False HOPE

It’s never more evident that the Georgia Lottery is a thriving entity than on a sunny Friday afternoon as one pushes through the metal turnstiles, past the armed security guard, into the bustling liquor store on University Avenue, just east of I-85.

Sitting behind scratched, bulletproof glass, a weathered man doles out cash in exchange for a percentage of patrons’ paychecks. With the new cash in hand, the line shifts to the left for those who wait eagerly to purchase instant win tickets. A few meander towards the dirty refrigerator on the opposite side of the store to buy beer and snack foods. The discarded evidence of these purchases lays scattered in the parking lot among cigarette butts, broken glass and plastic bags. The played instant win tickets—their fading gray foil scraped off to reveal scattered numbers, cherries and dollars signs—serve as reminders of the failed attempts to strike it rich quickly.

The Georgia Lottery has been a profitable business enterprise. With a prompt windfall of cash generated, the lottery was able to pay off its venture loans within the second week of operations. From its inception in 1993, the State of Georgia had entered into the murky waters of public works funding as a justification for the lottery’s existence. In particular, Georgia chose education as the beneficiary of the riches that were soon to be amassed.

It would be difficult to dismiss the financial impact that the lottery has had on the Georgia education system, touting on it’s website over $9 billion contributed to the students of Georgia, a number larger than the gross domestic product of Chad or Namibia. More specifically, the Georgia Lottery for Education Act states that there can be three uses for proceeds reaped from the lottery: the HOPE Scholarship, a way for students with a “B” average in high school to be reimbursed for tuition at in-state public and private colleges and universities; the Georgia prekindergarten program; and the loosely defined “Capital Outlay projects” for schools and greater education facilities throughout the state.

Behind any game of chance are two divided parties. Those that reap the benefits of the game, and those that fund the system by trying their luck, “just one more time.” There is no doubt that there are winners of the lottery. Specifically, the million-plus students who have had the opportunity to attend college throughout the state, or the 860,000 four-year-olds who have passed through the pre-k system.

Less clear is why the lottery thrives in Georgia. Enthusiasm shows no indication of waning. Each year its proceeds reach staggering proportions. For every winner shown on the local news there are the millions whose chances remain slim at best (1 in 135,145,920 to win Mega Millions, and 1 in 120,526,170 for Powerball), odds so slim that you are 18 to 120 times more likely to perish from a flesh eating bacteria than win the jackpot.

Who plays? Numerous studies have shown a direct correlation between high lottery ticket sales and lower-income areas around the United States, and Georgia is no exception. Low-income families in Atlanta spend five times as much of their incomes on the lottery than middle- or upper-income families do. Ironically, HOPE scholarship recipients are disproportionately upper- and middle-class. Income is not a qualifying factor for HOPE. Low income undergraduates qualify for the Federal Pell Grant, which disqualifies them for any HOPE money except about a 100 dollars for books. And since higher income families have more to spend on tutoring, HOPE’s requirement of a “B” average could effectively shut out lower income students with slightly lower grades who might still be admitted to college. So while HOPE is funded mostly by poor Georgians, it benefits a class of students who would probably be able to afford college without it. As it stands, the system has a significant percentage of less-fortunate individuals funding the educations of the well-off.

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Gerlach, Dan. The Lottery Tax: Still a Bad Idea for North Carolina. BTC Reports, Vol. 5, No. 3. NC Budget and Tax Center, February, 1999.

Dynarski, Susan “Hope for Whom? Financial Aid for the Middle Class and It’s Impact on College Attendance,” NBER Working Paper 7756, June 2000.