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California lottery lacks the bells and whistles of other states

April 05, 2009|Eric Bailey and Patrick McGreevy

SACRAMENTO — In Massachusetts, the average person spends more than $700 a year buying lottery tickets -- $2 a day for every man, woman and child. In South Dakota, wildly popular video lottery machines pull in half the state's general fund revenue. In Montana, there's one gambling machine for every 48 residents.

Now budget-busting California is making a big push to balance its books partly with the aid of a pumped-up, repackaged lottery.

Gov. Arnold Schwarzenegger and California lawmakers want to beef up the state's sagging games of chance to finance $5 billion in borrowing that would help balance the 2009-10 budget -- while keeping funds flowing to schools, the intended benefactors when the lottery was born a quarter-century ago.

Opponents say that if voters buy the overhaul proposal in the May 19 special election, when it will appear on the ballot with five other budget- related measures, they will be cracking the door open for more gambling by low-income residents who can ill afford it.

For The Record
Los Angeles Times Wednesday, April 08, 2009 Home Edition Main News Part A Page 4 National Desk 1 inches; 44 words Type of Material: Correction
Lottery revenue: An article in Sunday's California section about efforts to reinvigorate the state lottery incorrectly reported that South Dakota receives half of its general fund revenue from video lottery machines. In 2008, the machines provided about one-eighth of that state's general fund revenue.

They also are wary of potential forays into Internet sales and -- though it's a long shot -- the proliferation of video lottery terminals, the faux slot machines that have proven an enticing moneymaker in 14 other states.

"Are we going next to full-blown gambling like they do in Las Vegas?" asked state Sen. Bob Huff, a Republican from Diamond Bar and an opponent of Proposition 1C, the lottery measure.

The proposal is the biggest immediate revenue generator on the upcoming ballot. If approved, it also would mark another expansion of gambling under Schwarzenegger, who has overseen a big boost in the state's Indian casinos, including agreements that permit 17,000 additional slot machines for four of the state's wealthiest tribes.

State lottery officials say the changes they're eyeing are modest and uncontroversial -- bigger prizes, more advertising, more ticket machines in more locations. Their hope is to roughly double annual lottery revenue within a decade.

Any revenue escalation would also boost the bottom line for GTECH, the firm that provides the lottery with its operating hardware and stands to profit handsomely if new machines are added.

GTECH set up the only campaign committee devoted solely to promoting the lottery measure and has contributed $250,000 to the cause so far. If state officials are correct in projecting that lottery sales could double to $6 billion or more in the next decade, GTECH could see a 67% boost in revenue. The company reaped $46.2 million from the California lottery last year.

So far, the measure appears to be flopping with the public. A poll by the Public Policy Institute of California found that just 37% of likely voters back Proposition 1C, with 50% opposed. It's the least popular of the budget-related ballot measures.

California's original 1984 lottery initiative was marketed to voters as a boon to public schools. But it has proven more sales pitch than economic windfall; lottery profits represent little more than 1% of school funding, according to state officials.

Meanwhile, state residents haven't exactly made playing the lottery a staple of everyday life.

In California, per capita participation is among the lowest in the nation, with the average resident spending $83 a year, less than half the national average of $190 per person. Experts put a big part of the blame on California's relatively anemic payouts -- about 50 cents in prizes for every dollar spent.

Massachusetts, which operates the nation's most successful lottery, returns more than 70% as prizes. An increase in payouts in Florida tripled the sale of scratchers, while New York saw sales rise 251%.

Sen. Dean Florez (D-Shafter), a Proposition 1C supporter, drew a stark comparison to other, better-paying gambling venues -- slot machines that dish out 95 cents per dollar, horse racing at 84 cents on the dollar.

"You can see why the lottery has a hard time competing," he said.

A bigger and better lottery, and the borrowing it could pay for, is imperative to balance the state budget and avoid further program cuts, Florez and other boosters say. But any short-term budget relief it might provide could prove a long-term drain, according to a report by the nonpartisan legislative analyst's office.

Even a modernized lottery would be unlikely to raise enough money to both pay off the $5 billion the state would borrow and maintain education funding, the report said. That would force future lawmakers to find "hundreds of millions of dollars per year" in new revenue or make equivalent cuts in other services.

Opponents of the ballot measure, meanwhile, question whether a revamped lottery will sell on Wall Street's bond markets. They also see an ominous drift toward a state increasingly dependent on gambling, its landscape dotted with video lottery terminals. A report by the Rhode Island Gambling Treatment Program calls the video machines "the most addictive form of gambling in history."

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