Lottery Systems

What is a Lottery?

A lottery has three elements under the law: “consideration” (or an entry fee, which may but need not be money), a prize (cash or otherwise), and chance. If skill is involved (such as by solving a puzzle or making a hole-in-one), then the transaction, while it may still be gambling, is not considered a lottery. Varieties of lotteries include preprinted scratch-off tickets and pull-tab tickets, and drawings of numbers, such as Pick Three and Lotto games. A recent and wildly popular innovation in lotteries is the multijurisdictional lottery, such as the multistate Powerball game.

A Brief History of Lotteries

Lotteries to finance public projects have been traced to many cities in ancient Europe and Asia. The first recorded instance where lottery patrons purchased tickets containing numbers occurred in Florence in 1530.

Lotteries and other forms of gambling were important to finance public works before and after the American Revolution. Schools and other public works were often financed by lotteries, as banking systems and municipal bond systems were insufficient or nonexistent. Early American colleges and universities were built using lottery proceeds, and lottery proceeds supported the Continental army during the revolution. American lotteries were wildly popular but horribly corrupt. Changing mores, in addition to disgust with [Page 627]corruption, sent lotteries into a steep decline. By the end of Reconstruction, nearly all lotteries were illegal.

In 1963, New Hampshire became the first state in decades to operate a state-sanctioned lottery. By the 1970s, poor economic conditions and taxpayer revolts (such as California's Proposition 13) led many states to turn to lotteries. Lotteries are now widespread, and ballot measures authorizing lotteries rarely fail.

Lotteries to Support Education: What does the Research Show?

Many lotteries were promoted to support highly visible and popular social programs, such as education and environmental protection. Lottery advertising campaigns push these ties to politically popular programs, the effect of which is to “sanitize” an activity that many would otherwise find objectionable. The great weight of empirical research, however, shows no net financial gain for public schools receiving lottery proceeds. After finding no statistically significant relationship between lottery proceeds and education funding, Thomas Jones and John Amalfitano in 1994 recommended, as a matter of policy, that states no longer use lotteries as a means of supporting public education.

Several factors contribute to this conclusion. First, lottery proceeds represent a very small portion of financial support provided to public education. In most states, lottery proceeds account for less than 2% of education spending. Second, school leaders who request additional public funding are often rejected, as many policymakers either (a) wrongly assume lottery proceeds cover a large share of education costs or (b) use a school's receipt of lottery proceeds as political cover to deny additional funding. Also, lottery proceeds are unstable sources of income.

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