U.S. lotteries on decline

A weakening U.S. economy and declining discretionary incomes are negatively impacting one source of government financing that had previously been widely regarded as recession-proof: lotteries, reports the Wall Street Journal this week.

Lottery sales fell 2 percent in the third quarter year-on-year, reducing the dispersal of revenues to education and other programs.

Across the U.S., many state lotteries are reporting hefty declines, the WSJ reveals, with ticket sales down nearly 10 percent in California and more than 4 percent in Texas over the past few months. In good years, these lotteries have turned over more than $1 billion apiece to education programs, the most common lottery beneficiaries.

Lottery officials have long praised their games as low-cost entertainment that grow even more appealing to players when the economy turns down. But lottery sales nationwide fell about $215 million, or nearly 2 percent, from July through September compared with the same stretch in 2007, according to La Fleur's magazine, which tracks the lottery business.

The decline in lottery sales "is an unusual phenomenon," John W. Kindt, a gambling critic and business professor at the University of Illinois, told the Journal. A big proportion of lottery tickets are bought by people with gambling problems who are likely to play more in bad economic times, he said, even as intermittent players cut back.

Lottery-ticket sales, which include the big multistate jackpot games such as Mega Millions as well as the instant games known as scratchers, have dipped only once since 1992. That was in fiscal 1998, when they edged down less than 1 percent in a recessionary climate, according to the Census Bureau.

Otherwise, revenue has marched steadily upward. In the most recent fiscal year, which for most states ended June 30, national lottery sales rose more than $1 billion to $52.7 billion, La Fleur's reported.

In past recessions, players continued to buy tickets, but not this time, said Jack Boehm, director of the Colorado Lottery. "Now they are thinking, 'My retirement is gone, I might lose my job, I'd better start putting money away' - that means fewer dollars for lottery tickets."

In Colorado, sales since July have dropped almost $5 million, or 2.3 percent, compared with the same period last year. The decline has hit even the usually resilient scratch-off games, Boehm said, and at the current pace the state's lottery will sell 5 percent fewer tickets this fiscal year than last year -- a $25 million drop-off.

Lottery officials cite other reasons for weak sales, including a lack of big jackpots in multistate games and increased competition from other lotteries and casinos for gamblers' dollars. Natural disasters hurt sales in the Midwest and along the Gulf Coast, while Hurricane Ike knocked out thousands of retailers in Houston, where a quarter of Texas Lottery tickets are sold, said Robert E. Heith, spokesman for the Texas Lottery Commission.

At focus groups held for the commission earlier this year, about half the players said the poor economy had prompted them to cut back on lottery purchases. Die-hard players -- those who bought tickets in the previous month -- reported small cutbacks. But 27 percent of less-frequent players, those who bought tickets some time in the past year, reported declines of 81 percent to 100 percent in their lottery purchases, Heith said.

In some states, lottery officials are warning benefit programs that they will be receiving less money. Massachusetts, which uses much of its lottery funds to aid cities and towns, expects net proceeds to drop to $863 million from $913 million last fiscal year. In Bridgewater, 25 miles south of Boston, that aid accounts for about 10 percent of town revenue, and a cut this year would probably require closing a library or a centre for senior citizens, said Paul Sullivan, the municipal administrator.

Some lotteries are counting on Christmas stocking-stuffer tickets to boost sales. Others are dreaming up new games to spur interest among buyers. And lottery officials across the U.S. are hoping for a big new jackpot for Powerball, which is tweaking its rules and adding a major new participant, Florida.

Terri LaFleur, publisher of LaFleur's magazine, said she expects "a lot of legislative scrutiny for the expansion of lottery games, such as video lottery terminals, in 2009, as states face severe budget crunches."

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