At-A-Glance

Believing it would benefit public education, Texas voters approved a constitutional amendment in 1992, creating the Texas Lottery. They were shocked to learn later that lottery revenues would not be earmarked for education, but rather be placed in the state's general fund. Although that changed in 1997, when all Texas lottery proceeds by law began funneling to the Foundation School Fund, the lottery has never been the panacea for public education promised by lottery proponents. In fact, it became the "foot in the door" for legalized gambling in Texas and is still being used as an excuse to expand predatory gambling in the state.

Of the $15 million generated by the lottery since 1992, some $10 billion has gone to public education, a small fraction of Texas' annual public education budget of about $300 billion during that same time. To bolster less-than-promised revenues, the lottery has increasingly turned to "instant scratch off" tickets - known as a highly addictive form of gambling - and has begun marketing the tickets to appeal to children and teens.

A 2007 report also disclosed the lottery earns most of its money from low-income and disadvantaged populations, a reflection of how these addictive tickets are marketed. Gambling interests are now floating the idea of "selling" the lottery to private interests, who presumably would be allowed to market the lottery more aggressively. (See Lottery Privatization under Legislative Issues)

The Texas Lottery: A Closer Look

In November of 1991, an amendment to the Texas Constitution was adopted to allow the operation of the Texas Lottery. The Texas Lottery was the first lottery to privatize most of the lottery related functions, while retaining oversight, security, accounting, and Marketing functions for Lottery Commission staff. This model was known as the "Lottery Operator Model". GTECH was awarded the initial lottery operator contract and has held the contract to date. GTECH provides the terminals, sales staff, main frame computer (with a hotsite back-up) that tracks and administers the lottery games, communication (dedicated circuits, satellite, radio) that transmit the transactions between terminals and the main frame computer, research and sales support, customer service and repair support, instant ticket storage, ordering, and distribution.

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Testimony of Weston Ware, Ph.D, Volunteer Legislative Director for Texans Against Gambling, on August 27, 2008 before the joint meeting of the Senate Committee on Finance, the Sub-committee on General Government Issues and the Senate Committee on State Affairs in opposition to proposals for the privatizing of the Texas Lottery.

Texans Against Gambling has a long history of testimony on gambling issues in Texas.  Personally, except for the 2007 session, I have testified before legislative committees in every session since 1983, including many special sessions.  I am not new to the “bait and switch” tactics of investors and operators who want to make money off the citizens of Texas.  During the 80s it was the promise of $100 million, or sometimes double that, annually in direct revenues to Texas if we would just pass race track gambling.  That promise eventually resulted in four or five million annually to the state, not from live racing, but from the various add-ons like reduced state share and simulcast betting on races in other states.  It has been a rare legislative session that the horsemen have not come forward asking new favors of the Texas legislature.

.In 1989-91, these same and new gambling interests promised new bait to the citizens of Texas.  This promise was to care for the education of Texas children by the legalization of a state lottery.  It never was quite clear how much money was to come from the promise, but there was no doubt about it; it would take care of our kids.  Just pass the lottery and Texas will be rolling in dough.  Years of talk about the lottery and education, but that promissory check has bounced too.  The last I looked, lottery pays something like 3% of Texas education costs..

Now the entrepreneurs have offered more bait.  How does ten or twenty billion sound?  What is the new promise and where is the catch?  Where is the switch?.

First a word about economic impact studies.    Iin the 80s, it was the Department of Agriculture and major accounting firms validating the promises of pie in the sky.  In the 90s it was the hype of undefined wealth that would come from the lottery that could be used for the education of Texas children.

Today, we have heard the promises of untold wealth.  It is déjà vu  all over again!

Unfortunately, the switch in theTexas proposals would require the expansion of gambling in the form of constitutionally prohibited games like Keno, VLTs, and other casino style games as well as the expansion of the current lottery games to the Internet and other wireless devices.

