Krissy Wilcox has been selling lottery tickets at a service station on Madison’s Far East Side for as long as the Wisconsin Lottery has been around — nearly 30 years.
In her experience, lottery players come from all socioeconomic backgrounds, though over the past decade she has noticed more customers buying lottery tickets and then asking if the convenience store accepts food stamps.
“It seems to be a lower-income class that’s buying the scratch-offs regularly,” Wilcox said.
There may be something to Wilcox’s hunch. Per capita lottery sales in Wisconsin trend higher in neighborhoods with lower median incomes, according to a Wisconsin State Journal review of 2015 lottery sales data provided by the Department of Revenue.
The finding comes as Gov. Scott Walker has proposed in the 2017-19 state budget increasing the amount of lottery revenue for advertising by $3 million a year to $10.5 million, a 40 percent increase.
It would be the first increase in lottery advertising in a decade with the goal of generating more lottery sales for property tax relief. However, at least one Republican legislator, Rep. Rob Hutton, R-Brookfield, opposes the move and has asked that it be removed from the budget.
Hutton objects to the disproportionate impact of lottery sales on low-income people based on his review of ZIP code sales data. The State Journal review of ZIP code sales data found some evidence to support his argument, though there are several caveats.
In 2015, median lottery sales were $111 per person in the 67 ZIP codes with median incomes below $40,000. In the 84 ZIP codes with median incomes above $70,000, median per capita lottery sales were $78, the State Journal found.
Per capita sales in 2015 decreased roughly $1 for every $1,000 of additional median income, according to Marquette University Law School political science professor Charles Franklin, who reviewed the State Journal analysis. However, the data also showed some of the poorest areas with much lower per capita sales similar to the wealthiest areas.
“While places of lesser means are buying more tickets per capita, and that does go down as income rises, it certainly shows that the lottery attracts more revenue per capita from people in the lower-middle income categories,” Franklin said. “It does not appear that most of the sales or a disproportionate amount are coming from the very lowest income levels.”
The Department of Revenue criticized using ZIP code data to draw conclusions. In 2015, of the 5,966 lottery players who won more than $600, 56.4 percent lived in a different city than where they bought their ticket. Nearly a quarter of ZIP codes in the state don’t have a lottery retailer.
National research has found lower-income people spend a higher percentage of their income on lotteries than the wealthy, said Thomas Garrett, an associate professor of economics at the University of Mississippi who has studied state lotteries.
“The general consensus is that lotteries are regressive,” Garrett said. “You can generally assume the same is true in Wisconsin.”
But Garrett cautioned that using ZIP code sales data won’t provide definitive proof of individual behavior — each ZIP code includes a range of socioeconomic backgrounds, and commuters might buy lottery tickets away from where they live.
Researchers tend to combine sales data with survey data, and geographic trends could be explained by other factors, such as different levels of church attendance across neighborhoods, he said.
Former UW-Madison poverty researcher Irving Piliavin conducted three lottery studies on behalf of the Wisconsin Gaming Commission in 1989, 1991 and 1995. He found lower-income people were less likely to play the lottery than higher-income people. He also found those with mid-levels of education were more likely than those with high and low levels of education to play the lottery.
Rob Kohler, a consultant who worked for 12 years for the Texas Lottery, said for many years Texas lawmakers relied on phone survey research from the University of Texas that found typical lottery players were middle income, college-educated and white. Kohler was hired by the Christian Life Commission to review geographic sales data and was able to show sales were coming disproportionately from neighborhoods with higher concentrations of low-income minorities with no college education.
Kohler said large jackpot lotto drawings attract customers across all incomes and also benefit from word-of-mouth and news coverage publicity, while instant-win games are more likely to be purchased by lower-income customers. The latter make up more than 60 percent of lottery sales in Wisconsin.
“It’s a farce that you have to advertise,” Kohler said. “The net effect of advertising in our state hasn’t increased sales. What it’s done is it’s basically allowed the lottery to sink its roots more into the fabric of our society.”
The Wisconsin Lottery advertises both scratch-off and lotto games on a variety of platforms, including TV, radio, digital, print and in sports stadiums.
“While the Lottery has not received a product information increase since 2009, media costs and inflation have continued to rise,” Wisconsin Lottery director Cindy Polzin said. “Without an increase in product information, we suspect to see diminishing sales in the near future, therefore decreasing property tax relief.”
Walker defends ads
In the late 1990s, Walker, then a state legislator who aligned himself with anti-gambling religious conservatives, led an unsuccessful effort to put the Wisconsin Lottery up for a statewide referendum.
Speaking with reporters recently, Walker explained his switch from that position to supporting a rare increase in lottery advertising, saying “it is what it is out there.”
“If you’re going to have it, you want to make sure you can ensure the property tax relief that’s been promised in the past,” Walker said. “And that’s what our commitment is going forward. With the team that’s in there, they said to hit the marks to ensure that there’s ongoing property tax relief then they believe they needed to provide this information to the public.”
Wisconsin lottery sales have steadily increased while the property tax relief the lottery provides has held steady, according to the Wisconsin Taxpayers Alliance.
Last year sales 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.
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.
Wisconsin has a constitutional prohibition on using lottery revenue for promotional advertising. Instead, advertising must be limited to information about prize structure and the odds of winning, though the distinction between the two can become blurred.
Out of $6.05 million spent on lottery advertising in 2016, nearly $3.2 million was spent on TV and radio ads, $1.1 million was spent on print and digital ads and $1.9 million was spent on billboard and stadium ads, according to DOR.
“Media trends change and are constantly evolving, so flexibility is very important,” Department of Revenue spokeswoman Nicole Anspach said. “Based on media trends, the amounts in each category may fluctuate.”
Retailers reject ads
Several lottery retailers around the state told the State Journal that they either didn’t see a need for more lottery advertising or didn’t think it would make a difference.
“I don’t know if advertising is going to do a whole lot,” said Jim Nies, a Kwik Trip manager from Beaver Dam who travels among 15 stores around the state. “I’d rather see them put it back to the people who are playing it. Share the wealth.”
Nies said lottery customers tend to be older and he has noticed higher sales at stores in lower-income areas. But he’s also seen players hit a big jackpot and continue to come back hoping to experience the euphoria again.
Mike Seversin, owner of Seversin’s Service Center on Madison’s East Side and a participating retailer since a constitutional amendment allowing the lottery passed in 1987, called more advertising on the lottery “a waste of money.”
“Everyone knows it’s there,” Seversin said. “Who are they trying to get, young kids or what?”
Wilcox, the store manager at DB’s Service Center on Madison’s Far East Side, said the store’s only advertising for the lottery is a small sign in the window. And yet customers routinely stop in to ask whether they sell lottery tickets, she said.
“I think the lottery is kind of like Mountain Dew: People want it and they’re going to get it no matter how much you advertise,” she said.