Last summer, we did an analysis of state-by-state comparisons for what a lottery would generate.
In Governor Bryant’s media gaggle this morning, he was asked about how much a new lottery would provide. His answer was $80 million once it got up to speed (likely in calendar year 2020).
From our article last year where we estimated some lottery return scenarios . . .
Math is undefeated, so let’s look at it. Here’s a list of lottery revenues nationwide. Let’s look at our peer states of Louisiana, Arkansas and Tennessee. Louisiana, with a population of 4.65 million had receipts of about $351 million and a net benefit to the state of $131 million (a 37% payout). Arkansas, with a population of 3 million, had receipts of $362 million and a payout of $81 million (a 22% payout). Tennessee, with a population of 6.5 million, had receipts of $1 billion and a payout of $325 million (a 30% payout).
Mississippi has a population of 3 million. Let’s just say that every man, woman and child in Mississippi spent $75/year (a staggering sum when you think about it) on the lottery. That would yield gross lottery receipts of $225,000,000. Most lotteries offer about 62% payouts in prizes and average about 8% in administration. So that leaves and average take for the state of about 30%. That number in Mississippi would be $67.5M.
But remember, the $225M that was spent on lottery tickets wasn’t spent on consumer good subject to sales tax. So we have to remove most of that out of the sales tax equation. Mississippi’s sales tax collections is about $2.1 billion. So let’s, for argument’s sake, deduct $200M from what would be subject to Mississippi’s 7% sales tax. That’s $14M that won’t go to state and local governments as a result of the lottery. That should get backed out of the $67.5 million of “new revenue”.
Given that in the above mentioned example, Arkansas is showing gross lottery revenue of $120/resident in Arkansas (which again seems to be a staggering sum), the $80 million math that budget planners are using could seem to hold water.
At a 30% payout, Mississippi would need to gross about $265 million annually in lottery participation annually.