Thursday, July 5, 2018

The Lure of the Lottery

The creation of a Mississippi Lottery is one of those ideas that is advocated by many but falls by the wayside when push comes to shove at the state capitol.  Stagnant growth of tax revenue makes a lottery mighty tempting to more than a few people.   How much money would the state receive if Mississippi had a lottery?

The Louisiana Lottery website gives some idea of how much money flows in to the coffers of state government. The website states:

Bringing year-to-date contributions to $130.7 million, the Louisiana Lottery Corporation transferred $45.6 million to the state treasury during the third quarter of fiscal year 2018, up $4 million from the third quarter of fiscal year 2017 and exceeding budgeted transfers by more than $2 million.

“The Lottery team is pleased to have exceeded budgeted transfers to the state during the first three quarters of this fiscal year,” said Lottery President Rose Hudson. “We will continue our efforts to maximize revenue for the state of Louisiana during the next three months and are looking forward to a strong finish to wrap up this year.”

With third-quarter revenue of $130,365,568, the Lottery contributed $45,627,950 to the state treasury. By law, at least 35 percent of Lottery proceeds are transferred to the state treasury and dedicated for K-12 public education. Roughly 53 percent of sales fund prizes, and less than 6 percent is used to operate the Lottery. Since the Lottery began operations in 1991, more than $9.8 billion in revenue has been generated, primarily from ticket sales. More than $3.5 billion has been transferred to the state treasury.

Retailers earn 5.6 percent in compensation, including commission, incentives for cashing winning tickets and bonuses for selling winning tickets, totaling more than $7.2 million for January through March of 2018.

The Louisiana Lottery also states on its website how proceeds from ticket sales are spent.

53.41% to Prize Winners

More than half of Lottery sales are reserved for prize expenses. Prizes not claimed are returned to winners in the form of increased payouts on scratch-off tickets. Players have won about $4.75 billion in prizes since the Lottery's inception.

35.04% to State Treasury

The Lottery statute mandates that at least 35 percent of all Lottery revenue be transferred to the state treasury. Effective July 1, 2004, the Louisiana constitution provides that Lottery proceeds be earmarked for the Minimum Foundation Program (MFP), which funds K-12 public education in Louisiana. In addition, the first $500,000 in annual Lottery proceeds is earmarked for the Louisiana Department of Health and Hospitals-Office of Behavioral Health to fund problem gambling programs.

As of fiscal year 2017, the Lottery has transferred more than $3.4 billion to the state treasury. More than $159 million was transferred from sales in fiscal year 2017. The Louisiana Lottery ranks second among other U.S. jurisdictional lotteries in percentage of revenue transferred to its government.

5.6% to Lottery Retailers

Roughly 2,900 businesses in Louisiana earn five percent commission on the sale of Lottery products as licensed retailers. In addition to revenue from commissions, retailers earn an incentive of up to 2 percent for cashing winning tickets of $600 or less. Retailers are also paid a selling bonus of up to 1 percent on the sale of winning tickets for Lotto jackpots; Easy 5 jackpots; Powerball and Mega Millions match-5 prizes (including Power Play and Megaplier winnings); and Powerball and Mega Millions jackpots (1 percent of Louisianas contribution to the jackpots cash value or a minimum bonus of $25,000). Retailer commissions, incentives and bonuses reached $25.4 million in fiscal year 2017, amounting to nearly $517.9 million since the Lottery's inception.

5.95% to Lottery Operations

The Lottery retains around 6 percent of its revenue to fund statewide operations, including its headquarters, five regional sales offices where players claim winning tickets, technology for generating tickets and conducting drawings, ticket printing, advertising, promotions and staffing. For the 19th consecutive year, the Louisiana Lottery received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the U.S. and Canada. The Louisiana Lottery was also the first in the country to receive industry verification that its quality assurances meet best practices.

Kingfish note: JJ has mixed thoughts on creating a lottery in Mississippi.  The casinos are prime evidence of Adam Smith's invisible hand at work.  Jobs are created.  Property values increase.  Businesses are needed to support the casinos as suppliers and vendors.  The tax base is expanded.  However, the numbers are the numbers.  Mississippi has a much smaller population so a lottery would probably yield $20-30 million in tax revenue for the state if the Louisiana guidelines were followed.  

35 comments:

Anonymous said...

Based on our experience, I just don't trust the legislature or any member of it to design a lottery program or to determine the destination of any money made off a lottery. Is anything in this state working well that was designed, managed or overseen by that bunch?

Anonymous said...

I think casinos have ruined every town that has them. Flashing neon signs, high rise monsters, crime, pawn shops, closed fine restaurants, addiction, divorce....And this is not a Bible Thumper comment.

Anonymous said...

Fish, I am with you in that I have mixed feelings about the lottery. On the one hand, I'd say every little bit helps, so if the lottery yields $20M-$30M in revenue, that's $20M-$30M the State didn't have before, so go for it.

