The Lottery: Really Helping Schools?

Every Michigander has seen them: Mega Millions billboards advertising the money that could be yours with the right lottery ticket.

Offering instant wealth, the Mega Millions and other lottery games bring more than $2 billion in sales to Michigan. Where does this incredible sum go? Michigan Lottery advertising would have you believe that gambling is not a waste of money, but a way to benefit public education. An examination of where the money really goes, however, isn’t so encouraging.

Revenue increase through “painless” means is the best argument for state lotteries. It is deemed better for residents to voluntarily give money to the state via gambling than for the state to raise taxes. Under the belief that people would gamble regardless of its legality, and that the lottery would significantly benefit the public school system, Michigan voters approved the constitutional amendment necessary to establish a state lottery on May 16, 1972.

Since then, the lottery has expanded from a single game to more than 70 “scratch off” games and numerous online games. These games have generated more than $48 billion in ticket sales.

Whereas in 1995 approximately 40 percent of Michigan Lottery funds went to the School Aid Fund, that number had decreased to 30 percent by last year. Michigan Lottery spokesperson Andi Brancato attributes this change to the increase in lottery prizes. In order to keep people interested in paying for lottery tickets, both the chances of winning and the prizes for winning have increased.

Although Brancato raises an important point, such a change highlights the fact that the majority of lottery resources are required for self-sustainment. Five cents of every dollar goes to the continued advertising of the Michigan Lottery, as well sundry expenses. Seven cents is saved for the lottery retailers, while 58 cents goes to the lottery winners. Of the $48 billion the Michigan Lottery has generated after almost 40 years, only $16 billion has gone toward educational purposes. That is equal to about 15 months of school aid based on the 2012 state appropriation of $12.9 billion.

Since 1972, the Michigan Lottery has transferred an average of $410 million to the School Aid Fund annually. But when compared with other contributions to the School Aid Fund, such as state sales tax (42.5 percent), income tax earmarking (17.7 percent) and state property tax (16.7 percent), lottery proceeds (6.6 percent) are small.

There is nothing inherently wrong with spending a few dollars on a lottery ticket. But Michiganders should not support the lottery in the false belief that most of the proceeds are going the schools. Most of the money is used to keep the lottery running — a fact you’ll never see plastered on a flashy Mega Millions billboard.

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Victoria Hechtman is a communications intern with the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.