A State Lottery is a Notoriously Unstable and Inefficient Revenue Source and Lousy Economics
Recent studies show an Arkansas lottery would raise no more than $50 million or so.
Even during good economic times, the lottery has been proven to be an unstable and unreliable source of revenue. From 1997 to 1998, 17 of 37 lottery states had declines in lottery revenues from the previous year. From 1999 to 2000 the decline occurred in 19 of 37 states.
Money magazine reported that lottery states collect more in taxes and spend less on schools than non-lottery states.
Since 1990, per capita taxes in lottery states have risen more than three times as fast as in non-lottery states.
Convenience stores believe that selling lottery tickets hurts their businesses, citing such problems as employee time handling tickets, as well as shoplifting and lost sales due to long lines of lottery customers.1
University of Mississippi Donald Moak has found that state lotteries cost more to operate in southern states than the more dense and urbanized states in the Northeast and Midwest. This is because the operating expenses tied to providing access to more isolated rural areas cuts into net revenues. 2
Money thrown away on lottery tickets is money that is not saved, invested, or otherwise spent on consumer goods and services.
Rather than pump money into the economy, lotteries actually draw money out, as people buy tickets with money that otherwise might have been spent at pre-existing businesses. A survey of 1,200 California stores taken by the California Grocers Association reported an average decline in food sales of seven percent since the imposition of its lottery. 3
In 2000, the state of Georgia received only 29.6% of lottery revenues, the state of Louisiana received only 35% of revenues, and the state of Kentucky received only 27.8%. 4
Lottery revenue projections do not take into account costs to the state from compulsive gambling and addiction, including unemployment, health care costs, and bankruptcy. 5
A State Lottery Perverts the Role of Government
A lottery causes the state to be an economic predator of its weakest residents rather than a champion for their well-being.
No state lottery works unless it is marketed to the poor. In fact, many lottery marketing programs revolve around the time of welfare and social security check distributions.
Typical advertising by state lottery agencies reveals the aggressive nature by which states target the vulnerable.
In New York one billboard touted the lottery with the slogan “A dollar and a dream.”
The Illinois Lottery provides the most notorious examples of bad taste and predatory marketing practices. The most infamous example is the Illinois lottery advertisement in an impoverished Chicago neighborhood which read: “This could be your ticket out.”6
Another Illinois Lottery advertising campaign in the 1980s by the Illinois lottery consisted of 40 billboards reading: “How to Get from Washington Boulevard to Easy Street.” Washington Boulevard and other streets mentioned in these ads are located in a very depressed Chicago neighborhood. 7
Lottery marketing plans also push the envelope of taste, as with this plan from the Ohio SuperLotto Game: “We recommend that promotional ‘pushes’ be targeted as early as possible in the month. Government benefits, payroll and Social Security payments are released on the first Tuesday of each calendar month. This, in effect, creates millions of additional, non-taxable dollars in the local economies of which the majority is disposable.” 8
Who Really Plays the Lottery?
Dr. John Clotfelter and Philip Cook call state lotteries “the most regressive tax we know”. Clotfelter and Cook found that lottery players with incomes below $10,000 spend more than any other income group on the lottery, an estimated $597 per year.9
In Texas, high school dropouts spend an average of $173.17 per month on the lottery while those with college degrees spend $48.61. Blacks and Hispanics spend $108.96 and $102.20, respectively, while whites spend $55.02. 10
In 1998, Georgia State University survey found that Georgia families earning less than $25,000 per year spend two to three times as much on the lottery as a percentage of their income than households earning $50,000 or more. 11
The Atlanta Journal-Constitution discovered that Georgia Lottery ticket sales averaged $249 per resident in zip codes where the average annual income is less than $20,000 and only $97 per resident in zip codes with average incomes above $40,000. 12
In New York, a Newsday study showed that those living in the most impoverished areas of the state spent eight times more of their income on lottery tickets than did those living in the most affluent sections. 13
“Heavy players” (defined as those players spending $10 or more a week) of the Maryland Lottery included almost half of all lottery patrons without a high school diploma, almost half of those making less than $20,000 a year and more than 60 percent of all African-Americans players. 14
In one Chicago suburb where the average income is $117,000 a year, the average household spends $4.48 a month on the lottery. In another suburb where the average income is $33,000, the monthly average is $91.82. 15
A study by the Delaware Council of Gambling Problems discovered that lottery machines are strategically placed in poor neighborhoods. There were no machines in the highest-income areas of the state, one for every 17,000 in upper-income areas, one for every 5,000 in lower-middle to middle income areas, and one for every 2,000 in the lowest-income areas. 16
More Addictive Than You Realize
43% of callers to the 1-800-GAMBLER national hotline indicated problems with lottery gambling in 1995. 17
