State lotteries transfer wealth out of needy communities
WARREN, Mich. (AP) — While the growing expansion of casinos and state-sanctioned sports betting steal the spotlight, state lotteries have nearly doubled in size over the past two decades, driving a multibillion-dollar wealth transfer from low-income U.S. communities to powerful multinational companies.
A nationwide investigation of state lotteries by the Howard Center for Investigative Journalism at the University of Maryland found that lottery retailers are disproportionately clustered in lower-income communities in nearly every state. The investigation’s analysis of cellphone location data shows that the people who patronize those stores come from the same kinds of communities.
Once rare, lotteries now operate in all but five U.S. states. Driven by more than a half-billion dollars in annual ad spending, lottery ticket sales have grown from $47 billion to $82 billion since 2005, according to La Fleur’s 2022 World Lottery Almanac. In 10 states, lotteries generate more revenue than corporate income taxes.
The investigation also found that a key promise of lotteries across the country — that they support education — doesn’t hold up. Instead, lotteries often compound inequities by disproportionately benefiting college students and wealthier school districts far from the neighborhoods where most tickets are sold.
“Poor people are collateral damage to a cause of raising money for what the legislators feel is good purposes … public safety, local schools,” said Gregory W. Sullivan, a former Massachusetts inspector general and now research director for a free-market think tank in Boston.
The multibillion-dollar wealth transfer starts in places like Warren, Michigan, where Ashley Standifer buys tickets in one of the state’s poorest neighborhoods.
On a snowy April day, Standifer stopped by the Korner Party Store in this Detroit suburb, its largest sign advertising “Beer Wine Lotto,” to buy scratch-off tickets.
She buys scratch tickets three times daily.
Four years ago, she won $1,000 on a $3 ticket, but she hasn’t won big since.
“Of course, you know, I’m expecting to get my money back,’’ Standifer said. “But if I don’t … I’m still gonna buy it.”
Standifer’s spending is one small part of the $82 billion spent annually by lottery players, the first input in a nearly nationwide system that brings state-sponsored gambling directly into a majority of U.S. neighborhoods through more than 200,000 stores.
Standifer — and millions of players like her — lose about 35 cents for every dollar they spend.
“Yesterday I spent like $130 and I won like $85,” Standifer said, meaning she lost $45.
Those losses — $29 billion a year nationally — are why lotteries exist. The losses fund government programs and enrich others, including a Canadian private equity billionaire and a Japanese convenience-store conglomerate.
In the popular imagination, the lottery is funded by people who spend a few dollars on a Powerball ticket when the jackpot gets big. This is not reality.
More than two-thirds of lottery sales are of instant scratch-off tickets, which range in price from $1 to $50. A sliver of players are responsible for most of that spending.
A 1999 report to the National Gambling Impact Study Commission found the top 10% of lottery spenders accounted for two-thirds of sales. The most frequent players, the study found, had lower incomes, were high school dropouts and disproportionately Black.
High school dropouts spent four times more per year than college graduates. Black people spent, on average, nearly five times as much as white people.
Some states, like Massachusetts, are aware of frequent players’ importance. A 2016 study commissioned by the lottery showed that the top 10% of players account for about 40% of sales. The average player in that group reported lottery spending of nearly $200 per week.
In South Carolina, players with a household income of less than $35,000 a year spent more than twice as much as players with household incomes between $100,000 and $150,000, according to a 2014 state-commissioned study obtained by the Howard Center.
“When people get down, they probably take the last 10 or 20 dollars to try to make up 100 to 400 dollars,” said Cloyd White, 26, a construction worker from Jasper County, South Carolina, who estimated he spent $40 every day. “It’s a gamble and it’s risky, but I feel like it’s all about God.”
It’s also about choices states make about who can sell lottery tickets.
“There’s a reason why so many lottery outlets are concentrated in low-income areas across the United States,” said Les Bernal, national director of Stop Predatory Gambling.
The Howard Center found that stores in the vast majority of states with lotteries are disproportionately concentrated in communities with lower levels of education and income and higher poverty rates, with larger populations of Black and Hispanic people.
Only Alabama, Alaska, Hawaii, Utah and Nevada lack lotteries. The Howard Center was unable to obtain lottery retailer locations in South Dakota, but did obtain them for the other 44 states, plus Washington, D.C.
The center’s analysis found:
— In neighborhoods with lottery retailers, the percentage of the population that lives in poverty is higher than in neighborhoods without lottery retailers in all 44 states analyzed and in Washington, D.C.
— The Black population was higher in neighborhoods with lottery retailers than in neighborhoods without lottery retailers in 35 states and Washington, D.C.
— The Hispanic population was higher in neighborhoods with lottery retailers than in neighborhoods without lottery retailers in 37 states and Washington, D.C..
The store where Standifer bought her tickets is in a neighborhood that has a poverty rate almost three times Michigan’s average. It has four lottery retailers, with another 28 in bordering neighborhoods.
Neighborhoods with a lottery retailer in Michigan have a median poverty rate nearly double the rate in neighborhoods without lottery retailers, the center’s analysis found.
The North American Association of State and Provincial Lotteries, an industry group, says on its website that it’s misleading to examine where stores are concentrated because people “don’t always buy their lottery tickets in the neighborhoods where they live.”
That’s true. But the Howard Center’s firstof-its-kind analysis of mobile phone location data to study customers of lottery retailers shows they are mostly local.
The center used mobile location data from SafeGraph, a location intelligence firm that collects information about store foot traffic at U.S. businesses. The aggregated SafeGraph data reveals the neighborhoods where a store’s customers live.
A Marathon gas station in Warren, Michigan — a five-minute drive from the Korner Party Store where Standifer played — sold more than $725,000 in lottery tickets in 2020, ranking among the top 20% of retailers statewide.
More than two-thirds of its customers live in the same neighborhood as the gas station or in surrounding neighborhoods, with the average customer living within
1.1 miles of the store.