Even as players lined up across North Carolina last week to drop their dollars on chances at a big Powerball jackpot, officials acknowledged the new state lottery has a $200 million problem.

Overall sales for the games' first fiscal year are expected to miss the goal by at least that much, adding significant financial pressure to education programs that the lottery was created in 2005 to support.

With half the fiscal year over, officials have blamed lower-than-expected sales on months of small Powerball prizes, high gas prices, a tight economy -- even the chemical fire in suburban Apex last year.

"It's up to the people now," lottery director Tom Shaheen said in an interview. "It really is. And they're either going to play or they're not going to play."

It is clear, after nine months of sales, that North Carolinians are not buying tickets at the rate people do in other states with lotteries, a review by The News & Observer shows.

To be sure, players have spent more than $700 million on the lottery in North Carolina since it launched March 30.

But compared with players in the Southeast and across the nation, people here are not trying their luck. Per capita sales of scratch-off instant tickets, the sales leader for any lottery, are less than half of those sales in South Carolina and Georgia, for example. Overall sales have declined steadily from month to month, even as new games have been offered.

Although lottery officials mostly cite economic reasons for slow sales, an analysis of state and national lottery data by The N&O shows a more fundamental issue at play: By several key measures, when compared with adjoining lottery states or those with comparable sales or population, the North Carolina lottery has a weaker foundation.

The N&O's review shows there are fewer outlets here, lower prize amounts and lagging interest in Western North Carolina.

Other factors include criticism over how lottery proceeds will be spent and scandals that have surrounded the games' start.

"Cumulatively, it [all] has served to take the wind out of the sails," said John L. Rustin, a lobbyist for the N.C. Family Policy Council, which opposed the games.

Gov. Mike Easley championed the lottery even before he took office in 2001 to pay for some of his favorite education efforts. Polls showed widespread support for starting the lottery.

Easley pushed for the games on a pledge that they would support an existing day-care program for at-risk 4-year-olds, called More at Four; pay for more teachers to keep class sizes small; supplement college scholarships for the needy; and help with school construction across the state.

His office predicted sales of $1.2 billion in the first year. But because of slower sales, Shaheen said, $1 billion is the new target.

The shortfall will be felt. Instead of returning $425 million to education in the first year, the lottery is expected to bring in closer to $350 million for those efforts.

Legislators and the Easley administration haven't outlined how they will deal with the shortfall.

"It's too early to panic," said Dan Gerlach, Easley's senior budget adviser.

N.C. prizes, outlets lag

It is difficult to pinpoint why sales are off the mark. Lottery officials mostly cite economic reasons.

Shaheen said, though, he is surprised at how poor sales have been. Lottery play in other states has generally been solid. This month in Georgia, for instance, officials trumpeted another period of record growth. Tennessee did, too. Ohio's lottery just posted a 5 percent gain.

Shaheen, a past president of the national lottery association, said North Carolinians seem to be spending instead on heating bills, groceries, new cars, cell phones and more. Lottery tickets are discretionary dollars, he said: "A lot of 'em have gone to cell phones."

North Carolina's lottery is new, and experts in the industry say it should be given time to grow. Any comparisons should take into account that other states have had time to build a player base and experiment with the types of games offered.

But something else is happening here. Consider:

* Instead of 7,000 retail outlets by now, or as many as 10,000 (Shaheen once said that could be the maximum), North Carolina has signed up about 5,800 sellers. Outlets per resident is a ratio tracked in the lottery industry.

Although more outlets wouldn't automatically mean more sales -- extra stores might just spread it around -- the number of outlets for every resident in North Carolina trails what is seen in neighboring and similar lottery states.

And it is significantly behind the saturation levels of the nation's best-selling lottery states.

Shaheen said he has been focused on the retailers that signed on when the lottery began and has not focused on recruiting retailers. He plans to soon, he said.

* The state pays less in prizes than others and doesn't have room to add much more without legislative action.

