Privatizing the Michigan Lottery

In the past several years the idea of privatizing the Michigan lottery has been brought to the table multiple times, and there are valid arguments on both sides of the table.

As it exists today, the system feeds an incredible amount of funding in the Michigan public education system. Interestingly, as a percentage of the whole budget the purse is quite small (in 2007 it was ~$740 million, less than 7% of the budget as a whole), but taken as a separate entity it's still a massive amount of money. The issue is that it would be difficult to find a different revenue stream to replace it, even if privatization took place. Add in the rough conditions that the economy in Michigan is experiencing, and it doesn't look good.

One issue with the lottery is that growth seems to have stagnated over the past several years. While revenue is at record levels, as a percentage of the whole it is slowly declining. Over the previous ten years, growth has averaged about 2%. In one case revenue was less than the year before (in 2003 it was less than 2002). It seems that with the rise of American Indian casinos there is less desire (and possibly less expendable income) to purchase lottery tickets. People are getting their gambling kicks at the slots and blackjack tables instead. The other problem, as stated above, is the poor Michigan economy and rocketing gas prices. It all adds up to less money for fun.

The major argument against privatization is that it would constrict future revenue streams for the instant gratification of a giant purchase price from a private corporation. It would be similar to raising money with state backed bond issues; get lots of money now and hope our kids can pay it off or live with the consequences. However, some estimates have the purchase price in the billions, and that's a huge temptation for money starved state legislators, and a governor who is at the helm of the worst fiscal management in the history of the state.

Future revenue isn't the only problem, though. Many people look at it as a fix for one of the symptoms of the state's problems, not the root cause. The root problem is that the Michigan economy is abysmal, and privatizing the Michigan Lottery will only give the Michigan government more money to squander, when they haven't proven that they can manage the money they currently have. It would take the pressure off them for a short period, but it would only be smoke and mirrors. And the final destination might be a worse place than the state is in right now.

The Michigan Lottery has given over $14 billion to the public school budget over the past 35 years, and declining sales or no, it's a huge sum of cash. To find that amount of revenue in the current sales tax schema, a privatized Michigan Lottery would have to post sales of over $12.5 billion in tickets. Contrast that with their 2007 ticket sales of $2.3 billion, run the numbers, and make up your own mind.

About the Author

Allen Wright is a freelance writer who follows whatever topics hold his interest. Look for more information on the Michigan lottery and Michigan lottery privatization here.

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