Buzz
The jackpot for this Wednesday’s Powerball draw is an eye-popping $1.4 billion—imagine the possibilities with such a fortune! But let’s be realistic, winning is almost impossible. As Scott A. Norris, an assistant professor of mathematics at Southern Methodist University, told the Associated Press, "Even if you buy a hundred, thousand, or even a million tickets, it's still probably not going to happen."
The odds of winning are around one in 292 million, and they get slimmer with every passing second. The Texas Lottery’s executive director mentioned that “more than $1.2 million worth of Powerball tickets are being sold every minute.” So, while winning may be a long shot, someone’s still profiting. But who’s reaping the benefits of all this money, and where does it go?
Powerball is available in 47 different lotteries (across 44 states, plus D.C., Puerto Rico, and the U.S. Virgin Islands). As per a document from the Multi-State Lottery Association (MUSL), the body responsible for Powerball, total ticket sales have hit about $55.8 billion since the game began in April 1992 (as of January 9, 2016). In that time, approximately $16.5 billion has been paid out to jackpot winners, and $11.8 billion has gone to non-jackpot, secondary prize winners. This means that nearly half of Powerball’s total revenue has gone to the winners.
What happens to the remaining funds? That varies. According to the MUSL, "All profits from the games are kept by the state that sells the ticket." However, states must cover their expenses before counting profits, which include advertising costs, salaries for lottery commission employees, vendor fees, and expenses like "central accounting and the purchase of government securities for annuitized prizes." After covering these costs, states can determine their profit, and that’s when things start to get interesting.
Some state lotteries contribute very little. For instance, a 2012 NBC News report highlighted that Rhode Island’s lottery program contributed just 11 cents for every dollar in ticket sales to the state’s budget. On the other hand, some states perform much better. Oregon, for example, "generated 50 cents for each dollar of ticket sales" in 2011. These profits fluctuate for various reasons, such as the number of players or the efficiency of the lottery program. The NBC story also mentioned that some states "increase their profits by outsourcing their lottery operations to private companies."
Once the net profits are calculated, it’s up to each state to decide how to allocate the funds. Education is often a major recipient, with profits from the Virginia Lottery, for example, going to a K-12 education fund. Research has also found that some states treat lottery earnings as general revenue or use them to offset promised tax cuts, effectively turning them into a sort of hidden, "voluntary tax." A quick online search for your state’s budget report will provide more detailed information.
Though the $2 you spend on a Powerball ticket is distributed in various ways, don’t count on it ever coming back to you in full.
