Finance

Lottery Revenues Not a Sure Bet

The recent economic crisis suggests that state lotteries and other forms of gambling may not be the predictable cash cows they once were.
by | April 2011

Over the past few decades, states increasingly have turned to lotteries and other types of gambling as potential new sources of revenue. But the recent economic crisis suggests that gaming endeavors may not be the predictable cash cows they once were.

Forty-three states and the District of Columbia have legalized lotteries to help raise revenue. For most of the past 20 years, state lotteries have shown phenomenal growth, more than doubling from $8.8 billion in 1993 to $17.7 billion in 2007.

Two years ago, the math changed. In 2009, state revenues from lotteries dipped by 2.3 percent -- the first major decline in the past three decades, according to a report from the Nelson A. Rockefeller Institute of Government. That’s a problem, the report says, because states frequently earmark lottery revenues for specific spending in areas like education. “Expenditures on education and other programs will generally grow more rapidly over time,” the report says. “Thus, new gambling operations that are intended to pay for normal increases in general state spending may add to, rather than ease, long-term budget imbalances.”

Since 2009, lottery revenues have rebounded, but not by much, says Lucy Dadayan, a senior policy analyst at the Rockefeller Institute and a co-author of the report. For fiscal 2010, she says, lotteries nationwide saw a revenue increase of 2.7 percent. “That’s much weaker compared to previous years,” Dadayan says.

Georgia, for example, is facing a $1.2 billion revenue gap for lottery-funded programs, and slower ticket sales mean the state must find alternative ways to fund education expenditures. Gov. Nathan Deal last month approved deep cuts to the state’s popular HOPE scholarship program, which is funded by lottery proceeds. Florida and West Virginia have made similar cuts to their lottery-backed scholarship programs.

The overall lesson, says Dadayan? “No matter how many different games states come up with, they cannot count on it as a dependable source of revenue.”

Join the Discussion

After you comment, click Post. You can enter an anonymous Display Name or connect to a social profile.

More from Finance