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Latest economic casuality: state lottery revenue

 

As the California State Lottery reports sharp declines in ticket scales across the state, many business owners and residents in South Los Angeles say the dwindling economy has had mixed results on local lottery ticket sales.

Lottery ticket sales have plummeted by $105 million, or more than 10 percent, in the first four months of the 2008 fiscal year, compared to the same period last year. The Lottery does not keep track of sales for specific cities or regions, but some local business owners say the decline has been noticeable.

“I saw many more tickets sold before,” said the owner of “Mart,” a convenience store at the intersection of Jefferson Avenue and Arlington Street that is frequented by lottery ticket buyers in South Los Angeles. “Now, very few people buy tickets.”

Alex Traverso, a spokesman for the California State Lottery, says lotto officials have drawn a connection between the drop in sales and the souring economy. When a recession last hit California, sales dropped by about 4 percent by 2003.

“I think obviously the economy is one of the primary factors that people point to when they look at the drop in sales, namely because if people have less money in their discretionary funds, they’ll probably buy fewer lottery tickets,” he says.

But other business owners and lottery players say the dim economic forecast actually motivates some to spend more—and more often—on the chance to gamble their way to wealth, despite the low odds of winning big.

Poor more likely to play lottery


This phenomenon strikes particularly close to home in the poverty-stricken South Los Angeles. Studies have shown that residents of economically disadvantaged areas, such as South LA., where an estimated 30 percent of residents live in poverty, are more likely to buy lotto tickets.

Researchers at Carnegie Mellon University recently found that people who feel subjectively poor bought nearly twice as many lottery tickets as those who are made to feel wealthier.

“The hope of getting out of poverty encourages people to continue to buy tickets, even though their chances of stumbling upon a life-changing windfall are nearly impossibly slim and buying lottery tickets in fact exacerbates the very poverty that purchasers are hoping to escape,” one of the study’s lead authors wrote in a report, which was published last July in the Journal of Behavioral Decision Making.

The appearance of a lottery advertisement in the window of one convenience store that opened just one month ago was all it took to generate substantial interest from the surrounding community.

“We don’t have a lottery machine yet, but a lot of people are coming in and asking for tickets — Especially now with the big jackpot,” says the owner of the store, which is located on Jefferson just one block west of Arlington, who asked that his name not be published. “I expect business to pick up Monday when the machine comes.”

Traverso also points to other, behind-the-scenes factors for the fall in sales, including the size of the prize, which has been considerably lower than usual this year because of an increase in players cashing in on smaller prizes.

“More winners are winning at the smaller jackpots so we’re not seeing that prize money roll over into the larger jackpots,” he says.

Smaller payoffs contribute to decline


At this time last year, there had been nine jackpots of $100 million or more, Traverso says. This year, the jackpot has reached $100 million just four times.

“A lot of sales depend on the occasional player as opposed to the regular player that buys every day,” he says. “One hundred million dollars is the threshold where the occasional player seems to get excited and say, ‘Oh, well, maybe I’ll buy a ticket this time.’”

The recent $120 million jackpot was a lucrative enough idea to inspire one man, who approached the counter at “Mart” complaining about the $9 price tag on a six-pack of Miller Lite beer, to gingerly remove a $20 bill from his pocket to purchase a small stack of lottery tickets.

He says, “$120 million is worth my 20 bucks. I need this money tons and tons.”

He adds that the beer “is not even for me, it’s for my girl,” but notes that if he hits the $120 million jackpot, all the prize money would indeed be for him.

Dr. June Foley, a psychology professor who specializes in the psychology of gambling at Clinton Community College in Bluff Point, New York, says there is a great deal of scientific research supporting the idea that the buzz accompanying higher jackpots can impact one’s decision to buy lottery tickets.

“When jackpots are high, people talk about them more and they even get on the news,” she wrote in an e-mail. “People spend more time fantasizing about winning and thinking about the winners they have heard of.”

The impact on schools


Because about 35 percent of lottery revenues go toward public education, a continued drop in sales could have an impact on South L.A. schools. The California State Lotto contributed more that $960 million to public schools grades K-12 alone in 2007—more than $145 a student, according to 2007 financial reports. About 54 percent of lottery funds end up as prize money, and the rest is used for retailer commissions, operating expenses and game costs.

Brian Reed, a teacher at South L.A.’s Animo Pat Brown Charter High School and a member of the school’s advisory board, which oversees the budget, says his school receives about $4,700 a year, or 1.3 percent of its operating budget, from the state lottery. He says he’s not sure if lotto revenue will greatly affect the school’s upcoming budget, but the situation could exasperate the already heightened concerns about pending budget cuts in the school system.

“In general, we are expecting to make cuts this year because of the state’s general financial situation, but nothing about the lottery in particular has been talked about at our school,” he says.