Military wants share of lottery profits

Tom Philpott

Over 178,000 retail outlets across 41 states and the District of Columbia sell state lottery tickets. Last year they earned over $3 billion in commissions on ticket sales of almost $49 billion.

Military exchanges want a piece of that action.

Congress is weighing a proposal from the Department of Defense to amend current law to allow lottery ticket sales in stateside exchanges, except where such sales would pinch the businesses of blind vendors selling lottery tickets on base.

In drafting the proposal, Army and Air Force Exchange Service (AAFES) officials argued that lottery sales will help offset a sharp drop in revenues for morale, welfare and recreational (MWR) activities from a drawdown of U.S. forces from Europe and Korea through 2009.

The troop pullback is expected to halve about $100 million in net MWR funding coming from the operation of slot machines at U.S. bases overseas.

John M. Molino, deputy undersecretary of defense for military community and family policy, confirmed that the loss of slot machine revenue was the reason AAFES officials gave Congress to urge approval of lottery ticket sales in exchanges. However, he said, a bigger motivator for AAFES, is the obvious business opportunities stateside lottery sales present.

Lawmakers have been silent on the AAFES proposal since it arrived on Capitol Hill in May. At least a few members of Congress are expected to oppose it vigorously, on moral grounds, arguing that lottery sales will encourage military shoppers to gamble, said a congressional staff member who has studied the proposal.

Lottery retailers get a commission of five to eight percent on tickets sold, depending on state rules and incentives.

Pennsylvania lottery officials pitch it to retailers saying they will attract more customers and that 80 percent of lottery patrons buy at least one other item with every visit. In Pennsylvania, lottery players on average buy seven tickets at a time.

State lottery ticket sales last year averaged $183.70 for every man, woman and child living within lottery states, according to the North American Association of State and Provincial Lotteries.

AAFES officials haven’t analyzed their potential revenue gain, Molino said, but “Whatever share that is, they would like to get a piece of it.’’

Navy and Marine Corps exchanges will also sell lottery tickets if the proposal is approved.

Molino said he has no sense yet if other lottery retailers will oppose ticket sales in exchanges.

Currently, the law allows only blind vendors to sell lottery tickets on base.

Molino said he doesn’t know how many blind vendors do so, but the proposed legislation will bar exchanges from encroaching on their sales.

The Army is the service most worried about a drop in slot machine revenues from a global re-stationing of forces over the next several years.

Peter Isaacs, chief operating officer for the Army Community and Family Support Center, estimates that the Army inventory of slot machines will drop by 800. Total MWR revenue, for the Army alone, will fall from $90 million to $40 million.

“There is no way to stimulate or to replicate those machines elsewhere,’’ Isaacs said.

“Obviously you can’t use gambling devices in the United States. That is just less revenue to the totality of Army (non-appropriated fund) operations.’’

By law, certain base activities such as golf courses, recreation clubs, bowling alleys and marinas must be self-sustaining, which means no taxpayer support or reliance on “appropriated’’ dollars.

Overseas slot machines support such activities, primarily with construction funds.

The services contend that operating slot machines overseas is a safer way to entertain troops, and with more favorable odds, than gambling alternatives found off base.

A Defense Department report to Congress several years ago concluded that slot machines don’t significantly affect member indebtedness or aggravate pathological gambling disorder.

Tom Philpott can be contacted at Military Update, P.O. Box 231111, Centreville, Va. 20120-1111, or by e-mail at:
milupdate@aol.com