State Lotteries

views updated May 11 2018

44. State Lotteries

State lotteries have become nearly ubiquitous as state government activity. Forty states permit lotteries. In virtually all states with lotteries, the stated purpose is to raise revenue. However, there is wide diversity in how the money raised is distributed. Most states (about 16) designate lottery profits for schools and education, about thirteen states distribute profit to the general fund, or a fund for economic development, such as highway construction, in support of stadium authorities. A few states designate lottery revenues to fund various general environmental activities.

Many states apply the revenues to more than one purpose. A few states are quite unique. For example, Pennsylvania uses its revenue for programs designed to help the elderly with rent rebates and property tax assistance. Massachusetts uses its revenue in support of the arts. Maryland and Washington use substantial portions of their lottery revenue to raise money for sports stadium construction and operation.

A number of states have enacted provisions designed to help problem gamblers. Louisiana, for example, requires all lottery tickets to be printed with a toll-free gamblers assistance hotline phone number. At least four other states also have various provisions designed to assist problem gamblers.

One interesting provision in many state lottery laws provides for the garnishment of prizes to collect various debts, ranging from unpaid taxes to outstanding child support obligations. Usually, only prizes over a certain amount may be garnished. One state specifies that only prizes over $100 may be garnished, another sets the limit at $2,500. Texas permits garnishment of prizes won by persons who have defaulted on guaranteed student loans.

Interestingly, there are some unusual circumstances in various states. Maine, New Hampshire and Vermont each authorize two lotteries: their own and a Tri-State Lotto that is authorized under a tri-state compact. The proceeds are distributed equally among the three states. Finally, it is interesting to note that Nevada does not permit a state lottery. Perhaps this would be seen as competing with one of the states major industries.

Overall, the matter of state lotteries is only one category, albeit a big one, of the laws relating to gambling. The law of gambling is a very complex and varied area of state regulation. Of late, gambling itself has been subject to many political pressures, both for and against legalization. Although gambling is not treated in this chapter, one interested in the subject may use statute citations provided to locate the general gambling laws for each state.

