By Matt Pearce
7:30 AM CST, November 26, 2012
A lot of hopeful eyes are glued on the biggest number in gambling this week -- the record $425-million Powerball jackpot that’s destined to make some lottery ticket buyer somewhere very, very happy.
In advance of Wednesday's drawing, some people are already very happy: officials in states selling Powerball tickets. Behind the scenes, they've been setting the stage for bigger and bigger jackpots, both for ticket buyers and states selling tickets.
In the 2011-2012 fiscal year, state lottery commissions -- 33 of which run Powerball -- saw a historic year of revenue from ticket sales. Despite a still-anemic economy, 32 of the country’s 44 state lotteries set new sales highs that will make Powerball’s record-setting payout look like a pittance.
You think $425 million is impressive? Try $60.8 billion.
That’s the amount state lotteries reporting making in the last fiscal year, according to the North American Assn. of State and Provincial Lotteries. That’s an 8.7% increase from the previous fiscal year. And at the pace the industry is going, you can expect those numbers to continue.
Lotteries are, by their nature, losing games for ticket buyers; they’re designed to be fundraising machines for state governments, which are getting increasingly talented at squeezing revenues out of buyers with huge jackpots and scratch tickets.
Those bigger payouts aren’t just lucky runs. They’re intentional. Last year, Powerball doubled its ticket price to $2, which the lottery said would boost average jackpots from $141 million to $255 million, with the starting jackpot now beginning at $40 million instead of $20 million.
The impact on Powerball? A 27% increase in sales revenue despite a doubling of prices.
That’s made lotteries an attractive money source for state governments in a time of budget shortfalls and Republican resistance to raising taxes. Gambling used to be widely illegal across the U.S., with lottery fraud helping lead the cause for a ban in the 1800s.
Now state lotteries are like any other big business with a mandate for maximizing profit, with talk of “best practices”. Gambling in the back room has been replaced by -- in Minnesota -- lottery machines at ATMs and gas pumps.
While the public worked itself into a frenzy over this year’s $656-million Mega Millions jackpot, New Jersey was busy funneling $950 million of its record $2.8 billion in sales into programs for education, veterans, the developmentally disabled and others.
Before somebody had even bought a winning $337 million Powerball ticket in Michigan in August, the state was dumping a record $770 million of lottery sales money into its School Aid Fund.
For some, the knock against lotteries is that they’re essentially a hidden tax on the poor, who are more likely to buy tickets in the hopes of making it rich -- by playing against a system designed to take more money from ticket buyers than it pays out.Others bat down that criticism, replying that lotteries are consensual; no one is forcing ticket buyers to chase a $425-million jackpot, no matter how infinitesimal their odds of winning. (The odds are 1 in 175,223,510.)
But for lotto managers, as another huge Powerball jackpot approaches and the holiday season looks to see higher ticket sales, life is good.
“The Thanksgiving season is a time of year when we need to say ‘thank you’ for all of the great things that have befallen us both personally and professionally,” District of Columbia Lottery Executive Director Buddy Roogow wrote in the most recent edition of Lottery Insights, a trade magazine. “Across our industry, we are thankful for the great resume of customers, vendors and employees to whom we owe a huge debt of gratitude. So many lotteries enjoyed record years. Let that continue into the new year.”