Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, April 30, 1990                   TAG: 9004300238
SECTION: EDITORIAL                    PAGE: A10   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Short

HOW THE LOTTERY MAKES ITS PAYOUTS

All prize money is awarded to the players. In the case of a jackpot prize that is annuitized over 20 years, the prize money is invested by the lottery on behalf of the player.

When the lottery advertises a million-dollar prize, there is actually only about $500,000 in the jackpot prize pool. That $500,000 is invested in government bonds. The principal and interest over 20 years fund the annual payments to the prize-winner. All of those payments for 20 years equal the advertised jackpot prize.

In the case of Tina Saunders of Roanoke County, who won a jackpot of $1.7 million, approximately $850,000 was invested to fund her 20 annual payments of $85,000 before taxes. (As required by law, the Virginia Lottery deducts 20 percent federal taxes and 4 percent state taxes on all prizes over $5,000.) The investments are held for the winners by the state treasurer until all prize payments are completed.

Again, all prize money and interest goes to the player. None is retained by the lottery or the commonwealth.

By investing the prize money and paying players over 20 years, the lottery is able to fund larger jackpots.

\ KENNETH W. THORSON\ Director, State Lottery Department\ RICHMOND