January 21, 2010 News » Cover Story

Cash scratch fever 

Coloradans have long supported the Lottery. Maybe it's time for a role reversal

Mike Morrissey's liquor store sits at the corner of Spruce and Bijou streets, just west of Interstate 25, adjacent to a neighborhood some would call shabby. He's been there 18 years, so he knows his clientele backward and forward — "better than I should know them," he says.

Ask who buys lottery tickets from beneath his countertop cases, and he doesn't hesitate.

"People who live paycheck to paycheck are the ones buying tickets," he says.

Lower-income folks spend three times more on lottery tickets — mostly scratch — from Morrissey than middle-income customers. One elderly customer living in downtown subsidized housing bought rolls of tickets at $300 to $600 each, shelling out about $4,000 over the course of six months.

"He didn't win anything," Morrissey says.

Those are the kinds of folks the state of Colorado is counting on, the ones who don't care that the odds are stacked against them. Playing games in which chances to win range from 1 in 4 (scratch tickets) to 1 in 195 million (Powerball), they've rescued 718,171 acres of Colorado land from development, improved 1,000 community parks, built 700 miles of hiking and biking trails, and completed capital construction projects — all at a cost of more than $2.2 billion since the Colorado Lottery began in 1983.

In the worst cases, people who can't stop playing incur an inestimable social cost in broken relationships, lost jobs, prison, even suicide. The Lottery pays a pittance to help. It pays nothing for the impact of gaming addictions on cities and counties. And if and when problem gamblers finally reach out, they find appropriately trained counselors in woefully short supply; in El Paso County, it appears there are no certified counselors for a population of more than 500,000.

Some state legislators have begun to question the Lottery, and whether they should ask voters if they'd be willing to change the Colorado constitution to send its money elsewhere. But it's not compassion that has prompted those questions; it's a budget crunch. There's no doubt, for instance, that the state's $120 million annual profit from the Lottery could go some distance in reducing the $240 million cut lawmakers plan just for K-through-12 education next school year.

Says Rep. Sal Pace, D-Pueblo: "We should invest in people before we invest in open space."

Greater outdoors

Colorado is among 43 states that sponsor lotteries — Nevada, Utah, Wyoming, Mississippi, Alabama, Alaska and Hawaii don't have them — seizing on the games as an easy way to generate money that might have been spent on lotteries in neighboring states or illegal games anyway. (Colorado's highest volume lottery-ticket retailer is in Carr, about 20 minutes south of the Wyoming border.)

Across the country, proceeds go to education, college scholarships, economic development, senior programs, property tax relief and the general fund.

In Colorado, voters mandated the money go to parks and recreation, conserving land from development and an additional, smaller amount on school safety. Since the Lottery began in 1983, it's paid out $4.6 billion in prizes, spent $477.8 million (7 percent) on operating costs, and given the state that $2.2 billion for outdoor programs and other projects.

In fiscal year 2009 alone, which ended June 30, the Lottery provided $47.8 million for open space; nearly $12 million for the Colorado Division of Parks and Outdoor Recreation for trail and park maintenance and land; $54.3 million for Great Outdoors Colorado grants to local entities for trails, parks, land preservation and wildlife habitat preservation; and $5.5 million for school facilities. Before 1992, half the money was spent on state capital construction projects, and the rest went to outdoor programs.

Through the years, the Lottery has been a bonanza for El Paso County. Its cities, towns and other entities have received more than $141 million — second only to Jefferson County's $150 million.

Lottery money, in fact, has become essential for Colorado Springs as the latest recession's set in. While Lottery dollars once funded capital projects and a third of maintenance work, it now pays two-thirds of the city's parks maintenance budget, plugging a hole left by the budget ax, says Chris Lieber, city trails, open space and parks manager.

"It's been said parks maintenance is on life support," he says. "That life support is the Colorado Lottery these days."

The city also gets money through Great Outdoors Colorado (GOCO), funded exclusively by the Lottery, for big-ticket items such as Stratton Open Space and Red Rock Canyon, two showcase properties on the west side. Most recently, the city landed a $75,000 grant to study how to make the Manitou Incline legally accessible to the hiking public.

