The number of people trying their luck to win a lottery annuity settlement appears to be declining in many states. New Jersey privatized their lottery program in October of 2013 in an effort to increase sales and make the system more efficient. Unfortunately, the results haven’t been quite what lawmakers expected.
On Tuesday (11/24) the state Senate Legislative Oversight Committee summoned the state’s private lottery contractor, Northstar New Jersey, and state lottery officials in charge of lottery payments to answer questions on the recent revenue failures, according to the New Jersey news site NJ.com.
“There’s a real question as to whether lottery privatization is paying off anywhere,” said State Sen. Robert Gordon (D-Bergen), chairman of the oversight committee.
In the 2015 fiscal year the state’s lottery revenues contributed $960 million to state education and disabled veterans programs. A nice chunk of change, but less than the projected $1.037 billion that the state and lottery officials had budgeted in for the year.
While legislators are not happy with the discrepancy, especially because they agreed to pay a private company to avoid this very problem, lottery officials contend it has more to do with a nation-wide market trend than anything specific to New Jersey.
“While we all would prefer to see a revenue increase year over years, I would like to place the $960 million in 2015 revenue in the context of a national trend in which many lotteries across the country are experiencing poor results due to changes in consumer behavior beyond anyone’s control,” said Carole Hedinger, executive director of the lottery. “There has been a severe nationwide decline in consumers playing the big multi-state jackpot games ? Mega Millions and Powerball.”
The Mega Millions lottery annuity is paid out as one immediate payment followed by 29 annual payments. Each payment is 5% bigger than the previous one, so for a typical jackpot of $50 million, the initial payment would be more than $750,000, and future annual payments would grow to almost $3.1 million.
You can of course choose to receive your winnings in a lump sum versus annuity payments, but this will usually result in more taxes being withheld. No matter what winners choose, it’s important to keep in mind that whether lotto winners win $500 million or $1 million, about 70% lose or spend all their money in five years or less.