ALC-Lottery Oversight Subcommittee

Mr Hagler Former finance ministration office through a lottery Europe is to defy yourself. Thanks for the opportunity to be here today we appreciate your time I'll be brief but if I overlook anything that you see in the report that you have specific questions on if you just let me know I'll address those be happy to do so. I'd like to start by looking at the comparative income statements for July twenty two to July twenty one so it's a year over year look at look back and what we have here is if you notice revenues for July twenty two were fifty two million one hundred and seventy six thousand three hundred ninety two that was a nine point six percent increase. If you look just to two lines above that you'll see draw games and you'll see that the draw games between July twenty two in July twenty first of twenty one it was a hundred and eighteen percent increase and that's the I draw your attention to this because this is the importance of the large jackpots that we see from time to time although we can't predict when in the multi state games and so when you look at these numbers I'd like to tell you this this was all about using a shovel and down there and doing hard work but the reality of it is what we did use a shovel and do our work at hundred nineteen percent bump that you're looking at there was largely driven by the second largest jackpot mega millions history and we saw tremendous sales there's you'll see as I go through the additional information but you know if I would if I were sitting there looking and I saw hundred eighteen percent jump I'd kind of want to know what was the magic motion at that that cause that to happen in that quite frankly is what it was you'll also notice if you look the line above it instigating zeer was eleven point one percent drop part of that is due to the fact that when you have a large jackpot in a multi state game like that a lot of your players will shift they're playing so they'll take their instant expand and they'll put that over in the draw category so when I see the negative number on the on the instant games it's not something that terribly concerns me because I see with a hundred eighteen percent jump in draw games that's where it migrated to it certainly wasn't due to any any market rejection of those instigating. Looking at total operating expenses you'll see that we were higher year over year five point one percent. Any time you see large jackpots like that you're going to see also a lot of a lot of wins a lot of fallout wins you can see retailer commissions so as you look at those items up above that are in red draw game prizes retailer commissions and gaming contract cost those are all associated with that outsize jackpot as well so well we we earn more revenue off those tall jackpots we also incur more expenses as well and it's just an offset so there again those red numbers are not something that concern me but I wanted to ensure that you understood why those are what they are the income before transfers. It was ten million eight hundred thirty five thousand six hundred sixty one dollars and that was an increase of thirty two point four percent there again income before transfers so a lot of that was was driven by outside as mega millions sales but even if you back those out and you put up a more normalized number there we had really good months and and we saw good sell through across the portfolio but I think the number that's most important all of this is net proceeds and if you look at net proceeds year over year for the month of July you'll see that we had twelve million four hundred sixty five thousand nine hundred and seventy nine dollars a forty nine point five percent increase year over year now I will tell you and it was reported in the media that is the third highest months instance section of the lottery with regard to net proceeds and I think what that does is it. Personalizes the importance of our participation in these multi state games because although we can't predict when these outsiders jackpots are going to occur we certainly benefit when that wave does come upon us in in this instance for July of twenty two twelve twelve million dollar month largely made our year when you look at what our budget is you'll see that later on so here we are first month out of the year and and and at this point while we're just a little bit below budget we're right where you know we will take much more and everything's going to be. Great for a lot lack of a better word on on the net proceeds coming off of the mega millions sales. Looking at comparative income statements July twenty two actual versus budget so this is just a a look at what we expected in July of twenty two and what we actually produced in there again it'll be repetitive theme throughout my presentation here I'll try to keep that brief today but it'll be you know it's largely driven by that outsized making means jackpot if you look a hundred and twenty eight percent increase in draw game revenues for July of twenty two verses budget at total revenues we were up twenty three point two so you see that we were exceeding budget right now but there again when we set the budget we we do it mathematically and we kind of have a formula that we look at and it's not just throwing darts at the wall it looks tremendous right now it might beg the question will you gonna go back and re state your budget and and a man really we have that's not something that I favor and more importantly I think that we're riding off of that large outsize jackpot for mega million so we'll monitor that we understand that there may be a need to adjust going forward but we think we're right where we need to be and when you look over your over a year later on about two slides down you'll see why I think you'll see why that's my frame of mind that that I think the market will catch up with budget we expect to be budget that's that's that's the goal in by the same token I think you'll see performance come back closer to budget. Total operating expenses were higher at seventeen point one percent. Actual versus budget and there again that's just a function of retailer commissions draw game prizes and gaming contract costs so those are also associated with the outsize jackpot. If you look at income before transfers that's a number that's repetitive you see the ten million eight thirty five six sixty one that's fifty four point four percent over budget. Recognizing again we had a hundred nineteen percent increase in that in that draw game revenues so when you factor that in everything kind of comes back to the norm. You look at net proceeds there again twelve million four sixty five nine seventy nine that that's a that's an eye popping number that's your third largest number of since the inception as I mentioned earlier and that's ninety four point two percent above budget. Yes. Senator Rice you have questions I mean he can finish up I got a question of when he gets through. Okay. Turning to the Arkansas department of higher education transfer analysis you'll see that in July. Total net proceeds were twelve million four sixty five nine seventy nine. The total the twenty twenty three unclaimed prize is two hundred eighty six thousand five eighty two that's a number that at