34% of persons who entered publicly funded alcohol and drug treatment centers in Texas stated that the lottery was their most problematic gambling activitiy. 18
The top five percent of lottery players nationally spend nearly $3,400 annually on tickets, accounting for over half of all ticket sales. The top ten percent – who spend an average of $2,250 annually – account for two-thirds of total ticket sales.19
In Virginia, 20 percent of the state’s lottery ticket sales are made to just two percent of its adult population. 20
Dr. Lance Dodes, who runs Massachusetts’ largest outpatient treatment center for problem gamblers says that lottery players comprise 40% of his patients. 21
For Adults Only? Think Again
Based on the experience in Georgia and adjusting for the difference in populations, an Arkansas lottery would annually produce 6,000 teenage problem gamblers or those at risk of becoming problem gamblers. According to research sponsored by the Georgia Department of Human Resources, 62 percent of the state’s adolescents have gambled. The study also found that over a three year period almost three percent of 13- to 17-year-olds were already problem gamblers, and another 10 percent were at risk of becoming problem gamblers. In other words, a minimum of 56,000 Georgia adolescents were already experiencing severe problems with their gambling or were at risk of developing gambling difficulties. 22
A state-run lottery won’t prevent children from participating illegally. In Massachusetts, 47.1% of seventh graders and 74.6% of high school seniors have managed to purchase a lottery ticket.23
27%, 32%, 34%, and 35% of 15- to 18-year-olds in Minnesota, Louisiana, Texas, and Connecticut, respectively, have purchased lottery tickets despite being underage. 24
In 1997, researchers at Louisiana State University-Shreveport surveyed 12,066 Louisiana students in grades six through 12. They found that 86 percent had gambled, many by age 13, making experimentation with gambling more common than drug or alcohol use. Two-thirds-–66 percent—indicated they had gambled on scratch-off lottery tickets, and about 32 percent had played Lotto. The survey also found that 10 percent of the state’s students are problem gamblers, and another 5.7 percent have been identified as pathological gamblers. In addition, African-Americans and Hispanics were significantly more likely to be identified as pathological gamblers. 25
Long Odds and Low Returns
The odds of winning a lottery vary depending on the game and the cash prize offered. Lottery odds are by far the longest odds in gambling. Some sample odds are:Powerball Jackpot (Multi-State): 80,089,128:1 Georgia “Big Game” Jackpot: 76,275,360:1
The Louisville Courier-Journal estimated that a person is seven times more likely to be struck by lightning than winning the Kentucky Lottery. 28
According to the National Safety Council, these are the odds of dying fromNot only are lottery odds ridiculously long, pay-out rates for lotteries are also very poor, even by gambling industry standards. The pay out rate for lotteries hovers around 50% which roulette pays out 95%, slot machines payout 75-95%, and horse racing pays out 83-87%. 34
A Car Accident: 81:1 29
Poisoning: 344:1 30
Fire: 1,082:1 31
Being Struck by a Falling Object: 4,873:1 32
Falling into a Hole: 37,089:1 33
If Microsoft mogul Bill Gates put $30 billion in a typical state lottery and then played off the returns, his wealth would dwindle to $27.94 in just thirty days. 35
The Georgia Scholarship Lottery and Fading HOPE
In 1997, young people in the poorest counties in Georgia received an average of seven cents in education aid for every dollar spent on the lottery in their counties. By comparison, young people in the ten wealthi est counties received almost twenty cents.ing/gambling-Lottery-Quik-Facts.htm#FN36″>36
From the inception of the HOPE scholarship program, African-American enrollment in Georgia public colleges actually dropped by three percent. 37
Some people believe that what low-income people spend on the lottery they get back in better education for their children. University of Tennessee economist Bill Fox says that this isn’t so: “What the research shows is zero impact on lower income college students.”38
Cobb County, Georgia residents, most of whom live in “bedroom communities”, paid $154 per resident for lottery tickets and got back only $32 per resident in scholarships. 39
Only 31% of 1994 HOPE scholarship recipients managed to keep their scholarships by their senior year. 40
Since they require a “B” average, HOPE scholarships encourage the pernicious practice of grade inflation in schools. Marietta High School Principal Gordon Pritz says that “there is a tremendous amount of pressure on teachers to hand kids grades they may not have earned” so that they qualify for the scholarships.41
In 1997-1998, only 36% of HOPE scholarship recipients managed to keep their scholarships for the second year. 42
1 Watson, Tom, “Many convenience stores say lottery sales not a big draw,” USA Today, May 4, 1995, cited in “Thinking about the Lottery,” Bishop’s Task Force on the Lottery, Tennessee Annual Conference of the United Methodist Church.
2 Hill, Dr. John, “Lottery Revenues Not Stable.” South Carolina Policy Council.
3 “Not so small change,” Los Angeles Times, March 26, 1986, cited in Hill, Dr. John, Theft by Consent, fn94, Alabama Policy Institute.
4 Georgia Lottery Corporation; Louisiana Lottery Corporation; Kentucky Lottery Corporation
5 See, for example, NGISC (39), p. 7-21 an analysis of the correlation of gambling and bankruptcy et al.
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6 Goodman, Robert, “The lottery mystique: why work at all?” Newsday, June 28, 1991, cited in Reno, Roland A., “Lotteries in the United States: A Brief Overview”.