Legislators mandated that 35 percent of sales must go to education. After administrative expenses and commissions to retailers, about 52 percent of sales goes to prizes.

Other states devote more to prize payouts, many at more than 60 percent of sales.

Big prizes would help

South Carolina's lottery director, Ernie Passailaigue, wanted to run the lottery here and said he told officials in his job interview that the percentage mandate was a constraint. He maintains that offering more in prizes would boost sales and generate more money for education.

"If the players aren't winning something, they stop playing," he said.

Sales of instant scratch-off games have fallen steadily here, data show.

The lottery's first chairman, Charles Sanders of Durham, said in an e-mail message that he thinks smaller prizes are the biggest reason for the slow sales.

"While I am no expert," he wrote, "the frequency of people winning when they play is the major factor."

Shaheen said he will not lobby lawmakers for changes but is trying to direct more administrative money to prizes. New games coming to shelves soon, he said, will have larger payouts.

One possible source of extra prize money: The lottery had set aside $700,000 to pay sales incentive bonuses this year. Only $11,000 has been spent.

* The western third of the state is not in on the game.

Players in the counties west of Interstate 77 are not playing at levels seen elsewhere in the state. Some counties in the mountains have only a handful of outlets.

One reason for the low sales out west is that schools there generally do not stand to receive as much in school construction money as others in the distribution formula the legislature adopted. The formula sends extra money to counties with high property-tax rates, and the western counties tend to have low rates.

That has been an issue in Wake County, too, which stands to receive less than $9 million for construction. That doesn't cover the cost of one new school.

School leaders in the west have howled about the disparity.

"Everyone in Western North Carolina ... is upset about that," said state Sen. Martin L. Nesbitt Jr., an Asheville Democrat. "I'd never seen anything before like this that absolutely just blanked a region. You've got to fix that, and maybe we'll put our share in the pot."

Last week he filed a bill to change the formula.

He and others said Western North Carolinians do not oppose the gambling, including the lottery, on religious grounds. The state's only casino is in Cherokee.

"People play there, and they do have a reasonable chance of winning there, too," said Nesbitt, who says the lottery is a bad way to raise money from taxpayers. "I guess I'd like to say that the people in the west are the most intelligent. They've figured out that you have a better chance of getting struck by lightning than to win a big lottery prize."

Rosy forecast

Opponents of the lottery, including the Family Policy Council, had questioned the Easley administration's forecasts from the beginning as overly aggressive.

Indeed, the lottery's condition would not be viewed as a problem if not for a forecast by Easley's staff that the games would generate $425 million for education -- which assumed sales of more than $1.2 billion.

Shaheen and the lottery staff disagreed with that, but lawmakers adopted the Easley number, and that is what the education programs are now depending on.

Rep. Bill Owens of Elizabeth City, a high-ranking Democrat and one of the lottery's leading supporters, said it is too early to judge the lottery. But he acknowledged that the education programs that the games support might have to make do with a bit less money this year.

"If it only brings in $350 million, well, that's $350 million we didn't have," Owens said.

Gerlach, who once helped forecast lottery revenue in New York, said he used industry norms on per capita sales to predict what the games would bring in.

But North Carolina is different in that way, too.

Though bordered by states already running lotteries, it is one of the last to start one.

The early forecasts were generally based on states that enjoyed extra spending from their neighbors. North Carolinians were playing in Virginia and South Carolina; both states have experienced drop-offs since North Carolina started its lottery.

Tennessee and Georgia, for example, benefit because they share a border with Alabama, which does not have a lottery.

"My top 10 retailers are on the Alabama border," said Rebecca Paul Hargrove, president and CEO of the Tennessee lottery.

North Carolina doesn't have that luxury. It depends largely on the play of its residents.

"The players," Shaheen said, "just haven't decided whether they're going to do this or not."

(News researcher Paulette Stiles contributed to this report.)