RALEIGH – Will Democrats make a bad bet on a state lottery?
Denizens of the political class in Raleigh were buzzing Thursday about an article in the Winston-Salem Journal, and a follow-up piece by the Associated Press, that took note of House Speaker Jim Black’s now-explicit endorsement of enacting a government lottery in North Carolina without recourse to a referendum.
Black says, quite properly, that the state constitution does not authorize the General Assembly to transfer its legislative power to voters in a binding referendum. Thus any referendum held would be of a non-binding, “advisory” nature only. Lawmakers would still have to come back to Raleigh and vote for a bill to set up a state lottery, perhaps hoping that a positive vote in a non-binding referendum could act as political cover.
The speaker said that, if that’s true, then why not just pass the lottery straight-up? Such a move would have the advantage of moving up the date at which the government starts collecting lottery tax revenues, perhaps even into the 2005-06 fiscal year. Obviously, he and other Democratic leaders would love to find a way out of the budgetary box they’ve constructed in recent sessions. They don’t necessarily want to vote for the $741 million in higher state taxes that Gov. Mike Easley is proposing to cover most of the gap in his budget proposal. But if they turn to budget savings – which they should, by the way – some of their political constituencies will rebel.
The lottery debate is suffused with myths. One old-reliable one is that North Carolinians are sending hundreds of millions of dollars into the state treasuries of neighboring states with lotteries. The true “revenue loss” to out-of-state lotteries is about $80 million, and it’s not worth it financially to set up a lottery with far higher administrative costs (many of them consisting of revenue flows to out-of-state vendors) to redirect that money back into North Carolina.
Another myth, which Black apparently believes, is that a state lottery is an alternative to higher taxes. As I described in a JLF Spotlight paper released Thursday, lottery states have higher overall tax burdens than non-lottery states. Plus, the state revenue from a lottery is tax revenue. It consists of a very steep (and regressive) tax on those who play lotteries or derive income from their operation.
What I find particularly interesting about the Black-lotto boomlet is that it represents a potential change in political strategy. Many Democratic leaders used to favor an election-year lottery referendum because it would, they thought, turn out Democratic-leaning voting groups and thus improve their prospects.
Now, however, the thinking is that it’s the lottery itself, and the revenue it would generate, that is of the greatest political value to Democrats. This is no better a political strategy, in my opinion. It remains true that those voters who clearly oppose a state-run lottery may not be a majority, but they are a very active and vocal group. They are far more likely to vote against candidates supporting a lottery than other voters are to vote for a candidate for that reason, or to vote against lottery opponents.
The 2006 elections beckon, and there’s no statewide race on the ballot. I think it is likely that forcing Democrats to vote up-or-down on a state lottery will be a net loser for those in competitive districts. We’ll see if others agree.
Hood is president of the John Locke Foundation and publisher of Carolina Journal Online.