Tennessee Lottery Info

Posted 12:38 PM by Donald Sensing
SUMMARY OF INFORMATION
Some Lottery Truths

Proposed Lottery Will Not Solve Tennessee Tax Problems

Nothing to Budget - None of the income from the proposed lottery will go towards a state budget or teachers' salaries or curriculum or books, etc. It goes to 1) scholarships, and 2) money left over goes to capital expenditures for K - 12 (none for new college needs), and 3) if any other money is left over, before and after school programs for preschoolers.

Impact on State Taxes - What is the impact of lotteries on state taxes? Borg, Mason and Shapiro discovered that states will lose between 10% to 30% of their taxes in the first year of a lottery. The states without income taxes will lose towards the 30% end of the spectrum. With Tennessee's budget crunch and with no money going to the state General Budget from the lottery, Tennessee could lose up to 30% of their tax income. This will increase pressure to increase taxes and/or create new taxes. (Borg, Mary O.; Mason, Paul M.; and Stephen L. Shapiro. The Economic Consequences of State Lotteries. New York: Praeger Publishers, 1991.)

Cost to State Greater than Income - "University of Illinois professor John Kindt asks analysts to take a closer look at those numbers. He estimates that for every dollar a state receives in gambling revenues it costs the state nearly $3 to fund escalating criminal-justice and social-welfare programs. Other reports indicate that discretionary spending in communities decreases when the lottery is introduced. They say that every dollar spent on the lottery instead of dinner at a local restaurant is a dollar siphoned from the local community." (Dan Allsup, The American Legion Magazine, June, 2002, Page 23)

Lottery States Have Faster Increases in Taxes - "The ephemeral infusion of lottery dollars always results in prodigal spending, which, in turn, forces state legislators to raise taxes in order to shore up the budgetary shortfalls that develop when lottery revenue sags. Legislators keep their fingers crossed and hope that nobody remembers that the lottery was supposed to have made additional taxes unnecessary. Obfuscation about proceeds earmarked "for the children" will also keep people from asking probing and potentially embarrassing questions such as "What happened to all the education money that was in the general fund?" A study by Money magazine found that from 1990 to 1995 taxes grew three times faster in lottery states than in non-lottery states. In 1971, Governor Thomas Meskill of Conneticut successfully lobbied for a lottery by arguing, "Giving people the choice to raise money purchasing lottery tickets will
let your state hold the line on taxes." In 1991, however, Connecticut legislators enacted the state's first income tax even though lottery sales had reached $671 million n the previous year (Keating 1996)." (Michael Heberling, The Independent Review, Spring, 2002, p. 598. Michael Heberling is president of the Baker College Center for Graduate Studies in Flint, Michigan.)

States Without Lotteries Increase Spending in Education Faster - "In spite of all the rhetoric to the contrary, the states have been unable to deliver on their promise to increase spending on education by adopting the lottery. Ironically, states WITHOUT lotteries actually maintain and increase their education spending more than states WITH lotteries (Keating 1996). A 1997 study of the impact of lotteries on education funding concluded: 'regardless of when or where the lottery operated, education spending declined once a state put a lottery into effect.' For example, Florida spent 60 percent of its budget on education in the first year of its lottery's operation, in 1998. By 1993, however, education's share of the budget had dropped to 51 percent (National Gambling Impact Study 1999). When Ohio introduced its lottery in 1973, total spending for education amounted to 42 percent of total state expenditures. By 1994, however, education spending had dropped to 29 percent of the total. Like all other state legislatures, the Ohio legislature apparently siphoned off the existing education funds for other state programs (Garrett and Lawson 1998)." (Michal Heberling is president of Baker College Center for Graduate Studies in Flint, Michigan, The Independent Review,v. VI, n. 4, Spring, 2002, p 602-3)

Note: 1) None of the Tennessee's proposed lottery will go directly to the state budget. Proponents claim this will supplement the state budget. 2). Thus, it is very possible the scholarships proposed by the lottery could replace existing scholarships. The present funding for capital expenditures in the state budget could be replaced by income from the lottery. Thus, the "shell game" can continue in Tennessee with no increase in spending for education.

Money to Other States - One issue that keeps rising is "What about the money going to other states? Why not have a lottery so we can get our share of it?
Dr. William Thompson, professor at U.N.L.V. and gambling consultant, says that, yes, money does go to neighboring states. But those neighboring states are spending more money in social costs than they receive in all forms of gambling. He warns that any state that tries to "get the money back because they lose it to other states" will end up with greater costs to their own state than the money they receive. In other words, trying to retrieve lost money will only cause Tennessee to lose more money.

New Cost to Georgia From Addictions: The Georgia Department of Human services reports that the new compulsive gambling in Georgia, after the introduction of the HOPE Scholarship lottery, incurred new costs (from addictions only - not the other costs which emerge) which estimates range from $221 million to $884 million a year. (Charles Walston, The Atlanta Journal Constitution, 1999)

"If only Tennessee had a lottery, proponents say, they could do what Georgia has done. I assure you that there is a massive misconception regarding the impact the Georgia lottery has had on our schools. I want the voters of Tennessee to make their decision on a lottery based on facts - not hype. As a member of the Walker County Board of Education, I would like to share a few of those facts. Many people mention the proliferation of new schools in Walker and Catoosa counties as evidence of the lottery's impact. In Walker County, all of our capital improvements were funded by a passage of a 1 percent
special purpose local option sales tax. There is a provision in the lottery legislation that allows for proceeds to be applied to capital projects, but the system making application must qualify as a "rapidly growing district" to qualify for construction money. Few school districts qualify. Last year, the lottery dispensed only enough construction funds to build seven average size schools. The total expenditure would not have covered construction for Walker and Catoosa counties, much less the 178 other districts in the state." (Mike North, "Georgia Lottery Funding for Schools: Hype or Fact?" Chattanooga Times-Free Press.)

After writing about several misconceptions of the benefits of the Georgia lottery, Mike North writes in reference to local property taxes, "Do not imitate the Georgia system, or you will mimic Georgia in another area as well. You will see sales and property taxes continue to rise to support education, despite the millions of dollars you pump into the lottery coffers." (Mike North, "Georgia Lottery Funding for Schools: Hype or Fact?" Chattanooga Times-Free Press.) (September 21, 2002)

How much will your local county government lose in income because of a state lottery? Our counties could lose up to $66,666,000 (not an error) in revenue. Is your county open to losing money and having a local sales tax and/or local property tax and/or local sticker tax increase? (This doesn't even count the Tennessee sales tax lost to the lottery.)

