Issue Number 3 – No Guarantee Lottery Will Always be a Big Payoff

North Carolina Citizens for a Sound Economy today released Issue Number 3 of its ongoing effort to educate elected officials and citizens on why a government-run lottery is bad business and public policy.

National trends show that the $300 million figure is not guaranteed to last.

Manuel Wallace in his North Carolina Insight article, “13 Ways of Looking at a State Lottery,” talked about national trends over time show lotteries lose their ability to be a consistent source of revenue. From 1989 to 1997 lottery sales slipped from 3.5 percent to 2.2 percent of state’s revenues. This decline is attributable to several factors, with the most prominent being that the novelty value of the lottery wears off over time with lottery ticket buyers. When this happens, the lottery marketers have to “up the ante” to meet their sales goal to remain competitive with other lotteries. As a result, lottery marketers are forced to raise prize values and spend more money advertising the lottery.

Once the initial popularity of a lottery fades it can create revenue short falls that will force the state to either cut back services or raise taxes. These lottery shortfalls are beginning to show in Florida and Georgia, as both states are finding it hard to depend on revenue created by a lottery to meet extensive government commitments to fund public education. The situation in both states clearly casts doubts on North Carolina’s ability to continually generate the money needed to bridge any revenue short falls in the state budget.