Where Does Lottery Revenue Go?

Aug. 26, 2001 — -- No matter who matched all six lucky numbers in Saturday's $295 million Powerball game, the real winners are supposed to be education, environmental protection, and other projects earmarked to receive lottery proceeds.

The 21 states that participate in Powerball along with the District of Columbia will garner at least $114 million from the $380 million in tickets bought for this jackpot so far.

Some states, like Iowa, put lottery money in the state's general fund, but most target it toward a particular purpose — environmental protection in Colorado, or school aid and crime control in Montana, for example.

Many experts say, however, that even when lottery money is targeted toward a particular purpose, such as education or environmental protection, it has little or no effect.

The lottery money does go to the intended cause. However, instead of adding to the funds for those programs, legislators factor in the lottery revenue and allocate less government money to the program budgets, says one lottery critic, Patrick Pierce, a political scientist at St. Mary's College in Indiana, who has analyzed the impact of lotteries.

"In the first year of a lottery there is a dramatic increase [in spending on education]," he says.

In subsequent years, however, the increase in education spending is much smaller than in states without lotteries, Pierce says, even when adjusting for inflation, number of children in a state, and other factors.

"Given a few years, a state would have spent more on education without a lottery," he concludes.

Anger Among Former Lottery Supporters

Pierce's findings are echoed by Dave Clark, a spokesman for the Florida Education Association, a 120,000-member union of education employees.

"We hoped the Florida lottery would be something that would help our schools," Clark says. Instead, "The politicians began to use it for other things."

He believes legislators simply allocated less money to education, so that even with billions in lottery money, the net increase in education funding has been minimal.

A recent study by the North Carolina Center for Public Policy Research, a nonprofit analysis group, found some states do substitute lottery revenues for normal appropriations.

"Research in California, Florida, and Michigan shows that lottery funds have merely substituted for normal levels of appropriations, despite the fact that lotteries had been promoted as boosting spending for education," the center concluded in its report.

We’re Making a Difference, Lotteries Insist

The center noted, however, that the evidence is not unanimous. A study by State Policy Reports found that per-capita education spending was higher in the 37 lottery states than in non-lottery states, for example.

Florida lottery officials insist that proceeds from the games have had a large and positive impact on education.

"I think it's clear that the Florida lottery has contributed to the education of Florida students," a state lottery spokesman said, pointing to programs like the Bright Futures Scholarship Fund, which were created from scratch with lottery money.

Powerball officials echo their views.

"There's a lot of worthwhile projects that go on around the country because of the lottery," says Joe Mahoney, a spokesman for the Multi-State Lottery Association, which runs Powerball.

Arizona, for example, has benefited tremendously from its share of Powerball revenue, which totaled 24.7 million last year, says state lottery spokeswoman Kevan Kaighn.

That money went into the state's general fund, but profits from the Arizona lottery's own games are targeted to particular programs, like transportation, a Heritage Fund for state parks and other conservation activities, and a program that trains volunteers to be advocates for children in the court system.

"We think the lottery does real good things for Arizona," Kaighn says.

Officials with the Colorado lottery, which took in $78 million in revenue last year, are equally proud of their use of the proceeds from Powerball and other games.

"In Colorado, it's fabulous," says Chris Ledding, a lottery spokeswoman. "It goes directly to parks and recreation, and open-space preservation."