To see how much money your specific county receives in local sales option revenue and how much it could lose, go here.

Lotteries and Education

Lotteries Undermine Principles of Education - The Hawaii State Teachers Association in 1997 said that ".a lottery would undermine the values teachers try to instill in students." They said that ". . .a lottery would devalue the principle that achievement comes through hard work." These teachers voted against Hawaii having a lottery despite the fact that their schools were to receive 100% of lottery revenues. (Gordon, Mike, Teachers reject lottery idea, The Honolulu Advertiser, December 7, 1997.)

Non- Lottery States Have Faster Increases in Education Spending - "The ephemeral infusion of lottery dollars always results in prodigal spending, which, in turn, forces state legislators to raise taxes in order to shore up the budgetary shortfalls that develop when lottery revenue sags. Legislators keep their fingers crossed and hope that nobody remembers that the lottery was supposed to have made additional taxes unnecessary. Obfuscation about proceeds earmarked "for the children" will also keep people from asking probing and potentially embarrassing questions such as "What happened to all the education money that was in the general fund?" A study by Money magazine found that from 1990 to 1995 taxes grew three times faster in lottery states than in non-lottery states. In 1971, Governor Thomas Meskill of Conneticut successfully lobbied for a lottery by arguing, "Giving people the choice to raise money purchasing lottery tickets will let your state hold the line on taxes." In 1991, however, Connecticut legislators enacted the state's first income tax even though
lottery sales had reached $671 million n the previous year (Keating 1996)." (Michael Heberling, The Independent Review, Spring, 2002, p. 598. Michael Heberling is president of the Baker College Center for Graduate Studies in Flint, Michigan.)

Georgia Scholarships

Most HOPE Scholarship Recipients Lose Scholarships - ".few students keep
their HOPE scholarships throughout their college education. Indeed, only
36.2 percent of the 24,125 HOPE freshman for the 1996-97 school year kept
their scholarships after their fist year, according to the Georgia Student
Finance Commission, which oversees HOPE. (Karen Lundegaard and Brad
Reagan, "For states seeking HOPE, Georgia may ease the way," Wall Street
Journal, January 20, 1999, P 38). By their fourth year of school, only 31
percent of 1994 HOPE scholars had kept their scholarships." (Marsha
Davis, Gary Henry, and Thad Hall, "Evaluating the Georgia HOPE Scholarship
Program," Georgia State University, Council for School Performance,
http://cspweb.gsu.edu/csp/csp) as quoted in "Going For Broke: The
Economic and Social Impact of a South Carolina Lottery, John R. Hill and
Gary Palmer, February 10, 2001

(While I quoted the above, I've seen the yearly average retention of
scholarships provided me by the Georgia HOPE Scholarship and each year
since 1994 approximately 65% lose their scholarship after the first year
of being recipients.) (6-11-2002))

Taxes May Have to Supplement HOPE Scholarships - There will come a point
when the lottery money in Georgia will not be able to pay for the
scholarships the state promised their students. In fact, that may be here
sooner than later. This means Georgia will have to raise taxes to pay for
the scholarships. Thus, the lottery scholarships will force an increase
in taxes. For documentation of this, I'm printed an entire article ("HOPE
Funds will dry up, official says") from the June 6, 2002 The Augusta
Chronicle quoting the Georgia University System Chancellor and the Georgia
Governor about this very issue. It is at the end of this email.
(6-21-2002)

HOPE Causes Grade Inflation - Question - Will a HOPE scholarship increase
grades? Dr. Bridget Long, Assistant Professor of Education at Harvard, one
who concentrates on researching financial aid to colleges, states the
Georgia high school students with B averages or higher have grown 336
percent since 1982 and the main reason is not better education, it's
because well meaning Georgia teachers don't want to ruin a child's chance
of a scholarship. They also receive pressure from parents. The teacher
give too many students "B" grades when they deserve lower grades. HOPE
has resulting in a dumbing down of the Georgia education system.
Is a H.O.P.E. type scholarship something we are doing for our children or
is it something we are doing to our children? (6-27-2002)

General Article About Georgia Lottery - In the Atlanta
Journal-Constitution article titled "State should shelve lottery, HOPE"
(which I've printed fully at the end of this message if you wish to read
the whole article) we have another summary of a person from Georgia
writing about the harms of the Georgia Lottery and the HOPE Scholarship.
He writes about both the plusses and minuses of the lottery and the
scholarship. He concludes with the following:

"Even Georgia's secondary and university education systems have not
escaped unscathed. Here, damage is less obvious but real nonetheless.
Grade inflation to help kids acquire (and maintain) HOPE is rampant.

"Like the lottery itself, HOPE holds out the dangerous and seductive
promise of something for nothing.

"I won't hold my breath waiting for anything to change, but Georgia
would be better off without both the lottery and HOPE.

"(Governor) Barnes was quick to run what he called the "Cancer" of
video poker out of town on a rail. He won't do likewise to the lottery,
but he should. Instead, he stands cheering by as the state takes from the
desperate and downtrodden-and gives to the sons and daughters of
privilege." Luke Boggs (The complete article "State should shelve
lottery, HOPE" is printed at the end of this message) (7-30-2002)

(The following quotation is about the Georgia Hope Scholarship.) "Though
it has substantially improved the academic quality of the state's top
colleges, it has not significantly increased the overall number of
students going to college. Instead, it simply keeps more college-bound
students in the state. It has not increased the number of minority
students at an elite institution like Georgia, though it has allowed more
minority students to attend college. And the pressure to maintain the
scholarship often prompts students to drop difficult courses, and to take
a light course load." (David Firestone, New York Times New Service, The
Tennessean, Sunday, February 4, 2001, 13A.) (August 21, 2002)

