What is a Lottery?
A lottery is a scheme for raising money by selling chances to share in a distribution of prizes. This typically involves a numbered ticket (or slip) that is deposited with the lottery organization for possible selection in a drawing. The bettor’s number may be written on the ticket or randomly generated by the lottery system.
States generally enact their own laws regulating lotteries. These usually delegate the administration of the lottery to a state agency or public corporation. The agency or corporation will select and license retailers, train employees of the retailer to use lottery terminals, sell tickets and redeem winning tickets, assist retailers in promoting lottery games, pay high-tier prizes to players, and ensure that retailers and players comply with the lottery law and rules.
Often, the lottery proceeds are earmarked for certain public programs. This is an effective argument in times of economic stress, as voters will see that the proceeds are devoted to a specific purpose.
But there are some significant limitations to this strategy, including that the state government will only receive a fraction of the total funds “saved” by earmarking. The rest will remain in the general fund to be spent on whatever purposes the legislature chooses.
Moreover, the lottery is not an unbiased source of revenue, as it draws heavily from middle-income neighborhoods. While the poor do participate in lotteries, their participation is disproportionately low. In addition, a study by Clotfelter and Cook has shown that “state lottery revenues do not appear to reflect objective fiscal circumstances in the state.” They are a function of politics rather than of fiscal health.