognition. Senator Hammer. Thank you Mr on on the contract and maybe set up missed it you'll put out for request for proposal how many other bidders were there on the advertising contract. I believe and I and I don't have the exact number in front of me but there were in effect in excess of five original and I believe for actually made it into the queue I know that Mr Armstrong is here and could probably address any of the questions regarding how that state procurement procedure work he would have that information more than I would share your income the table sure Hillman which are from. If you would Sir please introduce yourself for the record and you're recognized. At thank you at to the chairs and the honorable members of the subcommittee I'm at Armstrong I'm with the office of state procurement. Your term thank you Mr and and what I will is just an extension or is this a new. My understanding is that this contract that you're talking about it was just talking about is a new contract as the result of a request for proposals okay I just wanna make sure that so there were there were four five other bidders B. sides of this company and that this one came out on top right that's my understanding that after the value waiters considered all of the qualifications in the various aspects of the proposals and then price was considered and factored in that it was awarded to the president was ranked or the entity in this case you Jr W. ranked the highest in what was the next closest dollar bid or do you have the GM there front and I'm I do not have in front of I can say that to you right now I can send an email to somebody and ask them to send that. If you don't mind Mr Senate you and Senate committee in our property which in the staff staff presented in our committee absolutely thank you for that be Kathy Schmidt or a different set for. Right hello Brandon Mr Smith I'll send that to you okay can I ask another one Mr while you're on thank you So dollar for dollar and everything factored in what what's your final score that was given a number that was given or just talk about the process of how you landed with them. As executive. As executive director I did not participate in the process it was a staff member senior staff at the lottery Mr Smith miss making that and Mr Hearn were on the ranking ten I have Mr Smith and Mr Hearn here today and they can address that more directly than I I felt like as executive director I didn't need to be anywhere near that according to the office of state procurement they agreed and said that would be inappropriate so okay with with the chair of the incoming president if you don't mind I don't mind. Since the General if you would please leave should introduced after the record I am Mike Smith the Director of gaming at the Arkansas lottery. I am more concerned under director of sales for the Arkansas lottery. We wish thank you could you just explain the process for how you have it just so there's of an explanation of the fairness of how you have it at this vendor. Sure there were the proposals were put in and they were evaluated based on technical score interviews and then our pricing was looked at and on the pricing did up the weighted value for each one of those three categories of which are thirty three and a third or what what was the break out as far as how you rated or waited. I don't remember the breakout of the score but I don't think they were equally weighted. Okay but. So dollar for dollar value for value this is this is what you include it's going to be the best for us and was it a pretty bright was a pretty broad gap between this one and whoever was second best. I know the successful bidder C. G. R. W. had the highest technical score and the lowest cost and I think there might have been equal on the interview scores okay all right thank you for that thank you Mr thank you. The representative Cavenaugh. Thank you Mr chair also going to ask about the contract the contract what does it actually covers that cover creative doesn't cover media by asking you can talk a little bit what the actual contract covers absolutely it it does cover all of the above so by way of example of media buying production promotions of all of the the pen appellee of things that a traditional agency of record what offer they offer less including social media support of digital placement media buying services things of that nature all of Mister chair sure at do you have an idea what the cost per body is contract let me look and see. I don't have the cost of by per se I do have the media placement commission for the previous R. if Q. verses the new R. F. P. which I think is pretty insightful the previous R. if Q. the commission paid by the lottery for media placement was thirteen percent and under the new R. F. P. at seven point five percent so there was a considerable amount of savings there and again I think that that in numbers to the benefit of having pricing including into the full consideration of the successful bidder which is hence why we went or if he is post or if you. One more follow up Mr one more. Do you it was the same provider last time to the R. if Q. versus our if pay correct that's correct any reasoning why the commission's went down that percentage point to the art of pay. I can't I can't tell you other than the sharpening of the pan when prices a consideration I mean that's what I would logically conclude is if you know you're going to be graded and prices inclusive of the of the total decision then you're going to sharpen the pencil okay thank you. Senator Hickey. Thank you Mr chair of maybe for staff and then to what re referred I hate per staff on the spot like this but I want to make sure whatever we review this contract and we're hearing that it's about supposedly in this first fiscal year something like six point seven million are we are we just reviewing the six point seven for that year or we reviewing the twenty million or we reviewing the whole seven year at thirty three six thirty three million six nineteen. Can someone staff. Tell me that because I was I was thinking whatever we review this that it is at that in that the entire amount. I'm asking that