the end of the year will will flow back into net proceeds we care that is a separate itemized number throughout the year you'll see that what our budget for twenty twenty three was seven million nineteen thousand one hundred dollars so we are actually better than budget five million seven hundred and thirty three thousand four hundred sixty one dollars so that's that's certainly a position that we we like to be in. Next I'll turn to the comparative income statements this is fiscal year in June thirtieth twenty two compared to fiscal year twenty one now remember fiscal year twenty one was a record year for us and that was the pandemic driven year so when we look down at those numbers and we compare we see total revenues actual total revenues and physical twenty two was five hundred eighty million two hundred and thirty four thousand six hundred eighty four dollars and the actual in twenty one which again was the pandemic driven number was six hundred and thirty two million five hundred and seventy nine thousand eight hundred ninety four that's an eight point three percent drop but that was an eight point three percent drop in the throes of record inflation so again that's the number we're really proud of it we knew we would see a down draft off that pandemic number with the opening of the larger economy and the other entertainment venues and just a world catching up with itself and not being tied to the couch if you look at our year to date twenty two budget that was five hundred nine million two hundred six thousand so we beat budget last year by thirteen point nine five percent and I had been asked by several members of the media last year if we had intended to re state budget and I have explained why it was not our preference to do that and I think when you look at that and you see a thirteen point nine five beat on budget that's impressive that's a double digit B. by the same token that's that's fairly normal in any organization that's trying to generate five hundred and fifty to six hundred million dollars in revenue you need you're gonna be within a range when you get the numbers that big you can swing one way or the other four five percent pretty quick. Next slide is the department of finance and administration retailer lost debt set off an income tax we had no retailer losses we run a really tight credit program at the lottery that's not to say that we don't occasionally have to chase some folks down some retailers but by and large we we see really good cooperation and we're proud of that zero number the total debt set off for July of twenty two was seven thousand sixty seven dollars ninety five cents the total since inception is two million two hundred sixty three thousand five hundred and sixty six dollars and thirteen cents. If you look at the income tax withheld for the month of July twenty two total federal and state combined were one million eighty four thousand eight hundred and forty three dollars since inception total income tax withheld is a hundred and fifty six million three hundred ninety eight thousand four hundred ninety nine dollars and I think the number that might jump off the page at you that that you'd want to circle is how much of that is state income tax and if you look one line up you'll see that since inception that's thirty three million seven hundred ninety one thousand and thirty dollars so that's you know that's an added benefit provided by lottery that a lot of times I think it's overlooked. The next couple of slides are retail sales by county and and I know each of you represent districts and and your your eyes will probably immediately fall down to those to those areas but I can tell you that the top five is in it this is for the month of July twenty two of the top performing County was Pulaski second top performing County was Washington the third top performing County was Benton the fourth top performing County was Craighead and the fifth top performing counting was Jeff's. And in the end it's pretty insightful if you look down through there and you'll see we break this out by games and you've got instant games cash three cash for Powerball mega millions natural state jackpot lucky for life fast play and then the total so if you're wondering what players in your district or are are buying you can look and that's a that's an actual representation of what we're seeing in sell through in your district. Representative actor. Stop in yes. I mean Mr Ragland yes the representative brown has a question yes thank you Mr chair of. I just want to clarify the definitions. What are transfers transfers are net income transferred over to the Arkansas department of higher education's trust fund so it's the scholarship trust fund okay and So that so that you cover all your operating expenses then before you have a transfer What about these unclaimed. In a sense unclaimed prizes unclaimed help how long does a person have to claim it rise it depends on the game and so the game will have a set of game rules and generally that's done we do it on an annualized basis so whatever goes into unclaimed prizes unclaimed prizes or or drawing down once the game goes out of market it was the amount of prizes in that game that were not one so when you're selling tickets you're not going to sell all the tickets that have prizes so once the game closes out in games close out at different times but once they close out we do the we do the calculation And we figure out how to those unsold packs how much in game prize was not claimed and we we carry that is a line item and then at the end of the year we pour that over the net proceeds which is what fund scholarships well if I have a ticket a winning ticket and I don't claim I see this confusion terms here if I don't claim my prize how long do I have to claim it. I mean you have to set aside money it's six months okay and then one other definition here what is a set off a set off is it a date set off so if they come in and they when let's say five hundred dollars and we run this through a data bank to see whether or not the old bag sample child support and if they two hundred dollars in child support we literally withhold the two hundred dollars from the five hundred dollar winning still get three hundred instead of five hundred and will pay two hundred over the child support enforcement and then the income taxes withheld that's withheld from a person's winning that's correct yes ma'am thank you my pleasure. I'll see the slide that I currently have on the screen is retail sales totals all counties and this is for them the month of July of twenty two and you'll see this is the fifty four million ninety four thousand two hundred and fifty one dollars and what we've done here is we've broken this out mind game. We changed our reporting a little bit we're going to so again and I'm always open to suggestions so if anybody is not getting information that you'd like to get it through these reports were happy to provide that but one of the things that we wanted to do is I've been here now two years as we wanted to look back and see and put ourselves in your shoes and say what information are we not reporting that we would want to know if we were sitting in those chairs and and of course that's a guess for us because we're not in your chairs and