(The following quotation is about the Georgia Hope Scholarship. After
talking about how the Georgia HOPE Scholarship has increased the number of
students staying in state in state colleges and universities but it has
not had a significant increase in the number of students going to college,
the article states:) Most starkly, the scholarships represent an enormous
transfer of money - $1.2 billion since 1993 - from lottery players, who
tend to live in the poorest counties, to 504,000 college students, who
come from the wealthiest counties. The program has become one of the most
popular middle-class entitlements and politicians who champion it are
often rewarded at the ballot box." (David Firestone, New York Times New
Service, The Tennessean, Sunday, February 4, 2001, 13A.) (September 6,
2002)

"The HOPE scholarship is the most popular lottery funded program in
Georgia. There is misunderstanding about the scholarships as well. It is
perceived that the cost of a HOPE scholar's education is fully funded by
the lottery, a voluntary tax. But is that entirely true?
" Georgia's public universities are no different than the public
universities in any other state. They are not allowed by law to pass the
full cost of education along to the student in the form of tuition and
fees. Therefore, the taxpaying public subsidizes tuition from the general
fund. For each student that receives HOPE funding, the state pays
approximately 200 percent more from the general fund to cover the costs
that tuition and fees do not pay.
"In other words, if the HOPE pays $4,000 per student, the taxpayer kicks
in another $8,000 from the general fund. This is no voluntary tax."
(Mike North, "Georgia Lottery Funding for Schools: Hype or Fact?"
Chattanooga Times-Free Press.) (September 18, 2002)

Addiction and Children's Addiction

Georgia Lottery and Teen Addictions - "Research shows that 90 percent of
the nation's compulsive gamblers got started in adolescence." (Dr.
Michael Gordon, Atlanta addictionologist, quoted by Tom Nugent, "1 million
teens addicted to gambling: U. S. report," AAP News, vol. 15, August 1999,
p. 7.)

. (The lottery is the only form of legalized gambling in Georgia. 1996
was only the 4th year of legalized gambling in Georgia.) The Georgia
Department of Human Resources reported in 1996, 62 percent of the state's
adolescents have gambled, 2.8% of 13-17 year olds are already problem
gamblers, and 10.3 percent are at risk of becoming problem gamblers. A
minimum of 8,400 Georgia adolescence were experiencing severe problems in
1996 plus another 47,950 adolescents were at risk developing gambling
difficulties. (Rachel Volberg, Gemini Research, "Gambling and problem
gambling among Georgia's adolescents," Reprot prepared for the Georgia
Department of Human Resources, June 25, 1996) (6-12-2002)

Lottery and Teen Pathological Gambling - A March 1998 survey by the New
York Council on Problem Gambling of more than 1,100 teenagers found that
75 percent have gambled in the past year, with 15 percent participating on
a weekly basis. Nearly one-third had purchased lottery tickets. Despite
their substantial lower incomes, adolescents in New York reported spending
approximately one-third as much as adults on gambling. Fourteen percent
of the students questioned were at risk of becoming problem gamblers, and
2.4 percent were identified as already seriously addicted to gambling.
Next to betting on games of personal skill and sports betting, the lottery
was identified as the game most likely to turn adolescents into problem
and pathological gamblers." (Rachel A. Volberg, "Gambling and problem
gambling among adolescents in New York," Report to the New York Council on
Problem Gambling, Inc. (Northampton, MA: Gemini Research, March 1998);
and John Wilen, "Panel, 80 percent of youth have tried gambling," Las
Vegas Sun, November 12, 1998, as quoted in Going for Broke, The Economic
and Social Impact of a South Carolina Lottery, John Hill and Gary Palmer,
February 10, 2001, p. 17)

"Research shows that 90 percent of the nation's compulsive gamblers got
started in adolescence." (Dr. Michael Gordon, Atlanta addictionologist,
quoted by Tom Nugent, "1 million teens addicted to gambling: U. S.
report," AAP News, vol. 15, August 1999, p. 7.) (June 13, 2002)

Lottery and Addictions - "If those in dispute are still not satisfied, I
hasten to add that 43% of those who called the national hotline
(1-800-GAMBLER) had problems specifically with the lottery (Reno 1998). I
find it fastening that gamblers themselves can identify the lottery as an
addictive form of gambling, yet Miller and many others cannot. Further,
in Texas, 34% of those attending publicly funded alcohol and drug
treatment centers cited the lottery as their "most problematic gambling
activity" (Wallisch 1995). If the lottery is not a potentially addictive
form of gambling, then gambling addicts themselves have certainly been
fooled." (Reno, Ronald. "Lottery Claims Bigger Slice of Poor's Income."
Chicago Tribune, May 26, 1995. ) (Wallisch, Lynn. "Gambling In Texas:
1995 Surveys of Adult and Adolescent Behavior: Executive Summary." Texas
Commission on Alcohol and Drug Abuse. ) (6-15-2002)

"The sale of lottery games to minors is illegal in every state. However,
by all measures, it is commonplace. A survey in Minnesota of 15- to
18-year-olds found that 27% had purchased lottery tickets for
themselves.49 Even higher levels of 32%, 34%, and 35% were recorded in
Louisiana, Texas, and Connecticut, respectively.50 In Massachusetts,
Connecticut, and other states, lottery tickets are available to the
general public through self-service vending machines. When one store owner
in Boston was asked if minors purchased tickets from the lottery ticket
dispenser in his lobby, he replied: "How would I know? No one's watching
it."51 Thus, it is not surprising that a survey conducted by the
Massachusetts Attorney General's office found that minors as young as 9
years old were able to purchase lottery tickets on 80% of their attempts,
and that 66% of minors were able to place bets on keno games. 75% of
Massachusetts high school seniors report having played the lottery.52"

49 Robyn Gearey, "The Numbers Game," The New Republic, May 19, 1997, p.
19.

50 Joe Gyan, Jr., "More Louisiana Youths Try Gambling than Drugs," [Baton
Rouge,
La.] Advocate, August 8, 1997; Lynn S. Wallisch, "Gambling in Texas:
1995 surveys
of Adult and Adolescent Gambling Behavior," Texas Commission on
Alcohol and
Drug Abuse, August 1996, p. 78; Lyn bixby, "Lottery Pitch Seen as
Luring Kids,"
Hartford Courant, October 23, 1997, p. A4.

