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Wyoming Lottery defends expenses, says it has cut marketing costs by more than half

The Wyoming Lottery Corporation is defending itself against charges that it is not sending enough money to the state and is spending excessively on expenses like marketing and salaries.

CEO Jon Clontz said that recent calls from some local government officials for legislation requiring the lottery to send a set amount or percentage of money each year were premature and stem from issues outside of his organization’s control.

A recent analysis of the lottery’s financial documents showed that it was locked into spending around $1 million per year to a Cheyenne marketing firm. Some local officials, including the executive director of the Wyoming Association of Municipalities, said they believed that spending was irresponsible given the relatively low transfers being made to the state, which passes on the funds to cities and towns.

Clontz said he believed the recent criticisms are unfair.

“The lottery did not create the budget shortfalls,” Clontz said. “I’d be curious to know what commissioners are doing about their own budget shortfalls.”

Clontz spoke with the Star-Tribune by phone Tuesday following a presentation to the Legislature’s Interim Joint Revenue Committee in Cheyenne.

He said that following a Star-Tribune article in November that highlighted a contract apparently guaranteeing an advertising firm a large annual payment, the lottery and the company, Warehouse Twenty One, agreed to remove the guaranteed payment clause from their contract.

However, Clontz said that other clauses in the contract meant that the lottery was always able to spend less than the stated guarantee. He said that removing the clause would simply clarify that for the public.

“There’s not a mandatory amount that I must spend no matter what,” Clontz said.

Marketing costs down

Wyoming Lottery Brand Guide 

The Wyoming Lottery Corporation's Cheyenne office. The lottery contracted with local advertising firm Warehouse Twenty One to both create its original brand and carry out marketing efforts.

While the lottery claimed it was exempt from releasing the contract under the Wyoming Public Records Act, the document was referred to in a public audit released last year. The audit stated that the lottery had agreed in 2014 to pay “no less than $1.5 million annually” to its marketing firm before lowering that amount to $850,000 last year. Clontz said that amount was further reduced to $650,000 per year last spring before the minimum guarantee was eliminated altogether within the last few weeks.

Lottery officials were unavailable to answer questions about marketing spending last month, but the report presented to the governor last month shows a dramatic reduction in marketing costs as a total percentage of lottery expenses from 30 percent in 2013 to less than 5 percent this year.

Roughly 40 percent of the money paid to Warehouse Twenty One this year has gone to media buys, meaning it was funneled through the marketing firm to television and radio stations and other platforms for advertisements.

The two largest goals of the marketing spending in 2017 have been “new game testing” and “events/sponsorships.”

Clontz said that initially the lottery had to spend more on marketing to create a brand and build awareness among Wyoming residents, but that in recent years he has been able to cut that spending and is hoping to reduce it by another $50,000 if doing so will not harm ticket sales.

Like the lottery itself, Clontz said that marketing is easy to attack for frustrated lawmakers and interest groups seeking new funding.

“Marketing and advertising is an easy target because it’s always a large budget and people think you don’t need to do that much,” Clontz said. “But it works. It generates sales and new players.”

He said the lottery is working to find the “sweet spot” where it’s possible to receive the maximum return on marketing investment.

Chief Administrative Office Robin Reining did not detail exactly how the lottery measured those returns but said that the lottery carefully tracks the success of each campaign and adjusts accordingly, including ending its sponsorship of Cheyenne Frontier Days this year.

“As we’ve reduced budget we’re definitely more strategic with how we approach our fiscal years,” Reining said. “Everything we do has a goal related to it — there are measurables.”

Reining said the lottery has focused more on lower-cost digital marketing efforts, including social media advertising and promotions on the lottery’s website, as it has sought to cut costs.

(Reining worked for Warehouse Twenty One until last year when she joined the lottery, originally as chief operating officer.)

Based on the numbers provided in the audit report, a Star-Tribune analysis found that the Wyoming lottery was spending more per capita on its marketing than every other neighboring state with a lottery system.

But the Wyoming lottery’s governor’s report used a slightly different model that counted only adults and included some non-neighboring states to find that marketing spending for the state was below average.

