But the report, a draft of which was viewed by The Associated Press, also cited a slumping economy and other factors for a recent slowdown in lottery sales after several years of big increases statewide. Sales rose less than 1 percent in 2007 after jumping more than 9 percent in 2006.
"Although it is still early and further data collection and analysis are necessary, it appears that the opening of slots gaming facilities is having some effect on lottery sales in the area immediately surrounding the casino," the report said.
The state in 2006 approved 11 sites for slot-machine casinos. Six were up and running in 2007, while a seventh slot-machine casino, Hollywood Casino at Penn National Race Course near Harrisburg, opened in February. Four more are licensed, but not yet open.
To illustrate the impact, the report's authors pointed out that lottery ticket sales in 2007 dropped an average of 4.2 percent in six casino counties - Bucks, Delaware, Erie, Luzerne, Monroe and Washington.
Sales in the 20 counties that are adjacent to the casino counties rose 0.7 percent - almost identical to the statewide average of 0.8 percent - while sales in the other 41 counties rose an average of 3.8 percent.
However, the report's authors also noted that many of the casino counties are close to, if not bordering, one of four neighboring states - Maryland, New Jersey, New York and Ohio - that participate in Mega Millions. The multistate lottery game competes with Pennsylvania's sales of Powerball tickets, it said.
Officials in Gov. Ed Rendell's administration told the AP in July 2006, before slots casinos opened, that they expected lottery sales to be unaffected by slot machines, although they also projected sales to slow after several years of expanding the number of ticket retailers and adding new games with better odds.
Results from other states have been mixed in the years following the legalization of casino-style gambling. Lottery sales have foundered in some states, but others have seen sales rise without interruption.
The lottery's approximately $3 billion in annual sales support services for the elderly, such as the state's low-cost pharmaceutical drug program, nursing home care, transportation and rebates on rent and property taxes.
The report studied the 15 months beginning in November 2006, when Mohegan Sun at Pocono Downs opened near Wilkes-Barre, through January. During the period, casino patrons wagered about $14 billion and lost almost $1.2 billion, according to figures from the Pennsylvania Gaming Control Board.
In a letter published in the report, state Revenue Secretary Tom Wolf called the review "very thorough, fair and objective," but maintained that he sees no definitive proof of a connection between slots and lottery sales.
"We have no reason to believe slots are negatively affecting sales; however, as you also pointed out, it may still be too soon to tell, since most of the facilities have not been open a year yet," Wolf wrote in the letter dated April 22.
