The casting of lots to determine fates or distribute property has a long record in human history, from Moses’s instructions for taking a census and distributing land in the Old Testament to Roman emperors giving away slaves during Saturnalian feasts. In modern times, lotteries have been a way for states to raise revenue without the onerous burdens of taxes on working people. During the immediate post-World War II period, lottery money allowed states to expand their array of social services without the need for especially onerous tax rates on working families; but that arrangement came to an end in the nineteen-seventies and eighties as income inequality widened, pensions and jobs disappeared, health-care costs went through the roof, and our long-standing national promise that education, hard work, and saving would render most children better off than their parents ceased to be true.
New Hampshire pioneered state-run lotteries in the modern era, and they became popular in the Northeast and Rust Belt states. Their popularity coincided with a national wave of tax revolt; in 1978, California passed Proposition 13, reducing property taxes by a whopping sixty-four percent. State lotteries were seen not as a drop in the bucket of government coffers, but as an alternative to high taxes, and they became a tool for raising large sums of money quickly.
As state governments grew increasingly dependent on lottery revenue, they often lost sight of their original mission to promote public welfare. Critics argue that lotteries promote addictive gambling behavior, that they are a major regressive tax on poorer communities, and that they erode traditional civic values.
But supporters say that if state governments don’t run lotteries, they will lose a valuable source of funding. And in recent years, the public’s support for the games has remained strong. In the United States, about 60% of adults play the lottery at least once a year.
Despite this broad public support, lottery officials have a difficult job. They have to balance the public’s desire for big prizes against their responsibility to safeguard the public welfare. They also have to manage the complexities of setting prize amounts and payout rules.
As a result, they tend to make policy decisions piecemeal and incrementally, and they rarely have a holistic overview of the industry. This makes them prone to the sort of distortions that we often see in other areas of government. As a result, few states have a coherent “lottery policy,” and they have a hard time keeping up with the ongoing evolution of the industry. This means that lottery officials are constantly reacting to a series of pressures that they can do little or nothing to change. And that’s a recipe for corruption. The first step in preventing this is to understand how lottery policies are set and administered. To do that, we’ve compiled this handy guide to the many different ways lottery policy is made in the states. It’s not an exhaustive list, but it gives you a sense of the different approaches to setting prizes and regulating the industry.