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How State Lotteries Impact Local Infrastructure

The upsides and downsides of state lottery programs.
Kayla Matthews | @KaylaEMatthews | October 17, 2018, 10am PDT
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When most people buy lottery tickets, they just hope they'll get lucky. They aren't thinking about where their money goes after it gets used to buy lottery tickets.

However, most U.S. states have lotteries, and the funds they generate help support local infrastructure. Without those funds, the roads and bridges in many states would likely be in even worse shape than they are now.

The Lottery Industry Gives Recipients Millions in Revenue

In Massachusetts, one of the places in the U.S. with a lottery program that helps communities, the profits from tickets sold are impressively high. During the 2017 fiscal year, Massachusetts sold $5.29 billion worth of tickets — a record. Also, lottery revenues are $58 million higher now than in 2016.

Also, Massachusetts' program to help communities — which resulted in over 350 getting more than $1 billion in net profits for the 2017 fiscal year — doesn't dictate how recipients must spend the funds, giving them the freedom to put the funds toward things like hiring more firefighters and improving the condition of wastewater treatment plants.

The funds get distributed based on population numbers and median home values. Lawrence, a community north of Boston, will receive $20 million from the program. Other communities expect less this fiscal year but will still receive amounts in the millions.

Lottery Programs Address Pressing Infrastructure Shortcomings

Lotteries also provide infrastructure boosts that would not otherwise be possible without such support. For example, Mississippi governor Phil Bryant fought hard to establish a lottery in his state. He asserted that it would generate approximately $200 million per year for infrastructure.

Also, during a press conference, Democratic House Minority Leader David Baria clarified that the state's infrastructure requires about $400 million to fix. So, the lottery wouldn't be a cure-all, but it would help.

Critics accused Bryant of trying to push the legislation through too quickly. On the last day of August in 2018, though, the bill got signed into law, thereby establishing the Mississippi Lottery Corporation, an organization run by a five-member board of directors.

Those people must work out the stipulations of selling tickets, including reaching out to retailers. It likely won't be possible to buy lottery tickets in the state until next year or the year after.

Some Lotteries Focus on Education

Although there are arguably positives associated with a lottery program like Massachusetts has — one that doesn't dictate how recipients must spend the funds — some people may prefer lottery programs that target one need.

Since 1999, all of the lottery revenues in Virginia and various other states go toward K-12 public education. Plus, the school divisions benefitting from the funding have nearly one-third of the amount given to do with what they wish. So far, Virginia's program has contributed more than $9 billion to the commonwealth's education system.

Moreover, many states have lottery scholarships. Although most are for children, there are some for adult learners too. The hope is that the funding could encourage people to stay in school when they might leave under other circumstances.

In some places around the country, people are disappointed because they say state legislators chose to spend lottery revenue on other things, even though the expectation was that a significant amount would go toward education.

Conversely, a study conducted by State Policy Reports found that lottery programs still make a difference for the states that get them. Specifically, per-capita spending on education was higher in the 37 states with education lotteries than without them.

Besides having a favorable impact on infrastructure by improving school buildings, lottery funding could have a broader effect by providing money for hiring highly qualified teachers and retaining the skilled ones already teaching in an area. Then, a community could earn or maintain a good reputation for education, potentially making families with kids especially eager to live there.

The Level of Dependency on a Lottery Varies

As evidenced by Mississippi, some states' leaders believe they're in dire need of the funds provided by a lottery, but the dependence states have on lotteries and games like Powerball is not universal.

For example, a study that examined overall state revenues found that lotteries accounted for only about two percent of the total revenue.

However, in South Dakota and Oregon, lotteries made up more than five percent of the revenue. Sometimes, lottery revenues make it possible to distribute funds differently than usual in a state, possibly making it so that formerly neglected needs get more attention.

State Lotteries Have Potential Downsides

Like almost anything else, state lotteries may come with cons that must be weighed before states implement them for help with infrastructure or other needs. Some opposers say they take advantage of people with gambling addictions and assert that up to 80 percent of revenue comes from only 10 percent of people in a state that plays the lottery — the so-called "super users."

States explored measures such as putting up billboards warning of the hazards of gambling. A recent study carried out in Massachusetts did find that people who play the lottery daily are more likely than those who don't to be gambling addicts. However, it's also reasonable to assume that individuals who want to gamble will do it, even if they have to travel to other states or use the internet.

Additionally, retailers are wary of accepting debit card transactions for lottery tickets. In Arkansas, some store owners there didn't like the idea, saying that the processing fees associated with those purchases could outweigh the commissions they receive.

One argument for going ahead with debit card sales is that being able to use a card to pay could encourage people to buy other things when they stop at convenience stores, and they might not make those purchases if they had only cash on hand.

Infrastructure Problems Don't Solve Themselves

No program is perfect, but it's undoubtable that lottery programs distribute money to states that wouldn't otherwise have the funding, and it's usually impossible to remedy infrastructure issues without extensive financial resources.

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