How Governments Use Lottery Revenue to Solve Fiscal Crises


The lottery is a form of gambling wherein people purchase tickets with numbers that are randomly drawn. The winning ticket holder receives a prize, usually cash or goods. This game is popular and many people participate in it on a regular basis. Many governments have lotteries to raise money for a variety of purposes, such as a school fund or medical research.

Lottery laws are different from state to state, but most states prohibit the sale of tickets that do not have a winning combination of numbers. However, some states allow the sale of tickets that offer a chance to win prizes that are not monetary, such as trips or sports memorabilia. These tickets must be purchased separately from the standard lottery tickets. The legality of these tickets is still a matter of debate.

Although the casting of lots has a long record in human history, lotteries for material gain are rather new. The first recorded public lottery was held for municipal repairs in Rome in 1466. State governments, looking for ways to solve fiscal crises without alienating anti-tax voters, quickly adopted these new sources of revenue.

During the nineteen seventies and eighties, lottery revenues soared and became a major source of state tax funds. But the popularity of the games coincided with a decline in economic security for most working people. Payroll checks grew smaller, pensions and health-care costs climbed, and the old national promise that hard work would bring financial stability largely disappeared.

Governments that rely on lottery revenues must keep ticket sales up or risk losing them. To do this, they pay out a significant percentage of the total revenue in prizes. This reduces the percentage that can be used for other state purposes, including education. Consumers don’t understand that they are paying a hidden tax on every lottery ticket they buy.

To keep ticket sales high, state lottery officials must also constantly introduce new games. This is an example of a “catch-22.” The more new games there are, the less likely it is that someone will buy a ticket. This makes it more difficult to attract new players and keeps existing ones from playing regularly.

In addition to introducing new games, lottery officials use marketing strategies similar to those employed by tobacco companies and video-game makers. These include slick advertising campaigns, attractive packaging, and the appearance of winning tickets to encourage repeat purchases. This approach is not unusual for any business, but it is particularly pronounced in government-sponsored lotteries.

The problem is that while these tactics might work for a while, they eventually backfire. Moreover, they fail to address the underlying problems with the lottery. For this reason, the best way to help reduce problem gambling is to reduce state dependence on lottery revenues.