Virginia Lottery

Don't Like Tolls? Take A Chance On This Idea

Governor Bob McDonnell and his Transportation Secretary, Sean Connaughton, lit up a firestorm across the commonwealth this week with an outline of a plan, via the Federal Highway Administration, to toll up Interstate 95 (see Jim Bacon at Bacon's Rebellion). We suspect the debate will get more vociferous on the policy — but more so on the political — side as the plan gets fleshed out fully and presented to the public. Transportation is the perennial issue in the Old Dominion. I still remember Wyatt Durrette campaigning in 1985 about how he was going to improve the roads in Northern Virginia. It's basically the Chicago Cubs of state policy: wait until next year. Why wait? When news broke, I immediately thought of the novel idea I proposed here three-and-a-half years ago that got some attention among blogs and even some members of the General Assembly. It's, speaking of sports, a win-win, no losers approach that can save all of the heartburn of another tax increase vs. tolling vs. so-called "user fee" debate.

This proposal does not increase taxes, spares drivers the ignominy of stopping to pay for the right to delay their commutes further, and will go a long way toward funding the road improvements we all desire — all while having fun and getting entertained in the process. Sound impossible? Hardly. It's one of the easiest solutions imaginable: Double the cost per lottery ticket.

Right now, all Virginia Lottery proceeds, by law, go toward education. However, if ticket prices were doubled, and the law was changed to split the revenue for transportation, education would lose none of its funding and wed have some case for roads. It has all the hallmarks of both the left and the right: it is a voluntary tax (conservative) and spreads the wealth around (liberal). How much more of a harmonious fix could there be?

Here's the original post, spelling out how it would work, from April 28, 2008:

We’re quite distressed the G.A., the Guvna, the transportation bureaucracy, the N.Va. developers and other special interests have gotten their knickers in a twist the last few years over the impending doom the Old Dominion’s woeful road situation is soon to pour down on us. Seems they’re all in a spot of bother over this Armageddon.

What’s the fuss? We have a simple answer.

We need money, right? Lots of it. That’s the only way to fix our transportation problems, or so we’re told. One side persistently wants to raise taxes. Another side says no (sometimes, kinda). Still others have made noise about legalizing new types of gambling and throwing that “voluntary tax” revenue to solve our transportation problems. Rumors floating around Capitol Square today are that this third group will hit the coming special session with more momentum.

Why go through all of that hassle? We already have mechanism in place. It just needs a bit of fine tuning.

The lottery was passed on the philosophy that it was a voluntary tax — only those who wanted to pay for it would pay it. (Actually, there’s a space on your Virginia Income Tax form to pay extra taxes voluntarily, but those preaching the need for more state taxes never lead by example.) So we have a lottery. Problem is, its revenues are limited to education funding.

Here’s the simple answer:

Double the cost on all lottery tickets. Amend the law so that 50 percent of all lottery revenue goes to transportation. Problem solved. Education money is not touched. Transportation gets its new revenue stream. Taxes are not raised but on those who wish to pay them. Say what? Higher prices may discourage people from buying lottery tickets? Or create an unfair burden? But somehow tax increases on necessities do not increase prices or are not burdensome?

Bingo! (Speaking of the devil, that’s another option.)

Even Greater Odds

If the last post wasn't prescient enough, how about this? On June 12th, we wrote about Washington and Lee Business Professor Scott Hoover who announced he was filing a law suit against the Virginia Lottery because it sells scratch off tickets even after the top prizes are won, but without notifying the public. Last Friday, Dr. Hoover filed his lawsuit, seeking an $85 million refund for those who have bought scratch off tickets without any chance at all of winning the top prize (read entire Richmond Times-Dispatch article here). According to the T-D, his suit contends that the Virginia Lottery:

". . . markets and designs these tickets so that they all focus upon the top prize and promises the purchaser some chance to win it," but, over the past five years, "the lottery has regularly refused to pull tickets from at least 60 game orders after the final prize has been claimed," according to the suit filed by Roanoke lawyer John Fishwick Jr. on Hoover's behalf. (Emphasis added.)

