Is the Lottery a Wise Use of State Funds?


The lottery is a fixture in American life, a gambling activity that people across the country spend an estimated $100 billion on each year. Yet while many state governments promote the games as ways to raise revenue, there are questions about whether this is a wise use of state funds and about the alleged negative impacts on lower-income individuals. Some of these issues are related to the way that lottery operations evolve, and they also reflect the ways that political officials at all levels prioritize state policies.

The casting of lots for determining fates or other events has a long record in human history, although the use of lotteries to award material prizes is much more recent. The first public lotteries, selling tickets for prizes of money, appear in records from the Low Countries around the 15th century. Some of these were organized by town councils to help build walls and town fortifications, while others distributed cash and goods, including food, clothing, weapons, and household goods.

In the early modern period, lotteries became more widespread in Europe. They were a popular alternative to paying taxes and they helped fund large public works projects such as canals, roads, bridges, universities, churches, and schools. Many of these were established by private promoters, but some, such as the 1749 lottery in Boston that helped finance the building of Faneuil Hall, were sponsored by the colonial government. Benjamin Franklin ran a lottery to raise money for a militia to defend Philadelphia against the French, and George Washington operated a lottery to build a road in Virginia over a mountain pass.

Lottery games today vary greatly in terms of what they offer and how they are run, but they share some common features. In most cases, the state legislates a legal monopoly; establishes a public corporation to run the lottery, or licenses a private firm in return for a share of the proceeds; and runs advertising campaigns. In some states, the money is used to help public education; in others, it is donated to a variety of other causes.

State legislatures and governors face conflicting goals when deciding how to allocate lottery revenues. While many people see the games as a good way to support education and other state priorities, others have concerns about compulsive gamblers or the regressive nature of lottery proceeds. State officials are also under pressure to increase revenues in an era of budgetary constraints and heightened anti-tax sentiments.

Lottery proponents argue that the funds raised through the games are not a drain on the state’s fiscal health, and they point to studies that show that state lottery revenues have generally been stable even when the states have faced financial distress. These arguments are most effective when the state’s fiscal condition is poor, but they have some appeal even when the state has ample funds and does not need to cut other programs or taxes. The fact is, however, that state lottery funds are a relatively small component of the total state budget.