Lottery Governance in the United States
In the United States, the lottery is a booming industry: in 2021 people spent upwards of $100 billion on tickets. But state lotteries, which are a form of gambling, aren’t nearly as well understood as they should be. Lotteries have a number of important implications, from their social equity and economic impact to their overall contribution to state budgets. But they’re also a case study in how state government makes policy in an incremental, piecemeal fashion that often fails to take a holistic view of public welfare.
Most states have lotteries. But there are six that don’t, including Alabama, Alaska, Hawaii, Mississippi, Utah, and Nevada, home to Las Vegas. These states have a variety of reasons for their absence: religion (Alabama and Utah); oil revenues (Mississippi and Nevada); the lack of a state government with the ability to authorize games (Utah); political concerns (Alaska); and the sense that the lottery already provides enough revenue.
The main reason states have lotteries is to raise money for a variety of state projects. Historically, they have promoted them as a painless source of revenue: voters voluntarily spend their money on a game in return for the benefit of the public good, which is a supposedly more palatable alternative to raising taxes. State governments have used lotteries to fund everything from town fortifications and walls to subsidized housing and kindergarten placements.
Today, lotteries are a crucial part of most state economies. The states that have them raise more than $100 billion a year, which is about half of all the state revenues in those states. The money is mainly used for education, but some of it goes to other state programs and to pay the salaries of state employees.
But despite this large sum, most states fail to provide an appropriate level of oversight for the lottery. Rather than acting as an independent watchdog, most states rely on the same group of people to scrutinize their lottery: convenience store owners (who typically sell the tickets); suppliers of scratch-off ticket machines (heavy contributions by these companies to state political campaigns are regularly reported); teachers (in those states where lotteries have a dedicated earmark for education); and politicians who have come to depend on the additional revenue from lotteries to fund their programs.
These groups may not be able to stop the expansion of state lotteries, but they can make sure that those lotteries are doing the most good for their citizens. One of the most important things they can do is to emphasize that the majority of lottery players and revenues come from middle-income neighborhoods, while a much smaller percentage comes from high-income or low-income areas. Unless these demographic gaps are closed, the benefits of state lotteries will be limited. And that’s a big, unrecognized problem.