All About That New Lotto Texas Rule That I'm Calling ... "By The State, For The State, Screw The People" ...

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The Lotto Report

All About That New Lotto Texas Rule
That I Predict/Fear The Commissioners
Will Adopt on Friday, Jan 11, 2013
This rule ... known only as the best kept secret in Texas ...
was written by the state, for the state, and to screw the people ...
This rule should NOT be adopted - it is not what players want -
Read on and to see if you agree with my assessment ...

ADOPTED As Suspected ... Very, very sad ...

Posted: Jan 10, 2013 - 5 PM
Revised: Jan 11, 2013 - 11 AM (Minor Additions/Fixed Typo's)

Editorial and Opinions
by Dawn Nettles
Publisher: The Lotto Report

Before I go into the details regarding this proposed/soon to be new Lotto Texas rule, let me say that the game should have been changed long before now. But not in the manner to which they have chosen to change the game.

Since July 31, 2010, the Texas Lottery Commission/Executive staff has allowed the current Lotto Texas game to pay out $56.9 million MORE than budgeted. The $56.9 million was split among JUST nineteen (19) players (jackpot winners). There is absolutely no excuse for a loss of this magnitude.

While the TX Lottery wants you and the commissioners to believe the problem is that the interest rate was down, this is clearly NOT the primary reason for the games failure and the overpayments to a select few. The reason is that SALES are down - sales did not support the jackpot amount advertised. Players quit playing because the Texas Lottery refused to listen to them and they took away the original game - specifically a matrix of pick 6 out of 50 numbers.

I will cover more about this later in the story - for now, let's move on so I can tell you what they are going to give us to play in the coming months. The only way you can speak will be with your dollar unless you choose to contact your state legislator and he can halt their plan.

Here's what they plan to change to "fix" the problem of paying out more than budgeted ... staff has told the commissioners that you will love this new game, its features and will support it ....

- Proposed/Planned Changes - Lotto Texas - 16 TAC 401.305
They plan to make these changes effective April 14, 2013

1. They are leaving the matrix the same - pick 6 out of 54 numbers -
odds will still be 25,827,165 million-to-one. (Though the rule
FAILS to show the odds of the game or odds of winning prizes)

2. Increase the annual pay to 30 years rather than the current 25 years.

3. Add an add-on game to Lotto Texas - for an extra dollar low tier prizes
will be increased if you match 2, 3, 4, or 5 numbers. You'll pay $2 for your ticket.

4. Start the jackpots at $5 million rather than $4 million. The jackpot will
increase in increments of $250K rather than millions when no one wins.

Here's why I say, think and believe they are screwing the People of Texas - I'll explain each change individually because each one is putting the screws to us.

1. They want to leave the matrix the same -
pick 6 out of 54 numbers
. Players have always opposed this.

FACTS - The 1999 rule change was pulled due to opposition to a 6/54 matrix. July 2000 - re-proposed and adopted 6/54 matrix in spite of opposition. Questionable documents in favor of the matrix change was provided to the commission to support adopting the rule. In the end, game failed miserably.

They changed game again in 2003 to a bonus number game (5/44 & 1/44). Game was opposed by the players and ultimately failed miserably too. Gary Grief even bought new balls and machines BEFORE the rule was proposed. It was a done deal no matter what the players had to say about it.

In 2006, admitting complete failure again, they went back to 6/54 in spite of opposition to this matrix. Commissioner Clowe told staff that if the people wanted 6/50, then give it to them. Thousands of players submitted comments asking for a 6/50 game but Executive staff convinced Clowe that it was a bad idea - they feared people would win.

Sales never recovered and since that change the TLC has overpaid jackpot winners by $14.1 million (the amount in reserve in early 2006) then another $56.9 million.

By leaving the matrix at 6/54 with the current proposed change - they are once again going against the will of the people. To support the game, players and pool players have made it adamantly clear they want a 6/50 matrix and won't support anything other than that for our in-state lotto game.

I will say that the current Commissioners may not be aware of the history of the game and its changes as none of them were Commissioners at the time. The same as they don't know that Texas Lottery staff was told emphatically to make all substantive rule changes highly visible on the TLC web site.

This rule change was never highly visible for players to see. Staff has new bosses so they've returned to their old ways/tricks.