On the other hand, I believe the old bumper sticker: "Lottery: A tax on people who are bad at math." The lottery is a regressive tax in that many participants are poor, so an argument can be made that the overall costs (hard dollar and otherwise) outweigh the incremental revenue.

At the intersect of the above, does your $20M-$30M estimate include the offset of lost sales tax revenue? My hypothesis is that most of the dollars that go to buy lotto tickets do not represent incremental spending, but rather re-directed spending, which would decrease sales taxes.

golferinmississippi said...

I have three thoughts/questions/comments that I am wondering:

1) Would a Mississippi Lottery share in the same pool of money if it was part of the multi-state conglomerates like powerball etc? or does Mississippi money stay in Mississippi, Louisiana money in Louisiana, etc?

2) If Tennessee, Arkansas, & Louisiana all have lotteries, I am sure there is spillover from Mississippi of people crossing the borders to buy tickets, especially for the big payouts. If we add the lottery those states will lose out on that money (making the comparison $$$ over inflated), and we aren't going to have the neighbors come over and purchase tickets. Maybe Alabamaians, but they are mulling a lottery bill of their own.

3) I know that proponents of the Lottery say it's the magic bullet that will solve all the state's problems, but we already live in an impoverished state. A large portion of lottery players (not talking about race) are poor. What little money they receive whether it's from welfare checks or low wage jobs, will have be spent trying to "hit the jackpot". For the 1 or 2 that hit the jackpot, it worked out, for the thousands of others... not so much. I guess the 35% that goes to the state treasury will go to take care of the newly added wards of the state after losing all their money.

At best case, it seems like a zero-sum game, but it would make us like the states around us. It would add cash to the general fund, but that money has to come from somewhere.

Anonymous said...

A lottery would be fine if the legislature didn't have access to the funds generated by it - they absolutely SUCK at managing how the state prioritizes spending.

Plain ol' Catfish said...

I agree with a majority of the posters here.

But with Tennessee, Arkansas, Louisiana having lotteries and participating in the mega lotteries, its high time we follow suit.

What the legislators do with the money falls on the citizens that elect them to office, be proactive and hold them accountable for doing what they are supposed to do.

If we as a state go ahead and implement a lottery, we can cash in on the Alabama spill over along our eastern border of the state, until they get one. That we can be ahead of the curve on something economically.

As far as it being a regressive tax, chi'please, we have a boatload of consumer taxes that kill the working poor in this state, along with casinos that eat up their money as is and now we are worried about regressive taxes?

Let's make it happen, stop letting our citizens go to neighboring states to play, keep that money in house, hold the legislators accountable for appropriating the money for good use.

Kingfish said...

Not approving your comment. You know how to spell "children" properly.

Wow said...

I actually agree with John Oliver on this one. Not a religious argument but the lottery is not a smart idea or an innovative way to gain tax revenue.


https://www.youtube.com/watch?v=9PK-netuhHA

Anonymous said...

When I lived in Texas I would drop a couple of $$ when I got gas. Not every time but maybe twice a month. I understand the math but it was fun to think about winning. I understand that many who play can’t afford it but they can’t afford cell phone, beer, drugs, getting nails and hair done,etc, etc but they do anyway. Plenty are leaving their money in Tee and LA already. We might just pick up some revenue on the underground money that currently goes untaxed.

The Mighty Kingfish And His Selective Radar.. said...

'Children' has been purposefully misspelled on this blog a hundred or more times. The way I spelled it has no racial connotation whatever, until you gave it one. Otherwise, why do you object? Get off your assumptive high-horse. As a matter of fact that is exactly how both of my now departed grandmothers pronounced and spelled it. Both of them, by the way, were white. Boy, when you get a hard-on, you keep it! Hard-on is not racist either.

Anonymous said...

Catfish...c'mon, the legislature is a bunch of unaccountable fools who talk shit for a couple of months to get elected, and then do whatever best serves them individually - they could not care less what they campaigned on. Sorry to burst your bubble with some realism.

Anonymous said...

I have just one QUESTION....Why do 45 out of 50 states have it? I guess we are just smarter than them?? OR maybe they are a lot smarter than us!!!!
JUST look at the LA and TN Revenue numbers!!!! Look what the put in the State Treasure every year.
How many people do you know that drive to LA and TN and buy lottery tickets? I am sure a bunch!!!

WAKE UP MISSISSIPPI!!!!!! It time to stop being the last at EVERYTHING!!

Why don't we let the people of MS VOTE on it??? OH The Politician don't want that!!! The PEOPLE would get what they wanted!!!

Anonymous said...

