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The pitfalls of Powerball: Why some states are on the losing end of the lottery system

Wednesday's Powerball jackpot has spiked to more than $450 million and is likely to grow. The prize is expected to boost sales this week, but ticket buying has reportedly dropped 35 percent since 2013, which is putting state budgets on the losing end of the lottery system. Ben Leubsdorf of The Wall Street Journal joins Alison Stewart from Washington to discuss the pitfalls of Powerball.

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  • ALISON STEWART, PBS ANCHOR:

    This Wednesday’s Powerball jackpot has already spiked to more than $450 million and will probably grow over the next couple of days.

    The huge prize is expected to boost sales this week, but ticket-buying has reportedly dropped 35 percent since 2013. And that’s putting state budgets on the losing end of the lottery system.

    Joining me now from Washington, D.C., to talk about the pitfalls of Powerball is Ben Leubsdorf with The Wall Street Journal.

    So, Ben, here’s the obvious question. Why the decline in participants?

  • BEN LEUBSDORF, The Wall Street Journal:

    Well, this is the biggest jackpot we have seen since December 2013 for any lottery game.

    And that’s why people aren’t buying tickets. People buy tickets, they get office pools, they — people come off the sidelines who aren’t regular players when you have a big, eye-popping jackpot like this. And we haven’t had one in a while.

    That’s the main reason that Powerball sales dropped 35 percent in 2014 from the prior year. In 2013, 2012, we had this string of really big jackpots for Mega Millions and for Powerball. And that got people playing the game.

    Now, when we haven’t had those big numbers, people haven’t been as impressed with an $80 million jackpot as they are with something above $200 million, above $300 million.

  • ALISON STEWART:

    So, explain to me how that directly results in state budgets having a problem.

  • BEN LEUBSDORF:

    Well, 44 states rely on lottery revenue as part of their revenue picture. And that’s — it’s not the biggest part of their revenue structure. Taxes, federal grants, those are still the big parts. But they rely on this money in order to, in many cases, pay for education or other expenses.

    So, when you have a big reduction in Powerball playing, you have got state lotteries saying, well, we have got to make up that revenue somehow. So, some states, Virginia in particular, has tweaked their scheduled to roll out more scratch-off games, instant win games to make that up lost revenue to make sure that they don’t have a shortfall when it comes to — time to settle the budget.

  • ALISON STEWART:

    So, if you can’t count on participants in the lottery, why do states have this as part of their budget portfolio?

  • BEN LEUBSDORF:

    Well, you know, it’s, by its nature, a random chance that — these drawings are pretty random.

    So, when we had the hot streak in 2012, 2013, states were — states were raking in a lot of revenue. Now we have had a dry streak for a while, and they haven’t been seeing it. But I think most officials aren’t too worried that this is going to continue. This could be the beginning of another string of big jackpots.

  • ALISON STEWART:

    It has been serious for certain states. Arkansas, for example, had one scholarship program that had a $5 million deficit.

    Is there anything that states can do to prevent this from happening to them?

  • BEN LEUBSDORF:

    Well, some states are very conservative in their revenue estimates.

    I spoke to the head of the North Carolina lottery, who says that they budget for — they assume that they’re going to have the standard number of players. They don’t count on a big jackpot to bring in lots of new players. If they do, she said, that’s gravy, that’s great for them. But they’re not going to be in trouble, she said, if they don’t have big jackpots materialize.

  • ALISON STEWART:

    Ben Leubsdorf from The Wall Street Journal, thanks so much.

  • BEN LEUBSDORF:

    Thank you.

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