Lotteries and Revenue by State

In 1964, New Hampshire became the first state in recent history to create a lottery.  Forty-four years later, Arkansas became the newest lottery state when voters approved a ballot question amending the state constitution in November 2008.    State lotteries are now authorized in all but seven states—Alabama, Alaska, Hawaii, Mississippi, Nevada, Utah and Wyoming.  The District of Columbia, Puerto Rico and the Virgin Islands also operate lotteries.

The nation's current economic downturn and the high gasoline prices in the summer of 2008 have been testing the lottery's reputation as a recession-proof revenue source (see NCSL's Gambling Developments in the States, 2008 for revenue snapshots from various states).  In addition, some states have discussed leasing their lotteries to private corporations.  Still, policy makers continue to look to lotteries as revenue generators—especially as gambling grows in popularity, state finances deteriorate, and the political aversion to increase taxes remains high.

State lotteries sold $54 billion in tickets in 2006 (the last year for which data are available).  That represented $180 dollars worth of lottery tickets sold per person in the United States and equaled 3 percent of total state revenue. 

Net proceeds, what money is left after subtracting out administration costs and prize payouts, affect state finances more directly than total ticket sales.  After administration costs and prizes, lottery proceeds to states in 2006 were almost $17 billion.  That equaled $57 in state proceeds per person or around 1 percent of total state revenue.

The size of state lotteries and their importance to the finances of each state varies significantly from these national averages, as shown in the table below.

Ticket Sales

In terms of absolute sales, New York's lottery is the country's largest, selling over $6 billion in tickets in 2006.  The three other most populous states also operate some of the largest lotteries. Florida, Texas and California each had sales of more than $3 billion in 2006.  Massachusetts operates the second largest lottery in the United States, with $4.2 billion worth of tickets sold in 2006.  Other large lotteries in absolute size are found in Pennsylvania, Georgia, New Jersey and Oregon.

Among the states, per capita lottery sales range from more than $1,400 to around $30.  Relative to its population, Rhode Island sells more lottery tickets than any other state—$1,441 worth of tickets per capita sold in 2006.  Delaware and West Virginia sold the equivalent of more than $800 in tickets per person the same year.  These large numbers likely reflect the ability of the lotteries in these states to attract players from neighboring states.  Other states with large per capita lottery sales include South Dakota, Massachusetts, and Oregon.

Rhode Island's lottery is the country's largest relative to total state revenue.  Ticket sales in Rhode Island equaled more than 20 percent of total state revenue in 2006.  Lottery sales in South Dakota, West Virginia, and Delaware represented more than 10 percent of total state revenue in 2006.  Ticket sales in Massachusetts were more than 9 percent of total state revenue that same year.

Net Proceeds to States

Net proceeds are the revenue that states receive from lotteries after taking out the operational costs.  In absolute terms, New York's lottery provides its state with the most net proceeds—$2.2 billion in 2006.  California, Florida, and Texas each received more than $1 billion from lotteries in 2006.  Pennsylvania's lottery provided the fifth largest amount of net proceeds, transferring $944 million to the state in 2006.