The Wyoming lottery has budgeted a total of $1 million on marketing during the current fiscal year, meaning it no longer has the highest per capita advertising costs, now spending less than states like Colorado and Nebraska but still more than Montana and South Dakota.

Expenses in context

File, Star-Tribune 

Wyoming Lottery Corporation CEO Jon Clontz defended his organization's expenses.

The report also seeks to contextualize other lottery expenses and rebuff complaints that administrative costs at the Wyoming lottery are unusually high.

It includes a graph that shows Clontz’s annual compensation of $191,618 is significantly less than other lottery executives in states where, like Wyoming, the lottery is not a state agency. Another chart shows that Clontz makes less than CEOs in four other states where lotteries have launched since 2003.

Clontz also argued that while lottery profits remitted to the state quarterly have fluctuated since they began in the spring of last year — ranging from $1.12 million to just $200,000 — looking only at direct transfers to the state is misleading.

The lottery has transferred a total of $5.5 million to the state but Clontz said the benefit to Wyoming has been far greater than that. Clontz noted the lottery has paid $33.5 million in prizes to lottery players in the state and paid over $5 million to retailers who sell lottery tickets.

“It’s not $5 million it’s $40 million, man,” Clontz said. “Think about before the lottery got here — there’s been an economic boost to Wyoming retailers.”

Wyoming Lottery board member Mary Throne, who was in the Legislature when it passed the law creating the lottery, agreed. She said that while she understands the frustration of local government officials who want to see more money remitted by the lottery, it is important to consider the broader benefits of the lottery.

“One interesting thing that I don’t think gets mentioned enough is the indirect effect for local communities in terms of increased sales tax,” Throne said. “For a community like Evanston the lottery is very important.”

(Throne is running for governor and is the presumptive Democratic nominee.)

Revenue limited

Ryan Dorgan, Star-Tribune 

A customer purchases Powerball tickets at a Loaf 'n Jug in Casper last year. The Wyoming Lottery is barred from selling "instant win" games, like scratch-off tickets.

Among both lottery officials and critics there is broad agreement that while it might be possible to continue reducing expenses and at least modestly increase the money remitted to the state, it will take more game options for the lottery to contribute more than a few million dollars per year to the state’s budget.

Clontz said that much of the current anger at the lottery comes from a misguided belief that the organization would be able to send $25 million, a number he has heard bandied about repeatedly, to state coffers each year. Even if it wasn’t still finding its footing and adding new games, Clontz said that amount is unrealistic.

“If you do the simple math, it’s just not possible with our population,” Clontz said.

While the lottery has generated over $25 million in total revenue so far this year, almost half that is required to be paid out in prizes. There are other expenses like security and game testing that the executive said he thinks people forgot about when the lottery was approved.

“Sometimes I think they thought we were going to pull up in a truck and hand out those little red tickets,” he said.

Throne agrees that lawmakers who supported the lottery, like herself, overestimated how much revenue it would generate.

“We were unrealistic in our expectations for how much money it would make given how much it costs and also the limitations we put in the bill on the number of games,” she said.

The law that created the lottery barred it from offering “instant win” games, such as scratch-off tickets. That puts a damper on the total amount of revenue the organization will ever generate, according to not only Clontz but also critics like Pete Obermueller, director of the Wyoming County Commissioners Association.

Obermueller said that if the state wants the lottery to remit closer to $10 million per year, the types of games it offers will need to be expanded. He said that under the current law, the most that local governments could hope to see in annual direct payments from the lottery is in the $3 million to $5 million range.

“You only get up to the $6, $7, $8, $10 million range if you talk about the lottery games that are illegal,” Obermueller said.

Still, Obermueller and Wyoming Association of Municipalities executive director Rick Kaysen both told the Star-Tribune last month that they are considering asking lawmakers to require the lottery to either cap expenses or remit a set amount or percentage of profits to the state each year.

Administrative cap considered

File, Star-Tribune  

Executive Director of the Wyoming Association of Municipalities Rick Kaysen has expressed concern that the Wyoming Lottery is not transferring more money to local governments.

