The Official Lottery and Its Impact on State Budgets

Official lottery is a national multi-state game that raises funds for various state purposes, most commonly education. Since New York Lottery’s inception in 1967, more than 34 billion dollars has been generated in revenue in aid of educational purposes. This revenue is disbursed through the state budget process based upon estimates of lottery earnings at the time of the budget’s passage, or in the event that actual Lottery revenues exceed those estimates.

In the early years of the legalized lottery, its proponents touted the lottery as a fiscal miracle, an instrument that could fill state coffers without raising taxes. In a nation defined politically by an aversion to taxation, this seemed appealing to politicians in search of ways to keep government services alive while avoiding punishing their constituents at the polls.

As it turned out, though, this promise was deceptive, and the lottery’s impact on state finances has always been considerably less dramatic than its proponents believed. New Jersey, where lotteries first appeared, imagined proceeds in the hundreds of millions; the actual amount brought in was thirty-three million dollars in its first year, or just two per cent of state income.

In the long run, however, the illusory promise of winning the lottery has had a significant impact on American life, Cohen writes. Lottery spending correlates with economic fluctuations, and lottery sales increase when wages fall, unemployment rises, or poverty rates climb. Research has also found that state lotteries tend to advertise and sell their products in neighborhoods that are disproportionately poor, and many low-income Americans are led to believe that lottery tickets offer them a quick route to wealth.