we're biased because we work in run the lottery but by the same token it occurred to us that you might like to see when we when we do total sales you might like to see which of these games are providing that revenue and so this chart is designed to do just that so if you look at the MM that's mega millions and you'll see that outside is nine million nine hundred ninety four thousand one hundred thirty nine dollars that's that July number the popular hundred eighteen percent that's the second highest jackpot in mega millions history so courses were very strong sales and so that was a big driver on delivering that fifty four million number at the box. The next one is the interlock minority firms report. And this is provided by our vendor interlock and this is this is a running total that they have with regard to the minority business firms that they utilize and I I've confessed to an air scientific games one of our other vendors also provided a document that is in your hard copy package but it didn't make the slide deck this this month it will next month and then also in your packet you'll see that the lottery had no expenses on minority businesses this last month. But we also had that submitted in your packet but it did not make the slide deck in again that's that was our and next month you will see that. For the next item on the screen is the request from the division of higher education for expense reimbursement in the amount of one million seven hundred twenty two thousand nine hundred ninety five dollars and thirty one cents. In the breakdown for that figure provided by the Arkansas department of higher education is on your screen now. Those are not numbers we generate those are generated by the Arkansas department of higher education we simply report those numbers to you as part of our statutory obligation. The next. So what is on your screen now the Arkansas department of higher education FY twenty two expense detail again those numbers were provided by the Arkansas department of higher education it's part of a reporting obligation. And then the next slide on your screen is the term contracts which were entered into during the month of July for twenty twenty two your first one that you know there is a scientific games contract that allows us to use the family tickets called Betty Boop which is a trademarked type of ticket. That that license cost us one dollar it simply is a legal mechanism that protects their trademark but allows us to issue these tickets that are in the Betty Boop family it's just one of the much like we do monopoly but we did enter into that contract it's a two year contract for one dollar it's perpetual and if we continue to issue Betty Boop tickets we can continue on the one dollars nominal consideration I'm not even sure the one dollars ever exchanged at that it is but that's what it is then the second one that you will see on the list as a contracted lottery entered into a Trojan sports properties that is the University of Arkansas at little rock's athletic department and we entered into a three year contract with them where we we go out and do promo activation at the baseball games in their basketball games it whenever they have big events out there we get promotional area where we can pitch our tents and we advertise to scholarships we advertise the sale of lottery tickets at the sporting events in we we find that it's a real hand in glove proposition because there recipients of the scholarship funds most lot of the students that attend there are attending on lottery scholarship in we think it's a it's it's a nice it's a nice partnership between a lottery and some of the area universities we do it with other universities as well but in the month of July we signed a contract with UALR. You'll notice the third one was the Arkansas state fair we entered into a contract with the Arkansas state fair for one year the amount of that contract was forty seven thousand five hundred dollars but what we get from that is as we get a presence right at the entry of the fair and we get to put up our big awnings and we get the literally promoter tickets and sell tickets and we don't just sell tickets we also provide information around how you can apply for the scholarship what those dates are and those are just as she handout and then we also have games that are not related to purchasing a lottery ticket you can win a T. shirt or you can win a hat or a Uzi or a backpack or any number of things and again it's just an opportunity for a lottery to market to the community at large the Arkansas state fair had seen real attrition I think over the last couple years due to pandemic and we we found great value in that we think a lot of folks are going to get out want to get back out to the fair and we thought that that was a good opportunity we expect to see sales generated far in excess of the forty seven thousand five hundred dollars that that that we spend so we thank we thank the benefit will outweigh the expense or we would not have done it. If you look at the next slide this is our demographic breakdown of the lottery we have a total of sixty seven employees right now that's down from I believe in twenty fourteen there were ninety three employees of the lottery when the lotteries commission was eliminated and lottery was placed under the aegis of the department of finance and administration there were a lot of duplications and and in in jobs in that resulted in a in a reduction I will tell you I believe when I joined there were sixty four sixty five and we've created a couple of jobs that I believe were necessary and primarily because the risk control and when you're running a business that's trying to generate five hundred and fifty to six hundred million dollars risk control should always be at the front your mind especially when you're in the gaming business because you know it's it's the old adage I I can't remember which gangster said It but they said why do you rob banks the side because that's where the money is and so when you're the lottery risk management has to be at the forefront of your mind and so we created a couple extra positions at the lottery that are essentially security and risk management positions and as a lottery grows I think that's where you'll see some you'll see some further growth it's going to be important to make sure that we stay out front of risk because all the good things and benefits that are generated by by the lottery in the form scholarships could easily be lost through one catastrophic risk event so you know if you ask us it lottery what keeps you up at night it's fear that somehow the lottery is going to be put at risk and so we really really watch that it's my personal background in the corporate world is risk management it's near and dear to my heart we're also really proud if you look at the diversity of the lottery on that chart I think that's probably second to none in any state agency we're we're very very proud of the fact that we strive to hire the very best people without barrier and and I think that's reflected in the numbers. And then the last slide that I have for you today is an internal audit report this is the audit of our beneficiary trust fund so this is our internal auditor's report he went in and looked at the at that