question because I need to know that before I. Your review the twenty million okay so we're remit. So although it's so the any extensions would have to come before us is that correct so although they've got a mutually agreed for the additional two years. Yes after after the three years those two would have to come before us okay yes so that kind of clarifies that here's my next question and I heard what you said in the in this coming fiscal year that it was going to be the six point seven. Is it your intention or is that within the and I do appreciate you doing are if the by the way instead of argue that I really appreciate that so and I know what you're going to miss not your intention but is there whatever we review this are we just saying that it's going to be six point seven the first year six point seven the second year and six point seven the third year or do you all have or could you all have the discretion. In the second year to go up to more than the six point seven in the third to go down to a lesser amount. Senator we we intend to look at it on a yearly basis and and so it a lot of what we're going to spend under that contract would be dependent on what are intended activities were for the year so by way of example if we're launching a new game or if there's and I'm talking not of instigating before launching into draw game or there's been a development of the drug game we might spend more that year and then another year where we don't have anything special to to circle around so the six point seven year one I think is that you know clearly we have a a plan for that we have a a rough plan of where we think that that spend would would take place going into the second year obviously we'll be looking at FY twenty force performance to help inform us as to how we should and in the subsequent years okay so what are your state your tell me it's not your intention I don't guess but from my standpoint I would never want let's just say in your to. If the if if you also management changes at the lottery for whatever reason that we don't have somebody in here that in your to just burst out the remaining thirteen million because that would not come before this body to be reviewed right so. Is it jobs intent to keep it at six point seven or less per year for those three years is that some type of statement that you can make that a bill record in here that that would be the intent and obviously if we change that I think we're my goal during my tenure here has been to be completely transparent with the subcommittee because I believe full information leads to the best decisions so obviously we would be back before you to explain what or why and give you the business case around that. Okay we'll make it was staff just to make a hundred percent sure because that is one thing we whenever we review these contracts you know again. We're reviewing total amounts and things like that but I think it was this body's intention whenever we hear this and see that in this coming fiscal year is six point seven that is somewhere around that in the second year in somewhere around that in the third year absolutely I guess if there was an extraordinary type thing where you saw well in your to you needed to go to ten million I would assume and expect that that would come before the body so that it be fully disclosed and come back to rail C. but I would agree with that senator because we would obviously attached that to some business need okay thank you Sir thank you. Okay good the representative eleven. Thank you Mr Jagger Graduations on the performance the lottery doing very well I service chair of the house Education Committee on this committee as well as the committee on higher education so I have a very vested interest in the solvency of our scholarship opportunities for our Kansans retail space is very competitive. competing for discretionary spending has always been competitive and in somewhat of a volatile. Kanemi that we're N. with record inflation it would seem that the competition for those discretionary dollars would even be at an all time high. So. While I. Reshaped you're forward thinking I am concerned that it would seem at a time when we are operating very well. That in knowing where we are with the economy now would be the time that I would think that we would really poor on the marketing and promotion efforts to capture is much more of that discretionary spending because if our economy were in the coming months to decline I would think we would need to build up as much reserves we could so. It concerns me that we're cutting back to close to a million dollars in marketing and promotion. Going into the next budget as opposed to. At least remaining constant with that marketing spend to try to capture the discretionary those discretionary funds do you do you not just just not see it that way. I I don't I think when consumers are constricted in their budget they're spending nationally ships around we see that we saw that during the pandemic we believe the during the pandemic that sales would fall off a cliff we saw the exact opposite with the closure of other alternative entertainment venues lottery became the only game in town council why anyone. You know with with you know previous for cyclists that will that's inconsistent with how I would have seen that and so that but that's what we saw and so that's why we started and after FY twenty one we have been slowly reducing our ad spend almost as a beta test just to see what impact that would have on sales but advertising will not increase consumer budget so we can throw money at advertising but if consumers are suffering inflation so necessities are costing more their discretionary income is going to be less regardless of whether we advertise or not and you know one of the things that that that you know always have to remind my team of his. One of our mission statement is to maximize net proceeds in a responsible manner and I've been I've said before I think a lot of times people overlook that were responsible the lottery was never designed to sell as many lottery tickets as click it was designed to sell lottery tickets to maximize net proceeds in a