Nation's state lotteries face economic, political squeeze

WASHINGTON -- After decades of remarkable growth, lottery sales are slipping because of competition from video gambling and casinos. For all the publicity surrounding winners of the biggest jackpots, 15 states recorded lower sales last year than in 1996.

Lotteries have been around longer than the American flag. In fact, the Virginia Company of London launched raffles in 1612 to raise money for the English colony in Jamestown. But King James I banned them nine years later.

For the most part, lotteries have flourished in this country since the late 1960s; 37 states and the District of Columbia now have them. Earlier this month, a Massachusetts babysitter won $197 million in the Big Game, the largest undivided pot ever. But 17 of the lotteries reported decreased sales in 1997, and 10 were down last year compared to 1997. Hailed as a pain-free alternative to taxes and derided as government-sponsored vice, lotteries are feeling the squeeze of market and political forces. Overall ticket sales grew by only 0.4 percent last year, the smallest increase since states introduced lotteries three decades ago, according to LaFleur's Lottery World, which tracks such statistics. Meanwhile, a national panel on gambling appears poised to call for restrictions on the types of innovation and promotion that states can use to pull their lotteries out of the doldrums. "It is a difficult time," said Terri LaFleur, who publishes the magazine that carries her name. "Sales are beginning to mature in a number of states, but many lotteries are not allowed to expand. As a result of other gambling opportunities out there -- casinos, video gaming machines at racetracks -- there is a lot of competition for gambling dollars." Nonexistent in the United States as recently as 1963, state lotteries had mushroomed into a $36 billion business by last year. The states and the nation's capital netted $12 billion last year and new lotteries are under consideration in Alabama, North Carolina, South Carolina and Tennessee. However, there are signs that public interest is waning as states try to squeeze more profit out of the games. In Louisiana, for instance, lottery sales dropped for four straight years before rebounding in 1998. In Texas, sales dropped from $3.76 billion in 1997 to $3.1 billion in 1998. Lottery officials blame a 1997 legislative change that cut the prize payout on scratch- off games to increase the state's profit. David B. Gale, executive director of the North American Association of State and Provincial Lotteries, attributes slumping sales in part to "jackpot fatigue." In 1984, when he was marketing director for the Ohio Lottery, "everybody went crazy for a $1 million jackpot, including the media," he said. "Today, it seems there is a threshold out there of about $20-25 million when the players become interested in the games and the media gets interested in covering it." Lotteries have responded by joining forces to create multistate games like Powerball, which last year awarded a record $295.7 million jackpot to a group of machinists from Ohio, and the Big Game. State lotteries are trying to broaden their appeal in other ways. Delaware, Oregon, Rhode Island, South Dakota and West Virginia have entered the booming field of "video lottery," which commonly takes the form of video poker or slot machines. And scratch-off games are getting new themes and creative prizes. But further efforts to boost slumping sales could be hindered by the National Gambling Impact Study Commission, which is to release a report in June. Commission members say they were struck by the findings of Duke University professors Charles Clotfelter and Philip Cook, authors of a 1989 book on lotteries called Selling Hope. Their study found that 5 percent of lottery players account for 51 percent of sales and spend an average of $3,500 a year on tickets. The commission may discourage lotteries from offering "casino-type activities" such as video poker and urge them to tone down advertising pitches. "My greatest concern about the lottery is that it preys on the desperation of the poor, maybe more than any other form of gambling," said commission member James Dobson, president of Focus on the Family. States and their lotteries are taking steps to polish their image. Responding to complaints about overly aggressive marketing, Connecticut lawmakers agreed recently to remove more than 200 lottery vending machines from supermarkets and other stores.

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