the trust fund that holds those scholarship funds to make sure and I think kind of to the point of an earlier question to make sure that all the money that is supposed to be deposited into that account for benefits scholarships actually made its way there you will note that we flew through that with absolutely no recommendations and no finding that's a real testament to the lottery's finance department which Mister Fetzer here my chief fiscal officer supervises and if that's not an easy accomplishment because when you're when you're trying to when you're trying to herd five hundred and fifty million cats it can be rough but but we did we do a great job of that and I think this internal audit report is reflective of that that's the end of my slide deck but I'll answer any questions that you have and I have other members of my executive staff here today so if there's something that I can answer hopefully one of them can you know that and we will try to be as responsive today as we can without need for follow up but if there is a need for follow up I'm certainly willing to provide what you need. Thank you. Representative ray you're recognized. Thank you Mr chairman Mr Hagler you said a lot of things that piqued my interest one of which was that I found it interesting that Betty Boop is still thank. I did I wasn't aware that either sorry. what. Sorry I think I'm offended representative back my apologies as well as you pointed out that the The amount of income tax that has been paid into the state through lottery sales I'm curious do you do you know if lottery winnings are taxed as ordinary income or they taxed at a at a special rate I believe it's ordinary income okay all right the second thing that I thought was interesting was the debt set off the you mentioned for child support are there other categories that are set off and do you have Can you run through a list of those or can you provide a list of those I'm curious to know really we've got that right here okay so what you have there on that set off is any tax owed to the state of Arkansas which would be to the department of finance and administration I think I've got the chart up there now you'll notice that we we look we do a tax Grubbs what we refer to it as kind of a just a vernacular term but attacks grew up in any of the winners to come in that taxes we'll see that and we capture that income and pay that back to the state of Arkansas so by example in July of twenty two out of all the people who came in and claim the winnings of over five hundred dollars because that's where this scrub is triggered it we collected five thousand sixty seven dollars and ninety five cents which doesn't seem like a lot for a month but then when you look at the total since inception we've actually recaptured you know one million five hundred ninety two thousand one hundred twenty one dollars and fifty four cents so that's income tax that otherwise was owed in doing that would continue to float out there but when you win the lottery and you wanna come get your your claim we pull that back. Okay so it's child support and assume it's income tax correctness of use in anything yes category okay It back I believe it was in the June meeting when there was debate about extending the contract on the consultant I had asked if the agency had I'm a believer five year business plan looking forward and I ask through BLR for that to be sent to me I recall that yes yes Sir so the the plan that was sent to me was a plan. From twenty sixteen to twenty twenty one correct which is is good retro actively but do you just does the agency have a five year plan going forward from twenty twenty two going forward we we have a draft that we're working with that I think I also mentioned during the June meeting the pandemic year for with F. threw us off and so what you saw in twenty one essentially became twenty two so now in twenty three is where we're working on the next five year plan It was an unusual circumstance when I joined the lottery in August of twenty twenty we were already in the pandemic and so it's a five year plan and it was consistent with what you're seeing in the private sector as well nobody knew how to do how do you do a five year plan when you're in a historic pandemic that no one's ever seen before it's like the black plague you really don't know what the future holds we are now starting to see normalization so to your point what we started to do now is put together that plan and we do it we're under a little bit of an emergency internally because are term contracts for both our instant agenda in our central gaming agenda run in twenty twenty six and you might say well we're only in twenty twenty to seems like you have quite a bit of time the world moves very fast and when you're talking about term contracts it will have to live with for a number of years it's important that you have a clear view of the future before you execute those contracts so we are working on that I can give you a draft it's won't make much sense yet but I can assure you that once we get to December and that's our internal goal is we would like to have a fresh five year plan we have in our head we talk about in our meetings we have not committed that to writing we have utilized the commercial consultant that was extended in June is part and parcel of that to help us drive that process more from a framework standpoint we believe that those that are employed at the lottery should ultimately be held accountable for that plan and and have to execute on that plan so you know state employees at the lottery at the executive level will be drafting the actual plan but we do use the commercial consultant for purposes of research so if we say what are peer lotteries tire size predicting over the next five years what are their plans look like not that we want dove tailing follow but we certainly want to look at our peer group to see how they look at the future and see we may have a different opinion and if so will justify that in the five year plan or maybe something unique to Arkansas. Our unique to our portfolio of games that's different than the peer group I'm happy to provide that to you yeah I would like to see the what you're working on and also so it sounds like the lottery staff is developing the five year plan and the consultants being used in a supportive role that's correct answers so the the plan that you sent me the twenty sixteen to twenty twenty one plan was that developed by the lottery staff as well or was that developed by the consultant I wasn't there but but but my understanding is is that plan was a combined combination of ever but I don't know how much I can't speak to the level of involvement or who was driving that process I wasn't there so I don't know what I do know is is when I came in one of the things that I was that I was set on was is I believe that yeah those that that are on staff at the executive level of the lottery are are are responsible for executing the plan and so I didn't want to run into a scenario where someone said well I didn't come up with that I can I knew that that was impossible but that's what the commercial consultant said we should do and so I try to take that accountability in push that down to our level and say the commercial consultant is