Powerball To Dump Illinois Over "Lack Of Budget"

Tyler Durden's picture

As if Illinois didn't have enough to worry about between an imminent downgrade to junk (as soon as July 1), soaring debt costs, insolvent pension funds, and roads that may soon resemble the lunar surface, today in the latest insult to a relentless series of injuries, the lottery itself is about to dump Illinois.

According to the Sun Times, the Multi-State Lottery Association, the organization that runs the Powerball lottery and Mega Millions games, will drop Illinois at the end of June without a budget agreement. Since Illinois has been unable to compromise on a budget for the past two years, and not even the threat of being the first US state in history of being "junked" has prompted a compromise, it most likely means that Illinois resident have just two more weeks of "get rich quick" opportunities, before they are cut off from the rest of America.

Speaking on Thursday, Illinois Lottery spokesman Jason Schaumburg confirmed that the games will be dropped without a state budget. He said the association has had discussions since 2015 about dropping Illinois, but this is the first time the group has taken action. He called it “another example of why the General Assembly needs to deliver a balanced budget to the governor." Alas, if the recent surge in Illinois GO debt yields...

.... or the threat of a default in the face of almost $15 billion in unpaid bills has failed to convinced the General Assembly, we doubt this will.

Its unfortunate. Powerball was the only thing that I would buy, because I knew that it would pay out,” said Anthony Martinez, who lives in the Logan Square neighborhood. “With the Illinois budget crisis, it’s not a guarantee that Illinois’ going to actually pay out on your lottery winnings.”

According to the Sun Times, the state reported $99.4 million in Mega Millions sales and $208 million in Powerball sales within the 2016 budget year. It’s unclear how much revenue the state got from the sale of those tickets.

The Multi-State Lottery Association is a non-profit, government-benefit association owned and operated by its 36 member lotteries. All profits are retained by the state lottery and are used to fund projects approved by the state legislatures, according to the association. The Illinois Lottery isn’t part of the association.

Powerball is offered in 44 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Mega Millions is offered in 44 states, along with the District of Columbia and the U.S. Virgin Islands.

Then again, removing the temptation of some of the high-profile lottery games is “not necessarily a terrible thing." Woodlawn resident Shaneen Murray said many people waste money on the lottery that they probably could be spending on other things.

“Maybe people can save money, or put their money toward something better,” she said. And, as we explained previously, she is absolutely correct.

As we explained in January 2016, the Powerball and various other state lotteries are nothing but a tax, if entirely voluntary, on America's poor.

The full explanation is below:

Why The Powerball Jackpot Is Nothing But Another Tax On America's Poor

What Seems To Be Is Always Better than Nothing

Summary: American adults spent an average of $251 on lottery tickets.  With a return of 53 cents on the dollar, this means the average person threw away $118 on unsuccessful lotto tickets – not a great investment.  So why are we spending so much?  Well, lotteries are a fun, cheap opportunity to daydream about the possibility of becoming an overnight millionaire (or in this case billionaire), but on the flip side people tend to overestimate the odds of winning.  Lower-income demographics spend a much greater portion of their annual earnings on lottery tickets than do wealthier ones

Since lotteries are state-run, that effectively means that the less affluent pay more in taxes (albeit by choice) than broadly appreciated.  And even winning the lottery doesn’t guarantee financial success.  More than 5% of lottery winners declare bankruptcy within 5 years of taking home the jackpot.  Despite their drawbacks, though, lotteries are no doubt here for the long haul – in states that have lotteries, an average of 11% of their total revenues come from lottery ticket sales, and the number is even as high as 36% in 2 states (West Virginia and Michigan).
 
Consider the following credit-card-advertisement style sequence of statistics:

  • Lottery ticket sales in the US in 2010:  $59 billion
  • Average spending per person:  $191
  • Average spending per adult:  $251
  • Chance at hitting the jackpot:  (Apparently) priceless.

I have never bought a lottery ticket and honestly don’t even know how.  And as far as I’m aware, I don’t know anyone who spends north of 200 bucks a year playing the lotto.  The only lottery my friends play is the NYC marathon lottery, where they’re gambling for maybe a 1 in 13 chance to fork over $255 for the privilege of slugging out 26 miles through the city’s streets.  Not quite hitting the jackpot in most people’s minds. 
 
But someone, somewhere is buying all those tickets.  In Massachusetts, where the lottery is more popular than in any other state, people spend an average of $634 a year on Mega Millions, Powerball and the like.  Delaware comes in at number 2 with $504 spent per person, while Rhode Island ($469), West Virginia ($388) and New York ($357) round out the top 5.  North Dakota brings up the rear with per capita lottery spending of $34.  You can see the full list in the table following the text. 
 
