Welcome Guest
Log In | Register )
You last visited December 4, 2016, 3:06 am
All times shown are
Eastern Time (GMT-5:00)

Will gamble on lottery revenue pay off for N.C.?

North Carolina LotteryNorth Carolina Lottery: Will gamble on lottery revenue pay off for N.C.?

Research shows more money goes to schools, but ad blitz may have unintended costs

"The states now offering lotteries do not simply make a product available in order to accommodate the widespread taste for buying a low-priced chance at a big prize. They seek to foster that taste. ...The state lottery agencies have in fact evolved into a new breed of government agency created in the mold of the modern corporation with its eyes firmly fixed on the bottom line."

So wrote Charles Clotfelter and Philip Cook, professors of public policy studies and economics at Duke University and authors of the authoritative 1989 Selling Hope: State Lotteries in America. The book describes how lotteries work and explores whether, despite generating large amounts of new revenue for hard-pressed states, they operate in the public interest.

Jack Betts of The Charlotte Observer caught up with Clotfelter by telephone to chat about North Carolina's newly adopted lottery, which will begin operation some time in 2006. Here's an edited version of that conversation:

Q. North Carolina's lottery prescribed that 35 percent of its revenues be set aside for education purposes, 15 percent for operating expenses and dispensing tickets, and 50 percent for prizes. How does that compare with other states?

"The 15 percent for operations seems higher than average, and the 50 percent for prizes is on the low side. The average is around 55 percent. The 35 percent set aside for education is significant.

"We look at the amount that is taken as revenue and liken it to a tax, an implicit tax. And what (N.C. is) doing is like selling a candy bar for a dollar, and taking 35 cents of it for the tax, leaving 65 cents for the candy bar. Compared to excise taxes on products like tobacco and alcohol, that's a pretty high tax. And (the state is) choosing to place this implicit tax on the buyers of a product they happen to be the monopoly producer of. And when they advertise this product, they are in a qualitatively different position from any other state activity.

"Look at it this way: What if North Carolina had somehow garnered the monopoly on carrots? Sure, there are some substitutes for carrots, but to buy a carrot, you would have to buy it from the state. People might get exercised at paying a 35 percent tax on carrots. It would be unusual to have a monopoly on carrots, and charge a high tax on carrots, and then advertise aggressively to sell more carrots, wouldn't it? But at least carrots are good for you.

Q. Can North Carolina devise a way to avoid supplanting other education spending once lottery revenues start coming in?

"The best way to avoid it is to spend money on something that the state has never spent money on before. That way (the state) can't take money away from other expenditures. (The state) can't do that in this case because the money is going for education.

"Georgia may be the exception. It instituted a brand new program (the Hope scholarships for college tuition) that had never been there before.

"There is some new research that shows that education revenues go, substantially, where they are supposed to go. Previously, research indicated there was some substitution of lottery revenues for existing spending."

Q. Will North Carolina have to advertise more aggressively than many expect in order to keep lottery revenues up?

"Probably. Offering just 50 percent of the revenue for prizes is not going to be as attractive as some other state lotteries are. And directing 35 percent of revenues for education paints a lottery state into a corner.

"One of the dilemmas here is that, having touted a lottery for revenue purposes, it is going to be up to those who run the lottery to go get that revenue. That organization is going to be in the best position to pursue the revenue and see that it comes in. I'm sure the wheels are already turning. You can sell a lot of things with enough advertising -- carrots or anything else."

Q. The lottery sets aside $1 million for gambling addiction treatment. Is that sufficient?

"I have no idea. It's not my field. For most people, a state lottery is not a harmful activity. But from what Phil Cook and I have read over the years, there is a small percentage in every state that is susceptible to gambling. For these people, availability of the games is one problem and advertising makes it worse. And there are some games that are more addictive than others.

"On top of the list of 'evil' games are video lottery games with instant payoffs. That's like going from soccer to rugby. And if that's the case in North Carolina, I think the word 'firestorm' might not be too strong. I think opposition might rise up against it."

Q. What advice would you have for state policymakers in preparing for a lottery?

"Be prepared to be taken out to lunch a lot.

"The lottery operators' mouths have been watering for a long time, looking at North Carolina, the biggest anti-lottery state left, until now.

"Phil Cook and I predicted for years that North Carolina would have a lottery, but we've only recently been proven right. At least it does comply with the wishes of a vast majority of the public.

