Lottery operations are entirely funded through the sale of Scratch and Lotto tickets. No tax
dollars go to support the Lottery.

Section 23-7-402, MCA, specifies how each dollar spent on Lottery tickets is to be distributed.
Below is an overview of sales and expenditures since the Lottery began operation:

	FY 87-88*	FY 89	FY 90	FY 91	FY 92	FY 93	FY 94	FY 95	FY 96	FY 97	FY 98	FY 99	FY 00	FY 01	FY 02	FY 03	FY 04	FY 05	FY 06	FY 07
Revenue	26.2	11.5	21.5	24.0	28.0	36.9	37.6	33.0	32.0	28.5	30.1	30.4	30.2	30.7	33.8	34.7	36.7	33.8	39.9	41.6
Prizes	11.9	5.3	10.2	11.7	13.6	17.7	18.1	16.2	15.9	14.3	15.3	15.1	15.6	15.7	17.1	17.5	18.7	17.8	20.7	21.4
Commissions	1.5	.7	1.3	1.4	1.6	2.1	2.1	1.8	1.8	1.6	1.7	1.7	1.7	1.7	2.0	2.0	2.1	2.0	2.3	2.5
Ticket Costs	.9	.6	2.9	4.0	4.2	5.2	4.9	3.5	3.3	3.0	3.4	3.6	4.1	4.2	4.4	4.8	4.8	4.7	4.0	3.4
Operations	3.5	2.1	2.9	2.7	3.0	3.0	3.1	2.9	3.2	3.0	3.1	2.9	3.0	3.0	3.0	2.9	3.0	3.3	3.3	3.1
Extraordinary Item												.3**			.2***
Proceeds to Teachers Retirement Fund	8.4	2.8	4.2
Proceeds to Schools				4.2	5.5	8.1	8.5	7.8
Proceeds to Board of Crime Control					.1	.8	.9	.8
Proceeds to State of Montana General Fund									7.8	6.6	6.6	6.8	5.8	6.1	7.5	7.5	8.1	6.2	9.1	11.4

Revenue is composed of ticket sales, earnings on investments, and licensing fees.

A minimum of 45% of all sales revenue is returned to players in the form of prizes.

Lottery retailers earn a 5% base commission on each ticket sold. They also have the opportunity
to earn additional commissions through a Scratch ticket retailer incentive program. Every Scratch
ticket sold over an established base qualifies for an incremental bonus of from 0.5% to 5%.

Ticket costs include the printing of Scratch tickets, the fee per ticket sold (Lotto and Scratch)
paid to the Lottery’s on-line vendor, and expenses related to the Lottery’s Operating System.

In March 1999, the Lottery entered into an agreement with Scientific Games International to
purchase hardware, software, and associated services to allow the sales of Lottery tickets and
Scratch ticket validation and accounting. Ticket costs increases starting in fiscal year (FY) 1999
are related to that investment and include depreciation, amortization, and interest expense.

In FY 1997, the Montana Lottery introduced an Instant Ticket Validation and Accounting System
(ITVAS) to automate sales, redemption, and accounting for Scratch tickets. Increased costs
associated with ITVAS are reflected in the Ticket Costs category.

In November 1989, midway through FY 90, the Lottery introduced the first of its on-line Lotto games,
Lotto*America. The increased costs associated with the offering of on-line products are reflected in
the increase in Ticket Costs beginning in FY 90.

The Montana Lottery is responsible for the marketing and sales of all Lottery products, public and
media relations, the security of all elements of the Lottery, warehousing and inventory control, and
Lottery operations, which include accounting, fiscal management, and information technology.

Beginning July 1, 1995, by legislative action, Lottery profits are transferred on a quarterly
basis to the state's General Fund. The General Fund provides money to state programs which
do not have a dedicated revenue source. In fiscal year 2007, the General Fund received
$11.4 million. To date, the Lottery has transferred over $89 million to the General Fund.

In FY 1992, the legislature earmarked 1.6% of Lottery profits to the Board of Crime Control to
fund administrative costs associated with juvenile detention centers. Beginning FY 1993,
9.1% of Lottery profits were transferred to the Board of Crime Control. Through June 30, 1995,
the Board of Crime Control received over $2.5 million.

Beginning July 1, 1990, the Legislature reallocated Lottery profits to the Office of Public Instruction
School Equalization Aid Account, which helped fund Montana’s elementary and secondary public
schools. Through the end of FY 1995, the Lottery transferred over $34 million to the Equalization Aid Account.

In November 1986, Legislative Referendum 100, the Montana State Lottery Act, passed by 69% of
the popular vote, with Lottery proceeds to go to the Teachers Retirement Fund for the purpose of
holding the line on or reducing property taxes. Through the end of FY 1990, Lottery proceeds to the
Teachers Retirement Fund totaled over $15 million.