7 United Press International, January 30, 1986, cited in Reno, Ronald Al., “Lotteries in the United States: A Brief Overview”.
8 Clotfelter and Cook, Selling Hope: State Lotteries in America (Cambridge, Mass.: Harvard University Press), 1989, cited in Hill, Dr. John, Going for Broke, fn 260, South Carolina Policy Council.
Back to Top of Section “A State Lottery Perverts the Role of Government”
9 The National Gambling Impact Study Commission, Final Report, June 1999, p. 7-10; Clotfelter, Phillip J. Cook. Julie A. Edell and Marian Moore, “State Lotteries at the Turn of the Century: Report to the National Gambling Impact Study Commission,” April 23, 1999, Table 10.
10 Ken Rodriguez, “ Surprise, surprise: The lottery rifles the pockets the poor” San Antonio Express-News
11 Data produced by Charlotte Steeh, Georgia State University, Applied Research Center, School of Policy Studies, September 10, 1998, cited in Hill, Dr. John, Theft by Consent, Alabama Policy Institute.
12 Walston, Charles, “Has the gamble paid off?” Atlanta Constitution, June 27, 1994, cited in Hill, Dr. John Theft by Consent, fn 111, Alabama Policy Institute.
13 Fessenden, Ford and Riley, John, “And the poor get poorer…,” Newsday, December 4, 1995 cited in Reno, Ronald, “Gambling and the Poor”, October 1, 1997.
14 Chinoy, Ira and Babington, Charles, “Low-income players feed lottery cash cow,” Washington Post, May 3, 1998.
15 Phillips-Fein, Kim, “Lotteryville, U.S.A.,” The Norton Reader: Tenth Edition.
16 Karcher, Alan J., Lotteries, (New Brunswick, NJ: Transaction, 1989), p.58, as cited by Sandeep Manalmurti and Robert A. Cooke, cited in Hill, Dr. John, Theft by Consent, fn 118., Alabama Policy Institute.
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17 Council on Compulsive Gambling in New Jersey, “1995 Statistics for 1-800-GAMBLER Helpline.” March 20, 1996, cited in Reno, Ronald A., “Lotteries in the United States: A Brief Overview”, April 1, 1998.
18 Wallisch, Lynn, “Gambling in Texas: 1995 Surveys of Adult and Adolescent Behavior: Executive Summary”, Texas Commission on Alcohol and Drug Abuse.
19 Horstman, Barry, “Lottery sales: Poorest buy most tickets.” Cincinnati Post, March 20, 1999.
20 Chinoy, Ira and Babington, Charles, “Low-income players feed lottery cash cow”, Washington Post, May 3, 1998.
21 Golden, Daniel and Halbfinger, David, “Lottery Addiciton Rises and Lives Fall”, Boston Globe, February 11, 1997.
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22 Rachel A. Volberg, Gemini Research, “Gambling and problem gambling among Georgia adolescents.” Report prepared for the Georgia Department of Human Resources, June 25, 1996.
23 Shaffer, Howard J., “The Emergence of Youthful Addiction: The Prevalence of Underage Lottery Use and the Impact of Gambling.” Massachusetts Council in Compulsive Gambling, Technical Report (011394-100), January 13, 1994.
24 The National Gambling Impact Study Commission, Final Report, June 1999, p. 3-4.
25 James R. Westphal, Jill A. Rush, Lee Stevens, Ron Horswell, and Lera Joyce Johnson, “Statewide baseline survey: Pathological gambling and substance abuse-Louisiana students, 6th through 12th grades” (Louisiana State University medical Center, Department of Psychiatry, April 27, 1998).
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26 Multi-State Lottery Corporation.
27 Georgia Lottery Corporation.
28 Statistical Assessment Service.
29 National Safety Council, “What are the odds of dying?”.
30 National Safety Council, “What are the odds of dying?”.
31 National Safety Council, “What are the odds of dying?”.
32 National Safety Council, “What are the odds of dying?”.
33 National Safety Council, “What are the odds of dying?”.
34 South Carolina Policy Council, “The Economic Facts of State-Run Lotteries: Windfall or Hoax”.
35 Gardner, David and Gardner, Tom, The Motley Fool You Have More Than You Think, (Fireside Books: New York), 2001, P. 44.
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36 Hill, Dr. John, Going for Broke, South Carolina Policy Council.using data from the Georgia County Guide (Athens: University of Georgia, 1998).
37 McMullen, Jr., Edward T., “Georgia’s Disappointing Education Lottery”, South Carolina Policy Council.
38 “Tennessee senator says lottery will stop the brain drain,” The Tennessean, September 13, 2001, United States Department of Education Digest of Education Statistics 2000. Table 206.
39 Analysis at http://www.georgiastats.uga.edu.
40 McMullen, Jr., Edward T., “Georgia’s Disappointing Education Lottery”, South Carolina Policy Council.
41 McMullen, Jr., Edward T., “Georgia’s Disappointing Education Lottery”, South Carolina Policy Council.
42 McMullen, Jr., Edward T., “Georgia’s Disappointing Education Lottery”, South Carolina Policy Council.
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