responsible manner and I think that that that's really what allows some people to to cross the Rubicon if you will in play lottery where they will not engage in other other forms of game so you know when you look at at the reduction that we're doing on the ad budget it's material it actually drops to the bottom line by the same token if we saw a complete downdraft and sales obviously we're going to adjust the dials and but but but we we get a lot of you know our advertising department through our vendors receive a lot information about where consumers are spending and what they're responding to and so we can always dial that back up but but the idea is is in tough economic times were no different than any other business we have to reduce our expenses just like all of us have had to do in our home budgets resembling and so we expect consumers will do the same thing And as our guide we we we look to Dr Silva we we look to DFA we look to this that we look to the national economists we look to national sentiment as well and and and we do monitor that so you know spends go up and down I think interestingly enough the trend in the lottery industry is for reduction in traditional advertising you know everybody is moving more and more towards a digital round social media and what's known as earned advertised which doesn't require spend on your part so you know we're trying to find new and novel ways to advertise the lottery and expose lottery without actually engaging in the traditional span because we're cognizant of the fact that every. Dollar we spend is one dollar less that's available for scholarships and I understand that in advertising when you invest in advertising the goal is is if you spend a dollar that's going to return let's say a multiple of that so maybe three times your dollar that you spend on advertising that that would be beneficial advertising but but even in that scenario there's a point of inflection so there's a point on the on the curve where you can continue to spend in advertising and marketing but you will have no more sales you or simply burning money we've learned on my part is is and also as we expand scholarship opportunities through legislation and in the recent General Assembly adding some additional pools of people that will be eligible scholarships and I know that did you just mention the presence of digital gaming an app on your phone what. Do you have any projections on how that could affect the retailers he was a look through the report and I see the revenue generated by the retailers never County that that's just you know that's. That's commerce back in our districts. What projection do you have as far as a reduction in sales at the retail space that will move over to the digital space don't don't have a figure for that because Arkansas doesn't really compare Apples to apples with many other states we have a we have a broadband problem in Arkansas so we've got a lot of consumers and still don't have the ability to engage in digital commerce if you will and if they do it's limited in its body or they have to drive into town so brick and mortar is what the lottery was built on some lotteries The New or lotteries may if if eventually exist and they would be built off and I lottery type platform from inception we were not were brick and mortar that that's our bread and butter they're very important to us we have Next week we have a meeting of our retail advisory board and will be meeting with you know members of the retail advisory board who are brick and mortar retailers and and and we're working collaboratively with them so as we move forward there's chances for cross promotion and we're actually beginning to do that now so some of our brick and mortar retailers are are cross marketing on our app in our app is referring over to them so you are seeing a hand in glove. The fifth thank you senator Hammer. Along that line I I don't see in the report maybe it's in here but the number total number of record more outlets that you have I know there's up I got my story straight there's a pretty major change the just sold all their gas stations they did not have a lottery now they're all in the in the new stores so do you have a total number of outlets two thousand sixteen and that does include the big red outlets that are converting to circle K. yeah okay so two thousand sixteen is the total number are we are we seeing the increase I mean that that's a pretty big block that went into the question yes but are we seeing the brick and mortar numbers keep going up are they dropping their static in its and and brick and mortar is an interesting player right now on the C. store and fuel space you're seeing you're seeing consolidation Sir a lot of the independence or rolling up into these larger chains and now we're beginning to see change take out additional chains so the the retail landscape is changing diametrically right now in front of us up by way of example big red being an excellent example a regional who was purchased by a national and we're seeing more and more that but importantly we're seeing the next leg up we're seeing national chains purchase other national chains no we've seen this before the C. store space. Where where the wind up and then they'll one line but right now the wind up process is what we're seeing so the total number of retailers may may shrink you know it in North America at large but I think it's just a change of the foot print and and not. Nothing that would that's keeping us awake at night we're not seeing C. stores are fuel centers just absolutely go away okay thank you. Going back to your advertising I remember a home of the marketing advertising majored in it one time coca Cola was the largest advertiser in America the young executive came to the CEO said you know we're relation after advertising money he said yes Sir I know that with your shall be which fifty percent is will eliminate and sometimes harder to identify the representative back to in. Thank you chairman I want to follow up on representative eleven point about the online can't that lottery if you could you have someone in your budget where you have the how much revenue is actually