One thing to point out is that with the lottery funds we would probably gain 50 to 100+ good paying jobs at the new lottery office(s), an ad firm would get another contract (maybe another couple of jobs added), real estate, extra money for the retailers as the LA formula pointed out, etc. the buttery fly effect reaches beyond tax revenues.

Anonymous said...

My biggest problem with a lottery is that it is state run, and not just operated by the state, but HEAVILY promoted. Listen to a local radio station next time you're in New Orleans and count the number of ads for the Louisiana Lottery. It's astounding.

And the ads are shameless. If a private company was selling something with such outlandish claims and incredibly high odds, state attorneys general would be slamming them with lawsuits regarding false advertising among other things.

"You can't win if you don't play!" Yeah? Well you can't win if you do play, either. You just can't. You'd have better luck tossing a quarter in the Reservoir, diving in, and retrieving it than you would hitting the Lotto. And this is the government of the state telling you that you have a chance at it. It's so irresponsible it's sad.

"But it brings in revenue!" So would the reinstitution of slavery, especially if the state RAN THE BUSINESS. Whoa! That's over the top! OK, then how about sanctioned dog fights run by the state. People are doing it now and there's a demand for it, so we might as well have the state control it, right? (Imagine the ads on local radio for the Mississippi Kennel Pugilism League!)

Just because something will make some money for the legislature to spend doesn't mean it needs to be enacted.

Let the chumps drive to Tennessee and Arkansas to piss away their money. This is a bad idea.

Anonymous said...

I am good at math. REALLY Good. But when I visit my in laws in La. we buy a lottery ticket, for the fun of it! Here is why we will never have one in Mississippi - Phillip Gunn. Gunn said on Super Talk last year that he is opposed to it on the grounds of HIS religious beliefs. He is a snake handler or something I guess.

Anonymous said...

I have supported and played the lottery for years. However, after seeing our legislature in action over the past few years I don't think this would be a good idea. Any money received from the lottery would just be offset by more tax cuts for the wealthy, or would be used to fill gaps in funding from tax cuts to the wealthy that have already passed.

Anonymous said...

Think of the revenue the state gains on imbeciles gassing up their F150s for the weekly trek to Mound. They spend $50 on gas to buy $20 worth of lottery tickets.

If we enact a lottery, the state will lose the fuel tax revenue.

Logic, baby.

Plain ol' Catfish said...

@ July 5, 2018 at 12:53 PM

You are good, you didn't hurt my feelings. But I believe that as citizens, our legislators only do what we allow them to do.

But there's so much division between the left and right in this state, and I think we can agree, they capitalize on that division and let us battle it out in the blogosphere.

The left doesn't want to incorporate a lottery because they feel its a regressive tax on the poor and the right doesn't want to do it because of "moral" reasons.

Mississippi needs to get into the 21st century and stop trying to legislate morality.

Oklahoma residents just voted on medical marijuana and it passed, hell what makes it so bad is that Oklahoma's legislature has a Republican supermajority bigger than our own in the Mississippi legislature, and they passed something as progressive as medical marijuana?

I just don't get the logic of saying, "yeah, let Mississippi residents go next door to piss away their money" - that's self-defeating and foolish. We are losing young residents to more progressive places, and now we have our own neighbors saying we should let our own residents spend money in the contiguous states with no reciprocal return?

Next session our legislators have easy fixes - create the lottery, address the marijuana issue, funds for roads and bridges, eliminating the birthday tax on vehicles, funding for public education, lowering the cost for 2-year colleges for students in technical and medical fields, and addressing the state flag. On to FY2021

Anonymous said...

Mississippi needs to get into the 21st century and stop trying to legislate morality.

Amen. Legalize dogfighting. It's morally repugnant, but we have to stop trying to legislate morality.

Legalize prostitution and allow girls and boys as young as 15 to choose if they want to participate. Why not? We have to stop trying to legislate morality.

Legalize all drugs, including heroin and other opioids, and remove any age restriction for purchase. We simply must stop trying to legislate morality!

Anonymous said...

One of the most pitiful sights I've seen was a middle aged woman in Arkansas who didn't look like she had two nickels to rub together, buying a scratch off lottery ticket, going back to her old van to see if she'd won, then heading back inside the store to buy another when her first ticket was a dud. I don't see how preying on vulnerable people can help our state.

Anonymous said...


SO I guess dog fighting, Prostitution, Drugs are all part of the 45 other states that have the Lottery!!!! I guess only a back woods MS idiot would think that way!!!

Plain ol' Catfish said...

@ July 5, 2018 at 2:41 PM

Speaking in hyperbole is childish.

Dogfighting is something the left and right are both clearly against, so why even suggest that?

Legalize prostitution - well to be quite frank with you, sex work is work. Other country's and states, (please see Nevada) have legalized it and guess what, venereal diseases declined, sex workers are required to maintain drug testing and health checks, they pay taxes on wages, and minimizes the criminal eliminate.

