Lotto Fever 

They may save the Democratic Party, but what do they do to government?

They may save the Democratic Party, but what do they do to government?

Ever since the electoral debacle of 1994, when Republicans throughout the South scored the sort of comprehensive political breakthrough that had been anticipated since the passage of the Civil Rights Act of 1964, Democrats have been looking for ways to get back into the good graces of the voters. Weighted down by President Clinton’s assorted lunacies and the perceived “liberalism” (whatever that means) of the national party, Democrats have seen Republicans seize the majority of the governorships and Senate seats in the states of the former confederacy.

Reeling from the loss of allegiance of traditionally Democratic white voters in a process that took 30 years to unfold, the notion of a quick fix for the Democratic Party holds some appeal in an environment where the underlying currents of voter change may take another 30 years to reverse. One quick fix that is showing promise in two southern states is the concept of the state lottery.

Democratic gubernatorial candidates Jim Hodges in South Carolina and Don Siegelman in Alabama have clawed their way into contention against reasonably popular Republican incumbents by riding the issue. Whether that early success can be made to stand up in November remains to be seen, but these days Democrats are inclined to grasp at any promising straw, and neither of these states has been especially good to Democrats in recent years. It may not be the ennobling notion of “the idea whose time has come,” of which Victor Hugo spoke. But when one is short of good ideas, a popular one will do just as well.

The model for these lottery proposals is the Georgia lottery, which has produced enough discretionary revenue to prop up Gov. Zell Miller as one the most popular of Southern governors. Under the Georgia program, lottery revenues pay for college scholarships for all students who maintain a B average. The lottery funds computers in the classroom, pre-kindergarten programs, and other such luxuries.

The generosity of the Georgia program has attracted enough attention to bring additional life—although no additional success yet—to the lottery initiative in the Tennessee General Assembly. Lottery advocates here have been trying without success for more than a dozen years to round up the necessary two-thirds votes in both houses of the General Assembly. Such a margin would allow voters to hold a referendum on repealing the prohibition of lotteries contained in the state Constitution. Last spring, the General Assembly managed to get itself sufficiently tied up in procedural alternatives to kill the idea for another year, but that only means the issue will be lurking around the corner once the Legislature returns next January.

The appeal of lotteries for politicians is fairly straightforward: they offer a new source of tax revenue from a politically painless source. After all, a lottery is a tax voluntarily paid. For citizens, the appeal is more varied: there is the fun of the game and the prospect of getting rich quick. The public also likes the fact that lotteries are, essentially, taxes that get paid by other people. They fund additional programs. They might even mean tax relief in other areas.

Lotteries are politically potent. In Kentucky in 1987, an obscure but wealthy businessman named Wallace Wilkinson surged past better known opponents by offering up the lottery as an alternative to future tax increases in an aggressive television advertising campaign. What was noteworthy about the Wilkinson campaign was that all of the Democratic candidates had polls showing the voters favored lotteries by a 4-1 margin. Wilkinson, whose key adviser was future Clinton crony James Carville, was the only one who believed his data. The others shied away from the issue, believing that voters were ultimately too tied to their Baptist heritage to end up embracing a pro-gambling candidate. (In Kentucky? What did they think goes on over at Churchill Downs?)

One of the problems with lotteries is that most states have found that revenue tends to level off, or even fall, after a few years. If states want their lottery revenues to grow, they must engage in aggressive marketing. They also have to increase the number, and types, of lottery games available to citizens.

For this reason, many of the states that have introduced lotteries in recent years—such as Georgia, which initiated its lottery in 1993—have concluded that lottery revenues are too unstable to be made a part of the general structure of financing for state government. Consequently, the revenues have been earmarked for non-recurring expenditures on a discretionary basis. In other words, they go to luxuries that the state might not otherwise fund. This way, the state is not dependent on the lottery for the basics, and the things the lotteries do fund can be easily scaled back in the event the lottery comes up short.

While fiscally responsible, the approach has its downsides. It essentially becomes a slush fund to be used for enhancing the political popularity of the politicians of the moment. That makes it a device for transferring money from those who have less to those who have more.

Opposition to lotteries as regressive is subject to some discussion. (The other form of opposition, which comes from the conservative, Christian anti-gambling folks, is not. This argument is, by its normative nature, non-debatable.) The regressive argument is generally promoted by a goo-goo, protect-the-poor impulse, and is based on the experience in too many states where a disproportionate share of the revenues from the lottery comes from people in the lower income brackets. Indeed, oftentimes the state’s marketing efforts must target these lower income citizens to be successful in reaching its revenue goals, which, to opponents, makes the situation even more heinous.

To these arguments, lottery supporters respond by saying, in effect, “So what?” The lottery is a voluntary tax, and while it may be a bad investment—only about half the money taken in is typically paid out in prizes—nobody forces anyone to play. The spectacle of the state preying on its less fortunate may be unsavory, but this is a free society, and people are entitled to their own folly.

The trouble with what was done in Georgia—and what is now being pushed for in Tennessee—is that the lottery maximizes the regressivity issue even further. Money is taken from poor lottery players to fund college scholarships for middle- and upper-middle class students, creating a redistribution of wealth of which the sheriff of Nottingham would have approved. While the college scholarships may be an admirable goal—and indeed may be the difference between a student of modest means going, or not going, to college—the laudability of the purpose should have nothing to do with how it gets paid for.

When the state decides to pursue some worthy policy goal, it can use any of its available revenue sources. That means college scholarships can be funded out of general revenues. Or, indeed, general revenues could be used to lower tuitions.

But when the lottery is used to fund such a program, voters are invited to view the program in a different light. It is as if something can now be done with found money. And they might not want to do this particular something if they had to ante up regular tax revenues for it.

In this sense, decision-making becomes distorted, and the priorities of government get altered. In Georgia, for instance, a massive pre-kindergarten program is funded by the lottery. Such programs are generally popular, but not necessarily educationally effective. And since it is funded out of irregular revenues, it is not held to the same standard of educational accountability as it would receive if it were funded from general revenue sources.

Lottery advocates in Tennessee have been pushing the proposal for so long through such a treacherous legislative odyssey that it is unclear whether they still remember why they set out on the journey. While the Georgia approach may have seduced Georgians, and may be singing its siren song in South Carolina and Alabama, Tennesseans at this point would do well to give some thought to just what they want from a lottery.

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