How Governments Use Lottery Profits to Fund Their Programs


The lottery is a form of gambling that involves drawing numbers at random for a prize. Some governments outlaw it, while others endorse it and organize state or national lotteries. In the United States, state governments have a monopoly on operating state-sponsored lotteries; they do not allow other commercial lotteries to compete against them. Governments use lottery profits to fund a variety of government programs, including education, infrastructure, and other social services.

The first state-sponsored lottery was established in New Hampshire in 1964, but by the late nineteen seventies, lotteries were spreading throughout the nation, thanks to the country’s booming economy and an intense antitax revolt. At the same time, state governments were desperately seeking ways to finance their budget crises that would not enrage antitax voters and a public that was becoming increasingly skeptical about the legitimacy of taxes and spending.

Advocates of state lotteries argued that a lottery was a painless source of revenue, with players voluntarily contributing money to the state and winning a prize that was far less painful than a tax increase or cuts to government services. And, as a bonus, the prizes won were more likely to stimulate local economies than federal or corporate grants.

While this argument was convincing to some, it was not persuasive to all. A number of people, including many liberals, opposed the lottery on moral grounds, and a significant minority of state legislatures did not support it at all. The lottery’s proponents had to find other strategies if they wanted to win the necessary support in those overwhelmingly conservative states.

Eventually, they began to argue that the proceeds of a state’s lottery could be used to cover only a single line item in the budget—usually education, but sometimes elder care or public parks or aid for veterans. This more limited strategy made legalization campaigns easier, as advocates could tell a story that appealed to people’s sense of fairness and responsibility, while still being relatively easy for voters to understand.

However, the narrower argument also meant that lotteries became linked to specific constituencies, such as convenience store owners (who benefit from the increased foot traffic generated by the advertisements), lottery suppliers (who are often large contributors to political campaigns), teachers (whose salaries were earmarked for lottery revenues), and state legislators who quickly grow accustomed to receiving additional appropriations from the lottery. Moreover, lottery advertising was typically most heavily promoted in neighborhoods that were disproportionately poor, black, or Hispanic. This racial bias was the source of some of the earliest controversy surrounding lotteries.