The Official Lottery and the State Budget Crisis

Official lottery, or state-run gambling, is a national staple, with Americans spending more than $100 billion each year. But this success has come at a price. Lottery critics have long questioned both the ethics of funding public services through gambling and the amount of money states stood to gain. Those opponents hailed from both parties and all walks of life, with the most vociferous protests coming from devout Protestants who saw government-sanctioned gambling as morally unconscionable.

In the nineteenth century, these concerns helped to stall state-run gambling. In the late twentieth century, however, a growing awareness of the big money to be made in the lottery and a crisis in state funding collided. As Cohen explains, with the Baby Boom and expanding social programs straining state budgets, it became increasingly difficult to balance a state’s books without raising taxes or cutting services. In the nineteen-sixties, voters reacted by approving a number of lotteries in which they could win cash or prizes ranging from bicycles to new homes. As a result, the modern national lottery has come into being.

The modern national lottery has a complex relationship to state governments and the overall economy. Its profits are largely derived from ticket sales, and those sales are responsive to economic fluctuations. For instance, as unemployment and poverty rates rise, so do lottery sales. In addition, as with all commercial products, a large percentage of lottery advertisements are geared to low-income communities and racial minorities.

State officials have a clear incentive to promote the lottery and tell voters that it is a “budgetary miracle.” With no oversight from a legislative body or independent agency, the lottery commission itself has a strong incentive to play up the good that it is doing. It can easily convince voters that it is helping to improve education, for example.

In reality, however, the lottery is not a magic bullet that can raise enough money to solve all of a state’s problems. To the contrary, it often diverts funds that would be better spent on something else, such as roads or public parks. To make up the difference, lawmakers must either raise taxes or cut other services, and both options are vehemently opposed by voters.

So, instead of trying to sell a statewide silver bullet that would float the entire state’s budget, legalization advocates shifted tactics. They began to argue that a lottery’s revenue could cover a specific line item in the budget—usually education but sometimes elder care or public parks, and occasionally aid for veterans. This strategy was less risky for legislators and easier to campaign for, because it allowed them to say that a vote for the lottery was not a vote for gambling but a vote for a particular service. This, in turn, helped to blunt criticism from fiscal conservatives who objected to the notion of using state money for purely private purposes.