Gov. Scott Walker is proposing to increase state spending on Wisconsin Lottery advertising for the first time in a decade even as ticket sales have set records in each of the last five years.
The state uses lottery proceeds to reduce property taxes, so the move is designed to deliver more property tax relief without spending taxpayer dollars — the extra advertising money comes from lottery sales. However, the last time the state banked on boosting ticket sales with more advertising spending, lottery sales actually declined.
The issue of advertising the state lottery has also been contentious in the past, particularly as research has shown lotteries transfer wealth from predominantly low-income players to middle- and upper-income property owners. The state constitution prohibits using lottery revenue for promotional advertising, and limits advertising to information about prize structure and the odds of winning.
Walker himself as a socially conservative legislator in the 1990s once authored a resolution seeking a statewide advisory referendum on whether to abolish the Wisconsin Lottery. Since he became governor, the lottery has increased ticket sales each year while the property tax relief it has generated has stagnated.
Walker’s 2017-19 budget calls for increasing annual lottery advertising spending by $3 million to $10.5 million per year, a 40 percent increase.
Lottery ticket sales last year topped $627 million, up 27 percent from a decade ago. Meanwhile, the total lottery property tax credit paid out has fluctuated, but was only 9 percent higher last year than it was in 2007.
In his budget request, Walker says the increased advertising is needed to “increase overall ticket sales” and “ensure continued property tax relief for Wisconsin homeowners.”
“The additional commitment to advertising for the lottery comes from lottery sales, not taxpayers,” Walker spokesman Tom Evenson said. “This was deemed a good management tool to protect future benefits of property taxpayers.”
Ticket sales are projected to decline this year to $617.4 million. With the advertising boost, Walker’s budget projects ticket sales will increase to $629.5 million in 2018 and $632.6 million in 2019.
DOR spokesman Casey Langan said the new advertising dollars are expected to generate $27 million more in ticket sales over the biennium. The state has for many years worked with Milwaukee-based advertising agency Hoffman York “to secure the best return on investment,” Langan said. He said the increase is not related to the current contract with the company, which expires at the end of June.
In 2007, when then-Gov. Jim Doyle last increased the advertising budget by $2.9 million, sales were down and the Department of Revenue estimated the ad boost would generate $30 million more in lottery sales over the next two years.
Instead, lottery sales declined by $17.5 million over two years as gas prices increased and the Great Recession hit. Since then, ticket sales have increased for seven straight years.
Proposal faces uncertainty
Lawmakers and advocacy groups on both the left and right were skeptical about Walker’s proposal.
“While additional spending to boost participation may seem logical, recent data doesn’t appear to support that approach,” said Rep. Rob Hutton, R-Brookfield.
Hutton said he’s seen state data that show participation in the state lottery comes from ZIP codes with higher poverty rates.
“This means that many individuals and families that are dependent on state financial assistance may well be funding tax relief for Wisconsin’s property owners,” Hutton said. “Not only is that fiscally unsound, one could argue the lottery may be causing additional harm to our vulnerable communities.”
Rep. Gordon Hintz, D-Oshkosh, a member of the Legislature’s budget committee, said “property tax relief is important, but I don’t know if continuing to wave gambling in the eyes and ears of the residents of the state is the most productive way to go about trying to lower property taxes while considering the negative impact of gambling on lives throughout the state.”
Julaine Appling, president of conservative Wisconsin Family Action, said she’d rather see Walker spend $3 million more on promoting the Success Sequence, a research-based life-skills message that emphasizes finishing school, getting a job, getting married and then having children. Walker is proposing $1 million over the biennium to promote that message.
“Balancing a state budget or even providing property tax credits based on gambling proceeds is not in the state’s nor its citizens’ best interest because much too often those who gamble are the ones who can least afford to do so,” Appling said.
Jon Peacock, director of the liberal Wisconsin Budget Project, said the lottery credit is “extremely unfair” because it doesn’t provide direct relief to the 30 percent of Wisconsin residents who rent.
Todd Berry, president of the Wisconsin Taxpayers Alliance, said research has shown lotteries are not a growth source of revenue or an efficient means of providing tax relief. Without new games and more advertising the revenue tends to decline, but that means spending more on administrative costs.
Berry noted the lottery credit as a percentage of the overall property tax burden has been on a downward trend.
“The lottery in Wisconsin has never delivered the kind of property tax relief advocates promised,” Berry said. “And compared to other states our lottery has never been as popular or productive.”
Wisconsin counties and municipalities received $158.2 million from the lottery and gaming tax credit last year, down from the previous two years. The average credit per property owner last year was $107.
Walker’s budget projects the state will be able to pay out $167.7 million in 2018 and $169.3 million in 2019.
Walker’s budget includes other forms of property tax relief, including $180.4 million to eliminate a state forestry property tax, an $87 million increase in the School Levy Tax Credit and $72.8 million in school aids targeted at reducing local tax levies. Altogether, Walker’s budget projects the tax bill for a median-value home in December 2018 will be $139 less than in December 2010.