Prop.1C: Modernizing the Lottery

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(Sacramento, CA)
Monday, May 4, 2009

Prop 1C would revamp the lottery in the hopes of increasing revenues.  And it would allow the state to borrow against those revenues to help balance this year’s budget.  But the recession is dragging lottery sales down.  Could the slumping economy impact the measure?


Today’s lottery isn’t just your parents’ scratcher game.
Lottery TV Show: “… Welcome to Make Me a Millionaire from the California Lottery.  One of our 12 lucky players will get a shot at our jackpot …” 
This statewide TV show debuted earlier this year.  And it’s helped the lottery make up some of its losses from more conventional games.
Lottery TV Show: “… so all you have to do is go out and purchase one of these …” 
Still, California’s lottery isn’t pulling in nearly as much revenue as other states.  So Governor Schwarzenegger and state lawmakers want to modernize it – then leverage the expected increase in revenues to get a big chunk of money up front.  David Crane is the governor’s economic advisor.
Crane: “What Proposition 1C does is it provides $5 billion worth of money at a lower cost than any other avenue that the state could take.  The only other ways to raise that $5 billion are to increase taxes or to have further cuts.” 
In fact, the measure actually allows for unlimited borrowing against future revenues.
Critics say Prop 1C is bad policy.  Not just socially, because it encourages gambling in tough economic times; but financially too.  The Reverend James Butler with the California Coalition Against Gambling Expansion says the state can’t even balance its budget now.
Butler: “So it makes no sense to borrow money, put an obligation onto the state budget that is mandated and will increase every year, so that it’ll make it even more difficult to balance future budgets.” 
But with the economy struggling and lottery sales down, would modernization actually do any good?  Kevin Klowden says yes.  He studies the lottery for the Milken Institute, a Southern California think tank.
Klowden: “The economy should recover while the lottery modernizes.  That timing will work out fairly well.  So you would actually expect to see a clear spike a couple years down the road.” 
Still, polls suggest the measure’s backers face long odds …
Lottery TV Show: “You’ve just won $2.8 million!” 
… though not that long!