Table 44: State Lotteries
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
ALABAMAProhibited: Art. IV §65 AL Constitution     
ALASKA05.15.100, et seq. Department of Revenue may license municipalities and organizations to conduct lotteries   
ARIZONA5-501, et seq.18.5% state lottery fund (for administrative and advertising expenses); 29% commerce and economic development commission fund, clean air fund, and local transportation assistance fund; 50% payment of prizes On prizes over $600, a set-off is allowed for any debts over $100 owed to the state, including overdue support180 days/70% to state lottery prize fund and 30% to special advocate fundSale to minor; alteration of ticket; sale by unauthorized person; sale at unauthorized price
ARKANSASProhibited: Art. 19 §14. AR Constitution     
CALIFORNIAGov. §8880, et seq.50% prizes; 34% benefit public education; 16% expensesFor the preservation of the rights, liberties, and welfare of the people to benefit education without additional or increased taxes, money should supplement, not be substituted for, public education funds 180 days; to benefit public purpose of educationSales to minors; counterfeit/altered tickets
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
COLORADO24-35-201 et seq.Of net proceeds: 40% conservation trust fund with 10% going to Division of Parks and Outdoor Recreation for acquisition and development; 50% of total revenue for disbursements of prizesAcquisition of state correctional facilitiesOffset for those who owe child support debt or arrearages up to full amount of prize180 daysSell ticket at greater price; unauthorized sale; sale to minor
CONNECTICUT12-568a; 12-800, et seq.Of net proceeds, $1.05 million goes to gamblers rehabilitation programs   Forgery/counterfeiting tickets; sale to minors; sale of out-of-state lottery tickets; unlicensed sale; at greater price §12-568 repealed 7/1/96
DELAWARE29-4801, et seq.At least 30% to the General Fund of the state from the State Lottery Fund; 45% payment of prizes; 20% administration and expensesTo produce the greatest income for the state; for video lottery to provide nonstate supported assistance to the harness and thoroughbred racing industries 1 year/State Lottery FundSales to minors; at greater price; alteration/forgery
DISTRICT OF COLUMBIA3-1301, et seq.1st pay operation, administration and capital expenses (including payment of prizes); remainder to General Fund of District of Columbia as general purpose revenue funds Lottery and charitable games fund pays for operation  1 year/General Fund of District of ColumbiaUnauthorized sales; forged/counterfeited/altered tickets; sale to minor
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
FLORIDA24.101, et seq.Deposited in administrative Trust Fund; remaining revenue to pay administrative expenses of lottery departmentTo support improvements in public education and not as a substitute for educational fundsOn prizes over $600; offset by outstanding obligation to any state agency or owing child support through a court180 days/added to pool from which future prizes are awarded or for special prize promotionsUnlawful assignment/transfer; unauthorized sale as retailer; sale to minor; counterfeited/altered ticket; at greater price; extension offered to purchase ticket
GEORGIA50-27-1, et seq.45% prize money; 35% of net proceeds to go to Lottery for Education Account (with 10% as a scholarship shortfall reserve account)To support improvements and enhancements for educational purposes and programs; funds used as supplement, not substituteOn prizes over $5,000, set-off for all debts over $100 owed to any state agency including taxes, child support, and judgments or liens180 days/up to $200,000 to Department of Human Resources to treat compulsive gambling disorders with the rest added to a pool for future prizes or special prize promotionsSale only at set price by authorized retailer; sale to minors; stolen, forged, or counterfeited tickets
HAWAIIOffense of gambling is prohibited. 712-1220. et seq.     
IDAHO67-7401, et seq.45% prize expense; 15% administrative costs; 3½% advertising and promotional costs. Of rest of net income: 1/2 to permanent building account; 1/2 to school district building account with a one-time allotment to permanent building fund advisory council for Vietnam Veterans MemorialTo benefit public purposes consonant with the public goodSubject to garnishment for unpaid taxes, child or spousal support; or public assistance benefits180 days/added to future prize poolsSales to minors; counterfeited, altered, or forged tickets
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
ILLINOIS20 ILCS 1605/1 et seq.Set by department; all revenue to go to State Lottery FundTo support the states Common School FundWithheld for past due supportSet by department/added to prize pool for special drawingsAt greater price; to charge a fee to redeem a prize; from unlicensed sales agent; altering ticket; sale to minors
INDIANA4-30-1-1, et seq.Administrative trust fund for prizes and expenses; any surplus revenue (where roughly $30 million goes to state teachers retirement fund and $7.5 million to pension relief fund with remaining surplus to the Build Indiana Fund for highway construction, job creation, economic development and state and local capital projects)To enable the people of Indiana to benefit from significant money for capital improvementsFor prizes over $599, if owes (1)outstanding debt to state agency, (2) delinquent state taxes, or (3) child support paid through a court [if multiple obligations, 1st to child support, 2nd to judgments owed, 3rd to tax liens, and 4th to unsecured debts owed by prize winner]180 days/added to pool for future prizes or used for special prize promotionsSale to minors; stolen/counterfeited/altered tickets; at different price; by unauthorized retailer or agent; sale on credit
IOWA99G.1, et seq. To support a variety of programs and services and provide continuing entertainment to the publicPrizes over $600 subject to garnishment for claimant agenciesPeriod deemed appropriate by commissioner/added to future prize pools and given to holders of winning tickets or shares in addition to amounts already allocatedSale at greater price; sale to minor (under 21); unauthorized sale; forged/altered ticket
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
KANSAS74-8701, et seq.; 79-4801, et seq.30% lottery operating fund for expenses; 45% prizes; rest to state gaming revenues fund and state general fund for state economic development, correctional institution buildings, county reappraisal fund  Within period established by rules and regulations/added to prize pools of subsequent lottery gamesForgery; unauthorized sale. Sale at greater price sale to minor (under 18)
