Where does the money go when you buy a Powerball ticket?
Powerball and other lotteries claim that ticket revenues go to fund state-run programs such as education, parks, emergency responders, veterans’ health and other services.
But lottery proceeds don’t always get used for their stated purposes. And while about one third of all lottery money returns to state budgets, critics say the money tends to replace — rather than supplement — existing funding for the targeted programs.
“Money from the lottery generally substitutes money that would go to education anyway,” said Patrick Pierce, a political science professor at St. Mary’s College in Indiana. “After a few years, lottery money earmarked for education tends to find its way into a state’s general revenue pool.”
One prime example is North Carolina, which started its lottery in 2005, calling it the North Carolina Education Lottery. 100% of the proceeds go to fund North Carolina’s public education budget.
But in 2009, the state cut its education funding by 12%. North Carolina now allocates a smaller percentage of its budget to education than it did when the lottery started.
In the initial version of North Carolina’s bill establishing the lottery, the law said that, “lottery net revenues shall supplement rather than be used as substitute funds for the total amount of money allocated for those public purposes.” But that language was stripped from the final version of the bill.
California, Florida and Michigan also have reduced spending on education over the past decade, allowing lottery funds to supplant existing funding. Other states, including New York, have actually increased spending on education despite using lottery revenues to fund schools.
Only 15 states use all or substantially all of the lottery proceeds for education, according to the latest statistics gathered by the North American Association of State and Provincial Lotteries.
In 2013, the states sold a combined $62 billion in lottery tickets, and $20 billion of those proceeds were returned to states’ budgets, according to the latest Census Bureau data. ($39 billion went to prize money and $3 billion were used for administration fees).
Most states just put the money back into the state’s budget for multiple or undeclared purposes. Pennsylvania spends all of its lottery proceeds on programs for the elderly. All of Wisconsin’s lottery funds go to fund property tax reductions.
And each state varies in terms of what percentage of lottery sales goes to fund projects. West Virginia and South Dakota return more than 70% of lottery revenues to state budgets, but just 21% of Massachusetts and Arkansas’ lottery sales go back to the state.
So some lottery funds do fund education initiatives. But for the majority of state lotteries, it’s unclear exactly where your lottery ticket spending ends up.