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Lottery mania 

Since the voters and the legislature settled the big questions about the worth of a state lottery by convincing margins, this may be disregarded as sour grapes or empty second-guessing. It can in no way affect anything except maybe dampen the excitement, but that is sorely needed.

The mania over a new lottery is always unrestrained, but the near hysteria of the Arkansas lottery's champions, including lawmakers who were once indifferent and certainly the members of the new state Lottery Commission, is a little over the top.

The big (but largely unsupported) argument for the lottery in the first place was that it would be a giant economic stimulus for this poor state by sending thousands of youngsters to college who otherwise would stay at home and remain unskilled and a drag on the economy.

So it was urgent to get the lottery going and tickets sold as fast as humanly possible at whatever cost, including some of the highest lottery salaries in the world. (This week they hired a security guard for the lottery offices for $115,000.) Every day that lottery tickets aren't sold will leave hundreds of youngsters at home and doomed to unproductive lives, the defenders of the costly executive hires said. A million dollars a day will be lost, said the new $324,000 director from South Carolina, Ernie Passailaigue.

As I said last week, if the opening day of the lottery misses the Oct. 29 deadline by a week or two months, no youngster is going to miss out on a college education.  The lottery will supplement the existing state scholarship effort — the legislature and the governor are prohibited by the Constitution now from ever reducing this effort even by a single dollar — and the state will begin the fall term next month with $100 million to pay the tuition of youngsters who meet the barest standards for successful college work. That is twice the demand of the past school year, although the standards have been lowered a little and the family income restrictions on state-funded scholarships removed so that children of the rich can get college assistance, too. That will make a lot more people eligible for scholarships but it won't have a big impact on the college-going rate.

But what about that economic impact? A surge in college attendance will produce growth and jobs. South Carolina, which is the template for the Arkansas lottery because it is so successful, is a good place to measure it.

South Carolina's unemployment rate in 2001, the year that the state rushed into the lottery, was below 5 percent. The rate is immaterial, but year after year, the state had tracked the national rate with uncanny precision. But a recent economic analysis observed that starting with 2002 the trend changed and South Carolina's joblessness began to exceed the national rate by persistent and widening margins. South Carolina's jobless rate in May was 12.1 percent, third behind Michigan and Oregon. In the adjoining scholarship lottery states of North Carolina and Georgia, the unemployment rates are not far behind.

Arkansas was 7 percent. Five of the seven non-lottery states, if you're curious, were well below the national rate of 9.4 percent.

That is not to argue that a lottery increases joblessness, but it is no panacea either, whatever use is made of the net lottery revenue left to a state. Oh, Oregon, where a staggering 12.5 percent were unemployed last month, has used its lush lottery money for job creation and economic development since 1985. Great work, Oregon.

But a lottery does have indisputable economic impacts. Because of the use that will be made of the net revenues of the Arkansas lottery, it will produce a substantial transfer of wealth, just not in the direction that Arkansas needs.

Although lottery cheerleaders dispute it, lottery participation everywhere but especially in the South, is regressive.  The poor are more apt to be regular ticket buyers. Study after study shows that the most frequent ticket buyers are African-American men, who happen to top the ranks of the unemployed, and people who never finished high school.  The most frequent college goers and beneficiaries of scholarships are in the higher ranks of family income and wealth. To be sure that the scholarships soaked up all the money that will be available when the lottery proceeds pour in, the state removed the family-income ceilings on scholarship eligibility effective next year.

If Arkansas emulates the South Carolina experience, one sure effect of the scholarship lottery will be substantially higher college costs.

There is one lottery game that can produce a fairly progressive participation rate — that is, the highly educated and wealthy take part. A Harvard study showed that when a multistate lottery like Powerball gets the jackpot to stratospheric levels rich people start to buy. 

Passailaigue says he will get Arkansas into Powerball quickly. Powerball and its big jackpots — one reached $365 million in 2006 — do get people buying. The downside of Powerball is that half the money it takes in from Arkansans — Passailaigue estimates $65 million in the truncated first year — instantly leaves the state. That can't be good for our cash-poor economy, can it? But, never fear, just like the lottery commercials will say, the good times are coming.

 

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