Study: Maine's Lottery Amounts to Tax on Poor
By Dave Sherwood, contributing writer
© Maine Center for Public Interest Reporting
Editor’s note: This story is the first in a three-part series entitled "Lottery: Selling Hope to the Hopeless."
WAITE, Maine — Wayne Seidl remembers the day a woman showed up at his shop and plunked her paycheck on the counter. She asked him to cash it in exchange for lottery tickets. It had been a hard week, she said.
Seidl, co-owner of the Waite General Store in northeastern Washington County, recalled the woman had three, maybe four, kids at home. He told her he felt the money would be better spent on food or clothes for her children. He refused to sell her the tickets. But he doubts it made much of a difference.
“If they don’t buy them here, they’ll go somewhere else,” he says.
Seidl, a former town selectman in Waite, population 101, has no shortage of such stories. Another frequent customer, he said, makes a 90-mile daily trip from Calais to Waite to Houlton, buying $25 scratch tickets at every stop along the way. One man routinely spends $200 a day on the lottery. Other regular buyers are on food stamps, unemployed or on welfare, he said.
Seidl’s tiny roadside convenience store, along a lonely stretch of Route 1 in an area where unemployment has often been the highest in the state, sells more lottery tickets per capita than any other in Maine: an astounding $1,313 for every man, woman and child in town, according to financial statements obtained under the state’s open records act.
That connection between being jobless and buying lottery tickets is not isolated to one town. A study of the lottery by Cornell University, conducted at the request of the Maine Center for Public Interest Reporting, shows that across the state, lottery ticket sales go up when people lose their jobs.
For every one percent increase in joblessness in a given zip code, sales of scratch and draw tickets jump 10 percent.
That was one finding in a six-month investigation of the Maine State Lottery, which the state calls “fun and exciting entertainment” on its website.
Among the investigation’s other findings:
- Maine’s poorest towns spend as much as 200 times more per person than those in wealthier areas, according to the data. “You’re selling to people who are already desperate, or in tough financial circumstances,” says Cornell behavioral economist and professor Dr. David Just, who conducted the study. “By promoting the lottery, the state is, in some way, complicit in this.”
- Since 2003, the state-run lottery has more than tripled its advertising budget, invested in sophisticated market research to better target new customers and installed flat-screen TVs in stores to encourage impulse buys, according to interviews and documents obtained by an open records request.
- Because the lottery pays for itself, the legislature exerts virtually no oversight over the process. “They basically run their own business,” says state Rep. Louis Luchini, D-Ellsworth, co-chair of the committee that oversees the lottery.
- Despite promoting the lottery over decades, the state has never studied its effect on the lives and finances of the poor and unemployed, who spend disproportionately on the lottery. State lottery and health officials interviewed said they had no data on addiction rates and had no plans or funding to gather it.
- Total sales of lottery tickets — about $230 million — are more than what Mainers spend every year on liquor and also more than the revenue generated from Maine’s corporate income tax. The lottery transfers an average of $50 million per year of the $230 million to the General Fund, the state’s primary operating budget, money that would otherwise need to come from cutting state services or raising taxes. That makes calls for more stringent oversight unpopular, legislators said. (The balance of the $230 million is paid out in winnings and used to administer and promote the lottery.)
When presented with the data, state lottery officials said the numbers didn’t tell the whole story. They emphasize the games are voluntary and that the majority of revenue is returned to winners and to the General Fund, to the benefit of all Maine people.
“I think you’d have to go to those locations and ask, 'What else is going on there?'” says the lottery’s deputy director, Tim Poulin.
Of the ten towns whose residents spend the most on lottery tickets, six are in Washington County, the state’s poorest county: Waite, Columbia, Vanceboro, Pembroke, Princeton and Perry, where players spent at least $600 on scratch and draw games in 2014, an analysis of lottery data shows.
Store owners in those towns said they were not surprised by the data. But they had mixed opinions on why Washington County residents stood out.
“People here rake blueberries, pick potatoes, make wreaths, snow plow or lobster,” says Wade Green, owner of Delia’s, a small grocery store in Columbia, where lottery sales equal $916 per person annually. “It’s all a gamble, just like the lottery.”
But research and data suggest poverty also plays a key role.
Residents of Washington County, which has the highest rates of poverty and unemployment in Maine, according to 2013 U.S. census data, spend $275 per person per year on lottery tickets, more than $100 more per year than residents of either Cumberland ($166) or York counties ($174), among Maine’s wealthiest.
