INSTANTLY RICH? STATE LOTTERY TO OFFER LUMP-SUM OR 26-YEAR PAYOUT.

Byline: Steve Geissinger Associated Press

In a steady stream, morning to night, players throw down their cash at Lotto Liquors to buy dreams of fabulous riches from the California Lottery.

Most smile - a glint flashing in their eyes - at the news that Super Lotto will begin offering its top prize in a lump sum, starting with the April 1 draw.

Instant millionaires!

``I'd want the whole prize now, so I could spend my money in Germany or France or wherever. I don't know when I'd be back,'' says Roger Beatty. The 51-year-old machinist, sporting a worn baseball cap, places his bet on a counter plastered with hundreds of old winning play slips.

The lottery is changing the top-prize payout to give two options, a lump-sum, upfront jackpot or smaller annual payments over 26 years. The agency hopes the changes will boost lagging sales. Many players like the idea because they get more money sooner - at first.

But there's a catch: Winners taking a lump sum will get only about half the advertised jackpot, which is what the lottery would have to invest to make the annual payments. They would get much more over the long run by opting for smaller annual payments.

And with instant wealth come instant headaches, like deciding what to do with the windfall.

Under the lump-sum plan, players must choose at the time they make their bet if they want a single check. They'll get the dollar amount that the lottery would have to invest today to pay the advertised amount in 26 ever-increasing payments. For a $3 million jackpot, that would be about $1.5 million before taxes.

Winners could invest the lump sum, but will they?

``If they invest, they'd be way ahead of the game,'' said financial planner Bob Affronti. ``But with most people, if they take a lump sum, it's going to be gone in 60 seconds.''

Under the old rules, the lottery paid off in 20 equal annual payments - a $3 million jackpot, for example, brought 20 annual payments of $150,000 each. The actual annual payment was $108,000 due to the standard federal tax withholding of 28 percent, or $42,000. There are no state taxes on lottery winnings.

Under the new rules, players will be paid in 26 years, instead of 20. And the dollar amount of the annual installments will grow from year to year - starting at $100,000 a year before taxes, for example for a $4 million jackpot, then slowly growing by about $4,000 a year, to a check for $204,000 before taxes in the 26th year.

Lottery Director William Popejoy said research shows older people especially like the idea of a big payoff. Nineteen of 35 other state lotteries offer a lump-sum choice.

``I'm 81 years old. I'd have to live to be over a hundred to collect it all if I chose the annuity,'' said James Boyers, a bespectacled former newspaper editor buying his ticket at Lotto Liquors.

``Hell yes, I'd like a one lump-sum payoff if I won,'' said Dominic Vairo. The 84-year-old retired railroad worker is wearing a shirt from Hawaii - his destination if he wins.

Some players will still want the annual payments.

``I'd want the annuity. I'm not very good with money,'' said Derek Kawate, a 26-year-old parcel service worker.

The new annuity will earn more interest and therefore pay more than the old annuity.

By adding six years to the payoff period, the lottery earns extra interest. Instead of advertising a $3 million jackpot paid by a 20-year annuity, it will advertise a $4 million jackpot, paid in 26 years.

For players, the gradually increasing annual payments are also a hedge against inflation. That could all be good for winners - except that they will pay more taxes because they're getting more money.

It could also be good for the lottery: The hope is that more players will seek the larger jackpot. And if no one wins one of the semiweekly jackpots, it rolls over. Bigger jackpots and more players add up to even bigger jackpots.

All this adds to overall sales, which means more money for the lottery and for education, which gets a third of the proceeds.

Sales have fallen below the lottery's potential for years, prompting a reorganization, layoffs and other changes such as adding the lump-sum payoff. The lottery expects to log $2.25 billion in 1997-98 sales, nearly restoring it to the sales of the late 1980s.

``It might lure me into playing weekly again,'' says Rose Dey, a 64-year-old housewife.

It's that kind of enthusiasm for the lump-sum payoff that worries gambling observers.

``They think, not only could I win, but I could have it in lump sum,'' said Tom Tucker of the California Council on Problem Gambling. ``It feeds into the dream world of the compulsive gambler.''

WHAT ARE THE ODDS?

The odds of winning California's Super Lotto jackpot are 1 in 18 million. The odds of some other events:

1 in 1 million (18 times more likely) to die from flesh-killing bacteria.

1 in 650,000 (nearly 28 times more likely) to be killed by terrorists while traveling abroad.

1 in nearly 650,000 (nearly 28 times more likely) to be dealt a royal flush on the opening hand in a poker game.

1 in 48,000 (375 times more likely) to die of heart disease from eating a broiled steak a week.

1 in 30,000 (600 times more likely) to die from lightning.

1 in 5,000 (3,600 times more likely) to die of cancer from eating a peanut butter sandwich a day.

Source: James Walsh, ``True Odds,'' Merritt Publishing, 1996.

THE OPTIONS

The lottery is changing the top-prize payout to give two options, a lump-sum, upfront jackpot or smaller annual payments over 26 years.

Winners taking a lump sum will get only about half the advertised jackpot, which is what the lottery would have to invest to make the annual payments.

They would get much more over the long run by opting for smaller annual payments.

Players must choose the lump-sum plan at the time they make their bet.

CAPTION(S):

2 boxes

Box: (1) WHAT ARE THE ODDS? (See Text)

(2) THE OPTIONS (See Text)