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Powerball To Dump Illinois Over “Lack Of Budget”

Courtesy of ZeroHedge. View original post here.

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

  • 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.
  • 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.
  • 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.
  • 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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