I have already written about the upcoming changes to Georgia’s HOPE scholarship program, and I wrote also about a failed alternative by Georgia Democrats to exclude the state’s wealthiest families from receiving scholarships.
Today there’s a pretty good piece in the AJC about the lottery funding for HOPE and pre-K generally: Lottery props up jackpots, gives less to state. The piece has been criticized for bias here at Peach Pundit, but it still contains some excellent data and points.
Total lottery sales in 1997 were $1.65 billion and topped out in 2009 at $3.40 billion. At the same time, the percentage given to education fell from 35%, the goal when the lottery was created, in 1997 to about 26% the last few years. The lower percentage is mostly due to larger payouts in prizes, which might be necessary to keep the program afloat: “Richard McGowan, a Boston College economics professor who has written critically about state lotteries, said there is something to the argument. Lotteries have life cycles, and Georgiaâ€™s mature game needs to reward gamers to keep their interest, he said.”
Other data also speaks to the lottery’s alleged efficiency:
A state audit of the lottery released just before the HOPE vote in the Senate offers further evidence that less is more. The audit found the Georgia Lottery is fifth-highest among 42 lotteries in the nation for jackpots and still ranked seventh in total money transferred to the state because it had maintained high overall sales.
Operating costs have not accelerated, by the way, coming in between 9% and 12% per year. (A broad range, but not an outrageously high amount.)
Another expert cited in the AJC piece points to a more fundamental problem with relying on lotteries for crucial revenue:
Paul Mason, an economics professor at the University of North Florida who has studied state lotteries, said the real problem is that state legislatures have used lotteries to replace traditional tax dollars for services. Now states are stuck with lotteries that cannot keep up with the rising cost of their programs, he said.
â€œItâ€™s a stupid bet that they have made worse by allocating more to prizes,” he said.
If I were a college student in Georgia, I’d do everything in my power to take advantage of HOPE, and I certainly don’t begrudge any students that money. In fact, I think we should provide a free first year of education to anyone who wants to attend a Georgia state college or university (perhaps through a loan that would not have to be paid back if that first year is successfully completed), and then give full or partial tuition as long as students are making adequate progress toward a degree.
I just have serious issues with the idea of lottery funding. I’m not against all gambling, but the Georgia Lottery has largely become a self-selected tax on generally less wealthy people who are draining money from their own wallets — and their own communities — to support generally wealthier families who are sending their kids to college. Obviously, there are myriad exceptions, but I think those are fair generalizations.
My other issue deals more fundamentally with the economics of the lottery. That $3.4 billion/year in lottery sales is equivalent to almost 20% of the entire state budget. We have an industry that eats up that much in consumer spending each year — and only about $850 million of that money goes directly to some productive use. This is a highly inefficient revenue stream that ties up huge amounts of consumer capital, has untold effects on the consumer economy generally, and drains money out of poor communities, as I noted above. I’d much rather see Georgia abolish — or scale back — its state-run lottery, and simply make the case to the citizens for an additional $850 million going to higher education and pre-K programs.