51 Comment made to author, Boston, February 1998.

52 Scott Harshbarger, Attorney General of the Commonwealth of
Massachusetts,
"Report on the Sale of Lottery Tickets to Minors in Massachusetts,"
July 1994, pp
3-4; Scott Harshbarger, Attorney General of the Commonwealth of
Massachusetts,
"Kids and Keno are a Bad Bet: A Report on the Sale of Keno Tickets
to Minors in
Massachusetts," October 1996, p. 1; Howard J. Shaffer, "The
Emergence of
Youthful Addiction: The Prevalence of Underage Lottery Use and the
Impact of
Gambling," Massachusetts Council on Compulsive Gambling, January 13,
19945, p.
9. (6-29-2002)

Georgia Lottery Introduces New Games that Compounds Addiction - ( Most
persons believe that a lottery is simply a piece of paper. However,
Georgia, Kentucky and Virginia have introduced new games with the same
casino type machines and call them something like "video lottery." Georgia
has "keno." "VLT" stands for Video Lottery Terminal. The following is a
statement about such.)

"There is growing evidence that the new games the lotteries have
introduced to increase sales are more addictive, and are compounding the
problem of compulsive gamblers. Dr. Lance Dodes, Director of the Center
for Problem Gambling at Mt. Auburn Hospital in Cambridge Massachusetts,
estimates that 40% of his patients are lottery players.42 A 1996 survey in
New York found that 9% of lottery players, and 14% of keno players, have
been compulsive gamblers at some point in their lives. The study also
concluded that keno in particular fosters addiction.43 One study of the
effect of VLTs on compulsive gamblers found that the number of individuals
in South Dakota seeking treatment for problem gambling declined
significantly during a temporary downtime for the lottery's VLTs and rose
sharply once they were returned to service.44

This link is widely recognized, even by those in the industry. In the
words of one lottery director: "[G]ambling, including playing the
lottery, is ... potentially addictive and can be dangerous and
destructive for some people, some of the time." 45 The new games "have
created what was once an almost unthinkable link between lotteries and
compulsive behavior." 46

42 David M. Halbfinger and Daniel Golden, "the Lottery's Poor choice
of Locations,"
Boston Globe, February 12, 1997, p. A1.

43 Daniel Golden and David M. Halbfinger, "Lottery Addiction Rises,
and Lives Fall," Boston Globe, February 11, 1997, p. A1.

44 R.D. Carr, J.E. Buchkoski, and T.J. Morgan, "'Video Lottery' and
Treatment for
Pathological Gambling: A Natural Experiment in South Dakota," South
Dakota
Journal of Medicine, January 1996, p. 31.

45 Conversation with Jeff Perlee, Director of the New York State
Lottery, February
1998.

46 Michale Jones, "Lotteries Must Strike Balance Between Letter of
the Law and
Unwritten Contract with Players," Gaming Law Review, Volume 2, No.
1, February
1998, p. 10. (7-4-2002)

New Cost to Georgia From Addictions: The Georgia Department of Human
services reports that the new compulsive gambling in Georgia, after the
introduction of the HOPE Scholarship lottery, incurred new costs (from
addictions only - not the other costs which emerge) which estimates range
from $221 million to $884 million a year. (Charles Walston, The Atlanta
Journal Constitution, 1999)

Lottery is Gambling

(I have heard proponents of a lottery in Tennessee say ".a lottery is not
gambling." By definition as a "game of chance," a lottery is gambling.
But note the following facts.)

"If those in dispute are still not satisfied, I hasten to add that 43% of
those who called the national hotline (1-800-GAMBLER) had problems
specifically with the lottery (Reno 1998). I find it fastening that
gamblers themselves can identify the lottery as an addictive form of
gambling, yet Miller and many others cannot. Further, in Texas, 34% of
those attending publicly funded alcohol and drug treatment centers cited
the lottery as their "most problematic gambling activity" (Wallisch 1995).
If the lottery is not a potentially addictive form of gambling, then
gambling addicts themselves have certainly been fooled." (Reno, Ronald.
"Lottery Claims Bigger Slice of Poor's Income." Chicago Tribune, May 26,
1995. ) (Wallisch, Lynn. "Gambling In Texas: 1995 Surveys of Adult and
Adolescent Behavior: Executive Summary." Texas Commission on Alcohol and
Drug Abuse. ) (6-15-2002)

Lottery and Casinos

Lottery is Predictor of Legalizing Casinos - "The experience of other
states shows the presence of a lottery is a strong predictor of whether a
state legalizes casinos. Pennsylvania is a prime example of a state on a
gambling binge. In addition to the lottery, Pennsylvania has bingo, horse
track racing, off-track betting and telephone wagering, and the
legislature is attempting to enact casino-slot-video poker gambling.
According to research by political science professor Patrick Pierce of St.
Mary's College, the presence of a state lottery is a stronger predictor of
whether a state legalizes casinos than the fiscal health of the electoral
cycle, citizens' religious fundamentalism, and the adoption of casinos by
neighboring states." (Patrick A. Pierce, "Roll the dice: The diffusion of
casinos in American states," Paper presented at the annual meeting of the
West Virginia Political Science Association, Morgantown, West Virginia,
October, 1997) (Quotation from Going for Broke, John R. Hill and Gary
Palmer, February 10, 2001, p 7.) (June 18, 2002)

Lottery Is Predictor of Legalizing Casinos - "In fact, 15 of the 18 states
with both lotteries and casinos - 83 percent - legalize a lottery first.
After these 15 states legalize a lottery, the legalization of casinos took
an average of less than 8 years." (Unaudited data from LaFleur's Lottery
World Online Magazine, wysiwyg:/58/http://www.lafleurs.com; and Rachel
Volberg, Gemini Research, Roaring Springs, PA) (Quotation from Going for
Broke, John R. Hill and Gary Palmer, February 10, 2001, p 7.) (June 20,
2002)