KENTUCKY154A.010. et seq.35% general fund; rest for expenses and prizes Yes180 days/added to pool for future prizes or special prize promotionsSale to minor; alter or forge tickets; attempt to win through fraud or deception or tampering with lottery equipment
LOUISIANA47:9000, et seq.Corporate operating fund for expenses and prizes; with at least 35% to Lottery Proceeds Fund with $500,000 allocated to Compulsive and Problem Gaming FundEnable the people of the state to benefit from the profits; tickets must include toll-free phone number for mental health services for compulsive arrearages or problem gamblingYes180 days/added to pool for future prizes or special prize promotionsSale to minor; false or altered tickets; influence winning or tampering with lottery equipment; illegal lottery devices; skimming lottery proceeds; bulk sale
MAINETit. 8 §371, et seq.; and Tri-State Lotto with New Hampshire and Vermont Tit. 8 §401,et seq.45% distributed as prizes; rest divided between expenses, General Fund, and Maine Outdoor Heritage Fund Child support purposes1 year/transferred to General Fund as undedicated revenueSale at greater price; sale to minor; alter or forge tickets
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
MARYLANDState Govt. §9-101, et seq.Pro rata basis for prizes and administrative expenses; for sports lotteries, proceeds go to Maryland Stadium Authority; for other lotteries, into General Fund of the state Under appropriate court order, prize may be paid to person other than winner; or any unpaid state or municipal tax182 days/added to unclaimed prize fund or nondaily/weekly lottery drawingSale to minor; forged/altered tickets; unauthorized sale
MASSACHUSETTSCh. 10 §22, et seq.45% payment of prizes; 15% administration and operating expenses; balance State Lottery FundAuthorized to conduct lottery for the benefit of the arts; provide property tax relief and continue services at the local levelFor past due child support on any prizes over $6001 year/allocated in same manner as other lottery revenueForged/altered tickets; sale to minor; sale at greater price
MICHIGANMCL 432.1, et seq.After payment of prizes (approximately 45%) and expenses, net revenue to state school aid fund10% of yearly state lottery advertising budget not to exceed $1 mil. goes to compulsive gaming prevention fundFor prizes over $1,000, for liabilities to state or support arrearages1 year/deposited in state school aid fund and distributed pursuant to lawSales to minors; sale at greater price; unauthorized sale; forged/altered ticket
MINNESOTA349A.01, et seq.15% lottery operations; 2.75% advertising; 60% prizes; rest to lottery fund/special revenue fund with 40% of these net proceeds going to Minnesota Environment and Natural Resources Trust Fund For prizes over $600, for delinquent state taxes; child support; court ordered restitution; or amount due any other claimant agency1 year of unclaimed prize money is added to the general fundSale to or purchase by minors; sale at greater price; unauthorized sale
MISSISSIPPIProhibited 97-33-31     
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
MISSOURI313.200, et seq.After expenses and prizes paid, remaining moneys to general revenue fund; 45% prizes, then expenses, remainder to general revenue fund Only pursuant to an appropriate judicial order; set-offs for delinquent child support180 days/revert to state lottery fundSale to minors; sale at greater price; forged/altered ticket; unauthorized sale
MONTANA23-7-10145% prize money; after expenses, net revenue transferred to state lottery fund. Net revenue transferred to state general fund effective 7/1/99 For prizes over $600. those owing child support through state child support enforcement agency6 months/paid into state lottery fundSale to minor; purchase only with cash or check; no credit
NEBRASKA9-801, et seq.40% prizes, 25% divided among Education Innovation Fund, Environmental Trust Fund, Compulsive Gamblers Assistance Fund, Nebraska Scholarship FundEducation Fund to encourage and fund high performance learning innovations, pilot projects, and model programsOn prizes over $500, any outstanding state tax liability or child or spousal supportPeriod of time set by regulation/used at discretion of tax commissioner for purposes set out in lottery statutesSale to person under 19 years of age; at price other than proscribed; unauthorized sale; alter ticket; no phone; mail or credit sales
NEVADAProhibited. Art. 4 §24 Nevada Constitution     
NEW HAMPSHIRE287-F:1, et seq.: Tri-State Lotto with Maine and Vermont50% common prize pool; operating costs charged proportionally to each stateFor raising additional revenueYes1 year/credited to prize poolSale at greater price; sale to minor; unauthorized sale
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
NEW JERSEY5:9-1, et seq.Payment of prizes and expenses with appropriations to state institutions and state aid for educationEntire net proceeds to be used for state institutions and state aid for education including higher education and senior citizen educationFor arrears of court-ordered child support obligations, and former recipients of Aid to Families with Dependent Children (AFDC), food stamps, or low income home energy assistance who were overpaid1 year/allocated in same manner as lottery revenue is allocated by stateForged/altered tickets; sale above fixed price; unauthorized sale
NEW MEXICO6-24-1, et seq.50% to prizes minus operating expenses with net remaining revenues: to lottery tuition fundTo benefit state residents by funding critical capital outlay needs of public schools and provide tuition assistance to resident undergraduates at New Mexico post-secondary schoolsOn prizes over $600, those owing debt to or collected by human services department for child support enforcementTime period established by authority/paid into prize fundSale at greater price; sale to minors; unauthorized sale; no sales on credit; forged/altered tickets; influencing winning of prize through fraud or deception
NEW YORKTax §1600, et seq.4065% for prizes depending on the game; 45 25% to state lottery fundSupplemental aid to all school children; signs must be posted to assist compulsive gamblers; special instant game in New York City to benefit anti-crime divisionOn prizes over $600, applied against past-due support (including alimony, child or spousal support or maintenance) and against any public assistance benefits given an individual within the last 10 years (not to exceed 50% of prize)1 year/retained in lottery prize account to be used for special lotto or supplemental lotto prizes or for promotion purposes to supplement other games on an occasional basisSale to minors (under 18)
NORTH CAROLINAProhibited. §14-289, et seq.     
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
