Lotteries: Preying On The Poor?

From Armen Keteyian And Phil Hirschkorn

When we took a close look at state-run lotteries last month, we discovered that, when it comes to education funding, they are little more than a drop in the bucket and far from a bucketful. (See Is The Lottery Short-Changing Schools?)

We also learned that a disproportionate sum of the nation's $50+ billion in lottery comes from the pockets of the poor and minority groups. One place we saw this first hand was Texas, whose lottery rakes in $65 million every week.

Walk into any convenience store in Houston's lower-income 3rd Ward, and it's a good bet you'll see some of the Texas Lottery's best customers. Lottery sales in this legislative district top $50 million a year, the highest in the state, while the average family income is less than $15,000 a year, well below the poverty line. Folks here spend six times more of their income on the lottery than the wealthiest district.

"It's a shift of the cost of government onto people who can least afford it," says State Rep. Garnett Coleman, who has represented this neighborhood for 17 years. "Is a drug dealer responsible when they sell to the person?" Coleman asks. "If somebody says, 'yeah,' then the state is responsible for hooking the people on the gaming, on the lottery."

"You're selling hope," says Rob Kohler, who worked 12 years for the Texas Lottery and is now a private consultant in Austin. It was his analysis of lottery sales data that opened Coleman's eyes, revealing who the majority of heavy players are.

"It's coming from the folks, you know, high minority, low education, and low income," Kohler says. "That can least afford to play the game."

Texas lottery spokesman Bobby Heith does not dispute the data. "The data is what it is. We don't target groups of people," Heith says.

In Texas, Blacks and Hispanics outspend Whites nearly two to one on lottery tickets. According to a 2005 Texas Tech demographic survey commissioned by the lottery, blacks in Texas spend $109 a month on lottery tickets, Hispanics spend $102, and whites spend $55.

"We put out Hispanic ads mainly because for Spanish speaking people. I mean, it's good business," Heith says. "We don't want to prey on anybody. We're here to run a business for the state."

The Texas lottery spends $30 million dollars a year on advertising, pushing 70 kinds of instant tickets, and none more popular or pricey than the new $50 scratch off, the costliest in the nation.

"Lottery products in convenience stores here in Texas have gone from competing with candy bars - a dollar - to now the lottery product is the most expensive product in the entire store," Kohler says.

Nationwide, according to the last National Gambling Impact Commission study, in 1999, 5% of lottery players are responsible for 50% of sales. Families making $50-to-100,000 a year spend, on average $200 a year on lottery tickets, while families making less than $25-thousand dollars spend $600, or three times as much.

But lottery officials, like Tennessee Lottery President Rebecca Hargrove, who has run lotteries in four states, resist the idea that their games prey on the poor.

"If you spend a dollar and you make $20,000 a year, that's a bigger percentage of your disposable income, then if you spend a dollar and you make $50,000 a year," Hargrove says.

"So, if I'm making $20,000 a year," Armen asked her, "it's a wise choice for me to spend my disposable income on a lottery ticket rather than putting it in a bank in a savings account?"

"I didn't say it was a wise choice. I said it was an individual's choice," Hargrove replied.

As one regular player in Houston's third ward told us: "A lot of us can get rich with knowledge. Some of us have to get rich with luck."