TIM O'BRIEN, guest anchor: State lotteries have been around for decades. Forty-two states now have them. More than half of those earmark some or all of the lottery money for public education. But critics say they exploit the poor. We take a look at one particularly controversial lottery in Texas. Lucky Severson reports.

LUCKY SEVERSON: Even though lottery sales nationwide have been steadily declining for the past decade, states like Texas have devised ingenious ways to boost the overall lottery revenue. One that's been a big hit is known as the scratch-off ticket. What appeals to people about these scratch-off tickets is that you don't have to wait for a drawing. You simply scratch the latex off and you know instantly whether you've won or lost. Rob Kohler, a lottery expert, says the scratch-off tickets are a big hit for one reason.

ROB KOHLER (Private Consultant): It's an impulse purchase with immediate gratification, and anytime you're able to raise the price of that impulse and, you know, it's no secret it's going to work.

SEVERSON: And that is exactly what the Texas Lottery Commission did last spring -- introduced a new ticket that cost $50, the most expensive scratch-off ticket in the country.

Mr. KOHLER: You've got six one-million dollar, you've got 20 $50,000 -- all the way down to a $50-prize for the winner. What a person sees is winning $5 million instantly, and the overall odds of winning that $5 million instantly is one out of 1.2 million. The odds are astronomical.

SEVERSON: Bobby Heith, spokesman for the Texas Lottery Commission, says the pros and cons of the $50 ticket were thoroughly researched.

BOBBY HEITH (Spokesman, Texas Lottery Commission): We're a state agency, and even though our mission is to generate as much revenue as possible, we have to do it in a responsible manner. We're always looking at new games to introduce that the players would like and to make them fun and entertaining. The $50 instant ticket was something that no one else had ever done.

SEVERSON: Suzii Paynter is with the Baptist General Convention of Texas, which has been opposing the lottery for years.

SUZII PAYNTER (Director, Texas Christian Life Commission, Baptist General Convention): Chance and luck and, you know, playing for prizes, and all that is a part of human nature. It can be very benign. But when you see it turned into an enterprise that becomes predatory, dishonest, unethical, where there's millions of dollars in lobby money poured into it, and you see the impact in terms of addiction and bankruptcy, you have to ask yourself the question when did this cross the line from fun and games?

SEVERSON: The $50 ticket was an instant success, generating $137 million in the first seven months. Although the publicly stated reason for the $50 ticket was to entice higher income buyers, it hasn't worked out that way. Independent studies show that's not the well-to-do who are buying. Rob Kohler was with the Texas Lottery Commission for 12 years. He is now a vocal opponent of the $50 scratch-off.

Mr. KOHLER: What our data shows is that in these areas where the sales are coming from that the percentage of folks on public assistance is high.

SEVERSON: Dora Galvan says a small number of lottery buyers purchase a majority of tickets.

(to Dora Galvan): What kind of people are buying these?

DORA GALVAN: All kinds.

SEVERSON: I mean rich, poor, every kind?

Ms. GALVIN: Mostly poor.

SEVERSON: The Lottery Commission's own studies found that $50 ticket sales were stronger in low-income areas than in high-income neighborhoods.

Mr. HEITH: We, again, conduct a demographic study every year, and that's what it's been showing for years.

SEVERSON: Puts you on the hot seat, doesn't it?

Mr. HEITH: Well, you have to take those things into consideration, and there are statutes. We can't, I think it says -- we can't unduly influence. We have to be very careful that we're never viewed as somebody targeting a low-income or even a high-income or any group other than the people that play the lottery.

Mr. KOHLER: I never saw anything that showed we were targeting poor folks. I don't believe that today, but there comes a point where the outcome -- the outcome is what it is whether you were intending it to be that or not.

SEVERSON: The findings here in Texas confirm those of a nationwide study of lottery ticket buyers. The study in 1999, the most recent available, found that families earning less than $25,000 a year spent three times as much money on lottery tickets as those earning more than $50,000 a year.

Mr. KOHLER: What I hear often is, "Rob, it's a tax on stupidity. You know what? If these folks, if these folks aren't doing the lottery, they're going to be doing something else stupid. And so why do you care?"

SEVERSON: Lottery critics say bettors like Clye Sutton probably shouldn't be playing in the first place if they don't know when to stop. Sutton just bought a $50 ticket.

(to Mr. Sutton): What did you get?

Mr. SUTTON: Seventy.

SEVERSON: Well, you did OK.

Mr. SUTTON: Yeah.