It’s difficult to pinpoint exactly who is investing so much money in a product that provides poor returns, but numerous studies show that lower-income people spend a much greater proportion of their earnings on lotteries than do wealthier people.  One figure suggests that households making less than $13,000 a year spend a full 9 percent of their income on lotteries.  This of course makes no sense – poor people should be the least willing to waste their hard-earned cash on games with such terrible odds of winning. (http://www.dailyfinance.com/2010/05/31/poor-people-spend-9-of-income-on-...).
 
Why bother?  Well, one answer is obvious enough and applies to just about everyone who plays.  For a buck (now $2 for Powerball) we have a cheap opportunity to daydream what could happen if we suddenly won millions of dollars.  But lotteries return 53 cents to the dollar.  So why are poor people irrationally buying tickets when the probability of winning is so slim?  One study by a team of Carnegie Mellon University behavioral economists (Haisley, Mostafa and Loewenstein) suggests it isn’t being poor but rather feeling poor that compels people to purchase lotto tickets.
 
By influencing participants’ perceptions of their relative wealth, the researchers found that people who felt poor bought almost two times as many lottery tickets as those who were made to feel more affluent.  Here’s how they did it:

  • Participants were asked to complete a survey that included an item on annual income.  One group was asked to provide its income on a scale that began at “less than $100,000” and went up from there in increments of $100,000.  It was designed so that most respondents would be in the lowest category and therefore feel poor. 
  • The other group, made to feel subjectively wealthier, was asked to report income on a scale that began with “less than $10,000” and increased in $10,000 increments.  Therefore most participants were in a middle or upper tier.
  • All participants were paid $5 for participating in the survey and given the chance to buy up to 5 $1 scratch-off lottery tickets.  The group who felt wealthier bought 0.67 tickets on average, compared with 1.27 tickets for the group who felt poor.

Lotteries essentially target and encourage lower-income individuals into a cycle that directly prevents them from improving their financial status and leverages their desire to escape poverty.  Yes, that’s a bit harsh, and yes, people have the right to make their own decisions.  Even bad ones…  Also, many people tend to significantly overestimate the odds of winning because we tend to assess the likelihood of an event occurring based on how frequently we hear about it happening.  The technical name for this is the Availability Heuristic, which means the more we hear about big winners in the press, the less uncommon a big payday begins to seem.   
 
Not that hitting the jackpot is guaranteed to substantially improve the winner’s life.  Economists at the University of Kentucky, University of Pittsburgh and Vanderbilt University collected data from 35,000 lottery winners of up to $150,000 in Florida’s Fantasy 5 lottery from 1993 to 2002.  Their findings are as follows:

  • More than 1,900 winners declared bankruptcy within 5 years, implying that 1% of Florida lottery players (both winners and losers) go bankrupt in any given year, which is about twice the rate for the broader population.
  • “Big” lottery winners, those awarded between $50,000 and $150,000 were half as likely as smaller winners to go bankrupt within 2 years of their win, however equally likely to go bankrupt 3 to 5 years after.
  • 5.5% of lottery winners declared bankruptcy within 5 years of bringing home the jackpot.
  • The average award for the big winners was $65,000 – more than enough to pay off the $49,000 in unsecured debt of the most financially distressed winners.

Lottery players tend to have below-average incomes, so they are probably less accustomed to budgeting when they receive a windfall.  There’s also a psychological term called Mental Accounting that explains how people might treat their winnings less cautiously than money they’ve worked for.  Money has come into their possession through luck, which similar to bonus payments, often induces an urge to purchase unnecessary items.
 
But whether you think state lotteries are awful or great, there’s another word for them: essentialIn both West Virginia and Michigan, for example, lottery sales accounted for 36% of total state revenues in fiscal year 2010, and on average state with lotteries take in 11% of total revenues in the form of lotto ticket sales.  We’ve included the full list in a table following the text.  There are still 7 states that don’t have their own lottery systems, so the national average would be lower. 
 
