Prizes Paid to Players

During FY12, the Lottery paid out more than $320 million in prizes to the holders of winning tickets. Lotto game prizes that are unclaimed one year after the date of the drawing and scratch game prizes that are unclaimed one year after the game ends can no longer be redeemed.  This unclaimed prize money goes to the State’s General Fund. Unclaimed prizes in FY12 totaled $10.3 million.

General Fund

The General Fund finances most programs operated by the State of Minnesota. During FY12, the Lottery contributed $68.2 million to this fund. While a significant amount of money, lottery proceeds make up less than 1 percent of the $31 billion collected for the General Fund during the biennium. The largest sources of revenue for the General Fund are the individual income tax (45 percent of General Fund revenue) and the sales tax (29 percent).

It is not possible to identify specific programs within the General Fund that are funded by lottery proceeds. Lottery money can be assumed to be distributed in the same percentages as overall spending from the General Fund.

Education programs comprise the single largest beneficiary of General Fund dollars, accounting for 48 percent of state spending during FY10-11. This is divided between K-12 education finance (41 percent) and post-secondary education (7 percent). Health and human services programs account for 27 percent of General Fund spending, with property tax aids and credits accounting for another 10 percent. The remaining 15 percent is spent on a wide range of programs, such as economic development, transportation and criminal justice.

Game and Fish Fund

The Game and Fish Fund is the primary means of funding the state's programs to manage and enhance hunting and fishing. The main sources of money for this fund include fishing and hunting licenses, fines for hunting and fishing rule violations, and other fees. The 2000 legislature was the first to dedicate a portion of lottery revenues to this fund.

For fiscal year 2012, 36.2 percent of the in-lieu-of-sales tax on lottery tickets is dedicated to this fund. By law, this money "may be spent only on activities that improve, enhance, or protect fish and wildlife resources, including conservation, restoration, and enhancement of land, water, and other natural resources of the state" (Minnesota Statutes section 297A.44, subdivision 1, paragraph (e), clause (1)). The law further states that this money "may not be used as a substitute for traditional sources of funding" but should be used to supplement existing programs.

For fiscal year 2012, the legislature appropriated 12.2 million in lottery revenue to the Department of Natural Resources through the Game and Fish Fund. 

Natural Resources Fund

The Natural Resources Fund receives money from various fees and resources connected with natural resources management, such as snowmobile and ATV registration fees, proceeds from the sale of some surplus state land, and fines for certain natural resources-related violations. Beginning in 2000, the legislature dedicated a portion of lottery revenues to this fund.

For fiscal year 2012, 36.2 percent of the in-lieu-of-sales tax on lottery tickets is dedicated to the Natural Resources Fund. By law, 45 percent of this money must be spent on state parks and trails; another 45 percent must be spent on parks and trails in the Twin Cities metropolitan area; 6 percent on local trails; and 4 percent on the Duluth, Como, and Apple Valley zoos. The law further states that this money “may not be used as a substitute for traditional sources of funding” but is to be used to supplement existing programs. For FY12, $12.2 million was allocated to the Natural Resources Fund.

Environment and Natural Resources Trust Fund

When you play, Minnesota wins! That’s because proceeds from the Minnesota State Lottery help finance a variety of projects that preserve, restore, and enhance our state’s environment and natural resources.

Each year, the Environment and Natural Resources Trust Fund receives 40 percent of Lottery net proceeds, or about 6 cents of every dollar spent on lottery tickets. The Legislature appropriated $50 million to 71 projects based on recommendations by the Legislative-Citizen Commission on Minnesota Resources (LCCMR). Since it began in 1990, the Trust Fund has provided almost $360 million to more than 820 projects around the state.

Lottery contributions to the Trust Fund totaled $31 million in fiscal year 2012. The remaining 60 percent of net proceeds is allocated to the state General Fund to pay for programs related to public education, health and human services, and public safety, among others.  Additionally, an in-lieu-of-sales tax on lottery tickets contributed another $24.4 million to environmental and natural resources programs in fiscal year 2012. This money was allocated for state and local parks and trails operations and maintenance, programs to enhance fishing and hunting, and the State’s three public zoos.

Administration

By law, the Lottery could not spend more than $29,000,000 on administrative costs in FY12.  Because of operating efficiencies, the Lottery returned an additional $3.88 million to the Environment and Natural Resources Trust Fund and General Fund from money allocated but not spent on administrative costs.

Major administrative expenses for the past fiscal year include:

• Salaries and benefits ($10.3 million)
• Advertising ($7.5 million)
• Promotional expense ($1.9 million)
• Professional services ($1.6 million)

Ticket and Lotto Vendor Expense

During FY12 the Lottery spent almost $18.1 million on the direct costs of producing and distributing lottery tickets. This includes the cost of printing and distributing scratch tickets ($8.6 million) and the cost of managing the system that produces and records lotto tickets ($9.5 million). As these costs vary directly with sales, they are not subject to a legal limit.

Retailer Commission

Lottery retailers earn money in several different ways. First, they earn 5.5 percent of the price of every ticket they sell. Next, they earn 1 percent of the prize value of winning tickets redeemed at the store. (Prizes up to $599 can be redeemed at Lottery retailers.) Finally, they are eligible to earn more through various incentive programs offered throughout the year. During the fiscal year ending June 30, 2012, Minnesota State Lottery retailers earned $31.5 million, or an average of $10,100 per store.