"But it does put the state in a rather odd position. The states that run lotteries, especially the aggressive ones, have a hard time telling a middle schooler to stay in school, work hard and graduate when the message they send (by promoting a lottery) is 'Take a chance, you might get rich quick.' "

Charlotte Observer

We'd love to see your comments here!  Register for a FREE membership — it takes just a few moments — and you'll be able to post comments here and on any of our forums. If you're already a member, you can Log In to post a comment.

10 comments. Last comment 11 years ago by CASH Only.
Page 1 of 1

United States
Member #379
June 5, 2002
11296 Posts
Offline
Posted: September 19, 2005, 2:29 pm - IP Logged

I hope that NC would not be offering games with less than a 50% prize return, such as through an in-state lotto instead of Lotto South. As everyone on LP knows, NY Lotto pays back only 38%-40%.

    Avatar

    United States
    Member #1826
    July 11, 2003
    2645 Posts
    Offline
    Posted: September 19, 2005, 5:28 pm - IP Logged

    I hope that NC would not be offering games with less than a 50% prize return, such as through an in-state lotto instead of Lotto South. As everyone on LP knows, NY Lotto pays back only 38%-40%.

    Don't worry, it can't happen. The Lottery act says that all games must pay 50% (although I seriously doubt any games with a payout over 50%).

    (insert signature here)


      United States
      Member #379
      June 5, 2002
      11296 Posts
      Offline
      Posted: September 19, 2005, 5:29 pm - IP Logged

      jimmy:

      Would that mean scratches too? Even NY scratch tickets pay 65%.

        Avatar

        United States
        Member #1826
        July 11, 2003
        2645 Posts
        Offline
        Posted: September 19, 2005, 5:43 pm - IP Logged

        jimmy:

        Would that mean scratches too? Even NY scratch tickets pay 65%.

        I think so. So I think I'd avoid those NC Scratchers. The lowest I've ever seen was in NJ with a 55% payout, and the odds there were about 1 in 6. So a 1 in 7 scratch in NC would'nt be out of the question. If I was living in NC, I'd still be driving to SC or VA for scratch-offs.

        (insert signature here)

          BobP's avatar - bobp avatar.png
          Dump Water Florida
          United States
          Member #380
          June 5, 2002
          3102 Posts
          Offline
          Posted: September 20, 2005, 2:09 am - IP Logged

          Not sure about the payout percentages when many of the prizes are a free ticket that does not cost the state a dollar to give as a prize.

          I find it troubling when a state works against it's citizens.  A properly run lottery should be a way to redistribute wealth, raise up people who have no other way of improving their lot in life and keep the lid on the garbage can by keeping hope alive.

          A couple of lottery tickets can help people get through a bad week with the hope the lottery will solve all their problems on Saturday night. 

          It is evil when the state encourages lottery play beyond the reasonable and the rush to promote rollovers or changing the game to draw in people with huge jackpots is simply wrong.  BobP
           

            dvdiva's avatar - 8ball

            United States
            Member #2338
            September 17, 2003
            2063 Posts
            Offline
            Posted: September 20, 2005, 2:38 am - IP Logged

            I don't see why people buy scratch tickets period considering that scandals regarding them keep happening and the payout is always low. I'm wondering when NC is going to join Powerball.

              wizeguy's avatar - animaniacs04

              United States
              Member #15143
              May 10, 2005
              414 Posts
              Offline
              Posted: September 20, 2005, 8:05 am - IP Logged

              I'm hoping they join MegaMillions! Thumbs Up

                Avatar
                new delhi
                India
                Member #22145
                September 20, 2005
                174 Posts
                Offline
                Posted: September 20, 2005, 11:08 am - IP Logged

                any news of the winner?????????? what happens if no one comes forward to claim the MM jackpot??

                  Todd's avatar - Cylon 2.gif
                  Chief Bottle Washer
                  New Jersey
                  United States
                  Member #1
                  May 31, 2000
                  23260 Posts
                  Offline
                  Posted: September 20, 2005, 11:11 am - IP Logged

                  any news of the winner?????????? what happens if no one comes forward to claim the MM jackpot??

                  Not yet.  NJ players get up to one year to claim their prize, so I guess we'll talk about the disposition of funds sometime next year if no one claims it, but I'm sure someone will.  Too early to be thinking about a lost ticket or something.

                   

                  Check the State Lottery Report Card
                  What grade did your lottery earn?

                   

                  Sign the Petition for True Lottery Drawings
                  Help eliminate computerized drawings!


                    United States
                    Member #379
                    June 5, 2002
                    11296 Posts
                    Offline
                    Posted: September 20, 2005, 3:51 pm - IP Logged

                    todd:

                    If only unclaimed MM or PB jackpots went back into the jackpot pool. But MM/PB players seem more serious about holding on to their tickets.