there to help you drive the process is there to help you with your research but ultimately the plan has to be yours and you have to own okay I got you the last thing I want to ask you about it and I'm sorry this is taking so long you put up I noticed that you keep Copious stats on the racial makeup of the employees at the lottery my question is do you do you have any data or give me survey research that shows the the racial statistics or break down of law lottery players. I don't think we did I I I I will I don't want to tell you know and I'll certainly go back and check and if we do I'll provide that to be a large for forwarding to you but I don't think we do nothing that I've seen insurers I tell you that and try to speak with certainty someone's gonna say we absolutely have that so let me go back and check it's nothing I've seen if you could check to be great I'd like okay now thank you absolutely. Senator Rapert you're recognized. Thank you Mr of Mr Ragland touching on on the report you had on the local advertising I'm spoiling the commercial consultants one that does definitely all the overall lottery promotion on this local aspect you're talking about that that the Trojans sports properties in the in the Arkansas livestock shows that something I recommend is it something that locals have come to the requesting or where the debt justification come from we we receive a reach out from the various universities asking us if that's something we're interested in doing we we started my understanding is the lottery began that that process with the university in Fayetteville and then expanded that out to include the university in Jonesborough it has since been expanded since I've been there too the university of central Arkansas in Conway we we are in discussions with the university in pine bluff as well we have begun to let you know our goal is to to move to to rotate that money around you'll always have to the you know the bigger institutions we think that makes sense they they that's you know they're they're followed statewide lot of the scholarship dollars go to those universities and and we see a lot of a lot of loyalty from people who were educated on a lottery scholarship actually coming back and playing lottery not so much to talk to winning huge jackpot but they feel like they're doing a little bit of a give back but really it's it's of them reaching out to us and and and also value waiting what the prospect is around that doesn't make good business sense because we do operate essentially as a business but we also or state agency and we recognize that you know we we want to be good community partners as well and when you're taking money from a certain part of the state to. Fund scholarships you certainly want to give some of that money back and I think that's reflected when you look at the if the monthly sales and you see where you know Washington County university Pulaski's first The Washington County second and counties third Craighead County Arkansas state is fourth Jefferson County is fifth so it I don't think we set out to to to kind of follow that that formula's but the reality is is even as you work through the business decision that seems to be kinda where where the chips fall. And I'm what I call is in direct advertising return a minute there's never a shortage the business having people come in and I will give you the opportunity you know when I went basically I feel like I'm donating most of it in the they're still incorrect can come back out of it but I I just want to is there a single are you the person that makes a determination or does your commercial a consultant help in that are are it's just a local it our advertising director actually man who's actually present here today is the one who is in direct contact with the universities this is a one person decision yours no no Sir she she's it she's the primary contact and so what she does is she she visits with them and pulls together the packet of what they're looking for and what kind of value proposition they could offer such as what types of promotional events are you going to have is a university that you would allow us to participate in and then once that's done we have an executive management committee and that is all of the division directors of the lottery and myself in so there's seven of us total there on that committee and we discussed at the McCollum the M. C. meeting we discussed at the EMC meeting the pros and the cons and and and and you know it's not a softball meeting I mean I always like to say that quoting al Davis the late raider football coach and owner when he used to say son these are easy because our practices are harder than anything we'll see on Sunday and so we we get in those meetings and shut the door and really get after each other I guess at the end of the day when they say do we want to do this or not I go around the room and kind of figure out who's on board and who's not listen to their their rationales but at the end of the day if there's one person that has to make that decision of that would be me to but one of senator John is is the the forty seven thousand five hundred for the fair I understand if this is the first time I've been in. If you report back in the future Committee how that the returns came back in if you're talking about that your goal is to sell tickets at that actually would be would be happy to do it I have to say that was kind of a flyer that's a test when we felt like with the fair having been constricted for the last twenty four months and what they did is they came in I hope you don't mind me saying this but they offered us a package they sell packages and they offered us a package at a reduced rate with the idea that we have done this years ago prior to my arrival and they had seen grants to great success in partnering up with the lottery and are thought was what's the foot drop through there on average what are they expecting as far as attendance and so when we when we kind of crunch the numbers and look at it from a business perspective we thought we we think we can we think on forty seven thousand five hundred dollars spent we'll see more benefit from that then if we put that money somewhere else so I will report back yesterday okay thank you thank you Mr. Representative back you're recognized. Thank you Mr chair of I want to take this back a little bit to the Department of higher ed expense detail. So. The salaries are the R. three hundred to two thousand and then it looks like related costs to those salaries is another hundred thirty one thousand right so the head how does that compare with terms of dollars of scholarships granted. Could the university hired obviously has a lot of different scholarships that they put out there how does that does sorry or is this just a part of their overall salary are these actually positions that are dedicated to the lottery end of saw how does that how does that dollar for dollar those sound salaries compared to actually Dollars are scholarships numbers are the these are not numbers generated by the lottery we simply report these numbers that the of the Department of higher education who I believe are present here today would be better better in a better position to address that and we would we we really don't know how