Deceptive Marketing of Lotteries by States

Lottery Marketing Targets the Poor - "Given the demographic attributes of
the 'typical' player, it should come as no surprise that lottery
advertisements specifically target the poor. State lottery commissions
tend to place more advertisements and sales outlets in lower income areas
('Slim Chances for Fat Lottery Winnings. 2000. Availabale at:
Speakout.com. May 10). Here are some of the advertising slogans from
around the country that have been used to boost ticket sales:
'All you need is a dollar and a dream." (New York)
'Hey, you never know.' (New York)
'Don't forget to play every day.' (Pennsylvania)
'Work is nothing but heart-attack-inducing drudgery.' (Massachusetts)
'A Million a Day - Just Play.' (Washington, D. C.)
'His [Martin Luther King's] vision lives on.honor the dream - D. C.
Lottery."
'This could be your ticket out.' (Illinois)
'How to Get from Washington Boulevard to Easy Street." (Illinois)
(Note Washington Bloulevard is located in a depressed Westside Chicago
neighborhood.)" (Michal Heberling is president of Baker College Center
for Graduate Studies in Flint, Michigan, The Independent Review,v. VI, n.
4, Spring, 2002, p 599) (June 23, 2002)

"Criticism of the advertising practices of lotteries is not confined to
critics outside of the industry. Speaking to a meeting of his fellow
lottery directors, Jeff Perlee, Director of the New York State Lottery,
warned that lottery officials:

'must confront the fact that the product they market is a vice
that is not
universally accepted...[State lottery advertisements] are so
far-fetched and so
fanciful that they would not stand up to the same
"truth-in-advertising"
standards to which advertising conducted by private industry is
held. Add to
that the fact that our advertising is often relentless in its
frequency, and lottery
critics and even supporters are left wondering what public
purpose is served
when a state's primary message to its constituents is a
frequent and enticing
appeal to the gambling instinct. The answer is none. No
legitimate public
purpose justifies the excesses to which some lottery
advertising has resorted.30'

"A Maryland state budget examiner's report on that state's lottery
advertising stated that it contained "misleading gimmickry" that
exaggerated the benefits to the public from lottery revenues. 31 In fact,
state lotteries are exempt from the Federal Trade Commission's
truth-in-advertising standards because they are state entities and, in
terms of their advertising, can in fact operate in a manner that true
commercial businesses cannot.32"
30 Jeff Perlee, "Should Lotteries Advertise?" paper delivered to
NASPL Directors'
Conference, Wilmington Delaware, May 1997.

31 Charles T. Clotfelter and Philip J. Cook, Selling Hope: State
Lotteries in America,
(Cambridge, Ma: Harvard University Press, 1989, p. 206.

32 Ellen Perlman, "Lotto's Little Luxuries," Governing, December
1996, p. 18. (6-30-2002)

Lotteries Use Misleading Advertisements - (The following is from Michal
Heberling is president of Baker College Center for Graduate Studies in
Flint, Michigan, The Independent Review,v. VI, n. 4, Spring, 2002, p
599-600)
"Sad to say, the states spend more to encourage citizens to play the
lottery than they do for any other state-sponsored message, such as "Stay
in School." Charles Clotfelter and associates have identified a number of
common approaches used in lottery advertising:
- Overemphasize the chances of winning. In 70 percent of the TV ads,
those pictured playing the lottery .. Won!
- Encourage players to minimize regret. Remind them of how bad they would
feel if they missed playing the lottery on the day when their numbers
'hit.'
- Provide misleading information about the true odds, or don't provide any
information at all (Reno 1998). Only 20 percent of the lotteries list the
odds of winning (Bast 1994).
The lotteries can get away with misleading advertisements because the
state
Governments serve as both promoter and regulator; hence, there is no one
to protect the consumer from abuses by the state. With respect to the
lottery, government is no longer even pretending to 'stand up for the
little guy.' Instead, it is preying on the elderly and the poor with a
state-sponsored get-rich-quick scam. The states are exempt from the
Federal Trade Commission's (FTC) truth-in-advertising standards. Although
the FTC requires Publisher's Clearing House and McDonald's to provide the
odds of winning their sweepstakes, it does not require the same aboveboard
standards for state lotteries (Houser 1999).
The Missouri lottery originally carried the following disclaimer with its
advertisement: 'This message is not intended to induce any person to
participate in a lottery or purchase a lottery ticket.' Unfortunately,
this responsible practice was dropped in 1988 because it was hurting sales
(Scoope 2000). It is probably safe to assume that a private firm would
not be permitted to drop its government-mandated warning label if its
sales were slack." (7-27-2002)

Lotteries in Other States

While Georgia has the H.O.P.E. Scholarships funded by the Georgia lottery,
Florida has a similar program in the Bright Futures scholarships funded by
the Florida lottery. An April 8, 2002 article in The Gainesville Sun
titled "UF, FSU advocate radical changes" reports that the presidents of
U. of Forida and Florida State University are not fans of the scholarship
program. President Charles Young (UF) says in the article "It's horrible
public policy." Like most states with similar programs, the article
reports he is criticizing the state keeping the tuition low by subsidizing
higher education with tax dollars and then awarding "merit" scholarships
which are disproportionately going to upper- and middle-income families.
"The poor are subsidizing the rich - that's the ultimate effect of it," he
said. "People who can't afford to come to the university are paying taxes
to support those who could very easily afford to go to Stanford or Harvard
or wherever else they might want to go." He even reports that nearly 30%
of UF's Bright Futures recipients received refund checks from the prepaid
tuition program in the 2000-01 school year. He adds, "If the state had so
much money that they didn't know what to do with it, then I would still
think (Bright Futures) was bad public policy, but I wouldn't be as
concerned about it." (Carrie Miller, The Gainesville Sun, April 8, 2002,
http://www.sunone.com/articles/2002-04-08a.shtml) (August 3, 2002)

Potential Corruption With Lotteries

Lottery Special Interest Groups - "The negative impact on state politics
of money connected with the lotteries is often cited by critics, with the
commercial suppliers and operators commonly used as examples. GTech and
Automated Wagering International (AWI) are the two companies that
dominate the lottery supply and lottery operations businesses. In 1997, of
the 38 lotteries, GTech had contracts to operate 29; AWI had 7;
Massachusetts and Virginia run their own systems. These two companies have
contributed heavily to state races. When GTech won the contract to operate
the California lottery in 1986, it had been the 6th largest contributor to
state campaigns that year, having donated a total of $300,000 to
individual state races. In addition, both companies devote substantial
sums to lobbying state legislatures and officials. GTech is alleged to
have spent $11 million on lobbyists in 1993 alone."54

The above means: The future state elections will be heavily influenced
by the gambling industry. The gambling industry is now the number one
contributor to election campaigns and it is the number one lobbying group
in the U.S.

