Louisiana's economic woes are understandable. But one reason for Rhode Island's downturn may be a little bit surprising.
At Governing's Outlook conference a couple of weeks ago, one of the speakers mentioned a prime culprit for Rhode Island's fiscal troubles. Lottery revenues aren't meeting expectations and state officials blame high gas prices. Lots of lottery players buy their tickets from gas stations, but, if they don't have change after they fill up, they're less likely to play. The state revised its FY 2006 lottery revenue estimate downward by more than $25 million in November.
Stateline noted a few months ago that a number of state lotteries have performed poorly in recent months and that officials are blaming gas prices. The obvious question, then, is why this phenomenon would create a gloomy budget outlook in Rhode Island, but not elsewhere.
The answer seems to be that Rhode Island is more dependent on its lottery than just about any other state. A report using FY 2003 data listed Rhode Island as tops nationwide in per capita lottery sales and, despite being so puny, 13th in overall sales. Lottery receipts account for more than 10% of the state's revenue.
Rhode Island's troubles may speak to the risk inherent in state budgets that depend heavily on sin taxes. There's always the danger that, for whatever reason, folks will stop sinning.
