POWERBALL AND OTHER MULTI-STATE LOTTERIES

(Excerpted from True Odds by James Walsh, Merritt Publishing, 1996, Santa Monica, CA. 1-800-638-7597.) Reprinted with permission of Merritt Publishing. All rights reserved.

Powerball is an interstate lottery designed to make money for small states by offering jackpots larger than their lotteries could alone. Sixteen states and the District of Columbia participate in the program, which is based in Iowa. In 1994, sales of $1 Powerball tickets were $850 million.

The game is a slight variation on the Lotto standard. It requires players to pick five numbers from 1 to 45 and then to pick one number--the Powerball--from 1 to 45. Players can choose the numbers themselves or have the computer do it for them.

The odds of winning something from Powerball are one in 35. In addition to picking all six numbers, there are eight other ways to collect prizes from $1 to $100,000.

In 1994, as drawing after drawing went by without a winner and the jackpot climbed higher, the lines to buy Powerball tickets stretched out the doors of some stores, even though the odds of winning the jackpot were nearly 1 in 55 million.

A Wisconsin couple claimed the record jackpot--$111 million. It was one of 13 multimillion-dollar jackpots claimed in 1994, each to be collected in 20 annual payments--with the federal government deducting 28 percent for income tax.

The first payment is made in cash. Then Powerball management takes what is left in the fund and buys U.S. Zero Coupon Treasury Bonds or other securities guaranteed by the federal government.

In 1995, securities that mature with a value of $1 million in a year cost about $957,000; those with a value of $1 million in 19 years--the final Powerball payment--cost about $225,000.

As in state lotteries, only half of every $1 Powerball sale is used for prizes. About 30 cents of that goes on the jackpot to buy securities and about 20 cents goes to cash prizes.

Each member state keeps the other 50 cents from every Powerball ticket sold within its borders.

That is used to pay retailers a commission and other costs, such as advertising.

Powerball has worked well enough that it has attracted competition. In March 1995, two days after the multistate Powerball lottery yielded a $101.8 million jackpot, the Coeur d'Alene Tribe of Idaho announced an ambitious lottery that could generate far larger payoffs as it links players in up to 36 states.

The Tribe hopes to offer its game in all 36 states, as well as the District of Columbia, that run lotteries.

The National Indian Lottery would permit players to call a toll-free number to set up an account, registering with a credit card and receiving a password and personal identification number. They could then call and make $5 minimum purchases, picking six out of 49 numbers at $1 a game.

Jackpots for the Saturday night drawings would be paid in lump sums; states spread the big winnings over many years. Taxes would be withdrawn before pay-outs, which would be mailed as certified checks.

The Tribe said that the jackpot probably would start at $50 million or more, and that subsequent payoffs could hit $200 million.

Normally 50 percent of the amount wagered would be returned in prizes. Players matching three or more numbers would be awarded prizes. The odds of matching all six numbers and winning the grand prize are 1 in 14 million.

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