By adopting this rule, the Texas Lottery is giving themselves absolute insurance that there will be even fewer winners than there was under the current rule. The reason I call this "absolute insurance" is because they are adding another game called Extra making the cost of a ticket $2.

This means they will actually be selling fewer tickets but sales could increase. Sounds confusing - huh? OK, OK, let me show you what I mean. I'll use little numbers ... Today - if they sell 100 tickets - they brought in $100 and hopefully sold 100 different combinations. Got it?

(In lottery language, the 100 different combination mentioned above is called "coverage." The lotteries use "coverage" to predict if there will be a winner for each draw)

By adding the "new game" and collecting $2 rather than $1 per ticket - they may sell 70 tickets and bring in $140 which IS an increase in sales. But, as you can see, the "coverage" (the number of combinations sold from the total number of possible combinations - 25.8 million) was reduced meaning it's less likely there will be a winner because they will be selling fewer of the available combinations per draw.

Players will NOT spend twice as much as they do now - they will reduce the number of tickets they buy if they want to gamble on the higher low tier prize amounts which really aren't worth the extra dollar.

Example of Lotto Texas' poor "coverage:" On Dec 8, 2012, the Texas Lottery sold 1,577,936 tickets and the "coverage" was 5.7666%. Combinations NOT sold totaled 24,337,823 (94.2334%). How do you expect to have a winner with sales/coverage such as this? It is highly unlikely and they know it. But players have no idea it's this bad - if they knew this - I predict, many would quit playing.

(By the way, of those 1,577,936 tickets sold, apparently 88,596 tickets were duplicates)

The game - with its odds and lack of tickets/combinations selling - should be outlawed. They are taking advantage of the majority of the players who don't really understand all of this. Our government is suppose to be watching out for our best interest, instead, they are taking advantage of ignorance and screwing us for the almighty dollar.

Coverage has been bad for years - it gets worse by the year - so when they adopt and make this game effective, they will be selling even fewer combinations per draw because people will reduce the number of tickets they normally buy in order to spend that extra dollar. Just like they have on Powerball.

Powerball example - coverage - On Dec 3, 2011, a $40 million jackpot. They sold 930,888 ONE DOLLAR tickets (sales were $930,888). On Dec 22, 2012, a $40 million jackpot, they sold 679,822 TWO DOLLAR tickets (sales were $1,359,644). As you can see, they sold fewer combinations but brought in more money. Please note - sales did not double.

This is why Powerball lowered their odds when they went to $2 per ticket. They weren't stupid - they knew fewer tickets would be sold so they could easily afford to decrease the odds so they'd have something positive (lower odds) to promote! Which is exactly what they did.

Please notice - Texas is not proposing to reduce the odds of Lotto Texas.

The ONLY reason Powerball sales are up is because of the astronomically huge jackpots where people spend foolishly - if Powerball hadn't had those few huge jackpots (ranging from $325 million to $588 million), I can assure you, sales would not be up for the states to brag about. Go look at Texas Powerball sales and you'll see what I'm talking about.

Sad but Very True FACT - April 23, 2006 through Jan 10, 2013 (today's date) - 701 Lotto Texas drawings ... 44 of the 701 drawings were won. (This averages 15 draws between wins)

2. Increase the annual pay to 30 years rather than the current 25 years.

Many of you may not understand this so you will need to trust me but this is worse than BAD. It's horrible. They are really putting the screws to us here. This is how they are reducing the payouts.

Here's why. Most of you think if you win, then you've won $4 million, $20 million, $100 million, $500 million because that's what they've advertised and this is what you think you'll win. Until you get to lottery headquarters, that is.

This is when you find out what you really won. You see, you've failed to see and understand the significance of that one little, bitty, tiny word that says, "annuitized" by that "$100 million jackpot" that you think you will receive should you win.

What you've really won and this has always, always been the case is - you have won a percentage of sales - the percentage should be close to the amount they need or you need to invest that would give a return of the amount advertised over a period of many years (25, 26, 30 years).

By increasing the annual pay to 30 years is the lotteries way of reducing the amount they have to pay you. Use your common sense - think - if you invest money for 30 years, then you'll make more than you would if you only invested it for 25 years. It you want a return of X number of dollars, then it requires more money to invest if it's a 25 year investment and less money is required if it's a 30 year investment.

It doesn't matter if you take annual pay or take the cash value option. The amount of money you will receive will be less money when it is based on 30 year pay - they are REDUCING the payouts.

