September | October 2014

 

 

 



Lotteries Provided Stable Funding Through Recession

By Elle Hull, CSG Research Assistant
Only six states—Alabama, Alaska, Hawaii, Mississippi, Nevada and Utah—don’t have a state lottery.
Alabama House Minority Leader Craig Ford wants to change that, and he thinks he has the support of the majority of Alabamans.
“Sixty-two percent of Alabama residents now want a lottery,” he said. That’s up from 46 percent of the people who voted for an amendment in 1999.
Ford would like to see the question of a state lottery on the ballot again. He said the way forward is to “let the people have the right to vote; put it in the form of a constitutional amendment.”
He estimates that Alabama is losing $250 million a year to nearby states that run lotteries, like Florida, Georgia and Tennessee. He believes a state lottery would generate $232 million in revenue for the state each year.
Many states with a lottery saw a more stable funding source in recent years.
“During the recession, as overall state revenues were sliding, lottery sales also fell but not as precipitously,” said Jennifer Burnett, program manager for fiscal and economic policy at The Council of State Governments. “While not entirely recession-proof, their relative stability as compared to other forms of state revenue add to lotteries’ appeal as a way to fill gaps in state budgets.”
Burnett said since 2009, state revenue from lotteries has been on the upswing, with a number of states—like Arizona—seeing big gains.
“Even as other forms of state revenue have been slow to return to pre-recession levels, lottery revenues have recovered quickly and are hitting record levels,” she said.
Ford thinks Alabama should reap some of those benefits. He wants to divide the money a lottery would generate between funding for Medicaid expansion and education programs, such as in-state scholarships for students who make A/B honor roll and helping fund a plan to implement school resource officers in every school in the state.
“There is a major lack of funding for education in the budget,” Ford said. “The state can’t fully fund many programs, classroom sizes are too large and educators are underpaid.”
He argues that a lottery is a voluntary tax and says to opponents, “If you don’t want to participate, you don’t have to participate, but you can reap the benefits.”
According to a recent CSG survey, most states use some of their nearly $19.5 billion in lottery revenue to fund education, and 18 states mandate that revenue be used exclusively, or almost exclusively, for this purpose. Six states and the District of Columbia put lottery revenue in the general fund to be used for any purpose. At least six states designate some portion of the revenues to programs that help those with gambling problems.
Massachusetts uses lottery revenue as direct aid to cities and towns, and Wyoming, which this year passed legislation to establish a state lottery, will follow suit. The first $6 million will go to cities and towns, and any revenue above that amount will go to education. Pennsylvania stands alone in using all of its lottery revenue for programs that benefit older residents.
In Mississippi, Rep. Alyce Clarke has introduced lottery legislation seven times in her state, including this year, but each time it has failed.
She said Mississippi residents, like those in Alabama, already play the lottery, they just do it in neighboring states where it is legal, such as Arkansas, Louisiana or Tennessee, according to the Arkansas News Bureau. She wants to see revenue from a state lottery used exclusively for in-state scholarships for high-achieving students.
“It doesn’t make sense to me to take our money to other states,” she said. “I’m saying to my people that we need to educate our children, just as they’re doing theirs. It doesn’t make sense to continuously pretend that we are not playing the lottery.”

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