The shortage for the advertised $21 million jackpot that hit on July 31 was not the first the Lottery Commission has had to cover.

Lotto Texas jackpots are guaranteed to be worth at least the advertised amount, but ticket sales have fallen short of covering 14 of the 24 jackpots won since August 2006, according to figures from lottery watchdog Dawn Nettles and documents posted on the commission's website.

State law allows officials to shift money from the state lottery account, which includes sales revenue from all lottery games.

The situation is drawing fresh criticism from Nettles, who said it means the lottery's operating account or proceeds slated for the school trust fund must suffer.

"What I know for sure is that Lotto Texas is not self-supporting. They are not able to pay the players from sales. They are having to get money from either their operating budget or school fund money," said Nettles, who owns the online Lotto Report. "The state's getting shortchanged."

Lottery Commission spokesman Robert Heith said the funding of the Lotto Texas jackpot "has no effect on Lottery operations or transfers to the Foundation School Fund." Overall ticket sales, the largest contributor to the state lottery account, totaled $3.7 billion in fiscal year 2009.

Nettles said the situation is compounded because the agency last year spent the last of a reserve fund that had been set aside within the lottery account to cover Lotto Texas prize shortages.

No reserve fund

The commission decided to do away with the reserve fund after the money that remained was spent, saying it made sense to pay prize shortages as necessary. The money that had been deducted for the reserve now goes to the prize pool, Heith said.

Nettles said jackpots should be whatever ticket sales will support. Currently, Lotto Texas jackpots start at $4 million and rise as the jackpots go unclaimed. Players are guaranteed to get at least the advertised amount, less taxes. They get more if sales support a higher amount.

"The lottery is not broke. They make lots and lots of money. But because of these guaranteed prizes, where they don't have enough sales to cover it, they are dipping into their own proceeds," Nettles said. "If the lottery doesn't need that money to pay their advertising agency or their salaries, at the end of the year, that money ought to be transferred to the foundation school fund or to the general revenue fund."

Nettles also said that ticket sales for Texas Two Step, another lottery game, have fallen $2 million short of the amount needed to pay prizes since June 2007. Heith said he could not confirm that figure.

Heith said the advertised jackpot is calculated by multiplying expected sales by the estimated cost to fund an investment yielding the jackpot amount over a 25-year period.

Lawmakers worry

According to commission figures, Lotto Texas sales totaled $695.3 million in fiscal year 2001, then began creeping downward, totaling $200.5 million in fiscal year 2009. Sales have increased this fiscal year to nearly $242.3 million as of July 31, a 35.6 percent increase over the same point the previous year.

"I think the Lotto Texas sales figures speak for themselves as to the assertion that Lotto Texas is struggling," Heith said, pointing to this year's increase. He said, "This game does have a loyal following."

State Rep. Jim Dunnam, a Waco Democrat who monitors the Texas lottery, said the shortfalls raise questions about how the Lottery operates.

"The structure of the program is obviously wrong," he said. "If they can't generate the money to pay what they're saying they're supposed to pay through the ticket sales, they need to restructure the whole program."

Rep. Garnet Coleman, D-Houston, said, "If it literally pulls money away from the dollars that go to schools, and it hasn't proved to increase sales ... it (the jackpot) should be based on the amount of ticket sales."

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