To further insult us, the new rule is still allowing the same exact percentage of sales going to a winner - 40.47% - which is what the current rule allows. Now ask yourself - why wouldn't they reduce that percentage for a jackpot winner and use the extra monies to increase the other prizes - which incidentally, are exactly the same as they are now.

3. Add an add-on game to Lotto Texas - for an extra dollar
low tier prizes
will be increased if you win something.

They plan to call this game "Extra" and they seem to be really proud of what they will be paying if you spend that extra dollar. They seem to think these payouts will impress you and you will support the changes. If you pay $2 for your ticket, then you would receive the following payouts IF you win ...

New prize - you win $2 if you match 2 numbers.
(This is BS - the unclaimed prize fund will benefit)

You win $10 if you match 3 numbers instead of the usual $3
(This is BS too)

You win $100 if you match 4 of 6 numbers instead of the usual $40 to $60.
(Again ... pure BS.)

Now here's where they are really trying to impress you ...

You win $10,000 if you match 5 of the 6 numbers.
WOW, WOW (I'm being sarcastic)

FACTS: Since April 26, 2006, they have sold 1,374,495,421 Lotto Texas tickets.
Out of that 1.3 BILLION tickets, ONLY 15,310 tickets matched 5 of 6 numbers.

FYI - .00111386% of the tickets matched 5 of 6 numbers.

And they want you to pay $2 for a remote chance
to win $10,000 for matching 5 numbers???? Sounds more like a con to me.

4. Start the jackpots at $5 million rather than $4 million. The jackpot will increase
in increments of $250K rather than millions when no one wins.

This is at the very heart of the problem - Texas wants to pretend to be something they are not. Their egos won't allow them to drop the starting jackpot - they've NEVER wanted to lower it. They need to accept the things they cannot change and change the things they can. It would be in the best interest of the state to start the jackpots at $1 million - it's what they can better afford, it's a more reasonable liability for taxpayers and is more truthful. But gee, these are ethics - a word not familiar to the Texas Lottery.

Since it is highly unlikely there would be any winners, (players will drop this game like a hot potato) it most likely won't matter what they start the pot at. They are risking state money in a manner that most private businesses would never allow or consider. Why the legislature would permit this is beyond me. My guess is that the legislature has been told not to sweat it as no one will win. This would prove - the game should be outlawed as its nothing more that a legal scam. Ripping players off knowing full well that they most likely can't win it is as deceiving as it comes. Having 95% of the combinations NOT sold is pretty damn good insurance that the state won't be paying out very often and players are not suppose to win statistically.


I want to know ... why have the Commissioners allowed the lottery to over pay Lotto Texas winners by $56.9 million plus another $14.1 million from the reserve fund since 2006? Why have the Commissioners not taken action sooner to protect the state? Why has the legislature allowed this? Why have they allowed Texas 2 Step winners to be overpaid by nearly $3 million? Why no action on this game?

A Special Word to the Commissioners

I would really like to have one of you explain to me how it is that you can believe Gary Grief and staff about their promises regarding rule changes when they have completely disregarded every comment from the consumers - how can you believe things will be much better IF you simply make the suggested changes given their track records of failure.

All you have to do is look back to 1996, 1999/2000, 2003 and the 2006 rule changes to see that NOT ONE WORD came to pass after adopting their proposed ideas. They have great excuses - but - that's exactly what they are - excuses.

Lotto Texas CAN be revived and it is in the best interest of the state to do everything you can to revive it. This is because this prize money is generally won by a TEXAN and the money generally remains in the state and is spent in our communities.

We've lost so much jackpot prize money in Mega Millions ($42.7 million more went out than what has come in to Texas) and Powerball ($142 million sent out of state - none has come in yet). This money helps economies. Texas is losing this benefit from our state run lottery.

Sales NEVER increased from previous rule changes but staff told the Commissioners that sales would increase. All in all, since 1996, the Texas Lottery commission has overpaid Lotto Texas winners by approx $180 million and cheated 13 wins out of $3 million. They would have cheated more had I not stepped in when I did.

Come Friday staff is going to tell you that no one or very few commented so they are going to recommend that you adopt 16 TAC 401.305. Are you going to ask WHY no one commented? Are you going to ask what kind of comments have come in in the past? Are you going to ask them what they did to generate comment? Are you going to believe them when they tell you it was posted in the Texas Register and that's all they are required to do? Are you going to believe that players read the Texas Register?

