PERRY/Lottery at what cost?
Wednesday, February 8, 2017 6:00 PM
The lottery conjures dreams of vanishing financial troubles through a winning ticket. According to the National Endowment for Financial Education, about 70 percent of big lottery winners end up bankrupt within a few years of claiming their prize. Some policy makers want the State of Mississippi to buy a ticket.
Mississippians repealed the Constitutional prohibition against lotteries with 53 percent of the vote in 1992. Since then, the legislature has declined to create one and governors of Mississippi generally have opposed a lottery. But at his State of the State Address last month, Governor Phil Bryant cracked the door on a policy change.
“I am open to a general discussion regarding the implementation of a state lottery,” Bryant said. He noted Arkansas “received $80 million from its lottery last fiscal year. That kind of data demands attention. When we see traffic crowded on the Mississippi River bridge taking revenue to our neighboring state, it may be time to face a new reality. We can no longer contain the people’s desire for a lottery; we can only force them to travel.”
Some Mississippians oppose lotteries or gambling on religious grounds. I don’t dismiss those beliefs, but when it comes to public policy, that ship has sailed (or rather docked) with the advent of casinos.
What casinos provide - that a lottery does not - are ancillary economic benefits. Casinos bring with them hotels and resorts, restaurants and golf courses, thousands of employees spending money as an economic multiplier. From a public policy position, would a lottery cannibalize casinos? The hospitality industry has thousands of jobs outside the gambling sphere which are dependent upon casino profitability. If profitability decreases, would that diminish an entire economic sector?
I doubt a lottery would diminish a gambler’s plan to drive hours to the Coast or Tunica to play table games, or spend a day or two at a casino. Perhaps a lottery would diminish local walk-ins from playing slot machines. Whatever the result, lottery revenue would need to match and exceed any lost casino related revenue for it to be a smart move for the state.
But there is a major difference between casinos and a lottery. The state taxes casinos. The state becomes an active partner with a vested interest in the success of its lottery monopoly. That partnership markets the lottery to increase participation and thus increase the financial reward to the partnership.
States spend millions of dollar on marketing the lottery to encourage people to buy tickets. That’s because advertising works. People respond and studies show the greatest response for lotteries come from the poorest 20 percent of the population. Those who can least afford to spend money on lottery tickets spend the greatest percentage of their income on tickets. And the state is an active player in pushing the “buy lottery tickets” message to these people.
The public policy conflict is obvious. The state is also an active player in assisting those in poverty meet their basic needs for food, housing and healthcare. Ultimately, the state’s policy toward those receiving such benefits should be – when possible – to encourage them to rise out of poverty; not targeting them with lottery illusions. Through a lottery, the state on one hand encourages irresponsible financial behavior from those in poverty it seeks with the other hand to help.
When balancing the books on a lottery, the state should subtract from the “new revenue” the costs of weakening its own anti-poverty policies.
Meanwhile, studies show children tend to mimic their parents’ attitude toward lotteries, and participating in lotteries when young promotes future risky financial behavior.
Mississippi Treasurer Lynn Fitch has championed financial literacy in public education. She launched a public-private partnership called “TEAM” (Treasurer’s Education About Money) to teach students to manage finances through online courses, as well as provide professional financial literacy development for teachers. She wrote last year, “It’s no coincidence that Mississippi ranks at the very top in poverty and at the very bottom in financial literacy. To break the cycle of poverty here and elsewhere, we need to teach the next generation the language of money. Understanding financial matters and the benefits of saving can also help make it possible for families and students to invest in themselves through higher education.”
Studies suggest low-income lottery players believe a winning ticket provides a better, easier alternative than building savings. Again, you have the government marketing a policy in contradiction to the financial literacy policies it promotes in schools.
Governor Bryant is open to the lottery discussion. Lieutenant Governor Tate Reeves has said he would consider it if a case could be made. Attorney General Jim Hood has suggested the lottery as a funding source for public education. But House Speaker Philip Gunn remains the greatest impediment to a lottery. The discussion continues.
Brian Perry is a partner with Capstone Public Affairs, LLC. Reach him at firstname.lastname@example.org or @CapstonePerry on Twitter.