A couple of closing thoughts on what this all means:

  • Don’t make investment decisions when you are feeling poor.  The study we cited earlier clearly shows that you are likely to buy more “lottery tickets” (think of that as a metaphor for any long shot investment) when you feel less affluent than those around you.
  • Lower income individuals likely pay more in “Taxes” than most economic commentators realize.  Assuming that the 80/20 rule applies to lottery participation, the bulk of that $59 billion in annual receipts likely comes from 20-25 million less affluent households.  That would be about $47 billion from this demographic, or roughly $2,400 per household.  Yes, I get the notion that this money is handed over in the hope of a payoff.  An ill-advised and mathematically unlikely hope, as it turns out.  But does that mean it doesn’t count as a societal contribution?
  • Maybe the U.S. needs a national lottery.  Yes, these games don’t necessarily encourage the best financial planning among the less affluent.  But there is no denying that playing the lottery is entirely voluntary.  There are probably some anti-gaming factions in government who wouldn’t like this approach, to be sure.  But there’s also no doubt that the Federal budget could use the money.  And, hey, you never know…

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Bloodstock's picture

"So why are poor people irrationally buying tickets when the probability of winning is so slim?  One study by a team of Carnegie Mellon University behavioral economists (Haisley, Mostafa and Loewenstein) suggests it isn’t being poor but rather feeling poor that compels people to purchase lotto tickets."

When the obvious it to obvious, then obviously hacks like these fail to see the forrest for the trees.

For $2, I can buy ONE lottery ticket for a chance to win big. Or I can buy one fair sized organic apple and get 50 cent back. I can't buy a coffee at Starsucks though, can I? Go to a movie? Nada, I need 3 X $2 for a matinee with no popcorn, no apple, no water. Will $2, get me into the zoo? Wait, I live in a zoo, forget that. What can I get for $2, these days? Not much except a bunch of cheap memories with no chance,,,no chance at all of bigger and better things in my life time. THAT'S WHY ASSHOLES! Take you Carnegie Mellon bullshit and shove it inbetween your ears and study that for awhile. Some people!

Boris Gudonov's picture

States lure the poor not only into buying lottery tickets, but also gambling in state-run casinos.  And they give them welfare to do it.  In Maryland, they have EBT cash machines on the "Maryland Live" casino floor.  And many liberals will tell you that it's just fine to give money to the poor so they can gamble in the state-run casino, buy beer, over-taxed cigarettes, lottery tickets, and strippers.  And this on top of the fact that the poor are encouraged to go on disability and get free opiates and other debilitating mood altering drugs courtesy of the prescription drug program.  And all so they can get as many reliable Democratic votes sucking on the public tit.  Actually caring about what they are doing to people?  Fuck that.

 

This whole country is fucked.  It's going to take some kind of massive depression to bring people back to their senses.

Pure Evil's picture

Just preparing the population the Universal Basic Income on the NWO plantation.

montresor's picture

A lot of people really look forward to their lottery ticket..  The old people still treat the lottery as a type of high stakes bingo.. They love to play their family's birthdays, the numbers of their baseball heros, their old military serial numbers, etc..   You guys know any elderly people in your community who play the god damned lottery religiously? For some of them, that lottery ticket might be at or near the top of a very small list of events that will get them out of the house.. Adult children may even use the lottery ticket as a measure of their elderly parent's health.. If dad didn't go get his lottery ticket this week, there might be a problem right? Better check in on him right?  So I feel for all those guys in Illinois that need to drive to the state line for their powerball ticket but it couldn't have happened to a better state..

Bloodstock's picture

"So why are poor people irrationally buying tickets when the probability of winning is so slim?  One study by a team of Carnegie Mellon University behavioral economists (Haisley, Mostafa and Loewenstein) suggests it isn’t being poor but rather feeling poor that compels people to purchase lotto tickets."

When the obvious is too obvious, then obviously hacks like these fail to see the forrest for the trees.

For $2, I can buy ONE lottery ticket for a chance to win big. Or I can buy one fair sized organic apple and get 50 cent back. I can't buy a coffee at Starsucks though, can I? Go to a movie? Nada, I need 3 X $2 for a matinee with no popcorn, no apple, no water. Will $2, get me into the zoo? Wait, I live in a zoo, forget that. What can I get for $2, these days? Not much except a bunch of cheap memories with no chance,,,no chance at all of bigger and better things in my life time. THAT'S WHY ASSHOLES! Take you Carnegie Mellon bullshit and shove it inbetween your ears and study that for awhile. Some people!

power_shift's picture

The lottery dumping the poor is the best thing that has happened to the liquor industry in a long time. That money has to go somewhere!

