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RALEIGH - The North Carolina lottery increased the amount of money it put into education over the past year by making a counterintuitive move that initially troubled some legislators.

When the General Assembly drafted the original lottery law in 2005, it included a mandate that 35 percent of the lottery's proceeds had to go toward education.

In 2007, that safeguard was waived, allowing the lottery to offer bigger prizes but reducing the state's cut of lottery revenues. The logic was that offering better odds and bigger prizes would entice more players, increase overall revenues and therefore produce a net gain for the state.

The gamble appears to have paid off, according to financial statements and audits reviewed by the N.C. Lottery Commission on Wednesday.

In July, August and September, for example, the lottery transferred about $20 million more to state education coffers than during the same time period in 2007.

"After startup, we lost a lot of players," lottery Director Tom Shaheen said. Those players, initially excited about the new lottery, favored games in neighboring states that had better odds of winning or bigger prize payouts. North Carolina's lottery revenues began to climb when it was able to match the prizes offered by its neighbors.

"We're getting those players back," Shaheen said.

The lottery increased the odds only for scratchoff games, not the Pick 3 or Cash 5 games in which numbered balls are drawn. And in every month since January when the new prize schemes went into effect, scratchoff ticket sales outpaced sales from the prior year by hefty margins.

When lawmakers made the change in 2007, even those who supported it said they worried that decreasing the state's percentage might not have the expected payoff.

"It does make me feel a little bit better knowing that the decision we made has helped the lottery from a player perspective and in turn helped our revenues," said Rep. Maggie Jeffus, a Greensboro Democrat and House budget writer.

Lottery opponents like Republican Sen. Phil Berger of Rockingham are uncertain that the boost in revenue is entirely a positive thing.

"It's resulting in more people spending more money that could probably be better used by individuals for other things," Berger said. "I'm not sure that should be viewed as good news."

The question for lottery officials is whether the improved revenue picture will hold or fall below expectations as the economy slows. The same conditions that have slowed tax revenues and prompted economists to say we are in a recession could also hurt lottery sales during the next year, Shaheen told lottery commission members.

In particular, he said lottery officials would be interested in seeing how sales in January and February fare compared with the prior year.

"Like everyone else in the world, we'll just have to wait and see where the economy is going," he said.

Plans for the coming year include a new numbered ball drawing game in which players will choose four numbers and a $5 instant game.

Shaheen also asked lottery commissioners for permission to draw up a marketing plan that would include Spanish language advertising. According to the lottery, 6 percent of the retailers who sell tickets serve customers who are primarily Spanish-speaking.

Commission member Bridget-Anne Hampden called the idea "an opportunity" and other commission members agreed, saying the lottery ignored Spanish-speakers at its peril.

The commission is likely to move cautiously to avoid running afoul of part of the lottery law that prohibits the agency from "targeting" any one minority, ethnic or other group through advertising.

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com