Powerball lottery: Who really benefits from lottery proceeds?

State and the federal government make millions off the lottery. Some question whether that's acceptable.

Charles Krupa/AP
Commuters in Methuen, Mass., drive past a sign advertising the Powerball jackpot drawing on Wednesday.

On Wednesday, theres a good chance that at least one person will become a multimillionaire in what is currently the world’s biggest lottery jackpot, now worth $1.5 billion.

But according to the founding principles of state lotteries, many others ought to benefit from the Powerball lottery windfall, such as veterans, students, and seniors, given that taxes on winnings and ticket sales go to the federal government and to the 44 states (plus the District of Columbia) that sanction state-run gambling.

When state lotteries first became popular in the US in the 1960s, starting with the New Hampshire sweepstakes, after a half-century hiatus following a series of scandals in the 1800s, they were sold to the public as easy fundraising tools that would funnel millions to public schools and other social programs. Lotteries have been used since the ancient days – from ancient China to ancient Rome to Colonial Virginia – to fund expensive public projects.

The money helps, but lottery critics worry that states have come to rely too heavily on unpredictable gambling revenues while exploiting the poor.

As The Atlantic has reported, the poorest third of households buy half of all lotto tickets, in part because lotteries are advertised most aggressively in poorer neighborhoods.

The people in those neighborhoods, typically earning less than $25,000, said in a survey that the most practical path to wealth was to buy a lottery ticket, according to The Christian Science Monitor.

States have become hooked on the easy stream of money, with all but six now relying on profits from lotteries for as much as 8 percent of their official revenue, says the Monitor.

In 2014, states sold $70 billion worth of lottery tickets, largely unchanged from 2013. Those sales yielded nearly $20 billion in proceeds, money that many states promise to use to supplement public education funding. But that’s not usually what happens, points out Patrick Pierce, a professor of political science at St. Mary's College in Notre Dame, Indiana.

His 1997 research on how states use lottery revenues showed that often they simply replace the money that would have been allocated to education in the state budget, rather than adding new funding.

"You can think of it as revenue substitution," Prof. Pierce told NBC News.

Whatever way one thinks of it, the bottom line for some people, like John O'Neil, communications director for the Virginia Education Association, an organization that represents 50,000 teachers and school professionals, is that the $7 billion that the lottery in that state has generated for schools since 1999 has funded "a lot of valuable programs," he told NBC.

He said the issue is not about the origin of the money, but whether lawmakers are putting enough of it toward education.

"It doesn't really matter to the teacher where the money comes from," he said. "What matters is that it's enough to support quality schools."

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