Thursday, February 12, 2009

Happy Fifth

A billion in sales, 76,000 scholars, and a few hard questions.

Posted By on Thu, Feb 12, 2009 at 4:00 AM

Let's have a "Happy Fifth Birthday" shout-out for the Tennessee Education Lottery.

Nothing screams "higher education" like Blazing 8s. Or Pot O' Gold, Bank Loot, Mad Money, Totally Topaz 7s, Winter Wonderland, Sacks of Cash, Deal or No Deal, Million Dollar Madness, Lotto 5, Lucky Sum, or Hottrax Champions.

Those are all names of lottery games that have helped drive annual revenues past the $1 billion mark since state government became a croupier in 2004. According to the Tennessee Higher Education Commission's annual report on the lottery last week, 76,000 Tennesseans got $225 million worth of lottery-funded scholarships in 2007-'08.

It was easy to be cynical about the Tennessee Education Lottery when it started five years ago. There was that Brave New World-like name, accurate in the same sense that the Sports Illustrated swimsuit issue is about sportswear.

There was the long road to passage under the guidance of Steve Cohen, then a maverick state senator from Memphis. The General Assembly upended a state constitutional ban on one form of gambling — lotteries — while upholding a ban on casinos.

Tunica casino operators said that their lavish resorts provided an experience you just can't get in a gas station or convenience store.

Journalists, myself included, called it a tax on stupidity and a reverse Robin Hood bill that took money from the poor to give it to the rich and the middle class in the form of college scholarships. Not to mention the indignity of having to stand in line behind some sap buying a $2 lottery ticket at my neighborhood convenience store while I patiently wait to buy essentials like beer and Doritos.

Today there are 4,700 places in Tennessee selling tickets and games. There are $1 million jackpots. The top scholarship award is $5,000 a year. Cohen is a second-term congressman. The lottery advertises on the Fox television hit program 24. And we savvy sophisticates who invested in mutual funds and dividend-paying bank stocks have lost half our life savings and seen the dividends disappear.

So, has the lottery been an unqualified success? I don't think so, and the annual report has a few troubling disclaimers, too:

Item: "As the program continues, the percentage of students in higher income brackets grows."

Item: "African-American students represent 12 percent of freshman recipients and 9 percent of all students on lottery scholarships." But they comprise 18 percent of the total undergraduate population, and they get only 1 percent of the $5,000 awards.

Item: Prior to 2008, 63 percent of lottery scholars lost their award by their third year. After standards were relaxed last year, 53 percent still lost their award.

Item: Two-thirds of recipients come from families with adjusted gross income (AGI) of $48,000 or more and 32 percent from families with AGI of $96,000 or more.

Item: "Students are staying in college at the same rate regardless of changes to scholarship renewal rates."

Item: Before the lottery, 81 percent of Tennessee's "best and brightest" went to college in-state. Now the figure is 84 percent. The biggest beneficiaries have been the University of Tennessee-Knoxville and private colleges.

Then there are the questions the annual report doesn't even address. Does the lottery generate new money? Hardly. With the exception of Alabama, Tennessee is surrounded by states with lotteries or casinos.

Full disclosure? More like bare minimum, when the topic is where the money comes from. Want to know the latest $1 million jackpot winner? No problem. Check the lottery website. The sales locations in your ZIP code? No problem. The top-selling locations in ZIP codes where most people live below the poverty line? Sorry, no can do.

Then there is the issue of government as shill. As researcher Robert Currey told the legislature in 2007, "Management MUST continue to find ways to increase sales." That means more commercials, more "instant" winner games, more online games, more similarities to casino gambling, and more hypocrisy.

Finally, there's this bailout thing. Congress is about to pass a bill with a price north of $800 billion. Some of that money will go to states like Tennessee, which can then pass it on to people suffering from the recession but still able to afford $1 billion in lottery tickets.

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