Lotteries: Entering the Big Time in State Finance

November 11, 1987

Download Special Report November 1987

Special Report November/December 1987

Executive Summary Like it or not — and millions of Americans hate the idea on moral or other grounds — state owned and operated “numbers games” known better as lotteries are a growing part of the financial support for state and local governments in the U.S.

The latest available facts and figures on the increasing financial reach of government-sanctioned gambling are presented in this Tax Foundation Special Report. They show:

  • A total of 22 states and the District of Columbia took in $12 .5 billion in lottery sales, producing almost $ 5 billion in net lottery income, after expenses and prizes, in the fiscal year ended June 30, 1986. Net lottery income for all states has been growing at 29% per year since FY 1980, accelerating to 36% per year since FY 1984. Five additional states approved lotteries in fiscal year 1987. Virginia voters approved a lottery on November 3 and several other states are considering proposals. About three-fourths of the U.S. population now is exposed to state-operated games.
  • Lotteries still are a small share of states’ total income and charges -1 to 5 percent of the revenue from state taxes and charges in FY ’86 — and profits vary far more, and more unpredictably, than tax revenues. But lotteries’ input, and thus their clout at state capitals, is growing. Lotteries brought in more revenue than tobacco and alcohol sales taxes last year in California, New York and eight other states and D.C.
  • State lotteries also remain a small part of the gambling financial scene, in terms of dollars. Guesses about the total value of gaming and wagering vary wildly, especially as to the extent of illegal betting in its many forms. One educated guesstimate puts the total “handle” at $199 billion in 1986. In terms of people taking part — a crucial measure.

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