coming from online I didn't see it in the in the presentation online is it is it is an interesting term we we don't have a lottery so on online games are are drawn games so we sell instigating switcher scratch offs and then the draw games which we refer to as online some people confuse that euphemistically I'm not saying you did but but the I lotteries online and and it was just an early term that was adopted that's unfortunate because it can create some some confusion right now what we're training as Arkansas was launched as an instant ticket state currently you know although it may change up or down one or two percentage points a month we tend to trend around eighty four percent instant. And the remainder is draw now importantly this year was unique we we had in our draw games in the multi state record games Powerball and mega millions we had significant jackpots that work on her up and they were so close in time that it drove sales so none of the three of us are going to sit here and tell you that all this performance was a direct result of something that we do we like to think we've contributed and we provided the platform to together that revenue but by the same token really when you see who's spending on drawing spending on instance its jackpot driven so if power ball is you know a billion dollars then obviously a lot of our instant players will migrate their spend over to draw it in in our world we refer to draw as is you know it's an online there are no physical card you get a ticket that's printed out of the machine so thank you. Senator Tucker. Thank you Mr chair and my question was really per perfectly aligned with representative Madeleine and. Is there an out I heard you I didn't think there was an app but I maybe missed this my first time on the subcommittee so I'm asking a bunch of dumb questions but I don't believe there was uh lottery purchases on or or gaming on an album am I wrong about that actually you're correct there are no lottery ticket purchases on the lottery at so what you can get on our app is you can enter our players club which has our second chance club in our points for prizes club and you can also download your place lips now that was part of the enhanced app that we did this last year on the other thing you can do now on the enhanced apps you can check your tickets to see if you're a winner not you don't actually have to get the car in travel to a retailer you can just check at your house and if it's a winner then you get the Kerr and go to the retailer but we we don't have an app where you can purchase tickets online now is we have to entities right now that that sell on their apps as well everyone is Jett pocket and the other as Lotto dot com they to the work that's not a lottery what they do is they have traditional lottery terminals just like our brick and mortar retailers and in fact they are required to operate a brick and mortar outlet in Arkansas under our rules so for these entities that operate apps where you can purchase tickets through the app they have to be they have to be affiliated with a licensed retailer here in Arkansas and we we forced each of them to set up their own retailer and that's how we regulate them indirectly in which you do in those instances is is you go on their app and you purchase a ticket they print that ticket out right there off of our terminal in there look in their brick and mortar location they then send a digital picture of that ticket to the player the the physical ticket is placed in a safe and their location and held in safekeeping for the player if the player wins then obviously they can come collect the ticket or they'll send them the tech but it's still for. As local ticket a lottery is is a scenario where you literally would go on and purchase your tickets online and a representative eleven is a point I think that's would be the concern for brick and mortar and and and there are some strategies around that in other states have been successful in in in in making sure that it was a win win win proposition and I wish your both of the trade groups of for the retailers that we deal with a fuel and and grocers that you know we think it's only appropriate if the lottery made the decision that we wanted to come out and and and we wanted to support a lottery that brick and mortar retailers should be in that conversation they should be at that table that's only the right thing to do so that would be you know our current situation we don't sell online we were for everybody off to our retailers to purchase tickets but our our mobile app acts as a conduit for communications to the to the digital piece I believe that was asked about earlier. Of course I'm sensitive to the retailer's but I'm curious if if you all have explored. You know going tolerate more or or digital format as well just given the nature of the world that we live in today we talk about the pandemic in the effect on the retail market something that you could get it do on your phone is certainly pandemic proof and you know other forms of gaming whether it's Serra center south when you know they have their own base they still have obviously brick and mortar locations in the state but they have a mobile gaming to with an app and and so I yeah I'm I'm stunned I don't want to be insensitive the retailers at all obviously they've. Have skin in the game but I'm just curious if you've explored that moving into the future in order to generate new revenue as representive Evans said we have more pools of students who gonna be eligible for lottery would love to grow revenue if we can and if that's something you've you explore or what the status of that might be absolutely Senator Tucker we we we study it frequently we talk about it every Wednesday at our executive management committee meetings it's been on our radar for for at least the last three years a we do believe that is it is a I will be a future necessity but but I think when you look at a state such as Arkansas and and we've got a lottery now that's fourteen years old that's fairly nascent in the lottery world so we're still relatively young we we we have to be delivered in our moves and it there again