At Bluebird Liquors in Hawthorne, California, where there's almost always a line to buy lottery tickets, owner Frank Kumamoto is eagerly awaiting California's entry into the multistate Mega Millions game. So are his regular customers.
"Oh, yeah, I'll play, because there's a bigger jackpot and more to win," said Barbara "Fluffy" Brown, a Boeing worker who drove from nearby Los Angeles to play the numbers here. "It's only a dollar, so what the heck?"
A week from Wednesday, California will become the 12th and largest state to join Mega Millions. The Golden State's entry means the country could soon see — for the first time — a half-billion-dollar lottery ticket.
"The more, the merrier," says Kumamoto, who plans to add to the three lottery ticket machines and hire more workers.
Buddy Roogow, director of the Maryland Lottery and president of Mega Millions, agrees.
"California ... adds over 35 million people in population and creates what we think is the ability for much larger jackpots, growing at a much faster rate," he says. "This is a big deal."
• Mega Millions is poised to blow away the record of $314.9 million for a single lottery ticket winner, set in 2002.
• It could also break the largest North American lottery jackpot ever: $363 million, set by a former version of Mega Millions called The Big Game.
• California's take from ticket sales could make good on Gov. Arnold Schwarzenegger's vow to do the improbable: Pour money into education without raising taxes.
• The mania for jackpots bloated with West Coast cash could threaten the original multistate lottery and jackpot record holder, Powerball.
Lotteries and their jackpots have been increasing for several years. Forty states plus the District of Columbia have lotteries, twice as many as 20 years ago. Oklahoma approved a lottery in November.
Americans shelled out $48 billion on lotteries in fiscal 2004, according to the North American Association of State and Provincial Lotteries. That means the average American spent more on lottery tickets than on reading materials or movie tickets.
Jackpots took a big jump when Iowa-based Powerball started a multistate game in 1992. Twenty-seven states plus the District of Columbia pool their ticket sales under its name. On Christmas 2002, Jack Whittaker of West Virginia hit for $314.9 million.
That's peanuts, lottery experts say. Sharon Lewis, a gaming consultant with PricewaterhouseCoopers in New York, says California's large population is likely to trigger bigger jackpots and more lottery revenue for all the states in Mega Millions. "As you start to get that momentum with the larger jackpots, more players start to buy tickets," she says.
Jackpots could reach $500 million or more with California in the game, Roogow predicts. Besides allowing California residents to participate, the change will raise the stakes for ticket buyers in the 11 other states that participate.
The revenue has become crucial. States made a net $14 billion from lotteries in fiscal 2003, according to the Tax Foundation, a Washington-based, non-partisan tax policy organization. California Lottery spokeswoman Cathy Doyle Johnston estimates the new game will bring the state as much as $500 million a year.
In California, 35% of the lottery revenue is being earmarked for education. Joining Mega Millions was part of Schwarzenegger's proposal to boost education spending and hold the line on taxes.
But locking up lottery revenue in a special account does not always mean more money for the cause. According to the Tax Foundation, most lottery states earmark their lottery "profits" for public education, but legislators shuffle other funds so the lottery tax revenue supplants, rather than supplements, existing funds.
Don Phares of the University of Missouri-St. Louis, who studies the economic impact of gaming on states, says the additional revenue is not likely to resolve Schwarzenegger's financial issues. "Is this a solution to California's fiscal problems? Hardly," he says.
Mega Millions' wooing of California could unsettle Powerball. Chuck Strutt, executive director of the Multi-State Lottery Association, which runs Powerball, said he had no comment on California's move.
Lewis of PricewaterhouseCoopers says Powerball states Arizona and Oregon, which border California, could see sales suffer.
Phares agrees. "A lot of the action seems to go where the really big pots are," he says.
Clyde Barrow, who analyzes lottery and gaming policy at the University of Massachusetts Dartmouth, expects California's entry to "have a temporary negative impact" on Powerball by attracting attention and large jackpots to the rival game.
"However, it is likely that Powerball will withstand the impact over the long run by introducing countermeasures of its own," he says.
That could mean adding states, taking steps to boost jackpots or increasing the frequency of jackpots.
Or maybe the shorter odds will benefit Powerball. Mega Millions will expand the pool of numbers players can select when California joins, increasing the odds of winning a jackpot from 1 in 135 million to 1 in 176 million. The odds of hitting the Powerball top prize are 1 in 121 million.
Boon for retailers
Retailers will have an incentive to put up with the crowds big jackpots create, even if they slow customers buying milk, beer, whiskey or cigarettes. Sellers get a percentage of lottery sales. In California, it's 6 cents for each $1 ticket sold.
Kumamoto's Bluebird Liquors is the second-biggest retail seller of California Lottery tickets. It has a reputation as a lucky place to play, evidenced by hundreds of $100-or-more winning announcements tacked to the ceiling.
"I've created six millionaires here," Kumamoto says.
Anti-gambling groups wonder at what cost.
It's "a radical expansion of the lottery," says Fred Jones, a lobbyist for the California Coalition Against Gambling Expansion. Jones says the hundreds of millions of dollars in additional lottery tickets will come from the pockets of low-income people. "They're preying on those who can least afford it," he says.
"I play for a long time, and never I win," says Carmen Laitano, an unemployed Costa Rican immigrant. Still, she has plans for the jackpot. "Maybe I buy homes for my children."