Legal Gambling May Be a Bad Bet

0 Comments | Insight on the News, May 31, 1999 | by Catherine Edwards

A study conducted by St. Mary's College in Notre Dame, Ind., examined education funding in all 50 states, including 12 in which lottery proceeds help fund schools. They discovered that upon establishing a lottery, states are likely to decrease their rate of appropriation for education and that, in the long run, many states then use revenues from the lotteries to replace, not augment, education spending.

The most touted example of a lottery funding education is in Georgia, where retired governor Zell Miller instituted the lottery in 1993 to help fund the Helping Outstanding Pupils Educationally, or HOPE, scholarship program that pays college expenses for students. The Georgia lottery sells more lottery tickets in poor areas than in affluent neighborhoods, but the average income for those receiving HOPE scholarships is $13,000 higher than the state average. This has led critics to suggest that this is a case of the poor subsidizing the better off under the guise of government good works. "You are introducing a regressive tax system, funded through people with low incomes and behavioral problems," Goodman says. "Is that a good way to run government?"

Using money from the lottery, the bulk of which comes from poor and low-income groups, to fund programs for such groups hardly is a wash because such as plan fails to consider the long-term social and economic problems caused by gambling itself. University of Illinois professor John Kindt calculates that for every $1 the state receives in gambling revenues, it costs the state nearly $3 in increased criminal-justice, social-welfare and other expenses. In addition, reports show that discretionary spending in communities goes down when the lottery is introduced. "Look, if you have $20 and you spend $10 on lottery tickets instead of dinner, that's $10 less for the local economy," says Goodman.

Terry Lanni, chief executive officer of MGM Grand Inc. in Las Vegas and a member of the NGISC, argues that at least casino gambling creates jobs. "Who else would go in and set up a business in the Mississippi Delta?" he asks. Minnesota lottery director Anderson says the number of lottery employees is dramatically less than the manpower required to run casinos or riverboats. But once the gambling interests come in they have big money to hire lobbyists. In 1993 the South Carolina Legislature passed a law mandating that jackpots from video poker not exceed $125 per person. Larry Huff, president of the only South Carolina antigambling-advocacy group, says the idea was that "nobody would want to play if winnings are that small." When a federal judge upheld the constitutionality of that law, the gambling interests enlisted more that 30 lobbyists to repeal it.

Meanwhile, the future of lotteries looks mixed. The NGISC has recommended in its draft report that lotteries be subject to more oversight. Major vendors may be investigated to ensure that they have no offshore holdings they could launder through the lottery system. The commission hopes to recommend a ban on Internet gambling and a uniform gambling-eligibility age of 21. After the commission files its report, it will be up to Congress and elected state officials to implement or ignore the recommendations. Easier said than done, say critics of legalized gambling. As former governor Beasley found out, "If you want to take on the gambling industry, be prepared to walk away from the governor's mansion."