Clontz said that requiring the lottery to send a specific dollar amount to the state each year would be a problem because sales are unpredictable. But Clontz, who has also worked for lotteries in Oregon and Washington, said he was used to working with expense caps and could do so relatively easily in Wyoming. Still, he cautioned both that Wyoming’s lottery is new enough that is still unclear what a stable amount of operating expenses look like, and that implementing an expense cap specifically because the state is going through a budget crunch would be hasty.

“I don’t necessarily think administrative caps are a bad thing,” he said. “But if you put an admin cap in just as a reaction to difficult budget times, I think it’s premature.”

For example, rolling out new games includes one-time expenses, and Clontz said the lottery would still like to expand its gaming portfolio.

But Clontz pushed back against the larger narrative presented by Obermueller and Kaysen that the the lottery is both unaccountable and not focusing enough on remitting funds to the state. He said that the lottery has four goals and was never instructed to focus primarily on generating public revenue. The goals as outlined by Clontz are to:

  1. Provide an economic benefit to retailers;
  2. ensure Wyoming residents don’t leave the state to buy lottery products;
  3. create “winners and value for players”;
  4. transfer as much profit as possible to the state.

Now, with the economic woes caused by the energy bust, Clontz feels like his original mandate is shifting underfoot.

“This budget crunch is kind of new to Wyoming and a common reaction is to displace blame,” he said. “You hear a lot of local politicians saying, ‘Why isn’t the lottery doing this? Why isn’t the lottery doing that?’ Well what are local politicians doing?”

The lottery, says Clontz, will never be able to fix the budget.

Wyoming's homeless population continues to grow, despite sharp drop in chronic homelessness

The number of people experiencing homelessness continues to rise in Wyoming even as the energy sector recovers from the bust.

During the night of Jan. 27, volunteers counted 873 homeless people across the Cowboy State, according to data released Wednesday by the U.S. Department of Housing and Urban Development. The number of people experiencing homelessness in the state has increased each year since 2014. In 2016, a similar measure counted 857 people.

Of those people experiencing homelessness, 41 percent were unsheltered, meaning they were staying in a public or private place not meant to accommodate a sleeping person, like a park bench or a car.

On a January night each year, staff from aid organizations and volunteers scour communities across the country and count the number of people living on the streets, in shelters or in temporary housing. While the data, known as the annual point-in-time count, is not all-encompassing and can be affected by the number of available shelter beds and weather, it is a starting point to gauge the extent of homelessness in a community.

The number of homeless people living in Wyoming spiked in 2011 and 2012, with a high count of 1,813 in 2012. The number dropped significantly in the following years, but has never returned to the lower numbers seen before 2011.

Lyle Konkol, HUD Wyoming field office director, said he couldn’t explain why the homeless population has steadily grown over the past few years despite moderate economic growth.

There were improvements in the numbers, however. The number of homeless families, chronically homeless individuals and homeless veterans showed a decrease from 2016.

“I think we’re making progress,” he said. “It’s a tough business, it’s very hard to operate on little money.”

Nationally, the number of people experiencing homelessness increased by 1 percent from 2016 following seven years of steady improvement. On that one January night, 553,742 people were homeless — 17 for every 10,000 people who live in the U.S. Officials with Department of Housing and Urban Development attributed much of that national growth to sharp rises in a handful of cities where the cost of living is rising, especially along the West Coast.

In Wyoming, service providers have been making extra efforts to help homeless veterans and the chronically homeless into housing as efficiently as possible, Konkol said. By HUD standards, a person qualifies as chronically homeless if he or she has a disability and has been continuously homeless at least a year or has experienced multiple episodes of homelessness in the last three years where the combined length of time is at least 12 months.

Wyoming workers counted 14 people who qualified as chronically homeless in 2017. That is the lowest number ever counted in Wyoming and is a significant decrease from the 91 chronically homeless individuals counted in 2016.

Similarly, workers counted 63 homeless veterans this year, the lowest number since 2008. Outside of 2012, when workers counted 311 homeless veterans, the number has ranged between 83 and 137 in the past decade.

