Lottery Payouts and State Revenue

State lotteries posted more than $53 billion in ticket sales in 2006 (the last year for which data are available).  The states' take from that amount was a little less than a third of the total—around $17 billion.  The rest of the money goes to pay for lottery operations.  Nationally, almost two-thirds of total ticket sales revenue is paid out in prizes, and the remainder (4 percent) is used to pay for the administrative costs associated with running a lottery. 

In each of the 42 current lottery states, this cost break out varies from the national averages.  The following chart shows lottery sales, costs and revenue in both amounts and percentages by state.

Prizes and Administration

Lotteries in Rhode Island and South Dakota are the most generous in prize payouts, each dedicating more than 78 percent of their ticket revenue to lottery game winners in 2006.  Lotteries in Massachusetts, Oregon and Minnesota each paid out more than 70 percent of total sales revenue in prizes that same year, also above the national average of 65 percent.

Lotteries in North Dakota and Iowa dedicate the lowest percentages of sales revenue to prizes—52 percent and 53 percent, respectively.

Administrative costs are largely determined by advertising and salaries.  Administrative costs are highest for lotteries in Montana and South Dakota—19 percent and 16 percent respectively of total sales revenue going towards operations in these states.  Other states spending above the national average on administrative costs are New Mexico, Iowa Nebraska and Kansas—all dedicating more than 10 percent of their lottery sales revenue to administration.

Rhode Island pays the smallest share of sales revenue to run the lottery—0.5 percent in 2006.  Delaware also pays much less than the average state in administrative costs—1.1 percent of ticket sales.

Proceeds

On average, states received 31.5 percent of the revenue from lottery ticket sales as final proceeds.  In some states the amount is much larger.   The lottery in Delaware transferred 44 percent of the revenue generated from ticket sales to the state treasury as net proceeds in 2006.  West Virginia was a close second in net proceeds shares, receiving 42 percent of ticket sales.  California, Louisiana, New Jersey and Oklahoma also received significantly large shares of ticket sales in 2006—each around 36 percent of total sales as proceeds to the state.

Proceeds as a share of total lottery revenue were lowest in South Dakota, Rhode Island and Massachusetts where around 21 percent of ticket sales were transferred to the state as net proceeds in 2006.  These states are also among those with the highest percentages of payouts in prizes.