These types of expenditures do more than just give people a pretty place to get outdoors, according to GOCO communications director Chris Leding.

"If you look at any tourism or economic development presentation, the outdoors is one of the state's best assets," she says. "Continuing to use Lottery proceeds is protecting one of the best assets we have. If local governments lost Lottery money for outdoor recreation projects, I think you would see some serious decline in the condition of livability in communities."

It's hard to argue with that, but Alicia Hansen does.

A lottery tax?

Hansen's a writer with the Tax Foundation, a nonpartisan tax research group based in Washington, D.C., and she takes issue with the whole idea of a lottery. For one thing, she says, lottery revenues are taxes, pure and simple. They're not user fees, she says, because that would suggest the fee (ticket price) pays for the cost of a service and nothing more.

"When a state runs a lottery, the amount they keep for themselves is more than they need to run the lottery," she says. "They are running a lottery to make money for other services. That's what makes it a tax."

Also, Hansen says, lottery revenues aren't neutral, because a subset of the population that enjoys a certain activity (the lottery) pays a disproportionate share for general services enjoyed by all (parks). And lotteries are regressive; they're supported more by lower-income people, as studies have shown. In fact, people in other states have argued that lottery money used there for college scholarships take from the poor to help the wealthy, a contention based on the reasoning that fewer poor people go to college.

In 2008, Carnegie Mellon University looked into why the jackpot dream seems particularly attractive to people with low incomes. Researchers found low-income people see the lottery as their best opportunity to enrich themselves, or at least crawl out of poverty — although, ironically, spending on the lottery can worsen the economic situation they're trying to escape.

Maybe that's why even in a recession, lotteries have held strong. In 2009, revenues dipped by 2.2 percent compared to 2008. But 2008 had been a record year, pulling in $122.3 million, a 2.7 percent increase over 2007.

At a time when many businesses are hurting, the Lottery has carved out an ambitious growth plan, hoping to add 200 new retailers by June 30, which would bring its total to 3,200. The last 200 retailers the Lottery added dribbled in over 10 years.

Colorado Lottery deputy director Tom Kitts admits it's an aggressive goal.

"We're like every other business," he says. "We're trying to find places where we can responsibly place our products. With this current economic environment, we've lost some retailers, because stores have closed."

The Lottery now is considering "nontraditional" outlets, he says, such as bowling alleys.

And another possible boon awaits: A rules change effective Jan. 31 allows states to offer both Powerball and Mega Millions, two multiple-state, big-jackpot games. Colorado, a Powerball state since 2001, has been rumored to be considering making the Mega Millions addition.

Monkey Money

While working on this story, I decided to take a shot. Standing in front of a glass case filled with colorful keys to the universe, I pondered: Vegas Action? Banana Twist? 4s Galore or Double Down?

I finally settled on five $1 Monkey Money scratch tickets, figuring my chances for a big pot were greater since it was the newest game. I stuffed them in my purse and sailed home with a tingle in my brain that chirped, "Maybe this will be a special day for me."

It wasn't. One ticket was good for $4. Net loss: $1.

My mild case of anticipatory euphoria, of course, was nothing compared to those truly in the grips of gambling. And visiting a Gamblers Anonymous meeting near downtown Colorado Springs brought me face-to-face with addiction.

After I agreed not to name them, several former gamblers at the meeting told me the lottery is a "gateway game" to the horrors of compulsive gambling. Others disagreed, but admitted they've known people who obsess on the lottery.

Kevin recalled a man from Fresno he knew while living in California who hit a $1 million lottery jackpot. It ruined his life. He spent all his winnings on more lottery tickets, stole money to buy more and eventually went to prison. When the IRS showed up to confirm his tax return's gambling losses, they found a million losing tickets piled in his basement. IRS agents filled a box and weighed it in an effort to count them all.

"Here's what a harmless $1 lottery ticket did to him," says Kevin, who still goes to meetings after not gambling for 19 years. "In my opinion, [the lottery] takes the most from people who have the least. It's state-sponsored addiction."

