The Massachusetts Lottery Seeks Expansion
The Mass Lottery, and state run lotteries in general, have become larger and more ubiquitous over the last few decades. In 1964 New Hampshire was the first state to create its own lottery and most of the Northeast followed suit thereafter. While Southern and Western states were slower to adopt their own systems, today only five states have continued to hold out: Hawaii, Alaska, Nevada, Utah, and Alabama. Mississippi was the most recent to join the lottery ranks, in 2018.
Massachusetts created its own lottery in 1972. In the ensuing five decades, the lottery’s offerings have steadily grown and the revenues generated from it have become one of the largest non-tax revenue sources for the state, raking in $143 billion since its founding. In 2022, for example, it was the fourth largest revenue source ($5.9 billion) and provided state coffers with over a billion dollars in profit after payouts and administrative expenses.
The Massachusetts lottery is more profitable than most other state lotteries because Massachusetts residents historically have the highest per capita lottery spending ($805) according to a recent study by LendingTree. The next highest state, New York, spent just over half as much at $456 per capita.
After the state collects revenue from the games and pays out winners, it distributes most of the net profit to Massachusetts’ 351 towns and cities in local aid.
Acts of Expansion
In recent months, the Mass Lottery and its supporters have sought to expand the lottery’s offerings and accessibility. A new $50 scratch ticket was announced in February, with the lottery anticipating an additional $150 million in net profit from its sales. Scratch tickets are the lottery’s most lucrative offering, making up 67 percent of all revenue in 2022.
In April, Governor Healey indicated her support for a provision of the House’s 2024 budget proposal that would allow for an iLottery, which allows the lottery to sell its offerings online. This expansion is projected to bring in as much as $200 million more in net profit per year.
To put this in perspective, Massachusetts isn’t the first state to create a $50 scratch ticket, but it is the first such state in New England. The next most expensive tickets – offered in Maine and Connecticut – are $30, or $20 cheaper.
If Massachusetts adopts the iLottery provision it would join New Hampshire and Rhode Island in offering an online option. Both of those states enable direct purchases from an app and website.
The Ethical Dilemma
The Mass Lottery, especially with its high revenue in comparison to other states, poses unique ethical quandaries for policy makers. In a state focused on the fairness of taxation and supportive of more progressive taxes, there is considerable support for lottery expansion, even though it acts as a regressive tax on lower income populations.
Some might distinguish between income, sales, and other types of taxes that are mandatory, and voluntarily buying a lottery ticket. Yet this position ignores the threat that gambling can pose to an individual’s health. Gambling addicts will often spend money they need to cover their basic needs in order to feed their compulsion, leading to debt, financial ruin, and social and psychological hardship. By encouraging and profiting off such addiction, the state becomes complicit in enabling it.
Publicly released data from 2016 showed that around 10 percent of Massachusetts adults were responsible for well over half the lottery’s revenues, spending as much as $6,000 a year. Indicating that the Lottery was supported in large part, by a group of frequent players.
For these reasons, several lawmakers have voiced their reservations about the iLottery provision. The Senate left out the iLottery provision from its version of the FY24 budget. The issue will now be resolved in a Conference Committee budget.
Rationalizations
Proponents have tried to counter these points by stipulating that the new iLottery’s primary purpose would be to draw in new users. They further state that the app would provide other protections, including user settings to allow individuals to moderate and track their spending. However, it’s unknown whether the increased ease of access might lead to more problem gamblers.
The ostensible reason for expansion, competing with online sports betting vendors that recently became legal in the state, may be an attempt to justify the new $50 scratch ticket and iLottery proposal. State officials believe Massachusetts residents are going to gamble anyway, and if they are, why not have the state profit and distribute additional funds in local aid?
Conclusion
While it’s unlikely the lottery will be rolled back anytime soon, it’s valuable to continually reassess whether and to what extent the state should rely on gambling revenue to balance its books. Lottery revenue helps to fund local services, but creating an online lottery and or higher priced scratch tickets could also have a detrimental effect on many of the Bay State’s most vulnerable citizens, the very residents that the new tax dollars will be targeted to help.
Massachusetts residents and state legislators should ask themselves whether these new changes represent sound public policy and align with other policies goals.
Additional Sources to Explore
The Mass Lottery: A Bay Stater’s Favorite Pastime
Massachusetts Confounding Relationship with Lottery Advertising
How Much Do Frequent Gamblers Contribute to Massachusetts Lottery Revenues?
About the Author
Aidan Enright is Pioneer’s economic research associate, responsible for analyzing data and developing reports on the state’s business climate and economic opportunity. Prior to working at Pioneer, he worked as a tutor and mentor in a Providence city school and was an intern for a U.S. Senator and the RI Department of Administration. Aidan earned a Bachelor of Arts in Political Science and Economics with a concentration in U.S. national politics from the College of Wooster.
