Lottery Funding

A lottery is a form of gambling in which participants are assigned numbers and the winners are selected by a random drawing. The casting of lots for material goods has a long history (indeed, there are several mentions of it in the Bible), but the use of lotteries as a means of public funding is much more recent. State governments have adopted and marketed lotteries in a bid to generate revenue for education, roads, prisons, and other social programs. But critics charge that state lotteries promote irresponsible gambling habits, are regressive in their impact on lower-income citizens, and raise many questions about their ethical value as a source of public funds.

There are a number of different ways to organize a lottery, but all involve some combination of record keeping, a random selection process, and prizes. The record keeping may be as simple as writing the names of the bettors on a piece of paper, which is then inserted into a large container to be randomly drawn for prize money; or it may be more sophisticated, requiring each bettor to purchase a numbered receipt that will be retrieved and recorded for later shuffling and selection for prizes. Prizes can be as small as a free ticket or as large as a substantial sum of money. The cost of organizing and promoting the lottery must be deducted from the prize pool, and some percentage normally goes to the state or sponsor.

In the early post-World War II period, states began to rely more heavily on the revenues from lotteries as a means of expanding their array of services without significantly burdening middle- and working-class taxpayers. This arrangement worked well for a while, but by the 1960s inflation was eroding the value of lottery winnings, and many people began to lose interest in playing the games. Moreover, as the public became more aware of the growing problems associated with gambling, many of them began to question whether state lotteries were doing more harm than good.

Lotteries are popular during times of economic stress because they are perceived to offer a painless source of government revenue: voters are happy to spend their money voluntarily on something that benefits the community, and politicians look at lotteries as a way to get tax revenue without raising taxes. Yet studies have shown that the objective fiscal condition of a state does not appear to have much influence on whether or when it adopts a lottery.

Once a lottery is established, its operations tend to evolve in a piecemeal fashion, with limited or no overall direction. The resulting lottery policies and operations do not necessarily take into account the needs of the general population, and public policy makers have little control over them. In fact, many states do not have a formal “lottery policy” or even a gambling policy at all. The continuing evolution of lottery operations makes it difficult for states to address issues such as compulsive gambling, regressive impact on low-income citizens, and the general desirability of gambling.