Herdee's picture

No surprise here. Obama and all his corrupt, overpaid government morons made sure they bankrupted the State. Very similar to Washington. Any job related to anything to do with any level of government has an attitude of entitlement. Overpaid and overpensioned while everybody else is supposed to pay for all these crooks. Obama was brought into power to bust the United States and submit Washington to world socialism and globalisation. Hussein and transvestite Michael, what a pair, even brought the kids in from Morocco while Hussein had questionable citizenship. $ 20 Trillion in the hole and now the deep state wants to remove Trump any way they can.

dexter_morgan's picture

LOL.....peoples republic of Illinois......

SubjectivObject's picture

A while back I would play Texas Two Step.

Had a systmem that consitently gave back 25-30% of bet monies while waiting on a big payout.

(chose all discrete values different for the entire range of numbers, because no number is picked twice in a draw)

And then they changed the rules and the returns went to about 5%

After that it's zero from me.

MisterMousePotato's picture

I must be misunderstanding you. It appears that you're saying that you had a system whereby you gave them a dollar and they, in return, gave you 25 cents and ...

you thought that was a good deal?

Quivering Lip's picture

Just think if the poor took Janet's advice and put that $118 away 20 years ago and added $118 per year. At 5% compounded annually they have a whopping $4400. 

rockstone's picture

You know it's very close to the end when the bookies stop taking your action.

arby63's picture

This is hilarious. I sure hope all the leftists in Illinois are proud of their achievements! Burn baby burn. Feel the Bern Illinois?

83_vf_1100_c's picture

I am impressed by Shaneen. She is quite eloquent given her race. Those sunglasses do make her ass look fat.

The lottery is a stupid tax. Mass seriously pulls in $600 per capita? That can't be right, can it?

EcoJoker's picture

 

It's not a tax.. nobody is forcing these morons from playing.   Poor people choose to be poor. 

Dead Indiana Sky's picture

Just imagine....If only the government cared enough about you and your family enough to mandate lottery ticket purchases, we'd all be rich!!  

Sparehead's picture

There's still Social Security. That's mandated and promisses a big fat prize when you play it your whole life. The odds of young people collecting may even be slighly better than Powerball too.

Boris Gudonov's picture

It's best to think of the lottery as a tax on stupidity, and then it makes a lot more sense.

 

By the way, why aren't lottery tickets a "human right", like health care?  Should we have the "right to hope"?

 

 

 

 

Umh's picture

There seems to be a lot of stupid in Massachusetts.

MrBoompi's picture

Frankly, Illinois residents will be money ahead by not having access to these long-shot lotteries.  

Hongcha's picture

Out of the box, people.  Tens of millions likes to play dat Powerball tang.  My fellow crackers, too!

This is a major opportunity for another company to step in.  JPM would be a natural choice - tie it in with the SNAP cards.

 

Sparehead's picture

Ya, but they're still Illinois residents so they're still fucked.

whatswhat1@yahoo.com's picture

The ultimate worse case scenario:  live in Chicago, County of Cook, State of Illinois.  I've managed to limit my exposure to one out of three.  Any wonder why I despise politicians?  What with almost everyone carrying a mobile device (virtual voting machine), why would anyone need a lying politician to not represent them.

Publicus's picture

You gotta be in to win.

MrSteve's picture

No, the odds of winning are the same whether you buy a ticket or not. Per USA weather stats, you are more likely to be struck by lightning than you are to have a winning lottery ticket. That's what the numbers say.

Publicus's picture

You must not be good at math and is a loser.

Umh's picture

That is taxpayer money buying many of those lottery tickets. "Lottery players tend to have below-average incomes, so they are probably less accustomed to budgeting when they receive a windfall. There’s also a psychological term called Mental Accounting that explains how people might treat their winnings less cautiously than money they’ve worked for." Mental accounting would also explain that they might as well buy a lottery ticket since the money came into their hands from the government to begin with.

JustPrintMoreDuh's picture

Rham should get a raise

Sparehead's picture

Ha, that state's so fucked they can't even manage the voluntary gambler's tax.

johnjkiii's picture

So what? That crap is a tax on the poor and those morons who cannot even figure odds. They could go to the track with no knowledge of horses and take less risk plus have more fun. Even the mob gave better odds on their numbers wheeze than the "State" does.

Bureau of compliance's picture

Lotteries are entirely hackable   https://patch.com/wisconsin/milwaukee/texas-men-charged-wisconsin-megabu...

Anyone have any doubt the usual suspects are skimming and scamming?

Drop-Hammer's picture

Here in Texas, I see mostly blacks and browns buying lottery tickets, most likely with my tax-dollars.  I buy tickets when the jackpots get into nine-figures.  Hey, lightning can strike.

Ms No's picture

I was just thinking about Powerball the other day and wondering how much money is being stolen out of it, in one way or another.