SEVERSON: Have you done the $50 before?

Mr. SUTTON: Yes, I have.

SEVERSON: How are you doing overall?

Mr. SUTTON: Not too good.

SEVERSON: He won on the first try, then went back for more.

Mr. SUTTON: This one's 50 and this one's 20. Yeah, it's a little harder to play when you really need the money. But I try to set aside every couple of weeks.

SEVERSON: He lost the second time, then tried one more, lost again and went home $70 poorer. Lottery tickets in Texas are commonly sold in markets and convenience stores like this one, which happens to be one of the top-selling lottery outlets in the state. Just the day before, the proprietors here had netted $200 from lottery commissions the day before.

(speaking to store proprietors): I almost get the impression from listening to you guys that you enjoy this?

STORE PROPRIETOR #1: Oh yeah, it's a fun game.

STORE PROPRIETOR #2: It's fun for us. It's fun for them, too.

STORE PROPRIETOR #1: We love to do it.

SEVERSON: If they lose, that's not fun?

STORE PROPRIETOR #1: That's not fun, yeah.

STORE PROPRIETOR #2: But they try for $10 million.

STORE PROPRIETOR #1: They try for $10 million. There's a rule, you know: if you don't play, you don't win.

SEVERSON: Yvonne Pingleton may or may not have the extra money to buy the $50 scratch off. She loses more than she dares tell her husband.

(to Yvonne Pingleton): Have you ever done the $50?

YVONNE PINGLETON: Yes.

SEVERSON: Really?

Ms. PINGLETON: Plenty of times.

SEVERSON: Plenty of times?

Ms. PINGLETON: Yes.

SEVERSON: And have you won?

Ms. PINGLETON: I've won $500 a couple of times, but I've spent 10 times more than that.

SEVERSON: So you do the lottery quite a lot?

Ms. PINGLETON: I do too much.

SEVERSON: Like once a day, once a week?

Ms. PINGLETON: Once a day, yeah.

SEVERSON: Once a day? Well, that can be very expensive.

Ms. PINGLETON: Yes, I'm trying to stop.

SEVERSON: Lottery proponents argue that revenue from ticket sales saves taxpayers money. In Texas, the lottery boasts that it has contributed $10 billion to education since 1997.

(to Ms. Paynter): It's helped education in this state over the years, hasn't it?

Ms. PAYNTER: Oh, it contributes money to education. For every dollar they put in, they take a dollar out of the general budget and give it to something else, so it's never really raised the level of money for education.

Mr. KOHLER: That $10 billion hasn't purchased any book or pencil for our kids that wouldn't have already been purchased if we didn't have a lottery.

SEVERSON: Critics are also upset that Texas legislators, looking to save money, cut the funding for the gambling addiction help line that was once prominent on every lottery ticket.

Ms. PAYNTER: They had plenty of money to do $30 million worth of advertising, but not a few hundred thousands dollars for addiction help. There you have it.

SEVERSON (to Mr. Heith): They took the 800 help line number off. Why would they do that?

Mr. HEITH: I don't know. That's been several sessions ago that they discontinued the funding for that help line. All of my talks to community organizations end with "play responsibly." And at the end of this interview where you'd say, "Is there anything you want to add?" I would say that: Play responsibly. It only takes one ticket to win.

SEVERSON: He says the commission listens to the critics, but it's the legislature that makes the decisions.

Mr. HEITH: We are governed by the legislature. If they wanted to change the way we do business, of course, obviously we would. We operate under very strict guidelines set forth by statute, and of course they can change those at any point. They can even pass a referendum and put it before the voters of Texas whether they even want a lottery.

Ms. PAYNTER: The church has watched the state get into the business of sort of cannibalizing its own citizens, and we don't think that's good. I think morally and ethically we're looking at what creates a good society. How do we contribute to the common good?

STORE PROPRIETOR #1 (speaking to customers): All right, try your luck. Try your luck.

SEVERSON: Some say all the bad publicity about the $50 ticket could signal the end of the Texas lottery, but that seems unlikely.

STORE PROPRIETOR #1: Try that one -- million dollars.

UNIDENTIFIED WOMAN: What if I don't win nothing? I'm going to play. I'm going to win.

SEVERSON: Other states are now looking at the $50 ticket. Meanwhile, Texas is looking at something even bigger -- a scratch-off ticket that costs $100.

For RELIGION & ETHICS NEWSWEEKLY, I'm Lucky Severson in Austin, Texas.