those numbers are determined that's on their side of the house. So we don't know we're just as statutorily required to reimburse and so these are the numbers they've requested be reimbursed pursuant to the statute. We don't have the detail behind the number that's not within our aegis that would be on their side they're audited separately from us on that I guess that would be Maybe they will do that offline all right thank you. The representative Richmond you're recognized. Thank you Mr chairman Mr thank you for taking time in providing the inform the brief I appreciate that I do have a couple questions I believe you guys your office anyways been working on some updates concerning the retailer licensing rules yes and and has has a governor had an opportunity to see a draft of that in the second part of my question is can we expect to see a draft bills rules say at the next meeting you absolutely will have them well before the next meeting Sir the the administrative rules the operational rules and the retailer rules had had been ad hoc amended between nine and current and there had never been a flush through and so when you look at the rules a lot of the rule spoke in terms of the commission and any retailer was denied a licensee could appeal to the commission will there have been no commission for the last five years and seven years and so we we would we'll as I started to look at it we we have we started having need to revise individual rooms and and when we looked at that it occurred to me again risk management is my background is you know there's great risk in continuing to do ad hoc Amendment of these rules we are long enough in the two thirteen years we need to just re re fresh the rules from eight Izzy and so what we did is we began researching that process and we realized it that we should do it simultaneously we should do all three sets rules because they inter relate so certain rules will relate to the reference another set of rules that I reference another set of rules and so our thought was instead of doing this one and then second and third was dorm all and will present as a package and so where we're at right now in the process is is we have completed our our edits and revisions and when we reached out to learn the process of doing this because nobody the lottery's ever done for these rules that been amended in thirteen years we were. Edged out the bay alarm they very very graciously kind of coached us and what was needed in one of the things that we found out was needed was a needed a markup which makes sense as a lawyer I'm used to using markups when I'm comparing documents and so we worked internally to prepare that mark up that was kind of an after the fact thing because we just did our editing and didn't really think about that we should've we didn't and and and when we were at the we were at the one yard line and the individual the lottery who was responsible for the marked up document became ill and was out on on leave and so that pushed us back two weeks we have since found a another state agency appear agency who is willing to assist us in the last little bit of markup that we need before we could submit the revised proposed rules to the governor. And and when we proposed to the governor we've been told well that's that's a very going to be a very short turnaround and you're going to we are going to have it it's that we suggest or we're going to tell you to go back and start over which I don't think would happen but once we receive that back from the governor with his approval then we publish for thirty days for public comment and once we publish then we're certainly you know that the the world's on notice and it'll be able to see all of the rule revisions but what I can tell you is if you'd like to look at a set of those rule and that should be that process should be completed by the end of the week is for submission to the governor and then is quickly as his office can turn that around we'll be publishing straight away but if you'd like to see an early version of those rules were happy to provide that to you won't have the markup document it would just be the new set of rules but if you'd rather wait a week and get the market document with that for compared purposes we can do that to whatever the body politics preferences were happy to comply. I would prefer the way we can get the the marked up version of this and have the whole thing if the if you could provide this committee that information I appreciate it absolutely will do so for bill are yes Sir thank you Sir. Are there any more questions from the members. Thank you very much thank you very much for your time. Next we got a report from a Arkansas department of higher education. Show introduce yourself Preciado yes Sir good afternoon Mister chair members committee Maria Markham director the Division of higher education and I have a sister director for finance Mr Nick fuller here as well. We have several exhibits to present to you today exhibit C. one of is the report on the status of the academic challenge students for fiscal year twenty twenty two I would point out that this report is only for current status of students as whether they maintain their eligibility at the end of spring twenty twenty two semester we have reports in October and in December that finalizes status of those students for the fall term so there will be more information coming at those meetings. And we have several charts one is for all students. And one is for our first time entering cohort I would point out that we had a decline in enrollment and expenditures due to the covered pandemic and that was that tracks pretty well are expenditures with our statewide enrollment decline. But I'm happy to take any questions on that. He said. You will have a question. Seeing the. Okay great exhibit C. two is our report on the status of the workforce challenge students for fiscal year twenty twenty two and this is the current status of all students who received a workforce challenge award in the fiscal year year ended June thirtieth twenty twenty two we had about a forty student decline which again is reflective of the decline enrollment. however our awarded students are percentage of declined words was consistent we saw in the previous academic year. I'm happy to take any questions on that one as well. Representative ray you're recognized. Thank you Mr chairman your doctor Markham I'm sure this is somewhere in here and I'm just this is the first time I'm looking at it but can you remind me what is the breakdown between the percentage between academic challenge and workforce challenge. A yes there's a resemblance this is terms of where the where the funding goes or how many recipients or and sure so exhibit one and two what one is the academic challenge to is workforce challenge you know see that the on the academic challenge we serve our rounds between traditional and nontraditional it looks like we have around forty thirty five thousand. Twenty six thousand students who participated in a academic challenge on workforce challenge we are below seven hundred so we had our six hundred eighty four awarded students in fiscal year twenty twenty two. Thank you yes. Do you. On this chart here. Regular salaries how many people reserve involved for this