Konkol attributed some of that success to an increased number of HUD vouchers that subsidize rent for homeless veterans allocated to the state and a program that minimizes wait times for homeless vets.

Despite the improvements, Konkol said Wyoming programs to combat homelessness are underfunded by the federal government. Each year, the state’s HUD office receives about $300,000 for its homeless programs. The funding levels are calculated based on a number of factors, including a state’s population, level of poverty and the point-in-time counts. The lack of federal funding means many programs have to spend more time applying for grants or seeking partnerships with the state or local governments.

“Our funding is tragically low compared to other states,” he said.

In Casper, workers at the Wyoming Rescue Mission have noticed an increase in the number of homeless people as well. But the shelter has also served a growing number of people who are not homeless but come to meals because they can’t afford to buy their own food, said Michael Cavalier, the mission’s communications and events coordinator.

Those clients won’t show up on the annual point-in-time count, he said, but reflect the economic reality in Casper.

He noted that the shelter has also served an increasing number of women who are homeless, but said that he could not pinpoint why.

“The reasons people are homeless varies person to person,” he said. “There’s nothing to say here’s the problem or here are the sets of problems.”

File, Star-Tribune  

The Wyoming Lottery's expenses, especially for marketing, have come under scrutiny recently but lottery officials defended the operational costs, which they say have been reduced significantly in recent years.

After police and administrators press student journalists for sources, UW may change sexual assault reporting policy

The University of Wyoming and its police department pressured student journalists to name its source for a story alleging sexual assaults by an unnamed resident assistant, prompting a lawyer to get involved and the school to consider changing its reporting policies.

On Nov. 3, the UW student paper, the Branding Iron, published a report headlined “Number of sexual assault reports increases.” The article begins with an allegation that an unnamed resident assistant had been accused of sexually assaulting “girls” in a dorm during the spring and fall 2017 semesters.

The report does not provide sources for that claim, nor does it offer details about who the resident assistant is or in what dorm the assaults allegedly took place.

Chad Baldwin, a spokesman for the university, said Tuesday that the University of Wyoming Police Department had concluded that the claim was false.

“It’s a baseless report,” he said.

Taylor Hannon, the editor in chief of the Branding Iron and a UW student, said the newspaper was “working on completing the story to further investigate.”

She said she and the other editors felt the story was appropriately backed up and “wouldn’t have run it” otherwise.

In any case, authorities did not know that the story was apparently rumor at the time it was posted. After its publication, a University of Wyoming Police Department detective contacted its author, according to a letter sent to the university by Bruce Moats, an attorney retained by the newspaper’s advisor. Moats also represents the Star-Tribune on some legal matters.

The detective spoke with the story’s author, a freshman, in what Hannon described as a setting that was like an interrogation. The author felt very pressured to give the detective information, Hannon said.

The journalist told the detective that she heard the story from another staff member, who told the detective that she’d “overheard the rumor” from another student in a class, according to Moats’ letter.

“The reporter was told to go find that student and get her name and number,” Moats wrote in his letter to Tara Evans, the general counsel for UW. “The reporter did so, but the student refused. The reporter informed police of the refusal and was told to try again or to give the source the office’s number.”

In a Dec. 1 editorial calling for more protection for journalists, the Branding Iron said the detective “continued to pressure another staff writer, calling her personal cell several times demanding information regarding a source that (the detective) should have obtained herself as a detective.”

The editorial calls for a statewide shield law. Generally, such laws protect journalists from having to give up sources in court or to authorities.

In addition to the law enforcement contact, Nycole Courtney — the interim dean of students — emailed the newspaper’s advisor, Cary Berry-Smith, to tell her that the students “are to give up (their) sources,” according to the editorial.

Hannon said the reporters have a right to protect their sources. But she added that she was not sure if any source had been granted anonymity or confidentiality in the reporting of the Nov. 3 report.

The university and police were apparently pressuring the paper not only out of a desire to investigate the alleged assault but also because they believed the Branding Iron staff were “mandatory reporters,” meaning that they were required to report campus sexual assault to the appropriate authorities.

