Michigan Lottery

The issue of privatizing the Michigan Lottery has come up several times over the years, and there are compelling reasons on both sides of the argument. In its current form, the lottery provides huge amounts of money to the public school system. And, even if as a percentage it’s a small amount (it’s roughly 6%), it’s still a huge sum of money that would be very difficult to replace – especially in the difficult economic times that Michigan is seeing right now.

The problem is that lottery sales seem to be dwindling. Growth for the past ten years has averaged 2%, with some years actually logging less sales than the year before. In 2003, Michigan Lottery contribution to the public school budget was $27 million less than it was in 2002. Why? Competition, for one. Private casinos are on the rise, along with internet gambling and sports wagering. For another, the Michigan economy is having big problems right now, and that leaves less money for “extras” such a Michigan Lottery tickets.

The issue with privatization is that it would severely limit the future revenues that the state would see from the lottery in trade for a one-time, huge infusion of money from its sale. Some estimates have that number in the billions, while others think more along the lines of a billion without the “s”. Some revenue could be replaced by applying the state sales tax the sale of Michigan Lottery tickets, but it would certainly never reach the level that we currently see.

So the main argument against privatizing the Michigan Lottery is that it’s a bandaid fix to a long term problem. A huge cash influx that could cover budget shortfalls for the next two or three years would get the current government off the hot seat, but we all know it’s only temporary, and we’ll be dealing with the same problem down the road. Except this time, the state will have comparatively little lottery revenue and no lump-sum cash from the sale to fix the problem.

The Michigan Lottery has contributed over $14 billion to the public school system over the past 34 years, and slowing growth or not, that’s a huge amount of money. To raise that magnitude of funding with our 6% sales tax, a privatized Michigan Lottery would have to sell $12.5 billion worth of tickets. Compare that with their 2007 ticket sales of $2.3 billion, run the numbers, and decide for yourself.