will speak to your question and two representatives thanks question of this chart was provided by and lottery and that came from us so the regular salaries fund all of our financial aid of positions at division of higher education both for lottery scholarships and our general revenue funded scholarships I believe have six seven seven now full time employees who administer all state scholarships for the state. Okay one more what about the professional fees that looks really high I don't know anything about that but yes the so much it was abnormally high we developed a new scholarship application portal in management system in the last year we're almost finished with that project so that is the fees that were required to develop that new system we have the universal scholarship portal that we had had for fifteen years I suppose it was just built on really all technology was time to to upgrade that. Thank you for. It in more of sorry Senator Hickey you're recognized hello just just one and if you said this I was off the side of the conversation and I ask the server every year I guess compared to last time where was that. We really don't have a comparison until October because we still have about half of our academic challenge students you have until October to provide all of their eligibility documentation on the the expense reimbursement yes it's about a million dollars more okay it was around seven hundred thousand in prior year in a million dollars it was for the scholarship application for oral development was where that increase came from. Otherwise the expenses were so that was online with a previous years all in professional fees yes Sir okay. And I thought I thought we can add an agreement that that we put these comparisons on paper over every year I think we had that discussion last time and we said we were going to do it Sir I apologize I didn't get that together and send it to the committee okay to get back to the office this week so I guess we need to probably put that legislation or something of staffed and if they don't mind because I specifically member asking that last year so I know that's a simple thing but I just I think that it's you know looking ahead two three four five years out whenever somebody's not sitting down here that remembers it be good to have those comparisons thank you yes Sir. Representative gene you're recognized. I mean representative changed. Thank you I have a question on the Regular salaries you said that was for financial aid yes ma'am now is that just for the scholarships we're talking about or is it across the board for all financial way. All of that that's all we have in our financial aid department at higher ed we have seven full time employees and that's all they do is administered this state scholarships okay is that charge back through the lottery yes that's not reflected in higher its budget that is the lottery okay well budget but they reimburse us for those expenses okay so that is only for lottery scholarship financial aid no that is for all scholarships interesting yes and I'm gonna have that I'll I'll have that comparison for you in the next exhibit so you can see how those break those breakdowns so will it also shows doesn't that take away from scholarships using all of this in salaries. Yes it is it is part of our administrative expenses for the lottery scholarship and that's higher than the scholarships. No ma'am is that it is not higher than this because we we wore last year we ordered seventy five million dollars in academic challenge scholarships okay for the state and yes just in the lottery academic challenge lottery funds and the salaries do not take away from that we've not turn anyone down. For receiving a lottery in the past year so we're not reducing the amount we award students that the sellers all right thank you. Senator Hammer you're recognized. Sir. Thank. Thank you a I think I've asked you this before I'm just not sure if it's representing this paperwork we've got legislation was passed several sessions ago that the student ended the first semester with zero credit hours that they would not be awarded the second half of their scholarship fund which is that accounted for as to how much that amounts to are we tracking that. We can get that information for you we don't have it yet that would be something that you it would be accounted for in the if you look at the second page of the the first document using the C. one the the first year student two thousand twenty cohort. The students listed on the drop column. There's a total of three eighty four of those those are first time award students that have been dropped within the first year. You see they they attempted. One hours and earn point one is an average overall for those. What what's the dollar value that's the two hundred and twenty one thousand dollars seven hundred fifty dollars. Okay that's that's turned back in where I forgot it goes back in back to the. Lottery had that just gets recycled through I make its return to lottery right are there any of his paid out because they don't get that second half that they they did not get the award for the spring semester stating it paid out again that's the amount that was paid for the fall semester okay when they were in attendance and refresh my memory just a school this is school get that money from the first half of the ward then Page through tuition or money Act money ends up with schools is that correct yes that the school will receive the money for that first semester but then they send us back the roster of students they had zero hours in December so they will not receive funds in the spring for that student. Okay but they they did receive scholarship funds in the in the fall semester and and I know that if I remember right you'll have some responsibility to track students as far as our success and are you are you seeing the needle move on that any or I'm just you know you get the money as the universities but if they're dropping at first semester because they don't have any of it finished enough credit hours to be able to could get the second half of the money what what is being done to try to increase that or improve that. Can you refer me state your question I'm sorry I I did not follow so the universities get the money in order make sure the students state in. And and have success in their first year. But if the number indicates that there are percentage students in order to make it through the first year but the universities are getting that money because it's a scholarship that ultimately is page yield to correct thank you the institutions get the money for the first semester yes while the students are enrolled in credit hours okay but then they wouldn't get it the second semester because the students didn't maintain their eligibility right but let me have an offline conversation because what I want to know is if you all get the money. They're supposed to be successful in the first year but they're not. But we're not able to recoup the money from the student because the money ended up with you all correct with the with the higher ed institutions with the institution right okay so I think what I'm I want to look at is drawing a correlation between the schools there to get the money but the students are being