NORTH DAKOTA53-12.1-01 et seq.50% for prizes, payment of expenses, $50,000 to compulsive gambling prevention and treatment fund, remainder to state general fund For prizes over $600, those owing debt to agencies, with priority to child support paymentsSet by attorney general, but no more than 1 yearforged/altered tickets; sale to minors; sale above fixed price
OHIO3770.01, et seq.50% prize payment less operation expenses; then at least 30% Lottery Profits Education FundLottery Profits Education Fund used to support elementary, secondary, vocational, and special education programs in appropriations made by the general assemblyOn prizes over $5,000, for default of support payment under support order180 days/returned to state lottery fund in unclaimed lottery prizes fundSale at greater price; unauthorized sale; sale to minor; influence lottery sales agent; on Ohio fairgrounds at annual exhibition
OKLAHOMAProhibited. Tit. 21 §§1051,et seq .     
OREGON461.010, et seq.; Art. XV §4 Oregon Constitution50% prizes; 16% expenses; 34% benefit public purpose (state lottery fund for jobs and economic development in Oregon)To provide additional moneys for public purpose of creating jobs and furthering economic development in Oregon without additional or increased taxesOn prizes in excess of $600, garnishment for person in arrears on child support obligation1 year/remain property of lottery commission and be allocated to the benefit of the public purpose (may be exempt from 1 year redemption period if in active military service with evidence of possession of winningthen have 1 year after discharge to redeemSale at greater price; sale to minors; altered/forged tickets
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
PENNSYLVANIATit. 72 §§3761-101, et seq.40% to pay prizes; after expenses, rest pursuant to Senior Citizens Property Tax or Rent Rebate and Older Persons Inflation Needs ActFor purpose of providing property tax relief to the elderly and to provide free or reduced fare transit service for the elderly; also to curb illegal gambling operations in PennsylvaniaYes1 year/paid to state lottery fund for statutorily prescribed purposesSales in excess of fixed price; unauthorized sales; sales to minors
RHODE ISLAND42-61-1, et seq.4565% prize fund (keno 4572%) less expenses; 25% (15% for keno) to general revenue fund (different percentages for video lottery games) For prizes over $600, set-off for unpaid child support arrearages over $5001 year/reverts to lottery fundSales above fixed price; sales to minors; altered/forged tickets
SOUTH CAROLINASC Const. Art. 17, Sec. 7 gives legislature authority to conduct lotteries, 59-150-10 et seq.45% prizes, 15% expenses, remainder in Education Lottery Account only appropriated for educational purposes and programs For prizes over $500, subject to attachments, garnishments, or executions issued pursuant to law180 days/reverts to Education Lottery AccountSales to minors, altered/forged tickets
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
SOUTH DAKOTA42-7A-1, et seq.Expenses and prizes (approx. 50%) from lottery operating fund; net proceeds to state general fund; state corrections facility construction fund, and state capital construction fund (lottery expenses may not exceed amount of net proceeds to these funds) Video lottery income directly deposited in state property tax reduction fund. SDCL§42-7A-24 For prizes in excess of $100, liability setoff program to satisfy debts owed or collected through state agencies (child support payments have priority)1 year or period deemed appropriate by executive director/added to prize pools of subsequent lottery gamesCounterfeiting lottery tickets; sale at greater price; sales to minors
TENNESSEEProhibited. Art. XI, §5 Tennessee Constitution     
TEXASGovt §§466.001, et seq.Payment of prizes, cost and expenses not to exceed 12%; establishment of pooled bond fund, lottery prize reserve fund, unclaimed prize fund, and prize payment account, balance to foundation school fund Delinquent tax, child support payments, or default in student guaranteed loan shall be deducted180 days/provides additional money to state lottery account; $20 million for TX Dept. of Health teaching hospital account, $5 million for Health and Human Services Commission for inpatient hospital services, rest to general fundSales to minors; sales by phone; stolen, forged or altered tickets; sale at greater price; sale on credit; unauthorized sale; sale for food stamps or with AFDC check; influencing selection of winner; fraud
UTAHProhibited. Art. VI, §27 Utah Constitution     
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
VERMONTT.31 §651, et seq.; and Tri-State Lotto, T.31 §671, et seq.After payment of prizes and expenses, proceeds go to state lottery fund, which after expenses, goes to general fund to be used solely for capital expenses and debt service. Not less than 50% to be paid in prizes  After one year, unclaimed prizes revert to state lottery fundSale to minors; sale at greater price; no license to convicted felons.
VIRGINIA58.1-4000, et seq.Operating costs and administration not to exceed 10% (with special reserve fund); rest to general fund solely for purpose of public education Unpaid child support obligations and payment of public assistance owed by individual180 days/paid into Literary Fund (prizes of less than $25 go into state lottery fund)Sale over fixed price; sales to minors; altered/forged tickets
WASHINGTON67.70.010, et seq.State lottery fund used for: payment of prizes and lottery administration; deposits to education construction and student achievement fund; distribution to county for payment of baseball stadium bonds (for no more than 20 years) On prizes over $600, any debts to state agency or political subdivision may be setoff180 days/retained in state lottery fund for further use as prizesSale to minors; sale at greater price; altered/forged tickets
StateCode SectionDistribution of RevenueAdditional PurposePrize Subject to GarnishmentTime Limit to Claim Prize/DispositionProhibited Related Activities
WEST VIRGINIA29-22-145% disbursement as prizes; 15% operation and administration expenses; excess is net profit: goes to school building debt service fund (up to $18 million); lottery education fund; school construction fund; lottery senior citizens fund; commerce division of tourism and parks For delinquent payment of child or spousal support180 days/reverts to state lottery fund for the purpose of awarding additional prizesAltered/forged tickets; unauthorized sales; sale at greater price; sales to minors
WISCONSIN565.01, et seq.; Wis. Const. Art. IV Sec. 24Proceeds deposited into state treasury for property tax relief Prizes over $1000 are subject to child support payments and spousal support180 days/used for future prizesForging ticket; sales to minors
WYOMINGProhibited. 6-7-101, et seq.     

