The Lottery and Its Impact on State Budgets

The lottery is a fixture in American life, and it’s the most popular form of gambling. People spend upward of $100 billion on tickets each year, and states promote the games as ways to raise revenue without onerous tax increases on working people. But just how meaningful that revenue is in broader state budgets, and whether it’s worth the trade-off of people losing money, deserves closer scrutiny.

Lottery has a long history, including use by biblical judges and Roman emperors as an alternative to public auctions and other means of giving away property or slaves. Its roots in human culture are far deeper, however, and can be traced to ancient times when the casting of lots was used to determine everything from marriages to land ownership.

During the colonial period, lotteries raised funds for private and public projects such as roads, canals, bridges, churches, colleges, schools, and hospitals. Some of the most successful and renowned universities in America were founded by the proceeds of lotteries, including Princeton and Columbia. The lotteries were also used to fund the Continental Army during the war with France, and later for military and civil purposes, as well as to raise capital for a variety of private business ventures.

The modern era of state lotteries began in 1964 with New Hampshire’s introduction, and the subsequent adoption of lotteries by nearly every other state followed suit. In each case, the arguments for and against their adoption, the structure of the resulting state lottery, and its evolution over time have been remarkably similar.

After the initial excitement of the lottery’s introduction, revenues typically expand rapidly, then level off or even decline. To keep people playing, the lotteries introduce a steady stream of new games with different odds and prizes. Some states have experimented with changing the odds, adding or subtracting balls to increase or decrease the probability of winning, or offering bigger jackpots and smaller prizes.

But the big issue is that lottery revenues are coming from a narrow segment of society—people who are poorer, less educated, nonwhite, and male. And while those folks are disproportionately represented among those who play, they’re also disproportionately likely to be the ones to win. That’s why it’s important to learn more about how lottery winners spend their prizes and what the odds of winning really are. Then you can decide if it’s something that’s right for you.