Lottery officials say they don't target specific demographics, but they know from their $114,000 Advertising and Playership Tracking Study that the typical player is a married man 25 to 44 who earns $35,000 to $75,000 a year, spends an average of $40 a month on the Lottery, and lives in the Denver metro area.

It's complicated to determine the incomes of those who buy lottery tickets in El Paso County, but places in Colorado Springs that have a thicket of liquor and convenience stores, bars and food markets lead in lottery sales volumes. Topping the list is the 80909 ZIP code area, with $3.35 million in ticket sales in the first half of 2009, according to Colorado Lottery data. The city's geographic bull's eye, 80909 takes in portions of East Platte Avenue, Academy Boulevard, Union Boulevard and Circle Drive, and boasts 38 lottery retailers, by far the most of any local ZIP code. Average annual household income in the 80909 area was $35,041, among the lowest in the city, in 2000 (the most recent Census figures available).

Second in line came 80906, where 23 stores sold $2.8 million in lottery tickets in the same six-month period. The 80906 area takes in the ritzy Broadmoor, which accounts for the 80906 area's higher average household income of $49,059. But it also includes South Nevada Avenue, Ivywild and Stratton Meadows, which, like 80909, are heavily populated with lower-income households and plenty of lottery retailers.

Kitts says the Lottery doesn't know how many low-income people play, but he adds, "Let's be honest here: A lot of low-income neighborhoods are along major thoroughfares. A lot of people stop to get gas, a pop, a lottery ticket, and don't live there."

Indeed, Morrissey's biggest ticket, a $50,000 winner, was sold to a tourist.

Morrissey sold $33,000 in scratch tickets and $11,000 in lottery tickets in the first half of 2009, but he says he doesn't sell tickets to make money. (His take was $2,942 for the first half of 2009, records show.) Many other store owners do, though, because the Colorado Lottery pays retailers a 6 percent commission on jackpot game sales and 7 percent on scratch tickets, more than most states. Commissions exceeded $458 million from 1983 through 2006.

"These commissions and bonuses help stimulate economies in local communities around the state, and benefit local businesses," the Colorado Lottery Web site asserts.

'Deep and insidious'

The North American Association of State and Provincial Lotteries, an advocacy group, says study after study has concluded that lotteries account for only 4 percent to 6 percent of calls to problem gambling hotlines. Its Web site notes that an Iowa State University study found that other factors have a higher correlation with problem gambling than playing the lottery; among them are frequently changing residences, being a member of a minority group, and serving in the armed forces.

But Amber Bunch, executive director of the Problem Gambling Coalition of Colorado, says gambling — whether betting on horses or playing state-sponsored lottery games — can lead to a cesspool of lost hopes and dreams, child and spouse abuse, and crime.

"If it's a problem behavior, it's a problem behavior," she says.

It's hard to know exactly how big the problem is and the level of its social impacts, because few compulsive gamblers seek help. And those who do wind up in counseling for possibly related matters, such as domestic violence, often conceal their problem from counselors, Bunch says.

"It's the hidden issue," she says. "It can be so deep and insidious."

One study showed pathological gambling can lead to problems in the children of gamblers, including higher levels of use of tobacco, alcohol, drugs and overeating. An Oregon research team found that 40 percent of clients enrolled in a state gambling treatment program said they committed crimes to finance their gambling.

Even Bunch doesn't know the scope of gambling problems in Colorado, since there's been no study here for 12 years. Previous research concluded that Colorado has few "pathological" gamblers, but compulsive gamblers can pose a burden to society without being pathological. Also, Colorado's casino gambling has grown markedly since then, most recently when law changes allowed casinos to remain open 24 hours, raised minimum bets to $100 and added craps and roulette.

Bunch's organization, which barely survives on $35,000 a year patched together from donor gifts, can't afford a study, which could cost up to $1 million. But she suspects her group's hotline barely scratches the surface.

Only 345 people from across the state — 26 from El Paso County — called the number for help in 2008, and even fewer last year, despite research that shows 2 percent to 5 percent of Americans are problem gamblers. If true, that would mean Colorado has from 64,000 to 160,000 residents with a gambling problem.