In his letter, Moats wrote that UW’s interpretation was incorrect: Quoting the university policy, he said that “every administrative officer, dean, director, department head, supervisor, and all instructional personnel” qualified as mandatory reporters. Students and unlisted employees appear to be excluded.

Baldwin said he would defer to Moats’ interpretation. The university’s 2015-2016 student code of conduct identifies mandatory reporters as “university officials,” then refers to the list included in Moats’ letter.

The university was working to create an exception within its policy for journalists, Baldwin added.

“Yes, there is a qualified privilege for reporters that we need to honor,” he said. “But also that — understand when it comes to the health and safety of our campus, we’re going to be pretty aggressive.”

Hannon said she was unaware of the proposed changes to the policy until she read it in media reports on Tuesday.

UWPD Chief Mike Samp told the Star-Tribune that there was no threat of punishment or arrest toward the reporters. Nor did they invoke any First Amendment protections, he said.

“Of course we’re going to check into that. Our only source of information at the time were those reporters,” Samp said. “The conversations from a law enforcement perspective, in my opinion, is they were courteous, they were respectful. Not coercion, not demanding.”

Baldwin said that “perhaps” the university went “too far in this case” but that officials took the report seriously. He noted that authorities neither arrested nor threatened any other legal action against the newspaper or its reporters.

“Perhaps we erred on the side of being too rigid there perhaps in this case, but the intent was, ‘Listen, let’s get to the bottom of what was reported here,’” he said.

In his letter, Moats wrote that the university’s response to the original article has already had a negative impact on the Branding Iron’s coverage. When a sexual assault was reported on campus last month, “no reporter for the Branding Iron would do the story for fear of being subjected to heavy-handed treatment like the two reporters here had endured,” he wrote.

The newspaper instead appeared to copy and paste the university’s own release about the assault and publish it on their website. The author of the article is given only as the Branding Iron.

Brad Diller, longtime principal of Kelly Walsh, announces his retirement

Brad Diller, the longtime principal of Kelly Walsh High School, will retire at the end of this school year, he confirmed Wednesday.

“I’m old, you know?” he said when asked what prompted his retirement. “I’ve been in the district — I think this is my 39th year at the end of the year. So it’s still a lot of fun to go to work every day, but there are other things out there to consider, and so I think it’s just a good time.”

Diller is in his 23rd year as principal of Kelly Walsh, one of Natrona County’s two large high schools. A Michigan native, he came to Casper in 1979 to work at Mountain View Elementary as a special education teacher. He led Kelly Walsh through its recent renovation that, together with construction at Natrona County High, cost roughly $200 million.

In a statement, district spokeswoman Tanya Southerland praised Diller’s impact on Kelly Walsh and Natrona County schools.

“His commitment to educational excellence for all students combined with his caring nature has made him a tremendous leader — not only at KWHS but in the district in our community,” Southerland wrote. “His positive attitude, sense of humor, and dedication to serving as a fair and quality leader will be missed by his colleagues at KWHS and all those who have grown under his tremendous leadership within the Natrona County School District.”

Diller said his decision was not influenced by the state’s current education funding shortfall or other factors. He said he spoke with Superintendent Steve Hopkins last spring and said he was considering retirement.

“No one has come in yet and said, ‘You need to go now,’ and I don’t want to be that guy,” Diller said.

Diller said he wasn’t part of the discussions on who would replace him as principal. Southerland declined to comment.

Diller said he plans to stay in Casper and volunteer at various nonprofits in the community.

“You know, the people asked, ‘What are you going to miss? What are you going to do?’” Diller said. “It’s always been about the kids. The best part has always been the kids and so that’s something, you know, I’ve said forever and believed forever and always will.”

Associated Press 

Three U.S. battleships that were hit from the air during the Japanese attack on Pearl Harbor on Dec. 7, 1941, which brought the U.S. into World War II. From left to right are the USS West Virginia, severely damaged; USS Tennessee, damaged; and USS Arizona, sunk.