Washington has always seemed a little embarrassed by its lottery. Not by the lottery itself, really, but by the way it takes advantage of a get-rich-quick scheme.
Back in 1982 when it was created, the lottery was a small part of that year’s response to the recession. It continues to raise a little cash for the government -- about $124 million a year for a state that spends about $15 billion.
As at the start, most people play because they want to win money. Most don’t win, of course, but unless they become addicted, it is a mostly harmless diversion. So why isn’t that good enough? Why must politicians continue to try to turn a vice into a virtue?
Attempts to turn an act of gambling into an act of charity spawned the myth that the lottery is a significant contributor to basic education. Then, rather than bust the myth, the Legislature gave in and dedicated profits to public schools. Next, the state thought putting the money toward school construction would help sales. And in 2010, lawmakers dedicated the money toward early childhood education and college scholarships.
The sponsor of the latest change, Sen. Jim Kastama, based his theory on the Georgia lottery. That state, roughly the same size as Washington, sells four times as many tickets. Kastama, a Puyallup Democrat, concluded the difference in sales must be due to the fact that Georgia dedicates lottery profits to college scholarships. His heart was in the right place, but not his facts. Georgia’s lottery has no competition from tribal casinos or commercial mini-casinos. Washington’s has lots of competition from both.
Testing the theory
At least the Legislature asked for a test of Kastama’s theory and ordered the Joint Legislative Audit and Review Committee to measure the effect of lottery advertising and the change of beneficiary on sales. The answer? Neither the lottery’s $12 million annual advertising budget nor publicity about the use of profits for scholarships appears to have made any difference.
Instead, two other factors influence whether lottery sales go up or down -- the jackpot and the economy. If the jackpot is high and the economy is good, sales generally go up. These results are consistent with research in other states and with examinations by the lottery itself and by the state’s Economic and Revenue Forecast Council which now forecasts lottery sales.
“While sales increased in (fiscal year) 2011 compared to (fiscal year) 2010, it does not appear that the beneficiary change was responsible for the increase,” the JLARC report stated. “The increase is consistent with what sales would have been without the beneficiary change … In addition, there was no statistically significant relationship between Lottery’s new beneficiary advertising campaign and ticket sales.”
In fact, none of the lottery’s advertising appears to make a difference in sales.
The lottery’s own surveys conclude that only 6 percent of players knew that scholarships benefited from profits and only a third of those players said it might influence them to buy more tickets.
Kastama isn’t ready to give up. After seeing a draft of the audit in January, he concluded the lottery didn’t devote enough of its advertising and marketing dollars to the good cause. One-quarter went toward publicizing the scholarship plan, one-quarter toward “jackpot awareness” and the rest on general lottery advertising. Advertising, Kastama said, should be “built around education, not get-rich-quick schemes.”
The audit asked the lottery to suggest ways to “evaluate and improve the effectiveness of its advertising budget in generating ticket sales.” Based on the audit, perhaps the lottery should use its advertising dollars to play up those get-rich-quick schemes, especially when the jackpots are sky-high. But it also may be that the lottery has reached its saturation point and that no marketing scheme can increase sales significantly. If that is true, maybe the way to get more money for college kids is to spend less on ad agencies and TV commercials.