Addiction vs. impulse

The perceived gulf between people who need help and people who get it stems in part from how society views compulsive gamblers, says Bunch.

"It's hard to get people to recognize this as a disorder," she says, "because people look at it as a character defect."

Pueblo Rep. Pace would seem to back up that assessment. When asked about the lottery, he says problem gambling will exist with or without it, because "you can't legislate against stupidity."

Even within the medical profession, gambling addiction isn't as commonly recognized as chemical dependency, says Pikes Peak Mental Health psychiatrist Dr. Martin Kron, who focuses on alcohol and drug addictions.

"It's a hot topic, whether the addiction is an addiction per se," Kron says. "Most of the treatment and training is geared toward chemical dependency. Usually the behavioral addictions, like sex and the Internet, get lumped into a separate category with 'impulse control.'"

That might make it difficult for a compulsive gambler to access some treatment services. A member of the local Gamblers Anonymous certainly sounded like an addict when he said during a recent meeting, "When I see a sign on I-25 for $225 million, I go nuts — within 15 minutes, I've spent that money." Yet to qualify for publicly subsidized counseling, he might have to have a well-recognized addiction, such as alcohol or drugs.

And then there's the question of who's going to fund the outreach and treatment. One might expect an organization to step up and lend a hand if its operations cause pain and suffering for individuals and, indirectly, the state as it copes with the fallout. But the Colorado Lottery spent only $73,141 last year on problem gambling awareness — to fund half the hotline expense, to advertise resources, to urge players to "play smart" and to sponsor a problem gambling conference. That's less than 2 one-hundredths of 1 percent of the Lottery's total revenue. The Lottery also publishes the hotline number on every ticket, but it's in tiny print.

The Connecticut lottery contributes $1.5 million annually for the prevention and treatment of gambling related disorders, the North American Association of State and Provincial Lotteries reports. Other states also pay healthy sums, such as Massachusetts, which contributes $655,000. The Iowa lottery must pay .5 of a percent of its gross lottery revenues and .5 of a percent of the adjusted gross receipts from the riverboat casinos and racetracks for gambling treatment and education services.

If the Colorado Lottery had to pay .5 of a percent of gross revenues, it would pay roughly $2.2 million annually.

While Kitts says the Lottery is in touch with the Department of Human Services, he challenges the need to do more than the state's already doing. He says there's been no scientific determination of the problem's breadth, and no showing that anyone's begging for help and can't get it. And, he says, "I'm not sure it's responsible to throw money at [gambling treatment] when there's no place to throw it. Where would we send the money?"

Which brings us to the lack of counselors. Bunch's group lists only six certified gambling-addiction counselors, none in Colorado Springs. (One who had been listed didn't renew her certification, so her name was dropped this week.)

But Bunch she is encouraged that last year, the Legislature allocated $110,865 to the state Department of Human Services to address gambling addiction, most of which will go to the University of Denver to provide training for counselors and to counsel problem gamblers.

Long odds

Senate President Brandon Shaffer acknowledges the Lottery has accomplished a lot for Colorado. But he notes that other needs loom.

"I know there are some legislators who are starting to look at what the constitutional measure would look like if we were to ask voters to redirect lottery funds," he says.

It wouldn't be easy.

"How do we get something like that, that requires two-thirds vote of the Legislature, on the ballot?" asks state Senate Majority Leader John Morse. "And then why refer a measure when you don't have any money to convince people?"

He estimates a successful statewide ballot measure campaign would cost $6 million. And, of course, even if voters did OK the measure, it wouldn't kick in until the 2011 budget season, at the earliest.

Morse understands voters dictated lottery money go to parks and recreation, but the current fiscal crisis leads him and colleagues to search for other revenue sources. Unlike Pace, who declines to be specific when asked how the money might "be distributed towards people," Morse immediately mentions K-through-12 education.

"Why are we spending money on parks when we could be making sure third-graders are getting a good education?" he asks.

The cuts, he notes, will trigger teacher layoffs, bigger classes and school closings.

"It will have a profound effect on public education," Morse says. "We can make up time later on buying land. A third-grader doesn't get a second chance."


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