Lottery companies promote the story of empathy derived from Powerball tickets and other games that help public schools. But this narrative obscures the truth: lottery revenues actually shift social spending from taxpayers to lottery ticket buyers.

Patrick Pierce, a professor of political science at the College of St. Mary, studies how states use lottery money. He found that the money is mainly used to replace existing state budgets, not to increase spending on education.

Lotteries are a form of gambling

As the power mania continues, it’s worth remembering how state lotteries prey on low-income people. Despite being promoted as a form of “harmless fun,” regular lottery participation is a form of speculative and irresponsible gambling that squanders the income of poor Americans who could otherwise be saving for their future. The regressive nature of lottery revenues makes it difficult to justify their supposed benefits to education.

State governments collect a direct portion of ticket sales and additional sales tax from ticket merchants and pour this money into their education budgets. However, the way lottery funds are distributed in schools leaves room for cronyism and mismanagement.

In addition, many states use lottery money to cover their administrative costs. In these cases, the state essentially buys its own lottery ticket. This practice raises important questions about the state’s ability to responsibly manage the lottery. It is also a potential source of conflict of interest for lawmakers who may vote on the lottery or other legislation that could benefit from its profits.

They collect money

Many states use lotteries to increase education funding. But a recent drop in lottery sales could have a big impact on state revenue. Peter Medlin of member station WNIJ reports that people are buying fewer tickets because of the pandemic, and that means hundreds of millions less for schools.

State lawmakers decide how much of the lottery proceeds goes to a dedicated cause, such as education or veterans affairs. They then supplement that portion of the budget with general funds. As a result, higher lottery revenues do not necessarily lead to greater state spending on dedicated programs, according to researchers Lucy Dadayan and Donald Boyd.

In Florida, for example, 80 cents from each lottery ticket goes to education, with the money split between K-12 schools and community colleges and universities. But when lottery winnings are higher than expected, the General Assembly can simply appropriate those additional funds through the budget. So the money may not go to students as quickly as it might seem.

They are a source of income

Lotteries have long been considered a source of revenue for states, especially for education. In fact, many lottery revenues are earmarked for specific uses, such as gambling addiction treatment and college scholarship programs. However, these funds can also go towards general funding for government services, including public works and social services. Whether this constitutes a user fee or not depends on how the money is spent and how it affects users.

In general, most states put a percentage of lottery revenue into a fund dedicated to treating gambling addiction, while the rest is usually used for public projects and education. For example, in 2022, Missouri’s lottery winnings contributed $337 million to its education system.

However, in some cases, lottery proceeds are not used as intended. For example, North Carolina’s original lottery law stated that “net lottery proceeds shall supplement rather than replace total appropriations for those purposes.” In practice, however, this has not happened, as the legislature has cut education spending by an amount greater than the lottery windfall.

They are a source of tax revenue

In states that use the lottery as a source of tax revenue, the revenue is often earmarked for education. But critics argue that these funds do not increase education spending as much as advocates claim. Instead, the money ends up being diverted elsewhere or used for voter-friendly tax cuts.

State officials can also influence voters by using the money to fund programs that don’t get as much support from other sources. For example, in California, lottery money helps pay for supplemental funding for school districts and community colleges, as well as public universities.

Some state lawmakers are reluctant to raise income or sales taxes, so they turn to the lottery as a way to increase spending on programs. This is an attractive strategy because it shifts the burden of paying for programs from taxpayers to ticket buyers, who are forced to buy tickets. But the lottery is still a form of taxation and can be regressive.