Companies argue that aggressive marketing of the lottery will attract a slew of new customers who don't normally gamble and raise the state a lot more money. They bait us with a big up-front payment and stable, predictable revenues. The companies that are heavily promoting privatization are the same ones that pushed sub-prime mortgages as "good for America." Nationally, they include scandal-ridden UBS, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley. 

The switch that these companies have to make to make more money requires us to look at the social and economic problems created when gambling games become more accessible and fast in operation.  According to Gambling in America:  Costs and Benefits, by Earl Grinols, the negative “externalities” or social costs of gambling that fall both on the gambler and the rest of us are such things as crime, business and employment loss, bankruptcy, suicide, illness, regulatory costs, family costs such as child neglect and abuse costs, abused dollars, and the corruption of the political process.

Nearly all authorities on both sides of the issue agree that at least one percent of the adult population already suffer from problem or pathological gambling.  In some states, figures indicate numbers as high as five percent.  Further, it is generally agreed by authorities that if you make gambling accessible (move a casino to your hometown), those figures will double.  I would suggest that the harm would be even much greater if these electronic gambling machines are placed in lottery outlets across the state of Texas.. 

In conclusion, the efforts to privatize the lottery are not the efforts of Texans who want to gamble more, or to use the machine designer’s terminology, “to gamble to extinction.”  These proposals come from investor wealth that wants to make more money, seeing Texas a market, and from some public  officials who are impressed by the funds behind the proposals.

Texans Against Gambling started a petition campaign last week asking people to sign on against the privatization and expansion of the Texas Lottery.  Something over 250 individuals have signed up to date to the following statement:

We, the undersigned, oppose any action by members of the Texas Legislature to privatize the Texas Lottery either by sale or lease or by any other arrangement, to a private business. We believe this action is a classic "bait and switch" tactic by gambling interests to expand predatory gambling in Texas in the form of constitutionally prohibited games like Keno, video lottery terminals and casino-style games at the expense of the citizens of Texas.
We further strongly urge Texas lawmakers to go on record as opposing the expansion of gambling in Texas in all its forms and refrain from accepting gifts or contributions of any kind from gambling interests, or anyone representing gambling interests.

We believe that these citizens reflect more concern for the economic health of Texas than the accumulated wealth of the gambling entrepreneurs wanting to “buy” the Texas Lottery.

Over the past several years, cash-trapped states around the country have been approached with the idea of privatizing their lotteries. The idea is that a private company will pay a particular State up front for a license to operate the lottery for a set number of years. The company will operate the lottery during that period and recoup their investment and an acceptable return on its investment. Unlike most states though, the Texas Lottery is already privatized; the lottery operator, GTECH, performs over 95% of the services.

Unfortunately, proposals from proponents of this "privatization" initiative in Texas, have advocated for the expansion of gambling in our state in the form of constitutionally prohibited games like Keno, VLTs, and other casino style games. In addition, they have recommended the expansion of the current lottery games to the Internet and other wireless devices.

They argue they can more aggressively market the lottery, attracting a slew of new customers who don't normally gamble, and raise the state a lot more money. They are dangling the carrots of a big up-front payment and stable, predictable revenues. The companies that are heavily promoting privatization are the same ones that pushed sub-prime mortgages as "good for America." They include scandal-ridden UBS, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley.

Texas Hold 'Em: Privatizing the Lottery Raises Gambling Stakes

Last year Governor Rick Perry proposed leasing or selling the Texas Lottery to collect a quick payout of somewhere between $14 billion and $20 billion. In promoting this idea, the governor has not showed all of his cards to the public. Projections that the gambling industry privately submitted to the governor's office make clear that the state cannot raise a purse of this size unless it resigns itself to the proliferation of more gambling in potentially more-addictive forms. If Texans oppose such a gambling expansion, then these documents suggest that what they should play with the Texas Lottery games is Texas Hold 'Em.

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