Stateline Story

High Gas Prices Could Chill Lottery Fever

  • November 21, 2005
  • By Kathleen Hunter

The recent nationwide rise in gas prices has several state lottery directors concerned that some motorists who are paying more at the pump are now short the pocket change they used to wager trying to strike it rich.

In Indiana, for instance, sales of scratch-off lottery tickets between July 1 and Sept. 30 were down $3 million from the previous quarter, according to the Chronicle-Tribune (Marion, Ind.), which quoted the state's lottery director and a convenience store owner, who attributed the drop to rising gas prices.

Tennessee lottery sales, which had increased consistently since the lottery began in January of 2004, began declining over the summer, according to The Commercial Appeal (Memphis).  Tennessee lottery spokeswoman Kym Gerlock told the paper that gas prices were affecting sales.
State lottery directors in New Hampshire and Rhode Island also have reportedly linked high gas prices to slumping lottery sales.

According to the U.S. Department of Energy , the nationwide, average price of regular, unleaded gasoline remains significantly higher than a year ago, even though the price has declined overall since a topping $3 a gallon in September.

Anecdotal evidence is popping up across the country that rising gas prices - particularly the September spike that followed Hurricane Katrina - are causing some gas station patrons to take a pass on purchasing state lottery tickets.

"People are spending it all on gas," Jeff Leonard, spokesman for the National Association of Convenience Stores , told Stateline.org .

State lotteries, which began in the Northeast in the 1960s and have since been adopted in 42 states, have become an increasingly important revenue raiser for states. Alabama, Alaska, Arkansas, Hawaii, Mississippi, Nevada, Utah and Wyoming are the only states that do not have lotteries.

If rising gas prices in fact contribute to an overall dip in state lottery revenue during the 2006 fiscal year, it would come on top of already declining profits. The amount of money states raised from lotteries fell from $14.1 billion in the 2003 fiscal year to $13.9 billion in 2004, said Sujit CanagaRetna, a fiscal analyst with the Council of State Governments , a bipartisan umbrella organization for state government officials.
The dip in profits comes in spite of the fact that total lottery sales have been climbing in recent years.

"The fact that states increased other gaming opportunities requires states to be more generous in their payouts," CanagaRetna said, citing a possible explanation for the decline in profits.

The numbers are still out on 2005 lottery sales so it's too soon to determine what, if any, comprehensive effect rising gas prices have had on sales. California, Georgia, Kentucky and Massachusetts are among the states where lottery sales performed particularly well recently.

Since New Hampshire launched the first modern state lottery in 1964, the games have earned more than $200 billion for government programs in the U.S. and Canada, according to North American Association of State and Provincial Lotteries .

North Carolina, which in July became the most recent state to authorize a lottery, is the latest in a growing group to earmark the funds raised for education. Thirteen other states (California, Florida, Georgia, Illinois, Michigan, Missouri, New Hampshire New Mexico, New York, North Dakota, Ohio, Tennessee and Vermont) also put all lottery funds towards education. Eleven more (Arizona, Idaho, Indiana, Kentucky, Louisiana, Montana, Nebraska, New Jersey, Oregon, Texas and West Virginia) direct a portion of the lottery proceeds to schools.

"When you pitch it as going to education the chances of it passing are much greater," CanagaRetna said.

 North Carolina Gov. Mike Easley (D) has been trying to get an education lottery in the Tar Heel state since he took office in 2001. Supporters argue that residents who are crossing the border to purchase tickets would spend their money in-state once there is a lottery and that the game will provide a guaranteed revenue stream for education. Opponents disputed the wisdom of relying on what they characterized as a volatile revenue source to fund education, and said a lottery unfairly preys on the poor.

North Carolina's lottery, which is slated to begin selling tickets in April, is projected to raise $400 million a year.

Some states use the money to fund other government services. South Dakota, Massachusetts and Wisconsin, for example, use lottery revenue to provide property tax relief, according to CSG. The Pennsylvania lottery is unique - all revenue benefits programs for the elderly, including low-cost prescription drugs, specialized transportation, and rent and property-tax assistance for seniors. In Indiana, a portion of lottery revenue pays the pensions of police and firefighters.

However they spend the profits, state officials and convenience store owners are aware that larger economic trends - be they rising gas prices or other economic hardships - can reduce disposable income, adversely affecting sales of everything from lottery tickets to Christmas gift items.

"The big concern is that every in-store item is impacted by higher gas prices. Wal-Mart's worried about it, the Christmas retailers are worried about it and, of course, convenience stories are worried about it," Leonard said.