Lotteries, State

views updated May 14 2018

Lotteries, State

State lotteries give participants the dream of winning huge jackpots while providing the state with funding for education, transportation, and other projects. State lotteries currently operate in about three-fourths of the states in the United States. These lotteries provide individuals with a relatively inexpensive means of gambling on the possibility of winning a huge jackpot. The first legal state lottery was established in New Hampshire in 1964, culminating 10 years of legislative effort.

Probabilities of Winning

A wide range of games is offered by the numerous state lotteries across the country. The offerings of the Florida State Lottery in 2001, for example, include Florida Lotto, Mega Money, Fantasy 5, Play 4, and CASH 3, as well as numerous instant games played with scratch-off tickets. These games cater to the preferences of potential players by varying the size of the prizes awarded and the probabilities of winning.

Florida Lotto, the premier game in the Florida State Lottery, holds drawings twice a week. In this game, six balls are drawn from a container holding fifty-three balls numbered from 1 to 53. To win the jackpot, the six numbers chosen by a player must match the numbers on the six balls drawn. The order in which the numbers are selected does not matter. The Florida State Lottery claims that the odds of winning this jackpot are 1 in 22,957,480. Players can also win by matching five, four, or three numbers as well. The probability of matching five of six is 1 in 81,410, and continues to increase as the amount of matched numbers decreases.

The probability of winning the jackpot in this game can be verified by determining the amount of six-number combinations possible or by multiplying the probabilities of six consecutive successful selections. Calculating the number of combinations yields the following, which can be expressed using the notation of factorials, denoted as "!",

Of these combinations, only one corresponds to selecting all six numbers correctly. Alternatively, using probabilities, you could multiply the probabilities that the numbers on a ticket are selected on each of the six successive selections. The probability of the first number drawn matching one of the player's chosen numbers is 6 in 53. If this occurs, there are five favorable numbers in the remaining fifty-two, and so on. Therefore, the probability of six consecutive successful selections is or 1 in 22,957,480.

Verifying the probability of correctly selecting five of the six numbers is only slightly more complex. Using the same logic as in the previous example, the probability of the first five matching numbers being selected on the first five draws is . If this occurs, there are forty-eight numbers remaining, and forty-seven are favorable to the result of correctly matching five of six numbers. Thus the probability of attaining this outcome would be . Though the fractions being multiplied would be different, the probability of the first number not matching and the next five matching would be which is equal to the previous result. It is easily verifiable that the probability of the nonmatching number occurring on any of the six selections is equal. Thus the overall probability of correctly selecting five of six is or 1 in 81,409.50355, which rounds to 1 in 81,410.