Coincidence, serendipity, prescience by us or what, the business day after Dr. Hoover filed his suit in Richmond Circuit Court came word that New Jersey is doing the same thing! (Click here for USA Today article.) 

We're shocked! You mean there's corruption in state sponsored gambling in the land of Tony Soprano? According to the article, people paying $20 per ticket for the Garden State's "$1,000,000 Explosion" today have "Z-E-R-O . . . chance of winning the $1 million top prize" but the New Jersey Lottery will continue to sell these game tickets even though "the game won't end until July 21." (Emphasis added.)

In fact, according to USA Today:

The six top prizes were awarded months ago, but the $20 tickets are still on sale. The best prize available today is $10,000.

About half of the 42 states that have lotteries — including Florida, New Jersey, Michigan and Tennessee — keep selling tickets after the top prizes are gone. (Emphasis added.) The states say the practice is fair because lottery tickets and websites disclose the practice. Also, other prizes are available.

Sales of scratch-off lottery tickets have soared since the introduction of high-priced tickets designed to have huge jackpots — $1 million or more is common — that can be won instantly.

Governments are by their nature inefficient. To let them run gambling operations risks running that inefficiency into something still worse. That worse is what we now see in several states — including Virginia — an arrogance of purposely deceiving people, many of whom buy such game tickets on hope as much as cash. Separating unsuspecting people from that hope signals big government at its worst, preying on those it is charged with serving. Rather, we see governments and their desire to be served. 

Poll: What Do You Think Should Happen At The Special Tax Session?

We all know what the governor and many legislators want to happen at The Special Tax Session starting June 23. But what do you think should happen? Then, after you vote, post your solutions, ideas and comments on this thread. Who knows? Maybe somebody in the General Assembly will like what you think. Remember our lottery idea? If you are creative enough, anything is possible. Voting ends June 25.

What Are The Odds?

What are the odds the Virginia Lottery has not been square its fellow Virginians on the actual odds of winning its scratch-off games? Scott Hoover, a Washington & Lee University business statistics professor, says at least even money. Hoover is suing the state gambling agency for refunds of $84.7 million for continuing to sell "scratcher" instant lottery tickets even when the top prize tickets get sold out (click here for an AP report on his suit). By law, The Lottery Department must publish the odds of winning for all of its games. Unlike the lotto games, where on the number of people who can select the winning numbers, the scratcher games are printed with a finite number of winners per batch. When a grand prize is won, those odds get steeper, yet the original published odds stay the same.

Hoover gives the "Beginner's Luck" scratcher game from last summer as an example. It had six grand prizes of $75,000. But when the last grand prize was sold on July 24, it continued to sell the tickets — 241,000 of them to be exact. Hoover knows this from his own investigation — he tracked the payouts from the game on the Lottery Department's Web site and received information from the department via a Freedom of Information Act request. In essence, the Lottery Department was sanctioning, according to Hoover, the selling of tickets in which the already infinitesimal odds of winning were reduced to absolute impossible because there were no more grand prizes left! In other words, a shell game!

The galling thing is, if all true, is that the Lottery orders new batches of the scratchers with the same original odds when the grand prizes are claimed. But instead of scrapping the remaining tickets and substituting the new batch, it continues to sell the old tickets to suck money out of unsuspecting and hopeful participants while the potential winning tickets are sitting in boxes!

This isn't like the two clowns on the classic television series Gunsmoke who couldn't figure their way out of a paper bag. By Hoover's analysis, the Lottery Department sold 36.8 million tickets after the grand prizes were gone in more than 47 scratch-off games since 2003. In his suit, Hoover asks not only for the refunded money, but that the Lottery Department be barred from selling "defective" tickets in the future.

If the professor is correct about all this, it will have implications beyond this particular form of state-sponsored gambling. There are many in the General Assembly who are hoping the impasse over tax increases for transportation and the thirst for more money will lead to their solution: The expansion of state-sponsored gambling in the form of "historical" horse racing — basically, video slots for horse racing.

We don't know what their odds of success will be. But the way the Lottery has been apparently fooling us all these years, don't think defeating it will be a sure bet.