Faced with stagnant sales and a rising sea of gambling competition, California Lottery officials are pushing legislation that would cut the percentage of the games' revenues guaranteed to schools and increase the amount paid out in prizes.

The strategy, backed by a coalition of lottery suppliers, retailers and school officials, is based on the idea that less is sometimes more: Bigger prizes will spur greater customer interest and increased sales, which will mean more money for education even if the percentage is less.

"The bottom line is to maximize the lottery for public education," said Assemblyman George Plescia, R-La Jolla, who is carrying the bill, AB 2938.

Plescia said that when other states, including Texas, New York and Massachusetts, have increased their lottery prize pools, their total revenue has soared because of more business.

But some education groups aren't keen on gambling on a bigger return from a smaller piece of the lottery pie.

"We have serious concerns about the bill," said Sandra Jackson, a spokeswoman for the 335,000-member California Teachers Association. "Schools are already hurting, and anything that could cut the funds we already receive would just hurt schools further."

At the heart of the matter is a provision in the constitutional amendment voters approved in 1984 that created the lottery. Under it, education was guaranteed no less than 34 percent of the games' revenues, with at least 50 percent for prizes and the rest for administrative costs and overhead.

Plescia's bill gradually would increase the share for prizes to 62 percent and reduce the share for schools to 25 percent. The increased prize money would be doled out in the form of more winning Scratcher tickets in the "midprize" range of $50 to $100.

The bill also would guarantee schools a minimum of $1 billion in lottery revenues annually.

If approved by the Legislature and signed by the governor, the measure would mark the first major overhaul of the lottery's revenue structure since the first Scratcher tickets went on sale in October 1985.

But it's not the first time lottery officials have tinkered with the structure.

Beginning in 1997, lottery officials started a three-year program that reduced administrative spending from 16 percent to 13 percent and plowed the savings into more prizes for the Scratcher games.

"We saw basically a doubling in Scratcher sales," said Dennis Sequeira, chief deputy director of the lottery, "from about $600 million to about $1.2 billion."

In 2000, Sequeira said, sales for SuperLotto games began to sag, so officials increased the jackpot structure. The result was increased consumer interest, enough that the lottery has provided about $1 billion to schools for each of the past three fiscal years, and is on track to do so this year.

While a billion dollars is nothing to scoff at, some education officials point out it doesn't go as far as it used to.

When the lottery began, revenues from the games made up about 3 percent of the funds schools received from the state. Now, it's about 1.8 percent.

"We've been after the lottery for years to revamp (its revenue distribution)," said Kevin Gordon, executive director of the California Association of School Business Officials, which supports the Plescia bill.

"We would much rather have a smaller percentage of a big, big pie than a bigger percentage of a Hostess Twinkie, which is basically what we've got."

Lottery revenues have been relatively flat in recent years, hovering between $2.8 billion and $2.9 billion since 2000, and Gordon and others point to competition from rival gambling venues such as Indian casinos as part of the reason.

"Lotteries are a different type of game, they're more of an impulse," said Bob Vincent, vice president of corporate communications for GTECH, a Rhode Island-based company that supplies equipment and expertise for 28 lotteries around the world, including California's. "(But) it obviously comes out of a pot of dollars that people have for entertainment, and that's not unlimited."

In a nod to the competition, Plescia's bill would allow the lottery to use casino themes such as roulette and blackjack in Scratcher games. Those themes, which have proved popular in other states' lotteries, currently are banned in California. The lottery act's framers wanted the games to look as little like gambling as possible.

In addition to GTECH - which spent close to $500,000 lobbying for an earlier version of Plescia's measure as well as for a bill that would allow lottery machines to make change - lottery retailers are championing the revenue shift.

"We look at it as something favorable for our members and especially for education in the state," said Paul A. Smith, vice president for government relations for the California Grocers Association. "More volume is good for everyone."

Maybe not everyone, say gambling critics.

"Lottery is the entry-level choice for new gamblers," said Tom Tucker, president of the Council on Compulsive Gambling of California. "Over half of the problem gamblers we deal with play the lottery consistently.

"Anytime there is more money to be made, then I think you are going to find more people spending more money to chase that little extra prize that may be out there."

More politically formidable than gambling critics to the bill's chances is opposition from education groups. In addition to the CTA, the California School Boards Association is opposed unless the measure is amended to guarantee revenues that would cover increased enrollment.

"We want to ensure that as enrollments increase, we are covered," said Debra Brown, legislative liaison for the school boards association. "Our concern is that if this doesn't work, the flat amount guaranteed by the current bill won't be enough."

Plescia said he's willing to work with bill opponents to allay their concerns.

"We don't want to jam this through, we'd like to have support from everyone," he said. "But the goal is to maximize money for education ... that's why we approved the lottery in the first place."