Lottery Fundraising and Public Policy


Lottery games are popular for their entertainment value and the potential to generate large sums of money. They also raise state funds for a variety of purposes. In the United States, most state governments operate a lottery. Lottery profits are typically deducted from ticket sales before distributing the winnings. The remainder is used for advertising and prize payouts. The alleged benefits of the money that is raised for state causes have been a key element in the approval of lotteries by voters.

But these claims about the benefits are misleading. It is important to understand that the proceeds of state lotteries are not actually a significant component of overall state revenues. In fact, lotteries are a classic example of how government policies evolve in an environment of anti-tax ideology. Once established, lotteries can become a self-perpetuating dynamo that imposes costs and obligations on state officials that they cannot avoid.

Initially, the state legislates its own monopoly; establishes a public corporation to run it (as opposed to licensing a private company in exchange for a share of the profits); begins operations with a small number of relatively simple games; and, under constant pressure from players and political forces seeking more revenue, progressively expands its size and complexity. State officials that inherit such a system are often left with no coherent “lottery policy” and no clear way to manage it.

The reason for this evolution is simple: State governments have a strong incentive to promote their lotteries to voters. The resulting popularity of the games is often seen as an effective alternative to raising taxes, especially during economic stress. Lottery promotion argues that the proceeds of the game are directly tied to the improvement of a specific public good, such as education. This argument is a powerful one in times of financial stress and can provide a useful tool for legislators to avoid tax increases or cuts in public services.

However, even when the fiscal health of a state is robust, lotteries can continue to win broad approval. This is largely due to their ability to create extensive and loyal constituencies, such as convenience store operators; lottery suppliers (heavy contributions by these companies to state political campaigns are commonly reported); teachers in those states where a percentage of the revenue is earmarked for them; and, of course, the players themselves.

The popularity of lottery games is also partly a function of the fact that people like to gamble. Lotteries offer a chance to win a big jackpot prize for a low cost. This is especially attractive to people with low incomes as the money can help them in meeting their day-to-day expenses. However, the main reason people buy lottery tickets is to get a sense of excitement and hope. In other words, they are trying to improve their quality of life. This is a very human urge. Hence, it is difficult for any government to prohibit this. In this context, it is important to keep in mind that gambling does not always lead to addiction and can be a healthy way to spend your spare time.