Lottery sales have implication for ND, Minn. state budgets

BISMARCK – The winners of Wednesday's record $1.6 billion Powerball jackpot weren't the only ones sitting on a new pile of cash.

State-run lotteries, like those in North Dakota and Minnesota, reported a rush of ticket sales in the days leading up to the drawing. And while both states use a majority of the money for prizes, those sales have some implications for the states' budgets.

Twenty-six percent of lottery sales goes to the North Dakota's general fund, which is used for a variety of government services. The lottery transferred $6.1 million to the general fund in the year that ended in June 2015, according to unaudited figures provided by the lottery.

That number is expected to rise in the coming year given the hype surrounding Wednesday's jackpot.

"This will be a record-setting year for us, without a doubt," North Dakota Lottery Director Randy Miller said. "It will increase our general fund transfers based on these strong sales we had for this Powerball jackpot run."

The week before the drawing, total lottery sales came in at roughly $4.1 million, about 10 times as much as the average weekly rate of $400,000 to $450,000, and they totaled almost $4.5 million in just the first four days of this week, Miller said. Most of those sales were Powerball tickets.

That means this fiscal year is well ahead of last year. From July to Wednesday, the state reported $21.7 million in total lottery sales, compared to $13.5 million for the same time period the year before.

But it's still not likely to make much of a dent in the state's budget-general fund appropriations are projected to be around $6 billion in this two-year budgeting cycle-and it's impossible to know for what lottery money was specifically used.

"Then they are commingled with all other general funds and used for general fund appropriations," said Pam Sharp, director of Office of Management and Budget. "They are not able to be tracked after they go there."

Likewise, Minnesota sets aside a portion of its lottery revenue for the state general fund. In fiscal year 2015, 13.7 percent of its lottery money, which translated to $73.3 million, went to the general fund.

Still, the lottery makes up less than 1 percent of that pool, which funds education, health and human services, transportation, economic development and other purposes, according to the lottery's website.

Using the money

The hype surrounding the latest Powerball jackpot has drawn renewed examination of how states use lottery money.

Many states have dedicated money to education funding, but Patrick Pierce, a political science professor at St. Mary's College in Indiana, has argued that the money merely replaces funding that would otherwise go toward education. He added the lottery can be a more politically palatable way of raising revenue without increasing taxes.

"I think the interesting way of thinking about this is that state legislators (are) learning how they could use lottery revenue to make their budgetary lives easier," Pierce said.

Charles Clotfelter, a public policy professor at Duke University who has studied state lotteries, said legislators have the choice to reallocate funding every time they meet.

"In most cases, it's not going to make a big difference," he said. "That is, if the lottery never happened, the expenditure pattern wouldn't be that much different."

But Clotfelter said using money for the general fund appears to be an "honest way to do it" rather than "pretend it's going to help education, it's going to be another source for the Legislature to call on."

Sen. Ray Holmberg, R-Grand Forks, called the revenues "nice," but he supported the lottery because he sensed his constituents wanted it. The Legislature voted down the lottery before it was passed by a citizen-initiated measure roughly 15 years ago.

"There was always the hype that it would be a big moneymaker, but that never really came to pass," said Holmberg, who is the Appropriations Committee chairman.

'Voluntary tax'

Despite making up a small portion of state budgets, Pierce said state legislators "have come to depend on the revenue."

"It's not going away," he said. "If it went away, (legislators) would have to find some way to deal with the revenue shortfall. And none of those ways is going to be as politically easy as the lottery or casinos, and both of those are sort of a voluntary tax."

Pierce also referred to the lottery as "regressive," a common refrain among those who say low-income residents spend a larger portion of their money on it. Some have called it a tax on the poor.

Rep. Lois Delmore, a Grand Forks Democrat who sits on the North Dakota Lottery Advisory Commission, said she supports the lottery in part because adjacent states already had the games before North Dakota, meaning money was leaving the state.

"The North Dakota Lottery reminds players that the lottery is a form of entertainment," said Ryan Koppy, sales and marketing manager for the lottery. "Playing is a choice; every ticket is bought voluntarily."

Specifics

While both Minnesota and North Dakota use lottery money for general purposes, they do dedicate some funding for specific programs.

Minnesota's Game and Fish Fund, Natural Resources Fund and Environment and Natural Resources Trust Fund received $60.1 million combined from the lottery in fiscal year 2015.

North Dakota sends $422,500 to the Multi-Jurisdictional Drug Task Force Grant Fund and $200,000 to the Compulsive Gambling Prevention and Treatment Fund every year.

Lisa Vig, director of Gambler's Choice at Lutheran Social Services, said her program receives money from the state lottery. The Powerball isn't necessarily appealing to a problem gambler because of the lack of immediacy, but Vig said the hype surrounding the major payout was causing clients some stress.

"I think it's pretty cool that, despite the fact that most people don't have strictly a lottery addiction, the Lottery Commission, the Attorney General's office was willing to set aside funds for treatment, recognizing that not everybody who gambles does it responsibly and safely," she said. "And we want to make sure help is available for those who need it."