54 Robyn Gearey, "The Numbers Game," The New Republic, May 19, 1997,
p. 19. (7-3-2002)

Believe it or not, lotteries can be "fixed," and "rigged" illegally. I'm
sorry this is longer than most, but you'll love reading this fascinating
account of the "Pennsylvania: The 666 Scam" written by Roger Abramson.
Yes, this is a True Story!

"Lottery machines are (theoretically) random, with no regard to lucky or
unlucky, good or evil. Unless, of course, someone tampers with it.

And, in 1980, that's exactly what happened in Pennsylvania in a scandal so
huge a movie ("Lucky Numbers") was made about it in (2000).

Before the Pennsylvania Lottery had a television studio of its own, it
broadcasted its lottery drawings from WTAE-TV in Wilkinsburg (near
Pittsburgh). The lottery used the well-known "ping-pong ball" method. A
bunch of ping-pong balls labeled with numbers between zero and nine would
be jumbled by an air machine and sucked up randomly, one-by-one, until
three digits were announced the winner.

The drawing was hosted by Nick Perry, an avuncular local weatherman who
was fingered by witnesses as the mastermind of the ultimate plan to fix
the lottery. "[W]hat I'm about to tell you I don't want you to tell no
one," Peter Maragos, an associate of Perry's testified Perry had told him.
"The lottery can be fixed."

The trick was to weight some of the balls down with white latex paint
(baby powder was tried first-unsuccessfully) so that they would be too
heavy for the air machine to lift. Perry enlisted the assistance of
station art director Joseph Bock, stagehand Fred Luman, Maragos and his
brother Jack, and, ultimately, district supervisor of the lottery Edward
Plevel, who possessed one of the two keys (Perry, conveniently enough, was
entrusted with the other) to the room containing the ping-pong balls.

The group conspired to weight down a set of replacement ping-pong balls
except those labeled "4" and "6" and replace the real balls with these on
April 24,1980. Before the drawing, they and their associates purchased
over 10,000 lottery tickets in all of the eight possible combinations of
"4" and "6" ("666," "444", "646", etc.). They also placed a number of
bets with private (and illegal) bookmakers.

The fix worked; the machine pulled up the numbers "666", and the
conspirators thought they had (literally) hit the jackpot. The winnings,
based on a $500 payout per winning ticket, were the largest in the game's
history: $3.5 million, almost half of which went to the Perry
conspirators,

Ironically, it was the underground bookie network, and not the state
lottery commission, that busted the scheme open. The bookmakers noticed
unusually heavy play on "4" and "6" combinations and suspected a fix as
soon as the three sixes were drawn. Consequently, they "put the word on
the street that they weren't paying off" and went to authorities with
their concerns.

The station itself also became more wary after review of the drawing
videotape. WTAE anchorman Don Cannon noted that "[w]e looked at it,
slowed it down frame-by-frame. All of the other balls were staying
flat-only the 4's and 6's seemed to be buoyant. That's when we started
investigating it thoroughly ourselves."

In the meantime, the state and lottery officials were playing defense,
insisting that there was no evidence of foul play. Howard Cohen,
Pennsylvania Revenue Secretary, was especially insistent, holding a news
conference that resulted in at least temporarily returning public
confidence in the lottery.

Some in the press, too, seemed to be unwilling to acknowledge the fire
that was responsible for all of the smoke, at least at first. A New York
Times article published just two weeks after the drawing, noted that

[t]hough the 666 payoff was the largest ever, the number that got the
heaviest play that day was 999. Had that been the winning number, the
payoff would have been $6.4 million. The number 444 was also played more
frequently than 666.

While there is no ready explanation for the betting pattern on 6, a check
of newspapers that day shows many references to 6, and lottery players
often follow such references as hunches.

A numerology chart in The Philadelphia Daily News listed the leading
number for April 24 as 6. The paper's banner headline was about the
Sixers, the city's basketball team. There was a page one picture showing
the number 6 on Julius Erving's basketball jersey. A columnist, in a
reference to the Democratic Presidential race, wrote that its takes 1,666
delegates to assure nomination.

The jig was up, however, when Pennsylvania law enforcement officials
conducted computer traces on ticket purchases and discovered the
fingerprints of the Perry conspirators everywhere.

The fallout was enormous. Pennsylvania's Attorney General Dick Thornburgh
(later Attorney General of the United States), with the help of a grand
jury, ultimately prosecuted the central members of the conspiracy. Perry
and Plevel were sent to prison on charges of "criminal mischief, criminal
conspiracy, theft by deception, and rigging a public contest" and Bock
and Luman were sentenced to one to five years in prison for their roles in
the scheme. The Managos brothers received lighter sentences for turning
state's evidence. Even to this day, two decades later, Pennsylvanians
"have been talking., investing the story with its own mythology, retelling
it whenever a glitch disrupts a lottery drawing."
mmrrc.dementia.org/mckhistperry.htm
New York Times, January 9, 1981, 10:6.
New York Times, September 20, 1980, 1:2.
mmrrc.dementia.org/mchistperry.htm
mmrrc.dementia.org/mchistperry.htm
New York Times, May 4, 1980, 68.
McFadden, Robert D., New York Times, Sept 21, 1980, 21:1.
mmrrc.dementia.org/mchistperry.htm
New York Times, December 18, 1981, IV, 15:2.
mmrrc.dementia.org/mchistperry.htm
mmrrc.dementia.org/mchistperry.htm
(August 11, 2002)

Can corruption exist related in any way to state lotteries?