I think we want to be responsible and arm so when you when you move into an I. lottery environment you're changing your world and is a risk manager my world changes diametrically at that point because you're essentially operating an online bank at that at that point I mean you're you're literally cashing tickets you're sending money everything's taking place through the internet and and that creates I have a year left from a security perspective a Respers Bective and and more importantly that I keep going back to it but I think it's only fair I think that to introduce that it it it benefits all parties if brick and mortar is in that conversation because there are ways for them to benefit from that but that's only possible if they're at the table. Hi Tucker you point back on. Internal. Good. You want to. J. Richard. Thanks very much we appreciate your time okay that's the in conversation. Sure you point your. Did did we have a motion review those contract is not. I'm not for sure do we have to have a motion review good you need a motion to. We haven't heard the saying. We haven't even done on your. Proposing. It will be one. Thank you. They're saying we haven't done the one T. one. The two. Mr can you refer me more directly to what do you want constitutes I don't have that marked on my documents. Bring to the. you over. Yes ma'am thank you. I think I've got this figured out now okay thank you very much We did execute or seeking authorization to execute a contract with the the University of Arkansas we've done this in years past this is a promotional partnership where the Arkansas scholarship lottery becomes when the featured advertisers at the university of Arkansas sporting events they also give us opportunities to promote the lottery and and our games and other venues as well contract is four eighty three thousand dollars it covers one year we have done this partnership in years past the U. of a importantly is our largest beneficiary institution and we believe they have a national brand and and it's certainly statewide brand we believe that the value that's provided by by contracting with them engaging in the sponsorship certainly produces the intended benefits and we believe that it's a value at. Any questions. No concern or question we Consider this review. You can. We jump around quite a bit of phone trouble questions did you cover your proposed twenty twenty four budget in your presentation. I did not but I'm prepared to do so. I know we we we joke around with the laws of questions or. So the FY twenty four budget that that that we have put together Is. In years in for FY twenty three we took kind of an amalgam of of production numbers and we did that because we were trying to find a hybrid number that we believe was indicative of a reasonable range for performance two years outside of the pandemic the FY twenty four budget was was produced in a more traditional fashion it was literally more linear thank you would do if you're looking year over year over year so for FY twenty twenty four budget our total operating revenues are forecasted at five hundred and sixty seven million nine hundred and twenty two thousand. Total operating expenses of four hundred seventy million a hundred eighty three thousand. Income before transfers of a hundred million seven hundred twenty three thousand in total transfers to the ADHD of a hundred million seven hundred thousand. That is the most aggressive budget that the lottery has ever put out in its history we're actually forecasting a hundred million dollars and net proceeds for the first time no we've achieve that and twenty one we we came very very close and twenty two we will exceeded and twenty three and we believe that it is entirely reasonable to expect to do that FY twenty four. Any questions on proposed budget. If the the Mr. Senator Hammer yes maybe your explanation just. Lamplight toward others when I'm looking at traffic your your proposed budget following the right sheet proposed budget for twenty three twenty four it's going to be. Four hundred seventy million one eighty three is that correct that is the instantaneous I'm sorry that's what instant ticket revenue. You have ninety seven point nine three zero an online ticket revenue which is our drug games. Less promotions discount and then retailer application and binding fees of six hundred and forty thousand other revenue of two thousand for total operating revenues of five hundred and sixty seven million nine hundred twenty two. The actual cost operate. The. Water is what four hundred and seventy million five hundred eighty three thousand is our forecast okay and that and that's coming in less than twenty one twenty two but greater than twenty two twenty three that's correct and and why is that well because we're we're anticipating higher sales but with those sales come expenses got to show your your budgets when we talk about I think budget in this world and when you talk about budget you're talking about the your including the total increase of sales that go with it that's correct we're self funded so that's how we look at it okay all right thank you Mr any other questions. But Sir back up staff has said that we do need a motion on these the contractor review so this go back to the one on the of tier two contract the. Icky. You. Contract the one. Second. All in favor say aye. All closely no. Okay on the two on Cranford Johnson would contract into you'll stay to. I make a motion that we review contract granted Johnson under the two. Her second. We're all in favor say aye All opposed. Okay we'll figure we through new. I believe so much. We just ran week of lot of new folks here they don't understand and it's not a problem the law we got everything covered up I appreciate everything you do you're always very clear and from with what what we do I will tell committee one thing that that we will try to sometime maybe in September the to your house and and we'll set it up through staff and and the some of the folks the there will be handling it so look forward to doing that and and and kind of see how the lottery really works so outstanding thank you Sir. No other questions we are adjourned.