Fantasy 5 requires the player to match five numbers selected from 26 numbers. Prizes are also awarded to those who correctly match three or four numbers. The probability calculations for this game are analogous to those of Florida Lotto. In Fantasy 5, the probabilities of matching five, four, or three numbers are 1 in 65,780, 1 in 627, and 1 in 32, respectively.

At the other end of the spectrum is Florida's CASH 3 game. This game gives the player a probability of 1 in 1,000 of winning $500 on a $1 ticket or $250 on a 50-cent ticket. In order to win, the player must match a 3-digit number, each digit of which is a number from 0 to 9. In this game, unlike Lotto, each digit is randomly selected from its own set of numbers from 0 to 9 and the order of the result is important.

The Mega Money game adds a bit of a twist. In this game the player picks four numbers from the thirty-two numbers on the top of the ticket and one number from thirty-two on the lower half of the ticket. In order to win, all four numbers on the upper portion and the number on the lower portion of the ticket must be drawn. Finding the probability of matching the first four numbers can be found in the same way as determining the jackpot probability in Lotto. In Mega Money, the probability is in 35,960. To determine the probability of winning the big prize in this game, you must multiply that result by the chances of correctly matching the one number on the lower part of the ticket, which is drawn from another bin of thirty-two balls. The probability of winning the big prize, which averages $200,000 in this game, is: in 1,150,720.


When there are no winners in a large game, like Florida Lotto, new tickets are sold for the next drawing, increasing the value of the prize. Some feel that if the jackpot has not hit several times in a row, that it is "due to be hit." In fact, the probability of any particular combination winning does not change. However, the increase in interest and, correspondingly, in the number of tickets purchased makes it more likely that the jackpot will hit than if a smaller number of tickets were sold.

Consider a hypothetical game in which the probability of winning the jackpot is 1 in 1,000,000. If the jackpot is relatively low and only 100,000 tickets are sold, the probability of the jackpot being hit is at most 1 in 10. The probability is not necessarily equal to since almost certainly, more than one person will have selected the same combination. Now assume the jackpot has not hit for several drawings and a huge prize has accrued. If more than a million tickets have been sold covering 900,000 of the possible 1,000,000 combinations, the probability of the jackpot being hit will now be 90 percent. The chances of any individual ticket winning, however, remains 1 in 1,000,000. An interesting consequence here is that there is no guarantee that a winner will receive the entire jackpot. It is possible that two or more ticket holders will have chosen the correct combination of numbers and would then divide the jackpot equally.

Allocation of Revenue

The potential revenue generated by a lottery has provided a strong incentive for states to pass legislation to legalize them. While the exact figures vary from state to state, normally about thirty to thirty-eight percent of the intake goes toward funding state programs. A little more than half is returned in prize money and the remainder is applied to various expenses associated with operating the lottery, such as advertising and paying commissions to vendors. To put the monetary amounts from lotteries that go into state budgets into perspective, the New Hampshire state lottery provided the state department of education with over $65 million in one fiscal year, bringing the total amount of aid to education in that state to $665 million. California boasts of more than $12 billion being earmarked for its public schools since 1985, while the New York state lottery provided $1.35 billion to education in the 19992000 fiscal year.

Prize Payoffs

The allure of huge jackpots influences many individuals to purchase lottery tickets. Advertisements touting multi-million dollar jackpots are common. Information regarding the payoff procedures for jackpots is readily available from state lottery commissions as well as from other sources. Most lotteries allow the winner to choose between one immediate lump sum payment or yearly payments over a period of time.

A jackpot winner in the California Super Lotto Plus, for example, can opt for an immediate payment of roughly half of the jackpot amount or can take payment annually for 26 years. In the long-term plan, the first installment is 2.5 percent of the jackpot amount. Successive yearly payments increase each year, with the final payment being about twice the initial. The sum of these twenty-six payments will be equal to the originally stated jackpot amount. Thus the winner of a $6 million jackpot could take approximately $3 million immediately or could get $150,000 as a first installment with successive yearly payments increasing each year and totaling $6 million after all the payments have been made.

Of course, lottery winners must take into consideration the taxes that must be paid on their winnings. Calculating taxes at one-third, a $6 million jackpot winner choosing the one-time payment option would get approximately $4 million. An individual may find that tax savings may be realized in the long term payoff; however, the large lump sum would not be available for investing purposes.

see also Probability, Experimental; Probability, Theoretical.

Robert J. Quinn

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