In the Washington County town of Waite, the $1,313 per capita spent on lottery tickets in 2014 contrasts with the wealthy coastal town of Kennebunkport, where the per capita spending was just $6, the lowest in the state. One in five families live in poverty in Waite, compared with fewer than one in 100 in Kennebunkport, 2013 census data show.
“Years ago, we used to sell scratch tickets, but we got rid of them,” says Pamela Hutchins, a business manager with Bradbury Bros. Market in Cape Porpoise, a waterfront Kennebunkport neighborhood. “Our clientele has changed. Most of this town is very wealthy. There’s just no demand anymore.”
Nearby Cape Elizabeth, an oceanfront suburb of Portland where residents spend just $25 per person per year on lottery tickets, also has one of the state’s highest per capita incomes, $53,505, and one of the state’s lowest unemployment rates, at just 3.9 percent, according to 2014 Maine Department of Labor statistics. Unemployment in the ten towns that sell the most lottery tickets per person is nearly double that of the ten towns that sell the least, according to 2014 data from the Maine Department of Labor.
“The bottom line is, a spike in unemployment means a spike in lottery sales,” says Cornell’s Just.
Just’s research in 39 states, over ten years, corroborates the findings in Maine: Bad times, the evidence shows, leads desperate people to take their chances on the lottery.
State officials said they keep no data on such trends in Maine, but questioned whether other factors, such as proximity to New Brunswick, whose residents sometimes cross the border to play Maine’s lottery, might boost sales.
Just acknowledges that geography may create outliers, but he said the quality of the data in Maine, and the statistical clarity of the relationship between unemployment and lottery sales, is unmistakable. “You just can’t attribute it to anything else,” he said.
The bigger question, he said, is what it means for the people who play the most.
“There are some people who do this for fun and then a small group for which this ends up being really massively damaging,” said Just.
Addicted to fun and excitement
Shelley Arsenault, of the Farmer’s Union store in Perry, population 889, knows most of her best lottery customers in this small Washington County town by name. Residents here purchase $615 in tickets per person annually.
Monica Altvater of Perry is a regular. On a rainy summer morning, Altvater bought more than a dozen scratch tickets at the counter. She likes “Cash Winfall” and “25X the Money,” $10 instant tickets that promise rewards of as much as $250,000.
“I won $15, spent $150, and I’m not even done yet,” she says, tossing losing tickets into the trash. “I may drop my whole paycheck here today.”
Lottery officials do not know how such habits affect the lives of players like Altvater.
Research into the social effect of the lottery, said Deputy Director Tim Poulin, falls to the state’s Department of Health and Human Services, not the lottery, which falls under the Department of Administrative and Financial Services. But Christine Theriault, of DHHS’s Office of Substance Abuse and Mental Health Services, said her office lacked funding to study the question.
The state spends $100,000 on problem gambling initiatives, said Theriault, but that money is spread across a wide spectrum, including higher-profile casino gambling.
“Somebody can be just as addicted to lottery tickets as they are to going to a casino, or sports betting, or card games, slot machines, poker,” Theriault says. “Unfortunately, we don’t have data that tell us how many people in the state have a problem. It’s a gap we have.”
What remains clear, however, is that players' hopes are often misplaced. The most favorable odds, sometimes as encouraging as about one in five, are for small winnings, often break-even prizes which experts say are critical to keep players coming back. The big jackpots, which also drive sales, offer extremely long odds. The odds of winning the Powerball, Maine’s bestselling draw game, for example, are 1 in 175 million, according to the lottery.
A person is 14,000 times more likely to get struck by lightning in his or her lifetime, the National Weather Service estimates.
Arsenault, who said she has worked at the Farmer’s Union in Perry for 26 years, says the odds hardly matter to many of her customers. With so many tickets on offer — she now sells 28 games where once there were just one or two — the details are lost in the frenzy.
“It’s gotten absolutely crazy,” she said. “I’ve seen it where people will come in, buy a gallon of milk and not have enough for a scratch ticket. They’ll turn around and put the milk back.”
Part II of this series will look at Maine’s approach to marketing and advertising the Maine lottery. In Part III, legislators weigh the costs and benefits of Maine’s state-run lottery.
Researcher Blake Davis contributed to this report.