"Five members of the Kentucky Lottery Corporation resigned after a report
found that lottery officials wasted taxpayer's money on perks, broke state
laws in awarding contracts, and engaged in other dubious practices,
including allowing retailers to keep lottery money for more than a month.
Kentucky lottery executives were paid $500,000 in bonuses the very day
that the Kentucky Lottery Corporation took out a $10 million loan."
(Carlton, Chad, "Lottery president, 3 board members quit, Chairman Brown
hints he'll also resign," Louisville Courier-Journal, 7/23/1993, cited in
Miles, Jim, "Comparison of Georgia and Kentucky Lottery", The Bipartisan
Lottery Opposition Committee (South Carolina), p. 2. Also
www.motherjones.com/coinop_congress/easymoney/KY.html. (This is quoted
from Gambling Free Tennessee Alliance 101 Things You Should Know About A
Lottery, 2002, p. 1) (August 13, 2002)
(The proponents said last Thursday that there is no evidence that
lotteries lead to corruption. The following is truthful response by the
Gambling Free Tennessee Alliance. There's more to come.)

. Kentucky, 1994: Five members of the Kentucky Lottery Corporation as
well
as the lottery president resigned after an audit found that lottery
officials
wasted taxpayers' money on perks, broke state laws in awarding contracts
and
engaged in other dubious practices, including allowing retailers to keep
lottery money for more than a month. Kentucky lottery executives were
paid
$500,000 in bonuses the very day that the Kentucky Lottery Corporation
took
out a $10 million loan.(Carlton, Chad, "Lottery president, 3 board members
quit, Chairman Brown hints he'll also resign," Louisville Courier-Journal,
7/23/1993. See also . Also
www.motherjones.com/coinop_congress/easymoney/KY.html)

. Kansas, 2001: The Director of the Kansas Lottery's Computer Division
was
charged with stealing close to $63,000 by doctoring tickets and pilfering
lottery funds. ("Gag Order Hinders Lottery Hearings," The (Topeka)
Capital-Journal, January 17, 2001)

. New Jersey, 1985: Reese Palley, former Chairman of the State Lottery
Commission, admitted giving false documents to a state ethics panel
investigating companies doing business with the lottery. Palley had
sought a
$675 kickback from a company trying to get a contract to supply video
lottery
machines. Palley pleaded guilty to conspiracy to fabricate evidence.(
"Ex-Lottery Chief Pleads Guilty," The New York Times, March 20, 1985, II,
12:5.)

. Ohio, 1980: The director of drawings for the Ohio Lottery and her
fiancée
were found guilty of four counts of mail fraud in connection with a plan
to
manipulate four "bonus pot" game drawings. The scheme netted the pair
$21,000. ("Two Guilty in Ohio Lottery Fraud," The New York Times, December
26, 1980, 25:4)

Lotteries Increase Illegal Gambling

Many ask, "People are gambling illegally now. Why not legalize it and get
that money?" Sounds good but the reality: Instead of decreasing, illegal
gambling actually increases as much as 22% with legalized gambling.
Why? Well, pretend a "bookie" comes to you saying, "You seem to be a
good religious person. You probably don't want to be seen purchasing a
lottery ticket. You probably don't want to wait in long lines to buy
tickets. Purchase from me and you will compete against my clientele
instead of the millions in the state lottery. So you'll know I'm honest,
we'll use the same numbers from the state lottery. If you need money,
I'll loan it to you. If you lose, you don't have to pay up immediately.
If you win, I'll get the money to you. No one will know. You won't even
have to pay taxes."
Legalizing gambling for the sake of recovering money lost to illegal
gambling sounds good, but it doesn't happen. Illegal gambling increases.

Zabilka, Ivan L., Striving After the Wind, p. 96., "Betting Virginia's
Future on casino gambling: Casinos and crime," and Commission on the
Review of the National Policy Toward Gambling, Gambling in America, p 156,
as cited by Sandeep Mangalmurti and Robert A. Cooke, "An Oklahoma State
Lottery: Seducing the Less Fortunate?" Resource Institute of Oklahoma,
April, 1994, p. 12. (7-6-2002)

+
Bankruptcies

The 298 counties that have the highest bankruptcies have had a jump in
bankruptcies of 18% since the introduction of gambling in their areas? OF
THESE 298 COUNTIES, SHELBY COUNTY RANKS NUMBER ONE AT 4 TIMES THE NATIONAL
AVERAGE OF PERSONAL BANKRUPTCY AND THIS IS TIED DIRECTLY TO GAMBLING IN
ITS SURROUNDING AREA. (SMR Research Corporation, The Personal Bankruptcy
Crisis, 1997: Demographics, Causes, Implications, and Solutions.)
(6-6-2002)

Lotteries and Potential Lawsuits

July 18, 2002 Former Massachusetts Attorney General Scott Harshbarger told
participants at the New England Conference on Problem Gambling:

-- the gaming business will be the next target for lawyers seeking
compensation for addicts.

-- As gambling continues to expand in Connecticut and across the country,
"somebody is going to sue somebody."

-- "there is a dramatic public health cost, there is a dramatic social
cost."

His comments follow a Canadian judge's ruling last week that "allowed a
class-action lawsuit against Lotto-Quebec to go forward. The lawsuit seeks
hundreds of millions of dollars in damages on behalf of people addicted to
video lottery terminals."

You can find the newspaper article reporting the above at:

http://ctnow.com/news/local/hcproblem0517.artmay17.story (7-18-2002)

Non-Profit Gambling

Most of us are unaware that the lottery proposal allows for each
non-profit organization in Tennessee to have one "game of chance" type
fund-raising event a year. This is the wording:

"All other forms of lottery not authorized herein are expressly prohibited
unless authorized by a two-thirds vote of all members elected to each
house of the general assembly for an annual event operated for the benefit
of a 501(c)(3) organization located in this state, as defined by the 2000
United States Tax Code or as may be amended from time to time."

Sounds good at first reading, but there are several major problems. I'll
deal with one today.

There are approximately 16,000 non-profits in Tennessee. Last year alone,
more than 3,300 bills were introduced in each Legislative body, plus over
1000 resolutions. Because the legislature would have to approve each
"annual event" request from a non-profit, the number of bills that would
need to be addressed would increase dramatically. As a result, the
legislature would be faced with longer hours, hurried sessions, and the
possibility of a constitutional problem because of the prospect of
exceeding the number of legislative days provided.

