If you’ve spent much time thinking about government-sponsored gambling, then a new report detailing how it takes from the poor and gives to the rich didn’t tell you much you didn’t know, except for a few updated numbers to underscore the problem.
If like most of us your thinking has been confined to the question of whether the jackpot’s big enough for you to buy a lottery ticket, and if so what numbers you’ll pick, then the work by the Howard Center for Investigative Journalism at the University of Maryland is worth a closer look.
In either case, the investigation should ultimately serve as a reminder about how South Carolina’s Legislature continues to dodge a state law that was designed to ensure that creating the so-called “education lottery” didn’t actually reduce our state’s commitment to education … which it has in fact done.
The report examined data from 44 of the 45 states that operate lotteries and found that lottery retailers are concentrated in poor neighborhoods, the people who spend the bulk of the money on lotteries are poor and the proceeds are split largely between two multinational corporations that operate the lotteries and government programs that tend to help middle- and upper-income families at the expense of the poor people who fund the programs.
In all, the report found, state lotteries have grown from a $47 billion-a-year industry as recently as 2005 to $82 billion-a-year today. And that money goes to the gamblers, who collectively get back much of the money but still lose on average 35 cents for every dollar they spend, the lottery businesses and lottery employees that take in $8 billion to run the games and those government programs.
Lottery backers have long pointed to studies that show players come from all income groups, while glossing over the fact that people with higher incomes buy a lottery ticket occasionally, when the jackpots get huge, while lower-income players buy multiple tickets daily. For instance, the report quoted a 2014 study commissioned by the S.C. lottery that found players with household incomes of less than $35,000 a year spent more than twice as much per person as players with household incomes between $100,000 and $150,000.
Lottery advocates also argue that that complaints about lottery outlets being clustered in low-income neighborhoods are misleading, because those outlets draw customers from outside the neighborhoods. But the Howard investigation likewise poked holes in that claim, by using cellphone location data to show that most players come from the same low-income neighborhoods where the outlets are located.
Lotteries in South Carolina and elsewhere are billed as an easy way to support education, but the report found that “lotteries often compound inequities by disproportionately benefiting college students and wealthier school districts far from the neighborhoods where most tickets are sold.”
For instance, less than $3 million of lottery proceeds in South Carolina’s 2022-23 state budget goes to K-12 education, with nearly all of the remaining $590 million going to higher education. And while we agree that it’s important for the state to support higher education, the unfortunate fact remains that there’s a close correlation between household income and college participation.
What the report doesn’t show, though, is how much the lottery actually harms public support for public education.
When South Carolina created the lottery, legislators realized that other states had reduced taxpayer funding for education after creating lotteries, so they included a section in the law that said the state couldn’t reduce the percent of non-lottery state spending devoted to public and higher education after the lottery started. Tragically, that law hasn’t been followed in years.
Before the lottery was created, the Legislature devoted 57% of the state budget to education. Calculating that percentage is not for the faint-hearted, and the last time the Legislative Audit Council did it, in 2018, it came to just 52%. That amounted to a shortfall of more than $400 million, for a cumulative shortfall of $2.1 billion since the lottery was created.
Lawmakers have increased education funding every year since then. But they’ve increased other funding by even more, so that by our more simplistic year-to-year calculations, the percent of state tax dollars devoted to education has actually fallen since 2018.
In order to make this breach of faith with lottery critics legal, the Legislature inserts language at the end of each year’s state budget that suspends “All acts or parts of acts inconsistent with any of the provisions” of the budget. But it doesn’t make it right.
