Arkansas Lottery addresses $20M negative balance with new financial clean-up legislation

The Arkansas State Legislature's Joint Education Committee convened on March 17, 2025, to address significant financial adjustments related to the Arkansas Lottery and its scholarship trust fund. The primary focus of the meeting was a proposed bill aimed at rectifying longstanding discrepancies in the lottery's financial reporting.

During the discussion, officials explained that since the lottery's inception in 2009, the definition of net proceeds had allowed for a modified cash basis instead of an accrual basis. This led to the Arkansas Lottery contributing more funds to the scholarship trust fund than necessary, resulting in a negative balance on its financial statements, which currently stands at just under $20 million.

The proposed legislation seeks to clean up these financial records by eliminating the shortfall reserve trust account, which was originally established to cover potential funding gaps for scholarships. With recent reforms in the lottery's financial management, the need for this reserve has diminished. The committee emphasized that this adjustment would prevent future negative positions on the balance sheet.

Officials assured committee members that the Department of Finance and Administration (DFA) and legislative auditors were fully aware of the situation and supported the proposed changes. The meeting concluded with an invitation for questions, indicating a willingness to clarify any remaining uncertainties about the financial adjustments.

This legislative move is expected to enhance the transparency and stability of the Arkansas Lottery's financial operations, ensuring that scholarship funding remains secure and effectively managed.