If this were the private sector - mismanagement of this much money and
failure to take action in the following areas would have heads flying out the door.

Another FACT - Reagan Greer and Lee Deviney lost their jobs because of an inflated jackpot. I reported it to the AG and as usual, the TLC initially denied the jackpot was inflated - rather telling the AG I didn't know what I was talking about. Ultimately, it was my fault Greer and Deviney lost their jobs "at will." (BTW - "At will firings" is a privilege the Texas Lottery no longer enjoys - they abused it and the legislature removed this privilege from them)

At any rate, in this case, Deviney advised senior management and Gary Grief, by email, acknowledged Deviney's advisory that the sales would not support that jackpot. But executive staff went against Deviney's warning and inflated the jackpot anyway. Then poor Deviney, Director of Finance, was fired. Yet he was doing his job. Reagan was fired simply because he was the Executive Director. Yet, the staff members who had a full understanding of the situation KEPT their jobs and remains there even today. (It's very important to note - the inflated jackpot was not won so the TLC lost no monies as a result of their risky, deceitful actions)

Now we have these people in high positions yet the agency isn't operating within a games budget. This neglect has literally cost the state of Texas hundreds of millions of dollars.

Additionally, this same Executive staff has allowed a lottery prize bank account to not be reconciled for 5 years. An account was closed because they couldn't reconcile it. This was another well kept secret. There's missing money rumored to be in the hundreds of thousands of dollars, alleged embezzlement and fraud accusations floating all around. Monies have been lost. But no one has lost their job - one person resigned but he was low on the totem pole if you know what I mean - he had a boss who should have been savvy to his work ethics - she knew the account hadn't been reconciled yet she took 5 years to take action (closed the account).

This executive staff instructed a staff member to slander a private citizen to a senator.

This executive staff is rehiring retired employees as soon as their departure time has expired allowing them to "double dip" while knowing that the legislature and the Governor has ask that the practice of double dipping please stop. This staff is discriminating in its hiring practices. These people are WELL paid to say the least.

The people responsible for these acts still have their jobs yet they've literally cost the state millions of dollars in unnecessary spending.

These are also the same people who have failed to improve a game with rule changes. Greed destroyed Lotto Texas & Cash5. Yet you (the commissioners) are trusting them to advise you to adopt a rule that I think you know the people oppose. This is why you wouldn't let me speak when you agreed to post the proposed changes during the Nov Commission meeting. Of course, you'll say it was because I was 20 minutes late to the meeting and didn't have my form filled out PRIOR to the start of the meeting.

FACT - Potential revenues will be lost if you adopt this rule.

(Note to my readers - with regard to the above paragraphs, I will be giving you full details on each and every one of the topics mentioned)

The Current Lotto Texas Rule (Effective April 2011) Contains Language Not Applicable ...
Sloppy legal work, sloppy proofing .... Does the Executive staff not read the rules?

Years ago (2006), in a long hard fought battle, the Texas Lottery quit holding monies in Reserve. You see, since 1992 the TLC has told players that they returned 50% of sales to players by way of prizes but that was NEVER true. This is because they withheld 2% from the players 50% of sales in reserve just in case it was needed to pay the one guaranteed prize of $3. If you read the rules, you'd see where the percentages allocated to each of the prizes only equals 48%. Ultimately however, the money in reserve was actually paid to Lotto Texas jackpot winners because the Texas Lottery advertised more than what sales would support. This was not the original intent of the reserve money, but this is what they used it for. At any rate, in the current rule adopted in 2011, you will see these statements ..... As you read these statements, understand, Lotto Texas has NO reserve fund but these statements are still in the rule!!!!

"(K) If sales proceeds and the Lotto Texas prize reserve fund are not sufficient to pay a jackpot prize, the commission shall use funds from other authorized sources, including the State Lottery Account as identified in Government Code, §466.355"

"(8) There will be no allocations from Lotto Texas ticket sales to the Lotto Texas prize reserve fund."

What I find humorous is that I told staff that they had mistakes in the rule but I never did tell them what the mistakes were. It appears they didn't try to find the errors or maybe they simply failed to recognize it was an error. How very sad.


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Comments - E-mail Us

The Lotto Report
Dawn Nettles
P. O. Box 495033
Garland, Texas 75049-5033
(972) 686-0660
(972) 681-1048 Fax