Missouri Lottery’s ad spending increases while school funding drops, audit finds

COLUMBIA, Mo. (KMIZ)

Missouri State Auditor Scott Fitzpatrick gave the Missouri Lottery Commission an overall “good” rating, even as a newly released audit shows lottery funding for schools dropped by more than $35 million while advertising spending increased by $5 million during fiscal year 2024.

The audit, released Tuesday, found advertising expenditures jumped from $399,973 in 2023 to $5.4 million in 2024. During that same time, total revenue also saw a drop of $49 million, meaning despite higher advertising spending, both revenue and transfers to education declined.

Missouri State Auditor Scott Fitzpatrick said Wednesday, there have been fluctuating transfers to education and money spent on advertising in the past.

"We've suggested that the lottery consider the value of the advertising and whether it's really driving increased activity for the lottery," Fitzpatrick said. "That activity is more tied to larger jackpots and things like that, that are kind of unrelated to advertising,"

In 2023, according to the audit, $425,038,869 was transferred to education compared to 2024 when $389,788,014 marking a $35 million drop.

The $35 million that would went to schools would have averaged $63,000 per school district. Fitzpatrick emphasized that while the drop is notable, lottery funding makes up a small share of education spending and did not affect total state funding for schools.

"There's a pretty small number, even with that decline in funding from the lottery, schools are still receiving record amounts of money from the state," Fitzpatrick said. "It's not a situation where that is like $35 million is what well under 1% of what we're spending on K-12 education right now,"

A previous audit report from 2018-23 found the lottery's advertising budget decreased by $16.7 million during that time frame while transfers to education increased by $53 million, highlighting advertising spending and money toward education remained steady in that stretch of time.

Fitzpatrick said the "good" rating he gave Missouri Lottery reflects the lottery's operation as whole and not money sent to schools across the state.

"The rating is an indication there weren't a lot of other findings. We didn't have any internal control findings about making sure the prize money paid out appropriately or that there were issues with verifying winners or anything like that," Fitzpatrick said. "I think it's an indication the lottery itself is a well-run enterprise,"

According to a news release, lottery officials indicated the changes in advertising expenditures are not only the factor that affects lottery sales, and other factors can play a substantial role in lottery sales.

For example, according to Fitzpatrick, Lottery officials say national jackpots can draw more media attention and boost sales, especially when jackpots are greater than $500 million.

Fitzpatrick noted the Missouri Lottery is increasingly competing with slot machines now found in many convenience stores, where most lottery ticket sales occur.

Missouri's advertising spending remains low compared to other states. For fiscal year 2024, the Lottery's advertising budget of 0.31% of sales ranked 44th out of 46 states that sponsor a lottery. In fiscal 2023, the lottery had the smallest advertising budget of any state and the District of Columbia at 0.02% of sales.

Missouri Lottery cited their reason for the significant increase in advertising spending in a Dec. 22 statement to Fitzpatrick.

"Lottery advertising plays a key role in maintaining the current customer base and helping to attract new customers just as any billion-dollar business would do. It helps keep lottery games relevant in a marketplace climate of rising prices and increasing gaming/entertainment options, particularly with sports betting going live in Missouri earlier this month and the amount of money sports betting companies are spending on advertising."

An annual report for Missouri Lottery broke down their advertising budget of $5.4 million and laid out its positive effects.

• Advertising aware is 55% up from 35% in fiscal year 2023 when advertising budget was $400,000
• Advertising helps to grow approval of the Missouri Lottery. Approval improved from 64% in fiscal year 2023 when the advertising budget was $400,000 to 66% in fiscal year 2024 when the advertising budget was $5.4 million
• The perceptions that the state of Missouri should continue offering lottery games that Lottery is a good way to raise money for education, and that Missouri Lottery proceeds help support public education increased from 2023-24 with the increase in advertising budget.

Since 1993, Missouri law has require that lottery proceeds be transferred to education.