The sales of Powerball tickets skyrocket every time the jackpots rise. It’s quite a bit of money that’s being sucked out of the pockets of regular people. American Programa Lotomania players spent more than $73 billion in 2015 on lottery tickets, according to the North American Association of State and Provincial Lotteries (NASPL).
Where does all of that money go? Where does the money go? To a private company, to the government, or to worthy causes? What are the real beneficiaries of lottery revenue?
How Lottery Revenues Are Distributed
The lottery revenue is distributed in three major categories: payouts to winners and commissions to the companies who sold them their tickets, overhead costs, and distributions to states that sold the tickets. These are the breakdowns:
The majority of the funds brought in by the lottery – usually between 50 and 60% – go to the winners. It includes both big jackpots as well as smaller prizes for matching fewer lottery numbers. Retailers also receive commissions for selling tickets and bonuses for selling jackpot-winning tickets, which account for another 5% of lottery revenue.
The lottery pays about 10% of its revenue towards administrative costs and overhead. Advertising, staff salaries, legal fees, ticket printing, and other necessities fall into this category.
The rest of the lottery money goes to the states that participate. As an example, states that sell more Powerball tickets receive a larger percentage of the revenue. State lotteries are entirely funded by the state that hosts them.
In 2015, the U.S. Census Board estimated that state-run lotteries contributed over $21 million to state coffers, and that doesn’t even include the revenue generated by the larger multi-state lotteries like Powerball and Mega Millions.
What does the state do with that money?
The State’s Lottery Revenues
The participating states can decide what to do with the money they raise through the lottery.
Almost all states allocate a small portion of the money they receive from the lottery to gambling addiction treatment. Additionally, many places spend a portion of their lottery funds in a general fund that can be used to address budget shortfalls in important communal areas like roadwork, the police force, and other social services.
The remainder is usually allocated for public works, most commonly for education. There are 14 states that mandate that all lottery revenues go to education, either through public school funding or college scholarship programs.
The NAASPL provides detailed information on how state lottery funds are allocated.
Lottery Revenue Benefits Good Causes
Participating states have used the billions of dollars in lottery revenue to benefit their residents. Examples include:
- The lottery funds in Wisconsin are used to make owning a home more affordable. The Wisconsin Lottery and Gaming Credit is funded by Wisconsin lotteries, pari-mutuel on-track betting, and bingo. Funds are tallied and split among qualified residences as a reduction in the amount of property taxes that are owed each year.
- A quarter of Minnesota’s lottery revenue goes into an Environment and Natural Resources Trust Fund. Water quality has been ensured, native fish and animals have been protected, septic pollution has been regulated, and many other important initiatives have been undertaken with the help of this fund.
- There is a Build Indiana Fund in Indiana, which has worked on projects such as preserving historic buildings, upgrading infrastructure, funding organizations that help children and seniors, and more.