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The Future of the California Lottery

by Indy, published

While legislators tussle over how to fix the current gap in the state’s budget deficit, at least they addressed last summer’s budget deficit.

Right?

Maybe wrong.

As part of the compromise that closed that gap – then at around $17 billion – legislators and Gov. Arnold Schwarzenegger agreed to put a ballot measure before voters sometime in 2009 that would borrow against future lottery revenues, with the understanding voters had to give the okay to overhaul the lottery in such a way as to increase its revenues for the state.

Days after the budget was finalized, the national economy went into a severe, visible tailspin, leading some observers to conclude that projections of future riches from the state lottery were as wishful thinking as, well, winning the lottery.

But there may be a greater problem than that: voters.

When voters decided to create a lottery in the 1980s, the promise was that doing so would permanently solve education funding problems.

Any observer of California politics since could tell you that such a promise never bore fruit. And the lottery’s ability to raise much money has since been curtailed by the expansion of other types of gambling, most notably Indian casinos.

Those factors have created both disdain among many voters toward the lottery, and a powerful moneyed interest in gambling tribes that could make a big impact on any ballot measure campaign involving the lottery.

So far, the lottery ballot measure hasn’t gotten much public scrutiny, perhaps because the governor hasn’t even scheduled the special election where it will be decided. Most expect that ballot to be in June.

But when the governor first proposed the idea last spring, a Public Policy Institute of California poll found only 30 percent of voters favored the idea.

That’s a bad sign. Historically, voters rarely pass ballot measures that start out with less than 50 percent approval ratings.

And in the case of the lottery, there are two voter groups who can’t be convinced to support it: Religious types who see the lottery as sinful gambling regardless of its provenance, and those who believe that it amounts to a tax on poor people who are most likely to play it.

Factor in that the Indian tribes could decide to spend against the measure because it would hurt their own bottom lines if more people played the lottery, and the proposed ballot measure may be running into a wall before it’s out of first gear.

Against all that, what choices do proponents have?

Schwarzenegger will almost certainly campaign for the measure if it looks like it’s in trouble. While his track record on backing government reform measures is mixed at best, he does have momentum on his side after his redistricting measure Proposition 11 passed last fall.

It’s also possible that individual legislators could try to buoy the measure, but there are several problems with such a scenario. One is that the state legislature by and large isn’t popular among voters; something they’re seen as being in favor of could lead many voters to conclude they’re better off opposing it.

As well, the governor’s relationship with legislators in both parties has gotten especially rocky over the last year, and as long as the state budget process involves loathsome choices – as it’s likely to for 2009-10 – lawmakers may feel little inclined to beat the bushes for a proposal the governor came up with.

All this means that state leaders of all stripes must consider the ramifications if the measure doesn’t pass.

According to state Department of Finance spokesman H.D. Palmer, the state figured on about $5 billion in 2009-10 from borrowing against lottery revenue, subject to voter approval.

So failure of the lottery reform measure would add that much to next year’s deficit, and that much in future budget years as well.

Many of the accusations hurled back and forth during the budget negotiations center on how one side or another refuses to buck its special-interest allies in the name of getting something done.

But in this case, the state’s government may have forgotten to consider the most powerful special-interest group of them all: California voters.

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