By Cameron Smith
With budgetary challenges again facing the State of Alabama, politicians are mulling the idea of a state-run lottery to provide an infusion of cash. Democratic gubernatorial candidate Parker Griffith has actively campaigned for a lottery to fund education. Governor Robert Bentley has responded by discussing how the proceeds of a lottery should be spent in the event that the Alabama Legislature and the people of Alabama decide to permit a state lottery.
The appeal of a lottery is clear. Consenting adults play a game of chance, and a portion of the proceeds fund government programs, education or otherwise.
Unfortunately, the reality of a state-run lottery is far less convenient.
The first problem is that state-run lotteries only return 20% to 40% of their sales for state programs. Consider the Missouri Lottery. In a state similar to Alabama in terms of population, the lottery generated slightly more than $1.1 billion in sales for 2013. Of that amount, about 25% actually went to funding public education. The remainder went to prizes, commissions, advertising and administration.
It might feel good to say that the lottery is helping fund government priorities without a tax increase, but it functions like a tax in that it takes money out of a state’s economy and the government redistributes the proceeds. Unlike a tax, a lottery consolidates the revenue among relatively few individuals rather than spending it on public priorities. In 2013, Missouri saw more than $750 million pulled out of its economy and reallocated to a small subset of prizewinners.
The next issue is that people with less money and lower educational attainment are the ones spending the greatest portion of their income on lottery tickets.
A 1999 report to the National Gambling Impact Study Commission conducted by professors at Duke University found that “the education category with the highest per capita spending [on lotteries] is those who did not complete high school, and the college graduates have the lowest.” The study also noted “high-school dropouts and people in the lowest-income category are heavily over-represented among those who are in the top 20 percent of lottery players.”
While lottery participation is voluntary, there are plenty of evidence to believe it will have a negative fiscal impact on lower-income families and those with less educational attainment.
If pulling money out of the economy and generating revenues from the poor and uneducated were not enough to give Alabama’s legislators second thoughts, how can politicians who campaigned on limiting the size of government create another bureaucracy with the sole purpose of running state gaming operations? Such a move seems to say, “We needed more money, so we decided to create more government.”
Religious opposition to a lottery has often been cited as the reason for its failure to gain traction in Alabama, but some of the strongest reasons for questioning a lottery’s merit have precious little to do with morality. Most Alabamians will not lose sleep about whether the state has a lottery or not, but the implications of such a policy shift are significant and worth a more developed conversation than Alabamians are hearing from current political sound bytes.
(Cameron Smith writes a regular column for Alabama Media Group. He is the National Director of the Liberty Foundation of America and is a Senior Fellow with the R Street Institute in Washington, DC. He may be reached at firstname.lastname@example.org or on Twitter @DCameronSmith.)