NCPA - National Center for Policy Analysis

Lottery Funds for Education are a Gamble

April 20, 2004

More state legislatures are considering the use of slot machine revenues as an attractive way to fund educational spending, says Donald Miller, a professor of mathematics at Saint Mary's College. Currently, 39 states and the District of Columbia have state-run lotteries, with other states considering similar proposals.

However, education revenues from state-run lotteries have not materialized as expected. According to a study by Miller and Patrick Pierce:

  • States that use lotteries for educational spending tend to see a declining growth in spending-per-capita of about $6 per year, compared to states without lottery funds, whose educational spending growth averages $12 per year.
  • In Ohio, education spending increased by $11-per-capita annually before the lottery was approved in 1975; afterward, educational spending per capita increased to $26 the first year, then declined to less than $7-per-capita annually.

The problem is not that lotteries are going belly up. In most states, lottery-generated revenue has continued to grow. But the politicians couldn't resist using lottery funds to replace rather than add to existing sources of education funding. Governors and legislators then used money that once had been earmarked for education on tax cuts, new programs or debt reduction -- but not for schools.

Georgia is attempting to prevent the same situation from happening in their state. They approved educational spending programs first, and then approved lottery to fund the programs, hoping to make a clear distinction on how the funds will be spent.

As states attempt to increase revenues without increasing tax burdens, more states will look to gambling for revenues -- in 2002, states' lottery revenues totaled $42 billion.

Source: Donald E. Miller, "Schools Lose Out in Lotteries," USA Today, April 15, 2004; see also Donald E. Miller and Patrick Pierce, "Lotteries for Education: Windfall or Hoax?" State and Local Government Review, Winter 1997, vol. 29.

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