North Carolina's lottery sales have tumbled since July, and the game's director predicts that -- under the best scenario -- the lottery will generate $75 million less for education than projected in the current state budget.

The sales of numbers games, such as Powerball and Cash 5, are up slightly since July, but scratch-and-win ticket sales have plummeted. Scratch, or instant, tickets are supposed to provide the growth in lotteries nationally. But in North Carolina, sales shrank from $52 million in July to $38 million in November.

"We are not on track at this point," said Tom Shaheen, the lottery's executive director.

Shaheen said he has no clear explanation for the downturn but he theorized that sales could suffer because consumers are spending more on gas, there has been no big Powerball jackpot to drive up playing, and North Carolina placed a lower limit on prize money than other states.

N.C. law also sharply limits the amount of money the lottery can spend on advertising and prohibits the ads from encouraging people to play.

"It has often been the case that the sales do go down a little bit" in the first months of a lottery, said Charles Clotfelter, a Duke University economics and law professor and a published expert on lotteries. "There's an initial blush of excitement, and sometimes they go down. That's the kind of circumstance that leads legislators to go back to the lottery agency and say, 'You're not being aggressive enough.' That's something we might anticipate."

Key state legislators expect to meet soon to examine the lottery's results so far and whether its guidelines need to be adjusted.

Success still stressed

Shaheen emphasized that the lottery is still "hugely successful" with a revenue stream of nearly $1 million per day for education that didn't exist a year ago.

Lottery executives have taken leftover money from the agency's operations budget to award more prizes in hopes of enticing more players.

State officials likely will have to drain the $50 million reserve created to cover shortfalls in lottery revenue this year. They also can use an extra $13 million produced because the game started several weeks before the beginning of the fiscal year, July 1.

Even adding that funding, however, would not cover the $425 million in education spending that the lottery is supposed to finance.

"It's something we warned lawmakers about for years that seems to have come to fruition very quickly. The revenue from the lottery is unreliable," said John Rustin, lobbyist for the Family Policy Council in Raleigh, which opposed the lottery.

Lottery proponents in the General Assembly pushed the state-sponsored gambling through as a fundraiser for education and wrote into the lottery law that 35 percent of proceeds will be funneled to pre-kindergarten, more teachers, scholarships and school construction.

Shaheen warned legislators when he signed on as director, though, that their budgeted projection was too high. They forecast about $1.2 billion in sales during the first full year, which translates into $425 million for education. The Lottery Commission last summer adopted a more modest projection of around $1.1 billion in sales.

But even that figure isn't holding up, Shaheen said last week. He now says the lottery could do $1 billion in business by June 30, the fiscal year's end. That works out to $350 million for education - $75 million less than lawmakers included in the budget.

It also would require a boon in sales in the coming months. To reach $1 billion for the year, it would have to sell $560 million in January through June.

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