Legalize all drugs, including heroin and other opioids, and remove any age restriction for purchase. We simply must stop trying to legislate morality!

The hits keep on coming from you, huh? Once again, when a state like Oklahoma pass legislation such as medical marijuana, why do you want to maintain the status quo? When a majority of conservatives and liberals would like to see this matter addressed a.s.a.p? Opiods are already legal, help yourself to any CVS, Walgreens, Drug Mart, Polk's Drugs, Walmart or Kroger Pharmacy.

Anonymous said...

How much of those ticket sales are from MS folks and if we got the lotto wouldn't we take some LA revenue from their residents buying tickets in MS by default.

Anonymous said...

2:06 - You totally left out the money spent on beer for a trip from, say, Jackson to Mound, LA and return. Last time I ran it, it was a seven beer trip. Unless there is a 'one lane traffic ahead' sign and then it's ten. Ten times four Milsaps Majors in the truck and, hell, that's forty cold ones purchased at Mr. Patel's place in Jacktown.

Anonymous said...

I am grown, let me spend my SS check the way I want.

Plain ol' Catfish said...

@ 4:59pm and 5:50pm

My sentiments exactly!

Anonymous said...

We have casinos and evidently they are fine. As I understand, there are no restrictions on allowing the poor into the casinos to spend their money.

We are about to have betting on College football games and evidently that is fine. I understand the sports betting laws were quickly passed (you can only bet inside of a casino). As I understand, there are no restrictions limiting sports betting only to the rich - even the poor can bet all of their money on their favorite College team.

And we object to the lottery because it takes money from the poor? I call Bullshit - We object because the casinos can't control the lottery money. That is why we object to it.


I smell bribes and payoffs here. Something coming from the capitol smells crooked as crap.

Anonymous said...

This is a link to a chart used perhaps by John Oliver showing administrative cost, state proceeds and prize money for various state lotteries.

https://fivethirtyeight.com/features/what-percentage-of-state-lottery-money-goes-to-the-state/

Why would Mississippi not organize their lottery around a high-state-revenue model like SD, OR, WV, DE or RI? We all seem to agree “it’s not about the math”..... so let’s maximize state revenue. You really think folks will buy their lottery tickets in another state because “the odds are better”?

Anonymous said...

intelligent people start an IRA or a SEP. rednecks, which flourish in this state dont do that. they play the lottery instead.

Anonymous said...

Any numbers on what the state obtains via taxes on winnings? Average Joe Blow doesn't pay taxes on those small wins, but what about the taxes on those 50K - $1M winners?

Anonymous said...

"intelligent people start an IRA or a SEP. rednecks, which flourish in this state dont do that. they play the lottery instead."

And exactly how is that any of your business? Intelligent people start sentences with capital letters. You failed the test three times.

Anonymous said...

Marijuana is the new lottery.

Anonymous said...

I agree....Look what the State of Colorado has benefited. Next Big Stock...Medical Marijuana.

Looks like we have a huge chance of getting the State Lottery approved. The Governor has "Seen the Light". About Time!!!!!

As I always say "Why is it good enough for 45 other States and not good enough for Mississippi?????

Anonymous said...

You're right that we can't legislate morality. Nor should we attempt to legislate what choices 'poor people' can make. Would there be a list of things they can't do or participate in based on economic criteria? If you're poor and can't rub two nickles together, you can't play the quarter slots. If you have three kids and a minimum wage job, you can't buy lottery tickets. If your car is six or more years old, you're not allowed to cross the state line since we know you're just headed somewhere to by scratch-offs.

Does the church draw up the list of rules or would that fall to a committee of people who know how to set rules for poor people? What would be the test for committee members? How would we decide which of you omnipotent igmos gets to sit in judgment?

Plain ol' Catfish said...

@ July 7, 2018 at 5:20 PM and July 8, 2018 at 4:06 AM

Thanks for understanding.

I just want a prosperous Mississippi, that has good roads, low on crime, invests in its people so that their quality of life is decent to great.

A lottery won't be the end-all or cure-all, but its a start for keeping Mississippi dollars in Mississippi, instead of our own citizens running to a neighboring state to gamble and we never see those dollars return.

We can take that money and reinvest it into our own backyard.

Now if we can go ahead address marijuana legislation and then on to changing the state flag, we can have some major gains in the next 4 to 5 years.

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Meet KIM Waaaaaade at the Entergy Tent. For five pesos, Kim will sell you a chance to win a deed to a crack house on Ridgeway Street stuffed in the Howard Industries pinata. Don't worry if the pinata is beaten to shreds, as Mr. Wade has Jose, Emmanuel, and Carlos, all illegal immigrants, available as replacements for the it. Upon leaving the Entergy tent, fig leaves will be available in case Entergy literally takes everything you have as part of its Trollfest ticket price adjustment charge.

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In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.


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