Setting the Record Straight

Economic downturn and "scratch-off" controversy shine new light on the game's dark side

There's only so much you can do to make the lottery respectable. No matter how open or honest the people are who run it, the game still boils down to a hard and dirty truth: a public entity is administering a program that seeks to separate citizens from their cash. One can dress it up as fun or fantasy or entertainment (and, to be fair, there probably is an element of this for some players), but at its core the lottery is about convincing as many people as possible (most of them of modest means) to spend their money on a sucker bet.

Those who may have allowed themselves to harbor illusions to the contrary about the North Carolina "Education Lottery" received some powerful wake up calls to this reality of late. The first comes from this morning's news headlines about the game's recent uptick in players and revenue. The second comes from a pair of national news stories about a disturbing, but perhaps unavoidable, fact about so-called "scratch-off" lottery games.

Let's take them in reverse order.

The scratch-off conundrum

Most non-lottery players and once-in-a-blue-moon participants know most of what they know about the lottery from billboards and TV drawings that trumpet large (often multi-million dollar) jackpots. Indeed, statistics indicate that it's only when large "Powerball" prizes get into the tens of millions of dollars that middle and upper income people who usually avoid the lottery tend to come out of the woodwork to plunk down a few bucks for a one-in-a-zillion chance at big money. These games and their incredibly long odds are pretty easy to understand: match five or six numbers exactly and win some big cash.  

Scratch-off games are another matter. To play these games, one simply purchases a small card from a lottery vendor - usually at a convenience or grocery store - and then scratches off some paint-like material that hides some information underneath. There is no drawing to wait for. One either wins or loses instantly as each card has been pre-printed as a winner or loser when it was made. Prizes can be as small as a couple of dollars or, depending on the game (there are dozens), as much as hundreds of thousands of dollars. Naturally, there are lots more of the former and a lot less of the latter.

Scratch-offs have become, in keeping with our society's insatiable desire for instant results, a key component of the lottery. They are, in effect, the lottery's fast food product. Scratch-offs also clearly appeal to people of more modest income for whom a $100 or $250 prize is a bigger deal than it is for a person of higher income.

There is, however, a fundamental problem with scratch-offs. As reported recently in USA Today and on CNN, the very nature of scratch-offs presents an inherent problem that is not immediately evident to all who play them.

Sometimes the odds of winning certain prizes are not just long, they are zero. Though startling at first blush, this fact stems from a simple reality. When all the cards for a particular game are printed, a certain number of top prize cards - say five - are distributed. This means that once those five have been purchased, others playing the game have NO chance of winning the top prize - even though the game may be marketed with such an enticing number. This problem is exacerbated in by the fact that players can take their time to redeem winning cards. In North Carolina, they have 90 days.

According to the USA Today article, some states have waited extended periods before pulling such games from retailers. Indeed, in Virginia, a law professor at Washington and Lee University has sued the state seeking compensation for players who played scratch-off games under the false impression that they could win top prizes that had, in fact, become unavailable.

Here in North Carolina, the staff of the state lottery is well-aware of the scratch-off conundrum. Lottery Director Tom Shaheen told N.C. Policy Watch that his staff closely monitors all instant games and normally tries to pull them once the big prizes have been won or the games have become "stale." He also reported, however, that on occasion, some games are allowed to remain on sale for a while if some of the larger, second tier prizes have yet to be claimed. Indeed, he reports that many players are aware of this reality and that some have complained when games have been pulled, to their thinking, too early. Shaheen also reported that the lottery has recently added information to its website that makes it possible to check on the current status of each instant game. You can view that web page here.

Even under the best of circumstances, however, Shaheen admits that there is no perfect solution to this problem. Unsophisticated and/or poorly educated lottery players - especially those without Internet access - will likely continue to play instant scratch-off games to the tune of millions of dollars each year, all while blissfully unaware that the big prizes they're dreaming of winning are not just long shots but literally non-existent.

The lottery's recent boom

All of which makes the stories like the one this morning on WRAL television and WRAL.com ("State lottery thrives as economy dives") all the more poignant.  Here are some excerpts:

"The economy may be down, but lottery sales are up. New statistics show the state lottery experienced about a 60 percent increase in sales this spring, compared to the same time last year."

The story continued:

"Lottery executive director Tom Shaheen said ticket sales, particularly scratch-offs, began picking up several months ago after the General Assembly approved changes that allowed the lottery to give out more in prizes, making tickets more attractive to players. However, some people are citing the sluggish economy as a reason for the boost in sales. ‘They're trying to hit the big money, and that's what it's all about. Trying to hit big,' store clerk Brian Hinton said of lottery players. ‘Sales are very good, very good.' Hinton said he doesn't expect lottery sales to slow down anytime soon." (Emphasis supplied).

Stories like this one from Washington state and this one from South Carolina seem to confirm that the hard times do in fact beget spikes in lottery sales. 

The secret to success?

In short, there appears to be at least two rather unpleasant and inconvenient truths about North Carolina's lottery as we contemplate its newfound "success" and celebrate the third anniversary of its ugly passage into law back in the summer of 2005.

First, having a dizzying array of scratch-off tickets may be one of the keys to raising a lot of revenue, but there's really no other way to put it: the tickets are, at least some of the time, an utter rip-off that's premised on something akin to false advertising. The fine print disclosures and good intentions and efforts of the folks who run the lottery may help to minimize the deception, but ultimately, scratch-offs seem to be an especially questionable part of what was already a questionable way to fund our public schools. 

Second, bad times make for more desperation amongst people living on the edge. If North Carolina wants to keep the lottery revenues flowing, the best thing it can probably do is pursue policies that keep its economy (and the incomes of lower and middle income households) in the tank.      

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This entry was posted on Wednesday, July 9th, 2008 at 2:41 pm and is filed under Setting the Record Straight. You can follow any responses to this entry through the RSS 2.0 feed.