State lottery estimates vary by $40 million
Posted on Thursday, June 26, 2008
Arkansas was treated to dueling lottery reports Wednesday, and they differed by $ 40 million.
A state lottery would raise about $ 61. 5 million a year for college scholarships, far less than the $ 100 million projected by the proposed lottery’s chief champion, Lt. Gov. Bill Halter, a report issued by a family advocacy group said Wednesday.
Arkansas Advocates for Children and Families also said a lottery would add more unfairness to the state tax system, do little to improve access to higher education and “prey among those who stand to lose the most from gambling.” Th e eight-page re port — “Gambling On Our Future: Why a State-Sponsored Lottery is Still a Bad Bet for Education & Families in Arkansas” — echoes the group’s 2002 finding, which estimated an Arkansas lottery would raise only $ 47 million.
It came as Halter’s Hope for Arkansas committee prepared to turn in a petition for a proposed constitutional amendment that would allow lotteries in the state if Arkansas voters adopted the amendment and the Legislature authorized the lotteries.
The committee had collected the necessary number of signatures weeks ago, Halter said, but kept gathering them in hopes of pushing the total beyond 100, 000. To get the lottery proposal on the Nov. 4 ballot, the petition must be turned in to the secretary of state by July 7 with the signatures of 77, 468 registered Arkansas voters.
Hope for Arkansas countered Arkansas Advocates for Children and Families on Wednesday with a 15-page report of its own and defended Halter’s $ 100 million estimate.
“We are pleased that their report reaches the same conclusion as does ours: A scholarship lottery will create tens of millions of dollars in new college scholarships without raising taxes,” said Bud Jackson, a spokesman for Hope for Arkansas.
The argument that low-income people spend a larger percentage of their income on lotteries is “a red herring,” he said. Low-income people pay a larger percentage of their income on everything because the cost of goods remains the same no matter how much money one earns, but middle- and high-income people account for a majority of all lottery proceeds, he said.
Lotteries have become the norm in the U. S. Forty-two of the 50 states and the District of Columbia have them.
How much Halter’s lottery would raise is an old bone of contention. In January 2006, when he began a later-aborted gubernatorial campaign, he said an Arkansas lottery could raise as much as $ 250 million, based on the assumption that an Arkansas lottery would be as effective as Georgia’s.
But Halter said he never intended that figure to be his estimate.
He later adopted a $ 100 million estimate based on 2006 per capita lottery proceeds in Louisiana, Missouri, Tennessee and Texas.
The state Department of Finance and Administration estimates an Arkansas lottery would raise $ 55 million. That’s based on a comparison with Kansas, which has about the same population as Arkansas, said Tim Leathers, deputy director for the department.
Arkansas Advocates’ $ 61. 5 million estimate was based on projected lottery ticket sales of $ 213. 4 million with $ 149. 4 million subtracted for prizes and administration and $ 2. 5 million in reduced state and local sales taxes from reduced sales on nongambling expenses.
The group cited the 2004-2006 experience of 10 states, including the five neighboring states of Louisiana, Missouri, Oklahoma, Tennessee and Texas. The others were Iowa, Kansas, Nebraska, New Mexico and West Virginia.
These states had median lottery ticket sales of about 0. 24 percent of state personal income in the three years, the report said.
Total Arkansas state personal income is projected to be $ 88. 9 billion in 2008 according to the University of Arkansas at Little Rock’s Institute for Economic Advancement, the report said.
Hope for Arkansas projected the $ 100 million based on the most current information regarding lottery proceeds per capita in the four states Halter used for his initial estimate — Louisiana, Missouri, Tennessee and Texas — as well as Oklahoma, its report said.
“This calculation yields an annual estimate of nearly $ 120 million for college scholarships, but Hope for Arkansas prefers to be conservative and lowered the projection to $ 100 million annually,” the committee’s report said.
Rich Huddleston, Arkansas Advocates’ executive director, said using per capita lottery proceeds to estimate a lottery’s revenues is “notoriously inaccurate.” Arkansas Advocates regards Arkansas’ tax system as regressive and said a lottery would make it even more so.
A lottery also is an unreliable source of revenue, the group said, citing research and news reports saying that many stateoperated lotteries have failed to meet expectations for raising funds.
Many states, including Texas, are considering privatizing their lotteries, hoping outside operators could generate more revenue, the report said.
Research shows that lotteries that raise money for education tend to subsidize people who would go to college anyway without creating a net gain in the number of college-educated residents, Arkansas Advocates said.
Jackson said it’s inaccurate to describe a voluntary lottery as “a tax” and it’s a common myth that lotteries are funded mostly by low-income people.
He said lotteries have been highly successful in many states and Arkansas’ scholarship lottery would supplement existing education funding.
The Legislature would be responsible for establishing a lottery that makes the most sense for Arkansas, and Halter believes the scholarship lottery “should devote a significant portion of proceeds to students whose families are economically disadvantaged and would otherwise be unable to afford a higher education,” Jackson said.
The same “can be said for adults who are seeking to enhance their own education or skills, but are unable to afford tuition,” he said.
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