In the past few decades many, many states have instituted state lottery systems, often as a way of paying for education without having to hike taxes on voters.
The problem with state lottery systems designed for education funding, however, as Jamal Abdul-Alim puts it over at Diverse Issues in Higher Education, is that this lottery cash is mostly most used, not for general education funding, but scholarships for rich people. As he writes:
Lotteries make inequities in higher education worse, not better. Since scholarship dollars only cover outstanding tuition and fees after all other financial aid has been accounted for, low-income students do not receive grant or scholarship dollars above and beyond tuition costs, meaning they must pay for books, transportation, housing, childcare, and other non-tuition expenses involved in going to college on their own, the brief states. “Therefore, if two students have the same tuition bill, but one qualifies for Pell and the other does not, the result is that the state will spend more award funds on the wealthier student with no federally recognized financial need than the student who qualifies for the maximum Pell grant,” the brief states. “In short, last-dollar tuition scholarships do not correct inequity in college access and affordability across socioeconomic brackets; in fact, when the scholarships are merit-based instead of need-based, these programs tend to increase inequity instead of alleviating it.”
Lotteries often function as a second tax on the poor to benefit the rich. This is the case because research shows that members of poor households tend to buy lottery tickets more than members of wealthy households. “In essence, poor families are helping send wealthy students to college,” the brief states. “In almost every study performed by economists, findings show that, as household income increases, the proportion spent on lotteries decreases.”
That’s according to a policy brief, “A Gamble with Consequences: State Lottery-Funded Scholarship Programs as a Strategy for Boosting College Affordability,” by Kati Lebioda of the American Association of State Colleges and Universities.
A more serious problem, which the country has actually seen with Georgia’s HOPE Scholarship and West Virginia’s PROMISE Scholarship, is that lotteries mostly end up going toward scholarships for high achieving students. That seems reasonable, but high school students with high grades and SAT scores are generally from reasonably affluent families. And they would have gone to college without the scholarships.
What’s more, the report indicates, lotteries may end up actually reducing money for education. “Lottery revenues… tend to replace instead of augment state appropriations for education. …While educational expenditures tend to increase right after a state starts a lottery, overall spending tends to decrease over time.” States that don’t have lotteries, in contrast, tend to spend more money on education.