January 23, 2007
State Lotteries Posted by John Steele Gordon at 10:55 AM EST I blogged yesterday about how governments, in the nature of things, are always desperate for money and will sometimes resort to dubious means to obtain it. Today’s New York Times reports a case in point: Illinois is considering selling its state lottery for $10 billion. The lottery last year had revenues of about $2 billion and profits of $630 million, a profit margin of 31.5 percent, which is a lot better than most oil companies can claim, so one wonders why the state would consider selling so fecund a cash cow. The answer is immediate money. The governor wants to put $6 billion of the proceeds into a fund to pay schools $630 million a year for sixteen years and use the other $4 billion for school construction. That would mean, of course, that seventeen years from now the state will have to either find new ways to continue funding schools or cut funding. But seventeen years is an eternity in politics and it will be someone else’s problem by then. Lotteries used to be called the numbers racket when they were still in private hands (i.e., organized crime), but gambling has become an ever-increasing source of revenues for states in recent years, since New Hampshire began the first modern state lottery in 1964. New York’s lottery is the state’s fourth-largest income source, and the Foxwoods resort and casino is Connecticut’s largest. Given the extraordinarily long odds against winning a lottery, it is said that they are a tax on people who are bad at math, and it is certainly a regressive tax, as lotteries appeal most strongly to those who have the least disposable income. Another way of looking at it, perhaps, is that a lottery ticket is a cheap chance to dream, providing good entertainment value for the price, at least until someone else wins it. But then there is always next week. The early history of state lotteries in this country is, to put it mildly, checkered, but no less colorful for that. For more on it, see my American Heritage article on the fabulously corrupt Louisiana State Lottery of the 19th century.
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