The Associated Press

LOUISVILLE - Kentucky Lottery officials say they have their first hard evidence that Tennessee's new lottery has chipped away at their income: Kentucky lost about $1.85 million in the $213 million Powerball drawing on May 8.

Before Tennessee's lottery started on Jan. 20, Kentucky officials estimated that 11 percent of all Kentucky lottery tickets were purchased by Tennessee residents crossing the border to buy them.

The Tennessee Lottery started with a few scratch-off games but has been steadily building its offerings and added Powerball to its product mix on April 19.

Christina Johnson, manager of Lotto Xpress in Guthrie just across the state border, said she used to have lines "backed up out the door all day" for Powerball drawings. That wasn't the case for the May 8 drawing, she said.

"I was sorry to see the lottery start down there," Johnson said. "It really hurt us."

Tennessee Lottery spokeswoman Kym Gerlock said that between the start of Powerball sales and the May 8 drawing, $7.5 million in tickets were sold across Tennessee.

In two comparable Powerball jackpots - $215 million in December 2002 and $210 million in November 2003 - Kentucky ticket sales totaled $24.7 million and $26 million respectively.

But during the run for the May 8 drawing, statewide Powerball sales totaled $20.1 million, said Larry Newby, the Kentucky Lottery's manager of research and planning.

In Kentucky, about 50 percent of all Powerball ticket sales are returned to players in prizes and an additional 13 percent goes to lottery expenses and retailer commissions. So of the $5 million in lost ticket sales, Newby said, about $1.85 million would have ended up in the Kentucky treasury - with most of the money earmarked for education and scholarship assistance.

Retailers in border counties, including Simpson, Fulton, Bell, Todd, Logan and Whitley, showed declines of at least 40 percent in Powerball sales in the recent run.

Sales of Kentucky Lottery scratch-off tickets have fallen about 3 percent for retailers along the Tennessee border since the January startup. And sales for the Kentucky Lottery's Pick 3 game are down 6.5 percent along the border since March 1, Newby said.

But both games have increased their total Kentucky sales since the Tennessee Lottery began. Newby attributes that to recently increased prize payouts.

Kentucky Lottery spokesman Chip Polston said officials fear that eventually the Tennessee Lottery will siphon off up to $75 million a year in Kentucky ticket sales. That means $30 million less going into the state treasury annually.

Kentucky Lottery sales for the first half of the fiscal year ending June 30 increased to $378 million, 10.7 percent higher than the same period the year before. Lottery officials would not project sales for the rest of the fiscal year.