successful the first semester dropping out what we'll we'll talk off line on that okay thank you. Any other questions. I do have one more just came to my my my order for students. drops out in the first semester let's say half of the first semester have the. How was very Gillian that's probably the scenario you're saying with a lot of the students as they enroll in a full fifteen hours they get halfway through the semester and they withdrawal so they didn't complete anything but the the students whether they're on scholarship or not they're responsible for paying the full tuition and fees for that semester so it stays within the institution. Thank you you're welcome Any other questions. Okay you're recognized going give you reviews okay thank you moving on to the exhibit D. one and D. two I think that will answer some of the questions that we had related to a staffing for our scholarship programs and what our spend has been on scholarships but the one of its report on expenditures deposits and balances of higher education grant funds and the net proceeds trust fund that support financially programs for fiscal year twenty twenty two. Of the first chart will show you that in twenty twenty two we had approximately seventy five million dollars in lottery expenditures for academic challenge you can add to that about three million dollars for concurrent challenge and a million and a half or so for workforce challenge so roughly eighty million dollars in lottery funds went toward student scholarships on the next page our actual expenditures for general revenue related scholarships was almost fifty eight million dollars so those two numbers together around a hundred and hundred thirty million dollars of in between G. R. ends lottery funds go to support. students fellowships. And then I do you want me to go ahead and explain due to and then if there are questions that are related to either. Okay go ahead okay at exhibit due to a again it's just the expense detail for the operations of finding our financial aid department and how those are funded so with the exception of the new application portal and management system those have been flat we have seven full time employees that administer all both lottery and general revenue related scholarships for the state. So I'm happy to take any questions about this as well. Okay Senator Pitsch you're recognized thank you my question kind of relates to the part of the one exhibit the one you gave us the dropouts the declined all that. But I think it might be interesting maybe it goes to senator Hammer question is offline discussion what's the retention rate that's tied to each of these scholarships because they were not generates on the scholarship well per scholarship I mean for giving a scholarship and it's based on the ACT or merit or whatever it's just something they bring from R. G. R. fund or from lottery but you've you've now brought this into two will. Whatever that is ten twelve things they're of different scholarships do we have retention rates that are tied higher or lower to certain scholarships and if so maybe we ought to look at that. Incoming we can definitely get that for all that information because of my gut instinct is that it's a different requirement for each of the scholarships my second gut instinct is some of a performing a much higher rate. And I would think higher ed universities having been out for six years I know we want to know what the performance as per world first. It has been several years since we conducted that analysis but it is something that we have done before so we can provide that. Senator Hammer you're recognized. Thank you Mr I want take one more run the question and yes. So we'll use the illustration first semester three hundred thousand is given out to students. And they get to the end of first semester they have accumulated in the hours therefore they don't get the second semester of three hundred thousand that first three hundred thousand. Stays with the university because it's paid to the university is that correct yes that's correct okay and and so I guess the question I would have heard the subject and maybe this will go to senator pitches request to and that is the accountability for the three hundred thousand that went to the universities that didn't track the students or didn't do what and I understand you can only do so much for somebody so it's got to be personally responsible and things happen death and families and all that stuff. That's what I want to drill down on is because universities got three hundred thousand dollars. And there was no investment in the classroom or there is no investment somewhere that those kids weren't successful getting through that that's what I want to drill down on and I think may that ties in my second question is on on the one with the landscape with with the the fact that we're going to get up a new dental school it looks like adventure late do you have any input thoughts or comments about the amount of expenditures are going out certainly bills and how do you see that changing or competing for a piece of fire so yes once we have a dental school established in Arkansas we will no longer pay out of state dental aid so that revenue will be available for other health education grants so we can up the amount that we have available for veterinary or any of these other programs or we could move it into our our other general scholarship funds so what if the ark what if what if in our kitchen can't get in our dental school but they could get in a dental school out of state is is that just the way the law is written yes that's correct so once we status at school the door closes for anybody that's correct and that is how we've handled our osteopathic of the others the others yes as we have brought in state institutions online the out of state support has been rededicated to other programs okay is that both dental aid and dental loans those two numbers combined yes that's correct how do you go about determine what other programs are gonna get that money out how what's the process that we would look at demand we would like a demand for the other scholarships and there are several of our scholarships that we are over spending of our military dependent scholarship we deficit spend into our fund balance almost every year our governor's scholars program historically we overspent that as well so having that additional revenue available that allows cashless member of the scholarships okay you know more. Lively okay thank you. Representative Ladyman you're recognized thank you Mr chairman of direct market my this is kind of changing the subject and see it in here but do you all track how these scholarships are dispensed throughout the state like the U. of a versus the issue is you L. R. yeah I don't see that in here but it's not in here but that is data that we have and we can provide that for you I'd be interested to see how it's distributed throughout the state and and love the large universities versus smaller schools be interesting yes we can we can provide that we know how much we spend the number of students by institution we can break it down that way. Thank you okay. Members there any other questions. Okay thank you very much thank you. There's no other business. In the journal.