Couldn't the legislature pass a bill to give this responsibility to
another agency? The legal interpretation - No, the bill says 2/3rds of
EACH house of the general assembly. Ready for more July sessions of our
state legislature? Ready to lobby your organization's "annual event" each
year to our state legislature? Ready for more legal application work for
your non-profit organization? (More later - including "What about lumping
them all under one vote?") (7-23-2002)

Something For Nothing

Rodney Smith writes a thoughtful and well articulated editorial in the
Memphis Commercial Appeal, September 20. The entire editorial is at the
end of this message. Here are a few nuggets.
"In law, the strongest witness is one who testifies against his own
interest. Because I teach at a public university and am wholly committed
to higher education in Tennessee, I am an apparent beneficiary of revenues
that would be generated by the proposed state lottery. It might be
assumed, therefore, that I favor the lottery. I do not. The proposed
lottery is immoral and imprudent. Its limited benefits would come at an
unacceptable, and at times devastating, societal cost. It deceptively
hides behind a noble cause - public education - while preying on human
weakness, affecting our most vulnerable citizens."

What happened at Enron and other corporations that have been afflicted by
fraud - insiders knowingly taking advantage of outsiders and bilking them
of their hard-earned money - is immoral. The lottery is analogous to Enron
in a number of unsettling ways.
LOTTERY PROPONENTS would have us believe that education in Tennessee will
receive something for nothing. That is a pernicious teaching. Journalist
George Will calls gambling "debased speculation, a lust for sudden wealth
that is not connected with the process of making society more productive
of goods and services. Government support of gambling gives a
legitimatizing imprimatur to the pursuit of wealth without work."
Similarly, offending officials at Enron took steps to satisfy their
personal lust for wealth without doing anything to build the economy. I do
not want to teach my children or my students that it is right to get
something for nothing."

Rodney Smith's Complete Editorial
Lottery, Enron are similar in many unsettling ways
September 20, 2002
Memphis Commercial Appeal, 9-20-02

Rodney K. Smith, Herff Chair of Excellence in Law, Cecil C. Humphreys
School
of Law, The University of Memphis. Professor Smith teaches ethics and
constitutional law at The University of Memphis. The views in this
commentary are his own and not necessarily those of The University of
Memphis.

In law, the strongest witness is one who testifies against his own
interest.
Because I teach at a public university and am wholly committed to higher
education in Tennessee, I am an apparent beneficiary of revenues that
would
be generated by the proposed state lottery.

It might be assumed, therefore, that I favor the lottery. I do not.

The proposed lottery is immoral and imprudent. Its limited benefits would
come at an unacceptable, and at times devastating, societal cost. It
deceptively hides behind a noble cause - public education - while preying
on
human weakness, affecting our most vulnerable citizens.

I initially resolved to avoid declaring the lottery immoral, knowing that
a
proponent of the lottery will surely cry: "Don't legislate my morality."

Dallin Oaks, a respected lawyer, observed that the
don't-legislate-morality
view is ''superficial," because much existing law and legislation,
including
family and criminal law, ''has a moral base."

What happened at Enron and other corporations that have been afflicted by
fraud - insiders knowingly taking advantage of outsiders and bilking them
of
their hard-earned money - is immoral. The lottery is analogous to Enron in
a
number of unsettling ways.

LOTTERY PROPONENTS would have us believe that education in Tennessee will
receive something for nothing. That is a pernicious teaching. Journalist
George Will calls gambling "debased speculation, a lust for sudden wealth
that is not connected with the process of making society more productive
of
goods and services. Government support of gambling gives a legitimatizing
imprimatur to the pursuit of wealth without work."

Similarly, offending officials at Enron took steps to satisfy their
personal
lust for wealth without doing anything to build the economy. I do not want
to teach my children or my students that it is right to get something for
nothing.

Some lottery advocates, in moments of candor, reluctantly concede that
gambling is often not a good thing. They acknowledge the lottery would
take
money from the poorest in Tennessee and give it to education, but they
contend that the end justifies the questionable means.

Statistics show that the heaviest lottery players are those with annual
household incomes of less than $10,000. With the lottery, the poorest of
the
poor are enticed by government-sponsored advertising to buy a ticket on
the
fraudulent ground that it can deliver them from the ravages of their
poverty.

In cooking their books, executives at Enron knew they could do just what
the
proponents of the lottery intend to do - get the unwitting to invest in
wild
and unwarranted speculation, quietly benefiting corporate officialdom in
the
process.

The long-term costs to society - increased crime, bankruptcy and harm to
children and families - exceed any short-term benefits from a lottery or
gambling of any sort.

As dean of the law school at the University of Arkansas at Little Rock, I
heard leaders of the Arkansas and Louisiana bars describe the harm
legalized
gambling had done in their states, including attorneys stealing from
clients
to feed their gambling addiction.

OFFICIALS AT Enron also believed short-term benefits to themselves and
stock
prices warranted accepting certain long-term risks, especially if those
risks could be shifted to others. The lottery differs from corporate fraud
in a notable way: Even with its corporate scandal, Enron shares were
generally a better investment than lottery tickets.

Until the moment of Enron's bankruptcy filing, analysts rated Enron a
better
buy - more likely to turn a profit - than a lottery ticket. At least Enron
retained some valuable assets, which are now the subject of bankruptcy
litigation.

The lottery has no valuable asset, only a less-than-Enron chance at
winning
a return. The state proposes to advertise and sell to its citizens a
poorer
investment than Enron stock.

I can see the wry smile of the lottery proponent as he condescendingly
replies: "Professor Smith, you exaggerate. The lottery is small and
innocent, hardly gambling at all, and it offers such alluring benefits."

C.S. Lewis anticipated just such an argument in his book The Screwtape
Letters, in which Wormwood, the devil, says to his supporters: "It does
not
matter how small the sins are, provided that their cumulative effect is to
edge the man away from the Light and out into the Nothing. Indeed the
safest
road to hell is the gradual one - the gentle slope, soft underfoot,
without
sudden turnings, without milestones, without signposts."

IF THE LOTTERY passes, students - many of whom come from wealthier
families - may receive scholarships, I may enjoy a salary increase, and we
may obtain the latest in computer technology. But each benefit funded with
tainted lottery dollars will diminish my capacity to teach my students.

They will know that each benefit has come at significant moral cost. They
will wonder what the real story is - is it the ethics of our words in the
classroom, or the ethic of our works in bettering ourselves materially
through funds generated from a morally bankrupt lottery?

I trust the citizens of Tennessee will be wise enough not to raise that
question.